Attached files

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8-K/A - 8-K/A - Primoris Services Corpa10-22474_18ka.htm
EX-23.1 - EX-23.1 - Primoris Services Corpa10-22474_1ex23d1.htm
EX-99.2 - EX-99.2 - Primoris Services Corpa10-22474_1ex99d2.htm
EX-99.5 - EX-99.5 - Primoris Services Corpa10-22474_1ex99d5.htm
EX-99.3 - EX-99.3 - Primoris Services Corpa10-22474_1ex99d3.htm
EX-99.4 - EX-99.4 - Primoris Services Corpa10-22474_1ex99d4.htm

Exhibit 99.6

 

PRIMORIS SERVICES CORPORATION

 

SEPTEMBER 30, 2010

 

AND DECEMBER 31, 2009

 

UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS

 



 

Primoris Services Corporation

Index to Unaudited Pro Forma Combined Financial Statements

 

 

Page

 

 

Unaudited Pro Forma Combined Financial Statements:

 

Introduction to Unaudited Pro Forma Combined Financial Statements

1

Pro Forma Combined Balance Sheet as of September 30, 2010 (Unaudited)

2

Pro Forma Combined Statement of Income for the Nine Months Ended September 30, 2010 (Unaudited)

3

Pro Forma Combined Statement of Income for the Year Ended December 31, 2009 (Unaudited)

4

Notes to Pro Forma Combined Financial Statements (Unaudited)

5-7

Supplemental Unaudited Pro Forma Combined Financial Statements with James Construction Group for the year ended December 31, 2009

8

Notes to Supplemental Unaudited Pro Forma Combined Financial Statements with James Construction Group for the year ended December 31, 2009

10

 



 

PRIMORIS SERVICES CORPORATION

 

UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS

 

On November 12, 2010 Primoris Services Corporation, a Delaware corporation (“we”, “us”, “our”, the “Company” or “Primoris”), completed a merger (the “Merger”) with Rockford Holdings Corporation, a privately-held Delaware corporation (“Rockford”).  Following the closing of the Merger, Rockford became a wholly-owned subsidiary of Primoris.

 

Primoris paid the Rockford stockholders approximately $64.2 million in initial Merger consideration at closing, consisting of the following: approximately $35 million in cash; 1,605,709 shares of unregistered Primoris common stock (the “Closing Shares”) with a defined value of approximately $12.5 million pursuant to the Merger Agreement; and a subordinated convertible promissory note in the principal amount of approximately $16.7 million.  In addition, if Rockford attains certain specified financial goals for the fiscal years ending December 31, 2010, 2011 and 2012, we have agreed to pay the Rockford stockholders an additional $18.4 million in earnout consideration, payable in cash and shares of unregistered Primoris common stock.  As a result, and assuming that the earnout consideration is earned, the total contractual consideration payable to the Rockford stockholders would be approximately $82.6 million.  On a fair value basis, total consideration payable to the Rockford stockholders is approximately $79.6 million, as outlined in the Notes to the unaudited pro forma combined consolidated financial statements on the table on page 5 below.

 

As prescribed by Securities and Exchange Commission guidelines, the following unaudited pro forma combined consolidated financial statements are based on the historical financial statements of Primoris and Rockford after giving effect to the Merger, and the assumptions, reclassifications and adjustments described in the accompanying notes to the unaudited pro forma combined financial statements.

 

The historical financial information has been adjusted in the unaudited pro forma combined financial data to give effect to pro forma events that are, based upon available information and certain assumptions, (i) directly attributable to the Merger, (ii) factually supportable and reasonable under the circumstances, and (iii) with respect to the statement of income, expected to have a continuing impact on the combined results.

 

The unaudited pro forma combined balance sheet as of September 30, 2010 is presented as if the Merger had occurred on September 30, 2010.  The unaudited pro forma combined statements of income for the nine months ended September 30, 2010 and the year ended December 31, 2009, are presented as if the Merger had occurred on January 1, 2009 with recurring acquisition-related adjustments reflected in the two periods.

 

The Merger will be accounted for under the acquisition method of accounting in accordance with the Financial Accounting Standard Board (“FASB”), Accounting Standard Codification or ASC 805-10 topic for “Business Combinations” (formerly referred to as FASB Statement of Financial Accounting Standards No. 141R).  Management has estimated the fair value of tangible and intangible assets acquired and liabilities assumed based on preliminary estimates and assumptions.  These preliminary estimates and assumptions could change significantly during the purchase price measurement period as we finalize the valuations of the net tangible assets and intangible assets.  Any change could result in material variances between our future financial results and the amounts presented in these unaudited combined financial statements, including variances in fair values recorded, as well as expenses associated with these items.

 

The following unaudited pro forma combined financial statements are prepared for illustrative purposes only and are not necessarily indicative of or intended to represent the results that would have been achieved had the Merger been consummated as of the dates indicated or that may be achieved in the future.  The unaudited pro forma combined financial statements do not reflect any operating efficiencies, associated cost savings or additional costs that we may achieve with respect to the combined companies.

 

The unaudited pro forma combined financial statements should be read in conjunction with Primoris’ historical consolidated financial statements and accompanying notes included in its Annual Report on Form 10-K for the year ended December 31, 2009, Quarterly Report on Form 10-Q for the quarter ended September 30, 2010, the historical consolidated financial statements of Rockford for the year ended March 31, 2010 (Exhibit 99.2 to this Form 8-K/A), the historical unaudited consolidated financial statements of Rockford as of and for the nine months ended September 30, 2010 (Exhibit 99.5 to this Form 8-K/A) and other information pertaining to Primoris and Rockford contained in this Form 8-K/A.

 

1



 

Primoris Services Corporation

Pro Forma Combined Balance Sheet

As of September 30, 2010

(Unaudited)

(Amounts in thousands)

 

 

 

(Note A)
Primoris
reported at
9/30/10

 

(Note B)
Rockford
reported at
9/30/10

 

Pro Forma
Adjustments

 

Notes

 

Proforma
Combined

 

Current assets:

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

107,594

 

26,807

 

(35,039

)

E

 

$

99,362

 

Customer retention deposits

 

9,178

 

 

 

 

 

 

9,178

 

Accounts receivable

 

148,981

 

28,478

 

 

 

 

 

177,459

 

Costs and estimated earnings in excess of billings

 

23,299

 

1,745

 

 

 

 

 

25,044

 

Inventory

 

22,618

 

 

 

 

 

 

22,618

 

Tax receivable

 

 

1,865

 

 

 

 

 

1,865

 

Deferred tax assets

 

6,068

 

1,734

 

 

 

 

 

7,802

 

Prepaid expenses and other current assets

 

9,521

 

986

 

 

 

 

 

10,507

 

Total current assets

 

327,259

 

61,615

 

(35,039

)

 

 

353,835

 

 

 

 

 

 

 

 

 

 

 

 

 

Property and equipment, net

 

96,818

 

22,667

 

1,816

 

H

 

121,301

 

Other assets

 

 

2,400

 

 

 

 

 

2,400

 

Investment in non-consolidated entities

 

19,274

 

 

 

 

 

 

 

19,274

 

Goodwill

 

28,404

 

3,866

 

29,716

 

N

 

95,295

 

Intangible assets

 

61,713

 

 

 

15,550

 

I

 

43,954

 

Total assets

 

$

533,468

 

$

90,548

 

$

12,043

 

 

 

$

636,059

 

 

 

 

 

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

 

 

 

Accounts Payable

 

$

76,814

 

3,519

 

 

 

 

 

$

80,333

 

Billings in excess of costs and estimated earnings

 

122,311

 

29,800

 

 

 

 

 

152,111

 

Accrued expenses and other current liabilities

 

39,205

 

9,046

 

546

 

F

 

48,797

 

Distributions and dividends payable

 

1,173

 

 

 

 

 

 

1,173

 

Current portion of long-term debt and capital leases

 

35,999

 

2,559

 

5,223

 

E

 

43,781

 

Current liabilities of discontinued operations

 

733

 

 

 

 

 

733

 

Total current liabilities

 

276,235

 

44,924

 

5,769

 

 

 

326,928

 

 

 

 

 

 

 

 

 

 

 

 

 

Long-term debt and capital leases, net of current portion

 

61,777

 

2,672

 

 

 

 

 

64,449

 

Deferred tax liabilities

 

1,483

 

3,882

 

6,529

 

M

 

11,894

 

Long-term purchase note payable

 

 

 

11,489

 

E

 

11,489

 

Other long-term liabilities

 

3,985

 

 

 

 

 

3,985

 

Contingent consideration - earnout liability

 

10,243

 

 

14,272

 

D

 

24,515

 

Total liabilities

 

353,723

 

51,478

 

38,059

 

 

 

443,260

 

 

 

 

 

 

 

 

 

 

 

 

 

Stockholders equity:

 

 

 

 

 

 

 

 

 

 

 

Common Stock

 

5

 

 

 

 

 

 

5

 

Additional paid-in capital - Rockford

 

 

14,130

 

(14,130

)

G

 

 

Additional paid-in capital - Primoris

 

118,779

 

 

 

13,600

 

D

 

132,379

 

Retained earnings - Primoris

 

60,961

 

24,940

 

(25,486

)

F, G

 

60,415

 

Accumulated other comprehensive income

 

 

 

 

 

 

 

 

 

Total stockholder’s equity

 

179,745

 

39,070

 

(26,016

)

 

 

192,799

 

Total liabilities and stockholders’ equity

 

$

533,468

 

$

90,548

 

$

12,043

 

 

 

$

636,059

 

 

2



 

PRIMORIS SERVICES CORPORATION

PRO FORMA COMBINED STATEMENT OF INCOME

For the nine months ended September 30, 2010

(Unaudited)

(Amounts in thousands, except per share amounts)

 

 

 

(Note A)
Primoris

 

(Note B)
Rockford

 

Pro Forma
Adjustment

 

Notes

 

Pro Forma
Combined

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenues

 

$

608,526

 

$

80,009

 

 

 

 

 

$

688,535

 

Cost of revenues

 

529,537

 

70,648

 

516

 

H, I, K

 

600,701

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross Profit

 

78,989

 

9,361

 

(516

)

 

 

87,834

 

 

 

 

 

 

 

 

 

 

 

 

 

Selling, general and administrative expenses

 

43,849

 

8,248

 

864

 

I, K

 

52,961

 

Operating income

 

35,140

 

1,113

 

(1,380

)

 

 

34,873

 

 

 

 

 

 

 

 

 

 

 

 

 

Income from non-consolidated entities

 

4,090

 

 

 

 

 

 

4,090

 

Foreign exchange gain (loss)

 

266

 

 

 

 

 

 

266

 

Other income (expense), net

 

(964

)

 

 

 

 

 

(964

)

Interest income

 

484

 

31

 

 

 

 

 

515

 

Interest (expense)

 

(3,872

)

(292

)

(512

)

E

 

(4,676

)

Total other income (expense)

 

4

 

(261

)

(512

)

 

 

(769

)

 

 

 

 

 

 

 

 

 

 

 

 

Income before income taxes

 

35,144

 

852

 

(1,892

)

 

 

34,104

 

 

 

 

 

 

 

 

 

 

 

 

 

Provision for income taxes

 

(13,782

)

(335

)

749

 

J

 

(13,368

)

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss)

 

$

21,362

 

$

517

 

$

(1,143

)

 

 

$

20,736

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings per share

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.53

 

 

 

 

 

L

 

$

0.49

 

Diluted

 

$

0.47

 

 

 

 

 

L

 

$

0.44

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding

 

 

 

 

 

 

 

 

 

 

 

Basic

 

40,499

 

 

 

1,606

 

L

 

42,105

 

Diluted

 

45,486

 

 

 

1,606

 

L

 

47,092

 

 

3



 

PRIMORIS SERVICES CORPORATION

PRO FORMA COMBINED STATEMENT OF INCOME

For the year ended December 31, 2009

(Unaudited)

Amounts in thousands, except per share amounts

 

 

 

(Note A)
Primoris

 

(Note C)
Rockford

 

Pro Forma
Adjustment

 

Notes

 

Pro Forma
Combined

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenues

 

$

467,010

 

$

166,223

 

 

 

 

 

$

633,233

 

Cost of revenues

 

391,435

 

132,585

 

4,498

 

H, I, K

 

528,518

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross Profit

 

75,575

 

33,638

 

(4,498

)

 

 

104,715

 

 

 

 

 

 

 

 

 

 

 

 

 

Selling, general and administrative expenses

 

34,781

 

9,571

 

1,141

 

I, K

 

45,493

 

Merger related stock expense

 

390

 

 

 

 

 

 

 

390

 

Operating income

 

40,404

 

24,067

 

(5,639

)

 

 

58,832

 

 

 

 

 

 

 

 

 

 

 

 

 

Income from non-consolidated entities

 

8,753

 

 

 

 

 

 

8,753

 

Foreign exchange gain (loss)

 

293

 

 

 

 

 

 

293

 

Interest income

 

640

 

32

 

 

 

 

 

672

 

Interest (expense), net

 

(1,979

)

(407

)

(688

)

E

 

(3,074

)

Total other income (expense)

 

7,707

 

(375

)

(688

)

 

 

6,644

 

 

 

 

 

 

 

 

 

 

 

 

 

Income before income taxes

 

48,111

 

23,692

 

(6,327

)

 

 

65,476

 

 

 

 

 

 

 

 

 

 

 

 

 

Provision for income taxes

 

(18,350

)

(8,636

)

2,518

 

J

 

(24,468

)

 

 

 

 

 

 

 

 

 

 

 

 

Income from continuing operations

 

29,761

 

15,056

 

(3,809

)

 

 

41,008

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss on discontinued operations, net of income taxes

 

(3,849

)

 

 

 

 

 

(3,849

)

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss) - pro forma

 

$

25,912

 

$

15,056

 

$

(3,809

)

 

 

$

37,159

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings per share - pro forma

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.81

 

 

 

 

 

L

 

$

1.11

 

Diluted

 

$

0.75

 

 

 

 

 

L

 

$

1.03

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding

 

 

 

 

 

 

 

 

 

 

 

Basic

 

31,937

 

 

1,606

 

L

 

33,543

 

Diluted

 

34,418

 

 

1,606

 

L

 

36,024

 

 

4



 

Primoris Services Corporation

Notes to Pro Forma Combined Financial Statements (Unaudited)

 

The unaudited pro forma combined balance sheet as of September 30, 2010 is presented as if the merger of Rockford had occurred on September 30, 2010.  The unaudited pro forma combined statements of operations for the nine months ended September 30, 2010, and the year ended December 31, 2009, are presented as if the Merger had occurred on January 1, 2009 with recurring acquisition-related adjustments reflected in each of the periods.

 

The statement of assets acquired and liabilities assumed as of November 12, 2010, the date of the acquisition, is based on preliminary estimates of fair value as follows, in thousands:

 

Cash

 

26,807

 

Accounts receivable, net

 

28,695

 

Cost and earnings in excess of billings

 

1,745

 

Deferred tax assets & tax receivable

 

3,599

 

Prepaid expenses

 

769

 

Property, plant and equipment

 

24,483

 

Other assets

 

2,400

 

Goodwill

 

33,582

 

Intangible assets

 

15,550

 

Accounts payable

 

(3,519

)

Billing in excess of costs and earnings

 

(29,800

)

Accrued expenses

 

(9,046

)

Current portion of long term debt

 

(2,559

)

Deferred tax liability

 

(10,411

)

Long term debt, net of current

 

(2,672

)

Total fair value of the consideration transferred

 

79,623

 

 


 

(A)                              The columns for Primoris represent the financial statements as reported for the period shown.

 

(B)                                The column for Rockford represents the historical financials statements of Rockford as of and for the nine months ended September 30, 2010.

 

(C)                                The column for Rockford represents the historical financial statements of Rockford for the year ended March 31, 2010.

 

(D)                               On November 12, 2010, Primoris issued 1,605,709 shares of our unregistered common stock to the Rockford stockholders, which were calculated based on an average price of $7.77 per share as defined in the Merger Agreement.  The fair value of the shares as of November 12, 2010 was $8.47/share, or approximately $13.6 million.

 

In addition to above common stock, the Company provided for additional consideration in the form of an earnout.  If Rockford’s EBITDA, as defined in the underlying Agreement and Plan of Merger, for the three month period ending December 31, 2010, is equal to or greater than $9.0 million, a number of shares equal to $4.6 million will be issued.  If Rockford’s EBITDA for the fifteen month period commencing October 1, 2010 and ending December 31, 2011 is equal to or great than $34 million but less than $38 million, we will issue a number of shares equal to $2.3 million and have agreed to pay $2.3 million in cash.  If Rockford’s EBITDA for the same fifteen month period above is equal to or greater than $38 million, we will issue an additional number of shares equal to $3.45 million and have agreed to pay an additional $3.45 million in cash.  If Rockford’s EBITDA for the year ending December 31, 2012 is equal to or greater than $14 million, we have agreed to pay $6.9 million in cash.  The number of shares for this earnout is to be calculated based on the average closing price of our common stock, as reported on NASDAQ, for the 20 business days prior to December 31 of each applicable period.

 

The estimated fair value of this earnout consideration (adjusting to reflect the time value of money and a contingent probability factor) as of the November 12, 2010 transaction date is approximately $14.3 million and is reflected as a liability on the Pro Forma Combined Balance Sheet as required under generally accepted accounting principles.

 

Should Rockford achieve all of the EBITDA contingency targets, this would result in an additional $4.13 million in expense to the Company’s earnings in future periods.  Such potential expense is not reflected in this pro forma combined statement of income.

 

5



 

(E)                                 On November 12, 2010, we paid the sellers approximately $35 million in cash and executed a promissory note payable to the sellers for approximately $16.7 million (the “Note”).  The principal amount of the Note has been divided into two portions, with approximately $9.7 million designated as “Loan A” and approximately $7.0 million as “Loan B”.  Both portions of the Note are due and payable on October 13, 2013 and both bear interest at an annual rate of 5% for months 1 through 12, 7% for months 13 through 24 and 8% for months 25 until the maturity date.  There is no prepayment penalty.  The current portion of the Note at closing was $5.2 million.

 

Interest expense for the note is approximately $0.512 million for the pro forma nine months ended September 30, 2010 (at an effective rate of interest of 7% as prescribed in the Note agreements for period 13 through period 21) and approximately $0.688 million for the pro forma year ended December 31, 2009 (at an effective rate of interest of 5% as prescribed in the Note agreements for period 1 through period 12).

 

(F)                                 Rockford incurred certain costs, including legal, accounting and tax consulting expenses relating to the sale of the business to Primoris, and was estimated at $0.186 million in costs.

 

Additionally, Primoris’ acquisition related costs, consisting of legal, accounting, tax consulting and due diligence costs were estimated to be $0.36 million.

 

(G)                                Reflects the elimination of the total stockholders equity of Rockford and represents the book value of net assets acquired by Primoris.

 

(H)                               The transaction will be accounted for under the acquisition method of accounting in accordance with the Financial Accounting Standard Board (“FASB”), Accounting Standard Codification or ASC 805-10 topic for “Business Combinations” (formerly referred to as FASB Statement of Financial Accounting Standards No. 141R).  Accordingly, the Rockford assets and liabilities are measured at fair value at the date of the acquisition.   Primoris performed a fair value assessment for fixed assets on the date of the acquisition and, on a preliminary basis, increased the book value by $1.8 million for fixed assets, primarily machinery and equipment.

 

The resulting adjustments to depreciation expense are an increase of approximately $0.34 million for the pro forma nine months ended September 30, 2010 and $0.45 million for the pro forma year ended December 31, 2009 and the adjustments are charged to cost of revenues.

 

(I)                                    To determine the estimated fair value of intangibles acquired, Primoris engaged a third party valuation specialist to assist management.  Based on the preliminary assessment, the acquired intangible asset categories, fair value and average amortization periods, generally on a straight-line basis, are as follows:

 

 

 

 

 

Fair

 

 

 

Amortization
Period

 

Value at
9/30/2010 (thousands)

 

 

 

 

 

 

 

Tradename

 

10 years

 

$

7,450

 

Non-compete agreements

 

 5 years

 

$

2,100

 

Customer relationships

 

10 years

 

$

2,200

 

Backlog

 

   0.75 years

 

$

3,800

 

 

Amortization expense is approximately $1.04 million for the nine months ended September 30, 2010, included in selling, general and administrative expenses, with no expense included in cost of revenues.  For the year ended December 31, 2009, amortization expense was $5.2 million, with $3.8 million included in cost of revenues and $1.4 million included in selling, general and administrative expenses.

 

The fair value of the tradename was determined based on the “relief from royalty” method, an approach under which fair value is estimated to be the present value of royalties saved because we own the intangible asset and therefore do not have to pay a royalty for its use.  The fair value for the non-compete agreements was valued based on a discounted “income approach” model including estimated financial results with and without the non-compete agreements in place.  The agreements were analyzed based on the potential impact competition from certain individuals could have on the financial results of the Company, assuming the agreements were not in place.  The customer relationships and backlog were valued utilizing the “excess earnings method” of income approach.  Estimated discounted cash flow associated with existing customers and projects was based on historical and market participant data.

 

These valuations are preliminary and subject to change.

 

(J)                                   The tax effect of both the income before income taxes for Rockford and the pro forma adjustments for the Acquisition is calculated using the Primoris corporate statutory rate of 39.8% for the periods presented.

 

6



 

(K)                               This adjustment reclassifies the Rockford presentation for “gain on sale of property, plant and equipment” from cost of revenues to selling, general and administrative in accordance with Primoris practice.  The adjustment for the nine months ended September 30, 2010 was $0.175 million and $0.244 million for the year ended December 31, 2009.

 

(L)                                 The adjustment to earnings per share reflects the impact of 1,605,709 shares of common stock issued to the sellers.

 

(M)                            This adjustment records the deferred tax liability related to the estimated fair value increase in recorded fixed assets and the estimated fair value of identified intangible assets acquired as a result of the Merger.

 

(N)                               This entry is to record estimated acquisition goodwill of $33.58 million and to eliminate historical goodwill of Rockford of $3.86 million.  Goodwill largely consists of expected benefits from the geographic expansion and presence of Rockford in the Pacific Northwest, addition of expanded pipeline capabilities, the opportunity to extend our infrastructure operations and other synergies of the combined companies, the value of the assembled workforce, other intangible assets that did not qualify for separate recognition and other intangible assets that were not individually identified because they cannot be reliably measured.  Goodwill is not expected to be deductible for Federal or state tax purposes.

 

7



 

PRIMORIS SERVICES CORPORATION

 

SUPPLEMENTAL UNAUDITED PRO FORMA COMBINED

FINANCIAL STATEMENTS WITH JAMES CONSTRUCTION GROUP (“JCG”)

FOR THE YEAR ENDED DECEMBER 31, 2009

 

On December 18, 2009, we acquired 100% of the equity interests in James Construction Group, LLC (“JCG”), following which JCG became our wholly-owned subsidiary.  Our historical results prior to that date do not include the effects of the acquisition of JCG.  The Company’s consolidated financial statements as of and for the year ended December 31, 2009, which were included in the Annual Report on Form 10-K filed on March 11, 2010, present pro forma information for the twelve months ended December 31, 2009 as if the JCG acquisition had occurred as of January 1, 2009.

 

The supplemental unaudited pro forma combined statement of income presented in the table below labeled “Supplemental Pro Forma Combined Statement of Income with JCG”, are based on the unaudited pro forma combined financial data of Primoris and Rockford contained elsewhere in this Current Report on Form 8-K/A and include the effect of combining the acquisition of JCG as if the JCG acquisition had occurred as of January 1, 2009.

 

The Supplemental Pro Forma Combined Statement of Income with JCG should be read in conjunction with the unaudited pro forma combined financial data of Primoris and Rockford included elsewhere herein, the respective Primoris financial statements and accompanying notes for the corresponding period, included in the Annual Report on Form 10-K filed on March 11, 2010, and the statements of revenues and expenses related to the JCG acquisition included in the Current Report on Form 8-K/A filed on January 22, 2010.

 

The following Supplemental Pro Forma Combined Statement of Income with JCG is prepared for illustrative purposes only and is not indicative of or intended to represent the results that would have been achieved had the transactions been consummated as of January 1, 2009 nor that may be achieved in the future.  The Supplemental Pro Forma Combined Statement of Income with JCG does not  reflect any operating efficiencies, associated cost savings or additional costs that we may achieve with respect to the combined companies.  In addition, since the Supplemental Pro Forma Combined Statement of Income with JCG has been prepared based on preliminary estimates of purchase consideration and fair values of assets acquired and liabilities assumed, the actual amounts recorded may differ materially from the information presented.

 

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PRIMORIS SERVICES CORPORATION

SUPPLEMENTAL PRO FORMA COMBINED STATEMENT OF INCOME WITH JCG

For the year ended December 31, 2009

(Unaudited)

Amounts in thousands, except per share amounts

 

 

 

(Note a)
Pro Forma
Combined
Primoris &
Rockford

 

(Note b)
JCG

 

Pro Forma
Adjustment

 

Notes

 

Pro Forma
Combined with
JCG

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenues

 

$

633,233

 

$

373,836

 

 

 

 

 

$

1,007,069

 

Cost of revenues

 

528,518

 

333,261

 

4,660

 

c, d

 

866,439

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross Profit

 

104,715

 

40,575

 

(4,660

)

 

 

140,630

 

 

 

 

 

 

 

 

 

 

 

 

 

Selling, general and administrative expenses

 

45,493

 

18,717

 

1,498

 

d, e

 

65,708

 

Merger related stock expense

 

390

 

 

 

 

 

 

 

390

 

Operating income

 

58,832

 

21,858

 

(6,158

)

 

 

74,532

 

 

 

 

 

 

 

 

 

 

 

 

 

Income from non-consolidated entities

 

8,753

 

 

 

 

 

 

8,753

 

Foreign exchange gain (loss)

 

293

 

 

 

 

 

 

293

 

Other income (expense), net

 

 

676

 

 

 

 

 

676

 

Gain on sale of property and equipment

 

 

1,717

 

(1,717

)

e

 

 

Interest income

 

672

 

79

 

 

 

 

751

 

Interest (expense), net

 

(3,074

)

 

(2,151

)

f

 

(5,225

)

Total other income (expense)

 

6,644

 

2,472

 

(3,868

)

 

 

5,248

 

 

 

 

 

 

 

 

 

 

 

 

 

Income before income taxes

 

65,476

 

24,330

 

(10,026

)

 

 

79,780

 

 

 

 

 

 

 

 

 

 

 

 

 

Provision for income taxes

 

(24,468

)

 

(5,693

)

g

 

(30,161

)

 

 

 

 

 

 

 

 

 

 

 

 

Income from continuing operations

 

41,008

 

24,330

 

(15,719

)

 

 

49,619

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss on discontinued operations, net of income taxes

 

(3,849

)

 

 

 

 

(3,849

)

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss) - pro forma

 

$

37,159

 

$

24,330

 

$

(15,719

)

 

 

$

45,770

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings per share - pro forma

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

1.11

 

 

 

 

 

h

 

$

1.13

 

Diluted

 

$

1.03

 

 

 

 

 

h

 

$

1.04

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding

 

 

 

 

 

 

 

 

 

 

 

Basic

 

33,543

 

 

6,996

 

h

 

40,539

 

Diluted

 

36,024

 

 

7,890

 

h

 

43,914

 

 

9



 

PRIMORIS SERVICES CORPORATION

 

NOTES TO SUPPLEMENTAL UNAUDITED PRO FORMA COMBINED

FINANCIAL STATEMENTS WITH JAMES CONSTRUCTION GROUP (“JCG”)

FOR THE YEAR ENDED DECEMBER 31, 2009

 

The Unaudited Supplemental Pro Forma Combined Statement of Income with JCG is based on the unaudited pro forma combined financial data of Primoris and Rockford contained elsewhere in this Current Report on Form 8-K/A and includes the effect of combining the December 18, 2009 acquisition of JCG as if the JCG acquisition had occurred as of January 1, 2009 with acquisition-related adjustments reflected in the statements.

 

The pro forma adjustments to the unaudited Supplemental Pro Forma Combined Statement of Income with JCG give effect to events that are directly attributable to the JCG transaction, are factually supportable and expected to have a continuing impact.  Such adjustments are based on the estimates of fair value of the related assets acquired and liabilities assumed as of the acquisition date.

 

(a)                                  The “Pro Forma Combined Primoris & Rockford” column represents the unaudited pro forma combined financial data of Primoris and Rockford contained elsewhere in this Current Report on Form 8-K/A for the period shown.

 

(b)                                 The “JCG” column includes the results of the JCG operations for the twelve months ended December 31, 2009.

 

(c)                                  Under ASC 805, the JCG assets and liabilities are measured at fair value at the date of the acquisition.  Primoris performed a fair value assessment for fixed assets on the date of the acquisition and increased the book value for the fixed assets, primarily machinery and equipment.  The resulting adjustment to depreciation expense was approximately $2.6 million for the year ended December 31, 2009.

 

(d)                                 The Company performed a fair value assessment for the JCG intangible assets acquired, which amounted to $39 million.  Additional amortization expense resulting from this increase was approximately $5.3 million for the year ended December 31, 2009 (with $2.1 million charged to cost of revenues and $3.2 million charged to selling, general and administrative expenses).

 

(e)                                  This adjustment reclassifies the JCG presentation for “gain on sale of property, plant and equipment” to selling, general and administrative expenses in accordance with Primoris practice.

 

(f)                                    A note payable of $53.5 million was included as part of the consideration paid for the JCG acquisition.  The resulting interest expense for the note was approximately $2.15 million for the year ended December 31, 2009.

 

(g)                                 The tax effect of the pro forma adjustments for the JCG acquisition used the Primoris corporate statutory rate of 39.8% for the year ended December 31, 2009.

 

(h)                                 As part of the consideration paid for the JCG acquisition, Primoris issued 81,852.78 shares of preferred stock, which were converted into 8,185,278 shares of common stock on April 12, 2010.  The adjustment to shares outstanding and to earnings per share reflects the shares of preferred stock as if they were converted into the 8,185,278 shares of common stock as of January 1, 2009.  Pro forma basic shares outstanding excluded the number of shares included in escrow under the JCG purchase agreement.

 

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