Primoris Services Corp - Quarter Report: 2011 June (Form 10-Q)

Table of Contents

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark One)

 

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

 

For the quarterly period ended June 30, 2011

 

OR

 

o         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 0001-34145

 

Primoris Services Corporation

(Exact name of registrant as specified in its charter)

 

 

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

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.   Yes x No o

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files). Yes o No o

 

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

 

 

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

 

At August 5, 2011, 51,059,132 shares of the registrant’s common stock were outstanding.

 

 

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PRIMORIS SERVICES CORPORATION

INDEX

 

	Page No.
Part I. Financial Information
Item 1. Financial Statements:
—Condensed Consolidated Balance Sheets at June 30, 2011 and December 31, 2010	3
—Condensed Consolidated Statements of Income for the three months and six months ended June 30, 2011 and 2010	4
— Condensed Consolidated Statements of Cash Flows for the three months and six months ended June 30, 2011 and 2010	5
—Notes to Condensed Consolidated Financial Statements	7
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	20
Item 3. Quantitative and Qualitative Disclosures About Market Risk	31
Item 4. Controls and Procedures	31
Part II. Other Information
Item 1. Legal Proceedings	32
Item 1A. Risk Factors	32
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	32
Item 3. Defaults Upon Senior Securities	32
Item 4. (Removed and Reserved)	32
Item 5. Other Information	32
Item 6. Exhibits	32
Signatures	33

 

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PART I.  FINANCIAL INFORMATION

 

ITEM 1.  FINANCIAL STATEMENTS

 

PRIMORIS SERVICES CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(In Thousands, Except Share Amounts)

(Unaudited)

 

		June 30, 2011			December 31, 2010
ASSETS
Current assets:
Cash and cash equivalents		$	135,289		$	115,437
Short term investments		23,000			26,000
Customer retention deposits and restricted cash		17,519			12,518
Accounts receivable, net		155,122			208,145
Costs and estimated earnings in excess of billings		33,584			17,275
Inventory		28,735			25,599
Deferred tax assets		9,533			9,533
Prepaid expenses and other current assets		11,255			12,925
Total current assets		414,037			427,432
Property and equipment, net		120,974			123,167
Investment in non-consolidated entities		18,034			18,805
Intangible assets, net		35,101			40,633
Goodwill		94,179			94,179
Total assets		$	682,325		$	704,216
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable		$	90,787		$	89,484
Billings in excess of costs and estimated earnings		171,545			205,268
Accrued expenses and other current liabilities		65,869			55,126
Dividends payable		1,276			1,234
Current portion of capital leases		3,304			4,286
Current portion of long-term debt		9,546			9,623
Current portion of subordinated debt		14,700			15,833
Liabilities of discontinued operations		733			733
Total current liabilities		357,760			381,587
Long-term capital leases, net of current portion		5,656			7,354
Long-term debt, net of current portion		33,105			38,428
Long-term subordinated debt, net of current portion		15,037			27,378
Deferred tax liabilities		12,500			12,500
Contingent earnout liabilities		10,394			24,591
Other long-term liabilities		1,862			4,147
Total liabilities		436,314			495,985
Commitments and contingencies
Stockholders’ equity
Common stock—$.0001 par value, 90,000,000 shares authorized, 51,044,307 and 49,359,600 issued and outstanding at June 30, 2011 and December 31, 2010		5			5
Additional paid-in capital		149,837			136,245
Retained earnings		96,169			71,981
Total stockholders’ equity		246,011			208,231
Total liabilities and stockholders’ equity		$	682,325		$	704,216

 

See Accompanying Notes to Condensed Consolidated Financial Statements

 

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PRIMORIS SERVICES CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(In Thousands, Except Per Share Amounts)

(Unaudited)

 

		Three Months Ended						Six Months Ended
		June 30,						June 30,
		2011			2010			2011			2010
Revenues		$	351,956		$	203,187		$	711,601		$	378,169
Cost of revenues		310,550			176,551			629,565			327,060
Gross profit		41,406			26,636			82,036			51,109
Selling, general and administrative expenses		20,477			15,823			40,322			29,269
Operating income		20,929			10,813			41,714			21,840
Other income (expense):
Income from non-consolidated entities		4,400			1,756			5,226			2,724
Foreign exchange gain (loss)		(72		)	94			(36		)	186
Other expense		(306		)	(322		)	(603		)	(631		)
Interest income		100			153			258			333
Interest expense		(1,353		)	(1,220		)	(2,724		)	(2,527		)
Income before provision for income taxes		23,698			11,274			43,835			21,925
Provision for income taxes		(9,236		)	(4,187		)	(17,095		)	(8,140		)
Net income		$	14,462		$	7,087		$	26,740		$	13,785
Earnings per share:
Basic		$	0.28		$	0.16		$	0.53		$	0.36
Diluted		$	0.28		$	0.16		$	0.52		$	0.30
Weighted average common shares outstanding:
Basic		51,044			43,163			50,363			38,210
Diluted		51,154			45,407			51,111			45,451

 

See Accompanying Notes to Condensed Consolidated Financial Statements

 

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PRIMORIS SERVICES CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In Thousands)

(Unaudited)

 

		Six Months Ended
		June 30,
		2011			2010
Cash flows from operating activities:
Net income		$	26,740		$	13,785
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation		12,043			8,303
Amortization of intangible assets		5,532			2,877
Loss (gain) on sale of property and equipment		(37		)	(1,228		)
Income from non-consolidated entities		(5,226		)	(2,724		)
Non-consolidated entity distributions		5,997			5,190
Contingent earnout liabilities		603			631
Changes in assets and liabilities:
Customer retention deposits and restricted cash		(5,001		)	(2,465		)
Accounts receivable		53,023			(13,436		)
Costs and estimated earnings in excess of billings		(16,309		)	(10,713		)
Inventory, prepaid expenses and other current assets		(1,466		)	(4,851		)
Accounts payable		1,303			1,824
Billings in excess of costs and estimated earnings		(33,723		)	3,537
Accrued expenses and other current liabilities		10,743			3,068
Other long-term liabilities		(2,285		)	1,354
Net cash provided by operating activities		51,937			5,152
Cash flows from investing activities:
Purchase of property and equipment		(10,810		)	(13,789		)
Proceeds from sale of property and equipment		997			2,013
Sale of short-term investments		26,000			25,058
Purchase of short-term investments		(23,000		)	(28,000		)
Net cash used in investing activities		(6,813		)	(14,718		)
Cash flows from financing activities:
Proceeds from issuance of long-term debt		2,500			20,000
Repayment of capital leases		(2,680		)	(1,905		)
Repayment of long-term debt		(7,900		)	(3,234		)
Repayment of subordinated debt		(13,474		)	(7,166		)
Proceeds from issuance of common stock		822			4,114
Purchase of Unit Purchase Option		(2,030		)	—
Dividends paid		(2,510		)	(2,124		)
Cash distributions to James shareholders		—			(1,966		)
Net cash provided by (used in) financing activities		(25,272		)	7,719
Cash flows from discontinued operations:
Operating activities		—			(874		)
Net cash used in discontinued operations		—			(874		)
Net change in cash and cash equivalents		19,852			(2,721		)
Cash and cash equivalents at beginning of the period		115,437			90,004
Cash and cash equivalents at end of the period		$	135,289		$	87,283

 

See Accompanying Notes to Condensed Consolidated Financial Statements

 

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SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION

 

		Six Months Ended
		June 30,
		2011			2010
		(Unaudited)
Cash paid during the period for:
Interest		$	2,724		$	2,527
Income taxes		$	12,693		$	7,688

 

SUPPLEMENTAL DISCLOSURES OF NONCASH INVESTING AND FINANCING ACTIVITIES

 

		Six Months Ended
		June 30,
		2011			2010
		(Unaudited)
Non-cash activities:
Accrued dividends declared		$	1,276		$	1,107

 

See Accompanying Notes to Condensed Consolidated Financial Statements

 

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PRIMORIS SERVICES CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars In Thousands, Except Per Share Amounts)

(Unaudited)

 

Note 1—Business Activity

 

Organization and operations — Primoris Services Corporation and its wholly-owned subsidiaries ARB, Inc. (“ARB”), ARB Structures, Inc., All Day Electric Company, Inc. (a 50% owned entity in 2010 and 100% owned entity in 2011), OnQuest, Inc., Born Heaters Canada, ULC, Cardinal Contractors, Inc., GML Coatings, LLC, Stellaris, LLC, Rockford Corporation (“Rockford”), Alaska Continental Pipeline, Inc. (formerly a division of Rockford), James Construction Group LLC (“JCG”), and Cardinal Mechanical, L.P. (incorporated as a division of JCG in April 2011), collectively, are engaged in various construction and product engineering activities. The Company’s underground and directional drilling operations install, replace and repair natural gas, petroleum, telecommunications and water pipeline systems. The Company’s industrial, civil and engineering operations build and provide maintenance services to industrial facilities including power plants, petrochemical facilities, and other processing plants, and construct multi-level parking structures, engage in the construction of highways, bridges and other environmental construction activities. The Company is incorporated in the State of Delaware and in 2011 moved its corporate headquarters from Lake Forest, California to 2100 McKinney Avenue, Suite 1500, Dallas, Texas 75201.

 

On November 8, 2010, the Company entered into a Stock Purchase Agreement (the “Rockford Agreement”) to acquire all of the outstanding shares of privately held Rockford Corporation (“Rockford”).  Upon completion of the transaction on November 12, 2010, Rockford became a wholly owned subsidiary of Primoris.  Based in Hillsboro (Portland), Oregon, Rockford specializes in the construction of large diameter natural gas and liquid pipelines and related facilities.

 

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

 

Note 2—Basis of Presentation

 

Interim Consolidated Financial Statements — The interim condensed consolidated financial statements for the three-month and six-month periods ended June 30, 2011 and 2010 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 the Company’s latest audited consolidated financial statements, have been omitted. This Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2011 (the “Second Quarter 2011 Report”) should be read in concert with the Company’s Annual Report on Form 10-K, filed on March 16, 2011, which contains the Company’s audited consolidated financial statements for the year ended December 31, 2010.

 

The interim financial information for the three-month and six-month periods ended June 30, 2011 and 2010 is unaudited and has been prepared on the same basis as the audited consolidated financial statements. However, the financial statements contained in this Second Quarter 2011 Report do not include all of the information and disclosures required by accounting principles generally accepted in the United States of America (“GAAP”) for audited financial statements. In the opinion of management, the unaudited information includes all adjustments (consisting of normal recurring adjustments) necessary for the fair presentation of the interim financial information.

 

Revenue recognition — The Company typically structures contracts as unit-price, time and material, fixed-price or cost reimbursable plus fee. Revenue is recognized on the cost-on-total-cost percentage-of-completion method for fixed price contracts.  In the percentage-of-completion method, estimated contract income and resulting revenue is calculated based on the total costs incurred to date as a percentage of total estimated costs. Total estimated costs, and thus contract revenues 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 and politics may affect the progress of a project’s completion and thus the timing of revenue recognition. If an estimate of total contract cost indicates a loss on a contract, the projected loss is recognized in full at the time of the estimate.

 

The caption “Costs and estimated earnings in excess of billings” represents the excess of contract revenues recognized under the percentage-of-completion method over billings to date. For those contracts in which billings exceed contract revenues recognized to date, such excesses are included in the caption “Billings in excess of costs and estimated earnings”.

 

Revenues on cost-plus and time and materials contracts are recognized as the related work is completed.

 

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In accordance with applicable terms of construction contracts, certain retainage provisions may be withheld by customers until completion and acceptance of the project. Final payments of the majority of such amounts are expected to be receivable in the following operating cycle.

 

Customer Concentration — The Company operates in multiple industry segments encompassing the construction of commercial, industrial and public works infrastructure assets throughout primarily the United States. Typically, the top ten customers in any one calendar year generate revenues in excess of 50% of total revenues and frequently consist of a different group of customers in each year.

 

During the three-months and six-months ending June 30, 2011, revenues generated by Rockford under the Ruby contract were $89.5 million and $216.4 million, respectively, which represented 25.4% and 30.4%, respectively, of total revenues during the periods. The Ruby contract is part of a large project for the construction of a natural gas pipeline from Wyoming to Oregon. The contract is a cost reimbursable plus a fixed fee arrangement and is expected to be substantially completed by the end of the third quarter 2011.  Additionally, work for the Louisiana Department of Transportation generated $68.5 million and $124.9 million for the three months and six months ending June 30, 2011, respectively, which represented 19.5% and 17.6% of total revenues for the respective periods.

 

Inventory — Inventory consists of uninstalled contract materials and expendable construction equipment that will be used in construction projects and is valued at the lower of cost, using first-in, first-out method, or market.

 

Note 3—Recent Accounting Pronouncements

 

Fair Value Disclosures

 

In January 2010, the FASB issued Accounting Standards Update No. 2010-06, “Improving Disclosures about Fair Value Measurements” (an update to ASC Topic 820 “Fair Value Measurements and Disclosures”).   ASU 2010-06 requires additional disclosures about fair value measurements including transfers in and out of Levels 1 and 2 and a higher level of disaggregation for the different types of financial instruments. For the reconciliation of Level 3 fair value measurements, information about purchases, sales, issuances and settlements should be presented separately. This ASU is effective for annual and interim reporting periods beginning after December 15, 2009 for most of the new disclosures and for periods beginning after December 15, 2010 for the new Level 3 disclosures. Comparative disclosures are not required in the first year the disclosures are required.  As of January 1, 2010, the Company adopted all the provisions of this accounting standard update, which did not result in a material impact on our financial statements.

 

In May 2011, the FASB issued ASU No. 2011-04, Fair Value Measurement: Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs, which provides amendments to FASB ASC Topic 820, Fair Value Measurement.  The objective of ASU 2011-04 is to create common fair value measurement and disclosure requirements between GAAP and International Financial Reporting Standards (“IFRS”).  The amendments clarify existing fair value measurement and disclosure requirements and make changes to particular principles or requirements for measuring or disclosing information about fair value measurements.  These amendments are not expected to have a significant impact on companies applying GAAP.  ASU 2011-04 is effective for interim and annual periods beginning after December 15, 2011.  The adoption of this standard will not have an impact on the Company’s consolidated financial statements other than additional disclosures.

 

Goodwill Impairment Testing

 

In December 2010, the FASB issued ASU 2010-28,  Intangibles - Goodwill and Other (Topic 350): When to Perform Step 2 of the Goodwill Impairment Test for Reporting Units with Zero or Negative Carrying Amounts (“ASU 2010-28”). ASU 2010-28 modifies Step 1 of the goodwill impairment test for reporting units with zero or negative carrying amounts. For those reporting units, an entity is required to perform Step 2 of the goodwill impairment test if it is more likely than not that a goodwill impairment exists. In determining whether it is more likely than not that a goodwill impairment exists, an entity should consider whether there are any adverse qualitative factors indicating that an impairment may exist. ASU 2010-28 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2010. The Company adopted this standard on January 1, 2011, which did not result in a material impact on our financial statements.

 

Comprehensive Income

 

In June 2011, the FASB issued ASU No. 2011-05, Comprehensive Income: Presentation of Comprehensive Income, which provides amendments to FASB ASC Topic 220, Comprehensive Income.  The objective of ASU 2011-05 is to require an entity to present the total of comprehensive income, the components of net income and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements.  ASU 2011-05 eliminates the option to present the components of other comprehensive income as part of the statement of equity.  ASU 2011-05 is effective for interim and annual periods beginning after December 15, 2011 and should be applied retrospectively.  The adoption of this standard will not have an impact on the Company’s consolidated financial statements other than requiring the Company to present its statements of comprehensive income separately from its statements of equity, as these statements are currently presented annually on a combined basis.

 

Note 4—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.

 

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In general, fair values determined by Level 1 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, using the fair value hierarchy levels identified under ASC Topic 820, the Company’s financial assets that are required to be measured at fair value at June 30, 2011 and December 31, 2010:

 

					Fair Value Measurements at Reporting Date
		Amount Recorded on Balance Sheet			Quoted Prices in Active Markets for Identical Assets (Level 1)			Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets at June 30, 2011:
Cash and cash equivalents		$	135,289		$	135,289		—		—
Short-term investments		$	23,000		$	23,000		—		—
Assets at December 31, 2010:
Cash and cash equivalents		$	115,437		$	115,437		—		—
Short-term investments		$	26,000		$	26,000		—		—

 

Short-term investments consist primarily of Certificates of Deposit (“CDs”) purchased through the CDARS (Certificate of Deposit Account Registry Service) program to provide Federal Deposit Insurance Corporation backing of the CDs and interest bearing money market accounts with various financial institutions.

 

In addition to the assets listed in the table, other financial instruments of the Company consist of accounts receivable, accounts payable and certain accrued liabilities.  These financial instruments generally approximate fair value based on the short-term nature of these instruments.  The carrying value of the Company’s long-term debt approximates fair value based on comparison with current prevailing market rates for loans of similar risks and maturities.

 

Note 5—Accounts Receivable

 

The following is a summary of the Company’s accounts receivable at the dates shown:

 

		June 30, 2011			December 31, 2010
Contracts receivable, net of allowance for doubtful accounts of $296 for June 30, 2011 and $200 for December 31, 2010		$	135,566		$	185,299
Retention		19,146			20,057
		154,712			205,356
Due from affiliates		—			200
Other accounts receivable		410			2,589
		$	155,122		$	208,145

 

Amounts “due from affiliates” primarily relate to amounts due from related parties (See Note 7 “Equity Method Investments” and Note 13 “Related Party Transactions”) for the performance of construction contracts. Contract revenues earned from related parties were approximately $2,465 and $362 for the three months, and $4,440 and $1,288 for the six months ended June 30, 2011 and 2010, respectively.

 

Note 6—Costs and Estimated Earnings on Uncompleted Contracts

 

Costs and estimated earnings on uncompleted contracts consist of the following at:

 

		June 30, 2011			December 31, 2010
Costs incurred on uncompleted contracts		$	2,300,336		$	2,339,551
Provision for estimated loss on uncompleted contracts		1,158			577
Gross profit recognized		215,843			245,974
		2,517,337			2,586,102
Less: billings to date		(2,655,298		)	(2,774,095		)
		$	(137,961	)	$	(187,993	)

 

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This net amount is included in the accompanying consolidated balance sheet under the following captions:

 

		June 30, 2011			December 31, 2010
Costs and estimated earnings in excess of billings		$	33,584		$	17,275
Billings in excess of costs and estimated earnings		(171,545		)	(205,268		)
		$	(137,961	)	$	(187,993	)

 

Note 7—Equity Method Investments

 

WesPac Energy LLC

 

On July 1, 2010, the Company acquired a 50% membership interest in WesPac Energy LLC, a Nevada limited liability company (“WesPac”). Pursuant to the terms of the Membership Interest Purchase Agreement, dated July 1, 2010, by and among the Company, WesPac and Kealine Holdings, LLC (“Kealine”), a Nevada limited liability company and the sole limited liability company member of WesPac prior to the closing, we acquired 50% of the issued and outstanding limited liability company membership interests of WesPac for total cash consideration of $18,065. Kealine holds the remaining 50% membership interest in WesPac.  We have no future obligation to make any additional investments into WesPac. All key investment, management and operating decisions of WesPac will require unanimous approval from a management committee equally represented by Kealine and us.

 

Founded in 1998 and based in Irvine, California, WesPac develops pipeline and terminal projects in the United States, Canada and Mexico, by building, expanding or enhancing infrastructure in the areas of pipeline transportation and storage efficiency enhancement. To date, WesPac has successfully developed, financed and brought to completion several such projects.  The Company believes the ownership interest in WesPac will broaden our exposure to a variety of pipeline, terminal and energy-related infrastructure opportunities across North America.

 

The following is a summary of the financial position and results as of and for the periods ended:

 

		June 30, 2011			December 31, 2010
Wespac Energy, LLC
Balance sheet data
Assets		$	28,892		$	30,161
Liabilities		2,986			4,248
Net assets		$	25,906		$	25,913
Company’s equity investment in venture		$	17,846		$	17,915

 

		Three months ended June 30,						Six months ended June 30,
		2011			2010			2011			2010
Earnings data:
Revenue		$	—		$	—		$	—		$	—
Expenses		$	11		$	—		$	138		$	—
Earnings before taxes		$	(11	)	$	—		$	(138	)	$	—
Company’s equity in earnings		$	(6	)	$	—		$	(69	)	$	—

 

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St.—Bernard Levee Partners

 

The Company purchased a 30% interest in St. — Bernard Levee Partners (“Bernard”) in the fourth quarter 2009 for $300 and accounts for this investment under the equity method. Bernard engages in construction activities in Louisiana.  Bernard distributed $5,880 and $3,177 to the Company during the six months ended June 30, 2011 and 2010, respectively, as calculated under the joint venture agreement.  The following is a summary of the financial position and results as of and for the periods ended:

 

		June 30, 2011			December 31, 2010
St. — Bernard Levee Partners
Balance sheet data
Assets		$	23,270		$	21,981
Liabilities		19,195			17,291
Net assets		$	4,075		$	4,690
Company’s equity investment in venture		$	188		$	878

 

		Three months ended June 30,						Six months ended June 30,
		2011			2010			2011			2010
Earnings data:
Revenue		$	27,674		$	65,892		$	55,710		$	108,022
Expenses		$	8,757		$	58,330		$	33,433		$	95,605
Earnings before taxes		$	18,917		$	7,562		$	22,277		$	12,417
Company’s equity in earnings		$	4,406		$	1,836		$	5,189		$	3,005

 

Otay Mesa Power Partners

 

During 2007, the Company established a joint venture, Otay Mesa Power Partners, for the sole purpose of constructing a power plant near San Diego, California.  The project was completed in 2010, and a distribution of $106 was received in March 2011.

 

Note 8 — Business Combinations

 

The November 12, 2010 acquisition of Rockford was accounted for using the acquisition method of accounting. The fair value of the consideration transferred to selling shareholders was $79,623.

 

As part of the acquisition, the Company agreed to issue additional cash and common stock to the sellers, contingent upon Rockford meeting certain operating performance targets for the fourth quarter 2010 and for the periods ending December 31, 2011 and 2012.  The 2010 earnout target for the fourth quarter 2010 was achieved and in March 2011, the Company issued 494,095 shares of common stock to the sellers.  As discussed in Note 12 — “Contingent Earnout Liabilities”, the estimated fair value of the remaining contingency was $10,394 and $9,791 at June 30, 2011 and December 31, 2010, respectively.

 

There have been no changes in the preliminary estimates of the fair value of the acquired assets and liabilities during the six months ended June 30, 2011.  The Company is continuing its evaluation of the fair value of the construction equipment acquired and expects to complete the final determination of the estimated fair value of the acquisition prior to the end of 2011.

 

Supplemental Unaudited Pro Forma Information for the three and six months ended June 30, 2010

 

The following pro forma information for the three and six months ended June 30, 2010 presents the results of operations as if the Rockford acquisition had occurred at the beginning of 2010. 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, based on the purchase price allocation;

 

·                                          the pro forma impact of interest expense on the subordinated $16.7 million promissory note, and assumes no early pay down of the promissory note;

 

·                                          the pro forma impact of the expense associated with the amortization of the discount for the fair value of the contingent consideration for potential earnout liabilities that may be achieved in 2011 and 2012;

 

·                                          the pro forma tax effect of both the income before income taxes for Rockford and the Rockford pro forma adjustments, calculated using a tax rate of 39.8% for the three and six months ended June 30, 2010; and

 

·                                          the pro forma weighted average shares outstanding include 1,605,709 shares of common stock issued as part of the acquisition, plus the 494,095 shares of stock earned as a result of achieving the fourth quarter 2010 earnout target.

 

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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 transaction been completed on January 1, 2010.  The pro forma results do not reflect any operating efficiencies and associated cost savings that the Company may have achieved with respect to the combined companies.

 

		Three months ended June 30, 2010			Six months ended June 30, 2010
Revenues		$	219,071		$	409,121
Income before provision for income taxes		$	8,882		$	16,944
Net income		$	5,647		$	10,786
Weighted average common shares outstanding:
Basic — (1)		45,263			40,310
Diluted — (1)		47,507			47,551
Earnings per share:
Basic		$	0.12		$	0.27
Diluted		$	0.12		$	0.23

 

(1)                                The adjustment to weighted average shares outstanding excludes the potential impact of any shares of common stock that may be issued contingent upon meeting certain financial targets at the end of 2011 and 2012.

 

Note 9—Intangible Assets

 

At June 30, 2011 and December 31, 2010, intangible assets totaled $35,101 and $40,633, respectively, net of amortization.  The table summarizes the intangible asset categories, amounts and the average amortization periods, which are generally on a straight-line basis, as follows:

 

		Amortization				June 30,			December 31,
		Period				2011			2010
Tradename		5 to 10 years				$	19,935		$	21,078
Non-compete agreements		5 years				$	5,425		$	6,155
Customer relationships		5 to 10 years				$	7,970		$	8,428
Backlog		0.75 to 2.25 years				$	1,771		$	4,972
				Total		$	35,101		$	40,633

 

Amortization expense of intangible assets was $2,767 and $1,496 for the three months ended June 30, 2011 and 2010, respectively, and amortization expense for the six months ended June 30, 2011 and 2010 was $5,532 and $2,877, respectively.  Estimated future amortization expense for intangible assets is as follows:

 

For the Years Ending December 31,		Estimated Intangible Amortization Expense
2011 (remaining six months)		$	3,718
2012		5,033
2013		4,655
2014		4,620
2015		3,545
Thereafter		13,530
		$	35,101

 

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Note 10—Accounts Payable and Accrued Liabilities

 

At June 30, 2011 and December 31, 2010, accounts payable includes retention amounts of approximately $12,154 and $14,382, respectively.  These amounts due to subcontractors have been retained pending contract completion and customer acceptance of jobs.

 

The following is a summary of accrued expenses and other current liabilities at:

 

		June 30, 2011			December 31, 2010
Payroll and related employee benefits		$	34,397		$	31,282
Insurance, including self-insurance reserves		20,001			15,992
Provision for estimated losses on uncompleted contracts		1,158			577
Corporate income taxes and other taxes		3,809			1,781
Accrued overhead cost		1,341			1,409
Other		5,163			4,085
		$	65,869		$	55,126

 

Note 11—Credit Arrangements

 

As of June 30, 2011, the Company has a Loan and Security Agreement (the “Agreement”) with The PrivateBank and Trust Company (the “Lender”) for a revolving line of credit in the total aggregate amount of $35,000.  The maturity dates, as amended, are as follows:

 

·                   a revolving loan in the amount of $20,000 (the “Revolving Loan A”), with a maturity date of October 26, 2013; and

·                   a revolving loan in the amount of $15,000 (the “Revolving Loan B”), with a maturity date of October 26, 2011.

 

Under the Agreement, the Lender agreed to issue letters of credit of up to $15,000 under Revolving Loan A.  As of June 30, 2011 and December 31, 2010, total commercial letters of credit outstanding under Revolving Loan A totaled $3,074 and $4,339, respectively.  Other than the commercial letters of credit, there were no borrowings under these two lines of credit during the three and six months ended June 30, 2011 and for the twelve months ended December 31, 2010.  At June 30, 2011, available borrowing capacity under Revolving Loan A was $16,926 and $15,000 under Revolving Loan B.

 

Any principal amount of each of Revolving Loan A and Revolving Loan B will bear interest at either: (i) LIBOR plus an applicable margin as specified in the Agreement, or (ii) the prime rate announced by the Lender plus an applicable margin as specified in the Agreement. The principal amount of any loan bearing interest at LIBOR plus an applicable margin may not be prepaid without being subject to certain penalties. There is no prepayment penalty for any loan bearing interest at the prime rate announced by the Lender plus an applicable margin.

 

All loans made by the Lender under the Agreement are secured by our assets, including, among others, our cash, inventory, goods, equipment (excluding equipment subject to certain permitted liens) and accounts receivable. Certain of our subsidiaries have executed joint and several guaranties in favor of the Lender for all amounts under the Agreement.  The Agreement and the line of credit facilities contain various restrictive covenants, including, among others, restrictions on investments, capital expenditures, minimum tangible net worth and debt service coverage requirements.  The Company was in compliance with the bank covenants as of June 30, 2011.

 

The Company has a credit facility with a Canadian bank for purposes of issuing commercial letters of credit in Canada, for an amount of up to $10,000 in Canadian dollars. The credit facility has an annual renewal and provides for the issuance of commercial letters of credit for a term of up to five years. The facility provides for an annual fee of 1% for any issued and outstanding commercial letters of credit. Letters of credit can be denominated in either Canadian or U.S. dollars. As of June 30, 2011 and December 31, 2010, total commercial letters of credit outstanding under this credit facility totaled $4,112 and $4,994 in Canadian dollars, respectively.  As of June 30, 2011, the available borrowing capacity under this credit facility was $5,888 in Canadian dollars.

 

The Company entered into an agreement with Bank of the West for the purpose of issuing commercial letters of credit, whereby the Company agrees to maintain a cash balance at the bank in an amount equal to the full amount of the letters of credit. As of June 30, 2011, the amount of letters of credit with a maturity of twelve months and the related restricted cash amounted to $2,023.

 

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At the time of the JCG acquisition on December 18, 2009, the Company assumed outstanding letters of credit of $5,600 under an amended credit agreement that expired on February 28, 2010. Upon termination of the credit agreement, the Company made a cash deposit as replacement for the letters of credit.

 

Subordinated Promissory Note — Rockford.   In connection with the acquisition of Rockford, the Company executed an unsecured promissory note (the “Rockford Note”) on November 12, 2010 in favor of the sellers of Rockford with an initial principal amount of $16,712.  The principal amount of the Rockford Note was divided into two portions.  Approximately $9,669 of the Rockford Note was designated as “Note A” and approximately $7,043 of the note was designated as “Note B.”  Note B was paid in full on March 10, 2011.

 

Note A is due and payable on October 31, 2013 and bears interest at different rates until maturity, averaging 6.67% over the life of Note A.  During the first 12 months of Note A, it bore interest at a rate equal to 5%.  For months 13 through 24, it bears interest at a rate equal to 7%. Thereafter and until maturity, Note A bears interest at a rate equal to 8%.  Payments of principal and interest are payable monthly in an amount of $269 principal plus interest over 36 months.  At June 30, 2011, a total of $7,789  was outstanding.

 

Note A may be prepaid in whole or in part at any time.  If we complete an equity financing while Note A is outstanding, we have agreed to use 15% of the net proceeds of any such equity financing in excess of $10 million to prepay a portion or all of Note A.  In addition, we have agreed to use 33% of any cash proceeds raised in connection with incurrence of any indebtedness (other than under a bank line of credit or to finance operating expenses, equipment and capital expenditures), to prepay a portion or all of Note A.

 

While any amount is outstanding under Note A, we have agreed to not take certain actions without the prior written consent of the Rockford Note holders’ representative.  We have agreed not to: (i) incur any obligations for seller financing associated with the acquisition of a business without subordinating it to the Rockford Note, (ii) make any payment on outstanding indebtedness that has been subordinated to the Rockford Note, (iii) make any distribution or declare or pay any dividends (except for regular, quarterly dividends), and (iv) consummate any transaction that would require prepayment under the Rockford Note, if we are not permitted to do so by our senior lender and/or surety companies.

 

The sellers have entered into subordination agreements with our senior lender, bonding agency and the holders of the JCG Note, pursuant to which the Rockford Note is subordinated to amounts owed to our senior lender, bonding agencies and the holders of the JCG Note.

 

Subordinated Promissory Note — JCG.   In connection with the acquisition of JCG, the Company executed an unsecured promissory note on December 18, 2009 in favor of the sellers of JCG with an initial principal amount of $53,500. The JCG Note is due and payable on December 15, 2014 and bears interest at differing rates until maturity.  For the first 9 months of the term of the note, the JCG Note bore interest at an annual rate equal to 5%.  For months 10 through 18, the JCG Note bore interest at an annual rate of 7%.  For months 19 until the maturity date, the JCG Note will bear interest at an annual rate of 8%.  Payments of principal and interest will be made on an amortizing basis over 60 months.  The JCG Note is subordinated to amounts owed to our commercial banks for lines of credit and to our bonding agencies.  At June 30, 2011, a total of $21,948 was outstanding.

 

The JCG Note may be prepaid in whole or in part at any time.  If we complete an equity financing while the JCG Note is outstanding, we have agreed to use the first $10 million of the net proceeds of any such equity financing, plus 75% of the net proceeds in excess of $10 million, to prepay a portion or all of the JCG Note. In addition, we have agreed to use 33% of any cash proceeds raised in connection with incurrence of any indebtedness (other than under a bank line of credit or to finance operating expenses, equipment and capital expenditures), to prepay a portion or all of the JCG Note.  As long as more than $10,000 is outstanding, we have agreed to not take certain actions without the prior written consent of the JCG Note holders, including, among others, purchase, acquire, redeem or retire any shares of our common stock.

 

Note 12 — Contingent Earnout Liabilities

 

Rockford Earnout Consideration

 

As part of the Rockford acquisition in November 2010, the Company agreed to issue additional cash and common stock to the sellers, contingent upon Rockford meeting certain operating performance targets for certain periods.  The earnout target established for the fourth quarter 2010 was achieved in March 2011. The liability of $4,600 was recorded as of December 31, 2010. In March 2011, the Company issued 494,095 shares of common stock to the sellers, reduced the liability and increased Stockholders’ Equity.

 

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The remaining contingent earnout liabilities related to the acquisition of Rockford consist of the following:

 

2011 Earnout Period

 

If Rockford’s financial performance as measured by income before interest, taxes, depreciation and amortization (“EBITDA”), as defined in the purchase agreement, for the fifteen month period from October 1, 2010 through December 31, 2011 is at least $34.0 million, we have agreed to pay $2.3 million in cash and issue an additional number of shares of our common stock equal to $2.3 million divided by the average closing price of our common stock, as reported on NASDAQ, for the 20 business days prior to December 31, 2011 (a total of $4.6 million). Alternatively, if Rockford’s financial performance for the fifteen month period from October 1, 2010 and through December 31, 2011 is at least $38.0 million, we have agreed to pay a cash amount of $3.45 million and issue a number of shares of our common stock equal to $3.45 million divided by the average closing price of our common stock, as reported on NASDAQ, for the 20 business days prior to December 31, 2011 (a total of $6.9 million).

 

2012 Earnout Period

 

If Rockford’s EBITDA financial performance for calendar year 2012 is at least $14.0 million, we have agreed to pay $6.9 million in cash.

 

At December 31, 2010, the estimated fair value of the contingent consideration for the potential earnout liabilities for the Rockford acquisition was $14,391, which included the liability for meeting the fourth quarter 2010 earnout target.  Excluding the fourth quarter 2010 earnout target, the liability at December 31, 2010 was $9,791.  The estimated fair value of the 2011 and 2012 earnout liabilities at June 30, 2011 was $10,394. The $603 change in the fair value was a non-cash charge to “other expense” in the consolidated statement of income for the six month period ended June 30, 2011.

 

JCG Earnout Consideration

 

As part of the JCG acquisition in December 2009, the Company agreed to issue a number of shares of common stock equal to $10.2 million if JCG’s EBITDA, as defined in the purchase agreement, was equal to or greater than $35 million for the year ending December 31, 2010. The earnout contingency was achieved and a liability of $10.2 million was recorded as of December 31, 2010. In March 2011, the Company issued 1,095,602 shares of common stock to the sellers, eliminated the liability and increased Stockholders’ Equity.

 

Note 13—Related Party Transactions

 

Primoris has entered into various transactions with Stockdale Investment Group, Inc. (“SIGI”).  Brian Pratt, our Chief Executive Officer, President and Chairman of the Board of Directors and our largest stockholder, also holds a majority interest in SIGI and is the chairman and a director of SIGI.  John M. Perisich, our Senior Vice President and General Counsel, is secretary of SIGI.

 

In 2010, the Company entered into a $6.0 million agreement to construct a wastewater facility for Pluris, LLC, a private company in which Brian Pratt holds the majority interest. During the six months ending June 30, 2011, the Company recognized revenues of $4,439. The construction is expected to be completed by December 31, 2011. The transaction was reviewed and approved by the Audit Committee of the Board of Directors of the Company.

 

Primoris leases properties located in Bakersfield, Pittsburg and San Dimas, California, and in Pasadena, Texas from SIGI. During the six months ended June 30, 2011 and 2010, the Company paid $381, and $444, respectively, in lease payments to SIGI for the use of these properties.

 

Primoris leases a property from Roger Newnham, one of our stockholders and a manager of our subsidiary Born Heaters Canada. The property is located in Calgary, Canada. During the six months ended June 30, 2011 and 2010, Primoris paid $137 and $130, respectively, in lease payments to Mr. Newnham for the use of this property. The term of the lease is through December 31, 2014.

 

As a result of the November 2010 acquisition of Rockford, the Company entered into a lease for property from Lemmie Rockford, one of our stockholders.  The property is located in Toledo, Washington.  During the six months ended June 30, 2011, Primoris paid $46 in lease payments to Mr. Rockford for the use of this property.  The lease expires on January 15, 2015.

 

Note 14—Income Taxes

 

The effective tax rate for the three and six months ended June 30, 2011 was 39.0% for both periods. The rate differs from the U.S. federal statutory rate of 35% due primarily to federal and state return to provision adjustments, state income taxes and the “Domestic Production Activity Deduction”.

 

To determine its quarterly provision for income taxes, the Company uses an estimated annual effective tax rate, which is based on expected annual income, statutory tax rates and tax planning opportunities available in the various jurisdictions to which the Company is subject. Certain significant or unusual items are separately recognized in the quarter in which they occur and can be a source of variability in the effective tax rate from quarter to quarter.  The Company recognizes interest and penalties related to uncertain tax positions, if any, as an income tax expense.

 

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Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences of temporary differences between the financial reporting basis and tax basis of the Company’s assets and liabilities. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

 

The tax years 2007 through 2010 remain open to examination by the United States Internal Revenue Service.  The tax years 2006 through 2010 remain open to examination by the other major taxing jurisdictions to which the Company is subject.

 

Note 15—Dividends and Earnings Per Share

 

The Company has paid or declared cash dividends during 2011 as follows:

 

·                  On November 5, 2010, the Company declared a cash dividend of $0.025 per common share, payable to stockholders of record on December 31, 2010.  The dividend, totaling $1,234 was paid on January 15, 2011.

·                  On March 10, 2011, the Company declared a cash dividend of $0.025 per common share, payable to stockholders of record on March 31, 2011.  The dividend, totaling $1,276 was paid on April 15, 2011.

·                  On May 6, 2011, the Company declared a cash dividend of $0.025 per common share, payable to stockholders of record on June 30, 2011.  The dividend, totaling $1,276 was paid on July 15, 2011.

 

The table below presents the computation of basic and diluted earnings per share for the three and six months ended June 30, 2011 and 2010:

 

		Three months ended June 30,						Six months ended June 30,
		2011			2010			2011			2010
Numerator:
Net income		$	14,462		$	7,087		$	26,740		$	13,785
Denominator:
Weighted average shares for computation of basic earnings per share		51,044			43,163			50,363			38,210
Dilutive effect of warrants and units (1)		110			1,165			66			1,431
Dilutive effect of contingently issuable shares (2)		—			—			659			1,197
Dilutive effect of preferred stock (3)		—			1,079			—			4,613
Dilutive effect of employee purchased shares (4)		—			—			23			—
Weighted average shares for computation of diluted earnings per share		51,154			45,407			51,111			45,451
Basic earnings per share		$	0.28		$	0.16		$	0.53		$	0.36
Diluted earnings per share		$	0.28		$	0.16		$	0.52		$	0.30

 

(1)          Represents the dilutive effect of common stock and warrants available under the Unit Purchase Option (“UPO”).  See Note 16 — “Stockholders’ Equity”.

 

(2)                     Represents the dilutive effect of the following contingency arrangements which were met at the end of each year, but for which shares of common stock were not issued until the following year:

 

a)                          A total of 2,499,975 shares of the Company’s common stock issued on March 25, 2010 when certain financial targets were met in 2009 under the merger agreement between Rhapsody and Former Primoris.

 

b)                         The effect of 74,906 shares of common stock that were issued as part of the acquisition of Cravens, issued in March 2010 upon meeting a defined performance target in 2009.  The seller and the Company entered into an agreement during 2010 terminating all future earnout contingencies.

 

c)                          A total of 1,095,646 shares issued to JCG’s sellers in March 2011 as a result of JCG meeting a defined performance target in 2010.

 

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d)                         A total of 494,095 shares issued to Rockford’s former stockholders in March 2011 as a result of Rockford meeting a defined performance target in 2010.  The purchase agreement provides for additional performance targets for 2011 and 2012 and may result in additional shares being issued.  Because the future contingencies have not yet been achieved, these shares have not been included in the calculation for diluted shares outstanding.

 

(3)                      Represents the dilutive effect of the conversion of preferred stock into 8,185,278 shares of common stock.  The conversion was approved at a special meeting of the stockholders held on April 12, 2010.

 

(4)                      Represents the dilutive effect of 94,966 shares of common stock issued to managers and executives of the Company under a purchase arrangement within the Company’s Long-Term Retention Plan.

 

Note 16—Stockholders’ Equity

 

Common stock — In March 2011, a total of 1,095,646 shares of common stock were issued to the JCG sellers as a result of JCG meeting a defined performance target in 2010.  A total of 494,095 shares were issued to Rockford’s former stockholders in March 2011 as a result of Rockford meeting a defined performance target in 2010.

 

Unit Purchase Options — At the time of our initial public offering in October 2006, our underwriter, Early Bird Capital, purchased a total of 450,000 Unit Purchase Options (“UPO”).  Each UPO provided the holder the right to purchase one share of common stock and one warrant.  With the expiration of the warrants on October 2, 2010, each UPO provided the holder with the right to purchase one share of common stock for $8.80 per share. The UPO expires on October 2, 2011, and the terms of the UPO allowed for a cashless conversion. On June 29, 2011, the underwriter exercised all of their 450,000 UPO on a cashless basis. Using the previous day’s closing price of $13.31 per share, the exercise would have resulted in the issuance of 152,480 shares of common stock. In lieu of issuing these shares, the parties negotiated a cash payment of approximately $2.0 million, which was made on June 30, 2011 and recorded as a reduction of additional paid-in capital on the balance sheet.

 

Note 17—Commitments and Contingencies

 

Leases — The Company leases certain property and equipment under non-cancellable operating leases which expire at various dates through 2019. The leases require the Company to pay all taxes, insurance, maintenance and utilities and are classified as operating leases in accordance with ASC Topic 840 “Leases”.

 

Total lease expense during the three and six months ended June 30, 2011 amounted to $2,275 and $4,621, respectively, including amounts paid to related parties of $282 and $563, respectively.  Total lease expense during the three and six months ended June 30, 2010 amounted to $2,437 and $5,010, including amounts paid to related parties of $291 and $574, respectively.

 

Letters of credit — At June 30, 2011, the Company had letters of credit outstanding of $9,210 and at December 31, 2010, the Company had letters of credit outstanding of $9,306.  The outstanding amounts include the U.S. dollar equivalents for letters of credit issued in Canadian dollars.

 

Self-Insurance— The Company’s insurance policies for general, auto and workers’ compensation are subject to self-insured retentions or deductible levels ranging from $100 to $250 per occurrence.  The Company also has employee health care benefit plans for most employees not subject to collective bargaining agreements.  The health care benefit plans are subject to a specific stop loss of $150 per individual per year.

 

Losses under the insurance programs are accrued based on management’s estimates of the ultimate liability for claims reported and an estimate of claims incurred but not reported.  These insurance liabilities are difficult to assess and estimate due to unknown factors, including the severity of an injury and the extent of damage.  The accruals are based upon known facts and historical trends, and management, with the assistance of third-party actuaries, believes such accruals are adequate.

 

Litigation— The Company is subject to claims and legal proceedings arising out of its business. Management believes that the Company has meritorious defenses to such claims. Although management is unable to ascertain the ultimate outcome of such matters, after review and consultation with counsel and taking into consideration relevant insurance coverage and related deductibles, management believes that the outcome of these matters will not have a materially adverse effect on the consolidated financial position of the Company.

 

Bonding— At June 30, 2011 and December 31, 2010, the Company had bid and completion bonds issued and outstanding totaling approximately $973,046 and $849,288, respectively.

 

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Note 18—Reportable Operating Segments

 

The Company provides services in three operating segments:  the East Construction Services segment, the West Construction Services segment and the Engineering segment.

 

The East Construction Services segment incorporates the JCG construction business, located primarily in the southeastern United States.  The segment also includes the businesses located in the Gulf Coast region of the United States, including Cardinal Mechanical, L.P., which was recently incorporated as a division of JCG, and the Cardinal Contractors, Inc. business.

 

The West Construction Services segment includes the construction services performed in the western United States, primarily in the states of California and Oregon.  Entities included in West Construction Services are ARB, ARB Structures, Inc., Stellaris, LLC, and Rockford for 2011.

 

The Engineering segment includes the results of OnQuest, Inc. and Born Heaters Canada, ULC.

 

In the following tables, all intersegment revenues and gross profit, which were immaterial, have been eliminated.

 

Segment Revenues

 

Revenue by segment for the three months ended June 30, 2011 and 2010 were as follows:

 

		For the three months ended June 30,
		2011					2010
Segment		Revenue			% of Segment Revenue		Revenue			% of Segment Revenue
East Construction Services		$	144,538		41.0	%	$	120,471		59.3	%
West Construction Services		196,623			55.9	%	69,821			34.4	%
Engineering		10,795			3.1	%	12,895			6.3	%
Total		$	351,956		100.0	%	$	203,187		100.0	%

 

Revenue by segment for the six months ended June 30, 2011 and 2010 were as follows:

 

		For the six months ended June 30,
		2011					2010
Segment		Revenue			% of Segment Revenue		Revenue			% of Segment Revenue
East Construction Services		$	272,617		38.3	%	$	224,707		59.4	%
West Construction Services		416,737			58.6	%	129,708			34.3	%
Engineering		22,247			3.1	%	23,754			6.3	%
Total		$	711,601		100.0	%	$	378,169		100.0	%

 

Segment Gross Profit

 

Gross profit by segment for the three months ended June 30, 2011 and 2010 were as follows:

 

		For the three months ended June 30,
		2011					2010
Segment		Gross Profit			% of Segment Revenue		Gross Profit			% of Segment Revenue
East Construction Services		$	17,295		12.0	%	$	13,593		11.3	%
West Construction Services		21,687			11.0	%	10,181			14.6	%
Engineering		2,424			22.5	%	2,862			22.2	%
Total		$	41,406		11.8	%	$	26,636		13.1	%

 

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