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Document and Entity Information - shares	3 Months Ended
Document and Entity Information - shares	Mar. 31, 2020	Apr. 27, 2020
Document and Entity Information
Document Type	10-Q
Document Quarterly Report	true
Document Transition Report	false
Document Period End Date	Mar. 31, 2020
Entity File Number	001-34145
Entity Registrant Name	Primoris Services Corporation
Entity Incorporation, State or Country Code	DE
Entity Tax Identification Number	20-4743916
Entity Address, Address Line One	2300 N. Field Street, Suite 1900
Entity Address, City or Town	Dallas
Entity Address, State or Province	TX
Entity Address, Postal Zip Code	75201
City Area Code	214
Local Phone Number	740-5600
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Large Accelerated Filer
Entity Small Business	false
Entity Emerging Growth Company	false
Entity Shell Company	false
Title of 12(b) Security	Common Stock
Trading Symbol	PRIM
Security Exchange Name	NASDAQ
Entity Common Stock, Shares Outstanding		48,260,436
Entity Central Index Key	0001361538
Current Fiscal Year End Date	--12-31
Document Fiscal Year Focus	2020
Document Fiscal Period Focus	Q1
Amendment Flag	false

CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands	Mar. 31, 2020	Dec. 31, 2019
Current assets:
Cash and cash equivalents	$ 93,474	$ 120,286
Accounts receivable, net	416,412	404,911
Contract assets	359,370	344,806
Prepaid expenses and other current assets	47,409	42,704
Total current assets	916,665	912,707
Property and equipment, net	363,993	375,888
Operating lease assets	253,117	242,385
Deferred tax assets	1,090	1,100
Intangible assets, net	67,460	69,829
Goodwill	215,103	215,103
Other long-term assets	17,675	13,453
Total assets	1,835,103	1,830,465
Current liabilities:
Accounts payable	258,962	235,972
Contract liabilities	176,847	192,397
Accrued liabilities	192,648	183,501
Dividends payable	2,895	2,919
Current portion of long-term debt	52,430	55,659
Total current liabilities	683,782	670,448
Long-term debt, net of current portion	290,749	295,642
Noncurrent operating lease liabilities, net of current portion	176,546	171,225
Deferred tax liabilities	17,820	17,819
Other long-term liabilities	50,762	45,801
Total liabilities	1,219,659	1,200,935
Commitments and contingencies (See Note 16)
Stockholders' equity
Common stock-$.0001 par value; 90,000,000 shares authorized; 48,254,575 and 48,665,138 issued and outstanding at March 31, 2020 and December 31, 2019, respectively	5	5
Additional paid-in capital	91,414	97,130
Retained earnings	524,655	531,291
Accumulated other comprehensive (loss) income	(1,661)	76
Noncontrolling interest	1,031	1,028
Total stockholders' equity	615,444	629,530
Total liabilities and stockholders' equity	$ 1,835,103	$ 1,830,465

CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares	Mar. 31, 2020	Dec. 31, 2019
Stockholders' equity
Common stock, par value (in dollars per share)	$ 0.0001	$ 0.0001
Common stock, shares authorized	90,000,000	90,000,000
Common stock, shares issued	48,254,575	48,665,138
Common stock, shares outstanding	48,254,575	48,665,138

CONSOLIDATED STATEMENTS OF INCOME - USD ($) shares in Thousands, $ in Thousands	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
CONSOLIDATED STATEMENTS OF INCOME
Revenue	$ 743,243	$ 661,558
Cost of revenue	695,433	609,098
Gross profit	47,810	52,460
Selling, general and administrative expenses	44,388	42,931
Operating income	3,422	9,529
Other income (expense):
Foreign exchange (loss) gain	136	(185)
Other income (expense), net	12	(370)
Interest income	281	349
Interest expense	(9,112)	(5,592)
(Loss) income before provision for income taxes	(5,261)	3,731
Provision for income taxes	1,527	(795)
Net (loss) income	(3,734)	2,936
Less net income attributable to noncontrolling interests	(3)	(989)
Net (loss) income attributable to Primoris	$ (3,737)	$ 1,947
Dividends per common share (in dollars per share)	$ 0.06	$ 0.06
(Loss) earnings per share:
Basic (in dollars per share)	(0.08)	0.04
Diluted (in dollars per share)	$ (0.08)	$ 0.04
Weighted average common shares outstanding:
Basic (in shares)	48,588	50,770
Diluted (in shares)	48,588	51,188

CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME
Net (loss) income	$ (3,734)	$ 2,936
Other comprehensive (loss) income, net of tax:
Foreign currency translation adjustments	(1,737)	374
Comprehensive (loss) income	(5,471)	3,310
Less net income attributable to noncontrolling interests	(3)	(989)
Comprehensive (loss) income attributable to Primoris	$ (5,474)	$ 2,321

- Definition

The consolidated profit or loss for the period, net of income taxes, including the portion attributable to the noncontrolling interest.

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+ Details

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY - USD ($) $ in Thousands	Common Stock	Additional Paid-in Capital	Retained Earnings	Accumulated Other Comprehensive Income (Loss)	Non Controlling Interest	Total
Balance at Dec. 31, 2018	$ 5	$ 144,048	$ 461,075	$ (908)	$ 2,763	$ 606,983
Balance (in shares) at Dec. 31, 2018	50,715,518
Increase (Decrease) in Stockholders' Equity Roll Forward
Net (loss) income			1,947		989	2,936
Foreign currency translation adjustments, net of tax				374		374
Issuance of shares to employees and/or directors		2,661				2,661
Issuance of shares to employees and/or directors (in shares)	127,384
Amortization of Restricted Stock Units		487				487
Dividend equivalent Units accrued - Restricted Stock Units		12	(12)
Distribution of noncontrolling entities					(5)	(5)
Dividends declared			(3,051)			(3,051)
Balance at Mar. 31, 2019	$ 5	147,208	459,959	(534)	3,747	610,385
Balance (in shares) at Mar. 31, 2019	50,842,902
Balance at Dec. 31, 2019	$ 5	97,130	531,291	76	1,028	629,530
Balance (in shares) at Dec. 31, 2019	48,665,138
Increase (Decrease) in Stockholders' Equity Roll Forward
Net (loss) income			(3,737)		3	(3,734)
Foreign currency translation adjustments, net of tax				(1,737)		(1,737)
Issuance of shares to employees and/or directors		1,174				1,174
Issuance of shares to employees and/or directors (in shares)	51,268
Amortization of Restricted Stock Units		499				499
Dividend equivalent Units accrued - Restricted Stock Units		4	(4)
Repurchase of stock		(7,393)				(7,393)
Repurchase of stock (in shares)	(461,831)
Dividends declared			(2,895)			(2,895)
Balance at Mar. 31, 2020	$ 5	$ 91,414	$ 524,655	$ (1,661)	$ 1,031	$ 615,444
Balance (in shares) at Mar. 31, 2020	48,254,575

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (Parenthetical) - $ / shares							3 Months Ended
	Feb. 22, 2020	Oct. 31, 2019	Aug. 02, 2019	May 03, 2019	Feb. 26, 2019	Nov. 02, 2018	Mar. 31, 2020	Mar. 31, 2019
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Cash dividend declared (in dollars per share)	$ 0.060	$ 0.060	$ 0.060	$ 0.060	$ 0.060	$ 0.060	$ 0.06	$ 0.06

CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Cash flows from operating activities:
Net (loss) income	$ (3,734)	$ 2,936
Adjustments to reconcile net (loss) income to net cash used in operating activities:
Depreciation and amortization	19,797	21,700
Stock-based compensation expense	499	487
Gain on sale of property and equipment	(2,311)	(2,217)
Unrealized loss on interest rate swap	4,970	1,447
Other non-cash items	1,821	80
Changes in assets and liabilities:
Accounts receivable	(13,911)	(24,722)
Contract assets	(15,682)	(2,328)
Other current assets	(4,849)	(2,231)
Other long-term assets	204	182
Accounts payable	23,934	(59,198)
Contract liabilities	(15,389)	2,590
Operating lease assets and liabilities, net	119	(1,447)
Accrued liabilities	(179)	(9,663)
Other long-term liabilities	(756)	288
Net cash used in operating activities	(5,467)	(72,096)
Cash flows from investing activities:
Purchase of property and equipment	(9,311)	(14,377)
Proceeds from sale of property and equipment	6,902	4,398
Net cash used in investing activities	(2,409)	(9,979)
Cash flows from financing activities:
Borrowings under revolving line of credit		40,000
Payments on revolving line of credit		(40,000)
Proceeds from issuance of long-term debt	6,800	23,105
Repayment of long-term debt	(14,976)	(17,170)
Proceeds from issuance of common stock purchased under a long-term incentive plan	578	1,804
Repurchase of common stock	(7,393)
Dividends paid	(2,919)	(3,043)
Other	(1,285)	(26)
Net cash (used in) provided by financing activities	(19,195)	4,670
Effect of exchange rate changes on cash and cash equivalents	259	327
Net change in cash and cash equivalents	(26,812)	(77,078)
Cash and cash equivalents at beginning of the year	120,286	151,063
Cash and cash equivalents at end of the year	93,474	73,985
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid for interest	4,061	4,065
Cash paid for income taxes, net of refunds received	(369)	(707)
Leased assets obtained in exchange for new operating leases	34,711	8,847
SUPPLEMENTAL DISCLOSURES OF NONCASH INVESTING AND FINANCING ACTIVITIES
Dividends declared and not yet paid	$ 2,895	$ 3,051

Nature of Business

3 Months Ended

Mar. 31, 2020

Nature of Business

Nature of Business

Note 1—Nature of Business

Organization and operations — Primoris Services Corporation is one of the leading providers of specialty contracting services operating mainly in the United States and Canada. We provide a wide range of specialty construction services, fabrication, maintenance, replacement, and engineering services to a diversified base of customers through our five segments.

We have longstanding customer relationships with major utility, refining, petrochemical, power, midstream, and engineering companies, and state departments of transportation. We provide our services to a diversified base of customers, under a range of contracting options. A substantial portion of our services are provided under Master Service Agreements (“MSA”), which are generally multi-year agreements. The remainder of our services are generated from contracts for specific construction or installation projects.

We are incorporated in the State of Delaware, and our corporate headquarters are located at 2300 N. Field Street, Suite 1900, Dallas, Texas 75201. Unless specifically noted otherwise, as used throughout these consolidated financial statements, “Primoris”, “the Company”, “we”, “our”, “us” or “its” refers to the business, operations and financial results of the Company and its wholly-owned subsidiaries.

Reportable Segments — We segregate our business into five reportable segments: the Power, Industrial and Engineering (“Power”) segment, the Pipeline and Underground (“Pipeline”) segment, the Utilities and Distribution (“Utilities”) segment, the Transmission and Distribution (“Transmission”) segment, and the Civil segment. See Note 17 – “Reportable Segments” for a brief description of the reportable segments and their operations.

The classification of revenue and gross profit for segment reporting purposes can at times require judgment on the part of management. Our segments may perform services across industries or perform joint services for customers in multiple industries. To determine reportable segment gross profit, certain allocations, including allocations of shared and indirect costs, such as facility costs, equipment costs and indirect operating expenses were made.

Joint Ventures — We own a 50% interest in the Carlsbad Power Constructors joint venture (“Carlsbad”), which engineered and constructed a gas-fired power generation facility located in Southern California, and its operations are included as part of the Power segment. As a result of determining that we are the primary beneficiary of the variable interest entity (“VIE”), the results of the Carlsbad joint venture are consolidated in our financial statements. The project was substantially complete as of December 31, 2018, and the warranty period expires in December 2020.

Financial information for the joint ventures is presented in Note 10 – “Noncontrolling Interests”.

Basis of Presentation

3 Months Ended

Mar. 31, 2020

Basis of Presentation

Basis of Presentation

Note 2—Basis of Presentation

Interim condensed consolidated financial statements — The interim condensed consolidated financial statements for the three month period ended March 31, 2020 and 2019 have been prepared in accordance with Rule 10-01 of Regulation S-X of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). As such, certain disclosures, which would substantially duplicate the disclosures contained in our Annual Report on Form 10-K, filed on February 24, 2020, which contains our audited consolidated financial statements for the year ended December 31, 2019, have been omitted.

This Form 10-Q should be read in conjunction with our most recent Annual Report on Form 10-K. The interim financial information is unaudited. In the opinion of management, the interim information includes all adjustments (consisting of normal recurring adjustments) necessary for the fair presentation of the interim financial information.

Customer concentration — We operate in multiple industry segments encompassing the construction of commercial, industrial and public works infrastructure assets primarily throughout the United States. Typically, the top ten customers in any one calendar year generate revenue that is approximately 50% of total revenue; however, the group that comprises the top ten customers varies from year to year. For the three months ended March 31, 2020 and 2019,

approximately 50.1% and 49.1%, respectively, of total revenue was generated from our top ten customers. For the three months ended March 31, 2020, one pipeline customer represented approximately 11.3% of total revenue and for the three months ended March 31, 2019 no one single customer represented greater than 10.0% of total revenue.

Recent Accounting Pronouncements

3 Months Ended

Mar. 31, 2020

Recent Accounting Pronouncements

Recent Accounting Pronouncements

Note 3—Recent Accounting Pronouncements

Recently adopted accounting pronouncements

In June 2016, the FASB issued ASU 2016-13, “Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments”, which introduced an expected credit loss methodology for the measurement and recognition of credit losses on most financial assets, including trade accounts receivables. The expected credit loss methodology under ASU 2016-13 is based on historical experience, current conditions and reasonable and supportable forecasts, and replaces the probable/incurred loss model for measuring and recognizing expected losses under current GAAP. The ASU also requires disclosure of information regarding how a company developed its allowance, including changes in the factors that influenced management’s estimate of expected credit losses and the reasons for those changes. The ASU and its related clarifying updates are effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years, with early adoption permitted. We adopted the new standard on January 1, 2020, and it did not have a material impact on our estimate of the allowance for uncollectable accounts.

In August 2018, the FASB issued ASU 2018-13, “Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement”, which eliminates certain disclosure requirements for recurring and nonrecurring fair value measurements. The ASU eliminates such disclosures as the amount of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy, and adds new disclosure requirements for Level 3 measurements. This ASU is effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years, with early adoption permitted for any eliminated or modified disclosures. We adopted the new standard on January 1, 2020, and it did not have a material impact on our disclosures.

Recently issued accounting pronouncements not yet adopted

In December 2019, the FASB issued ASU No. 2019-12, “Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes”, which removes certain exceptions to the general principles in Topic 740 and also clarifies and amends existing guidance to improve consistent application. This ASU is effective for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years. Depending on the amendment, adoption may be applied on the retrospective, modified retrospective, or prospective basis. We are currently evaluating the potential effects of adopting the provisions of ASU No. 2019-12.

Fair Value Measurements

3 Months Ended

Mar. 31, 2020

Fair Value Measurements

Fair Value Measurements

Note 4—Fair Value Measurements

ASC Topic 820, “Fair Value Measurements and Disclosures”, defines fair value, establishes a framework for measuring fair value in GAAP and requires certain disclosures about fair value measurements. ASC Topic 820 addresses fair value GAAP for financial assets and financial liabilities that are re-measured and reported at fair value at each reporting period and for non-financial assets and liabilities that are re-measured and reported at fair value on a non-recurring basis.

In general, fair values determined by Level 1 inputs use quoted prices (unadjusted) in active markets for identical assets or liabilities. Fair values determined by Level 2 inputs use data points that are observable such as quoted prices, interest rates and yield curves. Fair values determined by Level 3 inputs are “unobservable data points” for the asset or liability and include situations where there is little, if any, market activity for the asset or liability.

The following table presents, for each of the fair value hierarchy levels identified under ASC Topic 820, our financial assets and liabilities that are required to be measured at fair value at March 31, 2020 and December 31, 2019 (in thousands):


	Fair Value Measurements at Reporting Date
			Significant
	Quoted Prices		Other		Significant
	in Active Markets		Observable		Unobservable
	for Identical Assets		Inputs		Inputs
	(Level 1)		(Level 2)		(Level 3)
Assets as of March 31, 2020:
Cash and cash equivalents	$	93,474	$	—	$	—
Contingent consideration		—		—		938
Liabilities as of March 31, 2020:
Interest rate swap	$	—	$	11,414	$	—


Assets as of December 31, 2019:
Cash and cash equivalents	$	120,286	$	—	$	—
Contingent consideration		—		—		938
Liabilities as of December 31, 2019:
Interest rate swap	$	—	$	6,443	$	—

Other financial instruments not listed in the table consist of accounts receivable, accounts payable and certain accrued liabilities. These financial instruments generally approximate fair value based on their short-term nature. The carrying value of our long-term debt approximates fair value based on comparison with current prevailing market rates for loans of similar risks and maturities.

In the second quarter of 2019, we sold certain assets that included an earnout of $2.0 million, contingent upon the buyer meeting a certain performance target. The estimated fair value of the contingent consideration on the sale date was approximately $0.9 million. We measured the fair value of the contingent consideration using the income approach, which discounts the future cash payments expected upon meeting the performance target to present value. The fair value of the contingent consideration was impacted by two unobservable inputs, management’s estimate of the probability of meeting the performance target and the estimated discount rate (a rate that approximates our cost of capital). Significant changes in either of those inputs in isolation would result in a different fair value measurement. During the first quarter of 2020, there was no change to the fair value of the contingent consideration.

The interest rate swap is measured at fair value using the income approach, which discounts the future net cash settlements expected under the derivative contracts to a present value. These valuations primarily utilize indirectly observable inputs, including contractual terms, interest rates and yield curves observable at commonly quoted intervals. See Note 9 – “Derivative Instruments” for additional information.

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

+ References + Details

Revenue

3 Months Ended

Mar. 31, 2020

Revenue

Revenue

Note 5—Revenue

We generate revenue under a range of contracting types, including fixed-price, unit-price, time and material, and cost reimbursable plus fee contracts. A substantial portion of our revenue is derived from contracts that are fixed-price or unit-price and is recognized over time as work is completed because of the continuous transfer of control to the customer (typically using an input measure such as costs incurred to date relative to total estimated costs at completion to measure progress). For time and material and cost reimbursable plus fee contracts, revenue is recognized primarily on an input basis, based on contract costs incurred as defined within the respective contracts. Costs to obtain contracts are generally not significant and are expensed in the period incurred.

We evaluate whether two or more contracts should be combined and accounted for as one single performance obligation and whether a single contract should be accounted for as more than one performance obligation. ASC 606 defines a performance obligation as a contractual promise to transfer a distinct good or service to a customer. A contract’s transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied. Our evaluation requires significant judgment and the decision to combine a group of contracts or separate a contract into multiple performance obligations could change the amount of revenue and profit

recorded in a given period. The majority of our contracts have a single performance obligation, as the promise to transfer the individual goods or services is not separately identifiable from other promises in the contract and, therefore, is not distinct. However, occasionally we have contracts with multiple performance obligations. For contracts with multiple performance obligations, we allocate the contract’s transaction price to each performance obligation using the observable standalone selling price, if available, or alternatively our best estimate of the standalone selling price of each distinct performance obligation in the contract. The primary method used to estimate standalone selling price is the expected cost plus a margin approach for each performance obligation.

As of March 31, 2020, we had $2.08 billion of remaining performance obligations. We expect to recognize approximately 58% of our remaining performance obligations as revenue during the next four quarters and substantially all of the remaining balance by the first quarter of 2022.

Accounting for long-term contracts involves the use of various techniques to estimate total transaction price and costs. For long-term contracts, transaction price, estimated cost at completion and total costs incurred to date are used to calculate revenue earned. Unforeseen events and circumstances can alter the estimate of the costs and potential profit associated with a particular contract. Total estimated costs, and thus contract revenue and income, can be impacted by changes in productivity, scheduling, the unit cost of labor, subcontracts, materials and equipment. Additionally, external factors such as weather, client needs, client delays in providing permits and approvals, labor availability, governmental regulation, politics and any prevailing impacts from the pandemic caused by the coronavirus may affect the progress of a project’s completion, and thus the timing of revenue recognition. To the extent that original cost estimates are modified, estimated costs to complete increase, delivery schedules are delayed, or progress under a contract is otherwise impeded, cash flow, revenue recognition and profitability from a particular contract may be adversely affected.

The nature of our contracts gives rise to several types of variable consideration, including contract modifications (change orders and claims), liquidated damages, volume discounts, performance bonuses, incentive fees, and other terms that can either increase or decrease the transaction price. We estimate variable consideration as the most likely amount to which we expect to be entitled. We include estimated amounts in the transaction price to the extent we believe we have an enforceable right, and it is probable that a significant reversal of cumulative revenue recognized will not occur. Our estimates of variable consideration and the determination of whether to include estimated amounts in the transaction price are based largely on an assessment of our anticipated performance and all information (historical, current and forecasted) that is reasonably available to us at this time.

Contract modifications result from changes in contract specifications or requirements. We consider unapproved change orders to be contract modifications for which customers have not agreed to both scope and price. We consider claims to be contract modifications for which we seek, or will seek, to collect from customers, or others, for customer-caused changes in contract specifications or design, or other customer-related causes of unanticipated additional contract costs on which there is no agreement with customers. Claims can also be caused by non-customer-caused changes, such as rain or other weather delays. Costs associated with contract modifications are included in the estimated costs to complete the contracts and are treated as project costs when incurred. In most instances, contract modifications are for goods or services that are not distinct, and, therefore, are accounted for as part of the existing contract. The effect of a contract modification on the transaction price, and our measure of progress for the performance obligation to which it relates, is recognized as an adjustment to revenue on a cumulative catch-up basis. In some cases, settlement of contract modifications may not occur until after completion of work under the contract.

As a significant change in one or more of these estimates could affect the profitability of our contracts, we review and update our contract-related estimates regularly. We recognize adjustments in estimated profit on contracts under the cumulative catch-up method. Under this method, the cumulative impact of the profit adjustment is recognized in the period the adjustment is identified. Revenue and profit in future periods of contract performance are recognized using the adjusted estimate. In the three months ended March 31, 2020, revenue recognized from performance obligations satisfied in previous periods was $3.6 million. If at any time the estimate of contract profitability indicates an anticipated loss on a contract, the projected loss is recognized in full, including any previously recognized profit, in the period it is identified and recognized as an “accrued loss provision” which is included in “Contract liabilities” on the Condensed Consolidated Balance Sheets. For contract revenue recognized over time, the accrued loss provision is adjusted so that the gross profit for the contract remains zero in future periods.

At March 31, 2020, we had approximately $94.4 million of unapproved contract modifications included in the aggregate transaction prices. These contract modifications were in the process of being negotiated in the normal course of

business. Approximately $80.6 million of the contract modifications had been recognized as revenue on a cumulative catch-up basis through March 31, 2020.

In all forms of contracts, we estimate the collectability of contract amounts at the same time that we estimate project costs. If we anticipate that there may be issues associated with the collectability of the full amount calculated as the transaction price, we may reduce the amount recognized as revenue to reflect the uncertainty associated with realization of the eventual cash collection. For example, when a cost reimbursable project exceeds the client’s expected budget amount, the client frequently requests an adjustment to the final amount. Similarly, some utility clients reserve the right to audit costs for significant periods after performance of the work.

The timing of when we bill our customers is generally dependent upon agreed-upon contractual terms, milestone billings based on the completion of certain phases of the work, or when services are provided. Sometimes, billing occurs subsequent to revenue recognition, resulting in unbilled revenue, which is a contract asset. Also, we sometimes receive advances or deposits from our customers before revenue is recognized, resulting in deferred revenue, which is a contract liability.

The caption “Contract assets” in the Condensed Consolidated Balance Sheets represents the following:

●

unbilled revenue, which arise when revenue has been recorded but the amount will not be billed until a later date;

●

retainage amounts for the portion of the contract price earned by us for work performed, but held for payment by the customer as a form of security until we reach certain construction milestones; and

●

contract materials for certain job specific materials not yet installed, which are valued using the specific identification method relating the cost incurred to a specific project.

Contract assets consist of the following (in thousands):


	March 31,		December 31,
	2020		2019
Unbilled revenue	$	268,282	$	251,429
Retention receivable		78,216		81,393
Contract materials (not yet installed)		12,872		11,984
	$	359,370	$	344,806

Contract assets increased by $14.6 million compared to December 31, 2019 due primarily to higher unbilled revenue.

The caption “Contract liabilities” in the Condensed Consolidated Balance Sheets represents deferred revenue on billings in excess of contract revenue recognized to date, and the accrued loss provision.

Contract liabilities consist of the following (in thousands):


	March 31,		December 31,
	2020		2019
Deferred revenue	$	171,553	$	186,081
Accrued loss provision		5,294		6,316
	$	176,847	$	192,397

Contract liabilities decreased by $15.6 million compared to December 31, 2019 due primarily to lower deferred revenue.

Revenue recognized for the three months ended March 31, 2020, that was included in the contract liability balance at December 31, 2019 was approximately $97.9 million.

The following tables present our revenue disaggregated into various categories.

Master Service Agreements (“MSA”) and Non-MSA revenue was as follows (in thousands):


	For the three months ended March 31, 2020
Segment	MSA		Non-MSA		Total
Power	$	37,095		159,098		196,193
Pipeline		46,732		144,791		191,523
Utilities		104,011		43,159		147,170
Transmission		81,774		21,010		102,784
Civil		796		104,777		105,573
Total	$	270,408	$	472,835	$	743,243


	For the three months ended March 31, 2019
Segment	MSA		Non-MSA		Total
Power	$	49,195	$	96,188	$	145,383
Pipeline		21,849		112,965		134,814
Utilities		119,462		26,744		146,206
Transmission		101,723		16,720		118,443
Civil		650		116,062		116,712
Total	$	292,879	$	368,679	$	661,558

Revenue by contract type was as follows (in thousands):


	For the three months ended March 31, 2020
Segment	Fixed-price		Unit-price		Cost reimbursable (1)		Total
Power	$	144,850		181		51,162		196,193
Pipeline		15,345		81,830		94,348		191,523
Utilities		24,089		80,639		42,442		147,170
Transmission		13,636		88,789		359		102,784
Civil		19,859		75,447		10,267		105,573
Total	$	217,779	$	326,886	$	198,578	$	743,243

(1)	Includes time and material and cost reimbursable plus fee contracts.


	For the three months ended March 31, 2019
Segment	Fixed-price		Unit-price		Cost reimbursable (1)		Total
Power	$	75,143	$	6,613	$	63,627	$	145,383
Pipeline		17,227		374		117,213		134,814
Utilities		22,767		67,878		55,561		146,206
Transmission		8,463		105,841		4,139		118,443
Civil		22,685		78,494		15,533		116,712
Total	$	146,285	$	259,200	$	256,073	$	661,558

(1)	Includes time and material and cost reimbursable plus fee contracts.

Each of these contract types has a different risk profile. Typically, we assume more risk with fixed-price contracts. Unforeseen events and circumstances can alter the estimate of the costs and potential profit associated with a particular fixed-price contract. However, these types of contracts offer additional profits when we complete the work for less cost than originally estimated. Unit-price and cost reimbursable contracts generally subject us to lower risk. Accordingly, the associated fees are usually lower than fees earned on fixed-price contracts. Under these contracts, our profit may vary if actual costs vary significantly from the negotiated rates.

Goodwill and Intangible Assets

3 Months Ended

Mar. 31, 2020

Goodwill and Intangible Assets

Goodwill and Intangible Assets

Note 6—Goodwill and Intangible Assets

The carrying amount of goodwill by reportable segment is as follows (in thousands):


	March 31,		December 31,
Reporting Segment	2020		2019
Power	$	26,194	$	26,194
Pipeline		52,415		52,415
Utilities		37,312		37,312
Transmission		59,032		59,032
Civil		40,150		40,150
Total Goodwill	$	215,103	$	215,103

The table below summarizes the intangible asset categories, amounts and the average amortization periods, which are on a straight-line basis (in thousands):


		March 31, 2020						December 31, 2019
	Weighted Average Life	Gross Carrying Amount		Accumulated Amortization		Intangible assets, net		Gross Carrying Amount		Accumulated Amortization		Intangible assets, net
Tradename	9 years	$	16,040		(13,714)		2,326	$	16,040	$	(13,216)	$	2,824
Customer relationships	17 years		91,000		(26,128)		64,872		91,000		(24,353)		66,647
Non-compete agreements	5 years		1,900		(1,653)		247		1,900		(1,580)		320
Other	3 years		275		(260)		15		275		(237)		38
Total	16 years	$	109,215	$	(41,755)	$	67,460	$	109,215	$	(39,386)	$	69,829

Amortization expense of intangible assets was $2.4 million and $2.7 million for the three months ended March 31, 2020 and 2019, respectively. Estimated future amortization expense for intangible assets is as follows (in thousands):


	Estimated
	Intangible
	Amortization
For the Years Ending December 31,	Expense
2020 (remaining nine months)	$	6,448
2021		7,577
2022		6,416
2023		5,581
2024		4,862
Thereafter		36,576
	$	67,460

Accounts Payable and Accrued Liabilities

3 Months Ended

Mar. 31, 2020

Accounts Payable and Accrued Liabilities

Accounts Payable and Accrued Liabilities

Note 7—Accounts Payable and Accrued Liabilities

At March 31, 2020 and December 31, 2019, accounts payable included retention amounts of approximately $10.9 million and $11.3 million, respectively. These amounts owed to subcontractors have been retained pending contract completion and customer acceptance of jobs.

The following is a summary of accrued liabilities (in thousands):


	March 31,		December 31,
	2020		2019
Payroll and related employee benefits	$	74,008	$	64,705
Current operating lease liability		79,532		74,036
Casualty insurance reserves		9,902		9,918
Corporate income taxes and other taxes		6,822		9,027
Other		22,384		25,815
	$	192,648	$	183,501

Credit Arrangements

3 Months Ended

Mar. 31, 2020

Credit Arrangements

Credit Arrangements

Note 8—Credit Arrangements

Long-term debt and credit facilities consists of the following (in thousands):


	March 31,		December 31,
	2020		2019
Term loan	$	200,750	$	203,500
Revolving credit facility		—		—
Commercial equipment notes		93,309		105,114
Mortgage notes		49,854		43,474
Total debt		343,913		352,088
Unamortized debt issuance costs		(734)		(787)
Total debt, net	$	343,179	$	351,301
Less: current portion		(52,430)		(55,659)
Long-term debt, net of current portion	$	290,749	$	295,642

The weighted average interest rate on total debt outstanding at March 31, 2020 and December 31, 2019 was 3.9% and 4.0%, respectively.

Credit Agreement

Our amended and restated credit agreement (“Credit Agreement”) consists of a $220.0 million term loan and a $200.0 million revolving credit facility (“Revolving Credit Facility”), whereby the lenders agreed to make loans on a revolving basis from time to time and to issue letters of credit for up to the $200.0 million committed amount. The Credit Agreement also includes the ability to increase the borrowing capacity thereunder by $75.0 million, subject to obtaining additional or increased lender commitments. The maturity date of the Credit Agreement is July 9, 2023. At March 31, 2020, there were no outstanding borrowings under the Revolving Credit Facility, commercial letters of credit outstanding were $39.5 million, and available borrowing capacity was $160.5 million.

The Credit Agreement contains various restrictive and financial covenants including, among others, a senior debt/EBITDA ratio and debt service coverage requirements. In addition, the Credit Agreement includes restrictions on investments, change of control provisions and provisions in the event we dispose of more than 20% of our total assets. We were in compliance with the covenants for the Credit Agreement at March 31, 2020.

Canadian Credit Facilities

We have a demand credit facility for $4.0 million in Canadian dollars with a Canadian bank for purposes of issuing commercial letters of credit in Canada. At March 31, 2020, commercial letters of credit outstanding were $0.6 million in Canadian dollars, and the available borrowing capacity was $3.4 million in Canadian dollars. The credit facility contains a working capital restrictive covenant for OnQuest Canada, ULC, our wholly owned subsidiary. At March 31, 2020, OnQuest Canada, ULC was in compliance with the covenant.

We have a credit facility for $10.0 million in Canadian dollars with CIBC Bank for working capital purposes in the normal course of business (“Working Capital Credit Facility”). At March 31, 2020, there were no outstanding borrowings under the Working Capital Credit Facility, and available borrowing capacity was $10.0 million in Canadian dollars. The Working Capital Credit Facility contains a cross default restrictive covenant where a default under our Credit Agreement will represent a default in the Working Capital Credit Facility.

Derivative Instruments

3 Months Ended

Mar. 31, 2020

Derivative Instruments

Derivative Instruments

Note 9 — Derivative Instruments

We are exposed to certain market risks related to changes in interest rates. To monitor and manage these market risks, we have established risk management policies and procedures. We do not enter into derivative instruments for any purpose other than hedging interest rate risk. None of our derivative instruments are used for trading purposes.

Interest Rate Risk. We are exposed to variable interest rate risk as a result of variable-rate borrowings under our Credit Agreement. To manage fluctuations in cash flows resulting from changes in interest rates on a portion of our

variable-rate debt, we entered into an interest rate swap agreement on September 13, 2018 with an initial notional amount of $165.0 million, or 75% of the debt outstanding under our Term Loan, which was not designated as a hedge for accounting purposes. The notional amount of the swap will be adjusted down each quarter by 75% of the required principal payments made on the Term Loan. The swap effectively changes the variable-rate cash flow exposure on the debt obligations to fixed rates. The fair value of outstanding interest rate swap derivatives can vary significantly from period to period depending on the total notional amount of swap derivatives outstanding and fluctuations in market interest rates compared to the interest rates fixed by the swaps. As of March 31, 2020, and December 31, 2019, our outstanding interest rate swap agreement contained a notional amount of $150.6 million and $152.6 million, respectively, with a maturity date of July 10, 2023.

Credit Risk. By using derivative instruments to economically hedge exposures to changes in interest rates, we are exposed to counterparty credit risk. Credit risk is the failure of a counterparty to perform under the terms of a derivative contract. When the fair value of a derivative contract is positive, the counterparty owes us, which creates credit risk for us. When the fair value of a derivative contract is negative, we owe the counterparty and, therefore, we do not possess credit risk. We minimize the credit risk in derivative instruments by entering into transactions with high quality counterparties. We have entered into netting agreements, including International Swap Dealers Association (“ISDA”) Agreements, which allow for netting of contract receivables and payables in the event of default by either party.

The following table summarizes the fair value of our derivative contracts included in the Condensed Consolidated Balance Sheets (in thousands):


		March 31,		December 31,
	Balance Sheet Location	2020		2019
Interest rate swap	Other long-term liabilities		11,414		6,443
Total derivatives		$	11,414	$	6,443

The following table summarizes the amounts recognized with respect to our derivative instruments within the Condensed Consolidated Statements of Operations (in thousands):


		Three Months Ended
	Location of Loss Recognized	March 31,
	on Derivatives	2020		2019
Interest rate swap	Interest expense	$	5,435	$	1,596

Cash flows from derivatives settled are reported as cash flows from operating activities.

Noncontrolling Interests

3 Months Ended

Mar. 31, 2020

Noncontrolling Interests

Noncontrolling Interests

Note 10 — Noncontrolling Interests

We own a 50% interest in the Carlsbad joint venture which operates in the Power segment. The joint venture has been determined to be a VIE and we were determined to be the primary beneficiary as a result of our significant influence over the joint venture operations.

The joint venture is a partnership, and consequently, only the tax effect of our share of the income was recognized by us. The net assets of the joint venture are restricted for use by the specific project and are not available for our general operations.

The Carlsbad joint venture’s operating activities began in 2015 and are included in our Condensed Consolidated Statements of Operations as follows (in thousands):


	Three Months Ended March 31,
	2020		2019
Revenue	$	—	$	4,024
Net income attributable to noncontrolling interests		3		989

The Carlsbad joint venture made no distributions to the partners and we made no capital contributions to the Carlsbad joint venture during the three months ended March 31, 2020 and 2019. The project was substantially complete as of December 31, 2018 and the warranty period expires in December 2020.

The following table summarizes the total balance sheet amounts for the Carlsbad joint venture, which is included in our Condensed Consolidated Balance Sheets, and the total consolidated balance sheet amounts (in thousands):


	Joint Venture		Consolidated
At March 31, 2020	Amounts		Amounts
Cash	$	2,026	$	93,474
Accounts receivable		—		416,412
Contract assets		—		359,370
Due from Primoris		476		—
Accounts payable		—		258,962
Contract liabilities		434		176,847

At December 31, 2019
Cash	$	2,124	$	120,286
Accounts receivable		—		404,911
Contract assets		—		344,806
Accounts payable		38		235,972
Contract liabilities		425		192,397

Stock-Based Compensation

3 Months Ended

Mar. 31, 2020

Stock-Based Compensation

Stock-Based Compensation

Note 11—Stock-Based Compensation

In May 2013, the shareholders approved and we adopted the Primoris Services Corporation 2013 Long-term Incentive Equity Plan (“Equity Plan”). Our Board of Directors has granted 607,361 Restricted Stock Units (“Units”), net of forfeitures, to employees under the Equity Plan. The grants were documented in RSU Award Agreements, which provide for a vesting schedule and require continuing employment of the employee. The Units are subject to earlier acceleration, termination, cancellation or forfeiture as provided in the underlying RSU Award Agreement.

At March 31, 2020, a total of 260,630 Units were vested. The vesting schedule for the remaining Units are as follows:


		Number of Units
For the Years Ending December 31,		to Vest
2020 (remaining nine months)		23,896
2021		179,364
2022		84,415
2023		59,056
		346,731

Under guidance of ASC Topic 718 “Compensation — Stock Compensation”, stock-based compensation cost is measured at the date of grant, based on the calculated fair value of the stock-based award, and is recognized as expense over the employee’s requisite service period (generally the vesting period of the award).

The fair value of the Units was based on the closing market price of our common stock on the day prior to the date of the grant. Stock compensation expense for the Units is being amortized using the straight-line method over the service period. We recognized $0.5 million in compensation expense for each of the three months ended March 31, 2020 and 2019, respectively. At March 31, 2020, approximately $5.4 million of unrecognized compensation expense remained for the Units, which will be recognized over a weighted average period of 2.4 years.

Vested Units accrue “Dividend Equivalent Units” (as defined in the Equity Plan), which will be accrued as additional Units until the Units are converted to Common Stock. At March 31, 2020, a total of 2,401 Dividend Equivalent Units were accrued.

Income Taxes

3 Months Ended

Mar. 31, 2020

Income Taxes

Income Taxes

Note 12—Income Taxes

We are subject to tax liabilities imposed by multiple jurisdictions. We determine our best estimate of the annual effective tax rate at each interim period using expected annual pre-tax earnings, statutory tax rates, and available tax planning opportunities. Certain significant or unusual items are separately recognized in the quarter in which they occur

which can cause variability in the effective tax rate from quarter to quarter. We recognize interest and penalties related to uncertain tax positions, if any, as an income tax expense.

We do not include the income tax expense or benefit related to the net earnings or loss attributable to noncontrolling interest in our income tax expense as the entities are considered pass-through entities and, as such, the income tax expense or benefit is attributable to its owners. The effective tax rate on income including noncontrolling interests for the three months ended March 31, 2020 and 2019 was 29.0% and 21.3%, respectively. Excluding noncontrolling interest, the effective tax rate on (loss) income attributable to Primoris for the three months ended March 31, 2020 and 2019 was 29.0%. For the first three months of 2020 and 2019, our tax rate differs from the U.S. federal statutory rate of 21.0% primarily due to the impact of state income taxes and nondeductible components of per diem expenses.

Our U.S. federal income tax returns are generally no longer subject to examination for tax years before 2016. The statutes of limitation of state and foreign jurisdictions generally vary between 3 to 5 years. Accordingly, our state and foreign income tax returns are generally no longer subject to examination for tax years before 2014.

Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for temporary differences between the financial reporting bases and tax bases of assets and liabilities based on enacted tax rates expected to be in effect when such amounts are realized or settled. However, deferred tax assets are recognized only to the extent that it is more likely than not that they will be realized based upon consideration of available evidence, including future reversals of existing taxable temporary differences, future projected taxable income, the length of the tax asset carryforward periods, and tax planning strategies. The effects of remeasurement of deferred tax assets and liabilities resulting from changes in tax rates are recognized in income in the period of enactment.

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) was enacted by the US Government in response to the COVID-19 pandemic. Similarly, the Canada Emergency Wage Subsidy legislation was enacted on April 11, 2020 to provide employment retention incentives to certain Canadian employers. These relief measures did not materially affect the Consolidated Financial Statements for the first quarter of 2020. We are currently assessing the future implications of these provisions on our Consolidated Financial Statements.

Dividends and Earnings Per Share

3 Months Ended

Mar. 31, 2020

Dividends and Earnings Per Share

Dividends and Earnings Per Share

Note 13—Dividends and Earnings Per Share

We paid cash dividends during 2020 and 2019 as follows:


Declaration Date	Record Date	Date Paid	Amount Per Share
November 2, 2018	December 31, 2018	January 15, 2019		0.060
February 26, 2019	March 29, 2019	April 15, 2019		0.060
May 3, 2019	June 28, 2019	July 15, 2019		0.060
August 2, 2019	September 30, 2019	October 15, 2019		0.060
October 31, 2019	December 31, 2019	January 15, 2020		0.060
February 21, 2020	March 31, 2020	April 15, 2020		0.060

The payment of future dividends is contingent upon our revenue and earnings, capital requirements and our general financial condition, as well as contractual restrictions and other considerations deemed relevant by the Board of Directors.

The table below presents the computation of basic and diluted (loss) earnings per share for the three months ended March 31, 2020 and 2019 (in thousands, except per share amounts).


	Three Months Ended March 31,
	2020		2019
Numerator:
Net (loss) income attributable to Primoris	$	(3,737)	$	1,947

Denominator:
Weighted average shares for computation of basic earnings per share		48,588		50,770
Dilutive effect of shares issued to independent directors (1)		—		8
Dilutive effect of restricted stock units (1)		—		410
Weighted average shares for computation of diluted (loss) earnings per share		48,588		51,188

(Loss) earnings per share attributable to Primoris:
Basic	$	(0.08)	$	0.04
Diluted	$	(0.08)	$	0.04

(1)

The dilutive effect of shares issued to independent directors and restricted stock units of 9 and 300, respectively, for the three months ended March 31, 2020, were excluded from the weighted average diluted shares outstanding for the three months ended March 31, 2020, as their inclusion would be anti-dilutive.

Stockholders' Equity

3 Months Ended

Mar. 31, 2020

Stockholders' Equity

Stockholders' Equity

Note 14—Stockholders’ Equity

Common stock

We issued 34,524 and 114,106 shares of common stock in the three months ended March 31, 2020 and 2019, respectively, under our long-term retention plan (“LTR Plan”). The shares were purchased by the participants in the LTR Plan with payment made to us of $0.6 million and $1.8 million in the three months ended March 31, 2020 and 2019, respectively. Our LTR Plan for certain managers and executives allows participants to use a portion of their annual bonus amount to purchase our common stock at a discount from the market price. The shares purchased in the three months ended March 31, 2020 were a portion of bonus amounts earned in 2019, and the number of shares purchased was calculated based on 75% of the average daily closing market price of our common stock during December 2019. The shares purchased in the three months ended March 31, 2019 were for bonus amounts earned in 2018, and the number of shares was calculated at 75% of the average daily closing market price during December 2018.

In the three months ended March 31, 2020 and 2019, we issued 16,744 and 13,278 shares of common stock, respectively, as part of the quarterly compensation of the non-employee members of the Board of Directors.

As discussed in Note 11 — “Stock–Based Compensation”, as of March 31, 2020, the Board of Directors has granted a total of 607,361 shares of Units, net of forfeitures under the Equity Plan and a total of 2,401 Dividend Equivalent Units were accrued at March 31, 2020.

Share Repurchase Plan

In February 2020, our Board of Directors authorized a $25.0 million share repurchase program. Under the share repurchase program, we can, depending on market conditions, share price and other factors, acquire shares of our common stock on the open market or in privately negotiated transactions. In the three months ended March 31, 2020 we purchased and cancelled 461,831 shares of common stock, which in the aggregate, equaled $7.4 million at an average share price of $16.01. The share repurchase plan expires on December 31, 2020.

Leases

3 Months Ended

Mar. 31, 2020

Leases

Leases

Note 15—Leases

We lease administrative and various operational facilities, which are generally longer-term, project specific facilities or yards, and construction equipment under non-cancelable operating leases. We determine if an arrangement is a lease at inception. We have lease agreements with lease and non-lease components, which are generally accounted for separately. Operating leases are included in operating lease assets, accrued liabilities, and noncurrent operating lease liabilities on our Condensed Consolidated Balance Sheets.

Operating lease assets and operating lease liabilities are recognized at commencement date based on the present value of the future minimum lease payments over the lease term. In determining our lease term, we include options to extend or terminate the lease when it is reasonably certain that we will exercise that option. As most of our leases do not provide an implicit rate, we use our incremental borrowing rate based on the information available at commencement date to determine the present value of future payments. Lease expense from minimum lease payments is recognized on a straight-line basis over the lease term.

Our leases have remaining lease terms that expire at various dates through 2030, some of which may include options to extend the leases for up to 5 years. The exercise of lease extensions is at our sole discretion. Periodically, we sublease excess facility space, but any sublease income is generally not significant. Our lease agreements do not contain any material residual value guarantees or material restrictive covenants.

The components of lease expense are as follows (in thousands):


	Three Months Ended March 31,
	2020			2019
Operating lease expense	$	22,978	(1)	$	16,513	(1)

________________________________________

(1)	Includes short-term leases which are immaterial.

Our operating lease liabilities are reported on the Condensed Consolidated Balance Sheets as follows (in thousands):


	March 31,		December 31,
	2020		2019
Accrued liabilities	$	79,532	$	74,036
Noncurrent operating lease liabilities, net of current portion		176,546		171,225
	$	256,078	$	245,261

Commitments and Contingencies

3 Months Ended

Mar. 31, 2020

Commitments and Contingencies.

Commitments and Contingencies

Note 16—Commitments and Contingencies

NTTA settlement — On February 7, 2012, we were sued in an action entitled North Texas Tollway Authority (“NTTA”), Plaintiff v. James Construction Group, LLC, and KBR, Inc., Defendants, v. Reinforced Earth Company, Third-Party Defendant (the “Lawsuit”). On February 25, 2015, the Lawsuit was settled, and we recorded a liability for $17.0 million. A second defendant agreed to provide up to $5.4 million to pay for the total expected remediation cost of approximately $22.4 million. We will pay a third-party contractor approved by the NTTA to complete the remediation. In the event that the total remediation costs exceed the $22.4 million, the second defendant would pay 20% of the excess amount and we would pay for 80% of the excess amount. During the three months ended March 31, 2020, we increased our estimate of the total expected remediation costs by $0.5 million. We also spent $2.5 million for remediation during the three months ended March 31, 2020. While we continue to monitor the progress toward remediation and the total remediation costs, at this time we cannot determine the total eventual remediation cost. At March 31, 2020, the remaining accrual balance was $6.5 million.

Legal proceedings — We had been engaged in dispute resolution to collect money we believe we were owed for a construction project completed in 2014. The dispute resolution for the receivable initially required international arbitration; however, in the first half of 2016, the owner sought bankruptcy protection in U.S. bankruptcy court. We initiated litigation against the sureties who had provided lien and stop payment release bonds for the amount owed. During 2018, we settled with the sureties. In addition, we believe we are owed amounts from the bankruptcy trustee. We expect that we will collect a portion of the amount owed to us but cannot predict the timing of such collection.

We are subject to other claims and legal proceedings arising out of our business. We provide for costs related to contingencies when a loss from such claims is probable and the amount is reasonably estimable. In determining whether it is possible to provide an estimate of loss, or range of possible loss, we review and evaluate our litigation and regulatory matters on a quarterly basis in light of potentially relevant factual and legal developments. If we determine an unfavorable outcome is not probable or probable but not reasonably estimable, we do not accrue for a potential litigation loss.

Management is unable to ascertain the ultimate outcome of other claims and legal proceedings; however, after review and consultation with counsel and taking into consideration relevant insurance coverage and related deductibles/self-insurance retention, management believes that it has meritorious defenses to such claims and believes that the reasonably possible outcome of such claims will not, individually or in the aggregate, have a material adverse effect on our consolidated results of operations, financial condition or cash flow.

Bonding — At March 31, 2020 and December 31, 2019, the Company had bid and completion bonds issued and outstanding totaling approximately $829.0 million and $648.6 million, respectively.

Reportable Segments

3 Months Ended

Mar. 31, 2020

Reportable Segments

Reportable Segments

Note 17—Reportable Segments

We segregate our business into five reportable segments: the Power segment, the Pipeline segment, the Utilities segment, the Transmission segment, and the Civil segment. Each of our reportable segments is comprised of similar business units that specialize in services unique to the segment. Driving the end-user focused segments are differences in the economic characteristics of each segment, the nature of the services provided by each segment; the production processes of each segment; the type or class of customer using the segment’s services; the methods used by the segment to provide the services; and the regulatory environment of each segment’s customers.

The following is a brief description of the reportable segments:

The Power segment operates throughout the United States and in Canada and specializes in a range of services that include engineering, procurement, and construction, retrofits, upgrades, repairs, outages, and maintenance services for entities in the petroleum and petrochemical industries, as well as traditional and renewable power generators.

The Pipeline segment operates throughout the United States and specializes in a range of services, including pipeline construction and maintenance, pipeline facility and integrity services, installation of compressor and pump stations, and metering facilities for entities in the petroleum and petrochemical industries, as well as gas, water, and sewer utilities.

The Utilities segment operates primarily in California, the Midwest, the Atlantic Coast, and the Southeast regions of the United States and specializes in a range of services, including installation and maintenance of new and existing natural gas utility distribution systems and pipeline integrity services for entities in the gas utility market.

The Transmission segment operates primarily in the Southeastern, Midwest, Atlantic Coast, and Gulf Coast regions of the United States and specializes in a range of services, including installation and maintenance of new and existing electric utility transmission, substation, and distribution systems for entities in the electric utility market.

The Civil segment operates primarily in the Southeastern and Gulf Coast regions of the United States and specializes in highway and bridge construction, airport runway construction, demolition, site work, soil stabilization, mass excavation, flood control, and drainage projects for entities in the petroleum and petrochemical industries, state and municipal departments of transportation, and airports.

All intersegment revenue and gross profit, which was immaterial, has been eliminated in the following tables. Total assets by segment is not presented as our Chief Operating Decision Maker as defined by ASC 280 does not review or allocate resources based on segment assets.

Segment Revenue

Revenue by segment was as follows (in thousands):


	For the three months ended March 31,
	2020			2019
			% of			% of
			Total			Total
Segment	Revenue		Revenue	Revenue		Revenue
Power	$	196,193	26.4%	$	145,383	22.0%
Pipeline		191,523	25.8%		134,814	20.4%
Utilities		147,170	19.8%		146,206	22.1%
Transmission		102,784	13.8%		118,443	17.9%
Civil		105,573	14.2%		116,712	17.6%
Total	$	743,243	100.0%	$	661,558	100.0%

Segment Gross Profit

Gross profit by segment was as follows (in thousands):


	For the three months ended March 31,
	2020			2019
			% of			% of
			Segment			Segment
Segment	Gross Profit		Revenue	Gross Profit		Revenue
Power	$	18,682	9.5%	$	20,198	13.9%
Pipeline		16,492	8.6%		15,016	11.1%
Utilities		4,602	3.1%		8,241	5.6%
Transmission		1,712	1.7%		6,628	5.6%
Civil		6,322	6.0%		2,377	2.0%
Total	$	47,810	6.4%	$	52,460	7.9%

Segment Goodwill

The amount of goodwill recorded by each segment at March 31, 2020 and at December 31, 2019 is presented in Note 6 – “Goodwill and Intangible Assets”.

Geographic Region — Revenue and Total Assets

The majority of our revenue is derived from customers in the United States with approximately 4.2% and 4.6% generated from sources outside of the United States during the three months ended March 31, 2020 and 2019, respectively, principally in Canada. At March 31, 2020 and December 31, 2019, approximately 3.4% and 4.4%, respectively, of total assets were located outside of the United States, principally in Canada.

Subsequent Event

3 Months Ended

Mar. 31, 2020

Subsequent Events.

Subsequent Events

Note 18—Subsequent Events

Cash Dividend

On May 1, 2020, the Board of Directors declared a cash dividend of $0.06 per share of common stock for stockholders of record as of June 30, 2020, payable on or about July 15, 2020.

Fair Value Measurements (Tables)

3 Months Ended

Mar. 31, 2020

Fair Value Measurements

Schedule of financial assets and liabilities which are required to be measured at fair value


	Fair Value Measurements at Reporting Date
			Significant
	Quoted Prices		Other		Significant
	in Active Markets		Observable		Unobservable
	for Identical Assets		Inputs		Inputs
	(Level 1)		(Level 2)		(Level 3)
Assets as of March 31, 2020:
Cash and cash equivalents	$	93,474	$	—	$	—
Contingent consideration		—		—		938
Liabilities as of March 31, 2020:
Interest rate swap	$	—	$	11,414	$	—


Assets as of December 31, 2019:
Cash and cash equivalents	$	120,286	$	—	$	—
Contingent consideration		—		—		938
Liabilities as of December 31, 2019:
Interest rate swap	$	—	$	6,443	$	—