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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.

For the quarterly period ended September 30, 2022

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.

For the transition period from                    to                      .

Commission file number 001-34145

Primoris Services Corporation

(Exact name of registrant as specified in its charter)

Delaware

    

20-4743916

(State or Other Jurisdiction of

(I.R.S. Employer

Incorporation or Organization)

Identification No.)

2300 N. Field Street, Suite 1900

Dallas, Texas

75201

(Address of Principal Executive Offices)

(Zip Code)

Registrant’s telephone number, including area code: (214740-5600

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading symbol(s)

Name of each exchange on which registered

Common Stock, $0.0001 par value

PRIM

The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes   No 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  Yes   No 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act.:

Large accelerated filer  

    

Accelerated filer  

Non-accelerated filer  

Smaller reporting company  

Emerging growth company  

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes    No 

At November 1, 2022, 53,111,107 shares of the registrant’s common stock, par value $0.0001 per share, were outstanding.

PRIMORIS SERVICES CORPORATION

INDEX

    

Page No.

Part I. Financial Information

Item 1. Financial Statements:

—Condensed Consolidated Balance Sheets at September 30, 2022 and December 31, 2021 (Unaudited)

3

—Condensed Consolidated Statements of Income for the three and nine months ended September 30, 2022 and 2021 (Unaudited)

4

—Condensed Consolidated Statements of Comprehensive Income for the three and nine months ended September 30, 2022 and 2021 (Unaudited)

5

—Condensed Consolidated Statements of Stockholders’ Equity for the three and nine months ended September 30, 2022 and 2021 (Unaudited)

6

—Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2022 and 2021 (Unaudited)

8

—Notes to Condensed Consolidated Financial Statements (Unaudited)

10

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

29

Item 3. Quantitative and Qualitative Disclosures About Market Risk

44

Item 4. Controls and Procedures

44

Part II. Other Information

Item 1. Legal Proceedings

45

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

45

Item 6. Exhibits

46

Signatures

47

2

PART I.  FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS

PRIMORIS SERVICES CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(In Thousands, Except Share Amounts)

(Unaudited)

September 30,

December 31,

    

2022

    

2021

ASSETS

Current assets:

Cash and cash equivalents

$

111,937

$

200,512

Accounts receivable, net

 

687,884

 

471,656

Contract assets

 

645,725

 

423,659

Prepaid expenses and other current assets

 

216,560

 

86,263

Total current assets

 

1,662,106

 

1,182,090

Property and equipment, net

 

508,689

 

433,279

Operating lease assets

162,579

158,609

Deferred tax assets

7,214

1,307

Intangible assets, net

 

270,349

 

171,320

Goodwill

 

820,322

 

581,664

Other long-term assets

 

23,078

 

15,058

Total assets

$

3,454,337

$

2,543,327

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:

Accounts payable

$

477,327

$

273,463

Contract liabilities

 

255,524

 

240,412

Accrued liabilities

 

269,494

 

174,821

Dividends payable

 

3,195

 

3,192

Current portion of long-term debt

 

80,094

 

67,230

Total current liabilities

 

1,085,634

 

759,118

Long-term debt, net of current portion

 

1,122,064

 

594,232

Noncurrent operating lease liabilities, net of current portion

97,314

98,059

Deferred tax liabilities

 

42,314

 

38,510

Other long-term liabilities

 

39,003

 

63,353

Total liabilities

 

2,386,329

 

1,553,272

Commitments and contingencies (See Note 14)

Stockholders’ equity

Common stock—$0.0001 par value; 90,000,000 shares authorized; 53,111,107 and 53,194,585 issued and outstanding at September 30, 2022 and December 31, 2021, respectively

 

6

 

6

Additional paid-in capital

 

261,816

 

261,918

Retained earnings

 

809,369

 

727,433

Accumulated other comprehensive income

(3,183)

698

Total stockholders’ equity

 

1,068,008

 

990,055

Total liabilities and stockholders’ equity

$

3,454,337

$

2,543,327

See Accompanying Notes to Condensed Consolidated Financial Statements

3

PRIMORIS SERVICES CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(In Thousands, Except Per Share Amounts)

(Unaudited)

Three Months Ended

Nine Months Ended

September 30, 

September 30, 

    

2022

    

2021

    

2022

    

2021

Revenue

$

1,284,128

$

913,245

$

3,091,461

$

2,613,184

Cost of revenue

 

1,129,221

 

785,809

 

2,787,960

 

2,292,541

Gross profit

 

154,907

 

127,436

 

303,501

 

320,643

Selling, general and administrative expenses

 

75,721

 

61,706

 

190,905

 

172,885

Transaction and related costs

12,706

447

18,228

14,823

Gain on sale and leaseback transaction

(40,084)

 

Operating income

 

66,480

 

65,283

 

134,452

 

132,935

Other income (expense):

Foreign exchange loss, net

(683)

(239)

(443)

Other income, net

 

128

 

181

 

274

 

555

Interest expense, net

 

(13,075)

 

(4,698)

 

(20,656)

 

(14,154)

Income before provision for income taxes

 

52,850

 

60,766

 

113,831

 

118,893

Provision for income taxes

 

(9,810)

 

(16,710)

 

(22,311)

 

(32,694)

Net income

43,040

44,056

91,520

86,199

Dividends per common share

$

0.06

$

0.06

$

0.18

$

0.18

Earnings per share:

Basic

$

0.81

$

0.82

$

1.72

$

1.65

Diluted

$

0.80

$

0.81

$

1.70

$

1.63

Weighted average common shares outstanding:

Basic

 

53,181

 

53,769

 

53,228

 

52,354

Diluted

 

53,748

 

54,367

 

53,778

 

52,887

See Accompanying Notes to Condensed Consolidated Financial Statements

4

PRIMORIS SERVICES CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In Thousands)

(Unaudited)

Three Months Ended

Nine Months Ended

September 30, 

September 30, 

    

2022

    

2021

    

2022

    

2021

Net income

$

43,040

$

44,056

$

91,520

$

86,199

Other comprehensive income, net of tax:

Foreign currency translation adjustments

(4,058)

 

(1,077)

(3,881)

16

Comprehensive income

$

38,982

$

42,979

$

87,639

$

86,215

See Accompanying Notes to Condensed Consolidated Financial Statements

5

PRIMORIS SERVICES CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In Thousands, Except Share and Per Share Amounts)

(Unaudited)

Accumulated

Additional

Other

Total

Common Stock

Paid-in

Retained

Comprehensive

Stockholders’

    

Shares

    

Amount

    

Capital

    

Earnings

0

Income

    

Equity

Balance, June 30, 2022

 

53,209,461

$

6

$

262,394

$

769,523

$

875

$

1,032,798

Net income

 

 

 

 

43,040

 

43,040

Foreign currency translation adjustments, net of tax

(4,058)

(4,058)

Issuance of shares

19,631

 

 

393

 

 

393

Conversion of Restricted Stock Units, net of shares withheld for taxes

11,215

(104)

(104)

Stock-based compensation

 

 

 

1,753

 

 

1,753

Purchase of stock

(129,200)

(2,620)

(2,620)

Dividends declared ($0.06 per share)

 

 

 

 

(3,194)

 

(3,194)

Balance, September 30, 2022

 

53,111,107

$

6

$

261,816

$

809,369

$

(3,183)

$

1,068,008

Accumulated

Additional

Other

Total

Common Stock

Paid-in

Retained

Comprehensive

Stockholders’

    

Shares

    

Amount

    

Capital

    

Earnings

0

Income

    

Equity

Balance, December 31, 2021

 

53,194,585

$

6

$

261,918

$

727,433

$

698

$

990,055

Net income

 

 

 

 

91,520

 

91,520

Foreign currency translation adjustments, net of tax

(3,881)

(3,881)

Issuance of shares

 

62,013

1,464

 

1,464

Conversion of Restricted Stock Units, net of shares withheld for taxes

131,709

(1,324)

(1,324)

Stock-based compensation

5,748

5,748

Purchase of stock

(277,200)

(5,990)

(5,990)

Dividends declared ($0.18 per share)

 

(9,584)

 

(9,584)

Balance, September 30, 2022

 

53,111,107

$

6

$

261,816

$

809,369

$

(3,183)

$

1,068,008

See Accompanying Notes to Condensed Consolidated Financial Statements

6

PRIMORIS SERVICES CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (Continued)

(In Thousands, Except Share and Per Share Amounts)

(Unaudited)

Accumulated

Additional

Other

Total

Common Stock

Paid-in

Retained

Comprehensive

Stockholders’

    

Shares

    

Amount

    

Capital

    

Earnings

0

Income

0

Equity

Balance, June 30, 2021

 

53,731,206

$

6

$

274,008

$

660,425

$

2,051

$

936,490

Net income

 

 

 

 

44,056

 

 

44,056

Foreign currency translation adjustments, net of tax

(1,077)

(1,077)

Issuance of shares, net of issuance costs

 

7,328

 

 

212

 

 

 

212

Conversion of Restricted Stock Units, net of shares withheld for taxes

62,277

(726)

(726)

Stock-based compensation

1,661

1,661

Dividends declared ($0.06 per share)

 

 

 

 

(3,228)

 

 

(3,228)

Balance, September 30, 2021

 

53,800,811

$

6

$

275,155

$

701,253

$

974

$

977,388

Accumulated

Additional

Other

Total

Common Stock

Paid-in

Retained

Comprehensive

Stockholders’

    

Shares

    

Amount

    

Capital

    

Earnings

0

Income

0

Equity

Balance, December 31, 2020

 

48,110,442

$

5

$

89,098

$

624,731

$

958

$

714,792

Net income

 

 

 

 

86,199

 

 

86,199

Foreign currency translation adjustments, net of tax

16

16

Issuance of shares, net of issuance costs

 

5,588,328

 

1

 

178,234

 

 

 

178,235

Conversion of Restricted Stock Units, net of shares withheld for taxes

102,041

(1,325)

(1,325)

Stock-based compensation

9,146

9,146

Dividend equivalent Units accrued - Restricted Stock Units

2

(2)

Dividends declared ($0.18 per share)

 

 

 

 

(9,675)

 

 

(9,675)

Balance, September 30, 2021

 

53,800,811

$

6

$

275,155

$

701,253

$

974

$

977,388

See Accompanying Notes to Condensed Consolidated Financial Statements

7

PRIMORIS SERVICES CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In Thousands)

(Unaudited)

Nine Months Ended

September 30, 

    

2022

    

2021

Cash flows from operating activities:

Net income

$

91,520

$

86,199

Adjustments to reconcile net income to net cash (used in) provided by operating activities (net of effect of acquisitions):

Depreciation and amortization

 

69,348

 

78,865

Stock-based compensation expense

 

5,748

 

9,146

Gain on sale of property and equipment

 

(17,987)

 

(13,075)

Gain on sale and leaseback transaction

(40,084)

Unrealized gain on interest rate swap

(5,616)

(3,183)

Other non-cash items

1,877

823

Changes in assets and liabilities:

Accounts receivable

 

(122,867)

 

(69,659)

Contract assets

 

(148,044)

 

(54,262)

Other current assets

 

(98,489)

 

(21,070)

Other long-term assets

1,975

477

Accounts payable

133,731

57,698

Contract liabilities

 

(10,364)

 

(67,821)

Operating lease assets and liabilities, net

 

(896)

 

(1,388)

Accrued liabilities

 

40,016

 

21,327

Other long-term liabilities

 

(1,903)

 

(8,457)

Net cash (used in) provided by operating activities

 

(102,035)

 

15,620

Cash flows from investing activities:

Purchase of property and equipment

 

(75,696)

 

(102,133)

Proceeds from sale of assets

 

19,237

 

43,488

Proceeds from sale and leaseback transaction, net of related expenses

49,887

Cash paid for acquisitions, net of cash and restricted cash acquired

(478,438)

(606,974)

Net cash used in investing activities

 

(485,010)

 

(665,619)

Cash flows from financing activities:

Borrowings under revolving line of credit

150,000

100,000

Payments on revolving line of credit

 

 

(100,000)

Borrowings under Canadian credit facility

19,943

Payments under Canadian credit facility

(19,804)

Proceeds from issuance of long-term debt

 

469,531

 

461,719

Payments on long-term debt

 

(77,751)

 

(96,473)

Proceeds from issuance of common stock

596

178,707

Debt issuance costs

(6,643)

(4,876)

Dividends paid

 

(9,583)

 

(9,334)

Purchase of common stock

(5,990)

Other

(4,947)

 

(7,038)

Net cash provided by financing activities

 

515,352

 

522,705

Effect of exchange rate changes on cash, cash equivalents and restricted cash

(924)

300

Net change in cash, cash equivalents and restricted cash

 

(72,617)

 

(126,994)

Cash, cash equivalents and restricted cash at beginning of the period

 

205,643

 

330,975

Cash, cash equivalents and restricted cash at end of the period

$

133,026

$

203,981

See Accompanying Notes to Condensed Consolidated Financial Statements

8

PRIMORIS SERVICES CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)

(In Thousands)

(Unaudited)

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION

Nine Months Ended September 30, 

    

2022

    

2021

Cash paid for interest

$

20,025

$

16,555

Cash paid for income taxes, net of refunds received

2,540

31,194

Leased assets obtained in exchange for new operating leases

40,144

15,500

SUPPLEMENTAL DISCLOSURES OF NONCASH INVESTING AND FINANCING ACTIVITIES

Nine Months Ended September 30, 

    

2022

    

2021

Dividends declared and not yet paid

$

3,195

$

3,228

See Accompanying Notes to Condensed Consolidated Financial Statements

9

PRIMORIS SERVICES CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in Thousands, Except Share and Per Share Amounts)

(Unaudited)

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 three segments.

We have customer relationships with major utility, communications, 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 — The current reportable segments include the Utilities segment, the Energy/Renewables segment and the Pipeline Services (“Pipeline”) segment. See Note 15 – “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.

Note 2—Basis of Presentation

Interim condensed consolidated financial statements The interim condensed consolidated financial statements for the three and nine months ended September 30, 2022 and 2021 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 28, 2022, which contains our audited consolidated financial statements for the year ended December 31, 2021, 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. 

Reclassification — Certain previously reported amounts have been reclassified to conform to the current period presentation.

10

Restricted cash Restricted cash consists primarily of cash balances that are restricted as to withdrawal or usage and contract retention payments made by customers into escrow bank accounts and are included in prepaid expenses and other current assets in our Condensed Consolidated Balance Sheets. Escrow cash accounts are released to us by customers as projects are completed in accordance with contract terms. As a result of the PLH acquisition (as defined below), we acquired cash pledged to secure letters of credit, which is recorded as restricted cash at September 30, 2022. The following tables provide a reconciliation of cash, cash equivalents and restricted cash reported within the Condensed Consolidated Balance Sheets to the totals of such amounts shown in the Condensed Consolidated Statements of Cash Flows (in thousands):

September 30,

    

2022

    

2021

Cash and cash equivalents

$

111,937

$

199,025

Restricted cash included in prepaid expenses and other current assets

21,089

4,956

Total cash, cash equivalents and restricted cash shown in the consolidated statements of cash flows

$

133,026

$

203,981

    

    

December 31,

    

2021

    

2020

Cash and cash equivalents

$

200,512

$

326,744

Restricted cash included in prepaid expense and other current assets

5,131

4,231

Total cash, cash equivalents and restricted cash shown in the consolidated statements of cash flows

$

205,643

$

330,975

Depreciation Effective January 1, 2022, we changed our estimates of the useful lives of certain equipment to better reflect the estimated periods during which these assets will remain in service. The estimated useful lives of equipment that previously ranged three to seven years were increased to a range of three to ten years. The effect of this change in estimate reduced depreciation expense by $4.2 million, increased net income by $3.3 million, and increased basic and diluted earnings per share by $0.06 for the three months ended September 30, 2022. The effect of this change in estimate reduced depreciation expense by $15.3 million, increased net income by $12.2 million, and increased basic and diluted earnings per share by $0.23 for the nine months ended September 30, 2022.

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 40% to 50% of total revenue; however, the companies that comprise the top ten vary from year to year.

For the three and nine months ended September 30, 2022, approximately 53.3% and 48.4%, respectively, of total revenue was generated from our top ten customers. For the three months ended September 30, 2022, one renewable energy customer represented approximately 11.3% of total revenue and for the nine months ended September 30, 2022, no one customer accounted for more than ten percent of our total revenue.

For the three and nine months ended September 30, 2021, approximately 45.6% and 43.3%, respectively, of total revenue was generated from our top ten customers and no one customer accounted for more than ten percent of our total revenue.

Note 3—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,

11

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 September 30, 2022 and December 31, 2021 (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 September 30, 2022:

Cash and cash equivalents

$

111,937

 

$

 

$

Interest rate swap

1,270

Liabilities as of September 30, 2022:

Contingent consideration

2,691

Assets as of December 31, 2021:

Cash and cash equivalents

200,512

 

 

Liabilities as of December 31, 2021:

Interest rate swap

$

$

4,346

$

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.

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.

On a quarterly basis, we assess the estimated fair value of the contractual obligation to pay the contingent consideration and any changes in estimated fair value are recorded as non-operating income or expense in our Statement of Income. Fair value is determined utilizing a discounted cash flow analysis based on management’s estimate of the probability of the acquired company meeting the contractual operating performance target discounted using our weighted average cost of capital. Significant changes in either management’s estimate of the probability of meeting the performance target or our estimated discount rate would result in a different fair value measurement. Generally, a change in the assumption of the probability of meeting the performance target is accompanied by a directionally similar change in the fair value of contingent consideration liability, whereas a change in assumption of the estimated discount rate is accompanied by a directionally opposite change in the fair value of contingent consideration liability.

Upon meeting the target, we reflect the full liability on the balance sheet and record an adjustment to “Other income (expense), net” for the change in the fair value of the liability from the prior period.

The March 1, 2022 acquisition of Alberta Screw Piles, Ltd. (“ASP”) (as discussed in Note 4 Acquisitions”) includes an earnout of up to $3.2 million, contingent upon meeting certain performance targets over the one and two year periods ending March 1, 2023 and March 1, 2024, respectively. The estimated fair value of the contingent consideration on the acquisition date was $2.8 million. Under ASC 805, “Business Combinations” (“ASC 805”), we are required to estimate the fair value of contingent consideration based on facts and circumstances that existed as of the acquisition date and remeasure to fair value at each reporting date until the contingency is resolved. Since March 1, 2022, there have been no changes to the estimated fair value of the contingent consideration other than foreign currency translation adjustments and accretion of the liability.

12

Note 4—Acquisitions

Acquisition of PLH

On August 1, 2022, we acquired PLH Group, Inc. (“PLH”) in an all-cash transaction valued at approximately $438.3 million, net of cash acquired (the “PLH acquisition”). PLH is a utility-focused specialty construction company with concentrations in growing regions of the United States. The transaction directly aligns with our strategic focus on higher-growth, higher margin markets and expands our capabilities in the power delivery, communications, and gas utilities markets. The total purchase price was funded through a combination of borrowings under our term loan facility and borrowings under our revolving credit facility.

The table below represents the purchase consideration and the preliminary estimated fair values of the assets acquired and liabilities assumed as of the acquisition date. The final determination of fair value for certain assets and liabilities is subject to further change and will be completed as soon as the information necessary to complete the analysis is obtained. These amounts, which may differ materially from these preliminary estimates, will continue to be refined during the one-year measurement period, as defined in ASC 805, which ends during the third quarter of 2023. The primary areas of the preliminary estimates that are not yet finalized relate to property, plant and equipment, identifiable intangible assets, contract assets and liabilities, deferred income taxes, uncertain tax positions, the fair value of certain contractual obligations, and accounts receivable. Consideration amounts are also subject to changes resulting from the finalization of post-closing working capital adjustments (inclusive of cash).

Purchase consideration (in thousands)

Total purchase consideration

$

481,493

Less cash and restricted cash acquired

(43,152)

Net cash paid

$

438,341

Identifiable assets acquired and liabilities assumed (in thousands)

Cash, cash equivalents and restricted cash

$

43,152

Accounts receivable

74,411

Contract assets

75,359

Prepaid expenses and other current assets

13,444

Property, plant and equipment

63,528

Operating lease assets

16,340

Intangible assets:

 

Customer relationships

84,900

Tradename

17,700

Deferred tax assets

6,008

Other long-term assets

 

6,418

Accounts payable and accrued liabilities

(98,282)

Contract liabilities

(25,488)

Long-term debt (including current portion)

(3,313)

Noncurrent operating lease liabilities, net of current

(12,004)

Deferred tax liability

(3,032)

Other long-term liabilities

(4,136)

Total identifiable net assets

255,005

Goodwill

226,488

Total purchase consideration

$

481,493

We incorporated the majority of the PLH operations into our Utilities segment with the remaining operations going to our Energy/Renewables and Pipeline segments. Goodwill associated with the PLH acquisition principally consists of expected benefits from the expansion of our services into the utilities market and the expansion of our geographic

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presence. Goodwill also includes the value of the assembled workforce. Based on the current tax treatment, goodwill is not expected to be deductible for income tax purposes.

The intangible assets acquired with the PLH acquisition consisted of Customer relationships of $84.9 million and Tradenames of $17.7 million. The Customer relationships and Tradenames are being amortized over a weighted average useful life of