UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.

For the quarterly period ended June 30, 2020

OR

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.

For the transition period from                    to                      .

Commission file number 001-34145

Primoris Services Corporation

(Exact name of registrant as specified in its charter)

Delaware	20-4743916
(State or Other Jurisdiction of	(I.R.S. Employer
Incorporation or Organization)	Identification No.)
2300 N. Field Street, Suite 1900
Dallas, Texas	75201
(Address of Principal Executive Offices)	(Zip Code)

Registrant’s telephone number, including area code: (214) 740-5600

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading symbol(s)	Name of each exchange on which registered
Common Stock, $0.0001 par value	PRIM	The Nasdaq Stock Market LLC

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 ⌧  No ◻

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  Yes  ⌧ No ◻

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act.:

Large accelerated filer  ⌧	Accelerated filer  ☐
Non-accelerated filer  ☐	Smaller reporting company   ☐
	Emerging growth company   ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes  ☐  No ⌧

At July 27, 2020, 48,251,599 shares of the registrant’s common stock, par value $0.0001 per share, were outstanding.

PRIMORIS SERVICES CORPORATION

INDEX

	Page No.
Part I. Financial Information
Item 1. Financial Statements:
—Condensed Consolidated Balance Sheets at June 30, 2020 and December 31, 2019 (Unaudited)	3
—Condensed Consolidated Statements of Income for the three and six months ended June 30, 2020 and 2019 (Unaudited)	4
—Condensed Consolidated Statements of Comprehensive Income for the three and six months ended June 30, 2020 and 2019 (Unaudited)	5
—Condensed Consolidated Statements of Stockholders’ Equity for the three and six months ended June 30, 2020 and 2019 (Unaudited)	6
—Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2020 and 2019 (Unaudited)	8
—Notes to Condensed Consolidated Financial Statements (Unaudited)	10
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	27
Item 3. Quantitative and Qualitative Disclosures About Market Risk	42
Item 4. Controls and Procedures	43
Part II. Other Information
Item 1. Legal Proceedings	43
Item 1A. Risk Factors	43
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	44
Item 5. Other information	44
Item 6. Exhibits	45
Signatures	46

2

PART I.  FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS

PRIMORIS SERVICES CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(In Thousands, Except Share Amounts)

(Unaudited)

		June 30,		December 31,
	2020		2019
ASSETS
Current assets:
Cash and cash equivalents	$	155,670	$	120,286
Accounts receivable, net		468,949		404,911
Contract assets		376,733		344,806
Prepaid expenses and other current assets		45,943		42,704
Total current assets		1,047,295		912,707
Property and equipment, net		368,086		375,888
Operating lease assets		240,072		242,385
Deferred tax assets		1,116		1,100
Intangible assets, net		65,146		69,829
Goodwill		215,103		215,103
Other long-term assets		16,736		13,453
Total assets	$	1,953,554	$	1,830,465
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	256,980	$	235,972
Contract liabilities		223,077		192,397
Accrued liabilities		222,472		183,501
Dividends payable		2,893		2,919
Current portion of long-term debt		51,913		55,659
Total current liabilities		757,335		670,448
Long-term debt, net of current portion		300,899		295,642
Noncurrent operating lease liabilities, net of current portion		163,947		171,225
Deferred tax liabilities		17,820		17,819
Other long-term liabilities		68,649		45,801
Total liabilities		1,308,650		1,200,935
Commitments and contingencies (See Note 16)
Stockholders’ equity
Common stock—$.0001 par value; 90,000,000 shares authorized; 48,220,811 and 48,665,138 issued and outstanding at June 30, 2020 and December 31, 2019, respectively		5		5
Additional paid-in capital		91,257		97,130
Retained earnings		554,717		531,291
Accumulated other comprehensive (loss) income		(1,109)		76
Noncontrolling interest		34		1,028
Total stockholders’ equity		644,904		629,530
Total liabilities and stockholders’ equity	$	1,953,554	$	1,830,465

See Accompanying Notes to Condensed Consolidated Financial Statements

3

PRIMORIS SERVICES CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(In Thousands, Except Per Share Amounts)

(Unaudited)

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2020		2019		2020		2019
Revenue	$	908,216	$	789,929	$	1,651,459	$	1,451,487
Cost of revenue		807,249		709,398		1,502,682		1,318,496
Gross profit		100,967		80,531		148,777		132,991
Selling, general and administrative expenses		51,422		48,719		95,810		91,650
Operating income		49,545		31,812		52,967		41,341
Other income (expense):
Foreign exchange gain (loss), net		(200)		(403)		(64)		(588)
Other income (expense), net		706		177		718		(193)
Interest income		64		219		345		568
Interest expense		(3,690)		(6,716)		(12,802)		(12,308)
Income before provision for income taxes		46,425		25,089		41,164		28,820
Provision for income taxes		(13,463)		(7,265)		(11,936)		(8,060)
Net income		32,962		17,824		29,228		20,760
Less net income attributable to noncontrolling interests		(3)		(37)		(6)		(1,026)
Net income attributable to Primoris	$	32,959	$	17,787	$	29,222	$	19,734
Dividends per common share	$	0.06	$	0.06	$	0.12	$	0.12
Earnings per share:
Basic	$	0.68	$	0.35	$	0.60	$	0.39
Diluted	$	0.68	$	0.35	$	0.60	$	0.39
Weighted average common shares outstanding:
Basic		48,270		50,912		48,429		50,841
Diluted		48,668		51,228		48,782		51,208

See Accompanying Notes to Condensed Consolidated Financial Statements

4

PRIMORIS SERVICES CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In Thousands)

(Unaudited)

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2020		2019		2020		2019
Net income	$	32,962	$	17,824	$	29,228	$	20,760
Other comprehensive income, net of tax:
Foreign currency translation adjustments		552		362		(1,185)		736
Comprehensive income		33,514		18,186		28,043		21,496
Less net income attributable to noncontrolling interests		(3)		(37)		(6)		(1,026)
Comprehensive income attributable to Primoris	$	33,511	$	18,149	$	28,037	$	20,470

See Accompanying Notes to Condensed Consolidated Financial Statements

5

PRIMORIS SERVICES CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In Thousands, Except Share and Per Share Amounts)

(Unaudited)

									Accumulated
				Additional					Other		Non		Total
	Common Stock			Paid-in		Retained			Comprehensive		Controlling		Stockholders’
	Shares	Amount		Capital		Earnings		0	Loss		Interest		Equity
Balance, March 31, 2020	48,254,575	$	5	$	91,414	$	524,655		$	(1,661)	$	1,031	$	615,444
Net income	—		—		—		32,959			—		3		32,962
Foreign currency translation adjustments, net of tax	—		—		—		—			552		—		552
Issuance of shares to employees and directors	10,451		—		163		—			—		—		163
Conversion of Restricted Stock Units, net of shares withheld for taxes	13,516		—		(77)		—			—		—		(77)
Amortization of Restricted Stock Units	—		—		703		—			—		—		703
Dividend equivalent Units accrued - Restricted Stock Units	—		—		4		(4)			—		—		—
Repurchase of stock	(57,731)		—		(950)		—			—		—		(950)
Distribution of noncontrolling entities	—		—		—		—			—		(1,000)		(1,000)
Dividends declared ($0.06 per share)	—		—		—		(2,893)			—		—		(2,893)
Balance, June 30, 2020	48,220,811	$	5	$	91,257	$	554,717		$	(1,109)	$	34	$	644,904

									Accumulated
				Additional					Other		Non		Total
	Common Stock			Paid-in		Retained			Comprehensive		Controlling		Stockholders’
	Shares	Amount		Capital		Earnings		0	Loss		Interest		Equity
Balance, December 31, 2019	48,665,138	$	5	$	97,130	$	531,291		$	76	$	1,028	$	629,530
Net income	—		—		—		29,222			—		6		29,228
Foreign currency translation adjustments, net of tax	—		—		—		—			(1,185)		—		(1,185)
Issuance of shares to employees and directors	61,719		—		1,337		—			—		—		1,337
Conversion of Restricted Stock Units, net of shares withheld for taxes	13,516		—		(77)		—			—		—		(77)
Amortization of Restricted Stock Units	—		—		1,202		—			—		—		1,202
Dividend equivalent Units accrued - Restricted Stock Units	—		—		8		(8)			—		—		—
Repurchase of stock	(519,562)		—		(8,343)		—			—		—		(8,343)
Distribution of noncontrolling entities	—		—		—		—			—		(1,000)		(1,000)
Dividends declared ($0.12 per share)	—		—		—		(5,788)			—		—		(5,788)
Balance, June 30, 2020	48,220,811	$	5	$	91,257	$	554,717		$	(1,109)	$	34	$	644,904

6

PRIMORIS SERVICES CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (Continued)

(In Thousands, Except Share and Per Share Amounts)

(Unaudited)

									Accumulated
				Additional					Other		Non			Total
	Common Stock			Paid-in		Retained			Comprehensive		Controlling			Stockholders’
	Shares	Amount		Capital		Earnings		0	Loss		Interest		0	Equity
Balance, March 31, 2019	50,842,902	$	5	$	147,208	$	459,959		$	(534)	$	3,747		$	610,385
Net income	—		—		—		17,787			—		37			17,824
Foreign currency translation adjustments, net of tax	—		—		—		—			362		—			362
Conversion of Restricted Stock Units, net of shares withheld for taxes	122,319		—		(1,519)		—			—		—			(1,519)
Amortization of Restricted Stock Units	—		—		371		—			—		—			371
Dividend equivalent Units accrued - Restricted Stock Units	—		—		4		(4)			—		—			—
Distribution of noncontrolling entities	—		—		—		—			—		(3,500)			(3,500)
Dividends declared ($0.06 per share)	—		—		—		(3,058)			—		—			(3,058)
Balance, June 30, 2019	50,965,221	$	5	$	146,064	$	474,684		$	(172)	$	284		$	620,865

									Accumulated
				Additional					Other		Non			Total
	Common Stock			Paid-in		Retained			Comprehensive		Controlling			Stockholders’
	Shares	Amount		Capital		Earnings		0	Loss		Interest		0	Equity
Balance, December 31, 2018	50,715,518	$	5	$	144,048	$	461,075		$	(908)	$	2,763		$	606,983
Net income	—		—		—		19,734			—		1,026			20,760
Foreign currency translation adjustments, net of tax	—		—		—		—			736		—			736
Conversion of Restricted Stock Units, net of shares withheld for taxes	122,319		—		(1,519)		—			—		—			(1,519)
Issuance of shares to employees and directors	127,384		—		2,661		—			—		—			2,661
Amortization of Restricted Stock Units	—		—		858		—			—		—			858
Dividend equivalent Units accrued - Restricted Stock Units	—		—		16		(16)			—		—			—
Distribution of noncontrolling entities	—		—		—		—			—		(3,505)			(3,505)
Dividends declared ($0.12 per share)	—		—		—		(6,109)			—		—			(6,109)
Balance, June 30, 2019	50,965,221	$	5	$	146,064	$	474,684		$	(172)	$	284		$	620,865

See Accompanying Notes to Condensed Consolidated Financial Statements

7

PRIMORIS SERVICES CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In Thousands)

(Unaudited)

	Six Months Ended
	June 30,
	2020		2019
Cash flows from operating activities:
Net income	$	29,228	$	20,760
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization		39,231		43,392
Stock-based compensation expense		1,202		858
Gain on sale of property and equipment		(7,332)		(4,713)
Unrealized loss on interest rate swap		4,907		4,194
Other non-cash items		2,823		160
Changes in assets and liabilities:
Accounts receivable		(65,860)		(97,964)
Contract assets		(32,765)		(51,048)
Other current assets		(3,268)		5,309
Other long-term assets		223		(137)
Accounts payable		21,897		(31,405)
Contract liabilities		30,784		4,205
Operating lease assets and liabilities, net		(551)		(918)
Accrued liabilities		22,125		13,481
Other long-term liabilities		18,007		(2,698)
Net cash provided by (used in) operating activities		60,651		(96,524)
Cash flows from investing activities:
Purchase of property and equipment		(21,703)		(56,907)
Proceeds from sale of property and equipment		12,086		21,196
Net cash used in investing activities		(9,617)		(35,711)
Cash flows from financing activities:
Borrowings under revolving line of credit		—		140,000
Payments on revolving line of credit		—		(85,000)
Proceeds from issuance of long-term debt		33,873		23,105
Repayment of long-term debt		(32,469)		(34,320)
Proceeds from issuance of common stock purchased under a long-term incentive plan		578		1,804
Payment of taxes on conversion of Restricted Stock Units		(77)		(1,519)
Cash distribution to noncontrolling interest holders		(1,000)		(3,505)
Repurchase of common stock		(8,343)		—
Dividends paid		(5,814)		(6,094)
Other		(2,014)		(39)
Net cash (used in) provided by financing activities		(15,266)		34,432
Effect of exchange rate changes on cash and cash equivalents		(384)		854
Net change in cash and cash equivalents		35,384		(96,949)
Cash and cash equivalents at beginning of the period		120,286		151,063
Cash and cash equivalents at end of the period	$	155,670	$	54,114

See Accompanying Notes to Condensed Consolidated Financial Statements

8

PRIMORIS SERVICES CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)

(In Thousands)

(Unaudited)

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION

	Six Months Ended June 30,
	2020		2019
Cash paid for interest	$	7,735	$	7,955
Cash paid for income taxes, net of refunds received		(13)		(9,599)
Leased assets obtained in exchange for new operating leases		42,450		51,060

SUPPLEMENTAL DISCLOSURES OF NONCASH INVESTING AND FINANCING ACTIVITIES

	Six Months Ended June 30,
	2020		2019
Dividends declared and not yet paid	$	2,893	$	3,058

See Accompanying Notes to Condensed Consolidated Financial Statements

9

PRIMORIS SERVICES CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars In Thousands, Except Share and Per Share Amounts)

(Unaudited)

Note 1—Nature of Business

Organization and operations — Primoris Services Corporation is one of the leading providers of specialty contracting services operating mainly in the United States and Canada. We provide a wide range of specialty construction services, fabrication, maintenance, replacement, and engineering services to a diversified base of customers through our five segments.

We have longstanding customer relationships with major utility, refining, petrochemical, power, midstream, and engineering companies, and state departments of transportation. We provide our services to a diversified base of customers, under a range of contracting options. A substantial portion of our services are provided under Master Service Agreements (“MSA”), which are generally multi-year agreements. The remainder of our services are generated from contracts for specific construction or installation projects.

We are incorporated in the State of Delaware, and our corporate headquarters are located at 2300 N. Field Street, Suite 1900, Dallas, Texas 75201. 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.

Reportable Segments — We segregate our business into five reportable segments: the Power, Industrial and Engineering (“Power”) segment, the Pipeline and Underground (“Pipeline”) segment, the Utilities and Distribution (“Utilities”) segment, the Transmission and Distribution (“Transmission”) segment, and the Civil segment. See Note 17 – “Reportable Segments” for a brief description of the reportable segments and their operations.

The classification of revenue and gross profit for segment reporting purposes can at times require judgment on the part of management. Our segments may perform services across industries or perform joint services for customers in multiple industries. To determine reportable segment gross profit, certain allocations, including allocations of shared and indirect costs, such as facility costs, equipment costs and indirect operating expenses were made.

Joint Ventures — We own a 50% interest in the Carlsbad Power Constructors joint venture (“Carlsbad”), which engineered and constructed a gas-fired power generation facility located in Southern California, and its operations are included as part of the Power segment. As a result of determining that we are the primary beneficiary of the variable interest entity (“VIE”), the results of the Carlsbad joint venture are consolidated in our financial statements. The project was substantially complete as of December 31, 2018, and the warranty period expires in December 2020.

Financial information for the joint ventures is presented in Note 10 – “Noncontrolling Interests”.

Note 2—Basis of Presentation

Interim condensed consolidated financial statements — The interim condensed consolidated financial statements for the three and six month periods ended June 30, 2020 and 2019 have been prepared in accordance with Rule 10-01 of Regulation S-X of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). As such, certain disclosures, which would substantially duplicate the disclosures contained in our Annual Report on Form 10-K, filed on February 24, 2020, which contains our audited consolidated financial statements for the year ended December 31, 2019, have been omitted.

This Form 10-Q should be read in conjunction with our most recent Annual Report on Form 10-K. The interim financial information is unaudited.  In the opinion of management, the interim information includes all adjustments (consisting of normal recurring adjustments) necessary for the fair presentation of the interim financial information. 

Customer concentration — We operate in multiple industry segments encompassing the construction of commercial, industrial and public works infrastructure assets primarily throughout the United States. Typically, the top ten customers in any one calendar year generate revenue that is approximately 50% of total revenue;