10-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended	Commission file number
December 30, 2006	000-23943
PETER KIEWIT SONS’, INC. (Exact name of registrant as specified in its charter)
Delaware	91-1842817
(State of Incorporation)	(I.R.S. Employer Identification No.)
Kiewit Plaza, Omaha, Nebraska	68131
(Address of principal executive offices)	(Zip Code)
(402) 342-2052 (Registrant’s telephone number, including area code) Securities registered pursuant to Section 12(b) of the Act:  None Securities registered pursuant to Section 12(g) of the Act:  Common Stock, par value $0.01
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.  Yes [  ] No [X]
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 [  ] 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 [  ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K 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.  [X]
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer.  See definition of “accelerated filer and large accelerated filer” in rule 12b-2 of the Exchange Act.  (Check one.):  Large accelerated filer [   ]          Accelerated filer [ X ]          Non-accelerated filer [   ]
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).   Yes [  ] No [X]
The registrant’s stock is not publicly traded, and therefore, there is no ascertainable market value of voting stock held by non-affiliates.
18,560,855 shares of the registrant’s $0.01 par value Common Stock were issued and outstanding on February 27, 2007.
Portions of the registrant’s definitive proxy statement for its 2007 Annual Meeting of Stockholders are incorporated by reference into Part III of this Form 10-K.

TABLE OF CONTENTS
		Page
Part I
Item 1.	Business	1
Item 1A.	Risk Factors	4
Item 1B.	Unresolved Staff Comments	6
Item 2.	Properties	6
Item 3.	Legal Proceedings	7
Item 4.	Submission of Matters to a Vote of Security Holders	8
Item 4A.	Executive Officers of the Registrant	8
Part II
Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	11
Item 6.	Selected Financial Data	14
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	15
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	24
Item 8.	Financial Statements and Supplementary Data	26
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosures	54
Item 9A.	Controls and Procedures	54
Item 9B.	Other Information	56
Part III
Item 10.	Directors, Executive Officers and Corporate Governance	56
Item 11.	Executive Compensation	56
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	57
Item 13.	Certain Relationships and Related Transactions, and Director Independence	57
Item 14.	Principal Accountant Fees and Services	57
Part IV
Item 15.	Exhibits and Financial Statement Schedules	57
	Signatures	60

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PART I

Item 1.        Business.

Forward Looking Statements.

This document contains forward looking statements and information that are based on the beliefs of management as well as assumptions made by and information currently available to Peter Kiewit Sons', Inc. (“PKS,” which together with its subsidiaries in which it has or had control and variable interest entities of which it is the primary beneficiary is referred to herein as the “Company”).  When used in this document, the words “anticipate,” “believe,” “estimate,” “expect” and similar expressions, as they relate to the Company or its management, are intended to identify forward-looking statements.  Such statements reflect the current views of the Company with respect to future events and are subject to certain risks, uncertainties and assumptions.  Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may v ary materially from those described in this document.

General.

The Company is one of the largest construction contractors in the United States and Canada. The Company is also engaged in the coal mining business.  See Note 15 of the “Notes to Consolidated Financial Statements” for revenue, operating income and total assets by segment.  PKS was incorporated in Delaware in 1997, and is a successor to a Delaware corporation that was incorporated in 1941, which itself was the successor of a construction business enterprise founded in Omaha, Nebraska in 1884.

The Construction Business.

The Company performs construction services for a broad range of public and private customers primarily in the United States and Canada.  New contract awards during 2006 and 2005 were distributed among the following construction markets (approximately, by percentage of the total construction contract value) and construction revenue earned during 2006 and 2005 was distributed among the following construction markets (approximately, by percentage of the total construction revenue earned):

	2006		2005
Market	New Contract Awards	Construction Revenue Earned	New Contract Awards	Construction Revenue Earned
Transportation (including highways, bridges, airports, mass transit and rail)	37%	45%	42%	50%
Power/heat/cooling	19%	15%	17%	6%
Commercial building	11%	8%	10%	9%
Sewage and solid waste	9%	4%	7%	2%
Petroleum	9%	9%	4%	11%
Water supply/dams	7%	7%	6%	7%
Electrical	6%	4%	7%	7%
Mining	-	3%	4%	3%
All other markets	2%	5%	3%	5%
	100%	100%	100%	100%
The Company primarily performs construction services as a general contractor. As a general contractor, the Company is responsible for the overall direction and management of construction projects and for completion of each contract in accordance with its terms, plans, and specifications.  The Company plans and schedules the projects, procures materials, hires workers as needed, and awards subcontracts. The Company generally requires performance and payment bonds or other assurances of operational capability and financial capacity from its subcontractors.

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Contract Types.

The Company performs its construction work under various types of contracts, including fixed unit or lump-sum price, guaranteed maximum price, and cost-reimbursable (cost-plus) contracts.  Contracts are either competitively bid and awarded or negotiated.  The Company’s public contracts generally provide for the payment of a fixed price for the work performed. Profit on a fixed-price construction contract is realized on the difference between the contract price and the actual costs of construction, and the contractor bears the risk that it may not be able to perform all the work for the specified amount.  Profit on a cost-plus construction contract is realized on the amount the contractor is contractually able to bill in excess of the actual costs of construction, and the owner bears the risk that total costs may exceed the estimated amount.  Credit risk is minimal with public (government) owners since funds generally have been a ppropriated by the governmental project owner prior to commencing work on public projects.  Most public contracts are subject to termination at the election of the governmental contracting entity.  In the event of termination, however, the contractor is generally entitled to receive the contract price on completed work and payment of certain termination-related costs.  Credit risk with private owners is minimized because of statutory mechanics liens, which give the Company high priority in the event of lien foreclosures following financial difficulties of private owners.  Construction contracts generally provide for progress payments as work is completed, with a retainage, ranging from zero to ten percent, to be paid when performance is substantially complete.  In some instances, the Company is able to substitute bank letters of credit or escrowed securities in lieu of retainage.  Construction contracts frequently contain penalties or liquidated damages for late completion and i nfrequently provide bonuses for early completion.

Government Contracts.

Public contracts accounted for approximately 63% in 2006 and 70% in 2005, respectively, of the dollar value of construction contracts awarded to the Company and 61% in 2006 and 63% in 2005, respectively, of construction revenue earned by the Company.  Most of these contracts were awarded by government and quasi-government agencies under fixed price contracts after competitive bidding.  During 2006 and 2005, construction revenue recognized from a single public owner represented 9% and 11%, respectively, of the Company’s total revenue.  

Competition.

A contractor’s competitive position is based primarily on its prices for construction services, its ability to obtain performance bonds and its reputation for quality, timeliness, experience, and financial strength. The construction industry is highly competitive and lacks firms with dominant market power.  In 2006, Engineering News Record, a construction trade publication, ranked the Company as the eighth largest United States contractor in terms of 2005 revenue.  In terms of 2005 revenue, it ranked the Company as the second largest in the Domestic Heavy Contractor market and second in the Transportation market. It also ranked the Company in the top fifteen of various other construction markets and ranked it the ninth largest Contractor by New Contracts in terms of 2005 contract revenue.

Demand.

The volume and profitability of the Company’s construction work depends to a significant extent upon the general state of the economies of the United States and Canada, and the volume of work available to contractors. Fluctuating demand cycles are typical of the industry, and such cycles determine to a large extent the degree of competition for available projects.  The Company’s construction operations could be adversely affected by labor stoppages or shortages, adverse weather conditions, shortages of supplies, or governmental action.  The volume of available government work is affected by budgetary and political considerations.  A significant decrease in the amount of new government contracts, for whatever reason, would have a material adverse effect on the Company.

2

Backlog.

At the end of 2006 and 2005, the Company had construction backlog (anticipated revenue from uncompleted contracts) of approximately $6.3 billion and $5.8 billion, respectively.  Of current construction backlog, approximately $2.8 billion is not expected to be completed during 2007.  Additionally, the Company was low or selected bidder on $0.8 billion and $2.1 billion of jobs that had not yet been awarded at December 30, 2006 and December 31, 2005, respectively.  In 2006, the Company was awarded 212 jobs with total contract prices of approximately $4.0 billion and an average price of approximately $19 million per job and in 2005, the Company was awarded 241 jobs with total contract prices of approximately $4.5 billion and an average price of approximately $19 million per job.  There were 38 new projects with contract prices over $25 million, accounting for approximately 80% of the successful bid volume.  The Company 6;s 10 largest jobs in backlog make up 40% of total backlog at December 30, 2006 and 38% as of December 31, 2005.  A single owner makes up approximately 9% and 10% of total construction backlog at December 30, 2006 and December 31, 2005, respectively.

Joint Ventures.

The Company frequently enters into joint ventures to efficiently allocate expertise and resources among the venturers and to spread risks associated with particular projects.  In most joint ventures, if one venturer is financially unable to bear its share of expenses, the other venturers would be required to pay those costs.  The Company prefers to act as the sponsor of its joint ventures.  The sponsor generally provides the project manager, the majority of venturer-provided personnel, and accounting and other administrative support services.  The joint venture generally reimburses the sponsor for such personnel and services on a negotiated basis. The sponsor is generally allocated a majority of the venture’s profits and losses and usually has a controlling vote in joint venture decision-making.  During 2006 and 2005, the Company derived approximately 79% and 86%, respectively, of its construction joint venture revenue from sponsored joint ventures.  Joint venture revenue accounted for approximately 27% and 31% of its 2006 and 2005 total construction revenue, respectively.

Locations.

The Company has 21 principal construction operating offices located throughout North America, including its headquarters located in Omaha, Nebraska.  Through its decentralized system of management, the Company has been able to quickly respond to changes in local markets.  During 2006, the Company had construction projects in 36 states and 7 Canadian provinces.  Financial information about geographic areas for the fiscal years ended December 30, 2006, December 31, 2005 and December 25, 2004 is included in Note 15 of the "Notes to Consolidated Financial Statements."

The Coal Mining Business.

The Company owns and operates the Calvert Mine located in Texas and the Buckskin Mine located in Wyoming.  Each is a surface mining operation that produces coal used in domestic coal-fired electric generation facilities.  The Company produced and sold 25 million tons of coal from these mines in 2006.  The Company also manages two active surface coal mines located in the western United States.

Production and Distribution.

The Calvert Mine is located in Robertson County, Texas.  Overburden removal is conducted by means of a large, earth-moving machine called a dragline.  Mining operations are conducted by trucks and power shovels.  The Calvert Mine produces lignite for an electrical generation facility located adjacent to the mine.  The lignite is delivered to the facility by Company-owned haul trucks.

The Buckskin Mine is located in Campbell County, Wyoming.  Overburden removal and mining operations are conducted by trucks and power shovels.  The mined coal is processed through a loading facility and is delivered by a railroad line operated by the BNSF Railway Company.

Customers.

Three significant customers accounted for 23%, 16% and 11% of the 2006 coal mining business segment revenue, and 30%, 15% and 11% of the 2005 coal mining business segment revenue.

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Long-term Coal Supply Contracts and Backlog.

The Company’s coal sales generally are made under multi-year supply contracts.  At the end of 2006 and 2005, the Company had a sales backlog of approximately 122 million and 121 million tons of coal, respectively.  The remaining terms on these contracts range from less than 1 year to 20 years.  

Each contract has a base price, and most contain provisions to adjust the base price for changes in statutes or regulations.  Certain contracts allow for price adjustments based on actual cost experience or as measured by public indices.  Each contract includes coal quality and delivery volume specifications and includes penalties for failure to meet these specifications.

Competition.

The coal mining industry is highly competitive.  The Company not only competes with other domestic and foreign coal suppliers, some of whom are larger, but also with alternative methods of generating electricity.  Demand for the Company’s coal is affected by political, economic and regulatory factors.  Sales from the Buckskin Mine occur at the loading facility and require the customer to obtain transportation to their generating plant.  Transportation cost is a significant portion of the customer’s delivered cost of coal.  Many western coal companies are served by two railroads allowing the customer to potentially benefit from an additional distribution channel and competition between railroads compared to the single line available at the Buckskin Mine.

Environmental Protection.

Compliance with the United States, Canadian, state, provincial and local provisions regulating the discharge of materials into the environment, land restoration or otherwise relating to the protection of the environment, has not and is not expected to have a material effect upon the capital expenditures, results of operations, or competitive position of the Company’s operations except for reclamation accruals as described in Note 12 of the consolidated financial statements.

Employees.

At the end of 2006, the Company employed approximately 14,700 people.  Included in this number are approximately 7,100 employees subject to various collective bargaining agreements with labor unions.  During 2006, the Company was a participant in approximately 217 collective bargaining agreements.  These agreements typically expire within 1 to 3 years.  The Company considers relations with its employees and labor unions to be good.

Available Information.

Financial and other information of the Company can be accessed, free of charge, at its website www.kiewit.com.  The Company makes available at its website its periodic annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments thereto as soon as reasonably practicable after such material is electronically filed with or furnished to the Securities and Exchange Commission.

Item 1A.      Risk Factors.

The risks associated with the businesses of the Company include all of the risks inherent in the construction and coal mining businesses, including, but not limited to:

The risks associated with increasing competition in the businesses.

Market competition can adversely affect the results of the Company’s operations.  A contractor's competitive position is based primarily on its prices for construction services, ability to obtain performance bonds, its reputation for quality, timeliness, experience and financial strength.  The construction industry is highly competitive and lacks firms with dominant market power.  The Company may or may not secure work by being the lowest bidder on competitive construction projects.

The coal mining industry is highly competitive.  The Company not only competes with other domestic and foreign coal suppliers, some of whom are larger, but also with alternative methods of generating electricity.

4

The risk of attracting and retaining qualified personnel in a competitive environment.

The Company is dependent upon its ability to attract and retain highly qualified managerial, technical and business development personnel.  The Company can not be certain that it will retain key managerial, technical and business development personnel or that it will be able to attract and assimilate key personnel in the future.  Failure to retain or attract such personnel could adversely affect the Company’s future business operations, financial position, future results of operations and future cash flows.

The impact on the businesses of changes in national and regional economies.

The volume and profitability of the Company's construction operations depend to a significant extent upon the general state of the economies of the United States and Canada.  The construction business is dependent on the volume of work available to contractors.

The cyclical nature of the businesses.

Fluctuations in demand for the Company’s construction services can adversely affect the Company’s results of operations.  Fluctuating demand cycles are typical of the construction industry, and such cycles determine to a large extent the degree of competition for available projects.

The risks of cost overruns and job losses on particular projects.

Certain types of construction contracts pose greater risks than others.  The Company performs its construction work under various types of contracts, including fixed unit or lump-sum price, guaranteed maximum price, and cost-reimbursable contracts.  Such contracts are either competitively bid and awarded or negotiated.  Public and many private construction contracts generally provide for the payment of a fixed price for the work performed.  Profit on a fixed-price contract is realized on the difference between the contract price and the actual costs of construction, and the contractor bears the risk that it may not be able to perform all the work for the specified price.  Construction contracts frequently contain penalties or liquidated damages for late completion.

The risks associated with increases in costs of labor, fuel or materials, labor stoppages or shortages, adverse weather conditions, shortages of supplies and government actions.

The Company’s construction operations have been and could be adversely affected by increases in costs of labor, fuel or materials, labor stoppages or shortages, adverse weather conditions, shortages of supplies or governmental action. The volume of available government construction work is affected by budgetary and political considerations.  A significant decrease in the amount of new government contracts, for whatever reason, could have a material adverse effect on the Company’s results of operations.

The risk that the Company’s joint venture partners may not be able to meet their obligation.

The Company participates in various construction joint ventures.  Generally, each construction joint venture is formed to accomplish a specific project, is jointly controlled by the joint venture partners and is dissolved upon completion of the project.  The Company selects its joint venture partners based on its analysis of the prospective venturer’s construction and financial capabilities, expertise in the type of work to be performed and past working relationships with the Company, among other criteria.  The joint venture agreements typically provide that the interests of the Company in any profits and assets, and its respective share in any losses and liabilities that may result from the performance of the contract are limited to the Company’s stated percentage interest in the project.  The venture’s contract with the project owner typically requires joint and several liability, however the Company’s agreements with its joint ve nture partners provide that each party will assume and pay its full proportionate share of any losses resulting from a project.  Under these agreements, if one partner is unable to bear its share of the costs, the other partners will be required to pay those costs.  The Company regularly evaluates the financial stability of its business partners.  

The costs and restraints imposed upon operations by regulatory requirements.

Changes in the United States, Canadian, state, provincial and local provisions regulating the discharge of materials into the environment, land restoration or otherwise relating to the protection of the environment, could have a material effect upon the Company’s operations.

5

The risk of bankruptcy of, or nonpayment by, owners.

Credit risk with private owners of construction contracts is minimized because of statutory mechanics liens, which give the Company high priority in the event of lien foreclosures following financial difficulties of private owners.  Construction contracts generally provide for progress payments as work is completed, with a retainage, ranging from zero to ten percent, to be paid when performance is substantially complete.  In some instances, the Company is able to substitute bank letters of credit or escrowed securities in lieu of retainage.  

Public (government) construction contracts typically account for a significant portion of the combined prices of contracts awarded to the Company.  Most of these contracts are awarded by government and quasi-government units under fixed price contracts after a competitive bidding process.  Credit risk is minimal with public (government) owners since funds generally have been appropriated by the governmental project owner prior to commencing work on public projects.  Most public contracts are subject to termination at the election of the governmental contracting entity. In the event of termination, however, the contractor is generally entitled to receive the contract price on completed work and payment of certain termination-related costs.

Unanticipated mine operating conditions and other factors that are not within the Company’s control may impact coal production levels and costs.

The Company’s mining operations are inherently subject to changing conditions that can affect levels of production and production costs for varying lengths of time.  The Company is exposed to commodity price risk related to its purchase of diesel fuel and explosives.  Further, the Company is subject to price and availability risks related to other significant inputs that include tires and specialized mining equipment.  In addition, weather conditions, equipment replacement or repair, fires, variations in thickness of the layer, or seam, of coal, amounts of overburden, rock and other natural materials and other geological conditions, can impact the Company’s levels of production and production costs.

The Company faces numerous uncertainties in estimating its economically recoverable coal reserves.

The Company bases its reserve information on geological data assembled and analyzed by its staff, which includes various engineers and geologists, and periodically reviewed by outside firms.  The reserve estimates are annually updated to reflect production of coal from the reserves and new drilling or other data received.  There are numerous uncertainties inherent in estimating quantities of recoverable reserves, including many factors beyond the Company’s control.  These estimates thus may not accurately reflect the Company’s actual reserves.

Item 1B.      Unresolved Staff Comments.

None.

Item 2.        Properties.

The Company’s headquarters facilities are located in Omaha, Nebraska and are owned by the Company.

The Construction Business.

The Company has 20 construction district offices located in Arizona, California, Colorado, Georgia, Kansas, Massachusetts, Nebraska, New Jersey, Texas, Washington, Alberta and Quebec, 12 of which are owned and 8 of which are leased facilities.  The Company also has 24 construction area offices located in Alaska, Arkansas, California, Colorado, Florida, Hawaii, Illinois, Nebraska, New Mexico, New York, Texas, Washington, Alberta, British Columbia and Ontario, 4 of which are owned and 20 of which are leased facilities.  The Company owns or leases numerous shops, equipment yards, storage facilities, warehouses and construction material quarries.  Since construction projects are inherently temporary and location-specific, the Company owns approximately 1,700 portable offices, shops and transport trailers.  The Company has a large construction equipment fleet, including approximately 4,500 trucks, pickups and automobiles and 1,800 heavy c onstruction vehicles, such as graders, scrapers, backhoes and cranes.  

6

The Coal Mining Business.

The Company’s two coal mines, the Calvert Mine and the Buckskin Mine, are located in Robertson County, Texas and Campbell County, Wyoming, respectively.  The Company has a significant coal mining equipment fleet, including 1 dragline, 8 shovels/excavators, 94 other heavy mining vehicles and approximately 100 trucks, pickups, automobiles and transport trailers.

The Company estimates that its total recoverable coal reserves are in excess of 548 million tons, pursuant to federal and private coal leases. The yield from the mining of these reserves is based on an estimate of volume that can be economically and legally extracted to meet current market demand. The Company’s reserve estimates are prepared by experienced mining engineers and other operating personnel of the Company using drilling and geological studies in conjunction with mine planning software. The following table summarizes the Company’s principal mine locations and estimated reserves at December 30, 2006:

	Annual Production	Nature of	Years Until Reserve	Estimated Reserves
Mine	(in millions of tons)	Interest	Depletion	(in millions of tons)
Buckskin Mine	23	Leased	20	511
Calvert Mine	2	Leased	19	37

Item 3.        Legal Proceedings.

The Company is involved in various lawsuits and claims incidental to its business.  Management believes that any resulting liability, beyond that provided, should not materially affect the Company’s financial position, future results of operations or future cash flows.

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Item 4.        Submission of Matters to a Vote of Security Holders.
None during the three months ended December 30, 2006.
Item 4A.       Executive Officers of the Registrant.
The table below shows information as of February 27, 2007, about each executive officer of PKS, including his business experience during the past five years. PKS’ executive officers are elected annually to serve until their successors are elected and qualified or until their death, resignation or removal.
Name	Business Experience	Age
Scott L. Cassels	Mr. Cassels has been a Division Manager of PKS since May 2002.  Mr. Cassels has been a Senior Vice President of Kiewit Corporation, a subsidiary of PKS, since December 2004, a Senior Vice President of Kiewit Construction Company, a subsidiary of PKS, since June 2002 and President of Gilbert Industrial Corporation, a subsidiary of PKS, since June 2002.  Mr. Cassels was President of Gilbert Central Corp., a subsidiary of PKS, from June 2002 until June 2003 and was President of Kiewit Southern Co., a subsidiary of PKS, from August 1994 until June 2002.  Mr. Cassels has been a director of PKS since June 2004 and is a member of the Executive Committee of PKS’ board of directors.	48
John B. Chapman	Mr. Chapman has been Vice President of Human Resources and Administration of PKS since August 1997.	61
Richard W. Colf	Mr. Colf has been an Executive Vice President of PKS since July 1998.  Mr. Colf has been an Executive Vice President of Kiewit Corporation since December 2004 and an Executive Vice  President of Kiewit Pacific Co., a subsidiary of PKS, since September 1998.  Mr. Colf has been a director of PKS since August 1997 and is a member of the Executive Committee of PKS’ board of directors.  Mr. Colf was first elected to the board of directors of PKS’ former parent corporation in 1994.	63
Bruce E. Grewcock	Mr. Grewcock has been Chief Executive Officer of PKS since December 2004 and President of PKS since December 2000.  Mr. Grewcock was Chief Operating Officer of PKS from December 2000 until December 2004 and was an Executive Vice President of PKS from August 1997 until December 2000.  Mr. Grewcock has been President and Chief Executive Officer of Kiewit Corporation since December 2004.  Mr. Grewcock has been a director of PKS since August 1997 and is a member of the Executive Committee of the Board.  Mr. Grewcock was first elected to the board of directors of PKS’ former parent corporation in 1994.	53
Steven Hansen	Mr. Hansen has been a Division Manager of PKS since December 1997.  Mr. Hansen has been a Senior Vice President of Kiewit Corporation since December 2004, a Senior Vice President of Kiewit Construction Company since June 1999 and a Senior Vice President of Kiewit Pacific Co. since June 1998.  Mr. Hansen has been a director of PKS since June 2004 and is a member of the Executive Committee of PKS’ board of directors.	60

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Ben E. Muraskin	Mr. Muraskin has been the Treasurer of PKS since June 2003 and a Vice President of PKS since January 2000.  Mr. Muraskin is currently a director of Kiewit Investment Fund LLLP.	42
Christopher J. Murphy	Mr. Murphy has been a Division Manager and Vice President of PKS since August 2004.  Mr. Murphy has been a Senior Vice President of Kiewit Corporation since December 2004 and President of Kiewit Mining Group Inc., a subsidiary of PKS, since October 2005.  Mr. Murphy was President of Rinker Materials Corporation’s Western United States Division from October 2002 until August 2004.  Mr. Murphy was a Director, President and Chief Executive Officer of Kiewit Materials Company, a former subsidiary of PKS, from June 2000 until October 2002.  Prior to serving as Director, President and Chief Executive Officer of Kiewit Materials Company, since January 1980, Mr. Murphy held various positions with Decker Coal Company and Kiewit Mining Group Inc.  Mr. Murphy has been a director of PKS since June 2006.	52
Douglas E. Patterson	Mr. Patterson has been an Executive Vice President of PKS since November 2001.  Mr. Patterson has been an Executive Vice President of Kiewit Corporation since December 2004.  Mr. Patterson has been a director of PKS since June 2001 and is a member of the Executive Committee of PKS’ board of directors.	55
R. Michael Phelps	Mr. Phelps has been a Division Manager of PKS since May 1999.  Mr. Phelps has been a Senior Vice President of Kiewit Corporation since December 2004, a Senior Vice President of Kiewit Construction Company since June 2004, a Senior Vice President of Kiewit Pacific Co. since June 1999, and a Senior Vice President of Kiewit Western Co., a subsidiary of PKS, since July 1999.  Mr. Phelps has been a director of PKS since June 2004 and is a member of the Executive Committee of PKS’ board of directors.	53
Michael J. Piechoski	Mr. Piechoski has been a Senior Vice President of PKS since December 2004 and Chief Financial Officer of PKS since November 2002.  Mr. Piechoski was a Vice President of PKS from June 2000 until December 2004.  Mr. Piechoski was Treasurer of PKS from June 2000 until June 2003.	52
Kirk R. Samuelson	Mr. Samuelson has been a Division Manager of PKS since November 2001.  Mr. Samuelson has been a Senior Vice President of Kiewit Corporation since December 2004, a Senior Vice President of Kiewit Construction Company since June 2002, a Senior Vice President of Kiewit Pacific Co. since June 2005, a Senior Vice President of Kiewit Western Co. since June 2002 and President of Kiewit Federal Group Inc., a subsidiary of PKS, since June 2005.  Mr. Samuelson has been a director of PKS’ board of directors since June 2006.	49
Tobin A. Schropp	Mr. Schropp has been a Senior Vice President of PKS since November 2002 and General Counsel and Secretary of PKS since September 1998.  Mr. Schropp was a Vice President of PKS from September 1998 until November 2002.	44

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Thomas S. Shelby	Mr. Shelby has been a Division Manager of PKS since June 2004.  Mr. Shelby has been a Senior Vice President of Kiewit Corporation since December 2004, a Senior Vice President of Kiewit Construction Company since June 2004, President of Kiewit Energy Group Inc., a subsidiary of PKS, since June 2005 and was the President of Kiewit Industrial Co., a subsidiary of PKS, from June 2001 to June 2004.  Mr. Shelby has been a director of PKS since June 2006.	48
Michael J. Whetstine	Mr. Whetstine has been the Controller and Assistant Secretary of PKS since September 2003.  Mr. Whetstine has been a Vice President and the Controller of Kiewit Corporation since December 2004.  Mr. Whetstine served as Controller for DTN Corporation from January 2001 until August 2003.	40
PKS has adopted a Code of Ethics for Chief Executive Officer and Senior Financial Officers that applies to PKS’ Chief Executive Officer, Chief Financial Officer and Controller.  A copy of the Code of Ethics has been filed with the Securities and Exchange Commission and is referenced as Exhibit 14 to this Annual Report.  If PKS makes any substantive amendments to the Code of Ethics or grants any waiver from a provision of the Code of Ethics, PKS will disclose such information on a Current Report on Form 8-K with the Securities and Exchange Commission.

10

PART II

Item 5.        Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

Market Information.

As of December 30, 2006, PKS’ $0.01 par value redeemable common stock (“redeemable common stock”) was not listed on any national securities exchange or the NASDAQ National Market and there is no established public trading market for the redeemable common stock.

Repurchases.

Period	Total Number of Shares of Common Stock Repurchased	Average Price Paid per Share of Redeemable Common Stock
October 1, 2006 through October 31, 2006	6,937	$46.25
November 1, 2006 through November 30, 2006	-	-
December 1, 2006 through December 30, 2006	-	-
Total	6,937	$46.25

Pursuant to the terms of PKS’ Restated Certificate of Incorporation (“Certificate”), PKS is required to repurchase shares of redeemable common stock at a formula value, generally upon demand.  Redeemable common stock can generally be issued only to directors of PKS and employees of the Company and can be resold only to PKS at a formula value based on the year-end book value of PKS.
Formula Value.
The formula value of the redeemable common stock is based on the book value of PKS.  A significant element of the redeemable common stock formula value is the subtraction of the book value of property, plant and equipment used in the Company’s construction activities (approximately $176 million at December 30, 2006).
Restrictions.
Ownership of redeemable common stock is generally restricted to directors of PKS and active employees of the Company and is also conditioned upon the execution of repurchase agreements which restrict the transfer of the redeemable common stock.  Upon retirement, termination of employment, or death, PKS is required to repurchase the redeemable common stock at the applicable formula value, generally upon demand.
Stockholders.
On February 27, 2007, PKS had the following numbers of stockholders and outstanding shares:
Class of Stock	Stockholders	Outstanding Shares
Redeemable common stock	1,722	18,560,855

11

Dividends and Prices.
The chart below sets forth the cash dividends declared and paid on the redeemable common stock during 2006 and 2005 and the formula value after each dividend payment.
Dividend Declared	Dividend Paid	Dividend Per Share	Price Adjusted	Formula Price
January 4, 2005	January 5, 2005	$0.45	January 5, 2005	$38.05
April 22, 2005	May 2, 2005	$0.50	May 2, 2005	$37.55
January 4, 2006	January 5, 2006	$0.80	January 5, 2006	$47.10
April 28, 2006	May 1, 2006	$0.85	May 1, 2006	$46.25
PKS’ current dividend policy is to pay a regular cash dividend on redeemable common stock based on a percentage of the prior year’s net income before earnings attributable to redeemable common stock.
Subsequent to the year ended December 30, 2006, the Company declared and paid a dividend of $0.90 per share to shareholders of record at the close of business on January 4, 2007.

12

Performance Graph.

The Company’s redeemable common stock is not publicly traded. The Company’s Certificate contains a formula pursuant to which the redeemable common stock is valued. The graph below compares the cumulative total return (stock appreciation plus reinvested dividends) of the redeemable common stock for the five-year period 2002 through 2006, with the Standard and Poors’ Composite 500 Index and the Dow Jones Heavy Construction Index - US. Pursuant to the Certificate, for all periods presented in the graph below, the redeemable common stock was valued at the formula value determined by the Certificate at the end of the Company's fiscal year, reduced by dividends declared subsequent to such year-end.  For purposes of the graph, it has been assumed that dividends were immediately reinvested in additional shares of redeemable common stock, although such reinvestment was not permitted in actual practice. Although the Company’s fiscal year ended on the last Saturday in December, the redeemable common stock is compared against indexes which assume a fiscal year ending December 31.

The graph assumes that the value of the investment was $100 on December 31, 2001, and that all dividends and other distributions were reinvested.

	2001	2002	2003	2004	2005	2006
Peter Kiewit Sons', Inc. Redeemable Common Stock	100	130	160	192	245	308
S&P 500 Index	100	78	100	111	116	134
Dow Jones Heavy Construction Index - US	100	84	114	139	200	250

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Item 6.        Selected Financial Data.
The following table presents selected historical financial data of the Company as of and for the fiscal years ended 2002 through 2006, and is derived from the Company’s historical consolidated financial statements and the notes to those financial statements.
	Fiscal Year Ended
	2006		2005		2004		2003		2002
Results of operations:
Revenue	$	5,049	$	4,145	$	3,358	$	3,380	$	3,699
Net income before earnings attributable to redeemable common stock	$	274	$	228	$	201	$	157	$	193
Net income (1)	$	39	$	228	$	201	$	157	$	193
Per common share: (2)
Basic:	$	n/a	$	9.56	$	6.62	$	5.38	$	6.37
Diluted:	$	n/a	$	9.31	$	6.38	$	5.18	$	6.08
Dividends (3)	$	1.65	$	0.95	$	0.45	$	0.80	$	0.75
Formula price (4)	$	58.30	$	47.90	$	38.50	$	32.45	$	27.15
Book value	$	67.39	$	54.85	$	42.24	$	36.55	$	31.80
Financial position:
Total assets	$	2,721	$	2,370	$	2,217	$	1,889	$	1,876
Current portion of long-term debt	$	5	$	1	$	1	$	10	$	-
Long-term debt, net of current portion	$	25	$	38	$	36	$	22	$	24
Redeemable common stock  – liability (1)	$	1,130	$	-	$	-	$	-	$	-
Redeemable common stock – mezzanine equity (1)	$	-	$	1,082	$	1,333	$	1,106	$	995
(1) The Company adopted Statement of Financial Accounting Standards (“SFAS”) 150, “Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and Equity,” (“SFAS 150”) in 2006.  SFAS 150 requires the redeemable common stock to be recorded at formula value and presented as a liability in 2006.  Period to period changes in formula value represent an expense in the consolidated statement of operations captioned “Earnings attributable to redeemable common stock” beginning in 2006 which offsets a substantial portion of current year earnings.  Redeemable common stock is presented as mezzanine equity prior to 2006.  (See Note 2 “Redeemable Common Stock” in the audited consolidated financial statements).   The aggregate redemption value of redeemable common stock at December 30, 2006 and December 31, 2005 was $1,130 million and $945 million, respectively.
(2) Under the provisions of, SFAS 150, mandatorily redeemable shares are excluded from the calculation of earnings per share and as a result, no earnings per share have been presented for 2006 (see Note 2 “Redeemable Common Stock.”)
(3) The 2003 and 2002 dividends include $0.40 and $0.35 for dividends declared in those years, respectively, but paid in January of the subsequent year.
(4) Pursuant to the Certificate, the calculation of formula value, which is PKS’ stock price, is computed annually at the end of the fiscal year, except that adjustments to reflect dividends are made when declared.

14

Item 7.        Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The Company primarily operates in the construction industry and currently has two reportable operating segments, construction and coal mining.  The construction segment performs services for a broad range of public and private customers primarily in the United States and Canada.  Construction services are currently performed in the following construction markets: transportation (including highways, bridges, airports, mass transit and rail); petroleum; commercial building; electrical; water supply/dams; power/heat/cooling; mining; and sewage and solid waste.  The Company’s coal mining segment owns and manages coal mines in the United States that sell primarily to electric utilities.

The Company primarily performs its construction services as a general contractor.  As a general contractor, the Company is responsible for the overall direction and management of construction projects and for completion of each contract in accordance with its terms, plans, and specifications.  The Company plans and schedules the projects, procures materials, hires workers as needed, and awards subcontracts.  The Company generally requires performance and payment bonds or other assurances of operational capability and financial capacity from its subcontractors.

The Company performs its construction work under various types of contracts, including fixed unit or lump-sum price, guaranteed maximum price, and cost-reimbursable (cost-plus) contracts.  Contracts are either competitively bid and awarded or negotiated.  The Company’s public contracts generally provide for the payment of a fixed price for the work performed.  Profit on a fixed-price construction contract is realized on the difference between the contract price and the actual costs of construction, and the contractor bears the risk that it may not be able to perform all the work for the specified amount.  Profit on a cost-plus construction contract is realized on the amount the contractor is contractually able to bill in excess of the actual costs of construction, and the owner bears the risk that total costs may exceed the estimated amount.  Credit risk is minimal with public (government) owners since funds generally have been appropriated by the governmental project owner prior to commencing work on public projects.  Most public contracts are subject to termination at the election of the governmental contracting entity. In the event of termination, however, the contractor is generally entitled to receive the contract price on completed work and payment of certain termination-related costs.  Credit risk with private owners is minimized because of statutory mechanics liens, which give the Company high priority in the event of lien foreclosures following financial difficulties of private owners.  Construction contracts generally provide for progress payments as work is completed, with a retainage, ranging from zero to ten percent, to be paid when performance is substantially complete.  In some instances, the Company is able to substitute bank letters of credit or escrowed securities in lieu of retainage.  Construction contracts frequently contain penalties or liquidated damages for late completion and i nfrequently provide bonuses for early completion.

The construction industry is highly competitive and lacks firms with dominant market power.  A substantial portion of the Company’s business involves construction contracts obtained through competitive bidding.  A contractor’s competitive position is based primarily on its prices for construction services, its ability to obtain performance bonds, its reputation for quality, timeliness, experience and financial strength.  The volume and profitability of the Company’s construction work depends to a significant extent upon the general state of the economies of the United States and Canada, and the volume of work available to contractors.  Fluctuating demand cycles are typical of the industry, and such cycles determine to a large extent the degree of competition for available projects.  The Company’s construction operations could be adversely affected by increases in costs of labor, fuel or materials, labor stopp ages or shortages, adverse weather conditions, shortages of supplies, or governmental action. The volume of available government work is affected by budgetary and political considerations.  A significant decrease in the amount of new government contracts, for whatever reason, would have a material adverse effect on the Company.  For the fiscal years ended December 30, 2006 and December 31, 2005, public contracts accounted for approximately 63% and 70%, respectively, of the combined prices of contracts awarded to the Company.  For the fiscal years ended December 30, 2006 and December 31, 2005, public contracts accounted for approximately 61% and 63%, respectively, of revenue earned by the Company.  Most of these contracts were awarded by government and quasi-government agencies under fixed price contracts after competitive bidding.  During 2006 and 2005, construction revenue recognized from a single owner represented 9% and 11%, respectively, of the Company’s total revenue.

15

The Company frequently enters into joint ventures to efficiently allocate expertise and resources among the venturers and to spread risks associated with particular construction projects. In most joint ventures, if one venturer is financially unable to bear its share of expenses, the other venturers would be required to pay those costs.  The Company prefers to act as the sponsor of its joint ventures.  The sponsor generally provides the project manager, the majority of venturer-provided personnel, and accounting and other administrative support services.  The joint venture generally reimburses the sponsor for such personnel and services on a negotiated basis. The sponsor is generally allocated a majority of the venture’s profits and losses and usually has a controlling vote in joint venture decision-making.  During 2006 and 2005, the Company derived approximately 79% and 86%, respectively, of its construction joint venture revenue f rom sponsored joint ventures.  Construction joint venture revenue accounted for approximately 27% and 31% of its 2006 and 2005 total construction revenue, respectively.

For the fiscal year ended December 25, 2004, joint ventures formed after December 31, 2003 were assessed for consolidation under the provisions of the Financial Accounting Standards Board (“FASB”) Interpretation No. 46 (revised December 2003), “Consolidation of Variable Interest Entities,” (“FIN 46-R”).  Those meeting the consolidation criteria of FIN 46-R were consolidated in the financial statements.  Those not meeting the criteria continued to be accounted for under Emerging Issues Task Force (“EITF”) Issue No. 00-1 “Investor Balance Sheets and Income Statement Display under the Equity Method for Investments in Certain Partnerships and Other Ventures,” (“EITF No. 00-1,”) which permits the use of the equity method in the consolidated balance sheet, and pro-rata consolidation of the Company’s share of the operations of these construction joint ventures in the consolidated statements of operations.  

Beginning with the fiscal year ended December 31, 2005, the Company additionally assessed joint ventures formed prior to December 31, 2003 and after December 25, 2004 for consolidation under the provisions of FIN 46-R.  Those meeting the consolidation criteria of FIN 46-R were consolidated in the financial statements.  Those not meeting the criteria were presented according to EITF No. 00-1 as previously described.  

The fiscal year ended December 25, 2004 has not been restated to consolidate construction joint ventures meeting the consolidation criteria of FIN 46-R.  Instead, the fiscal year continues to reflect the previously reported accounting as described above.  

The Company owns and operates the Calvert Mine located in Texas and the Buckskin Mine located in Wyoming.  Each is a surface mining operation that produces coal used in domestic coal-fired electric generation facilities.  The Company also manages two active surface coal mines located in the western United States.

The Company’s coal sales generally are made under multi-year supply contracts.  Each contract has a base price, and most contain provisions to adjust the base price for changes in statutes or regulations.  Certain contracts allow for price adjustments based on actual cost experience or as measured by public indices.  Each contract includes coal quality and delivery volume specifications and includes penalties for failure to meet these specifications.

The coal mining industry is highly competitive.  The Company not only competes with other domestic and foreign coal suppliers, some of whom are larger, but also with alternative methods of generating electricity.  Demand for the Company’s coal is affected by political, economic and regulatory factors.  Sales from the Buckskin Mine occur at the loading facility and require the customer to obtain transportation to their generating plant.  Transportation cost is a significant portion of the customer’s delivered cost of coal.  Many western coal companies are served by two railroads allowing the customer to potentially benefit from an additional distribution channel and competition between railroads compared to the single line available at the Buckskin Mine.  Sales and delivery from the Calvert Mine are to an adjacent generating plant.

Due to their competitive nature, the construction and coal mining industries experience lower margins than many other industries.  As a result, cost control is a primary focus of the Company.  The ability to control costs enables the Company to price more competitively and also to complete contracts profitably.  Further, since the formula value of redeemable common stock is based upon PKS’ book value, formula value is primarily driven by the Company’s ability to complete contracts profitably.  Consequently, the Company views both margin as a percentage of revenue and general and administrative expenses as a percentage of revenue as key measures of operating results.  

16

Results of Operations 2006 vs. 2005
Revenue.
Revenue from each of the Company’s segments was:
						2006					2005
						(dollars in millions)
Construction						$	4,853				$	3,974
Coal mining							196					171
						$	5,049				$	4,145
Total construction revenue increased $879 million or 22% from the same period in 2005, consistent with increases in backlog since 2004.  Increases in revenue include numerous construction projects spanning various markets including power/heat/cooling ($382 million), petroleum ($193 million) exclusive of a large oil and gas joint venture project located in Newfoundland, Canada (“the Oil and Gas Project”), transportation ($149 million), sewage and solid waste disposal ($128 million), commercial building ($70 million) and water supply/dams ($63 million).  Offsetting these increases was a decrease in revenue from the Oil and Gas Project of $96 million (including $88 million in claim revenue) as the Oil and Gas Project was substantially completed in 2005.  Given the non-recurring nature of construction projects, the mix and volume of construction projects by market often varies from period to period.
Construction contract backlog was $6.3 billion and $5.8 billion at December 30, 2006 and December 31, 2005, respectively.  Additionally, the Company was low or selected bidder on $0.8 billion and $2.1 billion of construction jobs that had not been awarded at December 30, 2006 and December 31, 2005, respectively.  Foreign operations, located primarily in Canada, represent 9% and 15% of construction backlog at December 30, 2006 and December 31, 2005, respectively.  Domestic construction projects are spread geographically throughout the United States.  The Company’s 10 largest jobs in backlog make up 40% and 38% of total backlog at December 30, 2006 and December 31, 2005, respectively.  A single owner in the western region of the United States makes up 9% and 10% of total construction backlog at December 30, 2006 and December 31, 2005, respectively.
Coal mining revenues increased $25 million or 15% from the same period in 2005.  The increase is primarily attributable to increased tons sold and, to a lesser degree, an increased sales price per ton.
Coal mining sales backlog at December 30, 2006 and December 31, 2005 was approximately 122 million and 121 million tons of coal, respectively.  The remaining terms on these contracts range from less than 1 year to 20 years.
Operating Income.
Operating income consists of margin (revenue less cost of revenue), general and administrative expenses and gain on sale of operating assets.  Operating income from each of the Company’s segments was:
		2006								2005
		Construction			Coal Mining					Construction				Coal Mining
	(dollars in millions)
Margin	$	664		$	47				$	631			$	44
General and administrative expenses		(285	)		(10			)		(259		)		(11	)
Gain on sale of operating assets		22			-					12				-
Operating income	$	401		$	37				$	384			$	33

17

Margin.

Total construction margin increased $33 million or 5% from the same period in 2005.  The increased margin is attributable to increases on numerous construction projects spanning various markets including power/heat/cooling ($54 million), water supply/dams ($42 million), petroleum ($40 million), sewage and solid waste disposal ($21 million), transportation ($17 million) and commercial building ($14 million).  Partially offsetting these increases was a loss of approximately $40 million on a mineral processing facility project located in Alberta, Canada.  In addition, margin on the Oil and Gas Project decreased a total of $89 million (including $88 million in claim margin) as the Oil and Gas Project was substantially completed in 2005.  Given the non-recurring nature of construction projects, the mix and volume of construction projects by market often varies from period to period.

Construction margin as a percentage of construction revenue for the fiscal year ended December 30, 2006 decreased to 14% from 16% for the same period in 2005, primarily due to the claim margin earned from the Oil and Gas Project in 2005.

Total coal mining margin increased $3 million or 7% from the same period in 2005.  However, the margin as a percentage of revenue decreased to 24% in 2006 from 26% in 2005 due to higher costs of mining that offset generally higher selling prices and lower fees earned from a mining services contract.

General and Administrative Expenses.

General and administrative expenses related to construction operations for the fiscal year ended December 30, 2006 increased $26 million from the same period in 2005, primarily due to increased salaries and bonuses of $23 million driven by continued expansion of the Company’s construction operations.  As a percentage of construction revenue, general and administrative expenses were 6% and 7% for the fiscal years ended December 30, 2006 and December 31, 2005, respectively.  This decrease is due to prior year’s compensation expense related to the vesting of convertible debentures and the fact that increased revenues did not require a proportionate increase in general and administrative expenses.

General and administrative expenses related to coal mining operations decreased $1 million in 2006 as compared to the same period in 2005.  As a percentage of coal mining revenue, general and administrative expenses decreased to 5% for 2006 from 6% in 2005.  

Gain on Sale of Operating Assets.  

Net gains on the disposition of property, plant and equipment and other assets during the fiscal years ended December 30, 2006 and December 31, 2005 were $22 million and $12 million, respectively.  Gain on sale of operating assets is affected to a large degree by market conditions and the specific types and quantity of pieces of equipment sold.

Other Income (Expense).  

Other income (expense) increased $7 million for the year ended December 30, 2006 from the same period in 2005 primarily due to increased interest income driven by increased interest rates.

Minority Interest in Income of Consolidated Subsidiaries.

Minority interest in income of consolidated subsidiaries consists primarily of the portion of the consolidated construction joint ventures that is not owned by the Company.  Minority interest in income of consolidated subsidiaries decreased $57 million to $43 million in 2006 from $100 million in 2005.  The majority of this decrease is attributable to the completion of the Oil and Gas Project in 2005.  

18

Income Tax Expense.
The effective income tax rates for the fiscal years ended December 30, 2006 and 2005 were 36% and 33%, respectively.  The 2006 effective tax rate differs from the federal statutory rate primarily due to state income taxes, offset by depletion deductions, the production activities deduction and tax exempt interest income.  In 2005, the rate is less than the federal statutory rate due to federal and state research and development tax credits claimed for prior years, partially offset by state income taxes.
Earnings Attributable to Redeemable Common Stock.
As described in Note 2, “Redeemable Common Stock,” the Company adopted the provisions of Statement of Financial Accounting Standards (“SFAS”) 150 “Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and Equity” (“SFAS 150”) as of January 1, 2006.  SFAS 150 requires that redeemable common stock be recorded as a liability at formula value and that changes in formula value be recorded as an expense on the consolidated statement of operations.  That expense, captioned “Earnings attributable to redeemable common stock” represents the portion of earnings for the year that will increase formula value.
Results of Operations 2005 vs. 2004
Revenue.
Revenue from each of the Company’s segments was:
	2005		2004
	(dollars in millions)
Construction	$	3,974	$	3,265
Coal mining		171		93
	$	4,145	$	3,358
Total construction revenue increased $709 million or 21.7% from the same period in 2004.  Claim revenue increased $52 million from $48 million in 2004 to $100 million in 2005 ($44 million of the increase is attributable to the adoption of FIN 46-R) primarily due to a single claim on the Oil and Gas Project.  Exclusive of the Oil and Gas Project claim settlement, the consolidation of joint ventures under the provisions of FIN 46-R increased revenue $344 million over the prior period.  Other increases in revenue from 2004 to 2005 include numerous construction projects spanning various markets including petroleum ($99 million), commercial building ($48 million), power/heat/cooling ($54 million), water supply/dams ($70 million), sewage and solid waste disposal ($31 million) and other markets ($46 million).  Partially offsetting these increases were declines in a number of construction projects on the transportation market of $3 7 million from 2004 to 2005.  Given the non-recurring nature of construction projects, the mix and volume of construction projects by market often varies from period to period.  As discussed in the following paragraph, backlog has increased significantly.  Since many of these construction projects have not yet commenced or are in their early stages, revenue has not increased proportionately.
Construction contract backlog was $5.8 billion and $3.5 billion at December 31, 2005 and December 25, 2004, respectively.  Of the $2.3 billion added, $0.6 billion is due to the effect of consolidating joint ventures under the provisions of FIN 46-R.  Additionally, the Company was low or selected bidder on $2.1 billion and $0.2 billion of construction jobs that had not been awarded at December 31, 2005 and December 25, 2004, respectively.  Foreign operations, located primarily in Canada, represent 15.0% of construction backlog at December 31, 2005.  Domestic construction projects are spread geographically throughout the United States.  The Company’s 10 largest jobs in backlog make up 37.6% of total backlog at December 31, 2005.  A single owner in the western region of the United States makes up 9.6% of total construction backlog at December 31, 2005.
Coal mining revenues increased $78 million or 83.9% from the same period in 2004.  The increase is primarily attributable to a full year of revenues earned by the Buckskin Mine acquired on August 20, 2004.  See Note 4 of the “Notes to Consolidated Financial Statements.”
Coal mining sales backlog at December 31, 2005 was approximately 121 million tons of coal.  The remaining terms on these contracts range from less than 1 year to 20 years.

19

Operating Income.

Operating income consists of margin (revenue less cost of revenue), general and administrative expenses and gain on sale of operating assets.  Operating income from each of the Company’s segments was:

		2005						2004
		Construction			Coal Mining			Construction			Coal Mining
	(dollars in millions)
Margin	$	631		$	44		$	482		$	29
General and administrative expenses		(259	)		(11	)		(219	)		(7	)
Gain on sale of operating assets		12			-			12			-
Operating income	$	384		$	33		$	275		$	22
Margin.
Total construction margin increased $149 million or 30.9% from the same period in 2004.  The margin on claims increased $54 million from $49 million in 2004 to $103 million in 2005 ($44 million of the increase is attributable to the adoption of FIN 46-R), primarily due to a single claim settlement on the Oil and Gas Project.  Exclusive of the Oil and Gas Project claim settlement, the consolidation of joint ventures under the provisions of FIN 46-R increased margin $48 million over the prior period.  Other increases in margin include numerous construction projects spanning various markets including petroleum ($26 million), commercial building ($2 million), water supply/dams ($1 million), sewage and solid waste disposal ($7 million) and other markets ($19 million).  Also increasing margin was a reduction in the amount of job losses of $34 million from $113 million in 2004 to $79 million in 2005, primarily due to losses recog nized in 2004 on the Oil and Gas Project.  Partially offsetting these increases were declines in a number of construction projects in the transportation market ($18 million) and power/heat/cooling ($23 million).  Given the non-recurring nature of construction projects, the mix and volume of construction projects by market often varies from period to period.
Construction margin as a percentage of construction revenue for the fiscal year ended December 31, 2005 increased to 15.9% from 14.8% for the same period in 2004.  The increase was primarily related to the increase in claims during 2005.
Total coal mining margin increased $15 million or 51.7% from the same period in 2004.  The increase is primarily attributable to the acquisition of the Buckskin Mine on August 20, 2004.  However, the highly competitive coal market in the area in which the Buckskin Mine operates resulted in margin decreasing as a percentage of revenue from 31.2% in 2004 to 25.7% in 2005 due to a full year of consolidating Buckskin’s results of operations.
General and Administrative Expenses.
General and administrative expenses related to construction operations for the fiscal year ended December 31, 2005 increased $40 million from the same period in 2004, primarily due to increased compensation of $22 million in the areas of salaries, bonuses and profit sharing, a $10 million increase in compensation expense related to the vesting of convertible debentures and an increase in professional services expenses of $5 million primarily related to bidding and estimating costs and tax services.  As a percentage of revenue, general and administrative expenses were 6.5% and 6.7% for the fiscal years ended December 31, 2005 and December 25, 2004, respectively.  However, had joint ventures not been consolidated, the general and administrative expenses as a percentage of revenue would have been 7.2% for the fiscal year ended December 31, 2005 primarily as a result of the increases in compensation expense.  &n bsp;
General and administrative expenses related to coal mining operations were generally consistent from 2004 to 2005.  However, they decreased from 7.2% to 6.3% as a percentage of revenue as the acquisition of the Buckskin Mine did not require a proportionate increase in general and administrative expenses.

20

Gain on Sale of Operating Assets.  

Net gains on the disposition of property, plant and equipment and other assets during each of the fiscal years ended December 31, 2005 and 2004 were $12 million.  Gain on sale of operating assets is affected to a large degree by market conditions and the specific types and quantity of pieces of equipment sold.

Other Income (Expense).  

Investment income increased $13 million for the fiscal year ended December 31, 2005 from the same period in 2004.  The increase was due mainly to higher interest rates from the same time period in 2004, $3 million due to the effect of consolidating joint ventures under the provisions of FIN 46-R and the recognition of $3 million of look back interest income (interest related to the timing of revenue recognition for income tax purposes for completed construction projects).

Minority Interest in Income of Consolidated Subsidiaries.

Minority interest in income of consolidated subsidiaries consists primarily of the portion of the consolidated construction joint ventures that is not owned by the Company.  The increase in minority interest is attributable to the adoption of FIN 46-R which required certain construction joint ventures to be consolidated.  Prior to FIN 46-R, the Company would have accounted for its share of the operations of these joint ventures on a pro rata basis in the consolidated statements of operations.

Income Tax Expense.  

The effective income tax rates for the fiscal years ended December 31, 2005 and 2004 were 33.1% and 33.4%, respectively.  The 2005 effective tax rate is less than the federal statutory rate primarily due to federal and state research and development tax credits claimed for prior years, partially offset by state income taxes.  In 2004, the rate differs from the federal statutory rate due to resolution and settlement of prior year income tax liabilities partially offset by state and foreign income taxes.

Financial Condition – December 30, 2006 vs. December 31, 2005

Cash and cash equivalents increased $51 million to $369 million at December 30, 2006 from $318 million at December 31, 2005.  The major item contributing to the increase was cash provided by operations of $445 million, offset partially by capital expenditures of $189 million, net purchases of available-for-sale securities of $146, net repurchases of redeemable common stock of $19 million and dividends paid of $30 million.

Net cash provided by operations for the fiscal year ended December 30, 2006 increased by $49 million to $445 million as compared to $396 million in the same period in 2005.  This increase was primarily due to an increase in operating income (before depreciation) and investment income as well as cash received from owners before work is performed.  Cash provided by operations is affected to a large degree by the mix, timing, stage of completion and terms of individual contracts which are reflected in changes through current assets and liabilities.

Net cash used in investing activities for the fiscal year ended December 30, 2006 increased by $102 million to $305 million as compared to $203 million in the same period in 2005.  This increase was primarily due to an increase in net purchases of available-for-sale securities because cash generated by operations increased $49 million.  Capital spending varies due to the nature and timing of jobs awarded.  Management does not expect any material changes to capital spending.  Acquisitions depend largely on market conditions.

Net cash used in financing activities for the fiscal year ended December 30, 2006 decreased by $559 million to $88 million as compared to $647 million in the same time period in 2005.  Repurchases of redeemable common stock decreased $459 million from 2005 to 2006.  During 2005, the Company had significant repurchases of redeemable common stock due to the $398 million tender offer and $52 million of repurchases resulting from changes in the roles of certain members of executive management.  In addition, net withdrawals of cash by minority partners of joint ventures decreased $75 million.

21

Liquidity.  

During 2006, 2005 and 2004, the Company expended $189 million, $191 million and $162 million, respectively, on capital expenditures and acquisitions.  The Company anticipates that its future cash requirements for capital expenditures and acquisitions will not change significantly from these historical amounts.  Cash generated by joint ventures, while readily available, is generally not distributed to partners until the liabilities and commitments of the joint ventures have been substantially satisfied.  Other long-term liquidity uses include the payment of income taxes, long-term debt and dividends.  As of December 30, 2006, the Company had no material firm binding purchase commitments related to its investments other than meeting the normal course of business needs of its construction joint ventures.  The current portion of long-term debt as of December 30, 2006 was $5 million.  PKS paid dividends during 2006, 20 05 and 2004 of $30 million, $27 million and $25 million, respectively.  PKS also has the obligation to repurchase its redeemable common stock at any time during the year from shareholders.   

The Company anticipates repurchasing approximately 843,000 shares of redeemable common stock over the next 2 years as a result of changes in the roles of certain members of executive management.  The aggregate value of these shares calculated at the December 30, 2006 formula value is approximately $49 million.

It is customary in the Company’s industry to use standby letters of credit.  At December 30, 2006, the company had outstanding letters of credit with a number of banks totaling approximately $281 million.  None of the available letters of credit have been drawn upon.

The Company's current financial condition, together with anticipated cash flows from operations, should be sufficient for immediate cash requirements and future investing activities.  The Company does not presently have any committed bank credit facilities.  In the past, the Company has been able to borrow on satisfactory terms.  The Company believes that, to the extent necessary, it will likewise be able to borrow funds on acceptable terms for the foreseeable future.

Recent Accounting Pronouncements.
In June 2006, FASB released Interpretation No. 48 “Accounting for Uncertainty in Income Taxes – an Interpretation of FASB Statement No. 109,” (“FIN 48”).  FIN 48 provides specific guidance on how to address uncertainty in accounting for income tax assets and liabilities, prescribing recognition thresholds and measurement attributes.  FIN 48 is effective for the Company beginning with the 2007 fiscal year.  The adoption of FIN 48 will not have a material impact to the Company’s consolidated financial statements.
In September 2006, the FASB released SFAS No. 157, “Fair Value Measurements,” (“SFAS 157”).  SFAS 157 establishes a framework for measuring fair value in generally accepted accounting principles and expands disclosures about fair value measurement.  The changes to current practice relate to the definition of fair value, the methods used to measure fair value, and the expanded disclosures about fair value measurements.  SFAS 157 is effective for the Company beginning with the 2008 fiscal year.  The Company is continuing to evaluate the impact of the adoption of SFAS 157.
Contractual Obligations.
	Payments due by period
	Total		Less than 1 year			1-3 years		3-5 years		More than 5 years
	(dollars in millions)
Operating leases	$	45	$	16		$	17	$	7	$	5
Purchase obligations		1,740		1,381			329		27		3
Long-term debt		39		6			19		2		12
Noncurrent deferred income taxes		32		(2	)		14		8		12
Accrued reclamation		49		-			-		-		49
Total	$	1,905	$	1,401		$	379	$	44	$	81

22

Purchase obligations include the Company’s payables, purchase orders and other contractual obligations.  Purchase orders may include authorizations to purchase rather than binding agreements.  Other contractual obligations consist primarily of agreements with subcontractors and suppliers of construction materials.  If a construction project is canceled at the convenience of the owner, the Company can also generally cancel the underlying purchase obligations without penalty.

Amounts included in long-term debt include estimated interest payments.

Contractual obligations related to accrued reclamation are provided based on undiscounted estimated future cash flows, however, the accrued reclamation liability on the consolidated balance sheets is discounted in accordance with SFAS 143, “Accounting for Asset Retirement Obligation,” (“SFAS 143”).

As described previously, the Company anticipates repurchasing approximately 843,000 shares of redeemable common stock over the next 2 years as a result of changes in executive management.

Off-Balance Sheet Arrangements.

During 2006 and 2005, the Company did not enter into any off-balance sheet arrangements requiring disclosure under this caption.

Critical Accounting Policies.  

The development and selection of the critical accounting policies, related critical accounting estimates and the related disclosure of critical accounting policies has been reviewed with the Audit Committee of the Company’s Board of Directors.

Revenue Recognition.

Construction Contracts.

The Company uses the percentage of completion method of accounting.  Profit on a fixed-price construction contract is realized on the difference between the contract price and the actual costs of construction.  Profit on a cost-plus construction contract is realized on the amount the contractor is contractually able to bill in excess of the actual costs of construction.  Provision is made for the entire amount of future estimated losses on construction contracts in progress normally through the accrual of additional costs of revenue; claims and change orders for additional contract compensation, however, are not reflected in the accounts until they are settled.  Claims and change orders are considered settled when cash is received or upon receipt of a signed agreement.  Revisions in cost and profit estimates during the course of the work are reflected in the accounting period in which the facts which require the revision become known.  It is at least reasonably possible that cost and profit estimates will be revised in the near-term by amounts which may be material.

In accordance with industry practice, amounts realizable and payable under contracts which may extend beyond one year are included in current assets and liabilities.

Coal Sales Contracts.

The Company recognizes coal sales revenue at the time all contractual obligations have been satisfied.

Income Taxes.

The Company recognizes a current tax provision for its estimated tax liability on its current year tax returns.  Deferred income taxes are provided for the temporary differences between the financial reporting basis and the tax basis of the Company’s assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse.  Valuation allowances are recognized when it is anticipated that some or all of a deferred tax asset would not be realized.

23

Property, Plant and Equipment.

Property, plant and equipment are recorded at cost.  Depreciation for the majority of the Company’s property, plant and equipment is calculated using accelerated methods.  Depletion of mineral properties is provided on a units-of-extraction basis determined in relation to the total remaining amount of coal reserves.  The estimated useful lives of the Company’s other property, plant and equipment are as follows:

Land improvements

10 – 15 years

Buildings

5 – 39 years

Equipment

3 – 20 years

A change in depreciation methods or estimated useful lives could have a significant impact to income.

Accrued Insurance Costs.

The Company is self-insured for certain general, auto and worker’s compensation claims, and accrues for the estimated ultimate liability for incurred losses, both reported and unreported.  The Company bases its estimate of loss on historic trends modified for recent events and records its estimate of loss without regard to the time value of money.  The Company determines a range of ultimate liability for its incurred losses, and accrues an amount within the range. If the Company had accrued its insurance costs at the high end of the range, it would have recorded an additional liability and expense of $3 million.  It is at least reasonably possible that the estimate of ultimate liability will be revised in the near-term by amounts which may be material.

Accrued Reclamation.

The Company follows the policy of providing an accrual for reclamation of mined properties in accordance with SFAS 143 based on the estimated total cost of restoration of such properties to meet compliance with laws governing surface mining.  These estimated costs are calculated based on the expected future cash flows to remediate such properties discounted at a credit adjusted risk-free rate.  The fair value of a liability for an asset retirement obligation is recognized in the period in which it is incurred if a reasonable estimate of fair value can be made.  The associated retirement costs are capitalized and included as part of the carrying value of the long-lived asset and amortized to expense.  Changes in expected future cash flows are discounted at interest rates that were in effect at the time of the original estimate for downward revisions to such cash flows, and at interest rates in effect at the time of the change for upwa rd revisions in the expected future cash flows.  It is at least reasonably possible that accrued reclamation estimates will be revised in the near-term by amounts which may be material.  

Item 7A.       Quantitative and Qualitative Disclosures About Market Risk.

The Company holds a diversified portfolio of investments that primarily includes cash, high quality commercial paper, U.S. Government debt obligations, U.S. Government Agency debt obligations, tax exempt state and municipal securities and equity mutual funds.  Except for cash, each of these investments is subject, in varying degrees, to market risk, interest rate risk, economic risk and credit risk.  These risks, among others, could result in the loss of principal.

The Company has entered into several foreign currency forward contracts as a strategy to offset the earnings impact of currency fluctuations upon future transactions.  The forward contracts are generally scheduled to mature as those future transactions occur.  The forward contracts have not been designated as hedging instruments under SFAS 133, “Accounting for Derivative Instruments and Hedging Activities,” (“SFAS 133”).  The forward contracts had outstanding notional amounts of $U.S. 62 million at December 30, 2006 and December 31, 2005.  The forward contracts offset the earnings impact caused by currency fluctuations of U.S. dollar denominated liabilities and expenses related to the completion of construction contracts by Canadian subsidiaries.  The forward contracts are recorded in the consolidated balance sheets at fair value based upon quoted market prices.  Changes in the fair valu e of the forward contracts are immediately recognized in cost of revenue in the consolidated statements of operations.

24

The forward contracts mature monthly in varying amounts during 2007 and 2008 and will settle based upon the difference between the current exchange rate at the time of settlement and the exchange rates in the forward contracts.  At December 30, 2006, the fair value of these forward contracts was a current liability of approximately $3 million and a long-term liability of less than $0.5 million.  At December 31, 2005, the fair value of these forward contracts was a current liability of approximately $2 million and a long-term liability of less than $0.5 million.  During the fiscal year ended December 30, 2006, the Company recognized a loss of approximately $5 million on the forwards, of which approximately $4 million has been realized.  During the fiscal year ended December 31, 2005, the Company recognized a loss of approximately $3 million on the forwards, of which less than $1 million had been realized.  A 10% c hange in the Canadian / U.S. exchange rate would result in a gain of approximately $6 million in the event of an increase in the exchange rate, or a loss of approximately $6 million in the event of a decrease.

25

Item 8.

Financial Statements and Supplementary Data.

Report of Independent Registered Public Accounting Firm

The Board of Directors and Stockholders
Peter Kiewit Sons’, Inc.:

We have audited the accompanying consolidated balance sheets of Peter Kiewit Sons’, Inc. and subsidiaries as of December 30, 2006 and December 31, 2005, and the related consolidated statements of operations, changes in redeemable common stock, comprehensive income and excess of assets over liabilities, and cash flows for each of the years in the three-year period ended December 30, 2006.  In connection with our audits of the consolidated financial statements, we also have audited the financial statement schedule.  These consolidated financial statements and financial statement schedule are the responsibility of the Company’s management.  Our responsibility is to express an opinion on these consolidated financial statements and financial statement schedule based on our audits.  

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States).  Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.  An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements.  An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.  We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Peter Kiewit Sons’, Inc. and subsidiaries as of December 30, 2006 and December 31, 2005, and the results of their operations and their cash flows for each of the years in the three-year period ended December 30, 2006, in conformity with U.S. generally accepted accounting principles.  Also in our opinion, the related financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.

As discussed in note 1 to the consolidated financial statements, the Company in 2004 changed its method of accounting for variable interest entities.  

As discussed in note 2 to the consolidated financial statements, the Company in 2006 changed its method of accounting for redeemable common stock and stripping costs incurred during production in the mining industry.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the effectiveness of Peter Kiewit Sons’, Inc.’s internal control over financial reporting as of December 30, 2006, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), and our report dated February 27, 2007 expressed an unqualified opinion on management’s assessment of, and the effective operation of, internal control over financial reporting.  

KPMG LLP

Omaha, Nebraska

February 27, 2007

26

PETER KIEWIT SONS’, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
For the three fiscal years ended December 30, 2006
	2006			2005			2004
	(dollars in millions, except per share data)
Revenue	$	5,049		$	4,145			$	3,358
Cost of revenue		(4,338	)		(3,470	)			(2,847	)
Margin		711			675				511
General and administrative expenses		(295	)		(270	)			(226	)
Gain on sale of operating assets		22			12				12
Operating income		438			417				297
Other income (expense):
Investment income		38			29				16
Interest expense		(5	)		(5	)			(4	)
Other, net		(2	)		-				-
		31			24				12
Income before minority interest, income taxes and earnings attributable to redeemable common stock*		469			441				309
Minority interest in income of consolidated subsidiaries		(43	)		(100	)			(7	)
Income before income taxes and earnings attributable to redeemable common stock*		426			341				302
Income tax expense		(152	)		(113	)			(101	)
Net income before earnings attributable to redeemable common stock*		274			228				201
Earnings attributable to redeemable common stock*		(235	)		-				-
Net income	$	39		$	228			$	201
Net earnings per share:
Basic	$	*		$	9.56			$	6.62
Diluted	$	*		$	9.31			$	6.38
*  See Note 2 “Redeemable Common Stock”
See accompanying notes to consolidated financial statements.

27

PETER KIEWIT SONS’, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
December 30, 2006 and December 31, 2005
		2006					2005
		(dollars in millions)
ASSETS
Current assets:
Cash and cash equivalents	$	369				$	318
Marketable securities		546					395
Receivables, less allowance of $3 and $5		693					634
Unbilled contract revenue		226					179
Contract costs in excess of related revenue		16					22
Investment in nonconsolidated joint ventures		41					14
Deferred income taxes		64					63
Other		32					44
Total current assets				$	1,987				$	1,669
Property, plant and equipment, at cost		1,369					1,271
Less accumulated depreciation and amortization		(795	)				(728	)
Net property, plant and equipment					574					543
Other assets					160					158
				$	2,721				$	2,370
*  See Note 2 “Redeemable Common Stock”
See accompanying notes to consolidated financial statements.

28

PETER KIEWIT SONS’, INC. AND SUBSIDIARIES
Consolidated Balance Sheets, Continued
December 30, 2006 and December 31, 2005
	2006				2005
	(dollars in millions)
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable, including retainage of $91 and $85	$	306			$	265
Current portion of long-term debt		5				1
Accrued costs on construction contracts		293				235
Billings in excess of related costs and earnings		394				343
Distributions and costs in excess of investment in nonconsolidated joint ventures		7				6
Accrued insurance costs		88				82
Accrued payroll and payroll taxes		70				53
Other		68				94
Total current liabilities		1,231				1,079
Long-term debt, less current portion		25				38
Deferred income taxes		32				33
Accrued reclamation		28				29
Total liabilities excluding redeemable common stock*			$	1,316			$	1,179
Total redeemable common stock*				1,130				-
Total liabilities including redeemable common stock*				2,446				1,179
Minority interest				99				109
Commitments and contingencies
Preferred stock, no par value, 250,000 shares
authorized, no shares outstanding				-				-
Redeemable common stock ($945 million aggregate
redemption value at December 31, 2005):
Common stock, $0.01 par value, 125 million shares
authorized, 19,730,897 issued and
outstanding at December 31, 2005		-				-
Additional paid-in capital		-				239
Accumulated other comprehensive income		-				14
Retained earnings		-				829
Total redeemable common stock*				-				1,082
Excess of assets over liabilities including redeemable
common stock*				176				-
			$	2,721			$	2,370
*  See Note 2 “Redeemable Common Stock”
See accompanying notes to consolidated financial statements.

29

PETER KIEWIT SONS’, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
For the three fiscal years ended December 30, 2006
		2006			2005			2004
	(dollars in millions)
Cash flows from operations:
Net income	$	39		$	228		$	201
Adjustments to reconcile net income to
net cash provided by operations:
Earnings attributable to redeemable common stock*		235			-			-
Depreciation and amortization		129			117			92
Gain on sale of property, plant and
equipment and other investments, net		(22	)		(12	)		(10	)
Minority interest in income of consolidated subsidiaries		43			100			7
Change in other noncurrent liabilities		4			16			5
Deferred income taxes		6			6			(22	)
Change in working capital items:
Receivables		(62	)		(32	)		(18	)
Unbilled contract revenue and contract
costs in excess of related revenues		(47	)		(37	)		(7	)
Investment in nonconsolidated joint ventures, net		(25	)		8			27
Other current assets		12			(7	)		(16	)
Accounts payable		33			12			(3	)
Accrued construction costs and billings in
excess of revenue on uncompleted contracts		109			(44	)		15
Accrued payroll and payroll taxes		17			2			9
Other current liabilities		(21	)		34			34
Other		(5	)		5			3
Net cash provided by operations		445			396			317
Cash flows from investing activities:
Proceeds from sales of available-for-sale securities		1,912			2,308			1,247
Proceeds from maturities of available-for-sale securities		2			21			77
Purchases of  available-for-sale securities		(2,058	)		(2,373	)		(1,567	)
Proceeds from sale of property, plant and equipment		36			22			28
Acquisitions		-			(30	)		(74	)
Capital expenditures		(189	)		(161	)		(88	)
Additions to notes receivable		(12	)		(1	)		(1	)
Payments received on notes receivable		4			11			2
Net cash used in investing activities	$	(305	)	$	(203	)	$	(376	)
*  See Note 2 “Redeemable Common Stock”
See accompanying notes to consolidated financial statements.

30

PETER KIEWIT SONS’, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows, Continued
For the three fiscal years ended December 30, 2006
		2006			2005			2004
	(dollars in millions)
Cash flows from financing activities:
Long-term debt borrowings	$	-		$	-		$	17
Payments on long-term debt		(9	)		(9	)		(9	)
Change in outstanding checks in excess of funds
on deposit		4			(9	)		3
Issuances of redeemable common stock		55			40			53
Repurchases of redeemable common stock		(74	)		(533	)		(21	)
Dividends paid		(30	)		(27	)		(25	)
Minority interest contributions		44			16			-
Minority interest withdrawals		(78	)		(125	)		(2	)
Net cash (used in) provided by financing activities		(88	)		(647	)		16
Effect of exchange rates on cash		(1	)		7			2
Net increase (decrease) in cash and cash equivalents		51			(447	)		(41	)
Cash and cash equivalents from consolidation of construction joint ventures		-			325			-
Cash and cash equivalents at beginning of year		318			440			481
Cash and cash equivalents at end of year	$	369		$	318		$	440
Supplemental disclosures of cash flow information:
Taxes paid	$	174		$	92		$	105
Interest paid	$	3		$	5		$	3
Non-cash investing activities:
Note payable issued for acquisition	$	-		$	5		$	-
Non-cash financing activities:
Acquisition of coal lease	$	-		$	39		$	-
Conversion of convertible debentures	$	-		$	36		$	3
See accompanying notes to consolidated financial statements.

31

PETER KIEWIT SONS’, INC. AND SUBSIDIARIES
Consolidated Statements of Changes in Redeemable Common Stock,
Comprehensive Income and Excess of Assets Over Liabilities
For the three fiscal years ended December 30, 2006
	Redeemable Common Stock
							Accumulated
		Redeemable		Additional			Other					Excess of
		Common		Paid-in			Comprehensive		Retained			Assets Over
		Stock*		Capital			Income		Earnings			Liabilities*		Total
		(dollars in millions)
Balance at December 27, 2003	$	-	$	243		$	4	$	859		$	-	$	1,106
Dividends		-		-			-		(14	)		-		(14	)
Debenture conversions		-		3			-		-			-		3
Issuance of stock		-		53			-		-			-		53
Repurchase of stock		-		(5	)		-		(16	)		-		(21	)
Comprehensive income:
Net income		-		-			-		201			-		201
Other comprehensive income,
net of tax:
Foreign currency adjustment		-		-			4		-			-		4
Change in unrealized
holding gain		-		-			1		-			-		1
Total other comprehensive
income														5
Total comprehensive income														206
Balance at December 25, 2004	$	-	$	294		$	9	$	1,030		$	-	$	1,333
Dividends		-		-			-		(27	)		-		(27	)
Debenture conversions		-		36			-		-			-		36
Issuance of stock		-		40			-		-			-		40
Repurchase of stock		-		(131	)		-		(402	)		-		(533	)
Comprehensive income:
Net income		-		-			-		228			-		228
Other comprehensive income,
net of tax:
Foreign currency adjustment		-		-			4		-			-		4
Change in unrealized
holding gain		-		-			1		-			-		1
Total other comprehensive
income														5
Total comprehensive income														233
Balance at December 31, 2005	$	-	$	239		$	14	$	829		$	-	$	1,082
*  See Note 2 “Redeemable Common Stock”
See accompanying notes to consolidated financial statements.

32

PETER KIEWIT SONS’, INC. AND SUBSIDIARIES
Consolidated Statements of Changes in Redeemable Common Stock,
Comprehensive Income and Excess of Assets Over Liabilities
For the three fiscal years ended December 30, 2006
		Redeemable Common Stock
							Accumulated
		Redeemable		Additional			Other						Excess of
		Common		Paid-in			Comprehensive			Retained			Assets Over
		Stock*		Capital			Income (Loss)			Earnings			Liabilities*		Total
		(dollars in millions)
Balance at December 31, 2005	$	-	$	239		$	14		$	829		$	-	$	1,082
Cumulative effect of change in
accounting principles:
EITF 04-6 “Accounting for
Stripping Costs in the Mining
Industry”*		-		-			-			(8	)		-		(8	)
SFAS 150 “Accounting for Certain
Financial Instruments with
Characteristics of both Liabilities
and Equity”*		-		(239	)		(14	)		(821	)		137		(937	)
Change in excess of assets over
Liabilities*		-		-			-			-			39		39
December 30, 2006 Balance	$	-	$	-		$	-		$	-		$	176	$	176
*  See Note 2 “Redeemable Common Stock”
See accompanying notes to consolidated financial statements.

33

PETER KIEWIT SONS’, INC. AND SUBSIDIARIES

Notes To Consolidated Financial Statements

1.

Summary of Significant Accounting Policies and Description of Business:

The Business.

Peter Kiewit Sons’, Inc. (“PKS,” which together with its subsidiaries in which it has or had control and variable interest entities of which it is the primary beneficiary is referred to herein as the “Company”) is one of the largest construction contractors in the United States and Canada, and is also engaged in the coal mining business.  

The Company primarily performs its construction services as a general contractor.  As a general contractor, the Company is responsible for the overall direction and management of construction projects and for the completion of each contract in accordance with its terms, plans and specifications.

The Company performs its construction work under various types of contracts, including fixed unit or lump-sum price, guaranteed maximum price and cost-reimbursable (cost-plus) contracts.  Contracts are either competitively bid and awarded or negotiated.  The Company’s public contracts generally provide for the payment of a fixed price for the work performed.  Credit risk is minimal with public (government) owners since funds generally have been appropriated by the governmental project owner prior to commencing work on public projects.  Most public contracts are subject to termination at the election of the governmental contracting entity. In the event of termination, however, the contractor is generally entitled to receive the contract price on completed work and payment of certain termination-related costs.  Credit risk with private owners is minimized because of statutory mechanics liens, which give the Company high priority in the event of lien foreclosures following financial difficulties of private owners.  Construction contracts generally provide for progress payments as work is completed, with a retainage, ranging from zero to ten percent, to be paid when performance is substantially complete.  In some instances, the Company is able to substitute bank letters of credit or escrowed securities in lieu of retainage.  Construction contracts frequently contain penalties or liquidated damages for late completion and infrequently provide bonuses for early completion.

The construction industry is highly competitive and lacks firms with dominant market power.  A substantial portion of the Company’s business involves construction contracts obtained through competitive bidding.  A contractor’s competitive position is based primarily on its prices for construction services, its ability to obtain performance bonds and its reputation for quality, timeliness, experience and financial strength.  The volume and profitability of the Company’s construction work depends to a significant extent upon the general state of the economies of the United States and Canada, and the volume of work available to contractors.  Fluctuating demand cycles are typical of the industry, and such cycles determine to a large extent the degree of competition for available projects. The Company’s construction operations could be adversely affected by increases in costs of labor, fuel or materi als, labor stoppages or shortages, adverse weather conditions, shortages of supplies, or governmental action. The volume of available government work is affected by budgetary and political considerations.  A significant decrease in the amount of new government contracts, for whatever reason, would have a material adverse effect on the Company.  

The Company owns and operates two surface mining operations located in Texas and Wyoming that produce coal used in domestic coal-fired electric generation facilities.  The Company also manages two active surface coal mines located in the western United States.  

34

PETER KIEWIT SONS’, INC. AND SUBSIDIARIES

Notes To Consolidated Financial Statements (Continued)

1.

Summary of Significant Accounting Policies and Description of Business, Continued:

The Business, Continued.

The Company’s coal sales generally are made under multi-year supply contracts.  Each contract has a base price and most contain provisions to adjust the base price for changes in statutes or regulations.  Certain contracts allow for price adjustments based on actual cost experience or as measured by public indices.  Each contract includes coal quality and delivery volume specifications and includes penalties for failure to meet these specifications.

The coal mining industry is highly competitive.  The Company not only competes with other domestic and foreign coal suppliers, some of whom are larger, but also with alternative methods of generating electricity.  Demand for the Company’s coal is affected by political, economic and regulatory factors.  Sales from the Buckskin Mine occur at the loading facility and require the customer to obtain transportation to their generating plant.  Transportation cost is a significant portion of the customer’s delivered cost of coal.  Many western coal companies are served by two railroads allowing the customer to potentially benefit from an additional distribution channel and competition between railroads compared to the single line available at the Buckskin Mine.  Sales and delivery from the Calvert Mine are to an adjacent generating plant.

Basis of Presentation.

The consolidated financial statements include the accounts of PKS and its subsidiaries in which it has or had control and variable interest entities of which it is the primary beneficiary.

The Company participates in various construction joint ventures.  Generally, each construction joint venture is formed to accomplish a specific project, is jointly controlled by the joint venture partners and is dissolved upon completion of the project.  The Company selects its joint venture partners based on its analysis of the prospective venturer’s construction and financial capabilities, expertise in the type of work to be performed and past working relationships with the Company, among other criteria.  The joint venture agreements typically provide that the interests of the Company in any profits and assets, and its respective share in any losses and liabilities that may result from the performance of the contract are limited to the Company’s stated percentage interest in the project.  The venture’s contract with the project owner typically requires joint and several liability, however the Compa ny’s agreements with its joint venture partners provide that each party will assume and pay its full proportionate share of any losses resulting from a project.  Under these agreements, if one partner is unable to bear its share of the costs, the other partners will be required to pay those costs.  The Company regularly evaluates the financial stability of its business partners.  

For the fiscal year ended December 25, 2004, joint ventures formed after December 31, 2003 were assessed for consolidation under the provisions of the Financial Accounting Standards Board’s (“FASB”) Interpretation No. 46 (revised December 2003), “Consolidation of Variable Interest Entities,” (“FIN 46-R”).  Those meeting the consolidation criteria of FIN 46-R were consolidated in the financial statements.  Those not meeting the criteria continued to be accounted for under Emerging Issues Task Force (“EITF”) Issue No. 00-1, “Investor Balance Sheet and Income Statement Display under the Equity Method for Investments in Certain Partnerships and Other Ventures,” (“EITF No. 00-1”), which permits the use of the equity method in the consolidated balance sheets, and pro-rata consolidation of the Company’s share of the operations of these con struction joint ventures in the consolidated statements of operations.  

Beginning with the fiscal year ended December 31, 2005, the Company additionally assessed joint ventures formed prior to December 31, 2003 and after December 25, 2004 for consolidation under the provisions of FIN 46-R.  Those meeting the consolidation criteria of FIN 46-R were consolidated in the financial statements.  Those not meeting the criteria were presented according to EITF No. 00-1 as previously described.  

35

PETER KIEWIT SONS’, INC. AND SUBSIDIARIES

Notes To Consolidated Financial Statements (Continued)

1.

Summary of Significant Accounting Policies and Description of Business, Continued:

Basis of Presentation, Continued.

The fiscal year ended December 25, 2004 has not been restated to consolidate construction joint ventures meeting the consolidation criteria of FIN 46-R.  Instead, the fiscal year continues to reflect the previously reported accounting as described above.  

Revenue Recognition.

Construction Contracts.

The Company uses the percentage of completion method of accounting.  Profit on a fixed-price construction contract is realized on the difference between the contract price and the actual costs of construction.  Profit on a cost-plus construction contract is realized on the amount the contractor is contractually able to bill in excess of the actual costs of construction.  Provision is made for the entire amount of future estimated losses on construction contracts in progress, normally through the accrual of additional costs of revenue; claims and change orders for additional contract compensation, however, are not reflected in the accounts until they are settled.  Claims and change orders are considered settled when cash is received or upon receipt of a signed agreement.  Revisions in cost and profit estimates during the course of the work are reflected in the accounting period in which the facts which require the revision become known.  It is at least reasonably possible that cost and profit estimates will be revised in the near-term by amounts which may be material.

In accordance with industry practice, amounts realizable and payable under contracts which may extend beyond one year are included in current assets and liabilities.

Coal Sales Contracts.

The Company recognizes coal sales revenue at the time all contractual obligations have been satisfied.

Cash and Cash Equivalents.

Cash equivalents generally consist of highly liquid instruments with original maturities of three months or less when purchased.  The securities are stated at cost, which approximates fair value.

Outstanding checks in excess of funds on deposit in the amount of $49 million and $45 million at December 30, 2006 and December 31, 2005 have been reclassified to accounts payable. 

Retainage on Construction Contracts.

Construction contracts generally provide for progress payments as work is completed, a portion of which is customarily retained until performance is substantially complete.  Retainage is included in receivables.

In some instances, the Company is able to substitute bank letters of credit or escrowed securities in lieu of retainage.  Substituting securities in lieu of retainage is a technique employed by construction companies to earn interest on retained balances.  Included in retainage are escrowed securities which are not yet due, carried at fair value, which is determined based on quoted market prices for the securities on hand or for similar investments.  Net unrealized holding gains and losses, if any, are reported as a separate component of accumulated other comprehensive income (loss), net of tax.  

36

PETER KIEWIT SONS’, INC. AND SUBSIDIARIES

Notes To Consolidated Financial Statements (Continued)

1.

Summary of Significant Accounting Policies and Description of Business, Continued:

Marketable Securities.

The Company has classified all marketable securities and marketable non-current investments not accounted for under the equity method as available-for-sale.  The amortized cost of the securities used in computing unrealized and realized gains and losses is determined by specific identification.  Fair values are estimated based on quoted market prices for the securities on hand or for similar investments.  Net unrealized holding gains and losses are reported as a separate component of accumulated other comprehensive income (loss), net of tax.  The Company evaluates its investments for other than temporary declines in value based upon criteria that include the extent to which the investment’s carrying value exceeds its related market value, the duration of the market decline and the financial health of and specific prospects for the issuer.  Unrealized losses that are other than temporary are recognized in investment income in the consolidated statements of operations.

Income Taxes.

The Company recognizes a current tax provision for its estimated tax liability on its current year tax returns.  Deferred income taxes are provided for the temporary differences between the financial reporting basis and the tax basis of the Company’s assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse.  Valuation allowances are recognized when it is anticipated that some or all of a deferred tax asset would not be realized.

Property, Plant and Equipment.

Property, plant and equipment are recorded at cost.  Depreciation for the majority of the Company’s property, plant and equipment is calculated using accelerated methods.  Depletion of mineral properties is provided on a units-of-extraction basis determined in relation to the total remaining amount of coal reserves.  The estimated useful lives of the Company’s other property, plant and equipment are as follows:

Land improvements

10 – 15 years

Buildings

  5 – 39 years

Equipment

  3 – 20 years

Goodwill and Intangible Assets.

Goodwill represents the excess of cost over the fair value of net tangible and identifiable intangible assets of acquired businesses.  Goodwill is tested annually for impairment at the reporting unit level by comparing the fair value of the reporting unit with its carrying value.  If the carrying value exceeds the fair value, goodwill may be impaired.  If this occurs, the fair value of the reporting unit is then allocated to its assets and liabilities in a manner similar to a purchase price allocation in order to determine the implied fair value of the reporting unit goodwill.  This implied fair value is then compared with the carrying amount of the reporting unit goodwill, and if it is less, the Company would then recognize the impairment loss.

Intangible assets, which include coal contracts, are amortized on a units-of-production basis over the expected period of benefit, which does not exceed 25 years.  

No goodwill or intangible assets impairment losses have been recognized in any of the periods presented herein.

37

PETER KIEWIT SONS’, INC. AND SUBSIDIARIES
Notes To Consolidated Financial Statements (Continued)
	1. Summary of Significant Accounting Policies and Description of Business, Continued:
	Long-Lived Assets.
	The Company reviews the carrying amount of long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.  Measurement of any impairment would include a comparison of the present value of the estimated future operating cash flows anticipated to be generated during the remaining life of the assets to the net carrying value of the assets.
	Accrued Insurance Costs.
	The Company is self-insured for certain general, auto and worker’s compensation claims, and accrues for the estimated ultimate liability for incurred losses, both reported and unreported.  The Company bases its estimate of loss on historic trends modified for recent events and records its estimate of loss without regard to the time value of money.  It is at least reasonably possible that the estimate of ultimate liability will be revised in the near-term by amounts which may be material.
	Accrued Reclamation.
	The Company follows the policy of providing an accrual for reclamation of mined properties in accordance with Statement of Financial Accounting Standards (“SFAS”) 143, “Accounting for Asset Retirement Obligations,” (“SFAS 143,”) based on the estimated total cost of restoration of such properties to meet compliance with laws governing surface mining.  These estimated costs are calculated based on the expected future cash flows to remediate such properties discounted at a credit adjusted risk-free rate.  The fair value of a liability for an asset retirement obligation is recognized in the period in which it is incurred if a reasonable estimate of fair value can be made.  The associated retirement costs are capitalized and included as part of the carrying value of the long-lived asset and amortized to expense.  Changes in expected future cash flo ws are discounted at interest rates that were in effect at the time of the original estimate for downward revisions to such cash flows, and at interest rates in effect at the time of the change for upward revisions in the expected future cash flows.  It is at least reasonably possible that accrued reclamation estimates will be revised in the near-term by amounts which may be material.
	Foreign Currencies.
	The local currencies of foreign subsidiaries are the functional currencies for financial reporting purposes.  Assets and liabilities are translated into U.S. dollars at year-end exchange rates.  Revenue and expenses are translated using average exchange rates prevailing during the year.  Gains or losses resulting from currency translation are recorded as adjustments to accumulated other comprehensive income (loss).
	Use of Estimates.
	The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period.  Actual results could differ from those estimates.
	Fiscal Year.
	The Company has a 52-53 week fiscal year which ends on the last Saturday in December.  The fiscal year ended December 30, 2006 was a 52-week year, the fiscal year ended December 31, 2005 was a 53-week year and the fiscal year ended December 25, 2004 was a 52-week year.

38

	PETER KIEWIT SONS’, INC. AND SUBSIDIARIES
	Notes To Consolidated Financial Statements (Continued)
	1. Summary of Significant Accounting Policies and Description of Business, Continued:
Reclassifications.
When appropriate, immaterial items within the consolidated financial statements have been reclassified in the previous periods to conform to current year presentation.
The Company reclassified $345 million of short-term investments to marketable securities on its consolidated condensed balance sheet at December 31, 2005 which were previously presented as cash and cash equivalents.  The purchases and sales related to the investments for the fiscal years ended December 30, 2006, December 31, 2005 and December 25, 2004 have been presented on the consolidated statements of cash flows in the investing activities section.  The reclassification had no impact on the Company’s financial position or results of operations for any periods presented.
2. Redeemable Common Stock:
The Company’s redeemable common stock is the only class of stock that is issued and outstanding.  Ownership of the Company’s redeemable common stock is generally restricted to directors of PKS and active employees of the Company and is conditioned upon the execution of repurchase agreements which restrict the transfer of the redeemable common stock.  The Company is obligated to purchase all redeemable common stock upon the death or termination of the employment of a stockholder at the formula value computed pursuant to PKS’ Restated Certificate of Incorporation.  Additionally, the redeemable common stock has no active market, can only be sold to the Company and represents claims that have no priority over any other claims upon liquidation.
Effective January 1, 2006, the Company began accounting for the redeemable common stock under the provisions of SFAS 150, “Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and Equity” (“SFAS 150”).  Since the Company is obligated to purchase all redeemable common stock upon death or termination of a stockholder’s employment, it is considered ‘mandatorily redeemable’ under SFAS 150.  SFAS 150 requires that mandatorily redeemable stock be recorded at formula value and presented as a liability on the balance sheet.  The formula value of the redeemable common stock is determined annually and is based on the book value of the Company.  Formula value equals total assets (excluding property, plant and equipment used in the Company’s construction activities (“Construction PP&E”)), reduced by total liabilities (e xcluding the liability for redeemable common stock) and minority interest.  Any excess of assets over liabilities, which consists entirely of the net book value of the Construction PP&E ($176 million at December 30, 2006), is presented as “Excess of assets over liabilities including redeemable common stock.”  Period to period changes in formula value represent an expense in the consolidated statement of operations captioned “Earnings attributable to redeemable common stock” beginning in 2006.  Period to period changes in Construction PP&E are not attributable to redeemable common stock and therefore, represent “Net income” beginning in 2006 on the consolidated statement of operations.  Since formula value of the redeemable common stock is based on the book value of the Company, the SFAS 150 earnings attributable to redeemable common stock offsets a substantial portion of current year earnings.  Furthermore, since SFAS 150 requires that manda torily redeemable stock be excluded from earnings per share, the Company has not presented earnings per share beginning in 2006.  These accounting and presentation changes have occurred despite the fact that the underlying nature and terms of the Company’s redeemable common stock have not changed.
Prior to the adoption of SFAS 150, the Company accounted for the redeemable common stock under EITF Issue No. 87-23, “Book Value Stock Purchase Plans” (“EITF No. 87-23,”) whereby changes in the aggregate redemption value of the redeemable common stock are not recognized as an expense.  Additionally, the Company presented the redeemable common stock as mezzanine equity on the consolidated balance sheets.  As of January 1, 2006, SFAS No. 123-R, “Share-Based Payment,” preempted the provisions of EITF No. 87-23 for the Company and replaced them with those of SFAS 150.

39

PETER KIEWIT SONS’, INC. AND SUBSIDIARIES
Notes To Consolidated Financial Statements (Continued)
2. Redeemable Common Stock, Continued:
The changes in the components of the redeemable common stock for the year ended December 30, 2006 were as follows:
							Accumulated
		Redeemable		Additional			Other
		Common		Paid-in			Comprehensive		Retained
		Stock		Capital			Income		Earnings			Total
		(dollars in millions)
December 31, 2005 balance, $0.01 par
value, 125 million shares authorized,
19,730,897 issued and outstanding	$	-	$	239		$	14	$	829		$	1,082
Issuances of redeemable common stock		-		55			-		-			55
Dividends		-		-			-		(30	)		(30	)
Repurchases of redeemable common stock		-		(19	)		-		(55	)		(74	)
Cumulative change in accounting principle, net of tax (1)		-		-			-		(8	)		(8	)
Comprehensive income:
Net income before earnings attributable to redeemable common stock		-		-			-		274			274
Other comprehensive income
Foreign currency adjustment		-		-			4		-			4
Change in unrealized holding gain		-		-			3		-			3
Total other comprehensive income												7
Total comprehensive income												281
December 30, 2006 balance, $0.01 par
value, 125 million shares authorized,
19,380,177 issued and outstanding	$	-	$	275		$	21	$	1,010		$	1,306
Excess of assets over liabilities												(176	)
Total redeemable common stock											$	1,130
(1)  Effective January 1, 2006, the Company adopted EITF No. 04-6, “Accounting for Stripping Costs Incurred During Production in the Mining Industry,” (“EITF No. 04-6”).  Mining companies typically remove rock, soil and waste materials (“overburden”) in order to access mineral deposits.  EITF No. 04-6 specifies that the stripping costs related to exposed, but not extracted, mineral must be expensed as incurred rather than inventoried in the cost of the mineral.  Prior to implementing EITF No. 04-6, the Company deferred stripping costs and charged them to operations as coal was extracted and sold.
The cumulative effect, net of tax, of implementing EITF No. 04-6 resulted in a reduction of retained earnings attributable to redeemable common stock of $8 million during 2006.

40

PETER KIEWIT SONS’, INC. AND SUBSIDIARIES
Notes To Consolidated Financial Statements (Continued)
2. Redeemable Common Stock, Continued:
The changes in the components of accumulated other comprehensive income for the three fiscal years ended December 30, 2006 were as follows:
		2006			2005			2004
	(dollars in millions)
Balance at beginning of period	$	14		$	9		$	4
Unrealized holding gain arising during period		5			1			1
Tax (expense) benefit		(2	)		-			-
Foreign currency translation adjustments		(1	)		7			6
Tax (expense) benefit		5			(3	)		(2	)
Balance at end of period	$	21		$	14		$	9

Issuances and repurchases of redeemable common stock, including conversions, for the three fiscal years ended December 30, 2006, were as follows:
	2006		2005		2004
	(number of shares)
Shares at the beginning of period	19,730,897		31,561,896		30,242,689
Shares issued	1,194,190		2,287,759		1,975,380
Shares repurchased	(1,544,910	)	(14,118,758	)	(656,173	)
Shares outstanding at end of period	19,380,177		19,730,897		31,561,896
Tender Offer:
Pursuant to the Company’s May 17, 2005 offer to purchase up to 38% of its outstanding redeemable common stock, on June 30, 2005, the Company accepted for payment and repurchased a total of 10,612,343 shares (37.55%) of the redeemable common stock at the current redemption price of $37.55 per share for an aggregate redemption value of $398 million.
3. Recent Accounting Pronouncements:
In June 2006, the FASB released Interpretation No. 48 “Accounting for Uncertainty in Income Taxes – an Interpretation of FASB Statement No. 109,” (“FIN 48”).  FIN 48 provides specific guidance on how to address uncertainty in accounting for income tax assets and liabilities, prescribing recognition thresholds and measurement attributes.  FIN 48 is effective for the Company beginning with the 2007 fiscal year.  The Company believes that the adoption of FIN 48 will not have a material impact to the financial statements.
In September 2006, the FASB released Statement of Financial Accounting Standards (“SFAS”) No. 157, “Fair Value Measurements,” (“SFAS 157”).  SFAS 157 establishes a framework for measuring fair value in generally accepted accounting principles and expands disclosures about fair value measurement.  The changes to current practice relate to the definition of fair value, the methods used to measure fair value and the expanded disclosures about fair value measurements.  SFAS 157 is effective for the Company beginning with the 2008 fiscal year.  The Company is continuing to evaluate the impact of the adoption of SFAS 157.

41

PETER KIEWIT SONS’, INC. AND SUBSIDIARIES
Notes To Consolidated Financial Statements (Continued)
4. Acquisitions:
On July 29, 2005, the Company acquired the assets and certain liabilities of a company that installs and maintains fire sprinkler systems and a company that installs and maintains security systems for $35 million.  The operating results related to these acquisitions have been included in the consolidated financial statements since that date.  The acquisition occurred as part of the Company’s plan to expand its construction business.
On August 20, 2004, the Company acquired the assets and certain liabilities of the Buckskin Mine (“Buckskin”), a coal mine located near Gillette, Wyoming.  The total purchase price was $74 million.  The results of Buckskin’s operations have been included in the consolidated financial statements since that date.  The acquisition occurred as part of the Company’s plan to expand its coal mining business.
The pro forma results relating to these acquisitions were not material to the Company’s operations.
5. Earnings Per Share:
Basic earnings per share has been computed using the weighted average number of shares outstanding during each period.  Diluted earnings per share gives effect to convertible debentures considered to be dilutive redeemable common stock equivalents.  As described in Note 2, earnings per share for the fiscal year ended December 30, 2006 have not been presented consistent with the adoption of SFAS 150.
		2005		2004
	(dollars in millions, except per share data in thousands)
Net income available to redeemable common stockholders	$	228	$	201
Add:  Interest expense, net of tax effect,
associated with convertible debentures		*		1
Net income available to diluted shares	$	228	$	202
Total number of weighted average shares outstanding used to compute basic earnings per share		23,805		30,384
Incremental dilutive shares assuming conversion of convertible debentures		655		1,283
Total number of shares used to compute
diluted earnings per share		24,460		31,667
Net earnings per share:
Basic	$	9.56	$	6.62
Diluted	$	9.31	$	6.38
* Less than $0.5 million.

42

PETER KIEWIT SONS’, INC. AND SUBSIDIARIES

Notes To Consolidated Financial Statements (Continued)

6.

Disclosures about Fair Value of Financial Instruments:

Marketable Securities.

The following summarizes the amortized cost, unrealized holding gains and losses and estimated fair values of available-for-sale securities at December 30, 2006 and December 31, 2005:

			Unrealized				Unrealized
	Amortized		Holding				Holding				Fair
	Cost		Gains				Losses				Value
	(dollars in millions)
2006
U.S. debt securities	$	15	$	-			$	-			$	15
Mutual funds		22		14				-				36
Corporate debt securities		10		-				-				10
Municipal debt securities		449		-				-				449
Mortgage backed securities		36		-				-				36
Total	$	532	$	14			$	-			$	546
2005
U.S. debt securities	$	2	$	-			$	-			$	2
Mutual funds		21		10				-				31
Municipal debt securities		362		-				-				362
Total	$	385	$	10			$	-			$	395
Available-for-sale securities are classified as current assets based upon the Company’s intent and ability to use any and all of these securities as necessary to satisfy liquidity requirements that may arise from the nature of the Company’s operations.  Realized gains and losses for the three fiscal years ended December 30, 2006 are not material.
The contractual maturity dates of the available-for-sale securities at December 30, 2006 were as follows:
						Amortized Cost				Fair Value
						(dollars in millions)
Maturity Date
Within 1 year					$	437			$	451
After 1 year – 5 years						46				46
After 5 years – 10 years						11				11
After 10 years						38				38
Total					$	532			$	546
Available-for-sale securities due within 1 year include $330 million of Variable Rate Demand Notes (“VRDN’s”).  VRDN’s represent tax-exempt instruments of high credit quality.  Even though VRDN’s are issued and rated as long-term securities, they are priced and traded as short-term as they are subject to a demand feature that reduces their effective maturity dates.

43

PETER KIEWIT SONS’, INC. AND SUBSIDIARIES
Notes To Consolidated Financial Statements (Continued)
6. Disclosures about Fair Value of Financial Instruments, Continued:
Retainage.
The following summarizes the components of retainage on projects included in receivables at December 30, 2006 and December 31, 2005:
		2006		2005
		(dollars in millions)
Escrowed securities	$	115	$	118
Other retainage held by owners		109		103
	$	224	$	221
Foreign Currency Forward Contracts.
The Company has entered into several foreign currency forward contracts as a strategy to offset the earnings impact of currency fluctuations upon future transactions.  The forward contracts are generally scheduled to mature as those future transactions occur.  The forward contracts have not been designated as hedging instruments under SFAS 133, “Accounting for Derivative Instruments and Hedging Activities.”  The forward contracts had outstanding notional amounts of $U.S. 62 million at December 30, 2006 and December 31, 2005.  The forward contracts offset the earnings impact caused by currency fluctuations of U.S. dollar denominated liabilities and expenses related to the completion of construction contracts by Canadian subsidiaries.  The forward contracts are recorded in the consolidated balance sheets at fair value based upon quoted market prices.  Changes in the fair value of the forward contracts are immediately recognized in cost of revenue in the consolidated statements of operations.
The forward contracts mature monthly in varying amounts during 2007 and 2008 and will settle based upon the difference between the current exchange rate at the time of settlement and the exchange rates in the forward contracts.  At December 30, 2006, the fair value of these forward contracts was a current liability of approximately $3 million and a long-term liability of less than $0.5 million.  At December 31, 2005, the fair value of these forward contracts was a current liability of approximately $2 million and a long-term liability of less than $0.5 million.  During the fiscal year ended December 30, 2006, the Company recognized a loss of approximately $5 million on the forwards, of which approximately $4 million has been realized.  During the fiscal year ended December 31, 2005, the Company recognized a loss of approximately $3 million on the forwards, of which less than $1 million had been realized.
Long-term Debt.
The fair value of debt was estimated using the incremental borrowing rates of the Company for debt of the same remaining maturities and approximates the carrying amount.
Minority Interest.
Minority interest consists primarily of the portion of the consolidated construction joint ventures that is not owned by the Company.  Each construction joint venture was created for the completion of a single project.  Each joint venture’s assets consist of current assets and property, plant and equipment (primarily construction equipment) and all liabilities are current liabilities.  Upon completion of the project, all liabilities are settled, and the remaining cash is distributed to the partners according to their stated interests in the joint venture agreement.  The fair value of minority interest approximates the carrying value.

44

PETER KIEWIT SONS’, INC. AND SUBSIDIARIES
Notes To Consolidated Financial Statements (Continued)
7. Investment in Nonconsolidated Joint Ventures:
Summary financial information for nonconsolidated joint ventures follows:
Financial Position.
						2006						2005
						(dollars in millions)
Total Nonconsolidated Joint Ventures
Current assets				$		433				$		225
Other assets (primarily construction equipment)						19						16
						452						241
Current liabilities						(354			)			(202			)
Net assets				$		98				$		39
Company’s Share
Equity in net assets				$		34				$		11
Payable from joint ventures						-						(3			)
Investment in nonconsolidated joint ventures, net				$		34				$		8
Operations.
	2006				2005								2004
	(dollars in millions)
Total Nonconsolidated Joint Ventures
Revenue	$	677			$		245				$		1,363
Costs		(625	)				(248	)					(1,244	)
Operating income	$	52			$		(3	)			$		119
Company’s Share
Revenue	$	209			$		67				$		849
Costs		(182	)				(63	)					(742	)
Operating income	$	27			$		4				$		107
Depreciation is computed by the joint ventures using straight line and accelerated methods over the estimated useful lives of the assets which range from 3 to 7 years.

45

PETER KIEWIT SONS’, INC. AND SUBSIDIARIES
Notes To Consolidated Financial Statements (Continued)
8. Property, Plant and Equipment:
Property, plant and equipment, at cost, consists of the following at December 30, 2006 and December 31, 2005:
	2006									2005
	(dollars in millions)
Land	$			24						$		24
Mineral properties				121								120
Land improvements				38								40
Buildings				152								158
Equipment				1,034								929
	$			1,369						$		1,271
9. Other Assets:
Other assets consist of the following at December 30, 2006 and December 31, 2005:
			2006						2005
			(dollars in millions)
Notes receivable			$			20			$		8
Excess distribution to minority interest holder						30					49
Intangibles, net of accumulated amortization of $25 and $22 (Note 10)						37					40
Goodwill (Note 10)						54					54
Other noncurrent assets						19					7
			$			160			$		158
10. Goodwill and Intangible Assets:
Changes in goodwill consist of the following for the three fiscal years ended December 30, 2006:
		2006					2005						2004
		(dollars in millions)
Beginning balance		$			54		$	29					$	29
Additions					-			25						-
Ending balance		$			54		$	54					$	29

46

PETER KIEWIT SONS’, INC. AND SUBSIDIARIES
Notes To Consolidated Financial Statements (Continued)
10. Goodwill and Intangible Assets, Continued:
Amortizable coal contract intangibles consist of the following at December 30, 2006 and December 31, 2005:
		2006			2005
		(dollars in millions)
Gross carrying amount	$	62		$	62
Accumulated amortization		(25	)		(22	)
	$	37		$	40
Amortization expense recognized on intangibles was $3 million, $5 million and $5 million, respectively, for each of the fiscal years ended 2006, 2005 and 2004.
Future amortization expense is estimated to be $3 million for the fiscal year ended 2007 and $2 million for each of the fiscal years ended 2008-2011.

11. Long-term Debt:
At December 30, 2006 and December 31, 2005, long-term debt consisted of the following:
		2006		2005
		(dollars in millions)
Federal coal lease	$	16	$	24
7.386% bank loan due 2024		9		9
3.45% loan issued as part of an acquisition		5		5
Other		-		1
		30		39
Less current portion		5		1
	$	25	$	38
On January 1, 2005 the Bureau of Land Management issued to the Company a federal coal lease near Gillette, Wyoming (non-interest bearing, with a 4.65% imputed interest rate).  Under the terms of the lease, the remaining $16 million is due to be paid in two equal annual installments of $8 million in January 2008 and January 2009.
The bank loan was entered into by a consolidated partnership of the Company that owns and operates a hydroelectric power plant in Canada (the “Hydroelectric Partnership”).  The loan is payable monthly over a 20 year term.  Certain provisions of the bank loan require the Hydroelectric Partnership to maintain certain ratios and establish restricted cash reserves among other requirements.  Indebtedness under the bank loan is solely collateralized by the assets of the Hydroelectric Partnership and the assets of its partners.
The 3.45% loan was entered into by a subsidiary of the Company as part of an acquisition.  The loan is payable in a lump sum in 2007.
Scheduled maturities of long-term debt are as follows (in millions):  2007 - $5, 2008 - $8; 2009 - $9; 2010 - $-, 2011 - $- and thereafter - $8.

47

PETER KIEWIT SONS’, INC. AND SUBSIDIARIES
Notes To Consolidated Financial Statements (Continued)
12. Accrued Reclamation:
A reconciliation of accrued reclamation at December 30, 2006 and December 31, 2005 follows:
							2006						2005
							(dollars in millions
Beginning balance							$	29				$	26
Estimated cash flow revisions								(3	)				-
Reclamation liabilities incurred								-					2
Accretion expense								2					1
Ending balance							$	28				$	29
13. Income Taxes:
An analysis of the income tax expense (benefit) relating to income before income taxes and earnings attributable to redeemable common stock for the three fiscal years ended December 30, 2006 follows:
	2006			2005						2004
	(dollars in millions)
Current:
U.S. federal	$		121	$		79				$		110
Foreign			7			19						-
State			18			9						13
			146			107						123
Deferred:
U.S. federal			2			2						(13		)
Foreign			2			3						(5		)
State			2			1						(4		)
			6			6						(22		)
	$		152	$		113				$		101
The United States and foreign components of income before income taxes and earnings attributable to redeemable common stock follows:
		2006			2005						2004
		(dollars in millions)
United States		$	395		$			270			$		321
Foreign			31					71					(19		)
		$	426		$			341			$		302

48

PETER KIEWIT SONS’, INC. AND SUBSIDIARIES
Notes To Consolidated Financial Statements (Continued)
13. Income Taxes, Continued:
A reconciliation of the actual income tax expense (benefit) and the tax computed by applying the U.S. federal statutory rate (35%) to the income before income taxes and earnings attributable to redeemable common stock for the three fiscal years ended December 30, 2006 follows:
	2006					2005						2004
	(dollars in millions)
Computed tax at statutory rate	$	149				$		119				$		106
State income taxes		15						9						11
Foreign income taxes		(2		)				(1			)			-
Resolution and settlements of prior year tax liabilities		(1		)				(10			)			(15			)
Other		(9		)				(4			)			(1			)
	$	152				$		113				$		101
No U.S. income tax has been provided on the potential remittance of any undistributed income of foreign subsidiaries as the Company believes the investments in its foreign subsidiaries to be essentially permanent in duration.  Should it become apparent that the Company would remit any undistributed income of foreign subsidiaries, the U.S. income tax related to these remittances would be recorded at that time.
The components of the net deferred tax assets (liabilities) for the fiscal years ended December 30, 2006 and December 31, 2005 were as follows:
		2006								2005
		Current				Noncurrent				Current					Noncurrent
		(dollars in millions)
Deferred tax assets:
Construction accounting		$	12			$	-			$	14				$	-
Joint venture investments			16				-				19					-
Insurance claims			27				-				30					1
Reclamation costs			-				7				-					7
Other			16				-				11					1
Valuation allowance			(2		)		-				(3		)			-
Total deferred tax assets			69				7				71					9
Deferred tax liabilities:
Asset bases/accumulated depreciation			-				(20		)		-					(20		)
Joint venture investments			-				(7		)		-					(12		)
Other			(5		)		(12		)		(8		)			(10		)
Total deferred tax liabilities			(5		)		(39		)		(8		)			(42		)
Net deferred tax assets (liabilities)		$	64			$	(32		)	$	63				$	(33		)

49

PETER KIEWIT SONS’, INC. AND SUBSIDIARIES

Notes To Consolidated Financial Statements (Continued)

13.

Income Taxes, Continued:

Because of its historical earnings, its current backlog and various other factors, the Company believes that it is more likely than not that its deferred tax assets will be realized, therefore, no valuation allowance has been established for U.S. income tax purposes.  Included in other deferred tax assets above, the Company currently has $11 million of net operating loss carryforwards relating to Canadian construction activities that expire in varying amounts from 2010-2026.  The valuation allowance reflects the Company’s assessment that certain deferred tax assets related to these Canadian net operating losses and other foreign income tax items may not be realized.

14.

Employee Benefit Plans:

The Company makes contributions, based on collective bargaining agreements related to its construction operations, to several multi-employer union pension plans.  Total contribution expense recognized related to these multi-employer union pension plans was $48 million in 2006, $41 million in 2005 and $44 million in 2004.  These contributions are included in the cost of revenue.  Under federal law, the Company may be liable for a portion of future plan deficiencies; however, there are no known deficiencies.  During 2006, the Company was a participant in approximately 217 collective bargaining agreements covering approximately 7,100 employees.  These agreements typically expire within 1 to 3 years.

The Company sponsors a defined contribution retirement savings plan.  Profit sharing contributions were made to the plan in 2004.  In 2005, the Company enhanced the plan by replacing the profit sharing contribution with an employer match and a discretionary contribution.  The expense related to the plan was $17 million, $10 million and $4 million for the fiscal years ended December 30, 2006, December 31, 2005 and December 25, 2004, respectively.

15.

Segment, Geographic and Market Data:

The Company has two reportable segments, construction and coal mining.  Intersegment sales, if any, are recorded at cost and are eliminated upon consolidation.  There were no intersegment sales for the three fiscal years ended December 30, 2006.  Operating income is comprised of net sales less all identifiable operating expenses, allocated general and administrative expenses, gain on sale of operating assets, depreciation and amortization.  Investment income, interest expense and income taxes have been excluded from segment operations.  

50

PETER KIEWIT SONS’, INC. AND SUBSIDIARIES
Notes To Consolidated Financial Statements (Continued)
15. Segment, Geographic and Market Data, Continued:
Segment Data.
	2006				2005				2004
	Construction		Coal Mining		Construction		Coal Mining		Construction			Coal Mining
	(dollars in millions)
Revenue-external customers	$	4,853	$	196	$	3,974	$	171	$		3,265	$	93
Depreciation and amortization	$	104	$	16	$	89	$	20	$		77	$	16
Operating income	$	401	$	37	$	384	$	33	$		275	$	22
Total assets	$	2,600	$	263	$	2,267	$	254
In addition to total segment assets of $2,863 million and $2,521 million at December 30, 2006 and December 31, 2005, respectively, $169 million and $156 million of assets, respectively, were corporate assets, consisting primarily of cash and cash equivalents, and property and equipment, less accumulated depreciation.  Additionally, $311 million and $307 million, respectively, were eliminated due to the consolidation of intersegment balances.
Segment asset information, including information about equity method investments and expenditures for additions to long-lived assets, has not been presented as it is not reported to or reviewed by the chief operating decision maker.
Geographic Data.
								2006			2005		2004
							(dollars in millions)
Revenue, by location of services provided:
United States							$	4,351		$	3,511	$	3,022
Canada								698			634		336
							$	5,049		$	4,145	$	3,358
Long-lived assets:
United States							$	474		$	462	$	384
Canada								100			81		22
							$	574		$	543	$	406

51

PETER KIEWIT SONS’, INC. AND SUBSIDIARIES
Notes To Consolidated Financial Statements (Continued)
15. Segment, Geographic and Market Data, Continued:
Market Data.
		2006		2005				2004
	(dollars in millions)
Construction revenue by market:
Transportation	$	2,110	$	1,994			$	1,728
Power/heat/cooling		710		227				277
Petroleum		430		448				196
Commercial building		405		352				297
Water supply/dams		348		282				204
Electrical		263		285				317
Sewage and solid waste		209		87				72
Mining		131		117				69
All other construction markets		247		182				105
Total construction revenue		4,853		3,974				3,265
Coal mining revenue		196		171				93
Total revenue	$	5,049	$	4,145			$	3,358
During 2006, 2005 and 2004, construction revenue recognized from a single owner represented 9%, 11% and 12%, respectively, of the Company’s total revenue.
16. Related Party Transactions:
Mr. Walter Scott, Jr., a director of PKS, is a director and significant shareholder of MidAmerican Energy Holdings Company (“MidAmerican”).  The Company provided construction services to MidAmerican and recognized revenue of $53 million, $5 million and $54 million during each of the years 2006, 2005 and 2004, respectively.
17. Operating Leases:
The Company leases mineral properties, buildings and equipment under noncancelable operating lease agreements.  Future minimum lease commitments are as follows (dollars in millions):
2007					$	16
2008						10
2009						7
2010						5
2011						2
Thereafter						5
					$	45
Rent expense for the above leases during the years 2006, 2005 and 2004 was $23 million, $19 million and $17 million, respectively.

52

PETER KIEWIT SONS’, INC. AND SUBSIDIARIES
Notes To Consolidated Financial Statements (Continued)
18. Other Matters:
The Company is involved in various lawsuits and claims incidental to its business.  Management believes that any resulting liability, beyond that provided, should not materially affect the Company’s financial position, future results of operations or future cash flows.
The Company’s coal sales generally are made under multi-year supply contracts.  At the end of 2006 the Company had a sales commitment of approximately 122 million tons.  The remaining terms on these contracts range from less than 1 year to 20 years.
During the fiscal years ended December 30, 2006, December 31, 2005 and December 25, 2004, the Company recognized additional operating income of $13 million, $103 million and $49 million, respectively, of claim settlements on construction projects.
It is customary in the Company’s industry to use standby letters of credit.  At December 30, 2006, the company had outstanding letters of credit with a number of banks totaling approximately $281 million.  None of the available letters of credit have been drawn upon.
The Company anticipates repurchasing approximately 843,000 shares of redeemable common stock over the next 2 years as a result of changes in executive management.  The aggregate value of these shares calculated at the December 30, 2006 formula value is approximately $49 million.
19. Quarterly Information (Unaudited):
	March					June				September				December
		2006		2005			2006		2005		2006		2005		2006			2005
	(dollars in millions, except per share data)
Revenue	$	986	$	809		$	1,237	$	997	$	1,405	$	1,118	$	1,421		$	1,221
Margin	$	96	$	45		$	154	$	228	$	238	$	154	$	223		$	248
Net income (loss) before earnings attributable to redeemable common stock*	$	21	$	(6	)	$	52	$	60	$	92	$	54	$	109		$	120
Net income (loss)	$	10	$	(6	)	$	27	$	60	$	4	$	54	$	(2	)	$	120
Basic (loss) earnings per share:	$	*	$	(0.21	)	$	*	$	2.13	$	*	$	2.93	$	*		$	6.07
Diluted (loss) earnings per share:	$	*	$	(0.21	)	$	*	$	2.05	$	*	$	2.83	$	*		$	6.07
Dividends paid per share	$	0.80	$	0.45		$	0.85	$	0.50	$	-	$	-	$	-		$	-
During the normal course of business, the Company settles claims and recognizes income in the period in which such claims are settled.
* See Note 2 “Redeemable Common Stock”

53

Item 9.        Changes in and Disagreements With Accountants on Accounting and Financial Disclosures.

None.

Item 9A.       Controls and Procedures.

As required by Exchange Act Rule 13a-15(b), the management of the Company, including the Chief Executive Officer and Chief Financial Officer, conducted an evaluation as of the end of the period covered by this report, of the effectiveness of the Company’s disclosure controls and procedures as defined in Exchange Act Rule 13a-15(e).  Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective as of the end of the period covered by this report.  

Changes in Internal Control Over Financial Reporting.

As required by Exchange Act Rule 13a-15(d), the Company, including the Chief Executive Officer and Chief Financial Officer, also conducted an evaluation of the Company’s internal control over financial reporting to determine whether any changes occurred during the fourth quarter of the fiscal year ended December 30, 2006 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.  Based on that evaluation, there has been no such change during the fourth quarter of the fiscal year ended December 30, 2006.

Management’s Assessment of Internal Control Over Financial Reporting.

The management of the Company is responsible for establishing and maintaining effective internal control over financial reporting.  The management of the Company has conducted an assessment of the Company’s internal control over financial reporting at December 30, 2006, based on the criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.  Based upon that assessment, Management concluded that the Company’s internal control over financial reporting was effective at December 30, 2006.

The Company’s registered public accounting firm, KPMG LLP, has issued an attestation report on Management’s assessment of the Company’s internal control over financial reporting.  That report is included below.

54

Report of Independent Registered Public Accounting Firm

The Board of Directors and Stockholders

Peter Kiewit Sons’, Inc.:

We have audited management’s assessment, included in the accompanying Management’s Assessment of Internal Control Over Financial Reporting appearing under item 9A that Peter Kiewit Sons’, Inc. and subsidiaries (“the Company”) maintained effective internal control over financial reporting as of December 30, 2006, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).  The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting.  Our responsibility is to express an opinion on management’s assessment and an opinion on the effectiveness of the Company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.  Our audit included obtaining an understanding of internal control over financial reporting, evaluating management’s assessment, testing and evaluating the design and operating effectiveness of internal control, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

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 (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) 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 (3) provide reasonable assurance regarding prevention or timely detec tion 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.

In our opinion, management’s assessment that the Company maintained effective internal control over financial reporting as of December 30, 2006, is fairly stated, in all material respects, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).  Also, in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 30, 2006, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Peter Kiewit Sons’, Inc. and subsidiaries as of December 30, 2006 and December 31, 2005, and the related consolidated statements of operations, changes in redeemable common stock, comprehensive income and excess of assets over liabilities, cash flows, and related financial statement schedule for each of the years in the three-year period ended December 30, 2006, and our report dated February 27, 2007 expressed an unqualified opinion on those consolidated financial statements and financial statement schedule.  

KPMG LLP

Omaha, Nebraska

February 27, 2007

55

Limitations on the Effectiveness of Controls.

The 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.  The Company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company; (2) 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 (3) provide reasonable assurance regarding prevention or timely d etection 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 cannot provide absolute assurance of achieving financial reporting objectives, and may not prevent or detect misstatements.  Also, projections of any evaluation of effectiveness to future period 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.

Item 9B.       Other Information.

None.

PART III

Item 10.       Directors, Executive Officers and Corporate Governance.

The information required by Item 10 of Part III is incorporated by reference to PKS’ definitive proxy statement for the 2007 Annual Meeting of Stockholders to be filed with the Securities and Exchange Commission.  However, certain information is set forth in Item 4A, “Executive Officers of the Registrant,” above.

Item 11.       Executive Compensation.

The information required by Item 11 of Part III is incorporated by reference to PKS’ definitive proxy statement for the 2007 Annual Meeting of Stockholders to be filed with the Securities and Exchange Commission.

56

Item 12.       Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

The information required by Item 12 of Part III is incorporated by reference to PKS’ definitive proxy statement for the 2007 Annual Meeting of Stockholders to be filed with the Securities and Exchange Commission.

Item 13.       Certain Relationships and Related Transactions, and Director Independence.

The information required by Item 13 of Part III is incorporated by reference to PKS’ definitive proxy statement for the 2007 Annual Meeting of Stockholders to be filed with the Securities and Exchange Commission.

Item 14.       Principal Accountant Fees and Services.

The information required by Item 14 of Part III is incorporated by reference to PKS’ definitive proxy statement for the 2007 Annual Meeting of Stockholders to be filed with the Securities and Exchange Commission.

PART IV

Item 15.       Exhibits and Financial Statement Schedules.

(a)

The following documents are filed as part of this report:

1.

Consolidated Financial Statements as of December 30, 2006 and December 31, 2005 and for the three fiscal years ended December 30, 2006:

Reports of Independent Registered Public Accounting Firm dated February 27, 2007 of KPMG LLP

Consolidated Statements of Operations

Consolidated Balance Sheets

Consolidated Statements of Cash Flows

Consolidated Statements of Changes in Redeemable Common Stock, Comprehensive Income and Excess of Assets Over Liabilities

Notes to Consolidated Financial Statements

2.

Consolidated Financial Statement Schedules for the three fiscal years ended December 30, 2006:

II – Valuation and Qualifying Accounts and Reserves

Schedules not indicated above have been omitted because of the absence of the conditions under which they are required or because the information called for is shown in the consolidated financial statements or the notes thereto.

57

(b) Exhibits required by Item 601 of Regulation S-K.  Exhibits incorporated by reference are indicated in parentheses:
	Exhibit Number	Description
	3.1	Restated Certificate of Incorporation (Exhibit 3.1 to PKS’ Annual Report on Form 10-K for the period ended December 31, 2005 filed March 1, 2006).
	3.2	Amended and Restated By-laws.
	4	Form of Stock Repurchase Agreement for Employee Stockholders (Exhibit 4.3 to PKS’ Registration Statement on Form S-8 filed August 4, 2003).
	10	Executive Separation Plan dated October 29, 2004 between Kenneth E. Stinson and PKS (Exhibit 10 to PKS’ Annual Report on Form 10-K filed February 28, 2005).
	14	Code of Ethics (Exhibit 14 to PKS’ Annual Report on Form 10-K filed for the period ended December 27, 2003 filed March 4, 2004).
	21	List of Subsidiaries of the Company.
	31.1	Rule 15d-14(a) Certification of Chief Executive Officer.
	31.2	Rule 15d-14(a) Certification of Chief Financial Officer.
	32.1	Section 1350 Certification of Chief Executive Officer.
	32.2	Section 1350 Certification of Chief Financial Officer.

58

Schedule II
Valuation and Qualifying Accounts and Reserves
			Additions
	Balance		Charged to		Amounts			Balance
	Beginning		Costs and		Charged to			End of
	of Period		Expenses		Reserves			Period
	(dollars in millions)
Fiscal year ended December 30, 2006
Allowance for doubtful trade accounts	$	5	$	1	$	(3	)	$	3
Reserves:
Insurance claims	$	82	$	25	$	(19	)	$	88
Fiscal year ended December 31, 2005
Allowance for doubtful trade accounts	$	19	$	5	$	(19	)	$	5
Reserves:
Insurance claims*	$	79	$	16	$	(13	)	$	82
Fiscal year ended December 25, 2004
Allowance for doubtful trade accounts	$	7	$	19	$	(7	)	$	19
Reserves:
Insurance claims	$	70	$	11	$	(9	)	$	72
* The adoption of FIN 46-R resulted in the addition of $7 million to the beginning balance of reserves for insurance claims in 2005 from the ending balance at December 25, 2004.

59

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.
	PETER KIEWIT SONS’, INC.
	By: /s/  Tobin A. Schropp
Date: February 27, 2007	Name: Tobin A. Schropp
	Title: Senior Vice President
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 and in the capacities and on the dates indicated.

Name	Title	Date
/s/ Bruce E. Grewcock	President, Chief Executive Officer and Director (Principal Executive Officer)	February 27, 2007
Bruce E. Grewcock
/s/ Michael J. Piechoski	Senior Vice President and Chief Financial Officer (Principal Financial Officer)	February 27, 2007
Michael J. Piechoski
/s/ Michael J. Whetstine	Controller (Principal Accounting Officer)	February 27, 2007
Michael J. Whetstine
/s/ Mogens C. Bay	Director	February 27, 2007
Mogens C. Bay
/s/ Scott L. Cassels	Director	February 27, 2007
Scott L. Cassels
/s/ Richard W. Colf	Director	February 27, 2007
Richard W. Colf
/s/ Richard Geary	Director	February 27, 2007
Richard Geary
/s/ Steven Hansen	Director	February 27, 2007
Steven Hansen
/s/ Allan K. Kirkwood	Director	February 27, 2007
Allan K. Kirkwood
/s/ Michael R. McCarthy	Director	February 27, 2007
Michael R. McCarthy
/s/ Christopher J. Murphy	Director	February 27, 2007
Christopher J. Murphy
/s/ Douglas E. Patterson	Director	February 27, 2007
Douglas E. Patterson

60

Name	Title	Date
/s/ R. Michael Phelps	Director	February 27, 2007
R. Michael Phelps
/s/ Kirk R. Samuelson	Director	February 27, 2007
Kirk R. Samuelson
/s/ Walter Scott, Jr.	Director	February 27, 2007
Walter Scott, Jr.
/s/ Thomas S. Shelby	Director	February 27, 2007
Thomas S. Shelby
/s/ Kenneth E. Stinson	Director	February 27, 2007
Kenneth E. Stinson

61

EX-3

Exhibit 3.2

AMENDED AND RESTATED

BY-LAWS

OF

PETER KIEWIT SONS’, INC.

Adopted March 19, 1998

Amended March 31, 1998

Amended June 19, 1999

Amended June 14, 2004

Amended October 29, 2004

Amended February 27, 2007

#

TABLE OF CONTENTS

TO

AMENDED AND RESTATED

BY-LAWS

OF

PETER KIEWIT SONS’, INC.

Sections		Page
1-2	Offices……………………………………………………………………….		1
3	Seal………………………………………………………………………….		1
4-12	Stockholders' Meetings……………………………………………………...		1
13-16	Directors……………………………………………………………………..		2
17	Honorary Directors………………………………………………………….		3
18	Board Committee……………………………………………………………		4
19	Executive Committee………………………………………………………..		4
20	Compensation Committee…………………………………………………...		5
21	Audit Committee…………………………………………………………….		6
22	Intentionally Omitted….…………………………………………………….		6
23-24	Compensation of Directors………………………………………………….		6
25-28	Meetings of the Board……………………………………………………….		6
29-37	Officers……………………………………………………………………...		7
38	Shares of Stock….…………………………………………………………...		8
39	Certificates of Stock…………………………………………………………		8
40	Transfers of Stock…………………………………………………………...		8
41	Fixing Record Date ………………………………………………………....		9
42	Registered Stockholders……………………………………………………..		9
43	Lost Certificates……………………………………………………………..		9
44	Checks……………………………………………………………………….		9
45	Fiscal Year…………………………………………………………………..		9
46-47	Dividends……………………………………………………………………		10
48-49	Notices………………………………………………………………………		10
50	Amendments………………………………………………………………...		10
51	Indemnification……………………………………………………………...		10

#

AMENDED AND RESTATED BY-LAWS

OF

PETER KIEWIT SONS’, INC.

OFFICES

1.

The registered office of the corporation shall be in the City of Wilmington, County of New Castle, State of Delaware, and the name of the registered agent in charge thereof is The Corporation Trust Company.

2.

The corporation shall also have an office in the City of Omaha, State of Nebraska, and also offices at such other places as the board of directors may from time to time designate.

SEAL

3.

The corporate seal shall have inscribed thereon the name of the corporation, the year of its organization and the words "Corporate Seal, Delaware." Said seal may be used by causing it or a facsimile thereof to be impressed or affixed or reproduced or otherwise.

STOCKHOLDERS' MEETINGS

4.

The annual meeting of the stockholders of the corporation shall be held at such date, place and time as may be determined by the board of directors and as may be designated in the notice of such meeting for the purpose of electing a board of directors and the transaction of such other business as may properly be brought before the meeting.

5.

Special meetings of the stockholders may be held at such time and place as shall be stated in the notice of the meeting.

6.

The holders of a majority of the stock issued and outstanding, and entitled to vote thereat, present in person, or represented by proxy, shall be requisite and shall constitute a quorum at all meetings of the stockholders for the transaction of business except as otherwise provided by statute, by the Restated Certificate of Incorporation or by these By-laws. If, however, such quorum shall not be present or represented at any meeting of the stockholders, the stockholders entitled to vote thereat, present in person, or by proxy, shall have power to adjourn the meeting from time to time without notice other than announcement at the meeting, until a quorum shall be present. At such adjourned meeting at which a quorum shall be present any business may be transacted which might have been transacted at the meeting as originally notified.

7.

Each stockholder at every meeting of the stockholders shall be entitled to one vote in person or by proxy for each share of the capital stock entitled to vote held by such stockholder, but no proxy shall be voted on after three (3) years from its date, unless the proxy provides for a longer period.

At each election for directors every stockholder entitled to vote at such election shall have the right to vote, in person or by proxy, the number of shares owned by him for as many persons as there are directors to be elected and for whose election he has a right to vote, or to cumulate his votes by giving one candidate as many votes as the number of such directors multiplied by the number of his shares shall equal, or by distributing such votes on the same principle among any number of such candidates.

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8.

Notice of the annual meeting of the stockholders shall be given by the Secretary or an Assistant Secretary of the corporation as required by law.

9.

A complete list of the stockholders entitled to vote at every meeting of the stockholders shall be prepared, at least ten (10) days before every meeting, by the officer who has charge of the stock ledger of the corporation. The list shall be arranged in alphabetical order and shall show the address of each stockholder and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least ten (10) days prior to the meeting, either at a place within the city where the meeting is to be held, which place shall be specified in the notice of the meeting, or, if not so specified, at the place where the meeting is to be held. This list shall also be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by an y stockholder who is present.

10.

Special meetings of the stockholders, for any purpose or purposes, unless otherwise prescribed by statute, may be called by the chairman of the board and shall be called by the chairman of the board or secretary at the request in writing of a majority of the board of directors, or at the request in writing of stockholders owning a majority in amount of the entire capital stock of the corporation issued and outstanding and entitled to vote. Such request shall state the purpose or purposes of the proposed meeting.

11.

Business transacted at all special meetings shall be confined to the objects stated in the call.

12.

Written notice of a special meeting of stockholders, stating the time and place and object thereof, shall be served upon or mailed at least ten (10) days before such meeting to each stockholder entitled to vote thereat at such address as appears on the books of the corporation.

DIRECTORS

13.

The number of directors of the corporation which shall constitute the whole board shall be such number, not less than ten (10) nor more than fifteen (15), as the board of directors may from time to time fix by resolution. The directors shall be elected at the annual meeting of the stockholders, and each director shall be elected to serve until his successor shall be elected and shall qualify. Newly created directorships resulting from any increase in the authorized number of directors may be filled by a majority of the directors then in office, and the directors so elected shall hold office until the next annual election and until their successors are duly elected and shall qualify.

13A.

Nominations for the election of directors shall be made by the board of directors or a stockholder entitled to vote for the election of directors. However, a stockholder may nominate one or more persons for election as directors at a meeting held to elect directors only if written notice of such stockholder's intent to make each such nomination has been received by the Secretary of the corporation not later than (i) with respect to an election to be held at the annual meeting of stockholders, sixty (60) days before such meeting, and (ii) with respect to an election to be held at a special meeting of stockholders, the close of business on the seventh day following the date on which notice of such meeting is first given to stockholders.

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Each such notice from the stockholder to the Secretary shall set forth: (a) the name and address of the stockholder who intends to make the nomination and of the person or persons to be nominated; (b) a representation that the stockholder is a holder of record of stock of the corporation entitled to vote at such meeting and intends to appear in person or by proxy at the meeting to nominate the person or persons specified in the notice; (c) the written consent of each nominee to serve as a director of the corporation if so elected; (d) a description of all arrangements or understandings between the stockholder and each nominee and any other person or persons (naming each such person) pursuant to which the nomination or nominations are to be made by the stockholder; (e) such other information regarding each nominee proposed by such stockholder as would be required to be included in a preliminary proxy statement filed pursuant to the proxy rules of the Securities and Exchange Commission, had the nominee been nominated, or intended to be nominated, by the board of directors; and (f) such additional information about each such nominee as the board of directors may reasonably request to determine the eligibility of the nominee. The chairman of the meeting may refuse to acknowledge the nomination of any person not made in compliance with the foregoing procedure.

14.

The directors may hold their meetings and keep the books of the corporation outside of Delaware at the office of the corporation in the City of Omaha, Nebraska, or at such other places as they may from time to time determine.

15.

If the office of any director or directors becomes vacant by reason of death, resignation, retirement, disqualification, removal from office, or otherwise, a majority of the remaining directors, though less than a quorum, may choose a successor or successors, who shall hold office for the unexpired term in respect to which such vacancy occurred or until the next election of directors. However, if the stockholders remove a director, the vacancy shall be filled only upon the election of a successor director by the stockholders.

16.

The property, business and affairs of the corporation shall be managed by its board of directors which may exercise all lawful powers of the corporation and do all such lawful acts and things as are not by statute or by the Restated Certificate of Incorporation or by these By-laws directed or required to be exercised or done by the stockholders.

HONORARY DIRECTORS

17.

The board of directors by resolution may create an advisory board of directors and appoint one or more persons to such advisory board of directors. Persons appointed to said advisory board shall be considered honorary directors of the corporation. Members of said advisory board shall be entitled to attend regular and special meetings of the board of directors and participate in such meetings by their offering advice and consultation; but members of said advisory board shall not be entitled to vote on any matter being considered by the board of directors. A member of the advisory board of directors shall not be considered in any way a member of the board of directors or an officer or employee of the corporation.

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BOARD COMMITTEES

18.

The board of directors may by resolution passed by an affirmative vote of two-thirds of the whole board designate committees of the board, each consisting of two (2) or more of its members. Such committees shall include, but are not limited to, an executive committee, a compensation committee and an audit committee. The board of directors shall designate the chairman of each committee and all of the members of the committee shall serve at the pleasure of the board of directors.

A majority of each committee shall constitute a quorum. Each committee shall adopt its own rules of procedure and shall meet at stated times as provided by its rules of procedure or upon the call of the chairman of the committee or of any two members of the committee. Notice of each such meeting, stating the place, date, and hour thereof, shall be served personally on each member of the committee, or shall be mailed, telegraphed or telephoned to his address on the books of the corporation, at least twenty-four (24) hours before the meeting. A notice need not state the business proposed to be transacted at the meeting. No notice of the time or place of any meeting of the committee need be given to any member thereof who attends in person or who, in writing executed and filed with the records of the meeting either before or after the holding thereof, waives such notice. No notice need be given of an adjourned meeting of the committee. Meetings of the committee may be held at such place or places, either within or outside of the City of Omaha, State of Nebraska, as the committee shall determine, or as may be specified or fixed in the respective notices or waivers thereof. Each committee shall keep appropriate minutes of its proceedings and report all significant actions to the board of directors at the regular meetings thereof held next after such actions have been taken. Vacancies on such committee shall be filled by the board of directors. Members of such committee may be removed by the board of directors at any time with or without cause.

EXECUTIVE COMMITTEE

19.

The executive committee shall have and may exercise all or any of the powers of the board of directors in the management of the normal and ordinary business and affairs of the corporation at all times when the board of directors is not in session, and in connection therewith, the executive committee shall have full charge of the property, interest, business and transactions of the corporation. Specifically, but not by way of limitation, the executive committee shall have the following powers, duties and responsibilities while the board of directors is not in session:

(a)

To fix all remuneration of the officers and employees of the corporation, other than the “named executive officers” (as defined by applicable rules and regulations promulgated by the Securities and Exchange Commission or the Internal Revenue Service) and the officers designated as “executive officers” by resolution of the board of directors.

(b)

To maintain general charge and control of all accounting and data processing affairs of the corporation.

(c)

To maintain general charge and control of all major financial arrangements, and of acquisitions and dispositions of property which are not in the ordinary, routine, and regular course of business of the corporation and to make recommendations as to all matters within the purview of this subparagraph (c) to the board of directors.

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(d)

To maintain general charge of and to supervise the financial affairs of the corporation, including the budgetary, accounting, and statistical methods and procedures of the corporation, financial policies, practices and problems of the corporation and to make recommendations as to such financial or related matters as shall be referred to it by the board of directors, or which shall be raised by the committee on its own initiative.

(e)

To assure compliance with ethical standards.

(f)

To review the ownership of the corporation's securities by employee stockholders, other than the named executive officers, and make determinations concerning excessive stock ownership pursuant to Article Sixth (D)(3)(d) of the Restated Certificate of Incorporation, other than with respect to the named executive officers.

(g)

To review and approve all requests by stockholders of the corporation, other than the named executive officers, to transfer stock of the corporation to transferees within the guidelines established by Section 38 of these By-laws.

Notwithstanding the foregoing, the executive committee shall not have the power or authority of the board of directors in reference to amending the Restated Certificate of Incorporation, amending the By-laws, declaring dividends, adopting an agreement of merger or consolidation, recommending to the stockholders the sale, lease or exchange of all or substantially all of the corporation's property and assets, recommending to the stockholders a dissolution of the corporation or a revocation of a dissolution, authorizing the issuance of stock or to act contrary to any action previously undertaken by the board of directors, and shall not have the specific powers conferred upon other committees by these By-laws or by resolution of the board pursuant to the Restated Certificate of Incorporation of the corporation. The executive committee shall not have the authority to inaugurate reversals of, or departures from, fundamental polici es and methods of conducting the business of the corporation, as prescribed by the board. It shall have the power to authorize the seal of the corporation to be affixed to all papers and documents which may require it. All actions of the executive committee shall be subject to revision or alteration by the board of directors provided that no rights or acts of third parties shall be affected by any such revision or alteration.

COMPENSATION COMMITTEE

20.

The compensation committee shall consist entirely of two (2) or more members of the board of directors who are considered “outside directors” for purposes of Section 162(m) of the Internal Revenue Code of 1986, as amended (or any successor provision. The compensation committee shall have the duties and responsibilities set forth in the compensation committee charter, as may be amended from time to time by the board of directors.

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AUDIT COMMITTEE

21.

The audit committee shall consist entirely of two (2) or more members of the board of directors who meet the independence, financial literacy, and experience requirements as defined by applicable laws and regulations. At least one (1) member of the audit committee shall be designated as a “financial expert,” as defined by applicable laws and regulations. The audit committee shall have the duties and responsibilities set forth in the audit committee charter, as may be amended from time to time by the board of directors.

22.

[Intentionally Omitted.]

COMPENSATION OF DIRECTORS

23.

No stated salary or other compensation for services as a director shall be paid to a director who is otherwise paid a salary as an employee of the corporation or any of its subsidiaries or who holds a corporate officer position of this corporation. Any director without these qualifications, by resolution of the board, may be paid an annual sum for services as a director and such director may also be paid a fixed sum and expenses for each board meeting or other meeting attended by such director at the request of the corporation in his capacity as a director. In addition, any director without the foregoing qualifications, by resolution of the board, may be paid an annual sum for serving as a chairman of a committee of the board of directors. A director shall not be precluded from serving the corporation in any other capacity and receiving compensation therefor.

24.

Members of special or standing committees may be allowed like compensation for attending committee meetings.

MEETINGS OF THE BOARD

25.

The first meeting of each newly elected board shall be held at Omaha, Nebraska after the adjournment of the annual stockholders' meeting or at such other time and place either within or without the State of Delaware as shall be fixed by the newly elected directors, and no notice of such meeting shall be necessary.

26.

Regular meetings of the board may be held at such places within or without the State of Delaware and at such times as the board may from time to time determine, and if so determined notices thereof need not be given.

27.

Special meetings of the board may be called by the chairman of the board on three (3) days' notice to each director, either personally or by mail or by telegraph; special meetings shall be called by the chairman of the board or secretary in like manner and on like notice on the written request of two (2) directors.

28.

At all meetings of the board of directors a majority of the whole board of directors shall constitute a quorum for the transaction of business and the affirmative vote of a majority of the whole board shall be required to constitute the act of the board of directors, except as may be otherwise specifically provided by statute or by the Restated Certificate of Incorporation or by these By-laws.

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OFFICERS

29.

The officers of the corporation shall be a chief executive officer, chief operating officer, president,  secretary, controller and treasurer. In addition the board of directors may elect a chairman of the board, one or more vice chairmen of the board, a chairman of any committee designated by the board, one or more vice presidents, one or more of whom may be executive vice presidents, senior vice presidents, or assistant vice presidents, one or more assistant secretaries, assistant treasurers, assistant controllers and such other subordinate officers, and may appoint such other agents, as the board of directors may deem necessary.

30.

The chief executive officer, chief operating officer, president, secretary, controller and treasurer shall be elected annually by the board of directors at the first meeting of the board following the stockholders' annual meeting, or as soon thereafter as is conveniently possible. Other officers of the corporation may be elected by the board of directors from time to time. Agents of the corporation may be appointed by the board of directors from time to time. Each officer shall serve until his successor shall have been elected and qualified, or until his death, resignation or removal.

31.

Any officer or agent may be removed from office, with or without cause, at any time by the affirmative vote of a majority of the board of directors then in office.

32.

Any vacancy in any office from any cause may be filled for the unexpired portion of the term by the board of directors.

33.

The board of directors shall determine who shall preside at all meetings of the board of directors and shall also determine who shall preside at all meetings of the stockholders.

34.

The officers of the corporation shall hold such powers and perform such duties as from time to time may be assigned them by the board of directors.

35.

The chairman of the board, vice chairman of the board, chairman of the executive committee of the board, chief executive officer, chief operating officer, president, vice presidents, including the executive vice presidents, senior vice presidents and assistant vice presidents, shall be empowered to sign contracts, bids, proposals, certificates and other instruments of the corporation and shall also have the power to vote and otherwise act on behalf of the corporation, in person or by proxy, at any meeting of stockholders of or with respect to any action of stockholders of any other corporation in which this corporation may hold securities and otherwise to exercise any and all rights and powers which this corporation may possess by reason of its ownership of securities in such other corporation. The secretary and assistant secretaries shall be empowered to attest to such documents.

36.

The board of directors may from time to time delegate the powers and duties of any officer to any other officer, director or other person whom it may select.

37.

Any officer, agent or employee of the corporation, if so required by the board of directors, shall be bonded for the faithful performance of his duties, with such penalties, conditions and security as the board may require.

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SHARES OF STOCK

38.

The following restrictions on the ownership and transfer of the Common Stock of the corporation are hereby imposed:

(1)

Shares of Common Stock may be sold by the corporation only to Employees (as defined in the Restated Certificate of Incorporation). With the prior approval of the board of directors, an Employee owning such stock having a value of $2,000,000 or more may transfer such stock (a) to a fiduciary for the benefit of members of the stockholder-employee's spouse and/or children, (b) to a corporation, partnership, limited liability company, or other entity 100 percent owned by the stockholder-employee or the stockholder-employee and his spouse and/or children, or (c) to a fiduciary for the benefit of such a corporation; provided, however, that no employee may have in existence at any one time more than four entities owning shares of Common Stock of the corporation.  With the prior approval of the board of directors, Common stockholders may transfer stock to a tax-exempt charitable organization approved as such b y the Internal Revenue Service.

(2)

Common stockholder-employees may pledge such stock for loans in connection with the ownership of the corporation's stock.

(3)

All Common Stock of the corporation shall be issued and held at all times subject to the corporation's standard applicable repurchase agreements.

CERTIFICATES OF STOCK

39.

The certificates of stock of the corporation shall be numbered and shall be entered in the books of the corporation as they are issued. They shall exhibit the holder's name and number of shares and shall be signed by the president or a vice president and the treasurer or an assistant treasurer, or the secretary or an assistant secretary. Any or all of the signatures on the certificate may be by facsimile. They shall have noted on their face or back a reference to any repurchase agreement to which the shares of stock they represent are subject. If the corporation has a transfer agent or an assistant transfer agent or a transfer clerk acting on its behalf and a registrar, the signature of any such officer may be by facsimile. There shall be set forth on the face or back of the certificates of stock of the corporation a statement that the corporation will furnish without charge to each stockholder who so reque sts, a description of the powers, designations, preferences and relative, participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences and/or rights.

TRANSFERS OF STOCK

40.

Subject to the transfer restrictions applicable thereto, upon surrender to the corporation or the transfer agent of the corporation of a certificate for shares duly endorsed or accompanied by proper evidence of succession, assignment or authority to transfer, it shall be the duty of the corporation to issue a new certificate to the person entitled thereto, cancel the old certificate and record the transaction upon its books.

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FIXING RECORD DATE

41.

In order that the corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, or to express consent to corporate action in writing without a meeting, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, the board of directors may fix, in advance, a record date, which shall not be more than sixty (60) nor less than ten (10) days before the date of such meeting, nor more than sixty days prior to any other action. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the board of directors may fix a new record date for the adjourned meet ing.

REGISTERED STOCKHOLDERS

42.

The corporation shall be entitled to treat the holder of record of any share or shares of stock as the holder in fact thereof, and, accordingly, shall not be bound to recognize any equitable or other claim to or interest in such share on the part of any other person, whether or not it shall have express or other notice thereof, except as otherwise provided by the laws of Delaware.

LOST CERTIFICATES

43.

The board of directors may direct a new certificate or certificates to be issued in place of any certificate or certificates theretofore issued by the corporation alleged to have been lost or destroyed, upon the making of an affidavit of the fact by the person claiming the certificate of stock to be lost or destroyed. When authorizing such issue of a new certificate or certificates, the board of directors may, in its discretion and as a condition precedent to the issuance thereof, require the owner of such lost or destroyed certificate or certificates, or his legal representative, to advertise the same in such manner as it shall require and/or give the corporation a bond in such sum as it may direct as indemnity against any claim that may be made against the corporation with respect to the certificate alleged to have been lost or destroyed.

CHECKS

44.

All checks or demands for money and notes of the corporation shall be signed by such officer or officers or such other person or persons as the board of directors may from time to time designate.

FISCAL YEAR

45.

The fiscal year shall end on the last Saturday of December in each year.

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DIVIDENDS

46.

Dividends upon the capital stock of the corporation, subject to the provisions of the Restated Certificate of Incorporation, if any, may be declared by the board of directors at any regular or special meeting, pursuant to law. Dividends may be paid in cash, in property, or in shares of the capital stock.

47.

Before payment of any dividend there may be set aside out of any funds of the corporation available for dividends such sum or sums as the directors from time to time, in their absolute discretion, think proper as a reserve fund to meet contingencies, or for repairing or maintaining any property of the corporation, or for such other purpose as the directors shall think conducive to the interest of the corporation, and the directors may abolish any such reserve in the manner in which it was created.

NOTICES

48.

Whenever under the provisions of these By-laws notice is required to be given to any director or stockholder, it shall not be construed to mean personal notice, but such notice may be given in writing, by either personal delivery or mail. If mailed, notice is given when deposited in the United States mail, postage prepaid, directed to the stockholder or director at his address as it appears on the records of the corporation. No notice is required to be given to a stockholder to whom notices of two consecutive annual meetings (and any other written notice sent between those meetings) have been mailed addressed to him at his address as shown on the corporate records and have been returned undeliverable.

49.

Any notice required to be given under these By-laws may be waived in writing, signed by the person or persons entitled to said notice, whether before or after the time stated therein. Any person in attendance at any meeting in person or by proper proxy shall be deemed to have duly waived any notice thereof.

AMENDMENTS

50.

These By-laws may be amended by the affirmative vote of two-thirds of the whole board of directors or by the affirmative vote of the holders of two-thirds of the Common Stock issued and outstanding.

INDEMNIFICATION

51.

(a)

Actions, Suits or Proceedings Not by or in the Right of the Corporation. The corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened pending or completed action, suit or proceeding, whether civil, criminal, administrative, or investigative (other than an action by or in the right of the corporation) by reason of the fact that he is or was a director, officer or employee of the corporation, or is or was serving at the request of the corporation as a director, officer or employee of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with such action, suit or proceeding (including appeals) if he acted in good faith and in a manner he reasonably believed to be in or not oppos ed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the person did not act in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had reasonable cause to believe his conduct was unlawful.

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(b)

Actions or Suits by or in the Right of the Corporation. The corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the corporation to procure a judgment in its favor by reason of the fact that he is or was a director, officer or employee of the corporation, or is or was serving at the request of the corporation as a director, officer or employee of another corporation, partnership, joint venture, trust or other enterprise against expenses (including attorneys' fees), judgments, fines, and amounts paid in settlement actually and reasonably incurred by him in connection with the defense or settlement of such action or suit (including appeals) if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the corporation and except tha t no indemnification shall be made under this paragraph (b) in respect of any claim, issue or matter as to which the person seeking indemnification shall have been adjudged to be liable to the corporation unless and only to the extent that the Court of Chancery or the court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such indemnification which the Court of Chancery or such other court shall deem proper. No indemnity shall be paid under this paragraph (b) with respect to any claim, issue or matter arising out of any action by the person seeking indemnification which was knowingly fraudulent or deliberately dishonest or which involved willful misconduct, or arising out of such person's gaining any personal profit or advantage to which he was not legally entitled.

(c)

Indemnification Against Expenses of Successful Party. Notwithstanding the other provisions of this Section 51, to the extent that a director, officer or employee of the corporation has been successful on the merits or otherwise, including the dismissal of an action without prejudice, in defense of any action, suit or proceeding or in defense of any claim, issue or matter therein, he shall be indemnified against expenses (including attorneys' fees) actually and reasonably incurred by him in connection therewith.

(d)

Advances of Expenses. Expenses incurred by an officer or director in defending a civil or criminal action, suit or proceeding shall be paid by the corporation in advance of the final disposition of such action, suit or proceeding if the person seeking the advance shall undertake to repay such amount in the event that it is ultimately determined, as provided herein, that such person is not entitled to indemnification. Such expenses incurred by other employees and agents may be so paid upon such terms and conditions, if any, as the board of directors deems appropriate.

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(e)

Right to Indemnification Upon Application; Procedure Upon Application. Any indemnification under paragraphs (a), (b), or (c), or advance under paragraph (d) of this Section 51, shall be made promptly, and in any event within ninety days of a claim under paragraph (a), (b), or (c) and within thirty days of a claim under paragraph (d), upon the written request of the person seeking the indemnification or advance, unless with respect to applications under paragraph (a) or (b) a determination is made within ninety days (i) by the board of directors by a majority vote of a quorum consisting of directors who were not parties to such action suit or proceeding, or (ii) if such a quorum is not obtainable, or, even if obtainable, a quorum of disinterested directors so directs, by independent legal counsel in a written opinion, or (iii) by the shareholders, that such person acted in bad faith or in a manner th at such person did not believe to be in or not opposed to the best interests of the corporation, or with respect to any criminal proceeding, that such person believed or had reasonable cause to believe that his conduct was unlawful. In the event that no quorum of disinterested directors is obtainable, the board of directors shall promptly direct that independent legal counsel shall decide whether the person seeking the indemnification acted in the manner set forth in paragraphs (a) and (b). The right to indemnification and advances granted by this Section 51 shall be enforceable in any court of competent jurisdiction, if the corporation denies the claim, in whole or in part, or if no disposition of such claim is made within the ninety or thirty day time period specified in this paragraph (e). In any action to enforce the rights to indemnification and advancement of expenses created by this Section 51, a denial of the claim by the corporation shall not create any presumption that the person bringing the actio n did not act in a manner that would entitle him to such indemnification and advancement of expenses. In any such action, or in any suit by the corporation to recover an advancement of expenses pursuant to the terms of an undertaking, the burden of proving that the person seeking indemnification or an advancement of expenses is not entitled to such indemnification or advancement of expenses, under this Section 51 or otherwise, shall be on the corporation. Expenses incurred in successfully establishing a right to indemnification or advances, in whole or in part, in any such proceeding shall also be indemnified by the corporation.

(f)

Non-Exclusivity of Rights; Extent and Nature of Rights. The indemnification and advancement of expenses provided by this Section 51 shall not be deemed exclusive of any other rights to which any person seeking indemnification or advancement of expenses may be entitled under any by-laws, agreement, vote of shareholders or disinterested directors or otherwise, both as to action in his official capacity and as to action in another capacity while holding such office, and shall continue as to a person who has ceased to be a director, officer or employee and shall inure to the benefit of the heirs, executors and administrators of such a person. All rights to indemnification and advances of expenses under this Section 51 shall be deemed to be provided by a contract between the corporation and the director, officer or employee who serves in such capacity at any time while these By-laws are in effect, and sh all inure to the benefit of such person, his heirs, personal representatives, and estate, and shall be binding on any successor to the corporation. Neither any repeal or modification of these By-laws nor the merger or consolidation of the corporation with any other entity shall affect any rights or obligations in effect at the time of the repeal, modification, merger or consolidation. Notwithstanding any other provisions of this Section 51, except as provided in paragraph (e) hereof with respect to proceedings to enforce rights to indemnification, the corporation shall not indemnify any person in connection with a proceeding (or part thereof) initiated by such person unless such proceeding (or part thereof) was authorized by the board of directors of the corporation.

12

(g)

Other Enterprises, Fines, and Serving at Corporation's Request. For purposes of this Section 51, references to "other enterprises" shall include employee benefit plans; references to "fines" shall include any excise taxes assessed on a person with respect to any employee benefit plan; and references to "serving at the request of the corporation" shall include any service as a director, officer or employee of the corporation which imposes duties on, or involves services by, such director, officer or employee with respect to an employee benefit plan, its participants, or beneficiaries; and a person who acted in good faith and in a manner he reasonably believed to be in the interest of the participants and beneficiaries of an employee benefit plan shall be deemed to have acted in a manner "not opposed to the best interests of the corporation" as referred to in th is Section 51.

(h)

Savings Clause. If this Section 51 or any portion thereof shall be invalidated on any ground by any court of competent jurisdiction, then the corporation shall nevertheless indemnify each agent of the corporation as to expenses (including attorneys' fees), judgments, fines and amounts paid in settlement with respect to any action, suit or proceeding, whether civil, criminal, administrative or investigative, to the full extent permitted by any applicable portion of this Section 51 that shall not have been invalidated or by any applicable law.

13

EX-21

EXHIBIT 21
PETER KIEWIT SONS’, INC. AND SUBSIDIARIES
FEBRUARY 27, 2007
Ben Holt Company	Kiewit Hydropower Investors Inc.
Bibb and Associates, Inc.	Kiewit Industrial Co.
Bighorn Walnut, LLC	Kiewit Industrial Canada Co.
Buckskin Mining Company	Kiewit International Inc.
CMF Leasing Co.	Kiewit International Services Inc.
Construcciones Kiewit, S.A. de C.V.	Kiewit Investment Holdings Inc.
Construction Kiewit Cie	Kiewit Investment Subsidiary Inc.
Constructora Kiewit, C.A.	Kiewit Louisiana Co.
Continental Alarm & Detection Company	Kiewit Management Co.
Continental Fire Sprinkler Company	Kiewit Marine L.L.C.
GMF 1 L.L.C.	Kiewit Materials Group Inc.
GSC Atlanta, Inc.	Kiewit Mazon Constructores, S.A. de C.V.
GSC Contracting, Inc.	Kiewit McNair Creek Investors Corp.
General Construction Company	Kiewit de Mexico, S. de R.L. de C.V.
Gilbert Central Corp.	Kiewit Mexico LLC
Gilbert/Healy, L.P.	Kiewit Mining Group Inc.
Gilbert Industrial Corporation	Kiewit Mining Leasing Company
Gilbert Network Services, L.P.	Kiewit Mining Properties Inc.
Global Surety & Insurance Co.	Kiewit Network Services Co.
Guernsey Construction Company	Kiewit Offshore Services, Ltd.
KES Inc.	Kiewit Pacific Co.
KT Developers, LLC	Kiewit Southern Co.
KT Mining Inc.	Kiewit Southwest Co.
KiEnergy, Inc.	Kiewit Texas Co.
Kiewit Bahamas Co.	Kiewit Texas Construction L.P.
Kiewit Building Group Inc.	Kiewit Venezuela Inc.
Kiewit Canada Group Inc.	Kiewit Ventures Group Inc.
Kiewit Construction Company	Kiewit Western Co.
Kiewit Constructors Inc.	Lac De Gras Excavation Inc.
Kiewit Corporation	Les Enterprises Kiewit Ltee
Kiewit Development Company	Managed Lanes LP
Kiewit Energy Company	Mass. Electric Construction Co.
Kiewit Energy Canada Corp.	Mass. Electric Construction Canada Co.
Kiewit Energy Constructors Corp.	Mass. Electric Construction Venezuela, S.A.
Kiewit Energy Fabricators Corp.	Mass. Electric International, Inc.
Kiewit Energy Group Inc.	MECC Rail Mexicana, S.A. de C.V.
Kiewit Energy Holdings Inc.	Midwest Agencies, Inc.
Kiewit Energy International Inc.	Mission Materials Company
Kiewit Energy Ltd.	Peter Kiewit Sons Co.
Kiewit Engineering Co.	Seaworks, Inc.
Kiewit Engineering Canada Co.	Servitec de Sonora, S.A. de C.V.
Kiewit Federal Group Inc.	Twin Mountain Construction II Company
Kiewit Finance Group Inc.	V. K. Mason Construction Co.
Kiewit Frontier Inc.	Walnut Creek Mining Company

EX-31

Exhibit 31.1
CERTIFICATIONS
I, Bruce E. Grewcock, Chief Executive Officer, certify that:
1. I have reviewed this annual report on Form 10-K of Peter Kiewit Sons’, Inc.
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 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 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:
	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.

Date:  February 27, 2007

  /s/  Bruce E. Grewcock

Bruce E. Grewcock

Chief Executive Officer

EX-31

Exhibit 31.2

CERTIFICATIONS

I, Michael J. Piechoski, Chief Financial Officer, certify that:

1.

I have reviewed this annual report on Form 10-K of Peter Kiewit Sons’, Inc.

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 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 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:

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.

Date:  February 27, 2007

  /s/  Michael J. Piechoski

Michael J. Piechoski

Chief Financial Officer

EX-32

Exhibit 32.1

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

The certification set forth below is being submitted in connection with the filing of the Annual Report of Peter Kiewit Sons’, Inc. (the “Company”) on Form 10-K, for the period ended December 30, 2006, with the Securities and Exchange Commission (the “Report”), for the purpose of complying with Rule 13a-14(b) or Rule 15d-14(b) of the Securities Exchange Act of 1934 and Section 1350 of Chapter 63 of Title 18 of the United States Code.  The undersigned, Bruce E. Grewcock, Chief Executive Officer of the Company, certifies, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

          (1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

          (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

February 27, 2007

 /s/ Bruce E. Grewcock

Bruce E. Grewcock
Chief Executive Officer

EX-32

Exhibit 32.2

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

The certification set forth below is being submitted in connection with the filing of the Annual Report of Peter Kiewit Sons’, Inc. (the “Company”) on Form 10-K, for the period ended December 30, 2006, with the Securities and Exchange Commission (the “Report”), for the purpose of complying with Rule 13a-14(b) or Rule 15d-14(b) of the Securities Exchange Act of 1934 and Section 1350 of Chapter 63 of Title 18 of the United States Code.  The undersigned, Michael J. Piechoski, Chief Financial Officer of the Company, certifies, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

          (1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

          (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

February 27, 2007

 /s/ Michael J. Piechoski

Michael J. Piechoski
Chief Financial Officer