UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. |
For the quarterly period ended
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
(Exact name of registrant as specified in its charter)
| ||
(State or Other Jurisdiction of | (I.R.S. Employer | |
Incorporation or Organization) | Identification No.) | |
(Address of Principal Executive Offices) | (Zip Code) |
Registrant’s telephone number, including area code: (
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading symbol(s) | Name of each exchange on which registered |
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.
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).
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.:
| 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
At May 2, 2022,
PRIMORIS SERVICES CORPORATION
INDEX
2
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
PRIMORIS SERVICES CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(In Thousands, Except Share Amounts)
(Unaudited)
March 31, | December 31, | |||||
| 2022 |
| 2021 | |||
ASSETS | ||||||
Current assets: | ||||||
Cash and cash equivalents | $ | | $ | | ||
Accounts receivable, net |
| |
| | ||
Contract assets |
| |
| | ||
Prepaid expenses and other current assets |
| |
| | ||
Total current assets |
| |
| | ||
Property and equipment, net |
| |
| | ||
Operating lease assets | | | ||||
Deferred tax assets | | | ||||
Intangible assets, net |
| |
| | ||
Goodwill |
| |
| | ||
Other long-term assets |
| |
| | ||
Total assets | $ | | $ | | ||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||
Current liabilities: | ||||||
Accounts payable | $ | | $ | | ||
Contract liabilities |
| |
| | ||
Accrued liabilities |
| |
| | ||
Dividends payable |
| |
| | ||
Current portion of long-term debt |
| |
| | ||
Total current liabilities |
| |
| | ||
Long-term debt, net of current portion |
| |
| | ||
Noncurrent operating lease liabilities, net of current portion | | | ||||
Deferred tax liabilities |
| |
| | ||
Other long-term liabilities |
| |
| | ||
Total liabilities |
| |
| | ||
Commitments and contingencies (See Note 14) | ||||||
Stockholders’ equity | ||||||
Common stock—$ |
| |
| | ||
Additional paid-in capital |
| |
| | ||
Retained earnings |
| |
| | ||
Accumulated other comprehensive income | | | ||||
Total stockholders’ equity |
| |
| | ||
Total liabilities and stockholders’ equity | $ | | $ | | ||
See Accompanying Notes to Condensed Consolidated Financial Statements
3
PRIMORIS SERVICES CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In Thousands, Except Per Share Amounts)
(Unaudited)
Three Months Ended | |||||
March 31, | |||||
2022 |
| 2021 | |||
Revenue | $ | | $ | | |
Cost of revenue |
| |
| | |
Gross profit |
| |
| | |
Selling, general and administrative expenses |
| |
| | |
Transaction and related costs | | | |||
Operating income |
| |
| | |
Other income (expense): | |||||
Foreign exchange (loss) gain, net | ( | | |||
Other expense, net |
| ( |
| ( | |
Interest expense, net |
| ( |
| ( | |
(Loss) income before benefit (provision) for income taxes |
| ( |
| | |
Benefit (provision) for income taxes |
| |
| ( | |
Net (loss) income | ( | | |||
Dividends per common share | $ | | $ | | |
(Loss) earnings per share: | |||||
Basic | $ | ( | $ | | |
Diluted | $ | ( | $ | | |
Weighted average common shares outstanding: | |||||
Basic |
| |
| | |
Diluted |
| |
| | |
See Accompanying Notes to Condensed Consolidated Financial Statements
4
PRIMORIS SERVICES CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME
(In Thousands)
(Unaudited)
Three Months Ended | |||||
March 31, | |||||
2022 |
| 2021 | |||
Net (loss) income | $ | ( | $ | | |
Other comprehensive income, net of tax: | |||||
Foreign currency translation adjustments | | | |||
Comprehensive (loss) income | $ | ( | | ||
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 | Total | |||||||||||||||
Common Stock | Paid-in | Retained | Comprehensive | Stockholders’ | |||||||||||||
| Shares |
| Amount |
| Capital |
| Earnings | 0 | Income | 0 | Equity | ||||||
Balance, December 31, 2021 |
| | $ | | $ | | $ | | $ | | $ | | |||||
Net loss |
| — |
| — |
| — |
| ( |
| — |
| ( | |||||
Foreign currency translation adjustments, net of tax | — | — | — | — | | | |||||||||||
Issuance of shares |
| |
| — |
| |
| — |
| — |
| | |||||
Conversion of Restricted Stock Units, net of shares withheld for taxes | | — | ( | — | — | ( | |||||||||||
Stock-based compensation | — | — | | — | — | | |||||||||||
Dividends declared ($ |
| — |
| — |
| — |
| ( |
| — |
| ( | |||||
Balance, March 31, 2022 |
| | $ | | $ | | $ | | $ | | $ | | |||||
Accumulated | |||||||||||||||||
Additional | Other | Total | |||||||||||||||
Common Stock | Paid-in | Retained | Comprehensive | Stockholders’ | |||||||||||||
| Shares |
| Amount |
| Capital |
| Earnings | 0 | Income | 0 | Equity | ||||||
Balance, December 31, 2020 |
| | $ | | $ | | $ | | $ | | $ | | |||||
Net income |
| — |
| — |
| — |
| |
| — |
| | |||||
Foreign currency translation adjustments, net of tax | — | — | — | — | | | |||||||||||
Issuance of shares, net of issuance costs |
| |
| |
| |
| — |
| — |
| | |||||
Conversion of Restricted Stock Units, net of shares withheld for taxes | | — | ( | — | — | ( | |||||||||||
Stock-based compensation | — | — | | — | — | | |||||||||||
Dividend equivalent Units accrued - Restricted Stock Units | — | — | | ( | — | — | |||||||||||
Dividends declared ($ |
| — |
| — |
| — |
| ( |
| — |
| ( | |||||
Balance, March 31, 2021 |
| | $ | | $ | | $ | | $ | | $ | | |||||
See Accompanying Notes to Condensed Consolidated Financial Statements
6
PRIMORIS SERVICES CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
(Unaudited)
Three Months Ended | ||||||
March 31, | ||||||
| 2022 |
| 2021 | |||
Cash flows from operating activities: | ||||||
Net (loss) income | $ | ( | $ | | ||
Adjustments to reconcile net (loss) income to net cash provided by operating activities (net of effect of acquisitions): | ||||||
Depreciation and amortization |
| |
| | ||
Stock-based compensation expense |
| |
| | ||
Gain on sale of property and equipment |
| ( |
| ( | ||
Unrealized gain on interest rate swap | ( | ( | ||||
Other non-cash items | | | ||||
Changes in assets and liabilities: | ||||||
Accounts receivable |
| |
| | ||
Contract assets |
| ( |
| ( | ||
Other current assets |
| ( |
| ( | ||
Other long-term assets | ( | ( | ||||
Accounts payable | | | ||||
Contract liabilities |
| |
| ( | ||
Operating lease assets and liabilities, net |
| ( |
| ( | ||
Accrued liabilities |
| ( |
| | ||
Other long-term liabilities |
| ( |
| ( | ||
Net cash provided by operating activities |
| |
| | ||
Cash flows from investing activities: | ||||||
Purchase of property and equipment |
| ( |
| ( | ||
Proceeds from sale of assets |
| |
| | ||
Cash paid for acquisitions, net of cash acquired | ( | ( | ||||
Net cash used in investing activities |
| ( |
| ( | ||
Cash flows from financing activities: | ||||||
Borrowings under revolving line of credit | — | | ||||
Payments on revolving line of credit |
| — |
| ( | ||
Proceeds from issuance of long-term debt |
| |
| | ||
Payments on long-term debt |
| ( |
| ( | ||
Proceeds from issuance of common stock | | | ||||
Debt issuance costs | — | ( | ||||
Dividends paid |
| ( |
| ( | ||
Other | ( |
| ( | |||
Net cash (used in) provided by financing activities |
| ( |
| | ||
Effect of exchange rate changes on cash, cash equivalents and restricted cash | | | ||||
Net change in cash, cash equivalents and restricted cash |
| ( |
| ( | ||
Cash, cash equivalents and restricted cash at beginning of the period |
| |
| | ||
Cash, cash equivalents and restricted cash at end of the period | $ | | $ | | ||
See Accompanying Notes to Condensed Consolidated Financial Statements
7
PRIMORIS SERVICES CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
(In Thousands)
(Unaudited)
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Three Months Ended March 31, | ||||||
| 2022 |
| 2021 | |||
Cash paid for interest | $ | | $ | | ||
Cash paid for income taxes, net of refunds received | ( | ( | ||||
Leased assets obtained in exchange for new operating leases | | | ||||
SUPPLEMENTAL DISCLOSURES OF NONCASH INVESTING AND FINANCING ACTIVITIES
Three Months Ended March 31, | ||||||
| 2022 |
| 2021 | |||
Dividends declared and not yet paid | $ | | $ | | ||
See Accompanying Notes to Condensed Consolidated Financial Statements
8
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
We have customer relationships with major utility, communications, 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 — The current reportable segments include the Utilities segment, the Energy/Renewables segment and the Pipeline Services (“Pipeline”) segment. See Note 15 – “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.
Note 2—Basis of Presentation
Interim condensed consolidated financial statements — The interim condensed consolidated financial statements for the three months ended March 31, 2022 and 2021 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 28, 2022, which contains our audited consolidated financial statements for the year ended December 31, 2021, 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.
Reclassification — Certain previously reported amounts have been reclassified to conform to the current period presentation.
9
Restricted cash — Restricted cash consists primarily of contract retention payments made by customers into escrow bank accounts and are included in prepaid expenses and other current assets in our Condensed Consolidated Balance Sheets. Escrow cash accounts are released to us by customers as projects are completed in accordance with contract terms.
March 31, | ||||||
| 2022 |
| 2021 | |||
Cash and cash equivalents | $ | | $ | | ||
| | |||||
Total cash, cash equivalents and restricted cash shown in the consolidated statements of cash flows | $ | | $ | | ||
|
| |||||
December 31, | ||||||
| 2021 |
| 2020 | |||
Cash and cash equivalents | $ | | $ | | ||
| | |||||
Total cash, cash equivalents and restricted cash shown in the consolidated statements of cash flows | $ | | $ | | ||
Depreciation — Effective January 1, 2022, we changed our estimates of the useful lives of certain equipment to better reflect the estimated periods during which these assets will remain in service. The estimated useful lives of equipment that previously ranged to
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
For each of the three months ended March 31, 2022 and 2021, approximately
Note 3—Fair Value Measurements
ASC Topic 820, “Fair Value Measurements and Disclosures”, defines fair value, establishes a framework for measuring fair value in GAAP and requires certain disclosures about fair value measurements. ASC Topic 820 addresses fair value GAAP for financial assets and financial liabilities that are re-measured and reported at fair value at each reporting period and for non-financial assets and liabilities that are re-measured and reported at fair value on a non-recurring basis.
In general, fair values determined by Level 1 inputs use quoted prices (unadjusted) in active markets for identical assets or liabilities. Fair values determined by Level 2 inputs use data points that are observable such as quoted prices, interest rates and yield curves. Fair values determined by Level 3 inputs are “unobservable data points” for the asset or liability and include situations where there is little, if any, market activity for the asset or liability.
10
The following table presents, for each of the fair value hierarchy levels identified under ASC Topic 820, our financial assets and liabilities that are required to be measured at fair value at March 31, 2022 and December 31, 2021 (in thousands):
Fair Value Measurements at Reporting Date | |||||||||
|
| Significant |
| ||||||
Quoted Prices | Other | Significant | |||||||
in Active Markets | Observable | Unobservable | |||||||
for Identical Assets | Inputs | Inputs | |||||||
| (Level 1) |
| (Level 2) |
| (Level 3) | ||||
Assets as of March 31, 2022: | |||||||||
Cash and cash equivalents | $ | |
| $ | — |
| $ | — | |
Liabilities as of March 31, 2022: | |||||||||
Interest rate swap | — | | — | ||||||
Contingent consideration | — | — | | ||||||
Assets as of December 31, 2021: | |||||||||
Cash and cash equivalents | |
| — |
| — | ||||
Liabilities as of December 31, 2021: | |||||||||
Interest rate swap | $ | — | $ | | $ | — | |||
Other financial instruments not listed in the table consist of accounts receivable, accounts payable and certain accrued liabilities. These financial instruments generally approximate fair value based on their short-term nature. The carrying value of our long-term debt approximates fair value based on comparison with current prevailing market rates for loans of similar risks and maturities.
The interest rate swap is measured at fair value using the income approach, which discounts the future net cash settlements expected under the derivative contracts to a present value. These valuations primarily utilize indirectly observable inputs, including contractual terms, interest rates and yield curves observable at commonly quoted intervals. See Note 9 – “Derivative Instruments” for additional information.
On a quarterly basis, we assess the estimated fair value of the contractual obligation to pay the contingent consideration and any changes in estimated fair value are recorded as a non-operating charge in our Statement of Operations. Fluctuations in the fair value of contingent consideration are impacted by two unobservable inputs, management’s estimate of the probability of the acquired company meeting the contractual operating performance target and the estimated discount rate (a rate that approximates our cost of capital). Significant changes in either of those inputs in isolation would result in a different fair value measurement. Generally, a change in the assumption of the probability of meeting the performance target is accompanied by a directionally similar change in the fair value of contingent consideration liability, whereas a change in assumption of the estimated discount rate is accompanied by a directionally opposite change in the fair value of contingent consideration liability.
Upon meeting the target, we reflect the full liability on the balance sheet and record a charge to “Other income (expense), net” for the change in the fair value of the liability from the prior period.
The March 1, 2022 acquisition of Alberta Screw Piles, Ltd. (“ASP”) (as discussed in Note 4) includes an earnout of up to $
Note 4—Acquisitions
Acquisition of Alberta Screw Piles, Ltd.
On March 1, 2022, we acquired ASP for a cash price of approximately $
11
consideration on the acquisition date was $
Acquisition of Future Infrastructure Holdings, LLC.
On January 15, 2021, we acquired Future Infrastructure Holdings, LLC (“FIH”) for approximately $
During the fourth quarter of 2021, we finalized the estimate of fair values of the assets acquired and liabilities assumed of FIH. The tables below represent the purchase consideration and estimated fair values of the assets acquired and liabilities assumed. Significant changes since our initial estimates reported in the first quarter of 2021 primarily relate to a $
Purchase consideration (in thousands) | |||
Total purchase consideration | $ | | |
Less cash acquired | ( | ||
Net cash paid | $ | |
12
Identifiable assets acquired and liabilities assumed (in thousands) | |||
Cash and cash equivalents | $ | | |
Accounts receivable | | ||
Contract assets | | ||
Prepaid expenses and other current assets | | ||
Property, plant and equipment | | ||
Operating lease assets | | ||
Intangible assets: |
| ||
Customer relationships | | ||
Tradename | | ||
Other long-term assets |
| | |
Accounts payable and accrued liabilities | ( | ||
Contract liabilities | ( | ||
Long-term debt (including current portion) | ( | ||
Noncurrent operating lease liabilities, net of current | ( | ||
Other long-term liabilities | ( | ||
Total identifiable net assets | | ||
Goodwill | | ||
Total purchase consideration | $ | |
We incorporated the operations of FIH into our Utilities segment. Goodwill associated with the FIH acquisition principally consists of expected benefits from the expansion of our services into the communications market and the expansion of our geographic presence. Goodwill also includes the value of the assembled workforce. Based on the current tax treatment, goodwill is expected to be deductible for income tax purposes over a
The intangible assets acquired with the FIH acquisition consisted of Customer relationships of $
For the period from January 15, 2021, the acquisition date, to March 31, 2021, FIH contributed revenue of $
Acquisition related costs were $
Supplemental Unaudited Pro Forma Information for the three months ended March 31, 2021
The following pro forma information for the three months ended March 31, 2021 presents our results of operations as if the acquisition of FIH had occurred at the beginning of 2020. The supplemental pro forma information has been adjusted to include:
| ● | the pro forma impact of amortization of intangible assets and depreciation of property, plant and equipment; |
| ● | the pro forma impact of nonrecurring transaction and related costs directly attributable to the acquisition; and |
| ● | the pro forma tax effect of both income before income taxes, and the pro forma adjustments, calculated using a tax rate of |
13
The pro forma results are presented for illustrative purposes only and are not necessarily indicative of, or intended to represent, the results that would have been achieved had the FIH acquisition been completed on January 1, 2020.
Three Months Ended March 31, | |||
| 2021 | ||
(unaudited) | |||
Revenue | $ | | |
Income before provision for income taxes | | ||
Net income | | ||
Weighted average common shares outstanding: | |||
Basic |
| | |
Diluted |
| | |
Earnings per share: | |||
Basic | $ | ||
Diluted | |||
Note 5—Revenue
We generate revenue under a range of contracting types, including fixed-price, unit-price, time and material, and cost reimbursable plus fee contracts, each of which has a different risk profile. A substantial portion of our revenue is derived from contracts where scope is adequately defined, and therefore we can reasonably estimate total contract value. For these contracts, revenue is recognized over time as work is completed because of the continuous transfer of control to the customer (typically using an input measure such as costs incurred to date relative to total estimated costs at completion to measure progress). For certain contracts, where scope is not adequately defined and we can’t reasonably estimate total contract value, revenue is recognized either on an input basis, based on contract costs incurred as defined within the respective contracts, or an output basis based on units completed. Costs to obtain contracts are generally not significant and are expensed in the period incurred.
We evaluate whether two or more contracts should be combined and accounted for as one single performance obligation and whether a single contract should be accounted for as more than one performance obligation. ASC 606 defines a performance obligation as a contractual promise to transfer a distinct good or service to a customer. A contract’s transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied. Our evaluation requires significant judgment and the decision to combine a group of contracts or separate a contract into multiple performance obligations could change the amount of revenue and profit recorded in a given period. The majority of our contracts have a single performance obligation, as the promise to transfer the individual goods or services is not separately identifiable from other promises in the contract and, therefore, is not distinct. However, occasionally we have contracts with multiple performance obligations. For contracts with multiple performance obligations, we allocate the contract’s transaction price to each performance obligation using the observable standalone selling price, if available, or alternatively our best estimate of the standalone selling price of each distinct performance obligation in the contract. The primary method used to estimate standalone selling price is the expected cost plus a margin approach for each performance obligation.
As of March 31, 2022, we had $
Accounting for long-term contracts involves the use of various techniques to estimate total transaction price and costs. For long-term contracts, transaction price, estimated cost at completion and total costs incurred to date are used to calculate revenue earned. Unforeseen events and circumstances can alter the estimate of the costs and potential profit associated with a particular contract. Total estimated costs, and thus contract revenue and income, can be impacted by changes in productivity, scheduling, the unit cost of labor, subcontracts, materials and equipment. Additionally, external factors such as weather, client needs, client delays in providing permits and approvals, labor availability, governmental regulation, politics and any prevailing impacts from the pandemic caused by the coronavirus may affect the progress of a
14
project’s completion, and thus the timing of revenue recognition. To the extent that original cost estimates are modified, estimated costs to complete increase, delivery schedules are delayed, or progress under a contract is otherwise impeded, cash flow, revenue recognition and profitability from a particular contract may be adversely affected.
The nature of our contracts gives rise to several types of variable consideration, including contract modifications (change orders and claims), liquidated damages, volume discounts, performance bonuses, incentive fees, and other terms that can either increase or decrease the transaction price. We estimate variable consideration as the most likely amount to which we expect to be entitled. We include estimated amounts in the transaction price to the extent we believe we have an enforceable right, and it is probable that a significant reversal of cumulative revenue recognized will not occur. Our estimates of variable consideration and the determination of whether to include estimated amounts in the transaction price are based largely on an assessment of our anticipated performance and all information (historical, current and forecasted) that is reasonably available to us at this time.
Contract modifications result from changes in contract specifications or requirements. We consider unapproved change orders to be contract modifications for which customers have not agreed to both scope and price. We consider claims to be contract modifications for which we seek, or will seek, to collect from customers, or others, for customer-caused changes in contract specifications or design, or other customer-related causes of unanticipated additional contract costs on which there is no agreement with customers. Claims can also be caused by non-customer-caused changes, such as rain or other weather delays. Costs associated with contract modifications are included in the estimated costs to complete the contracts and are treated as project costs when incurred. In most instances, contract modifications are for goods or services that are not distinct, and, therefore, are accounted for as part of the existing contract. The effect of a contract modification on the transaction price, and our measure of progress for the performance obligation to which it relates, is recognized as an adjustment to revenue on a cumulative catch-up basis. In some cases, settlement of contract modifications may not occur until after completion of work under the contract.
As a significant change in one or more of these estimates could affect the profitability of our contracts, we review and update our contract-related estimates regularly. We recognize adjustments in estimated profit on contracts under the cumulative catch-up method. Under this method, the cumulative impact of the profit adjustment is recognized in the period the adjustment is identified. Revenue and profit in future periods of contract performance are recognized using the adjusted estimate. In the three months ended March 31, 2022, revenue recognized related to performance obligations satisfied in previous periods was $
At March 31, 2022, we had approximately $
In all forms of contracts, we estimate the collectability of contract amounts at the same time that we estimate project costs. If we anticipate that there may be issues associated with the collectability of the full amount calculated as the transaction price, we may reduce the amount recognized as revenue to reflect the uncertainty associated with realization of the eventual cash collection. For example, when a cost reimbursable project exceeds the client’s expected budget amount, the client frequently requests an adjustment to the final amount. Similarly, some utility clients reserve the right to audit costs for significant periods after performance of the work.
The timing of when we bill our customers is generally dependent upon agreed-upon contractual terms, milestone billings based on the completion of certain phases of the work, or when services are provided. Sometimes, billing occurs subsequent to revenue recognition, resulting in unbilled revenue, which is a contract asset. Also, we sometimes receive advances or deposits from our customers before revenue is recognized, resulting in deferred revenue, which is a contract liability.
The caption “Contract assets” in the Condensed Consolidated Balance Sheets represents the following:
15
| ● | unbilled revenue, which arises when revenue has been recorded but the amount will not be billed until a later date; |
| ● | retainage amounts for the portion of the contract price earned by us for work performed, but held for payment by the customer as a form of security until we reach certain construction milestones; and |
| ● | contract materials for certain job specific materials not yet installed, which are valued using the specific identification method relating the cost incurred to a specific project. |
Contract assets consist of the following (in thousands):
March 31, | December 31, | |||||
| 2022 |
| 2021 | |||
Unbilled revenue | $ | | $ | | ||
Retention receivable | | | ||||
Contract materials (not yet installed) |
| |
| | ||
$ | | $ | | |||
Contract assets increased by $
The caption “Contract liabilities” in the Condensed Consolidated Balance Sheets represents the following:
| ● | deferred revenue, which arises when billings are in excess of revenue recognized to date, and |
| ● | the accrued loss provision |
Contract liabilities consist of the following (in thousands):
March 31, | December 31, | |||||
| 2022 |
| 2021 | |||
Deferred revenue | $ | | $ | | ||
Accrued loss provision |
| |
| | ||
$ | | $ | | |||
Contract liabilities increased by $
Revenue recognized for the three months ended March 31, 2022, that was included in the contract liability balance at December 31, 2021, was approximately $
The following tables present our revenue disaggregated into various categories.
MSA and Non-MSA revenue was as follows (in thousands):
For the three months ended March 31, 2022 | |||||||||
Segment |
| MSA |
| Non-MSA |
| Total | |||
Utilities | $ | | $ | | $ | | |||
Energy/Renewables | | | | ||||||
Pipeline |
| | | | |||||
Total | $ | |
| $ | |
| $ | | |
For the three months ended March 31, 2021 | |||||||||
Segment | MSA |
| Non-MSA |
| Total | ||||
Utilities | $ | |
| $ | |
|
| | |
Energy/Renewables | | | | ||||||
Pipeline |
| |
|
| |
| | ||
Total | $ | |
| $ | |
| $ | | |
16
Revenue by contract type was as follows (in thousands):
For the three months ended March 31, 2022 | ||||||||||||
Segment | Fixed-price | Unit-price | Cost reimbursable (1) | Total | ||||||||
Utilities | $ | | $ | | $ | | $ | | ||||
Energy/Renewables | | | | | ||||||||
Pipeline |
| | | | | |||||||
Total | $ | |
| $ | |
| $ | |
| $ | | |
| (1) | Includes time and material and cost reimbursable plus fee contracts. |
For the three months ended March 31, 2021 | ||||||||||||
Segment | Fixed-price |
| Unit-price |
| Cost reimbursable (1) |
| Total | |||||
Utilities | $ | |
| $ | |
| $ | |
| $ | | |
Energy/Renewables | | | | | ||||||||
Pipeline |
| |
|
| |
|
| |
|
| | |
Total | $ | |
| $ | |
| $ | |
| $ | | |
Each of these contract types has a different risk profile. Typically, we assume more risk with fixed-price contracts. Unforeseen events and circumstances can alter the estimate of the costs and potential profit associated with a particular fixed-price contract. However, these types of contracts offer additional profits when we complete the work for less cost than originally estimated. Unit-price and cost reimbursable contracts generally subject us to lower risk. Accordingly, the associated fees are usually lower than fees earned on fixed-price contracts. Under these contracts, our profit may vary if actual costs vary significantly from the negotiated rates.
Note 6—Goodwill and Intangible Assets
The change in goodwill by segment for the three months ended March 31, 2022 was as follows (in thousands):
| Utilities |
| Energy/Renewables | Pipeline |
| Total | ||||||
Balance at December 31, 2021 | $ | | $ | | $ | | $ | | ||||
Goodwill acquired during the period |
| — |
| |
| — |
| | ||||
Balance at March 31, 2022 | $ | | $ | | $ | | $ | | ||||
The table below summarizes the intangible asset categories and amounts, which are amortized on a straight-line basis (in thousands):
March 31, 2022 | December 31, 2021 | ||||||||||||||||
Gross Carrying |
| Accumulated |
| Intangible assets, net |
| Gross Carrying |
| Accumulated |
| Intangible assets, net | |||||||
Tradename | $ | | ( | | $ | | $ | ( | $ | | |||||||
Customer relationships |
| | ( | |
| |
| ( |
| | |||||||
Non-compete agreements |
| | ( | |
| |
| ( |
| | |||||||
Total | $ | | $ | ( | $ | | $ | | $ | ( | $ | | |||||
17
Amortization expense of intangible assets was $
Estimated | |||
Intangible | |||
Amortization | |||
For the Years Ending December 31, |
| Expense | |
2022 (remaining nine months) | $ | | |
2023 | | ||
2024 |
| | |
2025 |
| | |
2026 |
| | |
Thereafter |
| | |
$ | | ||
Note 7—Accounts Payable and Accrued Liabilities
At March 31, 2022 and December 31, 2021, accounts payable included retention amounts of approximately $
The following is a summary of accrued liabilities (in thousands):
March 31, | December 31, | |||||
| 2022 |
| 2021 | |||
Payroll and related employee benefits | $ | | $ | | ||
Current operating lease liability | | | ||||
Casualty insurance reserves |
| |
| | ||
Corporate income taxes and other taxes |
| |
| | ||
Other |
| |
| | ||
$ | | $ | | |||
Note 8 — Debt
Long-term debt and credit facilities consists of the following (in thousands):
March 31, | December 31, | |||||
| 2022 |
| 2021 | |||
Term loan | $ | | $ | | ||
Commercial equipment notes | | | ||||
Mortgage notes |
| |
| | ||
Total debt | | | ||||
Unamortized debt issuance costs | ( | ( | ||||
Total debt, net | $ | | $ | | ||
Less: current portion |
| ( |
| ( | ||
Long-term debt, net of current portion | $ | | $ | | ||
The weighted average interest rate on total debt outstanding at March 31, 2022 and December 31, 2021 was
Credit Agreement
Our credit agreement consists of a $
18
The Credit Agreement contains various restrictive and financial covenants including, among others, a senior debt/EBITDA ratio and debt service coverage requirements. In addition, the Credit Agreement includes restrictions on investments, change of control provisions and provisions in the event we dispose of more than
We were in compliance with the covenants for the Credit Agreement at March 31, 2022.
On September 13, 2018, we entered into an interest rate swap agreement to manage our exposure to the fluctuations in variable interest rates. The swap effectively exchanged the interest rate on
Canadian Credit Facilities
We have a demand credit facility for $
We have a credit facility for $
Note 9 — Derivative Instruments
We are exposed to certain market risks related to changes in interest rates. To monitor and manage these market risks, we have established risk management policies and procedures. We do not enter into derivative instruments for any purpose other than hedging interest rate risk.
Interest Rate Risk. We are exposed to variable interest rate risk as a result of variable-rate borrowings under our Credit Agreement. To manage fluctuations in cash flows resulting from changes in interest rates on a portion of our variable-rate debt, we entered into an interest rate swap agreement on September 13, 2018 with an initial notional amount of $
Credit Risk. By using derivative instruments to economically hedge exposures to changes in interest rates, we are exposed to counterparty credit risk. Credit risk is the failure of a counterparty to perform under the terms of a derivative contract. When the fair value of a derivative contract is positive, the counterparty owes us, which creates credit risk for us. When the fair value of a derivative contract is negative, we owe the counterparty and, therefore, we do not possess credit risk. We minimize the credit risk in derivative instruments by entering into transactions with high quality counterparties. We have entered into netting agreements, including International Swap Dealers Association (“ISDA”) Agreements, which allow for netting of contract receivables and payables in the event of default by either party.
The following table summarizes the fair value of our derivative contracts included in the Condensed Consolidated Balance Sheets (in thousands):
|
|
| March 31, |
| December 31, | |||
Balance Sheet Location | 2022 | 2021 | ||||||
Interest rate swap | Other long-term liabilities | $ | | $ | | |||
19
The following table summarizes the amounts recognized with respect to our derivative instruments within the Condensed Consolidated Statements of Operations (in thousands):
Three Months Ended | ||||||||
Location of Gain Recognized | March 31, | |||||||
| on Derivatives | 2022 |
| 2021 | ||||
Interest rate swap |
| Interest expense, net | $ | | $ | | ||
Cash flows from derivatives settled are reported as cash flows from operating activities.
Note 10—Income Taxes
We are subject to tax liabilities imposed by multiple jurisdictions. We determine our best estimate of the annual effective tax rate at each interim period using expected annual pre-tax earnings, statutory tax rates and available tax planning opportunities. Certain significant or unusual items are separately recognized in the quarter in which they occur which can cause variability in the effective tax rate from quarter to quarter. We recognize interest and penalties related to uncertain tax positions, if any, as an income tax expense.
The effective tax rate on income for the three months ended March 31, 2022 and 2021 was
Our U.S. federal income tax returns are generally no longer subject to examination for tax years before 2018. The statutes of limitation of state and foreign jurisdictions generally vary between to
Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for temporary differences between the financial reporting bases and tax bases of assets and liabilities based on enacted tax rates expected to be in effect when such amounts are realized or settled. However, deferred tax assets are recognized only to the extent that it is more likely than not that they will be realized based upon consideration of available evidence, including future reversals of existing taxable temporary differences, future projected taxable income, the length of the tax asset carryforward periods and tax planning strategies. The effects of remeasurement of deferred tax assets and liabilities resulting from changes in tax rates are recognized in income in the period of enactment.
On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) was enacted by the US Government in response to the COVID-19 pandemic. We deferred FICA tax payments through the end of 2020 as allowed under the CARES Act. The remaining deferral balance was $
Note 11—Dividends and Earnings Per Share
We paid cash dividends during 2022 and 2021 as follows:
Declaration Date |
| Record Date |
| Date Paid |
| Amount Per Share | |
February 19, 2021 | March 31, 2021 | April 15, 2021 | $ | ||||
May 4, 2021 | June 30, 2021 | July 15, 2021 | |||||
August 3, 2021 | September 30, 2021 | October 15, 2021 | |||||
November 3, 2021 | December 31, 2021 | January 14, 2022 | |||||
February 24, 2022 | March 31, 2022 | April 15, 2022 | |||||
The payment of future dividends is contingent upon our revenue and earnings, capital requirements and our general financial condition, as well as contractual restrictions and other considerations deemed relevant by the Board of Directors.
20
The table below presents the computation of basic and diluted earnings per share for the three months ended March 31, 2022 and 2021 (in thousands, except per share amounts).
Three Months Ended March 31, | |||||||
| 2022 |
| 2021 |
| |||
Numerator: | |||||||
Net (loss) income | $ | ( | $ | | |||
Denominator: | |||||||
Weighted average shares for computation of basic earnings per share: |
| |
| | |||
Dilutive effect of shares issued to independent directors (1) |
| — |
| | |||
Dilutive effect of Restricted Stock Units ("RSUs") (1) |
| — |
| | |||
Weighted average shares for computation of diluted earnings per share |
| |
| | |||
(Loss) earnings per share: | |||||||
Basic | $ | ( | $ | | |||
Diluted | $ | ( | $ | | |||
| (1) | The dilutive effect of shares issued to independent directors and restricted stock units of |
Note 12—Stockholders’ Equity
Common stock
We issued
During the three months ended March 31, 2022 and 2021, we issued
During the three months ended March 31, 2022 and 2021, a total of
In connection with the acquisition of FIH, we offered certain FIH employees the option to purchase shares of our common stock at a
Secondary Offering
In March 2021, we entered into an underwriting agreement with Goldman Sachs & Co. LLC, Morgan Stanley & Co. LLC and UBS Securities LLC, as representatives of the underwriters, in connection with a public offering, pursuant to which we agreed to issue and sell
21
$
Share Purchase Plan
In November 2021, our Board of Directors authorized a $
Note 13—Leases
We lease administrative and operational facilities, which are generally longer-term, project specific facilities or yards, and construction equipment under non-cancelable operating leases. We determine if an arrangement is a lease at inception. We have lease agreements with lease and non-lease components, which are generally accounted for separately. Operating leases are included in operating lease assets, accrued liabilities, and noncurrent operating lease liabilities on our Condensed Consolidated Balance Sheets.
Operating lease assets and operating lease liabilities are recognized at commencement date based on the present value of the future minimum lease payments over the lease term. In determining our lease term, we include options to extend or terminate the lease when it is reasonably certain that we will exercise that option. As most of our leases do not provide an implicit rate, we use our incremental borrowing rate based on the information available at commencement date to determine the present value of future payments. Lease expense from minimum lease payments is recognized on a straight-line basis over the lease term.
Our leases have remaining lease terms that expire at various dates through 2031, some of which may include
The components of lease expense are as follows (in thousands):
Three Months Ended March 31, | ||||||
| 2022 | 2021 | ||||
Operating lease expense (1) | $ | | $ | | ||
________________________________________
| (1) | Includes short-term leases which are immaterial. |
Our operating lease liabilities are reported on the Condensed Consolidated Balance Sheets as follows (in thousands):
March 31, | December 31, | |||||
| 2022 | 2021 | ||||
$ | | $ | | |||
Noncurrent operating lease liabilities, net of current portion |
| |
| | ||
$ | | $ | | |||
Note 14—Commitments and Contingencies
Legal proceedings—We are subject to claims and legal proceedings arising out of our business. We provide for costs related to contingencies when a loss from such claims is probable and the amount is reasonably estimable. In determining whether it is possible to provide an estimate of loss, or range of possible loss, we review and evaluate our litigation and regulatory matters on a quarterly basis in light of potentially relevant factual and legal developments. If we determine an unfavorable outcome is not probable, or probable but not reasonably estimable, we do not accrue for a potential litigation loss.
22
Management is unable to ascertain the ultimate outcome of claims and legal proceedings; however, after review and consultation with counsel and taking into consideration relevant insurance coverage and related deductibles/self-insurance retention, management believes that it has meritorious defenses to such claims and believes that the reasonably possible outcome of such claims will not, individually or in the aggregate, have a material adverse effect on our consolidated results of operations, financial condition or cash flow.
Bonding — At March 31, 2022 and December 31, 2021, we had bid and completion bonds issued and outstanding totaling approximately $
Note 15—Reportable Segments
The current reportable segments include the Utilities segment, the Energy/Renewables segment, and the Pipeline segment.
Each of our reportable segments is composed of similar business units that specialize in services unique to the segment. Driving the end-user focused segments are differences in the economic characteristics of each segment, the nature of the services provided by each segment; the production processes of each segment; the type or class of customer using the segment’s services; the methods used by the segment to provide the services; and the regulatory environment of each segment’s customers.
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.
The following is a brief description of the reportable segments:
The Utilities segment operates throughout the United States and specializes in a range of services, including the installation and maintenance of new and existing natural gas and electric utility distribution and transmission systems, and communications systems.
The Energy/Renewables segment operates throughout the United States and in Canada and specializes in a range of services that include engineering, procurement, and construction, retrofits, highway and bridge construction, demolition, site work, soil stabilization, mass excavation, flood control, upgrades, repairs, outages, and maintenance services for entities in the renewable energy and energy storage, renewable fuels, and petroleum and petrochemical industries, as well as state departments of transportation.
The Pipeline segment operates throughout the United States and specializes in a range of services, including pipeline construction and maintenance, pipeline facility and integrity services, installation of compressor and pump stations, and metering facilities for entities in the petroleum and petrochemical industries, as well as gas, water, and sewer utilities.
All intersegment revenue and gross profit, which was immaterial, has been eliminated in the following tables. Total assets by segment is not presented as our Chief Operating Decision Maker as defined by ASC 280 does not review or allocate resources based on segment assets.
23
Segment Revenue
Revenue by segment was as follows (in thousands):
For the three months ended March 31, | ||||||||||
2022 | 2021 | |||||||||
% of | % of | |||||||||
Total | Total | |||||||||
Segment |
| Revenue |
| Revenue |
| Revenue |
| Revenue | ||
Utilities | $ | |
| $ | |
| ||||
Energy/Renewables | | | ||||||||
Pipeline |
| |
|
| |
| ||||
Total | $ | |
| $ | |
| ||||
Segment Gross Profit
Gross profit by segment was as follows (in thousands):
For the three months ended March 31, | ||||||||||
2022 | 2021 | |||||||||
% of | % of | |||||||||
Segment | Segment | |||||||||
Segment |
| Gross Profit |
| Revenue |
| Gross Profit |
| Revenue | ||
Utilities | $ | |
| $ | |
| ||||
Energy/Renewables | | | ||||||||
Pipeline |
| ( |
| ( |
| |
| |||
Total | $ | |
| $ | |
| ||||
Segment Goodwill
The amount of goodwill recorded by each segment at March 31, 2022 and at December 31, 2021 is presented in Note 6 – “Goodwill and Intangible Assets”.
Geographic Region — Revenue and Total Assets
The majority of our revenue is derived from customers in the United States with approximately
24
PRIMORIS SERVICES CORPORATION
MANAGEMENT’S DISCUSSION AND ANALYSIS
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Forward Looking Statements
This Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2022 (“First Quarter 2022 Report”) contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), which are subject to the “safe harbor” created by those sections. Forward-looking statements include information concerning our possible or assumed future results of operations, business strategies, financing plans, competitive position, industry environment, growth opportunities, the effects of regulation and the economy, generally. Forward-looking statements include all statements that are not historical facts and usually can be identified by terms such as “anticipates,” “believes,” “could,” “estimates,” “expects,” “intends,” “may,” “plans,” “potential,” “predicts,” “projects,” “should,” “will,” “would” or similar expressions.
Forward-looking statements include information concerning our possible or assumed future results of operations, business strategies, financing plans, competitive position, industry environment, potential growth opportunities, the effects of regulation and the economy, generally. Forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. Actual results may differ materially as a result of a number of factors, including, among other things, customer timing, project duration, weather, and general economic conditions; changes in our mix of customers, projects, contracts and business; regional or national and/or general economic conditions and demand for our services; price, volatility, and expectations of future prices of oil, natural gas, and natural gas liquids; variations and changes in the margins of projects performed during any particular quarter; increases in the costs to perform services caused by changing conditions; the termination, or expiration of existing agreements or contracts; the budgetary spending patterns of customers; inflation and other increases in construction costs that we may be unable to pass through to our customers; cost or schedule overruns on fixed-price contracts; availability of qualified labor for specific projects; changes in bonding requirements and bonding availability for existing and new agreements; the need and availability of letters of credit; costs we incur to support growth, whether organic or through acquisitions; the timing and volume of work under contract; losses experienced in our operations; the results of the review of prior period accounting on certain projects and the impact of adjustments to accounting estimates; developments in governmental investigations and/or inquiries; intense competition in the industries in which we operate; failure to obtain favorable results in existing or future litigation or regulatory proceedings, dispute resolution proceedings or claims, including claims for additional costs; failure of our partners, suppliers or subcontractors to perform their obligations; cyber-security breaches; failure to maintain safe worksites; risks or uncertainties associated with events outside of our control, including severe weather conditions, public health crises and pandemics (such as COVID-19), political crises or other catastrophic events; client delays or defaults in making payments; the cost and availability of credit and restrictions imposed by credit facilities; failure to implement strategic and operational initiatives; risks or uncertainties associated with acquisitions, dispositions and investments; possible information technology interruptions or inability to protect intellectual property; the Company’s failure, or the failure of our agents or partners, to comply with laws; the Company's ability to secure appropriate insurance; new or changing legal requirements, including those relating to environmental, health and safety matters; the loss of one or a few clients that account for a significant portion of the Company's revenues; asset impairments; and risks arising from the inability to successfully integrate acquired businesses. We discuss many of these risks in detail in Part I, Item 1A “Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, 2021 and our other filings with the Securities and Exchange Commission (“SEC”). You should read this First Quarter 2022 Report, our Annual Report on Form 10-K for the year ended December 31, 2021 and our other filings with the SEC completely and with the understanding that our actual future results may be materially different from what we expect.
Given these uncertainties, you should not place undue reliance on these forward-looking statements. Also, forward-looking statements represent our management’s beliefs and assumptions only as of the date of this First Quarter 2022 Report. We assume no obligation to update these forward-looking statements publicly, or to update the reasons actual results could differ materially from those anticipated in any forward-looking statements, even if new information becomes available.
25
The following discussion and analysis should be read in conjunction with the unaudited financial statements and the accompanying notes included in Part 1, Item 1 of this First Quarter 2022 Report and our Annual Report on Form 10-K for the year ended December 31, 2021.
Introduction
We are 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.
The current reportable segments include the Utilities segment, the Energy/Renewables segment and the Pipeline Services (“Pipeline”) segment. The Utilities segment operates throughout the United States and specializes in a range of services, including the installation and maintenance of new and existing natural gas and electric utility distribution and transmission systems, and communication systems.
The Energy/Renewables segment operates throughout the United States and in Canada and specializes in a range of services that include engineering, procurement, and construction, retrofits, highway and bridge construction, demolition, site work, soil stabilization, mass excavation, flood control, upgrades, repairs, outages, and maintenance services for entities in the renewable energy and energy storage, renewable fuels, and petroleum and petrochemical industries, as well as state departments of transportation.
The Pipeline segment operates throughout the United States and specializes in a range of services, including pipeline construction and maintenance, pipeline facility and integrity services, installation of compressor and pump stations, and metering facilities for entities in the petroleum and petrochemical industries, as well as gas, water, and sewer utilities.
We have longstanding customer relationships with major utility, refining, petrochemical, power, midstream, and engineering companies, and state departments of transportation. We have completed major underground and industrial projects for a number of large natural gas transmission and petrochemical companies in the United States, major electrical and gas projects for a number of large utility companies in the United States, as well as significant projects for our engineering customers. We enter into a large number of contracts each year, and the projects can vary in length from daily work orders to as long as 36 months, and occasionally longer, for completion on larger projects. Although we have not been dependent upon any one customer in any year, a small number of customers tend to constitute a substantial portion of our total revenue in any given year.
We generate revenue under a range of contracting types, including fixed-price, unit-price, time and material, and cost reimbursable plus fee contracts. A substantial portion of our revenue is derived from contracts where scope is adequately defined, and therefore we can reasonably estimate total contract value. For these contracts, revenue is recognized over time as work is completed because of the continuous transfer of control to the customer (typically using an input measure such as costs incurred to date relative to total estimated costs at completion to measure progress). For certain contracts, where scope is not adequately defined and we can’t reasonably estimate total contract value, revenue is recognized either on an input basis, based on contract costs incurred as defined within the respective contracts or an output basis based on units completed.
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.
Acquisition of Alberta Screw Piles, Ltd.
On March 1, 2022, we acquired ASP for a cash price of approximately $4.1 million. In addition, the sellers could receive a contingent earnout payment of up to $3.2 million based on achievement of certain operating targets over the one and two year periods ending March 1, 2023 and March 1, 2024, respectively. We incorporated the operations of ASP into our Energy/Renewables segment.
26
Acquisition of Future Infrastructure Holdings, LLC.
On January 15, 2021, we acquired Future Infrastructure Holdings, LLC (“FIH”) for approximately $604.7 million, net of cash acquired. FIH was incorporated into our Utilities segment and is a provider of non-discretionary maintenance, repair, upgrade, and installation services to the communication, regulated gas utility, and infrastructure markets. FIH furthers our strategic plan to expand our service lines, enter new markets, and grow our MSA revenue base. The transaction directly aligns with our strategy to grow in large, higher growth, higher margin markets, and expands our utility services capabilities. The total purchase price was funded through a combination of existing cash balances, borrowings under our term loan facility, and borrowings under our revolving credit facility.
Material trends and uncertainties
We generate our revenue from construction and engineering projects, as well as from providing a variety of specialty construction services. We depend in part on spending by companies in the communications, gas and electric utility industries, the energy, chemical, and oil and gas industries, as well as state departments of transportation and municipal water and wastewater customers. Over the past several years, each segment has benefited from demand for more efficient and more environmentally friendly energy and power facilities, more reliable gas and electric utility infrastructure, local highway and bridge needs, and from the activity level in the oil and gas industry. However, periodically, each of these industries and government agencies is adversely affected by macroeconomic conditions. Economic and other factors outside of our control may affect the amount and size of contracts we are awarded in any particular period.
Since March 2020, the COVID-19 outbreak has adversely impacted global activity and contributed to significant volatility in financial markets. While our services have generally been unaffected by various government measures enacted to slow the spread of COVID-19, the initial impacts to all segments were various levels of project interruptions and restrictions that delayed project timelines from those originally planned. In some cases, we experienced temporary work stoppages. This led to general inefficiencies from having to start and stop work, re-sequencing work, requiring on-site health screenings before entering a job site, and following proper social distancing practices. We were also restricted from completing work or prevented from starting work on certain projects. While we continue to be impacted by some of these factors in 2022, the primary impacts to our business through the first quarter of 2022 are inefficiencies in our workforce from absenteeism because of illness or quarantining. However, despite these impacts, our business model appears to be resilient, and we have adapted accordingly.
During 2021 COVID-19 vaccination coverage has broadened considerably across the United States since the vaccines were first approved and became available in late 2020, but progress in vaccination rates has slowed. The duration of effectiveness of the vaccines, as well as their effectiveness against future variants is uncertain. As such, due to the fluidity of the COVID-19 pandemic, uncertainties as to its scope and duration and macroeconomic implications, and ongoing changes in the way that governments, businesses and individuals react and respond to the pandemic, the ultimate impact on the Company remains uncertain. We anticipate that the COVID-19 pandemic could have a continued adverse impact on economic and market conditions and we could see an extended period of global economic slowdown. When COVID-19 is demonstrably contained, we anticipate a rebound in economic activity, depending on the rate, pace, and effectiveness of vaccinations and the containment efforts deployed by various national, state, and local governments.
To date, the inefficiencies experienced have had an unquantifiable impact on our business. We will continue to actively monitor the evolving situation and may take further actions to alter our business operations that we determine are in the best interests of our employees, customers, suppliers, and stakeholders, or as required by federal, state, or local authorities. It is not clear what the potential effects any such alterations or modifications may have on our business or on our financial results for the foreseeable future.
We also monitor our customers and their industries to assess the effect that changes in economic, market, and regulatory conditions may have on them. We have experienced reduced spending, project delays, and project cancellations by some of our customers over the last year, which we attribute to negative economic and market conditions, and we anticipate that these negative conditions and the impact of COVID-19 may continue to affect demand for our services in the near-term.
Fluctuations in market prices of oil, gas and other fuel sources have affected demand for our services. While we have seen signs of a recovery in the price of oil, the volatility in the prices of oil, gas, and liquid natural gas that has occurred in the past few years could create uncertainty with respect to demand for our oil and gas pipeline services, specifically in our pipeline services and Canadian operations, both in the near term and for future projects. While the
27
construction of gathering lines within the oil shale formations may remain at lower levels for an extended period, we believe that over time, the need for pipeline infrastructure for mid-stream and gas utility companies will result in a continuing need for our services. However, a prolonged period of depressed oil and gas prices could delay midstream pipeline opportunities.
The continuing changes in the regulatory environment has affected the demand for our services, either by increasing our work, delaying projects, or cancelling projects. For example, environmental laws and regulations have provided challenges to major pipeline projects, resulting in delays or cancellations that impact the timing of revenue recognition. However, environmental laws and new pipeline regulations could increase the demand for our pipeline maintenance and integrity services. In addition, the regulatory environment in California has resulted in delays for the construction of gas-fired power plants, while regulators continue to search for significant renewable resources. However, the increased demand for renewable resources is also creating demand for our construction and specialty services, such as the need for battery storage and the construction of solar power production facilities.
Seasonality, cyclicality and variability
Our results of operations are subject to quarterly variations. Some of the variation is the result of weather, particularly rain, ice, snow, and named storms, which can impact our ability to perform construction and specialty services. These seasonal impacts can affect revenue and profitability in all of our businesses since utilities defer routine replacement and repair during their period of peak demand. Any quarter can be affected either negatively, or positively by atypical weather patterns in any part of the country. In addition, demand for new projects tends to be lower during the early part of the calendar year due to clients’ internal budget cycles. As a result, we usually experience higher revenue and earnings in the second, third and fourth quarters of the year as compared to the first quarter.
Our project values range in size from several hundred dollars to several hundred million dollars. The bulk of our work is composed of project sizes that average less than $5.0 million. We also perform construction projects which tend not to be seasonal, but can fluctuate from year to year based on customer timing, project duration, weather, and general economic conditions. Our business may be affected by declines, or delays in new projects, or by client project schedules. Because of the cyclical nature of our business, the financial results for any period may fluctuate from prior periods, and our financial condition and operating results may vary from quarter to quarter. Results from one quarter may not be indicative of our financial condition, or operating results for any other quarter, or for an entire year.
Critical Accounting Policies and Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities as of the date of the financial statements and that affect the amounts of revenue and expenses reported for each period. These estimates and assumptions must be made because certain information that is used in the preparation of our financial statements cannot be calculated with a high degree of precision from data available, is dependent on future events, or is not capable of being readily calculated based on generally accepted methodologies. Often, these estimates are particularly difficult to determine, and we must exercise significant judgment. Actual results could differ significantly from our estimates, and our estimates could change if they were made under different assumptions or conditions. Our critical accounting policies and estimates are described in Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2021. There have been no material changes to our critical accounting policies and estimates since December 31, 2021.
28
Results of Operations
Consolidated Results
The following discussion compares the results of the three months ended March 31, 2022 to the three months ended March 31, 2021.
Revenue
Revenue was $784.4 million for the three months ended March 31, 2022, a decrease of $33.9 million, or 4.1%, compared to the same period in 2021. The decrease was primarily due to lower revenue in our Pipeline segment, partially offset by growth in our Utilities and Energy/Renewables segments.
Gross Profit
Gross profit was $56.5 million for the three months ended March 31, 2022, a decrease of $23.7 million, or 29.6%, compared to the same period in 2021. The decrease was primarily due to a decrease in revenue and margins. Gross profit as a percentage of revenue decreased to 7.2% for the three months ended March 31, 2022, compared to 9.8% for the same period in 2021, primarily as a result of negative gross margins in our Pipeline segment, as more fully described below. Partially offsetting the overall decline was the favorable impact of the change in useful lives of certain equipment which reduced our depreciation expense for the three months ended March 31, 2022 by $5.8 million.
Selling, general and administrative expenses
Selling, general and administrative (“SG&A”) expenses were $55.5 million during the three months ended March 31, 2022, an increase of $2.0 million, or 3.8% compared to the same period in 2021. SG&A expense as a percentage of revenue increased to 7.1% compared to 6.5% for the corresponding period in 2021, primarily due to decreased revenue.
Transaction and related costs
Transaction and related costs were $0.3 million for the three months ended March 31, 2022, a decrease of $13.6 million compared to the same period in 2021 due primarily to costs associated with the acquisition of FIH in 2021, which consisted primarily of professional fees paid to advisors and expense associated with the purchase of Primoris common stock by certain employees of FIH at a 15 percent discount.
Other income and expense
Non-operating income and expense items for the three months ended March 31, 2022 and 2021 were as follows (in thousands):
Three Months Ended | ||||||
March 31, | ||||||
| 2022 |
| 2021 | |||
Foreign exchange (loss) gain, net | $ | (116) | $ | 23 | ||
Other expense, net |
| (9) |
| (5) | ||
Interest expense, net |
| (2,876) |
| (4,636) | ||
Total other expense | $ | (3,001) | $ | (4,618) | ||
Foreign exchange loss, net reflects currency exchange fluctuations associated with our Canadian engineering operation, which operates principally in United States dollars.
Interest expense, net for the three months ended March 31, 2022, was $2.9 million compared to $4.6 million for the three months ended March 31, 2021. The decrease of $1.7 million was primarily due to a $2.9 million unrealized gain on our interest rate swap in 2022 compared to a $1.3 million unrealized gain in 2021.
Provision for income taxes
We are subject to tax liabilities imposed by multiple jurisdictions. We determine our best estimate of the annual effective tax rate at each interim period using expected annual pre-tax earnings, statutory tax rates and available tax
29
planning opportunities. Certain significant or unusual items are separately recognized in the quarter in which they occur which can cause variability in the effective tax rate from quarter to quarter. We recognize interest and penalties related to uncertain tax positions, if any, as income tax expense.
The effective tax rate on income was 27.0% for the three months ended March 31, 2022. The rate differs from the U.S. federal statutory rate of 21.0%, primarily due to state income taxes.
We recorded an income tax benefit for the three months ended March 31, 2022 of $0.6 million compared to income tax expense of $2.4 million for the three months ended March 31, 2021. The $3.0 million decrease in income tax expense is primarily driven by a $10.5 million decrease in pre-tax income.
Segment results
Utilities Segment
Revenue and gross profit for the Utilities segment for the three months ended March 31, 2022 and 2021 were as follows:
Three Months Ended March 31, | ||||||||||
2022 | 2021 | |||||||||
|
| % of |
|
| % of | |||||
Segment | Segment | |||||||||
(Thousands) | Revenue | (Thousands) | Revenue | |||||||
Utilities Segment | ||||||||||
Revenue | $ | 358,728 | $ | 335,012 | ||||||
Gross profit | 22,354 |
| 6.2% | 21,716 |
| 6.5% | ||||
Revenue increased by $23.7 million, or 7.1%, for the three months ended March 31, 2022, compared to the same period in 2021, primarily due to increased activity with gas utility and communications customers ($25.4 million).
Gross profit for the three months ended March 31, 2022 increased by $0.6 million, or 2.9%, compared to the same period in 2021, due to higher revenue. Gross profit as a percentage of revenue decreased to 6.2% during the three months ended March 31, 2022, compared to 6.5% in the same period in 2021, primarily due to customer project delays and increased fuel and labor costs, partially offset by better equipment utilization in 2022 from right sizing our fleet.
Energy/Renewables Segment
Revenue and gross profit for the Energy/Renewables segment for the three months ended March 31, 2022 and 2021 were as follows:
Three Months Ended March 31, | ||||||||||
2022 | 2021 | |||||||||
|
| % of |
|
| % of | |||||
Segment | Segment | |||||||||
(Thousands) | Revenue | (Thousands) | Revenue | |||||||
Energy/Renewables Segment | ||||||||||
Revenue | $ | 359,050 | $ | 352,864 | ||||||
Gross profit | 39,931 |
| 11.1% | 42,672 |
| 12.1% | ||||
Revenue increased by $6.2 million, or 1.8%, for the three months ended March 31, 2022, compared to the same period in 2021, primarily due to increased renewable energy activity ($29.4 million) partially offset by lower activity on industrial projects in 2022.
Gross profit for the three months ended March 31, 2022, decreased by $2.7 million, or 6.4%, compared to the same period in 2021, primarily due to lower margins, partially offset by higher revenue. Gross profit as a percentage of revenue decreased to 11.1% during the three months ended March 31, 2022, compared to 12.1% in the same period in 2021, primarily due to a favorable claims resolution on an industrial plant project in 2021.
30
Pipeline Segment
Revenue and gross profit for the Pipeline segment for the three months ended March 31, 2022 and 2021 were as follows:
Three Months Ended March 31, | ||||||||||
2022 | 2021 | |||||||||
|
| % of |
|
| % of | |||||
Segment | Segment | |||||||||
(Thousands) | Revenue | (Thousands) | Revenue | |||||||
Pipeline Segment | ||||||||||
Revenue | $ | 66,606 | $ | 130,453 | ||||||
Gross profit | (5,799) | (8.7%) | 15,793 | 12.1% | ||||||
Revenue decreased by $63.8 million, or 48.9%, for the three months ended March 31, 2022, compared to the same period in 2021. The decrease is primarily due to the substantial completion of three pipeline projects in 2021 ($71.4 million) and a decline in the overall midstream pipeline market demand.
Gross profit for the three months ended March 31, 2022 decreased by $21.6 million compared to the same period in 2021, primarily due to lower revenue and margins. Gross profit as a percentage of revenue decreased to (8.7%) during the three months ended March 31, 2022, compared to 12.1% in the same period in 2021, primarily due to higher costs on a pipeline project in the Mid-Atlantic from unfavorable weather conditions experienced in 2022 and lower than anticipated volumes in 2022, which led to higher relative carrying costs for equipment and personnel. In addition, we had strong performance and favorable margins realized on a Texas pipeline project in 2021.
31
Geographic area financial information
The majority of our revenue is derived from customers in the United States with approximately 4.8% generated from sources outside of the United States during the three months ended March 31, 2022, principally in Canada.
Backlog
For companies in the construction industry, backlog can be an indicator of future revenue streams. Different companies define and calculate backlog in different manners. We define backlog as a combination of: (1) anticipated revenue from the uncompleted portions of existing contracts where scope is adequately defined, and therefore we can reasonably estimate total contract value (“Fixed Backlog”), and (2) the estimated revenue on MSA work for the next four quarters (“MSA Backlog”). We do not include certain contracts in the calculation of backlog where scope, and therefore contract value, is not adequately defined.
The two components of backlog, Fixed Backlog and MSA Backlog, are detailed below.
Fixed Backlog
Fixed Backlog by reportable segment as of December 31, 2021 and March 31, 2022 and the changes in Fixed Backlog for the three months ended March 31, 2022 are as follows (in millions):
| Beginning Fixed |
|
|
| Ending Fixed |
| Revenue |
| Total Revenue | |||||||||||
Backlog at | Net Contract | Revenue | Backlog at | Recognized from | for 3 Months | |||||||||||||||
December 31, | Additions to | Recognized from | March 31, | Non-Fixed | ended March 31, | |||||||||||||||
Reportable Segment | 2021 | Fixed Backlog | Fixed Backlog | 2022 | 00 | 00 | Backlog Projects | 00 | 00 | 2022 | ||||||||||
Utilities | $ | 37.0 | $ | 65.4 | $ | 67.5 | $ | 34.9 | $ | 291.2 |
| $ | 358.7 | |||||||
Energy/Renewables | 2,328.3 | 270.3 | 307.6 | 2,291.0 | 51.5 | 359.1 | ||||||||||||||
Pipeline | 113.9 | 33.6 | 52.9 | 94.6 | 13.7 | 66.6 | ||||||||||||||
Total | $ | 2,479.2 | $ | 369.3 | $ | 428.0 | $ | 2,420.5 | $ | 356.4 | $ | 784.4 | ||||||||
Revenue recognized from non-Fixed Backlog projects shown above are generated by MSA projects and projects completed under time and material and cost reimbursable plus fee contracts where scope, and therefore contract value, is not adequately defined, or are generated from the sale of construction materials, such as rock or asphalt to outside third parties.
At March 31, 2022, our total Fixed Backlog was $2.42 billion representing a decrease of $58.7 million, or 2.4% compared to $2.48 billion at December 31, 2021.
MSA Backlog
The following table outlines historical MSA revenue for the past five quarters (in millions):
Quarterly MSA Revenue | ||||||
| 2021 |
| 2022 | |||
First Quarter | $ | 338.3 | $ | 349.3 | ||
Second Quarter | 413.2 |
| ||||
Third Quarter | 466.6 |
| ||||
Fourth Quarter | 385.7 | |||||
MSA Backlog includes anticipated MSA revenue for the next twelve months. We estimate MSA revenue based on historical trends, anticipated seasonal impacts and estimates of customer demand based on information from our customers.
32
The following table shows our estimated MSA Backlog at March 31, 2022 by reportable segment (in millions):
MSA Backlog | |||
at March 31, | |||
Reportable Segment: |
| 2022 | |
Utilities | $ | 1,426.8 | |
Energy/Renewables | 142.2 | ||
Pipeline |
| 35.6 | |
Total | $ | 1,604.6 | |
Total Backlog
The following table shows total backlog (Fixed Backlog plus MSA Backlog), by reportable segment as of the quarter-end dates shown below (in millions):
|
|
|
| ||||||||||||
Reportable Segment: |
| March 31, 2021 |
| June 30, 2021 |
| September 30, 2021 |
| December 31, 2021 |
| March 31, 2022 | |||||
Utilities | $ | 1,388.3 | $ | 1,403.6 | $ | 1,349.8 | $ | 1,383.6 | $ | 1,461.7 | |||||
Energy/Renewables |
| 1,386.4 |
| 1,205.1 |
| 1,221.8 |
| 2,455.3 |
| 2,433.2 | |||||
Pipeline |
| 313.7 |
| 261.3 |
| 167.6 |
| 163.9 |
| 130.1 | |||||
Total | $ | 3,088.4 | $ | 2,870.0 | $ | 2,739.2 | $ | 4,002.8 | $ | 4,025.0 | |||||
We expect that during the next four quarters, we will recognize as revenue approximately 77% of the total backlog at March 31, 2022, composed of backlog of approximately: 100% of the Utilities segment; 62% of the Energy/Renewables segment; and 100% of the Pipeline segment.
Backlog should not be considered a comprehensive indicator of future revenue, as a percentage of our revenue is derived from projects that are not part of a backlog calculation. The backlog estimates include amounts from estimated MSA contracts, but our customers are not contractually obligated to purchase an amount of services from us under the MSAs. Any of our contracts may be terminated by our customers on relatively short notice. In the event of a project cancellation, we may be reimbursed for certain costs, but typically we have no contractual right to the total revenue reflected in backlog. Projects may remain in backlog for extended periods of time as a result of customer delays, regulatory requirements or project specific issues. Future revenue from certain projects completed under time and material and cost reimbursable plus fee contracts may not be included in our estimated backlog amount.
Liquidity and Capital Resources
Liquidity represents our ability to pay our liabilities when they become due, fund business operations, and meet our contractual obligations and execute our business plan. Our primary sources of liquidity are our cash balances at the beginning of each period and our cash flows from operating activities. If needed, we have availability under our lines of credit to augment liquidity needs, and we have a current shelf registration statement filed with the SEC that allows for the issuance of an indeterminate amount of debt and equity securities. Our short-term and long-term cash requirements consist primarily of working capital, investments to support revenue growth and maintain our equipment and facilities, general corporate needs, and to service our debt obligations. At March 31, 2022, there were no outstanding borrowings under the Revolving Credit Facility, commercial letters of credit outstanding were $39.4 million, and available borrowing capacity was $160.6 million.
In order to maintain sufficient liquidity, we evaluate our working capital requirements on a regular basis. We may elect to raise additional capital by issuing common stock, convertible notes, term debt or increasing our credit facility as necessary to fund our operations or to fund the acquisition of new businesses.
Our cash and cash equivalents totaled $173.5 million at March 31, 2022, compared to $200.5 million at December 31, 2021. We anticipate that our cash and investments on hand, existing borrowing capacity under our credit facility, access to and capacity under a shelf registration statement, and our future cash flows from operations will provide sufficient funds to enable us to meet our operating needs, our planned capital expenditures, and settle our commitments and contingencies for the next twelve months and the foreseeable future.
The construction industry is capital intensive, and we expect to continue to make capital expenditures to meet anticipated needs for our services. During the three months ended March 31, 2022, we spent approximately $33.2 million
33
for capital expenditures, which included $13.4 million for construction equipment. Capital expenditures for the remaining nine months of 2022 are expected to total between $90.0 million and $110.0 million, which includes $55.0 million to $75.0 million for equipment.
Cash Flows
Cash flows during the three months ended March 31, 2022 and 2021 are summarized as follows (in thousands):
Three months ended | ||||||
March 31, | ||||||
| 2022 |
| 2021 | |||
Change in cash: | ||||||
Net cash provided by operating activities | $ | 6,577 | $ | 7,973 | ||
Net cash used in investing activities |
| (32,874) |
| (630,211) | ||
Net cash (used in) provided by financing activities |
| (1,226) |
| 508,464 | ||
Effect of exchange rate changes | 502 | 259 | ||||
Net change in cash, cash equivalents and restricted cash | $ | (27,021) | $ | (113,515) | ||
Operating Activities
The source of our cash flows from operating activities for the three months ended March 31, 2022 and 2021 were as follows (in thousands):
Three months ended | |||||||||
March 31, | |||||||||
| 2022 |
| 2021 |
| Change | ||||
Operating Activities: | |||||||||
Net (loss) income | $ | (1,674) | $ | 5,848 | $ | (7,522) | |||
Depreciation and amortization |
| 20,172 |
| 24,852 |
| (4,680) | |||
Changes in assets and liabilities |
| (6,385) |
| (25,004) |
| 18,619 | |||
Other |
| (5,536) |
| 2,277 |
| (7,813) | |||
Net cash provided by operating activities | $ | 6,577 | $ | 7,973 | $ | (1,396) | |||
Net cash provided by operating activities for the three months ended March 31, 2022 was $6.6 million compared to $8.0 million for the three months ended March 31, 2021. The change year-over-year was primarily due to a decrease in net income, partially offset by a favorable impact from the changes in assets and liabilities.
The significant components of the $6.4 million change in assets and liabilities for the three months ended March 31, 2022 are summarized as follows:
| ● | Contract assets increased by $46.0 million, primarily due to the timing of billing our customers; |
| ● | Other current assets increased by $32.6 million primarily due to $35.1 million of prepaid material purchases related to our solar projects; |
| ● | Contract liabilities increased by $52.0 million, primarily due to down payments or advance payments on projects in process; and |
| ● | Accounts receivable decreased by $25.7 million, primarily due to the timing of collecting from our customers. |
The significant components of the $25.0 million change in assets and liabilities for the three months ended March 31, 2021 are summarized as follows:
| ● | Contract liabilities decreased by $13.6 million, primarily due to lower deferred revenue; |
| ● | Other current assets increased by $14.2 million, primarily due to an increase in prepaid insurance from the payment of policy renewal premiums; |
34
| ● | Contract assets increased by $7.5 million due to the timing of billing our customers; and |
| ● | Accounts receivable decreased by $10.3 million, primarily due to the timing of collecting from our customers. |
Investing activities
For the three months ended March 31, 2022, we used $32.9 million in cash for investing activities compared to $630.2 million for the three months ended March 31, 2021.
During the three months ended March 31, 2022, we purchased property and equipment for $33.2 million compared to $19.1 million during the same period in the prior year. We believe the ownership or long-term leasing of equipment is generally preferable to renting equipment on a project-by-project basis, as this strategy helps to ensure the equipment is available for our projects when needed. In addition, this approach has historically resulted in lower overall equipment costs.
During the three months ended March 31, 2021, we used $613.2 million for acquisitions, primarily for the acquisition of FIH.
We periodically sell assets, typically to update our fleet. We received proceeds from the sale of assets of $4.4 million during the three months ended March 31, 2022, compared to $2.1 million during the same period in the prior year.
Financing activities
Financing activities used cash of $1.2 million for the three months ended March 31, 2022, which was primarily due to the following:
| ● | Proceeds from the issuance of debt of $30.0 million; |
| ● | Payment of long-term debt of $26.5 million; and |
| ● | Dividend payments to our stockholders of $3.2 million. |
Financing activities provided cash of $508.5 million for the three months ended March 31, 2021, which was primarily due to the following:
| ● | Proceeds from the entry into an amended and upsized term loan of $395.1 million, net of debt issuance costs paid; |
| ● | Proceeds from the issuance of common stock of $178.9 million; |
| ● | Payment of long-term debt of $59.4 million; and |
| ● | Dividend payments to our stockholders of $2.9 million. |
Credit Agreements
For a description of our credit agreements, see Note 8 — “Debt” in Item 1, Financial Statements of this First Quarter 2022 Report.
Common stock
For a discussion of items affecting our common stock, please see Note 12 — “Stockholders’ Equity” in Item 1, Financial Statements of this First Quarter 2022 Report.
Off-balance sheet transactions
We enter into certain off-balance sheet arrangements in the ordinary course of business that result in risks not directly reflected on our balance sheet. We have no off-balance sheet financing arrangement with VIEs. The following represents transactions, obligations or relationships that could be considered material off-balance sheet arrangements.
| ● | At March 31, 2022, we had letters of credit outstanding of $40.0 million under the terms of our credit agreements. These letters of credit are used by our insurance carriers to ensure reimbursement for amounts that they are disbursing on our behalf, such as beneficiaries under our self-funded insurance |
35
| program. In addition, from time to time, certain customers require us to post a letter of credit to ensure payments to our subcontractors or guarantee performance under our contracts. Letters of credit reduce our borrowing availability under our Credit Agreement and Canadian Credit Facility. If these letters of credit were drawn on by the beneficiary, we would be required to reimburse the issuer of the letter of credit, and we may be required to record a charge to earnings for the reimbursement. As of the date of this First Quarter 2022 Report, we do not believe that it is likely that any material claims will be made under a letter of credit; |
| ● | In the ordinary course of our business, we may be required by our customers to post surety bid or completion bonds in connection with services that we provide. At March 31, 2022 we had bid and completion bonds issued and outstanding totaling approximately $2.5 billion. The remaining performance obligation on those bonded projects totaled approximately $1.0 billion at March 31, 2022. As of the date of this First Quarter 2022 Report, we do not anticipate that we would have to fund material claims under our surety arrangements; |
| ● | Certain of our subsidiaries are parties to collective bargaining agreements with unions. In most instances, these agreements require that we contribute to multi-employer pension and health and welfare plans. For many plans, the contributions are determined annually and required future contributions cannot be determined since contribution rates depend on the total number of union employees and actuarial calculations based on the demographics of all participants. The Employee Retirement Income Security Act of 1974 (ERISA), as amended by the Multi-Employer Pension Amendments Act of 1980, subjects employers to potential liabilities in the event of an employer’s complete or partial withdrawal of an underfunded multi-employer pension plan. The Pension Protection Act of 2006 added new funding rules for multi-employer plans that are classified as “endangered”, “seriously endangered”, or “critical”. We do not currently anticipate withdrawal from any multi-employer pension plans. Withdrawal liabilities or requirements for increased future contributions could negatively impact our results of operations and liquidity; |
| ● | We enter into employment agreements with certain employees which provide for compensation and benefits under certain circumstances and which may contain a change of control clause. We may be obligated to make payments under the terms of these agreements; and |
| ● | From time to time, we make other guarantees, such as guaranteeing the obligations of our subsidiaries. |
Effects of Inflation and Changing Prices
Our operations are affected by increases in prices, whether caused by inflation or other economic factors. We attempt to recover anticipated increases in the cost of labor, equipment, fuel and materials through price escalation provisions in certain major contracts or by considering the estimated effect of such increases when bidding or pricing new work or by entering into back-to-back contracts with suppliers and subcontractors. To date, the impact of increases in prices have had an unquantifiable impact on our operations.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
In the ordinary course of business, we are exposed to risks related to market conditions. These risks primarily include fluctuations in foreign currency exchange rates, interest rates and commodity prices. We may seek to manage these risks through the use of financial derivative instruments. These instruments may include foreign currency exchange contracts and interest rate swaps.
Interest rate risk. Our Revolving Credit Facility and term loan bear interest at a variable rate which exposes us to interest rate risk. From time to time, we may use certain derivative instruments to hedge our exposure to variable interest rates. As of March 31, 2022, $131.0 million of our variable rate debt outstanding was economically hedged. Based on our variable rate debt outstanding as of March 31, 2022, a 1.0% increase or decrease in interest rates would change annual interest expense by approximately $3.8 million.
We do not execute transactions or use financial derivative instruments for trading or speculative purposes. We generally enter into transactions with counter-parties that are financial institutions as a means to limit significant exposure with any one party.
36
Item 4. Controls and Procedures
Disclosure Controls and Procedures
As of March 31, 2022, we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), of the effectiveness of the design and operation of our “disclosure controls and procedures”, as such term is defined under Exchange Act Rules 13a-15(e) and 15d-15(e).
Based on this evaluation, our CEO and CFO concluded that, at March 31, 2022, the disclosure controls and procedures were effective at the reasonable assurance level to ensure that information required to be disclosed by us in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC, and accumulated and communicated to our management, including our CEO and CFO, as appropriate to allow timely decisions regarding required disclosure.
In designing and evaluating the disclosure controls and procedures, our management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In reaching a reasonable level of assurance, our management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Our disclosure controls and procedures are designed to provide reasonable assurance of achieving their stated objectives.
Changes in Internal Control Over Financial Reporting
There were no changes to our internal control over financial reporting practices or processes that occurred during the quarter ended March 31, 2022 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Part II. Other Information
Item 1. Legal Proceedings
See Note 14 — “Commitments and Contingencies”, included in the unaudited notes to our condensed consolidated financial statements included under Part I of this Form 10-Q.
37
Item 6. Exhibits
The following exhibits are filed as part of this Quarterly Report on Form 10-Q.
Exhibit |
| Description | |||
10.1 | |||||
10.2 | |||||
10.3 | |||||
10.4 | |||||
31.1 | Rule 13a-14(a)/15d-14(a) Certification by the Registrant’s Chief Executive Officer (*) | ||||
31.2 | Rule 13a-14(a)/15d-14(a) Certification by the Registrant’s Chief Financial Officer (*) | ||||
32.1 | Section 1350 Certification by the Registrant’s Chief Executive Officer (**) | ||||
32.2 | Section 1350 Certification by the Registrant’s Chief Financial Officer (**) | ||||
101 INS | Inline XBRL Instance Document – The instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document (*) | ||||
101 SCH | Inline XBRL Taxonomy Extension Schema Document (*) | ||||
101 CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document (*) | ||||
101 LAB | Inline XBRL Taxonomy Extension Label Linkbase Document (*) | ||||
101 PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document (*) | ||||
101 DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document (*) | ||||
104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) | ||||
(*) | Filed herewith. |
(**) | Furnished herewith. |
38
SIGNATURES
Pursuant to the requirements 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.
PRIMORIS SERVICES CORPORATION | |
Date: May 9, 2022 | /s/ Kenneth M. Dodgen |
Kenneth M. Dodgen | |
Executive Vice President, Chief Financial Officer (Principal Financial Officer) |
39
Exhibit 31.1
RULE 13a-14(a)/15d-14(a) CERTIFICATION PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Thomas E. McCormick, certify that:
| 1. | I have reviewed this Quarterly Report on Form 10-Q for the period ended March 31, 2022, of Primoris Services Corporation; |
| 2. | Based on my knowledge, this Quarterly 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 Quarterly Report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this Quarterly 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 Quarterly 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 Quarterly 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 Quarterly Report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this Quarterly Report based on such evaluation; and |
| (d) | Disclosed in this Quarterly Report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter 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 (or persons performing the equivalent functions): |
| (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: May 9, 2022 | |
| |
/s/ Thomas E. McCormick | |
Thomas E. McCormick | |
President, Chief Executive Officer and Director | |
(Principal Executive Officer) | |
1
Exhibit 31.2
RULE 13a-14(a)/15d-14(a) CERTIFICATION PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Kenneth M. Dodgen, certify that:
| 1. | I have reviewed this Quarterly Report on Form 10-Q for the period ended March 31, 2022, of Primoris Services Corporation; |
| 2. | Based on my knowledge, this Quarterly 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 Quarterly Report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this Quarterly 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 Quarterly 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 Quarterly 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 Quarterly Report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this Quarterly Report based on such evaluation; and |
| (d) | Disclosed in this Quarterly Report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter 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 (or persons performing the equivalent functions): |
| (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: May 9, 2022 | |
| |
/s/ Kenneth M. Dodgen | |
Kenneth M. Dodgen | |
Executive Vice President, Chief Financial Officer | |
(Principal Financial Officer) | |
1
Exhibit 32.1
Certification Pursuant to Section 906
of the Sarbanes-Oxley Act of 2002 (18 U.S.C. Section 1350)
In connection with the Quarterly Report of Primoris Services Corporation (the “Company”) on Form 10-Q for the period ended March 31, 2022, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Thomas E. McCormick, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:
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. |
In witness whereof, the undersigned has executed and delivered this certificate as of the date set forth opposite his signature below.
Date: May 9, 2022 | /s/ Thomas E. McCormick |
| Thomas E. McCormick |
| President, Chief Executive Officer and Director |
| (Principal Executive Officer) |
1
Exhibit 32.2
Certification Pursuant to Section 906
of the Sarbanes-Oxley Act of 2002 (18 U.S.C. Section 1350)
In connection with the Quarterly Report of Primoris Services Corporation (the “Company”) on Form 10-Q for the period ended March 31, 2022, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Kenneth M. Dodgen, Executive Vice President, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:
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. |
In witness whereof, the undersigned has executed and delivered this certificate as of the date set forth opposite his signature below.
Date: May 9, 2022 | /s/ Kenneth M. Dodgen |
| Kenneth M. Dodgen |
| Executive Vice President, Chief Financial Officer |
| (Principal Financial Officer) |
1
CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares |
Mar. 31, 2022 |
Dec. 31, 2021 |
|---|---|---|
| Stockholders' equity | ||
| Common stock, par value (in dollars per share) | $ 0.0001 | $ 0.0001 |
| Common stock, shares authorized | 90,000,000 | 90,000,000 |
| Common stock, shares issued | 53,308,136 | 53,194,585 |
| Common stock, shares outstanding | 53,308,136 | 53,194,585 |
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) shares in Thousands, $ in Thousands |
3 Months Ended | |
|---|---|---|
Mar. 31, 2022 |
Mar. 31, 2021 |
|
| CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS | ||
| Revenue | $ 784,384 | $ 818,329 |
| Cost of revenue | 727,898 | 738,148 |
| Gross profit | 56,486 | 80,181 |
| Selling, general and administrative expenses | 55,455 | 53,432 |
| Transaction and related costs | 323 | 13,896 |
| Operating income | 708 | 12,853 |
| Other income (expense): | ||
| Foreign exchange (loss) gain, net | (116) | 23 |
| Other expense, net | (9) | (5) |
| Interest expense, net | (2,876) | (4,636) |
| (Loss) income before benefit (provision) for income taxes | (2,293) | 8,235 |
| Benefit (provision) for income taxes | 619 | (2,387) |
| Net income attributable to Primoris | $ (1,674) | $ 5,848 |
| Dividends per common share (in dollars per share) | $ 0.06 | $ 0.06 |
| (Loss) earnings per share: | ||
| Basic (in dollars per share) | (0.03) | 0.12 |
| Diluted (in dollars per share) | $ (0.03) | $ 0.12 |
| Weighted average common shares outstanding: | ||
| Basic (in shares) | 53,240 | 49,503 |
| Diluted (in shares) | 53,240 | 50,026 |
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME - USD ($) $ in Thousands |
3 Months Ended | |
|---|---|---|
Mar. 31, 2022 |
Mar. 31, 2021 |
|
| CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME | ||
| Net (loss) income | $ (1,674) | $ 5,848 |
| Other comprehensive (loss) income, net of tax: | ||
| Foreign currency translation adjustments | 1,013 | 461 |
| Comprehensive (loss) income | $ (661) | $ 6,309 |
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (Parenthetical) - $ / shares |
3 Months Ended | ||||||
|---|---|---|---|---|---|---|---|
Feb. 24, 2022 |
Nov. 03, 2021 |
Aug. 03, 2021 |
May 04, 2021 |
Feb. 19, 2021 |
Mar. 31, 2022 |
Mar. 31, 2021 |
|
| CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY | |||||||
| Cash dividend declared (in dollars per share) | $ 0.06 | $ 0.06 | $ 0.06 | $ 0.06 | $ 0.06 | $ 0.06 | $ 0.06 |
Nature of Business |
3 Months Ended |
|---|---|
Mar. 31, 2022 | |
| Nature of Business | |
| Nature of Business | 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 three segments. We have customer relationships with major utility, communications, 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 — The current reportable segments include the Utilities segment, the Energy/Renewables segment and the Pipeline Services (“Pipeline”) segment. See Note 15 – “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.
|
Basis of Presentation |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Mar. 31, 2022 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Basis of Presentation | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Basis of Presentation | Note 2—Basis of Presentation Interim condensed consolidated financial statements — The interim condensed consolidated financial statements for the three months ended March 31, 2022 and 2021 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 28, 2022, which contains our audited consolidated financial statements for the year ended December 31, 2021, 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. Reclassification — Certain previously reported amounts have been reclassified to conform to the current period presentation. Restricted cash — Restricted cash consists primarily of contract retention payments made by customers into escrow bank accounts and are included in prepaid expenses and other current assets in our Condensed Consolidated Balance Sheets. Escrow cash accounts are released to us by customers as projects are completed in accordance with contract terms. The following tables provide a reconciliation of cash, cash equivalents and restricted cash reported within the Condensed Consolidated Balance Sheets to the totals of such amounts shown in the Condensed Consolidated Statements of Cash Flows (in thousands):
Depreciation — Effective January 1, 2022, we changed our estimates of the useful lives of certain equipment to better reflect the estimated periods during which these assets will remain in service. The estimated useful lives of equipment that previously ranged to seven years were increased to a range of to ten years. The effect of this change in estimate reduced depreciation expense by $5.8 million, decreased net loss by $4.2 million, and decreased basic and diluted loss per share by $0.08 for the three months ended . 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 40% to 50% of total revenue; however, the companies that comprise the top ten vary from year to year. For each of the three months ended March 31, 2022 and 2021, approximately 45.4% of total revenue was generated from our top ten customers. For the three months ended March 31, 2022 one solar energy customer represented approximately 10.1% of total revenue and for the three months ended March 31, 2021, no single customer accounted for more than 10% of total revenue. |
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Measurements |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Mar. 31, 2022 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Fair Value Measurements | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Fair Value Measurements | Note 3—Fair Value Measurements ASC Topic 820, “Fair Value Measurements and Disclosures”, defines fair value, establishes a framework for measuring fair value in GAAP and requires certain disclosures about fair value measurements. ASC Topic 820 addresses fair value GAAP for financial assets and financial liabilities that are re-measured and reported at fair value at each reporting period and for non-financial assets and liabilities that are re-measured and reported at fair value on a non-recurring basis. In general, fair values determined by Level 1 inputs use quoted prices (unadjusted) in active markets for identical assets or liabilities. Fair values determined by Level 2 inputs use data points that are observable such as quoted prices, interest rates and yield curves. Fair values determined by Level 3 inputs are “unobservable data points” for the asset or liability and include situations where there is little, if any, market activity for the asset or liability. The following table presents, for each of the fair value hierarchy levels identified under ASC Topic 820, our financial assets and liabilities that are required to be measured at fair value at March 31, 2022 and December 31, 2021 (in thousands):
Other financial instruments not listed in the table consist of accounts receivable, accounts payable and certain accrued liabilities. These financial instruments generally approximate fair value based on their short-term nature. The carrying value of our long-term debt approximates fair value based on comparison with current prevailing market rates for loans of similar risks and maturities. The interest rate swap is measured at fair value using the income approach, which discounts the future net cash settlements expected under the derivative contracts to a present value. These valuations primarily utilize indirectly observable inputs, including contractual terms, interest rates and yield curves observable at commonly quoted intervals. See Note 9 – “Derivative Instruments” for additional information. On a quarterly basis, we assess the estimated fair value of the contractual obligation to pay the contingent consideration and any changes in estimated fair value are recorded as a non-operating charge in our Statement of Operations. Fluctuations in the fair value of contingent consideration are impacted by two unobservable inputs, management’s estimate of the probability of the acquired company meeting the contractual operating performance target and the estimated discount rate (a rate that approximates our cost of capital). Significant changes in either of those inputs in isolation would result in a different fair value measurement. Generally, a change in the assumption of the probability of meeting the performance target is accompanied by a directionally similar change in the fair value of contingent consideration liability, whereas a change in assumption of the estimated discount rate is accompanied by a directionally opposite change in the fair value of contingent consideration liability. Upon meeting the target, we reflect the full liability on the balance sheet and record a charge to “Other income (expense), net” for the change in the fair value of the liability from the prior period. The March 1, 2022 acquisition of Alberta Screw Piles, Ltd. (“ASP”) (as discussed in Note 4) includes an earnout of up to $3.2 million, contingent upon meeting certain performance targets over the and two year periods ending March 1, 2023 and March 1, 2024, respectively. The estimated fair value of the contingent consideration on the acquisition date and on March 31, 2022 was $2.8 million. Under ASC 805, “Business Combinations”, we are required to estimate the fair value of contingent consideration based on facts and circumstances that existed as of the acquisition date and remeasure to fair value at each reporting date until the contingency is resolved. |
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Acquisitions |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Mar. 31, 2022 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Acquisitions | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Acquisitions | Note 4—Acquisitions Acquisition of Alberta Screw Piles, Ltd. On March 1, 2022, we acquired ASP for a cash price of approximately $4.1 million. In addition, the sellers could receive a contingent earnout payment of up to $3.2 million based on achievement of certain operating targets over the and two year periods ending March 1, 2023 and March 1, 2024, respectively. The estimated fair value of the contingent consideration on the acquisition date was $2.8 million. The preliminary estimated fair values of the assets acquired and liabilities assumed as of the acquisition date consisted of $3.1 million of fixed assets, $1.9 million of working capital, and $1.9 million of goodwill. The final determination of fair value for the assets acquired and liabilities assumed is subject to further change and will be completed as soon as possible, but no later than one year from the acquisition date. The preliminary estimates that are not yet finalized relate to property, plant and equipment, identifiable intangible assets, and working capital. We incorporated the operations of ASP into our Energy/Renewables segment. Goodwill associated with the ASP acquisition principally consists of the value of the assembled workforce. Based on the current Canadian tax treatment, goodwill is expected to be deductible at a rate of 5% per year. Acquisition of Future Infrastructure Holdings, LLC. On January 15, 2021, we acquired Future Infrastructure Holdings, LLC (“FIH”) for approximately $604.7 million, net of cash acquired. FIH is a provider of non-discretionary maintenance, repair, upgrade, and installation services to the communication, regulated gas utility, and infrastructure markets. FIH furthers our strategic plan to expand our service lines, enter new markets, and grow our MSA revenue base. The transaction directly aligns with our strategy to grow in large, higher growth, higher margin markets, and expands our utility services capabilities. The total purchase price was funded through a combination of existing cash balances, borrowings under our term loan facility, and borrowings under our revolving credit facility. During the fourth quarter of 2021, we finalized the estimate of fair values of the assets acquired and liabilities assumed of FIH. The tables below represent the purchase consideration and estimated fair values of the assets acquired and liabilities assumed. Significant changes since our initial estimates reported in the first quarter of 2021 primarily relate to a $6.5 million reduction in the purchase consideration for the final working capital true-up and a $4.0 million increase in the final valuation of intangible assets. As a result of these and other adjustments to the initial estimated fair values of the assets acquired and liabilities assumed, goodwill decreased by approximately $7.2 million since the first quarter of 2021. Adjustments recorded to the estimated fair values of the assets acquired and liabilities assumed are recognized in the period in which the adjustments are determined and calculated as if the accounting had been completed as of the acquisition date.
We incorporated the operations of FIH into our Utilities segment. Goodwill associated with the FIH acquisition principally consists of expected benefits from the expansion of our services into the communications market and the expansion of our geographic presence. Goodwill also includes the value of the assembled workforce. Based on the current tax treatment, goodwill is expected to be deductible for income tax purposes over a 15-year period. The intangible assets acquired with the FIH acquisition consisted of Customer relationships of $122.0 million and Tradenames of $4.4 million. The Customer relationships and Tradenames are being amortized over a weighted average useful life of 19 years and one year, respectively. For the period from January 15, 2021, the acquisition date, to March 31, 2021, FIH contributed revenue of $60.7 million and gross profit of $9.8 million. Acquisition related costs were $13.5 million for the three months ended March 31, 2021, and are included in “Transaction and related costs” on the Condensed Consolidated Statements of Operations. Such costs primarily consisted of professional fees paid to advisors and expense associated with the purchase of Primoris common stock by certain employees of FIH at a 15 percent discount. Supplemental Unaudited Pro Forma Information for the three months ended March 31, 2021
The following pro forma information for the three months ended March 31, 2021 presents our results of operations as if the acquisition of FIH had occurred at the beginning of 2020. The supplemental pro forma information has been adjusted to include:
The pro forma results are presented for illustrative purposes only and are not necessarily indicative of, or intended to represent, the results that would have been achieved had the FIH acquisition been completed on January 1, 2020. For example, the pro forma results do not reflect any operating efficiencies and associated cost savings that we might have achieved with respect to the acquisition (in thousands, except per share amounts):
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Revenue |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Mar. 31, 2022 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Revenue | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Revenue | Note 5—Revenue We generate revenue under a range of contracting types, including fixed-price, unit-price, time and material, and cost reimbursable plus fee contracts, each of which has a different risk profile. A substantial portion of our revenue is derived from contracts where scope is adequately defined, and therefore we can reasonably estimate total contract value. For these contracts, revenue is recognized over time as work is completed because of the continuous transfer of control to the customer (typically using an input measure such as costs incurred to date relative to total estimated costs at completion to measure progress). For certain contracts, where scope is not adequately defined and we can’t reasonably estimate total contract value, revenue is recognized either on an input basis, based on contract costs incurred as defined within the respective contracts, or an output basis based on units completed. Costs to obtain contracts are generally not significant and are expensed in the period incurred. We evaluate whether two or more contracts should be combined and accounted for as one single performance obligation and whether a single contract should be accounted for as more than one performance obligation. ASC 606 defines a performance obligation as a contractual promise to transfer a distinct good or service to a customer. A contract’s transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied. Our evaluation requires significant judgment and the decision to combine a group of contracts or separate a contract into multiple performance obligations could change the amount of revenue and profit recorded in a given period. The majority of our contracts have a single performance obligation, as the promise to transfer the individual goods or services is not separately identifiable from other promises in the contract and, therefore, is not distinct. However, occasionally we have contracts with multiple performance obligations. For contracts with multiple performance obligations, we allocate the contract’s transaction price to each performance obligation using the observable standalone selling price, if available, or alternatively our best estimate of the standalone selling price of each distinct performance obligation in the contract. The primary method used to estimate standalone selling price is the expected cost plus a margin approach for each performance obligation.
As of March 31, 2022, we had $2.6 billion of remaining performance obligations. We expect to recognize approximately 64.1% of our remaining performance obligations as revenue during the next quarters and substantially all of the remaining balance by the end of 2023. Accounting for long-term contracts involves the use of various techniques to estimate total transaction price and costs. For long-term contracts, transaction price, estimated cost at completion and total costs incurred to date are used to calculate revenue earned. Unforeseen events and circumstances can alter the estimate of the costs and potential profit associated with a particular contract. Total estimated costs, and thus contract revenue and income, can be impacted by changes in productivity, scheduling, the unit cost of labor, subcontracts, materials and equipment. Additionally, external factors such as weather, client needs, client delays in providing permits and approvals, labor availability, governmental regulation, politics and any prevailing impacts from the pandemic caused by the coronavirus may affect the progress of a project’s completion, and thus the timing of revenue recognition. To the extent that original cost estimates are modified, estimated costs to complete increase, delivery schedules are delayed, or progress under a contract is otherwise impeded, cash flow, revenue recognition and profitability from a particular contract may be adversely affected. The nature of our contracts gives rise to several types of variable consideration, including contract modifications (change orders and claims), liquidated damages, volume discounts, performance bonuses, incentive fees, and other terms that can either increase or decrease the transaction price. We estimate variable consideration as the most likely amount to which we expect to be entitled. We include estimated amounts in the transaction price to the extent we believe we have an enforceable right, and it is probable that a significant reversal of cumulative revenue recognized will not occur. Our estimates of variable consideration and the determination of whether to include estimated amounts in the transaction price are based largely on an assessment of our anticipated performance and all information (historical, current and forecasted) that is reasonably available to us at this time. Contract modifications result from changes in contract specifications or requirements. We consider unapproved change orders to be contract modifications for which customers have not agreed to both scope and price. We consider claims to be contract modifications for which we seek, or will seek, to collect from customers, or others, for customer-caused changes in contract specifications or design, or other customer-related causes of unanticipated additional contract costs on which there is no agreement with customers. Claims can also be caused by non-customer-caused changes, such as rain or other weather delays. Costs associated with contract modifications are included in the estimated costs to complete the contracts and are treated as project costs when incurred. In most instances, contract modifications are for goods or services that are not distinct, and, therefore, are accounted for as part of the existing contract. The effect of a contract modification on the transaction price, and our measure of progress for the performance obligation to which it relates, is recognized as an adjustment to revenue on a cumulative catch-up basis. In some cases, settlement of contract modifications may not occur until after completion of work under the contract. As a significant change in one or more of these estimates could affect the profitability of our contracts, we review and update our contract-related estimates regularly. We recognize adjustments in estimated profit on contracts under the cumulative catch-up method. Under this method, the cumulative impact of the profit adjustment is recognized in the period the adjustment is identified. Revenue and profit in future periods of contract performance are recognized using the adjusted estimate. In the three months ended March 31, 2022, revenue recognized related to performance obligations satisfied in previous periods was $3.4 million. If at any time the estimate of contract profitability indicates an anticipated loss on a contract, the projected loss is recognized in full, including the reversal of any previously recognized profit, in the period it is identified and recognized as an “accrued loss provision” which is included in “Contract liabilities” on the Condensed Consolidated Balance Sheets. For contract revenue recognized over time, the accrued loss provision is adjusted so that the gross profit for the contract remains zero in future periods. At March 31, 2022, we had approximately $103.6 million of unapproved contract modifications included in the aggregate transaction prices. These contract modifications were in the process of being negotiated in the normal course of business. Approximately $94.3 million of the contract modifications had been recognized as revenue on a cumulative catch-up basis through March 31, 2022. In all forms of contracts, we estimate the collectability of contract amounts at the same time that we estimate project costs. If we anticipate that there may be issues associated with the collectability of the full amount calculated as the transaction price, we may reduce the amount recognized as revenue to reflect the uncertainty associated with realization of the eventual cash collection. For example, when a cost reimbursable project exceeds the client’s expected budget amount, the client frequently requests an adjustment to the final amount. Similarly, some utility clients reserve the right to audit costs for significant periods after performance of the work. The timing of when we bill our customers is generally dependent upon agreed-upon contractual terms, milestone billings based on the completion of certain phases of the work, or when services are provided. Sometimes, billing occurs subsequent to revenue recognition, resulting in unbilled revenue, which is a contract asset. Also, we sometimes receive advances or deposits from our customers before revenue is recognized, resulting in deferred revenue, which is a contract liability. The caption “Contract assets” in the Condensed Consolidated Balance Sheets represents the following:
Contract assets consist of the following (in thousands):
Contract assets increased by $46.3 million compared to December 31, 2021 primarily due to higher unbilled revenue. The caption “Contract liabilities” in the Condensed Consolidated Balance Sheets represents the following:
Contract liabilities consist of the following (in thousands):
Contract liabilities increased by $52.0 million compared to December 31, 2021 primarily due to higher deferred revenue. Revenue recognized for the three months ended March 31, 2022, that was included in the contract liability balance at December 31, 2021, was approximately $172.3 million. The following tables present our revenue disaggregated into various categories. MSA and Non-MSA revenue was as follows (in thousands):
Revenue by contract type was as follows (in thousands):
(1)Includes time and material and cost reimbursable plus fee contracts. Each of these contract types has a different risk profile. Typically, we assume more risk with fixed-price contracts. Unforeseen events and circumstances can alter the estimate of the costs and potential profit associated with a particular fixed-price contract. However, these types of contracts offer additional profits when we complete the work for less cost than originally estimated. Unit-price and cost reimbursable contracts generally subject us to lower risk. Accordingly, the associated fees are usually lower than fees earned on fixed-price contracts. Under these contracts, our profit may vary if actual costs vary significantly from the negotiated rates. |
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Goodwill and Intangible Assets |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Mar. 31, 2022 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Goodwill and Intangible Assets | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Goodwill and Intangible Assets | Note 6—Goodwill and Intangible Assets The change in goodwill by segment for the three months ended March 31, 2022 was as follows (in thousands):
The table below summarizes the intangible asset categories and amounts, which are amortized on a straight-line basis (in thousands):
Amortization expense of intangible assets was $3.6 million and $4.2 million for the three months ended March 31, 2022 and 2021, respectively. Estimated future amortization expense for intangible assets is as follows (in thousands):
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accounts Payable and Accrued Liabilities |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Mar. 31, 2022 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Accounts Payable and Accrued Liabilities | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Accounts Payable and Accrued Liabilities | Note 7—Accounts Payable and Accrued Liabilities At March 31, 2022 and December 31, 2021, accounts payable included retention amounts of approximately $17.4 million and $15.2 million, respectively. These amounts owed to subcontractors have been retained pending contract completion and customer acceptance of jobs. The following is a summary of accrued liabilities (in thousands):
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Mar. 31, 2022 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Debt | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Credit Agreements | Note 8 — Debt Long-term debt and credit facilities consists of the following (in thousands):
The weighted average interest rate on total debt outstanding at March 31, 2022 and December 31, 2021 was 3.0% and 2.8%, respectively. Credit Agreement Our credit agreement consists of a $592.5 million term loan (the “Term Loan”) and a $200.0 million revolving credit facility (the “Revolving Credit Facility” and together with the Term Loan, the “Credit Agreement”), whereby the lenders agreed to make loans on a revolving basis from time to time and to issue letters of credit for up to the $200.0 million committed amount, and the Credit Agreement contains an accordion feature that would allow us to increase the Term Loan or the borrowing capacity under the Revolving Credit Facility by up to $75.0 million. The maturity date of the credit agreement is . At March 31, 2022, there were borrowings outstanding under the Revolving Credit Facility, commercial letters of credit outstanding were $39.4 million, and available borrowing capacity was $160.6 million. The Credit Agreement contains various restrictive and financial covenants including, among others, a senior debt/EBITDA ratio and debt service coverage requirements. In addition, the Credit Agreement includes restrictions on investments, change of control provisions and provisions in the event we dispose of more than 20% of our total assets. We were in compliance with the covenants for the Credit Agreement at March 31, 2022. On September 13, 2018, we entered into an interest rate swap agreement to manage our exposure to the fluctuations in variable interest rates. The swap effectively exchanged the interest rate on 75% of the debt outstanding under our original Term Loan from variable LIBOR to a fixed rate of 2.89% per annum, in each case plus an applicable margin, which was 2.00% at March 31, 2022. Canadian Credit Facilities We have a demand credit facility for $4.0 million in Canadian dollars with a Canadian bank for purposes of issuing commercial letters of credit in Canada. At March 31, 2022, commercial letters of credit outstanding were $0.7 million in Canadian dollars, and the available borrowing capacity was $3.3 million in Canadian dollars. The credit facility contains a working capital restrictive covenant for OnQuest Canada, ULC, our wholly owned subsidiary. At March 31, 2022, OnQuest Canada, ULC was in compliance with the covenant. We have a credit facility for $10.0 million in Canadian dollars with CIBC Bank for working capital purposes in the normal course of business (“Working Capital Credit Facility”). At March 31, 2022, there were no outstanding borrowings under the Working Capital Credit Facility, and available borrowing capacity was $10.0 million in Canadian dollars. The Working Capital Credit Facility contains a cross default restrictive covenant where a default under our Amended Credit Agreement will represent a default in the Working Capital Credit Facility. |
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Derivative Instruments |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Mar. 31, 2022 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Derivative Instruments | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Derivative Instruments | Note 9 — Derivative Instruments We are exposed to certain market risks related to changes in interest rates. To monitor and manage these market risks, we have established risk management policies and procedures. We do not enter into derivative instruments for any purpose other than hedging interest rate risk. None of our derivative instruments are used for trading purposes. Interest Rate Risk. We are exposed to variable interest rate risk as a result of variable-rate borrowings under our Credit Agreement. To manage fluctuations in cash flows resulting from changes in interest rates on a portion of our variable-rate debt, we entered into an interest rate swap agreement on September 13, 2018 with an initial notional amount of $165.0 million, which was not designated as a hedge for accounting purposes. The notional amount of the swap is adjusted down each quarter by a portion of the required principal payments made on the Term Loan. The swap effectively changes the variable-rate cash flow exposure on the debt obligations to fixed rates. The fair value of outstanding interest rate swap derivatives can vary significantly from period to period depending on the total notional amount of swap derivatives outstanding and fluctuations in market interest rates compared to the interest rates fixed by the swap. As of March 31, 2022, and December 31, 2021, our outstanding interest rate swap agreement contained a notional amount of $131.0 million and $134.1 million, respectively, with a maturity date of July 10, 2023. Credit Risk. By using derivative instruments to economically hedge exposures to changes in interest rates, we are exposed to counterparty credit risk. Credit risk is the failure of a counterparty to perform under the terms of a derivative contract. When the fair value of a derivative contract is positive, the counterparty owes us, which creates credit risk for us. When the fair value of a derivative contract is negative, we owe the counterparty and, therefore, we do not possess credit risk. We minimize the credit risk in derivative instruments by entering into transactions with high quality counterparties. We have entered into netting agreements, including International Swap Dealers Association (“ISDA”) Agreements, which allow for netting of contract receivables and payables in the event of default by either party. The following table summarizes the fair value of our derivative contracts included in the Condensed Consolidated Balance Sheets (in thousands):
The following table summarizes the amounts recognized with respect to our derivative instruments within the Condensed Consolidated Statements of Operations (in thousands):
Cash flows from derivatives settled are reported as cash flows from operating activities. |
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Income Taxes |
3 Months Ended |
|---|---|
Mar. 31, 2022 | |
| Income Taxes | |
| Income Taxes | Note 10—Income Taxes We are subject to tax liabilities imposed by multiple jurisdictions. We determine our best estimate of the annual effective tax rate at each interim period using expected annual pre-tax earnings, statutory tax rates and available tax planning opportunities. Certain significant or unusual items are separately recognized in the quarter in which they occur which can cause variability in the effective tax rate from quarter to quarter. We recognize interest and penalties related to uncertain tax positions, if any, as an income tax expense. The effective tax rate on income for the three months ended March 31, 2022 and 2021 was 27.0% and 29.0%, respectively. For the first three months of 2022 our tax rate differs from the U.S. federal statutory rate of 21.0% primarily due to the impact of state income taxes. For the first three months of 2021, our tax rate differs from the U.S. federal statutory rate of 21.0% primarily due to the impact of state income taxes and nondeductible components of per diem expenses.
Our U.S. federal income tax returns are generally no longer subject to examination for tax years before 2018. The statutes of limitation of state and foreign jurisdictions generally vary between to 5 years. Accordingly, our state and foreign income tax returns are generally no longer subject to examination for tax years before 2016. Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for temporary differences between the financial reporting bases and tax bases of assets and liabilities based on enacted tax rates expected to be in effect when such amounts are realized or settled. However, deferred tax assets are recognized only to the extent that it is more likely than not that they will be realized based upon consideration of available evidence, including future reversals of existing taxable temporary differences, future projected taxable income, the length of the tax asset carryforward periods and tax planning strategies. The effects of remeasurement of deferred tax assets and liabilities resulting from changes in tax rates are recognized in income in the period of enactment. On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) was enacted by the US Government in response to the COVID-19 pandemic. We deferred FICA tax payments through the end of 2020 as allowed under the CARES Act. The remaining deferral balance was $21.7 million at March 31, 2022, and is included in Accrued liabilities on our Condensed Consolidated Balance Sheets. The deferral amount is due to the U.S. Treasury on January 3, 2023. |
Dividends and Earnings Per Share |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Mar. 31, 2022 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Dividends and Earnings Per Share | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Dividends and Earnings Per Share | Note 11—Dividends and Earnings Per Share We paid cash dividends during 2022 and 2021 as follows:
The payment of future dividends is contingent upon our revenue and earnings, capital requirements and our general financial condition, as well as contractual restrictions and other considerations deemed relevant by the Board of Directors. The table below presents the computation of basic and diluted earnings per share for the three months ended March 31, 2022 and 2021 (in thousands, except per share amounts).
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stockholders' Equity |
3 Months Ended |
|---|---|
Mar. 31, 2022 | |
| Stockholders' Equity | |
| Stockholders' Equity | Note 12—Stockholders’ Equity Common stock We issued 23,782 and 25,987 shares of common stock in the three months ended March 31, 2022 and 2021, respectively, under our long-term retention plan (“LTR Plan”). The shares were purchased by the participants in the LTR Plan with payment made to us of $0.6 million and $0.5 million in the three months ended March 31, 2022 and 2021, respectively. Our LTR Plan for certain managers and executives allows participants to use a portion of their annual bonus amount to purchase our common stock at a discount from the market price. The shares purchased in the three months ended March 31, 2022 were a portion of bonus amounts earned in 2021, and the number of shares purchased was calculated based on 75% of the average daily closing market price of our common stock during December 2021. The shares purchased in the three months ended March 31, 2021 were for bonus amounts earned in 2020, and the number of shares was calculated at 75% of the average daily closing market price during December 2020. During the three months ended March 31, 2022 and 2021, we issued 9,648 and 9,486 shares of common stock, respectively as part of the quarterly compensation of the non-employee members of the Board of Directors. During the three months ended March 31, 2022 and 2021, a total of 80,121 and 39,764 RSUs, net of forfeitures for tax withholdings, respectively, were converted to common stock.
In connection with the acquisition of FIH, we offered certain FIH employees the option to purchase shares of our common stock at a 15 percent discount of the closing market price of our common stock on the date of the acquisition. During the three months ended March 31, 2021, such employees purchased 1,038,309 shares of common stock, net of forfeitures for tax withholdings, with payment made to us of $28.9 million, resulting in the recognition of $5.1 million in stock compensation expense included in Transaction and related costs in the Condensed Consolidated Statements of Operations. Secondary Offering In March 2021, we entered into an underwriting agreement with Goldman Sachs & Co. LLC, Morgan Stanley & Co. LLC and UBS Securities LLC, as representatives of the underwriters, in connection with a public offering, pursuant to which we agreed to issue and sell 4,500,000 shares of common stock, par value $.0001 per share. The shares were offered and sold at a public offering price of $35.00 per share. Our gross proceeds of the offering, before deducting underwriting discounts, commissions and offering expenses, were approximately $157.5 million. Our net proceeds were approximately $149.3 million and were used to repay a portion of the borrowings incurred under our Credit Agreement in connection with the acquisition of FIH. Share Purchase Plan In November 2021, our Board of Directors authorized a $25.0 million share purchase program. Under the share purchase program, we can, depending on market conditions, share price and other factors, acquire shares of our common stock on the open market or in privately negotiated transactions. In February 2022, our Board of Directors replenished the limit to $25.0 million. During the three months ended March 31, 2022, we did not purchase any shares of common stock. As of March 31, 2022, we had $25.0 million remaining for purchase under the share purchase program. The share purchase plan expires on December 31, 2022.
|
Leases |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Mar. 31, 2022 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Leases | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Leases | Note 13—Leases We lease administrative and operational facilities, which are generally longer-term, project specific facilities or yards, and construction equipment under non-cancelable operating leases. We determine if an arrangement is a lease at inception. We have lease agreements with lease and non-lease components, which are generally accounted for separately. Operating leases are included in operating lease assets, accrued liabilities, and noncurrent operating lease liabilities on our Condensed Consolidated Balance Sheets. Operating lease assets and operating lease liabilities are recognized at commencement date based on the present value of the future minimum lease payments over the lease term. In determining our lease term, we include options to extend or terminate the lease when it is reasonably certain that we will exercise that option. As most of our leases do not provide an implicit rate, we use our incremental borrowing rate based on the information available at commencement date to determine the present value of future payments. Lease expense from minimum lease payments is recognized on a straight-line basis over the lease term. Our leases have remaining lease terms that expire at various dates through 2031, some of which may include options to extend the leases for up to 5 years. The exercise of lease extensions is at our sole discretion. Periodically, we sublease excess facility space, but any sublease income is generally not significant. Our lease agreements do not contain any material residual value guarantees or material restrictive covenants. The components of lease expense are as follows (in thousands):
________________________________________
Our operating lease liabilities are reported on the Condensed Consolidated Balance Sheets as follows (in thousands):
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Commitments and Contingencies |
3 Months Ended |
|---|---|
Mar. 31, 2022 | |
| Commitments and Contingencies. | |
| Commitments and Contingencies | Note 14—Commitments and Contingencies Legal proceedings—We are subject to claims and legal proceedings arising out of our business. We provide for costs related to contingencies when a loss from such claims is probable and the amount is reasonably estimable. In determining whether it is possible to provide an estimate of loss, or range of possible loss, we review and evaluate our litigation and regulatory matters on a quarterly basis in light of potentially relevant factual and legal developments. If we determine an unfavorable outcome is not probable, or probable but not reasonably estimable, we do not accrue for a potential litigation loss. Management is unable to ascertain the ultimate outcome of claims and legal proceedings; however, after review and consultation with counsel and taking into consideration relevant insurance coverage and related deductibles/self-insurance retention, management believes that it has meritorious defenses to such claims and believes that the reasonably possible outcome of such claims will not, individually or in the aggregate, have a material adverse effect on our consolidated results of operations, financial condition or cash flow. Bonding — At March 31, 2022 and December 31, 2021, we had bid and completion bonds issued and outstanding totaling approximately $2.5 billion and $3.2 billion, respectively. The remaining performance obligation on those bonded projects totaled approximately $1.0 billion and $1.2 billion at March 31, 2022 and December 31, 2021, respectively.
|
Reportable Segments |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Mar. 31, 2022 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Reportable Segments | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Reportable Segments | Note 15—Reportable Segments The current reportable segments include the Utilities segment, the Energy/Renewables segment, and the Pipeline segment. Each of our reportable segments is composed of similar business units that specialize in services unique to the segment. Driving the end-user focused segments are differences in the economic characteristics of each segment, the nature of the services provided by each segment; the production processes of each segment; the type or class of customer using the segment’s services; the methods used by the segment to provide the services; and the regulatory environment of each segment’s customers. 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. The following is a brief description of the reportable segments: The Utilities segment operates throughout the United States and specializes in a range of services, including the installation and maintenance of new and existing natural gas and electric utility distribution and transmission systems, and communications systems. The Energy/Renewables segment operates throughout the United States and in Canada and specializes in a range of services that include engineering, procurement, and construction, retrofits, highway and bridge construction, demolition, site work, soil stabilization, mass excavation, flood control, upgrades, repairs, outages, and maintenance services for entities in the renewable energy and energy storage, renewable fuels, and petroleum and petrochemical industries, as well as state departments of transportation. The Pipeline segment operates throughout the United States and specializes in a range of services, including pipeline construction and maintenance, pipeline facility and integrity services, installation of compressor and pump stations, and metering facilities for entities in the petroleum and petrochemical industries, as well as gas, water, and sewer utilities. All intersegment revenue and gross profit, which was immaterial, has been eliminated in the following tables. Total assets by segment is not presented as our Chief Operating Decision Maker as defined by ASC 280 does not review or allocate resources based on segment assets. Segment Revenue Revenue by segment was as follows (in thousands):
Segment Gross Profit Gross profit by segment was as follows (in thousands):
Segment Goodwill The amount of goodwill recorded by each segment at March 31, 2022 and at December 31, 2021 is presented in Note 6 – “Goodwill and Intangible Assets”. Geographic Region — Revenue and Total Assets The majority of our revenue is derived from customers in the United States with approximately 4.8% and 3.5% generated from sources outside of the United States during the three months ended March 31, 2022 and 2021, respectively, principally in Canada. At March 31, 2022 and December 31, 2021, approximately 3.9% and 3.5%, respectively, of total assets were located outside of the United States, principally in Canada. |
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Basis of Presentation (Policies) |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Mar. 31, 2022 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Basis of Presentation | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Reclassification | Reclassification — Certain previously reported amounts have been reclassified to conform to the current period presentation. |
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Restricted cash | Restricted cash — Restricted cash consists primarily of contract retention payments made by customers into escrow bank accounts and are included in prepaid expenses and other current assets in our Condensed Consolidated Balance Sheets. Escrow cash accounts are released to us by customers as projects are completed in accordance with contract terms. The following tables provide a reconciliation of cash, cash equivalents and restricted cash reported within the Condensed Consolidated Balance Sheets to the totals of such amounts shown in the Condensed Consolidated Statements of Cash Flows (in thousands):
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Depreciation | Depreciation — Effective January 1, 2022, we changed our estimates of the useful lives of certain equipment to better reflect the estimated periods during which these assets will remain in service. The estimated useful lives of equipment that previously ranged to seven years were increased to a range of to ten years. The effect of this change in estimate reduced depreciation expense by $5.8 million, decreased net loss by $4.2 million, and decreased basic and diluted loss per share by $0.08 for the three months ended . |
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Customer concentration | 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 40% to 50% of total revenue; however, the companies that comprise the top ten vary from year to year. For each of the three months ended March 31, 2022 and 2021, approximately 45.4% of total revenue was generated from our top ten customers. For the three months ended March 31, 2022 one solar energy customer represented approximately 10.1% of total revenue and for the three months ended March 31, 2021, no single customer accounted for more than 10% of total revenue. |
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Basis of Presentation (Tables) |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Mar. 31, 2022 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Basis of Presentation | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of reconciliation of cash, cash equivalents and restricted cash | The following tables provide a reconciliation of cash, cash equivalents and restricted cash reported within the Condensed Consolidated Balance Sheets to the totals of such amounts shown in the Condensed Consolidated Statements of Cash Flows (in thousands):
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Measurements (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Mar. 31, 2022 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Fair Value Measurements | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of financial assets and liabilities which are required to be measured at fair value | The following table presents, for each of the fair value hierarchy levels identified under ASC Topic 820, our financial assets and liabilities that are required to be measured at fair value at March 31, 2022 and December 31, 2021 (in thousands):
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Acquisitions (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Mar. 31, 2022 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Acquisitions | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of pro forma results | For example, the pro forma results do not reflect any operating efficiencies and associated cost savings that we might have achieved with respect to the acquisition (in thousands, except per share amounts): | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| FIH | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Acquisitions | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Summary of the identifiable assets acquired and liabilities assumed |
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of pro forma results |
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Revenue (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Mar. 31, 2022 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Revenue | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of contract assets | Contract assets consist of the following (in thousands):
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of contract liabilities | Contract liabilities consist of the following (in thousands):
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of revenue disaggregation by various categories | The following tables present our revenue disaggregated into various categories. MSA and Non-MSA revenue was as follows (in thousands):
Revenue by contract type was as follows (in thousands):
(1)Includes time and material and cost reimbursable plus fee contracts.
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Goodwill and Intangible Assets (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Mar. 31, 2022 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Goodwill and Intangible Assets | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of goodwill by reporting unit |
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Summary of intangible asset categories, amounts and the average amortization periods | The table below summarizes the intangible asset categories and amounts, which are amortized on a straight-line basis (in thousands):
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of estimated future amortization expense for intangible assets |
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accounts Payable and Accrued Liabilities (Tables) |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Mar. 31, 2022 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Accounts Payable and Accrued Liabilities | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Summary of accrued liabilities | The following is a summary of accrued liabilities (in thousands):
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt (Tables) |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Mar. 31, 2022 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Debt | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of long-term debt and credit facilities | Long-term debt and credit facilities consists of the following (in thousands):
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Derivative Instruments (Tables) |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Mar. 31, 2022 | ||||||||||||||||||||||||||||||||||||||||||||||
| Derivative Instruments | ||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of fair values of our derivative contracts included in the Condensed Consolidated Balance Sheets | The following table summarizes the fair value of our derivative contracts included in the Condensed Consolidated Balance Sheets (in thousands):
|
|||||||||||||||||||||||||||||||||||||||||||||
| Schedule of derivative instruments within the Condensed Consolidated Statements of Income |
|
|||||||||||||||||||||||||||||||||||||||||||||
Dividends and Earnings Per Share (Tables) |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Mar. 31, 2022 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Dividends and Earnings Per Share | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of cash dividends paid or declared | We paid cash dividends during 2022 and 2021 as follows:
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of computation of basic and diluted earnings per share | The table below presents the computation of basic and diluted earnings per share for the three months ended March 31, 2022 and 2021 (in thousands, except per share amounts).
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Leases (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Mar. 31, 2022 | |||||||||||||||||||||||||||||||||||||||||||
| Leases | |||||||||||||||||||||||||||||||||||||||||||
| Summary of components of lease expense | The components of lease expense are as follows (in thousands):
________________________________________
|
||||||||||||||||||||||||||||||||||||||||||
| Summary of operating lease liabilities | Our operating lease liabilities are reported on the Condensed Consolidated Balance Sheets as follows (in thousands):
|
||||||||||||||||||||||||||||||||||||||||||
Reportable Segments (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Mar. 31, 2022 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Reportable Segments | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of revenue and gross profit by segment | Segment Revenue Revenue by segment was as follows (in thousands):
Segment Gross Profit Gross profit by segment was as follows (in thousands):
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Nature of Business (Details) |
3 Months Ended |
|---|---|
|
Mar. 31, 2022
segment
| |
| Nature of Business | |
| Number of reportable segments | 3 |
Basis of Presentation - Restricted Cash (Details) - USD ($) $ in Thousands |
Mar. 31, 2022 |
Dec. 31, 2021 |
Mar. 31, 2021 |
Dec. 31, 2020 |
|---|---|---|---|---|
| Basis of Presentation | ||||
| Cash and cash equivalents | $ 173,505 | $ 200,512 | $ 212,770 | $ 326,744 |
| Restricted cash included in prepaid expense and other current assets | $ 5,117 | $ 5,131 | $ 4,690 | $ 4,231 |
| Restricted Cash, Statement of Financial Position | Prepaid Expense and Other Assets, Current | Prepaid Expense and Other Assets, Current | Prepaid Expense and Other Assets, Current | Prepaid Expense and Other Assets, Current |
| Total cash, cash equivalents and restricted cash shown in the consolidated statements of cash flows | $ 178,622 | $ 205,643 | $ 217,460 | $ 330,975 |
Fair Value Measurements (Details) - USD ($) $ in Thousands |
Mar. 01, 2022 |
Mar. 31, 2022 |
Dec. 31, 2021 |
|---|---|---|---|
| ASP | |||
| Liabilities | |||
| Contingent consideration | $ 2,800 | $ 2,800 | |
| Contingent consideration | |||
| Earnout | $ 3,200 | ||
| Minimum | ASP | |||
| Contingent consideration | |||
| Performance targets period | 1 year | ||
| Maximum | ASP | |||
| Contingent consideration | |||
| Performance targets period | 2 years | ||
| Recurring | Quoted Prices in Active Markets for Identical Assets (Level 1) | |||
| Assets | |||
| Cash and cash equivalents | 173,505 | $ 200,512 | |
| Recurring | Significant Unobservable Inputs (Level 3) | |||
| Liabilities | |||
| Contingent consideration | 2,757 | ||
| Recurring | Interest rate swap | Significant Other Observable Inputs (Level2) | |||
| Liabilities | |||
| Derivative liability | $ 1,450 | $ 4,346 |
Acquisitions - Alberta Screw Piles, Ltd (Details) - USD ($) $ in Thousands |
Mar. 01, 2022 |
Mar. 31, 2022 |
Dec. 31, 2021 |
|---|---|---|---|
| Preliminary estimated fair values | |||
| Goodwill | $ 583,534 | $ 581,664 | |
| ASP | |||
| Acquisitions | |||
| Cash payment made | $ 4,100 | ||
| Earnout | 3,200 | ||
| Estimated fair value of the contingent consideration | 2,800 | $ 2,800 | |
| Preliminary estimated fair values | |||
| Estimated fair values of the assets acquired, fixed assets | 3,100 | ||
| Estimated fair values of the assets acquired, working capital | 1,900 | ||
| Goodwill | $ 1,900 | ||
| Goodwill expected to be deductible rate | 5.00% | ||
| ASP | Minimum | |||
| Acquisitions | |||
| Performance targets period | 1 year | ||
| ASP | Maximum | |||
| Acquisitions | |||
| Performance targets period | 2 years |
Acquisitions - Pro Forma Information (Details) $ / shares in Units, shares in Thousands, $ in Thousands |
3 Months Ended |
|---|---|
|
Mar. 31, 2021
USD ($)
$ / shares
shares
| |
| Pro forma results | |
| Tax rate | 29.00% |
| FIH | |
| Pro forma results | |
| Revenue | $ 822,775 |
| Income before provision for income taxes | 15,057 |
| Net income | $ 10,693 |
| Weighted average common shares outstanding: | |
| Basic (in shares) | shares | 49,665 |
| Diluted (in shares) | shares | 50,194 |
| Earnings per share: | |
| Basic (in dollars per share) | $ / shares | $ 0.22 |
| Diluted (in dollars per share) | $ / shares | $ 0.21 |
Revenue - Performance obligations (Details) $ in Millions |
3 Months Ended |
|---|---|
|
Mar. 31, 2022
USD ($)
| |
| Revenue | |
| Remaining performance obligations | $ 2,600.0 |
| Revenue recognized from performance obligations satisfied in previous periods | 3.4 |
| Amount of contract modifications included in the expected contract value. | 103.6 |
| Amount of unapproved contract modifications recognized as revenue on a cumulative catch-up basis | $ 94.3 |
Revenue - Performance obligations - 2021 (Details) - Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2022-04-01 |
3 Months Ended |
|---|---|
Mar. 31, 2022 | |
| Revenue expected timing | |
| Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction | 12 months |
| Percentage of remaining performance obligation expected to be recognized in period | 64.10% |
Revenue - Contract assets (Details) - USD ($) $ in Thousands |
3 Months Ended | |
|---|---|---|
Mar. 31, 2022 |
Dec. 31, 2021 |
|
| Revenue | ||
| Unbilled revenue | $ 317,880 | $ 283,767 |
| Retention receivable | 134,189 | 124,990 |
| Contract materials (not yet installed) | 17,849 | 14,902 |
| Contract assets | 469,918 | $ 423,659 |
| Increase (decrease) in contract assets | $ 46,300 |
Revenue - Contract liabilities (Details) - USD ($) $ in Thousands |
3 Months Ended | |
|---|---|---|
Mar. 31, 2022 |
Dec. 31, 2021 |
|
| Revenue | ||
| Deferred revenue | $ 281,826 | $ 234,352 |
| Accrued loss provision | 10,595 | 6,060 |
| Contract liabilities | 292,421 | $ 240,412 |
| Decrease in contract liabilities | 52,000 | |
| Revenue recognized included in contract liability at beginning of period | $ 172,300 |
Goodwill and Intangible Assets - Goodwill (Details) $ in Thousands |
3 Months Ended |
|---|---|
|
Mar. 31, 2022
USD ($)
| |
| Goodwill | |
| Goodwill, Beginning Balance | $ 581,664 |
| Goodwill acquired during the period | 1,870 |
| Goodwill, Ending Balance | 583,534 |
| Utilities | |
| Goodwill | |
| Goodwill, Beginning Balance | 462,905 |
| Goodwill, Ending Balance | 462,905 |
| Energy/Renewables | |
| Goodwill | |
| Goodwill, Beginning Balance | 66,344 |
| Goodwill acquired during the period | 1,870 |
| Goodwill, Ending Balance | 68,214 |
| Pipeline | |
| Goodwill | |
| Goodwill, Beginning Balance | 52,415 |
| Goodwill, Ending Balance | $ 52,415 |
Goodwill and Intangible Assets - Intangible Assets (Details) - USD ($) $ in Thousands |
3 Months Ended | ||
|---|---|---|---|
Mar. 31, 2022 |
Mar. 31, 2021 |
Dec. 31, 2021 |
|
| Intangible assets | |||
| Gross Carrying Amount | $ 237,567 | $ 237,567 | |
| Accumulated Amortization | (69,857) | (66,247) | |
| Intangible assets, net | 167,710 | 171,320 | |
| Amortization expense of intangible assets | 3,600 | $ 4,200 | |
| Tradenames | |||
| Intangible assets | |||
| Gross Carrying Amount | 20,440 | 20,440 | |
| Accumulated Amortization | (20,024) | (19,675) | |
| Intangible assets, net | 416 | 765 | |
| Customer relationships | |||
| Intangible assets | |||
| Gross Carrying Amount | 215,227 | 215,227 | |
| Accumulated Amortization | (47,960) | (44,727) | |
| Intangible assets, net | 167,267 | 170,500 | |
| Non-compete agreements | |||
| Intangible assets | |||
| Gross Carrying Amount | 1,900 | 1,900 | |
| Accumulated Amortization | (1,873) | (1,845) | |
| Intangible assets, net | $ 27 | $ 55 | |
Goodwill and Intangible Assets - Future Amortization (Details) - USD ($) $ in Thousands |
Mar. 31, 2022 |
Dec. 31, 2021 |
|---|---|---|
| Estimated future amortization expense for intangible assets | ||
| 2022 (remaining nine months) | $ 9,817 | |
| 2023 | 12,409 | |
| 2024 | 11,690 | |
| 2025 | 10,968 | |
| 2026 | 10,518 | |
| Thereafter | 112,308 | |
| Intangible assets, net | $ 167,710 | $ 171,320 |
Accounts Payable and Accrued Liabilities (Details) - USD ($) $ in Thousands |
Mar. 31, 2022 |
Dec. 31, 2021 |
|---|---|---|
| Accounts Payable and Accrued Liabilities | ||
| Retention amounts included in accounts payable | $ 17,400 | $ 15,200 |
| Accrued liabilities | ||
| Payroll and related employee benefits | 96,693 | 77,887 |
| Current operating lease liability | 59,342 | 61,587 |
| Casualty insurance reserves | 8,082 | 7,107 |
| Corporate income taxes and other taxes | 6,726 | 7,967 |
| Other | 22,227 | 20,273 |
| Total accrued liabilities | $ 193,070 | $ 174,821 |
Debt (Details) - USD ($) $ in Thousands |
Mar. 31, 2022 |
Dec. 31, 2021 |
|---|---|---|
| Credit Agreements | ||
| Total debt | $ 669,197 | $ 665,660 |
| Unamortized debt issuance costs | (3,935) | (4,198) |
| Total debt, net | 665,262 | 661,462 |
| Current portion of long-term debt | (65,972) | (67,230) |
| Long-term debt, net of current portion | 599,290 | 594,232 |
| Term Loan | ||
| Credit Agreements | ||
| Total debt | 512,875 | 520,281 |
| Commercial equipment notes | ||
| Credit Agreements | ||
| Total debt | 123,254 | 107,934 |
| Mortgages | ||
| Credit Agreements | ||
| Total debt | $ 33,068 | $ 37,445 |
Debt - Narrative (Details) - USD ($) $ in Thousands |
3 Months Ended | |||
|---|---|---|---|---|
Jan. 15, 2021 |
Sep. 13, 2018 |
Mar. 31, 2022 |
Dec. 31, 2021 |
|
| Credit Agreements | ||||
| Weighted average interest rate (as a percent) | 3.00% | 2.80% | ||
| Aggregate principal amount | $ 665,262 | $ 661,462 | ||
| Revolving Credit Facility | ||||
| Credit Agreements | ||||
| Maximum borrowing capacity | 200,000 | |||
| Potential increase per the agreement | 75,000 | |||
| Borrowings outstanding | 0 | |||
| Credit Agreement | ||||
| Credit Agreements | ||||
| Percentage of credit agreement, threshold restriction of total assets | 20.00% | |||
| Available borrowing capacity | 160,600 | |||
| Term Loan | ||||
| Credit Agreements | ||||
| Maximum borrowing capacity | 592,500 | |||
| Potential increase per the agreement | $ 75,000 | |||
| Interest rate swap agreement | 75.00% | |||
| Derivative fixed interest rate (as a percent) | 2.89% | |||
| Term Loan | LIBOR | ||||
| Credit Agreements | ||||
| Basis spread on variable rate (as a percent) | 2.00% | |||
| Commercial letters of credit | ||||
| Credit Agreements | ||||
| Maximum borrowing capacity | $ 200,000 | |||
| Borrowings outstanding | $ 39,400 |
Debt - Canadian Credit Facilities (Details) $ in Millions |
Mar. 31, 2022
CAD ($)
|
|---|---|
| Canadian Credit Facility | |
| Credit Agreements | |
| Maximum borrowing capacity | $ 4.0 |
| Available borrowing capacity | 3.3 |
| Canadian Credit Facility | Commercial letters of credit | |
| Credit Agreements | |
| Letters of credit outstanding | 0.7 |
| Working Capital Credit Facility | |
| Credit Agreements | |
| Maximum borrowing capacity | 10.0 |
| Available borrowing capacity | 10.0 |
| Borrowings outstanding | $ 0.0 |
Derivative Instruments (Details) $ in Millions |
3 Months Ended | ||
|---|---|---|---|
|
Mar. 31, 2022
USD ($)
instrument
|
Dec. 31, 2021
USD ($)
|
Sep. 13, 2018
USD ($)
|
|
| Derivative Instruments | |||
| Number of Instruments used for trading | instrument | 0 | ||
| Interest rate swap | |||
| Derivative Instruments | |||
| Notional Amount | $ | $ 131.0 | $ 134.1 | $ 165.0 |
Derivative Instruments - Derivative contract and instruments (Details) - Interest rate swap - USD ($) $ in Thousands |
3 Months Ended | ||
|---|---|---|---|
Mar. 31, 2022 |
Mar. 31, 2021 |
Dec. 31, 2021 |
|
| Interest expense | |||
| Derivative Instruments | |||
| Amount of loss recognized on derivatives, net | $ (1,967) | $ (277) | |
| Other long-term liabilities | |||
| Derivative Instruments | |||
| Liability Derivatives | $ 1,450 | $ 4,346 | |
Income Taxes (Details) - USD ($) $ in Millions |
3 Months Ended | |
|---|---|---|
Mar. 31, 2022 |
Mar. 31, 2021 |
|
| Income Taxes | ||
| Effective income tax rate reconciliation (in percent) | 27.00% | 29.00% |
| U.S. federal statutory income tax rate (as a percent) | 21.00% | 21.00% |
| Minimum period of statute of limitations of state and foreign jurisdictions | 3 years | |
| Maximum period of statute of limitations of state and foreign jurisdictions | 5 years | |
| Deferred FICA tax payments reserve | $ 21.7 | |
Dividends and Earnings Per Share (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands |
3 Months Ended | ||||||
|---|---|---|---|---|---|---|---|
Feb. 24, 2022 |
Nov. 03, 2021 |
Aug. 03, 2021 |
May 04, 2021 |
Feb. 19, 2021 |
Mar. 31, 2022 |
Mar. 31, 2021 |
|
| Cash dividend declared (in dollars per share) | $ 0.06 | $ 0.06 | $ 0.06 | $ 0.06 | $ 0.06 | $ 0.06 | $ 0.06 |
| Numerator: | |||||||
| Net (loss) income | $ (1,674) | $ 5,848 | |||||
| Denominator: | |||||||
| Weighted average shares for computation of basic earnings per share | 53,240 | 49,503 | |||||
| Dilutive effect of shares issued to independent directors | 5 | ||||||
| Dilutive effect of RSUs | 518 | ||||||
| Weighted average shares for computation of diluted earnings per share | 53,240 | 50,026 | |||||
| (Loss) earnings per share: | |||||||
| Basic earnings per share (in dollars per share) | $ (0.03) | $ 0.12 | |||||
| Diluted earnings per share (in dollars per share) | $ (0.03) | $ 0.12 | |||||
| Restricted stock units | |||||||
| Denominator: | |||||||
| Dilutive effect of RSUs | 546 | ||||||
| Independent directors. | |||||||
| Denominator: | |||||||
| Dilutive effect of RSUs | 6 | ||||||
Stockholders' Equity - Secondary Offering & Share Purchase Plan (Details) - USD ($) $ / shares in Units, $ in Thousands |
1 Months Ended | 3 Months Ended | ||||
|---|---|---|---|---|---|---|
Mar. 31, 2021 |
Mar. 31, 2022 |
Mar. 31, 2021 |
Feb. 28, 2022 |
Dec. 31, 2021 |
Nov. 21, 2021 |
|
| Secondary Offering | ||||||
| Common Stock, Par or Stated Value Per Share | $ 0.0001 | $ 0.0001 | ||||
| Proceeds from issuance of common stock | $ 422 | $ 178,863 | ||||
| Share Purchase Plan | ||||||
| Aggregate purchase price up to which shares can be acquired under share purchase program | $ 25,000 | $ 25,000 | ||||
| Amount remaining for purchase under share purchase program | $ 25,000 | |||||
| Secondary offering | ||||||
| Secondary Offering | ||||||
| Issuance of shares, net of issuance costs (in shares) | 4,500,000 | |||||
| Common Stock, Par or Stated Value Per Share | $ 0.0001 | $ 0.0001 | ||||
| Share price (in dollars per share) | $ 35.00 | $ 35.00 | ||||
| Proceeds from Issuance of Common Stock Gross | $ 157,500 | |||||
| Proceeds from issuance of common stock | $ 149,300 | |||||
Leases - Components of Lease Expense and Operating Lease Liabilities (Details) - USD ($) $ in Thousands |
3 Months Ended | ||
|---|---|---|---|
Mar. 31, 2022 |
Mar. 31, 2021 |
Dec. 31, 2021 |
|
| Options to extend leases | true | ||
| Components of lease expense | |||
| Operating lease expense | $ 17,596 | $ 21,656 | |
| Operating lease liabilities | |||
| Accrued liabilities | $ 59,342 | $ 61,587 | |
| Operating Lease, Liability, Current, Statement of Financial Position [Extensible List] | Accrued Liabilities, Current | Accrued Liabilities, Current | |
| Noncurrent operating lease liabilities, net of current portion | $ 86,467 | $ 98,059 | |
| Operating lease liabilities | $ 145,809 | $ 159,646 | |
| Maximum | |||
| Renewal term | 5 years | ||
Commitments and Contingencies - Legal (Details) - USD ($) $ in Billions |
Mar. 31, 2022 |
Dec. 31, 2021 |
|---|---|---|
| Commitments and Contingencies. | ||
| Bid and completion bonds issued and outstanding | $ 2.5 | $ 3.2 |
| Remaining performance obligation on the bonded projects. | $ 1.0 | $ 1.2 |
Reportable Segments (Details) $ in Thousands |
3 Months Ended | |
|---|---|---|
|
Mar. 31, 2022
USD ($)
segment
|
Mar. 31, 2021
USD ($)
|
|
| Segment reporting information | ||
| Number of reportable segments | segment | 3 | |
| Revenue | $ 784,384 | $ 818,329 |
| % of Total Revenue | 100.00% | 100.00% |
| Gross Profit | $ 56,486 | $ 80,181 |
| % of Revenue | 7.20% | 9.80% |
| Non-United States | ||
| Segment reporting information | ||
| % of Total Revenue | 4.80% | 3.50% |
| Utilities | ||
| Segment reporting information | ||
| Revenue | $ 358,728 | $ 335,012 |
| % of Total Revenue | 45.70% | 40.90% |
| Gross Profit | $ 22,354 | $ 21,716 |
| % of Revenue | 6.20% | 6.50% |
| Energy/Renewables | ||
| Segment reporting information | ||
| Revenue | $ 359,050 | $ 352,864 |
| % of Total Revenue | 45.80% | 43.20% |
| Gross Profit | $ 39,931 | $ 42,672 |
| % of Revenue | 11.10% | 12.10% |
| Pipeline | ||
| Segment reporting information | ||
| Revenue | $ 66,606 | $ 130,453 |
| % of Total Revenue | 8.50% | 15.90% |
| Gross Profit | $ (5,799) | $ 15,793 |
| % of Revenue | (8.70%) | 12.10% |
Reportable Segments - Revenue and Total Assets by Geographic Area (Details) |
3 Months Ended | 12 Months Ended | |
|---|---|---|---|
Mar. 31, 2022 |
Mar. 31, 2021 |
Dec. 31, 2021 |
|
| Revenues and total assets by geographic area | |||
| % of Revenue | 100.00% | 100.00% | |
| Non-United States | |||
| Revenues and total assets by geographic area | |||
| % of Revenue | 4.80% | 3.50% | |
| % of total assets | 3.90% | 3.50% | |
$;GQO,8/.I%/<;6_0/_G8,98YU?!!\GN6F_(\&