Kate Tholking - Vice President, Investor Relations David King - President and Chief Executive Officer Pete Moerbeek - Executive Vice President and Chief Financial Officer.

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

Greetings. And welcome to the Primoris reports 2018 third quarter financial results call. At this time, all participants are in a listen-only mode and a brief question-and-answer session will follow the formal presentation. [Operator Instructions]. As a reminder, this conference is being recorded.

I'd now like to turn the conference over to your host, Kate Tholking, Director of Investor Relations. Please go ahead..

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

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

Once on the Investors site, you'll find the slides in the “Events & Presentations” section, next to the webcast link for today's call. Before we begin, I'd 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, our Form 10-Q which was filed last night, and other filings with the SEC.

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 security laws. I'd now like to turn the call over to our CEO, David King..

Good morning, everyone, and thank you for joining us today to discuss our third quarter results. As I begin my remarks, I'd like to first give a special thanks to Pete Moerbeek, our CFO, who has announced his retirement plans. Pete has served this company and its shareholders well since he became our CFO almost 10 years ago.

Our words cannot express our gratitude for Pete and his contribution as we have grown from the third quarter 2009 revenues of $111 million to today's record $909 million. Also, on the call with us today is Ken Dodgen, Executive Vice President and Corporate Controller.

Before I begin my normal segment comments, I want to share a few recent highlights from some of our projects. While we obviously benefit from a large pipeline and other industrial construction projects, Primoris continues to generate revenue and profits from other end markets.

Some of the highlights include Primoris has begun a pilot program at multiple locations on the West Coast for a major utility. The program is developing electrical vehicle charging stations for both residential and commercial applications.

Primoris also achieved mechanical completion with 500-megawatt gas-fired peaking plant for all five GE gas turbine generator blocks at Carlsbad. Primoris also used a very creative execution approach to successfully complete a major horizontal drill underneath the Carquinez Strait in California.

Primoris also reached mechanical completion on the largest solar project in the State of Texas. The Midway Solar farm project installed more than 680,000 solar panels on almost 1,500 acres of land in Pecos County.

Primoris also completed 40 miles of high-voltage transmission line in West Texas, while in Iowa, also installing over 14 miles of 69 KV and 11 miles of distribution underbuilds. Primoris was also a part of the hurricane relief efforts for Hurricane Florence and Michael this past quarter.

We provided over 400 employees, and we are proud of their efforts in helping restore power in the areas affected by the hurricanes.

And finally, Primoris continues to be an industry leader in safety, with 14 business units finishing our quarter without a single OSHA recordable incident rate, achieving the lowest-ever total recordable incident rate in Primoris' history.

These projects, as well as many more, allowed us to achieve our record quarterly revenue of $909 million and record quarterly net income of $33 million. These results demonstrate our strong execution across multiple business units. These results also allowed us to follow through on our goal of strengthening our balance sheet.

We paid down some of the debt incurred for the acquisition of Willbros, and we’re already on our way towards returning to pre-acquisition debt-to-equity levels. And while our backlog is down slightly from the second quarter, I believe this is a timing issue as we see multiple opportunities for large awards across several operating segments.

While we have also made strides in lowering our SG&A cost, I believe we can continue to improve, and I'll let Pete address the specifics in his comments. Because of both the lumpiness of the project awards and the MSA nature of our utility work, we tend to focus on actual backlog rather on a book-to-bill perspective.

For the quarter, our new business taken allowed us to roughly maintain our backlog even with our record revenue burn. I'm also pleased to see the new types and diversity of the projects that we’re being awarded.

These range from gas and electrical distribution MSA renewals to pipeline awards to front-end engineering design and management and certain LNG facilities. They include awards for power, both refining and petrochemical-based industrial work, site work, midstream facilities and terminal storage projects.

I'm also pleased to see our prospect funnel increasing as we head into the fourth quarter and 2019. In the fourth quarter, we expect that our customers will continue to deploy the capital in multiple-year MSA agreements, as well as reach final investment decisions for several of the major projects we are pursuing.

Now, diving into the segments, I'll start with the Civil segment. We’re pleased to see this segment's progress in obtaining more profitable work as well as beginning the process of commercially settling change orders and claims.

The weather was certainly a challenge, as both Texas and Louisiana received over one-half their annual rainfall in the month of September. At best, our crews were only able to work half the month, while we had some crews who had only a few days of workable condition.

On one Primoris I&M job site, we received 40 inches of rain in the month of September, which clearly affected productivity. Jonas Beatty's team executed well under these challenging conditions. They have seen a resurgence of bidding opportunities, which we expect to translate into backlog and revenue in 2019 and early 2020.

Some of these opportunities could result in major projects for which we could be selected in 2019. On the Heavy Civil side, we announced last week a new $102 million award for TxDOT.

We are confident that the actions Mark Buchanan, the President of the Heavy Civil group, has taken over the past year will allow for strong performance financially on this project.

We have refined our estimating approaches significantly, implemented more disciplined execution approach and approved bidding markups and focused an awfully lot of attention on schedule. After our experience with the Belton jobs, we have become very educated on how to work with TxDOT.

The Texas heavy civil market continues to show broad strength and we expect to take advantage of strategic job opportunities as they arise. Louisiana is a little different story as the focus of that state's efforts have been primarily along the I-10 corridor. This is an area where, historically, we have been able to operate well.

As with the task of turning around any battleship, the process has been slow, but we are becoming more optimistic about heavy civil opportunities and our ability to perform up to our expectations. Our Power, Industrial & Engineering segment is wrapping up two successful power projects, one on the East Coast and one of the West Coast.

Tim Healy's ARB Industrial team in California has delivered another great power job for Primoris at Carlsbad. The recent passage of California SB 100 and its mandate for 100% renewable energy by 2045 has added to the political challenges facing any new natural gas projects.

ARB Industrial has been selected for a new repowering project scheduled to begin in 2019. However, the plant is currently reviewing over 30 alternative configurations. And while we feel optimistic that we will receive that eventual reward, this drawn-out process has pushed potential revenue into 2020.

While large national gas power projects have historically been great projects for ARB Industrial, they are not the only drivers of our industrial work on the West Coast. We’re doing smaller single-cycle, gas-fired plants as well as pressure stations for utility customers.

We just announced the renewal of an MSA for this group working in the oil fields, doing ongoing maintenance for roughly $30 million a year. And we are focused on expanding our presence in the battery storage and utility scale solar markets, markets that we expect will benefit from SB 100.

We recently built one of the largest battery storage facilities in North America and are ready to take advantage of this market that is expected to grow significantly over the next few years.

Our expansion into the solar market is enhanced by our Primoris Renewable Energy business and their work at the Midway Solar facility in West Texas I mentioned earlier. This was our first foray into the utility-scale market, and we are pleased not only that it was a profitable job, but it looks great on our resume.

The business unit continues to work closely with other Primoris business units. For the last 10 consecutive quarters, utility photovoltaic added over a gigawatt of capacity. And the total U.S. photovoltaic capacity is expected to more than double over the next five years.

Of course, our Industrial work along the Gulf Coast was impacted by some rainfall, as was our Civil segment. While the completion of the large Lake Charles ethane cracker project has impacted our year-over-year comparison, Primoris' Industrial constructors are executing well on current projects.

The funnel opportunities for Conrad Bourg's team is looking strong. We said last quarter that we expected some of these large projects to either break late this year or early in 2019, and that continues to be the case.

We see tremendous bidding opportunities across the petrochemical spectrum, including LNG plants, thermal expansions, methanol facilities and syngas. We were pleased to have been able to announce our first new award for Primoris Willbros Canada, building new storage tank at an oil sands facility.

Jeremy Kinch's team had a profitable quarter as work in the oil sands mines picked up, and they reduced the operating expense level at the unit. Of course, we're entering the winter months in Canada, so we expect a seasonal slowdown, but, overall, I'm very pleased with the results from the Canadian unit to date.

Both our OnQuest and Primoris Design & Construction Engineering units grew revenue and backlog in the quarter. At OnQuest, we are seeing improved opportunities in the Canadian petrochemical market, as low-cost NGL feedstock is driving expansion in ethylene and propylene facilities.

Randy Kessler's team is having success getting on the bid list for a larger heater package, and they are also pushing into opportunities for biomass and land gas-filled product lines.

Kevin Maloney and the PDC group continue to work on front-end engineering and design projects, and they are assisting other Primoris business units in pursuing opportunities ranging from crackers to alkylation units.

I'd also like to welcome Kevin Smith, who joined Primoris in August as segment president, overseeing our Gulf Coast Industrial, Fabrication & Engineering business units after Gary Martin retired. Kevin has over 40 years of construction experience, specifically in gas processing, refining, petrochem, power and LNG industries.

I look forward to working with him to take advantage of the opportunities in the Gulf Coast industrial market. We have also brought on a new segment president for the Utilities & Distribution segment, as Jay Osborn has finally taken his well-earned retirement.

Mike Christy has nearly 30 years of construction experience, with management roles focused on utility and telecom industries. He has big shoes to fill, but I'm confident he is up to that task. He picked a good quarter to start as the third quarter revenue is historically the strongest for our gas utility work.

In the Midwest, Doug Reeves is continuing our effort to expand Q3C's geographic reach, and Q3C is now close to operations throughout the entire state of Iowa. ARB Underground, led by Scott Summers, continues with strong execution.

In addition to their regular natural gas utility MSA work, we announced an underground transmission conversion project, which will install trench and conduit systems. Our Florida-based utility group, Primoris Design and Services, is achieving the goals we set for them when we acquired them last year and we're pleased with their steady growth.

The Utility & Distribution segment is a significant contributor to the growth we have seen in our MSA revenue. Nearly 60% of the record $390 million MSA revenue in the third quarter was from this segment. The Pipeline & Underground segment garnered a lot of attention in the third quarter.

While most of the focus has been on Rockford and the Atlantic Coast Pipeline project, I want to begin by talking about our open shop units, Primoris Field Services and Primoris Pipeline. The Primoris Field Services team has generated nearly 3 times as much revenue in the first three quarters of 2018 as in the first three quarters of 2017.

The business unit is led by Jeff Bridges, who has been instrumental in growing this business. Patrick McRae's Primoris Pipeline team is executing well on a Permian Basin-West Texas job, which we announced in August. We have devoted two spreads to the job, although the September rain will likely push completion into the first quarter of 2019.

Patrick's team has done plenty of opportunities – or has seen plenty of opportunities to pursue for the remainder of 2019 and into 2020. There are multiple 100-mile plus pipelines being planned across the Permian Basin in Southwest, and we expect that Primoris Pipeline will win its fair share of these opportunities.

Turning to Rockford, we anticipate our spreads will be very busy on ACP throughout the entire 2019 year and into part of 2020. Although the additional spread capacity we implemented last year is still unspoken for at Rockford, we’ll be very picky on what we want them to win. Pipelines aren't developed in a vacuum.

And owners are well aware that much of the current industry capacity is committed to two large projects, one of which is ACP. So, while there are multiple projects on the table for 2019, they can't all be built at once, and we expect that some of them will be pushed back to 2020 and perhaps beyond, extending the life of this strong midstream market.

For now, Rockford is focused on the successful execution of the ACP project, and their other project is currently underway. I know the permitting issues have been in the news, and I expect we'll continue to hear about them throughout the life of the project.

Josh Ramsey and the entire Rockford team are doing an outstanding job, staying in close communication with our customer and partners, tracking our performance, making sure we have the crews and equipment in place to work.

We will be pulling back out of West Virginia during the winter months, focusing mainly on access roads, but at the same time, we anticipate ramping up on the North Carolina and Virginia portions of the project. As you can tell, I expect continued strong performance across our Pipeline business units in 2019.

I want to close with our newest segment, Transmission & Distribution. With the financial and operational strength of Primoris now backing them, Johnny Priest's group is having success expanding work for their existing customer base and signing on new customers.

While labor availability is tight in this end market, we are pleased that workers are returning to Primoris T&D. We are actively recruiting, training and hiring new linemen to whom we offer a strong company with a reliable future.

In late September, over 40 crews were in Virginia, North Carolina, South Carolina, doing restoration work after Hurricane Florence. In September and continuing into October, we had over 30 crews working in Florida help clean-up from Hurricane Michael.

The emergency storm work results in lost time on regular maintenance work in the affected areas, but we are proud to be part of the effort of helping communities recover from these devastating storms. I want to conclude with a comment on the progress we have made in integrating the operations of Willbros' acquired business units into Primoris.

As you can see from our operating results, Willbros has made a positive contribution to our record third quarter financial results. We believe that the integration is going smoothly and we remain very pleased with the acquisition.

I want to thank Tom McCormick, our Chief Operating Officer, and all of our employees, new and old, for their help in making this integration process a success, while maintaining their high level of focus and dedication to our existing projects. With that said, I'll now turn it over to Peter to talk about the numbers.

Pete?.

Thank you, David. And good morning, everyone. I want to highlight the results of our record-setting financial performance for the third quarter, without repeating all the numbers which are included in both our earnings release and Form 10-Q, which we filed yesterday evening. I also want to close out some open items.

Revenues in the 2018 third quarter were $909 million compared to $608 million in the 2017 third quarter. Third quarter revenues increased significantly in three of our segments, remained flat in the Civil segment and included the results of the newly formed Transmission & Distribution segment, created after the June 1, 2018 acquisition of Willbros.

During the quarter, three large utility customers represented a combined $202 million or 22.2% of our revenues. The third quarter is historically the strongest for our utility work. And this year, we were able to add the revenue contributions of a third large utility, now part of the newly-formed Transmission segment.

That utility represented $55 million or 6.1% of total third quarter revenue. Even with the increase in revenues, we were able to improve our gross profit to 11.7% of revenues compared to 11.6% of revenues in the 2017 third quarter.

Selling, general and administrative expenses in the 2018 third quarter were $52 million compared to $42 million in the 2017 third quarter. On last year's third quarter earnings call, I said that our goal was to reduce our SG&A expenses as a percent of revenues to the 6% to 6.5% range.

Despite Tahira's incredulity and, obviously, benefiting from the record earnings, we achieved an all-time low of SG&A expenses at 5.7% of revenues. We have now proved that we can exceed our goal. Merger-related expenses in the third quarter were $3.8 million and $13.2 million for year-to-date.

The third quarter included retention program expenses, additional severance and the impairment of part of the facility lease for Willbros' former Houston headquarters. At this point, we expect our fourth quarter expenses to be in the $1 million to $2 million range. We continue to work through purchase accounting for the Willbros acquisition.

At September 30, 2018, we have recorded $55 million in goodwill associated with the acquisition, which we allocated among the operating segments as follows – $43 million to the Transmission segment, $8 million to the Power segment and $4 million to the Pipeline segment.

We have also recorded intangible assets of $49 million, primarily for customer relationships. The intangible assets are being amortized over a 20-year period. For the quarter, our total amortization was $3.1 million, and we expect a similar amount for the fourth quarter.

We have one year from the purchase date to finalize the purchase accounting numbers, so they will most likely change. However, at $104 million, the total of goodwill and intangibles is less than our estimates at the time of the acquisition.

Along that line, when we first announced the acquisition, we were not able to determine at what point the Willbros acquisition will be accretive. In the four months since the closing, the acquisition has contributed pretax earnings of a little over $1 million.

We now expect that the acquisition will be accretive for 2018, for the first fiscal year of ownership and, hopefully, for many years to come. We see opportunities to continue to improve the operating results of the acquisition. This month, we expect to move the Transmission segment under the Primoris' ERP system.

And by the end of this year or shortly thereafter, we should be able to pull the plug on the legacy Willbros information systems. Completion of that task will both reduce operating expenses and enhance the integration process.

As we mentioned on the last call, in early July, we entered into a $220 million variable interest rate term note, which allowed us to pay off the $82 million outstanding senior notes and $135 million of revolver borrowings used to fund the Willbros acquisition.

During the quarter, we used cash on hand to pay down the remaining $35 million of the revolver balance. In September, we entered into an interest rate swap agreement to effectively change 75% of the term loan from a variable rate to a fixed rate loan.

At September 30, 2018, our total debt stood at $370 million, consisting of a $270 million term loan, $143 million in equipment notes, $11 million of mortgage notes and $1 million of unamortized debt issuance costs. Our weighted average interest rate for the outstanding debt was 4.1%.

In August 2018, the Board of Directors increased the amount of our authorized share repurchase program from $5 million to $20 million. During the third quarter, we purchased and canceled 335,705 shares for approximately $8.5 million. At quarter end, $11.5 million remain under the authorized program, which expires on December 31, 2018.

On the legal front, during the third quarter, we increased by $3.5 million a liability for forecasted remediation cost from a 2015 settlement of a project performed by James Construction in the early 2000s. At September 30, 2018, the accrued liability balance was $18.5 million.

During the quarter, we made some progress toward resolving the outstanding receivable from a project that we completed in 2014. As the owner is in bankruptcy, we have been attempting to collect the money owed us from several sureties.

In the second quarter, we reached a partial settlement and received $12 million, which reduced our receivable balance to $21 million. During the third quarter, we reached an additional settlement for $9 million and we were able to recognize gross profit of $6.2 million.

We received the payment in October, and the remaining balance of $12 million is now fully reserved. A trial date with the remaining surety has been set for November 26, 2018. We hope that we can bring this matter to full resolution in the fourth quarter, a full four years after we completed the work.

For the 2018 third quarter, cash used in operating activities was $12 million compared to $45 million in cash provided by operating activities in the 2017 third quarter.

If there's ever a good reason for using cash, it is to fund the significant increase in third quarter revenues, which have led to higher levels of account receivable and contract assets. During October and November, we have seen some very big collection days.

In the 2018 third quarter, we spent approximately $35 million on capital expenditures for a total year-to-date expenditure of $81 million. We expect expenditures between $10 million and $15 million in the fourth quarter. Our fixed backlog at September 30, 2018 was $1.6 billion, MSA backlog was $1.1 billion and total backlog was $2.7 billion.

And, finally, our guidance for the remainder of the year which, at this point, becomes quarterly guidance. We’d normally expect that we could make a good estimate for the next quarter's earnings. However, there's not much normal about this year.

We have seen significant delays in the ACP project, but are now forecasting good revenues for Rockford in the quarter. We have been challenged by extreme rainfall, but we've seen some improved weather and there is much work that we plan to do before the onfall of winter. We expect to see resolution for significant claims in the quarter.

The potential results for the quarter vary widely. But we see a path to another record quarter. Therefore, we have left our 2018 guidance at the same level, and we will run as fast as we possibly can. Before concluding the call, I'd like to take a few moments at the end of my last earnings call.

I thank David for his comments at the start of the call and I appreciate the opportunity that David and Brian Pratt gave me to be the CFO of Primoris. I have been fortunate to lead an outstanding finance team and have worked with a large number of great operations team members.

We did not have an earnings call for our first quarter as a public company, but in the 40 calls since, I have been able to report 40 consecutive quarters of positive GAAP earnings. I have enjoyed meeting many of our owners and working with a group of analysts who really do understand our business.

Both Tahira and Adam have been long-time followers of our story, and I believe that Lee Jagoda has been on all 40 of these calls, usually first in the queue.

The new voice that you will hear in today's Q&A and investor meetings and on future earnings call is that of Ken Dodgen, who will succeed me as CFO, as Janet and I head toward the Pacific Northwest. Ken has been at Primoris for about year-and-a-half, and I know that he will do well. Let's get to your question.

And I will turn the call over Rob, our operator..

Thank you. [Operator Instructions]. The first question today is coming from the line of Brent Thielmann with D.A. Davidson. Please proceed with your question..

Great. Thanks. Good morning. And, Pete, all the best to you as well..

Thank you..

You guys are putting up some really solid results here in the Power, Industrial & Engineering business side.

I know we're not talking about 2019 quite yet, but could you talk qualitatively about how you're thinking about the segment and the business into next year? Is next year a kind of rebuilding year in terms of bookings, backlog, for resumption in growth in 2020 or can we continue to grow off of these pretty strong levels?.

Yes. I'll start out with that, Brent. This is David. Let me segment between our west – or the union shop and then the open. On the west, as I mentioned in the comments, we've been able to get through that SB 100.

We've been able to get some MSA work, some maintenance work, some of those kind of things, but they are not the big projects like the power project. The power project, I think, that we've kind of been verbally awarded, but yet certainly not ours to share, is going to go through a few more phases.

We're hopeful that that will get released sometime in 2019. But, as I said, most of that revenue borrowing will really take place mostly in 2020. So, I think what you're going to see on the west is some of the smaller projects. But we're certainly out there, certainly getting our fair share, and I think we'll do quite well out there.

When you get to the open shop, it's a little bit different scenario. We've been waiting for some of that pent-up demand to break loose on the Gulf Coast. We’ve continued to see some of the refining in petrochem, more of the petrochem side of it than the refining side of it.

But, as you know, there's some fairly large petrochem projects that we're well positioned for that we think we're going to get early in 2019 that will burn very quickly for us. We're already beginning to see through some of the actions of our engineering efforts. We're already beginning to see some of the site work break loose for Jonas' group.

We're already doing some site work on some facilities. And then, of course, we're tracking quite a few of the LNG-related projects and things like that. So, we actually feel that those will start to come to fruition also. And, in fact, out there, we're working on one currently, although albeit in a very small role right now.

So, I think what you're going to see in the open shop is a much more robustness of the bigger projects, quicker than you will on the west side..

Okay. Thanks for that, David. And then, on Civil, it sounds like there's more sort of disruptive forces in the quarter than anything else on the margin.

Do you feel good about getting that business back to kind of a mid-single-digit run rate in the near term?.

Yes, we do. In fact, I think we've mentioned this for several quarters. And every time, we have meetings with investors, we’re going to open that spigot pretty much any time we want and gain in revenue.

But we've intentionally kept that unit at pretty flat, okay? Even though the rest of the organization has been growing, we've intentionally kept that flat to make sure that we got our estimating and management and execution skills and superintendent levels trained and everything the way we wanted them to, so that we’d get the performance off the work that we wanted.

So, yeah. And then, if you remember, we're still burning off quite a bit of revenue that had zero margin with it. And so, as these other jobs are performing better, they are getting masked over by the fact of some of the revenue burn with zero margin performance So, yeah, I guess, in summary, I would say I do see that continuing to get better.

And once we're confident that – and we wouldn't have taken this recent job that we mentioned had Tom and myself not been very confident in that execution approach as well as the estimate and the team that we put on it. But as we get more confident in that, we'll begin to grow that business unit again..

Okay. And just last one, if I could. It sounds like you got debt down. Willbros integration seems to be going pretty smoothly.

Are you starting to kind of cultivate the acquisition pipeline again and thinking about that or do you want to take a little more time and integrate this Willbros transaction?.

Well, believe it or not, I never turned it off. Obviously, you want to digest what you've got, but we continued to look at some opportunities out there. We didn't find one that we really liked. We've always been a very acquisition-oriented organization. You won't see that change at all.

I can tell you that I will get hungrier and hungrier for acquisitions as the quarters go on. So, yeah, I was pretty focused – or the company was pretty focused, keeping our eye on the execution side of the company; at the same time, doing the integration of the acquisition.

And I think, by our results, you've seen that we didn't take our eyes off the ball. But, yeah, I'll start, after the first year, getting pretty hungry for another acquisition, but it will have to be the proper one..

Okay, great. Thank you..

Yes, sir. Thank you..

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

Hey, good morning, guys. Nice quarter. .

Thank you, Adam..

Pete, I'm really going to miss you. Congratulations..

Thank you..

Can’t believe it. Can’t believe it’s been 10 years..

I can, Adam. I’ll say that. I'm just having fun with Pete. I'm only joking, Adam..

I think, Pete, you touched on it. I'm still trying to figure out the annual guidance and kind of how we get there for Q4. The one piece that you mentioned, I think you said you got $12 million in October from the legal settlement.

So, is that included at some kind of a gross profit margin in Q4?.

No. That actually related to Q3. We didn't get the cash until Q4, and that's why the numbers are what they are. What I said was that we fully anticipate that we should be able to get to a resolution of that matter some time during the fourth quarter at this point, and so there is some potential upside there..

But is that kind of baked into your outlook for Q4 or no?.

I think we are expecting some positive outcome, yes. And I can't tell you the specific number, Adam, because we're in litigation. But I think there is some upside from that, yes..

So, okay. So, we can put that in the Power segment.

But then, is the Pipeline segment, is that – did the margins jump up a lot in Q4 versus Q3?.

We should definitely see some of that, Adam, because of – I think I mentioned to you, we've got the Primoris Pipeline jobs going on out in West Texas. Now, we're going to have some rain, and so let's bar – let's make a comment barring any weather-related issues. And I think, hope to God, they’ve had enough rain out in West Texas by now.

But that job was originally scheduled to be finished by the end of the year, but because it got hit by that rain, a little bit, as I mentioned, will bleed over into the first part of next year. But that one is going to be blowing and going as fast as we can.

As we mentioned, there's nothing holding us back now in ACP, both in North Carolina and Virginia. And typically, weather doesn't bother you too much up in North Carolina and Virginia. And as I mentioned, we pulled out of West Virginia because of the weather issues there in the hills.

So, yeah, I think you are going to see some movement in the Pipeline side. And I think we also talked about the Field Services side that Jeff Bridges is handling for us. That business unit has been adding quite a bit of backlog, so we should burn fairly well there also..

Okay. So, Field Services is good as well.

And then, what about Transmission? Maybe there's some pull-through of some storm work in Q4 on the profit side?.

Well, we still have some that comes in because of the work that was done in October. So, yes, there’ll be some in there. I never want to pray for a storm. So, I hope we don't have any more storms that the guys have to go do in the month of November or December. But, yeah, you will see a little bit of the uptick there from their October.

Now, typically, November and December is a slowdown for them as far as their market is concerned. So, there may be a balancing effect there..

Okay.

But if I'm reading you right, it seems like relative to this full year guidance of the $1.50 to $1.70, you'd be more comfortable if we were kind of at the low end or maybe even a little bit below the low end going into the Q4 or forward?.

Well, I try not to say too much on that, Adam, because, obviously – sure, I guess, I'd always prefer you come in on the low side. That way, if I come in up on the high side, you give me credit for it. And I think Pete said it very well in his comments. Adam, there's a lot of moving parts and pieces.

When you're down to the last quarter – as you know, we used to give rolling four quarters, and so now on an annual basis, when you're at the really last quarter, everything has to click together. And there's just a lot of moving parts and pieces in our organization. That's why we left it and maintained it where it was at..

Okay. Good. Okay, thanks again..

Thank you, Adam..

The next question is from the line of Tahira Afzal with KeyBanc. Please proceed with your question..

Hi, folks. Congrats on the quarter. .

Thanks, Tahira..

Thanks, Tahira..

You spoke to us, with the ACP, $35 million reduction. But it seems you guys were able to more than make up for it. So, congrats on that. I guess, my first question is really in regards to Golden Pass.

You said you started some work on that already, David?.

A very small portion, Tahira. We're doing some side road work and things. Very minor. I want to make sure you realize it's very minor, but it was an indication for us to get on sides and things. We certainly do not have the selection for anything other than that at this point in time.

We are certainly trying to get it, but – so, yeah, we are out there with – in a small form currently..

So, I guess, I'm asking because it seems from all the calls you've had with some of the larger E&Cs, they're pretty overwhelmed. In the past, that's translated into a whole bunch of orders for yourself, David.

Is there any reason that would be different this time?.

Ask that question again, Tahira, because I didn't hear the very last part. Sorry, say that again..

So, I was just trying to figure out – typically, with these mega projects, if my larger E&C names start to get a little overwhelmed. That typically means business trickles down to you to $300 million type of orders.

Is there any reason it would be different this time over the next six to nine months?.

No. Now, I understand your question. I think you're absolutely right, Tahira. That's typically what happens, is it will start trickling down to us and then you slowly build from there. That was why I was interested in us getting out there and doing a little bit of current work that we're doing. So, I anticipate it's going to be very much the same way..

Got it, okay. And then, I know your U&D operations, very solid in the quarter. Sometimes they don't get that much love from us on the Street. But 9% year-on-year growth, how much of that is sustainable? We have seen utilities moving more towards accelerating some of the aging pipe replacements.

Is this sort of feeding into this trend or is there something else that we should consider one-time in this quarter?.

No. I don't think you should consider any of what we've got on as one-time, especially not on the Utilities & Distribution side.

I think, if you remember, when we went through the due diligence and the acquisition on Willbros on the T&D side, I think we mentioned to you that, one of the things that we found very exciting about it was once we got into the T&D, we found a substantial portion of revenue.

I want to say it was in that $60 million, $70 million run rate on an annualized basis. That really was not T&D. It was gas U&D work. And through this quarter, we have sequentially been moving that gas Utilities & Distribution work out of T&D and over into our U&D space because it was coming to that T&D group by default.

In other words, they really weren't going out there trying to sell it, but they were in there during the T&D portion, so the U&D portion kind of came with it. So, what we're still continuing to see, Tahira, is utilities ask us more and more to come in and bid some of both their U&D work and their T&D work.

When we bought the organization in Florida, we've continued to see that one grow. And we've got Florida companies now asking us, entities like NextEra asking us to come in and start bidding some additional work for them on the U&D side that we had previously not done.

And I was looking for a statistic – I think I can find it here quickly – that I was kind of interested in sharing. It came out through a publication the other day that natural gas utilities add an average of 1 new customer every minute nationwide. So, I don't see that slowing down currently, Tahira..

Got it, okay. And last question for me, and that's really in regards to ACP. It seems you have around $550 million of revenues in 2019. We see line three as still very much needed, given the binding commitments out there, maybe even we need some more lines. And then, of course, the Permian cycle seems to be doing its own thing.

As you look at 2020, do you feel you can keep your main line revenues flat to even up?.

I tell you what? Right now, with the opportunities we're seeing, I think we can keep it flat. I think it's too early for me to say that it would go up because I know, off of ACP, that we're going to be – except for the additional line that we added on Rockford, that we're going to be pretty full with work in 2019.

And I'm sure you saw Dominion's announcement that they’ve actually lengthened the project out to mid-2020. And so, that leaves us about half a year to fill for Rockford. And I think we will definitely fill that. That's the reason I'm saying I feel comfortable about that staying flat.

And I certainly see what's going on out in the Permian relative to Primoris Pipeline and Field Services. So, too early for me to tell you that that would grow, but continuing to run with a good 2019 and 2020. I think we've got visibility therein..

Okay. Pete, we’re going to miss you a lot. Thank you for all the patience and hand-holding through tough times. And, hopefully, we’ll find a reason to visit you in sunny San Diego..

Thanks, Tahira. I will say this, by the way, that, no, we’re not giving guidance for 2020..

I try. Take care..

The next question is from the line of Lee Jagoda with CJS Securities. Please proceed with your question..

In fairness, I was on another call. Heard you guys were talking about me and I hopped on. .

Safe place..

So, first and foremost, a huge congratulations and a thank you, Pete, for everything over the years. Secondly, if I ask anything that's been asked, I apologize.

So, first and foremost, in terms of the acquisition-related expenses that hit the quarter, do you have an estimate of what will be in Q4 that's implied in guidance?.

Yeah. Somewhere between $1 million and $2 million..

Okay. And then, related to Carlsbad, where are we in the time line there? I think it was supposed to end this quarter, but I don't know if it's got more to go and….

Yeah. We did reach mechanical completion and everything on it. We've got a few cleanup things to do. But, basically, it's substantially complete. But there’ll still be a little bit of revenue burning this fourth quarter, Lee..

And, generally, when projects get to substantially complete, you tend to release profitability.

Is there any profitability remaining that we should expect in Q4?.

There will be some that will come out..

Okay. And I take it you’ve already said Willbros is performing on plan with the original expectations.

Given that it feels like we're at least a little ahead versus where we thought we'd be at this point, is there any update to the original guidance for EBITDA for the acquisition?.

Well, Lee, I promise never to give EBITDA guidance again and I made it almost all the way through the call. I think, Lee, that what we're seeing is we're already at the point of positive pre-tax earnings. We expect that we will do better than what we said. I'm not sure if we have a pencil to it yet.

We're in the midst of doing our 2019 plans now, but we expect that by the end of this – it's profitable now. It will continue profitability in the fourth quarter. And we still have some opportunities to reduce costs and continue to integrate the businesses. So, I think we'll end up doing better than the $25 million that we had forecast in March..

Well, and with you leaving, I probably should have asked it, as would anyone else would like to give EBITDA guidance. That’s all I have. Thank you, guys, again. And, Pete, I'm sure we’ll talk soon..

Okay. Thanks, Lee..

Thanks, Lee..

Thank you. The next question is from the line of Adam Thalhimer with Thompson Davis. Please go ahead with your question..

Thanks for letting me come back in here. Just wanted to ask, for 2019, in the Power segment, kind of high level, it just seems like there's a lot of moving pieces with some projects getting pushed.

What are your high-level thoughts for Power in 2019?.

And you specifically want to talk Power, and not Power & Industrial? So just Power-related projects?.

No. The whole segment. Whole segment..

Okay, okay. Just want to make sure. But I'm going to segment it a little bit. We're still seeing some very good opportunities on some of the solar projects that we're chasing. I'm optimistic, but guardedly optimistic that another one of those Midway-type projects will come our way very, very quick.

As I mentioned, the gas-fired stuff on the West Coast, that's going to be a little bit more delayed. And any revenue there, I don't think would come about until 2020. As far as Power, over in the Southeast area, although we've got a few opportunities we're chasing, I don't see anything major there that will break quickly on just pure Power.

Now when we start talking Industrial, we've already began to see some of the industrial gas organizations begin to start looking to release projects on their industrial gas site, whether it be hydrogen-related or air separation projects, things of that nature. We are in the throes of talking with a major petrochem company.

And that would be a substantial – for Jonas' group, could be another one of the ethane cracker-type projects that we could get in our backyard.

And then, obviously, these LNG facilities, when you look at the three or four that we are certainly chasing, every one of those are in our back doorstep down there in Louisiana, close to our main headquarters in between Houston and Baton Rouge.

So, Industrial-wise, I think you're going to see some pretty good uptick from a business development perspective, probably fairly quick in the first quarter.

And then, I will also say that the little engineering company we've always had, OnQuest, that we started 10 years ago, we are doing quite well on the peak shaving plant that they are executing currently up in the Northeast. There's another identical plant to that that could materialize early in the first quarter.

That would keep that business unit running quite well. And then, our PD&C group that we started in Tyler, they are a front-end engineering and design. I mentioned that some of that work has already begun to pay off, that Jonas Beatty's group – I think we announced it, a $20 million-plus work that they got because of the engineering efforts therein.

And that engineering group has got three other front-end engineering and design projects that they're doing, that we know the FIDs are there for those projects. So, I expect that Jonas' group and then Conrad's group will get some work off of those facilities also fairly early into the, say, first or second quarter of next year..

Okay. I appreciate that. Thanks, David..

Yes, sir..

Thank you. I'll now turn the floor back to David King for closing remarks..

Well, everyone, as I said, I really hate to see Pete go, but I know Ken Dodgen can do a good job for us. And I want to appreciate you participating in our third quarter call. We really do appreciate your interest and your questions. I want you to have a great day. And I ask again that everybody – encourage everyone to go out and vote.

I think freedom to vote is a much-cherished part of the freedom we have in this country. And thank you for participating in today's call. Good day..

This will conclude today's conference. You may disconnect your lines at this time. Thank you for your participation..