Kate Tholking - Director, IR David King - CEO, President and Director Peter Moerbeek - CFO, EVP and Director.

Patrick Sullivan - KeyBanc Capital Markets William Steinwart - Stephens Inc. William Newby - D.A. Davidson & Co. Robert Burleson - Canaccord Genuity Lee Jagoda - CJS Securities.

Greetings and welcome to the Primoris Services Corporation 2017 Second Quarter Financial Results Call. [Operator Instructions]. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Ms. Kate Tholking, Director of Investor Relations. Thank you, Ms. Tholking. You may begin..

Thank you, Michelle. Hello. Good morning, everyone and thank you for joining us today. Our speakers for today will be David King, President and Chief Executive Officer; and Pete Moerbeek, Executive Vice President and Chief Financial Officer.

Before we begin, 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 estimates, believe, expects, projects, may and future or similar expressions are intended to identify forward-looking statements.

Forward-looking statements inherently involve risk 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, 2016, 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 CEO, David King..

Thanks, Kate. Thank you all for joining us this morning. We're very proud of our financial results for both the quarter and the first 6 months of 2017. We now have 3 consecutive quarters of year-over-year revenue growth as we strive to deliver consistent results.

In the second quarter, all 4 of our operating segments saw revenue growth, helping us to achieve the highest quarterly revenue on the company's history. The revenue generated strong earnings, driven by the exceptional operating performance, especially at Rockford, our Pipeline & Underground segment star performer.

The revenue and earnings growth were accompanied by top tier safety performance at our job sites. Even with the record revenue burn in the second quarter, we maintained our backlog at close to $2.8 billion.

We added over 550 million in new business taken in the quarter and our MSA backlog continue to grow from a record high at the end of last year 2016. Over the past year, we have focused on strengthening our sales teams and we're announcing the benefit in more consistent project wins and strengthening relationships with our customers.

Our operating cash flow in the quarter was terrific, bolstered by both our earnings and our disciplined focus on receivables.

For the year, we have invested $23 million in construction equipment and our equipment manager had to move now oversees nearly 10,000 pieces of construction equipment which is more equipment than that managed at most companies or even cities in the United States. We run our equipment as a profit center.

And in the past quarter, we made a nice profit from running our equipment to third-parties when units weren't being utilized for other Primoris projects. In addition to investing in equipment, we invested approximately $66 million on acquisitions in the quarter.

We acquired Florida Gas Contractors, an open shop utility and distribution contractor, headquartered in Dade City, Florida, that will operate under the name Primoris Distribution Services, as part of our Utility & Distribution segment.

We also acquired Coastal Field Services, a pipeline and maintenance contractor, headquartered in Beaumont, Texas, that will be part of our Pipeline & Underground segment. We also expanded the capabilities of our Primoris design and construction business located in Tyler, Texas, as part of our strategic plan to increase our engineering offerings.

Now let me provide more detail for operating segments. I'll start with the Civil segment. The Primoris I&M Group is seeing revenue decline as we near the end of their large Louisiana petrochemical project. Earlier this year, we announced a new methanol project for that group and work on that project should carry the group through the third quarter.

There are several large ethane crackers, methanol plants and LNG facilities that we're tracking and that we feel confident will bring work our direction, but the timing of some of these projects remains uncertain. In the meantime, Jonas Beatty's team is keeping busy with their historical clients and mining operations maintenance work.

As it has been for the last few quarters, Primoris Heavy Civil had a challenging quarter, but we're definitely seeing turnaround in that group. We strengthened our management team last year and are starting to see the results with positive news on the remaining work on the Texas Highway I-35 quarter jobs.

Mark Buchanan has been working closely with TxDOT, getting them to recognize and begin to negotiate our change order requests and time extensions associated with all of the I-35 quarter projects.

We recently received payment for the LDs and road user fees that wrongly were withheld on one of these projects, while we continue our efforts for the same on the remaining projects.

Of the original 5 built-in area jobs, 2 are complete, 1 will be complete by year end, another will be completed in first quarter of 2018 and the last one is scheduled to be completed in the second half of 2018. Based on the current uncertainties associated with the jobs, they are being recognized at 0 gross margin.

While we did not need to take any additional write-downs on the I-35 quarter jobs this quarter, unfortunately, we did have to write down several other jobs in Arkansas and Louisiana.

Our new management team has now taken a closer look at the execution plans, performance to date and schedules for completion of our non-Belton jobs and decided to write down the jobs while we continue to negotiate plans with the owners. The project with the write-downs are the latter stages of being finished and should be complete by year's end.

During the quarter, we have also continued Primoris Heavy Civil diversification beyond only highway projects as we announce $56 million of work at the George Bush Airport at Houston and $21 million of Fort Worth in Freeport, Texas. These types of projects have generally higher margins than typical DoT work.

We expect to see continued improvement in our execution and more consistent project delivery in our Civil group. The power, industrial and engineering segment is a bit of a mixed bag. Their overall results were strong, driven by performance on power jobs in California by Tim Healy's team.

But the Carlsbad project underway and the Wilmington cogen facility wrapping up nicely, we've identified some large projects that we expect to bid on both in California and across the United States. We know that natural gas-fired plants in California are facing escalating pushback from environmentalists and we'll need to expand our high horizons.

Our first nonunion POWER job in Virginia is roughly 30% complete, going well and we expect the group will be on that project through the second quarter of 2018. The industrial market in the Gulf Coast is still soft as oil prices are stabilizing, but still not strong.

We're tracking several LNG export facilities and we're the designated subcontractor on a few of them, but they're not moving forward as fast as we'd like. We have continued to see positive movement in the petrochemical facilities, as evidenced by the $40 million MEG award announced in July for Primoris industrial contractors.

With a large Louisiana petrochemical facility, roughly 90% complete for this group, Conrad Bourg's group is looking for new awards, including projects where you can partner with Primoris I&M again under the same successful model.

In May, we announced our first project for the Primoris Renewable Energy which received contracts to build 2 EPC battery storage units in Texas.

The group has also secured work for solar installations in Southern California and is looking at additional projects where it can install solar arrays on carports or rooftops for an entire school district or hospital system.

Some of these projects may provide opportunities for the company to not only be the contractor for these jobs, but also to invest and on the final project on a limited basis, to benefit from a reoccurring revenue stream and tax benefits of a clean energy project.

Our OnQuest group is also making progress on some of their larger projects, such as the PDH facility in Canada and a peak shaving facility in the northeast.

While material prices for items, such as tubes and castings are seeing some arise, that market was still soft during the procurement phase of these projects, helping Randy Kessler's group with margins during the quarter. The team also continues to win heater supply projects, such as a recent platforming heater win for a Singapore refinery.

Our newest engineering effort, the Primoris Design and Construction Group, started operations during the quarter. And I'm pleased to say that the group signed 2 front-end engineering and design projects. Both FEED projects where our -- are for a major refinery.

And we hope to use our success on these FEED projects to translate them into larger, full EPC awards. This is in line with our business strategy for the group and they met this goal faster than we expected. Our Utilities & Distribution segment had another strong quarter, as the group continues to be one of our most consistent performers.

Primoris had a record $181 million in MSA revenue during the quarter, most of which is utility work. And I want to point out that there are many benefits to this MSA work. First off, it provides us with a consistent basis of work.

ARB Underground has been providing MSA work in California for over 60 years, a large gas utility clients and we hope to continue that work for the next 60 years. But an additional benefit of MSA work is relationships we're building with our customers which can give us an edge in understanding and bidding non-MSA lump sum projects for them.

For example, Jay Osborn's Q3C group, secured an $11 million lump-sum project in Denver that we won largely by understanding the client's specific needs based on the strength of our relationship with that client.

That is the kind of relationship we're trying to build as we move our utility work in the new geographies, such as Q3Cs, new MSAs in Iowa and in Illinois. It's also the strategy behind our acquisition of Florida Gas Contractors which not only gets us into a new geography with new clients, but gives us open shop capabilities as well.

Jason Osborn continues to build nationally our Utilities & Distribution growth, both organically and through acquisitions, as he laid these groups expansion goals for us throughout the United States. Let me finish with our Pipeline & Underground segment, led by Scott Summers.

Our Vadnais Trenchless team is working on a 90 million project in Venice, California, to install a 54-inch force main needed to replace an existing aged forced main. Vadnais team is also regions outside the Western United States for opportunities working closely with our other sister companies to identify projects.

During the quarter, we acquired Coastal Field Services which will be working closely with Primoris Field Services, doing T&M work for mainly energy clients. When we compare their client base, we realize there's not a lot of overlap which means we expect to see growth in this business.

Historically, Coastal had to pass on jobs when there was a significant pipeline component. But with their new sister company, Primoris Pipeline, we will now be able to bid on that work.

Primoris Pipeline work is going steady with the Midland facility job carrying them through the year and they're looking at other large projects in the same area that could start early in 2018. Another potential project -- potential market that Patrick McRae's team sees is the frac water market.

And unlike some of our pipeline competitors, we do have experience with HDPE pipe. Finally, I want to end where I started, by complimenting the Rockford team on their outstanding results from the 2 Florida pipeline jobs. Frank Welch, Josh Ramsey, Mickey and Dickey Langston and their entire team planned this project out and executed perfectly.

Their margins were helped by unusually dry weather conditions in Florida, but the credit for the execution is all theirs. We reached substantial completion on both jobs in the quarter for a very pleased client, having met a demanding schedule.

Rockford is spending the second half of this year on some smaller work in Pennsylvania as well as planning our execution approaches for the Atlantic Coast pipeline project. Our current plan anticipates some minor tree cutting work at the end of this year, with 3 spreads starting in 2018, beginning in April and one spread operating in 2019.

This work will be challenging as laying a 42-inch pipe off the side of a Mountain in West Virginia, is very different than laying it across flat Georgia, but I have every confidence that this team is up to the challenge.

There are other large pipeline jobs being discussed and a quorum now may make permitting somewhat more certain, but fitting in the opportunities will be completing a jigsaw puzzle. While the schedule isn't set in stone, operating 3 spreads in 2018 will be a good challenge for Rockford. As I said, it was a great quarter for Primoris.

Our pipeline work exceeded expectations, our MS continues to grow, we used our cash to invest for growth and we've been maintained a near record backlog even with near record revenue burn. We benefited from exceptional contributions from all the members of our operations teams, led by our Chief Operations Officer, Tom McCormick.

Let me tell now turn the call over to Pete Moerbeek so that he can give you a little more information and perspective about the numbers.

Pete?.

Thank you, David and good morning, everyone. We filed our Form 10-Q this morning, thereby benefiting all of us on the call by allowing me to substantially reduce my comments about our second quarter financial performance. Revenue for the 2017 second quarter was a record $631 million, 38% increase over the same period in 2016.

At the halfway point of 2017, our revenue was $1.2 billion, an increase of $305 million or 34% over the first 6 months of 2016. We're certainly well underway to generating record revenues in 2017. For the first 6 months of the year, our largest customer was TxDOT.

The 2 Florida pipeline jobs were our second and third largest customer and the petrochemical project in South Louisiana was fourth. Since David has discussed the significant revenue trends, I'll spend a few moments commenting on the profitability of that revenue.

Second quarter 2017 gross profit of $84.5 million was a 95% increase over the same period in 2016. And the year-to-date gross profit of $139.5 million was a 69% increase over the first months of 2016. It's easy to find a place to start.

By far, the largest contributor to this improvement was from Rockford's execution on the 2 Florida jobs which are now substantially complete. Our Pipeline & Underground segment gross profit increased by $33 million for the quarter and $56 million for the first 6 months of the year. Work our guys did was outstanding.

But I would like to reiterate that the topography and weather provide us good as it gets for pipeline work. And I would caution not to expect quite the same margin next year as work begins on the Atlantic Coast project.

We don't know what the weather conditions will be like on those jobs, but certainly a massive rainstorm when we're on the side of a mountain wrestling with 42-inch pipe does not help productivity. For our other segments, POWER's gross margin was helped by the start of the much-anticipated Carlsbad project.

And the growth in utilities gross margin was mainly the result of increasing revenues. Similar to the first quarter, the crosscutting work that we performed for a large California utility did not generate gross profit. But the profitability of the other work that we did for the customer, more than made up for it.

We're still hopeful that with much of the continuing completed for the crosscutting, we will begin to benefit from the replacement part of the program.

Finally, the Civil segment, was anything but, as write down for heavy Civil jobs in Arkansas and Louisiana led to a gross loss of $5 million for the quarter and $2 million for the first 6 months of 2017. As we have completed a top to bottom review of the divisions' jobs, we believe that we can see thin pricks of light at the end of the tunnel.

And our current expectation is that the heavy Civil will be generating gross profit for the latter half of 2017. Our selling, general and administrative expenses we're $46 million for the quarter or 7.3% of revenue, a slight uptick as a percentage compared to the same period in 2016.

Excluding the revenues and SG&A for the 2 acquisitions on the startup engineering effort, our SG&A expenses were $44.2 million or 7% of revenue. That is still a too high level. But the quarter included several one-time expenses, the elimination of which should increase our operating leverage.

There was also a slight increase in legal expenses this quarter as we continue to work through our outstanding litigation. The good news is that we haven't had any major legal cases to our docket and the remaining receivables dispute is currently scheduled to go to trial in the fourth quarter of this year.

Our provision for income taxes in the second quarter of 2017 was $42 million, for an effective rate on income attributable to Primoris of 39.7%. We anticipate that our year end effective tax rate will be close to 39%. Net income attributable to Primoris was $21.5 million in the second quarter 2017, a 326% increase over the same period last year.

Fully diluted quarterly earnings per share increased from $0.10 in the second quarter of 2016 to $0.42 for the second quarter of 2017. Our cash flow continues to be outstanding, with operating cash flow of $67 million in the second quarter, at $116 million year-to-date, that's an improvement of $111 million over the first 6 months of 2016.

We used $66 million of the cash that we generated to acquire Florida Gas Contractors, now Primoris Distribution Services for approximately $30 million; Coastal Field Services, now Primoris Coastal Field Services, for approximately $27.5 million and an additional engineering assets for PD&C of approximately $2.3 million.

As David mentioned, Primoris Distribution Services is now part of the utilities segment and Primoris Coastal Field Services is now part of the pipeline segment. We added a contingent earn-out liability with a fair value of $1.2 million from the Primoris Distribution Services acquisition.

The earnout is for a 1-year period, starting in May 2018 -- ending in May 2018. Excluding the acquisitions, we purchased $25.5 million of new property, plant and equipment during the quarter. Year-to-date we spent $45 million on capital expenditures and assume mortgage notes of $4 million.

We anticipate spending another $15 million to $20 million on CapEx, during the remaining 6 months of 2017. At June 30, 2017, our balance sheet showed cash and cash equivalents of 111.7 million, of which $48 million was restricted for use in our joint venture projects. We ended the quarter with tangible net worth of $316.6 million.

During the quarter, we paid down $12.2 million of long term debt and our total debt at quarter end of $241.5 million had a weighted average interest rate of 2.97%. During the first 6 months of 2017, we did not enter into any new long term debt secured by equipment.

At June 30, 2017, we had fixed backlog of $2.06 billion and MSA backlog of $694 million for a total backlog of $2.75 billion which is a significant increase over the June 30, 2016 backlog amount and only a $48 million decline from last quarter's numbers.

Given the record revenue burn in the second quarter, we're pleased that we could maintain this backlog level. Our estimated MSA backlog increased by $36 million on the quarter, primarily with the increase coming from the MSAs that were part of the 2 acquisitions. And finally, our earnings guidance.

We're moving up both the top and bottom end of our guidance range by $0.05. We now expect net income attributable to Primoris to be between $1.05 and $1.25 per fully diluted share for the 4 quarters ended June 30, 2018.

We're assuming only 1 quarter of contribution from the Atlantic coastline project and we continue to exclude any potential litigation settlements. With that, it's time for your questions which do not really need to be brief. Michelle, the call is yours..

[Operator Instructions]. Our first question comes of the line of Tahira Afzal with KeyBanc Capital Markets..

This is Patrick on for Tahira. Just starting with guidance.

Given that the midpoint for the next four quarters got moved up to $1.15, I was wondering if you could provide a, some details regarding seasonality? And whether it's more back-end loaded, et cetera? And then with the sequential increase, I was wondering if we should be expecting a similar cadence in upcoming quarters?.

I think if you go back and look where we were last quarter and move it to this quarter, the biggest change you're seeing is that we fully -- that we now anticipate a strong quarter, second quarter next year from a contribution from ACP.

We believe that we're going to have kind of the same traditional progress, you're going to have not a terribly strong first quarter unlike this year when we had the Florida jobs.

But if you go back to where we're traditionally, I think you'll see very strong, good third and fourth quarters not a strong first quarter and then what looks like what now, very strong second quarter next year..

Okay, cool. Make sense.

And then looking at the POWER segment a little bit, you touched back on the pushback you're seeing in California and there being more of a migration towards renewables, I was wondering if you could just kind of give a little bit more of your outlook on the impact for natural gas power plant prospects in California? And then building off of that, given the news of Scana abandoning their nuclear plants, how do you feel the opportunities and prospects for that natural gas power and pipelines since there'll be a need to backfill that generation capacity..

All right. Thanks, Patrick. On the California projects, obviously, there's always been a pushback in the environmental side on some of the natural gas based power projects. There are still a lot out there that we're tracking. And there will be some of those that will definitely make it through the approval process.

In fact, we're extremely hopeful on one of them. There will still be a continued push against them in California, but there is a definite need for them still in California on natural gas based.

But that is also one of the reasons that we've diversified and looked at some battery storages and some solar applications and as you know, we've done solar projects out there also. Quite honestly, we tend to believe that you'll still see those natural gas based power projects come through.

As you know the NRG project that we did, it took, gosh, nearly 2 or 3 years for it finally to get approved, but it finally did get approved and we're building it currently. The same thing will hold true with some of these others.

Now on the nuclear power projects that you mentioned that's been stopped, we had begin to see and I think this will actually help the visibility on some of the natural gas power projects that we were seeing in the Southeast.

And as I mentioned earlier, we're seeing some opportunities there for bidding as we bid of the power projects outside of California. I think some of that power will have to be replaced that was planned from those nuclear facilities so I guess I see some positives from that developing..

Our next question comes on the line of Matt Duncan with Stephens Inc..

This is Will on for Matt. Hey, David, I wanted to start where you left off on your remarks on the large diameter pipeline market, it's looks to be shaping up for a busy 2018.

So first part of my question is, with your current spread capacity, you touched on it a little bit with the large diameter pipeline and all of your other Pipeline & Underground segment businesses, taking into consideration, what level of annual revenue can you generate in that segment, if we're fully utilized next year? And secondly, can you run through your ACP startup expectations again?.

Yes, I'll let Pete comment on the revenue that we might be able to burn off in the year. But the ACP, what -- we're currently doing a lot of planning, so we're actually working on the project most of it is not digging holes or anything. As I mentioned, we're going be doing some minor tree falling toward the end of the year.

And we really currently right now, it's from a scheduling perspective, the real first work that we do is scheduled April 1, that's why Pete mentioned earlier in this call, we don't really see going on that until the second quarter of next year. So that's kind of on the ACP side.

I will tell you that with the 3 spreads, currently plan for Rockford in that 2018, we will stay extremely busy for Rockford. Just on a ballpark-ish type, I guess Pete can answer this more specifically. But if you figure that there's 3, there's 4 spreads that make up the roughly backlog that we booked on that.

And these things typically burn over a 12-month cycle, 14-month cycle and maybe 3/4 of that might be potentially burned setup.

So Pete, you want to make some comments there?.

I was going to use a number somewhere in the 350 to 500 range, with the variable being where you're working and the length of the project and how efficient our guys can be. If we go back and look at Ruby which was we ended up about $460 million of revenue and we did that over 5 or 6 quarters, primarily.

And again, we were in an area where we could get tremendous advantage from our equipment, that's going to be maybe a little bit more challenging in West Virginia. But you're probably -- -- we're really running full somewhere between $350 million and $500 million..

Will, let me add one more thing, we alluded to it in my opening comments, closing comments. We were able to burn fast and quick and hot through Florida because we had great weather and is very flat.

When you get up of those hills and the snow and the weather conditions and things, you may see a lot of variability in the revenue you burn by how many days you can work. So there's a degree of uncertainty there..

Yes. Absolutely understood. That's very helpful. And then flipping over to guidance as well.

Can we talk a little bit about the revenue expectations over the next 12 months for that $1.05 to $1.25? And then how much, if any, contemplates accretion from your recent acquisitions?.

We traditionally do not give revenue guidance specifically. We reluctantly give the next 12-month guidance. I think that you can certainly anticipate that we would exceed the $2 billion that we've been at the last 2 or 3 years. Not sure that I want to totally commit to what sort of internal numbers we have, but obviously, they're better than that.

I think we -- as we look into more of our segments start to work together, we see some pretty good opportunities to increase the revenue. But probably I'm not quite ready to tell you exactly what the guidance is.

And I'm sorry, the second part of your question?.

Well, that kind of [indiscernible] as well.

If you wanted to break down any acquisition contributions?.

I'm sorry. We're going to see the companies that we bought. We believe that they'll be accretive, again, but not major needle moving. We think that they're going to be good, very solid contributors, but not something that's going to make significant changes to our numbers..

Fair enough. And then last thing, if I can sneak one in here, Pete, you touched on the adjusted SG&A levels with the one timers and litigation and such. If you could give us a better sense about how we should be thinking about a more normalized quarterly SG&A expense level going forward, that will be helpful..

I think our goal is to get us a whole lot closer to the 6.0% to 6.2% over the next few -- of revenues over the next few quarters. I think we all have a continuing need to look at how do we even make that better, but I think you're going to see us start heading toward that 6.0% here over the next couple of quarters..

Our next question comes from the line of Bill Newby with D. A. Davidson..

Just wanted to ask a couple of more questions on the Civil segment. I guess, ignore what happened in the quarter, what are you guys seeing there in terms of just bid markets, particularly in Texas.

You're kind of seen a slow first half let-ins so far, is that starting to change a little bit? Just any thoughts there?.

Yes. I'll comment that a lot of people thought Prop 7 will jump in quicker. But you got to remember, Prop 7 there's a lot of engineering work that had to be done and you're absolutely right, Bill. There was a little bit of a slow down on the amount of bidding projects that came out. We're actually seeing that now begin to turn around a little bit.

And I think what the DOT is doing is looking at realizing that they've got a -- they're going into a market where there's a lot of work to be done. There's a limited number of contractors that can do bigger projects and obviously, you've got the smaller ones that can do smaller projects.

I think what DoT is doing is looking at how do they package those packages and how big do they make them. If they make them too big, they can cause smaller contractors to fill. If they make them too large, they the opportunity to get some bids and so they're looking at how do they, package those things.

We're actually seeing still a number of bidders out there. But surprisingly, where we might use to see 10 or 12 bidders on a project, now we're beginning to see 6 or 7. I still don't like 6 or 7, but we're seeing a smaller number of bidders on particular projects.

I think you'll see that trend toward the latter half of this year, more bidding activity pick back up overall for DOT..

Thank you.

And also on that segment, as you start to see some of these projects run-off? I mean this problem products, does the mix change it all there? I mean something like maybe nonheavy highway, work starts to pick up? Does that change your margin assumptions at all, maybe for Pete?.

Well, let me comment and then I'll let Pete add any other color he wants on it. We started, gosh, I guess 2 years ago, looking at how to get a little bit more of a mix in there to get the margins up. Highway work with a number of bidders and things and the competitive nature of it doesn't really yield itself much to margin improvements.

Unless we just have a lot of contractors that bow out which I don't see that happening. We have improved the mix by getting some of the airport work and port facility work.

But when you look at the overall size of that work, in a total dollar base versus the backlog of DoT work, yes, it's moving and it will up a little bit, but I don't think it's moving it up substantially. Pete, any other color, okay? I think Pete is shaking his head, his agreeing with me on this..

Our next question comes from the line of Bobby Burleson with Canaccord Genuity..

So I was curious, it sounds like there's some nice synergies for that utilities work, the MSA work and you talked about being able to pick up additional leans.

Is that kind of -- when you think about the size of the total opportunity out there as you expand your traditional utilities work into new geographies, can you guys kind of sketched out what incremental kind of market were kind of overall kind of bid opportunity there is for some of the what you call the lump sum wins that you got?.

Okay. You know Bobby, it's interesting, your question there. Up until the Florida Gas Contractors acquisition, all of our Utilities & Distribution work was limited to union work.

And our teams, all the way from California and then Q3C up in Minnesota and everything, they were organically growing that by literally moving with relationships to customers, that's how we got into Denver, that's how we got into the other states that I mentioned earlier, the both Jay and Jason Osborn have been doing.

With the addition of the nonunion, Florida Gas Contractors, in the region that they serve which is particularly nonunion regions.

Yes, we see some great, obviously, acquisition-oriented opportunity to grow that business, because we can expand now and both serve the costumer's based in the geographies from a union perspective as well as an open shop perspective. It does lend itself and that was a very strategic thing, Bobby, that we did.

At our strategic planning meetings that we have and the earlier one this year, our team said, from the Utilities & Distribution segment, we need to move into some other states that are union-oriented and we need to find a nonunion entity to break into those markets. So I would tell you, we will see growth in those areas.

The interesting thing that I also mentioned about those relationships, we started with those relationships that we have, the MSA's which is nearly all of our utility and distribution work is MSA work, very small portion of it, it's lump sum, but because of the relationships, they will look and say, wait a minute, we got a $6 million, $7 million, $8 million, $10 million lump sum over here, very well defined, why can't you guys just bid that one also and do that work.

So it is giving us growth into that lump sum side of the Utilities & Distribution segment that we hereto before, really didn't chase per se. So I don't know if it's answering your question, but I do see some growth in the utility side.

The market out there, I know you asked accretion, how big is it, oh my gosh, there's a tremendous amount of utility and distribution work to be done in these aging infrastructures. So to be honest with you, I think we can do as much as we can possibly can to see as fast as we can grow..

Okay, great.

And now that FERC has a quorum or the ability to have a quorum, are you seeing any -- anything changed in terms of the pace of projects that you see potentially coming to the market? Is there any movements or positive or otherwise, given that development?.

Bobby, it's too early to say. They just literally got approved, this last week. You know we always felt like that they would get approved. We -- obviously, not having a quorum in there, there was a degree of uncertainty and hold up in projects that I think now will certainly flow on through. But it's too early to see any real difference between now.

It's a good question to ask next quarter, because I think next quarter we'll have a lot more visibility as to whether or not they've approved and push through those projects..

Our next question comes from the line of Lee Jagoda with CJS Securities..

So Pete, as we look at SG&A, can you break out the various onetime expenses in acquisition-related expenses to give us some more comfort that we can get back down towards that 6% or 6.2% of sales over the next couple of quarters?.

Yes, but you're probably do a better job if I direct you to the 10-Q because I think we've done a pretty good job of detailing at that. Some of the increase this quarter was for compensation related expenses as we looked at being in a much higher level at the end of the year for incentive comp.

Some of it was the new -- the 2 new -- the 3 new -- the impact of the new businesses. And then there was about $2 million that was legal related and there was some acquisition expenses that probably will go down that are in the probably $1 million to $2 million range. So I think, overall, you can identify those and kind of start to pick at them.

Now the 6% is, obviously, goal, I'm not sure that we're going to be obtain that and certainly next 1 or 2 quarters but that's the direction that we're trying to move the whole company..

I was just going to add one more comment to Pete's. In some of those compensation related things, we had put some stay bonuses in on the Civil side, when we were looking at what to do on the Civil side from some of those projects to make sure that we didn't lose some key individuals.

And as we restructured that group and put more management change out the management in it, we needed those stay bonuses to keep the main guys that we wanted intact. As we burn those off which a lot of them will burn off toward the end of this year, you won't see those kind of things reoccurring..

Okay. And then switching gears, looking at the heavy highway piece, particularly in Louisiana and Arkansas, can you give us some more detail around what caused the productivity issues? Whether they're substantially behind you.

Think about margin in the back half of this year compared to the first half of this year and how we ramp towards more meaningful profitability there?.

Yes. Let me answer them in reverse. I'll tell you what happened in a moment. First of all, the timing on that, I think in I mentioned in my opening remarks that those projects are in their later stages and both of them -- those will be burned off by the end of the year.

So we don't anticipate any changes more, but at the same point in time, we should have been burned also they really won't be getting into next year. When we originally estimated the jobs, they had a particular execution approach that they were going to be using.

It become apparent that, that execution approach wasn't the proper approach on building some of that work. But yet the individuals that we had that we're running the jobs continued to be optimistic, I'll use that word.

And when our new management got in and looked at them and said, look, we bid this under one execution approach, but we're actually having to execute it under a different approach to actually physically build the project. We need to look at that more deeply, even though there are some of them that think we can pull some of that back.

As you know, we're pretty conservative in nature on that. So we decided to take the write-downs. There is also some of it that we think could potentially be recovered and a change order with the customers. But at this point in time, it's too early to tell the validity of whether or not we can get some of that back.

So again, being conservative as we're, we just took the write-downs..

Okay. One more for me and Pete, I don't know if you'll answer the question, but I'll certainly try.

Given you made 3 acquisition or I guess 2.5 acquisitions, during the quarter, is there a way to look at those in total and say over the next 12 months, we expect these acquisitions to add ex of revenues?.

Of revenue, I'm sorry was that your question?.

Yes, of revenue..

I think that you're probably looking somewhere between $50 million and $100 million. I know that's not very precise, but at this point, since we've gone one of them for a week at quarters end, I'd say $50 million to $100 million is probably a good number..

There are no further questions at this time. I would like to turn the call back over to Mr. David King for closing remarks..

Thanks for everyone being on the call with us today. Primoris continues our growth since going public in 2008, as evidenced I think by our report today. This growth comes from our safety, quality and excellence by all of our dedicated employees and all of our work and our company core value of what we say and do the right thing.

We'll continue to do the right thing with our customers and our investors. Thanks again for your time and have a good day..

Thank you. This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation and have a wonderful day..