Acquisitions (Tables)

9 Months Ended

Sep. 30, 2018

Schedule of Preliminary Purchase Price Allocation

In accordance with ASC 805, the total purchase price and assumed liabilities were allocated to the net tangible and identifiable intangible assets based on their estimated fair values as of June 14, 2018 as presented in the table below (in thousands).

We expect to finalize these amounts within 12 months from the acquisition date.

Assets
Cash	$	2,995
Receivables		70,160
Contract assets		44,947
Inventories		23,424
Other current assets		5,533
Property and equipment		185,353
Investments in affiliates		55,400
Deferred income taxes		24,335
Other noncurrent assets		17,868
Total tangible assets		430,015
Identifiable intangible assets		58,448
Liabilities
Identifiable intangible liabilities		6,700
Accounts payable		38,321
Contract liabilities		7,854
Accrued expenses and other current liabilities		47,583
Long-term debt		191,500
Other long-term liabilities		31,893
Total liabilities assumed		323,851
Total identifiable net assets acquired		164,612
Goodwill		185,228
Estimated purchase price	$	349,840

Summary of amortized intangible assets and liabilities

The following table lists amortized intangible assets and liabilities from the Layne and LiquiForce acquisitions that are included in other noncurrent assets and other long-term liabilities in the condensed consolidated balance sheets as of September 30, 2018 (in thousands):

	Weighted Average Useful Lives (Years)		Gross Value		Accumulated Amortization			Net Value
Assets
Customer relationships		7	$	33,391	$	(2,813	)	$	30,578
Backlog		3		9,488		(4,013	)		5,475
Developed technologies		4		9,276		(817	)		8,459
Trademarks/trade names		4		8,996		(770	)		8,226
Favorable contracts		3		4,900		(1,511	)		3,389
Covenants not to compete and other		5		873		(103	)		770
Intangible assets			$	66,924	$	(10,027	)	$	56,897
Liabilities
Unfavorable contracts		2	$	6,897	$	(3,209	)	$	3,688
Unfavorable leases		1		300		(88	)		212
Intangible liabilities			$	7,197	$	(3,297	)	$	3,900

Schedule of Goodwill

The following table presents the goodwill balance by reportable segment:

(in thousands)	September 30, 2018		December 31, 2017		September 30, 2017
Transportation	$	19,798	$	19,798	$	19,798
Water		135,230		618		618
Specialty		39,821		31,437		31,437
Materials		49,847		1,946		1,946
Total goodwill	$	244,696	$	53,799	$	53,799

Goodwill represents the excess of the purchase price over the fair value of the underlying net tangible and intangible assets. The factors that contributed to the recognition of goodwill from the acquisitions of Layne and LiquiForce include acquiring a workforce with capabilities in the global water management, construction and drilling markets, cost savings opportunities and synergies. For the Layne acquisition, we recorded $128.9 million, $47.9 million, and $8.4 million of goodwill allocated to our Water, Materials and Specialty reportable segments, respectively. For the LiquiForce acquisition, we recorded $19.2 million in goodwill that was allocated to our Water reportable segment. The goodwill from both acquisitions is not expected to be deductible for income tax purposes. The following table presents the changes in goodwill since December 31, 2017 (in thousands):

Balance at December 31, 2017	$	53,799
Layne acquisition goodwill		185,228
LiquiForce acquisition goodwill		19,264
Reclassification of goodwill to assets held for sale		(13,450	)
Goodwill translation adjustment		(145	)
Balance at September 30, 2018	$	244,696

Schedule of Pro Forma Financial Information

The financial information in the table below summarizes the combined results of operations of Granite and Layne, on a pro forma basis, as though the companies had been combined as of January 1, 2017 (in thousands, except per share amounts). The pro forma financial information is presented for informational purposes only and is not indicative of the results of operations that would have been achieved if the acquisition had taken place on January 1, 2017.

	Three Months Ended September 30,		Nine Months Ended September 30,
	2017		2018		2017
Revenue	$	1,087,111	$	2,638,664	$	2,539,178
Net income (loss)		39,550		81,151		(25,271	)

Net income (loss) attributable to Granite		37,477		73,661		(29,422	)
Basic net income (loss) per share attributable to common shareholders		0.82		1.61		(0.65	)
Diluted net income (loss) per share attributable to common shareholders		0.80		1.60		(0.65	)

Summary of Acquisition and Integration Expenses

Acquisition and integration expenses associated with both the Layne and LiquiForce acquisitions for the three and nine months ended September 30, 2018 were comprised of the following (in thousands):

	Three Months Ended		Nine Months Ended
	September 30, 2018		September 30, 2018
Professional services and other expenses	$	7,083	$	33,556
Severance and personnel costs		2,251		10,474
Total	$	9,334	$	44,030