Good morning. My name is Emma, and I will be your conference facilitator today. At this time, I would like to welcome everyone to the Granite Construction Investor Relations Third Quarter 2019 Conference Call. This call is being recorded. All lines have been placed on mute to prevent any background noise. And after the presenters’ remarks, there will be a question-and-answer period. [Operator Instructions]It is now my pleasure to turn the conference over to your host, Head of Investor Relations, Lisa Curtis. Ma'am, the floor is yours.

Thank you Emma, and good morning everybody. I want to welcome you to the Granite Construction incorporated third quarter 2019 earnings conference call. I am pleased to be here today with President and Chief Executive Officer, Jim Roberts; and Senior Vice President and Chief Financial Officer, Jigisha Desai.Please note that today's earnings presentation references slides available on the Events and Presentations page of Granite's Investor Relations website investor.graniteconstruction.com.We begin today with an overview of the company's safe harbor language. Some of the discussion today may include forward-looking statements. These forward-looking statements are estimates reflecting the current expectations and best judgment of senior management regarding future events, occurrences, growth, demand, strategic plans, circumstances, activities, performance, outcomes, guidance backlog, committed and awarded projects and results.Actual results could differ materially from statements made today. Please refer to Granite's most recent 10-K and 10-Q filings for more complete descriptions of risk factors that could affect projections and assumptions. The company assumes no obligation to update forward-looking statements whether as a result of new information future events or otherwise.Certain non-GAAP measures may be discussed during today's call and from time-to-time by the company's executives. These include, but are not limited to adjusted EBITDA, adjusted EBITDA margin, adjusted net income or loss, adjusted earnings or loss per share, committed and awarded projects, backlog or results. Please note that some metrics may reference or exclude non-recurring acquisition-related expenses and one-time integration costs. Reconciliations of certain non-GAAP measures are included as part of our earnings press releases and in company presentations, which are available on our Investor Relations website.Now I would like to turn the call over to Granite Construction Incorporated President and Chief Executive Officer, Jim Roberts.

Well, thank you Lisa and good morning everyone. I want to thank you all for joining us today. Before I hand the call to Jigisha to review our results in detail, I want to first touch on progress made and challenges remaining in our Heavy Civil operating group. I will also discuss how our core businesses are capitalizing on well-funded infrastructure markets to grow our end market-focused businesses.As we get started, I also want to acknowledge some positive accomplishments that reflect both the strength and the value of Granite's strong core values and of Granite's evolving culture. For the second consecutive year, Granite has been recognized and certified as a great place to work. This certification is a rigorous data-driven methodology developed by Great Place to Work that is based on validated employee feedback. We are very proud to once again be certified as a great place to work as our most powerful partnership is the one we have with our employees. Everything at Granite begins with our people.We also recognize and deeply appreciate Granite employees for our continuously improving safety performance. 2019 is once again showing that our employees can reach new heights when taking care of one another, and we are rapidly approaching another record year with our year-to-date safety incident tracking at the lowest rate in the history of the company.Even more impressive, these results include the businesses we acquired last year where safety performance has improved dramatically, helping this portion of our company reach industry best standards in just over a year's time. We are also very proud to announce that we won first place in the Heavy Civil highway category for over three million worker hours at the Associated General Contractor of California's Construction Safety Excellence Awards. This is the second consecutive year that Granite…

Thank you, Jim and good morning everyone. Results in the third quarter and throughout 2019 have been hampered by Heavy Civil operating group performance which masked strong profitable market conditions and business performance in our Construction and Materials businesses.Favorable weather provided our teams with the runway needed to work efficiently this quarter and we made up a lot of ground lost to wet weather through May. As a result, Granite's consolidated third quarter 2019 revenues were $1.1 billion, up more than 3% year-over-year and year-to-date revenues were $2.5 billion, also up modestly compared to last year.With the progression of these large complex Heavy Civil projects this year, we encountered significant unanticipated issues requiring additional cost to perform owner-required demand.Third quarter 2019 earnings per share were $0.43 compared to earnings per share of $1.17 last year. The year-to-date loss was $2.39 per share compared to earnings of $0.84 per share in the prior year. Quarterly and year-to-date 2019 results also include acquisition-related expenses of $7.1 million and $27.2 million, respectively.Third quarter 2019 gross profit was $91.4 million compared to $144.5 million last year. On a year-to-date basis, gross profit was $79.5 million, down from $281.1 million in 2018. With last year's acquisitions now more than a year behind us, we continue to align cost structures.Selling, general, and administrative expenses increased 3.8% year-over-year to $73.4 million in the third quarter of 2019 with SG&A as a percentage of revenue steady at 6.7%.Granite's CAP increased 44.5% to $4.7 billion, which includes approximately $1 billion of negotiated work related to project procurements in the past 12 to 18 months. Today, the trend in composition and quality of our CAP is evolving with a greater mix of smaller, best-value Granite-led negotiated work combined with a geographical and end market diversity. Remember, we now perform over…

Thank you, Jigisha. It has become clear that the Heavy Civil industry we help lead has structural issues. The ability for the industry to effectively and profitably deliver projects of significant scale remains impacted by flawed assumptions and broken practices at scale both by construction participants and by project owners. It is up to us as builders and as America's infrastructure company to break this chain.We are committed to and we are taking immediate action to fix our Heavy Civil business from within. We will avoid risk for which we are not compensated. And while it will take some time, our teams already have begun working to get the risk-reward balance back in equilibrium.We are grounded in Granite's core values as we execute our strategy, assess markets redirect resources and focus our teams on activity that creates value for all stakeholders. Granite has immensely talented teams across the country and we are committed to making the necessary business changes that will enable our teams to deliver consistent profitable performance.And with that we'll be happy to answer your questions.

[Operator Instructions] Our first question is from Michael Dudas with Vertical Research.

Hi, Lisa, Jigisha Desai.

Good morning.

Jim could you elaborate further on the third quarter charges taken in Heavy Civil, are there any -- is it a combination of the legacy projects you touched upon in the second quarter? How many more that -- in this review that you found in the third quarter? And is that also limiting your ability to provide this near-term guidance because of the review that still needs to run through the books?

Okay. So the work we did in -- over the last 90 days focused on a strategic review of the entire Heavy Civil business. And as we looked at it and made a bunch of determinations that you see in the press release and as discussed here they are a product of the overall business what we reported in Q2 and what we reported in Q3. Of course there's a combination of projects in there and all of them have made up that segment of losses.The key ingredient as we go forward and think about our performance going forward the key ingredient for Q4 Mike is really weather. And as we look at it today huge fluctuations in our business occur every Q4 and when we felt it was far more important to focus on expectations for 2020 than just one quarter out.So no I would not suggest that the biggest issue that we're -- that we have we're not talking about Q4 is Heavy Civil, it's more relative to weather. And as we look forward to 2020 our guidance into 2020 is focused on getting our Heavy Civil business back to what I would call a conservative approach towards not contributing to the bottom line for 2020, but focusing to stabilize it and that is embedded into the guidance for 2020.

So my follow-up is relative to that preliminary guidance. So given what your guidance was for 2019 on a revenue and margin basis and all the difficulties you've had in the last six months on the large projects that guidance as you indicated is conservative, but it's also reflective of major changes in the large project issue that whatever anticipation of contribution that you would have anticipated otherwise you're likely not going to see?

Correct from the perspective of both revenue and earnings. So one of the things we've mentioned is that, our anticipation is to bid smaller work and that will automatically reduce the revenue relative to that side of the business. And we are not suggesting that the Heavy Civil group will provide any contribution to the company in 2020 as we work through all of the tactical steps of our strategic review to get that business back into alignment in 2020.But what I will say is that, the growth that you will see in our earnings projections for next year and our guidance is coming from the core strong operating performance part of our business which obviously as you can tell in the third quarter is operating at a very high level.

Thanks.

Thanks Mike.

Our next question comes from Alex Rygiel with B. Riley FBR.

Thanks. Good morning Jim and Jigisha.

Good morning Alex.

Jim frankly I'm having a little bit of a difficult time here bridging the strength in the vertical business versus the reported results in the transportation segment and your commentary about the Heavy Civil group and the losses in that segment. So, I don't know if you can walk me from one end to the other. But I would love to kind of narrow in and dig down into appreciating and understanding, how strong that vertical business was?

Okay. And I think that really is the core of the subject matter Alex of our entire portfolio today. So, when we look at trying to bridge the gap and I think that's a great way of looking at it for the results in Q3, certainly the losses that we reported in the Heavy Civil business are the operating income of the Heavy Civil business and I think we reported there that there was a $69 million loss in that business. That is all within the transportation segment.And therefore, what you can do is, offset that with the strong operating performance of the vertically integrated business and it shows then that the offset with still at a positive gross profit was significant margin improvement in the overall vertically integrated business. So, you do the entire performance issues of the Heavy Civil reside in the transportation sector alone. Does that help?

It does. And what was the revenue contribution in the transportation segment associated with the Heavy Civil group?

Well I don't have that in front of me.

I do.

I think, we've actually -- I can find that for you though. If you give us a few minutes while we're chatting Alex, I can certainly come back with that.

Perfect. And then, your lack of guidance for 2019 would suggest you have a little bit of -- you have less visibility on maybe additional cost to perform in the fourth quarter associated with some of these large projects. Can you discuss that in a little bit greater detail?

Yes. Well certainly. I think that, one of the things that we thought was important was to guide our investors to a more I'll call it prudent one-year outlook versus a one-quarter outlook. And certainly, there can always be adjustments in our business. But the key ingredient here was to try to get the -- bridge the gap through the end of 2020. And then there's two ingredients in the third -- in the fourth quarter.Obviously, there could be more adjustments in the Heavy Civil business that we are not aware of today, but the key ingredient also is that we've got a brand-new team leading Heavy Civil and we're excited about Dave and his oversight. And we're asking him to dive deep over the next couple months to make sure that that business is set for long-term value. So, we didn't want to provide too much detail on that business, while Dave is doing his detailed review.But the other thing Alex, it's really important here is that, as we produce through Q4, weather will play a major role in our core business. We had good weather in Q3 and our core operating performance was very, very strong, like we said the strongest it's been in almost 10 years. And if we can continue with the good weather, we could have excellent results in that part of our business in Q4 as well. So, with the new team leading, the Heavy Civil group starting today and the opportunity for the core operating performance to vary depending on weather made it feel like why provide a short-term guidance when the real key to the company we believe is to try to portray where the company is going over the next year and longer.

Alex, going back to your -- sorry I've got the revenue number. Let me just give you that. Its $162 million for the quarter, for the Heavy Civil group compared to $224 million last year. Sorry.

Perfect. And then one last question. Last quarter, Jim you updated us on those four legacy projects and you talked about expectations for when they would be completed and you talked about the revenue value in backlog. Could you update us on those two items? And then, in this current quarter, were there any other projects in the Heavy Civil group that created some of the drag? Or did any other projects come in materially below expectations that caused the Heavy Civil segment to be weak?

Okay. So two things then. So, let's talk about the completion of legacy projects. They're on track to be completed as planned, Alex. And I would suggest that, three of the four will still be done by early to middle next year and as we mentioned, one will move through the end of 2021 and that is on track. And there was some adjustments in Q3 from the legacy projects, certainly mitigated tremendously from what you saw in Q2. There's potential for adjustments going forward, but they were much more, much minor compared to what you saw previously.And there are other -- yes there are other projects inside of the portfolio that did add to the overall performance of the Heavy Civil group. And there was one project, literally one project that added to it that will be complete at the end of the year.So movement going forward. We're getting them behind us as quickly as possible. The new management team has been told to work through these expedite the delivery of them and get them behind us as much as we can in 2019 to look forward to 2020 as a positive year for the company.

Thank you.

Thank you, Alex

Our next question comes from Brent Thielman with D.A. Davidson.

Thanks, good morning.

Good morning, Brent.

Good morning.

Jim a follow-up to Alex's question. How many of those new jobs identified will you still need to work through in 2020?

Sorry, I'll try to get it Brent. Can you ask that again?

The new jobs identified where you took some losses this quarter beyond the legacy projects, how many of those will you continue to work through in 2020?

We have -- so if you look at it and certainly the Q will define it in more detail. There will be a couple of jobs that will be going full bore in 2020 that took some charges in Q3. But again I don't think they're a major portion of the overall performance issues. The performance issues resided and really the one job was the biggest single issue and a host of smaller jobs combined. So the one job that was the biggest issue is completed -- being completed as we speak. And the legacy jobs will be completed by midyear at the latest next year with one legacy job carrying into the end of 2021.

Okay. And then on the Water business, it wasn't clear to me, how large was the hit that business took from the now divested business. Can you talk to us about what that business was? And how much -- now that you've divested, how much does that take out of revenue on an annual basis going forward?

Yeah. So it wasn't a big business, Brent but it was a business that had plagued our predecessor for quite some time. And although it was a -- I'll call it a sizable loss for that business, it was -- we'll just quantify it, it was less than $10 million. So it was something that added to the poor performance. We did have a plan to divest it. We did divest it but we did take the charge.

Okay. Thanks.

You bet.

[Operator Instructions] Our next question comes from Joe Giordano with Cowen.

Hey guys, good morning. This is Francisco [ph] in for Joe.

Good morning.

So I wanted to follow-up on the Heavy Civil loss. Is there any reason why it was not taken last quarter when everything else was announced? Was this something that was known back then? And how likely is it to persist in the future?

Okay. So certainly, we would have taken it if it was known in Q2. What we found was that on a couple of these projects, they were new and I mentioned it in the discussion earlier these were issues that we are continuing to dispute with owners. And we believe that there's a lag in the revenue and the cost portion of this. We booked the cost in the quarter with the anticipation that we're going to continue to pursue additional revenue as we go forward. And that's a big part of our strategic plan.Tactical step is that we believe we need to do a stronger, better job of pursuing these dispute resolutions as we go forward. So certainly they weren't known. And as we go forward, it is important to remember that we can always have more issues. Although I think we're getting our arms around them in a much stronger fashion and we believe that we're down to a very small group of items, but every single quarter we have to assess issues that occur in the quarter and they can get better or worse.Example, you could have another owner dispute that could cause you I'll call it a negative consequence to your earnings or you can settle a dispute above what your expectations were and you can actually have a positive net from it. So we look at that every single quarter and report the new events in the quarter that they were taken and the act occurred.

Okay. Thank you, Jim. That's helpful. And just for the follow-up on the revenue growth outlook. You guys started the year with a low-teens growth outlook, which was then brought down to high single-digits and now we've just got the 2020 outlook of mid single-digits. Could you just give us some color as to why this outlook has been coming down, especially with the supportive funding environment that you guys are seeing?

Certainly, certainly. So one of the key ingredients is that that we expect nice growth inside of our core operating business of our vertically integrated construction and materials business which also by the way is driving some of those really good specialty numbers that you saw in the quarter of 17% margin. So that business will grow nicely in 2020, because as we look forward, the markets are strong very healthy and you'll see that on the higher end of any growth expectations.What you're going to see as part of our strategic plan is a reduction in the Heavy Civil business. And so therefore, when you offset the nice growth on the core part of the business with a reduction in the size of the Heavy Civil business that's why we came up with the newer lower overall number. But it is really a combination of high growth in the core part of the business and lower growth in the Heavy Civil business which we believe will help…

Okay.

We believe it will help obviously optimize our value by minimizing the size of the Heavy Civil business. And one of the key steps in our strategic review was to lay a guideline out there as to how large that Heavy Civil business would be relative to the overall size of the company. And as you noted and heard us, we expect it to be no more than 15% of our overall company revenue. So you'll see that come down over time as we try to risk adjust our overall portfolio and I think that's a key ingredient. As you look at the company going forward, we're growing the core vertically integrated business and reducing the size of the Heavy Civil business.

Yes. I would say that our Heavy Civil -- the charges that we took through quarter to -- on a year-to-date basis is about 5% drag on our revenue for the year, while our vertically integrations have grown almost above double-digits in Q3. So the macro environment in our Western operations is very strong and we are seeing that double-digit growth in that environment. Where you are seeing the drag is on our Heavy Civil.

Right. And that's planned drag for 2020...

Exactly.

Based on our strategic review and focusing on getting that business to derisk that overall business within the company.

That makes sense.

Thank you, Jigisha. Okay. You bet.

Our next question comes from Jerry Revich with Goldman Sachs.

Yes. Hi, good morning everyone. Jim, can you talk about the overall bid environment? Obviously, the Department of Transportation budgets look pretty robust but we've seen slowing bid awards in California and in Texas. And I'm wondering if you could just comment on what you're seeing. Is that slowdown in the awards impacting your bookings rate? And what's your take on the seeming disconnect at least over the past couple months between really strong budgets and the pace of bid awards and lendings?

Yes. Jerry, I think that's a good question relative to this is very lumpy. What we've seen in the DOT is as they build their annual budgets for the upcoming fiscal year, we know that the budgets have increased nicely from the 2018, 2019 fiscal year to the 2019, 2020 fiscal year. But what we have seen is that they tend to lump them into quarters based on when the projects have been designed and are ready for procurement. So we did see as noted that they were a little slow in Q3 in the state of California, but that means that the additional bidding environment is going to be really strong as we go forward, because they have already budgeted the full increase for 2020 to 2021.So I think you're just going to see a little lumpiness from quarter-to-quarter. Texas is the same way. The state of Washington is the same way, which is a huge state for Granite. And the overall year is not on a -- I'll call it a very even zeal. It's very lumpy quarter to quarter.The other thing that I think is important -- Jerry, just let me if I could a key ingredient to Granite when we look at our -- the amount of work that we bid on a monthly basis, we're still bidding today about $1 billion a month and that -- we haven't seen that ever historically in the company. And the key there is that we have slowed down the Heavy Civil business. We've got about I think $1.3 billion. We're bidding for the remainder of 2019 in that part of our business, but the day-to-day part of our business with jobs less than $100 million has really just rocketed up to the new levels.And so our hit rate's going up. You see our CAP going up. Even with the DOT in the last quarter slowing down a little bit, it's the specialty work, it's the mining work, it's the commercial and residential -- mostly commercial industrial business has really boomed. And that's why you're seeing the Specialty business do so well at the same time.So, the combination of our day-to-day smaller work is very, very healthy. I don't see that changing going forward. I see it being very strong in 2020. And I think the key ingredient to our guidance is that although I think there could be a disappointment relative to the overall growth of the company, it is focused on growing the right part of our business, the high-performing part of our business. And slowing down, getting our arms around the Heavy Civil business, going step by step with new management, and getting that our arm around it so that we can perform at a consistent higher level in that business as we go forward.

And on that note as you look at the Heavy Civil backlog of call it $1.8 billion or wherever it exited the quarter, what proportion of that backlog is projects booked after your strategic review? Can you just give us a sense? Because you were very clear about identifying the vintage of projects that you're concerned with.And I wonder if you just help us get a sense for what proportion of that backlog we should be thinking about as booked after the strategic change's been made, i.e. lower risk?

Okay. Maybe just one more time. The amount of the overall backlog in our Heavy Civil group is about $1.6 billion to $1.7 billion. And you're asking to break that down to further -- Jerry, what is it exactly would you like to hear?

Sure. So, you are clear that the contracts that you are concerned with were projects that were booked between 2014 and 2017 if I remember the exact vintage that you're concerned with. So, I'm wondering out of the remaining backlog that we have now considering we've burned through some of these projects $1.6 billion to $1.7 billion, what proportion of that has been booked under the new parameters that have lower risk versus the parameters that got us in trouble last time?

Okay. So, we've got -- I mean one way to look at it is that out of the overall portfolio, I would suggest about $700 million of it has been booked in the last couple years, so with a portion of it being the legacy projects and the remainder of it being the interim from 2014 to 2017.So, if you want to look at it from the perspective of -- I think we've got a couple of hundred million still to burn on the legacy projects you've got about $700 million in the new work since 2017 and you've got -- the remainder of it would be built between 2014 and 2017.So, the key ingredient is above the $1.7 million $700 million is of the new -- is brand new that we believe is under the new oversight, the new expectations. And what we did is when we projected out our earnings; we took the entire portfolio into 2020 and said it will not create value for the overall Granite portfolio.And that would be because we would be finishing up the older jobs the 2012 to 2014 jobs. We have a job or two in the 2015 to 2017 category and then the new $700-plus million from 2017 on will begin in 2020. So, that's kind of the breakout. $300 million and then maybe use -- $700 million would be 2014 to 2017 and then $700 million beyond it.

Okay. I appreciate the color. And then as part of the strategic review, I'm wondering if you could just talk about whether you've evaluated other parts of the portfolio. Clearly the Water divestiture is one piece, maybe it was contemplated previously. But any other piece that you've thought about?And specifically, we've seen pretty healthy valuations for some heavy materials businesses in the market given the low interest rates. And I'm wondering if you can talk about other parts of the portfolio review as it stands now.

Sure. So the focus Jerry over the last 90 days was the Heavy Civil business trying to get it back in alignment with a risk reward into equilibrium. So, -- but relative to the Water business that we had -- when we did our initial review and our work over the last year during the integration, we did further perfect our expectation that there were certain parts of the business that we're going to divest. And what we did in the third quarter obviously was divest on one portion of those. The overall Granite strategy is absolutely focused on growing our vertically integrated business and that hasn't changed.Now we've been distracted and rightfully so with the Heavy Civil business to work hard to get that back into alignment, but our key growth strategy is to expand our investment in our Construction and Materials business going forward. And as we've said, strategically when we get this Heavy Civil business back on track, which we are working to do immediately, we will continue -- you'll continue to see us invest and geographically diversify our vertically integrated business consisting of -- a large portion of that obviously is our Materials business.So that -- we agree with you that that part of the business is very healthy. You saw 19% margins in Q3. That business relative to the Granite portfolio strictly needs good weather to keep that business chugging along at a nice pace. It’s very healthy and we don't see that changing for quite some time, because most of the markets that we reside in today have a very nice long-term focused investment approach and we think the funding is there for quite some time.

I appreciate discussion. Thank you.

Okay, Jerry. Thank you.

[Operator Instructions] Our next question comes from Alex Rygiel with B. Riley FBR.

Yes. Thanks. Jim, can you remind us what you have remaining under your share buyback authorization? And if there's any limitations in the near-term on that?

Jigisha, you want to go ahead?

Yeah. I mean we have a $200 million worth of authorizations in place. As of the second quarter, we had about $190 million available. We did buy some shares during the third quarter and we will continue to be opportunistic and monitor what happens with the market. So we certainly have an opportunity to be in the marketplace.

So, how many shares did you buy in the third quarter?

I want to say 100,000 shares.

In addition management also did go into the market in Q3 as well.

Management and the Directors.

Right.

Yes.

Thank you.

Our next question comes from Jim Brilliant with Century Management.

Yeah. Hi, guys.

Hi, Jim.

Yeah. Just a couple of clarifications. So on the Heavy Civil side, you've obviously run some additional costs without receiving the offsetting revenue, just from an accounting standpoint until you have this dispute resolved. What's that -- what's -- so -- which we can see you lost $69 million in the quarter, but it didn't have the respective cash impact. But you mentioned that you're going to press harder on dispute resolution. So what will you be doing now that you haven't been doing in the past to close the gap between additional costs and recognition of revenue when you get the dispute result?

Jim, I think that is absolutely a key question and a key portion of our plan going forward. So, several things, because you're right, I mentioned in the discussion that it's widening the amount of disputes versus what we can actually book in terms of revenue. So, what we've done is on some of our big disputes that one of the biggest I've been personally involved in it been on the East Coast working in the middle of it with the upper echelon of the -- one of our major owners. We've actually had CEOs of our group, all meet with the upper echelon of a major customer to expedite and we have an agreed path forward now on one major dispute. We're also focusing with full-time dispute personnel leadership from Granite and our partners on the joint ventures. We are attaching full-time people to the jobs. Whereas before the management team and the external legal help would really drive the work with the owner. We've changed that. We've put full-time people on the projects to expedite the work out of these disputes.Secondarily on the new jobs that we have -- on the new jobs we have today that we've gotten in the last year we're putting full-time contract administrators on these jobs to focus on dispute resolution upfront instead of waiting for what we consider a bad practice in the industry, whereas when disputes occur you notify and you resolve them at the tail end of the job because that's an option allowable in the contract. That's what's happening today Jim on the projects that we're in.So as we get to the end here certainly we expect resolution with a potential opportunity to enhance our earnings and our cash flow. But on all new projects we now have full-time resources focused on contract administration to make sure that we don't get put in this position again.

And what is the cash that has yet to be collected as you resolve these disputes?

So obviously, it's quite large Jim, and we don't talk about the actual numbers because of the significance of the work we're doing with the individual owners. But yes, it's huge. I mean, there's I'll say hundreds of millions involved.

And based on what you said earlier, some of that is year-end, a large portion of that is by this time next year?

Well I don't -- I can't put a date on the resolution. In fact there was that same discussion that I had. I remember in Q2 what they asked was well how much of this are you going to collect in Q3, Q4? And I would tell you that as we progress through Q3 we've worked hard to get more of these claims well defined; these disputes well defined; we've worked hard on cash flow with the owners. And obviously, we didn't come to come to conclusion in Q3 with anything significant at all.So if things could happen in Q4, they could happen in Q1, Q2, Q3, next year, we can't put a time frame on it with the owners because we're still in negotiations as we speak. And remember there's more than one job. We have one that's very large, we have another one that's quite large as well and we have a host of others. And I would not want to mislead anybody to suggest that there's going to be a large collection in Q4, although we do expect large collections over the next couple of years.

And so are these going to be incremental collections, as you resolve parts of the dispute or is it kind of you resolve it all and then collect it at the end?

Well I think there's two ways to look at it. What's happened Jim in the jobs that we're building today is that the settlements have been pushed till the end of the job.

Global settlements.

And we call them global settlements. Thank you Jigisha, exactly. We call them global settlements. We don't think...

And this isn't just with you -- this isn't just you this is just everybody else that's been involved in these jobs that have been pushed out and changed orders et cetera, et cetera.

Sure. Correct, Jim. But remember the biggest portion of these outstanding disputes in our larger non-sponsored joint venture projects that we mentioned in Q2. So the overall value of the disputes is well over $1 billion. Our portion is hundreds of millions. And there's two ways to look at it. We certainly would be willing to negotiate short-term settlements, where as long as we did not forego our rights for the larger settlement in the long run.And if we could settle portions of these disputes in advance, certainly that would be a nice cash infusion, because we have funded these jobs out of our balance sheet, which by the way had a really nice increase in Q3 from Q2. So we're well funded and are creating earnings power from a cash flow perspective today. But I'd be happy to negotiate these things piece-by-piece, but typically, what's come to play in the industry is that you do one global settlement at the end of the job.That is not what we want to do going forward, because we don't believe it's good for earnings, because of the way you have to actually account for the losses in advance of the additional revenue.And it's not good for cash flow. So we're changing our approach towards, how we handle disputes as we go forward.

Yeah. There is definitely a dispute.

Yeah just to clarify in my mind. So this largest dispute the East Coast dispute at well over $1 billion, which you've got hundreds of millions locked up in you're -- this is all of the other suppliers in the dispute you're now globally trying to resolve this in a combined effort. Is that -- is the effort to this?

Okay.

Is that changed?

Yeah. Jim. No, Jim. Let me read -- kind of -- global settlement I want to make sure that I define that properly then I'm sorry. It means that, we have foregone the settlement of a host of previous disputes, into one final settlement at the end of the job.Now our partners and Granite are involved in it. And there could be some flow down to some vendors and subcontractors. But what I mean by a global settlement is that, we have waited till the end of the job for one final settlement.And it is not that we've brought more people into It is the joint venture that is building the project or in some cases Granite by ourselves building the project. And the global means strictly we wait until the end of the job, to do a lump sum settlement. Does that help you on the definition Jim?

Yeah. Yeah. Okay.

Yeah. It doesn't change the people that are involved in the settlement, because it is already the entire joint venture or in the case of when it's just a Granite job, it's just Granite.

Okay. And then, in the guidance for 2020, do you have any assumption of settlements in there?

No. And I say that from the perspective that we do not have any, I'll call it upside or downside in the conclusion of these settlements in 2020. Certainly we're hoping for a good upside.We believe we're conservative in the way we approach these disputes. And we don't forecast what the resolution of the end dispute will be.

Okay.

But again I'll remind that, certainly, we don't always win on every settlement. So there could be some that create more positive value. And there could be some that we lose that could be a negative value in next year.But it is really important to remember that, any settlement is automatically a positive cash flow issue, because we have already expended all the cash. And if we just got back what we thought we were going to get back and didn't have an uptick to our earnings, we would have an uptick to our cash flow.

So Jim one point of clarification is, when we go through these disputes, we do work with our legal team to come up with an estimable, probable recovery. And a portion of it is reflected on our financial statement.And so any settlement, on any of these issues, will -- could possibly have a true-up on the financial statement. But most of these settlements will have an improvement on our cash position, because as Jim said we've been basically financing these projects.

Well you've been financing them without booking the offsetting revenues.

That's correct. The cash portion of it is equivalent to the revenue portion of it.

Correct.

That is correct.

Okay. Okay, thank you.

This concludes our question-and-answer session. I would like to turn the conference back over to today's host for any closing remarks.

Well thank you everyone for your questions. A quick note for our shareholders and investors, Jigisha, Lisa and I will be on the road and at conferences visiting our operations and investors around the country over the next quarter or two.Please reach out to Lisa. And we will look forward to speaking with all of you and meeting with any of you that care to me with us. And as always, thank you to all of our employees for keeping our fellow workers safe, and for exhibiting Granite's core values every single day.And as always, Jigisha, Lisa and I are available for follow-up if you have any further questions. Thank you.

The conference has now concluded. Thank you for attending today's presentation.