10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

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

For the fiscal year ended December 31, 2017

OR

o 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

(Exact name of registrant as specified in its charter)

Delaware	77-0239383
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification Number)
585 West Beach Street
Watsonville, California	95076
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (831) 724-1011

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

Title of each class	Name of each exchange on which registered
Common Stock, $0.01 par value	New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes x No o

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o No x

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 x No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files). Yes x No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o

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 x Accelerated filer o   Non-accelerated filer o   Smaller reporting company o   Emerging growth company o

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. o

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

The aggregate market value of voting and non-voting common equity held by non-affiliates of the registrant was $1.9 billion as of June 30,2017, based upon the price at which the registrant’s Common Stock was last sold as reported on the New York Stock Exchange on such date.

At February 13, 2018, 39,890,345 shares of Common Stock, par value $0.01, of the registrant were outstanding. 

DOCUMENTS INCORPORATED BY REFERENCE

Certain information called for by Part III is incorporated by reference to the definitive Proxy Statement for the Annual Meeting of Shareholders of Granite Construction Incorporated to be held on June 7, 2018, which will be filed with the Securities and Exchange Commission not later than 120 days after December 31, 2017.

Index

PART I

Item 1.	BUSINESS
Item 1A.	RISK FACTORS
Item 1B.	UNRESOLVED STAFF COMMENTS
Item 2.	PROPERTIES
Item 3.	LEGAL PROCEEDINGS
Item 4.	MINE SAFETY DISCLOSURES

PART II

Item 5.	MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Item 6.	SELECTED FINANCIAL DATA
Item 7.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Item 7A.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Item 8.	FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Item 9.	CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
Item 9A.	CONTROLS AND PROCEDURES
Item 9B.	OTHER INFORMATION

PART III

Item 10.	DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Item 11.	EXECUTIVE COMPENSATION
Item 12.	SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
Item 13.	CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
Item 14.	PRINCIPAL ACCOUNTANT FEES AND SERVICES

PART IV

Item 15.	EXHIBITS, FINANCIAL STATEMENT SCHEDULES
	EXHIBIT 21
	EXHIBIT 23.1
	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
Item 16.	FORM 10-K SUMMARY

1

DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS

From time to time, Granite makes certain comments and disclosures in reports and statements, including in this Annual Report on Form 10-K, or statements made by its officers or directors, that are not based on historical facts, including statements regarding future events, occurrences, circumstances, activities, performance, outcomes and results that may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are identified by words such as “future,” “outlook,” “assumes,” “believes,” “expects,” “estimates,” “anticipates,” “intends,” “plans,” “appears,” “may,” “will,” “should,” “could,” “would,” “continue,” and the negatives thereof or other comparable terminology or by the context in which they are made. In addition, other written or oral statements which constitute forward-looking statements have been made and may in the future be made by or on behalf of Granite. These forward-looking statements are estimates reflecting the best judgment of senior management and reflect our current expectations regarding future events, occurrences, circumstances, activities, performance, outcomes and results. These expectations may or may not be realized. Some of these expectations may be based on beliefs, assumptions or estimates that may prove to be incorrect. In addition, our business and operations involve numerous risks and uncertainties, many of which are beyond our control, which could result in our expectations not being realized or otherwise materially affect our business, financial condition, results of operations, cash flows and liquidity. Such risks and uncertainties include, but are not limited to, those more specifically described in this report under “Item 1A. Risk Factors.” Due to the inherent risks and uncertainties associated with our forward-looking statements, the reader is cautioned not to place undue reliance on them. The reader is also cautioned that the forward-looking statements contained herein speak only as of the date of this Annual Report on Form 10-K, and, except as required by law, we undertake no obligation to revise or update any forward-looking statements for any reason.

PART I

Item 1. BUSINESS

Introduction

Granite Construction Company was originally incorporated in 1922. In 1990, Granite Construction Incorporated was formed as the holding company for Granite Construction Company and its wholly owned and consolidated subsidiaries and was incorporated in Delaware. Unless otherwise indicated, the terms “we,”  “us,”  “our,”  “Company” and “Granite” refer to Granite Construction Incorporated and its wholly owned and consolidated subsidiaries.

We deliver infrastructure solutions for public and private clients primarily in the United States. We are one of the largest diversified heavy civil contractors and construction materials producers in the United States. We operate nationwide, serving both public and private sector clients. Within the public sector, we primarily concentrate on heavy-civil infrastructure projects, including the construction of streets, roads, highways, mass transit facilities, airport infrastructure, bridges, trenchless and underground utilities, power-related facilities, water-related facilities, utilities, tunnels, dams and other infrastructure-related projects. Within the private sector, we perform site preparation and infrastructure services for residential development, energy development, commercial and industrial sites, and other facilities, as well as provide construction management professional services.

Operating Structure

Our business is organized into three reportable business segments. These business segments are: Construction, Large Project Construction and Construction Materials. See Note 18 of “Notes to the Consolidated Financial Statements” for additional information about our reportable business segments.

In addition to business segments, we review our business by operating groups and by public and private market sectors. Our operating groups are defined as follows: (i) California; (ii) Northwest, which primarily includes offices in Alaska, Arizona, Nevada, Utah and Washington; (iii) Heavy Civil, which primarily includes offices in California, Florida, New York and Texas and (iv) Kenny, which primarily includes offices in Illinois. Each of these operating groups includes financial results from our Construction and Large Project Construction segments. A project’s results are reported in the operating group that is responsible for the project, not necessarily the geographic area where the work is located. In some cases, the operations of an operating group include the results of work performed outside of that geographic region. Our California and Northwest operating groups include financial results from our Construction Materials segment.

2

Construction: Revenue from our Construction segment was $1.7 billion and $1.4 billion (55.7% and 54.3% of our total revenue) in 2017 and 2016, respectively. Revenue from our Construction segment is derived from both public and private sector clients. The Construction segment performs construction management, as well as various civil construction projects with a large portion of the work focused on new construction and improvement of streets, roads, highways, bridges, site work, underground, power-related facilities, water-related facilities, utilities and other infrastructure projects. These projects are typically bid-build projects completed within two years with a contract value of less than $75 million.

Large Project Construction: Revenue from our Large Project Construction segment was $1.0 billion and $0.9 billion (34.5% and 35.3% of our total revenue) in 2017 and 2016, respectively. The Large Project Construction segment focuses on large, complex infrastructure projects which typically have a longer duration than our Construction segment work. These projects include major highways, mass transit facilities, bridges, tunnels, waterway locks and dams, pipelines, canals, power-related facilities, water-related facilities, utilities and airport infrastructure. This segment primarily includes bid-build, design-build and construction management/general contractor contracts, together with various contract methods relating to public-private partnerships, generally with contract values in excess of $75 million.

We utilize design-build, construction management/general contractor, construction management at-risk, and other alternative procurement methods of project delivery. Unlike traditional bid-build projects where owners first hire a design firm or design a project themselves and then put the project out to bid for construction, design-build projects provide the owner with a single point of responsibility and a single contact for both final design and construction. Although design-build projects carry additional risk as compared to traditional bid-build projects, the profit potential can also be higher. Under the construction management/general contractor and construction management at-risk methods of delivery, we contract with owners to assist the owner during the design phase of the contract with constructability efficiencies, with the understanding that we will negotiate a contract on the construction phase when the design nears completion. Revenue from alternative procurement method projects represented 76.1% and 81.0% of Large Project Construction revenue in 2017 and 2016, respectively.

We participate in joint ventures with other construction companies mainly on projects in our Large Project Construction segment. Joint ventures are typically used for large, technically complex projects, including design-build projects, where it is necessary or desirable to share risk and resources. Joint venture partners typically provide independently prepared estimates, shared financing and equipment, and often bring local knowledge and expertise. For more information see the “Joint Ventures” section below.

Construction Materials: Revenue from our Construction Materials segment to third parties was $292.8 million and $261.2 million (9.8% and 10.4% of our total revenue) in 2017 and 2016, respectively. The Construction Materials segment mines and processes aggregates and operates plants that produce construction materials, primarily asphalt, for internal use and for sale to third parties. We have significant aggregate reserves that we own or lease through long-term leases. Sales to our construction projects represented 37.3% of our combined internal and external Construction Materials sales during 2017, and ranged from 30.5% to 38.5% over the last five years. The remainder is sold to third parties.

3

Business Strategy

Our business strategy is to consistently deliver ideas, innovations, products and services to our clients to power today’s mobile society by executing entrepreneurial market strategies that leverage the benefits of our company-wide resources and our core values. Our most fundamental objective is to increase long-term shareholder value as measured by the appreciation of the value of our common stock over a period of time, as well as dividend payouts. In alphabetical order, the following are key factors in our ability to achieve this objective:

Aggregate Materials - We own and lease aggregate reserves and own processing plants that are vertically integrated into our construction operations. By ensuring availability of these resources and providing quality products, we believe we have a competitive advantage in many of our markets, as well as a source of revenue and earnings from the sale of construction materials to third parties.

Decentralized Profit Centers - Each of our operating groups is established as an individual profit center which encourages entrepreneurial activity while allowing the operating groups to benefit from centralized administrative, operational expertise and support functions.

Dedicated Construction Equipment - We own and lease a large fleet of well-maintained heavy construction equipment. Dedicated access to a large pool of construction equipment enables us to compete more effectively by ensuring availability and maximizing returns on investment of the equipment.

Diversification - To mitigate the risks inherent in the construction business as the result of general economic factors, we pursue projects: (i) in both the public and private sectors; (ii) in federal, rail, power, water and renewable energy markets; (iii) for a wide range of clients from the federal government to small municipalities and from large corporations to individual homeowners; (iv) in diverse geographic markets; (v) that are construction management/general contractor, design-build and bid-build; (vi) at fixed price, time and materials, cost reimbursable and fixed unit price; and (vii) of various sizes, durations and complexity. In addition to pursuing opportunities with traditional project funding, we continue to evaluate other sources of project funding (e.g., public and private partnerships).

Employee Development - We believe that our employees are the primary factor for the successful implementation of our business strategies. Significant resources are employed to attract, develop and retain extraordinary and diverse talent and fully promote each employee’s capabilities.

Operational Excellence - We have a continual focus on Operational Excellence,which includes the following:

• Code of Conduct - We believe in maintaining high ethical standards through an established code of conduct and an effective company-wide compliance program, while being guided by our core values at all times.

• Environment - Our focus on sustainability encompasses many aspects of how we conduct ourselves and practice our Core Values. We believe sustainability is important to our clients, employees, shareholders, and communities, and is also a long-term business driver. By focusing on specific initiatives that address social, environmental and economic challenges, we can minimize risk and increase our competitive advantage.

• Productivity - We strive to use our resources efficiently to deliver work on time and on budget.

• Quality - We believe in satisfying our clients, preventing risk, and driving improvement by performing work right the first time.

• Safety - We believe the safety of our employees, the public and the environment is a moral obligation as well as good business. By identifying and concentrating resources to address jobsite hazards, we continually strive to eliminate our incident rates and the costs associated with accidents.

Performance-Based Incentives - Managers are incentivized with cash compensation and restricted stock unit equity awards, payable upon the attainment of pre-established annual financial and non-financial metrics.

Risk-Balanced Growth - We intend to grow our business by working on many types of infrastructure projects, as well as by expanding into new geographic areas and end markets organically and through acquisitions. Growth opportunities are evaluated relative to their incremental impact to the execution risk and profitability profile of our operating portfolio.

Selective Bidding - We focus our resources on bidding jobs that meet our selective bidding criteria, which include analyzing the risk of a potential job relative to: (i) available personnel to estimate and prepare the proposal as well as to effectively manage and build the project; (ii) the competitive environment; (iii) our experience with the type of work and with the owner; (iv) local resources and partnerships; (v) equipment resources; and (vi) the size, complexity and expected profitability of the job.

4

Raw Materials

We purchase raw materials, including but not limited to, aggregate products, cement, diesel and gasoline fuel, liquid asphalt, natural gas, propane and steel, from numerous sources. Our aggregate reserves supply a portion of the raw materials needed in our construction projects. The price and availability of raw materials may vary from year to year due to market conditions and production capacities. We do not foresee a lack of availability of any raw materials over the next twelve months.

Seasonality

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, profitability and the required number of employees.

Customers

Customers in our Construction segment are predominantly in the public sector and include certain federal agencies, state departments of transportation, county and city public works departments, school districts and developers, utilities and private owners of industrial, commercial and residential sites. Customers of our Large Project Construction segment are also predominantly in the public sector and currently include various state departments of transportation, local transit authorities, utilities and federal agencies. Customers of our Construction Materials segment include internal usage by our own construction projects, as well as third-party customers. Our third party customers include, but, are not limited to, contractors, landscapers, manufacturers of products requiring aggregate materials, retailers, homeowners, farmers and brokers.

During the year ended December 31, 2017, our largest volume customer, including both prime and subcontractor arrangements, was the California Department of Transportation (“Caltrans”). Revenue recognized from contracts with Caltrans during 2017 represented $281.7 million (9.4% of our total revenue), of which $219.9 million (13.2% of segment revenue) was in the Construction segment, $57.2 million (5.5% of segment revenue) was in the Large Project Construction segment and $4.6 million (1.6% of segment revenue) was in the Construction Materials segment. During the year ended December 31, 2016, our largest volume customer, including both prime and subcontractor arrangements, was Caltrans. Revenue recognized from contracts with Caltrans during 2016 represented $222.4 million (8.8% of our total revenue), of which $173.4 million (12.7% of segment revenue) was in the Construction segment and $48.7 million (5.5% of segment revenue) was in the Large Project Construction segment. During the year ended December 31, 2015, our largest volume customer, including both prime and subcontractor arrangements, was the New York State Department of Transportation (“NYSDOT”). Revenue recognized from contracts with NYSDOT during 2015 represented $199.0 million (8.4% of total revenue), all of which was in the Large Project Construction segment (24.5% of segment revenue).

Contract Backlog

Our contract backlog consists of the revenue we expect to record in the future on awarded contracts, including 100% of our consolidated joint venture contracts and our proportionate share of unconsolidated joint venture contracts. We generally include a project in our contract backlog at the time it is awarded and to the extent we believe funding is probable. Certain government contracts where funding is appropriated on a periodic basis are included in contract backlog at the time of the award when it is probable the contract value will be funded and executed. Certain contracts contain contract options that are exercisable at the option of our customers without requiring us to go through an additional competitive bidding process or contain task orders that are signed under master contracts under which we perform work only when the customer awards specific task orders to us. Awarded contracts that include unexercised contract options and unissued task orders are included in contract backlog to the extent options are exercised or task order issuance is probable.

Substantially all of the contracts in our contract backlog may be canceled or modified at the election of the customer; however, we have not been materially adversely affected by contract cancellations or modifications in the past (see “Contract Provisions and Subcontracting”). Many projects in our Construction segment are added to backlog and completed within the same fiscal year and, therefore, may not be reflected in our beginning or year-end contract backlog. Contract backlog by segment is presented in “Contract Backlog” under “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Our contract backlog was $3.7 billion and $3.5 billion at December 31, 2017 and 2016, respectively. Approximately $2.0 billion of the December 31, 2017 contract backlog is expected to be completed during 2018. 

5

Equipment

At December 31, 2017 and 2016, we owned the following number of construction equipment and vehicles:

December 31,	2017	2016
Heavy construction equipment	1,905	1,934
Trucks, truck-tractors, trailers and vehicles	3,618	3,503

Our portfolio of equipment includes backhoes, barges, bulldozers, cranes, excavators, loaders, motor graders, pavers, rollers, scrapers, trucks, special equipment for pipeline rehabilitation and tunnel boring machines that are used in our Construction, Large Project Construction and Construction Materials segments. We pool certain equipment to maximize utilization. We continually monitor and adjust our fleet size so that it is consistent with the size of our business, considering both existing contract backlog and expected future work. We lease or rent equipment to supplement our portfolio of equipment in response to construction activity cycles. In 2017 and 2016, we spent $43.6 million and $65.1 million, respectively, on purchases of construction equipment and vehicles.

Employees

On December 31, 2017, we employed approximately 1,900 salaried employees who work in project, functional and business unit management, estimating and clerical capacities, plus approximately 1,700 hourly employees. The total number of hourly personnel is subject to the volume of construction in progress and is seasonal. During 2017, the number of hourly employees ranged from approximately 1,700 to 3,700 and averaged approximately 2,900. Four of our wholly-owned subsidiaries, Granite Construction Company, Granite Construction Northeast, Inc., Granite Infrastructure Constructors, Inc., and Kenny Construction Company, are parties to craft collective bargaining agreements in many areas in which they operate.

We believe our employees are our most valuable resource, and our workforce possesses a strong dedication to and pride in our company. Our managerial and supervisory personnel have an average of approximately 10 years of service with Granite.

Competition

Competitors in our Construction segment typically range from small, local construction companies to large, regional, national and international construction companies. We compete with numerous companies in individual markets; however, there are few, if any, companies which compete in all of our market areas. Many of our Construction segment competitors have the ability to perform work in either the private or public sectors. When opportunities for work in one sector are reduced, competitors tend to look for opportunities in the other sector. This migration has the potential to reduce revenue growth and/or increase pressure on gross profit margins.

The scale and complexity of jobs in the Large Project Construction segment preclude many smaller contractors from bidding such work. Consequently, our Large Project Construction segment competition is typically comprised of large regional, national and international construction companies.

We own and/or have long-term leases on aggregate resources that we believe provide a competitive advantage in certain markets for both the Construction and Large Project Construction segments.

Competitors in our Construction Materials segment typically range from small local materials companies to large regional, national and international materials companies. We compete with numerous companies in individual markets; however, there are few, if any, companies which compete in all of our market areas. 

Factors influencing our competitiveness include price, estimating abilities, knowledge of local markets and conditions, project management, financial strength, reputation for quality, aggregate materials availability, and machinery and equipment. Historically, the construction business has not required large amounts of capital for the smaller size construction work pursued by our Construction segment, which can result in relative ease of market entry for companies possessing acceptable qualifications. By contrast, the construction work pursued and performed by our Large Project Construction segment typically requires large amounts of capital that may make entry into the market by future competitors more difficult. Historically, the required amount of capital has not had a significant impact on our ability to compete in the marketplace. Although the construction business is highly competitive, we believe we are well positioned to compete effectively in the markets in which we operate.

6

Contract Provisions and Subcontracting

Contracts with our customers are primarily “fixed unit price” or “fixed price.” Under fixed unit price contracts, we are committed to providing materials or services at fixed unit prices (for example, dollars per cubic yard of concrete placed or cubic yard of earth excavated). While the fixed unit price contract shifts the risk of estimating the quantity of units required for a particular project to the customer, any increase in our unit cost over the expected unit cost in the bid, whether due to inflation, inefficiency, incorrect estimates or other factors, is borne by us unless otherwise provided in the contract. Fixed price contracts are priced on a lump-sum basis under which we bear the risk that we may not be able to perform the work for the specified contract amount. The percentage of fixed price contracts in our contract backlog was 66.9% at December 31, 2017 compared with 63.8% at December 31, 2016. The percentage of fixed unit price contracts in our contract backlog was 29.8% and 30.8% at December 31, 2017 and 2016, respectively. All other contract types represented 3.3% and 5.4% of our contract backlog at December 31, 2017 and 2016, respectively.

With the exception of contract change orders and affirmative claims, which are typically sole-source, our construction contracts are primarily obtained through competitive bidding in response to solicitations by both public agencies and private parties and on a negotiated basis as a result of solicitations from private parties. Project owners use a variety of methods to make contractors aware of new projects, including posting bidding opportunities on agency websites, disclosing long-term infrastructure plans, advertising and other general solicitations. Our bidding activity is affected by such factors as the nature and volume of advertising and other solicitations, contract backlog, available personnel, current utilization of equipment and other resources and competitive considerations. Our contract review process includes identifying risks and opportunities during the bidding process and managing these risks through mitigation efforts such as contract negotiation, bid/no bid decisions, insurance and pricing. Contracts fitting certain criteria of size and complexity are reviewed by various levels of management and, in some cases, by the Executive Committee of our Board of Directors. Bidding activity, contract backlog and revenue resulting from the award of new contracts may vary significantly from period to period.

There are a number of factors that can create variability in contract performance as compared to the original bid. Such factors can positively or negatively impact costs and profitability, may cause higher than anticipated construction costs and can create additional liability to the contract owner. The most significant of these include:

• the completeness and accuracy of the original bid; 

• costs associated with scope changes;

• changes in costs of labor and/or materials;

• extended overhead and other costs due to owner, weather and other delays;

• subcontractor performance issues;

• changes in productivity expectations;

• site conditions that differ from those assumed in the original bid;

• changes from original design on design-build projects;

• the availability and skill level of workers in the geographic location of the project;

• a change in the availability and proximity of equipment and materials;

• our ability to fully and promptly recover on affirmative claims and back charges for additional contract costs; and

• the customer’s ability to properly administer the contract.

The ability to realize improvements on project profitability at times is more limited than the risk of lower profitability. For example, design-build projects typically incur additional costs such as right-of-way and permit acquisition costs. In addition, design-build contracts carry additional risks such as those associated with design errors and estimating quantities and prices before the project design is completed. We manage this additional risk by including contingencies to our bid amounts, obtaining errors and omissions insurance and obtaining indemnifications from our design consultants where possible. However, there is no guarantee that these risk management strategies will always be successful.

Most of our contracts, including those with the government, provide for termination at the convenience of the contract owner, with provisions to pay us for work performed through the date of termination. We have not been materially adversely affected by these provisions in the past. Many of our contracts contain provisions that require us to pay liquidated damages if specified completion schedule requirements are not met, and these amounts could be significant.

7

We act as prime contractor on most of our construction projects. We complete the majority of our projects with our own resources and subcontract specialized activities such as electrical and mechanical work. As prime contractor, we are responsible for the performance of the entire contract, including subcontract work. Thus, we may be subject to increased costs associated with the failure of one or more subcontractors to perform as anticipated. Based on our analysis of their construction and financial capabilities, among other criteria, we typically require the subcontractor to furnish a bond or other type of security to guarantee their performance and/or we retain payments in accordance with contract terms until their performance is complete. Disadvantaged business enterprise regulations require us to use our good faith efforts to subcontract a specified portion of contract work done for governmental agencies to certain types of disadvantaged contractors or suppliers. As with all of our subcontractors, some may not be able to obtain surety bonds or other types of performance security.

Joint Ventures

We participate in various construction joint ventures of which we are a limited member (“joint ventures”) in order to share expertise, risk and resources for certain highly complex projects. Generally, each construction joint venture is formed as a partnership or limited liability company to accomplish a specific project and is jointly controlled by the joint venture partners. We select our joint venture partners (“partner(s)”) based on our analysis of their construction and financial capabilities, expertise in the type of work to be performed and past working relationships, among other criteria. The joint venture agreements typically provide that our interests in any profits and assets, and our respective share in any losses and liabilities, that may result from the performance of the contract are limited to our stated percentage interest in the project.

Under each joint venture agreement, one partner is designated as the sponsor. The sponsoring partner typically provides all administrative, accounting and most of the project management support for the project and generally receives a fee from the joint venture for these services. We have been designated as the sponsoring partner in certain of our current joint venture projects and are a non-sponsoring partner in others.

We consolidate joint ventures where we have determined that through our participation we have a variable interest and are the primary beneficiary as defined by Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 810, Consolidation, and related standards. Where we have determined we are not the primary beneficiary of a joint venture but do exercise significant influence, we account for our share of the operations of unconsolidated construction joint ventures on a pro rata basis in revenue and cost of revenue in the consolidated statements of operations and in equity in construction joint ventures in the consolidated balance sheets. We account for non-construction unconsolidated joint ventures under the equity method of accounting and include our share of the operations in equity in income of affiliates in the consolidated statements of operations and in investment in affiliates in the consolidated balance sheets. We have been divesting equity method investments in real estate affiliates as part of our 2010 Enterprise Improvement Plan.

We also participate in various “line item” joint venture agreements under which each partner is responsible for performing certain discrete items of the total scope of contracted work. The revenue for these discrete items is defined in the contract with the project owner and each joint venture partner bears the profitability risk associated only with its own work. There is not a single set of books and records for a line item joint venture. Each partner accounts for its items of work individually as it would for any self-performed contract. We account for our portion of these contracts as revenues and cost of revenue in the consolidated statements of operations and in relevant balances in the consolidated balance sheets.

The agreements with our partner(s) for both construction joint ventures and line item joint ventures define each partner’s management role and financial responsibility in the project. The amount of operational exposure is generally limited to our stated ownership interest. However, 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). We estimate our liability for performance guarantees for our unconsolidated and line item joint ventures and include them in accrued expenses and other current liabilities with a corresponding increase in equity in construction joint ventures in the consolidated balance sheets. We reassess our liability when and if changes in circumstances occur. The liability and corresponding asset are removed from the consolidated balance sheets upon completion and customer acceptance of the project. Circumstances that could lead to a loss under these agreements beyond our stated ownership interest include the failure of a partner to contribute additional funds to the venture in the event the project incurs a loss or additional costs that we could incur should a partner fail to provide the services and resources that it had committed to provide in the agreement. 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.

At December 31, 2017, there was $4.6 billion of construction revenue to be recognized on unconsolidated and line item construction joint venture contracts, of which $1.5 billion represented our share and the remaining $3.1 billion represented our partners’ share. See Note 6 of “Notes to the Consolidated Financial Statements” for more information.

8

Insurance and Bonding

We maintain general and excess liability, construction equipment, workers’ compensation and medical insurance; all in amounts consistent with industry practice and as part of our overall risk management strategy. Further, our policies are held with financially stable coverage providers, often in a layered or quota share arrangement which reduces the likelihood of an interruption or impact to operations.

In connection with our business, we generally are required to provide various types of surety bonds that provide an additional measure of security for our performance under certain public and private sector contracts. Our ability to obtain surety bonds depends upon our capitalization, working capital, past performance, management expertise and external factors, including the capacity of the overall surety market. Surety companies consider such factors in light of the amount of our contract backlog that we have currently bonded and their current underwriting standards, which may change from time to time. The capacity of the surety market is subject to market-based fluctuations driven primarily by the level of surety industry losses and the degree of surety market consolidation. When the surety market capacity shrinks it results in higher premiums and increased difficulty obtaining bonding, in particular for larger, more complex projects throughout the market. In order to help mitigate this risk, we employ a co-surety structure involving three sureties. Although we do not believe that fluctuations in surety market capacity have significantly affected our ability to grow our business, there is no assurance that it will not significantly affect our ability to obtain new contracts in the future (see “Item 1A. Risk Factors”).

Environmental Regulations

Our operations are subject to various federal, state and local laws and regulations relating to the environment, including those relating to discharges to air, water and land, the handling and disposal of solid and hazardous waste, the handling of underground storage tanks and the cleanup of properties affected by hazardous substances. Certain environmental laws impose substantial penalties for non-compliance and others, such as the federal Comprehensive Environmental Response, Compensation and Liability Act, impose strict, retroactive, joint and several liability upon persons responsible for releases of hazardous substances. We continually evaluate whether we must take additional steps at our locations to ensure compliance with environmental laws. While compliance with applicable regulatory requirements has not materially adversely affected our operations in the past, there can be no assurance that these requirements will not change and that compliance will not adversely affect our operations in the future. In addition, our aggregate materials operations require operating permits granted by governmental agencies. We believe that tighter regulations for the protection of the environment and other factors will make it increasingly difficult to obtain new permits and renewal of existing permits may be subject to more restrictive conditions than currently exist.

The California Air Resource Board requires California equipment owners/operators to reduce diesel particulate and nitrogen oxide emissions from in-use off-road diesel equipment and to meet progressively more restrictive emission targets from 2010 to 2022 by retrofitting equipment with diesel emission control devices or replacing equipment with new engine technology as it becomes available. Since 2010, costs to prepare the Company for compliance have totaled $25.7 million and future costs are expected to be immaterial; however, it is not possible to determine the total future cost of compliance.

As is the case with other companies in our industry, some of our aggregate products contain varying amounts of crystalline silica, a common mineral. Also, some of our construction and material processing operations release, as dust, crystalline silica that is in the materials being handled. Excessive, prolonged inhalation of very small-sized particles of crystalline silica has allegedly been associated with respiratory disease (including Silicosis). During 2016, the Occupational Safety and Health Administration (“OSHA”) implemented new and more stringent occupational exposure thresholds for crystalline silica exposure as respirable dust. In addition, the Mine Safety and Health Administration is proposing the identical rule as implemented by OSHA. We have implemented dust control procedures to measure compliance with requisite thresholds and to verify that respiratory protective equipment is made available as necessary. We also communicate, through safety data sheets and other means, what we believe to be appropriate warnings and cautions to employees and customers about the risks associated with excessive, prolonged inhalation of mineral dust in general and crystalline silica in particular (see “Item 1A. Risk Factors”). The scope of new exposure limits indicates that additional engineering controls, beyond providing respirators will be required to reduce potential exposure in response to the reduced exposure limits. The OSHA General Industry and Construction Standards were phased in during late 2017 and will be fully implemented by the end of June of 2018. Expenses related to this implementation were immaterial during the year ended December, 31, 2017 and are expected to be immaterial in 2018.

Website Access

Our website address is www.graniteconstruction.com. On our website we make available, free of charge, our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and all amendments to those reports as soon as reasonably practicable after such material is electronically filed with or furnished to the Securities and Exchange Commission (“SEC”). The information on our website is not incorporated into, and is not part of, this report. These reports, and any amendments to them, are also available at the website of the SEC, www.sec.gov.

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Executive Officers of the Registrant

Information regarding our executive officers is set forth below.

Name	Age	Position
James H. Roberts	61	President and Chief Executive Officer
Laurel J. Krzeminski	63	Executive Vice President and Chief Financial Officer
Kyle T. Larkin	46	Senior Vice President and Group Manager
James D. Richards	54	Senior Vice President and Group Manager
Dale Swanberg	55	Senior Vice President and Group Manager

Mr. Roberts joined Granite in 1981 and has served in various capacities, including President and Chief Executive Officer since September 2010. He also served as Executive Vice President and Chief Operating Officer from September 2009 through August 2010, Senior Vice President from May 2004 through September 2009, Granite West Manager from February 2007 through September 2009, Branch Division Manager from May 2004 through February 2007, Vice President and Assistant Branch Division Manager from 1999 to 2004, and Regional Manager of Nevada and Utah Operations from 1995 to 1999. Mr. Roberts served as Chairman of The National Asphalt Pavement Association in 2006. He received a B.S.C.E. in 1979 and an M.S.C.E. in 1980 from the University of California, Berkeley, and an M.B.A. from the University of Southern California in 1981. He also completed the Stanford Executive Program in 2009.

Ms. Krzeminski joined Granite in 2008 and has served as Chief Financial Officer since November 2010. She has served as Executive Vice President since December 2015, Senior Vice President from January 2013 through December 2015, Vice President from July 2008 through December 2012, Interim Chief Financial Officer from June 2010 to October 2010 and Corporate Controller from July 2008 through May 2010. From 1993 to 2007, she served in various corporate and operational finance positions with The Gillette Company (acquired by The Procter & Gamble Company in 2005), including Finance Director for the Duracell and Braun North American business units. Ms. Krzeminski also served as the Director of Gillette’s Sarbanes-Oxley Section 404 Compliance program and as Gillette’s Director of Corporate Financial Reporting. Ms. Krzeminski is currently a member of the board of directors of Terracon. Her experience also includes several years in public accounting with an international accounting firm. Ms. Krzeminski received a B.S. in Business Administration-Accounting from San Diego State University.

Mr. Larkin joined Granite in 1996 and has served as Senior Vice President and Group Manager since October 2017, Vice President and Regional Manager in Nevada from January 2014 to September 2017 and President of Granite’s wholly-owned subsidiary, Intermountain Slurry Seal, Inc. from 2011 to 2014. He served as Manager of Construction at the Reno area office from 2008 to 2011 and Chief Estimator from 2004 to 2008. Mr. Larkin holds a B.S. in Construction Management from California Polytechnic State University, San Luis Obispo and an M.B.A. from the University of Massachusetts, Amherst.

Mr. Richards joined Granite in January 1992 and has served as Senior Vice President and Group Manager since January 2013. He also served as Arizona Region Manager from February 2006 through December 2012, Arizona Region Chief Estimator from January 2000 through January 2006 and in other positions at Granite’s Arizona Branch between 1992 and 2000. Prior to joining Granite, he served as a U.S. Army Officer. Mr. Richards received a B.S. in Civil Engineering from New Mexico State University in 1987.

Mr. Swanberg joined Granite in 2015 and has served as Senior Vice President and Group Manager since January 2017 and as Vice President and Deputy Group Manager from April 2015 to December 2016. In 2013, Mr. Swanberg served as the Chief Operating Officer of Flatiron Construction. Prior to Flatiron Construction, he served in various positions for the Walsh Group from 1985 to 2012, including as the President of the Heavy Civil Group. Mr. Swanberg received a B.S. in Civil Engineering from Bradley University in 1984.

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Item 1A. RISK FACTORS

Set forth below and elsewhere in this report and in other documents we file with the SEC are various risks and uncertainties that could cause our actual results to differ materially from the results contemplated by the forward-looking statements contained in this report or otherwise adversely affect our business.

• Unfavorable economic conditions may have an adverse impact on our business. Volatility in the global financial system, deterioration in general economic activity, and fiscal, monetary and other policies that the federal, state and local government(s) may enact, including infrastructure spending or deficit reduction measures, may have an adverse impact on our business, financial position, results of operations, cash flows and liquidity. In particular, low tax revenues, budget deficits, financing constraints, including timing of long-term federal, state and local funding releases, and competing priorities could negatively impact the ability of government agencies to fund existing or new infrastructure projects in the public sector. In addition, these factors could have a material adverse effect on the financial market and economic conditions in the United States as well as throughout the world, which may limit our ability and the ability of our customers to obtain financing and/or could impair our ability to execute our acquisition strategy. In addition, levels of new commercial and residential construction projects could be adversely affected by oversupply of existing inventories of commercial and residential properties, low property values and a restrictive financing environment.

• We work in a highly competitive marketplace. We have multiple competitors in all of the areas in which we work, and some of our competitors are larger than we are and may have greater resources than we do. Government funding for public works projects is limited, thus contributing to competition for the limited number of public projects available. This increased competition may result in a decrease in new awards at acceptable profit margins. In addition, should downturns in residential and commercial construction activity occur, the competition for available public sector work would intensify, which could impact our revenue, contract backlog and profit margins.

• Government contracts generally have strict regulatory requirements. Approximately 81.8% of our Construction and Large Project Construction revenue in 2017 was derived from contracts funded by federal, state and local government agencies and authorities. Government contracts are subject to specific procurement regulations, contract provisions and a variety of socioeconomic requirements relating to their formation, administration, performance and accounting and often include express or implied certifications of compliance. Claims for civil or criminal fraud may be brought for violations of regulations, requirements or statutes. We may also be subject to qui tam litigation brought by private individuals on behalf of the government under the Federal Civil False Claims Act, which could include claims for up to treble damages. Further, if we fail to comply with any of the regulations, requirements or statutes or if we have a substantial number of accumulated Occupational Safety and Health Administration, Mine Safety and Health Administration or other workplace safety violations, our existing government contracts could be terminated and we could be suspended from government contracting or subcontracting, including federally funded projects at the state level. Should one or more of these events occur, it could have a material adverse effect on our financial position, results of operations, cash flows and liquidity.

• Government contractors are subject to suspension or debarment from government contracting. Our substantial dependence on government contracts exposes us to a variety of risks that differ from those associated with private sector contracts. Various statutes to which our operations are subject, including the Davis-Bacon Act (which regulates wages and benefits), the Walsh-Healy Act (which prescribes a minimum wage and regulates overtime and working conditions), Executive Order 11246 (which establishes equal employment opportunity and affirmative action requirements) and the Drug-Free Workplace Act, provide for mandatory suspension and/or debarment of contractors in certain circumstances involving statutory violations. In addition, the Federal Acquisition Regulation and various state statutes provide for discretionary suspension and/or debarment in certain circumstances that might call into question a contractor’s willingness or ability to act responsibly, including as a result of being convicted of, or being found civilly liable for, fraud or a criminal offense in connection with obtaining, attempting to obtain or performing a public contract or subcontract. The scope and duration of any suspension or debarment may vary depending upon the facts and the statutory or regulatory grounds for debarment and could have a material adverse effect on our financial position, results of operations, cash flows and liquidity.

• Our success depends on attracting and retaining qualified personnel, joint venture partners and subcontractors in a competitive environment. The success of our business is dependent on our ability to attract, develop and retain qualified personnel, joint venture partners, advisors and subcontractors. Changes in general or local economic conditions and the resulting impact on the labor market and on our joint venture partners may make it difficult to attract or retain qualified individuals in the geographic areas where we perform our work. If we are unable to provide competitive compensation packages, high-quality training programs and attractive work environments or to establish and maintain successful partnerships, our reputation, relationships and/or ability to profitably execute our work could be adversely impacted.

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• Failure to maintain safe work sites could result in significant losses. Construction and maintenance sites are potentially dangerous workplaces and often put our employees and others in close proximity with mechanized equipment, moving vehicles, chemical and manufacturing processes, and highly regulated materials.  On many sites, we are responsible for safety and, accordingly, must implement safety procedures.  If we fail to implement these procedures or if the procedures we implement are ineffective, we may suffer the loss of or injury to our employees, as well as expose ourselves to possible litigation. Our failure to maintain adequate safety standards through our safety programs could result in reduced profitability or the loss of projects or clients, and could have a material adverse impact on our financial position, results of operations, cash flows and liquidity.

• As a part of our growth strategy we have made and may make future acquisitions, and acquisitions involve many risks. These risks include:

◦ difficulties integrating the operations and personnel of the acquired companies;

◦ diversion of management’s attention from ongoing operations;

◦ potential difficulties and increased costs associated with completion of any assumed construction projects;

◦ insufficient revenues to offset increased expenses associated with acquisitions and the potential loss of key employees or customers of the acquired companies;

◦ assumption of liabilities of an acquired business, including liabilities that were unknown at the time the acquisition was negotiated;

◦ difficulties relating to assimilating the personnel, services, and systems of an acquired business and to assimilating marketing and other operational capabilities;

◦ increased burdens on our staff and on our administrative, internal control and operating systems, which may hinder our legal and regulatory compliance activities;

◦ difficulties in applying and integrating our system of internal controls to an acquired business;

◦ if we issue additional equity securities, such issuances could have the effect of diluting our earnings per share as well as our existing shareholders’ individual ownership percentages in the Company;

◦ the recording of goodwill or other non-amortizable intangible assets that will be subject to subsequent impairment testing and potential impairment charges, as well as amortization expenses related to certain other intangible assets; and

◦ while we often obtain indemnification rights from the sellers of acquired businesses, such rights may be difficult to enforce, the losses may exceed any dedicated escrow funds, and the indemnitors may not have the ability to financially support the indemnity.

Failure to manage and successfully integrate acquisitions could harm our financial position, results of operations, cash flows and liquidity.

• An inability to obtain bonding could have a negative impact on our operations and results. As more fully described in “Insurance and Bonding” under “Item 1. Business,” we generally are required to provide surety bonds securing our performance under the majority of our public and private sector contracts. Our inability to obtain reasonably priced surety bonds in the future and, while we monitor the financial health of our insurers and the insurance market, catastrophic events could reduce available limits or the breadth of coverage both of which could significantly affect our ability to be awarded new contracts and could, therefore, have a material adverse effect on our financial position, results of operations, cash flows and liquidity.

• We may be unable to identify and contract with qualified Disadvantaged Business Enterprise (“DBE”) contractors to perform as subcontractors. Certain of our government agency projects contain minimum DBE participation clauses. If we subsequently fail to complete these projects with the minimum DBE participation, we may be held responsible for breach of contract, which may include restrictions on our ability to bid on future projects as well as monetary damages. To the extent we are responsible for monetary damages, the total costs of the project could exceed our original estimates, we could experience reduced profits or a loss for that project and there could be a material adverse impact to our financial position, results of operations, cash flows and liquidity.

• Fixed price and fixed unit price contracts subject us to the risk of increased project cost. As more fully described in “Contract Provisions and Subcontracting” under “Item 1. Business,” the profitability of our fixed price and fixed unit price contracts can be adversely affected by a number of factors that can cause our actual costs to materially exceed the costs estimated at the time of our original bid. This could result in reduced profits or a loss for that project and there could be a material adverse impact to our financial position, results of operations, cash flows and liquidity.

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• Design-build contracts subject us to the risk of design errors and omissions. Design-build is increasingly being used as a method of project delivery as it provides the owner with a single point of responsibility for both design and construction. We generally subcontract design responsibility to architectural and engineering firms. However, in the event of a design error or omission causing damages, there is risk that the subcontractor or their errors and omissions insurance would not be able to absorb the liability. In this case we may be responsible, resulting in a potentially material adverse effect on our financial position, results of operations, cash flows and liquidity.

• Many of our contracts have penalties for late completion. In some instances, including many of our fixed price contracts, we guarantee that we will complete a project by a certain date. If we subsequently fail to complete the project as scheduled we may be held responsible for costs resulting from the delay, generally in the form of contractually agreed-upon liquidated damages. To the extent these events occur, the total cost of the project could exceed our original estimate and we could experience reduced profits or a loss on that project and there could be a material adverse impact to our financial position, results of operations, cash flows and liquidity.

• Strikes or work stoppages could have a negative impact on our operations and results. We are party to collective bargaining agreements covering a portion of our craft workforce. Although strikes or work stoppages have not had a significant impact on our operations or results in the past, such labor actions could have a significant impact on our operations and results if they occur in the future.

• Failure of our subcontractors to perform as anticipated could have a negative impact on our results. As further described in “Contract Provisions and Subcontracting” under “Item 1. Business,” we subcontract portions of many of our contracts to specialty subcontractors, but we are ultimately responsible for the successful completion of their work. Although we seek to require bonding or other forms of guarantees, we are not always successful in obtaining those bonds or guarantees from our higher-risk subcontractors. In this case we may be responsible for the failures on the part of our subcontractors to perform as anticipated, resulting in a potentially adverse impact on our cash flows and liquidity. In addition, the total costs of a project could exceed our original estimates and we could experience reduced profits or a loss for that project, which could have an adverse impact on our financial position, results of operations, cash flows and liquidity.

• Our joint venture contracts subject us to risks and uncertainties, some of which are outside of our control. As further described in Note 1 of “Notes to the Consolidated Financial Statements” and under “Item 1. Business; Joint Ventures,” we perform certain construction contracts as a limited member of joint ventures. Participating in these arrangements exposes us to risks and uncertainties, including the risk that if our partners fail to perform under joint and several liability contracts, we could be liable for completion of the entire contract. In addition, if our partners are not able or willing to provide their share of capital investment to fund the operations of the venture, there could be unanticipated costs to complete the projects, financial penalties or liquidated damages. These situations could have a material adverse effect on our financial position, results of operations, cash flows and liquidity.

To the extent we are not the controlling partner, we have limited control over many of the decisions made with respect to the related construction projects. These joint ventures may not be subject to the same compliance requirements, including those related to internal control over financial reporting. While we have controls to sufficiently mitigate the risks associated with reliance on their control environment and financial information, to the extent the controlling partner makes decisions that negatively impact the joint venture or internal control problems arise within the joint venture, it could have a material adverse impact on our business, financial position, results of operations, cash flows and liquidity.

• Our failure to adequately recover on affirmative claims brought by us against project owners or other project participants (e.g., back charges against subcontractors) for additional contract costs could have a negative impact on our liquidity and future operations. In certain circumstances, we assert affirmative claims against project owners, engineers, consultants, subcontractors or others involved in a project for additional costs exceeding the contract price or for amounts not included in the original contract price. These types of affirmative claims occur due to matters such as delays or changes from the initial project scope, both of which may result in additional costs. Often, these affirmative claims can be the subject of lengthy arbitration or litigation proceedings, and it is difficult to accurately predict when and on what terms they will be fully resolved. The potential gross profit impact of recoveries for affirmative claims may be material in future periods when they, or a portion of them, become probable and estimable or are settled. When these types of events occur, we use working capital to cover cost overruns pending the resolution of the relevant affirmative claims and may incur additional costs when pursuing such potential recoveries. A failure to recover on these types of affirmative claims promptly and fully could have a negative impact on our financial position, results of operations, cash flows and liquidity. In addition, while clients and subcontractors may be obligated to indemnify us against certain liabilities, such third parties may refuse or be unable to pay us.

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• Failure to remain in compliance with covenants under our debt and credit agreements, service our indebtedness, or fund our other liquidity needs could adversely impact our business. Our debt and credit agreements and related restrictive and financial covenants are more fully described in Note 11 of “Notes to the Consolidated Financial Statements.” Our failure to comply with any of these covenants, or to pay principal, interest or other amounts when due thereunder, would constitute an event of default under the applicable agreements.  Under certain circumstances, the occurrence of an event of default under one of our debt or credit agreements (or the acceleration of the maturity of the indebtedness under one of our agreements) may constitute an event of default under one or more of our other debt or credit agreements. Default under our debt and credit agreements could result in (i) us no longer being entitled to borrow under the agreements; (ii) termination of the agreements; (iii) the requirement that any letters of credit under the agreements be cash collateralized; (iv) acceleration of the maturity of outstanding indebtedness under the agreements; and/or (v) foreclosure on any collateral securing the obligations under the agreements. If we are unable to service our debt obligations or fund our other liquidity needs, we could be forced to curtail our operations, reorganize our capital structure (including through bankruptcy proceedings) or liquidate some or all of our assets in a manner that could cause holders of our securities to experience a partial or total loss of their investment in us.

• Unavailability of insurance coverage could have a negative effect on our operations and results. We maintain insurance coverage as part of our overall risk management strategy and pursuant to requirements to maintain specific coverage that are contained in our financing agreements and in most of our construction contracts. Although we have been able to obtain reasonably priced insurance coverage to meet our requirements in the past, there is no assurance that we will be able to do so in the future, and our inability to obtain such coverage could have an adverse impact on our ability to procure new work, which could have a material adverse effect on our financial position, results of operations, cash flows and liquidity.

• Accounting for our revenues and costs involves significant estimates. As further described in “Critical Accounting Policies and Estimates” under “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations,” accounting for our contract-related revenues and costs, as well as other expenses, requires management to make a variety of significant estimates and assumptions. Although we believe we have sufficient experience and processes to enable us to formulate appropriate assumptions and produce reasonably dependable estimates, these assumptions and estimates may change significantly in the future and could result in the reversal of previously recognized revenue and profit. Such changes could have a material adverse effect on our financial position and results of operations.

• We use certain commodity products that are subject to significant price fluctuations. Petroleum based products, such as fuels, lubricants, and liquid asphalt, are used to power or lubricate our equipment, operate our plants, and a significant ingredient in the asphaltic concrete we manufacture for sale to third parties and use in our asphalt paving construction projects. Although we are partially protected by asphalt or fuel price escalation clauses in some of our contracts, many contracts provide no such protection. We also use steel and other commodities in our construction projects that can be subject to significant price fluctuations. To mitigate these risks, we pre-purchase commodities, enter into supply agreements or enter into financial contracts to secure pricing.  Although we have not been significantly adversely affected by price fluctuations in the past, there is no guarantee that we will not be in the future.

• We are subject to environmental and other regulation. As more fully described in “Environmental Regulations” under “Item 1. Business,” we are subject to a number of federal, state and local laws and regulations relating to the environment, workplace safety and a variety of socioeconomic requirements. Noncompliance with such laws and regulations can result in substantial penalties, or termination or suspension of government contracts as well as civil and criminal liability. In addition, some environmental laws and regulations impose liability and responsibility on present and former owners, operators or users of facilities and sites for contamination at such facilities and sites, without regard to causation or knowledge of contamination. We occasionally evaluate various alternatives with respect to our facilities, including possible dispositions or closures. Investigations undertaken in connection with these activities may lead to discoveries of contamination that must be remediated, and closures of facilities may trigger compliance requirements that are not applicable to operating facilities. While compliance with these laws and regulations has not materially adversely affected our operations in the past, there can be no assurance that these requirements will not change and that compliance will not adversely affect our operations in the future. Furthermore, we cannot provide assurance that existing or future circumstances or developments with respect to contamination will not require us to make significant remediation or restoration expenditures.

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• Weather can significantly affect our revenues and profitability. Our ability to perform work is significantly affected by weather conditions such as precipitation and temperature. Changes in weather conditions can cause delays and otherwise significantly affect our project costs. The impact of weather conditions can result in variability in our quarterly revenues and profitability, particularly in the first and fourth quarters of the year.

• Increasing restrictions on securing aggregate reserves could negatively affect our future operations and results. Tighter regulations and the finite nature of property containing suitable aggregate reserves are making it increasingly challenging and costly to secure aggregate reserves. Although we have thus far been able to secure reserves to support our business, our financial position, results of operations, cash flows and liquidity may be adversely affected by an increasingly difficult permitting process.

• We may be required to contribute cash to meet our unfunded pension obligations in certain multi-employer plans. Four of our wholly-owned subsidiaries, Granite Construction Company, Granite Construction Northeast, Inc., Granite Industrial, Inc., and Kenny Construction Company, participate in various domestic multi-employer pension plans on behalf of union employees. Union employee benefits generally are based on a fixed amount for each year of service. We are required to make contributions to the plans in amounts established under collective bargaining agreements.  Pension expense is recognized as contributions are made. The domestic pension plans are subject to the Employee Retirement Income Security Act of 1974 (“ERISA”). Under ERISA, a contributor to a multi-employer plan may be liable, upon termination or withdrawal from a plan, for its proportionate share of a plan’s unfunded vested liability. While we currently have no intention of withdrawing from a plan and unfunded pension obligations have not significantly affected our operations in the past, there can be no assurance that we will not be required to make material cash contributions to one or more of these plans to satisfy certain underfunded benefit obligations in the future.

• Force majeure events, including natural disasters and terrorists’ actions, could negatively impact our business, which may affect our financial condition, results of operations or cash flows. Force majeure or extraordinary events beyond the control of the contracting parties, such as natural and man-made disasters, as well as terrorist actions, could negatively impact the economies in which we operate.  We typically negotiate contract language where we are allowed certain relief from force majeure events in private client contracts and review and attempt to mitigate force majeure events in both public and private client contracts. We remain obligated to perform our services after most extraordinary events subject to relief that may be available pursuant to a force majeure clause.  If we are not able to react quickly to force majeure events, our operations may be affected, which could have a material adverse effect on our financial position, results of operations, cash flows and liquidity.

• Changes to our outsourced software or infrastructure vendors as well as any sudden loss, breach of security, disruption or unexpected data or vendor loss associated with our information technology systems could have a material adverse effect on our business. We rely on third-party software and infrastructure to run critical accounting, project management and financial information systems.  If software or infrastructure vendors decide to discontinue further development, integration or long-term maintenance support for our information systems, or there is any system interruption, delay, breach of security, loss of data or loss of a vendor, we may need to migrate some or all of our accounting, project management and financial information to other systems. Despite business continuity plans, these disruptions could increase our operational expense as well as impact the management of our business operations, which could have a material adverse effect on our financial position, results of operations, cash flows and liquidity.

• Cybersecurity attacks on or breaches of our information technology environment could result inbusiness interruptions, remediation costs and/or legal claims. To protect confidential customer, vendor, financial and employee information, we employ information security measures that secure our information systems from cybersecurity attacks or breaches. Even with these measures, we may be subject to unauthorized access of digital data with the intent to misappropriate information, corrupt data or cause operational disruptions. If a failure of our safeguarding measures were to occur, it could have a negative impact to our business and result in business interruptions, remediation costs and/or legal claims, which could have a material adverse effect on our financial position, results of operations, cash flows and liquidity.

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• A change in tax laws or regulations of any federal, state or international jurisdiction in which we operate could increase our tax burden and otherwise adversely affect our financial position, results of operations, cash flows and liquidity. We continue to assess the impact of various U.S. federal, state, local and international legislative proposals that could result in a material increase to our U.S. federal, state, local and/or international taxes. We cannot predict whether any specific legislation will be enacted or the terms of any such legislation. However, if such proposals were to be enacted, or if modifications were to be made to certain existing regulations, the consequences could have a material adverse impact on us, including increasing our tax burden, increasing our cost of tax compliance or otherwise adversely affecting our financial position, results of operations, cash flows and liquidity.

• Our contract backlog is subject to unexpected adjustments and cancellations and could be an uncertain indicator of our future earnings. We cannot guarantee that the revenues projected in our contract backlog will be realized or, if realized, will be profitable. Projects reflected in our contract backlog may be affected by project cancellations, scope adjustments, time extensions or other changes. Such changes may adversely affect the revenue and profit we ultimately realize on these projects.

• Our business strategy includes growing our international operations, which are subject to a number of special risks. As part of our strategic diversification efforts, we may enter into more construction contracts in international locations, which may subject us to a number of special risks unique to foreign countries and/or operations. Due to the special risks associated with non-U.S. operations, our exposure to such risks may not be proportionate to the percentage of our revenues attributable to such operations.

• Rising inflation and/or interest rates could have an adverse effect on our business, financial condition and results of operations. Economic factors, including inflation and fluctuations in interest rates, could have a negative impact on our business. If our costs were to become subject to significant inflationary pressures, we may not be able to fully offset such higher costs through price increases. Our inability or failure to do so could have a material adverse effect on our financial position, results of operations, cash flows and liquidity.

The foregoing list is not all-inclusive. There can be no assurance that we have correctly identified and appropriately assessed all factors affecting our business or that the publicly available and other information with respect to these matters is complete and correct. Additional risks and uncertainties not presently known to us or that we currently believe to be immaterial may also adversely affect us. These developments could have material adverse effects on our business, financial condition, results of operations and liquidity. For these reasons, the reader is cautioned not to place undue reliance on our forward-looking statements.

Item 1B. UNRESOLVED STAFF COMMENTS

None.

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Item 2. PROPERTIES

Quarry Properties

As of December 31, 2017, we had 46 active and 15 inactive permitted quarry properties available for the extraction of sand and gravel and hard rock, all of which are located in the western United States. All of our quarries are open-pit and are primarily accessible by road. We process aggregates into construction materials for internal use and for sale to third parties. Our plant equipment is powered mostly by electricity provided by local utility companies. The following map shows the approximate locations of our permitted quarry properties as of December 31, 2017.

We estimate our permitted proven¹ and probable² aggregate reserves to be approximately 680.1 million tons with an average permitted life of approximately 54 years at present operating levels. Present operating levels are determined based on a three-year annual average aggregate production rate of 12.7 million tons. Reserve estimates were made by our geologists and engineers based primarily on drilling studies. Reserve estimates are based on various assumptions, and any material inaccuracies in these assumptions could have a material impact on the accuracy of our reserve estimates. These properties are primarily used by our Construction and Construction Materials segments.

¹Proven reserves are determined through the testing of samples obtained from closely spaced subsurface drilling and/or exposed pit faces. Proven reserves are sufficiently understood so that quantity, quality, and engineering conditions are known with sufficient accuracy to be mined without the need for any further subsurface work. Actual required spacing is based on geologic judgment about the predictability and continuity of each deposit.

²Probable reserves are determined through the testing of samples obtained from subsurface drilling but the sample points are too widely spaced to allow detailed prediction of quantity, quality, and engineering conditions. Additional subsurface work may be needed prior to mining the reserve.

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The following tables present information about our quarry properties as of December 31, 2017 (tons in millions):

	Type
Quarry Properties	Sand & Gravel	Hard Rock	Permitted Aggregate Reserves (tons)	Unpermitted Aggregate Reserves (tons)	Three-Year Annual Average Production Rate (tons)	Average Reserve Life
Owned quarry properties	22	4	397.5	345.0	5.9	67
Leased quarry properties1	23	12	282.6	41.6	6.8	41

¹Our leases have terms which range from month-to-month to 45 years with most including an option to renew.

		Permitted Reserves for Each Product Type (tons)		Percentage of Permitted Reserves Owned and Leased
State	Number of Properties	Sand & Gravel	Hard Rock	Owned		Leased
California	24	239.4	222.4	56	%	44	%
Non-California	37	127.9	90.4	64	%	36	%

Plant Properties

We operate plants at our quarry sites to process aggregates into construction materials. Some of our sites may have more than one crushing, concrete or asphalt processing plant. In an effort to continuously increase efficiencies based on external and internal demands, we sold or otherwise disposed of three plants during 2017 and several plants and the associated land in California during 2016. These sales or dispositions resulted in gains during 2017 and 2016 of approximately $0.2 million and $2.6 million, respectively, that were recorded to gain on sales of property and equipment in the consolidated statements of operations. At December 31, 2017 and 2016, we owned the following plants:

December 31,	2017	2016
Aggregate crushing plants	29	30
Asphalt concrete plants	49	50
Cement concrete batch plants	7	7
Asphalt rubber plants	6	6
Lime slurry plants	8	8

These plants are primarily used by our Construction and Construction Materials segments.

Other Properties

The following table provides our estimate of certain information about other properties as of December 31, 2017:

	Land Area (acres)	Building Square Feet
Office and shop space (owned and leased)	1,255	1,435,778

As of December 31, 2017, approximately 57% of our office and shop space was attributable to our Construction segment, 7% to our Large Project Construction segment and 4% to our Construction Materials segment. The remainder is primarily attributable to administration.

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Item 3. LEGAL PROCEEDINGS 

In the ordinary course of business, we and our affiliates are involved in various legal proceedings alleging, among other things, liability issues or breach of contract or tortious conduct in connection with the performance of services and/or materials provided, the outcomes of which cannot be predicted with certainty. We and our affiliates are also subject to government inquiries in the ordinary course of business seeking information concerning our compliance with government construction contracting requirements and various laws and regulations, the outcomes of which cannot be predicted with certainty.

Some of the matters in which we or our joint ventures and affiliates are involved may involve compensatory, punitive, or other claims or sanctions that, if granted, could require us to pay damages or make other expenditures in amounts that are not probable to be incurred or cannot currently be reasonably estimated. In addition, in some circumstances our government contracts could be terminated, we could be suspended, debarred or incur other administrative penalties or sanctions, or payment of our costs could be disallowed. While any of our pending legal proceedings may be subject to early resolution as a result of our ongoing efforts to resolve the proceeding whether or when any legal proceeding will be resolved is neither predictable nor guaranteed.

Accordingly, it is possible that future developments in such proceedings and inquiries could require us to (i) adjust existing accruals, or (ii) record new accruals that we did not originally believe to be probable or that could not be reasonably estimated. Such changes could be material to our financial condition, results of operations and/or cash flows in any particular reporting period. In addition to matters that are considered probable for which the loss can be reasonably estimated, disclosure is also provided when it is reasonably possible and estimable that a loss will be incurred or when it is reasonably possible that the amount of a loss will exceed the amount recorded.

Liabilities relating to legal proceedings and government inquiries, to the extent that we have concluded such liabilities are probable and the amounts of such liabilities are reasonably estimable, are recorded in the consolidated balance sheets. The aggregate liabilities recorded as of December 31, 2017 and 2016 related to these matters were approximately $0.9 million and $4.3 million, respectively, and were primarily included in accounts payable and accrued expenses and other current liabilities in our consolidated balance sheets. The aggregate range of possible loss related to (i) matters considered reasonably possible, and (ii) reasonably possible amounts in excess of accrued losses recorded for probable loss contingencies, including those related to liquidated damages, could have a material impact on our consolidated financial statements if they become probable and the reasonably estimable amount is determined.

Item 4. MINE SAFETY DISCLOSURES

The information concerning mine safety violations or other regulatory matters required by Section 1503(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act and Item 104 of Regulation S-K (17CFR 229.104) is included in Exhibit 95 to this Annual Report on Form 10-K.

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PART II

Item 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Our common stock trades on the New York Stock Exchange under the ticker symbol GVA.

As of February 13, 2018, there were 39,890,345 shares of our common stock outstanding held by 709 shareholders of record.

We have paid quarterly cash dividends since the second quarter of 1990, and we expect to continue to do so. However, declaration and payment of dividends is within the sole discretion of our Board of Directors, subject to limitations imposed by Delaware law and compliance with our credit agreements (which allow us to pay dividends so long as we have at least $150 million in unencumbered cash and cash equivalents and marketable securities), and will depend on our earnings, capital requirements, financial condition and such other factors as the Board of Directors deems relevant. As of December 31, 2017, we had unencumbered cash, cash equivalents and marketable securities that exceeded the aforementioned limitations.

Market Price and Dividends of Common Stock
2017 Quarters Ended	December 31,		September 30,		June 30,		March 31,
High	$	67.40	$	59.36	$	55.11	$	59.99
Low	55.78		47.05		45.14		45.19
Dividends per share	0.13		0.13		0.13		0.13
2016 Quarters Ended	December 31,		September 30,		June 30,		March 31,
High	$	62.18	$	51.35	$	48.59	$	47.99
Low	42.59		44.35		40.16		35.69
Dividends per share	0.13		0.13		0.13		0.13

During the three months ended December 31, 2017, we did not sell any of our equity securities that were not registered under the Securities Act of 1933, as amended. The following table sets forth information regarding the repurchase of shares of our common stock during the three months ended December 31, 2017:

Period	Total Number of Shares Purchased1	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Approximate Dollar Value of Shares that May Yet be Purchased Under the Plans or Programs2
October 1 through October 31, 2017	109	$	58.43	—	$	200,000,000
November 1 through November 30, 2017	810	$	64.34	—	$	200,000,000
December 1 through December 31, 2017	3,144	$	65.34	—	$	200,000,000
Total	4,063	$	64.96	—

¹The number of shares purchased is in connection with employee tax withholding for units vested under our 2012 Equity Incentive Plan.

² On April 7, 2016, the Board of Directors authorized us to purchase up to $200.0 million of our common stock at management’s discretion, which replaced the former authorization including the amount available. We did not purchase shares under the share purchase plan in any of the periods presented. The specific timing and amount of any future purchases will vary based on market conditions, securities law limitations and other factors.

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Performance Graph

The following graph compares the cumulative 5-year total return provided to shareholders on Granite Construction Incorporated’s common stock relative to the cumulative total returns of the S&P 500 index and the Dow Jones U.S. Heavy Construction index. The Dow Jones U.S. Heavy Construction index includes the following companies: AECOM, Chicago Bridge & Iron Co NV, EMCOR Group Inc., Fluor Corp., Jacobs Engineering Group Inc., KBR Inc., Quanta Services Inc., and Valmont Industries Inc. Certain of these companies differ from Granite in that they derive revenue and profit from non-U.S. operations and have customers in different markets. The graph tracks the performance of a $100 investment in our common stock and in each (with the reinvestment of all dividends) from December 31, 2012 through December 31, 2017.

COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*

Among Granite Construction Incorporated, the S&P 500 Index

and the Dow Jones U.S. Heavy Construction Index

n Granite Construction Incorporated u S&P 500 l DOW Jones U.S. History Construction

*$100 invested on 12/31/12 in stock or index, including reinvestment of dividends. Fiscal year ending December 31.

December 31,	2012		2013		2014		2015		2016		2017
Granite Construction Incorporated	$	100.00	$	105.77	$	116.62	$	133.57	$	173.07	$	201.52
S&P 500	100.00		132.39		150.51		152.59		170.84		208.14
Dow Jones U.S. Heavy Construction	100.00		131.28		97.77		86.51		106.71		112.44

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Item 6. SELECTED FINANCIAL DATA

Other than contract backlog, the selected consolidated financial data set forth below have been derived from our consolidated financial statements. Refer to the consolidated financial statements for further information. These historical results are not necessarily indicative of the results of operations to be expected for any future period.

Selected Consolidated Financial Data
Years Ended December 31,	2017			2016			2015			2014			2013
Operating Summary	(In Thousands, Except Per Share Data)
Revenue1	$	2,989,713		$	2,514,617		$	2,371,029		$	2,275,270		$	2,266,901
Gross profit1	314,933			301,370			299,836			239,741			177,177
As a percent of revenue	10.5		%	12.0		%	12.6		%	10.5		%	7.8		%
Selling, general and administrative expenses	222,811			219,299			203,817			193,256			191,860
As a percent of revenue	7.5		%	8.7		%	8.6		%	8.5		%	8.5		%
Restructuring (gains) charges, net2	(2,411		)	(1,925		)	(6,003		)	(2,643		)	52,139
Net income (loss)	75,801			66,200			68,248			35,876			(44,766		)
Amount attributable to non-controlling interests	(6,703		)	(9,078		)	(7,763		)	(10,530		)	8,343
Net income (loss) attributable to Granite1	69,098			57,122			60,485			25,346			(36,423		)
As a percent of revenue	2.3		%	2.3		%	2.6		%	1.1		%	(1.6		)%
Net income (loss) per share attributable to common shareholders:
Basic	$	1.74		$	1.44		$	1.54		$	0.65		$	(0.94	)
Diluted	$	1.71		$	1.42		$	1.52		$	0.64		$	(0.94	)
Weighted average shares of common stock:
Basic	39,795			39,557			39,337			39,096			38,803
Diluted	40,372			40,225			39,868			39,795			38,803
Dividends per common share	$	0.52		$	0.52		$	0.52		$	0.52		$	0.52
Consolidated Balance Sheet
Total assets	$	1,871,978		$	1,733,453		$	1,626,878		$	1,600,048		$	1,609,362
Cash, cash equivalents and marketable securities	366,501			317,105			358,531			358,028			346,323
Working capital	576,804			559,058			519,177			454,121			396,759
Current maturities of long-term debt	46,048			14,796			14,800			1,247			1,247
Long-term debt	178,453			229,498			244,323			275,621			276,868
Other long-term liabilities	45,446			51,430			46,613			44,495			48,580
Granite shareholders’ equity	945,108			885,988			839,237			794,385			781,940
Book value per share	23.70			22.36			21.29			20.27			20.09
Common shares outstanding	39,871			39,621			39,413			39,186			38,918
Contract backlog	$	3,718,157		$	3,484,405		$	2,908,438		$	2,718,873		$	2,526,751

1 During the year ended December 31, 2017, we identified and corrected amounts related to revisions in estimates that should have been recorded during the year ended December, 31, 2016. These corrections resulted in a $4.9 million decrease to revenue and gross profit and a $1.6 million decrease in net income attributable to Granite Construction Incorporated for the year ended December 31, 2017 (see Note 2 of “Notes to the Consolidated Financial Statements”).

2 During the years ended December 31, 2017, 2016, 2015 and 2014 we recorded restructuring gains of $2.4 million, $1.9 million, $6.0 million and $1.3 million, respectively, related to our 2010 Enterprise Improvement Plan (“EIP”). In addition, during 2014, we recorded $1.3 million in gains related to nonperforming quarry sites and during 2013, we recorded net restructuring charges of $49.0 million, including amounts attributable to non-controlling interests of $3.9 million, related to our EIP and $3.1 million in other impairment charges related to nonperforming quarry sites.

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Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION ANDRESULTS OF OPERATIONS

General

We are one of the largest diversified heavy civil contractors and construction materials producers in the United States, engaged in the construction and improvement of streets, roads, highways, mass transit facilities, airport infrastructure, bridges, trenchless and underground utilities, power-related facilities, water-related facilities, utilities, tunnels, dams and other infrastructure-related projects. We own aggregate reserves and plant facilities to produce construction materials for use in our construction business and for sale to third parties. Our permanent offices are located in Alaska, Arizona, California, Florida, Illinois, Nevada, New York, Texas, Utah and Washington. We have three reportable business segments: Construction, Large Project Construction and Construction Materials (see Note 18 of “Notes to the Consolidated Financial Statements”).

In addition to business segments, we review our business by operating groups and by public and private market sectors. Our operating groups are defined as follows: (i) California; (ii) Northwest, which primarily includes offices in Alaska, Arizona, Nevada, Utah and Washington; (iii) Heavy Civil, which primarily includes offices in California, Florida, New York and Texas; and (iv) Kenny, which primarily includes offices in Illinois. Each of these operating groups may include financial results from our Construction and Large Project Construction segments. A project’s results are reported in the operating group that is responsible for the project, not necessarily the geographic area where the work is located. In some cases, the operations of an operating group include the results of work performed outside of that geographic region. Our California and Northwest operating groups include financial results from our Construction Materials segment.

The four primary economic drivers of our business are (i) the overall health of the U.S. economy; (ii) federal, state and local public funding levels; (iii) population growth resulting in public and private development; and (iv) the need to replace or repair aging infrastructure. A stagnant or declining economy will generally result in reduced demand for construction and construction materials in the private sector. This reduced demand increases competition for private sector projects and will ultimately also increase competition in the public sector as companies migrate from bidding on scarce private sector work to projects in the public sector. In addition, a stagnant or declining economy tends to produce less tax revenue for public agencies, thereby decreasing a source of funds available for spending on public infrastructure improvements. Some funding sources that have been specifically earmarked for infrastructure spending, such as diesel and gasoline taxes, are not as directly affected by a stagnant or declining economy, unless actual consumption is reduced or gasoline sales tax revenues decline consistent with fuel prices. However, even these can be temporarily at risk as federal, state and local governments take actions to balance their budgets. Additionally, fuel prices and more fuel efficient vehicles can have a dampening effect on consumption, resulting in overall lower tax revenue. Conversely, increased levels of public funding as well as an expanding or robust economy will generally increase demand for our services and provide opportunities for revenue growth and margin improvement.

Critical Accounting Policies and Estimates

The financial statements included in “Item 8. Financial Statements and Supplementary Data” have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). The preparation of these financial statements requires management to make estimates that affect the reported amounts of assets and liabilities, revenue and expenses, and related disclosure of contingent assets and liabilities. Our estimates and related judgments and assumptions are continually evaluated based on available information and experiences; however, actual amounts could differ from those estimates.

The following are accounting policies and estimates that involve significant management judgment and can have significant effects on the Company’s reported results of operations. The Audit/Compliance Committee of our Board of Directors has reviewed our disclosure of critical accounting policies and estimates.  

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Revenue and Earnings Recognition for Construction Contracts

Revenue and earnings on construction contracts, including construction joint ventures, are recognized under the percentage of completion method using the ratio of costs incurred to estimated total costs.

Revenue from unapproved change orders is recognized to the extent the related costs have been incurred, the amount can be reliably estimated and recovery is probable.

On certain projects we have submitted and have pending unresolved contract modifications and affirmative claims (“affirmative claims”) to recover additional costs to which the Company believes it is entitled under the terms of contracts with customers, subcontractors, vendors or others. The owners or their authorized representatives and/or other third parties may be in partial or full agreement with the modifications or affirmative claims, or may have rejected or disagree entirely or partially as to such entitlement.

Revenue related to affirmative claims with customers is recognized to the extent of costs incurred when it is probable that a claim settlement with a customer will result in additional revenue and the amount can be reasonably estimated. A reduction to costs related to affirmative claims with non-customers with whom we have a contractual arrangement (“back charges”) is recognized when the estimated recovery is probable and the amount can be reasonably estimated. Except for contractual back charges, a reduction to cost related to affirmative claims against non-customers is recognized when the claims are settled. Recognizing affirmative claims and back charge recoveries requires significant judgments of certain factors including, but not limited to, dispute resolution developments and outcomes, anticipated negotiation results, and the cost of resolving such matters and estimates.

Provisions are recognized in the consolidated statements of operations for the full amount of estimated losses on uncompleted contracts whenever evidence indicates that the estimated total cost of a contract exceeds its estimated total revenue. All contract costs, including those associated with affirmative claims, change orders and back charges, are recorded as incurred and revisions to estimated total costs are reflected as soon as the obligation to perform is determined. Contract costs consist of direct costs on contracts, including labor and materials, amounts payable to subcontractors, direct overhead costs and equipment expense (primarily depreciation, fuel, maintenance and repairs). All state and federal government contracts and many of our other contracts provide for termination of the contract at the convenience of the party contracting with us, with provisions to pay us for work performed through the date of termination. Pre-contract costs are expensed as incurred.

The accuracy of our revenue and profit recognition in a given period depends on the accuracy of our estimates of the cost to complete each project. Cost estimates for all of our projects use a detailed “bottom up” approach and we believe our experience allows us to create materially reliable estimates. There are a number of factors that can contribute to changes in estimates of contract cost and profitability. The most significant of these include:

• the completeness and accuracy of the original bid;

• costs associated with scope changes;

• changes in costs of labor and/or materials;

• extended overhead and other costs due to owner, weather and other delays;

• subcontractor performance issues;

• changes in productivity expectations;

• site conditions that differ from those assumed in the original bid;

• changes from original design on design-build projects;

• the availability and skill level of workers in the geographic location of the project;

• a change in the availability and proximity of equipment and materials;

• our ability to fully and promptly recover on affirmative claims and back charges for additional contract costs; and

• the customer’s ability to properly administer the contract.

The foregoing factors, as well as the stage of completion of contracts in process and the mix of contracts at different margins may cause fluctuations in gross profit and gross profit margin from period to period. Significant changes in cost estimates, particularly in our larger, more complex projects have had, and can in future periods have, a significant effect on our profitability.

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Goodwill

As of December 31, 2017 and 2016, we had five reporting units in which goodwill was recorded as follows:

• Kenny Group Construction

• Kenny Group Large Project Construction

• Northwest Group Construction

• Northwest Group Construction Materials

• California Group Construction

The most significant goodwill balances reside in the reporting units associated with the Kenny Group. See Note 9 of “Notes to the Consolidated Financial Statements” for balances by reportable segment.

We perform impairment tests annually as of November 1 and more frequently when events and circumstances occur that indicate a possible impairment of goodwill. In addition, we evaluate goodwill for impairment if events or circumstances change between annual tests indicating a possible impairment.  Examples of such events or circumstances include the following: 

• a significant adverse change in legal factors or in the business climate; 

• an adverse action or assessment by a regulator; 

• a more likely than not expectation that a segment or a significant portion thereof will be sold; or 

• the testing for recoverability of a significant asset group within the segment. 

We elected to only perform the quantitative goodwill impairment tests for the 2017 annual test. In performing the quantitative goodwill impairment tests, we calculate the estimated fair value of the reporting unit in which the goodwill is recorded using the discounted cash flows and market multiple methods. Judgments inherent in these methods include the determination of appropriate discount rates, the amount and timing of expected future cash flows and growth rates, and appropriate benchmark companies. The cash flows used in our 2017 discounted cash flow model were based on five-year financial forecasts, which in turn were based on the 2018-2020 operating plan developed internally by management adjusted for market participant-based assumptions. Our discount rate assumptions are based on an assessment of the equity cost of capital and appropriate capital structure for our reporting units. In assessing the reasonableness of our determined fair values of our reporting units, we evaluate the reasonableness of our results against our current market capitalization. 

The estimated fair value is compared to the net book value of the reporting unit, including goodwill. If the fair value of the reporting unit exceeds its net book value, goodwill of the reporting unit is considered not impaired. If the fair value of the reporting unit is less than its net book value, goodwill is impaired and the excess of the reporting unit’s net book value over the fair value is recognized as an impairment loss.

The results of our annual goodwill impairment tests, performed in accordance with Accounting Standards Codification (“ASC”) Topic 350, Intangibles - Goodwill and Other, indicated that the estimated fair values of our reporting units exceeded their net book values (i.e., cushion) by at least 20% for the reporting units with goodwill. Out of the five reporting units with goodwill, the Kenny Large Project Construction business is the most susceptible to fluctuations in results depending on awarded work given the large size and limited frequency of awards. While we believe the current cushion for the reporting unit is adequate to absorb these fluctuations, a material decline in job win rates could have a material impact to this reporting unit’s estimated fair value.

Long-lived Assets

We review property and equipment and amortizable intangible assets for impairment at an asset group level whenever events or changes in circumstances indicate the net book value of an asset group may not be recoverable. Recoverability of these asset groups is measured by comparing their net book values to the future undiscounted cash flows the asset groups are expected to generate. If the asset groups are considered to be impaired, an impairment charge will be recognized equal to the amount by which the net book value of the asset group exceeds fair value. We group construction and plant equipment assets at a regional level, which represents the lowest level for which identifiable cash flows are largely independent of the cash flows of other groups of assets. When an individual asset or group of assets is determined to no longer contribute to the vertically integrated asset group, it is assessed for impairment independently.

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Insurance Estimates

We carry insurance policies to cover various risks, primarily general liability, automobile liability, workers compensation and employee medical expenses under which we are liable to reimburse the insurance company for a portion of each claim paid. Payment for general liability and workers compensation claim amounts generally range from the first $0.5 million to $1.0 million per occurrence. We accrue for probable losses, both reported and unreported, that are reasonably estimable using actuarial methods based on historic trends, modified, if necessary, by recent events. Changes in our loss assumptions caused by changes in actual experience would affect our assessment of the ultimate liability and could have an effect on our operating results and financial position up to $1.0 million per occurrence for general liability and workers compensation or $0.3 million for medical insurance.

Asset Retirement Obligations

We account for the costs related to legal obligations to reclaim aggregate mining sites and other facilities by recording our estimated asset retirement obligation at fair value, capitalizing the estimated liability as part of the related asset’s carrying amount and allocating it to expense over the asset’s useful life. To determine the fair value of the obligation, we estimate the cost for a third-party to perform the legally required reclamation including a reasonable profit margin. This cost is then increased for future estimated inflation based on the estimated years to complete and discounted to fair value using present value techniques with a credit-adjusted, risk-free rate. In estimating the settlement date, we evaluate the current facts and conditions to determine the most likely settlement date.

We review reclamation obligations at least annually for a revision to the cost or a change in the estimated settlement date. Additionally, reclamation obligations are reviewed in the period that a triggering event occurs that would result in either a revision to the cost or a change in the estimated settlement date.

Contingencies

We are currently involved in various claims and legal proceedings. Loss contingency provisions are recorded if the potential loss from any asserted or unasserted claim or legal proceeding is considered probable and the amount can be reasonably estimated. If a potential loss is considered probable but only a range of loss can be determined, the low-end of the range is recorded. These accruals represent management’s best estimate of probable loss. Disclosure is also provided when it is reasonably possible and estimable that a loss will be incurred or when it is reasonably possible that the amount of a loss will exceed the amount recorded. Significant judgment is required in both the determination of probability of loss and the determination as to whether an exposure is reasonably estimable. Because of uncertainties related to these matters, accruals are based only on the best information available at the time. As additional information becomes available, we reassess the potential liability related to claims and litigation and may revise our estimates. See Note 17 of “Notes to the Consolidated Financial Statements” and “Item 3. Legal Proceedings” for additional information.

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Current Economic Environment and Outlook

Steady demand across end markets and geographies enabled our teams to finish the 2017 fiscal year in a very solid position. Total Company backlog finished at $3.7 billion, a year-end record. Public and private markets remain highly competitive, as economic stability and steady-to-improving demand continue to provide broad growth opportunities for our businesses. Following decades of under-investment, state, regional, and local public infrastructure investment is poised to grow. We continue to emphasize pricing discipline, balancing a bottom-line focus in 2018 with significant, long-term revenue growth opportunities for our Construction and Construction Materials segments emanating from a significant step-up in public investment this year.

State and local infrastructure funding commitments across the country have improved significantly in the past few years. More than half of U.S. states have taken action over the past five years to stabilize maintenance and to reinvest in transportation infrastructure. Recent, long-term voter- and legislature-approved measures across the Western U.S. totaling more than $200 billion, comprise and are the resources for a long-overdue, long-term infrastructure investment, one that we expect will fuel increased near-term public demand in 2018. California’s 10-year, $52.4 billion investment from Senate Bill 1 (“SB1”), The Road Repair and Accountability Act of 2017, passed in the second quarter of 2017, and spending is slated to accelerate meaningfully in 2018 and beyond. On the June 5, 2018 California ballot, voters will weigh in on Proposition 69, which amends the California Constitution to protect funds designated for transportation to only be used for that purpose. Recent polling appears to indicate broad support for this measure, which would protect the SB1 funds for their designated transportation use. Certain California groups are attempting to add a voter initiative to repeal SB1 to the November 2018 ballot; no such initiative has yet qualified. We are continuing to monitor progress on this initiative.

Congress recently passed and the President signed a two-year federal budget agreement, ending more than six years of funding by continuing resolution. This bolsters funding for the Fixing America’s Surface Transportation (“FAST”) Act, passed in December 2015, which has broadened and stabilized state and local visibility through 2020. Should the federal government approve substantive, incremental infrastructure investment in 2018, it would be an additional growth catalyst; however, it would be unlikely to create significant business impact before 2019 or 2020.

Managing risks and being compensated appropriately for the complex skills required to build tomorrow's great public infrastructure projects guides our Large Project Construction strategy. The market for these projects remains robust. As we prioritize and pursue billions of dollars worth of future North American projects, we are acutely focused on projects that provide appropriate returns relative to risks.

Results of Operations

Comparative Financial Summary
Years Ended December 31,	2017			2016			2015
(in thousands)
Total revenue	$	2,989,713		$	2,514,617		$	2,371,029
Gross profit	314,933			301,370			299,836
Selling, general and administrative expenses	222,811			219,299			203,817
Operating income	98,715			92,354			110,308
Total other (income) expense	(5,748		)	(4,008		)	6,881
Amount attributable to non-controlling interests	(6,703		)	(9,078		)	(7,763		)
Net income attributable to Granite Construction Incorporated	69,098			57,122			60,485

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Revenue

Total Revenue by Segment
Years Ended December 31,	2017				2016				2015
(dollars in thousands)
Construction	$	1,664,708	55.7	%	$	1,365,198	54.3	%	$	1,262,675	53.2	%
Large Project Construction	1,032,229		34.5		888,193		35.3		812,720		34.3
Construction Materials	292,776		9.8		261,226		10.4		295,634		12.5
Total	$	2,989,713	100.0	%	$	2,514,617	100.0	%	$	2,371,029	100.0	%

Construction Revenue
Years Ended December 31,	2017				2016				2015
(dollars in thousands)
California:
Public sector	$	442,374	26.5	%	$	370,397	27.1	%	$	403,904	32.0	%
Private sector	181,351		10.9		191,000		14.0		127,338		10.1
Northwest:
Public sector	568,137		34.1		462,529		34.0		415,787		32.9
Private sector	107,482		6.5		93,830		6.9		109,682		8.7
Heavy Civil:
Public sector	53,346		3.2		23,829		1.7		29,505		2.3
Private sector	4,212		0.3		651		—		—		—
Kenny:
Public sector	153,511		9.2		166,454		12.2		98,526		7.8
Private sector	154,295		9.3		56,508		4.1		77,933		6.2
Total	$	1,664,708	100.0	%	$	1,365,198	100.0	%	$	1,262,675	100.0	%

Construction revenue in 2017 increased $299.5 million, or 21.9%, compared to 2016 primarily due to increased volumes from entering the year with greater contract backlog in the Kenny, Northwest and Heavy Civil public sectors, from an improved success rate on bidding activity on power and airport related construction in the California public sector and on power work in the Kenny private sector. The increases were partially offset by declines in the California private sector from a reduction in solar construction and the Kenny public sector from the completion of projects in 2016 and a decrease in awards in 2017.

Large Project Construction Revenue
Years Ended December 31,	2017				2016				2015
(dollars in thousands)
Heavy Civil1	$	778,068	75.4	%	$	691,151	77.8	%	$	615,070	75.7	%
Kenny:
Public sector	123,286		11.9		95,893		10.8		86,291		10.6
Private sector	43,141		4.2		24,470		2.8		42,055		5.2
California1	46,914		4.5		42,770		4.8		23,461		2.9
Northwest1	40,820		4.0		33,909		3.8		45,843		5.6
Total	$	1,032,229	100.0	%	$	888,193	100.0	%	$	812,720	100.0	%

¹For the periods presented, this Large Project Construction revenue was earned from the public sector.

Large Project Construction revenue in 2017 increased $144.0 million, or 16.2%, compared to 2016, primarily due to progress on new and existing projects partially offset by a net negative impact from revisions in estimates (see Note 2 of “Notes to the Consolidated Financial Statements” for more information).

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Construction Materials Revenue
Years Ended December 31,	2017				2016				2015
(dollars in thousands)
California	$	178,048	60.8	%	$	148,778	57.0	%	$	191,605	64.8	%
Northwest	114,728		39.2		112,448		43.0		104,029		35.2
Total	$	292,776	100.0	%	$	261,226	100.0	%	$	295,634	100.0	%

Construction Materials revenue in 2017 increased $31.6 million, or 12.1%, compared to 2016 primarily due to a net increase in sales volume from improved demand and a net increase in sales prices from an improved market.

Contract Backlog

Our contract backlog consists of the revenue we expect to record in the future on awarded contracts, including 100% of our consolidated joint venture contracts and our proportionate share of unconsolidated joint venture contracts. We generally include a project in our contract backlog at the time it is awarded and to the extent we believe funding is probable. Certain government contracts where funding is appropriated on a periodic basis are included in contract backlog at the time of the award when it is probable the contract value will be funded and executed. Certain contracts contain contract options that are exercisable at the option of our customers without requiring us to go through an additional competitive bidding process or contain task orders that are signed under master contracts under which we perform work only when the customer awards specific task orders to us. Awarded contracts that include unexercised contract options and unissued task orders are included in contract backlog to the extent options are exercised or task order issuance is probable as further described in “Contract Backlog” under “Item 1. Business.” Substantially all of the contracts in our contract backlog may be canceled or modified at the election of the customer; however, we have not been materially adversely affected by contract cancellations or modifications in the past. 

The following tables illustrate our contract backlog as of the respective dates:

Total Contract Backlog by Segment
December 31,	2017				2016
(dollars in thousands)
Construction	$	896,955	24.1	%	$	1,030,487	29.6	%
Large Project Construction	2,821,202		75.9		2,453,918		70.4
Total	$	3,718,157	100.0	%	$	3,484,405	100.0	%

Construction Contract Backlog
December 31,	2017				2016
(dollars in thousands)
California:
Public sector	$	259,933	28.9	%	$	227,379	22.1	%
Private sector	109,959		12.3		73,958		7.2
Northwest:
Public sector	223,420		24.9		311,382		30.2
Private sector	38,697		4.3		27,582		2.7
Heavy Civil:
Public sector	43,016		4.8		92,214		8.9
Private sector	—		—		4,195		0.4
Kenny:
Public sector	141,469		15.8		235,298		22.8
Private sector	80,461		9.0		58,479		5.7
Total	$	896,955	100.0	%	$	1,030,487	100.0	%

Construction contract backlog of $897.0 million at December 31, 2017 was $133.5 million, or 13.0%, lower than at December 31, 2016 due to the progress and completion of existing projects in the Northwest, Heavy Civil and Kenny public sectors partially offset by improved success rate of bidding activity in the California operating group and Kenny and Northwest private sectors.

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Large Project Construction Contract Backlog
December 31,	2017				2016
(dollars in thousands)
Heavy Civil1	$	2,362,443	83.8	%	$	1,746,915	71.3	%
California1	40,283		1.4		86,703		3.5
Northwest1	53,465		1.9		91,894		3.7
Kenny:
Public sector	307,904		10.9		428,159		17.4
Private sector	57,107		2.0		100,247		4.1
Total	$	2,821,202	100.0	%	$	2,453,918	100.0	%

¹For the periods presented, all Large Project Construction contract backlog is related to contracts with public agencies.

Large Project Construction contract backlog of $2.8 billion at December 31, 2017 was $367.3 million, or 15.0%, higher than December 31, 2016 primarily due an improved success rate of bidding activity in the Heavy Civil operating group. Our share of a highway construction project in Houston, our share of a bridge replacement project in Washington D.C., a bridge replacement project in New York, a military infrastructure project in Guam and an interstate improvement project in Virginia contributed to this backlog. These increases were partially offset by progress on existing projects in all other operating groups.

Non-controlling partners’ share of Large Project Construction contract backlog as of December 31, 2017 and 2016 was $382.8 million and $141.5 million, respectively.

One Large Project Construction contract had forecasted losses with remaining revenue of $106.2 million, or 3.8%, of Large Project Construction contract backlog at December 31, 2017. At December 31, 2016, there were no loss contracts with material backlog. Provisions are recognized in the consolidated statements of operations for the full amount of estimated losses on uncompleted contracts whenever evidence indicates that the estimated total cost of a contract exceeds its estimated total revenue. Future revisions to these estimated losses will be recorded in the periods in which the revisions are estimated.

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Gross Profit

The following table presents gross profit by business segment for the respective periods:

Years Ended December 31,	2017			2016			2015
(dollars in thousands)
Construction	$	247,014		$	209,215		$	187,506
Percent of segment revenue	14.8		%	15.3		%	14.8		%
Large Project Construction	29,793			64,137			79,467
Percent of segment revenue	2.9			7.2			9.8
Construction Materials	38,126			28,018			32,863
Percent of segment revenue	13.0			10.7			11.1
Total gross profit	$	314,933		$	301,370		$	299,836
Percent of total revenue	10.5		%	12.0		%	12.6		%

Construction gross profit in 2017 increased $37.8 million, or 18.1%, compared to 2016 primarily due to increased revenue volume. Construction gross margin as a percentage of segment revenue for 2017 decreased to 14.8% from 15.3% in 2016 primarily due to fewer positive revisions in estimates that individually had an impact of less than $1.0 million on gross profit partially offset by higher bid day margins.

Large Project Construction gross profit in 2017 decreased $34.3 million, or 53.5%, compared to 2016. Large Project Construction gross margin as a percentage of segment revenue for 2017 decreased to 2.9% from 7.2% in 2016. The decreases were primarily due to a net negative impact from revisions in estimates (see Note 2 of “Notes to the Consolidated Financial Statements”).

As of December 31, 2017, there were three projects for which additional costs were reasonably possible in excess of the probable amounts included in the cost forecast. The reasonably possible aggregate range that has the potential to adversely impact gross profit during the year ended December 31, 2018 was zero to $44.0 million.

Construction Materials gross profit in 2017 increased $10.1 million, or 36.1%, compared to 2016. Construction Materials gross margin as a percentage of segment revenue for 2017 increased to 13.0% from 10.7% in 2016. The increase was primarily due to an increase in asphalt and aggregate sales volumes as well as an increase in aggregate sales prices.

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Selling, General and Administrative Expenses

The following table presents the components of selling, general and administrative expenses for the respective periods:

Years Ended December 31,	2017			2016			2015
(dollars in thousands)
Selling
Salaries and related expenses	$	45,631		$	46,015		$	43,193
Incentive compensation	4,412			2,650			3,370
Restricted stock unit amortization	2,569			1,809			1,257
Other selling expenses	7,688			10,122			7,940
Total selling	60,300			60,596			55,760
General and administrative
Salaries and related expenses	77,571			71,032			67,939
Incentive compensation	9,402			9,345			8,653
Restricted stock unit amortization	10,996			9,670			4,611
Other general and administrative expenses	64,542			68,656			66,854
Total general and administrative	162,511			158,703			148,057
Total selling, general and administrative	$	222,811		$	219,299		$	203,817
Percent of revenue	7.5		%	8.7		%	8.6		%

Selling, General and Administrative Expenses

Selling, general and administrative expenses for 2017 increased $3.5 million, or 1.6%, compared to 2016. Selling, general and administrative expenses as a percentage of revenue decreased to 7.5% in 2017 from 8.7% in 2016.

Selling, general and administrative expenses include variable cash and restricted stock unit (“RSU”) performance-based incentives for select management personnel on which our compensation strategy heavily relies. The cash portion of these incentives is expensed when earned while the RSU portion is expensed as earned over the vesting period of the RSU award of generally three years; however, immediate vesting may apply to certain awards pursuant to the 2012 Equity Incentive Plan.

Selling Expenses

Selling expenses include the costs for estimating and bidding, including customer reimbursements for portions of our selling/bid submission expenses (i.e. stipends), business development and materials facility permits. Selling expenses can vary depending on the volume of projects in process and the number of employees assigned to estimating and bidding activities. As projects are completed or the volume of work slows down, we temporarily redeploy project employees to bid on new projects, moving their salaries and related costs from cost of revenue to selling expenses. Selling expenses for 2017 remained relatively unchanged compared to 2016. The increase in incentive compensation, due to an increase in operating income in most operating groups, was partially offset by a decrease in other selling expenses primarily due to an increase in stipends during 2017.

General and Administrative Expenses

General and administrative expenses include costs related to our operational offices that are not allocated to direct contract costs and expenses related to our corporate functions. Other general and administrative expenses include travel and entertainment, outside services, information technology, depreciation, occupancy, training, office supplies, changes in the fair market value of our Non-Qualified Deferred Compensation plan liability and other miscellaneous expenses, none of which individually exceeded 10% of total general and administrative expenses. Total general and administrative expenses for 2017 increased $3.8 million, or 2.4%, compared to 2016, primarily due to an increase in salaries and related expenses from an increase in employee benefits and compensation. These increases were partially offset by decreases in other general and administrative expenses primarily due to a write-off of capitalized software during 2016.

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Other (Income) Expense

The following table presents the components of other (income) expense for the respective periods:

Years Ended December 31,	2017			2016			2015
(in thousands)
Interest income	$	(4,742	)	$	(3,225	)	$	(2,135	)
Interest expense	10,800			12,366			14,257
Equity in income of affiliates	(7,107		)	(7,177		)	(3,210		)
Other income, net	(4,699		)	(5,972		)	(2,031		)
Total other (income) expense	$	(5,748	)	$	(4,008	)	$	6,881

Interest income for 2017 increased $1.5 million when compared to 2016 primarily due to an increase in interest rates associated with our marketable securities and cash equivalents. Interest expense for 2017 decreased $1.6 million when compared to 2016 primarily due to a reduction of the principal balance of our 2019 Notes (as defined in the Senior Notes Payable section below) from a payment made in late 2016. Other income, net for 2017 decreased $1.3 million primarily due to changes in the fair market values of our Non-Qualified Deferred Compensation plan assets and a gain associated with a consolidated real estate entity during 2016.

Income Taxes

The following table presents the provision for income taxes for the respective periods:

Years Ended December 31,	2017			2016			2015
(dollars in thousands)
Provision for income taxes	$	28,662		$	30,162		$	35,179
Effective tax rate	27.4		%	31.3		%	34.0		%

Our 2017 tax rate decreased by 3.9% from 31.3% to 27.4% when compared to 2016 primarily due to the revaluation of our deferred tax assets and liabilities as a result of the recently enacted U.S. Tax Cuts and Jobs Act of 2017.

On December 22, 2017 the U.S. Tax Cuts and Jobs Act of 2017 (“Tax Reform”) was signed into law. As a result of Tax Reform, the U.S. statutory tax rate was lowered from 35% to 21% effective January 1, 2018, among other changes. ASC Topic 740, Accounting for Income Taxes, requires companies to recognize the effect of tax law changes in the period of enactment; therefore, we were required to revalue our deferred tax assets and liabilities at December 31, 2017 at the new rate. The Securities and Exchange Commission issued Staff Accounting Bulletin No. 118 (“SAB 118”) to address the application of U.S. GAAP in situations when a registrant does not have the necessary information available, prepared, or analyzed (including computations) in reasonable detail to complete the accounting for certain tax effects of Tax Reform. The Company has recognized a $3.7 million provisional benefit for the tax impacts of Tax Reform in its consolidated financial statements for the year ended December 31, 2017. The majority of the provisional benefit is related to the revaluation of deferred tax assets and liabilities at December 31, 2017 as a result of Tax Reform. The ultimate impact may differ from this provisional amount, possibly materially, as a result of additional analysis, changes in interpretations and assumptions the Company has made, additional regulatory guidance that may be issued, and actions the Company may take as a result of Tax Reform. The accounting is expected to be complete when the 2017 U.S. corporate income tax return is filed in 2018.

Amount Attributable to Non-controlling Interests

The following table presents the amount attributable to non-controlling interests in consolidated subsidiaries for the respective periods:

Years Ended December 31,	2017			2016			2015
(in thousands)
Amount attributable to non-controlling interests	$	(6,703	)	$	(9,078	)	$	(7,763	)

The amount attributable to non-controlling interests represents the non-controlling owners’ share of the income or loss of our consolidated construction joint ventures. The decrease for 2017 when compared to 2016 was primarily due to a decrease in the estimated recovery from back charge claims in 2016 offset by the income from consolidated construction joint ventures awarded in the third quarter of 2016.

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Prior Years

Revenue: Construction revenue for the year ended December 31, 2016 increased by $102.5 million, or 8.1%, compared to the year ended December 31, 2015 primarily due to increased volumes from entering the year with greater contract backlog in the Northwest and Kenny public sectors, as well as from an improved success rate on bidding activity for solar work in the California private sector. The increases were partially offset by declines in the Northwest and Kenny private sectors as well as a decline in the California public sector from the completion of projects in 2016 coupled with lower beginning contract backlog and a decline in the volume of awarded work during 2016.

Large Project Construction revenue for the year ended December 31, 2016 increased by $75.5 million, or 9.3%, compared to the year ended December 31, 2015, primarily due to progress on new projects in the California operating group, Heavy Civil operating group and Kenny public sector. These increases were partially offset by decreases in the Northwest operating group and Kenny private sector from completion of projects in late 2015 and early 2016 coupled with lower beginning contract backlog in the Kenny private sector.

Construction Materials revenue for the year ended December 31, 2016 decreased $34.4 million, or 11.6%, when compared to the year ended December 31, 2015 primarily due to a net decline in sales volume across most of our markets in California with demand shifting to increased internal (Construction segment) use in 2016.

Contract Backlog: Construction contract backlog of $1.0 billion at December 31, 2016 was $169.8 million, or 19.7%, higher than at December 31, 2015. The increase was primarily due to an improved success rate of bidding activity in the Northwest, Heavy Civil and Kenny operating groups and in the private sector of the California operating group, partially offset by progress on existing projects in the public sector of the California operating group.

Large Project Construction contract backlog of $2.5 billion at December 31, 2016 was $406.1 million, or 19.8%, higher than at December 31, 2015 primarily due to new awards in all operating groups.

Gross Profit: Construction gross profit in 2016 increased $21.7 million, or 11.6%, compared to 2015. Construction gross margin as a percentage of segment revenue for 2016 increased to 15.3% from 14.8% in 2015. The increases were primarily due to increased revenue volume from an increase in beginning backlog and margin improvement from increased private sector projects, increased margin on contract backlog at the beginning of 2016 compared to 2015 and reduced net revisions in estimates.

Large Project Construction gross profit in 2016 decreased $15.3 million, or 19.3%, compared to 2015. Large Project Construction gross margin as a percentage of segment revenue for 2016 decreased to 7.2% from 9.8% in 2015. The decreases were primarily due to net changes from revisions in estimates, including an increase to estimated costs to complete from outstanding affirmative claims, change orders and back charges.

Construction Materials gross profit in 2016 decreased $4.8 million, or 14.7%, compared to 2015. Construction Materials gross margin as a percentage of segment revenue for 2016 decreased to 10.7% from 11.1% in 2015. The decreases were primarily due to declines in external sales volumes and sales prices partially offset by a decrease in variable costs from improved efficiency at certain asphalt plants.

Selling, General and Administrative Expenses: Selling, general and administrative expenses for 2016 increased $15.5 million, or 7.6%, compared to 2015. Selling expenses for 2016 increased $4.8 million, or 8.7%, compared to 2015.The increases were primarily due to increases in salaries and related expenses and pre-bid costs, both from increased bidding activity. Total general and administrative expenses for 2016 increased $10.6 million, or 7.2%, compared to 2015, primarily due to an increase in restricted stock unit amortization from awards issued in the first quarter of 2016, a portion of which immediately vested. In addition, the increase in other general and administrative expense was due to a change in the fair market value of our Non-Qualified Deferred Compensation plan liability, which is offset in other (income) expense.

Other Expense (Income): Interest expense for 2016 decreased $1.9 million when compared to 2015 primarily due to a reduction of the principal balance of our 2019 Notes (as defined in Liquidity and Capital Resources section below) from payments made in late 2015, partially offset by an increase in the effective interest rate. Equity in income of affiliates for 2016 increased $4.0 million when compared to 2015 primarily due to income in the normal course of business associated with an unconsolidated real estate affiliate and with our asphalt terminal business in Nevada. Other income, net for 2016 increased $3.9 million primarily due to a gain associated with a consolidated real estate entity as well as from changes in the fair market values of our Non-Qualified Deferred Compensation plan assets and our interest rate swap during 2016.

Provision for Income Taxes: Our 2016 tax rate decreased by 2.7% from 34.0% to 31.3% when compared to 2015 primarily due to an increase in non-controlling interests and an increase in the domestic production activities deduction.

Amount Attributable to Non-controlling Interests: The increase for 2016 when compared to 2015 was primarily due to a change in the estimated recovery from back charge claims in 2016 and income from consolidated construction joint ventures awarded in the third quarter of 2015.

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Liquidity and Capital Resources

The timing differences between our cash inflows and outflows require us to maintain adequate levels of working capital. We believe our cash and cash equivalents, short-term investments, available borrowing capacity and cash expected to be generated from operations will be sufficient to meet our expected working capital needs, capital expenditures, financial commitments, cash dividend payments, and other liquidity requirements associated with our existing operations for the next twelve months. We maintain a collateralized credit facility of $290.0 million, of which $136.7 million was available at December 31, 2017 (see Credit Agreement discussion below), to provide capital needs to fund growth opportunities, either internal or generated through acquisitions or to pay installments on our 2019 Notes (see Senior Notes Payable discussion below). If we experience a prolonged change in our business operating results or make a significant acquisition, we may need additional sources of financing, which, if available, may be limited by the terms of our existing debt covenants, or may require the amendment of our existing debt agreements. There can be no assurance that sufficient capital will continue to be available in the future or that it will be available on terms acceptable to us.

Our revenue, gross profit and the resulting cash flows can differ significantly from period to period due to a variety of factors, including our projects’ progressions toward completion, outstanding contract change orders and affirmative claims and the payment terms of our contracts. While we typically invoice our customers on a monthly basis, our contracts frequently call for retention that is a specified percentage withheld from each payment until the contract is completed and the work accepted by the customer.

The following table presents our cash, cash equivalents and marketable securities, including amounts from our consolidated construction joint ventures (“CCJVs”), as of the respective dates:

December 31,	2017		2016
(in thousands)
Cash and cash equivalents excluding CCJVs	$	139,352	$	116,211
CCJV cash and cash equivalents1	94,359		73,115
Total consolidated cash and cash equivalents	233,711		189,326
Short-term and long-term marketable securities2	132,790		127,779
Total cash, cash equivalents and marketable securities	$	366,501	$	317,105

¹The volume and stage of completion of contracts from our CCJVs may cause fluctuations in joint venture cash and cash equivalents between periods. These funds generally are not available for the working capital or other liquidity needs of Granite until distributed.

²See Note 3 of “Notes to the Consolidated Financial Statements” for the composition of our marketable securities.

Our primary sources of liquidity are cash and cash equivalents, marketable securities and cash generated from operations. We may also from time to time access our Credit Agreement (defined below), issue and sell equity, debt or hybrid securities or engage in other capital markets transactions.

Our cash and cash equivalents consisted of deposits, money market funds and commercial paper held with established national financial institutions. Marketable securities consist of U.S. Government and agency obligations, commercial paper and corporate bonds.

Total consolidated cash and cash equivalents increased $44.4 million during 2017 due to a $23.1 million increase in cash and cash equivalents excluding CCJVs and a $21.2 million increase in CCJV cash and cash equivalents - see Cash Flows discussion below. Granite’s portion of CCJV cash and cash equivalents was $56.5 million and $44.7 million as of December 31, 2017 and 2016, respectively. Excluded from the table above is Granite’s portion of unconsolidated construction joint venture cash and cash equivalents of $91.0 million and $151.3 million as of December 31, 2017 and 2016, respectively. The assets of each consolidated and unconsolidated construction joint venture relate solely to that joint venture. The decision to distribute joint venture assets must generally be made jointly by a majority of the members and, accordingly, these assets, including those associated with estimated cost recovery of customer affirmative claims and back charge claims, are generally not available for the working capital needs of Granite until distributed.

Our principal uses of liquidity are paying the costs and expenses associated with our operations, servicing outstanding indebtedness, making capital expenditures and paying dividends on our capital stock. We may also from time to time prepay or repurchase outstanding indebtedness and acquire assets or businesses that are complementary to our operations.

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Cash Flows

Years Ended December 31,	2017			2016			2015
(in thousands)
Net cash provided by (used in):
Operating activities	$	146,195		$	73,146		$	66,978
Investing activities	(59,186		)	(96,390		)	(30,707		)
Financing activities	(42,624		)	(40,266		)	(39,396		)

As a large construction and heavy civil contractor and construction materials producer, our operating cash flows are subject to seasonal cycles, as well as the cycles associated with winning, performing and completing projects. Additionally, operating cash flows are impacted by the timing related to funding construction joint ventures and the resolution of uncertainties inherent in the complex nature of the work that we perform, including affirmative claims settlements. Our working capital assets result from both public and private sector projects. Customers in the private sector can be slower paying than those in the public sector; however, private sector projects generally have higher gross profit as a percentage of revenue.

We manage our combined accounts receivable, net, costs and estimated earnings in excess of billings and billings in excess of costs and estimated earnings balances, our primary working capital assets, using day’s sales outstanding (“DSO”). We calculate DSO by dividing Net DSO Receivables by Net DSO Revenue for the current quarter multiplied by 90 days, as presented below:

December 31,	2017		2016		2015
(in thousands)
Accounts receivable, net	$	479,791	$	419,345	$	340,822
Less: retentions	91,135		84,878		91,670
Less: other receivables	17,014		17,523		14,033
Plus: Costs and estimated earnings in excess of billings	103,965		73,102		59,070
Less: Billings in excess of costs and estimated earnings	135,146		97,522		92,515
Net DSO Receivables	340,461		292,524		201,674
Current quarter total revenue	$	801,274	$	666,681	$	630,162
Less: Granite’s interest in unconsolidated construction joint venture revenue	167,201		135,830		162,009
Net DSO Revenue	634,073		530,851		468,153
DSO	48		50		39

DSO decreased 2 days to 48 days as of December 31, 2017 when compared to 50 days at December 31, 2016.

We manage our accounts payable and accrued expenses and other current liabilities balances, our primary working capital liabilities, using day’s payables outstanding (“DPO”). We calculate DPO by dividing Net DPO Payables by Net DPO Expenses for the current quarter multiplied by 90 days, as presented below:

December 31,	2017		2016		2015
(in thousands)
Accounts payable	$	237,673	$	199,029	$	157,571
Plus: accrued expenses and other current liabilities	236,407		218,587		200,935
Less: performance guarantees	88,606		83,110		65,514
Less: deficit in unconsolidated construction joint ventures	15,939		16,648		8,626
Net DPO Payables	369,535		317,858		284,366
Current quarter total cost of revenue	$	700,567	$	585,431	$	529,538
Less: Granite’s interest in unconsolidated construction joint venture cost of revenue	165,817		136,396		148,163
Plus: current quarter selling, general and administrative expenses	59,068		59,342		60,010
Net DPO Expenses	593,818		508,377		441,385
DPO	56		56		58

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Accrued expenses and other current liabilities typically include items such as accruals for salaries and related benefits, insurance and sales, use and property tax, some of which are not scalable to our cost volume. DPO remained flat at 56 days as of December 31, 2017 when compared to December 31, 2016.

Cash provided by operating activities of $146.2 million during 2017 increased $73.0 million when compared to 2016. The increase was primarily due to a $33.8 million increase in net income after adjusting for non-cash items, a $15.5 million increase in net distributions from unconsolidated joint ventures and a $23.7 million increase in cash from working capital. The increase in cash from working capital was due to a $16.9 million increase in cash provided by working capital liabilities and a $6.8 million decrease in cash used in working capital assets. The increase in cash provided by working capital liabilities was primarily due to an increase in cost volume and the decrease in cash used in working capital assets was primarily due to a one day improvement in DSO partially offset by an increase in revenue volume.

Cash used in investing activities of $59.2 million during 2017 represents a $37.2 million decrease from the amount of cash used by investing activities in 2016. The change was primarily due to a decrease in purchases, net of sales proceeds, of property and equipment (see Capital Expenditures discussion below) and an increase in maturities, net of purchases and proceeds, of marketable securities.

Cash used in financing activities of $42.6 million during 2017 represents a $2.4 million increase in cash used when compared to 2016. The change was primarily due to a $5.0 million decrease in proceeds from long term debt and a $1.8 million increase in repurchases of common stock related to shares surrendered to pay taxes for vested restricted stock units partially offset by a $4.4 million increase in net contributions from non-controlling partners related to consolidated joint ventures.

Prior Year

DSO increased 11 days to 50 days at December 31, 2016 when compared to 39 days at December 31, 2015. DPO decreased to 56 days at December 31, 2016 compared to 58 at December 31, 2015.

Cash provided by operating activities of $73.1 million during 2016 increased $6.2 million when compared to 2015. The increase was primarily due to a $5.5 million increase in net income after adjusting for non-cash items and a $23.5 million increase in net distributions from unconsolidated joint ventures partially offset by a $22.8 million decrease in cash from working capital. The decrease in cash from working capital was due to a $41.8 million increase in cash used by working capital assets partially offset by an $18.9 million increase in cash provided by working capital liabilities. The increase in cash used by working capital assets was primarily due to a decrease in cash from accounts receivable from an increase in revenue volume, an increase in DSO due to an increase in contracts with customers in the private sector, which are typically slower paying than customers in the public sector and the timing of new consolidated projects in our Large Project Construction segment. The increase in cash provided by working capital liabilities was primarily due to an increase in cost of revenue volume from new consolidated construction joint ventures year over year.

Cash used in investing activities of $96.4 million during 2016 represents a $65.7 million increase from the amount of cash used by investing activities in 2015. The increase was primarily due to a $47.0 million increase in purchases, net of sales proceeds, of property and equipment (see Capital Expenditures discussion below) and a $24.0 million increase in purchases of marketable securities net of calls and maturities of investments.

Cash used in financing activities of $40.3 million during 2016 was in line with 2015 driven by dividend payments and net payments on outstanding indebtedness.

Capital Expenditures

During the year ended December 31, 2017, we had capital expenditures of $67.7 million compared to $91.0 million during 2016. Major capital expenditures are typically for aggregate and asphalt production facilities, aggregate reserves, construction equipment, buildings and leasehold improvements and investments in our information technology systems. The timing and amount of such expenditures can vary based on the progress of planned capital projects, the type and size of construction projects, changes in business outlook and other factors. The decrease in capital expenditures during 2017 when compared to 2016 was primarily due to an increase in leasing equipment during 2017 and a decrease in job specific equipment purchases for our Large Project Construction segment. We currently anticipate 2018 capital expenditures to be between $100.0 million and $105.0 million.

37

Derivatives

We recognize derivative instruments as either assets or liabilities in the consolidated balance sheets at fair value using Level 2 inputs.

In January 2016, we entered into an interest rate swap designed to convert the interest rate on our term loan from a variable to fixed interest rate (see Credit Agreement section below).

In December 2016, we terminated the interest rate swap we entered in March 2014 due to the possibility of increasing interest rates (see Senior Notes Payable section below).

Debt and Contractual Obligations

The following table summarizes our significant obligations outstanding as of December 31, 2017:

	Payments Due by Period
(in thousands)	Total		Less than 1 year		1-3 years		3-5 years		More than 5 years
Long-term debt – principal1	$	225,056	$	46,277	$	178,779	$	—	$	—
Long-term debt – interest2	20,872		9,651		11,221		—		—
Operating leases3	47,951		12,169		16,943		11,668		7,171
Other purchase obligations4	13,696		13,484		212		—		—
Deferred compensation obligations5	24,696		4,298		3,580		1,881		14,937
Asset retirement obligations6	22,527		4,701		5,002		2,752		10,072
Total	$	354,798	$	90,580	$	215,737	$	16,301	$	32,180

¹Debt issuance costs are excluded from the table.

²Included in the total is $7.9 million in interest related to borrowings under our Credit Agreement, calculated using the fixed rate associated with the cash flow hedge of 1.47% plus the applicable margin in effect as of December 31, 2017. The future payments were calculated using the applicable margin in effect as of December 31, 2017 and may differ from actual results. In addition, included in the total is $7.3 million in interest related to borrowings under the 2019 Notes, the terms of which include a 6.11% per annum interest rate. See Note 11 of “Notes to the Consolidated Financial Statements.”

³These obligations represent the minimum rental commitments and minimum royalty requirements under all noncancellable operating leases. See Note 16 of “Notes to the Consolidated Financial Statements.”

⁴These obligations represent firm purchase commitments for equipment and other goods and services not directly connected with our construction contract backlog which are individually greater than $10,000 and have an expected fulfillment date after December 31, 2017.

⁵The timing of expected payment of deferred compensation is based on estimated dates of retirement. Actual dates of retirement could be different and could cause the timing of payments to change.

⁶Asset retirement obligations represent reclamation and other related costs associated with our owned and leased quarry properties, the majority of which have an estimated settlement date beyond five years. See Note 8 of “Notes to the Consolidated Financial Statements.”

In addition to the significant obligations described above, as of December 31, 2017, we had approximately $3.6 million associated with uncertain tax positions filed on our tax returns which were excluded because we cannot make a reasonably reliable estimate of the timing of potential payments relative to such reserves.

Credit Agreement

As of December 31, 2017, we had a $290.0 million credit facility (the “Credit Agreement”), of which $200.0 million was a revolving credit facility and $90.0 million was a term loan that matures on October 28, 2020 (the “Maturity Date”). The Credit Agreement has a sublimit for letters of credit of $100.0 million. As of December 31, 2017 and 2016, $6.2 million and $5.0 million of the term loan balance was included in current maturities of long-term debt, respectively, and the remaining $83.8 million and $90.0 million, respectively, was included in long-term debt in the consolidated balance sheets.

Of the $95.0 million term loan outstanding as of December 31, 2016, we paid $5.0 million of the principal balance during 2017. Of the remaining $90.0 million outstanding as of December 31, 2017, 1.25% of the original principal balance is due in three quarterly installments beginning in March 2018, 2.50% of the original principal balance is due in eight quarterly installments beginning in December 2018 and the remaining balance is due on the Maturity Date.

As of December 31, 2017, the total stated amount of all issued and outstanding letters of credit under the Credit Agreement was $8.3 million. As of December 31, 2017 and 2016, $25.0 million and $30.0 million had been drawn for the 2017 and 2016 installments of the 2019 Notes (defined below), respectively. As of December 31, 2017, the total unused availability under the Credit Agreement was $136.7 million. The letters of credit will expire between July 2018 and October 2018.

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Borrowings under the Credit Agreement bear interest at LIBOR or a base rate (at our option), plus an applicable margin based on certain financial ratios calculated quarterly. LIBOR varies based on the applicable loan term, market conditions and other external factors. The applicable margin was 1.75% for loans bearing interest based on LIBOR and 0.75% for loans bearing interest at the base rate at December 31, 2017. Accordingly, the effective interest rate using three-month LIBOR and base rate was 3.44% and 5.25%, respectively, at December 31, 2017 and we elected to use LIBOR. Borrowings at the base rate have no designated term and could be repaid without penalty any time prior to the Maturity Date. Borrowings bearing interest at a LIBOR rate have a term no less than one month and no greater than six months (or such longer period not to exceed 12 months if approved by all lenders). At the end of each term, such borrowings can be paid or continued at our discretion as either a borrowing at the base rate or a borrowing at a LIBOR rate with similar terms. Our obligations under the Credit Agreement are guaranteed by certain of our subsidiaries and are collateralized on an equivalent basis with the obligations under the 2019 Notes (defined below) by first priority liens (subject only to other permitted liens) on substantially all of the assets of the Company and our subsidiaries that are guarantors or borrowers under the Credit Agreement.

In January 2016, we entered into an interest rate swap designated as a cash flow hedge with an effective date of April 2016 and an initial notional amount of $98.8 million which matures in October 2020. The interest rate swap is designed to convert the interest rate on the term loan from a variable rate of interest of LIBOR plus an applicable margin to a fixed rate of 1.47% plus the same applicable margin. The interest rate swap is reported at fair value using Level 2 inputs in the consolidated balance sheets. Gains or losses on the effective portion are initially reported as a component of accumulated other comprehensive income (loss) and subsequently reclassified to interest expense in the consolidated statements of operations when the quarterly hedged interest payment is settled. As of December 31, 2017, and 2016, the fair value of the cash flow hedge was $1.4 million and $0.8 million, respectively, and was included in other current assets in the consolidated balance sheets. The unrealized gains and losses, net of taxes, on the effective portion reported as a component of accumulated other comprehensive income (loss) and the interest expense reclassified from accumulated other comprehensive income (loss) were both immaterial during the years ended December 31, 2017 and 2016.

The Credit Agreement provides for the release of the liens securing the obligations, at our option and expense, so long as certain conditions as defined by the terms in the Credit Agreement are satisfied (“Collateral Release Period”). However, if subsequent to exercising the option, our Consolidated Fixed Charge Coverage Ratio is less than 1.25 or our Consolidated Leverage Ratio is greater than 2.50, then we would be required to promptly re-pledge substantially all of the assets of the Company and our subsidiaries that are guarantors or borrowers under the Credit Agreement. As of December 31, 2017, the conditions for the exercise of our right under the Credit Agreement to have liens released were not satisfied.

Senior Notes Payable

As of December 31, 2017 and 2016, senior notes payable in the amount of $80.0 million and $120.0 million, respectively, were due to a group of institutional holders and had an interest rate of 6.11% per annum (“2019 Notes”). As of December 31, 2017, two equal annual installments for 2018 and 2019 were remaining. As of December 31, 2017, $40.0 million of the outstanding balance was included in long-term debt in the consolidated balance sheets and the remaining $40.0 million was included in current maturities of long-term debt in the consolidated balance sheets. As of December 31, 2016, $110.0 million of the outstanding balance was included in long-term debt in the consolidated balance sheets, including $30.0 million due for the 2017 installment as we had the ability and intent to pay the 2017 installment using borrowings under the Credit Agreement (defined above) or by obtaining other sources of financing. The remaining $10.0 million was included in current maturities of long-term debt in the consolidated balance sheets.

In December 2016, we terminated the interest rate swap we entered in March 2014 due to the possibility of increasing interest rates. The interest rate swap is reported at fair value using Level 2 inputs in the consolidated balance sheets. Gains or losses, including net periodic settlement amounts, are recorded in other income, net, in our consolidated statements of operations. During the years ended December 31, 2016 and 2015, we recorded net gains of $0.3 million and $1.5 million, respectively.

Our obligations under the note purchase agreement governing the 2019 Notes (the “2019 NPA”) are guaranteed by certain of our subsidiaries and are collateralized on an equivalent basis with the Credit Agreement by liens on substantially all of the assets of the Company and subsidiaries that are guarantors or borrowers under the Credit Agreement. The 2019 NPA provides for the release of liens and re-pledge of collateral on substantially the same terms and conditions as those set forth in the Credit Agreement.

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Surety Bonds and Real Estate Mortgages

We are generally required to provide various types of surety bonds that provide an additional measure of security under certain public and private sector contracts. At December 31, 2017, approximately $3.5 billion of our contract backlog was bonded. Performance bonds do not have stated expiration dates; rather, we are generally released from the bonds after the owner accepts the work performed under contract. The ability to maintain bonding capacity to support our current and future level of contracting requires that we maintain cash and working capital balances satisfactory to our sureties.

Our investments in real estate affiliates are subject to mortgage indebtedness. This indebtedness is non-recourse to Granite but is recourse to the real estate entities. The terms of this indebtedness are typically renegotiated to reflect the evolving nature of the real estate projects as they progress through acquisition, entitlement and development. Modification of these terms may include changes in loan-to-value ratios requiring the real estate entity to repay portions of the debt. The debt associated with our unconsolidated real estate ventures is disclosed in Note 7 of “Notes to the Consolidated Financial Statements.”

Covenants and Events of Default

Our debt and credit agreements require us to comply with various affirmative, restrictive and financial covenants, including the financial covenants described below. Our failure to comply with any of these covenants, or to pay principal, interest or other amounts when due thereunder, would constitute an event of default under the applicable agreements. Under certain circumstances, the occurrence of an event of default under one of our debt or credit agreements (or the acceleration of the maturity of the indebtedness under one of our agreements) may constitute an event of default under one or more of our other debt or credit agreements. Default under our debt and credit agreements could result in (i) us no longer being entitled to borrow under the agreements; (ii) termination of the agreements; (iii) the requirement that any letters of credit under the agreements be cash collateralized; (iv) acceleration of the maturity of outstanding indebtedness under the agreements and/or (v) foreclosure on any collateral securing the obligations under the agreements.

The most significant financial covenants under the terms of our Credit Agreement and 2019 Notes require the maintenance of a minimum Consolidated Tangible Net Worth, a minimum Consolidated Interest Coverage Ratio and a maximum Consolidated Leverage Ratio.

As of December 31, 2017 and pursuant to the definitions in the agreements, our Consolidated Tangible Net Worth was $953.6 million, which exceeded the minimum of $752.0 million, our Consolidated Leverage Ratio was 1.25 which did not exceed the maximum of 3.00 and our Consolidated Interest Coverage Ratio was 15.59 which exceeded the minimum of 4.00.

As of December 31, 2017, we were in compliance with all covenants contained in the Credit Agreement and related to the 2019 Notes. We are not aware of any non-compliance by any of our unconsolidated real estate entities with the covenants contained in their debt agreements.

Share Purchase Program

On April 7, 2016, the Board of Directors authorized us to purchase up to $200.0 million of our common stock at management’s discretion, which replaced the former authorization including the amount available. We did not purchase shares under the share purchase program in any of the periods presented. The specific timing and amount of any future purchases will vary based on market conditions, securities law limitations and other factors.

Recently Issued and Adopted Accounting Pronouncements

See “Note 1 - Summary of Significant Accounting Policies” of “Notes to the Consolidated Financial Statements” under the captions Recently Issued Accounting Pronouncements and Recently Adopted Accounting Pronouncements.

40

Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We maintain an investment portfolio of various holdings, types and maturities. We purchase instruments that meet high credit quality standards, as specified in our investment policy. It also limits the amount of credit exposure to any one issue, issuer or type of instrument. The portfolio and accompanying cash balances are targeted to an average maturity of no more than one year from the date the purchase is settled. On an ongoing basis we monitor credit ratings, financial condition and other factors that could affect the carrying amount of our investment portfolio. 

Marketable securities, consisting of U.S. government and agency obligations, commercial paper and corporate bonds, are classified as held-to-maturity and are stated at cost, adjusted for amortization of premiums and discounts to maturity.

Given the short-term nature of certain investments, our investment income is subject to the general level of interest rates in the United States at the time of maturity and reinvestment. We have managed the financial market risks due largely to changes in interest rates primarily by managing the maturities in our investment portfolio. We do not have any material business transactions in foreign currencies.

The fair value of our short-term held-to-maturity investment portfolio and related income would not be significantly affected by changes in interest rates since the investment maturities are short. The fair value of our long-term held-to-maturity investment portfolio may be affected by changes in interest rates.

We are exposed to various commodity price risks, including, but not limited to, diesel fuel, natural gas, propane, steel, cement and liquid asphalt arising from transactions that are entered into in the normal course of business. In order to manage or reduce commodity price risk, we monitor the costs of these commodities at the time of bid and price them into our contracts accordingly. Additionally, some of our contracts include commodity price escalation clauses which partially protect us from increasing prices. At times we enter into supply agreements or pre-purchase commodities to secure pricing and may use financial contracts to further manage price risk.

As of December 31, 2017, $80.0 million of senior notes payable were due to a group of institutional holders in two remaining equal installments in 2018 and 2019 and bear interest at 6.11% per annum.

As of December 31, 2017, a $90.0 million term loan was outstanding under the Credit Agreement that had an effective interest rate of 3.44% using three-month LIBOR and the applicable margin, that we converted under a swap arrangement to a fixed rate of 1.47% plus the same applicable margin. The applicable margin is based on certain financial ratios calculated quarterly and can vary in future periods. Each 25 basis point increase in the applicable margin would result in $0.2 million annually in additional interest expense.

As of December 31, 2017, $55.0 million had been drawn and was outstanding under the revolving portion of the Credit Agreement that had an effective interest rate of 3.44% using three-month LIBOR and the applicable margin. We had the option of electing LIBOR or the base rate and we elected to use LIBOR. LIBOR is a variable rate subject to market changes over the life of the loan with no guarantees to fix as forecasted. Each 25 basis point increase in one-month LIBOR or in the applicable margin of the loan would result in an additional $0.1 million of annual interest expense.

See “Liquidity and Capital Resources” section above for further discussion on the senior notes payable and Credit Agreement.

41

The table below presents principal amounts due by year and related weighted average interest rates for our cash and cash equivalents, held-to-maturity investments and significant debt obligations as of December 31, 2017 (dollars in thousands):

	2018			2019			2020			2021			2022			Thereafter			Total
Assets
Cash, cash equivalents, held-to-maturity investments	$	301,486		$	30,015		$	25,000		$	10,000		$	—		$	—		$	366,501
Weighted average interest rate	1.33		%	1.40		%	1.50		%	1.94		%	—		%	—		%	1.37		%
Liabilities
Fixed rate debt
Senior notes payable	$	40,000		$	40,000		$	—		$	—		$	—		$	—		$	80,000
Interest rate	6.11		%	6.11		%	—		%	—		%	—		%	—		%	6.11		%
Variable rate debt
Credit Agreement - term loan	$	6,250		$	10,000		$	73,750		$	—		$	—		$	—		$	90,000
Effective interest rate1	3.22		%	3.22		%	3.22		%	—		%	—		%	—		%	3.22		%
Credit Agreement - revolving credit facility2	$	—		$	—		$	55,000		$	—		$	—		$	—		$	55,000
Effective interest rate3	—		%	—		%	3.44		%	—		%	—		%	—		%	3.44		%

¹ The weighted average interest rate was calculated using the fixed rate associated with the cash flow hedge of 1.47% plus the applicable margin in effect as of December 31, 2017 and may differ from actual results.

²Credit Agreement - revolving credit facility consists of $25.0 million and $30.0 million that had been drawn for the 2017 and 2016 installments of the 2019 Notes, respectively.

³The weighted average interest rate was calculated using three-month LIBOR rates and the applicable margin in effect as of December 31, 2017 and may differ from actual results.

The estimated fair value of our cash, cash equivalents and short-term held-to-maturity investments approximates the principal amounts reflected above based on the generally short maturities of these financial instruments. Based on the fixed borrowing rates currently available to us for bank loans with similar terms and average maturities, the fair value of the senior notes payable was approximately $82.2 million and $124.7 million as of as of December 31, 2017 and 2016, respectively. The fair value of the term loan under the Credit Agreement was approximately $89.9 million and $94.0 million as of December 31, 2017 and 2016, respectively. The fair value of the revolving credit facility under the Credit Agreement was approximately $55.1 million and $29.5 million as of December 31, 2017 and 2016, respectively.

42

Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The following consolidated financial statements of Granite, the supplementary data and the independent registered public accounting firm’s report are incorporated by reference from Part IV, Item 15(1) and (2):

Report of Independent Registered Public Accounting Firm

Consolidated Balance Sheets - At December 31, 2017 and 2016

Consolidated Statements of Operations - Years Ended December 31, 2017, 2016 and 2015

Consolidated Statements of Comprehensive Income - Years Ended December 31, 2017, 2016 and 2015

Consolidated Statements of Shareholders’ Equity - Years Ended December 31, 2017, 2016 and 2015

Consolidated Statements of Cash Flows - Years Ended December 31, 2017, 2016 and 2015

Notes to the Consolidated Financial Statements

Quarterly Financial Data (unaudited)

Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

Not applicable.

Item 9A. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures: Our management carried out, as of December 31, 2017, with the participation of our Chief Executive Officer and our Chief Financial Officer, an evaluation of the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)). Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of December 31, 2017, our disclosure controls and procedures were effective to provide reasonable assurance that material information required to be disclosed by us in reports we file under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC rules and forms and that information required to be disclosed by us in the reports we file or submit under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Control Over Financial Reporting: During the quarter ended December 31, 2017, we implemented new transition and adoption controls as part of our efforts to adopt Accounting Standards Codification Topic 606, Revenue from Contracts with Customers and the related Accounting Standards Updates (“Topic 606”). These controls will be effective until the adoption of Topic 606 is complete and relate to evaluation of our contracts with customers and the resulting impact, if any, to our balance sheet and prospective revenue, upon the adoption of Topic 606, the monitoring of the adoption process and evaluation of the amounts used in the disclosures in Note 1 of “Notes to the Consolidated Financial Statements” within Item 15 of this Annual Report on Form 10-K. As the transition and adoption process continues, there may be additional changes in internal controls over financial reporting. However, there were no other changes to our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Management’s Report on Internal Control Over Financial Reporting: Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rules 13a-15(f) and 15d -15(f). Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, our management conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in “Internal Control—Integrated Framework (2013)” issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on that evaluation, our management concluded that our internal control over financial reporting was effective as of December 31, 2017.

Independent Registered Public Accounting Firm Report: PricewaterhouseCoopers LLP, the independent registered public accounting firm that audited our consolidated financial statements included in this Annual Report on Form 10-K, has issued a report on the Company’s internal control over financial reporting as of December 31, 2017. The report, which expresses an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting as of December 31, 2017, is included in “Item 15. Exhibits and Financial Statement Schedules” under the heading “Report of Independent Registered Public Accounting Firm.”

Item 9B. OTHER INFORMATION

Not Applicable.

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PART III

Certain information required by Part III is omitted from this report. We will file our definitive proxy statement for our Annual Meeting of Shareholders to be held on June 7, 2018 (the “Proxy Statement”) not later than 120 days after the end of the fiscal year covered by this report, and certain information included therein is incorporated herein by reference.

Item 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

For information regarding our Directors and compliance with Section 16(a) of the Securities Exchange Act of 1934, we direct you to the sections entitled “Proposal 1 - Election and Ratification of Directors” and “Section 16(a) Beneficial Ownership Reporting Compliance,” respectively, in the Proxy Statement. For information regarding our Audit/Compliance Committee and our Audit/Compliance Committee’s financial expert, we direct you to the section entitled “Information about the Board of Directors and Corporate Governance - Committees of the Board - Audit/Compliance Committee” in the Proxy Statement. For information regarding our Code of Conduct, we direct you to the section entitled “Information about the Board of Directors and Corporate Governance - Code of Conduct” in the Proxy Statement. Information regarding our executive officers is contained in the section entitled “Executive Officers of the Registrant,” in Part I, Item I of this report. This information is incorporated herein by reference.

Item 11. EXECUTIVE COMPENSATION

For information regarding our Executive Compensation, we direct you to the section captioned “Executive and Director Compensation and Other Matters” in the Proxy Statement. This information is incorporated herein by reference.

Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

This information is located in the sections captioned “Stock Ownership of Beneficial Owners and Certain Management” and “Equity Compensation Plan Information” in the Proxy Statement. This information is incorporated herein by reference.

Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

You will find this information in the sections captioned “Transactions with Related Persons” and “Information about the Board of Directors and Corporate Governance - Director Independence” in the Proxy Statement. This information is incorporated herein by reference.

Item 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

You will find this information in the section captioned “Independent Registered Public Accountants - Principal Accountant Fees and Services” in the Proxy Statement. This information is incorporated herein by reference.

44

PART IV

Item 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES

The following documents are filed as part of this report:

1. Financial Statements. The following consolidated financial statements and related documents are filed as part of this report:

Financial Statements	Page
Report of Independent Registered Public Accounting Firm	F-1 to F-2
Consolidated Balance Sheets at December 31, 2017 and 2016	F-3
Consolidated Statements of Operations for the Years Ended December 31, 2017, 2016 and 2015	F-4
Consolidated Statements of Comprehensive Income for the Years Ended December 31, 2017, 2016 and 2015	F-5
Consolidated Statements of Shareholders’ Equity for the Years Ended December 31, 2017, 2016 and 2015	F-6
Consolidated Statements of Cash Flows for the Years Ended December 31, 2017, 2016 and 2015	F-7 to F-8
Notes to the Consolidated Financial Statements	F-9 to F-37
Quarterly Financial Data (unaudited)	F-38

2. Financial Statement Schedules. Schedules are omitted because they are not required or applicable, or the required information is included in the Financial Statements or related notes.

3. Exhibits. The Exhibits listed in the accompanying Exhibit Index, which is incorporated herein by reference, are filed or incorporated by reference as part of, or furnished with, this report.

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders of Granite Construction Incorporated:

Opinions on the Financial Statements and Internal Control over Financial Reporting

We have audited the accompanying consolidated balance sheets of Granite Construction Incorporated and its subsidiariesas of December 31, 2017 and 2016 and the related consolidated statements of operations, comprehensive income, shareholders’ equity and cash flows for each of the three years in the period endedDecember 31, 2017, including the related notes (collectively referred to as the “consolidated financial statements”).We also have audited the Company's internal control over financial reporting as of December 31, 2017, based on criteria established in Internal Control - Integrated Framework(2013)issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the consolidatedfinancial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2017 and 2016, and the results of theiroperations and their cash flows for each of the three years in the period ended December 31, 2017 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2017, based on criteria established in Internal Control - Integrated Framework(2013)issued by the COSO.

Basis for Opinions

The Company’s management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in Management’s Report on Internal Control Over Financial Reporting appearing under Item 9A. Our responsibility is to express opinions on the Company’s consolidatedfinancial statements and on the Company’s internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidatedfinancial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.

Our audits of the consolidatedfinancial statements included performing procedures to assess the risks of material misstatement of the consolidatedfinancial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidatedfinancial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidatedfinancial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

F- 1

Definition and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ PricewaterhouseCoopers LLP

San Francisco, California

February 16, 2018

We have served as the Company’s auditor since 1982.

F- 2

GRANITE CONSTRUCTION INCORPORATED
CONSOLIDATED BALANCE SHEETS
(dollars in thousands, except share and per share data)
December 31,	2017		2016
ASSETS
Current assets
Cash and cash equivalents ($94,359 and $73,115 related to consolidated construction joint ventures (“CCJVs”))	$	233,711	$	189,326
Short-term marketable securities	67,775		64,884
Receivables, net ($52,031 and $52,613 related to CCJVs)	479,791		419,345
Costs and estimated earnings in excess of billings ($1,437 and $5,046 related to CCJVs)	103,965		73,102
Inventories	62,497		55,245
Equity in construction joint ventures	247,826		247,182
Other current assets ($10,384 and $7,500 related to CCJVs)	36,513		39,908
Total current assets	1,232,078		1,088,992
Property and equipment, net ($38,361 and $20,500 related to CCJVs)	407,418		406,650
Long-term marketable securities	65,015		62,895
Investments in affiliates	38,469		35,668
Goodwill	53,799		53,799
Other noncurrent assets	75,199		85,449
Total assets	$	1,871,978	$	1,733,453
LIABILITIES AND EQUITY
Current liabilities
Current maturities of long-term debt	$	46,048	$	14,796
Accounts payable ($34,795 and $26,419 related to CCJVs)	237,673		199,029
Billings in excess of costs and estimated earnings ($37,701 and $33,704 related to CCJVs)	135,146		97,522
Accrued expenses and other current liabilities ($2,126 and $1,544 related to CCJVs)	236,407		218,587
Total current liabilities	655,274		529,934
Long-term debt	178,453		229,498
Deferred income taxes, net	1,361		5,441
Other long-term liabilities	44,085		45,989
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 39,871,314 shares as of December 31, 2017 and 39,621,140 shares as of December 31, 2016	399		396
Additional paid-in capital	160,376		150,337
Accumulated other comprehensive income (loss)	634		(371		)
Retained earnings	783,699		735,626
Total Granite Construction Incorporated shareholders’ equity	945,108		885,988
Non-controlling interests	47,697		36,603
Total equity	992,805		922,591
Total liabilities and equity	$	1,871,978	$	1,733,453

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

F- 3

GRANITE CONSTRUCTION INCORPORATED
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
Years Ended December 31,	2017			2016			2015
Revenue
Construction	$	1,664,708		$	1,365,198		$	1,262,675
Large Project Construction	1,032,229			888,193			812,720
Construction Materials	292,776			261,226			295,634
Total revenue	2,989,713			2,514,617			2,371,029
Cost of revenue
Construction	1,417,694			1,155,983			1,075,169
Large Project Construction	1,002,436			824,056			733,253
Construction Materials	254,650			233,208			262,771
Total cost of revenue	2,674,780			2,213,247			2,071,193
Gross profit	314,933			301,370			299,836
Selling, general and administrative expenses	222,811			219,299			203,817
Restructuring gains	(2,411		)	(1,925		)	(6,003		)
Gain on sales of property and equipment	(4,182		)	(8,358		)	(8,286		)
Operating income	98,715			92,354			110,308
Other (income) expense
Interest income	(4,742		)	(3,225		)	(2,135		)
Interest expense	10,800			12,366			14,257
Equity in income of affiliates	(7,107		)	(7,177		)	(3,210		)
Other income, net	(4,699		)	(5,972		)	(2,031		)
Total other (income) expense	(5,748		)	(4,008		)	6,881
Income before provision for income taxes	104,463			96,362			103,427
Provision for income taxes	28,662			30,162			35,179
Net income	75,801			66,200			68,248
Amount attributable to non-controlling interests	(6,703		)	(9,078		)	(7,763		)
Net income attributable to Granite Construction Incorporated	$	69,098		$	57,122		$	60,485
Net income per share attributable to common shareholders (see Note 14)
Basic	$	1.74		$	1.44		$	1.54
Diluted	$	1.71		$	1.42		$	1.52
Weighted average shares of common stock
Basic	39,795			39,557			39,337
Diluted	40,372			40,225			39,868
Dividends per common share	$	0.52		$	0.52		$	0.52

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

F- 4

GRANITE CONSTRUCTION INCORPORATED
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in thousands)
Years Ended December 31,	2017			2016			2015
Net income	$	75,801		$	66,200		$	68,248
Other comprehensive income (loss), net of tax:
Net unrealized gain on derivatives	$	191		$	184		$	—
Less: reclassification for net losses included in interest expense	159			319			—
Net change	$	350		$	503		$	—
Foreign currency translation adjustments, net	655			626			(1,072		)
Other comprehensive income (loss)	$	1,005		$	1,129		$	(1,072	)
Comprehensive income	$	76,806		$	67,329		$	67,176
Non-controlling interests in comprehensive income	(6,703		)	(9,078		)	(7,763		)
Comprehensive income attributable to Granite	$	70,103		$	58,251		$	59,413

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

F- 5

GRANITE CONSTRUCTION INCORPORATED
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(in thousands, except share data)
	Outstanding Shares		Common Stock			Additional Paid-in Capital			Accumulated Other Comprehensive (Loss) Income			Retained Earnings			Total Granite Shareholders’ Equity			Non-controlling Interests			Total Equity
Balances at December 31, 2014	39,186,386		$	392		$	134,605		$	(428	)	$	659,816		$	794,385		$	22,721		$	817,106
Net income	—		—			—			—			60,485			60,485			7,763			68,248
Other comprehensive loss	—		—			—			(1,072		)	—			(1,072		)	—			(1,072		)
Restricted stock units vested	317,524		3			—			—			—			3			—			3
Amortized restricted stock units	—		—			8,763			—			—			8,763			—			8,763
Purchase of common stock	(114,969	)	(1		)	(3,855		)	—			—			(3,856		)	—			(3,856		)
Cash dividends on common stock	—		—			—			—			(20,476		)	(20,476		)	—			(20,476		)
Transactions with non-controlling interests, net	—		—			—			—			—			—			400			400
Employee Stock Purchase Plan (“ESPP”) and other	23,936		—			1,399			—			(394		)	1,005			—			1,005
Balances at December 31, 2015	39,412,877		394			140,912			(1,500		)	699,431			839,237			30,884			870,121
Net income	—		—			—			—			57,122			57,122			9,078			66,200
Other comprehensive income	—		—			—			1,129			—			1,129			—			1,129
Restricted stock units vested	308,619		3			—			—			—			3			—			3
Amortized restricted stock units	—		—			13,383			—			—			13,383			—			13,383
Purchase of common stock	(116,355	)	(1		)	(5,226		)	—			—			(5,227		)	—			(5,227		)
Cash dividends on common stock	—		—			—			—			(20,590		)	(20,590		)	—			(20,590		)
Transactions with non-controlling interests, net	—		—			—			—			—			—			(3,359		)	(3,359		)
ESPP and other	15,999		—			1,268			—			(337		)	931			—			931
Balances at December 31, 2016	39,621,140		396			150,337			(371		)	735,626			885,988			36,603			922,591
Net income	—		—			—			—			69,098			69,098			6,703			75,801
Other comprehensive income	—		—			—			1,005			—			1,005			—			1,005
Restricted stock units vested	375,100		4			—			—			—			4			—			4
Amortized restricted stock units	—		—			15,764			—			—			15,764			—			15,764
Purchase of common stock	(140,070	)	(1		)	(6,976		)	—			—			(6,977		)	—			(6,977		)
Cash dividends on common stock	—		—			—			—			(20,720		)	(20,720		)	—			(20,720		)
Transactions with non-controlling interests, net	—		—			—			—			—			—			4,391			4,391
ESPP and other	15,144		—			1,251			—			(305		)	946			—			946
Balances at December 31, 2017	39,871,314		$	399		$	160,376		$	634		$	783,699		$	945,108		$	47,697		$	992,805

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

F- 6

GRANITE CONSTRUCTION INCORPORATED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Years Ended December 31,	2017			2016			2015
Operating activities
Net income	$	75,801		$	66,200		$	68,248
Adjustments to reconcile net income to net cash provided by operating activities:
Non-cash restructuring gains	(939		)	(1,000		)	(1,044		)
Depreciation, depletion and amortization	66,345			64,375			64,309
Gain on sales of property and equipment	(4,182		)	(8,358		)	(8,286		)
Change in deferred income taxes	(4,824		)	9,842			28,258
Stock-based compensation	15,764			13,383			8,763
Equity in net loss (income) from unconsolidated construction joint ventures	14,634			(15,614		)	(43,374		)
Net income from affiliates	(7,107		)	(7,177		)	(3,210		)
Changes in assets and liabilities:
Receivables	(60,272		)	(75,756		)	(32,877		)
Costs and estimated earnings in excess of billings, net	(26,066		)	2,100			(22,374		)
Inventories	(7,252		)	308			13,367
Contributions to unconsolidated construction joint ventures	(16,937		)	(11,795		)	(69,313		)
Distributions from unconsolidated construction joint ventures	39,955			19,344			53,367
Prepaid and other assets, net	13,211			(13,873		)	(1,078		)
Accounts payable	36,716			37,731			8,363
Accrued expenses and other current liabilities	11,348			(6,564		)	3,859
Net cash provided by operating activities	146,195			73,146			66,978
Investing activities
Purchases of marketable securities	(124,543		)	(129,685		)	(104,971		)
Maturities of marketable securities	120,000			50,000			29,260
Proceeds from called marketable securities	—			55,000			75,000
Purchases of property and equipment ($18,309 million, $17,810 million and $0 related to CCJVs)	(67,695		)	(90,970		)	(44,179		)
Proceeds from sales of property and equipment	10,202			12,946			13,148
Collection of notes receivable	1,052			4,331			943
Other investing activities, net	1,798			1,988			92
Net cash used in investing activities	(59,186		)	(96,390		)	(30,707		)
Financing activities
Proceeds from long-term debt	25,000			30,000			30,000
Debt principal payments	(45,000		)	(45,025		)	(46,763		)
Cash dividends paid	(20,687		)	(20,563		)	(20,445		)
Purchases of common stock	(6,977		)	(5,227		)	(3,777		)
Contributions from non-controlling partners	11,500			5,250			7,462
Distributions to non-controlling partners	(7,109		)	(5,258		)	(6,992		)
Other financing activities	649			557			1,119
Net cash used in financing activities	(42,624		)	(40,266		)	(39,396		)
Increase (decrease) in cash and cash equivalents	44,385			(63,510		)	(3,125		)
Cash and cash equivalents at beginning of year	189,326			252,836			255,961
Cash and cash equivalents at end of year	$	233,711		$	189,326		$	252,836

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

F- 7

GRANITE CONSTRUCTION INCORPORATED
CONSOLIDATED STATEMENTS OF CASH FLOWS - (Continued)
(in thousands)
Years Ended December 31,	2017			2016			2015
Supplementary Information
Cash paid during the period for:
Interest	$	11,446		$	13,392		$	14,601
Income taxes	33,948			29,872			4,298
Other non-cash activities:
Performance guarantees	5,497			17,596			(10,306		)
Non-cash investing and financing activities:
Restricted stock units issued, net of forfeitures (See Note 13)	$	11,505		$	21,101		$	6,220
Accrued cash dividends	5,183			5,151			5,124
Accrued equipment purchases	(1,945		)	(3,865		)	2,891

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

F- 8

GRANITE CONSTRUCTION INCORPORATED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

1. Summary of Significant Accounting Policies

Description of Business: Granite Construction Incorporated is one of the largest diversified heavy civil contractors and construction materials producers in the United States, engaged in the construction and improvement of streets, roads, highways, mass transit facilities, airport infrastructure, bridges, trenchless and underground utilities, power-related facilities, water-related facilities, utilities, tunnels, dams and other infrastructure-related projects. We have permanent offices located in Alaska, Arizona, California, Florida, Illinois, Nevada, New York, Texas, Utah and Washington. Unless otherwise indicated, the terms “we,” “us,” “our,” “Company” and “Granite” refer to Granite Construction Incorporated and its wholly owned and consolidated subsidiaries.

Principles of Consolidation: The consolidated financial statements include the accounts of Granite Construction Incorporated and its wholly owned and consolidated subsidiaries. All material inter-company transactions and accounts have been eliminated. Additionally, we participate in various joint ventures (“joint ventures”). We consolidate these joint ventures where we have determined that through our participation we have a variable interest and are the primary beneficiary as defined by Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 810, Consolidation, and related standards. The factors we use to determine the primary beneficiary of a variable interest entity (“VIE”) may include the decision authority of each partner, which partner manages the day-to-day operations of the project and the amount of our equity investment in relation to that of our partners. If we determine that the power to direct the significant activities is shared equally by two or more joint venture parties, then there is no primary beneficiary and no party consolidates the VIE.

Where we have determined we are not the primary beneficiary of a joint venture but do exercise significant influence, we account for our share of the operations of unconsolidated construction joint ventures on a pro rata basis in revenue and cost of revenue in the consolidated statements of operations and in equity in construction joint ventures in the consolidated balance sheets. We account for non-construction unconsolidated joint ventures under the equity method of accounting and include our share of the operations in equity in income from affiliates in the consolidated statements of operations and in investment in affiliates in the consolidated balance sheets. We have been divesting equity method investments in real estate affiliates as part of our 2010 Enterprise Improvement Plan (“EIP”).

Use of Estimates in the Preparation of Financial Statements: The financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”).  The preparation of these financial statements requires management to make estimates that affect the reported amounts of assets and liabilities, revenue and expenses, and related disclosure of contingent assets and liabilities. Our estimates and related judgments and assumptions are continually evaluated based on available information and experiences; however, actual amounts could differ from those estimates. 

Revenue Recognition - Construction Contracts: Revenue and earnings on construction contracts, including construction joint ventures, are recognized under the percentage of completion method using the ratio of costs incurred to estimated total costs.

Revenue from unapproved change orders is recognized to the extent the related costs have been incurred, the amount can be reliably estimated and recovery is probable.

On certain projects we have submitted and have pending unresolved contract modifications and affirmative claims (“affirmative claims”) to recover additional costs to which the Company believes it is entitled under the terms of contracts with customers, subcontractors, vendors or others. The owners or their authorized representatives and/or other third parties may be in partial or full agreement with the modifications or affirmative claims, or may have rejected or disagree entirely or partially as to such entitlement.

Revenue related to affirmative claims with customers is recognized to the extent of costs incurred when it is probable that a claim settlement with a customer will result in additional revenue and the amount can be reasonably estimated. A reduction to costs related to affirmative claims with non-customers with whom we have a contractual arrangement (“back charges”) is recognized when the estimated recovery is probable and the amount can be reasonably estimated. Except for contractual back charges, a reduction to cost related to affirmative claims against non-customers is recognized when the claims are settled. Recognizing affirmative claims and back charge recoveries requires significant judgments of certain factors including, but not limited to, dispute resolution developments and outcomes, anticipated negotiation results, and the cost of resolving such matters.

F- 9

GRANITE CONSTRUCTION INCORPORATED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

Provisions are recognized in the consolidated statements of operations for the full amount of estimated losses on uncompleted contracts whenever evidence indicates that the estimated total cost of a contract exceeds its estimated total revenue. All contract costs, including those associated with affirmative claims, back charges and change orders, are recorded as incurred and revisions to estimated total costs are reflected as soon as the obligation to perform is determined. Contract costs consist of direct costs on contracts, including labor and materials, amounts payable to subcontractors, direct overhead costs and equipment expense (primarily depreciation, fuel, maintenance and repairs). All state and federal government contracts and many of our other contracts provide for termination of the contract at the convenience of the party contracting with us, with provisions to pay us for work performed through the date of termination. Pre-contract costs are expensed as incurred.

The accuracy of our revenue and profit recognition in a given period depends on the accuracy of our estimates of the cost to complete each project. Cost estimates for all of our projects use a detailed “bottom up” approach and we believe our experience allows us to create materially reliable estimates. There are a number of factors that can contribute to changes in estimates of contract cost and profitability. The most significant of these include:

• the completeness and accuracy of the original bid;

• costs associated with scope changes;

• changes in costs of labor and/or materials;

• extended overhead and other costs due to owner, weather and other delays;

• subcontractor performance issues;

• changes in productivity expectations;

• site conditions that differ from those assumed in the original bid;

• changes from original design on design-build projects;

• the availability and skill level of workers in the geographic location of the project;

• a change in the availability and proximity of equipment and materials;

• our ability to fully and promptly recover on affirmative claims and back charges for additional contract costs; and

• the customer’s ability to properly administer the contract.

The foregoing factors, as well as the stage of completion of contracts in process and the mix of contracts at different margins may cause fluctuations in gross profit and gross profit margin from period to period. Significant changes in cost estimates, particularly in our larger, more complex projects have had, and can in future periods have, a significant effect on our profitability.

Revenue Recognition - Materials: Revenue from the sale of materials is recognized when delivery occurs and risk of ownership passes to the customer.

Balance Sheet Classifications: Prepaid expenses and amounts receivable and payable under construction contracts (principally retentions) that may exist over the duration of the contract and could extend beyond one year are included in current assets and liabilities. A one-year time period is used as the basis for classifying all other current assets and liabilities.

Cash and Cash Equivalents: Cash equivalents are securities having maturities of three months or less from the date of purchase. Included in cash and cash equivalents in the consolidated balance sheets as of December 31, 2017 and 2016, was $94.4 million and $73.1 million, respectively, related to CCJVs. Our access to joint venture cash may be limited by the provisions of the venture agreements.

Costs and Estimated Earnings in Excess of Billings: Costs and estimated earnings in excess of billings represent unbilled amounts earned and reimbursable under contracts. These amounts become billable according to the contract terms, which usually consider the passage of time, achievement of milestones or completion of the project. With the exception of customer affirmative claims, generally, such unbilled amounts will be billed and collected over the next twelve months. Settlement with the customer of outstanding affirmative claims is dependent on the claims resolution process and could extend beyond one year or the project operating cycle. Based on our historical experience, we generally consider the collection risk related to these amounts to be low. When events or conditions indicate that the amounts outstanding may become uncollectible, an allowance is estimated and recorded.

Marketable Securities: We determine the classification of our marketable securities at the time of purchase and re-evaluate these determinations at each balance sheet date. Debt securities are classified as held-to-maturity when we have the positive intent and ability to hold the securities to maturity. Held-to-maturity investments are stated at amortized cost and are periodically assessed for other-than-temporary impairment. Amortized cost of debt securities is adjusted for amortization of premiums and accretion of discounts to maturity, and is included in interest income. The cost of securities redeemed or called is based on the specific identification method.

F- 10

GRANITE CONSTRUCTION INCORPORATED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

Derivative Instruments: We recognize derivative instruments as either assets or liabilities in the consolidated balance sheets at fair value using Level 2 inputs. To receive hedge accounting treatment, derivative instruments that are designated as cash flow hedges must be highly effective in offsetting changes to expected future cash flows on hedged transactions. The effective portion of the gain or loss on cash flow hedges is reported as a component of accumulated other comprehensive income (loss) and subsequently reclassified to interest expense in the consolidated statements of operations when the periodic hedged cash flows are settled. Adjustments to fair value on derivative instruments that do not qualify for hedge accounting treatment are reported through other (income) expense in the consolidated statements of operations. We do not enter into derivative instruments for speculative or trading purposes.

Fair Value of Financial Assets and Liabilities: We measure and disclose certain financial assets and liabilities at fair value. ASC Topic 820, Fair Value Measurements and Disclosures, defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC Topic 820 also establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard describes three levels of inputs that may be used to measure fair value:

Level 1 - Quoted prices in active markets for identical assets or liabilities.

Level 2 - Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3 - Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

We utilize the active market approach to measure fair value for our financial assets and liabilities. We report separately each class of assets and liabilities measured at fair value on a recurring basis and include assets and liabilities that are disclosed but not recorded at fair value in the fair value hierarchy.

The carrying value of marketable securities approximates their fair value as determined by market quotes. Rates currently available to us for debt with similar terms and remaining maturities are used to estimate the fair value of existing debt. The carrying value of receivables and other amounts arising out of normal contract activities, including retentions, which may be settled beyond one year, is estimated to approximate fair value. 

Concentrations of Credit Risk and Other Risks: Financial instruments, which potentially subject us to concentrations of credit risk, consist primarily of cash and cash equivalents, short-term and long-term marketable securities, and accounts receivable. We maintain our cash and cash equivalents and our marketable securities with several financial institutions. We invest with high credit quality financial institutions and, by policy, limit the amount of credit exposure to any one financial institution.

Our receivables are from customers concentrated in the United States, and we have no material receivables from foreign operations as of December 31, 2017 or 2016. We perform ongoing credit evaluations of our customers and generally do not require collateral, although the law provides us the ability to file mechanics’ liens on real property improved for private customers in the event of non-payment by such customers. We maintain an allowance for doubtful accounts which has historically been within management’s estimates.

Inventories: Inventories consist primarily of quarry products valued at the lower of average cost or market. We write down the inventories based on estimated quantities of materials on hand in excess of approximately one year of demand. At December 31, 2017 and 2016, inventory also included $11.9 million and $5.0 million, respectively, of materials specifically related to a project in our Kenny Large Project Construction operating group and was valued at cost.

Investments in Real Estate Affiliates: Each real estate development project accounted for under the equity method of accounting is reviewed in accordance with ASC Topic 323, Investments - Equity Method and Joint Ventures. These projects are evaluated for impairment using the other-than-temporary impairment model, which requires an impairment charge to be recognized if our investment’s carrying amount exceeds its fair value, and the decline in fair value is deemed to be other than temporary.

F- 11

GRANITE CONSTRUCTION INCORPORATED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

Events or changes in circumstances, which would cause us to review undiscounted future cash flows include, but are not limited to:

• significant decreases in the market price of the asset;

• significant adverse changes in legal factors or the business climate;

• significant changes to the development or business plans of a project;

• accumulation of costs significantly in excess of the amount originally expected for the acquisition, development or construction of the asset; and

• current period cash flow or operating losses combined with a history of losses, or a forecast of continuing losses associated with the use of the asset.

Future undiscounted cash flows and fair value assessments are estimated based on entitlement status, market conditions, cost of construction, debt load, development schedules, status of joint venture partners and other factors applicable to the specific project. Fair value is estimated based on the expected future cash flows attributable to the asset or group of assets and on other assumptions that market participants would use in determining fair value, such as market discount rates, transaction prices for other comparable assets, and other market data. Our estimates of cash flows may differ from actual cash flows due to, among other things, fluctuations in interest rates, decisions made by jurisdictional agencies, economic conditions, or changes to our business operations.

Property and Equipment: Property and equipment are stated at cost. Depreciation for construction and other equipment is primarily provided using accelerated methods over lives ranging from three to seven years, and the straight-line method over lives from three to twenty years for the remaining depreciable assets. We believe that accelerated methods best approximate the service provided by the construction and other equipment. Depletion of quarry property is based on the usage of depletable reserves. We frequently sell property and equipment that has reached the end of its useful life or no longer meets our needs, including depleted quarry property. At the time that an asset or an asset group meets the held-for-sale criteria as defined by ASC Topic 360, Property, Plant, and Equipment, we write it down to fair value, if the fair value is below the carrying value. Fair value is estimated by a variety of factors including, but not limited to, market comparative data, historical sales prices, broker quotes and third party valuations. If material, such property is separately disclosed, otherwise it is held in property and equipment until sold. The cost and accumulated depreciation or depletion of property sold or retired is removed from the balance sheet and the resulting gains or losses, if any, are reflected in operating income for the period. In the case that we abandon an asset, an amount equal to the carrying amount of the asset, less salvage value, if any, will be recognized as expense in the period that the asset was abandoned. Repairs and maintenance are charged to operations as incurred.

Costs related to the development of internal-use software during the preliminary project and post-implementation stages are expensed as incurred. Costs incurred during the application development stage are capitalized. These costs consist primarily of software, hardware and consulting fees, as well as salaries and related costs. Amounts capitalized are reported as a component of office furniture and equipment within property and equipment. Capitalized software costs are depreciated using the straight-line method over the estimated useful life of the related software, which range from three to seven years. During the years endedDecember 31, 2017, 2016 and 2015, we capitalized $7.9 million, $6.6 million and $2.3 million, respectively, of internal-use software development and related hardware costs.

Long-lived Assets: We review property and equipment and amortizable intangible assets for impairment at an asset group level whenever events or changes in circumstances indicate the net book value of an asset group may not be recoverable. Recoverability of these asset groups is measured by comparison of their net book values to the future undiscounted cash flows the asset groups are expected to generate. If the asset groups are considered to be impaired, an impairment charge will be recognized equal to the amount by which the net book value of the asset groups exceed their fair value. We group construction and plant equipment assets at a regional level, which represents the lowest level for which identifiable cash flows are largely independent of the cash flows of other groups of assets. When an individual asset or group of assets is determined to no longer contribute to the vertically integrated asset group, it is assessed for impairment independently.

As of December 31, 2017, amortizable intangible assets include covenants not to compete, permits, trade names and customer lists which are being amortized on a straight-line basis over remaining terms from three to twenty years.

Capitalized Interest: Interest, to the extent it is incurred in connection with the construction of certain self-constructed assets and real estate development projects, is capitalized and recorded as part of the asset to which it relates. Capitalized interest on self-constructed assets is amortized over their estimated useful lives and is expensed on real estate projects as they are sold.

F- 12

GRANITE CONSTRUCTION INCORPORATED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

Goodwill: As of December 31, 2017 and 2016, we had five reporting units in which goodwill was recorded as follows:

• Kenny Group Construction

• Kenny Group Large Project Construction

• Northwest Group Construction

• Northwest Group Construction Materials

• California Group Construction

The most significant goodwill balances reside in the reporting units associated with the Kenny Group. See Note 9 for balances by reportable segment.

We perform impairment tests annually as of November 1 and more frequently when events and circumstances occur that indicate a possible impairment of goodwill. In addition, we evaluate goodwill for impairment if events or circumstances change between annual tests indicating a possible impairment.  Examples of such events or circumstances include the following: 

• a significant adverse change in legal factors or in the business climate; 

• an adverse action or assessment by a regulator; 

• a more likely than not expectation that a segment or a significant portion thereof will be sold; or 

• the testing for recoverability of a significant asset group within the segment. 

We elected to only perform the quantitative goodwill impairment tests for the 2017 annual test. In performing the quantitative goodwill impairment tests, we calculate the estimated fair value of the reporting unit in which the goodwill is recorded using the discounted cash flows and market multiple methods. Judgments inherent in these methods include the determination of appropriate discount rates, the amount and timing of expected future cash flows and growth rates, and appropriate benchmark companies. The cash flows used in our 2017 discounted cash flow model were based on five-year financial forecasts, which in turn were based on the 2018-2020 operating plan developed internally by management adjusted for market participant based assumptions. Our discount rate assumptions are based on an assessment of the equity cost of capital and appropriate capital structure for our reporting units. In assessing the reasonableness of our determined fair values of our reporting units, we evaluate the reasonableness of our results against our current market capitalization. 

The estimated fair value is compared to the net book value of the reporting unit, including goodwill. If the fair value of the reporting unit exceeds its net book value, goodwill of the reporting unit is considered not impaired. If the fair value of the reporting unit is less than its net book value, goodwill is impaired and the excess of the reporting unit’s net book value over the fair value is recognized as an impairment loss.

The results of our annual goodwill impairment tests, performed in accordance with ASC 350, Intangibles - Goodwill and Other, indicated that the estimated fair values of our reporting units exceeded their net book values (i.e., cushion) by at least 20% for the reporting units with goodwill. Out of the five reporting units with goodwill, the Kenny Large Project Construction business is the most susceptible to fluctuations in results depending on awarded work given the large size and limited frequency of awards. While we believe the current cushion for the reporting unit is adequate to absorb these fluctuations, a material decline in job win rates could have a material impact to this reporting unit’s estimated fair value.

Billings in Excess of Costs and Estimated Earnings: Billings in excess of costs and estimated earnings is comprised of cash collected from customers and billings to customers on contracts in advance of work performed, including advance payments negotiated as a contract condition. Generally, unearned project-related costs will be earned over the next twelve months.

F- 13

GRANITE CONSTRUCTION INCORPORATED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

Asset Retirement Obligations: We account for the costs related to legal obligations to reclaim aggregate mining sites and other facilities by recording our estimated asset retirement obligation at fair value, capitalizing the estimated liability as part of the related asset’s carrying amount and allocating it to expense over the asset’s useful life. To determine the fair value of the obligation, we estimate the cost for a third-party to perform the legally required reclamation including a reasonable profit margin. This cost is then increased for future estimated inflation based on the estimated years to complete and discounted to fair value using present value techniques with a credit-adjusted, risk-free rate. In estimating the settlement date, we evaluate the current facts and conditions to determine the most likely settlement date.

We review reclamation obligations at least annually for a revision to the cost or a change in the estimated settlement date. Additionally, reclamation obligations are reviewed in the period that a triggering event occurs that would result in either a revision to the cost or a change in the estimated settlement date.

Warranties: Many of our construction contracts contain warranty provisions covering defects in equipment, materials, design or workmanship that generally run from six months to one year after our customer accepts the contract. Because of the nature of our projects, including contract owner inspections of the work both during construction and prior to acceptance, we have not experienced material warranty costs for these short-term warranties and, therefore, do not believe an accrual for these costs is necessary. Certain construction contracts carry longer warranty periods, ranging from two to ten years, for which we have accrued an estimate of warranty cost. The warranty liability is estimated based on our experience with the type of work and any known risks relative to the project and was not material as of December 31, 2017 and 2016. 

Accrued Insurance Costs: We carry insurance policies to cover various risks, primarily general liability, automobile liability, workers compensation and employee medical expenses, under which we are liable to reimburse the insurance company for a portion of each claim paid. The amounts for which we are liable for general liability and workers compensation generally range from the first $0.5 million to $1.0 million per occurrence. We accrue for probable losses, both reported and unreported, that are reasonably estimable using actuarial methods based on historic trends modified, if necessary, by recent events. Changes in our loss assumptions caused by changes in actual experience would affect our assessment of the ultimate liability and could have an effect on our operating results and financial position up to $1.0 million per occurrence for general liability and workers compensation or $0.3 million for medical insurance.

Performance Guarantees: Agreements with our joint venture partners (“partner(s)”) for both construction joint ventures and line item joint ventures define each partner’s management role and financial responsibility in the project. The amount of operational exposure is generally limited to our stated ownership interest. However, due to the joint and several nature of the performance obligations under the related owner contracts, if one of the partners fails 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). We estimate our liability for performance guarantees for our unconsolidated construction joint ventures and line item joint ventures using estimated partner bond rates and include them in accrued expenses and other current liabilities (see Note 10) with a corresponding increase in equity in construction joint ventures in the consolidated balance sheets. We reassess our liability when and if changes in circumstances occur. The liability and corresponding asset are removed from the consolidated balance sheets upon customer acceptance of the project. Circumstances that could lead to a loss under these agreements beyond our stated ownership interest include the failure of a partner to contribute additional funds to the venture in the event the project incurs a loss or additional costs that we could incur should a partner fail to provide the services and resources that it had committed to provide in the agreement.

Contingencies: We are currently involved in various claims and legal proceedings. Loss contingency provisions are recorded if the potential loss from any asserted or unasserted claim or legal proceeding is considered probable and the amount can be reasonably estimated. If a potential loss is considered probable but only a range of loss can be determined, the low-end of the range is recorded. These accruals represent management’s best estimate of probable loss. Disclosure is also provided when it is reasonably possible that a loss will be incurred or when it is reasonably possible that the amount of a loss will exceed the amount recorded. Significant judgment is required in both the determination of probability of loss and the determination as to whether an exposure is reasonably estimable. Because of uncertainties related to these matters, accruals are based only on the best information available at the time. As additional information becomes available, we reassess the potential liability related to claims and litigation and may revise our estimates. See Note 17 and “Item 3. Legal Proceedings” for additional information.

Stock-Based Compensation: We measure and recognize compensation expense, net of estimated forfeitures, over the requisite vesting periods for all stock-based payment awards made. Stock-based compensation is included in selling, general and administrative expenses and cost of revenue on our consolidated statements of operations.

F- 14

GRANITE CONSTRUCTION INCORPORATED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

Restructuring (Gains) Charges: Pursuant to an approved plan, we record severance costs when an employee has been notified, unless the employee provides future service, in which case severance costs are expensed ratably over the future service period. Other restructuring costs are recognized when the liability is incurred. Costs associated with terminating a lease contract are recorded at the contract termination date, in accordance with contract terms, or on the cease-use date, net of estimated sublease income, if applicable. In determining the amount related to termination of a lease, various assumptions are used including the time period over which facilities will be vacant, expected sublease term and sublease rates. These assumptions may be adjusted upon the occurrence of future events. Asset impairment analyses resulting from restructuring events are performed in accordance with ASC subtopic 360-10, Property, Plant and Equipment. See the Property and Equipment and Long-lived Assets accounting policies above for further information on asset impairment charges. During the years ended December 31, 2017, 2016 and 2015 we recorded net restructuring gains of $2.4 million, $1.9 million and $6.0 million (including amounts attributable to non-controlling interests of $3.3 million), respectively, related to our EIP.

Income Taxes: Deferred taxes are provided on a liability method whereby deferred tax assets are recognized for deductible temporary differences and operating loss carry-forwards and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities in the consolidated financial statements and their respective tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.

We report a liability in other long-term liabilities in the consolidated balance sheets for unrecognized tax benefits resulting from uncertain tax positions taken or expected to be taken in a tax return. We recognize interest and penalties, if any, related to unrecognized tax benefits in other (income) expense in the consolidated statements of operations.

Computation of Earnings Per Share: Basic net income per share is computed using the weighted-average number of common shares outstanding during the period. Diluted net income per share is computed using the weighted-average number of common shares and dilutive potential common shares outstanding during the period. Potential common shares include stock options and restricted stock units, under the 2012 Equity Incentive Plan.

Recently Issued Accounting Pronouncements:

In May 2014, the FASB issued ASC Topic 606, Revenue from Contracts with Customers, and subsequently issued several related Accounting Standards Updates (“ASU”s) (“Topic 606”), which provide guidance for recognizing revenue from contracts with customers. The core principle of Topic 606 is that revenue will be recognized when promised goods or services are transferred to customers in an amount that reflects consideration for which entitlement is expected in exchange for those goods or services. Topic 606 will be effective commencing with our quarter ending March 31, 2018.

We will adopt Topic 606 using the modified retrospective transition approach, which we will elect to apply Topic 606 to contracts with customers that are not substantially complete, i.e. less than 90% complete, as of January 1, 2018. We do not expect Topic 606 to have a material impact on our Construction Materials segment’s revenue. The impact of Topic 606 primarily relates to our Construction and Large Project Construction segments specifically in the following areas:

• Multiple performance obligations - In accordance with Topic 606, we have reviewed construction contracts with customers, including those related to contract modifications, to determine if there are multiple performance obligations. Based on this review, we have identified one unconsolidated joint venture contract in our Large Project Construction segment that will have multiple performance obligations.

• Multiple contracts - We reviewed contracts containing task orders and identified one Large Project Construction segment contract and one Construction segment contract that consist of multiple individual contracts as defined by Topic 606.

• Provision for losses - Provisions for losses will be recognized in the consolidated statements of operations for the full amount of estimated losses at the uncompleted performance obligation level whenever evidence indicates that the estimated total cost of a performance obligation exceeds its estimated total revenue. Currently provisions for losses are recorded at the contract level. We have identified one unconsolidated joint venture contract in our Large Project Construction segment that will have, as of the effective date, actual and provisions for losses related to completed and uncompleted performance obligations, respectively.

F- 15

GRANITE CONSTRUCTION INCORPORATED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

Based on our estimated costs to complete and our assessment of the impact from the adoption of Topic 606 as of December 31, 2017, we estimate a net cumulative decrease to retained earnings between $15.0 million and $18.0 million as of January 1, 2018.

In addition to the above, we expect to separately present contract assets and liabilities in the consolidated balance sheets. Contract assets will include amounts due under contractual retainage provisions, unbilled receivables, costs and estimated earnings in excess of billings and capitalized mobilization costs. Contract liabilities will include provisions for losses and billings in excess of costs and estimated earnings.

There will also be new disclosures related to revenue including information about unearned revenue and revenue disaggregated by operating group. Unearned revenue will be similar to our existing contract backlog but will only include project amounts when the related contract, contract options and task orders, as applicable, are executed rather than when awarded and funding is probable.

In January 2016, the FASB issued ASU No. 2016-01, Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities, which, among other things, eliminates the requirement to disclose the method(s) and significant assumptions used to estimate the disclosed fair value of financial instruments measured at amortized cost on the consolidated balance sheets. This ASU will be effective commencing with our quarter ending March 31, 2018. We do not expect the adoption of this ASU to have a material impact on our consolidated financial statements.

In February 2016, the FASB issued ASU No. 2016-02, Leases(Topic 842) and subsequently issued a related ASU, which requires lessees to recognize the following for all leases (with the exception of short-term leases) at the commencement date: (a) a lease liability, which is a lessee’s obligation to make lease payments arising from a lease, measured on a discounted basis; and (b) a right-of-use asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term. The ASU will be effective commencing with our quarter ending March 31, 2019. We expect the adoption of this ASU to have a material and essentially equal increase to current assets and current liabilities on our consolidated balance sheets.

In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments. The amendments in this ASU clarify and provide specific guidance on eight cash flow classification issues that are not currently addressed by current U.S. GAAP. This ASU will be effective commencing with our quarter ending March 31, 2018. We do not expect the adoption of this ASU to have a material impact on our consolidated financial statements.

In October 2016, the FASB issued ASU No. 2016-16, Intra-Entity Transfers of Assets Other Than Inventory. The amendments in this ASU require the income tax consequences of an intra-entity transfer of an asset other than inventory to be recognized when the transfer occurs instead of when the asset is sold to an outside party. This ASU will be effective commencing with our quarter ending March 31, 2018. Although we do not expect the adoption of this ASU to have a material impact on our consolidated financial statements upon adoption, it may have a material impact if applicable transactions occur.

In January 2017, the FASB issued ASU No. 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business, which is intended to help companies evaluate whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses by providing a more robust framework to use in determining when a set of assets and activities is a business. This ASU will be effective commencing with our quarter ending March 31, 2018. Although we do not expect the adoption of this ASU to have a material impact on our consolidated financial statements upon adoption, ir may have a material impact if applicable transactions occur.

In May 2017, the FASB issued ASU No. 2017-09, Compensation-Stock Compensation (Topic 718) Scope of Modification Accounting, which clarifies that changes to the value, vesting conditions, or award classification of share-based payment awards must be accounted for as modifications. This ASU will be effective commencing with our quarter ending March 31, 2018. Although we do not expect the adoption of this ASU to have a material impact on our consolidated financial statements upon adoption, it may have a material impact if applicable transactions occur.

In August 2017, the FASB issued ASU No. 2017-12, Derivatives and Hedging (Topic 815):Targeted Improvements to Accounting for Hedging Activities, which refines and expands hedge accounting for both financial (e.g., interest rate) and commodity risks. This ASU will be effective commencing with our quarter ending March 31, 2019. We do not expect the adoption of this ASU to have a material impact on our consolidated financial statements.

F- 16

GRANITE CONSTRUCTION INCORPORATED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

Recently Adopted Accounting Pronouncements:

In March 2016, the FASB issued ASU No. 2016-05, Derivatives and Hedging (Topic 815): Effect of Derivative Contract Novations on Existing Hedge Accounting Relationships, which clarifies that a change in the counterparty to a derivative instrument that has been designated as a hedging instrument does not, in and of itself, require de-designation of that hedging relationship provided that all other hedge accounting criteria continue to be met. The ASU was effective commencing with our quarter ending March 31, 2017 and had no impact on our consolidated financial statements.

In January 2017, the FASB issued ASU No. 2017-04, Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. This ASU eliminated Step 2 from the goodwill impairment test, which measures goodwill impairment by comparing the implied fair value of a reporting unit’s goodwill to its carrying amount. According to the ASU, an impairment charge should be recorded if a reporting unit’s net book value exceeds its fair value, limited to the amount of goodwill allocated to that reporting unit. We elected to early adopt the ASU, effective January 1, 2017. The estimated fair value of our reporting units exceeded the net book values; therefore, the adoption of this ASU had no impact on our consolidated financial statements.

In March 2017, the FASB issued ASU No. 2017-08, Receivables—Nonrefundable Fees and Other Costs (Subtopic 310-20), Premium Amortization on Purchased Callable Debt Securities, which requires the premium for certain callable debt securities held at a premium to be amortized to the earliest call date rather than at maturity. The ASU does not require an accounting change for securities held at a discount; the discount continues to be amortized to maturity. The ASU was effective commencing with our quarter ending March 31, 2017 and had an immaterial impact on our consolidated financial statements.

2. Revisions in Estimates

Our profit recognition related to construction contracts is based on estimates of 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. When we experience significant changes in our estimates of costs to complete, 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. We use the cumulative catch-up method applicable to construction contract accounting to account for revisions in estimates. 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 cost estimates in the future. In our review of these changes for the year ended December 31, 2017 we identified and corrected amounts that should have been recorded during the year ended December, 31, 2016. This correction resulted in a $4.9 million decrease to Large Project Construction revenue and gross profit and a $1.6 million decrease in net income attributable to Granite Construction Incorporated. We have assessed the impact of this correction to the financial statements of prior periods’ and to the financial statements for the year ended December 31, 2017 and have concluded that the amounts are not material. In our review of these changes for the years ended 2016 and 2015, we did not identify any material amounts that should have been recorded in a prior period.     

In the normal course of business, we have revisions in estimated costs some of which are associated with unresolved affirmative claims and back charges. The estimated or actual recovery related to these 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.

F- 17

GRANITE CONSTRUCTION INCORPORATED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

Affirmative Claims

Revisions in estimates for the years ended December 31, 2017, 2016 and 2015, included increases in revenue of $34.9 million, $37.3 million and $48.5 million, respectively, related to the estimated cost recovery of customer affirmative claims. Of these totals, $30.9 million, $25.4 million and $37.3 million, were offset by an increase in estimated contract costs that were in excess of the estimated recovery during the years ended December 31, 2017, 2016 and 2015, respectively. For the remaining $4.0 million, $11.9 million and $11.2 million, respectively, estimated contract costs in excess of estimated cost recovery were recorded in prior periods.

Back Charges

Revisions in estimates for the years ended December 31, 2017, 2016 and 2015, included reduction of cost of revenue of $4.6 million, $15.7 million and $7.0 million, respectively, related to the estimated recovery of back charges. Of these totals, $2.5 million, $4.8 million and $0.5 million, were offset by an increase in estimated contract costs that were in excess of the estimated recovery during the years ended December 31, 2017, 2016 and 2015, respectively. For the remaining $2.1 million, $10.9 million and $6.5 million, respectively, estimated contract costs in excess of estimated cost recovery were recorded in prior periods.

The tables below include the impact to gross profit from significant revisions in estimates related to estimated and actual recovery of customer affirmative claims and back charges as well as the associated estimated contract costs.

Construction

The net changes in project profitability from revisions in estimates, both increases and decreases, which individually had an impact of $1.0 million or more on gross profit were net increases of $4.0 million, $1.3 million and $19.9 million for the years ended December 31, 2017, 2016 and 2015, respectively. The projects are summarized as follows (dollars in millions):

Increases

Years Ended December 31,		2017		2016		2015
Number of projects with upward estimate changes		10		7		14
Range of increase in gross profit from each project, net	$	1.1 - 3.9	$	1.1 - 4.8	$	1.1 - 6.6
Increase on project profitability	$	17.2	$	14.2	$	30.7

The increases during the years ended December 31, 2017, 2016 and 2015 were due to lower costs and higher productivity than originally anticipated and owner directed scope changes. The 2017 and 2016 increases were also due to estimated cost recovery from affirmative claims.

Decreases

Years Ended December 31,		2017		2016		2015
Number of projects with downward estimate changes		6		7		5
Range of reduction in gross profit from each project, net	$	1.0 - 4.4	$	1.0 - 3.9	$	1.0 - 3.3
Decrease on project profitability	$	13.2	$	12.9	$	10.8

The decreases during the years ended December 31, 2017, 2016 and 2015 were due to additional costs and lower productivity than originally anticipated. The 2017 decreases were also due to increases in estimated cost to complete from outstanding affirmative claims and change orders.

F- 18

GRANITE CONSTRUCTION INCORPORATED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

Large Project Construction

The net changes in project profitability from revisions in estimates, both increases and decreases, which individually had an impact of $1.0 million or more on gross profit were net decreases of $66.6 million and $13.5 million and a net increase of $7.6 million for the years ended December 31, 2017, 2016 and 2015, respectively. Amounts attributable to non-controlling interests were $2.1 million and $4.3 million of the net decreases and $3.0 million of the net increase for the years ended December 31, 2017, 2016 and 2015, respectively. The projects are summarized as follows (dollars in millions):

Increases

Years Ended December 31,		2017		2016		2015
Number of projects with upward estimate changes		1		8		7
Range of increase in gross profit from each project, net	$	2.0	$	1.2 - 6.5	$	1.5 - 6.7
Increase on project profitability	$	2.0	$	27.2	$	27.9

The increases during the years ended December 31, 2017 and 2016 were due to higher productivity and lower costs than anticipated and settlement of affirmative claims as well as estimated cost recovery from affirmative claims during 2016. The increases during the year ended December 31, 2015 were due to owner-directed scope changes and lower costs than anticipated, as well as estimated cost recovery from affirmative claims.

Decreases

Years Ended December 31,		2017		2016		2015
Number of projects with downward estimate changes		7		5		6
Range of reduction in gross profit from each project, net	$	1.3 - 17.2	$	1.3 - 13.6	$	1.0 - 5.5
Decrease on project profitability	$	68.6	$	40.7	$	20.3

The decreases during the years ended December 31, 2017, 2016 and 2015 were primarily due to additional design, weather and owner-related costs and lower productivity than originally anticipated, net of estimated and actual recovery from customer affirmative claims and back charges. As of December 31, 2017, there were three projects for which additional costs were reasonably possible in excess of the probable amounts included in the cost forecast. The reasonably possible aggregate range that has the potential to adversely impact gross profit during the year ended December 31, 2018 was zero to $44.0 million. As the related projects proceed, future estimates may change and could have a material effect on our financial position, results of operations and/or cash flows in the future.

3. Marketable Securities

All marketable securities were classified as held-to-maturity as of the dates presented and the carrying amounts of held-to-maturity securities were as follows (in thousands):

December 31,	2017		2016
U.S. Government and agency obligations	$	17,910	$	10,002
Commercial paper	49,865		54,882
Total short-term marketable securities	67,775		64,884
U.S. Government and agency obligations	59,993		62,895
Corporate bonds	5,022		—
Total long-term marketable securities	65,015		62,895
Total marketable securities	$	132,790	$	127,779

Scheduled maturities of held-to-maturity investments were as follows (in thousands):

December 31, 2017
Due within one year	$	67,775
Due in one to five years	65,015
Total	$	132,790

F- 19

GRANITE CONSTRUCTION INCORPORATED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

4. Fair Value Measurement

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

	Fair Value Measurement at Reporting Date Using
December 31, 2017	Level 1		Level 2		Level 3		Total
Cash equivalents
Money market funds	$	37,284	$	—	$	—	$	37,284
Commercial paper	9,967		—		—		9,967
Total assets	$	47,251	$	—	$	—	$	47,251

	Fair Value Measurement at Reporting Date Using
December 31, 2016	Level 1		Level 2		Level 3		Total
Cash equivalents
Money market funds	$	10,057	$	—	$	—	$	10,057
Total assets	$	10,057	$	—	$	—	$	10,057

Derivatives

The commodity swaps that we entered in 2014 were settled in October 2015. Gains or losses, including net periodic settlement amounts, were recorded in other income, net in our consolidated statements of operations. During the year ended December 31, 2015, we recorded a net loss of $0.4 million.

Interest Rate Swaps

In December 2016, we terminated the fixed to variable interest rate swap we entered in March 2014 due to the possibility of increasing interest rates. The interest rate swap is reported at fair value using Level 2 inputs in the consolidated balance sheets. Gains or losses, including net periodic settlement amounts, are recorded in other income, net in our consolidated statements of operations. During the years ended December 31, 2016 and 2015, we recorded net gains of $0.3 million and $1.5 million, respectively.

In January 2016, we entered into an interest rate swap designated as a cash flow hedge with an effective date of April 2016 and an initial notional amount of $98.8 million which matures in October 2020. The interest rate swap is designed to convert the interest rate on the term loan described in Note 11 from a variable rate of interest of LIBOR plus an applicable margin to a fixed rate of 1.47% plus the same applicable margin. The interest rate swap is reported at fair value using Level 2 inputs in the consolidated balance sheets. Gains or losses on the effective portion are initially reported as a component of accumulated other comprehensive income (loss) and subsequently reclassified to interest expense in the consolidated statements of operations when the quarterly hedged interest payment is settled. As of December 31, 2017 and 2016, the fair value of the cash flow hedge was $1.4 million and $0.8 million, respectively, and was included in other current assets in the consolidated balance sheets. Associated gains or losses were recorded in the consolidated statements of operations and were immaterial during the years ended December 31, 2017 and 2016.

F- 20

GRANITE CONSTRUCTION INCORPORATED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

Other Assets and Liabilities

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

December 31,		2017				2016
	Fair Value Hierarchy	Carrying Value		Fair Value		Carrying Value		Fair Value
Assets:
Held-to-maturity marketable securities	Level 1	$	132,790	$	132,002	$	127,779	$	127,365
Liabilities (including current maturities):
Senior notes payable1	Level 3	$	80,000	$	82,190	$	120,000	$	124,654
Credit Agreement term loan1	Level 3	$	90,000	$	89,871	$	95,000	$	93,991
Credit Agreement - revolving credit facility, 2016 draw1	Level 3	$	30,000	$	30,105	$	30,000	$	29,452
Credit Agreement - revolving credit facility, 2017 draw1	Level 3	$	25,000	$	24,949	$	—	$	—

¹The fair values of the senior notes payable and Credit Agreement (defined in Note 11) loan are based on borrowing rates available to us for long-term loans with similar terms, average maturities, and credit risk.

We measure certain nonfinancial assets and liabilities at fair value on a nonrecurring basis, at least annually. As of December 31, 2017 and 2016, the nonfinancial assets and liabilities included our asset retirement and reclamation obligations, as well as assets and corresponding liabilities associated with performance guarantees.

The fair value of asset retirement obligations were measured using Level 3 inputs and performance guarantees were measured using Level 2 inputs. Asset retirement obligations were initially measured using internal discounted cash flow calculations based upon our estimates of future retirement costs - see Note 8 for details of the asset retirement balances and Note 1 for further discussion on fair value measurements. Performance guarantees were measured using estimated partner bond rates - see Note 10 for the liability balances and Note 1 for further discussion on performance guarantees.

During the years ended December 31, 2017, 2016 and 2015, nonfinancial assets and liabilities fair value adjustments were related to our asset retirement obligations and restructuring gains associated with our EIP, detailed as follows:

• Asset retirement obligations adjustments were $0.5 million, $2.1 million and $0.2 million, respectively. See Note 8 for further information.

• Restructuring gains associated with our EIP were $2.4 million, $1.9 million and $6.0 million (including amounts attributable to non-controlling interests of $3.3 million), during the years ended December 31, 2017, 2016 and 2015, respectively, primarily associated with the release of lease obligations, sale of a real estate asset related to our equity method investments and the sale of a previously impaired consolidated real estate asset.

5. Receivables, net (in thousands)

December 31,	2017		2016
Construction contracts completed and in progress:
Billed	$	252,467	$	206,570
Unbilled	77,135		81,590
Retentions	91,135		84,878
Total construction contracts completed and in progress	420,737		373,038
Construction material sales	42,192		29,357
Other	17,014		17,523
Total gross receivables	479,943		419,918
Less: allowance for doubtful accounts	152		573
Total net receivables	$	479,791	$	419,345

F- 21

GRANITE CONSTRUCTION INCORPORATED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

Receivables include amounts billed and billable to clients for services provided as of the end of the applicable period and do not bear interest. To the extent costs are not contractually billable or have not been earned, including claim recovery estimates, the associated revenue is included in costs and estimated earnings in excess of billings or billings in excess of costs and estimated earnings in the consolidated balance sheets. As of December 31, 2017 and 2016, the aggregate claim recovery estimates included in these balances were approximately $26.7 million and $12.3 million, respectively. Included in other receivables at December 31, 2017 and 2016 were items such as estimated recovery from back charge claims, notes receivable, fuel tax refunds, receivables from vendors and income tax refunds. No such receivables individually exceeded 10% of total net receivables at any of these dates. As of December 31, 2017 and 2016, the estimated recovery from back charge claims included in Other receivables was $1.1 million and $0.3 million, respectively.

During the year ended December 31, 2017, our largest volume customer, including both prime and subcontractor arrangements, was the California Department of Transportation (“Caltrans”). Revenue recognized from contracts with Caltrans during 2017 represented $281.7 million (9.4% of our total revenue) of which $219.9 million (13.2% of segment revenue) was in the Construction segment, $57.2 million (5.5% of segment revenue) in the Large Project Construction segment and $4.6 million (1.6% of segment revenue) was in the Construction Materials segment. During the year ended December 31, 2016, our largest volume customer, including both prime and subcontractor arrangements, was Caltrans. Revenue recognized from contracts with Caltrans during 2016 represented $222.4 million (8.8% of total revenue), of which $173.4 million (12.7% of segment revenue) was in the Construction segment and $48.7 million (5.5% of segment revenue) was in the Large Project Construction segment. During the year ended December 31, 2015, our largest volume customer, including both prime and subcontractor arrangements, was the New York State Department of Transportation (“NYSDOT”). Revenue recognized from contracts with NYSDOT during 2015 represented $199.0 million (8.4% of total revenue), all of which was in the Large Project Construction segment (24.5% of segment revenue).

We regularly review our accounts receivable, including past due amounts, to determine their probability of collection. If it is probable that an amount is uncollectible, it is charged to bad debt expense and a corresponding reserve is established in allowance for doubtful accounts. If it is deemed certain that an amount is uncollectible, the amount is written off.

Certain construction contracts include retainage provisions. The balances billed but not paid by customers pursuant to these provisions generally become due upon completion and acceptance of the project work or products by the owners. No retention receivable individually exceeded 10% of total net receivables at any of the presented dates. As of December 31, 2017, the majority of the retentions receivable are expected to be collected within one year. As of December 31, 2017 and 2016, there were no retentions receivables determined to be uncollectible.

6. Construction Joint Ventures

We participate in various construction joint ventures (“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 December 31, 2017, there was $4.6 billion of construction revenue to be recognized on unconsolidated and line item construction joint venture contracts of which $1.5 billion represented our share and the remaining $3.1 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. See Note 10 for disclosure of the performance guarantee amounts recorded in the consolidated balance sheets and Note 1 for additional discussion.

Generally, each construction joint venture is formed to accomplish a specific project and is jointly controlled by the joint venture partners. The joint venture agreements typically provide that our interests in any profits and assets, and our respective share in any losses and liabilities, that may result from the performance of the contracts are limited to our stated percentage interest in the project. Under our joint venture contractual arrangements, we provide capital to these joint ventures in return for an ownership interest. In addition, partners dedicate resources to the joint ventures necessary to complete the contracts and are reimbursed for their cost. The operational risks of each construction joint venture are passed along to the joint venture members. As we absorb our share of these risks, our investment in each venture is exposed to potential gains and losses.

We have determined that certain of these joint ventures are consolidated because they are 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 years ended December 31, 2017, 2016 and 2015, we determined no change was required for existing construction joint ventures.

F- 22

GRANITE CONSTRUCTION INCORPORATED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

The volume and stage of completion of contracts from our consolidated and unconsolidated construction joint ventures may cause fluctuations in cash and cash equivalents and, for consolidated construction joint ventures, billings in excess of costs and estimated earnings, costs in excess of billings and estimated earnings and property and equipment between periods.

The assets and liabilities of each consolidated and unconsolidated construction joint venture relate solely to that joint venture. The decision to distribute joint venture assets must generally be made jointly by a majority of the members and, accordingly, these assets, including those associated with estimated cost recovery of customer affirmative claims and back charge claims, are generally not available for the working capital needs of Granite until distributed.

Consolidated Construction Joint Ventures    

At December 31, 2017, we were engaged in six active consolidated construction joint venture projects, with contract values ranging from $49.8 million to $409.6 million and a combined total of $1.2 billion. Our share of revenue remaining to be recognized on these consolidated joint ventures was $492.8 million and ranged from $4.9 million to $201.3 million. Our proportionate share of the equity in these joint ventures was between 50.0% and 65.0%. During the years ended December 31, 2017, 2016 and 2015, total revenue from consolidated construction joint ventures was $185.5 million, $119.8 million and $54.4 million, respectively. During the years ended December 31, 2017 and 2016 consolidated construction joint ventures provided $36.9 million and $37.8 million, respectively, of operating cash flows and used $16.4 million during the year ended December 31, 2015.

Unconsolidated Construction Joint Ventures

As of December 31, 2017, we were engaged in eleven active unconsolidated joint venture projects with contract values ranging from $77.3 million to $3.7 billion and a combined total of $12.4 billion of which our share was $3.7 billion. Our proportionate share of the equity in these unconsolidated joint ventures ranged from 20.0% to 50.0%. As of December 31, 2017, our share of the revenue remaining to be recognized on these unconsolidated joint ventures was $1.5 billion and ranged from $0.5 million to $365.0 million.

The following is summary financial information related to unconsolidated construction joint ventures (in thousands):

December 31,	2017		2016
Assets:
Cash, cash equivalents and marketable securities	$	289,940	$	537,991
Other current assets1	812,577		644,809
Noncurrent assets	219,825		207,240
Less partners’ interest	869,782		935,615
Granite’s interest1,2	452,560		454,425
Liabilities:
Current liabilities	682,832		696,215
Less partners’ interest and adjustments3	462,159		472,324
Granite’s interest	220,673		223,891
Equity in construction joint ventures4	$	231,887	$	230,534

¹Included in this balance and in accrued and other current liabilities on our consolidated balance sheets as of December 31, 2017 and 2016 was $88.6 million and $83.1 million, respectively, related to performance guarantees (see Note 10 of “Notes to the Consolidated Financial Statements”).

²Included in this balance as of December 31, 2017 and 2016 was $74.3 million and $65.4 million, respectively, related to Granite’s share of estimated cost recovery of customer affirmative claims. In addition, the balances as of December 31, 2017 and 2016 included $11.8 million and $5.6 million, respectively, related to Granite’s share of estimated recovery of back charge claims.

³Partners’ 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 primarily related to gross profit forecast differences.

⁴As of December 31, 2017 and 2016, this balance included $15.9 million and $16.6 million, respectively, of deficit in construction joint ventures that is included in accrued expenses and other current liabilities in the consolidated balance sheets.

F- 23

GRANITE CONSTRUCTION INCORPORATED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

Years Ended December 31,	2017			2016		2015
Revenue:
Total	$	2,057,336		$	1,958,158	$	1,924,544
Less partners’ interest and adjustments1	1,469,550			1,387,532		1,341,334
Granite’s interest	587,786			570,626		583,210
Cost of revenue:
Total	1,995,915			1,915,376		1,819,257
Less partners’ interest and adjustments1	1,394,347			1,360,459		1,279,954
Granite’s interest	601,568			554,917		539,303
Granite’s interest in gross (loss) profit	$	(13,782	)	$	15,709	$	43,907

¹Partners’ 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 primarily related to gross profit forecast differences.

During the years ended December 31, 2017, 2016 and 2015, unconsolidated construction joint venture net income was $62.2 million, $41.8 million and $105.6 million, respectively, of which our share was net loss of $14.4 million and net income of $15.6 million and $43.4 million, respectively. The differences between our share of the joint venture net loss when compared to the joint venture net income during the year ended December 31, 2017 primarily resulted from differences between our estimated total revenue and cost of revenue when compared to that of our partners’ on four projects. These joint venture net income 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

We participate in various “line item” joint venture agreements under which each partner is responsible for performing certain discrete items of the total scope of contracted work. The revenue for each line item joint venture partners’ discrete items of work is defined in the contract with the project owner and each joint venture partner bears the profitability risk associated with its own work. There is not a single set of books and records for a line item joint venture. Each partner accounts for its items of work individually as it would for any self-performed contract. We include only our portion of revenue and cost of revenue associated with these contracts in our consolidated financial statements. As of December 31, 2017, we had one active line item joint venture construction project with a total contract value of $66.2 million of which our portion was $49.0 million. As of December 31, 2017, our share of revenue remaining to be recognized on the line item joint venture was $1.4 million. During the years ended December 31, 2017, 2106 and 2015, our portion of revenue from line item joint ventures was $22.9 million, $35.0 million and $26.0 million, respectively.

7. Investments in Affiliates

Our investments in affiliates balance is related to our investments in unconsolidated non-construction entities that we account for using the equity method of accounting, including investments in real estate entities and a non-real estate entity.

The real estate entities were formed to accomplish specific real estate development projects in which our wholly-owned subsidiary, Granite Land Company (“GLC”), participates with third-party partners. The non-real estate entity is a 50% interest in a limited liability company which owns and operates an asphalt terminal and operates an emulsion plant in Nevada.

We have determined that the real estate entities are not consolidated because although they are VIEs, we are not the primary beneficiary. We have determined that the non-real estate entity is not consolidated because it is not a VIE and we do not hold the majority voting interest. As such, this entity is accounted for using the equity method. We account for our share of the operating results of the equity method investments in other income in the consolidated statements of operations and as a single line item in the consolidated balance sheets as investments in affiliates.

F- 24

GRANITE CONSTRUCTION INCORPORATED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

Our investments in affiliates balance consists of the following (in thousands):

December 31,	2017		2016
Equity method investments in real estate affiliates	$	29,472	$	25,911
Equity method investments in other affiliate	8,997		9,757
Total investments in affiliates	$	38,469	$	35,668

The following table provides summarized balance sheet information for our affiliates accounted for under the equity method on a combined basis (in thousands):

December 31,	2017		2016
Current assets	$	31,320	$	30,836
Noncurrent assets	129,039		124,670
Total assets	160,359		155,506
Current liabilities	30,131		18,485
Long-term liabilities1	31,636		37,217
Total liabilities	61,767		55,702
Net assets	98,592		99,804
Granite’s share of net assets	$	38,469	$	35,668

¹The balance primarily relates to debt associated with our real estate investments. See Note 11 for further discussion.

The equity method investments in real estate affiliates included $24.3 million and $20.8 million in residential real estate in Texas as of December 31, 2017 and 2016, respectively. The remaining balances were in commercial real estate in Texas. Of the $160.4 million in total assets as of December 31, 2017, real estate entities had total assets ranging from less than $1.6 million to $68.5 million and the non-real estate entity had total assets of $28.1 million.

The following table provides summarized statement of operations information for our affiliates accounted for under the equity method on a combined basis (in thousands):

Years Ended December 31,	2017		2016		2015
Revenue	$	56,372	$	56,127	$	47,457
Gross profit	23,007		22,398		19,117
Income before taxes	17,154		19,117		8,446
Net income	17,154		19,117		8,446
Granite’s interest in affiliates’ net income	7,107		7,177		3,210

8. Property and Equipment, net

Balances of major classes of assets and allowances for depreciation and depletion are included in property and equipment, net in the consolidated balance sheets as follows (in thousands):

December 31,	2017		2016
Equipment and vehicles	$	778,549	$	756,602
Quarry property	182,267		174,839
Land and land improvements	108,830		110,999
Buildings and leasehold improvements	82,601		82,762
Office furniture and equipment	56,894		56,381
Property and equipment	1,209,141		1,181,583
Less: accumulated depreciation and depletion	801,723		774,933
Property and equipment, net	$	407,418	$	406,650

Depreciation and depletion expense primarily included in cost of revenue in our consolidated statements of operations was $63.8 million for the year ended December 31, 2017 and was $61.0 million for both years ended December 31, 2016 and 2015. 

F- 25

GRANITE CONSTRUCTION INCORPORATED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

Capitalized interest costs related to certain self-constructed assets were immaterial for the years ended December 31, 2017, 2016 and 2015 and were included in investments in affiliates and property and equipment in the consolidated balance sheets.

We have recorded liabilities associated with our legally required obligations to reclaim owned and leased quarry property and related facilities. As of December 31,2017 and 2016, $4.8 million and $1.9 million, respectively, of our asset retirement obligations were included in accrued expenses and other current liabilities and $17.7 million and $20.1 million, respectively, were included in other long-term liabilities in the consolidated balance sheets.

The following is a reconciliation of these asset retirement obligations (in thousands):

Years Ended December 31,	2017			2016
Beginning balance	$	21,936		$	26,558
Revisions to estimates	462			(2,058		)
Liabilities settled	(966		)	(3,806		)
Accretion	1,095			1,242
Ending balance	$	22,527		$	21,936

9. Intangible Assets

Indefinite-lived Intangible Assets

Indefinite-lived intangible assets primarily consist of goodwill. The following table presents the goodwill balance by reportable segment (in thousands):

December 31,	2017		2016
Construction	$	29,260	$	29,260
Large Project Construction	22,593		22,593
Construction Materials	1,946		1,946
Total goodwill	$	53,799	$	53,799

Amortized Intangible Assets

The following is the breakdown of our amortized intangible assets that are included in other noncurrent assets in the consolidated balance sheets (in thousands):

			Accumulated
December 31, 2017	Gross Value		Amortization			Net Value
Permits	$	25,959	$	(12,504	)	$	13,455
Customer lists	2,200		(1,467		)	733
Trade name	4,100		(2,159		)	1,941
Covenants not to compete and other	50		(26		)	24
Total amortized intangible assets	$	32,309	$	(16,156	)	$	16,153

December 31, 2016
Permits	$	25,959	$	(11,514	)	$	14,445
Acquired backlog	1,500		(1,472		)	28
Customer lists	2,200		(1,174		)	1,026
Trade name	4,100		(1,727		)	2,373
Covenants not to compete and other	50		(24		)	26
Total amortized intangible assets	$	33,809	$	(15,911	)	$	17,898

Amortization expense related to amortized intangible assets for the years ended December 31, 2017, 2016 and 2015 was $1.7 million, $2.0 million and $2.2 million, respectively, and was primarily included in selling, general and administrative expenses in the consolidated statements of operations. In addition, during the years ended December 31, 2017 and 2016, the gross value and associated accumulated amortization was adjusted for fully amortized intangible assets that we no longer intend to use. Based on the amortized intangible assets balance at December 31, 2017, amortization expense expected to be recorded in the future is as follows: $1.7 million in 2018; $1.7 million in 2019; $1.6 million in 2020; $1.4 million in 2021; and $9.7 million thereafter.

F- 26

GRANITE CONSTRUCTION INCORPORATED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

10. Accrued Expenses and Other Current Liabilities (in thousands):

December 31,	2017		2016
Payroll and related employee benefits	$	68,210	$	53,802
Accrued insurance	39,946		44,471
Performance guarantees (see Note 1)	88,606		83,110
Other	39,645		37,204
Total	$	236,407	$	218,587

Other includes dividends payable, accrued legal reserves, warranty reserves, asset retirement obligations, remediation reserves and other miscellaneous accruals, none of which are greater than 5% of total current liabilities.

11. Long-Term Debt and Credit Arrangements (in thousands):

December 31,	2017			2016
Senior notes payable	$	80,000		$	120,000
Credit Agreement term loan	90,000			95,000
Credit Agreement revolving credit loan	55,000			30,000
Debt issuance costs	(499		)	(706		)
Total debt	224,501			244,294
Less current maturities	46,048			14,796
Total long-term debt	$	178,453		$	229,498

The aggregate minimum principal maturities of long-term debt, including current maturities, for each of the three years following December 31, 2017 are as follows: 2018 - $46.3 million; 2019 - $50.0 million; and 2020 - $128.8 million. We have no long-term debt payments due after 2020.

Senior Notes Payable

As of December 31, 2017 and 2016, senior notes payable in the amount of $80.0 million and $120.0 million, respectively, were due to a group of institutional holders and had an interest rate of 6.11% per annum (“2019 Notes”). As of December 31, 2017, $40.0 million of the outstanding balance was included in long-term debt in the consolidated balance sheets and the remaining $40.0 million was included in current maturities of long-term debt in the consolidated balance sheets. As of December 31, 2016, $110.0 million of the outstanding balance was included in long-term debt in the consolidated balance sheets, including $30.0 million due for the 2017 installment as we had the ability and intent to pay the 2017 installment using borrowings under the Credit Agreement (defined below) or by obtaining other sources of financing. The remaining $10.0 million was included in current maturities of long-term debt in the consolidated balance sheets.

Our obligations under the note purchase agreement governing the 2019 Notes (the “2019 NPA”) are guaranteed by certain of our subsidiaries and are collateralized on an equivalent basis with the Credit Agreement discussed below by liens on substantially all of the assets of the Company and subsidiaries that are guarantors or borrowers under the Credit Agreement. The 2019 NPA provides for the release of liens and re-pledge of collateral on substantially the same terms and conditions as those set forth in the Credit Agreement.

F- 27

GRANITE CONSTRUCTION INCORPORATED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

Credit Agreement

As of December 31, 2017, we had a $290.0 million credit facility (the “Credit Agreement”), of which $200.0 million was a revolving credit facility and $90.0 million was a term loan that matures on October 28, 2020 (the “Maturity Date”). The Credit Agreement has a sublimit for letters of credit of $100.0 million. As of December 31, 2017 and 2016, $6.2 million and $5.0 million of the term loan balance was included in current maturities of long-term debt, respectively, and the remaining $83.8 million and $90.0 million, respectively, was included in long-term debt in the consolidated balance sheets.

Of the $95.0 million term loan outstanding as of December 31, 2016, we paid $5.0 million of the principal balance during 2017. Of the remaining $90.0 million outstanding as of December 31, 2017, 1.25% of the original principal balance is due in three quarterly installments beginning in March 2018, 2.50% of the original principal balance is due in eight quarterly installments beginning in December 2018 and the remaining balance is due on the Maturity Date.

As of December 31, 2017, the total stated amount of all issued and outstanding letters of credit under the Credit Agreement was $8.3 million. As of December 31, 2017 and 2016, $25.0 million and $30.0 million had been drawn for the 2017 and 2016 installments of the 2019 Notes, respectively. The total unused availability under the Credit Agreement was $136.7 million. The letters of credit will expire between July 2018 and October 2018.

Borrowings under the Credit Agreement bear interest at LIBOR or a base rate (at our option), plus an applicable margin based on certain financial ratios calculated quarterly. LIBOR varies based on the applicable loan term, market conditions and other external factors. The applicable margin was 1.75% for loans bearing interest based on LIBOR and 0.75% for loans bearing interest at the base rate at December 31, 2017. Accordingly, the effective interest rate using three-month LIBOR and base rate was 3.44% and 5.25%, respectively, at December 31, 2017 and we elected to use LIBOR. Borrowings at the base rate have no designated term and could be repaid without penalty any time prior to the Maturity Date. Borrowings bearing interest at a LIBOR rate have a term no less than one month and no greater than six months (or such longer period not to exceed 12 months if approved by all lenders). At the end of each term, such borrowings can be paid or continued at our discretion as either a borrowing at the base rate or a borrowing at a LIBOR rate with similar terms. Our obligations under the Credit Agreement are guaranteed by certain of our subsidiaries and are collateralized on an equivalent basis with the obligations under the 2019 Notes (defined above) by first priority liens (subject only to other permitted liens) on substantially all of the assets of the Company and our subsidiaries that are guarantors or borrowers under the Credit Agreement.

In January 2016, we entered into an interest rate swap designated as a cash flow hedge with an effective date of April 2016 and an initial notional amount of $98.8 million which matures in October 2020. The interest rate swap is designed to convert the interest rate on the term loan described above from a variable rate of interest of LIBOR plus an applicable margin to a fixed rate of 1.47% plus the same applicable margin (see Note 4 for details).

The Credit Agreement provides for the release of the liens securing the obligations, at our option and expense, so long as certain conditions as defined by the terms in the Credit Agreement are satisfied (“Collateral Release Period”). However, if subsequent to exercising the option, our Consolidated Fixed Charge Coverage Ratio is less than 1.25 or our Consolidated Leverage Ratio is greater than 2.50, then we would be required to promptly re-pledge substantially all of the assets of the Company and our subsidiaries that are guarantors or borrowers under the Credit Agreement. As of December 31, 2017, the conditions for the exercise of our right under the Credit Agreement to have liens released were not satisfied.

Real Estate Indebtedness

Our unconsolidated investments in real estate entities is subject to mortgage indebtedness. This indebtedness is non-recourse to Granite, but is recourse to the real estate entity. The terms of this indebtedness are typically renegotiated to reflect the evolving nature of the real estate project as it progresses through acquisition, entitlement and development. Modification of these terms may include changes in loan-to-value ratios requiring the real estate entity to repay portions of the debt. The debt associated with our unconsolidated real estate entities is disclosed in Note 7.

F- 28

GRANITE CONSTRUCTION INCORPORATED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

Covenants and Events of Default

Our debt and credit agreements require us to comply with various affirmative, restrictive and financial covenants, including the financial covenants described below. Our failure to comply with any of these covenants, or to pay principal, interest or other amounts when due thereunder, would constitute an event of default under the applicable agreements. Under certain circumstances, the occurrence of an event of default under one of our debt or credit agreements (or the acceleration of the maturity of the indebtedness under one of our agreements) may constitute an event of default under one or more of our other debt or credit agreements. Default under our debt and credit agreements could result in (i) us no longer being entitled to borrow under the agreements; (ii) termination of the agreements; (iii) the requirement that any letters of credit under the agreements be cash collateralized; (iv) acceleration of the maturity of outstanding indebtedness under the agreements and/or (v) foreclosure on any collateral securing the obligations under the agreements.

The most significant financial covenants under the terms of our Credit Agreement and 2019 NPA require the maintenance of a minimum Consolidated Tangible Net Worth, a minimum Consolidated Interest Coverage Ratio and a maximum Consolidated Leverage Ratio.

As of December 31, 2017 and pursuant to the definitions in the agreements, our Consolidated Tangible Net Worth was $953.6 million, which exceeded the minimum of $752.0 million, our Consolidated Leverage Ratio was 1.25 which did not exceed the maximum of 3.00 and our Consolidated Interest Coverage Ratio was 15.59 which exceeded the minimum of 4.00.

As of December 31, 2017, we were in compliance with all covenants contained in the Credit Agreement and related to the 2019 NPA. We are not aware of any non-compliance by any of our unconsolidated real estate entities with the covenants contained in their debt agreements.

12. Employee Benefit Plans

Profit Sharing and 401(k) Plan: The Profit Sharing and 401(k) Plan (the “401(k) Plan”) is a defined contribution plan covering all employees except employees covered by collective bargaining agreements and certain employees of our consolidated construction joint ventures. Each employee’s combined pre-tax 401(k) and post-tax (Roth) contributions cannot exceed 50% of their eligible pay or Internal Revenue Code annual contribution limits. Our 401(k) matching contributions can be up to 6% of an employee’s gross pay at the discretion of the Board of Directors. Our 401(k) matching contributions to the 401(k) Plan for the years ended December 31, 2017, 2016 and 2015 were $12.1 million, $11.0 million and $5.4 million, respectively. Profit sharing contributions from the Company may be made to the 401(k) Plan in an amount determined by the Board of Directors. We made no profit sharing contributions during the years ended December 31,2017, 2016 and 2015.

Non-Qualified Deferred Compensation Plan: We offer a Non-Qualified Deferred Compensation Plan (“NQDC Plan”) to a select group of our highly compensated employees. The NQDC Plan provides participants the opportunity to defer payment of certain compensation as defined in the NQDC Plan. In October 2008, a Rabbi Trust was established to fund our NQDC Plan obligation and was fully funded as of December 31, 2017. The assets held by the Rabbi Trust at December 31, 2017 and 2016 are substantially in the form of Company-owned life insurance and are included in other noncurrent assets in the consolidated balance sheets. As of December 31, 2017, there were 61 active participants in the NQDC Plan. NQDC Plan obligations were $24.7 million and $21.5 million as of December 31, 2017 and 2016, respectively.

Multi-employer Pension Plans: Four of our wholly-owned subsidiaries, Granite Construction Company, Granite Construction Northeast, Inc., Granite Industrial, Inc., and Kenny Construction Company contribute to various multi-employer pension plans on behalf of union employees. The risks of participating in these multiemployer plans are different from single-employer plans in the following aspects:

• Assets contributed to the multi-employer plan by one employer may be used to provide benefits to employees of other participating employers.

• If a participating employer stops contributing to the plan, the unfunded obligations of the plan may be borne by the remaining participating employers.

• If we chose to stop participating in some of the multi-employer plans, we may be required to pay those plans an amount based on the underfunded status of the plan, referred to as a withdrawal liability.

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GRANITE CONSTRUCTION INCORPORATED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

The following table presents our participation in these plans (dollars in thousands):

	Pension Plan Employer Identification Number	Pension Protection Act (“PPA”) Certified Zone Status1		FIP / RP Status Pending / Implemented2	Contributions						Surcharge Imposed	Expiration Date of Collective Bargaining Agreement3
Pension Trust Fund		2017	2016		2017		2016		2015
Locals 302 and 612 IUOE-Employers Construction Industry Retirement Plan	91-6028571	Green	Green	No	$	3,646	$	3,113	$	3,000	No	12/31/2017 5/31/2018 12/31/2019
Pension Trust Fund for Operating Engineers Pension Plan	94-6090764	Red	Red	Yes	10,431		9,266		9,070		No	1/31/2018 10/31/2018 6/30/2019 5/15/2020 6/15/2020 6/30/2020 9/30/2020
Operating Engineers Pension Trust Fund	95-6032478	Yellow	Red	Yes	4,692		5,357		3,647		No	6/30/2019
Laborers Pension Trust Fund for Northern California	94-6277608	Yellow	Yellow	Yes	2,464		2,215		2,403		No	6/30/2019
Construction Laborers Pension Trust for Southern California	43-6159056	Green	Green	No	2,002		2,095		1,349		No	6/30/2018
Laborers Pension Fund	36-2514514	Green	Green	No	3,208		2,328		1,919		No	5/31/2021
All other funds (38 as of December 31, 2017)					10,341		8,708		7,171
			Total Contributions:		$	36,784	$	33,082	$	28,559

¹The most recent PPA zone status available in 2017 and 2016 is for the plan’s year-end during 2016 and 2015, respectively. The zone status is based on information that we received from the plan and is certified by the plan’s actuary. Among other factors, plans in the red zone are generally less than 65 percent funded, plans in the orange zone are less than 80 percent funded and have an Accumulated Funding Deficiency in the current year or projected into the next six years, plans in the yellow zone are less than 80 percent funded, and plans in the green zone are at least 80 percent funded. Subsequent to December 31, 2016, the Operating Engineers Pension Trust Fund zone status changed from red to yellow for the plan’s year-end during 2015.

²The “FIP/RP Status Pending/Implemented” column indicates plans for which a financial improvement plan (“FIP”) or a rehabilitation plan (“RP”) is either pending or has been implemented.

³Lists the expiration date(s) of the collective-bargaining agreement(s) to which the plans are subject. Pension trust funds with a range of expiration dates have various collective bargaining agreements. Expired collective bargaining agreements are under negotiation.

Based upon the most recently available annual reports, the Company’s contribution to each of the individually significant plans listed in the table above was less than 5% of each plan’s total contributions. We currently have no intention of withdrawing from any of the multi-employer pension plans in which we participate that would result in a significant withdrawal liability. In addition, we do not have any significant future obligations or funding requirements related to these plans other than the ongoing contributions that are paid as hours are worked by plan participants.

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GRANITE CONSTRUCTION INCORPORATED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

13. Shareholders’ Equity

Stock-based Compensation: The 2012 Equity Incentive Plan provides for the issuance of restricted stock, restricted stock units (“RSUs”) and stock options to eligible employees and to members of our Board of Directors. A total of 1,595,675 shares of our common stock have been reserved for issuance of which 1,072,750 remained available as of December 31, 2017. No stock options or restricted stock were granted during the years ended December 31, 2017, 2016 and 2015. There were no stock options or restricted stock outstanding as of December 31, 2017.

Restricted Stock Units: RSUs are issued for services to be rendered and may not be sold, transferred or pledged for such a period as determined by our Compensation Committee. RSU stock compensation cost is measured at our common stock’s fair value based on the market price at the date of grant. We recognize compensation cost only for RSUs that we estimate will ultimately vest. We estimate the number of shares that will ultimately vest at each grant date based on our historical experience and adjust compensation cost based on changes in those estimates over time.

RSU compensation cost is recognized ratably over the shorter of the vesting period (generally three years) or the period from grant date to the first maturity date after the holder reaches age 62 and has completed certain specified years of service, when all RSUs become fully vested. Vesting of RSUs is not subject to any market or performance conditions and vesting provisions are at the discretion of the Compensation Committee. An employee may not sell or otherwise transfer unvested RSUs and, in the event employment is terminated prior to the end of the vesting period, any unvested RSUs are surrendered to us. We have no obligation to purchase these RSUs that are surrendered to us.

A summary of the changes in our RSUs during the years ended December 31, 2017, 2016 and 2015 is as follows (shares in thousands):

Years Ended December 31,	2017				2016				2015
	RSUs		Weighted-Average Grant-Date Fair Value per RSU		RSUs		Weighted-Average Grant-Date Fair Value per RSU		RSUs		Weighted-Average Grant-Date Fair Value per RSU
Outstanding, beginning balance	681		$	39.15	451		$	32.73	565		$	31.38
Granted	259		51.31		572		43.17		228		33.40
Vested	(372	)	43.89		(307	)	36.24		(300	)	31.50
Forfeited	(44	)	43.51		(35	)	40.97		(42	)	33.38
Outstanding, ending balance	524		$	41.51	681		$	39.15	451		$	32.73

Compensation cost related to RSUs was $15.8 million ($11.4 million net of effective tax rate), $13.4 million ($9.2 million net of effective tax rate), and $8.8 million ($5.8 million net of effective tax rate) for the years ended December 31, 2017, 2016 and 2015, respectively. The grant date fair value of RSUs vested during the years ended December 31, 2017, 2016 and 2015 was $16.7 million, $11.5 million and $10.3 million, respectively. As of December 31, 2017, there was $10.0 million of unrecognized compensation cost related to RSUs which will be recognized over a remaining weighted-average period of 1.2 years.

401(k) Plan: As of December 31, 2017, the 401(k) Plan owned 1,454,844 shares of our common stock. Dividends on shares held by the 401(k) Plan are charged to retained earnings and all shares held by the 401(k) Plan are treated as outstanding in computing our earnings per share.

Employee Stock Purchase Plan: Our ESPP allows qualifying employees to purchase shares of our common stock through payroll deductions of up to 15% of their compensation, subject to Internal Revenue Code limitations, at a price of 95% of the fair market value as of the end of each of the six-month offering periods, which commence on May 15 and November 15 of each year. During each of the years ended December 31, 2017, 2016 and 2015, proceeds from the ESPP were $0.8 million for 16,413, 16,717 and 22,567 shares, respectively.

Share Purchase Program: On April 7, 2016, the Board of Directors authorized us to purchase up to $200.0 million of our common stock at management’s discretion, which replaced the former authorization including the amount available. We did not purchase shares under the share purchase program in any of the periods presented. The specific timing and amount of any future purchases will vary based on market conditions, securities law limitations and other factors.

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GRANITE CONSTRUCTION INCORPORATED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

14. Weighted Average Shares Outstanding and Net Income Per Share

The following table presents a reconciliation of the weighted average shares outstanding used in calculating basic and diluted net income per share as well as the calculation of basic and diluted net income per share (in thousands except per share amounts):

Years Ended December 31,	2017		2016		2015
Numerator (basic and diluted):
Net income allocated to common shareholders for basic calculation	$	69,098	$	57,122	$	60,485
Denominator:
Weighted average common shares outstanding, basic	39,795		39,557		39,337
Dilutive effect of stock options and restricted stock units	577		668		531
Weighted average common shares outstanding, diluted	40,372		40,225		39,868
Net income per share, basic	$	1.74	$	1.44	$	1.54
Net income per share, diluted	$	1.71	$	1.42	$	1.52

15. Income Taxes

Following is a summary of the provision for income taxes (in thousands):

Years Ended December 31,	2017			2016		2015
Federal:
Current	$	27,877		$	15,657	$	4,810
Deferred	(4,397		)	9,919		25,955
Total federal	23,480			25,576		30,765
State:
Current	5,520			4,567		1,914
Deferred	(338		)	19		2,500
Total state	5,182			4,586		4,414
Total provision for income taxes	$	28,662		$	30,162	$	35,179

Following is a reconciliation of our provision for income taxes based on the Federal statutory tax rate to our effective tax rate (dollars in thousands):

Years Ended December 31,	2017					2016					2015
Federal statutory tax	$	36,562		35.0	%	$	33,728		35.0	%	$	35,165		34.0	%
State taxes, net of federal tax benefit	3,814			3.7		2,990			3.1		3,769			3.6
Percentage depletion deduction	(1,368		)	(1.3	)	(1,352		)	(1.4	)	(1,444		)	(1.4	)
Domestic production activities deduction	(2,765		)	(2.7	)	(1,624		)	(1.7	)	(306		)	(0.3	)
Non-controlling interests	(2,346		)	(2.3	)	(3,177		)	(3.3	)	(2,639		)	(2.6	)
Nondeductible expenses	1,128			1.1		1,094			1.1		219			0.2
Tax Cuts and Jobs Act of 2017	(3,664		)	(3.5	)	—			—		—			—
Other	(2,699		)	(2.6	)	(1,497		)	(1.5	)	415			0.5
Total	$	28,662		27.4	%	$	30,162		31.3	%	$	35,179		34.0	%

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GRANITE CONSTRUCTION INCORPORATED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

On December 22, 2017 the U.S. Tax Cuts and Jobs Act of 2017 (“Tax Reform”) was signed into law. As a result of Tax Reform, the U.S. statutory tax rate was lowered from 35% to 21% effective January 1, 2018, among other changes. ASC Topic 740, Accounting for Income Taxes, requires companies to recognize the effect of tax law changes in the period of enactment; therefore, we were required to revalue our deferred tax assets and liabilities at December 31, 2017 at the new rate. The Securities and Exchange Commission issued Staff Accounting Bulletin No. 118 (“SAB 118”) to address the application of U.S. GAAP in situations when a registrant does not have the necessary information available, prepared, or analyzed (including computations) in reasonable detail to complete the accounting for certain tax effects of Tax Reform. The Company has recognized the provisional tax impacts of Tax Reform in its consolidated financial statements for the year ended December 31, 2017. The majority of the $3.7 million provisional benefit above is related to the revaluation of deferred tax assets and liabilities at December 31, 2017 as a result of Tax Reform. The ultimate impact may differ from this provisional amount, possibly materially, as a result of additional analysis, changes in interpretations and assumptions the Company has made, additional regulatory guidance that may be issued, and actions the Company may take as a result of Tax Reform. The accounting is expected to be complete when the 2017 U.S. corporate income tax return is filed in 2018.

Following is a summary of the deferred tax assets and liabilities (in thousands):

December 31,	2017			2016
Long-term deferred tax assets:
Receivables	$	526		$	573
Inventory	1,513			2,212
Insurance	7,401			12,524
Deferred compensation	8,985			12,740
Other accrued liabilities	1,525			2,294
Accrued compensation	1,738			11,031
Other	1,379			2,481
Net operating loss carryforwards	2,614			2,341
Valuation allowance	(2,471		)	(2,153		)
Total long-term deferred tax assets	23,210			44,043
Long-term deferred tax liabilities:
Property and equipment	16,832			29,400
Contract income recognition	7,739			20,084
Total long-term deferred tax liabilities	24,571			49,484
Net long-term deferred tax liabilities	$	(1,361	)	$	(5,441	)

As of December 31, 2017, our deferred tax asset for net operating loss carryforwards relates to state and local net operating loss carryforwards with the significant carryforwards expiring beginning in 2035. We have provided a valuation allowance on the net deferred tax assets for certain state and local jurisdictions because we do not believe it is more likely than not that they will be realized.

The following is a summary of the change in valuation allowance (in thousands):

December 31,	2017		2016		2015
Beginning balance	$	2,153	$	641	$	1,185
Additions (deductions), net	318		1,512		(544		)
Ending balance	$	2,471	$	2,153	$	641

The additions to the valuation allowance are related to the revaluation of our net deferred tax assets related to U.S. Tax Reform enacted during the year ended December 31, 2017 discussed above. Deductions to the valuation allowance are insignificant for the year ended December 31, 2017.

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GRANITE CONSTRUCTION INCORPORATED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

Uncertain tax positions: We file income tax returns in the U.S. and various state and local jurisdictions. We are currently under examination by various state taxing authorities for various tax years. We do not anticipate that any of these audits will result in a material change in our financial position. We are no longer subject to U.S. federal examinations by tax authorities for years before 2012. With few exceptions, as of December 31, 2017, we are no longer subject to state examinations by taxing authorities for years before 2010.

We had approximately $3.2 million and $3.3 million of total gross unrecognized tax benefits as of December 31, 2017 and 2016, respectively. There were approximately $3.1 million and $3.2 million of unrecognized tax benefits that would affect the effective tax rate in any future period at December 31, 2017 and 2016, respectively. We do not anticipate a significant increase or decrease in our unrecognized tax benefits that will impact our effective tax rate in 2018.

The following is a tabular reconciliation of unrecognized tax benefits (in thousands) the balance of which is included in other long-term liabilities on the consolidated balance sheets:

December 31,	2017			2016			2015
Beginning balance	$	3,262		$	1,578		$	887
Gross increases – current period tax positions	—			1,902			1,006
Gross decreases – current period tax positions	(73		)	(125		)	(156		)
Gross increases – prior period tax positions	1			2			—
Gross decreases – prior period tax positions	(6		)	(5		)	—
Settlements with taxing authorities/lapse of statute of limitations	(13		)	(90		)	(159		)
Ending balance	$	3,171		$	3,262		$	1,578

We record interest on uncertain tax positions in interest expense in our consolidated statements of operations. During the years ended December 31, 2017, 2016 and 2015, we recognized approximately $0.2 million interest expense, $0.1 million interest expense and $0.1 million of interest income, respectively. Approximately $0.4 million and $0.2 million of accrued interest related to our uncertain tax position liability was included in other long-term liabilities in our consolidated balance sheets at December 31, 2017 and 2016, respectively.

16. Commitments, Contingencies and Guarantees

Leases: Minimum rental commitments and minimum royalty requirements under all noncancellable operating leases, primarily quarry property, in effect at December 31, 2017 were (in thousands):

Years Ending December 31,
2018	$	12,169
2019	8,946
2020	7,997
2021	6,874
2022	4,794
Later years (through 2046)	7,171
Total	$	47,951

Operating lease and equipment rental and royalty expense primarily included in cost of revenue in our consolidated statements of operations was $16.4 million, $18.2 million and $11.3 million in 2017, 2016 and 2015, respectively. 

Performance Guarantees

We participate in various joint ventures and line item joint ventures under which each partner is responsible for performing certain discrete items of the total scope of contracted work. See Note 1, Note 6 and Note 10 for further details.

Surety Bonds

We are generally required to provide various types of surety bonds that provide an additional measure of security under certain public and private sector contracts. At December 31, 2017, $3.5 billion of our contract backlog was bonded. Performance bonds do not have stated expiration dates; rather, we are generally released from the bonds after the owner accepts the work performed under contract. The ability to maintain bonding capacity to support our current and future level of contracting requires that we maintain cash and working capital balances satisfactory to our sureties.

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GRANITE CONSTRUCTION INCORPORATED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

17. Legal Proceedings 

In the ordinary course of business, we and our affiliates are involved in various legal proceedings alleging, among other things, liability issues or breach of contract or tortious conduct in connection with the performance of services and/or materials provided, the various outcomes of which cannot be predicted with certainty. We and our affiliates are also subject to government inquiries in the ordinary course of business seeking information concerning our compliance with government construction contracting requirements and various laws and regulations, the outcomes of which cannot be predicted with certainty.

Some of the matters in which we or our joint ventures and affiliates are involved may involve compensatory, punitive, or other claims or sanctions that, if granted, could require us to pay damages or make other expenditures in amounts that are not probable to be incurred or cannot currently be reasonably estimated. In addition, in some circumstances our government contracts could be terminated, we could be suspended, debarred or incur other administrative penalties or sanctions, or payment of our costs could be disallowed. While any of our pending legal proceedings may be subject to early resolution as a result of our ongoing efforts to resolve the proceedings, whether or when any legal proceeding will be resolved is neither predictable nor guaranteed.

Accordingly, it is possible that future developments in such proceedings and inquiries could require us to (i) adjust existing accruals, or (ii) record new accruals that we did not originally believe to be probable or that could not be reasonably estimated. Such changes could be material to our financial condition, results of operations and/or cash flows in any particular reporting period. In addition to matters that are considered probable for which the loss can be reasonably estimated, disclosure is also provided when it is reasonably possible and estimable that a loss will be incurred or when it is reasonably possible that the amount of a loss will exceed the amount recorded.

Liabilities relating to legal proceedings and government inquiries, to the extent that we have concluded such liabilities are probable and the amounts of such liabilities are reasonably estimable, are recorded in the consolidated balance sheets. The aggregate liabilities recorded as of December 31, 2017 and 2016 related to these matters were approximately $0.9 million and $4.3 million, respectively, and were primarily included in accounts payable and accrued expenses and other current liabilities in our consolidated balance sheets. The aggregate range of possible loss related to (i) matters considered reasonably possible, and (ii) reasonably possible amounts in excess of accrued losses recorded for probable loss contingencies, including those related to liquidated damages, could have a material impact on our consolidated financial statements if they become probable and the reasonably estimable amount is determined.

18. Business Segment Information

Our reportable segments are: Construction, Large Project Construction and Construction Materials.

In addition to business segments, we review our business by operating groups. Our operating groups are defined as follows: (i) California; (ii) Northwest, which primarily includes offices in Alaska, Arizona, Nevada, Utah and Washington; (iii) Heavy Civil, which primarily includes offices in California, Florida, New York and Texas and (iv) Kenny, which primarily includes offices in Illinois. Each of these operating groups may include financial results from our Construction and Large Project Construction segments. Our California and Northwest operating groups include financial results from our Construction Materials segment.

The Construction segment performs various construction projects with a large portion of the work focused on new construction and improvement of streets, roads, highways, bridges, site work, underground, power-related facilities, water-related facilities, utilities and other infrastructure projects. These projects are typically bid-build projects completed within two years with a contract value of less than $75 million.

The Large Project Construction segment focuses on large, complex infrastructure projects which typically have a longer duration than our Construction segment work. These projects include major highways, mass transit facilities, bridges, tunnels, waterway locks and dams, pipelines, canals, power-related facilities, water-related facilities, utilities and airport infrastructure. This segment primarily includes bid-build, design-build, construction management/general contractor contracts, together with various contract methods relating to public-private partnerships, generally with contract values in excess of $75 million.

The Construction Materials segment mines and processes aggregates and operates plants that produce construction materials for internal use and for sale to third parties.

The accounting policies of the segments are the same as those described in the Summary of Significant Accounting Policies (see Note 1). We evaluate segment performance based on gross profit or loss, and do not include selling, general and administrative expenses or non-operating income or expense. Segment assets include property and equipment, intangibles, goodwill, inventory and equity in construction joint ventures.

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GRANITE CONSTRUCTION INCORPORATED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

Summarized segment information is as follows (in thousands):

Years Ended December 31,	Construction		Large Project Construction		Construction Materials			Total
2017
Total revenue from reportable segments	$	1,664,708	$	1,032,229	$	467,140		$	3,164,077
Elimination of intersegment revenue	—		—		(174,364		)	(174,364		)
Revenue from external customers	1,664,708		1,032,229		292,776			2,989,713
Gross profit	247,014		29,793		38,126			314,933
Depreciation, depletion and amortization	22,517		11,087		22,393			55,997
Segment assets	136,031		340,105		282,709			758,845
2016
Total revenue from reportable segments	$	1,365,198	$	888,193	$	425,029		$	2,678,420
Elimination of intersegment revenue	—		—		(163,803		)	(163,803		)
Revenue from external customers	1,365,198		888,193		261,226			2,514,617
Gross profit	209,215		64,137		28,018			301,370
Depreciation, depletion and amortization	22,816		6,796		23,437			53,049
Segment assets	151,475		314,823		282,472			748,770
2015
Total revenue from reportable segments	$	1,262,675	$	812,720	$	432,284		$	2,507,679
Elimination of intersegment revenue	—		—		(136,650		)	(136,650		)
Revenue from external customers	1,262,675		812,720		295,634			2,371,029
Gross profit	187,506		79,467		32,863			299,836
Depreciation, depletion and amortization	20,117		10,343		22,389			52,849
Segment assets	139,399		274,975		288,900			703,274

A reconciliation of segment gross profit to consolidated income before provision for income taxes is as follows (in thousands):

Years Ended December 31,	2017			2016			2015
Total gross profit from reportable segments	$	314,933		$	301,370		$	299,836
Selling, general and administrative expenses	222,811			219,299			203,817
Restructuring gains	(2,411		)	(1,925		)	(6,003		)
Gain on sales of property and equipment	(4,182		)	(8,358		)	(8,286		)
Total other (income) expense	(5,748		)	(4,008		)	6,881
Income before provision for income taxes	$	104,463		$	96,362		$	103,427

A reconciliation of segment assets to consolidated total assets is as follows (in thousands):

December 31,	2017		2016		2015
Total assets for reportable segments	$	758,845	$	748,770	$	703,274
Assets not allocated to segments:
Cash and cash equivalents	233,711		189,326		252,836
Short-term and long-term marketable securities	132,790		127,779		105,695
Receivables, net	479,791		419,345		340,822
Deferred income taxes, net	—		—		4,329
Other current assets, excluding segment assets	140,478		113,010		85,556
Property and equipment, net, excluding segment assets	29,242		32,397		36,721
Investments in affiliates	38,469		35,668		33,182
Other noncurrent assets, excluding segment assets	58,652		67,158		64,463
Consolidated total assets	$	1,871,978	$	1,733,453	$	1,626,878

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GRANITE CONSTRUCTION INCORPORATED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

19. Subsequent Events Footnote

On February 13, 2018, the Company entered into an Agreement and Plan of Merger (“Merger Agreement”) to acquire Layne Christensen Company (“Layne”), a U.S.-based global water management, construction and drilling company. The acquisition is subject to the approval by Layne stockholders and other customary closing conditions.

The transaction is structured as a stock-for-stock merger in which each outstanding share of Layne common stock will be exchanged for 0.27 share of Company common stock. All outstanding stock options, restricted stock awards and unvested performance shares will be cashed out in accordance with the terms of the Merger Agreement. Using Granite’s closing share price as of February 16, 2018 of $60.36, the purchase price of the transaction in stock and cash would be approximately $360 million, excluding the assumption of approximately $209 million of debt at its estimated fair market value using Level 3 inputs as of February 16, 2018. The ultimate value of the transaction will be determined on the closing date in accordance with the terms of the Merger Agreement.

Following the completion of the acquisition, two outstanding issuances of Layne’s convertible notes will remain outstanding. The 4.25% convertible notes (the “4.25% Notes”) have outstanding principal of $69.5 million, a current conversion price of $22.93 per Layne share and mature on November 15, 2018. As permitted under the terms of the 4.25% Note indenture, following the closing, the conversion provisions of the 4.25% Notes will be amended to provide that the 4.25% notes will be cash settled only. The 8.0% convertible notes (the “8.0% Notes”) have outstanding principal of $99.9 million, a current conversion price of $11.70 per Layne share and mature on May 1, 2019. The maturity of the 8.0% Notes accelerates to August 15, 2018 if the 4.25% Notes remain outstanding on that date. At closing, the 8.0% Notes will become convertible into shares of Company common stock. At closing, the Company will also assume Layne’s $24.5 million of letters of credit, or issue new letters of credit. These additional debt obligations assumed at closing would exceed the amount of indebtedness currently permitted under the Company’s existing credit facility and private placement notes. The Company will seek consents or waivers from its existing lenders with respect to this additional indebtedness. The Company has also received a commitment letter for a new $370 million backstop financing facility, which the Company will use to the extent these consents or waivers are not received prior to closing.

Item 16. FORM 10-K SUMMARY

None.

F- 37

Quarterly Financial Data

The following table sets forth selected unaudited quarterly financial information for the years ended December 31, 2017 and 2016. This information has been prepared on the same basis as the audited consolidated financial statements and, in the opinion of management, contains all adjustments necessary for a fair statement thereof. Net income (loss) per share calculations are based on the weighted average common shares outstanding for each period presented. Accordingly, the sum of the quarterly net income (loss) per share amounts may not equal the per share amount reported for the year.

QUARTERLY FINANCIAL DATA
(unaudited - dollars in thousands, except per share data)
2017 Quarters Ended	December 31,			September 30,			June 30,			March 31,
Revenue	$	801,274		$	957,126		$	762,913		$	468,400
Gross profit	100,707			114,530			74,570			25,126
As a percent of revenue	12.6		%	12.0		%	9.8		%	5.4		%
Net income (loss)	$	35,325		$	48,055		$	16,272		$	(23,851	)
As a percent of revenue	4.4		%	5.0		%	2.1		%	(5.1		)%
Net income (loss) attributable to Granite	$	32,773		$	45,982		$	14,133		$	(23,790	)
As a percent of revenue	4.1		%	4.8		%	1.9		%	(5.1		)%
Net income (loss) per share attributable to common shareholders:
Basic	$	0.82		$	1.15		$	0.35		$	(0.60	)
Diluted	$	0.81		$	1.14		$	0.35		$	(0.60	)

2016 Quarters Ended	December 31,			September 30,			June 30,			March 31,
Revenue	$	666,681		$	803,905		$	604,579		$	439,452
Gross profit	81,250			107,674			73,201			39,245
As a percent of revenue	12.2		%	13.4		%	12.1		%	8.9		%
Net income (loss)	$	19,264		$	38,172		$	18,526		$	(9,762	)
As a percent of revenue	2.9		%	4.7		%	3.1		%	(2.2		)%
Net income (loss) attributable to Granite	$	16,173		$	37,190		$	14,199		$	(10,440	)
As a percent of revenue	2.4		%	4.6		%	2.3		%	(2.4		)%
Net income (loss) per share attributable to common shareholders:
Basic	$	0.41		$	0.94		$	0.36		$	(0.27	)
Diluted	$	0.40		$	0.92		$	0.35		$	(0.27	)

F- 38

INDEX TO 10-K EXHIBITS

Exhibit No.		Exhibit Description
2.1	*	Agreement and Plan of Merger by and among Granite Construction Incorporated, Layne Christensen Company and Lowercase Merger Sub Incorporated, dated as of February 13, 2018 [Exhibit 2.1 to the Company’s Form 8-K filed on February 14, 2018]
2.2	*	Stock Purchase Agreement, dated December 28, 2012, by and between Granite Construction Incorporated and Kenny Industries, Inc. [Exhibit 2.1 to the Company’s Form 8-K filed on January 4, 2013]
3.1	*	Certificate of Incorporation of Granite Construction Incorporated, as amended [Exhibit 3.1.b to the Company’s Form 10-Q for quarter ended June 30, 2006]
3.2	*	Amended Bylaws of Granite Construction Incorporated [Exhibit 3.1 to the Company’s Form 8-K filed on November 15, 2011]
10.1	* **	Key Management Deferred Compensation Plan II, as amended and restated [Exhibit 10.1 to the Company’s Form 10-Q for quarter ended March 31, 2010]
10.2	* **	Granite Construction Incorporated Amended and Restated 1999 Equity Incentive Plan as Amended and Restated [Exhibit 10.1 to the Company’s Form 10-Q for quarter ended June 30, 2009]
10.2.a	* **	Amendment No. 1 to the Granite Construction Incorporated Amended and Restated 1999 Equity Incentive Plan as Amended and Restated [Exhibit 10.2.a to the Company’s Form 10-K for year ended December 31, 2009]
10.7	*	Note Purchase Agreement between Granite Construction Incorporated and Certain Purchasers dated December 12, 2007 [Exhibit 10.1 to the Company’s Form 8-K filed January 31, 2008]
10.8	*	First Amendment to the Note Purchase Agreement, dated October 11, 2012, between Granite Construction Incorporated and the holders of the 2019 Notes party thereto. [Exhibit 10.7 to the Company’s Form 10-Q for the quarter ended September 30, 2012]
10.9	*	Subsidiary Guaranty Agreement from the Subsidiaries of Granite Construction Incorporated as Guarantors of the Guaranty of Notes and Note Agreement and the Guaranty of Payment and Performance dated December 12, 2007 [Exhibit 10.10 to the Company’s Form 10-K for year ended December 31, 2007]
10.11	* **	Form of Amended and Restated Director and Officer Indemnification Agreement [Exhibit 10.10 to the Company’s Form 10-K for year ended December 31, 2002]
10.12	* **	Executive Retention and Severance Plan II effective as of March 9, 2011 [Exhibit 10.1 to the Company’s Form 10-Q for the quarter ended March 31, 2011]
10.13	* **	Form of Restricted Stock Agreement effective March 2010 [Exhibit 10.18 to the Company’s Form 10-K for the year ended December 31, 2010]
10.14	* **	Form of Non-employee Director Stock Option Agreement as amended and effective April 7, 2006 [Exhibit 10.19 to the Company’s Form 10-K for the year ended December 31, 2010]
10.15	* **	Form of Restricted Stock Units Agreement effective January 1, 2010 [Exhibit 10.20 to the Company’s Form 10-K for the year ended December 31, 2010]
10.16	* **	Form of Non-employee Director Restricted Stock Units Agreement effective January 1, 2010 [Exhibit 10.21 to the Company’s Form 10-K for the year ended December 31, 2010]
10.17	* **	Granite Construction Incorporated Annual Incentive Plan effective January 1, 2010, as amended [Exhibit 10.22 to the Company’s Form 10-K for the year ended December 31, 2011]
10.18	* **	Amendment No. 2 to the Granite Construction Incorporated Annual Incentive Plan effective January 1, 2012 [Exhibit 10.23 to the Company’s Form 10-K for the year ended December 31, 2011]
10.19	* **	Granite Construction Incorporated Long Term Incentive Plan effective January 1, 2010, as amended [Exhibit 10.24 to the Company’s Form 10-K for the year ended December 31, 2011]
10.20	* **	Amendment No. 2 to the Granite Construction Incorporated Long Term Incentive Plan effective January 1, 2012 [Exhibit 10.25 to the Company’s Form 10-K for the year ended December 31, 2011]
10.21	* **	Granite Construction Incorporated 2012 Equity Incentive Plan [Exhibit 10.1 to the Company’s Form 8-K filed on May 25, 2012]
10.22	* **	Form of Non-Employee Director Restricted Stock Unit Agreement effective May 22, 2012 [Exhibit 10.2 to the Company’s Form 8-K filed on May 25, 2012]
10.23	* **	Granite Construction Incorporated NEO LTIP Awards Form of Restricted Stock Unit Agreement (Vesting on Date of Grant) [Exhibit 10.30 to the Company's Form 10-K for the year ended December 31, 2012]
10.24	* **	Granite Construction Incorporated NEO LTIP Awards Form of Restricted Stock Unit Agreement (3 Year Vesting Schedule) [Exhibit 10.31 to the Company's Form 10-K for the year ended December 31, 2012]

Exhibit No.		Exhibit Description
10.25	*	Second Amendment to Note Purchase Agreement, dated as of March 3, 2014 [Exhibit 10.32 to the Company's Form 10-K for the year ended December 31, 2013]
10.26	*	Second Amended and Restated Credit Agreement, dated October 28, 2015, by and among Granite Construction Incorporated, Granite Construction Company, GILC Incorporated, the lenders party thereto and Bank of America, N.A., as Administrative Agent, Collateral Agent, Swing Line Lender and L/C Issuer [Exhibit 10.26 to the Company's Form 10-K for the year ended December 31, 2015]
10.27	*	Second Amended and Restated Guaranty Agreement, dated October 28, 2015, by and among Granite Construction Incorporated, the guarantors party thereto and Bank of America, N.A., as Administrative Agent [Exhibit 10.26 to the Company's Form 10-K for the year ended December 31, 2015]
18.1	*	Preferability Letter from PricewaterhouseCoopers LLP [Exhibit 18 to the Company's Form 10-Q for quarter ended March 31, 2015]
21	†	List of Subsidiaries of Granite Construction Incorporated
23.1	†	Consent of PricewaterhouseCoopers LLP
31.1	†	Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2	†	Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32	††	Certification of Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
95	†	Mine Safety Disclosure
101.INS	†	XBRL Instance Document
101.SCH	†	XBRL Taxonomy Extension Schema
101.CAL	†	XBRL Taxonomy Extension Calculation Linkbase
101.DEF	†	XBRL Taxonomy Extension Definition Linkbase
101.LAB	†	XBRL Taxonomy Extension Label Linkbase
101.PRE	†	XBRL Taxonomy Extension Presentation Linkbase

*    Incorporated by reference

**  Compensatory plan or management contract

†    Filed herewith

††  Furnished herewith

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

GRANITE CONSTRUCTION INCORPORATED

By: /s/ Laurel J. Krzeminski

Laurel J. Krzeminski

Executive Vice President and Chief Financial Officer

(Principal Financial and Accounting Officer)

Date: February 16, 2018

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant in the capacities indicated and on the dates indicated.

/s/ William H. Powell
William H. Powell, Chairman of the Board and Director	February 16, 2018
/s/ James H. Roberts
James H. Roberts, President and Chief Executive Officer	February 16, 2018
By: /s/ Laurel J. Krzeminski
Laurel J. Krzeminski	February 16, 2018
/s/ Claes G. Bjork
Claes G. Bjork, Director	February 16, 2018
/s/ James W. Bradford, Jr.
James W. Bradford, Jr., Director	February 16, 2018
/s/ David C. Darnell
David C. Darnell, Director	February 16, 2018
/s/ Patricia D. Galloway
Patricia D. Galloway, Director	February 16, 2018
/s/ David H. Kelsey
David H. Kelsey, Director	February 16, 2018
/s/ Celeste B. Mastin
Celeste B. Mastin, Director	February 16, 2018
/s/ Michael F. McNally
Michael F. McNally, Director	February 16, 2018
/s/ Gaddi H. Vasquez
Gaddi H. Vasquez, Director	February 16, 2018

EX-21

Exhibit 21

List of Subsidiaries of Granite Construction Incorporated

Subsidiary	State of Incorporation	Name Under Which Subsidiary Does Business
Granite Construction Company	California	Granite Construction Company
		California Granite Company
		C.B. Concrete Company
		Concrete Products Company
		Dayton Materials
		Granite Construction Company of California
		Granite Construction Company of Connecticut
		Granite Construction Company of Nebraska
		Granite Construction Supply
		Granite-Trumbull
Kenny Construction Company	Illinois	Kenny Construction Company

EX-23.1

Exhibit 23.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We hereby consent to the incorporation by reference in the Registration Statements on Forms S-3 (No. 333-172599) and S-8 (No. 333-80471, No. 333-118299, No. 333-181642, No. 333-170488 and No. 033-36485) of Granite Construction Incorporated of our report dated February 16, 2018 relating to the financial statements and the effectiveness of internal control over financial reporting, which appears in this Form 10‑K.

/s/ PricewaterhouseCoopers LLP

San Francisco, California

February 16, 2018

EX-31.1

Exhibit 31.1

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER

I, James H. Roberts, certify that:

1. I have reviewed this Annual Report on Form 10-K of Granite Construction Incorporated;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Dated:	February 16, 2018	/s/ James H. Roberts
		James H. Roberts
		President and Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER

I, Laurel J. Krzeminski, certify that:

1. I have reviewed this Annual Report on Form 10-K of Granite Construction Incorporated;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Dated:	February 16, 2018	/s/ Laurel J. Krzeminski
		Laurel J. Krzeminski
		Executive Vice President and Chief Financial Officer

EX-32

Exhibit 32

CERTIFICATION OF CHIEF EXECUTIVE OFFICER AND

CHIEF FINANCIAL OFFICER PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, each of the undersigned officers of Granite Construction Incorporated (the “Company”) does hereby certify that, to such officers’ knowledge:

(i) The Annual Report on Form 10-K for the year ended December 31, 2017 of the Company fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, and (ii) the information contained in the Annual Report on Form 10-K fairly presents in all material respects the financial condition and results of operations of the Company as of and for the periods expressed in the Annual Report on Form 10-K.

Dated:	February 16, 2018	/s/ James H. Roberts
		James H. Roberts
		President and Chief Executive Officer
Dated:	February 16, 2018	/s/ Laurel J. Krzeminski
		Laurel J. Krzeminski
		Executive Vice President and Chief Financial Officer

A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signatures that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to Granite Construction Incorporated and will be retained by Granite Construction Incorporated and furnished to the Securities and Exchange Commission or its staff upon request.

EX-95

Exhibit 95

MINE SAFETY DISCLOSURE

We operate surface mines in the western United States to produce construction aggregates. The operation of our mines is subject to regulation by the federal Mine Safety and Health Administration (“MSHA”) under the Federal Mine Safety and Health Act of 1977 (the “Mine Act”). MSHA conducted 69 and 43 inspections at 30 and 25 of our mines during the years ended December 31, 2017 and 2016, respectively. There were 15 and 5 reportable citations or orders following 8 and 4 of those inspections during the years ended December 31, 2017 and 2016, respectively. The chart below contains information regarding certain mining safety and health citations or orders that MSHA issued during the years ended December 31, 2017 and 2016 associated with our mining operations. With respect to this information, it should be noted that: (i) the number of citations and orders will vary depending on the size of the mine, (ii) the number of citations issued will vary from inspector to inspector and mine to mine, and (iii) citations and orders can be contested and appealed, and in that process, may be reduced in severity and amount or dismissed.

(dollars in thousands)	Year Ended			Year Ended
	December 31, 2017			December 31, 2016
Name of Mine	Section 1041	Proposed Assessments2		Section 1041	Proposed Assessments2
Bee Rock Quarry	—	—		1	0.3
Capay Facility	1	0.3		—	—
Conrock	—	—		1	0.3
Lockwood Quarry	—	—		4	2.0
N50	2	1.9		—	—
Rosemary Quarry	—	—		4	1.0
Singer Pit	—	—		1	1.4
Swan Pit	1	1.2		—	—
Wade Sand	—	—		1	0.1
Walker Pit	—	—		1	0.3
Whatcom Plant	1	0.4		1	0.1
Total	5	$	3.8	14	$	5.5

¹The total number of violations of mandatory health or safety standards that could significantly and substantially contribute to the cause and effect of a coal or other mine safety or health hazard under Section 104 of the Mine Act for which the operator received a citation from the MSHA.

²The total dollar value of proposed assessments from the MSHA under the Mine Act.

During the years ended December 31, 2017 and 2016, with respect to our mines:

• For the years ended December 31, 2017 and 2016, MSHA did not issue any order requiring persons to be withdrawn from the areas affected by any alleged violations of mandatory health or safety standards under Section 104(b) of the Mine Act.

• MSHA did not identify any flagrant violations under Section 110(b)(2) of the Mine Act.

• We did not experience any mining-related fatalities.

• We did not receive written notice of a pattern of violations of mandatory health or safety standards from MSHA under Section 104(e) of the Mine Act or written notice of the potential to have a pattern of violations of mandatory health or safety standards from MSHA.

• MSHA did not issue any citations and orders for an alleged unwarrantable failure of the mine operator to comply with mandatory health or safety standards under Section 104(d) of the Mine Act during the years ended December 31, 2017 and December 31, 2016.

• MSHA issued one imminent danger order requiring immediate withdrawal from the affected areas under Section 107(a) of the Mine Act during the year ended December 31, 2017 and did not issue any imminent danger orders during the year ended December 31, 2016.

None of the citations issued during the year ended December 31, 2017 and 2016 are the subject of a formal appeal before the Federal Mine Safety and Health Review Commission.

1

XML

Document And Entity Information Document - USD ($) $ in Billions	12 Months Ended
	Dec. 31, 2017	Feb. 13, 2018	Jun. 30, 2017
Document And Entity [Abstract]
Entity Registrant Name	GRANITE CONSTRUCTION INC
Entity Central Index Key	0000861459
Current Fiscal Year End Date	--12-31
Entity Filer Category	Large Accelerated Filer
Document Type	10-K
Document Period End Date	Dec. 31, 2017
Document Fiscal Year Focus	2017
Document Fiscal Period Focus	FY
Amendment Flag	false
Entity Common Stock, Shares Outstanding		39,890,345
Entity Well-known Seasoned Issuer	Yes
Entity Voluntary Filers	No
Entity Current Reporting Status	Yes
Entity Public Float			$ 1.9

XML

CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands	Dec. 31, 2017	Dec. 31, 2016
Current assets
Cash and cash equivalents ($94,359 and $73,115 related to consolidated construction joint ventures (“CCJVs”))	$ 233,711	$ 189,326
Short-term marketable securities	67,775	64,884
Receivables, net ($52,031 and $52,613 related to CCJVs)	479,791	419,345
Costs and estimated earnings in excess of billings ($1,437 and $5,046 related to CCJVs)	103,965	73,102
Inventories	62,497	55,245
Equity in construction joint ventures	247,826	247,182
Other current assets ($10,384 and $7,500 related to CCJVs)	(36,513)	(39,908)
Total current assets	1,232,078	1,088,992
Property and equipment, net ($38,361 and $20,500 related to CCJVs)	407,418	406,650
Long-term marketable securities	65,015	62,895
Investments in affiliates	38,469	35,668
Goodwill	53,799	53,799
Other noncurrent assets	75,199	85,449
Total assets	1,871,978	1,733,453
Current liabilities
Current maturities of long-term debt	46,048	14,796
Accounts payable ($34,795 and $26,419 related to CCJVs)	237,673	199,029
Billings in excess of costs and estimated earnings ($37,701 and $33,704 related to CCJVs)	135,146	97,522
Accrued expenses and other current liabilities ($2,126 and $1,544 related to CCJVs)	236,407	218,587
Total current liabilities	655,274	529,934
Long-term debt	178,453	229,498
Deferred income taxes, net	1,361	5,441
Other long-term liabilities	44,085	45,989
Commitments and contingencies
Equity
Preferred stock, $0.01 par value, authorized 3,000,000 shares, none outstanding	0	0
Common stock, $0.01 par value, authorized 150,000,000 shares; issued and outstanding 39,871,314 shares as of December 31, 2017 and 39,621,140 shares as of December 31, 2016	399	396
Additional paid-in capital	160,376	150,337
Accumulated other comprehensive loss	634	(371)
Retained earnings	783,699	735,626
Total Granite Construction Incorporated shareholders’ equity	945,108	885,988
Non-controlling interests	47,697	36,603
Total equity	992,805	922,591
Total liabilities and equity	$ 1,871,978	$ 1,733,453

XML

CONSOLIDATED BALANCE SHEETS CONSOLIDATED BALANCE SHEET (PARENTHETICALS - Assets and Liabilities) - USD ($) $ in Thousands	Dec. 31, 2017	Dec. 31, 2016
Cash and cash equivalents	$ 233,711	$ 189,326
Costs and estimated earnings in excess of billings	103,965	73,102
Other Assets, Current	36,513	39,908
Property and equipment, net	407,418	406,650
Accounts payable	237,673	199,029
Billings in excess of costs and estimated earnings	135,146	97,522
Accrued expenses and other current liabilities	236,407	218,587
Consolidated Construction Joint Venture [Member] | Joint Venture Consolidated [Member]
Cash and cash equivalents	94,359	73,115
Receivables, net	52,031	52,613
Costs and estimated earnings in excess of billings	1,437	5,046
Other Assets, Current	10,384	7,500
Property and equipment, net	38,361	20,500
Accounts payable	34,795	26,419
Billings in excess of costs and estimated earnings	37,701	33,704
Accrued expenses and other current liabilities	$ 2,126	$ 1,544

XML

CONSOLIDATED BALANCE SHEETS CONSOLIDATED BALANCE SHEET (PARENTHETICALS) - $ / shares	Dec. 31, 2017	Dec. 31, 2016
Statement of Financial Position [Abstract]
Preferred Stock, Par or Stated Value Per Share	$ 0.01	$ 0.01
Preferred Stock, Shares Authorized	3,000,000	3,000,000
Preferred Stock, Shares Outstanding	0	0
Common Stock, Par or Stated Value Per Share	$ 0.01	$ 0.01
Common Stock, Shares Authorized	150,000,000	150,000,000
Common Stock, Shares, Issued	39,871,314	39,621,140
Common Stock, Shares, Outstanding	39,871,314	39,621,140

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CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) shares in Thousands, $ in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Revenue
Construction	$ 1,664,708	$ 1,365,198	$ 1,262,675
Large Project Construction	1,032,229	888,193	812,720
Construction Materials	292,776	261,226	295,634
Total revenue	2,989,713	2,514,617	2,371,029
Cost of revenue
Construction	1,417,694	1,155,983	1,075,169
Large Project Construction	1,002,436	824,056	733,253
Construction Materials	254,650	233,208	262,771
Total cost of revenue	2,674,780	2,213,247	2,071,193
Gross profit	314,933	301,370	299,836
Selling, general and administrative expenses	222,811	219,299	203,817
Restructuring gains	(2,411)	(1,925)	(6,003)
Gain on sales of property and equipment	(4,182)	(8,358)	(8,286)
Operating income	98,715	92,354	110,308
Other (income) expense
Interest income	(4,742)	(3,225)	(2,135)
Interest expense	10,800	12,366	14,257
Equity in income of affiliates	(7,107)	(7,177)	(3,210)
Other income, net	(4,699)	(5,972)	(2,031)
Total other (income) expense	(5,748)	(4,008)	6,881
Income before provision for income taxes	104,463	96,362	103,427
Provision for income taxes	28,662	30,162	35,179
Net income	75,801	66,200	68,248
Amount attributable to non-controlling interests	(6,703)	(9,078)	(7,763)
Net income attributable to Granite Construction Incorporated	$ 69,098	$ 57,122	$ 60,485
Net income per share attributable to common shareholders (see Note 14)
Basic (in dollars per share)	$ 1.74	$ 1.44	$ 1.54
Diluted (in dollars per share)	$ 1.71	$ 1.42	$ 1.52
Weighted average shares of common stock
Weighted average common stock outstanding, basic (in shares)	39,795	39,557	39,337
Weighted average common stock outstanding, diluted (in shares)	40,372	40,225	39,868
Dividends per common share (in dollars per share)	$ 0.52	$ 0.52	$ 0.52

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CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY - USD ($) $ in Thousands	Total	Common Stock [Member]	Additional Paid-in Capital [Member]	AOCI Including Portion Attributable to Noncontrolling Interest [Member]	Retained Earnings [Member]	Total Granite Shareholders' Equity [Member]	Noncontrolling Interests [Member]
Beginning Balance at Dec. 31, 2014	$ 817,106	$ 392	$ 134,605	$ (428)	$ 659,816	$ 794,385	$ 22,721
Beginning Balance (in shares) at Dec. 31, 2014		39,186,386
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income	68,248	$ 0	0	0			7,763
Net Income Attributable to Parent	60,485				60,485	60,485
Other comprehensive income (loss)	(1,072)	0	0	(1,072)		(1,072)	0
Stock units vested	3	$ 3	0	0	0	3	0
Stock units vested (in shares)		317,524
Amortized restricted stock units	8,763	$ 0	8,763	0	0	8,763	0
Purchase of common stock	(3,856)	$ (1)	(3,855)	0	0	(3,856)	0
Purchase of common stock (in shares)		(114,969)
Cash dividends on common stock	(20,476)	$ 0	0	0	(20,476)	(20,476)	0
Transactions with noncontrolling interests, net	400	0	0	0	0	0	400
Stock options exercised and other	1,005	$ 0	1,399	0	(394)	1,005	0
Stock options exercised and other (in shares)		23,936
Ending Balance at Dec. 31, 2015	870,121	$ 394	140,912	(1,500)	699,431	839,237	30,884
Ending Balance (in shares) at Dec. 31, 2015		39,412,877
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income	66,200	$ 0	0	0			9,078
Net Income Attributable to Parent	57,122				57,122	57,122
Other comprehensive income (loss)	1,129	0	0	1,129	0	1,129	0
Stock units vested	3	$ 3	0	0	0	3	0
Stock units vested (in shares)		308,619
Amortized restricted stock units	13,383	$ 0	13,383	0	0	13,383	0
Purchase of common stock	(5,227)	$ (1)	(5,226)	0	0	(5,227)	0
Purchase of common stock (in shares)		(116,355)
Cash dividends on common stock	(20,590)	$ 0	0	0	(20,590)	(20,590)	0
Transactions with noncontrolling interests, net	3,359	0	0	0	0	0	3,359
Stock options exercised and other	931	$ 0	1,268	0	(337)	931	0
Stock options exercised and other (in shares)		15,999
Ending Balance at Dec. 31, 2016	$ 922,591	$ 396	150,337	(371)	735,626	885,988	36,603
Ending Balance (in shares) at Dec. 31, 2016	39,621,140	39,621,140
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income	$ 75,801	$ 0	0				6,703
Net Income Attributable to Parent	69,098				69,098	69,098
Other comprehensive income (loss)	1,005	0	0	1,005	0	1,005	0
Stock units vested	4	$ 4	0		0	4	0
Stock units vested (in shares)		375,100
Amortized restricted stock units	15,764	$ 0	15,764		0	15,764	0
Purchase of common stock	(6,977)	$ (1)	(6,976)		0	(6,977)	0
Purchase of common stock (in shares)		(140,070)
Cash dividends on common stock	(20,720)	$ 0	0		(20,720)	(20,720)	0
Transactions with noncontrolling interests, net	4,391	0	0	0	0	0	4,391
Stock options exercised and other	946	$ 0	1,251	0	(305)	946	0
Stock options exercised and other (in shares)		15,144
Ending Balance at Dec. 31, 2017	$ 992,805	$ 399	$ 160,376	$ 634	$ 783,699	$ 945,108	$ 47,697
Ending Balance (in shares) at Dec. 31, 2017	39,871,314	39,871,314

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CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Operating activities
Net income	$ 75,801	$ 66,200	$ 68,248
Adjustments to reconcile net income to net cash provided by operating activities:
Non-cash restructuring gains	(939)	(1,000)	(1,044)
Depreciation, depletion and amortization	66,345	64,375	64,309
Gain on sales of property and equipment	(4,182)	(8,358)	(8,286)
Change in deferred income taxes	(4,824)	9,842	28,258
Stock-based compensation	15,764	13,383	8,763
Equity in net loss (income) from unconsolidated joint ventures	14,634	(15,614)	(43,374)
Net Income from affiliates	(7,107)	(7,177)	(3,210)
Changes in assets and liabilities:
Receivables	(60,272)	(75,756)	(32,877)
Costs and estimated earnings in excess of billings, net	(26,066)	2,100	(22,374)
Inventories	(7,252)	308	13,367
Contributions to unconsolidated construction joint ventures	(16,937)	(11,795)	(69,313)
Distributions from unconsolidated construction joint ventures	39,955	19,344	53,367
Prepaid and other assets, net	13,211	(13,873)	(1,078)
Accounts payable	36,716	37,731	8,363
Accrued expenses and other current liabilities	11,348	(6,564)	3,859
Net cash provided by operating activities	146,195	73,146	66,978
Investing activities
Purchases of marketable securities	(124,543)	(129,685)	(104,971)
Maturities of marketable securities	120,000	50,000	29,260
Proceeds from called marketable securities	0	55,000	75,000
Purchases of property and equipment ($18,309 million, $17,810 million and $0 related to CCJVs)	(67,695)	(90,970)	(44,179)
Proceeds from sales of property and equipment	10,202	12,946	13,148
Collection of notes receivable	1,052	4,331	943
Other investing activities, net	1,798	1,988	92
Net cash used in investing activities	(59,186)	(96,390)	(30,707)
Financing activities
Proceeds from long-term debt	25,000	30,000	30,000
Debt principal payments	(45,000)	(45,025)	(46,763)
Cash dividends paid	(20,687)	(20,563)	(20,445)
Purchases of common stock	(6,977)	(5,227)	(3,777)
Contributions from non-controlling partners	11,500	5,250	7,462
Distributions to non-controlling partners	(7,109)	(5,258)	(6,992)
Other financing activities	649	557	1,119
Net cash used in financing activities	(42,624)	(40,266)	(39,396)
Cash and cash equivalents at beginning of year	189,326	252,836	255,961
Cash and cash equivalents at end of year	233,711	189,326	252,836
Increase (decrease) in cash and cash equivalents	44,385	(63,510)	(3,125)
Cash paid during the period for:
Interest	11,446	13,392	14,601
Income taxes	33,948	29,872	4,298
Other non-cash activities:
Performance guarantees	5,497	17,596	(10,306)
Non-cash investing and financing activities:
Restricted stock units issued, net of forfeitures (See Note 13)	11,505	21,101	6,220
Accrued cash dividends	5,183	5,151	5,124
Accrued equipment purchases	(1,945)	(3,865)	2,891
Joint Venture Consolidated [Member]
Changes in assets and liabilities:
Net cash provided by operating activities	36,900	37,800	(16,400)
Joint Venture Consolidated [Member] | Consolidated Construction Joint Venture [Member]
Investing activities
Purchases of property and equipment ($18,309 million, $17,810 million and $0 related to CCJVs)	18,309,000	17,810,000	$ 0
Financing activities
Cash and cash equivalents at beginning of year	73,115
Cash and cash equivalents at end of year	$ 94,359	$ 73,115

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CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME Statement - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Net income	$ 75,801	$ 66,200	$ 68,248
Net change	350	503	0
Foreign currency translation adjustment, net	655	626	(1,072)
Other comprehensive income (loss), net of tax	1,005	1,129	(1,072)
Comprehensive income	76,806	67,329	67,176
Comprehensive income attributable to Granite	70,103	58,251	59,413
Non-controlling interests in comprehensive income	(6,703)	(9,078)	(7,763)
Cash Flow Hedging [Member]
Net unrealized gain on derivatives	191	184	0
Less: reclassification for net losses included in interest expense	$ 159	$ 319	$ 0

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Revisions in Estimates

12 Months Ended

Dec. 31, 2017

Change in Accounting Estimate [Abstract]

Revision in Estimates

Revisions in Estimates

Our profit recognition related to construction contracts is based on estimates of 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. When we experience significant changes in our estimates of costs to complete, 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. We use the cumulative catch-up method applicable to construction contract accounting to account for revisions in estimates. 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 cost estimates in the future. In our review of these changes for the year ended December 31, 2017 we identified and corrected amounts that should have been recorded during the year ended December, 31, 2016. This correction resulted in a $4.9 million decrease to Large Project Construction revenue and gross profit and a $1.6 million decrease in net income attributable to Granite Construction Incorporated. We have assessed the impact of this correction to the financial statements of prior periods’ and to the financial statements for the year ended December 31, 2017 and have concluded that the amounts are not material. In our review of these changes for the years ended 2016 and 2015, we did not identify any material amounts that should have been recorded in a prior period.     

In the normal course of business, we have revisions in estimated costs some of which are associated with unresolved affirmative claims and back charges. The estimated or actual recovery related to these 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.

Affirmative Claims

Revisions in estimates for the years ended December 31, 2017, 2016 and 2015, included increases in revenue of $34.9 million, $37.3 million and $48.5 million, respectively, related to the estimated cost recovery of customer affirmative claims. Of these totals, $30.9 million, $25.4 million and $37.3 million, were offset by an increase in estimated contract costs that were in excess of the estimated recovery during the years ended December 31, 2017, 2016 and 2015, respectively. For the remaining $4.0 million, $11.9 million and $11.2 million, respectively, estimated contract costs in excess of estimated cost recovery were recorded in prior periods.

Back Charges

Revisions in estimates for the years ended December 31, 2017, 2016 and 2015, included reduction of cost of revenue of $4.6 million, $15.7 million and $7.0 million, respectively, related to the estimated recovery of back charges. Of these totals, $2.5 million, $4.8 million and $0.5 million, were offset by an increase in estimated contract costs that were in excess of the estimated recovery during the years ended December 31, 2017, 2016 and 2015, respectively. For the remaining $2.1 million, $10.9 million and $6.5 million, respectively, estimated contract costs in excess of estimated cost recovery were recorded in prior periods.

The tables below include the impact to gross profit from significant revisions in estimates related to estimated and actual recovery of customer affirmative claims and back charges as well as the associated estimated contract costs.

Construction

The net changes in project profitability from revisions in estimates, both increases and decreases, which individually had an impact of $1.0 million or more on gross profit were net increases of $4.0 million, $1.3 million and $19.9 million for the years ended December 31, 2017, 2016 and 2015, respectively. The projects are summarized as follows (dollars in millions):

Increases

Years Ended December 31,		2017		2016		2015
Number of projects with upward estimate changes		10		7		14
Range of increase in gross profit from each project, net	$	1.1 - 3.9	$	1.1 - 4.8	$	1.1 - 6.6
Increase on project profitability	$	17.2	$	14.2	$	30.7

The increases during the years ended December 31, 2017, 2016 and 2015 were due to lower costs and higher productivity than originally anticipated and owner directed scope changes. The 2017 and 2016 increases were also due to estimated cost recovery from affirmative claims.

Decreases

Years Ended December 31,		2017		2016		2015
Number of projects with downward estimate changes		6		7		5
Range of reduction in gross profit from each project, net	$	1.0 - 4.4	$	1.0 - 3.9	$	1.0 - 3.3
Decrease on project profitability	$	13.2	$	12.9	$	10.8

The decreases during the years ended December 31, 2017, 2016 and 2015 were due to additional costs and lower productivity than originally anticipated. The 2017 decreases were also due to increases in estimated cost to complete from outstanding affirmative claims and change orders.

Large Project Construction

The net changes in project profitability from revisions in estimates, both increases and decreases, which individually had an impact of $1.0 million or more on gross profit were net decreases of $66.6 million and $13.5 million and a net increase of $7.6 million for the years ended December 31, 2017, 2016 and 2015, respectively. Amounts attributable to non-controlling interests were $2.1 million and $4.3 million of the net decreases and $3.0 million of the net increase for the years ended December 31, 2017, 2016 and 2015, respectively. The projects are summarized as follows (dollars in millions):

Increases

Years Ended December 31,		2017		2016		2015
Number of projects with upward estimate changes		1		8		7
Range of increase in gross profit from each project, net	$	2.0	$	1.2 - 6.5	$	1.5 - 6.7
Increase on project profitability	$	2.0	$	27.2	$	27.9

The increases during the years ended December 31, 2017 and 2016 were due to higher productivity and lower costs than anticipated and settlement of affirmative claims as well as estimated cost recovery from affirmative claims during 2016. The increases during the year ended December 31, 2015 were due to owner-directed scope changes and lower costs than anticipated, as well as estimated cost recovery from affirmative claims.

Decreases

Years Ended December 31,		2017		2016		2015
Number of projects with downward estimate changes		7		5		6
Range of reduction in gross profit from each project, net	$	1.3 - 17.2	$	1.3 - 13.6	$	1.0 - 5.5
Decrease on project profitability	$	68.6	$	40.7	$	20.3

The decreases during the years ended December 31, 2017, 2016 and 2015 were primarily due to additional design, weather and owner-related costs and lower productivity than originally anticipated, net of estimated and actual recovery from customer affirmative claims and back charges. As of December 31, 2017, there were three projects for which additional costs were reasonably possible in excess of the probable amounts included in the cost forecast. The reasonably possible aggregate range that has the potential to adversely impact gross profit during the year ended December 31, 2018 was zero to $44.0 million. As the related projects proceed, future estimates may change and could have a material effect on our financial position, results of operations and/or cash flows in the future.

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Summary of Significant Accounting Policies

12 Months Ended

Dec. 31, 2017

Accounting Policies [Abstract]

Summary of Significant Accounting Policies

Summary of Significant Accounting Policies

Description of Business: Granite Construction Incorporated is one of the largest diversified heavy civil contractors and construction materials producers in the United States, engaged in the construction and improvement of streets, roads, highways, mass transit facilities, airport infrastructure, bridges, trenchless and underground utilities, power-related facilities, water-related facilities, utilities, tunnels, dams and other infrastructure-related projects. We have permanent offices located in Alaska, Arizona, California, Florida, Illinois, Nevada, New York, Texas, Utah and Washington. Unless otherwise indicated, the terms “we,” “us,” “our,” “Company” and “Granite” refer to Granite Construction Incorporated and its wholly owned and consolidated subsidiaries.

Principles of Consolidation: The consolidated financial statements include the accounts of Granite Construction Incorporated and its wholly owned and consolidated subsidiaries. All material inter-company transactions and accounts have been eliminated. Additionally, we participate in various joint ventures (“joint ventures”). We consolidate these joint ventures where we have determined that through our participation we have a variable interest and are the primary beneficiary as defined by Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 810, Consolidation, and related standards. The factors we use to determine the primary beneficiary of a variable interest entity (“VIE”) may include the decision authority of each partner, which partner manages the day-to-day operations of the project and the amount of our equity investment in relation to that of our partners. If we determine that the power to direct the significant activities is shared equally by two or more joint venture parties, then there is no primary beneficiary and no party consolidates the VIE.

Where we have determined we are not the primary beneficiary of a joint venture but do exercise significant influence, we account for our share of the operations of unconsolidated construction joint ventures on a pro rata basis in revenue and cost of revenue in the consolidated statements of operations and in equity in construction joint ventures in the consolidated balance sheets. We account for non-construction unconsolidated joint ventures under the equity method of accounting and include our share of the operations in equity in income from affiliates in the consolidated statements of operations and in investment in affiliates in the consolidated balance sheets. We have been divesting equity method investments in real estate affiliates as part of our 2010 Enterprise Improvement Plan (“EIP”).

Use of Estimates in the Preparation of Financial Statements: The financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”).  The preparation of these financial statements requires management to make estimates that affect the reported amounts of assets and liabilities, revenue and expenses, and related disclosure of contingent assets and liabilities. Our estimates and related judgments and assumptions are continually evaluated based on available information and experiences; however, actual amounts could differ from those estimates. 

Revenue Recognition - Construction Contracts: Revenue and earnings on construction contracts, including construction joint ventures, are recognized under the percentage of completion method using the ratio of costs incurred to estimated total costs.

Revenue from unapproved change orders is recognized to the extent the related costs have been incurred, the amount can be reliably estimated and recovery is probable.

On certain projects we have submitted and have pending unresolved contract modifications and affirmative claims (“affirmative claims”) to recover additional costs to which the Company believes it is entitled under the terms of contracts with customers, subcontractors, vendors or others. The owners or their authorized representatives and/or other third parties may be in partial or full agreement with the modifications or affirmative claims, or may have rejected or disagree entirely or partially as to such entitlement.

Revenue related to affirmative claims with customers is recognized to the extent of costs incurred when it is probable that a claim settlement with a customer will result in additional revenue and the amount can be reasonably estimated. A reduction to costs related to affirmative claims with non-customers with whom we have a contractual arrangement (“back charges”) is recognized when the estimated recovery is probable and the amount can be reasonably estimated. Except for contractual back charges, a reduction to cost related to affirmative claims against non-customers is recognized when the claims are settled. Recognizing affirmative claims and back charge recoveries requires significant judgments of certain factors including, but not limited to, dispute resolution developments and outcomes, anticipated negotiation results, and the cost of resolving such matters.

Provisions are recognized in the consolidated statements of operations for the full amount of estimated losses on uncompleted contracts whenever evidence indicates that the estimated total cost of a contract exceeds its estimated total revenue. All contract costs, including those associated with affirmative claims, back charges and change orders, are recorded as incurred and revisions to estimated total costs are reflected as soon as the obligation to perform is determined. Contract costs consist of direct costs on contracts, including labor and materials, amounts payable to subcontractors, direct overhead costs and equipment expense (primarily depreciation, fuel, maintenance and repairs). All state and federal government contracts and many of our other contracts provide for termination of the contract at the convenience of the party contracting with us, with provisions to pay us for work performed through the date of termination. Pre-contract costs are expensed as incurred.

The accuracy of our revenue and profit recognition in a given period depends on the accuracy of our estimates of the cost to complete each project. Cost estimates for all of our projects use a detailed “bottom up” approach and we believe our experience allows us to create materially reliable estimates. There are a number of factors that can contribute to changes in estimates of contract cost and profitability. The most significant of these include:

• the completeness and accuracy of the original bid;

• costs associated with scope changes;

• changes in costs of labor and/or materials;

• extended overhead and other costs due to owner, weather and other delays;

• subcontractor performance issues;

• changes in productivity expectations;

• site conditions that differ from those assumed in the original bid;

• changes from original design on design-build projects;

• the availability and skill level of workers in the geographic location of the project;

• a change in the availability and proximity of equipment and materials;

• our ability to fully and promptly recover on affirmative claims and back charges for additional contract costs; and

• the customer’s ability to properly administer the contract.

The foregoing factors, as well as the stage of completion of contracts in process and the mix of contracts at different margins may cause fluctuations in gross profit and gross profit margin from period to period. Significant changes in cost estimates, particularly in our larger, more complex projects have had, and can in future periods have, a significant effect on our profitability.

Revenue Recognition - Materials: Revenue from the sale of materials is recognized when delivery occurs and risk of ownership passes to the customer.

Balance Sheet Classifications: Prepaid expenses and amounts receivable and payable under construction contracts (principally retentions) that may exist over the duration of the contract and could extend beyond one year are included in current assets and liabilities. A one-year time period is used as the basis for classifying all other current assets and liabilities.

Cash and Cash Equivalents: Cash equivalents are securities having maturities of three months or less from the date of purchase. Included in cash and cash equivalents in the consolidated balance sheets as of December 31, 2017 and 2016, was $94.4 million and $73.1 million, respectively, related to CCJVs. Our access to joint venture cash may be limited by the provisions of the venture agreements.

Costs and Estimated Earnings in Excess of Billings: Costs and estimated earnings in excess of billings represent unbilled amounts earned and reimbursable under contracts. These amounts become billable according to the contract terms, which usually consider the passage of time, achievement of milestones or completion of the project. With the exception of customer affirmative claims, generally, such unbilled amounts will be billed and collected over the next twelve months. Settlement with the customer of outstanding affirmative claims is dependent on the claims resolution process and could extend beyond one year or the project operating cycle. Based on our historical experience, we generally consider the collection risk related to these amounts to be low. When events or conditions indicate that the amounts outstanding may become uncollectible, an allowance is estimated and recorded.

Marketable Securities: We determine the classification of our marketable securities at the time of purchase and re-evaluate these determinations at each balance sheet date. Debt securities are classified as held-to-maturity when we have the positive intent and ability to hold the securities to maturity. Held-to-maturity investments are stated at amortized cost and are periodically assessed for other-than-temporary impairment. Amortized cost of debt securities is adjusted for amortization of premiums and accretion of discounts to maturity, and is included in interest income. The cost of securities redeemed or called is based on the specific identification method.

Derivative Instruments: We recognize derivative instruments as either assets or liabilities in the consolidated balance sheets at fair value using Level 2 inputs. To receive hedge accounting treatment, derivative instruments that are designated as cash flow hedges must be highly effective in offsetting changes to expected future cash flows on hedged transactions. The effective portion of the gain or loss on cash flow hedges is reported as a component of accumulated other comprehensive income (loss) and subsequently reclassified to interest expense in the consolidated statements of operations when the periodic hedged cash flows are settled. Adjustments to fair value on derivative instruments that do not qualify for hedge accounting treatment are reported through other (income) expense in the consolidated statements of operations. We do not enter into derivative instruments for speculative or trading purposes.

Fair Value of Financial Assets and Liabilities: We measure and disclose certain financial assets and liabilities at fair value. ASC Topic 820, Fair Value Measurements and Disclosures, defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC Topic 820 also establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard describes three levels of inputs that may be used to measure fair value:

Level 1 - Quoted prices in active markets for identical assets or liabilities.

Level 2 - Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3 - Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

We utilize the active market approach to measure fair value for our financial assets and liabilities. We report separately each class of assets and liabilities measured at fair value on a recurring basis and include assets and liabilities that are disclosed but not recorded at fair value in the fair value hierarchy.

The carrying value of marketable securities approximates their fair value as determined by market quotes. Rates currently available to us for debt with similar terms and remaining maturities are used to estimate the fair value of existing debt. The carrying value of receivables and other amounts arising out of normal contract activities, including retentions, which may be settled beyond one year, is estimated to approximate fair value. 

Concentrations of Credit Risk and Other Risks: Financial instruments, which potentially subject us to concentrations of credit risk, consist primarily of cash and cash equivalents, short-term and long-term marketable securities, and accounts receivable. We maintain our cash and cash equivalents and our marketable securities with several financial institutions. We invest with high credit quality financial institutions and, by policy, limit the amount of credit exposure to any one financial institution.

Our receivables are from customers concentrated in the United States, and we have no material receivables from foreign operations as of December 31, 2017 or 2016. We perform ongoing credit evaluations of our customers and generally do not require collateral, although the law provides us the ability to file mechanics’ liens on real property improved for private customers in the event of non-payment by such customers. We maintain an allowance for doubtful accounts which has historically been within management’s estimates.

Inventories: Inventories consist primarily of quarry products valued at the lower of average cost or market. We write down the inventories based on estimated quantities of materials on hand in excess of approximately one year of demand. At December 31, 2017 and 2016, inventory also included $11.9 million and $5.0 million, respectively, of materials specifically related to a project in our Kenny Large Project Construction operating group and was valued at cost.

Investments in Real Estate Affiliates: Each real estate development project accounted for under the equity method of accounting is reviewed in accordance with ASC Topic 323, Investments - Equity Method and Joint Ventures. These projects are evaluated for impairment using the other-than-temporary impairment model, which requires an impairment charge to be recognized if our investment’s carrying amount exceeds its fair value, and the decline in fair value is deemed to be other than temporary.

Events or changes in circumstances, which would cause us to review undiscounted future cash flows include, but are not limited to:

• significant decreases in the market price of the asset;

• significant adverse changes in legal factors or the business climate;

• significant changes to the development or business plans of a project;

• accumulation of costs significantly in excess of the amount originally expected for the acquisition, development or construction of the asset; and

• current period cash flow or operating losses combined with a history of losses, or a forecast of continuing losses associated with the use of the asset.

Future undiscounted cash flows and fair value assessments are estimated based on entitlement status, market conditions, cost of construction, debt load, development schedules, status of joint venture partners and other factors applicable to the specific project. Fair value is estimated based on the expected future cash flows attributable to the asset or group of assets and on other assumptions that market participants would use in determining fair value, such as market discount rates, transaction prices for other comparable assets, and other market data. Our estimates of cash flows may differ from actual cash flows due to, among other things, fluctuations in interest rates, decisions made by jurisdictional agencies, economic conditions, or changes to our business operations.

Property and Equipment: Property and equipment are stated at cost. Depreciation for construction and other equipment is primarily provided using accelerated methods over lives ranging from three to seven years, and the straight-line method over lives from three to twenty years for the remaining depreciable assets. We believe that accelerated methods best approximate the service provided by the construction and other equipment. Depletion of quarry property is based on the usage of depletable reserves. We frequently sell property and equipment that has reached the end of its useful life or no longer meets our needs, including depleted quarry property. At the time that an asset or an asset group meets the held-for-sale criteria as defined by ASC Topic 360, Property, Plant, and Equipment, we write it down to fair value, if the fair value is below the carrying value. Fair value is estimated by a variety of factors including, but not limited to, market comparative data, historical sales prices, broker quotes and third party valuations. If material, such property is separately disclosed, otherwise it is held in property and equipment until sold. The cost and accumulated depreciation or depletion of property sold or retired is removed from the balance sheet and the resulting gains or losses, if any, are reflected in operating income for the period. In the case that we abandon an asset, an amount equal to the carrying amount of the asset, less salvage value, if any, will be recognized as expense in the period that the asset was abandoned. Repairs and maintenance are charged to operations as incurred.

Costs related to the development of internal-use software during the preliminary project and post-implementation stages are expensed as incurred. Costs incurred during the application development stage are capitalized. These costs consist primarily of software, hardware and consulting fees, as well as salaries and related costs. Amounts capitalized are reported as a component of office furniture and equipment within property and equipment. Capitalized software costs are depreciated using the straight-line method over the estimated useful life of the related software, which range from three to seven years. During the years endedDecember 31, 2017, 2016 and 2015, we capitalized $7.9 million, $6.6 million and $2.3 million, respectively, of internal-use software development and related hardware costs.

Long-lived Assets: We review property and equipment and amortizable intangible assets for impairment at an asset group level whenever events or changes in circumstances indicate the net book value of an asset group may not be recoverable. Recoverability of these asset groups is measured by comparison of their net book values to the future undiscounted cash flows the asset groups are expected to generate. If the asset groups are considered to be impaired, an impairment charge will be recognized equal to the amount by which the net book value of the asset groups exceed their fair value. We group construction and plant equipment assets at a regional level, which represents the lowest level for which identifiable cash flows are largely independent of the cash flows of other groups of assets. When an individual asset or group of assets is determined to no longer contribute to the vertically integrated asset group, it is assessed for impairment independently.

As of December 31, 2017, amortizable intangible assets include covenants not to compete, permits, trade names and customer lists which are being amortized on a straight-line basis over remaining terms from three to twenty years.

Capitalized Interest: Interest, to the extent it is incurred in connection with the construction of certain self-constructed assets and real estate development projects, is capitalized and recorded as part of the asset to which it relates. Capitalized interest on self-constructed assets is amortized over their estimated useful lives and is expensed on real estate projects as they are sold.

Goodwill: As of December 31, 2017 and 2016, we had five reporting units in which goodwill was recorded as follows:

• Kenny Group Construction

• Kenny Group Large Project Construction

• Northwest Group Construction

• Northwest Group Construction Materials

• California Group Construction

The most significant goodwill balances reside in the reporting units associated with the Kenny Group. See Note 9 for balances by reportable segment.

We perform impairment tests annually as of November 1 and more frequently when events and circumstances occur that indicate a possible impairment of goodwill. In addition, we evaluate goodwill for impairment if events or circumstances change between annual tests indicating a possible impairment.  Examples of such events or circumstances include the following: 

• a significant adverse change in legal factors or in the business climate; 

• an adverse action or assessment by a regulator; 

• a more likely than not expectation that a segment or a significant portion thereof will be sold; or 

• the testing for recoverability of a significant asset group within the segment. 

We elected to only perform the quantitative goodwill impairment tests for the 2017 annual test. In performing the quantitative goodwill impairment tests, we calculate the estimated fair value of the reporting unit in which the goodwill is recorded using the discounted cash flows and market multiple methods. Judgments inherent in these methods include the determination of appropriate discount rates, the amount and timing of expected future cash flows and growth rates, and appropriate benchmark companies. The cash flows used in our 2017 discounted cash flow model were based on five-year financial forecasts, which in turn were based on the 2018-2020 operating plan developed internally by management adjusted for market participant based assumptions. Our discount rate assumptions are based on an assessment of the equity cost of capital and appropriate capital structure for our reporting units. In assessing the reasonableness of our determined fair values of our reporting units, we evaluate the reasonableness of our results against our current market capitalization. 

The estimated fair value is compared to the net book value of the reporting unit, including goodwill. If the fair value of the reporting unit exceeds its net book value, goodwill of the reporting unit is considered not impaired. If the fair value of the reporting unit is less than its net book value, goodwill is impaired and the excess of the reporting unit’s net book value over the fair value is recognized as an impairment loss.

The results of our annual goodwill impairment tests, performed in accordance with ASC 350, Intangibles - Goodwill and Other, indicated that the estimated fair values of our reporting units exceeded their net book values (i.e., cushion) by at least 20% for the reporting units with goodwill. Out of the five reporting units with goodwill, the Kenny Large Project Construction business is the most susceptible to fluctuations in results depending on awarded work given the large size and limited frequency of awards. While we believe the current cushion for the reporting unit is adequate to absorb these fluctuations, a material decline in job win rates could have a material impact to this reporting unit’s estimated fair value.

Billings in Excess of Costs and Estimated Earnings: Billings in excess of costs and estimated earnings is comprised of cash collected from customers and billings to customers on contracts in advance of work performed, including advance payments negotiated as a contract condition. Generally, unearned project-related costs will be earned over the next twelve months.

Asset Retirement Obligations: We account for the costs related to legal obligations to reclaim aggregate mining sites and other facilities by recording our estimated asset retirement obligation at fair value, capitalizing the estimated liability as part of the related asset’s carrying amount and allocating it to expense over the asset’s useful life. To determine the fair value of the obligation, we estimate the cost for a third-party to perform the legally required reclamation including a reasonable profit margin. This cost is then increased for future estimated inflation based on the estimated years to complete and discounted to fair value using present value techniques with a credit-adjusted, risk-free rate. In estimating the settlement date, we evaluate the current facts and conditions to determine the most likely settlement date.

We review reclamation obligations at least annually for a revision to the cost or a change in the estimated settlement date. Additionally, reclamation obligations are reviewed in the period that a triggering event occurs that would result in either a revision to the cost or a change in the estimated settlement date.

Warranties: Many of our construction contracts contain warranty provisions covering defects in equipment, materials, design or workmanship that generally run from six months to one year after our customer accepts the contract. Because of the nature of our projects, including contract owner inspections of the work both during construction and prior to acceptance, we have not experienced material warranty costs for these short-term warranties and, therefore, do not believe an accrual for these costs is necessary. Certain construction contracts carry longer warranty periods, ranging from two to ten years, for which we have accrued an estimate of warranty cost. The warranty liability is estimated based on our experience with the type of work and any known risks relative to the project and was not material as of December 31, 2017 and 2016. 

Accrued Insurance Costs: We carry insurance policies to cover various risks, primarily general liability, automobile liability, workers compensation and employee medical expenses, under which we are liable to reimburse the insurance company for a portion of each claim paid. The amounts for which we are liable for general liability and workers compensation generally range from the first $0.5 million to $1.0 million per occurrence. We accrue for probable losses, both reported and unreported, that are reasonably estimable using actuarial methods based on historic trends modified, if necessary, by recent events. Changes in our loss assumptions caused by changes in actual experience would affect our assessment of the ultimate liability and could have an effect on our operating results and financial position up to $1.0 million per occurrence for general liability and workers compensation or $0.3 million for medical insurance.

Performance Guarantees: Agreements with our joint venture partners (“partner(s)”) for both construction joint ventures and line item joint ventures define each partner’s management role and financial responsibility in the project. The amount of operational exposure is generally limited to our stated ownership interest. However, due to the joint and several nature of the performance obligations under the related owner contracts, if one of the partners fails 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). We estimate our liability for performance guarantees for our unconsolidated construction joint ventures and line item joint ventures using estimated partner bond rates and include them in accrued expenses and other current liabilities (see Note 10) with a corresponding increase in equity in construction joint ventures in the consolidated balance sheets. We reassess our liability when and if changes in circumstances occur. The liability and corresponding asset are removed from the consolidated balance sheets upon customer acceptance of the project. Circumstances that could lead to a loss under these agreements beyond our stated ownership interest include the failure of a partner to contribute additional funds to the venture in the event the project incurs a loss or additional costs that we could incur should a partner fail to provide the services and resources that it had committed to provide in the agreement.

Contingencies: We are currently involved in various claims and legal proceedings. Loss contingency provisions are recorded if the potential loss from any asserted or unasserted claim or legal proceeding is considered probable and the amount can be reasonably estimated. If a potential loss is considered probable but only a range of loss can be determined, the low-end of the range is recorded. These accruals represent management’s best estimate of probable loss. Disclosure is also provided when it is reasonably possible that a loss will be incurred or when it is reasonably possible that the amount of a loss will exceed the amount recorded. Significant judgment is required in both the determination of probability of loss and the determination as to whether an exposure is reasonably estimable. Because of uncertainties related to these matters, accruals are based only on the best information available at the time. As additional information becomes available, we reassess the potential liability related to claims and litigation and may revise our estimates. See Note 17 and “Item 3. Legal Proceedings” for additional information.

Stock-Based Compensation: We measure and recognize compensation expense, net of estimated forfeitures, over the requisite vesting periods for all stock-based payment awards made. Stock-based compensation is included in selling, general and administrative expenses and cost of revenue on our consolidated statements of operations.

Restructuring (Gains) Charges: Pursuant to an approved plan, we record severance costs when an employee has been notified, unless the employee provides future service, in which case severance costs are expensed ratably over the future service period. Other restructuring costs are recognized when the liability is incurred. Costs associated with terminating a lease contract are recorded at the contract termination date, in accordance with contract terms, or on the cease-use date, net of estimated sublease income, if applicable. In determining the amount related to termination of a lease, various assumptions are used including the time period over which facilities will be vacant, expected sublease term and sublease rates. These assumptions may be adjusted upon the occurrence of future events. Asset impairment analyses resulting from restructuring events are performed in accordance with ASC subtopic 360-10, Property, Plant and Equipment. See the Property and Equipment and Long-lived Assets accounting policies above for further information on asset impairment charges. During the years ended December 31, 2017, 2016 and 2015 we recorded net restructuring gains of $2.4 million, $1.9 million and $6.0 million (including amounts attributable to non-controlling interests of $3.3 million), respectively, related to our EIP.

Income Taxes: Deferred taxes are provided on a liability method whereby deferred tax assets are recognized for deductible temporary differences and operating loss carry-forwards and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities in the consolidated financial statements and their respective tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.

We report a liability in other long-term liabilities in the consolidated balance sheets for unrecognized tax benefits resulting from uncertain tax positions taken or expected to be taken in a tax return. We recognize interest and penalties, if any, related to unrecognized tax benefits in other (income) expense in the consolidated statements of operations.

Computation of Earnings Per Share: Basic net income per share is computed using the weighted-average number of common shares outstanding during the period. Diluted net income per share is computed using the weighted-average number of common shares and dilutive potential common shares outstanding during the period. Potential common shares include stock options and restricted stock units, under the 2012 Equity Incentive Plan.

Recently Issued Accounting Pronouncements:

In May 2014, the FASB issued ASC Topic 606, Revenue from Contracts with Customers, and subsequently issued several related Accounting Standards Updates (“ASU”s) (“Topic 606”), which provide guidance for recognizing revenue from contracts with customers. The core principle of Topic 606 is that revenue will be recognized when promised goods or services are transferred to customers in an amount that reflects consideration for which entitlement is expected in exchange for those goods or services. Topic 606 will be effective commencing with our quarter ending March 31, 2018.

We will adopt Topic 606 using the modified retrospective transition approach, which we will elect to apply Topic 606 to contracts with customers that are not substantially complete, i.e. less than 90% complete, as of January 1, 2018. We do not expect Topic 606 to have a material impact on our Construction Materials segment’s revenue. The impact of Topic 606 primarily relates to our Construction and Large Project Construction segments specifically in the following areas:

• Multiple performance obligations - In accordance with Topic 606, we have reviewed construction contracts with customers, including those related to contract modifications, to determine if there are multiple performance obligations. Based on this review, we have identified one unconsolidated joint venture contract in our Large Project Construction segment that will have multiple performance obligations.

• Multiple contracts - We reviewed contracts containing task orders and identified one Large Project Construction segment contract and one Construction segment contract that consist of multiple individual contracts as defined by Topic 606.

• Provision for losses - Provisions for losses will be recognized in the consolidated statements of operations for the full amount of estimated losses at the uncompleted performance obligation level whenever evidence indicates that the estimated total cost of a performance obligation exceeds its estimated total revenue. Currently provisions for losses are recorded at the contract level. We have identified one unconsolidated joint venture contract in our Large Project Construction segment that will have, as of the effective date, actual and provisions for losses related to completed and uncompleted performance obligations, respectively.

Based on our estimated costs to complete and our assessment of the impact from the adoption of Topic 606 as of December 31, 2017, we estimate a net cumulative decrease to retained earnings between $15.0 million and $18.0 million as of January 1, 2018.

In addition to the above, we expect to separately present contract assets and liabilities in the consolidated balance sheets. Contract assets will include amounts due under contractual retainage provisions, unbilled receivables, costs and estimated earnings in excess of billings and capitalized mobilization costs. Contract liabilities will include provisions for losses and billings in excess of costs and estimated earnings.

There will also be new disclosures related to revenue including information about unearned revenue and revenue disaggregated by operating group. Unearned revenue will be similar to our existing contract backlog but will only include project amounts when the related contract, contract options and task orders, as applicable, are executed rather than when awarded and funding is probable.

In January 2016, the FASB issued ASU No. 2016-01, Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities, which, among other things, eliminates the requirement to disclose the method(s) and significant assumptions used to estimate the disclosed fair value of financial instruments measured at amortized cost on the consolidated balance sheets. This ASU will be effective commencing with our quarter ending March 31, 2018. We do not expect the adoption of this ASU to have a material impact on our consolidated financial statements.

In February 2016, the FASB issued ASU No. 2016-02, Leases(Topic 842) and subsequently issued a related ASU, which requires lessees to recognize the following for all leases (with the exception of short-term leases) at the commencement date: (a) a lease liability, which is a lessee’s obligation to make lease payments arising from a lease, measured on a discounted basis; and (b) a right-of-use asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term. The ASU will be effective commencing with our quarter ending March 31, 2019. We expect the adoption of this ASU to have a material and essentially equal increase to current assets and current liabilities on our consolidated balance sheets.

In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments. The amendments in this ASU clarify and provide specific guidance on eight cash flow classification issues that are not currently addressed by current U.S. GAAP. This ASU will be effective commencing with our quarter ending March 31, 2018. We do not expect the adoption of this ASU to have a material impact on our consolidated financial statements.

In October 2016, the FASB issued ASU No. 2016-16, Intra-Entity Transfers of Assets Other Than Inventory. The amendments in this ASU require the income tax consequences of an intra-entity transfer of an asset other than inventory to be recognized when the transfer occurs instead of when the asset is sold to an outside party. This ASU will be effective commencing with our quarter ending March 31, 2018. Although we do not expect the adoption of this ASU to have a material impact on our consolidated financial statements upon adoption, it may have a material impact if applicable transactions occur.

In January 2017, the FASB issued ASU No. 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business, which is intended to help companies evaluate whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses by providing a more robust framework to use in determining when a set of assets and activities is a business. This ASU will be effective commencing with our quarter ending March 31, 2018. Although we do not expect the adoption of this ASU to have a material impact on our consolidated financial statements upon adoption, ir may have a material impact if applicable transactions occur.

In May 2017, the FASB issued ASU No. 2017-09, Compensation-Stock Compensation (Topic 718) Scope of Modification Accounting, which clarifies that changes to the value, vesting conditions, or award classification of share-based payment awards must be accounted for as modifications. This ASU will be effective commencing with our quarter ending March 31, 2018. Although we do not expect the adoption of this ASU to have a material impact on our consolidated financial statements upon adoption, it may have a material impact if applicable transactions occur.

In August 2017, the FASB issued ASU No. 2017-12, Derivatives and Hedging (Topic 815):Targeted Improvements to Accounting for Hedging Activities, which refines and expands hedge accounting for both financial (e.g., interest rate) and commodity risks. This ASU will be effective commencing with our quarter ending March 31, 2019. We do not expect the adoption of this ASU to have a material impact on our consolidated financial statements.

Recently Adopted Accounting Pronouncements:

In March 2016, the FASB issued ASU No. 2016-05, Derivatives and Hedging (Topic 815): Effect of Derivative Contract Novations on Existing Hedge Accounting Relationships, which clarifies that a change in the counterparty to a derivative instrument that has been designated as a hedging instrument does not, in and of itself, require de-designation of that hedging relationship provided that all other hedge accounting criteria continue to be met. The ASU was effective commencing with our quarter ending March 31, 2017 and had no impact on our consolidated financial statements.

In January 2017, the FASB issued ASU No. 2017-04, Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. This ASU eliminated Step 2 from the goodwill impairment test, which measures goodwill impairment by comparing the implied fair value of a reporting unit’s goodwill to its carrying amount. According to the ASU, an impairment charge should be recorded if a reporting unit’s net book value exceeds its fair value, limited to the amount of goodwill allocated to that reporting unit. We elected to early adopt the ASU, effective January 1, 2017. The estimated fair value of our reporting units exceeded the net book values; therefore, the adoption of this ASU had no impact on our consolidated financial statements.

In March 2017, the FASB issued ASU No. 2017-08, Receivables—Nonrefundable Fees and Other Costs (Subtopic 310-20), Premium Amortization on Purchased Callable Debt Securities, which requires the premium for certain callable debt securities held at a premium to be amortized to the earliest call date rather than at maturity. The ASU does not require an accounting change for securities held at a discount; the discount continues to be amortized to maturity. The ASU was effective commencing with our quarter ending March 31, 2017 and had an immaterial impact on our consolidated financial statements.

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Fair Value Measurement

12 Months Ended

Dec. 31, 2017

Fair Value Disclosures [Abstract]

Fair Value Measurement

Fair Value Measurement

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

	Fair Value Measurement at Reporting Date Using
December 31, 2017	Level 1		Level 2		Level 3		Total
Cash equivalents
Money market funds	$	37,284	$	—	$	—	$	37,284
Commercial paper	9,967		—		—		9,967
Total assets	$	47,251	$	—	$	—	$	47,251

	Fair Value Measurement at Reporting Date Using
December 31, 2016	Level 1		Level 2		Level 3		Total
Cash equivalents
Money market funds	$	10,057	$	—	$	—	$	10,057
Total assets	$	10,057	$	—	$	—	$	10,057

Derivatives

The commodity swaps that we entered in 2014 were settled in October 2015. Gains or losses, including net periodic settlement amounts, were recorded in other income, net in our consolidated statements of operations. During the year ended December 31, 2015, we recorded a net loss of $0.4 million.

Interest Rate Swaps

In December 2016, we terminated the fixed to variable interest rate swap we entered in March 2014 due to the possibility of increasing interest rates. The interest rate swap is reported at fair value using Level 2 inputs in the consolidated balance sheets. Gains or losses, including net periodic settlement amounts, are recorded in other income, net in our consolidated statements of operations. During the years ended December 31, 2016 and 2015, we recorded net gains of $0.3 million and $1.5 million, respectively.

In January 2016, we entered into an interest rate swap designated as a cash flow hedge with an effective date of April 2016 and an initial notional amount of $98.8 million which matures in October 2020. The interest rate swap is designed to convert the interest rate on the term loan described in Note 11 from a variable rate of interest of LIBOR plus an applicable margin to a fixed rate of 1.47% plus the same applicable margin. The interest rate swap is reported at fair value using Level 2 inputs in the consolidated balance sheets. Gains or losses on the effective portion are initially reported as a component of accumulated other comprehensive income (loss) and subsequently reclassified to interest expense in the consolidated statements of operations when the quarterly hedged interest payment is settled. As of December 31, 2017 and 2016, the fair value of the cash flow hedge was $1.4 million and $0.8 million, respectively, and was included in other current assets in the consolidated balance sheets. Associated gains or losses were recorded in the consolidated statements of operations and were immaterial during the years ended December 31, 2017 and 2016.

Other Assets and Liabilities

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

December 31,		2017				2016
	Fair Value Hierarchy	Carrying Value		Fair Value		Carrying Value		Fair Value
Assets:
Held-to-maturity marketable securities	Level 1	$	132,790	$	132,002	$	127,779	$	127,365
Liabilities (including current maturities):
Senior notes payable1	Level 3	$	80,000	$	82,190	$	120,000	$	124,654
Credit Agreement term loan1	Level 3	$	90,000	$	89,871	$	95,000	$	93,991
Credit Agreement - revolving credit facility, 2016 draw1	Level 3	$	30,000	$	30,105	$	30,000	$	29,452
Credit Agreement - revolving credit facility, 2017 draw1	Level 3	$	25,000	$	24,949	$	—	$	—

¹The fair values of the senior notes payable and Credit Agreement (defined in Note 11) loan are based on borrowing rates available to us for long-term loans with similar terms, average maturities, and credit risk.

We measure certain nonfinancial assets and liabilities at fair value on a nonrecurring basis, at least annually. As of December 31, 2017 and 2016, the nonfinancial assets and liabilities included our asset retirement and reclamation obligations, as well as assets and corresponding liabilities associated with performance guarantees.

The fair value of asset retirement obligations were measured using Level 3 inputs and performance guarantees were measured using Level 2 inputs. Asset retirement obligations were initially measured using internal discounted cash flow calculations based upon our estimates of future retirement costs - see Note 8 for details of the asset retirement balances and Note 1 for further discussion on fair value measurements. Performance guarantees were measured using estimated partner bond rates - see Note 10 for the liability balances and Note 1 for further discussion on performance guarantees.

During the years ended December 31, 2017, 2016 and 2015, nonfinancial assets and liabilities fair value adjustments were related to our asset retirement obligations and restructuring gains associated with our EIP, detailed as follows:

• Asset retirement obligations adjustments were $0.5 million, $2.1 million and $0.2 million, respectively. See Note 8 for further information.

• Restructuring gains associated with our EIP were $2.4 million, $1.9 million and $6.0 million (including amounts attributable to non-controlling interests of $3.3 million), during the years ended December 31, 2017, 2016 and 2015, respectively, primarily associated with the release of lease obligations, sale of a real estate asset related to our equity method investments and the sale of a previously impaired consolidated real estate asset.

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Marketable Securities

12 Months Ended

Dec. 31, 2017

Marketable Securities [Abstract]

Marketable Securities

Marketable Securities

All marketable securities were classified as held-to-maturity as of the dates presented and the carrying amounts of held-to-maturity securities were as follows (in thousands):

December 31,	2017		2016
U.S. Government and agency obligations	$	17,910	$	10,002
Commercial paper	49,865		54,882
Total short-term marketable securities	67,775		64,884
U.S. Government and agency obligations	59,993		62,895
Corporate bonds	5,022		—
Total long-term marketable securities	65,015		62,895
Total marketable securities	$	132,790	$	127,779

Scheduled maturities of held-to-maturity investments were as follows (in thousands):

December 31, 2017
Due within one year	$	67,775
Due in one to five years	65,015
Total	$	132,790

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Receivables, net

12 Months Ended

Dec. 31, 2017

Receivables [Abstract]

Receivables, Net

Receivables, net (in thousands)

December 31,	2017		2016
Construction contracts completed and in progress:
Billed	$	252,467	$	206,570
Unbilled	77,135		81,590
Retentions	91,135		84,878
Total construction contracts completed and in progress	420,737		373,038
Construction material sales	42,192		29,357
Other	17,014		17,523
Total gross receivables	479,943		419,918
Less: allowance for doubtful accounts	152		573
Total net receivables	$	479,791	$	419,345

Receivables include amounts billed and billable to clients for services provided as of the end of the applicable period and do not bear interest. To the extent costs are not contractually billable or have not been earned, including claim recovery estimates, the associated revenue is included in costs and estimated earnings in excess of billings or billings in excess of costs and estimated earnings in the consolidated balance sheets. As of December 31, 2017 and 2016, the aggregate claim recovery estimates included in these balances were approximately $26.7 million and $12.3 million, respectively. Included in other receivables at December 31, 2017 and 2016 were items such as estimated recovery from back charge claims, notes receivable, fuel tax refunds, receivables from vendors and income tax refunds. No such receivables individually exceeded 10% of total net receivables at any of these dates. As of December 31, 2017 and 2016, the estimated recovery from back charge claims included in Other receivables was $1.1 million and $0.3 million, respectively.

During the year ended December 31, 2017, our largest volume customer, including both prime and subcontractor arrangements, was the California Department of Transportation (“Caltrans”). Revenue recognized from contracts with Caltrans during 2017 represented $281.7 million (9.4% of our total revenue) of which $219.9 million (13.2% of segment revenue) was in the Construction segment, $57.2 million (5.5% of segment revenue) in the Large Project Construction segment and $4.6 million (1.6% of segment revenue) was in the Construction Materials segment. During the year ended December 31, 2016, our largest volume customer, including both prime and subcontractor arrangements, was Caltrans. Revenue recognized from contracts with Caltrans during 2016 represented $222.4 million (8.8% of total revenue), of which $173.4 million (12.7% of segment revenue) was in the Construction segment and $48.7 million (5.5% of segment revenue) was in the Large Project Construction segment. During the year ended December 31, 2015, our largest volume customer, including both prime and subcontractor arrangements, was the New York State Department of Transportation (“NYSDOT”). Revenue recognized from contracts with NYSDOT during 2015 represented $199.0 million (8.4% of total revenue), all of which was in the Large Project Construction segment (24.5% of segment revenue).

We regularly review our accounts receivable, including past due amounts, to determine their probability of collection. If it is probable that an amount is uncollectible, it is charged to bad debt expense and a corresponding reserve is established in allowance for doubtful accounts. If it is deemed certain that an amount is uncollectible, the amount is written off.

Certain construction contracts include retainage provisions. The balances billed but not paid by customers pursuant to these provisions generally become due upon completion and acceptance of the project work or products by the owners. No retention receivable individually exceeded 10% of total net receivables at any of the presented dates. As of December 31, 2017, the majority of the retentions receivable are expected to be collected within one year. As of December 31, 2017 and 2016, there were no retentions receivables determined to be uncollectible.

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Construction and Line Item Joint Ventures

12 Months Ended

Dec. 31, 2017

Construction and Line Item Joint Ventures [Abstract]

Construction and Line Item Joint Ventures

Construction Joint Ventures

We participate in various construction joint ventures (“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 December 31, 2017, there was $4.6 billion of construction revenue to be recognized on unconsolidated and line item construction joint venture contracts of which $1.5 billion represented our share and the remaining $3.1 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. See Note 10 for disclosure of the performance guarantee amounts recorded in the consolidated balance sheets and Note 1 for additional discussion.

Generally, each construction joint venture is formed to accomplish a specific project and is jointly controlled by the joint venture partners. The joint venture agreements typically provide that our interests in any profits and assets, and our respective share in any losses and liabilities, that may result from the performance of the contracts are limited to our stated percentage interest in the project. Under our joint venture contractual arrangements, we provide capital to these joint ventures in return for an ownership interest. In addition, partners dedicate resources to the joint ventures necessary to complete the contracts and are reimbursed for their cost. The operational risks of each construction joint venture are passed along to the joint venture members. As we absorb our share of these risks, our investment in each venture is exposed to potential gains and losses.

We have determined that certain of these joint ventures are consolidated because they are 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 years ended December 31, 2017, 2016 and 2015, we determined no change was required for existing construction joint ventures.

The volume and stage of completion of contracts from our consolidated and unconsolidated construction joint ventures may cause fluctuations in cash and cash equivalents and, for consolidated construction joint ventures, billings in excess of costs and estimated earnings, costs in excess of billings and estimated earnings and property and equipment between periods.

The assets and liabilities of each consolidated and unconsolidated construction joint venture relate solely to that joint venture. The decision to distribute joint venture assets must generally be made jointly by a majority of the members and, accordingly, these assets, including those associated with estimated cost recovery of customer affirmative claims and back charge claims, are generally not available for the working capital needs of Granite until distributed.

Consolidated Construction Joint Ventures    

At December 31, 2017, we were engaged in six active consolidated construction joint venture projects, with contract values ranging from $49.8 million to $409.6 million and a combined total of $1.2 billion. Our share of revenue remaining to be recognized on these consolidated joint ventures was $492.8 million and ranged from $4.9 million to $201.3 million. Our proportionate share of the equity in these joint ventures was between 50.0% and 65.0%. During the years ended December 31, 2017, 2016 and 2015, total revenue from consolidated construction joint ventures was $185.5 million, $119.8 million and $54.4 million, respectively. During the years ended December 31, 2017 and 2016 consolidated construction joint ventures provided $36.9 million and $37.8 million, respectively, of operating cash flows and used $16.4 million during the year ended December 31, 2015.

Unconsolidated Construction Joint Ventures

As of December 31, 2017, we were engaged in eleven active unconsolidated joint venture projects with contract values ranging from $77.3 million to $3.7 billion and a combined total of $12.4 billion of which our share was $3.7 billion. Our proportionate share of the equity in these unconsolidated joint ventures ranged from 20.0% to 50.0%. As of December 31, 2017, our share of the revenue remaining to be recognized on these unconsolidated joint ventures was $1.5 billion and ranged from $0.5 million to $365.0 million.

The following is summary financial information related to unconsolidated construction joint ventures (in thousands):

December 31,	2017		2016
Assets:
Cash, cash equivalents and marketable securities	$	289,940	$	537,991
Other current assets1	812,577		644,809
Noncurrent assets	219,825		207,240
Less partners’ interest	869,782		935,615
Granite’s interest1,2	452,560		454,425
Liabilities:
Current liabilities	682,832		696,215
Less partners’ interest and adjustments3	462,159		472,324
Granite’s interest	220,673		223,891
Equity in construction joint ventures4	$	231,887	$	230,534

¹Included in this balance and in accrued and other current liabilities on our consolidated balance sheets as of December 31, 2017 and 2016 was $88.6 million and $83.1 million, respectively, related to performance guarantees (see Note 10 of “Notes to the Consolidated Financial Statements”).

²Included in this balance as of December 31, 2017 and 2016 was $74.3 million and $65.4 million, respectively, related to Granite’s share of estimated cost recovery of customer affirmative claims. In addition, the balances as of December 31, 2017 and 2016 included $11.8 million and $5.6 million, respectively, related to Granite’s share of estimated recovery of back charge claims.

³Partners’ 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 primarily related to gross profit forecast differences.

⁴As of December 31, 2017 and 2016, this balance included $15.9 million and $16.6 million, respectively, of deficit in construction joint ventures that is included in accrued expenses and other current liabilities in the consolidated balance sheets.

Years Ended December 31,	2017			2016		2015
Revenue:
Total	$	2,057,336		$	1,958,158	$	1,924,544
Less partners’ interest and adjustments1	1,469,550			1,387,532		1,341,334
Granite’s interest	587,786			570,626		583,210
Cost of revenue:
Total	1,995,915			1,915,376		1,819,257
Less partners’ interest and adjustments1	1,394,347			1,360,459		1,279,954
Granite’s interest	601,568			554,917		539,303
Granite’s interest in gross (loss) profit	$	(13,782	)	$	15,709	$	43,907

¹Partners’ 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 primarily related to gross profit forecast differences.

During the years ended December 31, 2017, 2016 and 2015, unconsolidated construction joint venture net income was $62.2 million, $41.8 million and $105.6 million, respectively, of which our share was net loss of $14.4 million and net income of $15.6 million and $43.4 million, respectively. The differences between our share of the joint venture net loss when compared to the joint venture net income during the year ended December 31, 2017 primarily resulted from differences between our estimated total revenue and cost of revenue when compared to that of our partners’ on four projects. These joint venture net income 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

We participate in various “line item” joint venture agreements under which each partner is responsible for performing certain discrete items of the total scope of contracted work. The revenue for each line item joint venture partners’ discrete items of work is defined in the contract with the project owner and each joint venture partner bears the profitability risk associated with its own work. There is not a single set of books and records for a line item joint venture. Each partner accounts for its items of work individually as it would for any self-performed contract. We include only our portion of revenue and cost of revenue associated with these contracts in our consolidated financial statements. As of December 31, 2017, we had one active line item joint venture construction project with a total contract value of $66.2 million of which our portion was $49.0 million. As of December 31, 2017, our share of revenue remaining to be recognized on the line item joint venture was $1.4 million. During the years ended December 31, 2017, 2106 and 2015, our portion of revenue from line item joint ventures was $22.9 million, $35.0 million and $26.0 million, respectively.

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Investments in Affiliates

12 Months Ended

Dec. 31, 2017

Investments in and Advances to Affiliates, Balance [Abstract]

Investments in and Advances to Affiliates, Schedule of Investments [Text Block]

Investments in Affiliates

Our investments in affiliates balance is related to our investments in unconsolidated non-construction entities that we account for using the equity method of accounting, including investments in real estate entities and a non-real estate entity.

The real estate entities were formed to accomplish specific real estate development projects in which our wholly-owned subsidiary, Granite Land Company (“GLC”), participates with third-party partners. The non-real estate entity is a 50% interest in a limited liability company which owns and operates an asphalt terminal and operates an emulsion plant in Nevada.

We have determined that the real estate entities are not consolidated because although they are VIEs, we are not the primary beneficiary. We have determined that the non-real estate entity is not consolidated because it is not a VIE and we do not hold the majority voting interest. As such, this entity is accounted for using the equity method. We account for our share of the operating results of the equity method investments in other income in the consolidated statements of operations and as a single line item in the consolidated balance sheets as investments in affiliates.

Our investments in affiliates balance consists of the following (in thousands):

December 31,	2017		2016
Equity method investments in real estate affiliates	$	29,472	$	25,911
Equity method investments in other affiliate	8,997		9,757
Total investments in affiliates	$	38,469	$	35,668

The following table provides summarized balance sheet information for our affiliates accounted for under the equity method on a combined basis (in thousands):

December 31,	2017		2016
Current assets	$	31,320	$	30,836
Noncurrent assets	129,039		124,670
Total assets	160,359		155,506
Current liabilities	30,131		18,485
Long-term liabilities1	31,636		37,217
Total liabilities	61,767		55,702
Net assets	98,592		99,804
Granite’s share of net assets	$	38,469	$	35,668

¹The balance primarily relates to debt associated with our real estate investments. See Note 11 for further discussion.

The equity method investments in real estate affiliates included $24.3 million and $20.8 million in residential real estate in Texas as of December 31, 2017 and 2016, respectively. The remaining balances were in commercial real estate in Texas. Of the $160.4 million in total assets as of December 31, 2017, real estate entities had total assets ranging from less than $1.6 million to $68.5 million and the non-real estate entity had total assets of $28.1 million.

The following table provides summarized statement of operations information for our affiliates accounted for under the equity method on a combined basis (in thousands):

Years Ended December 31,	2017		2016		2015
Revenue	$	56,372	$	56,127	$	47,457
Gross profit	23,007		22,398		19,117
Income before taxes	17,154		19,117		8,446
Net income	17,154		19,117		8,446
Granite’s interest in affiliates’ net income	7,107		7,177		3,210

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Property and Equipment, Net

12 Months Ended

Dec. 31, 2017

Property, Plant and Equipment and Asset Retirement Obligation [Abstract]

Property and Equipment, Net

Property and Equipment, net

Balances of major classes of assets and allowances for depreciation and depletion are included in property and equipment, net in the consolidated balance sheets as follows (in thousands):

December 31,	2017		2016
Equipment and vehicles	$	778,549	$	756,602
Quarry property	182,267		174,839
Land and land improvements	108,830		110,999
Buildings and leasehold improvements	82,601		82,762
Office furniture and equipment	56,894		56,381
Property and equipment	1,209,141		1,181,583
Less: accumulated depreciation and depletion	801,723		774,933
Property and equipment, net	$	407,418	$	406,650

Depreciation and depletion expense primarily included in cost of revenue in our consolidated statements of operations was $63.8 million for the year ended December 31, 2017 and was $61.0 million for both years ended December 31, 2016 and 2015. 

Capitalized interest costs related to certain self-constructed assets were immaterial for the years ended December 31, 2017, 2016 and 2015 and were included in investments in affiliates and property and equipment in the consolidated balance sheets.

We have recorded liabilities associated with our legally required obligations to reclaim owned and leased quarry property and related facilities. As of December 31,2017 and 2016, $4.8 million and $1.9 million, respectively, of our asset retirement obligations were included in accrued expenses and other current liabilities and $17.7 million and $20.1 million, respectively, were included in other long-term liabilities in the consolidated balance sheets.

The following is a reconciliation of these asset retirement obligations (in thousands):

Years Ended December 31,	2017			2016
Beginning balance	$	21,936		$	26,558
Revisions to estimates	462			(2,058		)
Liabilities settled	(966		)	(3,806		)
Accretion	1,095			1,242
Ending balance	$	22,527		$	21,936

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Intangible Assets

12 Months Ended

Dec. 31, 2017

Goodwill and Intangible Assets Disclosure [Abstract]

Intangible Assets

Intangible Assets

Indefinite-lived Intangible Assets

Indefinite-lived intangible assets primarily consist of goodwill. The following table presents the goodwill balance by reportable segment (in thousands):

December 31,	2017		2016
Construction	$	29,260	$	29,260
Large Project Construction	22,593		22,593
Construction Materials	1,946		1,946
Total goodwill	$	53,799	$	53,799

Amortized Intangible Assets

The following is the breakdown of our amortized intangible assets that are included in other noncurrent assets in the consolidated balance sheets (in thousands):

			Accumulated
December 31, 2017	Gross Value		Amortization			Net Value
Permits	$	25,959	$	(12,504	)	$	13,455
Customer lists	2,200		(1,467		)	733
Trade name	4,100		(2,159		)	1,941
Covenants not to compete and other	50		(26		)	24
Total amortized intangible assets	$	32,309	$	(16,156	)	$	16,153

December 31, 2016
Permits	$	25,959	$	(11,514	)	$	14,445
Acquired backlog	1,500		(1,472		)	28
Customer lists	2,200		(1,174		)	1,026
Trade name	4,100		(1,727		)	2,373
Covenants not to compete and other	50		(24		)	26
Total amortized intangible assets	$	33,809	$	(15,911	)	$	17,898

Amortization expense related to amortized intangible assets for the years ended December 31, 2017, 2016 and 2015 was $1.7 million, $2.0 million and $2.2 million, respectively, and was primarily included in selling, general and administrative expenses in the consolidated statements of operations. In addition, during the years ended December 31, 2017 and 2016, the gross value and associated accumulated amortization was adjusted for fully amortized intangible assets that we no longer intend to use. Based on the amortized intangible assets balance at December 31, 2017, amortization expense expected to be recorded in the future is as follows: $1.7 million in 2018; $1.7 million in 2019; $1.6 million in 2020; $1.4 million in 2021; and $9.7 million thereafter.

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Accrued Expenses and Other Current Liabilities

12 Months Ended

Dec. 31, 2017

Other Liabilities Disclosure [Abstract]

Other Liabilities Disclosure [Text Block]

Accrued Expenses and Other Current Liabilities (in thousands):

December 31,	2017		2016
Payroll and related employee benefits	$	68,210	$	53,802
Accrued insurance	39,946		44,471
Performance guarantees (see Note 1)	88,606		83,110
Other	39,645		37,204
Total	$	236,407	$	218,587

Other includes dividends payable, accrued legal reserves, warranty reserves, asset retirement obligations, remediation reserves and other miscellaneous accruals, none of which are greater than 5% of total current liabilities.

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Long-Term Debt and Credit Arrangements

12 Months Ended

Dec. 31, 2017

Debt Disclosure [Abstract]

Long-Term Debt and Credit Arrangements

Long-Term Debt and Credit Arrangements (in thousands):

December 31,	2017			2016
Senior notes payable	$	80,000		$	120,000
Credit Agreement term loan	90,000			95,000
Credit Agreement revolving credit loan	55,000			30,000
Debt issuance costs	(499		)	(706		)
Total debt	224,501			244,294
Less current maturities	46,048			14,796
Total long-term debt	$	178,453		$	229,498

The aggregate minimum principal maturities of long-term debt, including current maturities, for each of the three years following December 31, 2017 are as follows: 2018 - $46.3 million; 2019 - $50.0 million; and 2020 - $128.8 million. We have no long-term debt payments due after 2020.

Senior Notes Payable

As of December 31, 2017 and 2016, senior notes payable in the amount of $80.0 million and $120.0 million, respectively, were due to a group of institutional holders and had an interest rate of 6.11% per annum (“2019 Notes”). As of December 31, 2017, $40.0 million of the outstanding balance was included in long-term debt in the consolidated balance sheets and the remaining $40.0 million was included in current maturities of long-term debt in the consolidated balance sheets. As of December 31, 2016, $110.0 million of the outstanding balance was included in long-term debt in the consolidated balance sheets, including $30.0 million due for the 2017 installment as we had the ability and intent to pay the 2017 installment using borrowings under the Credit Agreement (defined below) or by obtaining other sources of financing. The remaining $10.0 million was included in current maturities of long-term debt in the consolidated balance sheets.

Our obligations under the note purchase agreement governing the 2019 Notes (the “2019 NPA”) are guaranteed by certain of our subsidiaries and are collateralized on an equivalent basis with the Credit Agreement discussed below by liens on substantially all of the assets of the Company and subsidiaries that are guarantors or borrowers under the Credit Agreement. The 2019 NPA provides for the release of liens and re-pledge of collateral on substantially the same terms and conditions as those set forth in the Credit Agreement.

Credit Agreement

As of December 31, 2017, we had a $290.0 million credit facility (the “Credit Agreement”), of which $200.0 million was a revolving credit facility and $90.0 million was a term loan that matures on October 28, 2020 (the “Maturity Date”). The Credit Agreement has a sublimit for letters of credit of $100.0 million. As of December 31, 2017 and 2016, $6.2 million and $5.0 million of the term loan balance was included in current maturities of long-term debt, respectively, and the remaining $83.8 million and $90.0 million, respectively, was included in long-term debt in the consolidated balance sheets.

Of the $95.0 million term loan outstanding as of December 31, 2016, we paid $5.0 million of the principal balance during 2017. Of the remaining $90.0 million outstanding as of December 31, 2017, 1.25% of the original principal balance is due in three quarterly installments beginning in March 2018, 2.50% of the original principal balance is due in eight quarterly installments beginning in December 2018 and the remaining balance is due on the Maturity Date.

As of December 31, 2017, the total stated amount of all issued and outstanding letters of credit under the Credit Agreement was $8.3 million. As of December 31, 2017 and 2016, $25.0 million and $30.0 million had been drawn for the 2017 and 2016 installments of the 2019 Notes, respectively. The total unused availability under the Credit Agreement was $136.7 million. The letters of credit will expire between July 2018 and October 2018.

Borrowings under the Credit Agreement bear interest at LIBOR or a base rate (at our option), plus an applicable margin based on certain financial ratios calculated quarterly. LIBOR varies based on the applicable loan term, market conditions and other external factors. The applicable margin was 1.75% for loans bearing interest based on LIBOR and 0.75% for loans bearing interest at the base rate at December 31, 2017. Accordingly, the effective interest rate using three-month LIBOR and base rate was 3.44% and 5.25%, respectively, at December 31, 2017 and we elected to use LIBOR. Borrowings at the base rate have no designated term and could be repaid without penalty any time prior to the Maturity Date. Borrowings bearing interest at a LIBOR rate have a term no less than one month and no greater than six months (or such longer period not to exceed 12 months if approved by all lenders). At the end of each term, such borrowings can be paid or continued at our discretion as either a borrowing at the base rate or a borrowing at a LIBOR rate with similar terms. Our obligations under the Credit Agreement are guaranteed by certain of our subsidiaries and are collateralized on an equivalent basis with the obligations under the 2019 Notes (defined above) by first priority liens (subject only to other permitted liens) on substantially all of the assets of the Company and our subsidiaries that are guarantors or borrowers under the Credit Agreement.

In January 2016, we entered into an interest rate swap designated as a cash flow hedge with an effective date of April 2016 and an initial notional amount of $98.8 million which matures in October 2020. The interest rate swap is designed to convert the interest rate on the term loan described above from a variable rate of interest of LIBOR plus an applicable margin to a fixed rate of 1.47% plus the same applicable margin (see Note 4 for details).

The Credit Agreement provides for the release of the liens securing the obligations, at our option and expense, so long as certain conditions as defined by the terms in the Credit Agreement are satisfied (“Collateral Release Period”). However, if subsequent to exercising the option, our Consolidated Fixed Charge Coverage Ratio is less than 1.25 or our Consolidated Leverage Ratio is greater than 2.50, then we would be required to promptly re-pledge substantially all of the assets of the Company and our subsidiaries that are guarantors or borrowers under the Credit Agreement. As of December 31, 2017, the conditions for the exercise of our right under the Credit Agreement to have liens released were not satisfied.

Real Estate Indebtedness

Our unconsolidated investments in real estate entities is subject to mortgage indebtedness. This indebtedness is non-recourse to Granite, but is recourse to the real estate entity. The terms of this indebtedness are typically renegotiated to reflect the evolving nature of the real estate project as it progresses through acquisition, entitlement and development. Modification of these terms may include changes in loan-to-value ratios requiring the real estate entity to repay portions of the debt. The debt associated with our unconsolidated real estate entities is disclosed in Note 7.

Covenants and Events of Default

Our debt and credit agreements require us to comply with various affirmative, restrictive and financial covenants, including the financial covenants described below. Our failure to comply with any of these covenants, or to pay principal, interest or other amounts when due thereunder, would constitute an event of default under the applicable agreements. Under certain circumstances, the occurrence of an event of default under one of our debt or credit agreements (or the acceleration of the maturity of the indebtedness under one of our agreements) may constitute an event of default under one or more of our other debt or credit agreements. Default under our debt and credit agreements could result in (i) us no longer being entitled to borrow under the agreements; (ii) termination of the agreements; (iii) the requirement that any letters of credit under the agreements be cash collateralized; (iv) acceleration of the maturity of outstanding indebtedness under the agreements and/or (v) foreclosure on any collateral securing the obligations under the agreements.

The most significant financial covenants under the terms of our Credit Agreement and 2019 NPA require the maintenance of a minimum Consolidated Tangible Net Worth, a minimum Consolidated Interest Coverage Ratio and a maximum Consolidated Leverage Ratio.

As of December 31, 2017 and pursuant to the definitions in the agreements, our Consolidated Tangible Net Worth was $953.6 million, which exceeded the minimum of $752.0 million, our Consolidated Leverage Ratio was 1.25 which did not exceed the maximum of 3.00 and our Consolidated Interest Coverage Ratio was 15.59 which exceeded the minimum of 4.00.

As of December 31, 2017, we were in compliance with all covenants contained in the Credit Agreement and related to the 2019 NPA. We are not aware of any non-compliance by any of our unconsolidated real estate entities with the covenants contained in their debt agreements.

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Employee Benefit Plans

12 Months Ended

Dec. 31, 2017

Retirement Benefits [Abstract]

Compensation and Employee Benefit Plans

Employee Benefit Plans

Profit Sharing and 401(k) Plan: The Profit Sharing and 401(k) Plan (the “401(k) Plan”) is a defined contribution plan covering all employees except employees covered by collective bargaining agreements and certain employees of our consolidated construction joint ventures. Each employee’s combined pre-tax 401(k) and post-tax (Roth) contributions cannot exceed 50% of their eligible pay or Internal Revenue Code annual contribution limits. Our 401(k) matching contributions can be up to 6% of an employee’s gross pay at the discretion of the Board of Directors. Our 401(k) matching contributions to the 401(k) Plan for the years ended December 31, 2017, 2016 and 2015 were $12.1 million, $11.0 million and $5.4 million, respectively. Profit sharing contributions from the Company may be made to the 401(k) Plan in an amount determined by the Board of Directors. We made no profit sharing contributions during the years ended December 31,2017, 2016 and 2015.

Non-Qualified Deferred Compensation Plan: We offer a Non-Qualified Deferred Compensation Plan (“NQDC Plan”) to a select group of our highly compensated employees. The NQDC Plan provides participants the opportunity to defer payment of certain compensation as defined in the NQDC Plan. In October 2008, a Rabbi Trust was established to fund our NQDC Plan obligation and was fully funded as of December 31, 2017. The assets held by the Rabbi Trust at December 31, 2017 and 2016 are substantially in the form of Company-owned life insurance and are included in other noncurrent assets in the consolidated balance sheets. As of December 31, 2017, there were 61 active participants in the NQDC Plan. NQDC Plan obligations were $24.7 million and $21.5 million as of December 31, 2017 and 2016, respectively.

Multi-employer Pension Plans: Four of our wholly-owned subsidiaries, Granite Construction Company, Granite Construction Northeast, Inc., Granite Industrial, Inc., and Kenny Construction Company contribute to various multi-employer pension plans on behalf of union employees. The risks of participating in these multiemployer plans are different from single-employer plans in the following aspects:

• Assets contributed to the multi-employer plan by one employer may be used to provide benefits to employees of other participating employers.

• If a participating employer stops contributing to the plan, the unfunded obligations of the plan may be borne by the remaining participating employers.

• If we chose to stop participating in some of the multi-employer plans, we may be required to pay those plans an amount based on the underfunded status of the plan, referred to as a withdrawal liability.

The following table presents our participation in these plans (dollars in thousands):

	Pension Plan Employer Identification Number	Pension Protection Act (“PPA”) Certified Zone Status1		FIP / RP Status Pending / Implemented2	Contributions						Surcharge Imposed	Expiration Date of Collective Bargaining Agreement3
Pension Trust Fund		2017	2016		2017		2016		2015
Locals 302 and 612 IUOE-Employers Construction Industry Retirement Plan	91-6028571	Green	Green	No	$	3,646	$	3,113	$	3,000	No	12/31/2017 5/31/2018 12/31/2019
Pension Trust Fund for Operating Engineers Pension Plan	94-6090764	Red	Red	Yes	10,431		9,266		9,070		No	1/31/2018 10/31/2018 6/30/2019 5/15/2020 6/15/2020 6/30/2020 9/30/2020
Operating Engineers Pension Trust Fund	95-6032478	Yellow	Red	Yes	4,692		5,357		3,647		No	6/30/2019
Laborers Pension Trust Fund for Northern California	94-6277608	Yellow	Yellow	Yes	2,464		2,215		2,403		No	6/30/2019
Construction Laborers Pension Trust for Southern California	43-6159056	Green	Green	No	2,002		2,095		1,349		No	6/30/2018
Laborers Pension Fund	36-2514514	Green	Green	No	3,208		2,328		1,919		No	5/31/2021
All other funds (38 as of December 31, 2017)					10,341		8,708		7,171
			Total Contributions:		$	36,784	$	33,082	$	28,559

¹The most recent PPA zone status available in 2017 and 2016 is for the plan’s year-end during 2016 and 2015, respectively. The zone status is based on information that we received from the plan and is certified by the plan’s actuary. Among other factors, plans in the red zone are generally less than 65 percent funded, plans in the orange zone are less than 80 percent funded and have an Accumulated Funding Deficiency in the current year or projected into the next six years, plans in the yellow zone are less than 80 percent funded, and plans in the green zone are at least 80 percent funded. Subsequent to December 31, 2016, the Operating Engineers Pension Trust Fund zone status changed from red to yellow for the plan’s year-end during 2015.

²The “FIP/RP Status Pending/Implemented” column indicates plans for which a financial improvement plan (“FIP”) or a rehabilitation plan (“RP”) is either pending or has been implemented.

³Lists the expiration date(s) of the collective-bargaining agreement(s) to which the plans are subject. Pension trust funds with a range of expiration dates have various collective bargaining agreements. Expired collective bargaining agreements are under negotiation.

Based upon the most recently available annual reports, the Company’s contribution to each of the individually significant plans listed in the table above was less than 5% of each plan’s total contributions. We currently have no intention of withdrawing from any of the multi-employer pension plans in which we participate that would result in a significant withdrawal liability. In addition, we do not have any significant future obligations or funding requirements related to these plans other than the ongoing contributions that are paid as hours are worked by plan participants.

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Shareholders' Equity

12 Months Ended

Dec. 31, 2017

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Stockholders' Equity

Shareholders’ Equity

Stock-based Compensation: The 2012 Equity Incentive Plan provides for the issuance of restricted stock, restricted stock units (“RSUs”) and stock options to eligible employees and to members of our Board of Directors. A total of 1,595,675 shares of our common stock have been reserved for issuance of which 1,072,750 remained available as of December 31, 2017. No stock options or restricted stock were granted during the years ended December 31, 2017, 2016 and 2015. There were no stock options or restricted stock outstanding as of December 31, 2017.

Restricted Stock Units: RSUs are issued for services to be rendered and may not be sold, transferred or pledged for such a period as determined by our Compensation Committee. RSU stock compensation cost is measured at our common stock’s fair value based on the market price at the date of grant. We recognize compensation cost only for RSUs that we estimate will ultimately vest. We estimate the number of shares that will ultimately vest at each grant date based on our historical experience and adjust compensation cost based on changes in those estimates over time.

RSU compensation cost is recognized ratably over the shorter of the vesting period (generally three years) or the period from grant date to the first maturity date after the holder reaches age 62 and has completed certain specified years of service, when all RSUs become fully vested. Vesting of RSUs is not subject to any market or performance conditions and vesting provisions are at the discretion of the Compensation Committee. An employee may not sell or otherwise transfer unvested RSUs and, in the event employment is terminated prior to the end of the vesting period, any unvested RSUs are surrendered to us. We have no obligation to purchase these RSUs that are surrendered to us.

A summary of the changes in our RSUs during the years ended December 31, 2017, 2016 and 2015 is as follows (shares in thousands):

Years Ended December 31,	2017				2016				2015
	RSUs		Weighted-Average Grant-Date Fair Value per RSU		RSUs		Weighted-Average Grant-Date Fair Value per RSU		RSUs		Weighted-Average Grant-Date Fair Value per RSU
Outstanding, beginning balance	681		$	39.15	451		$	32.73	565		$	31.38
Granted	259		51.31		572		43.17		228		33.40
Vested	(372	)	43.89		(307	)	36.24		(300	)	31.50
Forfeited	(44	)	43.51		(35	)	40.97		(42	)	33.38
Outstanding, ending balance	524		$	41.51	681		$	39.15	451		$	32.73

Compensation cost related to RSUs was $15.8 million ($11.4 million net of effective tax rate), $13.4 million ($9.2 million net of effective tax rate), and $8.8 million ($5.8 million net of effective tax rate) for the years ended December 31, 2017, 2016 and 2015, respectively. The grant date fair value of RSUs vested during the years ended December 31, 2017, 2016 and 2015 was $16.7 million, $11.5 million and $10.3 million, respectively. As of December 31, 2017, there was $10.0 million of unrecognized compensation cost related to RSUs which will be recognized over a remaining weighted-average period of 1.2 years.

401(k) Plan: As of December 31, 2017, the 401(k) Plan owned 1,454,844 shares of our common stock. Dividends on shares held by the 401(k) Plan are charged to retained earnings and all shares held by the 401(k) Plan are treated as outstanding in computing our earnings per share.

Employee Stock Purchase Plan: Our ESPP allows qualifying employees to purchase shares of our common stock through payroll deductions of up to 15% of their compensation, subject to Internal Revenue Code limitations, at a price of 95% of the fair market value as of the end of each of the six-month offering periods, which commence on May 15 and November 15 of each year. During each of the years ended December 31, 2017, 2016 and 2015, proceeds from the ESPP were $0.8 million for 16,413, 16,717 and 22,567 shares, respectively.

Share Purchase Program: On April 7, 2016, the Board of Directors authorized us to purchase up to $200.0 million of our common stock at management’s discretion, which replaced the former authorization including the amount available. We did not purchase shares under the share purchase program in any of the periods presented. The specific timing and amount of any future purchases will vary based on market conditions, securities law limitations and other factors.

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Weighted Average Shares Outstanding and Net Income (Loss) Per Share (Notes)

12 Months Ended

Dec. 31, 2017

Earnings Per Share [Abstract]

Earnings Per Share [Text Block]

Weighted Average Shares Outstanding and Net Income Per Share

The following table presents a reconciliation of the weighted average shares outstanding used in calculating basic and diluted net income per share as well as the calculation of basic and diluted net income per share (in thousands except per share amounts):

Years Ended December 31,	2017		2016		2015
Numerator (basic and diluted):
Net income allocated to common shareholders for basic calculation	$	69,098	$	57,122	$	60,485
Denominator:
Weighted average common shares outstanding, basic	39,795		39,557		39,337
Dilutive effect of stock options and restricted stock units	577		668		531
Weighted average common shares outstanding, diluted	40,372		40,225		39,868
Net income per share, basic	$	1.74	$	1.44	$	1.54
Net income per share, diluted	$	1.71	$	1.42	$	1.52

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Income Taxes

12 Months Ended

Dec. 31, 2017

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

Following is a summary of the provision for income taxes (in thousands):

Years Ended December 31,	2017			2016		2015
Federal:
Current	$	27,877		$	15,657	$	4,810
Deferred	(4,397		)	9,919		25,955
Total federal	23,480			25,576		30,765
State:
Current	5,520			4,567		1,914
Deferred	(338		)	19		2,500
Total state	5,182			4,586		4,414
Total provision for income taxes	$	28,662		$	30,162	$	35,179

Following is a reconciliation of our provision for income taxes based on the Federal statutory tax rate to our effective tax rate (dollars in thousands):

Years Ended December 31,	2017					2016					2015
Federal statutory tax	$	36,562		35.0	%	$	33,728		35.0	%	$	35,165		34.0	%
State taxes, net of federal tax benefit	3,814			3.7		2,990			3.1		3,769			3.6
Percentage depletion deduction	(1,368		)	(1.3	)	(1,352		)	(1.4	)	(1,444		)	(1.4	)
Domestic production activities deduction	(2,765		)	(2.7	)	(1,624		)	(1.7	)	(306		)	(0.3	)
Non-controlling interests	(2,346		)	(2.3	)	(3,177		)	(3.3	)	(2,639		)	(2.6	)
Nondeductible expenses	1,128			1.1		1,094			1.1		219			0.2
Tax Cuts and Jobs Act of 2017	(3,664		)	(3.5	)	—			—		—			—
Other	(2,699		)	(2.6	)	(1,497		)	(1.5	)	415			0.5
Total	$	28,662		27.4	%	$	30,162		31.3	%	$	35,179		34.0	%

On December 22, 2017 the U.S. Tax Cuts and Jobs Act of 2017 (“Tax Reform”) was signed into law. As a result of Tax Reform, the U.S. statutory tax rate was lowered from 35% to 21% effective January 1, 2018, among other changes. ASC Topic 740, Accounting for Income Taxes, requires companies to recognize the effect of tax law changes in the period of enactment; therefore, we were required to revalue our deferred tax assets and liabilities at December 31, 2017 at the new rate. The Securities and Exchange Commission issued Staff Accounting Bulletin No. 118 (“SAB 118”) to address the application of U.S. GAAP in situations when a registrant does not have the necessary information available, prepared, or analyzed (including computations) in reasonable detail to complete the accounting for certain tax effects of Tax Reform. The Company has recognized the provisional tax impacts of Tax Reform in its consolidated financial statements for the year ended December 31, 2017. The majority of the $3.7 million provisional benefit above is related to the revaluation of deferred tax assets and liabilities at December 31, 2017 as a result of Tax Reform. The ultimate impact may differ from this provisional amount, possibly materially, as a result of additional analysis, changes in interpretations and assumptions the Company has made, additional regulatory guidance that may be issued, and actions the Company may take as a result of Tax Reform. The accounting is expected to be complete when the 2017 U.S. corporate income tax return is filed in 2018.

Following is a summary of the deferred tax assets and liabilities (in thousands):

December 31,	2017			2016
Long-term deferred tax assets:
Receivables	$	526		$	573
Inventory	1,513			2,212
Insurance	7,401			12,524
Deferred compensation	8,985			12,740
Other accrued liabilities	1,525			2,294
Accrued compensation	1,738			11,031
Other	1,379			2,481
Net operating loss carryforwards	2,614			2,341
Valuation allowance	(2,471		)	(2,153		)
Total long-term deferred tax assets	23,210			44,043
Long-term deferred tax liabilities:
Property and equipment	16,832			29,400
Contract income recognition	7,739			20,084
Total long-term deferred tax liabilities	24,571			49,484
Net long-term deferred tax liabilities	$	(1,361	)	$	(5,441	)

As of December 31, 2017, our deferred tax asset for net operating loss carryforwards relates to state and local net operating loss carryforwards with the significant carryforwards expiring beginning in 2035. We have provided a valuation allowance on the net deferred tax assets for certain state and local jurisdictions because we do not believe it is more likely than not that they will be realized.

The following is a summary of the change in valuation allowance (in thousands):

December 31,	2017		2016		2015
Beginning balance	$	2,153	$	641	$	1,185
Additions (deductions), net	318		1,512		(544		)
Ending balance	$	2,471	$	2,153	$	641

The additions to the valuation allowance are related to the revaluation of our net deferred tax assets related to U.S. Tax Reform enacted during the year ended December 31, 2017 discussed above. Deductions to the valuation allowance are insignificant for the year ended December 31, 2017.

Uncertain tax positions: We file income tax returns in the U.S. and various state and local jurisdictions. We are currently under examination by various state taxing authorities for various tax years. We do not anticipate that any of these audits will result in a material change in our financial position. We are no longer subject to U.S. federal examinations by tax authorities for years before 2012. With few exceptions, as of December 31, 2017, we are no longer subject to state examinations by taxing authorities for years before 2010.

We had approximately $3.2 million and $3.3 million of total gross unrecognized tax benefits as of December 31, 2017 and 2016, respectively. There were approximately $3.1 million and $3.2 million of unrecognized tax benefits that would affect the effective tax rate in any future period at December 31, 2017 and 2016, respectively. We do not anticipate a significant increase or decrease in our unrecognized tax benefits that will impact our effective tax rate in 2018.

The following is a tabular reconciliation of unrecognized tax benefits (in thousands) the balance of which is included in other long-term liabilities on the consolidated balance sheets:

December 31,	2017			2016			2015
Beginning balance	$	3,262		$	1,578		$	887
Gross increases – current period tax positions	—			1,902			1,006
Gross decreases – current period tax positions	(73		)	(125		)	(156		)
Gross increases – prior period tax positions	1			2			—
Gross decreases – prior period tax positions	(6		)	(5		)	—
Settlements with taxing authorities/lapse of statute of limitations	(13		)	(90		)	(159		)
Ending balance	$	3,171		$	3,262		$	1,578

We record interest on uncertain tax positions in interest expense in our consolidated statements of operations. During the years ended December 31, 2017, 2016 and 2015, we recognized approximately $0.2 million interest expense, $0.1 million interest expense and $0.1 million of interest income, respectively. Approximately $0.4 million and $0.2 million of accrued interest related to our uncertain tax position liability was included in other long-term liabilities in our consolidated balance sheets at December 31, 2017 and 2016, respectively.

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Commitments, Contingencies and Guarantees

12 Months Ended

Dec. 31, 2017

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies Disclosure

Commitments, Contingencies and Guarantees

Leases: Minimum rental commitments and minimum royalty requirements under all noncancellable operating leases, primarily quarry property, in effect at December 31, 2017 were (in thousands):

Years Ending December 31,
2018	$	12,169
2019	8,946
2020	7,997
2021	6,874
2022	4,794
Later years (through 2046)	7,171
Total	$	47,951

Operating lease and equipment rental and royalty expense primarily included in cost of revenue in our consolidated statements of operations was $16.4 million, $18.2 million and $11.3 million in 2017, 2016 and 2015, respectively. 

Performance Guarantees

We participate in various joint ventures and line item joint ventures under which each partner is responsible for performing certain discrete items of the total scope of contracted work. See Note 1, Note 6 and Note 10 for further details.

Surety Bonds

We are generally required to provide various types of surety bonds that provide an additional measure of security under certain public and private sector contracts. At December 31, 2017, $3.5 billion of our contract backlog was bonded. Performance bonds do not have stated expiration dates; rather, we are generally released from the bonds after the owner accepts the work performed under contract. The ability to maintain bonding capacity to support our current and future level of contracting requires that we maintain cash and working capital balances satisfactory to our sureties.

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Legal Proceedings

12 Months Ended

Dec. 31, 2017

Commitments and Contingencies Disclosure [Abstract]

Legal Proceedings

Legal Proceedings 

In the ordinary course of business, we and our affiliates are involved in various legal proceedings alleging, among other things, liability issues or breach of contract or tortious conduct in connection with the performance of services and/or materials provided, the various outcomes of which cannot be predicted with certainty. We and our affiliates are also subject to government inquiries in the ordinary course of business seeking information concerning our compliance with government construction contracting requirements and various laws and regulations, the outcomes of which cannot be predicted with certainty.

Some of the matters in which we or our joint ventures and affiliates are involved may involve compensatory, punitive, or other claims or sanctions that, if granted, could require us to pay damages or make other expenditures in amounts that are not probable to be incurred or cannot currently be reasonably estimated. In addition, in some circumstances our government contracts could be terminated, we could be suspended, debarred or incur other administrative penalties or sanctions, or payment of our costs could be disallowed. While any of our pending legal proceedings may be subject to early resolution as a result of our ongoing efforts to resolve the proceedings, whether or when any legal proceeding will be resolved is neither predictable nor guaranteed.

Accordingly, it is possible that future developments in such proceedings and inquiries could require us to (i) adjust existing accruals, or (ii) record new accruals that we did not originally believe to be probable or that could not be reasonably estimated. Such changes could be material to our financial condition, results of operations and/or cash flows in any particular reporting period. In addition to matters that are considered probable for which the loss can be reasonably estimated, disclosure is also provided when it is reasonably possible and estimable that a loss will be incurred or when it is reasonably possible that the amount of a loss will exceed the amount recorded.

Liabilities relating to legal proceedings and government inquiries, to the extent that we have concluded such liabilities are probable and the amounts of such liabilities are reasonably estimable, are recorded in the consolidated balance sheets. The aggregate liabilities recorded as of December 31, 2017 and 2016 related to these matters were approximately $0.9 million and $4.3 million, respectively, and were primarily included in accounts payable and accrued expenses and other current liabilities in our consolidated balance sheets. The aggregate range of possible loss related to (i) matters considered reasonably possible, and (ii) reasonably possible amounts in excess of accrued losses recorded for probable loss contingencies, including those related to liquidated damages, could have a material impact on our consolidated financial statements if they become probable and the reasonably estimable amount is determined.

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Business Segment Information

12 Months Ended

Dec. 31, 2017

Segment Reporting [Abstract]

Business Segment Information

Business Segment Information

Our reportable segments are: Construction, Large Project Construction and Construction Materials.

In addition to business segments, we review our business by operating groups. Our operating groups are defined as follows: (i) California; (ii) Northwest, which primarily includes offices in Alaska, Arizona, Nevada, Utah and Washington; (iii) Heavy Civil, which primarily includes offices in California, Florida, New York and Texas and (iv) Kenny, which primarily includes offices in Illinois. Each of these operating groups may include financial results from our Construction and Large Project Construction segments. Our California and Northwest operating groups include financial results from our Construction Materials segment.

The Construction segment performs various construction projects with a large portion of the work focused on new construction and improvement of streets, roads, highways, bridges, site work, underground, power-related facilities, water-related facilities, utilities and other infrastructure projects. These projects are typically bid-build projects completed within two years with a contract value of less than $75 million.

The Large Project Construction segment focuses on large, complex infrastructure projects which typically have a longer duration than our Construction segment work. These projects include major highways, mass transit facilities, bridges, tunnels, waterway locks and dams, pipelines, canals, power-related facilities, water-related facilities, utilities and airport infrastructure. This segment primarily includes bid-build, design-build, construction management/general contractor contracts, together with various contract methods relating to public-private partnerships, generally with contract values in excess of $75 million.

The Construction Materials segment mines and processes aggregates and operates plants that produce construction materials for internal use and for sale to third parties.

The accounting policies of the segments are the same as those described in the Summary of Significant Accounting Policies (see Note 1). We evaluate segment performance based on gross profit or loss, and do not include selling, general and administrative expenses or non-operating income or expense. Segment assets include property and equipment, intangibles, goodwill, inventory and equity in construction joint ventures.

Summarized segment information is as follows (in thousands):

Years Ended December 31,	Construction		Large Project Construction		Construction Materials			Total
2017
Total revenue from reportable segments	$	1,664,708	$	1,032,229	$	467,140		$	3,164,077
Elimination of intersegment revenue	—		—		(174,364		)	(174,364		)
Revenue from external customers	1,664,708		1,032,229		292,776			2,989,713
Gross profit	247,014		29,793		38,126			314,933
Depreciation, depletion and amortization	22,517		11,087		22,393			55,997
Segment assets	136,031		340,105		282,709			758,845
2016
Total revenue from reportable segments	$	1,365,198	$	888,193	$	425,029		$	2,678,420
Elimination of intersegment revenue	—		—		(163,803		)	(163,803		)
Revenue from external customers	1,365,198		888,193		261,226			2,514,617
Gross profit	209,215		64,137		28,018			301,370
Depreciation, depletion and amortization	22,816		6,796		23,437			53,049
Segment assets	151,475		314,823		282,472			748,770
2015
Total revenue from reportable segments	$	1,262,675	$	812,720	$	432,284		$	2,507,679
Elimination of intersegment revenue	—		—		(136,650		)	(136,650		)
Revenue from external customers	1,262,675		812,720		295,634			2,371,029
Gross profit	187,506		79,467		32,863			299,836
Depreciation, depletion and amortization	20,117		10,343		22,389			52,849
Segment assets	139,399		274,975		288,900			703,274

A reconciliation of segment gross profit to consolidated income before provision for income taxes is as follows (in thousands):

Years Ended December 31,	2017			2016			2015
Total gross profit from reportable segments	$	314,933		$	301,370		$	299,836
Selling, general and administrative expenses	222,811			219,299			203,817
Restructuring gains	(2,411		)	(1,925		)	(6,003		)
Gain on sales of property and equipment	(4,182		)	(8,358		)	(8,286		)
Total other (income) expense	(5,748		)	(4,008		)	6,881
Income before provision for income taxes	$	104,463		$	96,362		$	103,427

A reconciliation of segment assets to consolidated total assets is as follows (in thousands):

December 31,	2017		2016		2015
Total assets for reportable segments	$	758,845	$	748,770	$	703,274
Assets not allocated to segments:
Cash and cash equivalents	233,711		189,326		252,836
Short-term and long-term marketable securities	132,790		127,779		105,695
Receivables, net	479,791		419,345		340,822
Deferred income taxes, net	—		—		4,329
Other current assets, excluding segment assets	140,478		113,010		85,556
Property and equipment, net, excluding segment assets	29,242		32,397		36,721
Investments in affiliates	38,469		35,668		33,182
Other noncurrent assets, excluding segment assets	58,652		67,158		64,463
Consolidated total assets	$	1,871,978	$	1,733,453	$	1,626,878

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Quarterly Financial Data

12 Months Ended

Dec. 31, 2017

Quarterly Financial Information Disclosure [Abstract]

Quarterly Financial Data

Quarterly Financial Data

The following table sets forth selected unaudited quarterly financial information for the years ended December 31, 2017 and 2016. This information has been prepared on the same basis as the audited consolidated financial statements and, in the opinion of management, contains all adjustments necessary for a fair statement thereof. Net income (loss) per share calculations are based on the weighted average common shares outstanding for each period presented. Accordingly, the sum of the quarterly net income (loss) per share amounts may not equal the per share amount reported for the year.

QUARTERLY FINANCIAL DATA
(unaudited - dollars in thousands, except per share data)
2017 Quarters Ended	December 31,			September 30,			June 30,			March 31,
Revenue	$	801,274		$	957,126		$	762,913		$	468,400
Gross profit	100,707			114,530			74,570			25,126
As a percent of revenue	12.6		%	12.0		%	9.8		%	5.4		%
Net income (loss)	$	35,325		$	48,055		$	16,272		$	(23,851	)
As a percent of revenue	4.4		%	5.0		%	2.1		%	(5.1		)%
Net income (loss) attributable to Granite	$	32,773		$	45,982		$	14,133		$	(23,790	)
As a percent of revenue	4.1		%	4.8		%	1.9		%	(5.1		)%
Net income (loss) per share attributable to common shareholders:
Basic	$	0.82		$	1.15		$	0.35		$	(0.60	)
Diluted	$	0.81		$	1.14		$	0.35		$	(0.60	)

2016 Quarters Ended	December 31,			September 30,			June 30,			March 31,
Revenue	$	666,681		$	803,905		$	604,579		$	439,452
Gross profit	81,250			107,674			73,201			39,245
As a percent of revenue	12.2		%	13.4		%	12.1		%	8.9		%
Net income (loss)	$	19,264		$	38,172		$	18,526		$	(9,762	)
As a percent of revenue	2.9		%	4.7		%	3.1		%	(2.2		)%
Net income (loss) attributable to Granite	$	16,173		$	37,190		$	14,199		$	(10,440	)
As a percent of revenue	2.4		%	4.6		%	2.3		%	(2.4		)%
Net income (loss) per share attributable to common shareholders:
Basic	$	0.41		$	0.94		$	0.36		$	(0.27	)
Diluted	$	0.40		$	0.92		$	0.35		$	(0.27	)

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Subsequent Events

12 Months Ended

Dec. 31, 2017

Subsequent Events [Abstract]

Subsequent Events

Subsequent Events Footnote

On February 13, 2018, the Company entered into an Agreement and Plan of Merger (“Merger Agreement”) to acquire Layne Christensen Company (“Layne”), a U.S.-based global water management, construction and drilling company. The acquisition is subject to the approval by Layne stockholders and other customary closing conditions.

The transaction is structured as a stock-for-stock merger in which each outstanding share of Layne common stock will be exchanged for 0.27 share of Company common stock. All outstanding stock options, restricted stock awards and unvested performance shares will be cashed out in accordance with the terms of the Merger Agreement. Using Granite’s closing share price as of February 16, 2018 of $60.36, the purchase price of the transaction in stock and cash would be approximately $360 million, excluding the assumption of approximately $209 million of debt at its estimated fair market value using Level 3 inputs as of February 16, 2018. The ultimate value of the transaction will be determined on the closing date in accordance with the terms of the Merger Agreement.

Following the completion of the acquisition, two outstanding issuances of Layne’s convertible notes will remain outstanding. The 4.25% convertible notes (the “4.25% Notes”) have outstanding principal of $69.5 million, a current conversion price of $22.93 per Layne share and mature on November 15, 2018. As permitted under the terms of the 4.25% Note indenture, following the closing, the conversion provisions of the 4.25% Notes will be amended to provide that the 4.25% notes will be cash settled only. The 8.0% convertible notes (the “8.0% Notes”) have outstanding principal of $99.9 million, a current conversion price of $11.70 per Layne share and mature on May 1, 2019. The maturity of the 8.0% Notes accelerates to August 15, 2018 if the 4.25% Notes remain outstanding on that date. At closing, the 8.0% Notes will become convertible into shares of Company common stock. At closing, the Company will also assume Layne’s $24.5 million of letters of credit, or issue new letters of credit. These additional debt obligations assumed at closing would exceed the amount of indebtedness currently permitted under the Company’s existing credit facility and private placement notes. The Company will seek consents or waivers from its existing lenders with respect to this additional indebtedness. The Company has also received a commitment letter for a new $370 million backstop financing facility, which the Company will use to the extent these consents or waivers are not received prior to closing.

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Summary of Significant Accounting Policies (Policies)

12 Months Ended

Dec. 31, 2017

Accounting Policies [Abstract]

Principles of Consolidation

Principles of Consolidation: The consolidated financial statements include the accounts of Granite Construction Incorporated and its wholly owned and consolidated subsidiaries. All material inter-company transactions and accounts have been eliminated. Additionally, we participate in various joint ventures (“joint ventures”). We consolidate these joint ventures where we have determined that through our participation we have a variable interest and are the primary beneficiary as defined by Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 810, Consolidation, and related standards. The factors we use to determine the primary beneficiary of a variable interest entity (“VIE”) may include the decision authority of each partner, which partner manages the day-to-day operations of the project and the amount of our equity investment in relation to that of our partners. If we determine that the power to direct the significant activities is shared equally by two or more joint venture parties, then there is no primary beneficiary and no party consolidates the VIE.

Where we have determined we are not the primary beneficiary of a joint venture but do exercise significant influence, we account for our share of the operations of unconsolidated construction joint ventures on a pro rata basis in revenue and cost of revenue in the consolidated statements of operations and in equity in construction joint ventures in the consolidated balance sheets. We account for non-construction unconsolidated joint ventures under the equity method of accounting and include our share of the operations in equity in income from affiliates in the consolidated statements of operations and in investment in affiliates in the consolidated balance sheets.

Use of Estimates in the Preparation of Financial Statements

Use of Estimates in the Preparation of Financial Statements: The financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”).  The preparation of these financial statements requires management to make estimates that affect the reported amounts of assets and liabilities, revenue and expenses, and related disclosure of contingent assets and liabilities. Our estimates and related judgments and assumptions are continually evaluated based on available information and experiences; however, actual amounts could differ from those estimates.

Revenue Recognition - Construction Contracts

Revenue Recognition - Construction Contracts: Revenue and earnings on construction contracts, including construction joint ventures, are recognized under the percentage of completion method using the ratio of costs incurred to estimated total costs.

Revenue from unapproved change orders is recognized to the extent the related costs have been incurred, the amount can be reliably estimated and recovery is probable.

On certain projects we have submitted and have pending unresolved contract modifications and affirmative claims (“affirmative claims”) to recover additional costs to which the Company believes it is entitled under the terms of contracts with customers, subcontractors, vendors or others. The owners or their authorized representatives and/or other third parties may be in partial or full agreement with the modifications or affirmative claims, or may have rejected or disagree entirely or partially as to such entitlement.

Revenue related to affirmative claims with customers is recognized to the extent of costs incurred when it is probable that a claim settlement with a customer will result in additional revenue and the amount can be reasonably estimated. A reduction to costs related to affirmative claims with non-customers with whom we have a contractual arrangement (“back charges”) is recognized when the estimated recovery is probable and the amount can be reasonably estimated. Except for contractual back charges, a reduction to cost related to affirmative claims against non-customers is recognized when the claims are settled. Recognizing affirmative claims and back charge recoveries requires significant judgments of certain factors including, but not limited to, dispute resolution developments and outcomes, anticipated negotiation results, and the cost of resolving such matters.

Provisions are recognized in the consolidated statements of operations for the full amount of estimated losses on uncompleted contracts whenever evidence indicates that the estimated total cost of a contract exceeds its estimated total revenue. All contract costs, including those associated with affirmative claims, back charges and change orders, are recorded as incurred and revisions to estimated total costs are reflected as soon as the obligation to perform is determined. Contract costs consist of direct costs on contracts, including labor and materials, amounts payable to subcontractors, direct overhead costs and equipment expense (primarily depreciation, fuel, maintenance and repairs). All state and federal government contracts and many of our other contracts provide for termination of the contract at the convenience of the party contracting with us, with provisions to pay us for work performed through the date of termination. Pre-contract costs are expensed as incurred.

The accuracy of our revenue and profit recognition in a given period depends on the accuracy of our estimates of the cost to complete each project. Cost estimates for all of our projects use a detailed “bottom up” approach and we believe our experience allows us to create materially reliable estimates. There are a number of factors that can contribute to changes in estimates of contract cost and profitability. The most significant of these include:

• the completeness and accuracy of the original bid;

• costs associated with scope changes;

• changes in costs of labor and/or materials;

• extended overhead and other costs due to owner, weather and other delays;

• subcontractor performance issues;

• changes in productivity expectations;

• site conditions that differ from those assumed in the original bid;

• changes from original design on design-build projects;

• the availability and skill level of workers in the geographic location of the project;

• a change in the availability and proximity of equipment and materials;

• our ability to fully and promptly recover on affirmative claims and back charges for additional contract costs; and

• the customer’s ability to properly administer the contract.

The foregoing factors, as well as the stage of completion of contracts in process and the mix of contracts at different margins may cause fluctuations in gross profit and gross profit margin from period to period. Significant changes in cost estimates, particularly in our larger, more complex projects have had, and can in future periods have, a significant effect on our profitability.

Revenue Recognition - Materials

Revenue Recognition - Materials: Revenue from the sale of materials is recognized when delivery occurs and risk of ownership passes to the customer.

Balance Sheet Classification

Balance Sheet Classifications: Prepaid expenses and amounts receivable and payable under construction contracts (principally retentions) that may exist over the duration of the contract and could extend beyond one year are included in current assets and liabilities. A one-year time period is used as the basis for classifying all other current assets and liabilities.

Cash and Cash Equivalents

Cash and Cash Equivalents: Cash equivalents are securities having maturities of three months or less from the date of purchase. Included in cash and cash equivalents in the consolidated balance sheets as of December 31, 2017 and 2016, was $94.4 million and $73.1 million, respectively, related to CCJVs. Our access to joint venture cash may be limited by the provisions of the venture agreements.

Costs and Estimated Earnings in Excess of Billings

Costs and Estimated Earnings in Excess of Billings: Costs and estimated earnings in excess of billings represent unbilled amounts earned and reimbursable under contracts. These amounts become billable according to the contract terms, which usually consider the passage of time, achievement of milestones or completion of the project. With the exception of customer affirmative claims, generally, such unbilled amounts will be billed and collected over the next twelve months. Settlement with the customer of outstanding affirmative claims is dependent on the claims resolution process and could extend beyond one year or the project operating cycle. Based on our historical experience, we generally consider the collection risk related to these amounts to be low. When events or conditions indicate that the amounts outstanding may become uncollectible, an allowance is estimated and recorded.

Marketable Securities

Marketable Securities: We determine the classification of our marketable securities at the time of purchase and re-evaluate these determinations at each balance sheet date. Debt securities are classified as held-to-maturity when we have the positive intent and ability to hold the securities to maturity. Held-to-maturity investments are stated at amortized cost and are periodically assessed for other-than-temporary impairment. Amortized cost of debt securities is adjusted for amortization of premiums and accretion of discounts to maturity, and is included in interest income. The cost of securities redeemed or called is based on the specific identification method.

Derivative Instruments

Derivative Instruments: We recognize derivative instruments as either assets or liabilities in the consolidated balance sheets at fair value using Level 2 inputs. To receive hedge accounting treatment, derivative instruments that are designated as cash flow hedges must be highly effective in offsetting changes to expected future cash flows on hedged transactions. The effective portion of the gain or loss on cash flow hedges is reported as a component of accumulated other comprehensive income (loss) and subsequently reclassified to interest expense in the consolidated statements of operations when the periodic hedged cash flows are settled. Adjustments to fair value on derivative instruments that do not qualify for hedge accounting treatment are reported through other (income) expense in the consolidated statements of operations. We do not enter into derivative instruments for speculative or trading purposes.

Fair Value of Financial Assets and Liabilities

Fair Value of Financial Assets and Liabilities: We measure and disclose certain financial assets and liabilities at fair value. ASC Topic 820, Fair Value Measurements and Disclosures, defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC Topic 820 also establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard describes three levels of inputs that may be used to measure fair value:

Level 1 - Quoted prices in active markets for identical assets or liabilities.

Level 2 - Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3 - Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

We utilize the active market approach to measure fair value for our financial assets and liabilities. We report separately each class of assets and liabilities measured at fair value on a recurring basis and include assets and liabilities that are disclosed but not recorded at fair value in the fair value hierarchy.

Concentrations Of Credit Risk And Other Risks

Concentrations of Credit Risk and Other Risks: Financial instruments, which potentially subject us to concentrations of credit risk, consist primarily of cash and cash equivalents, short-term and long-term marketable securities, and accounts receivable. We maintain our cash and cash equivalents and our marketable securities with several financial institutions. We invest with high credit quality financial institutions and, by policy, limit the amount of credit exposure to any one financial institution.

Our receivables are from customers concentrated in the United States, and we have no material receivables from foreign operations as of December 31, 2017 or 2016. We perform ongoing credit evaluations of our customers and generally do not require collateral, although the law provides us the ability to file mechanics’ liens on real property improved for private customers in the event of non-payment by such customers. We maintain an allowance for doubtful accounts which has historically been within management’s estimates.

Inventories

Inventories: Inventories consist primarily of quarry products valued at the lower of average cost or market. We write down the inventories based on estimated quantities of materials on hand in excess of approximately one year of demand. At December 31, 2017 and 2016, inventory also included $11.9 million and $5.0 million, respectively, of materials specifically related to a project in our Kenny Large Project Construction operating group and was valued at cost.

Investments in Real Estate Affiliates

Investments in Real Estate Affiliates: Each real estate development project accounted for under the equity method of accounting is reviewed in accordance with ASC Topic 323, Investments - Equity Method and Joint Ventures. These projects are evaluated for impairment using the other-than-temporary impairment model, which requires an impairment charge to be recognized if our investment’s carrying amount exceeds its fair value, and the decline in fair value is deemed to be other than temporary.

Events or changes in circumstances, which would cause us to review undiscounted future cash flows include, but are not limited to:

• significant decreases in the market price of the asset;

• significant adverse changes in legal factors or the business climate;

• significant changes to the development or business plans of a project;

• accumulation of costs significantly in excess of the amount originally expected for the acquisition, development or construction of the asset; and

• current period cash flow or operating losses combined with a history of losses, or a forecast of continuing losses associated with the use of the asset.

Future undiscounted cash flows and fair value assessments are estimated based on entitlement status, market conditions, cost of construction, debt load, development schedules, status of joint venture partners and other factors applicable to the specific project. Fair value is estimated based on the expected future cash flows attributable to the asset or group of assets and on other assumptions that market participants would use in determining fair value, such as market discount rates, transaction prices for other comparable assets, and other market data. Our estimates of cash flows may differ from actual cash flows due to, among other things, fluctuations in interest rates, decisions made by jurisdictional agencies, economic conditions, or changes to our business operations.

Property and Equipment

Property and Equipment: Property and equipment are stated at cost. Depreciation for construction and other equipment is primarily provided using accelerated methods over lives ranging from three to seven years, and the straight-line method over lives from three to twenty years for the remaining depreciable assets. We believe that accelerated methods best approximate the service provided by the construction and other equipment. Depletion of quarry property is based on the usage of depletable reserves. We frequently sell property and equipment that has reached the end of its useful life or no longer meets our needs, including depleted quarry property. At the time that an asset or an asset group meets the held-for-sale criteria as defined by ASC Topic 360, Property, Plant, and Equipment, we write it down to fair value, if the fair value is below the carrying value. Fair value is estimated by a variety of factors including, but not limited to, market comparative data, historical sales prices, broker quotes and third party valuations. If material, such property is separately disclosed, otherwise it is held in property and equipment until sold. The cost and accumulated depreciation or depletion of property sold or retired is removed from the balance sheet and the resulting gains or losses, if any, are reflected in operating income for the period. In the case that we abandon an asset, an amount equal to the carrying amount of the asset, less salvage value, if any, will be recognized as expense in the period that the asset was abandoned. Repairs and maintenance are charged to operations as incurred.

Costs related to the development of internal-use software during the preliminary project and post-implementation stages are expensed as incurred. Costs incurred during the application development stage are capitalized. These costs consist primarily of software, hardware and consulting fees, as well as salaries and related costs. Amounts capitalized are reported as a component of office furniture and equipment within property and equipment. Capitalized software costs are depreciated using the straight-line method over the estimated useful life of the related software, which range from three to seven years.

Long-lived Assets

Long-lived Assets: We review property and equipment and amortizable intangible assets for impairment at an asset group level whenever events or changes in circumstances indicate the net book value of an asset group may not be recoverable. Recoverability of these asset groups is measured by comparison of their net book values to the future undiscounted cash flows the asset groups are expected to generate. If the asset groups are considered to be impaired, an impairment charge will be recognized equal to the amount by which the net book value of the asset groups exceed their fair value. We group construction and plant equipment assets at a regional level, which represents the lowest level for which identifiable cash flows are largely independent of the cash flows of other groups of assets. When an individual asset or group of assets is determined to no longer contribute to the vertically integrated asset group, it is assessed for impairment independently.

As of December 31, 2017, amortizable intangible assets include covenants not to compete, permits, trade names and customer lists which are being amortized on a straight-line basis over remaining terms from three to twenty years.

Capitalized Interest

Capitalized Interest: Interest, to the extent it is incurred in connection with the construction of certain self-constructed assets and real estate development projects, is capitalized and recorded as part of the asset to which it relates. Capitalized interest on self-constructed assets is amortized over their estimated useful lives and is expensed on real estate projects as they are sold.

Goodwill

Goodwill: As of December 31, 2017 and 2016, we had five reporting units in which goodwill was recorded as follows:

• Kenny Group Construction

• Kenny Group Large Project Construction

• Northwest Group Construction

• Northwest Group Construction Materials

• California Group Construction

The most significant goodwill balances reside in the reporting units associated with the Kenny Group. See Note 9 for balances by reportable segment.

We perform impairment tests annually as of November 1 and more frequently when events and circumstances occur that indicate a possible impairment of goodwill. In addition, we evaluate goodwill for impairment if events or circumstances change between annual tests indicating a possible impairment.  Examples of such events or circumstances include the following: 

• a significant adverse change in legal factors or in the business climate; 

• an adverse action or assessment by a regulator; 

• a more likely than not expectation that a segment or a significant portion thereof will be sold; or 

• the testing for recoverability of a significant asset group within the segment. 

We elected to only perform the quantitative goodwill impairment tests for the 2017 annual test. In performing the quantitative goodwill impairment tests, we calculate the estimated fair value of the reporting unit in which the goodwill is recorded using the discounted cash flows and market multiple methods. Judgments inherent in these methods include the determination of appropriate discount rates, the amount and timing of expected future cash flows and growth rates, and appropriate benchmark companies. The cash flows used in our 2017 discounted cash flow model were based on five-year financial forecasts, which in turn were based on the 2018-2020 operating plan developed internally by management adjusted for market participant based assumptions. Our discount rate assumptions are based on an assessment of the equity cost of capital and appropriate capital structure for our reporting units. In assessing the reasonableness of our determined fair values of our reporting units, we evaluate the reasonableness of our results against our current market capitalization. 

The estimated fair value is compared to the net book value of the reporting unit, including goodwill. If the fair value of the reporting unit exceeds its net book value, goodwill of the reporting unit is considered not impaired. If the fair value of the reporting unit is less than its net book value, goodwill is impaired and the excess of the reporting unit’s net book value over the fair value is recognized as an impairment loss.

The results of our annual goodwill impairment tests, performed in accordance with ASC 350, Intangibles - Goodwill and Other, indicated that the estimated fair values of our reporting units exceeded their net book values (i.e., cushion) by at least 20% for the reporting units with goodwill. Out of the five reporting units with goodwill, the Kenny Large Project Construction business is the most susceptible to fluctuations in results depending on awarded work given the large size and limited frequency of awards. While we believe the current cushion for the reporting unit is adequate to absorb these fluctuations, a material decline in job win rates could have a material impact to this reporting unit’s estimated fair value.

Billings in Excess of Costs and Estimated Earnings

Billings in Excess of Costs and Estimated Earnings: Billings in excess of costs and estimated earnings is comprised of cash collected from customers and billings to customers on contracts in advance of work performed, including advance payments negotiated as a contract condition. Generally, unearned project-related costs will be earned over the next twelve months.

Asset Reclamation Costs

Asset Retirement Obligations: We account for the costs related to legal obligations to reclaim aggregate mining sites and other facilities by recording our estimated asset retirement obligation at fair value, capitalizing the estimated liability as part of the related asset’s carrying amount and allocating it to expense over the asset’s useful life. To determine the fair value of the obligation, we estimate the cost for a third-party to perform the legally required reclamation including a reasonable profit margin. This cost is then increased for future estimated inflation based on the estimated years to complete and discounted to fair value using present value techniques with a credit-adjusted, risk-free rate. In estimating the settlement date, we evaluate the current facts and conditions to determine the most likely settlement date.

We review reclamation obligations at least annually for a revision to the cost or a change in the estimated settlement date. Additionally, reclamation obligations are reviewed in the period that a triggering event occurs that would result in either a revision to the cost or a change in the estimated settlement date.

Performance Guarantees and Warranties

Warranties: Many of our construction contracts contain warranty provisions covering defects in equipment, materials, design or workmanship that generally run from six months to one year after our customer accepts the contract. Because of the nature of our projects, including contract owner inspections of the work both during construction and prior to acceptance, we have not experienced material warranty costs for these short-term warranties and, therefore, do not believe an accrual for these costs is necessary. Certain construction contracts carry longer warranty periods, ranging from two to ten years, for which we have accrued an estimate of warranty cost. The warranty liability is estimated based on our experience with the type of work and any known risks relative to the project and was not material as of December 31, 2017 and 2016. 

Performance Guarantees: Agreements with our joint venture partners (“partner(s)”) for both construction joint ventures and line item joint ventures define each partner’s management role and financial responsibility in the project. The amount of operational exposure is generally limited to our stated ownership interest. However, due to the joint and several nature of the performance obligations under the related owner contracts, if one of the partners fails 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). We estimate our liability for performance guarantees for our unconsolidated construction joint ventures and line item joint ventures using estimated partner bond rates and include them in accrued expenses and other current liabilities (see Note 10) with a corresponding increase in equity in construction joint ventures in the consolidated balance sheets. We reassess our liability when and if changes in circumstances occur. The liability and corresponding asset are removed from the consolidated balance sheets upon customer acceptance of the project. Circumstances that could lead to a loss under these agreements beyond our stated ownership interest include the failure of a partner to contribute additional funds to the venture in the event the project incurs a loss or additional costs that we could incur should a partner fail to provide the services and resources that it had committed to provide in the agreement.

Accrued Insurance Costs

Accrued Insurance Costs: We carry insurance policies to cover various risks, primarily general liability, automobile liability, workers compensation and employee medical expenses, under which we are liable to reimburse the insurance company for a portion of each claim paid. The amounts for which we are liable for general liability and workers compensation generally range from the first $0.5 million to $1.0 million per occurrence. We accrue for probable losses, both reported and unreported, that are reasonably estimable using actuarial methods based on historic trends modified, if necessary, by recent events. Changes in our loss assumptions caused by changes in actual experience would affect our assessment of the ultimate liability and could have an effect on our operating results and financial position up to $1.0 million per occurrence for general liability and workers compensation or $0.3 million for medical insurance.

Contingencies

Contingencies: We are currently involved in various claims and legal proceedings. Loss contingency provisions are recorded if the potential loss from any asserted or unasserted claim or legal proceeding is considered probable and the amount can be reasonably estimated. If a potential loss is considered probable but only a range of loss can be determined, the low-end of the range is recorded. These accruals represent management’s best estimate of probable loss. Disclosure is also provided when it is reasonably possible that a loss will be incurred or when it is reasonably possible that the amount of a loss will exceed the amount recorded. Significant judgment is required in both the determination of probability of loss and the determination as to whether an exposure is reasonably estimable. Because of uncertainties related to these matters, accruals are based only on the best information available at the time. As additional information becomes available, we reassess the potential liability related to claims and litigation and may revise our estimates.

Stock-based Compensation

Stock-Based Compensation: We measure and recognize compensation expense, net of estimated forfeitures, over the requisite vesting periods for all stock-based payment awards made. Stock-based compensation is included in selling, general and administrative expenses and cost of revenue on our consolidated statements of operations.

Restructuring and Impairment Charges (Gains)

Restructuring (Gains) Charges: Pursuant to an approved plan, we record severance costs when an employee has been notified, unless the employee provides future service, in which case severance costs are expensed ratably over the future service period. Other restructuring costs are recognized when the liability is incurred. Costs associated with terminating a lease contract are recorded at the contract termination date, in accordance with contract terms, or on the cease-use date, net of estimated sublease income, if applicable. In determining the amount related to termination of a lease, various assumptions are used including the time period over which facilities will be vacant, expected sublease term and sublease rates. These assumptions may be adjusted upon the occurrence of future events. Asset impairment analyses resulting from restructuring events are performed in accordance with ASC subtopic 360-10, Property, Plant and Equipment. See the Property and Equipment and Long-lived Assets accounting policies above for further information on asset impairment charges.

Income Taxes

Income Taxes: Deferred taxes are provided on a liability method whereby deferred tax assets are recognized for deductible temporary differences and operating loss carry-forwards and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities in the consolidated financial statements and their respective tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.

We report a liability in other long-term liabilities in the consolidated balance sheets for unrecognized tax benefits resulting from uncertain tax positions taken or expected to be taken in a tax return. We recognize interest and penalties, if any, related to unrecognized tax benefits in other (income) expense in the consolidated statements of operations.

Computation of Earnings Per Share

Computation of Earnings Per Share: Basic net income per share is computed using the weighted-average number of common shares outstanding during the period. Diluted net income per share is computed using the weighted-average number of common shares and dilutive potential common shares outstanding during the period. Potential common shares include stock options and restricted stock units, under the 2012 Equity Incentive Plan.

Recently Issued and Adopted Accounting Pronouncements

Recently Issued Accounting Pronouncements:

In May 2014, the FASB issued ASC Topic 606, Revenue from Contracts with Customers, and subsequently issued several related Accounting Standards Updates (“ASU”s) (“Topic 606”), which provide guidance for recognizing revenue from contracts with customers. The core principle of Topic 606 is that revenue will be recognized when promised goods or services are transferred to customers in an amount that reflects consideration for which entitlement is expected in exchange for those goods or services. Topic 606 will be effective commencing with our quarter ending March 31, 2018.

We will adopt Topic 606 using the modified retrospective transition approach, which we will elect to apply Topic 606 to contracts with customers that are not substantially complete, i.e. less than 90% complete, as of January 1, 2018. We do not expect Topic 606 to have a material impact on our Construction Materials segment’s revenue. The impact of Topic 606 primarily relates to our Construction and Large Project Construction segments specifically in the following areas:

• Multiple performance obligations - In accordance with Topic 606, we have reviewed construction contracts with customers, including those related to contract modifications, to determine if there are multiple performance obligations. Based on this review, we have identified one unconsolidated joint venture contract in our Large Project Construction segment that will have multiple performance obligations.

• Multiple contracts - We reviewed contracts containing task orders and identified one Large Project Construction segment contract and one Construction segment contract that consist of multiple individual contracts as defined by Topic 606.

• Provision for losses - Provisions for losses will be recognized in the consolidated statements of operations for the full amount of estimated losses at the uncompleted performance obligation level whenever evidence indicates that the estimated total cost of a performance obligation exceeds its estimated total revenue. Currently provisions for losses are recorded at the contract level. We have identified one unconsolidated joint venture contract in our Large Project Construction segment that will have, as of the effective date, actual and provisions for losses related to completed and uncompleted performance obligations, respectively.

Based on our estimated costs to complete and our assessment of the impact from the adoption of Topic 606 as of December 31, 2017, we estimate a net cumulative decrease to retained earnings between $15.0 million and $18.0 million as of January 1, 2018.

In addition to the above, we expect to separately present contract assets and liabilities in the consolidated balance sheets. Contract assets will include amounts due under contractual retainage provisions, unbilled receivables, costs and estimated earnings in excess of billings and capitalized mobilization costs. Contract liabilities will include provisions for losses and billings in excess of costs and estimated earnings.

There will also be new disclosures related to revenue including information about unearned revenue and revenue disaggregated by operating group. Unearned revenue will be similar to our existing contract backlog but will only include project amounts when the related contract, contract options and task orders, as applicable, are executed rather than when awarded and funding is probable.

In January 2016, the FASB issued ASU No. 2016-01, Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities, which, among other things, eliminates the requirement to disclose the method(s) and significant assumptions used to estimate the disclosed fair value of financial instruments measured at amortized cost on the consolidated balance sheets. This ASU will be effective commencing with our quarter ending March 31, 2018. We do not expect the adoption of this ASU to have a material impact on our consolidated financial statements.

In February 2016, the FASB issued ASU No. 2016-02, Leases(Topic 842) and subsequently issued a related ASU, which requires lessees to recognize the following for all leases (with the exception of short-term leases) at the commencement date: (a) a lease liability, which is a lessee’s obligation to make lease payments arising from a lease, measured on a discounted basis; and (b) a right-of-use asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term. The ASU will be effective commencing with our quarter ending March 31, 2019. We expect the adoption of this ASU to have a material and essentially equal increase to current assets and current liabilities on our consolidated balance sheets.

In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments. The amendments in this ASU clarify and provide specific guidance on eight cash flow classification issues that are not currently addressed by current U.S. GAAP. This ASU will be effective commencing with our quarter ending March 31, 2018. We do not expect the adoption of this ASU to have a material impact on our consolidated financial statements.

In October 2016, the FASB issued ASU No. 2016-16, Intra-Entity Transfers of Assets Other Than Inventory. The amendments in this ASU require the income tax consequences of an intra-entity transfer of an asset other than inventory to be recognized when the transfer occurs instead of when the asset is sold to an outside party. This ASU will be effective commencing with our quarter ending March 31, 2018. Although we do not expect the adoption of this ASU to have a material impact on our consolidated financial statements upon adoption, it may have a material impact if applicable transactions occur.

In January 2017, the FASB issued ASU No. 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business, which is intended to help companies evaluate whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses by providing a more robust framework to use in determining when a set of assets and activities is a business. This ASU will be effective commencing with our quarter ending March 31, 2018. Although we do not expect the adoption of this ASU to have a material impact on our consolidated financial statements upon adoption, ir may have a material impact if applicable transactions occur.

In May 2017, the FASB issued ASU No. 2017-09, Compensation-Stock Compensation (Topic 718) Scope of Modification Accounting, which clarifies that changes to the value, vesting conditions, or award classification of share-based payment awards must be accounted for as modifications. This ASU will be effective commencing with our quarter ending March 31, 2018. Although we do not expect the adoption of this ASU to have a material impact on our consolidated financial statements upon adoption, it may have a material impact if applicable transactions occur.

In August 2017, the FASB issued ASU No. 2017-12, Derivatives and Hedging (Topic 815):Targeted Improvements to Accounting for Hedging Activities, which refines and expands hedge accounting for both financial (e.g., interest rate) and commodity risks. This ASU will be effective commencing with our quarter ending March 31, 2019. We do not expect the adoption of this ASU to have a material impact on our consolidated financial statements.

Recently Adopted Accounting Pronouncements:

In March 2016, the FASB issued ASU No. 2016-05, Derivatives and Hedging (Topic 815): Effect of Derivative Contract Novations on Existing Hedge Accounting Relationships, which clarifies that a change in the counterparty to a derivative instrument that has been designated as a hedging instrument does not, in and of itself, require de-designation of that hedging relationship provided that all other hedge accounting criteria continue to be met. The ASU was effective commencing with our quarter ending March 31, 2017 and had no impact on our consolidated financial statements.

In January 2017, the FASB issued ASU No. 2017-04, Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. This ASU eliminated Step 2 from the goodwill impairment test, which measures goodwill impairment by comparing the implied fair value of a reporting unit’s goodwill to its carrying amount. According to the ASU, an impairment charge should be recorded if a reporting unit’s net book value exceeds its fair value, limited to the amount of goodwill allocated to that reporting unit. We elected to early adopt the ASU, effective January 1, 2017. The estimated fair value of our reporting units exceeded the net book values; therefore, the adoption of this ASU had no impact on our consolidated financial statements.

In March 2017, the FASB issued ASU No. 2017-08, Receivables—Nonrefundable Fees and Other Costs (Subtopic 310-20), Premium Amortization on Purchased Callable Debt Securities, which requires the premium for certain callable debt securities held at a premium to be amortized to the earliest call date rather than at maturity. The ASU does not require an accounting change for securities held at a discount; the discount continues to be amortized to maturity. The ASU was effective commencing with our quarter ending March 31, 2017 and had an immaterial impact on our consolidated financial statements.

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Revisions in Estimates (Tables)

12 Months Ended

Dec. 31, 2017

Construction [Member]

Change in Accounting Estimate [Line Items]

Schedule of Change in Accounting Estimate

Increases

Years Ended December 31,		2017		2016		2015
Number of projects with upward estimate changes		10		7		14
Range of increase in gross profit from each project, net	$	1.1 - 3.9	$	1.1 - 4.8	$	1.1 - 6.6
Increase on project profitability	$	17.2	$	14.2	$	30.7

Decreases

Years Ended December 31,		2017		2016		2015
Number of projects with downward estimate changes		6		7		5
Range of reduction in gross profit from each project, net	$	1.0 - 4.4	$	1.0 - 3.9	$	1.0 - 3.3
Decrease on project profitability	$	13.2	$	12.9	$	10.8

Large Project Construction [Member]

Change in Accounting Estimate [Line Items]

Schedule of Change in Accounting Estimate

Decreases

Years Ended December 31,		2017		2016		2015
Number of projects with downward estimate changes		7		5		6
Range of reduction in gross profit from each project, net	$	1.3 - 17.2	$	1.3 - 13.6	$	1.0 - 5.5
Decrease on project profitability	$	68.6	$	40.7	$	20.3

Increases

Years Ended December 31,		2017		2016		2015
Number of projects with upward estimate changes		1		8		7
Range of increase in gross profit from each project, net	$	2.0	$	1.2 - 6.5	$	1.5 - 6.7
Increase on project profitability	$	2.0	$	27.2	$	27.9

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Fair Value Measurement (Tables)

12 Months Ended

Dec. 31, 2017

Fair Value Disclosures [Abstract]

Schedule of Fair Value, Assets and Liabilities Measured on Recurring Basis [Table Text Block]

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

	Fair Value Measurement at Reporting Date Using
December 31, 2017	Level 1		Level 2		Level 3		Total
Cash equivalents
Money market funds	$	37,284	$	—	$	—	$	37,284
Commercial paper	9,967		—		—		9,967
Total assets	$	47,251	$	—	$	—	$	47,251

	Fair Value Measurement at Reporting Date Using
December 31, 2016	Level 1		Level 2		Level 3		Total
Cash equivalents
Money market funds	$	10,057	$	—	$	—	$	10,057
Total assets	$	10,057	$	—	$	—	$	10,057

Fair Value, by Balance Sheet Grouping [Table Text Block]

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

December 31,		2017				2016
	Fair Value Hierarchy	Carrying Value		Fair Value		Carrying Value		Fair Value
Assets:
Held-to-maturity marketable securities	Level 1	$	132,790	$	132,002	$	127,779	$	127,365
Liabilities (including current maturities):
Senior notes payable1	Level 3	$	80,000	$	82,190	$	120,000	$	124,654
Credit Agreement term loan1	Level 3	$	90,000	$	89,871	$	95,000	$	93,991
Credit Agreement - revolving credit facility, 2016 draw1	Level 3	$	30,000	$	30,105	$	30,000	$	29,452
Credit Agreement - revolving credit facility, 2017 draw1	Level 3	$	25,000	$	24,949	$	—	$	—

¹The fair values of the senior notes payable and Credit Agreement (defined in Note 11) loan are based on borrowing rates available to us for long-term loans with similar terms, average maturities, and credit risk.

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Marketable Securities (Tables)

12 Months Ended

Dec. 31, 2017

Marketable Securities [Abstract]

Schedule of Marketable Securities

All marketable securities were classified as held-to-maturity as of the dates presented and the carrying amounts of held-to-maturity securities were as follows (in thousands):

December 31,	2017		2016
U.S. Government and agency obligations	$	17,910	$	10,002
Commercial paper	49,865		54,882
Total short-term marketable securities	67,775		64,884
U.S. Government and agency obligations	59,993		62,895
Corporate bonds	5,022		—
Total long-term marketable securities	65,015		62,895
Total marketable securities	$	132,790	$	127,779

Held-to-maturity Securities

Scheduled maturities of held-to-maturity investments were as follows (in thousands):

December 31, 2017
Due within one year	$	67,775
Due in one to five years	65,015
Total	$	132,790

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Receivables, Net (Tables)

12 Months Ended

Dec. 31, 2017

Receivables [Abstract]

Schedule of Accounts, Notes, Loans and Financing Receivable

Receivables, net (in thousands)

December 31,	2017		2016
Construction contracts completed and in progress:
Billed	$	252,467	$	206,570
Unbilled	77,135		81,590
Retentions	91,135		84,878
Total construction contracts completed and in progress	420,737		373,038
Construction material sales	42,192		29,357
Other	17,014		17,523
Total gross receivables	479,943		419,918
Less: allowance for doubtful accounts	152		573
Total net receivables	$	479,791	$	419,345

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Construction and Line Item Joint Ventures (Tables)

12 Months Ended

Dec. 31, 2017

Construction and Line Item Joint Ventures [Abstract]

Schedule of Unconsolidated Joint Ventures

The following is summary financial information related to unconsolidated construction joint ventures (in thousands):

December 31,	2017		2016
Assets:
Cash, cash equivalents and marketable securities	$	289,940	$	537,991
Other current assets1	812,577		644,809
Noncurrent assets	219,825		207,240
Less partners’ interest	869,782		935,615
Granite’s interest1,2	452,560		454,425
Liabilities:
Current liabilities	682,832		696,215
Less partners’ interest and adjustments3	462,159		472,324
Granite’s interest	220,673		223,891
Equity in construction joint ventures4	$	231,887	$	230,534

¹Included in this balance and in accrued and other current liabilities on our consolidated balance sheets as of December 31, 2017 and 2016 was $88.6 million and $83.1 million, respectively, related to performance guarantees (see Note 10 of “Notes to the Consolidated Financial Statements”).

²Included in this balance as of December 31, 2017 and 2016 was $74.3 million and $65.4 million, respectively, related to Granite’s share of estimated cost recovery of customer affirmative claims. In addition, the balances as of December 31, 2017 and 2016 included $11.8 million and $5.6 million, respectively, related to Granite’s share of estimated recovery of back charge claims.

³Partners’ 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 primarily related to gross profit forecast differences.

⁴As of December 31, 2017 and 2016, this balance included $15.9 million and $16.6 million, respectively, of deficit in construction joint ventures that is included in accrued expenses and other current liabilities in the consolidated balance sheets.

Years Ended December 31,	2017			2016		2015
Revenue:
Total	$	2,057,336		$	1,958,158	$	1,924,544
Less partners’ interest and adjustments1	1,469,550			1,387,532		1,341,334
Granite’s interest	587,786			570,626		583,210
Cost of revenue:
Total	1,995,915			1,915,376		1,819,257
Less partners’ interest and adjustments1	1,394,347			1,360,459		1,279,954
Granite’s interest	601,568			554,917		539,303
Granite’s interest in gross (loss) profit	$	(13,782	)	$	15,709	$	43,907

¹Partners’ 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 primarily related to gross profit forecast differences.

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Investments in Affiliates (Tables)

12 Months Ended

Dec. 31, 2017

Investments in and Advances to Affiliates, Balance [Abstract]

Investments in Affiliates

Our investments in affiliates balance consists of the following (in thousands):

December 31,	2017		2016
Equity method investments in real estate affiliates	$	29,472	$	25,911
Equity method investments in other affiliate	8,997		9,757
Total investments in affiliates	$	38,469	$	35,668

Equity Method Investment Summarized Balance Sheet Information

The following table provides summarized balance sheet information for our affiliates accounted for under the equity method on a combined basis (in thousands):

December 31,	2017		2016
Current assets	$	31,320	$	30,836
Noncurrent assets	129,039		124,670
Total assets	160,359		155,506
Current liabilities	30,131		18,485
Long-term liabilities1	31,636		37,217
Total liabilities	61,767		55,702
Net assets	98,592		99,804
Granite’s share of net assets	$	38,469	$	35,668

Equity Method Investment Summarized Income Statement Information

The following table provides summarized statement of operations information for our affiliates accounted for under the equity method on a combined basis (in thousands):

Years Ended December 31,	2017		2016		2015
Revenue	$	56,372	$	56,127	$	47,457
Gross profit	23,007		22,398		19,117
Income before taxes	17,154		19,117		8,446
Net income	17,154		19,117		8,446
Granite’s interest in affiliates’ net income	7,107		7,177		3,210

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Property and Equipment, Net (Tables)

12 Months Ended

Dec. 31, 2017

Property, Plant and Equipment and Asset Retirement Obligation [Abstract]

Property and Equipment

Balances of major classes of assets and allowances for depreciation and depletion are included in property and equipment, net in the consolidated balance sheets as follows (in thousands):

December 31,	2017		2016
Equipment and vehicles	$	778,549	$	756,602
Quarry property	182,267		174,839
Land and land improvements	108,830		110,999
Buildings and leasehold improvements	82,601		82,762
Office furniture and equipment	56,894		56,381
Property and equipment	1,209,141		1,181,583
Less: accumulated depreciation and depletion	801,723		774,933
Property and equipment, net	$	407,418	$	406,650

Change in Asset Retirement Obligation

The following is a reconciliation of these asset retirement obligations (in thousands):

Years Ended December 31,	2017			2016
Beginning balance	$	21,936		$	26,558
Revisions to estimates	462			(2,058		)
Liabilities settled	(966		)	(3,806		)
Accretion	1,095			1,242
Ending balance	$	22,527		$	21,936

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Intangible Assets (Tables)

12 Months Ended

Dec. 31, 2017

Goodwill and Intangible Assets Disclosure [Abstract]

Schedule of Goodwill

The following table presents the goodwill balance by reportable segment (in thousands):

December 31,	2017		2016
Construction	$	29,260	$	29,260
Large Project Construction	22,593		22,593
Construction Materials	1,946		1,946
Total goodwill	$	53,799	$	53,799

Schedule of Finite-Lived Intangible Assets by Major Class

Amortized Intangible Assets

The following is the breakdown of our amortized intangible assets that are included in other noncurrent assets in the consolidated balance sheets (in thousands):

			Accumulated
December 31, 2017	Gross Value		Amortization			Net Value
Permits	$	25,959	$	(12,504	)	$	13,455
Customer lists	2,200		(1,467		)	733
Trade name	4,100		(2,159		)	1,941
Covenants not to compete and other	50		(26		)	24
Total amortized intangible assets	$	32,309	$	(16,156	)	$	16,153

December 31, 2016
Permits	$	25,959	$	(11,514	)	$	14,445
Acquired backlog	1,500		(1,472		)	28
Customer lists	2,200		(1,174		)	1,026
Trade name	4,100		(1,727		)	2,373
Covenants not to compete and other	50		(24		)	26
Total amortized intangible assets	$	33,809	$	(15,911	)	$	17,898

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Accrued Expenses and Other Current Liabilities (Tables)

12 Months Ended

Dec. 31, 2017

Other Liabilities Disclosure [Abstract]

Schedule of Accrued Liabilities [Table Text Block]

Accrued Expenses and Other Current Liabilities (in thousands):

December 31,	2017		2016
Payroll and related employee benefits	$	68,210	$	53,802
Accrued insurance	39,946		44,471
Performance guarantees (see Note 1)	88,606		83,110
Other	39,645		37,204
Total	$	236,407	$	218,587

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Long-Term Debt and Credit Arrangements (Tables)

12 Months Ended

Dec. 31, 2017

Debt Disclosure [Abstract]

Schedule of Long-term Debt Instruments

Long-Term Debt and Credit Arrangements (in thousands):

December 31,	2017			2016
Senior notes payable	$	80,000		$	120,000
Credit Agreement term loan	90,000			95,000
Credit Agreement revolving credit loan	55,000			30,000
Debt issuance costs	(499		)	(706		)
Total debt	224,501			244,294
Less current maturities	46,048			14,796
Total long-term debt	$	178,453		$	229,498

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Employee Benefit Plans (Tables)

12 Months Ended

Dec. 31, 2017

Retirement Benefits [Abstract]

Schedule of Multiemployer Plans

The following table presents our participation in these plans (dollars in thousands):

	Pension Plan Employer Identification Number	Pension Protection Act (“PPA”) Certified Zone Status1		FIP / RP Status Pending / Implemented2	Contributions						Surcharge Imposed	Expiration Date of Collective Bargaining Agreement3
Pension Trust Fund		2017	2016		2017		2016		2015
Locals 302 and 612 IUOE-Employers Construction Industry Retirement Plan	91-6028571	Green	Green	No	$	3,646	$	3,113	$	3,000	No	12/31/2017 5/31/2018 12/31/2019
Pension Trust Fund for Operating Engineers Pension Plan	94-6090764	Red	Red	Yes	10,431		9,266		9,070		No	1/31/2018 10/31/2018 6/30/2019 5/15/2020 6/15/2020 6/30/2020 9/30/2020
Operating Engineers Pension Trust Fund	95-6032478	Yellow	Red	Yes	4,692		5,357		3,647		No	6/30/2019
Laborers Pension Trust Fund for Northern California	94-6277608	Yellow	Yellow	Yes	2,464		2,215		2,403		No	6/30/2019
Construction Laborers Pension Trust for Southern California	43-6159056	Green	Green	No	2,002		2,095		1,349		No	6/30/2018
Laborers Pension Fund	36-2514514	Green	Green	No	3,208		2,328		1,919		No	5/31/2021
All other funds (38 as of December 31, 2017)					10,341		8,708		7,171
			Total Contributions:		$	36,784	$	33,082	$	28,559

¹The most recent PPA zone status available in 2017 and 2016 is for the plan’s year-end during 2016 and 2015, respectively. The zone status is based on information that we received from the plan and is certified by the plan’s actuary. Among other factors, plans in the red zone are generally less than 65 percent funded, plans in the orange zone are less than 80 percent funded and have an Accumulated Funding Deficiency in the current year or projected into the next six years, plans in the yellow zone are less than 80 percent funded, and plans in the green zone are at least 80 percent funded. Subsequent to December 31, 2016, the Operating Engineers Pension Trust Fund zone status changed from red to yellow for the plan’s year-end during 2015.

²The “FIP/RP Status Pending/Implemented” column indicates plans for which a financial improvement plan (“FIP”) or a rehabilitation plan (“RP”) is either pending or has been implemented.

³Lists the expiration date(s) of the collective-bargaining agreement(s) to which the plans are subject. Pension trust funds with a range of expiration dates have various collective bargaining agreements.

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Shareholders' Equity (Tables)

12 Months Ended

Dec. 31, 2017

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Schedule of Share-based Compensation, Restricted Stock and Restricted Stock Units Activity

A summary of the changes in our RSUs during the years ended December 31, 2017, 2016 and 2015 is as follows (shares in thousands):

Years Ended December 31,	2017				2016				2015
	RSUs		Weighted-Average Grant-Date Fair Value per RSU		RSUs		Weighted-Average Grant-Date Fair Value per RSU		RSUs		Weighted-Average Grant-Date Fair Value per RSU
Outstanding, beginning balance	681		$	39.15	451		$	32.73	565		$	31.38
Granted	259		51.31		572		43.17		228		33.40
Vested	(372	)	43.89		(307	)	36.24		(300	)	31.50
Forfeited	(44	)	43.51		(35	)	40.97		(42	)	33.38
Outstanding, ending balance	524		$	41.51	681		$	39.15	451		$	32.73

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Weighted Average Shares Outstanding and Net Income (Loss) Per Share (Tables)

12 Months Ended

Dec. 31, 2017

Earnings Per Share [Abstract]

Schedule of Earnings Per Share, Basic and Diluted [Table Text Block]

The following table presents a reconciliation of the weighted average shares outstanding used in calculating basic and diluted net income per share as well as the calculation of basic and diluted net income per share (in thousands except per share amounts):

Years Ended December 31,	2017		2016		2015
Numerator (basic and diluted):
Net income allocated to common shareholders for basic calculation	$	69,098	$	57,122	$	60,485
Denominator:
Weighted average common shares outstanding, basic	39,795		39,557		39,337
Dilutive effect of stock options and restricted stock units	577		668		531
Weighted average common shares outstanding, diluted	40,372		40,225		39,868
Net income per share, basic	$	1.74	$	1.44	$	1.54
Net income per share, diluted	$	1.71	$	1.42	$	1.52

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Income Taxes (Tables)

12 Months Ended

Dec. 31, 2017

Income Tax Disclosure [Abstract]

Schedule of Components of Income Tax Expense (Benefit)

Following is a summary of the provision for income taxes (in thousands):

Years Ended December 31,	2017			2016		2015
Federal:
Current	$	27,877		$	15,657	$	4,810
Deferred	(4,397		)	9,919		25,955
Total federal	23,480			25,576		30,765
State:
Current	5,520			4,567		1,914
Deferred	(338		)	19		2,500
Total state	5,182			4,586		4,414
Total provision for income taxes	$	28,662		$	30,162	$	35,179

Schedule of Effective Income Tax Rate Reconciliation

Following is a reconciliation of our provision for income taxes based on the Federal statutory tax rate to our effective tax rate (dollars in thousands):

Years Ended December 31,	2017					2016					2015
Federal statutory tax	$	36,562		35.0	%	$	33,728		35.0	%	$	35,165		34.0	%
State taxes, net of federal tax benefit	3,814			3.7		2,990			3.1		3,769			3.6
Percentage depletion deduction	(1,368		)	(1.3	)	(1,352		)	(1.4	)	(1,444		)	(1.4	)
Domestic production activities deduction	(2,765		)	(2.7	)	(1,624		)	(1.7	)	(306		)	(0.3	)
Non-controlling interests	(2,346		)	(2.3	)	(3,177		)	(3.3	)	(2,639		)	(2.6	)
Nondeductible expenses	1,128			1.1		1,094			1.1		219			0.2
Tax Cuts and Jobs Act of 2017	(3,664		)	(3.5	)	—			—		—			—
Other	(2,699		)	(2.6	)	(1,497		)	(1.5	)	415			0.5
Total	$	28,662		27.4	%	$	30,162		31.3	%	$	35,179		34.0	%

Schedule of Deferred Tax Assets and Liabilities

Following is a summary of the deferred tax assets and liabilities (in thousands):

December 31,	2017			2016
Long-term deferred tax assets:
Receivables	$	526		$	573
Inventory	1,513			2,212
Insurance	7,401			12,524
Deferred compensation	8,985			12,740
Other accrued liabilities	1,525			2,294
Accrued compensation	1,738			11,031
Other	1,379			2,481
Net operating loss carryforwards	2,614			2,341
Valuation allowance	(2,471		)	(2,153		)
Total long-term deferred tax assets	23,210			44,043
Long-term deferred tax liabilities:
Property and equipment	16,832			29,400
Contract income recognition	7,739			20,084
Total long-term deferred tax liabilities	24,571			49,484
Net long-term deferred tax liabilities	$	(1,361	)	$	(5,441	)

Summary of Valuation Allowance

The following is a summary of the change in valuation allowance (in thousands):

December 31,	2017		2016		2015
Beginning balance	$	2,153	$	641	$	1,185
Additions (deductions), net	318		1,512		(544		)
Ending balance	$	2,471	$	2,153	$	641

Summary of Income Tax Contingencies

The following is a tabular reconciliation of unrecognized tax benefits (in thousands) the balance of which is included in other long-term liabilities on the consolidated balance sheets:

December 31,	2017			2016			2015
Beginning balance	$	3,262		$	1,578		$	887
Gross increases – current period tax positions	—			1,902			1,006
Gross decreases – current period tax positions	(73		)	(125		)	(156		)
Gross increases – prior period tax positions	1			2			—
Gross decreases – prior period tax positions	(6		)	(5		)	—
Settlements with taxing authorities/lapse of statute of limitations	(13		)	(90		)	(159		)
Ending balance	$	3,171		$	3,262		$	1,578

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Commitments, Contingencies and Guarantees (Tables)

12 Months Ended

Dec. 31, 2017

Commitments and Contingencies Disclosure [Abstract]

Schedule of Future Minimum Rental Payments for Operating Leases

Leases: Minimum rental commitments and minimum royalty requirements under all noncancellable operating leases, primarily quarry property, in effect at December 31, 2017 were (in thousands):

Years Ending December 31,
2018	$	12,169
2019	8,946
2020	7,997
2021	6,874
2022	4,794
Later years (through 2046)	7,171
Total	$	47,951

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Business Segment Information (Tables)

12 Months Ended

Dec. 31, 2017

Segment Reporting [Abstract]

Schedule of Segment Reporting Information

Summarized segment information is as follows (in thousands):

Years Ended December 31,	Construction		Large Project Construction		Construction Materials			Total
2017
Total revenue from reportable segments	$	1,664,708	$	1,032,229	$	467,140		$	3,164,077
Elimination of intersegment revenue	—		—		(174,364		)	(174,364		)
Revenue from external customers	1,664,708		1,032,229		292,776			2,989,713
Gross profit	247,014		29,793		38,126			314,933
Depreciation, depletion and amortization	22,517		11,087		22,393			55,997
Segment assets	136,031		340,105		282,709			758,845
2016
Total revenue from reportable segments	$	1,365,198	$	888,193	$	425,029		$	2,678,420
Elimination of intersegment revenue	—		—		(163,803		)	(163,803		)
Revenue from external customers	1,365,198		888,193		261,226			2,514,617
Gross profit	209,215		64,137		28,018			301,370
Depreciation, depletion and amortization	22,816		6,796		23,437			53,049
Segment assets	151,475		314,823		282,472			748,770
2015
Total revenue from reportable segments	$	1,262,675	$	812,720	$	432,284		$	2,507,679
Elimination of intersegment revenue	—		—		(136,650		)	(136,650		)
Revenue from external customers	1,262,675		812,720		295,634			2,371,029
Gross profit	187,506		79,467		32,863			299,836
Depreciation, depletion and amortization	20,117		10,343		22,389			52,849
Segment assets	139,399		274,975		288,900			703,274

Reconciliation of Operating Profit (Loss) from Segments to Consolidated

A reconciliation of segment gross profit to consolidated income before provision for income taxes is as follows (in thousands):

Years Ended December 31,	2017			2016			2015
Total gross profit from reportable segments	$	314,933		$	301,370		$	299,836
Selling, general and administrative expenses	222,811			219,299			203,817
Restructuring gains	(2,411		)	(1,925		)	(6,003		)
Gain on sales of property and equipment	(4,182		)	(8,358		)	(8,286		)
Total other (income) expense	(5,748		)	(4,008		)	6,881
Income before provision for income taxes	$	104,463		$	96,362		$	103,427

Reconciliation of Assets from Segment to Consolidated

A reconciliation of segment assets to consolidated total assets is as follows (in thousands):

December 31,	2017		2016		2015
Total assets for reportable segments	$	758,845	$	748,770	$	703,274
Assets not allocated to segments:
Cash and cash equivalents	233,711		189,326		252,836
Short-term and long-term marketable securities	132,790		127,779		105,695
Receivables, net	479,791		419,345		340,822
Deferred income taxes, net	—		—		4,329
Other current assets, excluding segment assets	140,478		113,010		85,556
Property and equipment, net, excluding segment assets	29,242		32,397		36,721
Investments in affiliates	38,469		35,668		33,182
Other noncurrent assets, excluding segment assets	58,652		67,158		64,463
Consolidated total assets	$	1,871,978	$	1,733,453	$	1,626,878

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Quarterly Financial Data (Tables)

12 Months Ended

Dec. 31, 2017

Quarterly Financial Information Disclosure [Abstract]

Schedule of Quarterly Financial Data

QUARTERLY FINANCIAL DATA
(unaudited - dollars in thousands, except per share data)
2017 Quarters Ended	December 31,			September 30,			June 30,			March 31,
Revenue	$	801,274		$	957,126		$	762,913		$	468,400
Gross profit	100,707			114,530			74,570			25,126
As a percent of revenue	12.6		%	12.0		%	9.8		%	5.4		%
Net income (loss)	$	35,325		$	48,055		$	16,272		$	(23,851	)
As a percent of revenue	4.4		%	5.0		%	2.1		%	(5.1		)%
Net income (loss) attributable to Granite	$	32,773		$	45,982		$	14,133		$	(23,790	)
As a percent of revenue	4.1		%	4.8		%	1.9		%	(5.1		)%
Net income (loss) per share attributable to common shareholders:
Basic	$	0.82		$	1.15		$	0.35		$	(0.60	)
Diluted	$	0.81		$	1.14		$	0.35		$	(0.60	)

2016 Quarters Ended	December 31,			September 30,			June 30,			March 31,
Revenue	$	666,681		$	803,905		$	604,579		$	439,452
Gross profit	81,250			107,674			73,201			39,245
As a percent of revenue	12.2		%	13.4		%	12.1		%	8.9		%
Net income (loss)	$	19,264		$	38,172		$	18,526		$	(9,762	)
As a percent of revenue	2.9		%	4.7		%	3.1		%	(2.2		)%
Net income (loss) attributable to Granite	$	16,173		$	37,190		$	14,199		$	(10,440	)
As a percent of revenue	2.4		%	4.6		%	2.3		%	(2.4		)%
Net income (loss) per share attributable to common shareholders:
Basic	$	0.41		$	0.94		$	0.36		$	(0.27	)
Diluted	$	0.40		$	0.92		$	0.35		$	(0.27	)

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Revisions in Estimates (Details) $ in Millions	12 Months Ended
	Dec. 31, 2017 USD ($) project	Dec. 31, 2016 USD ($) project	Dec. 31, 2015 USD ($) project
Change in Accounting Estimate [Line Items]
Impact From Affirmative Claim Recovery Estimate	$ 34.9	$ 37.3	$ 48.5
Amount Considered Significant on Individual Project Gross Profit	1.0	1.0	1.0
Impact from estimated recovery of backcharge claims	(4.6)	(15.7)	(7.0)
Construction [Member]
Change in Accounting Estimate [Line Items]
Increase (Decrease) on Project Profitability	4.0	1.3	19.9
Contracts Accounted for under Percentage of Completion [Member] | Large Project Construction [Member]
Change in Accounting Estimate [Line Items]
Increase (Decrease) on Project Profitability	(66.6)	(13.5)	7.6
Contracts Accounted for under Percentage of Completion [Member] | Large Project Construction [Member] | Noncontrolling Interest [Member]
Change in Accounting Estimate [Line Items]
Increase (Decrease) on Project Profitability	(2.1)	(4.3)	3.0
Upward Estimate Change [Member] | Construction [Member]
Change in Accounting Estimate [Line Items]
Increase (Decrease) on Project Profitability	$ 17.2	$ 14.2	$ 30.7
Number of Projects with Estimate Changes | project	10	7	14
Upward Estimate Change [Member] | Construction [Member] | Minimum [Member]
Change in Accounting Estimate [Line Items]
Range Of Effect On Gross Profit	$ 1.1	$ 1.1	$ 1.1
Upward Estimate Change [Member] | Construction [Member] | Maximum [Member]
Change in Accounting Estimate [Line Items]
Range Of Effect On Gross Profit	3.9	4.8	6.6
Upward Estimate Change [Member] | Large Project Construction [Member]
Change in Accounting Estimate [Line Items]
Increase (Decrease) on Project Profitability	$ 2.0	$ 27.2	$ 27.9
Number of Projects with Estimate Changes | project	1	8	7
Upward Estimate Change [Member] | Large Project Construction [Member] | Minimum [Member]
Change in Accounting Estimate [Line Items]
Range Of Effect On Gross Profit	$ 2.0	$ 1.2	$ 1.5
Upward Estimate Change [Member] | Large Project Construction [Member] | Maximum [Member]
Change in Accounting Estimate [Line Items]
Range Of Effect On Gross Profit	2.0	6.5	6.7
Downward Estimate Change [Member] | Construction [Member]
Change in Accounting Estimate [Line Items]
Increase (Decrease) on Project Profitability	$ (13.2)	$ (12.9)	$ (10.8)
Number of Projects with Estimate Changes | project	6	7	5
Downward Estimate Change [Member] | Construction [Member] | Minimum [Member]
Change in Accounting Estimate [Line Items]
Range Of Effect On Gross Profit	$ (1.0)	$ (1.0)	$ (1.0)
Downward Estimate Change [Member] | Construction [Member] | Maximum [Member]
Change in Accounting Estimate [Line Items]
Range Of Effect On Gross Profit	(4.4)	(3.9)	(3.3)
Downward Estimate Change [Member] | Large Project Construction [Member]
Change in Accounting Estimate [Line Items]
Increase (Decrease) on Project Profitability	$ (68.6)	$ (40.7)	$ (20.3)
Number of Projects with Estimate Changes | project	7	5	6
Downward Estimate Change [Member] | Large Project Construction [Member] | Minimum [Member]
Change in Accounting Estimate [Line Items]
Range Of Effect On Gross Profit	$ (1.3)	$ (1.3)	$ (1.0)
Downward Estimate Change [Member] | Large Project Construction [Member] | Maximum [Member]
Change in Accounting Estimate [Line Items]
Range Of Effect On Gross Profit	(17.2)	(13.6)	(5.5)
Revisions to Estimated Total Contract Costs [Member] [Member]
Change in Accounting Estimate [Line Items]
Impact From Affirmative Claim Recovery Estimate	30.9	25.4	37.3
Impact from estimated recovery of backcharge claims	2.5	4.8	0.5
No Material Associated Cost [Member]
Change in Accounting Estimate [Line Items]
Impact From Affirmative Claim Recovery Estimate	4.0	11.9	11.2
Impact from estimated recovery of backcharge claims	$ 2.1	10.9	$ 6.5
Sales Revenue, Net [Member]
Change in Accounting Estimate [Line Items]
Quantifying Misstatement in Current Year Financial Statements, Amount		4.9
Gross Profit [Member]
Change in Accounting Estimate [Line Items]
Quantifying Misstatement in Current Year Financial Statements, Amount		$ 1.6

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Summary of Significant Accounting Policies (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Significant Accounting Policies [Line Items]
Materials Valued At Cost	$ 11,900	$ 5,000
Restructuring gains	(2,411)	(1,925)	$ (6,003)
Cash and cash equivalents	233,711	189,326	252,836	$ 255,961
Capitalized Computer Software, Additions	7,900	6,600	2,300
Minimum [Member]
Significant Accounting Policies [Line Items]
Cumulative Effect of New Accounting Principle in Period of Adoption	15,000
Workers' Compensation Liability	500
Maximum [Member]
Significant Accounting Policies [Line Items]
Cumulative Effect of New Accounting Principle in Period of Adoption	18,000
Workers' Compensation Liability	$ 1,000
Software Development [Member] | Minimum [Member]
Significant Accounting Policies [Line Items]
Property, Plant and Equipment, Useful Life	3 years
Software Development [Member] | Maximum [Member]
Significant Accounting Policies [Line Items]
Property, Plant and Equipment, Useful Life	7 years
3531 Construction Machinery and Equip [Member] | Minimum [Member]
Significant Accounting Policies [Line Items]
Property, Plant and Equipment, Useful Life	3 years
3531 Construction Machinery and Equip [Member] | Maximum [Member]
Significant Accounting Policies [Line Items]
Property, Plant and Equipment, Useful Life	7 years
Other Capitalized Property Plant and Equipment [Member] | Minimum [Member]
Significant Accounting Policies [Line Items]
Property, Plant and Equipment, Useful Life	3 years
Other Capitalized Property Plant and Equipment [Member] | Maximum [Member]
Significant Accounting Policies [Line Items]
Property, Plant and Equipment, Useful Life	20 years
Consolidated Construction Joint Venture [Member] | Joint Venture Consolidated [Member]
Significant Accounting Policies [Line Items]
Cash and cash equivalents	$ 94,359	$ 73,115
Noncontrolling Interest [Member] | Enterprise Improvement Plan [Member] | Restructuring Type, Real Estate Asset Impairment [Member]
Significant Accounting Policies [Line Items]
Restructuring and impairment gains - non-controlling interest			$ 3,300
Workers Compensation and Public Liability [Member]
Significant Accounting Policies [Line Items]
Change in Loss Assumptions, Potential Effect on Operating Results and Financial Position	1,000
Health Insurance Product Line [Member]
Significant Accounting Policies [Line Items]
Change in Loss Assumptions, Potential Effect on Operating Results and Financial Position	$ 300

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Fair Value Measurement - Assets and Liabilities Measured at Fair Value on a Recurring Basis (Details) - Fair Value, Measurements, Recurring [Member] - USD ($) $ in Thousands	Dec. 31, 2017	Dec. 31, 2016
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, Fair Value Disclosure	$ 47,251	$ 10,057
Money Market Funds [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Cash and Cash Equivalents, Fair Value Disclosure	37,284	10,057
Commercial Paper [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Cash and Cash Equivalents, Fair Value Disclosure	9,967
Level 1 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, Fair Value Disclosure	47,251	10,057
Level 1 [Member] | Money Market Funds [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Cash and Cash Equivalents, Fair Value Disclosure	37,284	10,057
Level 1 [Member] | Commercial Paper [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Cash and Cash Equivalents, Fair Value Disclosure	9,967
Level 2 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, Fair Value Disclosure	0	0
Level 2 [Member] | Money Market Funds [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Cash and Cash Equivalents, Fair Value Disclosure	0	0
Level 2 [Member] | Commercial Paper [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Cash and Cash Equivalents, Fair Value Disclosure	0
Level 3 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, Fair Value Disclosure	0	0
Level 3 [Member] | Money Market Funds [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Cash and Cash Equivalents, Fair Value Disclosure	0	$ 0
Level 3 [Member] | Commercial Paper [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Cash and Cash Equivalents, Fair Value Disclosure	$ 0

XML

Fair Value Measurement - Carrying and Fair Value Amounts (Details) - USD ($) $ in Thousands		Dec. 31, 2017	Dec. 31, 2016
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Held-to-maturity Securities		$ 132,790
Credit Agreement Loan, carrying value		290,000
Reported Value Measurement [Member] | Held-to-Maturity [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Held-to-maturity Securities		132,790
Reported Value Measurement [Member] | Level 1 [Member] | Held-to-Maturity [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Held-to-maturity Securities			$ 127,779
Held-to-maturity marketable securities, carrying value		132,790	127,779
Reported Value Measurement [Member] | Level 3 [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Long term portion of term loan		90,000	95,000
Reported Value Measurement [Member] | Level 3 [Member] | Senior Notes [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Senior notes payable, carrying value		80,000	120,000
Estimate of Fair Value Measurement [Member] | Level 1 [Member] | Held-to-Maturity [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Held-to-maturity Securities		132,002	127,365
Estimate of Fair Value Measurement [Member] | Level 3 [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Long term portion of term loan	[1]	89,871	93,991
Estimate of Fair Value Measurement [Member] | Level 3 [Member] | Senior Notes [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Senior notes payable, carrying value	[1]	82,190	124,654
Revolving Credit Facility [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Credit Agreement Loan, carrying value		200,000
Long-term Line of Credit, Noncurrent		55,000	30,000
2017 Draw [Member] | Estimate of Fair Value Measurement [Member] | Level 3 [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Long-term Line of Credit, Noncurrent	[1]	24,949	0
2017 Draw [Member] | Revolving Credit Facility [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Long-term Line of Credit, Noncurrent		25,000
2017 Draw [Member] | Revolving Credit Facility [Member] | Level 3 [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Long-term Line of Credit, Noncurrent			0
2017 Draw [Member] | Revolving Credit Facility [Member] | Reported Value Measurement [Member] | Level 3 [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Long-term Line of Credit, Noncurrent		25,000
2016 Draw [Member] | Estimate of Fair Value Measurement [Member] | Level 3 [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Long-term Line of Credit, Noncurrent	[1]	30,105	29,452
2016 Draw [Member] | Revolving Credit Facility [Member] | Level 3 [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Long-term Line of Credit, Noncurrent			$ 30,000
2016 Draw [Member] | Revolving Credit Facility [Member] | Reported Value Measurement [Member] | Level 3 [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Long-term Line of Credit, Noncurrent		$ 30,000

[1] 1The fair values of the senior notes payable and Credit Agreement (defined in Note 11) loan are based on borrowing rates available to us for long-term loans with similar terms, average maturities, and credit risk.

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Fair Value Measurement Fair Value Measurement - Narrative (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Asset retirement obligations adjustments	$ (462)	$ (2,058)	$ (200)
Restructuring gains	(2,411)	(1,925)	(6,003)
Derivative Asset	1,400	800
Commodity Contract [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Derivative, Gain (Loss) on Derivative, Net			(400)
Interest Rate Swap [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Derivative, Gain (Loss) on Derivative, Net		$ 300	1,500
Cash Flow Hedging [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Interest rate swap initial notional amount	$ 98,800
Cash flow hedge fixed rate	1.47%
Noncontrolling Interest [Member] | Restructuring Type, Real Estate Asset Impairment [Member] | Enterprise Improvement Plan [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Restructuring gains			$ (3,300)

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Marketable Securities - Carrying Amounts of Marketable Securities (Details) - USD ($) $ in Thousands	Dec. 31, 2017	Dec. 31, 2016
Schedule of Marketable Securities [Line Items]
Held-to-maturity Securities	$ 132,790
Short-term marketable securities	67,775	$ 64,884
Long-term marketable securities	65,015	62,895
Held-to-Maturity [Member]
Schedule of Marketable Securities [Line Items]
Short-term marketable securities	67,775	64,884
Long-term marketable securities	65,015	62,895
U.S. Government and agency obligations [Member] | Held-to-Maturity [Member]
Schedule of Marketable Securities [Line Items]
Short-term marketable securities	17,910	10,002
Long-term marketable securities	59,993	62,895
Commercial paper [Member] | Held-to-Maturity [Member]
Schedule of Marketable Securities [Line Items]
Short-term marketable securities	49,865	54,882
Corporate Bond Securities [Member] | Held-to-Maturity [Member]
Schedule of Marketable Securities [Line Items]
Long-term marketable securities	$ 5,022	$ 0

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Marketable Securities - Maturities of Held to Maturity Investments (Details) $ in Thousands	Dec. 31, 2017 USD ($)
Marketable Securities [Abstract]
Due within one year	$ 67,775
Due in one to five years	65,015
Total	$ 132,790

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Receivables, Net (Details) - USD ($) $ in Thousands	3 Months Ended								12 Months Ended
	Dec. 31, 2017	Sep. 30, 2017	Jun. 30, 2017	Mar. 31, 2017	Dec. 31, 2016	Sep. 30, 2016	Jun. 30, 2016	Mar. 31, 2016	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Accounts, Notes, Loans and Financing Receivable [Line Items]
Accounts Receivable, Gross, Current	$ 420,737				$ 373,038				$ 420,737	$ 373,038
Affirmative Claim Recovery Estimate	26,700				12,300				26,700	12,300
Back charges claims	1,100				300				1,100	300
Accounts Notes Loans and Financing Receivable Gross Current	479,943				419,918				479,943	419,918
Allowance for Accounts Notes Loans and Financing Receivable Current	152				573				152	573
Receivables, net	479,791				419,345				479,791	419,345
Revenue, Net	801,274	$ 957,126	$ 762,913	$ 468,400	666,681	$ 803,905	$ 604,579	$ 439,452	2,989,713	2,514,617	$ 2,371,029
Construction [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Revenue, Net									1,664,708	1,365,198	1,262,675
Large Project Construction [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Revenue, Net									1,032,229	888,193	812,720
Construction Materials [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Revenue, Net									292,776	261,226	$ 295,634
Retentions [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Accounts Notes Loans and Financing Receivable Gross Current	91,135				84,878				91,135	84,878
Construction Material Sales [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Accounts Notes Loans and Financing Receivable Gross Current	42,192				29,357				42,192	29,357
Other Business Products and Services [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Accounts Notes Loans and Financing Receivable Gross Current	17,014				17,523				$ 17,014	$ 17,523
California Department of Transportation [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Percentage Of Revenue Attributable to Counterparty									9.40%	8.80%
Revenue, Net									$ 281,700	$ 222,400
California Department of Transportation [Member] | Construction [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Percentage Of Revenue Attributable to Counterparty									13.20%	12.70%
Revenue, Net									$ 219,900	$ 173,400
California Department of Transportation [Member] | Large Project Construction [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Percentage Of Revenue Attributable to Counterparty									5.50%	5.50%
Revenue, Net									$ 57,200	$ 48,700
California Department of Transportation [Member] | Construction Materials [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Percentage Of Revenue Attributable to Counterparty									1.60%
Revenue, Net									$ 4,600
New York State Department of Transportation [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Percentage Of Revenue Attributable to Counterparty											8.40%
Revenue, Net											$ 199,000
New York State Department of Transportation [Member] | Large Project Construction [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Percentage Of Revenue Attributable to Counterparty											24.50%
Uncollectible Receivables [Member] | Retentions [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Accounts Notes Loans and Financing Receivable Gross Current	0				0				0	0
Billed Revenues [Member] | Completed and in Progress [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Accounts Receivable, Gross, Current	252,467				206,570				252,467	206,570
Unbilled Revenues [Member] | Completed and in Progress [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Accounts Receivable, Gross, Current	$ 77,135				$ 81,590				$ 77,135	$ 81,590

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Construction and Line Item Joint Ventures (Details) $ in Thousands	12 Months Ended
	Dec. 31, 2017 USD ($)	Dec. 31, 2016 USD ($)	Dec. 31, 2015 USD ($)
Construction Joint Venture [Line Items]
Contracts Revenue	$ 1,664,708	$ 1,365,198	$ 1,262,675
Net Cash Provided by (Used in) Operating Activities	146,195	73,146	66,978
Partnership Interest [Member] | Unconsolidated Construction Joint Venture [Member]
Construction Joint Venture [Line Items]
Revenue Remaining to be Recognized on Unconsolidated Construction Joint Ventures	4,600,000
Joint Venture Consolidated [Member]
Construction Joint Venture [Line Items]
Net Cash Provided by (Used in) Operating Activities	$ 36,900	37,800	(16,400)
Joint Venture Consolidated [Member] | Consolidated Construction Joint Venture [Member]
Construction Joint Venture [Line Items]
Number of active construction joint venture projects	6
Total Construction Contract Value	$ 1,200,000
Joint Venture Unconsolidated [Member] | Unconsolidated Construction Joint Venture [Member]
Construction Joint Venture [Line Items]
Unconsolidated Construction Joint Venture Net Income	$ 62,200	41,800	105,600
Number of active construction joint venture projects	11
Total Construction Contract Value	$ 12,400,000
Joint Venture Unconsolidated [Member] | Line Item Joint Venture [Member]
Construction Joint Venture [Line Items]
Number of active construction joint venture projects	1
Reporting Entitys Interest in Joint Venture [Member]
Construction Joint Venture [Line Items]
Total Construction Contract Value	$ 1,500,000
Reporting Entitys Interest in Joint Venture [Member] | Consolidated Construction Joint Venture [Member]
Construction Joint Venture [Line Items]
Revenue Remaining to be Recognized on Consolidated Construction Joint Ventures	492,800
Reporting Entitys Interest in Joint Venture [Member] | Unconsolidated Construction Joint Venture [Member]
Construction Joint Venture [Line Items]
Unconsolidated Construction Joint Venture Net Income	(14,400)	15,600	43,400
Revenue Remaining to be Recognized on Unconsolidated Construction Joint Ventures	1,500,000
Total Construction Contract Value	3,700,000
Reporting Entitys Interest in Joint Venture [Member] | Line Item Joint Venture [Member]
Construction Joint Venture [Line Items]
Contracts Revenue	22,914	34,966	25,955
Other Partners Interest in Partnerships [Member] | Unconsolidated Construction Joint Venture [Member]
Construction Joint Venture [Line Items]
Total Construction Contract Value	3,100,000
Minimum [Member] | Joint Venture Consolidated [Member] | Consolidated Construction Joint Venture [Member]
Construction Joint Venture [Line Items]
Total Construction Contract Value	49,800
Contracts Revenue	185,500	$ 119,800	$ 54,400
Minimum [Member] | Joint Venture Unconsolidated [Member] | Unconsolidated Construction Joint Venture [Member]
Construction Joint Venture [Line Items]
Total Construction Contract Value	77,300
Minimum [Member] | Joint Venture Unconsolidated [Member] | Line Item Joint Venture [Member]
Construction Joint Venture [Line Items]
Total Construction Contract Value	66,217
Minimum [Member] | Reporting Entitys Interest in Joint Venture [Member] | Consolidated Construction Joint Venture [Member]
Construction Joint Venture [Line Items]
Revenue Remaining to be Recognized on Consolidated Construction Joint Ventures	$ 4,900
Proportionate Share of the Consolidated and Unconsolidated Joint Ventures Equity Owned by or Beneficial Interest in the Reporting Entity Directly or Indirectly	50.00%
Minimum [Member] | Reporting Entitys Interest in Joint Venture [Member] | Unconsolidated Construction Joint Venture [Member]
Construction Joint Venture [Line Items]
Revenue Remaining to be Recognized on Unconsolidated Construction Joint Ventures	$ 500
Proportionate Share of the Consolidated and Unconsolidated Joint Ventures Equity Owned by or Beneficial Interest in the Reporting Entity Directly or Indirectly	20.00%
Minimum [Member] | Reporting Entitys Interest in Joint Venture [Member] | Line Item Joint Venture [Member]
Construction Joint Venture [Line Items]
Total Construction Contract Value	$ 49,040
Revenue Per Project Remaining to be Recognized on Line Item Construction Joint Ventures	1,400
Maximum [Member] | Joint Venture Consolidated [Member] | Consolidated Construction Joint Venture [Member]
Construction Joint Venture [Line Items]
Total Construction Contract Value	409,600
Maximum [Member] | Joint Venture Unconsolidated [Member] | Unconsolidated Construction Joint Venture [Member]
Construction Joint Venture [Line Items]
Total Construction Contract Value	3,700,000
Maximum [Member] | Reporting Entitys Interest in Joint Venture [Member] | Consolidated Construction Joint Venture [Member]
Construction Joint Venture [Line Items]
Revenue Remaining to be Recognized on Consolidated Construction Joint Ventures	$ 201,300
Proportionate Share of the Consolidated and Unconsolidated Joint Ventures Equity Owned by or Beneficial Interest in the Reporting Entity Directly or Indirectly	65.00%
Maximum [Member] | Reporting Entitys Interest in Joint Venture [Member] | Unconsolidated Construction Joint Venture [Member]
Construction Joint Venture [Line Items]
Revenue Remaining to be Recognized on Unconsolidated Construction Joint Ventures	$ 365,000
Proportionate Share of the Consolidated and Unconsolidated Joint Ventures Equity Owned by or Beneficial Interest in the Reporting Entity Directly or Indirectly	50.00%

XML

Schedule of Unconsolidated Construction Joint Ventures Assets and Liabilities (Details) - USD ($) $ in Thousands		Dec. 31, 2017	Dec. 31, 2016
Construction Joint Venture [Line Items]
Affirmative Claim Recovery Estimate		$ 26,700	$ 12,300
Unconsolidated Joint Venture Back charges claims		11,800	5,600
Deficit in unconsolidatedconstruction joint venture		15,900	16,600
Equity in Construction Joint Ventures	[1]	231,887	230,534
Unconsolidated Construction Joint Venture [Member]
Construction Joint Venture [Line Items]
Performance Guarantees		88,600	83,100
Joint Venture Unconsolidated [Member] | Unconsolidated Construction Joint Venture [Member]
Construction Joint Venture [Line Items]
Cash and cash equivalents		289,940	537,991
Other current assets	[2]	812,577	644,809
Noncurrent Assets		219,825	207,240
Current Liabilities		682,832	696,215
Other Partners Interest in Partnerships [Member] | Unconsolidated Construction Joint Venture [Member]
Construction Joint Venture [Line Items]
Interest in assets		869,782	935,615
Interest in liabilities	[3]	462,159	472,324
Reporting Entitys Interest in Joint Venture [Member] | Unconsolidated Construction Joint Venture [Member]
Construction Joint Venture [Line Items]
Affirmative Claim Recovery Estimate		74,300	65,400
Interest in assets	[2],[4]	452,560	454,425
Interest in liabilities		$ 220,673	$ 223,891

[1] As of December 31, 2017 and 2016, this balance included $15.9 million and $16.6 million, respectively, of deficit in construction joint ventures that is included in accrued expenses and other current liabilities in the consolidated balance sheets.

[2] Included in this balance and in accrued and other current liabilities on our consolidated balance sheets as of December 31, 2017 and 2016 was $88.6 million and $83.1 million, respectively, related to performance guarantees (see Note 10 of “Notes to the Consolidated Financial Statements”).

[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 primarily related to gross profit forecast differences.

[4] Included in this balance as of December 31, 2017 and 2016 was $74.3 million and $65.4 million, respectively, related to Granite’s share of estimated cost recovery of customer affirmative claims. In addition, the balances as of December 31, 2017 and 2016 included $11.8 million and $5.6 million, respectively, related to Granite’s share of estimated recovery of back charge claims

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Construction and Line Item Joint Ventures Schedule of Unconsolidated Construction Joint Ventures Revenue and Costs (Details) - Unconsolidated Construction Joint Venture [Member] - USD ($) $ in Thousands		12 Months Ended
		Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Joint Venture Unconsolidated [Member]
Unconsolidated Joint Venture [Line Items]
Revenue		$ 2,057,336	$ 1,958,158	$ 1,924,544
Cost of Revenue		1,995,915	1,915,376	1,819,257
Other Partners Interest in Joint Venture [Member]
Unconsolidated Joint Venture [Line Items]
Revenue	[1]	1,469,550	1,387,532	1,341,334
Cost of Revenue	[1]	1,394,347	1,360,459	1,279,954
Reporting Entitys Interest in Joint Venture [Member]
Unconsolidated Joint Venture [Line Items]
Revenue		587,786	570,626	583,210
Cost of Revenue		601,568	554,917	539,303
Gross Profit (Loss)		$ (13,782)	$ 15,709	$ 43,907

[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 primarily related to gross profit forecast differences.

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Investments in Affiliates - Investments in Affiliates (Details) - USD ($) $ in Thousands		Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Investment [Line Items]
Investments in affiliates		$ 38,469	$ 35,668	$ 33,182
Joint Venture Unconsolidated [Member]
Investment [Line Items]
Investments in affiliates		38,469	35,668
Equity Method investments in Real Estate Affiliates [Member] | Joint Venture Unconsolidated [Member]
Investment [Line Items]
Investments in affiliates		29,472	25,911
Other Affiliates [Member] | Joint Venture Unconsolidated [Member]
Investment [Line Items]
Investments in affiliates		8,997	9,757
Current Assets		31,320	30,836
Noncurrent Assets		129,039	124,670
Total assets		160,359	155,506
Current Liabilities		30,131	18,485
Long-Term Liabilities	[1]	31,636	37,217
Total Liabilities		61,767	55,702
Net assets		98,592	99,804
Granite’s share of net assets		38,469	35,668
Variable Interest Entity, Not Primary Beneficiary [Member] | Joint Venture Unconsolidated [Member]
Investment [Line Items]
Total assets		28,100
Texas [Member] | Variable Interest Entity, Not Primary Beneficiary [Member] | Residential Real Estate [Member] | Real Estate Entities [Member] | Joint Venture Unconsolidated [Member]
Investment [Line Items]
Granite’s share of net assets		24,300	$ 20,800
Minimum [Member] | Variable Interest Entity, Not Primary Beneficiary [Member] | Real Estate Entities [Member] | Joint Venture Unconsolidated [Member]
Investment [Line Items]
Total assets		1,600
Maximum [Member] | Variable Interest Entity, Not Primary Beneficiary [Member] | Real Estate Entities [Member] | Joint Venture Unconsolidated [Member]
Investment [Line Items]
Total assets		$ 68,500

[1] The balance primarily relates to debt associated with our real estate investments. See Note 11 for further discussion.

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Investments in Affiliates Equity Method Investment Summarized Income Statement Information (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Granite’s interest in affiliates’ net income	$ 7,107	$ 7,177	$ 3,210
Other Affiliates [Member] | Joint Venture Unconsolidated [Member]
Revenue	56,372	56,127	47,457
Gross profit	23,007	22,398	19,117
Income before taxes	17,154	19,117	8,446
Net income	17,154	19,117	8,446
Granite’s interest in affiliates’ net income	$ 7,107	$ 7,177	$ 3,210

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Property and Equipment, Net (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Property, Plant and Equipment [Line Items]
Property and equipment	$ 1,209,141	$ 1,181,583
Less: accumulated depreciation and depletion	801,723	774,933
Property and equipment, net	407,418	406,650
Depreciation and Depletion	63,800	61,000	$ 61,000
Equipment and vehicles [Member]
Property, Plant and Equipment [Line Items]
Property and equipment	778,549	756,602
Quarry property [Member]
Property, Plant and Equipment [Line Items]
Property and equipment	182,267	174,839
Land and land improvements [Member]
Property, Plant and Equipment [Line Items]
Property and equipment	108,830	110,999
Building and leasehold improvements [Member]
Property, Plant and Equipment [Line Items]
Property and equipment	82,601	82,762
Office furniture and equipment [Member]
Property, Plant and Equipment [Line Items]
Property and equipment	$ 56,894	$ 56,381

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Property and Equipment, Net - Asset Retirement Obligation (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Asset Retirement Obligation Disclosure [Abstract]
Asset retirement obligations included in accrued expenses and other current liabilities	$ 4,800	$ 1,900
Asset retirement obligations included in other long-term liabilities	17,700	20,100
Asset Retirement Obligation, Roll Forward Analysis [Roll Forward]
Beginning balance	21,936	26,558
Revisions to estimates	462	2,058	$ 200
Liabilities settled	(966)	(3,806)
Accretion	1,095	1,242
Ending balance	$ 22,527	$ 21,936	$ 26,558

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Intangible Assets - Indefinite Lived Intangible Assets (Details) - USD ($) $ in Thousands	Dec. 31, 2017	Dec. 31, 2016
Indefinite-lived Intangible Assets by Major Class [Line Items]
Goodwill	$ 53,799	$ 53,799
Construction [Member]
Indefinite-lived Intangible Assets by Major Class [Line Items]
Goodwill	29,260	29,260
Large Project Construction [Member]
Indefinite-lived Intangible Assets by Major Class [Line Items]
Goodwill	22,593	22,593
Construction Materials [Member]
Indefinite-lived Intangible Assets by Major Class [Line Items]
Goodwill	$ 1,946	$ 1,946

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Intangible Assets - Finite Lived Intangible Assets (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Finite-Lived Intangible Assets, Net [Abstract]
Total amortized intangible assets, Gross Value	$ 32,309	$ 33,809
Total amortized intangible assets, Accumulated Amortization	(16,156)	(15,911)
Total amortized intangible assets, Net Value	16,153	17,898
Amortization expense	1,700	2,000	$ 2,200
Finite-Lived Intangible Assets, Amortization Expense, Maturity Schedule [Abstract]
Future amortization expense, 2016	1,700
Future amortization expense, 2017	1,700
Future amortization expense, 2018	1,600
Future amortization expense, 2019	1,400
Future amortization expense, thereafter	9,700
Permits [Member]
Finite-Lived Intangible Assets, Net [Abstract]
Total amortized intangible assets, Gross Value	25,959	25,959
Total amortized intangible assets, Accumulated Amortization	(12,504)	(11,514)
Total amortized intangible assets, Net Value	13,455	14,445
Customer lists [Member]
Finite-Lived Intangible Assets, Net [Abstract]
Total amortized intangible assets, Gross Value	2,200	2,200
Total amortized intangible assets, Accumulated Amortization	(1,467)	(1,174)
Total amortized intangible assets, Net Value	733	1,026
Covenants not to compete [Member]
Finite-Lived Intangible Assets, Net [Abstract]
Total amortized intangible assets, Gross Value	50	50
Total amortized intangible assets, Accumulated Amortization	(26)	(24)
Total amortized intangible assets, Net Value	24	26
Acquired Backlog[Member]
Finite-Lived Intangible Assets, Net [Abstract]
Total amortized intangible assets, Gross Value		1,500
Total amortized intangible assets, Accumulated Amortization		(1,472)
Total amortized intangible assets, Net Value		28
Trade Names [Member]
Finite-Lived Intangible Assets, Net [Abstract]
Total amortized intangible assets, Gross Value	4,100	4,100
Total amortized intangible assets, Accumulated Amortization	(2,159)	(1,727)
Total amortized intangible assets, Net Value	$ 1,941	$ 2,373

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Accrued Expenses and Other Current Liabilities (Details) - USD ($) $ in Thousands	Dec. 31, 2017	Dec. 31, 2016
Other Liabilities Disclosure [Abstract]
Payroll and related employee benefits	$ 68,210	$ 53,802
Accrued insurance	39,946	44,471
Performance guarantees (see Note 1)	88,606	83,110
Other	39,645	37,204
Total	$ 236,407	$ 218,587

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Long-Term Debt and Credit Arrangements (Details) $ in Thousands	12 Months Ended
	Dec. 31, 2017 USD ($)	Dec. 31, 2016 USD ($)	Dec. 31, 2015 USD ($)
Debt Instrument [Line Items]
Debt, Long-term and Short-term, Combined Amount	$ 224,501	$ 244,294
Long-term Debt, Fiscal Year Maturity [Abstract]
Long-term Debt, Maturities, Repayments of Principal in 2017	46,300
Long-term Debt, Maturities, Repayments of Principal in 2018	50,000
Long-term Debt, Maturities, Repayments of Principal in 2019	128,800
Long-term Debt, Maturities, Repayments of Principal in 2020	0
Long-term debt	178,453	229,498
payment on term loan	5,000
Current maturities of long-term debt	46,048	14,796
Proceeds from long-term debt	25,000	30,000	$ 30,000
Letters of Credit Outstanding, Amount	$ 8,300
Covenant Compliance	We were in compliance with the covenants contained in our senior note agreements and Credit Agreement.
Consolidated Interest Coverage Ratio, Actual	15.59
Consolidated Interest Coverage Ratio, Covenant	4.00
Credit Agreement Loan, carrying value	$ 290,000
Revolving Credit Facility [Member]
Long-term Debt, Fiscal Year Maturity [Abstract]
Long-term Line of Credit, Noncurrent	55,000	30,000
Credit Agreement Loan, carrying value	$ 200,000
Cash Flow Hedging [Member]
Long-term Debt, Fiscal Year Maturity [Abstract]
Derivative, Variable Interest Rate	1.47%
Term Loan [Member]
Long-term Debt, Fiscal Year Maturity [Abstract]
Credit Agreement Loan, carrying value	$ 90,000	95,000
Institutional Groups One and Two (As Amended March 2014) [Member]
Long-term Debt, Fiscal Year Maturity [Abstract]
Consolidated Leverage Ratio, Maximum, After Quarter Ending September 30, 2014	3.00
Senior notes payable [Member] | Institutional Group Two [Member]
Long-term Debt, Fiscal Year Maturity [Abstract]
Interest rate	6.11%
Senior Notes [Member]
Debt Instrument [Line Items]
Debt, Long-term and Short-term, Combined Amount	$ 80,000	120,000
Long-term Debt, Fiscal Year Maturity [Abstract]
Long-term debt	40,000	110,000
Current maturities of long-term debt	40,000	10,000
Other notes payables [Member]
Long-term Debt, Fiscal Year Maturity [Abstract]
Debt Issuance Costs, Net	(499)	(706)
Line of Credit [Member]
Long-term Debt, Fiscal Year Maturity [Abstract]
Line of Credit Facility, Remaining Borrowing Capacity	$ 136,700
Debt Instrument, Basis Spread on Variable Rate, LIBOR Loans	1.75%
Debt Instrument, Basis Spread on Variable Rate	0.75%
Consolidated Fixed Charge Coverage Ratio, Minimum, Collateral Release Period	1.25
Consolidated Leverage Ratio, Maximum, Collateral Release Period	2.50
Line of Credit [Member] | Minimum [Member]
Long-term Debt, Fiscal Year Maturity [Abstract]
Line of Credit Facility, Interest Rate at Period End	3.44%
Line of Credit [Member] | Maximum [Member]
Long-term Debt, Fiscal Year Maturity [Abstract]
Line of Credit Facility, Interest Rate at Period End	5.25%
Line of Credit [Member] | Institutional Groups One and Two (As Amended March 2014) [Member]
Long-term Debt, Fiscal Year Maturity [Abstract]
Consolidated Tangible Net Worth, Actual	$ 953,600
Consolidated Tangible Net Worth, Covenant	$ 752,000
Adjusted Consolidated Leverage Ratio, Actual	1.25
Letter of Credit [Member]
Long-term Debt, Fiscal Year Maturity [Abstract]
Line of Credit Facility, Maximum Borrowing Capacity	$ 100,000
Term Loan [Member]
Debt Instrument [Line Items]
Debt, Long-term and Short-term, Combined Amount	90,000	95,000
Long-term Debt, Fiscal Year Maturity [Abstract]
Long-term debt	$ 83,800	90,000
Long-term Debt, Percentage Of Loan To Be Paid In Seven Installments, Beginning March 2017	1.25%
Long-term Debt, Percentage Of Loan To Be Paid In Nine Installments, Beginning In December 2018	2.50%
Current maturities of long-term debt	$ 6,200	5,000
Long-term Debt [Member] | Senior Notes [Member] | 2019 Notes [Member]
Long-term Debt, Fiscal Year Maturity [Abstract]
Long-term Debt, Maturities, Repayments of Principal, Remainder of Fiscal Year		$ 30,000

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Employee Benefit Plans (Details) $ in Thousands	12 Months Ended
	Dec. 31, 2017 USD ($) participant	Dec. 31, 2016 USD ($)	Dec. 31, 2015 USD ($)
Employee Benefits Plans [Line Items]
Defined Contribution Plan, Maximum Annual Contribution Per Employee, Percent	50.00%
Defined Contribution Plan, Employer Matching Contribution, Percent	6.00%
Defined Contribution Plan, Cost	$ 12,100	$ 11,000	$ 5,400
Number of Participants in Non Qualifed Deferred Compensation Plan | participant	61
Deferred Compensation Liability, Current and Noncurrent	$ 24,700	21,500
Multiemployer Plan, Contributions by Employer	$ 36,784	33,082	28,559
Multiemployer Plans, Maximum Percent Funded Status for Red Zone	65.00%
Multiemployer Plans, Maximum Percent Funded Status for Yellow Zone and Minmum Percent for Green Zone	80.00%
Locals 302 and 612 Operating Engineers Employers Retirement Fund [Member]
Employee Benefits Plans [Line Items]
Multiemployer Plan, Contributions by Employer	$ 3,646	3,113	3,000
Operating Engineers Pension Trust Fund [Member]
Employee Benefits Plans [Line Items]
Multiemployer Plan, Contributions by Employer	4,692	5,357	3,647
Pension Trust Fund for Operating Engineers Pension Plan [Member]
Employee Benefits Plans [Line Items]
Multiemployer Plan, Contributions by Employer	10,431	9,266	9,070
Laborers Pension Trust Fund for Northern California [Member] [Member]
Employee Benefits Plans [Line Items]
Multiemployer Plan, Contributions by Employer	2,464	2,215	2,403
Laborers Pension Trust Fund for Northern California [Member] [Member] [Member]
Employee Benefits Plans [Line Items]
Multiemployer Plan, Contributions by Employer	2,002	2,095	1,349
Laborers Pension Fund [Member]
Employee Benefits Plans [Line Items]
Multiemployer Plan, Contributions by Employer	3,208	2,328	1,919
All Other Pension Trust Funds [Member]
Employee Benefits Plans [Line Items]
Multiemployer Plan, Contributions by Employer	10,341	8,708	7,171
Deferred Profit Sharing [Member]
Employee Benefits Plans [Line Items]
Defined Contribution Plan, Cost	$ 0	$ 0	$ 0

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Shareholders' Equity (Details) - USD ($) $ / shares in Units, $ in Millions	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Authorized	1,595,675
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Available for Grant	1,072,750
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Nonvested, Number of Shares [Roll Forward]
Compensation cost not yet recognized, period for recognition	1 year 2 months 12 days
Profit Sharing and 401(k) Plan (the “401(k) Plan”), Shares in 401(k) Plan	1,454,844
Employee Stock Purchase Plan, Maximum Payroll Deduction	15.00%
Employee Stock Purchase Plan, Percent of Total Share Value	95.00%
Proceeds from ESPP	$ 0.8
Shares from ESPP	16,413	16,717	22,567
Stock Repurchase Program, Authorized Amount	$ 200.0
Employee Stock Option [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Nonvested, Number of Shares [Roll Forward]
Outstanding, ending balance (in shares)	0
Restricted Stock Units (RSUs) [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Allocated Share-based Compensation Expense	$ 15.8	$ 13.4	$ 8.8
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Nonvested, Number of Shares [Roll Forward]
Outstanding, beginning balance (in shares)	681	451	565
Outstanding, beginning balance, Weighted Average Grant Date Fair Value per Share (in dollars per share)	$ 39.15	$ 32.73	$ 31.38
Granted (in shares)	259	572	228
Granted, Weighted Average Grant Date Fair Value per Share (in dollars per share)	$ 51.31	$ 43.17	$ 33.40
Vested (in shares)	(372)	(307)	(300)
Vested, Weighted Average Grant Date Fair Value Per Share (in dollars per share)	$ 43.89	$ 36.24	$ 31.50
Forfeited (in shares)	(44)	(35)	(42)
Forfeited, Weighted Average Grant Date Fair Value per Share (in dollars per share)	$ 43.51	$ 40.97	$ 33.38
Outstanding, ending balance (in shares)	524	681	451
Outstanding, ending balance, Weighted Average Grant Date Fair Value per Share (in dollars per share)	$ 41.51	$ 39.15	$ 32.73
Allocated Share-based Compensation Expense, Net of Tax	$ 11.4	$ 9.2	$ 5.8
Employee Service Share-based Compensation, Nonvested Awards, Total Compensation Cost Not yet Recognized	10.0
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period, Total Grant Date Fair Value	$ 16.7	$ 11.5	$ 10.3
Restricted Stock [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Nonvested, Number of Shares [Roll Forward]
Outstanding, ending balance (in shares)	0

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Earnings Per Share - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended								12 Months Ended
	Dec. 31, 2017	Sep. 30, 2017	Jun. 30, 2017	Mar. 31, 2017	Dec. 31, 2016	Sep. 30, 2016	Jun. 30, 2016	Mar. 31, 2016	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Earnings Per Share [Abstract]
Net Income Attributable to Parent	$ 32,773	$ 45,982	$ 14,133	$ (23,790)	$ 16,173	$ 37,190	$ 14,199	$ (10,440)	$ 69,098	$ 57,122	$ 60,485
Weighted average common stock outstanding, basic (in shares)									39,795	39,557	39,337
Dilutive effect of stock options and restricted stock units									577	668	531
Incremental Common Shares Attributable to Dilutive Effect of Share-based Payment Arrangements									577	668	531
Weighted average common stock outstanding, diluted (in shares)									40,372	40,225	39,868
Basic (in dollars per share)	$ 0.82	$ 1.15	$ 0.35	$ (0.60)	$ 0.41	$ 0.94	$ 0.36	$ (0.27)	$ 1.74	$ 1.44	$ 1.54
Diluted (in dollars per share)	$ 0.81	$ 1.14	$ 0.35	$ (0.60)	$ 0.40	$ 0.92	$ 0.35	$ (0.27)	$ 1.71	$ 1.42	$ 1.52

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Income Taxes (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2017	Dec. 31, 2016
Federal:
Current	$ 27,877	$ 15,657	$ 4,810
Deferred	(4,397)	9,919	25,955
Total federal	23,480	25,576	30,765
State:
Current	5,520	4,567	1,914
Deferred	(338)	19	2,500
Total state	5,182	4,586	4,414
Provision for income taxes	28,662	30,162	35,179
Effective Income Tax Rate Reconciliation, Amount [Abstract]
Federal statutory tax	36,562	33,728	35,165
State taxes, net of federal tax benefit	3,814	2,990	3,769
Percentage depletion deduction	(1,368)	(1,352)	(1,444)
Domestic production deduction	(2,765)	(1,624)	(306)
Noncontrolling interests	(2,346)	(3,177)	(2,639)
Nondeductible expenses	1,128	1,094	219
Tax Cuts and Jobs Act of 2017	(3,664)	0	0
Other	(2,699)	(1,497)	415
Provision for income taxes	$ 28,662	$ 30,162	$ 35,179
Effective Income Tax Rate Reconciliation, Percent [Abstract]
Federal statutory tax, Percent	35.00%	35.00%	34.00%
State taxes, net of federal tax benefit, Percent	3.70%	3.10%	3.60%
Percentage depletion deduction, Percent	(1.30%)	(1.40%)	(1.40%)
Domestic production deduction, Percent	(2.70%)	(1.70%)	(0.30%)
Non-controlling interests, Percent	(2.30%)	(3.30%)	(2.60%)
Nondeductible expenses, Percent	1.10%	1.10%	0.20%
Tax Cuts and Jobs Act of 2017, Percent	(3.50%)	0.00%	0.00%
Other, Percent	(2.60%)	(1.50%)	0.50%
Total, Percent	27.40%	31.30%	34.00%
Deferred tax assets:
Receivables				$ 526	$ 573
Inventory				1,513	2,212
Insurance				7,401	12,524
Deferred compensation				8,985	12,740
Other accrued liabilities				1,525	2,294
Accrued compensation				1,738	11,031
Other				1,379	2,481
Net operating loss carryforward				2,614	2,341
Valuation allowance	$ 2,153	$ 641	$ 1,185	2,471	2,153
Total deferred tax assets				23,210	44,043
Deferred tax liabilities:
Property and equipment				16,832	29,400
Contract income recognition				7,739	20,084
Total long-term deferred tax liabilities				24,571	49,484
Deferred Tax Liabilities, Tax Deferred Income				1,361	5,441
Deferred Tax Assets, Valuation Allowance [Roll Forward]
Beginning balance	2,153	641	1,185
Additions (deductions), net	318	1,512	(544)
Ending balance	2,471	2,153	641
Reconciliation of Unrecognized Tax Benefits, Excluding Amounts Pertaining to Examined Tax Returns [Roll Forward]
Beginning balance	3,300
Ending balance	3,200	3,300
Unrecognized Tax Benefits	3,300	3,300		3,200	3,300
Unrecognized Tax Benefits that Would Impact Effective Tax Rate				3,100	3,200
Unrecognized Tax Benefits, Interest on Income Taxes Expense	200	(100)	100
Unrecognized Tax Benefits, Interest on Income Taxes Accrued				400	200
Other Long Term Liabilities [Member]
Reconciliation of Unrecognized Tax Benefits, Excluding Amounts Pertaining to Examined Tax Returns [Roll Forward]
Beginning balance	3,262	1,578	887
Gross increases – current period tax positions	0	1,902	1,006
Gross decreases – current period tax positions	(73)	(125)	(156)
Gross increases – prior period tax positions	1	2	0
Gross decreases – prior period tax positions	(6)	(5)	0
Settlements with taxing authorities/lapse of statute of limitations	(13)	(90)	(159)
Ending balance	3,171	3,262	1,578
Unrecognized Tax Benefits	$ 3,262	$ 1,578	$ 887	$ 3,171	$ 3,262

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Commitments, Contingencies and Guarantees (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Operating Leases, Future Minimum Payments Due, Fiscal Year Maturity [Abstract]
2018	$ 12,169
2019	8,946
2020	7,997
2021	6,874
2022	4,794
Later years (through 2046)	7,171
Total	47,951
Operating Leases, Rent Expense	16,400	$ 18,200	$ 11,300
Surety Bond [Member]
Operating Leases, Future Minimum Payments Due, Fiscal Year Maturity [Abstract]
Other Commitment	$ 3,500,000

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Legal Proceedings Legal Proceedings (Details) - USD ($) $ in Millions	Dec. 31, 2017	Dec. 31, 2016
Loss Contingencies [Line Items]
Estimated accruals for legal proceedings and inquiries	$ 0.9	$ 4.3

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Business Segment Information Business Segment Information - Narrative (Details) $ in Millions	Dec. 31, 2017 USD ($)
Minimum [Member] | Large Project Construction [Member]
Segment Reporting Information [Line Items]
Total Contract Value	$ 75
Maximum [Member] | Construction [Member]
Segment Reporting Information [Line Items]
Total Contract Value	$ 75

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Business Segment Information (Details) - USD ($) $ in Thousands	3 Months Ended								12 Months Ended
	Dec. 31, 2017	Sep. 30, 2017	Jun. 30, 2017	Mar. 31, 2017	Dec. 31, 2016	Sep. 30, 2016	Jun. 30, 2016	Mar. 31, 2016	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Segment Reporting Information [Line Items]
Revenue from external customers	$ 801,274	$ 957,126	$ 762,913	$ 468,400	$ 666,681	$ 803,905	$ 604,579	$ 439,452	$ 2,989,713	$ 2,514,617	$ 2,371,029
Gross profit	100,707	114,530	74,570	25,126	81,250	107,674	73,201	39,245	314,933	301,370	299,836
Segment assets	1,871,978				1,733,453				1,871,978	1,733,453	1,626,878
Reconciliation from Segment Totals to Consolidated [Abstract]
Cash and cash equivalents	233,711				189,326				233,711	189,326	252,836	$ 255,961
Receivables, net	479,791				419,345				479,791	419,345
Other current assets	36,513				39,908				36,513	39,908
Property and equipment, net	407,418				406,650				407,418	406,650
Investments in affiliates	38,469				35,668				38,469	35,668	33,182
Other noncurrent assets	75,199				85,449				75,199	85,449
Gross profit	100,707	$ 114,530	$ 74,570	$ 25,126	81,250	$ 107,674	$ 73,201	$ 39,245	314,933	301,370	299,836
Selling, general and administrative expenses									222,811	219,299	203,817
Restructuring gains									(2,411)	(1,925)	(6,003)
Total Other Income (Expense)									(5,748)	(4,008)	6,881
Income before provision for income taxes									104,463	96,362	103,427
Gain on sales of property and equipment									(4,182)	(8,358)	(8,286)
Construction [Member]
Segment Reporting Information [Line Items]
Revenue from external customers									1,664,708	1,365,198	1,262,675
Large Project Construction [Member]
Segment Reporting Information [Line Items]
Revenue from external customers									1,032,229	888,193	812,720
Construction Materials [Member]
Segment Reporting Information [Line Items]
Revenue from external customers									292,776	261,226	295,634
Operating Segments [Member]
Segment Reporting Information [Line Items]
Revenues									3,164,077	2,678,420	2,507,679
Gross profit									314,933	301,370	299,836
Depreciation, depletion and amortization									55,997	53,049	52,849
Segment assets	758,845				748,770				758,845	748,770	703,274
Reconciliation from Segment Totals to Consolidated [Abstract]
Gross profit									314,933	301,370	299,836
Operating Segments [Member] | Construction [Member]
Segment Reporting Information [Line Items]
Revenue from external customers									1,664,708	1,365,198	1,262,675
Gross profit									247,014	209,215	187,506
Depreciation, depletion and amortization									22,517	22,816	20,117
Segment assets	136,031				151,475				136,031	151,475	139,399
Reconciliation from Segment Totals to Consolidated [Abstract]
Gross profit									247,014	209,215	187,506
Operating Segments [Member] | Large Project Construction [Member]
Segment Reporting Information [Line Items]
Revenue from external customers									1,032,229	888,193	812,720
Gross profit									29,793	64,137	79,467
Depreciation, depletion and amortization									11,087	6,796	10,343
Segment assets	340,105				314,823				340,105	314,823	274,975
Reconciliation from Segment Totals to Consolidated [Abstract]
Gross profit									29,793	64,137	79,467
Operating Segments [Member] | Construction Materials [Member]
Segment Reporting Information [Line Items]
Revenues									467,140	425,029	432,284
Gross profit									38,126	28,018	32,863
Depreciation, depletion and amortization									22,393	23,437	22,389
Segment assets	282,709				282,472				282,709	282,472	288,900
Reconciliation from Segment Totals to Consolidated [Abstract]
Gross profit									38,126	28,018	32,863
Intersegment Eliminations [Member]
Segment Reporting Information [Line Items]
Revenue from external customers									(174,364)	(163,803)	(136,650)
Intersegment Eliminations [Member] | Construction [Member]
Segment Reporting Information [Line Items]
Revenue from external customers									0	0	0
Intersegment Eliminations [Member] | Large Project Construction [Member]
Segment Reporting Information [Line Items]
Revenue from external customers									0	0	0
Intersegment Eliminations [Member] | Construction Materials [Member]
Segment Reporting Information [Line Items]
Revenue from external customers									(174,364)	(163,803)	(136,650)
Segment Reconciling Items [Member]
Reconciliation from Segment Totals to Consolidated [Abstract]
Cash and cash equivalents	233,711				189,326				233,711	189,326	252,836
Short-term and long-term marketable securities	132,790				127,779				132,790	127,779	105,695
Receivables, net	479,791				419,345				479,791	419,345	340,822
Deferred income taxes	0				0				0	0	4,329
Other current assets	140,478				113,010				140,478	113,010	85,556
Property and equipment, net	29,242				32,397				29,242	32,397	36,721
Other noncurrent assets	$ 58,652				$ 67,158				$ 58,652	$ 67,158	$ 64,463

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Quarterly Financial Data (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended								12 Months Ended
	Dec. 31, 2017	Sep. 30, 2017	Jun. 30, 2017	Mar. 31, 2017	Dec. 31, 2016	Sep. 30, 2016	Jun. 30, 2016	Mar. 31, 2016	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Restructuring gains									$ 2,411	$ 1,925	$ 6,003
Quarterly Financial Data [Abstract]
Revenue, Net	$ 801,274	$ 957,126	$ 762,913	$ 468,400	$ 666,681	$ 803,905	$ 604,579	$ 439,452	2,989,713	2,514,617	2,371,029
Gross profit	$ 100,707	$ 114,530	$ 74,570	$ 25,126	$ 81,250	$ 107,674	$ 73,201	$ 39,245	314,933	301,370	299,836
Gross profit as a percent of revenue	12.60%	12.00%	9.80%	5.40%	12.20%	13.40%	12.10%	8.90%
Net income (loss)	$ 35,325	$ 48,055	$ 16,272	$ (23,851)	$ 19,264	$ 38,172	$ 18,526	$ (9,762)	75,801	66,200	68,248
Net income (loss) as a percent of revenue	4.40%	5.00%	2.10%	(5.10%)	2.90%	4.70%	3.10%	(2.20%)
Net income (loss) attributable to Granite	$ 32,773	$ 45,982	$ 14,133	$ (23,790)	$ 16,173	$ 37,190	$ 14,199	$ (10,440)	$ 69,098	$ 57,122	$ 60,485
Net income (loss) attributable to Granite as a percent of revenue	4.10%	4.80%	1.90%	(5.10%)	2.40%	4.60%	2.30%	(2.40%)
Net (loss) income per share attributable to common shareholders:
Diluted (in dollars per share)	$ 0.81	$ 1.14	$ 0.35	$ (0.60)	$ 0.40	$ 0.92	$ 0.35	$ (0.27)	$ 1.71	$ 1.42	$ 1.52
Basic (in dollars per share)	$ 0.82	$ 1.15	$ 0.35	$ (0.60)	$ 0.41	$ 0.94	$ 0.36	$ (0.27)	$ 1.74	$ 1.44	$ 1.54
(Loss) income before (benefit from) provision for income taxes									$ (104,463)	$ (96,362)	$ (103,427)
Noncontrolling Interest [Member]
Quarterly Financial Data [Abstract]
Net income (loss)									$ 6,703	$ 9,078	7,763
Restructuring Type, Real Estate Asset Impairment [Member] | Enterprise Improvement Plan [Member] | Noncontrolling Interest [Member]
Net (loss) income per share attributable to common shareholders:
Restructuring and impairment (gains) charges, net											$ (3,300)

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Subsequent Events (Details) - USD ($) $ / shares in Units, $ in Millions	Feb. 14, 2018	Feb. 16, 2018	Dec. 31, 2017
Subsequent Event [Line Items]
Backstop financing commitment letter			$ 8.3
Subsequent Event [Member] | Layne Christensen Company [Member]
Subsequent Event [Line Items]
Number of company shares issuable per share of acquiree	0.27
Company price per share on date of acquisition		$ 60.36
Purchase price	$ 360.0
Debt assumed in acquisition	209.0
Backstop financing commitment letter	370.0
Subsequent Event [Member] | Layne Christensen Company [Member] | 4.25% Notes [Member]
Subsequent Event [Line Items]
Debt assumed in acquisition	$ 69.5
Conversion price per share	$ 22.93
Interest rate	4.25%
Subsequent Event [Member] | Layne Christensen Company [Member] | 8.0% Notes [Member]
Subsequent Event [Line Items]
Debt assumed in acquisition	$ 99.9
Conversion price per share	$ 11.70
Interest rate	8.00%
Subsequent Event [Member] | Letter of Credit [Member] | Layne Christensen Company [Member]
Subsequent Event [Line Items]
Debt assumed in acquisition	$ 24.5