Note 1—Nature of Business

Organization and operations — Primoris Services Corporation is a holding company of various construction and product engineering subsidiaries. The Company’s underground and directional drilling operations install, replace and repair natural gas, petroleum, telecommunications and water pipeline systems, including large diameter pipeline systems. The Company’s industrial, civil and engineering operations build and provide maintenance services to industrial facilities including power plants, petrochemical facilities, and other processing plants; construct multi-level parking structures; and engage in the construction of highways, bridges and other environmental construction activities. The Company is incorporated in the State of Delaware, and its corporate headquarters are located at 2100 McKinney Avenue, Suite 1500, Dallas, Texas 75201.

Reportable Operating Segments — For a number of years and through the end of the second quarter 2014, the Company segregated its business into three operating segments: the East Construction Services segment, the West Construction Services segment and the Engineering segment. In the third quarter 2014, the Company reorganized its business segments to match the changes in the Company’s internal organization and management structure. The current operating segments include: the West Construction Services segment (“West segment”), which is unchanged from the previous segment, the East Construction Services segment (“East segment”), which is realigned from the previous East Construction Services segment, and the Energy segment, which included certain subsidiaries that were included as part of the prior year East Construction Services segment (“Energy segment”). All prior period amounts related to the segment change have been retrospectively reclassified throughout these quarterly financial statements to conform to the new presentation. See Note 15 — Reportable Operating Segments.

The following table lists the Company’s primary operating subsidiaries and their current and prior reportable operating segment:

Subsidiary	Operating Segment	Prior Operating Segment
ARB, Inc., including Stellaris, LLC (“ARB”)	West	West
ARB Structures, Inc.	West	West
Q3 Contracting, Inc. (“Q3C”)	West	West
Rockford Corporation (“Rockford”)	West	West

Vadnais Trenchless Services, Inc. (“Vadnais”); acquired in 2014	West	West
Silva Group (“Silva”)	East	East
Cardinal Contractors, Inc.	East	East
BW Primoris, LLC (“BWP”)	East	East
James Construction Group, LLC (“JCG”):
JCG Heavy Civil Division	East	East
JCG Infrastructure and Maintenance Division	East	East
JCG Industrial Division	Energy	East
Primoris Energy Services Corporation (“PES”)	Energy	East
OnQuest, Inc.	Energy	Engineering
OnQuest, Canada, ULC (Born Heaters Canada, ULC prior to 2013)	Energy	Engineering

In 2012, PES purchased Sprint Pipeline Services, L.P. which has operated using the Sprint name as a DBA from the acquisition through February 2015. In accordance with the purchase agreement, the name of the former Sprint operating entity was changed to “Primoris Pipeline Services” (“PPS”) in March 2015. In this Form 10-K, references to PPS are references to the Sprint operating entity. PES acquired two subsidiaries, The Saxon Group (“Saxon”) in 2012 and Force Specialty Services, Inc. (“FSSI”) in 2013. Effective January 1, 2014, Saxon and FSSI were merged into PES along with the Industrial division of JCG. Throughout this Form 10-K, references to PPS, FSSI, Saxon and James Industrial are to the divisions of PES for 2014, while the references for the years prior to 2014 are to the entities or divisions.

The Company owns 50% of the Blythe Power Constructors joint venture (“Blythe”) created for the installation of a parabolic trough solar field and steam generation system in California, and its operations are included as part of the West Construction Services segment. The Company determined that in accordance with FASB Topic 810, the Company was the primary beneficiary of a variable interest entity and has consolidated the results of Blythe in its financial statements. The project has been completed and the project warranty will expire in May 2015 at which time the Company anticipates terminating Blythe. Financial information is presented in “Note 13—Noncontrolling Interests.”

In January 2014, the Company created a wholly owned subsidiary, BW Primoris, LLC, a Texas limited liability company (“BWP”). BWP’s goal is to develop water projects, primarily in Texas, that will need the Company’s construction services. On January 22, 2014, BWP entered into an agreement to purchase the assets and business of Blaus Wasser, LLC, a Wyoming limited liability company, for approximately $5 million. During the first quarter of 2014, BWP entered into an intercompany construction contract with Cardinal Contractors, Inc. to build a small water treatment facility which will be owned by BWP. When the treatment facility is completed, the facility will generate revenues through a take-or-pay contract with a west Texas municipal entity. For 2014, all intercompany revenue and profit of the project was eliminated, and at December 31, 2014, a total of $12.9 million has been capitalized as property, plant and equipment.

In May 2014, the Company created a wholly owned subsidiary, Vadnais Trenchless Services, Inc., a California company (“Vadnais”), which on June 5, 2014, purchased the assets, of Vadnais Corporation for $6.4 million. a Vadnais Corporation was a general contractor specializing in micro-tunneling. The assets purchased were primarily equipment, building and land. The purchase included a contingent earnout on meeting certain operating targets.

During the third quarter 2014, the Company made three small purchases totaling $8.2 million acquiring the net assets of Surber Roustabout, LLC (“Surber”), Ram-Fab, LLC (“Ram-Fab”) and Williams Testing, LLC (“Williams”). Surber and Ram-Fab operate as divisions of PES, and Williams is a division of Cardinal Contractors, Inc. Surber provides general oil and gas related construction activities in Texas; Ram-Fab is a fabricator of custom piping systems located in Arkansas; and Williams provides construction services related to sewer pipeline maintenance, rehabilitation and integrity testing in the Florida market. The Surber and Ram-Fab purchases provided for a contingent earnout amounts as discussed in “Note 4—Business Combinations”

Unless specifically noted otherwise, as used throughout these consolidated financial statements, “Primoris”, “the Company”, “we”, “our”, “us” or “its” refers to the business, operations and financial results of the Company and its wholly-owned subsidiaries.

Seasonality—Primoris’ results of operations are subject to quarterly variations. Some of the variation is the result of winter weather, particularly rain and snow, which can impact the Company’s ability to perform construction services. The winter weather also limits our ability to perform pipeline integrity testing and routine maintenance for our utility customers’ underground systems since the systems are used for heating. In most years, utility owners obtain bids and award contracts for major maintenance, integrity and replacement work after the heating season, and the work must be completed by the following winter. In addition, demand for new projects can be lower during the early part of the year due to clients’ internal budget cycles.

Similarly, weather and budget cycles affect our major pipeline projects and our heavy civil work with more construction activity completed in the third and fourth quarters of most years as compared to the first two quarters. While the majority of our industrial construction is performed in relatively warm weather climates in California and the Gulf Coast, adverse winter weather or significant weather events, such as hurricanes, can have a significant impact on quarterly financial results.

Variability—In addition to seasonality, the Company is dependent on large construction projects, which tend not to be seasonal but fluctuate from year to year based on many factors including general economic conditions, general market conditions for the project and the Company’s ability to win contract awards. The award and notice to proceed and eventual completion of large projects can have a significant impact on the financial results for any period and may cause fluctuations from prior periods can cause our financial condition and operating results to vary from quarter-to-quarter. Accordingly, our operating results for any particular period may not be indicative of the results that can be expected for any other period.