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Acquisitions

9 Months Ended

Sep. 30, 2022

Note 4—Acquisitions

Acquisition of PLH

On August 1, 2022, we acquired PLH Group, Inc. (“PLH”) in an all-cash transaction valued at approximately $438.3 million, net of cash acquired (the “PLH acquisition”). PLH is a utility-focused specialty construction company with concentrations in growing regions of the United States. The transaction directly aligns with our strategic focus on higher-growth, higher margin markets and expands our capabilities in the power delivery, communications, and gas utilities markets. The total purchase price was funded through a combination of borrowings under our term loan facility and borrowings under our revolving credit facility.

The table below represents the purchase consideration and the preliminary estimated fair values of the assets acquired and liabilities assumed as of the acquisition date. The final determination of fair value for certain assets and liabilities is subject to further change and will be completed as soon as the information necessary to complete the analysis is obtained. These amounts, which may differ materially from these preliminary estimates, will continue to be refined during the one-year measurement period, as defined in ASC 805, which ends during the third quarter of 2023. The primary areas of the preliminary estimates that are not yet finalized relate to property, plant and equipment, identifiable intangible assets, contract assets and liabilities, deferred income taxes, uncertain tax positions, the fair value of certain contractual obligations, and accounts receivable. Consideration amounts are also subject to changes resulting from the finalization of post-closing working capital adjustments (inclusive of cash).


Purchase consideration (in thousands)
Total purchase consideration	$	481,493
Less cash and restricted cash acquired		(43,152)
Net cash paid	$	438,341


Identifiable assets acquired and liabilities assumed (in thousands)
Cash, cash equivalents and restricted cash	$	43,152
Accounts receivable		74,411
Contract assets		75,359
Prepaid expenses and other current assets		13,444
Property, plant and equipment		63,528
Operating lease assets		16,340
Intangible assets:
Customer relationships		84,900
Tradename		17,700
Deferred tax assets		6,008
Other long-term assets		6,418
Accounts payable and accrued liabilities		(98,282)
Contract liabilities		(25,488)
Long-term debt (including current portion)		(3,313)
Noncurrent operating lease liabilities, net of current		(12,004)
Deferred tax liability		(3,032)
Other long-term liabilities		(4,136)
Total identifiable net assets		255,005
Goodwill		226,488
Total purchase consideration	$	481,493

We incorporated the majority of the PLH operations into our Utilities segment with the remaining operations going to our Energy/Renewables and Pipeline segments. Goodwill associated with the PLH acquisition principally consists of expected benefits from the expansion of our services into the utilities 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 not expected to be deductible for income tax purposes.

The intangible assets acquired with the PLH acquisition consisted of Customer relationships of $84.9 million and Tradenames of $17.7 million. The Customer relationships and Tradenames are being amortized over a weighted average useful life of 15 years and 1.8 years, respectively. For the period from August 1, 2022, the acquisition date, to September 30, 2022, PLH contributed revenue of $155.7 million and gross profit of $12.3 million.

Acquisition related costs were $12.7 million and $18.2 million for the three and nine months ended September 30, 2022, and are included in “Transaction and related costs” on the Condensed Consolidated Statements of Income. Such costs primarily consisted of professional fees paid to advisors.

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.

We incorporated the operations of FIH into our Utilities segment. For the three months ended September 30, 2021, FIH contributed revenue of $65.1 million and gross profit of $11.4 million. For the period from January 15, 2021, the acquisition date, to September 30, 2021, FIH contributed revenue of $198.5 million and gross profit of $32.0 million.

Acquisition related costs were $0.4 million and $14.2 million for the three and nine months ended September 30, 2021, respectively, and are included in “Transaction and related costs” on the Condensed Consolidated Statements of Income. 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% discount.

Supplemental Unaudited Pro Forma Information for the three and nine months ended September 30, 2022 and 2021

The following pro forma information for the three and nine months ended September 30, 2022 and 2021 presents our results of operations as if the acquisition of PLH had occurred at the beginning of 2021 and 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 18.6% and 19.6% for the three and nine months ended September 30, 2022, respectively and 29.0% and 27.5% for the three and nine months ended September 30, 2021, respectively.

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 PLH and FIH acquisitions been completed on January 1, 2021. 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):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
	(unaudited)		(unaudited)		(unaudited)		(unaudited)
Revenue	$	1,339,477	$	1,102,971	$	3,485,099	$	3,038,474
Income before provision for income taxes		62,760		59,194		101,760		43,679
Net income		51,111		42,220		81,815		31,669

Weighted average common shares outstanding:
Basic		53,181		53,769		53,228		52,407
Diluted		53,748		54,367		53,778		54,946

Earnings per share:
Basic	$	0.96	$	0.79	$	1.54	$	0.60
Diluted		0.95		0.78		1.52		0.58

Acquisition of B Comm Holdco, LLC

On June 8, 2022 we acquired B Comm Holdco, LLC (“B Comm”) for approximately $36.0 million, net of cash acquired. B Comm is a provider of maintenance, repair, upgrade and installation services to the communications markets. The transaction directly aligns with the strategy to grow our MSA revenue base and expand our communication services within the utility markets. The preliminary estimated fair values of the assets acquired and liabilities assumed as of the acquisition date consisted of $4.8 million of fixed assets, $13.2 million of working capital, $10.2 million of intangible assets and $10.1 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 fixed assets, identifiable intangible assets, and accounts receivable and accrued liabilities. We incorporated the operations of B Comm into our Utilities segment. Goodwill associated with the B Comm acquisition principally consists of 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.

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. 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 $2.9 million of fixed assets, $1.9 million of working capital, and $2.1 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 accounts receivable, prepaid expenses and accrued liabilities. 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.