Kate Tholking - Vice President, Investor Relations David King - President and CEO Pete Moerbeek - Executive Vice President and CFO.

Lee Jagoda - CJS Securities Tahira Afzal - KeyBanc Capital Markets Adam Thalhimer - Thompson Davis Bill Newby - D.A. Davidson.

Greetings. And welcome to Primoris Services Corporation 2018 Second Quarter Financial Results. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded.

I would now like to turn the conference over to your host, Kate Tholking, VP of Investor Relations..

Thank you, Dena. Good morning, everyone. Thank you for joining us today. Our speakers for the day will be David King, President and Chief Executive Officer; and Pete Moerbeek, our Executive Vice President and Chief Financial Officer.

In addition to this morning’s press release, we have also posted slides on our website that highlight key points we plan to discuss on the call. You can access them by going to our corporate website, www.prim.com, then selecting Investors.

Once on the Investors site, you will find the slides in the Events & Presentations section next to the webcast link for today’s call. Before we begin, I would like to remind everyone that statements made during today’s call may contain certain forward-looking statements, including with regard to the company’s future performance.

Words such as estimates, 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, 2017 and the 10-Q, which was filed this morning.

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 would now like to turn the call over to our CEO, David King..

Good morning, everyone. Thank you for joining us today to discuss our second quarter results. I could summarize our second quarter results by saying that we completed the Willbros acquisition and the ACP project that did not start as quickly as we had hoped.

But that summary does not give credit to the hard work and positive results from the rest of the Primoris team. So, as I begin my remarks, I wanted to first congratulate all of our employees and stakeholders for a great first 10 years as a publicly traded company.

It is only fitting that we celebrate our 10th year anniversary on NASDAQ with the Opening Bell Ceremony last Friday. Since its inception dating back to the 1960s, our organization has completed 26 acquisitions, started up three new business units and with our latest acquisition has reached a new record backlog backed by solid MSA foundation.

Since going public, Primoris’ revenues have achieved an impressive growth rate. I want to say thank you to our shareholders, clients, financial partners and employees in helping Primoris continue to set and achieve our strategic goals of becoming the best-in-class in all of our business segments.

Well, we are off to a good start in the second quarter with our power job delivering strong results, our engineering work picking up, and our gas and utility electric work continuing to show steady growth.

Our pipeline work was down significantly as we not only had a tough comparison with last year’s second quarter, but the delay in the ACP project revving up this quarter. We view the delay as a timing issue for the ACP project and remain confident in the strength of both the large and smaller diameter pipeline market in the future.

The newly acquired Willbros businesses are running as planned and the electrical T&D Group saw good margins for the month of June.

The addition of this Group has pushed our MSA backlog to its highest ever level at $1.1 billion and we are confident that our MSA work will continue to provide a solid and growing revenue base for Primoris in the years to come.

I am very pleased with the amount of overhead and other related cost reductions since we finalized our acquisition of Willbros. We are right in line with where I expected us to be as we continue implementing our cost reduction plans. We continue to see additional opportunities to cut costs ranging across real estate, insurance, bonding and equipment.

These are not just ideas. These are real areas of cost reduction. Additionally, we are very excited about the opportunity to grow revenue at the acquired business units. We are working with some great operations personnel brought over in the acquisition like Johnny Priest, Adam Campbell, Scott Porter, Jeremy Kinch and Sheridon Taylor.

Our balance sheet remains strong with a very solid cash position and while the acquisition of Willbros clearly increased our debt level, it is at a manageable level and we experience to bring -- expect to bring it closer to our historical range of 50% debt to equity over the next few years.

I will start my discussion this morning of the segment results with the Civil segment. While the financial results have improved year-over-year, we are disappointed in the second quarter negative margins for the segment.

Our Heavy Civil management team led by Mark Buchanan is showing improved performance on newly awarded work and to-date they are having good success with Louisiana design-build work.

However, we are still cleaning up some older projects, in this quarter that include recognizing some higher cost on Houston Airport project that clearly was not ready to be built and so we terminated our work on that project.

As we said before, Heavy Civil work is like a slow moving battleship and though we started the work of pointing the ship in the right direction is not quite there yet.

I would also like to add that Mark and his team have been making a tremendous effort on completing the remaining legacy projects within their forecasted cost, while also implementing very effective commercial management to recover time impact cost.

Jonas Beatty’s Primoris I&M Group, the other half of the Civil segment has been slowed to gain additional work after they have come off the large petrochemical project. The number of prospects and bids they have seen has not been lacking, just the time on some of the industrial projects along the Gulf Coast has been slow in developing.

They are working hard with their sister companies to find replacement work and there are some interesting prospects for them in the methanol refining and LNG markets, but until those projects move forward, growing their backlog will be a challenge.

The timing of the Gulf project -- Gulf Coast project is also affecting our Primoris Industrial Constructors Group in the Power, Industrial and Engineering segment. While work has ramped up on the MEG plant, we are still running underutilized in this Group.

We are encouraged by the recent work -- recent awards for work at the new petrochemical facility in Southern Louisiana, and we have been able to add additional scope for several of our other business units to this project.

Conrad Bourg Group is seeing good opportunity for pump station work, ocean litigation, air separations and PVC plant expansions just to name a few. Conrad’s team has also begun to see work ramping up in our recently announced work -- awards for work on ethane crackers and ethylene facilities.

Our renewables teams continue to work at the largest solar installation project to date in Texas. It’s an impressive site covering well over 1,500 acres. The heat in West Texas has been a safety challenge for our crew, but they are managing to keep on schedule.

The Group is also pursuing additional work including projects near our current solar project and for clients with whom we have a strong history. Tim Healy’s ARB Industrial team has seen excellent performance to date on their large power job and they are hoping to first fire the last unit at the end of this month.

NRG has recognized this Group both for safety and performance on this project. Tim’s Group continues to pursue additional power project and while the permitting process for gas-fired projects in California remains tediously slow, we believe there is a strong likelihood of another award by year end.

As we predicted with the passage of California’s SB 54, ARB Industrial is busy with both capital and maintenance refinery work, as we just recently announced additional work on a large refinery integration project. We believe there could be additional scope for us on this site that would carry the team well into 2019.

We added the Canadian operations from the Willbros acquisition into this segment and for the month of June, Jeremy Kinch and his team made a positive contribution to the gross margin.

They are working to make sure that we manage our expense levels while ensuring that we can take advantage of the record production rates in the Canadian oil sands market. We are also putting into place business development efforts to baseload our fabrication facilities in Edmonton. Both of our engineering groups also had good second quarter results.

OnQuest, led by Randy Kessler, is close to completing its engineering design work for an LNG project in the Northeast, its largest LNG installation to-date. The Group is seeing more micro LNG opportunities than a year ago.

They are also expanding their target markets to include the biogas market and they have grown into the market for larger heater reformers as they are now being asked to bid on projects in the tens of millions of dollars, whereas a few years ago, they were limited to projects half that size.

They are also seeing a lot more downstream ethylene and propylene expansion projects in Canada. They are facing a potential challenge in the current tariff environment, a challenge faced by everyone in the industry as has caused some pricing uncertainty for our clients.

Primoris Design & Construction has entered its second year of operations in a solid position, having recently picked up additional front-end engineering and design work for alkylation, green diesel, sulfur recovery and fractionation units at several refining locations across the United States.

Kevin Maloney’s team continues to focus on their strength, the refining and syngas markets, and they have several good prospects for new awards in the second half of this year. Our Utilities and Distribution segment, business units continue to deliver steady growth.

Q3C is seeing lots of work in the Midwest region and Ohio area, and they have opened a new office in Baltimore after a client requested them to expand operations into Maryland. The weather caused a late start for them to the spring work for this Group, but they have hit the ground running now.

We are setting up a new training department in our Midwest region for Q3C in Minnesota to be proactive in making sure we have qualified skilled gas distribution workers to meet the market demand. Our Q3C Rocky Mountain region out of Denver had an excellent second quarter also.

We are pleased to announce that Primoris Distribution Services acquired just over a year ago in Florida had a great second quarter and made their earn-out goal. Congratulations to David Runyan, and their entire team in Florida.

They have been steady building their backlog in the Florida market and with our Willbros acquisition they are seeing opportunities along the Southeast coast.

ARB Underground performed as planned as Scott Summers’ team is not only working on their traditional natural gas work, but they continue to pick up some electrical work including the recently announced transmission conversion project in Southern California.

We expect them to have their traditional strong second half of the year as utility work continues to ramp up. As I mentioned our Pipeline and Underground segment face significant headwinds and comparing to a great second quarter last year with project delays for both Primoris Pipeline and Rockford.

While we were unable to formally announce any large new award for Patrick McRae’s Primoris Pipeline Group during the second quarter, we know that there are abundant opportunities in the Permian Basin for this Group.

As part of the Willbros acquisition, we added facilities work to Jeff Bridges’ Primoris Field Services business unit, which also benefits from the activity level in the Permian. This morning’s announcement of $145 million of work for these two groups is a really good start to capitalizing on our opportunities.

The Rockford Group was pleased to be released late in the quarter on 10 miles of one of the ACP’s spreads. The timing is uncertain as to when they will be released on the remaining miles we hope to start this year.

Our conversation with the owner are encouraging and we are being paid for equipment that we have already moved in the yards and for the over $20 million in MAXX that we have already purchased.

Josh Ramsey’s team has a challenge ahead for the rest of the year, but when we receive the full notice to proceed on these three spreads schedule for this year, we are ready to go.

The sales teams for both Rockford and Primoris Pipeline are attracting multiple large and small diameter pipeline projects and we remain extremely excited about this Group’s prospects over the next few years.

Finally, our Vadnais Trenchless Group led by Paul Vadnais is continuing to execute well on the large Dual Force Main project in Marina Del Rey, California. I would like to end my comments with our newest segment, the Transmission and Distribution segment. We are pleased with the first month performance for this Group, but it’s only one month.

From a management viewpoint, Johnny Priest is continuing to run Primoris T&D and the amount of work out there right now outpaces anything he has seen in his 40-plus years in the business.

With Primoris as its parent company, the T&D Group has been able to sign new awards with customers that have been hesitant because of previous concerns about their financial viability. Within the first two months, they have been awarded work from some of the largest electrical utilities in the country.

While bad storms do create a challenge for most of our other segments, the T&D Group can see an increase in work after bad weather. For example, after a recent storm in Texas caused transmission towers to fall until 22 miles of overhead lines were down, our T&D team mobilized over 100 repair technicians within the first six hours.

We look forward to seeing great things from this new T&D business. With just one month of T&D work, our one year estimated MSA revenue is now $1.1 million. We expect our annual MSA rate revenues to continue to grow over the coming years in line with our strategic goal of providing a solid and profitable revenue base for Primoris.

Combined with the strength of the pipeline market and the anticipated strong finish on our major power projects, we remain confident that 2018 will be a record year for Primoris and as we start to look further out, 2019 is already shaping up to be another banner year.

As I mentioned in an interview last week in New York, I am very proud of the manner in which all the Primoris employees worked to be the best in the industry, from safety, to quality, to relationships, by implementing one of our company principles of always do the right thing.

I will pass it over to Pete now to walk you through some of the numbers for this quarter.

Pete?.

Thank you, David, and good morning, everyone. Since, I have been the CFO for most of the 10 years that Primoris has been a publicly traded company, it was an honor to be included in the NASDAQ Opening Bell Ringing Ceremony last Friday. I agree with David’s sentiments about our progress.

This past quarter was made interesting by the purchase accounting for the Willbros acquisition. But our financial team worked diligently so that we could file our Form 10-Q last night, between it and this morning’s earnings press release, you have all the numbers, but I want to provide some color starting with the Willbros acquisition.

We closed the Willbros acquisition on June 1, 2018 by paying $38.4 million for 100% of the shares of Willbros stock, a $123.2 million to settle Willbros’ bank debt and $3.1 million to pay for Willbros legal fees associated with the merger agreement. That totals $165 million, which we funded from our commercial revolving credit facility.

Prior to the closing, Willbros repaid us the $15 million plus accrued interest that we had advanced under our temporary credit agreement. After those payments, Willbros still had $54 million of cash. That’s our net cash purchase price was $111 million.

During the second quarter, we negotiated with our commercial banks to establish a Term Loan for the Willbros acquisition and in July we completed a $220 million refinancing that allowed us to pay off our Senior Secured Notes in full and reduced our $200 million revolver outstanding balance to $35 million.

We expect to repay the amounting revolver balance by the end of August. The Term Loan requires that we make quarterly principal payments of 1.25% of the original amount for the first three years and quarterly principal repayments of 1.875% of the original amount for years four and five. There are no prepayment penalties for early repayment.

At present, the interest rate is approximately 4.35% and is floating with 30-day LIBOR rates. We intend to execute a swap transaction this month that will fix the interest rate for most of the Term Loan. Our expectation is that after we execute the swap, our fixed rate for the Term Note will be approximately 5.2%.

As a part of the acquisition, we made a series of purchase accounting entries. We determined with the assistance of a third-party consultant that we had acquired intangible assets of $54 million, primarily from established customer relationships.

The intangible assets will add approximately $3 million to annual amortization expense for the next 20 years. We also recorded goodwill of $44 million as a result of the acquisition.

Included in this amount, our estimates of the expected total costs for two legacy oil and gas pipeline jobs that we inherited, our estimates of fair value of the fixed assets and equipment and real estate leases, our estimates of certain severance liabilities and our estimate of the tax benefits of the net operating loss carry-forwards and other tax impacts.

We expect that some of our original estimates may be changed during the measurement period, which extends for one year from the date of the acquisition. The goodwill amount will be tested annually for impairment. The Willbros acquisition call started me on the bad habit of providing non-GAAP numbers.

So let me continue that habit one more time to provide clarity for this quarter. Of course, there is a reconciliation in our press release. On a pro forma basis, the Willbros acquisition reduced earnings per share for the quarter by $0.08 and by $0.10 for the first six months of this year.

For the quarter, we recorded $7.7 million for merger-related expenses, consisting primarily of payments and accruals of severances and retention agreements entered into by Willbros prior to the merger agreement and expenses related to investment banking and legal services through the completion of the merger.

Excluding the merger-related expenses, for the month of June, Willbros operations provided revenue of $61 million, gross profit of $6.8 million and operating income of $2.9 million. Obviously, the results of one month do not make a solid trend, but they are encouraging. Let me shift the focus now to all of Primoris.

Total revenue for the 2018 second quarter was $649 million, compared to $631 million in the 2017 second quarter. The majority of the increase came from the 2018 acquisition of Willbros and the 2017 acquisitions of Florida Gas and Coastal, which added a combined $73.8 million in revenues this quarter compared to last year’s second quarter.

Our largest client in the 2018 second quarter was a Texas DOT, representing 9.4% of total revenue, while our second largest customer was a large California utility, representing 8.7% of total revenue. Gross profit in the 2018 second quarter was $71.4 million, down from $84.5 million in the 2017 second quarter.

The vast majority of the $13.1 million decline occurred in the Pipeline and Underground segment, where gross profit was down $28.7 million, due largely to the 2017 completion of the two Florida Pipeline jobs and the current year delay in the start of ACP. Gross profit increased in each of the other four operating segments.

We have four remaining Heavy Civil jobs in the Belton, Texas area that are in a last position with estimated remaining revenue of $34.1 million. We expect that these jobs and their zero gross margin contribution will be completed this year.

Selling, general and administrative expenses were $43.5 million in the 2018 second quarter or 6.7% of revenues, down from $44.9 million in the 2017 second quarter or 7.1% of revenues. We are definitely headed in the right direction. This quarter we have separated our merger and related expenses and are reporting them as a separate line item.

Amortization expense in the 2018 second quarter was $2.7 million, up from $1.9 million in the 2017 second quarter. We expect another $6.3 million in amortization expense in the second half of this year. During the 2018 second quarter, we recognized an expense of $800,000 as Primoris Distribution Service made their earn-out target.

After we make the final payment this quarter, we will have no remaining earn-out liabilities. Our provision for income taxes in the 2018 second quarter was $3.7 million for an effective rate on income attributable to Primoris of 24%.

We believe this will be our effective tax rate for the remainder of the year, after which certain investment tax credits expire and we believe our effective tax rate will be closer to 28%.

Net income attributable to Primoris in the 2018 second quarter was $11.7 million or $0.23 per diluted share, compared to the 2017 second quarter result of $21.5 million or $0.42 per fully diluted share. On a non-GAAP pro forma basis, excluding the impact of Willbros, net income was $15.7 million or $0.31 per fully diluted share.

Obviously, an earlier start for ACP could have helped bridge the reduction in quarterly earnings, but we believe this is strictly a timing issue. Operating cash flow in the 2018 second quarter was negatively impacted by the merger and the related expenses that we paid during the quarter.

Capital expenditures for the quarter were net $24.9 million and we expect to spend between $25 million and $35 million for the remainder of the year net of any proceeds from equipment sales. That estimate includes $5 million to $7 million for equipment for the acquired Willbros’ business units.

Our fixed backlog at June 30, 2018 was $1.7 billion, MSA backlog was $1.1 billion and total backlog was $2.8 billion. That’s the first time both backlog amounts have exceeded $1 billion. Let me conclude by discussing our guidance for the remainder of the year.

Based on the impact of the ACP delays and the impact of the merger costs to complete the Willbros acquisition, we expected that we would be reducing our guidance. Our previous guidance was based on three quarters of ACP revenues totaling approximately $210 million. In the second quarter, we would burned $24 million of that total.

However, we consider that ACP is still expected to generate the remaining $190 million in the remainder of 2018 and when we consider the positive impact of the Willbros’ operations for the month of July -- of June and the potential for expense reduction, we realize that we do have an opportunity for a very strong financial performance in the second half of the year.

In addition, there are other factors that give us confidence such as the opportunities in the small diameter pipeline market, as evidenced by today’s new jobs announcement and expectations for continuing improvements in our utility work.

While we clearly have our challenges at this time, we believe that we can attain the results within our guidance range. Therefore, we are leaving our 2018 guidance at a range of $1.50 to $1.70 earnings per fully diluted share. Hopefully, I am now done with non-GAAP measures so that guidance is based on GAAP earnings for 2018. Thank you.

I have definitely talked enough. It’s time for your questions.

Dena?.

[Operator Instructions] Our first question comes from the line of Lee Jagoda from CJS Securities. Please proceed with your question..

Hi. Good morning..

Good morning, Lee..

Just starting with the guidance, Pete, which Q2 EPS number is included in the $1.50 to $1.70?.

The full GAAP number, so the $0.23..

Okay.

And then, if I look back at a couple of these awards, so starting with the ones that were awarded to Willbros back in July, can you talk about whether those were new customers for Willbros, new customers for Primoris and sort of how the acquisition of Willbros by Primoris should ultimately be beneficial to the comp, to the combined entity?.

Yeah. Lee, this is David. I will take that one. They were not new customers to either of us. In the electrical sector, obviously, they were new to Primoris, but this particular client we have done some other types of projects with them before. We did announce some of the overhead work with them.

I am quite confident we will get some other work out of them on some Underground and some other things. What we did during the diligence if you remember on some of our discussion both myself and Tom McCormick, our Operating Officer went with Johnny and met with basically all of the major customers that Willbros had.

And as I mentioned in my comments some of them were a little resitant -- hesitant I should say, to actually let them go ahead and award some work, so they were kind of on standby waiting to see. They had no concern about the T&D Group performing the work. They only had concern about the financial viability of them in their parent company at that time.

So, yeah, those are customers that we know quite well in other arenas, but they are not new customers to the T&D Group..

Got it.

And then, Pete, could you help us try to figure out some of the seasonality of the Willbros business and then maybe break up the revenues into the various reportable segments?.

After all a one month of ownership, the T&D business itself tends to be slightly different seasonality than what we are used to with the gas distribution.

The primary electric companies want to use their system when they have the opportunity during the end of May through sometime in September, because especially where Willbros is located in the Southeast, there is tremendous demands for air conditioning.

So their work tends to be a little bit skewed more towards the back half of the year and hopefully some into the first quarter. The Canadian work is somewhat seasonal strictly, because of the fact that you are not going to do a lot of work in Canada in the winter.

So it’s kind of -- it will be somewhat like Q3C and the work that we have picked up from the facilities type work that’s going to be very much similar to what we do with our Primoris Field Services.

So if you look at it in total, you are going to see, it is really early in the estimating game, but you are going to see that you are going do have strong third and fourth quarters..

Lee, let me add one more thing for you relative to the customers. The one project MSA that we announced was for a major customer.

One of the other major customers gave us a smaller order that doesn’t hit our radar screen relative to above $10 million as far as announcing it and then we actually had a third customer that started leaking out awards to us also.

So we have actually had three of those customers that we went through in the due diligence that now have fallen through on, exactly what they said was once the viability was there financially they would begin placing awards. The bigger one was obviously announced. The other two have not been announced..

Perfect. I will hop back in queue and give others a chance. Thanks..

Our next question comes from the line of Tahira Afzal from KeyBanc Capital Markets. Please proceed with your question..

Hi, guys.

How are you doing?.

Good morning..

Good morning, Tahira..

First of all, congratulations to everyone at Primoris on the Bell Ringing. I saw your interview, David..

Well, thank you. Sometimes I don’t know how I came across in those interviews and it was a little bit impromptu for me. So, hopefully, it wasn’t too bad to look at..

No. You did a good job. I guess, I was doing some math into 2019 and correct me where I am wrong, I mean, as you said and as I tried there seemed to be several petchem sort of projects and LNG projects that do carry pretty high visibility for you into 2019. To your point, don’t know when they come across exactly in the second half of the year.

And then, on the pipeline side, just wanted to get a sense, if I look at your revenues for next year, it’s tough to get below $700 million, right, because you have -- your original bookings for ACP was $680 million.

If you are burning around $190 million this year and the project is slated for completion and you take your base load business over there as it’s going right now, it’s tough to get below $700 million.

And I guess the point I am getting to is if I put your revenue bridge and assume no growth really in PI&E and Civil, you will get to around $2.7 billion in revenues and that is not including Willbros. I would love to get your commentary on how you see your revenue bridge as of right now..

Well, I will let Pete talk about the revenue bridge for you in a moment. I will -- let me talk some specifics on the projects. I think you are very close where I think we have mentioned before on what we see as the revenue burn.

Hopefully, if ACP continues or gets really burning like we are talking about that $190 million-ish type number that you are talking about. And yeah, they are scheduled to complete next year, so I can certainly see and agree with you on your kind of numbers therein, obviously, I don’t want to see ACP slip much further.

I can tell you, obviously, we are working on the one spread 2A and then looking at starting some work in North Carolina, some of the other Virginia work is still going to be slowed down through some of this process..

All right..

So predicated on that not slipping further, I would agree with our numbers on the revenue bridge. Pete can talk specifically about the dollars or the figure, the actual math side of it. I will tell you on the petchem side. We have tracked those jobs. We are very much dedicated subs on several of them.

So I do look for some of those to begin to break in the second half and definitely in 2019. So I am probably not as concerned about our Industrial sector and Civil sector on the I&M side of the Civil, mainly because I do see some of those begin to break.

So, Pete, do you want to comment on the actual revenue numbers?.

Yeah. Tahira, we have said couple of years ago that our goal was $3 billion by ‘19 and I think that if you look at the sort of numbers that you are seeing already on the pipeline at Willbros to it and then some of the rest of our business, there is no reason that we can’t get there, but I am not giving guidance..

Okay. Okay, Pete. I thought I would try my luck over there. I guess just on the pipeline side.

Do you have Chinook the two spreads to one in your bookings or not yet?.

We just announced it this morning and we….

Okay..

… although we had been verbally awarded. You now my rule here is until I have really got the ink on the paper, even if I have got a limited notice to proceed, I don’t announce and we may start work on a limited, but I don’t want to announce and just announced that in this morning. So, yeah, they would be in our, we do look for those to burn.

I think our announcement said that most of that will burn all throughout the latter half of this year. So that will burn very quickly for us over the next six months and it is the two spreads..

All right. Okay. And last question and then I will hop back into the queue. When you look at your SP petchem and LNG opportunities, do shape up for you, if I look at Sasol as an example, David, they can be pretty sizable.

If you look at the underutilization you have in that segment right now, what is the upside on the revenue side on an annual basis versus what your utilization is right now if all else plays out really well?.

Oh! That’s a good question to hear. I don’t know that I have actually put a pen and pencil to it to try to say what’s the upside on the revenue for it? I don’t know that I could really answer that right, Tahira, maybe I can give you this kind of a feel for it.

We are probably running at -- my guess is somewhere around that 50% and maybe in the I&M Group actually less than 50% utilization and on our Industrial side definitely around that 50% or underutilization.

So the revenue run rate we are running at we could easily double those, but I haven’t put up a piece or pen and pencil to it and that would be without really trying to hire and grow, and we definitely can expand well past what our capacity is right now..

Got it..

We were able....

Yeah..

Yeah. We were to accomplish about $500 million in revenues on Sasol in a couple of years and there is nothing that says we couldn’t do that again..

Got it. Okay. Thank you, Pete. Thank you, David..

Yes..

Our next question comes from the line of Adam Thalhimer from Thompson Davis. Please proceed with your question..

Hey. Good morning, guys..

Good morning, Adam..

Good morning, Adam..

I just want to start off on ACP. I am curious the Court of Appeals ruling that came through yesterday afternoon, just curious how that might impact the timing..

Oh! We are still looking at that. I will tell you -- we -- as I mentioned on my prepared remarks, we have already got certain things and there is a certain amount of work that’s already been released up there that that’s really not going to affect. Now will that have an effect if it continues to stay the course longer and delay it? Sure.

But at this time, Adam, I don’t think we see that much of an effect occurring at least what’s been released to us. It may affect it, as I say, some of the work that we are looking to do in the latter half versus -- and push it over into 2019.

I will also make a comment that, as we were looking at ACP, we actually added to the additional spread capacity to our Rockford Group, added a new superintendent and complete spread capacity, which will allow us to continue to go after work that’s non-ACP related in the event that ACP does slow down some.

So I am trying to use that as a backstop if we do get some slowdown on ACP..

Okay.

And then what are your thoughts on Civil margins going forward?.

They need to get better. The answer is that I think what we are seeing is for the jobs that we did and started in the last couple of years, we appear to be doing much better on the margins. We obviously still need to get out of the jobs that we are.

I would expect that starting by next year you are going to see us get to positive margins and then hopefully by the end of the year, we get closer to the 4% to 5% that we believe that margin should be for the Heavy Civil.

And then the Civil, if you include I&M that’s probably going to depend on when they can pick up some additional work if they get some of this big work that would be very useful..

Okay. And then you have had some recent awards for the T&D Group.

What are your thoughts on the revenue capacity on an annual basis for that Group?.

I think we originally, Pete, looked at that....

Yeah. We originally thought it would be in the $450 million to $500 million range..

Yeah..

To be honest, Adam, there is nothing that says we can’t grow beyond that. We appeared to have the attention of the customers and the interest of the customers. Our challenge is we will be bringing equipment online when it’s needed.

And then we have the same challenge in electric T&D that all of our competitors and peers do, which is making sure that we can replenish and find qualified Lineman, Journeyman that can do the work. So, I think, the limitations are not as likely to be the customers as they are, our ability to bring to bear both new equipment and new people..

And, Adam, adding on what Pete was saying on both the equipment and the people, obviously, the equipment as we have mentioned, we are beginning to put some CapEx in there in strategic locations, where we think we will get the biggest bang for the buck quickest.

And then on the people, we have actually met again, Tom McCormick has done most of it for me. But meeting with the different customers and looking at the training programs they have -- that they have in place at some of the community college and also the Southeast Lineman School in the Southeast U.S.

And we are getting relationships established with each of those community organizations, as well as the Southeast Lineman to train the craftsman that we think necessary in this in lineman’s field to make sure we have got adequate resources..

Okay. Great. Thanks, guys..

Thank you, Adam..

[Operator Instructions] Our next question comes from the line of Bill Newby from D.A. Davidson. Please proceed with your question..

Good morning, guys. Thanks..

Good morning..

Good morning..

Just a few -- you have all done a little bit more on ACP, you guys haven’t talked about enough yet.

I guess, any color on that contract structure, David, and I guess, is it -- I mean are there contingencies or compensation things built into that if you do see further delays?.

Yes. On from a consortium basis, first of all, the contingencies risk with the customer. We make sure that the new contracting philosophy allowed the customer to take advantage of any savings that there might be in their own contingencies.

As we move the equipment in, the customer pays the cost of the equipment and the rates therein, and then, in any standby time if the project is delayed, the customer pays the standby time.

So I am not concerned about us not making money relative to standing by, I think, that’s covered, obviously, we don’t burn the revenue when we are on standby and we are just like the customer, we would rather be burning the revenue with the customer than get -- than getting paid for standby. But, yeah, there is standby provisions in the contract..

Okay. I didn’t figured it out. I just want to double check..

Yes. Sure..

And then, you mentioned you brought on some extra team for this ACP project. I guess, how mobile is that team if you do want to move them to another project. Can you move them all the way into the Permian or....

Yes. And I didn’t say I brought them in for the ACP project. What I did was we wanted to add another spread capability, because we pretty much got the spread bosses and things that Rockford had committed on the ACP projects. So I am -- I don’t tell a customer one thing and then pull and run the other direction.

So what we did from a management perspective, we said, look, let’s add one more spread capability, so that other customers that we have that want Rockford to do projects, we could actually move or spread for them without affecting ACP. I can pretty much move them around the country.

You do have to realize that there is an open shop versus a union aspect of that. Most of the work are going to be done in the Permian Basin is going to be open shop, not union. It doesn’t mean I can’t go out there and do it union. It’s just that the cost parameters there may end may not be as effective as an open shop..

Got it. I appreciate it. That’s all I got. I will get back in queue..

Thanks..

Ladies and gentlemen, we have reached the end of the question-and-answer session. And I would like to turn the call back to David for closing remarks..

Well, we certainly appreciate your continued interest in Primoris. We do have planned Investor Relation trips to Boston, New York and Chicago -- hopefully we will see some of you soon and answer some additional questions. We appreciate your time today and have a good day..

This concludes today’s conference. You may disconnect your lines at this time. Thank you for your participation..