Kate A. Tholking - Director-Investor Relations Brian L. Pratt - Chairman David L. King - Chief Executive Officer and President Peter J. Moerbeek - Executive Vice President, Chief Financial Officer.

Lee Jagoda - CJS Securities, Inc. Michael David Shlisky - Global Hunter Securities, LLC Tahira Afzal - KeyBanc Capital Markets, Inc. Adam Robert Thalhimer - BB&T Capital Markets Daniel Mannes - Avondale Partners LLC John Bergstrom Rogers - D.A. Davidson & Co. Jason A. Wangler - Wunderlich Securities, Inc..

Greetings and welcome to the Primoris Services Corporation Second Quarter Financial Results Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Miss.

Kate Tholking, Director of Investor Relations. Thank you. You may begin..

Brian Pratt, Chairman of the Board; David King, President and Chief Executive Officer; and Pete Moerbeek, Executive Vice President and Chief Financial Officer.

Before we start, I'd like to remind everyone that statements made during today's call may contain certain forward-looking statements, including with regards to the company's future performance. Words such as estimated, believes, expects, projects, may and future or similar expressions are intended to identify forward-looking statements.

Forward-looking statements inherently involve risks and uncertainties, including without limitation those discussed in this morning's press release and those detailed in the Risk Factors section and other portions in our Annual Report on Form 10-K for the period ending December 31, 2014, our Quarterly Report on Form 10-Q which was filed this morning, and other filings with the Securities and Exchange Commission.

Primoris does not undertake any obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws. I'd now like to turn the call over to our Chairman, Brian Pratt..

Good morning, everyone, and thanks for dialing in. As most of you know, this is my first earnings call as Chairman and not CEO. And before turning the call over to David, I would like to say a few words. Other than my family, my career here at Primoris, and before that, ARB, has been the most gratifying part of my life.

The people I have served and served with have been the source of great satisfaction in the 41 years here at the company.

As I have said many times over the last month, I'm not retiring, I'm simply pushing back from the day-to-day operation of the business to focus on strategy, including mergers and acquisitions, a focus where I think I can offer great value.

This shouldn't come as a great surprise to anyone that has followed our company, as we established a succession committee for this precise purpose in March of 2011. So after four years plus of effort investigating dozens and dozens of candidates to find the right person for the job, we finally accomplished the task.

That being said, I'm very confident in our choice of David as my successor. I've known him longer than his tenure here and have had the opportunity to work with him closely for over a year-and-a-half. I'm impressed with his ethics, his work ethic, his intelligence, skill-set and dedication to our company.

Over the past four decades, we've enjoyed terrific success, and most of the reason we had is because we've hired and nurtured great talent, the very best the industry has to offer. David is no exception to this history of attractive and inspiring brilliant people. Another key to our success is the fact that it isn't based on one person.

We continue to have a hugely broad and deep set of invested and talented managers that have voiced and exhibited their embrace to this change. Finally, as I've had a chance to share with many of the investors online, I'm very honored by your belief and confidence in our company.

By the way, I remain the largest shareholder of the company and have no plans to change that status. So now, to all listening today, everyone that has invested time, interest, money, hard work and heartache, thank you for everything you've done for Primoris and me, and I deeply am grateful.

David?.

Thank you, Brian, and thank all of you for joining us today. I know my accent is a bit thicker than Brian's, but hopefully you can get used to it. It should have come as no surprise to anyone that the weather plagued us in the second quarter, causing our revenue and profit for the quarter to be well below where we originally anticipated.

The rain in the Gulf Coast region was beyond anything I've seen in my career, and, in fact, the second quarter of 2015 was the wettest second quarter in Texas since they began tracking rainfall in 1895.

Not only did we have to suspend or delay operations on large projects in all three of our operating segments, we also incurred additional cost as we attempted to get back to work. I do not believe that any reasonable person would have foreseen the amount of rain we had and its impact.

We certainly didn't expect that our Rockford pipeline crews would have to use flat-bottomed boats to go down the right-of-way and pick up mats that had floated away. That's a first for me.

In spite of the challenges created by almost the nonstop rain that we experienced, Primoris continued our record of profitable growth in the second quarter, which demonstrates that our execution model works even in the face of adversity. Let me repeat that. Our execution model is not broken. It was just a little waterlogged during the second quarter.

While our current work was impacted by the weather in the second quarter, our bidding activity has never been stronger. Not only are we seeing growth across our major markets, but the individual projects we are seeing are increasing in value.

These potential new awards are in our sweet spot, and I have great confidence that our backlog will continue to increase substantially in the second half of this year. We are currently in negotiation on several major projects in each of our three operating segments.

During the second quarter, our East segment had no escape from the rain as most of their work was either in Texas or Louisiana. The Heavy Civil group led by Mike Kilgore lost nearly 40 days to rain in the second quarter on their jobs in the Belton, Texas area.

Since we promoted Rodney James to head all of our highway operations within the Civil group working with Mike, the work on those Belton projects has been improving. We're working with TxDOT on claims resulting from the weather delays, but in the meantime, profit for the group has taken a hit.

While this made for a tough quarter, the prospects for this division are encouraging with nearly $2 billion of new opportunities in our sites. Civil work at the large petrochemical facility in Louisiana managed to ramp-up slightly despite the rain and the execution by James, I&M group led by Jonas Beatty on that job is outstanding.

Now that things are drying out, we expect to ramp up on the civil portion of that project. Our Cardinal Contractors water and wastewater group experienced some of the same weather issues on their Texas project, as everyone else did. But their year-to-date new awards has already surpassed total bookings for 2014.

Under Richard Holt's leadership, we're now seeing an increase in the average size and backlog growth of these projects. Richard's doing a great job for us.

Our PES Industrial division, which is part of the Energy segment's PES group headed by Jim Henry, is working on that same Louisiana project but they did not get much traction as the rain precluded them from doing any substantial work on the project.

During the quarter, Conrad Bourg's team lost 20 of 63 potential work days; however, we ramped up in July as things began to dry out and we expect the revenue run rate for that division to grow to somewhere around $15 million a month by the fourth quarter. Their head count is also growing rapidly and should get nearly 1,500 by the end of the year.

In addition, we are pursuing over $2.8 billion of potential opportunities in this group. Our strong win rate gives us confidence that Louisiana's division in this early stretch of a long period of sustained growth.

PES's Cardinal Mechanical is a small division, but Don Patrick and his team has been doing an outstanding job and had an outstanding quarter. Their gross profit in the second quarter was nearly equal to their entire 2014 profit.

While it's usually feast or famine for his team, this was definitely a quarter where we need everything we could get, and we appreciate all their hard work. Don's new business opportunities are also shaping up nicely for 2016.

Robert Grimes and the crew over at PES Primoris pipeline had to contend not only with the rain but also the lack of major capital project pipeline projects as a combination of lower energy prices, hesitant customers, and increased competition that put pressure in their markets.

While the smaller T&M work has begun to pick up, we'll continue to have excess capacity with this group until capital pipeline projects pick up for them. We're working hard to fill the gap and have at least $1 billion of potential prospects in our sights.

The OnQuest engineers led by Randy Kessler continue to see growing revenue from our micro and mini-LNG projects as they wrapped up the facility outside of San Antonio, and we're nearing completion on the Florida facility. This will be the third operating LNG facility we've completed.

We're also in negotiations on a second Florida facility that would be significantly larger than the 10,000-gallon-per-day facilities we've designed thus far. This award would be a material addition to our backlog and cement our status as the go-to destination for turnkey micro-LNG facilities.

We continue to see the numerous opportunities in this market, and it gives us optimism well into 2016.

Our Canadian OnQuest engineers are seeing award prospects in the $20 million to $30 million range, a noticeable step-up from the $2 million to $3 million heater awards they've seen in the past and a good indication that customers have begun to notice their capabilities. Our newest acquisition, Primoris AV, is located in Minnesota.

And like others up in the Bakken, they've seen their work slow down as energy prices remain depressed. We bought this group in February of this year and were aware of the challenges they were facing.

But we continue to believe Mike Hanson and the Primoris AV team gives us a great foothold in the region and they'll also be able to perform electrical work for other Primoris subsidiaries. Moving on to our West segment. Our utility work both in California and the Midwest picked up nicely after a seasonally slow first quarter.

We recently promoted Jason Osborn to lead Q3C, and he and the team there continue to win new master service agreements. They have grown their business with existing customers and at the same time are reaching out and winning projects with new customers.

Jason is doing a great job in this new role as Group President, and he's taken the move from Denver back to Little Canada, Minnesota, in stride.

We asked Jay Osborn, our previous Q3C President, to lead our expansion efforts into other utility distribution markets throughout the United States and have great expectations in future opportunities in that area. Jay is also using his relationships to help and manage our newly acquired Primoris AV organization.

ARB Underground, utility and distribution work had a good quarter, as integrity work in Southern California under our MSA picked up. Our Northern California work had a slow first half of the year, as one of our largest customers has been slow to release work, while waiting for resolution of their rate case with the CPUC.

However, we're now adding 20 to 25 people a week and are confident that we'll have a strong second half. Scott Summers and the AR team continue to pursue additional work and some of the opportunities could result in substantial multi-year awards. Scott and his team continue to deliver great results for Primoris.

Over at Primoris Vadnais Trenchless, a company we acquired late last year, Paul Vadnais continues along his strategic plan to expand into other markets in the United States, as well as pursuing larger capital-intensive projects. Their current list of projects is very encouraging for substantial backlog into 2016.

At ARB Structures, Mark Thurman and his team are signing up more work than they've had in a long time. They've expanded their relationship with key customers, and head count is growing. Their current list of prospects is the largest it's been since 2009 recession, a sign that things should only get better for his group.

Our ARB Industrial division in California headed by Tim Healy continues to slog through the drought literally and figuratively.

For the past several quarters, we anticipated that 2015 would be a challenging year as large power projects and other industrial projects rolled off and revenue from potential new projects is unlikely to be material until 2016.

That has played out as we expected, but we were pleased to announce the large combined-cycle award for over $200 million in the second quarter. We currently have a limited notice to proceed for this project and anticipate a full notice to proceed by the end of this year.

We are also in early negotiation with another customer for a substantial power plant award which would be the largest in our company's history. While we do not expect revenue from this potential award to hit until late 2016, it would provide dramatic increase in our backlog. The opportunities for Tim's groups is very substantial.

We are optimistic of numerous awards in future quarters and significant backlog growth in this area. Last but not least, our Rockford group did an outstanding job in the quarter in the face of unprecedented rainfall. While Rockford does work all over the country, it happens that right now their largest project is just Southwest of Houston.

They had eight complete rainouts in the month of June alone, the right-of-way became a small river which is why they needed those flat bottomed boats I mentioned earlier. We've held off on recognizing any profit on change orders for this project, but despite this, Frank Welch, Josh Ramsey, and the Rockford team stayed profitable.

It was an incredible effort from the entire team. Looking ahead, we see tremendous opportunities for them which they're currently negotiating and proposing as the large diameter pipeline market looks poised to expand.

We've already announced a $200 million plus job that will begin in the second half of 2016 and there are several billion dollars of additional new pipelines that are scheduled to breakdown later in 2016 and into 2017 and 2018.

We will be challenged for the next few quarters, but Rockford's backlog is building and we're optimistic we will have a record backlog for this group well into 2017 and 2018. Finally, let me not ignore the potential for us that's M&A.

We got close on a couple of deals in the second quarter and though we ended up walking away from them, let me remind you that sometimes the best deals are the ones that you do not do. The potential M&A market is one of the reasons I'm so pleased that Brian has agreed to focus on that area as a strategic advisor.

His insight into how Primoris can best grow and whether a company will mesh with our entrepreneurial culture are an invaluable resource for this company. Before I close and let Pete go through the financial specifics, I think it's worth mentioning a few of the other corporate initiatives that we have underway.

Earlier this year, we brought Lance Hendrix on board to lead our corporate business development processes. We're implementing our client and opportunity management system that will allow us to more strategically pursue opportunities as well as plan and forecast new sales markets.

We've also begun implementing additional policies and procedures, both execution in nature as well as organizational, as we move forward in the growth of Primoris. We're also well into our corporate identity and branding program. I'll now pass the call over to Pete and let him give you the finer details..

Thank you, David. As Kate mentioned earlier, the finance team worked very hard so that we could file our Form 10-Q this morning, which means I can talk less and we can move to your questions a little earlier. It also gives me a chance to add to the congratulations that David has received in his new role with Primoris.

Our second quarter revenues were $484 million, compared to $515 million last year, a reduction of $32 million. Our second quarter earnings were $3.6 million, or $0.07 per fully diluted share, compared to $16 million, or $0.31 per share last year. As we have discussed, the unprecedented rainfall across the Gulf Coast significantly impacted the company.

The year-over-year results were also negatively affected by the completion in 2014 of a large solar project and a large pipeline project which have not yet been replaced by equivalent sized projects this year. As would be expected, our gross margins suffered from the weather, too.

For the quarter, we achieved a margin of 9.6%, compared to 11.9% last year. The wet, rainy weather caused both lost rain days, as well as productivity issues for getting back to work on waterlogged job sites. All of our operating segments were impacted.

There were a few bright spots, notably our JCG/I&M divisions' work on a large petrochemical project in Louisiana and profitable results on the part of Q3C and ARB operations helped, too. Our SG&A expenses increased to $38.5 million in the second quarter or 8% of total revenue.

Of course, the lower revenues impacted SG&A as a percent, but a large part of the dollar increase in SG&A was due to the legal cost associated with the two 2014 collection issues, as well as the cost associated with our internal review.

While the review and collections issues are both ongoing items for now, we don't expect them to go on into perpetuity. At that point, SG&A expense should be reduced. Our two new acquisitions also contributed to the increase in SG&A.

While our tangible net worth continues to grow and with the strong $292 million at quarter end, our current cash balance of $86 million is lower than normal for us. Several of the contributing factors include the $51 million receivable balances from the two projects completed last year.

We are engaged in dispute resolution to enforce collection and have reserved $28 million in billings in excess of costs and estimated earnings. Let me remind you that we've not taken any profit on these two jobs to-date, although we believe we have very strong case for each client.

At this point, we would not expect either dispute to be resolved this year. As you can imagine, the impact of rain on our revenues and profits this quarter also impacted our cash from operations. The costs associated with those flat-bottomed boats that David mentioned add up quickly.

While we expect that some of the rain-related costs may be recovered in future quarters, it definitely was an impact on cash during the second quarter. And then, there is the good and the bad news. Summer is here and our jobs are in full swing, along with the natural draw on cash that occurs as we ramp up.

There's always a lag between month end and billings, and so it's reasonable to expect that cost and estimated earnings in excess of billings will increase for the next month or so.

Our debt includes $158 million in equipment notes, $75 million in senior notes, and nearly $2 million on capital lease obligations, with a weighted average interest rate on our total debt of 2.7%. Our current debt-to-equity ratio is 51.4%. And in June, we announced an additional $75 million shelf agreement.

This brings our total available borrowing capacity to over $250 million at quarter-end. Our total backlog at June 30, 2015 was a record level of $2.2 billion, consisting of $1.8 billion in fixed backlog and $432 million in MSA backlog.

Our fixed backlog includes only contracts for which we have a known revenue amount, and our MSA backlog includes four quarters of estimated MSA revenues. And finally, I want to comment on our estimate for the next 12 months. As the second quarter proved, it is challenging to estimate progress in construction projects in the short term.

Last quarter, we gave, reluctantly, our first estimates. At that time, I said that our preference would be to look out for a longer period such as the next four quarters. Based on current backlog, existing MSA work and expected bookings, we believe that our next 12-month efforts are on track to generate earnings of between $1.15 and $1.30 per share.

We're coming off of a tough first half this year, and we unfortunately cannot make up that shortfall in the next few days or weeks. However, at this time, we would expect that over the next four quarters, our earnings would track our historical patterns, highest in the third quarter and lowest in the first quarter of the calendar year.

I promised my comments would be short. So I will now pass the time back to the operator, so that David and Brian can answer your questions..

Thank you..

Good morning Lee..

Our first question is coming from Lee Jagoda of CJS Securities. Please proceed with your question..

Good morning, Brian, and let me be the first to say that we'll definitely miss you on these calls in the future..

You've got my phone number there in Dallas, Lee. I'm glad to set you up anytime you want to call..

So, cutting back to the quarter, just on Sasol in Q2, what was the total contribution from the project and what's the expected split between Energy and the East on the first $290 million?.

Was that on Sasol? I'm sorry. You sneezed about then. Okay. Yeah. Lee, they told me you would be – this is David King, by the way. They mentioned you'd be the first caller, so that's great. Pete can give you the exact numbers. No question about it.

In the East, in our James' Heavy Civil group, Jonas' I&M group contributed quite nicely to our returns for the quarter. As I mentioned in my notes, that project has been executing quite well. He was getting at one time up to about $4 million, $4.5 million of revenue on a monthly basis. So he's really geared up.

I think he had about 350 people working out there at the project job site. That will continue to gear up for him and continue to move in a positive direction throughout the rest of this year and even into 2016.

The Conrad's group obviously had less of an effect because of the rain that I mentioned, and plus we have to get – I&M has to do their work before the industrial group can get in and do their work. I believe Conrad's group was pushing off somewhere around $1 million, maybe $1.5 million quarter revenue burn.

But as I mentioned, his group right now currently, he's probably got about 200 people, maybe 300, and it will be going up close to about 1,500 by yearend.

Pete, have you got any exact numbers?.

Yeah. It was $39.2 million for East, and it was much lower, less than $5 million, for Energy..

Great.

And then just as a follow-up, can you discuss in a little more detail the project-level gross margins on some of the projects that had issues in the quarter and the potential recovery of costs on those and how easy or difficult those might be?.

I can talk at a high level on them, Lee. Obviously, we're very conservative. That's one of the things I love about this company, and I know Brian has mentioned that many times in the past. We will take up the cost, but we're certainly not going to take any margin in effect until we get the change orders or claims or whatever settled.

I'll speak currently on the projects, really the Rockford project. Obviously, that project was down in that southwest part of Houston. I went down and toured that project myself. Yes, we have change orders in. That's been a good customer for us. It's been a reasonable customer for us to deal with.

So do I expect that we will get some of that returned? Yes. The margins on that project were pretty much in line with what we had bid the project. We were making good progress on it, but unfortunately the rain just crippled us. Relative to the heavy civil work going on, on the I-35 corridor, as I mentioned earlier, that rain was devastating.

We were shut down most of it. We're back working. July has been a nice hot month for us, so we're happy about that. We are talking to TxDOT. We've had meetings with them this last month. They are expecting us to discuss that with them as we move forward. Those are typical margins we get on that type of work. You can see it from a historical standpoint..

Okay, great. That's very helpful, and Dave, I look forward to working with you going forward here..

Thank you, Lee..

Thank you. Our next question is coming from Mike Shlisky of Global Hunters Securities. Please proceed with your question..

Good morning, folks..

Hi, Mike..

You have that good-size power plant award at ARB California during the quarter. That appears to be right up your alley and with your skilled folks over there. I was kind of wondering if you can expect pretty strong profitability from that particular contract versus other parts of your business.

And it's also a JV, so is there anything we should be aware of as far as the accounting there?.

I'll let Pete handle that..

Yes. We will book the revenues and the profits, obviously, the way that we've traditionally done, which is we start at a lower margin as we recognize the contingencies.

As a JV, we are the lead partner, so we will book all the revenues, cost and balance sheet associated with the project and then you will see at the bottom of our financials a non-controlling interest reduction of earnings each quarter. But, yes, you will see in our financials and revenue and in profitability gross margins 100% of that project..

And how you view that as far as how it's going to do on margins? Does that seem positive to you versus other parts of your business?.

Well, I think we're going to be some like the historical projects. I'm not sure we'll be quite as great as our El Segundo project. But what I think you will see is that we will start at pretty a good margin and then that will increase as we attain certain milestones.

Certainly, it was bid at levels that are very comparable to what we had bid other projects at..

Okay, great. And then my other question, some other folks out there in the E&C world were seeing some permit issues on some of their pipeline projects during the second quarter. You didn't really mention that, you kind of said that it's a bit more of the weather affected your earnings.

I'm wondering if you had any impacts from permit issues during the quarter on pipelines or elsewhere?.

Well, as you know, we got two different pipeline groups. We got our Rockford pipeline group. And to answer to your question there, no, we really haven't been experiencing that.

Now, obviously, on the major projects that we're pursuing that we've not yet booked, obviously, we're following those closely with the clients, and some are having some permit issues, but some or others are not. Again, there's some competing pipelines out there, so we're following that very closely.

But as far as our work going on, no, we've not been experiencing any of that. Now, our open-shop pipeline group, as I mentioned, they struggled a little bit this last quarter, mainly just due to the lower oil prices and the heavy pressure on the market.

And we certainly were not willing to go down and take some projects that really didn't have the kind of profitability in them that we're used to seeing. So anyway, I hope that answers your question..

Yes. Thanks very much. I'll pass it along. Appreciate it..

Thank you. Our next question is coming from Tahira Afzal of KeyBanc Capital Markets. Please proceed with your question..

Thank you. Good morning, David..

Good morning, Tahira..

I guess first question is on some of the opportunities you talked about, David. I know you've done a great job on the micro LNG side as well as the fertilizer, ammonia side.

Any chance you could take a bigger role in some of the large LNG projects that we see ramping up potentially? And if so, would you need to buy and beef up on some fabrication assets?.

Well, Tahira, I think we've mentioned to you – let me kind of answer the question in reverse for a moment on the fabrication side. We bought Ram-Fab. I didn't mention them in my earlier comments, but that unit for us has been doing quite well also. We also bought additional shop facilities down in New Iberia, Louisiana, and we're outfitting those.

So as far as having adequate fabrication facilities on some of these other projects, I think currently we've got over about 250,000 square feet of shop space. So I feel we've got enough bullets in our gun, so to speak, for that. As far as the micro, you're right, Tahira.

We are really moving strongly in that market, and that's a market that Brian brought up, I don't know, three or four years ago, and it really is shaping up quite nicely, and I hope we're going to have some nice announcements to make over this next month or two.

We are seeing in that Gulf Coast area, because of the larger LNG projects, not projects that we would normally go after from a participation standpoint, but we are seeing that the site dirt work and some of the industrial side of it they are needing additional capacity relative to personnel or dirt work foundations, things of that nature.

So we are seeing those opportunities, but as far as participating in one from an overall major perspective, I think we'd be looking at more of a sub-contract basis on some of that work..

Got it, David. So if I was to really pinpoint within that energy and industrial prospect list, which seems to be very big that you talked about.

Can you kind of give us a split of where the bigger opportunities are in terms of end markets?.

Yes.

Well, Tahira, are you talking about specific types of project in that market?.

I guess, is it more like petrochem? Or is it sort of leaning towards other industrial work? Just trying to get a sense..

It's a mix, Tahira. Part of the opportunities we're seeing are obviously in the ammonia side, part of it's in methanol, part of it's in PDH or dehydrogenation-type projects. Some of it's in air separation projects. We're also seeing quite a bit from our power side on the Saxon group as some of these plants are converted over.

So it's a mix of that kind of work, Tahira..

Got it. Okay. And my last question is a more tricky one, David. So if you pass it on to Pete this time, that's fine with me. But you've given us a 12-month guidance.

How should we look at it as a split between the two halves? Should we assume, of course, it's a little more backend loaded, even though the first quarter typically is seasonally weak for you all? I would love to get a sense on that over-building the second half of this year..

Well, I will pass that over to Pete. I know that you kept pushing Brian and all of us until we gave you guidance, and now you want a little dissection, even a little bit more than a guidance. But I'll pass that over to Pete..

Thanks, David..

And Pete is going to repeat what he said, if you look at the next four quarters, we expect them to be somewhat along where we have been historically in years where we've not had the entire world rain on us in the first half..

Thank you, Pete, for that verbose answer. And, Brian, we're really going to miss you. David, you've got some tough shoes to fill in as you probably know, but we look forward to working with you..

Yes. Thanks, Tahira. It's been a lot of fun..

Absolutely..

Thank you. Our next question is coming from Adam Thalhimer of BB&T Capital Markets. Please proceed with your question..

Hey. Good morning, guys. And Brian and....

It's okay. Good morning, Adam..

Congratulations on your new role. Sorry, lots of calls this morning. I'm trying to understand the Carlsbad plant, I didn't realize it was full EPC.

Can you kind of walk us through that again? How much is in backlog?.

Well, we've announced the project. It was a little over $200 million project for us. It is a joint venture with us. Our engineering partner on that is Burns & McDonnell. That project is a full EPC project for us. Currently we've got limited notice to proceed. We're obviously hopeful it'll get full notice to proceed by year-end.

Of course, a lot of it depends on whether there is any more objections from the PUC. The turbines themselves are not part of the project. That's why you saw a lower dollar volume of that release. Those are purchased by the plant in that particular case. Some of the projects we go after has the turbines included in our pricing, some doesn't.

This one just happens not to have it..

So it's a little over $200 million that you put in backlog, and then that's what you'll recognize as revenue, but you still have some non-controlling interest off of that?.

Yes, correct..

Got it. Okay.

And then the other power plants you alluded to, is that also in California?.

Obviously, if it's in Tim's bailiwick and if it's in Tim's area, then you could probably make that assumption, yes..

Okay. And then, David, you talked about the several billion dollars worth of potential pipe jobs out there.

Can you give us any color on kind of how firm those jobs feel in this oil and gas environment?.

Some of them are firming up a lot quicker, some are obviously still in more of the full study stages. You've probably seen a lot in the marketplace out there. The types of projects we're talking about are Sabal Trail and, of course, the Atlantic Coast Pipeline project and Atlantic Sunrise and Sandpiper and NEXUS.

Those that I've mentioned right there are obviously for the bigger players, Spectra, Dominion and Williams and Enbridge. And you look at those alone, that's probably $3.5 billion worth of potential projects. Will all of them go and when all of them will go, that's probably the biggest question.

But, yes, there are some that's very firming up now, and we've actually had some very good discussions with some of them. And it's really just a fraction of the work that's out there. There's a lot more of that work.

And if you look at our typical win percentages in that type of area, especially for our Rockford group, you could probably make the same assumption and be very optimistic than I am that our Rockford group is going to get a pretty heavy backlog coming into that 2017, 2018.

And we've already got a good backlog with the Florida connector (37:35) work that we announced earlier this year..

Okay. Well, can you comment a little bit on the backlog? Because it is impressive that you guys have been able to grow backlog sequentially year-to-date and your backlog is up double-digits year-over-year. It would imply good revenue growth over the next four quarters, which is probably included in your EPS range.

But I feel like we should be very encouraged about the backlog..

Well, I am. There's a good side of that and there's not good a side of it. Obviously, I would have liked to have burned a whole lot more of the backlog in the first half of this year. The first quarter wasn't particularly good.

We had a lot of rain and complained about it, and I wish we hadn't have now because I think God looked down on us and said, if you're going to complain about the first quarter, I'll give you some more. So second quarter wasn't good. So, that revenue still got a burn. So some of that was just burn revenue that we didn't get off the books.

But you're reading my comments, I think, correctly. I am very encouraged about the backlog. We've got a couple of the areas that are still soft for us. But when you look at the power side, you look at the pipeline side, you look at the LNG side, you look at the utility and distribution side, all of those are really beginning to come forward for us.

And so I am very encouraged..

Okay. Thank you, David..

Thank you. Our next question is coming from Dan Mannes of Avondale Partners. Please proceed with your question..

Thanks. Good morning, guys..

Good morning, Dan..

Good morning, Dan..

So, first of all, again, I'll throw in my congratulations as well to both of you. Brian, I'm certainly going to miss all your colorful commentary and the occasional nickname, but I'll definitely look forward to working with David as well..

Thanks, Dan. I've enjoyed it..

It's been good..

Dan, I'll try not to say Oprah and bonbons..

Well, hopefully, you'll develop your own colorful commentary. We look forward to that. I wanted to follow up on a couple issues.

First of all, obviously given the weather in the second quarter and some of our your projects which extend over time, any thoughts on how that may diminuate some of your margins in the forthcoming quarters, just as you look at percentage of completion accounting or do you think things kind of spring back now that we're through the weather?.

Well, I certainly hope things spring back. That's what I'm counting on. The month of July, as I've mentioned, has really turned out warm and our crews are out there back working, and I've seen on our Rockford project that I mentioned that was so waterlogged, that one we'll be finishing up probably within the next month. So it'll burn off real quick.

Our highway department guys are back working. Our industrial guys are back working. So, Dan, I'm pretty encouraged that that's behind us now and we'll see that. Now relative to the margins, as I mentioned, we're a conservative company.

I've liked that aspect when I first met Brian a number of years ago, and we're certainly not going to start declaring any margins until we're sure that those claims and our change orders are solidly booked.

And so I'm just going to have to reserve to tell you that I'll have to answer that at a later time because we're still in the throes of getting some of those things resolved.

But as far as the work proceeding that we have, even though it may be at a lower margin than we had originally bid it at because of the extra work we picked up with the weather, our extra cost we picked up with the weather, I'm still encouraged that will burn off as we're expecting at the burn off. There was a bad side and a good side of the weather.

Obviously, we've talked about the bad side of the weather. The good side of the weather is there's going to be a lot more things to build now. There's a lot of roads that were damaged and bridges that were damaged, and that's going to spur a lot more contracts for us.

You hate that because we really would have preferred the weather not to have caused those issues in the states, but it did. So we probably will see a little bit of positive out of that coming in the 2016 timeframe..

Sounds good. I did want to touch on pipeline real quickly. Obviously, you talked about a lot of the big stuff that's out there, most of which has 2016 and 2017 starts.

How do you think through maybe the next 12 months for both Primoris pipeline and for Rockford, given maybe a little bit of a softer near-term environment in the large pipe? Can you guys keep these guys busy over the next 12 months, or should we assume a bit of a weaker environment, which, frankly, given last year, you had kind of a similar issue in the second half?.

No. Dan, those groups are staying busy. Obviously, we like to go after some of these bigger projects, but we've got several smaller projects, and a lot of times they don't hit your radar screen because they're certainly under a $10 million or $15 million capital-type projects. So we need and we like those smaller projects to keep them going.

But obviously these bigger projects, we face a little less competition and we can get our margins up a little bit more on the bigger opportunities. But right now, the Rockford guys are completely staying busy.

As I mentioned in my comments earlier, our open-shop pipeline group, they've been under a little bit more pressure, but we're currently seeing the margins go up in some of that now because some of the contractors have taken some cheaper work and we've been disciplined and just not willing to take that cheaper work.

I certainly could have put the crews to working, but I don't see an advantage in putting them to work if I'm just going to be losing money on a job. So we've been a little bit more disciplined in what we're chasing and what prices we're putting out there. But, no, I think you'll see them stay busy, Dan..

Got it. And if you'll indulge me with one final question, just on the distribution business on gas, obviously you saw a sequential pick up which you expected.

Can you talk about maybe the pace on regional expansion because that seems to be a really big opportunity for you, but I'm wondering how quickly you can ramp regionally or is this something where maybe you really need to do some M&A to broaden your footprint?.

Well, there are areas where I think Jay can help us in some areas that we're already had been and had some crews working that were maybe on the capital pipeline side and the distribution market was there. So have we looked at some M&As in that area? Absolutely, but at the same time, we want to make sure that they're the right fit for us.

I know Jay is very eager to get us into some additional markets and things. And as you know, just with Q3C alone, we really didn't have an entity in Denver until we sent Jason up there and basically created a complete market for us up in Denver from the distribution standpoint. So it wasn't an acquisition need at all.

It was just a matter of taking some management resources, put him in that area and go back in there and talk to the customers that's used to working with us and like to work with us. But it's just a fraction of a lot of the work. We've got a lot of work in a lot of different areas.

And that growth that I'm talking about, while I want it, it would just be a fractional add-on to what we're currently doing..

Got it. Thanks for all the color, guys..

Yes, sir..

Thank you. Our next question is coming from John Rogers of D.A. Davidson. Please proceed with your question..

Hi. Good morning..

Good morning, John..

A couple of things. First of all, I guess maybe for Pete, in terms of the guidance, previously you talked about a flat year this year, and obviously with the rain, you're not going to get there. But that implied a much stronger second half than what we've seen in 2014.

And with some work, I assume, being delayed, how much of that can you recover in this year, and should we still look at an improvement in the second half?.

I expect you'll see some improvement if you look strictly to last year, but I think if you look back at some of our historical patterns, you'll probably get a sense – a better sense for where we're thinking.

Some of it's going to come back, John, and some of it, I think – until we get some change orders or we get some approvals from clients, some of it is just – no, we're not going to see until we get that done..

Okay. And until that – you complete those negotiations..

Yes. And certainly in the case of some of the transportation agencies, that can be quite a while away, and some of them you wait until the end of the job. Hopefully, you can negotiate earlier, but sometimes it will take a year or two years before you see really all the positive impact..

Okay. And then in terms of the – you talked about your backlog burn expectations over the next 12 months as well. And if you just add up those numbers, it's somewhere around $1.4 billion, $1.5 billion.

What's kind of typical on a forward basis is book and burn work that comes in?.

Well, I think part of what – you are not seeing if you look just strictly at those are parts of our revenue, excuse me, that are not run through backlog..

Okay..

So you need to add kind of an estimate for that. And then I think what you also have is a situation where – we know that we're very close to getting some jobs that we expect will be able to contribute to the revenue in the next four quarters..

Okay. But those....

That's why we're fairly comfortable that we can get to the sort of numbers. And remember, I didn't give you revenue guidance. I gave you earnings guidance..

Right.

And I guess what I just wanted to understand is the earnings guidance, is that based on what's in backlog or on what you expect?.

That's based on where we expect to be..

Okay..

And yes, it has – so it's a fairly wide range intentionally and we think that there are some real positives towards the upside, but also don't want to give you something that's totally out of left field..

Okay.

And then, I don't know, for whoever, in terms of your negotiations on some of the outstanding claims that we've been talking about the last couple of quarters, any update there?.

Well, I'll make a comment, and then Pete can add if he'd like. You know that Brian and I are alike in certain ways. I can tell you my feeling. Our people work hard on those projects to earn the money and when the clients don't pay us, I'm not the kind of person that wants to go in and beg a client to pay me for what he already owes me.

He owes me what he owes me, so we should get paid for them. On those two claims, the one project for us is we're proceeding – well, actually, we're proceeding to court on both of them. They are into some – mediation on some. They are in arbitration on others. We'll see the outcome.

But as of this call, there's not much that's really transpired other than we're not willing to take a penny on a dollar. We want what we want and we deserve what we want and what we – so really not much I can share. Pretty standstill right now.

Pete?.

Yeah. One is in litigation, and it's probably going to go to court if it goes that far, early next year; and the other is in....

International....

...ICC arbitration, binding arbitration and sometime in the middle of next year is when we expect the ruling..

And I will have to say that every day we go further on these, I think we get more and more solidly in our court, in our side of the equation that says that we're right and we'll get – we should get full recovery. That's what we're going for..

Okay.

And then, I guess just lastly maybe for Brian, now that you've got some time to spend on it, how quickly are we going to see some of these acquisitions and what are you looking at?.

Yes. It's an odd market. You've got guys that are – you look at the public valuation of companies, where it should be the apex of valuations and the public guys were in the values of 5 times to 7 times multiple of EBITDAs and you got private guys with the public guys who're buying in the 10 times to 14 times.

So, the whole thing is a bit nonsensical to me. We see plenty of opportunities, but a lot of our targets have had the same kind of first quarter and second quarter we've had. So you've got good solid companies, but if you look at your trailing earnings and they're not – it makes them less attractive. But we're being very careful.

We're looking at areas that where we don't get over-concentrated in specific markets and I'm very optimistic on a couple, but I was optimistic on the last two. And then, for various reasons, we didn't execute. Those are by our choice.

So, I think it's – I think, there are some great opportunities out there, but we're being very careful to pick the markets and pick the right guys.

And we're very – we're a little bit unique in the fact that we really study and look at a company's culture to make sure it fits us, and a lot of guys don't do that, and a lot of the sellers don't want you to do that because they don't want you talking to other guys until they know they got a deal that's going to close.

But we're pretty insistent on and pretty fastidious about it, and we turn a lot of deals down because we don't like the fit with the culture. And I think that's one of our great strengths that David – when we brought him in, that was a basis of which we brought him in, was he matches our culture. He's as adamant about his collections as I am.

He's all about knowing your cost. He's all about taking care of the client, but in a professional, respectful way on both ends, and so I'm very optimistic, but who knows when. It could be a month, it could be next year. We always seem to do something right before Tahira has a conference.

So, if KeyBanc start their conference again, we'd probably get a deal done..

And in terms of areas, Brian, I mean a couple of years ago, you went after expanding the civil business and then the pipeline business, and the Energy sector, the gas-oriented business. I mean, any thoughts there on priorities? I know you have to take what the market will give you, but....

We've got such a great footprint now. It allows us to look at so many opportunities that are kind of tuck-ins or fit-ins which is fabulous. My background is mostly Energy, and of course that business is kind of unpopular on the street right now. But my God, the opportunities there, the valuations are very, very attractive.

At the same time, we don't want to get too heavily weighted, more heavily weighted in some of the industries we're in. So, we're all over looking at, and I got to tell you, it's really a lot of fun.

It's one of the things I've always enjoyed about the job because you get to see a lot of guys that sometimes you look at it, and go, "God, I didn't know there was even a business there, and you guys are making a lot of money." So, we're looking at areas where we're not, but I'd be neglect if I didn't tell you that we're also looking at areas where we're already active because the valuations are appropriate or even cheap in some areas.

But we're not going to get too far afield from where we currently are, which is a fairly diverse set of skills. So, some of those guidance I can give you. We're looking at water and wastewater again. We're looking at, God forbid, even vertical work which I hate, but it's just the skinny work, but there are some real opportunities there, too.

So, I don't think we'll be buying any high-tech industries..

Okay. All right. Thank you, all..

Oh, Pete just set a footnote in front of me. We ought to do some vertical integration and buy a boat company – boat rental companies. This was the largest rainfall in Texas ever recorded..

For the quarter..

For the quarter. Astonishing. The neat thing about notice on the chart though is that the rainfall typically retracts very aggressively the next year. It's got a spike.

Historically, it has a one-year spike and then it's either back at normal or below normal the next year and that only hasn't occurred one-time where you had two years with high rainfall..

Thank you. Our next question is coming from Jason Wangler of Wunderlich Securities. Please proceed with your question..

Hey. Good morning, guys. Just maybe dovetailing a little bit on the question on M&A.

As you kind of walked away from these deals, is it just simply a price situation where you just – you can't get there, or are there anything – or are there other things that you're really kind of in play as you look out in the market?.

No..

That's all right. I'm going to comment a couple of things and then turn it over to Brian. Jason, it's David King. No, it wasn't a price thing. Obviously, well, I should say that one of them tended to be – we thought we had maybe a deal, but the price went up afterward.

So obviously we live by our word, and so that was not one that we wanted to pursue further.

That was more of a – we look at them – how can we integrate them? How can we fold them in? How can we get – turn that entity into even more of a profitable entity by bringing them into the Primoris group of companies? And for that one, it just didn't seem the right fit for us, from my perspective.

And Brian and I spoke about it, and he said, I feel the same way. And so, then it was a matter of us just dropping that one because that one was certainly not a price issue. It was just a matter of fit.

Brian?.

Well, yeah. I mean, we pretty much have a price resolve before we go into these things that differentiates us from private equity, where the price constantly changes until the closing day. But we look under all rocks, and we're very fastidious. We have this process down to a science. And in general, when you look under rocks, stuff crawls out.

Some of it's good, some of it's bad, and when you got one, you keep turning over rocks. And everything you turn over, there's stuff that crawls out that's ugly. It just tells you, you shouldn't do the deal. But Dave is exactly right. You get into these things.

I'm blue collar in my outlook, and if a guy who wants to run the business is something besides blue collar, if he wants to clip coupon and have the money sent to him, that doesn't generate a terrific culture.

And some of these things are kind of – I like guys that know how to operate, that really fit our culture, that know how to get in the dirt and wrestle around and make money. And you find that out actually after you've signed a term sheet before you really find that out..

Great. I'll turn it back. Thank you, guys..

Thank you..

Thank you. We are showing no further questions in queue at this time. I would like to turn the floor back over for additional or closing comments..

Thank you. I would – this is David King. I'd like to thank all of you for participating on today's call. I'll be getting around and meeting more of you with Kate as we set up some of the meetings. And really appreciate your questions today and interest in Primoris Services Corporation. Thank you, and again, this concludes the call..

Ladies and gentlemen, thank you for your participation. This concludes today's teleconference. You may disconnect your lines at this time and have a wonderful....