Granite Announces Agreement to Acquire Kenny Construction Company
Forward-Looking Statement Statements made in this presentation are not based on historical facts, including statements regarding future events, occurrences, circumstances, activities, performance, outcomes and results, that may be forward looking in nature. Under the Private Securities Litigation Reform Act of 1995, a safe harbor may be provided to us for certain of these forward-looking statements. Words such as future, outlook, believes, expects, appears, may, will, should, anticipates, estimates, intends, plans, could, would, continue, or the negative thereof or comparable terminology, are intended to identify these forward-looking statements. 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 our senior management and are based on our current expectations and projections concerning future events, many of which are outside of our control, and involve a number of risks and uncertainties that could cause actual results to differ materially from those suggested by the forward-looking statements. Some of these expectations may be based on beliefs, assumptions or estimates that may prove to be incorrect. Factors that might cause or contribute to such differences include, but are not limited to, those risks described in the Company s Annual Report on Form 10-K under Item 1A. Risk Factors and in Part II, Item 1A. Risk Factors in the Quarterly Report on Form 10-Q. Except as required by law, we undertake no obligation to revise or update any forward-looking statements for any reason. As a result, the audience is cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this presentation. Except as required by law, we undertake no obligation to revise or update any forward-looking statements for any reason. 2
KENNY CONSTRUCTION COMPANY Overview National heavy-civil contractor specializing in power infrastructure, tunneling, and underground water utilities Founded in 1928 by John J. Kenny Headquarters located in Northbrook, Illinois Projected 2012 revenues of $280 million and year-end backlog of $390 million Highly-experienced project management teams 425 Employees Recognized leader in safety 3
KENNY CONSTRUCTION COMPANY Power $90 billion market Tunnel 21% Water 23% Expertise in high-voltage transmission and distribution Substation projects Strategic partner with developer and owners Power 51% Other 5% Primary focus is construction management and logistics PROJECTED 2012 REVENUES BY PROJECT TYPE 4
KENNY CONSTRUCTION COMPANY Tunneling $8 billion market Tunnel 21% Water 23% Leader in development of highly productive and technically complex tunnel systems Power 51% Other 5% Expertise using rapid tunneling technology, including tunnel boring machines Experienced with hard and soft-rock PROJECTED 2012 REVENUES BY PROJECT TYPE 5
KENNY CONSTRUCTION COMPANY Water/Underground $48 billion market Tunnel 21% Water 23% Trenchless technologies InLiner business for pipe and manhole rehabilitation Water main and utility work Power 51% Other 5% Size of projects range from 8 to 120 diameter PROJECTED 2012 REVENUES BY PROJECT TYPE 6
KENNY CONSTRUCTION COMPANY Civil/Other Civil work includes roads, bridges, structures, water/wastewater and rehabilitation Serves as general contractor, construction manager, JV partner or subcontractor Power 51% Tunnel 21% Water 23% Other 5% Project pursuits typically $5 to $100 million PROJECTED 2012 REVENUES BY PROJECT TYPE 7
Advancing Granite s Strategic Plan 8
TO BE ONE OF AMERICA'S LEADING INFRASTRUCTURE COMPANIES 2016 Vision Be the company of choice for employees, owners and partners Be the leading US transportation contractor Expand our presence into multiple end-markets Establish a meaningful presence in Canada and US Protectorates Lead the construction industry in sustainability 9
TRANSACTION Strategic Rationale Expands presence into targeted end markets Demonstrated expertise in several priority end markets Represents large markets with attractive long-term fundamentals Combined capabilities and footprint offer significant incremental opportunities Granite s size, resources and core capabilities enables Kenny to compete for larger projects Opportunity for significant pipe rehabilitation projects in Western U.S. by utilizing Granite s footprint to expand business beyond Chicago and Colorado Complements organizational culture Completed multiple award-winning complex heavy-civil projects Demonstrated history of successful joint ventures and long-term alliances with owners Recognized leader in safety 10
TRANSACTION Summary Acquisition price of $130 million Granite to receive step-up in assets for tax purposes 5.0x EBITDA, based on effective net purchase price Financed through cash and borrowings under existing line of credit Transaction has been closed and will become effective on December 31, 2012 Break even impact for 2013 EPS, including integration costs and intangible asset amortization primarily related to value of existing backlog Accretive in 2013 excluding intangible amortization 11
ACQUISITION Key Takeaways Expands presence into targeted end markets Enhanced capabilities and footprint offer significant incremental opportunities Complements organizational structure Financially attractive transaction 12