GRANITE CONSTRUCTION INC MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (form 10-Q)

The following discussion and analysis should be read in conjunction with our
Annual Report on Form 10-K for the year ended December 31, 2021 (our "Annual
Report") and the unaudited condensed consolidated financial statements and the
accompanying notes thereto included herein.

Forward-Looking Disclosure


From time to time, Granite makes certain comments and disclosures in reports and
statements, including in this Quarterly Report on Form 10-Q, or statements made
by its officers or directors, that are not based on historical facts, including
statements regarding future events, occurrences, circumstances, strategy,
activities, performance, outlook, outcomes, guidance, capital expenditures,
committed and awarded projects, 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
that 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,
strategy, activities, performance, outlook, outcomes, guidance, capital
expenditures, committed and awarded projects, 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 our Annual
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 Quarterly Report on Form 10-Q and, except as required by law, we undertake
no obligation to revise or update any forward-looking statements for any reason.

Overview


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

During the fourth quarter of 2021, we updated our strategy to focus on our core
business capabilities, to leverage our current geographic based home markets in
the civil construction and materials business and to target expansion based upon
that combined strategy. Also related to our new strategic plan, during the
fourth quarter of 2021, we reorganized our operating groups to improve operating
efficiencies and better position the Company for long-term growth. In
alphabetical order, our continuing business operating groups are California,
Central and Mountain.

In addition, we revised the financial information our chief operating decision
maker, or decision-making group (our "CODM"), regularly reviews to allocate
resources and assess our performance. This change is consistent with our
strategic plan update and better aligns with our continuing civil construction
and materials business. Our CODM now regularly reviews financial information
regarding our two primary product lines, construction and materials, as well as
our operating groups. We identified our CODM as our Chief Executive Officer and
our Chief Operating Officer.

As a result of these changes, in accordance with Financial Accounting Standards
Board ("FASB") Accounting Standards Codification ("ASC") Topic 280, Segment
Reporting, our reportable segments, which are the same as our operating
segments, were changed to two reportable segments: Construction and Materials
(see Note 19 of "Notes to the Condensed Consolidated Financial Statements").

The five 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; (iv) the need to
build, replace or repair aging infrastructure; and (v) the pricing of certain
commodity related products. Changes in these drivers can either reduce our
revenues and/or gross profit margins or provide opportunities for revenue growth
and gross profit margin improvement.

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Current Economic Environment and Outlook


Funding for our public work projects, which accounts for approximately 75% of
our portfolio, is dependent on federal, state, regional and local revenues. At
the federal level, President Biden signed the $1.2 trillion Infrastructure
Investment and Jobs Act ("IIJA") on November 15, 2021. The five-year IIJA
provides the largest increase in federal highway, bridge and transit funding in
more than six decades and includes $550 billion in incremental funding. With the
2022 federal spending bill passed by Congress and signed by President Biden in
March 2022, the first installment of IIJA can begin to be appropriated to
infrastructure spending programs. We believe the increased multi-year spending
commitment will improve the programming visibility for state and local
governments and bring meaningful impact to project lettings starting in late
2022 and then growing in 2023 and beyond.

At state, regional and local levels, voter-approved state and local
transportation measures continue to support infrastructure spending. In
the November 2021 elections, voters in 17 states approved 89% of state and local
ballot initiatives that will provide an additional $6.9 billion in one-time and
recurring revenue for transportation improvements. In California, our top
revenue-generating state, a significant part of the state infrastructure spend
is funded through Senate Bill 1 (SB-1), the Road Repair and Accountability Act
of 2017, which is a 10-year, $54.2 billion program without any sunset
provisions. Revenue collected through SB-1 is on track to increase over the next
five years and supports our expected growth in the state.

Over the past year, segments of the construction industry were adversely
affected by inflation as well as supply chain and labor constraints. Inflation
has impacted the cost of inputs such as oil related items, concrete and
steel. We continually monitor the expected movement of our construction input
costs and apply strategies to mitigate the impacts including adjusting the
pricing of our contracts. One of the most significant impacts to our results of
operations has been the increase in price of diesel fuel and liquid asphalt. The
conflict in Ukraine has further increased oil prices since late February 2022.
While we actively work to mitigate the impacts of oil price inflation, further
price increases may adversely impact us in the future.

Granite's Committed and Awarded Projects ("CAP") continues to be strong. During
2021, we saw increased interest in best-value or alternative delivery
procurement work by state departments of transportation, such as California and
Utah, along with other state agencies. This shift in delivery procurement
methodology creates a delay in certain project bookings and project start times
in the short term, but we believe will give us the opportunity for larger future
work with more sustainable margins and less inherent risk.

While we are encouraged by the growth outlook, the COVID-19 pandemic continues
to create uncertainties to the economy and the normal cadence of
project bids, and could adversely impact our operations and financial results in
future periods.

Strategic Actions

The planned divestitures of the businesses in our former Water and Mineral
Services operating group ("WMS") reflects our new strategy to focus on our core
civil construction and materials businesses by using sale proceeds to invest in
these two businesses. The divestitures also create opportunities to streamline
operational support functions, improve overhead efficiency and better leverage
efficiencies of scale. The current and projected strong demand for civil
construction supports the decision to grow our vertically integrated business.
Through our newly reorganized operational structure, our focus is to pursue
opportunities in markets where our operating groups' presence, capabilities and
resources provide strategic advantages, with improved and consistent margin
expectations. The sale of our trenchless and pipe rehabilitation services
business ("Inliner") was completed on March 16, 2022 for a purchase price of
$159.7 million, and we received cash proceeds of $142.6 million based on
preliminary post-closing adjustments (see Note 3 of "Notes to the Condensed
Consolidated Financial Statements"). We ended the first quarter of 2022 with a
strong balance sheet and liquidity providing flexibility to invest to
strengthen and expand our home market footprint.

Litigation Matter


As further discussed in Note 18 of "Notes to the Condensed Consolidated
Financial Statements," in early February 2022, our wholly-owned subsidiary,
Layne Christensen Company ("Layne"), was sued for $70 million and Granite
received an arbitration demand for $30 million relating to Layne's work on the
Salesforce Tower foundation. Layne was a subcontractor on this project and
potential liability for this project remained with Layne in connection with our
acquisition of Layne in June 2018.  See Note 18 and "In connection with
acquisitions or divestitures, we may become subject to liabilities" and "We are
involved in lawsuits and legal proceedings in the ordinary course of our
business and may in the future be subject to other litigation and legal
proceedings, and, if any of these are resolved adversely against us, it could
harm our business, financial condition and results of operations" in Item 1A.
Risk Factors in our Annual Report for additional information.

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Results of Operations


Our operations are typically affected more by weather conditions during the
first and fourth quarters of our fiscal year which may alter our construction
schedules and can create variability in our revenues and profitability.
Therefore, the results of operations of a given quarter are not indicative of
the results to be expected for the full year.

The following table presents a financial summary for the three months ended
March 31, 2022 and 2021:

                                                              Three Months Ended March 31,
(in thousands)                                                  2022                 2021
Total revenue                                              $      547,586       $      566,332
Gross profit                                               $       49,775       $       53,712
Selling, general and administrative expenses               $       58,501   

$ 61,161
Other costs (see Note 7 of “Notes to the Condensed
Consolidated Financial Statements”)

                        $        8,214       $       74,309
Operating loss                                             $      (16,608 )     $      (79,513 )
Total other expense, net                                   $        4,640       $        4,645
Net loss from continuing operations                        $      (15,917 ) 

$ (62,401 )
Net income (loss) from discontinued operations (see Note
3 of “Notes to the Condensed Consolidated Financial
Statements”)

                                               $        6,096   

$ (2,922 )
Amount attributable to non-controlling interests from
continuing operations

                                      $       (3,118 )     $         (872 )
Net loss attributable to Granite Construction
Incorporated                                               $      (12,939 )     $      (66,195 )




Revenue

Total Revenue by Segment

                                  Three Months Ended March 31,
(dollars in thousands)           2022                      2021
Construction             $ 474,935        86.7 %   $ 506,971        89.5 %
Materials                   72,651        13.3        59,361        10.5
Total                    $ 547,586       100.0 %   $ 566,332       100.0 %


Construction Revenue

                                  Three Months Ended March 31,
(dollars in thousands)           2022                      2021
California               $ 144,387        30.4 %   $ 159,266        31.4 %
Central                    224,093        47.2       253,293        50.0
Mountain                   106,455        22.4        94,412        18.6
Total                    $ 474,935       100.0 %   $ 506,971       100.0 %


Construction revenue for the three months ended March 31, 2022 decreased by
$32.0 million, or 6.3%, when compared to 2021. These decreases were primarily
driven by lower Committed and Awarded Projects ("CAP") and progression on
existing projects in the Central operating group and less favorable weather
conditions in the current year in the California operating group. These
decreases were partially offset by increased revenue in the Mountain operating
group. During the three months ended March 31, 2022 and 2021, the majority of
revenue earned in the Construction segment was from the public sector.

Materials Revenue

                                 Three Months Ended March 31,
(dollars in thousands)           2022                     2021
California               $ 45,687        62.8 %   $ 41,956        70.7 %
Central                    10,362        14.3        8,380        14.1
Mountain                   16,602        22.9        9,025        15.2
Total                    $ 72,651       100.0 %   $ 59,361       100.0 %

Materials revenue for the three months ended March 31, 2022 increased by
$13.3 million, or 22.4%, when compared to 2021 driven by increases in aggregate
and asphalt volumes in all three operating groups.

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Committed and Awarded Projects


Effective during the three months ended June 30, 2021, on a retroactive basis,
we renamed contract backlog to CAP and added the general construction portion of
construction management/general contractor ("CM/GC") contracts. This is the same
presentation used in our quarterly reports, earnings calls and press releases.
Prior period amounts have been revised to reflect this change. In line with the
revised reportable segments, all CAP is now in the Construction segment.

CAP consists of two components: (1) unearned revenue and (2) other awards.
Unearned revenue includes the revenue we expect to record in the future on
executed contracts, including 100% of our consolidated joint venture contracts
and our proportionate share of unconsolidated joint venture contracts. We
generally include a project in unearned revenue at the time a contract is
awarded, the contract has been executed and to the extent we believe funding is
probable. Contract options and task orders are included in unearned revenue when
exercised or issued, respectively. Certain government contracts where funding is
appropriated on a periodic basis are included in unearned revenue at the time of
the award when it is probable the contract value will be funded and executed.

Other awards include the general construction portion of CM/GC contracts and
awarded contracts with unexercised contract options or unissued task orders. The
general construction portion of CM/GC contracts are included in other awards to
the extent contract execution and funding is probable. Contracts with
unexercised contract options or unissued task orders are included in other
awards to the extent option exercise or task order issuance is probable.

(dollars in thousands)        March 31, 2022               December 31, 2021              March 31, 2021

Unearned revenue $ 2,491,537 63.3 % $ 2,595,085 64.7 % $ 3,171,552 76.0 %
Other awards

               1,443,190          36.7       1,414,979          35.3       1,000,380          24.0
Total                    $ 3,934,727         100.0 %   $ 4,010,064         100.0 %   $ 4,171,932         100.0 %




(dollars in thousands)        March 31, 2022               December 31, 2021              March 31, 2021
California               $ 1,480,950          37.7 %   $ 1,476,066          36.8 %   $ 1,349,272          32.3 %
Central                    1,426,255          36.2       1,585,309          39.5       2,057,790          49.4
Mountain                   1,027,522          26.1         948,689          23.7         764,870          18.3
Total                    $ 3,934,727         100.0 %   $ 4,010,064         

100.0 % $ 4,171,932 100.0 %



CAP of $3.9 billion at March 31, 2022 remained relatively unchanged when
compared to December 31, 2021. Significant new awards during the three months
ended March 31, 2022 included a $32 million highway realignment project in the
California operating group, a $22 million train station track and platform
expansion project in the California operating group and a $20 million road
improvement contract in Arizona for the Central operating group.

Non-controlling partners' share of CAP as of March 31, 2022, December 31,
2021 and March 31, 2021 was $177.1 million, $214.3 million and $321.3 million,
respectively. At March 31, 2022, four contracts had total forecasted losses with
remaining revenue of $176.4 million, or 4.5%, of total CAP.



Gross Profit


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

                                Three Months Ended March 31,
(dollars in thousands)            2022                 2021
Construction                 $       48,192       $       52,769
Percent of segment revenue             10.1 %               10.4 %
Materials                             1,583                  943
Percent of segment revenue              2.2                  1.6
Total gross profit           $       49,775       $       53,712
Percent of total revenue                9.1 %                9.5 %


Construction gross profit for the three months ended March 31, 2022 decreased by
$4.6 million, or 8.7%, when compared to 2021 primarily due to lower revenue and
progression of lower margin work early in the year.

Materials gross profit for the three months ended March 31, 2022 increased by
$0.6, or 67.9% when compared to 2021 due to increases in aggregate and asphalt
volumes as well as price increases and oil price mitigation efforts such as bulk
purchases and forward contracts that offset the impact of higher fuel and liquid
asphalt costs.

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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:

                                               Three Months Ended March 31,
(dollars in thousands)                           2022                 2021
Selling
Salaries and related expenses               $       15,148       $       15,624
Restricted stock unit amortization                     633                  653
Other selling expenses                               1,475                1,066
Total selling                                       17,256               17,343
General and administrative
Salaries and related expenses                       24,145               23,278
Restricted stock unit amortization                   1,655                

1,065

Other general and administrative expenses           15,445               

19,475

Total general and administrative                    41,245               

43,818

Total selling, general and administrative   $       58,501       $       61,161
Percent of revenue                                    10.7 %               10.8 %


Selling Expenses

Selling expenses include the costs for estimating and bidding including
offsetting 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 the three months ended
March 31, 2022 remained relatively unchanged when compared to 2021.

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, incentive compensation,
changes in the fair market value of our Non-Qualified Deferred Compensation plan
liability and other miscellaneous expenses. Total general and administrative
expenses for the three months ended March 31, 2022 decreased by $2.6 million, or
5.9%, when compared to 2021, primarily due to decreases in the fair market value
of our Non-Qualified Deferred Compensation plan liability, which is offset in
other (income) expense, net, through our own company-owned life insurance
policy.



Other Costs

The following table presents other costs for the respective periods:


                            Three Months Ended March 31,
(dollars in thousands)       2022                 2021
Other costs              $       8,214       $        74,309


Other costs (see Note 7 of "Notes to the Condensed Consolidated Financial
Statements") for the three months ended March 31, 2022 decreased $66 million
when compared to 2021, primarily due to the legal settlement charge during the
three months ended March 31, 2021.

Income Taxes

The following table presents the benefit from income taxes on continuing
operations for the respective periods:


                                                              Three Months Ended March 31,
(dollars in thousands)                                         2022         

2021

Benefit from income taxes on continuing operations $ (5,331 )

   $       (21,757 )
Effective tax rate                                                  25.1 %                25.9 %


We calculate our income tax provision for continuing operations at the end of
each interim period by estimating our annual effective tax rate and applying
that rate to our loss before benefit from income taxes. The effect of changes in
enacted tax laws, tax rates or tax status is recognized in the interim period in
which the change occurs. See Note 17 of "Notes to the Condensed Consolidated
Financial Statements" for more information.

Amount Attributable to Non-controlling Interests

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


                                                     Three Months Ended March 31,
(in thousands)                                          2022                

2021

Amount attributable to non-controlling interests $ (3,118 ) $

(872 )



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 amount for the three months ended March 31,
2022 increased $2.2 million, primarily due to net negative impacts from
revisions in estimates on two projects in the prior year, neither of which had
an impact of $5 million or more on gross profit.

Net Income (Loss) from Discontinued Operations


Net income (loss) from discontinued operations for the three months ended March
31, 2022 increased $9.0 million when compared to 2021 primarily due to the gain
on sale of Inliner as well as ceasing depreciation and amortization on WMS
property, plant and equipment, finite-lived intangible assets and right-of-use
lease assets in the current year due to the classification of these assets as
held-for-sale beginning December 31, 2021 (see Note 3 of "Notes to the Condensed
Consolidated Financial Statements").

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Liquidity and Capital Resources


Our primary sources of liquidity are cash and cash equivalents, investments,
available borrowing capacity and cash generated from operations. We may also
from time to time issue and sell equity, debt or hybrid securities or engage in
other capital markets transactions or sell one or more business units, divisions
or assets including the WMS businesses.

Our material cash requirements include 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, repurchase shares of our
common stock or acquire assets or businesses that are complementary to our
operations.

We believe our primary sources of liquidity 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 believe our primary sources
of liquidity, access to debt and equity capital markets, proceeds from the sales
of the WMS businesses and cash expected to be generated from operations will be
sufficient to meet our long-term requirements and plans. However, there can be
no assurance that sufficient capital will continue to be available or that it
will be available on terms acceptable to us.

As of March 31, 2022, our cash and cash equivalents consisted of deposits and
money market funds held with established national financial institutions and
marketable securities consisting primarily of U.S. Government and agency
obligations and corporate commercial paper. Our credit facility consists of a
term loan and a revolving credit facility. During the three months ended March
31, 2022, $60.9 million of the term loan was repaid prior to its stated
maturity. Of the $275.0 million revolving credit facility capacity,
$242.1 million was available for borrowing at March 31, 2022. See Note 15 of
"Notes to the Condensed Consolidated Financial Statements" for further
discussion regarding the credit agreement.

In evaluating our liquidity position and needs, we also consider cash and cash
equivalents held by our consolidated construction joint ventures ("CCJVs"). The
following table presents our cash, cash equivalents and marketable securities,
including amounts from our CCJVs, for continuing operations as of the respective
dates:

                                                                    December 31,
(in thousands)                                  March 31, 2022          2021           March 31, 2021

Cash and cash equivalents excluding CCJVs $ 260,831 $ 302,864 $ 330,347
CCJV cash and cash equivalents (1)

                      100,080            92,783              110,486
Total consolidated cash and cash equivalents            360,911           395,647              440,833
Short-term and long-term marketable
securities (2)                                           36,728            15,600               11,300
Total cash, cash equivalents and marketable
securities                                     $        397,639     $     

411,247 $ 452,133



(1) The volume and stage of completion of contracts from our CCJVs may cause
fluctuations in joint venture cash and cash equivalents between periods. 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.
(2) All marketable securities were classified as held-to-maturity and consisted
of U.S. and agency obligations and corporate commercial paper as of all periods
presented.

Granite’s portion of CCJV cash and cash equivalents was $57.7 million,
$54.4 million and $64.2 million as of March 31, 2022, December 31, 2021 and
March 31, 2021, respectively. Excluded from the table above is:

$53.6 million, $56.5 million and $54.1 million as of March 31, 2022,

December 31, 2021 and March 31, 2021, respectively, in Granite’s portion

of unconsolidated construction joint venture cash and cash equivalents

$7.5 million, $16.5 million and $12.1 million as of March 31, 2022,

December 31, 2021 and March 31, 2021, respectively, that is included in

current assets held-for-sale

Capital Expenditures


During the  three months ended March 31, 2022, we had capital expenditures of $
31.3 million, including $ 3.4 million related to discontinued operations,
compared t o $18.8 million, including $ 3.3 million related to discontinued
operations during the three months ended March 31,  2021. 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. We currently anticipate 2022 capital expenditures for continuing
operations to be between approximately $100 million and $115 million.
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Cash Flows

                                     Three months ended March 31,
(in thousands)                         2022                 2021
Net cash provided by (used in):
Operating activities              $      (50,180 )     $       38,087
Investing activities              $       89,396       $      (16,303 )
Financing activities              $      (82,904 )     $       (4,992 )


Operating activities

As a large infrastructure contractor and construction materials producer, our
revenue, gross profit and the resulting operating cash flows can differ
significantly from period to period due to a variety of factors,
including project progression toward completion, outstanding contract change
orders and affirmative claims, and the payment terms of our
contracts. 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 claim and
back charge 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. While we typically invoice our
customers on a monthly basis, our contracts frequently provide for retention
that is a specified percentage withheld from each payment by our customers until
the contract is completed and the work accepted by the customer.

Cash used in operating activities of $ 50.2 million for the  three months ended
March 31, 2022 represents an $ 88.3 million increase in cash used when compared
to cash provided in the same period of  2021. This change was primarily due
to an increase in cash used of $ 80.9 million due to changes in working capital
(excluding the $66.0 million net decrease in working capital related to the
securities litigation settlement), partially offset by a decrease in cash
used of $ 50.7 million (including the $66.0 million in net securities litigation
settlement charges) due to lower net loss and adjustments for non-cash items and
a decrease of $ 7.9 million in contributions, net of distributions, to
unconsolidated joint ventures and affiliates. The decrease in cash used in
working capital was primarily due to increases of receivables and contract
assets, net.

Related to the securities litigation settlement discussed in Note 18 of "Notes
to the Condensed Consolidated Financial Statements," we have separately
presented the $129.0 million liability and the associated $63.0 million
insurance receivable in the condensed consolidated statement of cash flows for
the three months ended March 31, 2021. The liability was paid and the receivable
was collected in October 2021; therefore, the impact on operating cash flow
occurred in the fourth quarter of 2021 and there was no impact during the three
months ended March 31, 2022 or 2021.

Investing activities

Cash provided by investing activities of $89.4 million for the three months
ended March 31, 2022 represents a $105.7 million increase when compared to 2021.
The change was primarily due to proceeds from the sale of the Inliner business.

Financing activities


Cash used in financing activities of $82.9 million for the three months ended
March 31, 2022 represents a $77.9 million increase when compared to 2021. The
change was primarily due to the prepayment of $60.9 million of our term loan as
well as repurchases of common stock of $20.2 million.

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Derivatives


We recognize derivative instruments as either assets or liabilities in the
condensed consolidated balance sheets at fair value using Level 2 inputs. See
Note 10 to "Notes to the Condensed Consolidated Financial Statements" for
further information. The hedge option and warrant derivative
transactions related to the 2.75% Convertible Notes were recorded to equity on
our condensed consolidated balance sheets based on the cash proceeds.

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 March 31, 2022, approximately $2.2 billion of our $3.9 billion CAP
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
non-construction entities is included in Note 12 of "Notes to the Condensed
Consolidated Financial Statements."

Covenants and Events of Default


Our Third Amended and Restated Credit Agreement dated May 18, 2021, as
subsequently amended (the "Credit Agreement") requires us to comply with various
affirmative, restrictive and financial covenants, including the financial
covenants described below. Our failure to comply with these covenants would
constitute an event of default under the Credit Agreement. Additionally, the
2.75% Convertible Notes are governed by the terms and conditions of the
indenture. Our failure to pay principal, interest or other amounts when due or
within the relevant grace period on our 2.75% Convertible Notes or our Credit
Agreement would constitute an event of default under the 2.75% Convertible Notes
indenture or the Credit Agreement. A default under our Credit Agreement could
result in (i) us no longer being entitled to borrow under such facility; (ii)
termination of such facility; (iii) the requirement that any letters of credit
under such facility be cash collateralized; (iv) acceleration of amounts owed
under the Credit Agreement; and/or (v) foreclosure on any lien securing the
obligations under such facility. A default under the 2.75% Convertible Notes
indenture could result in acceleration of the maturity of the notes.

The most significant financial covenants under the terms of our Credit Agreement
require the maintenance of a minimum Consolidated Interest Coverage Ratio and a
maximum Consolidated Leverage Ratio. As of March 31, 2022, the Consolidated
Leverage Ratio was 2.58, which did not exceed the maximum of 3.00. Our
Consolidated Interest Coverage Ratio was 6.07, which was above the minimum of
4.00.

Share Repurchase Program

As announced on April 29, 2016, on April 7, 2016, the Board of Directors
authorized us to repurchase up to $200.0 million of our common stock at
management's discretion (the "2016 authorization"). As part of the
2016 authorization, we established a plan to facilitate common stock
repurchases. As announced on February 3, 2022, on February 1, 2022, the Board of
Directors authorized us to purchase up to $300.0 million of our common stock at
management's discretion (the "2022 authorization"). The 2022 authorization
replaced the 2016 authorization, including the amount available for repurchase,
and no further repurchases will take place under the 2016 authorization. During
the three months ended March 31, 2022, we repurchased 611,000 shares under the
2022 authorization. As of March 31, 2022, $281.5 million of the authorization
remained available. The specific timing and amount of any future repurchases
will vary based on market conditions, securities law limitations and other
factors.

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 any 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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