UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One) xQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. For the quarterly period ended March 31, 2010 OR oTRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.

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

~~For the quarterly period ended June 30, 2009~~

OR

o		~~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 0001-34145

Primoris Services Corporation

(Exact name of registrant as specified in its charter)

Delaware (State or Other Jurisdiction of Incorporation or Organization)		20-4743916 (I.R.S. Employer Identification No.)

26000 Commercentre Drive, Lake Forest, California (Address of Principal Executive Offices)		92630 (Zip Code)

Registrant’s telephone number, including area code: (949) 598-9242

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 x No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate ~~Website,~~Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files). Yes o No o

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

Large accelerated filer o		Accelerated filer ox

Non-accelerated filer o ~~Do not check if a smaller reporting company.~~		Smaller reporting company xo
Do not check if a smaller reporting company.

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

As of ~~August 4, 2009, 32,477,364~~May 7, 2010, 44,227,691 shares of the registrant’s common stock were outstanding.

Table of Contents

PRIMORIS SERVICES CORPORATION ~~AND SUBSIDIARIES~~

INDEX

	Page NoNo.

Part I. Financial Information

Item ~~1 Condensed Consolidated~~1. Financial Statements:

—Condensed Consolidated Balance Sheets as of ~~June 30, 2009~~March 31, 2010 and December 31, ~~2008~~2009	3

—Condensed Consolidated Statements of Income for the three months ended March 31, 2010 and ~~six months ended June 30,~~March 31, 2009 ~~andJune 30, 2008~~	4

—Condensed Consolidated Statements of Stockholders’ Equity	5

—Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2010 and ~~six months ended June 30,~~March 31, 2009 ~~and June 30, 2008~~	56

—Notes to Condensed Consolidated Financial Statements	78

Item 22. Management’s Discussion and Analysis of Financial Condition and Results of Operations	1720

Item 33. Quantitative and Qualitative Disclosures About Market Risk	2931

Item 4T4. Controls and Procedures	2931

Part II. Other Information

Item 11. Legal Proceedings	3031

Item 1A1A. Risk Factors	3032

Item 22. Unregistered Sales of Equity Securities and Use of Proceeds	3032

Item 33. Defaults Upon Senior Securities	3132

Item ~~4 Submission of Matters to a Vote of Security Holders~~4. (Removed and Reserved)	3132

Item 55. Other Information	32

Item 66. Exhibits	32

Signatures	33

Table of Contents

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

PRIMORIS SERVICES CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(In Thousands, Except Share Amounts)

	March 31, 2010		December 31, 2009
	(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	83,289	$	90,004
Short term investments	29,000		30,058
Restricted cash	6,931		6,845
Accounts receivable, net	117,610		108,492
Costs and estimated earnings in excess of billings	16,187		11,378
Inventory	24,683		22,275
Deferred tax assets	5,630		5,630
Prepaid expenses and other current assets	10,029		5,501
Current assets from discontinued operations	—		5,304
Total current assets	293,359		285,487
Property and equipment, net	90,653		92,568
Investment in non-consolidated entities	2,174		5,599
Intangible assets, net	31,314		32,695
Goodwill	59,678		59,678
Total assets	$	477,178	$	476,027
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	65,888	$	62,568
Billings in excess of costs and estimated earnings	113,397		114,035
Accrued expenses and other current liabilities	35,716		34,992
Distributions and dividends payable	1,102		2,987
Current portion of capital leases	3,859		4,220
Current portion of long-term debt	6,568		6,482
Current portion of subordinated debt	9,165		10,397
Current liabilities of discontinued operations	333		6,511
Total current liabilities	236,028		242,192
Long-term debt, net of current portion	24,694		26,368
Long-term capital leases, net of current portion	7,130		7,734
Long-term subordinated debt, net of current portion	41,863		43,853
Deferred tax liabilities	2,643		2,643
Other long-term liabilities	11,350		9,278
Total liabilities	323,708		332,068
Commitments and contingencies
Stockholders’ equity
Preferred stock—$.0001 par value, 1,000,000 shares authorized, 81,852.78 issued and outstanding at March 31, 2010 and December 31, 2009	—		—
Common stock—$.0001 par value, 90,000,000 shares authorized, 35,900,483 and 32,704,903 issued and outstanding at March 31, 2010 and December 31, 2009	3		3
Additional paid-in capital	104,738		100,644
Retained earnings	48,577		42,982
Accumulated other comprehensive income	152		330
Total stockholders’ equity	153,470		143,959
Total liabilities and stockholders’ equity	$	477,178	$	476,027

See Accompanying Notes to Condensed Consolidated Financial Statements

Table of Contents

PRIMORIS SERVICES CORPORATION

~~PART I. FINANCIAL INFORMATION~~

~~ITEM 1.~~ CONDENSED CONSOLIDATED ~~FINANCIAL~~ STATEMENTS

~~CONDENSED CONSOLIDATED BALANCE SHEETS~~ OF INCOME

(~~IN THOUSANDS, EXCEPT SHARE AMOUNTS)~~In Thousands, Except Per Share Amounts)

June 30,
2009

December 31,
2008

(Unaudited)

ASSETS

Current assets:

Cash and cash equivalents

$
59,781

$
73,018

Short-term investments

15,091

15,036

Restricted cash

8,326

11,111

Accounts receivable, net

95,483

90,826

Costs and estimated earnings in excess of billings

20,870

21,017

Deferred income taxes

5,591

5,591

Prepaid expenses, inventory and other current assets

4,385

5,856

Total current assets

209,527

222,455

Property and equipment, net

28,181

26,224

Other assets

255

139

Investment in non-consolidated entities

1,333

500

Other intangible assets, net

34

52

Goodwill

2,842

2,842

Total assets

$
242,172

$
252,212

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:

Accounts payable

$
48,471

$
56,088

Billings in excess of costs and estimated earnings

67,309

72,664

Accrued expenses and other current liabilities

23,266

26,067

Distributions and dividends payable

812

5,696

Current portion of capital leases

1,582

2,198

Current portion of long-term debt

6,046

5,679

Total current liabilities

147,486

168,392

Long-term debt, net of current portion

25,324

26,624

Long-term capital leases, net of current portion

—

341

Deferred tax liabilities

1,429

1,425

Total liabilities

174,239

196,782

Commitments and contingencies

Stockholders’ equity

Preferred stock—$.0001 par value, 1,000,000 shares authorized, 0 outstanding

—

—

Common stock—$.0001 par value; authorized: 90,000,000 shares; 32,477,364 and 29,977,339 issued and outstanding at June 30, 2009 and December 31, 2008

3

3

Additional paid-in capital

34,796

34,796

Retained earnings

33,031

20,528

Accumulated other comprehensive income

103

103

Total stockholders’ equity

67,933

55,430

Total liabilities and stockholders’ equity

$
242,172

$
252,212

	Three months ended March 31,
	2010			2009
	(Unaudited)
Revenues	$	174,982		$	123,550
Cost of revenues	150,509			109,044
Gross profit	24,473			14,506
Selling, general and administrative expenses	13,755			7,416
Operating income	10,718			7,090
Other income (expense):
Income from non-consolidated entities	968			2,167
Foreign exchange gain	92			229
Interest income	180			259
Interest expense	(1,307		)	(526		)

Income from continuing operations, before provision for income taxes	10,651			9,219
Provision for income taxes	(3,953		)	(3,599		)
Income from continuing operations	6,698			5,620
Income on discontinued operations, net of income taxes	—			20
Net income	$	6,698		$	5,640
Earnings per share:
Basic:
Income from continuing operations	$	0.20		$	0.19
Income on discontinued operations	$	—		$	—
Net income	$	0.20		$	0.19
Diluted:
Income from continuing operations	$	0.15		$	0.17
Income on discontinued operations	$	—		$	—
Net income	$	0.15		$	0.17
Weighted average common shares outstanding:
Basic	33,202			30,116
Diluted	45,544			32,477

See Accompanying Notes to Condensed Consolidated Financial Statements

Table of Contents

PRIMORIS SERVICES CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF ~~INCOME~~STOCKHOLDERS’ EQUITY

(~~IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)~~In Thousands, Except Share Amounts)

Three Months Ended

Six Months Ended

June 30,

June 30,

2009

2008

2009

2008

(Unaudited)

(Unaudited)

Revenues

$
126,900

$
142,444

$
255,638

$
311,835

Cost of revenues

105,977

127,810

219,987

280,988

Gross profit

20,923

14,634

35,651

30,847

Selling, general and administrative expenses

8,388

6,622

16,002

14,623

Operating income

12,535

8,012

19,649

16,224

Other income (expense):

Income from non-consolidated entities

1,736

1,204

3,903

3,027

Foreign exchange gain (loss)

(26
)
(41
)
203

(22
)
Interest income (expense) net

(334
)
(147
)
(594
)
(224
)
Income before provision for income taxes

13,911

9,028

23,161

19,005

Provision for income taxes

(5,331
)
(259
)
(8,941
)
(454
)
Net income

$
8,580

$
8,769

$
14,220

$
18,551

Basic earnings per share

$
0.26

$
0.37

$
0.45

$
0.79

Diluted earnings per share

$
0.26

$
0.37

$
0.44

$
0.79

Weighted average common shares outstanding

Basic

32,477

23,587

31,303

23,587

Diluted

32,835

23,587

32,477

23,587

Pro forma net income data—2008:

Income before provision for income tax, as reported

$
9,028

$
19,005

Adjustments for provision for income tax

(3,593
)

(7,564
)
Pro forma adjusted net income

$
5,435

$
11,441

Pro forma earnings per share

Basic

$
0.23

$
0.49

Diluted

$
0.23

$
0.49

	Common Stock			Preferred Stock			Additional Paid-in			Retained			Accum. Other Comprehensive			Total Stockholders’
	Shares	Amount		Shares	Amount		Capital			Earnings			Income			Equity
Balance, December 31, 2008	29,977,339	$	3	—	$	—	$	34,796		$	20,528		$	103		$	55,430
Net income	—	—		—	—		—			25,912			—			25,912
Issuance of common shares to Former Primoris owners	2,500,025	—		—	—		—			—			—			—
Stock issued for the purchase of Cravens Services, Inc.	139,082	—		—	—		1,000			—			—			1,000
Repurchase of warrants	—						(94		)							(94		)
Dividends — common	—	—		—	—		—			(3,254		)	—			(3,254		)
Dividends — preferred	—	—		—	—		—			(204		)	—			(204		)
Foreign currency hedge effect	—	—		—	—		—			—			227			227
Preferred stock issued for purchase of James Construction Group	—	—		81,852.78	—		64,500			—			—			64,500
Warrant exercises	88,457	—		—	—		442			—			—			442
Balance, December 31, 2009	32,704,903	$	3	81,852.78	$	—	$	100,644		$	42,982		$	330		$	143,959
Net income	—	—		—	—		—			6,698			—			6,698
Issuance of common shares to Former Primoris owners	2,499,975	—		—	—		390			—			—			390
Additional contingent stock issued for the purchase of Cravens Services, Inc.	74,906	—		—	—		600			—			—			600
Dividends — common	—	—		—	—		—			(898		)	—			(898		)
Dividends — preferred	—	—		—	—		—			(205		)	—			(205		)
Foreign currency hedge effect	—	—		—	—		—			—			(178		)	(178		)
Warrant exercises	620,699	—		—	—		3,104			—			—			3,104
Balance, March 31, 2010 (Unaudited)	35,900,483	$	3	81,852.78	$	—	$	104,738		$	48,577		$	152		$	153,470

See Accompanying Notes to Condensed Consolidated Financial Statements

Table of Contents

PRIMORIS SERVICES CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(~~IN THOUSANDS)~~In Thousands)

	Three Months Ended						Six Months Ended
	June 30,						June 30,						Three months ended March 31,
	2009			2008			2009			2008			2010			2009
	(Unaudited)						(Unaudited)						(Unaudited)
Cash flows from operating activities:
Net income	$	8,580		$	8,769		$	14,220		$	18,551		$	6,698		$	5,640
Adjustments to reconcile net income to net cash provided by:
Depreciation and amortization	2,089			1,529			3,990			2,967
Amortization of other intangible assets	9			9			18			18
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation													4,172			1,835
Amortization of intangible assets													1,381			9
Gain on sale of property and equipment	(375		)	(344		)	(1,499		)	(484		)	(1,139		)	(1,124		)
Income from non-consolidated entities	(1,736		)	(1,204		)	(3,903		)	(3,027		)	(968		)	(2,167		)
Non-consolidated entity distributions	—			—			3,400			566			4,393			3,400
Changes in assets and liabilities:
Restricted cash	(94		)	(860		)	2,785			781			(86		)	324
Accounts receivable	(11,270		)	26,288			(4,657		)	30,032			(9,118		)	8,701
Costs and estimated earnings in excess of billings	(157		)	1,138			147			(7,829		)	(4,809		)	2,172
Prepaid expenses, inventory and other current assets	4,702			(150		)	1,471			69
Inventory, prepaid expenses and other current assets													(6,936		)	44
Other assets	(334		)	370			(116		)	884			(178		)	(1,009		)
Accounts payable	301			(12,879		)	(7,617		)	(13,528		)	3,320			(9,105		)
Billings in excess of costs and estimated earnings	(1,881		)	2,356			(5,355		)	12,080			(638		)	(5,189		)
Deferred income tax	4			—			4			—
Accrued expenses and other current liabilities	(3,969		)	2,305			(2,095		)	273			724			3,242
Other long-term liabilities	—			16			—			29			2,072			—
Net cash provided (used) by operating activities	(4,131		)	27,343			793			41,382
Net cash provided by operating activities													(1,112		)	6,773
Cash flows from investing activities:
Purchase of property and equipment	(1,888		)	(2,148		)	(3,077		)	(3,665		)	(2,556		)	(1,171		)
Sale (purchase) of short-term investments	10,075			—			(55		)	—
Advances to non-consolidated entities	(1,036		)	—			(1,036		)	—
Purchase of short term investments													1,058			(10,130		)
Proceeds from sale of property and equipment	402			619			1,652			787			1,438			1,250
Net cash provided (used) in investing activities	7,553			(1,529		)	(2,516		)	(2,878		)
Net cash used in investing activities													(60		)	(10,051		)
Cash flows from financing activities:
Repayment of long-term debt	(1,461		)	(1,726		)	(3,956		)	(3,180		)	(1,588		)	(2,495		)
Repayment of capital leases	(482		)	—			(957		)	—			(965		)	(475		)
Repayment of subordinated debt													(3,222		)	—
Stock issued for business acquired													600			—
Stock issued to foreign managers													390			—
Proceeds from exercise of warrants for the issuance of common stock													3,104			—
Repurchase of warrants	(11		)	—			(93		)	—			—			(82		)
Dividends	(812		)	—			(1,561		)	—			(1,022		)	(749		)
Cash distributions to stockholders	—			(11,903		)	(4,947		)	(18,018		)
Net cash provided (used) in financing activities	(2,766		)	(13,629		)	(11,514		)	(21,198		)
Cash distributions to selling stockholders													(1,966		)	(4,947		)
Net cash used in financing activities													(4,669		)	(8,748		)
Cash flows from discontinued operations:
Operating activities													(874		)	(2,710		)
Net cash used in discontinued operations													(874		)	(2,710		)

Net change in cash and cash equivalents	656			12,185			(13,237		)	17,306			(6,715		)	(14,736		)
Cash and cash equivalents at beginning of the period	59,125			68,087			73,018			62,966
Cash and cash equivalents at beginning of period													90,004			72,848
Cash and cash equivalents at end of the period	$	59,781		$	80,272		$	59,781		$	80,272		$	83,289		$	58,112

See Accompanying Notes to Condensed Consolidated Financial Statements

Table of Contents

PRIMORIS SERVICES CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)

(~~IN THOUSANDS)~~In Thousands)

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION

	Three Months Ended				Six Months Ended
	June 30,				June 30,				Three months ended March 31,
	2009		2008		2009		2008		2010		2009
	(Unaudited)				(Unaudited)				(Unaudited)
Cash paid during the period for:
Interest	$	538	$	521	$	1,057	$	1,207	$	1,617	$	257
Income taxes	$	7,704	$	259	$	11,100	$	454	$	516	$	3,397

Non-cash activities
Obligations incurred for the acquisition of property and equipment leases	$	—	$	7,075	$	3,023	$	7,075

SUPPLEMENTAL DISCLOSURES OF NONCASH INVESTING AND FINANCING ACTIVITIES

	Three months ended March 31,
	2010		2009
	(Unaudited)
Non-Cash Activities
Obligations incurred for the acquisition of property and equipment leases	$	—	$	3,023
Accrued dividends	$	1,102	$	812

See Accompanying Notes to Condensed Consolidated Financial Statements

Table of Contents

PRIMORIS SERVICES CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In ~~thousands, except per share amounts)~~Thousands, Except Per Share Amounts)

(Unaudited)

Note 1—Business Activity

Organization and operations—Primoris Services Corporation, a Delaware corporation (“Primoris”, the “Company”, “we”, “us” or “our”), and its wholly-owned subsidiaries ARB, Inc. (“ARB”), ARB Structures, Inc., Onquest, Inc., James Construction Group, LLC (“JCG”), Cravens Services, Inc., Born Heaters Canada, ULC, Cardinal Contractors, Inc., GML Coatings, LLC, Cardinal Mechanical, L.P., and Stellaris, LLC, ~~and ARB Ecuador, Ltda.,~~ collectively, ~~the “Company”,~~ are engaged in various construction and engineering activities. The Company’s underground and directional drilling operations install, replace and repair natural gas, petroleum, telecommunications and water pipeline systems. The Company’s industrial, civil and engineering operations construct and provide maintenance services to industrial facilities including power plants, petrochemical facilities and other processing plants and construct multi-level parking structures. The Company ~~is incorporated in the State of Delaware and~~ has its corporate headquarters in Lake Forest, California.

On December 18, 2009, the Company acquired JCG. JCG is one of the largest general contractors based in the Gulf Coast states and is engaged in highway, industrial and environmental construction, primarily in Louisiana, Texas and Florida. JCG is the successor company to T. L. James and Company, Inc., a well-known Louisiana company that has been in business for over 80 years. Headquartered in Baton Rouge, Louisiana, JCG serves both government and private clients.

In October 2009, the Company also acquired the assets of Cravens Partners, Ltd., a Texas-based provider of civil and utility infrastructure construction services. Following the acquisition, the Company created a wholly-owned subsidiary named Cravens Services, Inc. (“Cravens”)

Note 2—Basis of Presentation

Interim ~~consolidated financial statements~~Consolidated Financial Statements—The interim condensed consolidated financial statements for the three-month ~~and six-month~~ periods ended ~~June 30,~~March 31, 2010 and 2009 ~~and 2008~~ have been prepared in accordance with Rule 10-01 of Regulation S-X ~~Rule 10-01~~ of the Securities Exchange Act of ~~1934.~~1934, as amended (the “Exchange Act”). As such, certain disclosures, which would substantially duplicate the disclosures contained in the Company’s latest audited consolidated financial statements, have been omitted. This Quarterly Report on Form 10-Q for the quarterly period ended ~~June 30, 2009~~March 31, 2010 (the ~~“Second~~“First Quarter ~~2009~~2010 Report”) should be read in concert with the Company’s Annual Report on Form 10-K, filed on March ~~24, 2009,~~11, 2010, which contains the Company’s audited consolidated financial statements for the year ended December 31, ~~2008.~~2009.

The interim financial information for the ~~three-month periods~~three month-periods ended March 31, 2010 and ~~six-month periods ended June 30,~~ 2009 ~~and 2008~~ is unaudited and has been prepared on the same basis as the audited financial statements. However, the financial statements contained in this ~~Second~~First Quarter ~~2009~~2010 Report do not include all of the information and disclosures required by accounting principles generally accepted in the United States of America (“GAAP”) for audited financial statements. In the opinion of management, ~~this~~the unaudited information includes all adjustments (consisting of normal recurring adjustments) necessary for the fair presentation of the interim financial information.

~~In May 2009, the FASB issued SFAS No. 165, “~~~~Subsequent Events~~”. We applied the requirements of SFAS No. 165 beginning with this Second Quarter 2009 Report. We evaluated all significant events or transactions that occurred after June 30, 2009 up to August 11, 2009, the date we issued these financial statements. During this period, we identified one subsequent event that is described in Note 15 “Subsequent Event”.

~~Use of Estimates~~—The preparation of the Company’s condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities as of the date of the condensed consolidated financial statements, and the reported amounts of revenues and expenses during the reporting periods. Actual results could materially differ from those estimates. Significant estimates used in preparing these condensed consolidated financial statements include estimated costs to complete contracts, which have a direct effect on gross profit, estimates for worker’s compensation self insurance reserves, fair value estimates for financial assets and financial liabilities, reserves for bad debt and other accruals.

Revenue recognition—A number of factors relating to the business of the Company affect the recognition of contract revenue. The Company typically structures contracts as unit-price, time and material, fixed-price or cost plus fixed fee. Revenue is recognized on the percentage-of-completion method for all fixed-price contracts. Under the percentage-of-completion method, estimated contract income and resulting revenue is generally accrued based on costs incurred to date as a percentage of total estimated costs. Total estimated costs, and thus contract revenue and income, are impacted by changes in productivity, scheduling, the unit cost of labor, subcontracts, materials and equipment and other unforeseen events. Additionally, external factors such as weather, client needs, client delays in providing permits and approvals, labor availability, governmental regulation and politics may affect the progress of a project’s completion and thus the timing of revenue recognition. If a current estimate of total contract cost indicates a loss on a contract, the projected loss is recognized in ~~full.~~

~~Table of Contents~~full when determined.

The caption “Costs and estimated earnings in excess of billings” represents the excess of contract revenues from fixed-priced contracts recognized under the percentage-of-completion method over billings to date. For those fixed-priced contracts in which billings exceed contract revenues recognized to date, such excesses are included in the caption “Billings in excess of costs and estimated earnings”.

Table of Contents

Revenues on cost-plus and time and materials contracts are recognized as the related work is completed.

In accordance with the terms of the contracts, certain retainage provisions are withheld by customers until completion and acceptance of the contracts. Final payments of the majority of such amounts are expected to be ~~receivable~~received in the following ~~periods.~~operating cycle, which is typically within a year.

Note 3—Recent Accounting Pronouncements

~~In April 2009, the Financial Accounting Standards Board (“FASB”) issued three accounting pronouncements:~~Fair Value Disclosures

·In January 2010, the FASB ~~Staff Position FAS 157-4, “~~~~Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly~~~~” (“FSP FAS 157-4”) provides guidelines for making fair value measurements more consistent with the principles presented in Statement of Financial~~issued Accounting Standards ~~(“SFAS”)~~Update No. 157. FSP FAS 157-4 provides additional authoritative guidance in determining whether a market is active or inactive, and whether a transaction is distressed. It is applicable to all assets and liabilities (i.e. financial and non-financial) and will require enhanced disclosures.

·~~FASB Staff Position FAS 115-2 and FAS 124-2,~~2010-06, “~~Recognition and Presentation of Other-Than-Temporary Impairments~~” provides additional guidance to provide greater clarity about the credit and noncredit component of an other-than-temporary impairment event and to improve presentation and disclosure of other-than-temporary impairments in the financial statements.

·~~FASB Staff Position FAS 107-1 and APB 28-1, “~~~~Interim~~Improving Disclosures about Fair Value ~~of Financial Instruments~~Measurements” ~~amends FASB Statement No. 107,~~ (an update to ASC Topic 820 “~~Disclosures about~~ Fair Value ~~of Financial Instruments~~Measurements and Disclosures”~~”, to require~~). ASU 2010-06 requires additional disclosures about fair value measurements including transfers in and out of Levels 1 and 2 and a higher level of disaggregation for the different types of financial ~~instruments~~instruments. For the reconciliation of Level 3 fair value measurements, information about purchases, sales, issuances and settlements should be presented separately. This ASU is effective for annual and interim reporting periods beginning after December 15, 2009 for most of the new disclosures and for periods beginning after December 15, 2010 for the new Level 3 disclosures. Comparative disclosures are not required in ~~interim~~the first year the disclosures are required. The Company adopted this accounting standard update as ~~well as in annual financial statements. This FSP also amends Accounting Principles Board (“APB”) Opinion No. 28, “~~~~Interim Financial Reporting~~~~”, to require those disclosures in all interim financial statements.~~

~~We adopted the three FASB Staff Positions above during the second quarter ended June 30, 2009, and adoption~~of January 1, 2010, which did not result in a material impact on our financial statements.

Consolidation of Variable Interest Entities

In ~~April,~~June 2009, the FASB issued ~~Staff Position FAS 141(R)-1, “~~an amendment to an accounting standard for ASC Topic 810 “Consolidation”, (formerly referred to as “Statement of Financial Accounting ~~for Assets Acquired and Liabilities Assumed in a Business Combination That Arises from Contingencies” which amends and clarifies FASB Statement No. 141 (revised 2007), “~~~~Business Combinations~~”, and provides guidelines for the initial recognition and measurement, subsequent measurement and accounting, and disclosure of assets and liabilities arising from contingencies in a business combination. This pronouncement will be effective for any acquisition made after January 1, 2009.

~~In May 2009, the FASB issued SFAS No. 165, “~~~~Subsequent Events~~~~”. SFAS No. 165 establishes general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued.~~ SFAS No. 165 is effective for interim or annual periods ending after June 15, 2009. The adoption of SFAS No. 165 during the three months ended June 30, 2009, did not have a material effect on the Company’s consolidated financial statements.

~~SFAS~~Standards No. 167, “Amendments to FASB Interpretation No. 46R~~” amends FASB Interpretation~~ “ (“~~FIN”~~SFAS 167”)) ~~No. 46 (Revised December 2003), “~~~~Consolidation of Variable Interest Entities~~,”which sets rules for determining whether to consolidate an entity that is insufficiently capitalized or is not controlled through voting (or similar rights). These rules are based on an entity’s purpose and design and the company’s ability to direct the ~~entity’s~~ activities that most significantly impact the entity’s economic performance. SFAS 167 requires additional disclosures about the reporting company’s involvement with variable-interest entities and any significant changes in risk exposure due to that involvement as well as its affect on the company’s financial statements. ~~SFAS 167 will be~~The accounting standard became effective January 1, 2010. The Company ~~is currently evaluating~~adopted the amendment as of January 1, 2010, which did not result in a material impact on ~~the Company’s financial statements.~~

~~Table of Contents~~
~~SFAS No. 168, “~~~~The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles, a Replacement of FASB Statement No. 162~~~~”. SFAS No. 168 replaces SFAS No. 162, “~~~~The Hierarchy of Generally Accepted Accounting Principles~~” and establishes the FASB Accounting Standards Codification as the source of authoritative accounting principles recognized by the FASB for non-governmental entities in the preparation of financial statements in conformity with GAAP. SFAS No. 168 will be effective for the Company’s financial statements for periods ending after September 15, 2009. SFAS No. 168 is not expected to have a significant impact on the Company’s consolidatedour financial statements.

Note 4—Fair Value Measurements

~~On January 1, 2008, the Company adopted SFAS No. 157,~~ASC Topic 820, “Fair Value ~~Measures~~Measurements and Disclosures” ~~(“SFAS No. 157”). This Statement~~, defines fair value, establishes a framework for measuring fair value in GAAP ~~expands~~and requires certain disclosures about fair value ~~measurements and applies under other accounting pronouncements that require or permit~~measurements. ASC Topic 820 addresses fair value ~~measurements. SFAS No. 157 does not require any new fair value measurements. The 2008 adoption related to our~~GAAP for financial assets and financial liabilities that are re-measured and reported at fair value at each reporting ~~period.~~
~~In accordance with FASB Staff Position No. FAS-157-2, on January 1, 2009, the Company adopted SFAS No. 157~~period and for non-financial assets and liabilities that are re-measured and reported at fair value on a recurring basis, which included goodwill and ~~other~~ intangible assets for purposes of impairment assessments. ~~This adoption in 2009 did not have a material impact on the financial statements of the Company.~~

In general, fair values determined by Level 1 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~~using the fair value hierarchy levels ~~required~~identified under ~~SFAS No. 157,~~ASC Topic 820, the Company’s financial assets that are required to be measured at fair value ~~on a recurring basis~~ at ~~June 30, 2009~~March 31, 2010 and December 31, ~~2008:~~2009:

Fair Value Measurements at Reporting Date

Fair Value Measurements at Reporting Date

Amount
Recorded
on Balance
Sheet

Quoted Prices
in Active Markets
for Identical Assets
(Level 1)

Significant
Other
Observable
Inputs
(Level 2)

Significant
Unobservable
Inputs
(Level 3)

Amount
Recorded
on Balance
Sheet

Quoted Prices
in Active Markets
for Identical Assets
(Level 1)

Significant
Other
Observable
Inputs
(Level 2)

Significant
Unobservable
Inputs
(Level 3)

Assets as of June 30, 2009:

Assets as of March 31, 2010:

Cash and cash equivalents

$
59,781

$
59,781

—

—

$
83,289

$
83,289

—

—

Short-term investments

$
15,091

$
15,091

—

—

$
29,000

$
29,000

—

—

Assets as of December 31, 2008:

Other assets — hedge contracts

$
203

—

$
203

—

Assets as of December 31, 2009:

Cash and cash equivalents

$
73,018

$
73,018

—

—

$
90,004

$
90,004

—

—

Short-term investments

$
15,036

$
15,036

—

—

$
30,058

$
30,058

—

—

Other assets — hedge contracts

$
266

—

$
266

—

9

Table of Contents

In addition to the assets listed in the table, other financial ~~instruments~~assets and liabilities of the Company consist of accounts receivable, accounts payable and certain accrued liabilities. These financial assets and liabilities generally approximate fair market value based on their short-term nature. The carrying value of the Company’s long-term debt approximates fair value based on comparison with current prevailing market rates for loans of similar risks and maturities. ~~The Company’s other financial instruments generally approximate fair market value based on the short-term nature of these instruments.~~

Note 5—Accounts Receivable

The following is a summary of the Company’s accounts ~~receivable:~~receivable as of the dates shown:

June 30,
2009

December 31,
2008

March 31,
2010

December 31,
2009

(Unaudited)

(Unaudited)

Contracts receivable, net of allowance for doubtful accounts of $200

$
78,514

$
73,430

Contracts receivable, net of allowance for doubtful accounts of $200 for March 31, 2010 and for December 31, 2009

$
95,774

$
82,254

Retention

17,414

15,804

20,825

25,907

95,928

89,234

116,599

108,161

Due from affiliates

—

17

4

—

Other accounts receivable

445

1,575

1,007

331

$
95,483

$
90,826

$
117,610

$
108,492

Amounts “due from affiliates” primarily relate to ~~amounts due~~receivables from related parties (see Note 7, “Equity Method Investments” and Note ~~10,~~14, “Related Party Transactions”) for the performance of construction contracts. Contract revenues earned from related parties were ~~$5,611~~approximately $927 and ~~$3,689~~$5,708 for the three months ended March 31, 2010 and ~~$11,319 and $9,341 for the six months ended June 30,~~ 2009, ~~and 2008,~~ respectively.
~~At June 30, 2009 and December 31, 2008 amounts due from Otay Mesa Power Partners totaling $696 and $1,340, respectively, are included in contracts receivable (see Note 7, “~~~~Equity Method Investments~~~~”).~~
9

~~Table of Contents~~

Note 6—Costs and Estimated Earnings on Uncompleted Contracts

Costs and estimated earnings on uncompleted contracts consist of the ~~following:~~following at:

June 30,
2009

December 31,
2008

March 31,
2010

December 31,
2009

(Unaudited)

(Unaudited)

Costs incurred on uncompleted contracts

$
1,003,956

$
1,267,650

$
1,560,669

$
2,036,251

Provision for estimated (gain) loss on uncompleted contracts

(353
)
700

Provision for estimated loss on uncompleted contracts

557

332

Gross profit recognized

80,034

95,608

136,853

201,254

1,083,637

1,363,958

1,698,079

2,237,837

Less: billings to date

(1,130,076
)
(1,415,605
)

(1,795,289
)
(2,340,494
)

$
(46,439
)
$
(51,647
)

$
(97,210
)
$
(102,657
)

This net amount is included in the accompanying condensed consolidated balance sheet under the following captions:

June 30,
2009

December 31,
2008

March 31,
2010

December 31,
2009

(Unaudited)

(Unaudited)

Costs and estimated earnings in excess of billings

$
20,870

$
21,017

$
16,187

$
11,378

Billings in excess of cost and estimated earnings

(67,309
)
(72,664
)
Billings in excess of costs and estimated earnings

(113,397
)
(114,035
)

$
(46,439
)
$
(51,647
)

$
(97,210
)
$
(102,657
)
10

Table of Contents

Note 7—Equity Method Investments
OMPP

During 2007, the Company established a joint venture, ~~Otay Mesa Power Partners (“OMPP”),~~OMPP, for the sole purpose of constructing a power plant near San Diego, California. The Company has a 40% interest in the ~~project~~venture and accounts for its investment in OMPP using the equity method. ARB ~~one of the subsidiaries of the Company,~~ acts as one of OMPP’s primary ~~subcontractors and~~subcontractors. As of March 31, 2010, ARB has contracts with OMPP totaling ~~$45,319 as of June 30, 2009.~~$49,019, which are nearing completion. ARB recognized ~~$10,181~~$12 in ~~related~~ revenues in the ~~six~~three months ended ~~June 30, 2009~~March 31, 2010 and ~~$9,341~~$5,384 in the ~~six~~three months ended ~~June 30, 2008.~~March 31, 2009. These revenues are included in the contract revenues earned from related parties as stated in Note 5, “Accounts Receivable”.

June 30,
2009

December 31,
2008

March 31,
2010

December 31,
2009

(Unaudited)

(Unaudited)

Otay Mesa Power Partners—Joint Venture

OMPP—Joint Venture

Balance sheet data

Assets

$
23,661

$
48,775

$
993

$
9,176

Liabilities

18,663

50,540

310

1,493

Net assets

$
5,298

$
(1,765
)

$
683

$
7,683

Company’s equity investment in venture

$
979

$
(706
)

$
410

$
4,610

Three months ended June 30

Six months ended June 30,

Three months ended
March 31,

2009

2008

2009

2008

2010

2009

(Unaudited)

(Unaudited)

(Unaudited)

Earnings data:

Revenue

$
34,494

$
26,140

$
78,386

$
48,176

$
—

$
43,892

Gross profit

$
4,473

$
2,944

$
15,558

$
7,324

$
—

$
11,085

Earnings before taxes

$
4,475

$
3,010

$
15,563

$
7,568

$
—

$
11,088

Company’s equity in earnings

$
2,700

$
1,204

$
5,085

$
3,027

$
—

$
2,385

OMPP distributed ~~$8,500~~$7,000 to its equity holders during the ~~six~~three months ended ~~June 30, 2009,~~March 31, 2010, of which the Company’s share was $4,200. For the three months ended March 31, 2009, OMPP distributed $8,500, of which, the Company’s shares was $3,400. The OMPP agreement states that distributions made prior to the completion of the contract are considered advances on account of ~~the related~~each partner’s share as determined at the completion of the underlying contract. ~~The deficit shown in the table above due to the excess distributions received as of December 31, 2008 was included in accrued expenses on the Company’s condensed consolidated balance sheet.~~

10

~~Table of Contents~~All Day Electric
The Company has a 49% interest in ARB Arendal, SRL de CV (“ARB Arendal”), and accounts for this investment under the equity method. ARB Arendal engages in construction activities in Mexico. Because of the uncertainty on the outcome of the negotiations of ARB Arendal with a major customer in Mexico, the Company determined there was an other than temporary impairment of its investment in and advances to ARB Arendal. The Company wrote down the investment to $0 as of December 31, 2007, and has reserved advances of $1,036 made during the three months ended June 30, 2009 and has not recognized any earnings for the three and six months ended June 30, 2009 and 2008.

The Company purchased a 49% interest in All Day Electric (“All Day”) in December 2008 for $500 and accounts for this investment under the equity method. All Day engages in electrical construction activities mainly in Northern California. ARB recognized $914 in revenues in the three months ended March 31, 2010; there were no revenues for the same period in the prior year. The following is a summary of the financial position and results as of and for the periods ended:

March 31,
2010

December 31,
2009

(Unaudited)

All Day Electric

Balance sheet data

Assets

$
2,305

$
5,661

Liabilities

1,670

4,615

Net assets

$
635

$
1,046

Company’s equity investment in venture

$
311

$
513

Three months ended
March 31,

2010

2009

(Unaudited)

Earnings data:

Revenue

$
2,903

$
971

Gross profit

$
(104
)
$
128

Net income

$
(411
)
$
(118
)
Company’s equity in earnings

$
(202
)
$
(218
)
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Table of Contents
St.— Bernard Levee Partners
JCG owns a 30% interest in St.—Bernard Levee Partners (“Bernard”) for $300 and accounts for this investment under the equity method. Bernard engages in construction activities in Louisiana. Bernard distributed $964 to its equity holders during the three months ended March 31, 2010, of which the Company’s ~~equity~~share was $194. The following is a summary of the financial position and results as of and for the periods ended:

March 31,
2010

December 31,
2009

(Unaudited)

St. —Bernard Levee Partners

Balance sheet data

Assets

$
34,974

$
3,149

Liabilities

29,893

1,966

Net assets

$
5,081

$
1,183

Company’s equity investment in venture

$
1,353

$
378

Three months ended
March 31,

2010

2009

(Unaudited)

Earnings data:

Revenue

$
42,130

$
—

Gross profit

$
4,855

$
—

Earnings before taxes

$
4,855

$
—

Company’s equity in earnings

$
1,169

$
—

Note 8 — Business Combinations
The December 18, 2009 acquisition of JCG was accounted using the acquisition method of accounting. The preliminary allocation of the purchase price based on the fair value of the acquired assets, less liabilities assumed, as of December 18, 2009, amounted to $133.19 million.
As part of the acquisition, the Company will issue $10 million in ~~earnings~~common stock to the sellers, contingent upon JCG meeting a specific operating performance target for the year 2010. As discussed in Note 13 — “Other Liabilities”, the estimated fair value of this contingency was ~~$72~~$8.19 and $8.5 million as of December 31, 2009 and March 31, 2010, respectively.
Other than the adjustment in the fair value of the contingent consideration discussed above, there have been no changes in the preliminary estimates of the fair value of the acquired assets and liabilities that have been identified during the three months ended March 31, 2010. The Company expects to complete the final determination of the fair value of the tangible and intangible assets acquired prior to the end of 2010.
Supplemental Unaudited Pro Forma Information for the three months ended ~~June 30,~~March 31, 2009 ~~and a loss of $146~~
The following pro forma information for the ~~six~~three months ended ~~June 30,~~March 31, 2009 presents the results of operations as if the JCG acquisition had occurred at the beginning of 2009. ~~This resulted~~The supplemental pro forma information has been adjusted to include:
·the pro forma impact of amortization of intangible assets and depreciation of property, plant and equipment, based on the purchase price allocation;
·the pro forma impact of interest expense on the $53.5 million subordinated promissory note;
·the pro forma tax effect of both the income before income taxes for JCG and the JCG pro forma adjustments, calculated using the statutory corporate tax rate of 39.8% for the three months ended March 31, 2009.
The pro forma results are presented for illustrative purposes only and are not necessarily indicative of or intended to represent the results that would have been achieved had the transaction been completed on January 1, 2009 or that may be achieved in the future. The pro forma results do not reflect any operating efficiencies and associated cost savings that the Company may, or may not, achieve with respect to the combined companies.
12

Table of Contents

Three months ended
March 31, 2009

Revenues

$
217,293

Income from continuing operations, before provision for income taxes

$
13,573

Income from continuing operations

$
8,241

Net income

$
8,261

Weighted average common shares outstanding:

Basic — (1)

37,112

Diluted — (1)

40,662

Earnings per share:

Basic — income from continuing operations

$
0.22

Basic — net income

$
0.20

Diluted — income from continuing operations

$
0.22

Diluted — net income

$
0.20

(1)          The adjustment to weighted average shares outstanding reflects the conversion of the Preferred Stock issued as part of the acquisition consideration (see Note 17 — “Stockholders’ Equity”), as if such shares were converted into common stock, at a ~~net investment~~conversion rate of 100 common shares per share. On April 12, 2010, the Preferred Stock was converted into common stock.
The adjustment to weighted average shares outstanding excludes the potential impact of the Earnout Shares that may be issued contingent upon meeting a certain financial target at the end of 2010. Pro forma basic shares outstanding included 81,852.78 shares of Preferred Stock less 11,897.18 Escrow Shares, totaling 69,955.60 shares of Preferred Stock. Shares included in ~~All Day~~pro forma diluted shares outstanding represent the 81,852.78 shares of ~~$354 as of June 30, 2009.~~Preferred Stock.

Note 8—9—Intangible Assets
At March 31, 2010 and December 31, 2009, intangible assets totaled $31,314 and $32,695, respectively, net of amortization. The following table summarizes the intangible asset categories, average amortization periods, which are generally on a straight-line basis and the fair value, as follows:

Amortization

March 31,

December 31,

Period

2010

2009

Tradename

5 to 10 years

$
15,365

$
15,785

Non-compete agreements

5 years

$
5,130

$
5,403

Customer relationships

5 to 10 years

$
6,624

$
6,793

Backlog

0.75 to 2.25 years

$
4,195

$
4,714

Total

$
31,314

$
32,695

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Table of Contents
Amortization expense on intangible assets was $1,381 and $9 for the three months ended March 31, 2010 and 2009, respectively. Estimated amortization expense for intangible assets as of March 31, 2010 is as follows:
For the Years Ending
December 31,

Estimated
Intangible
Amortization
Expense

2010 (remaining nine months)

$
4,297

2011

5,544

2012

3,873

2013

3,455

2014

3,360

Thereafter

10,785

$
31,314

Note 10—Discontinued Operations
During December 2009, the Company discontinued all operations in Ecuador, and a plan was put in place to sell the stock ownership of the Ecuador company. Consequently, the results of operations and cash flows for these operations are reflected as discontinued operations for all periods presented. Previously, the Ecuador operations were included in the Company’s Construction Services segment.
A liability of $333 remains on the balance sheet as of March 31, 2010 for the discontinued Ecuador operations.
In February 2010, the Company entered into an agreement for the sale of the Ecuador business. The Company agreed to pay $1.0 million of remaining liabilities of the business, and the buyer delivered to the Company a combination of $400 in Primoris stock owned by the buyer and a $300 note payable. The buyer also agreed to provide an indemnification to the Company for any remaining liabilities. The sale was completed in March 2010 and had no material impact to the Company.
Note 11—Accounts Payable and Accrued Liabilities

At ~~June 30, 2009~~March 31, 2010 and December 31, ~~2008,~~2009, accounts payable includes retentions of approximately ~~$8,546~~$12,952 and ~~$7,741,~~$12,616, respectively, due to subcontractors, which have been retained pending contract completion and customer acceptance of jobs.

The following is a summary of accrued expenses and other current ~~liabilities:~~liabilities at:

June 30,
2009

December 31,
2008

March 31,
2010

December 31,
2009

(Unaudited)

(Unaudited)

Payroll and related employee benefits

$
8,571

$
6,981

$
18,271

$
18,321

Insurance, including self-insurance reserves

10,308

9,994

11,145

11,245

Provision for estimated losses on uncompleted contracts

557

332

Corporate income taxes and other taxes

1,234

2,807

1,756

640

Earn-out liability

—

615

Provision for estimated losses on uncompleted contracts

625

700

Accrued leases and rents

418

917

251

262

Accrued overhead cost

437

1,521

OMPP liability

—

706

Other

1,673

1,826

3,736

4,192

$
23,266

$
26,067

$
35,716

$
34,992

Note 9—12—Credit Arrangements

Credit Agreements.On ~~July 31, 2008,~~October 28, 2009, we completed a merger (“Merger”) of Rhapsody Acquisition Corp. and Primoris Corporation, a privately held Nevada corporation (“Former Primoris”). Prior to the Merger, on March 2007, Former Primoris entered into a ~~new~~Loan and Security Agreement (the “Agreement”) with The PrivateBank and Trust Company (the “Lender”) for a revolving line of credit ~~agreement payable~~in the total aggregate amount of $35.0 million. Under the Agreement, the Lender provides two revolving loans to us:
·a ~~bank group~~revolving loan in the amount of $20.0 million (the “Revolving Loan A”), with a maturity date of October 28, 2012; and
·a revolving loan in the amount of $15.0 million (the “Revolving Loan B”), with a maturity date of October 27, 2010.
14

Table of Contents
The Lender agreed to issue for our account letters of credit up to $15.0 million, under Revolving Loan A. As of March 31, 2010 and December 31, 2009, total commercial letters of credit outstanding under this credit facility totaled $3,634 and $849, respectively. The principal amount of each of Revolving Loan A and Revolving Loan B will bear interest at either: (i) LIBOR plus an ~~interest~~applicable margin as specified in the Agreement, or (ii) the prime rate announced by the Lender plus an applicable margin as specified in the Agreement. The principal amount of ~~prime or~~any loan bearing interest at LIBOR plus an applicable ~~margin. The revolving line~~margin may not be prepaid at any time without being subject to certain penalties. There is ~~secured~~no prepayment penalty for any loan bearing interest at the prime rate announced by ~~substantially all~~ the assets of the Company. The Company can borrow up to $30,000 based on a defined rate of interest, and all amounts borrowed under the line of credit are due March 31, 2010. There were no amounts outstanding under the line of credit at June 30, 2009 or December 31, 2008, other than letters of credit issued in the amounts of $677 and $677, respectively, which reduces the amount available on the revolving line.Lender plus an applicable margin.

~~Also prior to the Merger, in~~In January 2008, ~~Former Primoris~~the Company entered into a credit facility (as amended) for purposes of issuing commercial letters of credit in Canada, for an amount up to 10 million in Canadian dollars. The credit facility with a Canadian bank is for a term of 5 years, and provides for an annual fee of 1% for any issued and outstanding commercial letters of credit. Letters of credit can be denominated in either Canadian or U.S. dollars. As of ~~June 30, 2009~~March 31, 2010 and December 31, ~~2008,~~2009, total commercial letters of credit outstanding under this credit facility totaled ~~$4,822~~$4,631 and ~~$4,981 (in U.S. dollars),~~$5,284, respectively.

11All loans made by the Lender under the Agreement are secured by our assets, including, among others, our cash, inventory, goods, equipment (excluding equipment subject to certain permitted liens) and accounts receivable. Certain of our subsidiaries have executed joint and several guaranties in favor of the Lender for all amounts under the Agreement. The Agreement and the line of credit facilities contain various restrictive covenants, including, among others, restrictions on investments, capital expenditures, minimum tangible net worth and debt service coverage requirements. The Company was in compliance with its restrictive covenants as of March 31, 2010.
At the time of the JCG acquisition on December 18, 2009, the Company assumed outstanding letters of credit of $5,565 under an amended credit agreement that expired on February 28, 2010. Upon termination of the credit agreement, the Company made a cash deposit as replacement for the letters of credit.
Subordinated Promissory Note. In connection with the acquisition of JCG, the Company executed an unsecured Promissory Note on December 18, 2009 in favor of the sellers of JCG with an initial principal amount of $53.5 million. The Promissory Note is due and payable on December 15, 2014 and bears interest at differing rates until maturity. For the first 9 months of the term of the note, the Promissory Note bears interest at an annual rate equal to 5%. For months 10 through 18, the note will bear interest at an annual rate of 7%. For the months 19 until the maturity date, the Promissory Note will bear interest at an annual rate of 8%. Payments of principal and interest will be payable in cash on an amortizing basis over 60 monthly payments. The Promissory Note is subordinated to amounts owed to our commercial banks for lines of credit and to our bonding agencies.
The Promissory Note may be prepaid in whole or in part at any time, and partial prepayment is required in the event the Company completes certain equity financing, receives warrant exercise proceeds or obtains proceeds under certain new indebtedness. As long as more than $10 million is outstanding under the Promissory Note, we have agreed to not take certain actions without the prior written consent of the Promissory Note holders, including, among others, purchase, acquire, redeem or retire any shares of our common stock. As of March 31, 2010, a total of $51.0 million was outstanding on the Promissory Note. In April 2010, the Company made a partial prepayment of the Promissory Note in the amount of $2.3 million after receiving warrant exercise proceeds for the issuance of common stock during the prior three months.
Note 13 — Other Liabilities
Included in other liabilities were the following amounts resulting from our acquisitions of JCG and Cravens in the fourth quarter of 2009.
As part of the December 2009 JCG acquisition agreement, the Company will issue $10 million in common stock to the sellers, contingent upon JCG meeting a specific operating performance target for the year 2010. At December 31, 2009, the estimated fair value of the contingent consideration was established at $8.19 million. The estimated fair value as of March 31, 2010 was valued at $8.5 million. The $0.3 million change in the fair value was a non-cash charge to selling, general and administrative expenses.
The October 2009 Cravens acquisition also included potential consideration for an additional $2.0 million in common stock and $0.5 million in cash to the sellers, contingent upon meeting specific operating performance targets for the years 2009, 2010 and 2011. At December 31, 2009, the estimated fair value of the contingent consideration was established at $1.8 million, of which, $750 was current as of December 31, 2009. Upon meeting the 2009 performance target, the Company paid $150 and issued 74,906 shares of common stock in March 2010. There was no change to the estimated fair value at March 31, 2010 for the remaining earnout consideration.
15

Table of Contents

Note ~~10—~~14—Related Party Transactions

~~The Company~~Primoris has entered into various transactions with Stockdale Investment Group, Inc. (“SIGI”). The ~~largest~~majority stockholder, Chief Executive Officer, President and Chairman of the Board of Directors of ~~the Company,~~Primoris, Brian Pratt, also holds a majority interest in SIGI. In addition, the following two officers ~~and/or~~and directors of ~~the Company~~Primoris also serve as officers ~~and/or~~and directors of ~~SIGI (with their respective positions with SIGI reflected in parentheses):~~SIGI: Brian Pratt ~~(chairman~~(SIGI chairman and director) and John M. Perisich ~~(secretary)~~(SIGI secretary).

Two officers and/or directors of the Company also served as officers and directors of SIGI in the past, including John P. Schauerman (president and director) and Scott Summers (vice president and director).
~~The Company~~Primoris leases properties from SIGI located in Bakersfield, Pittsburg and San Dimas, California, as well as a property in Pasadena, Texas. During the ~~six~~three months ended ~~June 30,~~March 31, 2010 and 2009, ~~and 2008,~~ the Company paid ~~$394~~$221 and ~~$373,~~$190, respectively, in lease payments to SIGI for the use of these properties. Prior to the Merger, the Company also leased certain construction and transportation equipment from SIGI. This equipment was purchased from SIGI on the closing date of the Merger and the leases were terminated.

The Company leased an airplane from SIGI for business use. During the ~~six~~three months ended ~~June 30,~~March 31, 2009, ~~and 2008,~~ the Company paid ~~$70 and $119, respectively,~~$60 in lease payments to SIGI for the use of the airplane. This lease ~~commenced on May 1, 2004 and~~ was terminated on March 31, 2009 when SIGI sold the airplane.

~~The Company~~Primoris leases ~~certain~~a property from Roger Newnham, a stockholder of the Company’s common stock and a manager at the subsidiary Born Heaters Canada. The property is located in Calgary, Canada. ~~This lease was entered into on similar terms as negotiated with an independent third party.~~ During the ~~six-month period~~three months ended ~~June 30,~~March 31, 2010 and 2009, Primoris paid $62 and ~~2008, the Company paid $171 and $149,~~$86, respectively, in lease payments to Mr. Newnham for the use of this property. The three-year lease for the Calgary property commenced in October 2005 and was renewed and extended until September ~~2009.~~2010.
Note ~~11—Income Taxes and Pro Forma Net Income~~
15—Income Taxes

The effective tax rate for the three ~~and six~~ months ended ~~June 30, 2009~~March 31, 2010 (“First Quarter 2010”) was ~~38.3% and 38.6%, respectively.~~37.1%. The rate for ~~both~~ the ~~three months and six months ended June 30, 2009~~First Quarter 2010 differs from the U.S. federal statutory rate of 35% due primarily to state income ~~tax~~taxes and the ~~impact of the “Domestic~~Domestic Production Activity ~~Deduction”.~~Deduction.

To determine its quarterly provision for income taxes, the Company uses an estimated annual effective tax rate, which is based on expected annual income, statutory tax rates and tax planning opportunities available in the various jurisdictions to which the Company is subject. ~~Significant~~Certain significant or unusual items are separately recognized in the quarter in which they occur and can be a source of variability in the effective tax rate from quarter to quarter. The Company recognizes interest and penalties related to uncertain tax positions, if any, in income tax expense.

Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences of temporary differences between the financial reporting basis and tax basis of the Company’s assets and liabilities. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

The ~~Company adopted the provisions of FIN 48, “~~~~Accounting for Uncertainty in Income Taxes—an interpretation of FASB Statement No. 109~~~~”, on January 1, 2007. As of June 30,~~tax years 2006 through 2009 ~~and December 31, 2008, there were no recorded liabilities related~~remain open to ~~unrecognized tax benefits. Management does not anticipate that there will be a material change in the balance of unrecognized tax benefits within the next 12 months.~~
~~The Company recognizes interest and penalties related to uncertain tax positions in income tax expense.~~
12

~~Table of Contents~~
The effective tax rate for the three and six months ended June 30, 2008 was 2.9% and 2.4%, respectively, representing primarily Canadian and California income taxes. Through July 31, 2008, the date of the Merger, Former Primoris elected to be taxed in accordance with Subchapter S ofexamination by the United States Internal Revenue ~~Code (“Code”) and similar codes for certain states. While this election was in effect,~~Service. The tax years 2005 through 2009 remain open to examination by the ~~income was taxed for federal income tax purposes~~other major taxing jurisdictions to ~~the stockholders of Former Primoris. Accordingly, no provision for federal income tax was required by Former Primoris.~~
~~Pro Forma Net Income~~
~~Pro forma net income is shown on the condensed consolidated statements of income, and reflects an adjustment for income tax at the applicable statutory rates as if~~which the Company ~~had been taxed in accordance with Subchapter C of the Code since the beginning of 2008 using an effective tax rate of 39.8%.~~is subject.

Note ~~12—~~16—Dividends and Earnings Per Share

On March ~~16, 2009,~~4, 2010, the Company declared a cash dividend of $0.025 per common share, payable to stockholders of record as of March 31, ~~2009.~~2010 and to holders of shares of the Company’s Series A Non-Voting Contingent Convertible Preferred stock (“Preferred Stock”) issued in connection with the December 18, 2009 acquisition of JCG. The dividend, totaling ~~$812,~~$1,102 was paid on April 15, ~~2009. Additionally, on May 19, 2009, the Company declared a cash dividend~~2010.
16

Table of ~~$0.025 per common share, payable to stockholders of record as of June 30, 2009. The dividend, totaling $812, was paid on July 15, 2009.~~Contents

The table below presents the computation of basic and diluted earnings per share for the three ~~and six~~ months ended ~~June 30, 2009~~March 31, 2010 and ~~2008:~~2009:

Three months
ended June 30,

Six months
ended June 30,

2009

2008

2009

2008

Three months ended
March 31,

(Unaudited)

(Unaudited)

2010

2009

(Unaudited)

Numerator:

Net income

$
8,580

$
8,769

$
14,220

$
18,551

$
6,698

$
5,640

Net income (pro forma – 2008) – (1)

$
8,580

$
5,435

$
14,220

$
11,441

Denominator:

Weighted average shares for computation of basic earnings per share

32,477

23,587

31,303

23,587

33,202

30,116

Dilutive effect of warrants and units (2)

358

—

—

—

Dilutive effect of contingently issuable shares (3)

—

—

1,174

—

Dilutive effect of warrants and units

1,751

—

Dilutive effect of contingently issuable shares (1) (2)

2,406

2,361

Dilutive effect of conversion of Preferred Stock (3)

8,185

—

Weighted average shares for computation of diluted earnings per share

32,835

23,587

32,477

23,587

45,544

32,477

Basic earnings per share

$
0.26

$
0.37

$
0.45

$
0.79

$
0.20

$
0.19

Diluted earnings per share

$
0.26

$
0.37

$
0.44

$
0.79

$
0.15

$
0.17

Basic earnings per share (pro forma – 2008) – (1)

$
0.26

$
0.23

$
0.45

$
0.49

Diluted earnings per share (pro forma – 2008) – (1)

$
0.26

$
0.23

$
0.44

$
0.49

(1)        ~~As discussed in Note 11—“~~~~Income Taxes and Pro Forma Net Income~~~~”, pro forma~~On July 31, 2008, ~~net income and earnings per share are shown on the condensed consolidated statements of income and reflect an adjustment for income tax at the applicable statutory rates as if~~ the Company ~~had been taxed in accordance with Subchapter C~~completed the merger (“Merger”) of Rhapsody Acquisition Corp. (the Company’s former name) and Primoris Corporation, a privately held Nevada corporation (“Former Primoris”). The July 2008 merger agreement provided that the Former Primoris stockholders would receive up to an additional 5,000,000 shares of the ~~Code since~~Company’s common stock, contingent upon the ~~beginning~~combined company attaining certain financial targets in 2008 and 2009. The Company achieved the specified financial milestones for both 2009 and 2008. As a result, 2,500,025 shares of ~~2008 using an effective tax rate~~common stock were issued to Former Primoris stockholders in March 2009 and 2,499,975 shares of ~~39.8 percent.~~
13

~~Table of Contents~~common stock were issued to Former Primoris stockholders in March 2010.

(2)        Represents the ~~dilutive~~ effect of 4,705,956 common stock warrants with a strike price of $5.00 per share and the effect of the Units available under the Unit Purchase Option (“UPO”) at a purchase price of $8.80 per Unit. The UPO provides for the purchase of 450,000 Units. Each Unit consists of one share74,906 shares of common stock ~~plus one warrant to purchase~~that were issued as part of the acquisition of Cravens. The shares were contingent on meeting a ~~share of common stock at a strike price of $5.00 per share.~~defined performance target in 2009. The target was met in the fourth quarter 2009. The shares were issued on March 30, 2010.

(3)        Represents the ~~dilutive~~ effect of ~~2,500,025~~8,185,278 shares of ~~Company~~common stock that were ~~issued~~approved for issuance at a special meeting of the stockholders held on April 12, 2010. The stockholders approved the issuance of shares of common stock to the ~~Former Primoris stockholders on March 17, 2009. These~~holders of 81,852.78 shares ~~were to be issued contingent upon attaining certain defined performance targets in 2008. It was determined that~~of Preferred Stock and approved the ~~targets would be met in September 2008 and were included as part~~conversion of the ~~diluted shares outstanding. Subsequent~~Preferred Stock to ~~the shares being issued on March 17, 2009, the shares were included as part of the basic weighted average shares outstanding. No dilutive impact is included for an additional 2,500,000~~8,185,278 shares of ~~stock, which may be issued in 2010, contingent upon meeting a defined performance target for 2009.~~common stock.

Note ~~13—~~17—Stockholders’ Equity
Preferred stock — The Company is authorized to issue 1,000,000 shares of $0.0001 par value preferred stock. As part of the consideration for the acquisition of JCG, the Company issued 81,852.78 shares of Preferred Stock to JCG’s former members. On April 12, 2010, at a special meeting of the stockholders, the stockholders approved the conversion of the 81,852.78 shares of Preferred Stock into an aggregate of 8,185,278 shares of common stock.
Warrants exercised — As of March 31, 2010, there were 3,996,800 warrants outstanding to purchase the Company’s common stock. Each warrant entitles the holder to purchase one share of common stock at a price of $5.00 per share and is exercisable at any time on or prior to October 2, 2010, unless earlier redeemed by the Company. During the first quarter 2010, a total of 620,699 warrants were exercised.
Note 18—Commitments and Contingencies

Leases—The Company leases certain property and equipment under ~~non-cancelable~~non-cancellable operating leases which expire at various dates through 2019. The leases require the Company to pay all taxes, insurance, maintenance and ~~utilities with respect to such property and equipment.~~utilities.

Certain of these leases are with entities related ~~entities, which share similar~~through common ownership by stockholders, officers, and directors ~~with~~of the Company. The leases are classified as operating leases in accordance with ~~SFAS No. 13,~~ ASC Topic 840-“~~Accounting for Leases~~”Leases”.

Total lease expense during the three ~~and six~~ months ended ~~June 30,~~March 31, 2010 and 2009 amounted to approximately ~~$1,851~~$2,539 and ~~$3,859,~~$2,008, respectively, including amounts paid to related parties of ~~$289~~$283 and ~~$565,~~$276, respectively. ~~Total lease expense during the three and six months ended June 30, 2008 amounted to approximately $1,700 and $3,800, including amounts paid to related parties~~
17

Table of ~~$261 and $521, respectively.~~Contents

Letters of credit—At ~~June 30, 2009~~March 31, 2010 and December 31, ~~2008,~~2009, the Company had letters of credit outstanding of approximately ~~$5,498~~$8,265 and ~~$5,658,~~$11,989, respectively.

Litigation—The Company is subject to claims and legal proceedings arising out of its business. Management believes that the Company has meritorious defenses to such claims. Although management is unable to ascertain the ultimate outcome of such matters, after review and consultation with counsel and taking into consideration relevant insurance coverage and related deductibles, management believes that the outcome of these matters will not have a materially adverse effect on the consolidated financial position of the Company.

Bonding—As of ~~June 30, 2009~~March 31, 2010 and December 31, ~~2008,~~2009, the Company had bid and ~~payment/performance~~completion bonds issued and outstanding totaling ~~$255,321~~approximately $767,324 and ~~$353,008,~~$773,762, respectively.

Note ~~14—~~19—Reportable Operating Segments

In prior periods, the Company reported two operating segments: the Construction Services segment and the Engineering segment. As a result of the acquisition of JCG and to changes in the management structure, the Company changed the reportable operating segments effective on January 1, 2010, by splitting the former Construction Services segment into two separate segments. The ~~Company operates in two reportable segments:~~prior year information for the Construction Services segment has been reclassified into the new segments. The three new segments are East Construction Services, West Construction Services and Engineering.
The East Construction Services segment incorporates the JCG construction business, located primarily in the southeastern United States. The segment also includes the businesses located in the Gulf Coast region of the United States that were formerly included in the Construction Services segment, including Cardinal Contractors, Inc., Cardinal Mechanical and Cravens.
The West Construction Services segment includes the construction services performed in the western United States, primarily in the state of California. Entities included in West Construction Services are ARB, ARB Structures, Inc., and Stellaris, LLC.
The Engineering segment remains unchanged and includes the results of Onquest, Inc. and Born Heaters Canada, ULC.
In the following tables, all intersegment revenues and gross profit have been eliminated, which were immaterial.

~~The following table sets forth the Company’s revenue~~Revenue by segment for the three months ended ~~June 30,~~March 31, 2010 and 2009 ~~and 2008:~~were as follows:

For the three months ended June 30,

For the three months ended March 31,

2009

2008

2010

2009

Segment

Revenue

% of
Segment
Revenue

Revenue

% of
Segment
Revenue

Revenue

% of
Segment
Revenue

Revenue

% of
Segment
Revenue

(Unaudited)

(Unaudited)

Construction Services

$
113,538

89.5
%
$
120,329

84.5
%
East Construction Services

$
104,236

59.6
%
$
14,739

11.9
%
West Construction Services

59,887

34.2
%
90,044

72.9
%
Engineering

13,362

10.5
%
22,115

15.5
%

10,859

6.2
%
18,767

15.2
%
Total

$
126,900

100.0
%
$
142,444

100.0
%

$
174,982

100.0
%
$
123,550

100.0
%

14Gross profit by segment for the three months ended March 31, 2010 and 2009 were as follows:

For the three months ended March 31,

2010

2009

Segment

Gross
Profit

% of
Segment
Revenue

Gross
Profit

% of
Segment
Revenue

(Unaudited)

East Construction Services

$
9,621

9.2
%
$
1,710

11.6
%
West Construction Services

12,211

20.4
%
11,087

12.3
%
Engineering

2,641

24.3
%
1,709

9.1
%
Total

$
24,473

14.0
%
$
14,506

11.7
%
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Table of Contents
~~The following table sets forth the Company’s revenue by segment for the six months ended June 30, 2009 and 2008:~~

For the six months ended June 30,

2009

2008

Segment

Revenue

% of
Segment
Revenue

Revenue

% of
Segment
Revenue

(Unaudited)

Construction Services

$
223,509

87.4
%
$
266,697

85.5
%
Engineering

32,129

12.6
%
45,138

14.5
%
Total

$
255,638

100.0
%
$
311,835

100.0
%
~~The following table sets forth the Company’s gross profit by segment for the three months ended June 30, 2009 and 2008:~~

For the three months ended June 30,

2009

2008

Segment

Gross
Profit

% of
Segment
Revenue

Gross
Profit

% of
Segment
Revenue

(Unaudited)

Construction Services

$
19,656

17.3
%
$
13,203

11.0
%
Engineering

1,267

9.5
%
1,431

6.5
%
Total

$
20,923

16.5
%
$
14,634

10.3
%
~~The following table sets forth the Company’s gross profit by segment for the six months ended June 30, 2009 and 2008:~~

For the six months ended June 30,

2009

2008

Segment

Gross
Profit

% of
Segment
Revenue

Gross
Profit

% of
Segment
Revenue

(Unaudited)

Construction Services

$
32,675

14.6
%
$
27,999

10.5
%
Engineering

2,976

9.3
%
2,848

6.3
%
Total

$
35,651

14.0
%
$
30,847

9.9
%

Revenues as presented below are based on the geographic region in which the contracting subsidiary is located and not the location of the client or job site:

For the six months ended June 30,

2009

2008

Total Assets

Country:

Revenue

% of
Revenue

Revenue

% of
Revenue

June 30,
2009

December 31,
2008

(Unaudited)

(Unaudited)

United States

$
230,826

90.3
%
$
302,522

97.0
%
$
219,999

$
231,642

Canada

12,334

4.8
%
9,112

2.9
%
14,658

12,514

Ecuador

12,478

4.9
%
201

0.1
%
7,515

8,056

$
255,638

100.0
%
$
311,835

100.0
%
$
242,172

$
252,212

15

~~Table of Contents~~

Revenues

For the three months ended March 31,

2010

2009

Total Assets

Country:

Revenue

% of
Revenue

Revenue

% of
Revenue

March 31,
2010

December 31,
2009

(Unaudited)

(Unaudited)

United States

$
172,044

98.3
%
$
116,010

93.9
%
$
471,064

$
465,025

Non-United States

2,938

1.7

7,540

6.1

6,114

11,002

Total

$
174,982

100.0
%
$
123,550

100.0
%
$
477,178

$
476,027

Note ~~15—~~20—Subsequent Event

On July 22, 2009, the Company announced that it has begun demobilization at Chevron Corp’s Richmond Refinery located in Contra Costa, California. Primoris’ wholly-owned subsidiary, ARB, Inc., had been constructing a hydrogen plant at the Richmond facility under contract from Praxair, Inc. since September 2008, with completion expected in the first calendar quarter of 2010. As announced by the Company on July 9, 2009, a California state judge’s ruling halted construction at Richmond following opposition from environmental groups and what the judge identified as inadequacies in Chevron’s environmental impact report. On July 20, 2009, Chevron filed an appeal to overturn the judge’s order. The futureA special meeting of the ~~project remains~~stockholders was held on April 12, 2010. The stockholders approved the issuance of shares of common stock to the holders of 81,852.78 shares of Preferred Stock and approved the conversion of the Preferred Stock into 8,185,278 shares of common stock.   Additionally, the stockholders approved the issuance of up to 6,508,276 shares of common stock, which shares may be issued as earnout consideration in ~~question until~~connection with the ~~appeals court can decide the issues.~~December 18, 2009 acquisition of JCG.

Approximately 160 Primoris personnel were assigned to the Richmond project. Approximately one-half of these workers will remain on site, as permitted by the judge’s order, to assist with demobilization and site preservation, with a smaller contingent potentially remaining on site for preservation post- demobilization. The remaining one-half of the Richmond workforce were reassigned to other Company projects or laid-off. Praxair has continued to meet all of its contractual obligations to Primoris. At June 30, 2009, the Company estimates that the backlog associated with the Richmond contract was approximately $52.0 million, which, based on the scheduled project completion date, would have been realized over the next three quarters.
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PRIMORIS SERVICES CORPORATION
MANAGEMENT’S DISCUSSION AND ANALYSIS

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

Forward Looking Statements

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended ~~(“Exchange~~(the “Exchange Act”), which are subject to the “safe harbor” created by those sections. Forward-looking statements include information concerning our possible or assumed future results of operations, business strategies, financing plans, competitive position, industry environment, potential growth opportunities, the effects of regulation and the economy, generally. Forward-looking statements include all statements that are not historical facts and can be identified by terms such as “anticipates,” “believes,” “could,” “estimates,” “expects,” “intends, “may,” “plans,” “potential,” “predicts,” “projects,” “should,” “will,” “would” or similar expressions.

Forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. We discuss many of these risks in detail in Part I, Item 1A “Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, ~~2008~~2009 and our other filings with the Securities and Exchange Commission (“SEC”). Also, forward-looking statements represent our management’s beliefs and assumptions only as of the date of this Quarterly Report on Form 10-Q. You should read this Quarterly Report on Form 10-Q, our Annual Report on Form 10-K for the year ended December 31, ~~2008,~~2009 and our other filings with the SEC completely and with the understanding that our actual future results may be materially different from what we expect.

Given these uncertainties, you should not place undue reliance on these forward-looking statements. We assume no obligation to update these ~~forward-looking~~forward- looking statements publicly, or to update the reasons actual results could differ materially from those anticipated in any forward-looking statements, even if new information becomes available.

The following discussion and analysis should be read in conjunction with the unaudited financial statements and notes thereto included in Part 1, Item 1 of this Quarterly Report on Form 10-Q.

Introduction

Primoris Services Corporation is a holding company with various subsidiaries that cumulatively form a diversified ~~engineering and~~ construction company providing a wide range of construction and engineering services. These services include fabrication, maintenance, replacement and ~~engineering~~other services to major public utilities, petrochemical companies, energy companies, municipalities and other customers. Our activities are performed primarily in the Southeast and Southwest United States, more specifically in Louisiana and California, with strategic presences in Florida, Texas and Canada.

We install, replace, repair and rehabilitate natural gas, refined product, ~~telecommunications,~~ water and wastewater pipeline systems, and also construct mechanical facilities and other structures, including power plants, petrochemical facilities, refineries and parking structures. In addition, we provide maintenance services, including inspection, overhaul and emergency repair services, to cogeneration plants, refineries and similar mechanical facilities.
Through our recent acquisition of James Construction Group, LLC (“JCG”) in December 2009, we provide services in heavy civil construction projects, including highway and bridge construction, concrete paving, levee construction, airport runway and taxiway construction and marine facility construction. JCG’s infrastructure and maintenance division provides large earthwork and site development, landfill construction, site remediation and mining support services. JCG’s industrial division, with a client base comprised primarily of private industrial companies, provides all phases of civil and structural construction, mechanical equipment erection, process pipe installation and boiler, furnace and heater installation and repair.
Through our subsidiary Onquest, Inc. (“Onquest”), we provide engineering and design services for fired heaters and furnaces primarily used in refinery applications. Through our subsidiary Cardinal Contractors, Inc., we construct water and wastewater facilities primarily in Florida. A substantial portion of our activities are performed in the Western United States, and more specifically in California. In addition, we have strategic presences in Florida, Texas, Latin America and Canada.

On July 31, 2008, we completed a merger (“Merger”) of Rhapsody Acquisition Corp. (“Rhapsody”) and Primoris Corporation, a privately held Nevada corporation (“Former Primoris”). Unless specifically noted otherwise, as used throughout this Quarterly Report on Form 10-Q, “Primoris”, the “Company” or “we,” “our,” or “us” refers to the business, operations and financial results of Former Primoris prior to, and Primoris Services Corporation subsequent to, the closing of the Merger on July 31, 2008, between Rhapsody and Former Primoris as the context requires. “Rhapsody” refers to the operations or financial results of Rhapsody Acquisition Corp. prior to the closing of the Merger.
The Merger was accounted for as a reverse acquisition. Under this method of accounting, we were treated as the “acquired” company for financial reporting purposes. This determination was primarily based on the operations and management of Former Primoris comprising the ongoing operations and management of the Company after the Merger. In accordance with guidance applicable to these circumstances, the Merger was considered to be a capital transaction in substance. Accordingly, for accounting purposes, the Merger was treated as the equivalent of Former Primoris issuing stock for our net assets, accompanied by a recapitalization. Our pre-Merger net assets are stated at historical cost, with no goodwill or other intangible assets recorded.
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We make ~~available free of charge through our Internet Website~~ our press releases, our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and all other required filings with the SEC ~~and amendments thereto~~available, free of charge through our Internet Web site, as soon as reasonably practical after they are electronically filed with, or furnished to, the SEC. Our principal executive offices are located at 26000 Commercentre Drive, Lake Forest, California 92630, and our telephone number is (949) 598-9242. Our ~~Website~~Web site address is www.primoriscorp.com. The information on our ~~Website~~Web site is neither part of nor incorporated by reference into this Quarterly Report on Form 10-Q.

We provide services in three segments, which consist of the ~~following two segments:~~East Construction Services segment, the West Construction Services segment and the Engineering segment.

In prior periods, the Company reported two operating segments: the Construction Services ~~Segment:~~segment and the Engineering segment. As a result of the acquisition of JCG and to changes in the management structure, the Company changed the reportable operating segments effective on January 1, 2010, by splitting the former Construction Services segment into two separate segments. The prior year information for the Construction Services segment has been reclassified into the two new segments. The three new segments are East Construction Services, West Construction Services and Engineering and are outlined as follows:

The East Construction Services segment ~~specializes~~incorporates the JCG construction services business, located primarily in the southern United States, specializing in highway, industrial and environmental projects. The East Construction Services segment also consists of the businesses located in the Gulf Coast region of the United States that were formerly a part of the Construction Services segment, including Cardinal Contractors, Inc., Cardinal Mechanical and Cravens Services, Inc. The East Construction Services segment provides a range of services that include:
·Heavy civil construction projects including highway and bridge construction, paving, levee construction, airport runway and taxiway construction and marine facility construction;
·          ��       Providing large earthwork and site development, site remediation and mining support services;
·General construction and construction management of facilities and plants dedicated to water treatment, water reclamation and wastewater treatment and related systems; and
·Providing installation and maintenance of other infrastructure projects.
The West Construction Services segment includes construction services performed in the western United States, primarily in the states of California and Nevada. The entities that are included in West Construction Services include ~~designing, building/installing, replacing, repairing/rehabilitating~~ARB, ARB Structures, Inc., and ~~providing management~~Stellaris, LLC. The West Construction Services segment provides a range of services ~~for construction related projects. Our services~~that include:

·                  Providing installation of underground pipeline, cable and conduits for entities primarily in the petroleum, petrochemical and ~~water industries;~~gas industries and projects with water/wastewater distribution requirements;
·                  Providing installation and maintenance of industrial facilities for entities in the power, petroleum and petrochemical ~~and water~~ industries; ~~and~~
·                  Providing installation of complex commercial and industrial cast-in-place ~~structures.~~structures; and
~~Engineering Segment:~~·Providing other earthwork, site development and remediation work.

The Engineering segment ~~specializes in designing,~~includes the results of Onquest and Born Heaters Canada, ULC (“Born Heaters”). The Engineering segment provides services that include:
·Designing, supplying and installing high-performance furnaces, heaters, burner management systems and related combustion and process technologies for clients in the oil refining, petrochemical and power generation ~~industries. It also furnishes turnkey~~industries; and
·Furnishing turn-key project management with ~~the~~ technical expertise and the ability to deliver custom engineering solutions worldwide.
The following table provides the historical revenues for the previously reported quarters for 2009 into the three new operating segments.

Three Months Ended

March 31,

June 30,

September
30,

December
31,

Total

Segment:

2009

2009

2009

2009

2009

East Construction Services

$
14,739

$
13,459

$
13,830

$
26,987

$
69,015

West Construction Services

90,044

92,788

80,933

76,456

340,221

Engineering

18,767

13,363

11,848

13,796

57,774

$
123,550

$
119,610

$
106,611

$
117,239

$
467,010

Material trends and uncertainties

We generate our revenue from both large and small construction and engineering projects. The award of these contracts is dependent on a number of factors, many of which are not within our control. Business in the construction industry is cyclical. We depend in part on spending by companies in the energy, and oil and gas industries, as well as on municipal water and wastewater customers. Over the past ~~several~~few years, ~~both our Construction Services and Engineering segments~~we have benefited from demand for more efficient and more environmentally friendly energy and power facilities and from the ~~past~~ strength of the oil and gas industry. Economic factors outside of our control may affect the ~~amount~~number and size of contracts awarded to us in any particular period.

~~Visibility into the~~21

Table of Contents
The current ~~economic~~macroeconomic issues, ~~and how these will impact the Company, especially~~including those in the ~~United States, remains murky.~~financial markets, will likely impact our future results. While we currently have adequate backlog and projects to bid, we are uncertain as to ~~the impact of~~how the current global financial ~~turmoil~~issues will ~~affect~~impact our clients. ~~In addition, our competitive environment is seeing some migration into our market segment from other industries experiencing higher levels of stress.~~

Seasonality and cyclicality

Our operating results can be subject to seasonal and cyclical variations. Weather, particularly rain, can impact our ability to perform construction work. Our clients’ budget cycles have an impact on the timing of project awards. Accordingly, our financial condition and operating results may vary from quarter-to-quarter. Absent the awarding ~~and construction~~ of a large project, the combination of weather and budget cycles suggest that revenues tend to be lowest in ~~our~~the first ~~fiscal~~ quarter.
18

~~Table of Contents~~

Results of operations

Revenues, gross profit, operating income and net income for the three ~~and six~~ months ended ~~June 30,~~March 31, 2010 and 2009 ~~and 2008~~ were as follows:

Three Months Ended June 30,

2009

2008

(Thousands,
except per share
amounts)

% of
Revenue

(Thousands,
except per share
amounts)

% of
Revenue

Revenues

$
126,900

100.0
%
$
142,444

100.0
%
Gross profit

20,923

16.5
%
14,634

10.3
%
Selling, general and administrative expense

8,388

6.6
%
6,622

4.6
%
Operating income

12,535

9.9
%
8,012

5.6
%
Other income (expense)

1,376

1.1
%
1,016

0.7
%
Income before income taxes

13,911

11.0
%
9,028

6.3
%
Income tax provision (1)

(5,331
)
(4.2
)%
(259
)
(0.2
)%
Net income

$
8,580

6.8
%
$
8,769

6.2
%
Net income per share:

Basic

$
0.26

$
0.37

Diluted

$
0.26

$
0.37

Weighted average common shares outstanding

Basic

32,477

23,587

Diluted

32,835

23,587

Six Months Ended June 30,

2009

2008

(Thousands,
except per share
amounts)

% of
Revenue

(Thousands,
except per share
amounts)

% of
Revenue

Revenues

$
255,638

100.0
%
$
311,835

100.0
%
Gross profit

35,651

14.0
%
30,847

9.9
%
Selling, general and administrative expense

16,002

6.3
%
14,623

4.7
%
Operating income

19,649

7.7
%
16,224

5.2
%
Other income (expense)

3,512

1.4
%
2,781

0.9
%
Income before income taxes

23,161

9.1
%
19,005

6.1
%
Income tax provision (1)

(8,941
)
(3.5
)%
(454
)
(0.1
)%
Net income

$
14,220

5.6
%
$
18,551

5.9
%
Net income per share:

Basic

$
0.45

$
0.79

Diluted

$
0.44

$
0.79

Weighted average common shares outstanding

Basic

31,303

23,587

Diluted

32,477

23,587

~~(1)~~As discussed in “Provision for income taxes” and “Pro forma net income data” below, the Company made a change in our tax status from that of Subchapter S of the Internal Revenue Code (“S-Corporation”) to that of Subchapter C of the Internal Revenue Code as part of the Merger in July 2008. After the Merger, the combined entity became subject to federal and state income tax in the jurisdictions in which we do business. Prior to the Merger, as an S-Corporation, we had no provision for federal income tax and only minimal provision for state income tax.
19

~~Table of Contents~~

Three Months Ended March 31,

2010

2009

(Thousands,
except per
share
amounts)

% of
Revenue

(Thousands,
except per
share
amounts)

% of
Revenue

Revenues

$
174,982

100.0
%
$
123,550

100.0
%
Gross profit

24,473

14.0
%
14,506

11.7
%
Selling, general and administrative expense

13,755

7.9
%
7,416

6.0
%
Operating income

10,718

6.1
%
7,090

5.7
%
Other income (expense)

(67
)
—
%
2,129

1.7
%
Income before income taxes

10,651

6.1
%
9,219

7.4
%
Income tax provision

(3,953
)
(2.3
)%
(3,599
)
(2.9
)%
Net income from continuing operations

$
6,698

3.8
%
$
5,620

4.5
%
Profit from discontinued operations

—

20

%
Net income

$
6,698

3.8
%
$
5,640

4.5
%
Earnings per share:

Basic:

Income from continuing operations

$
0.20

$
0.19

Income on discontinued operations

$
—

$
—

Net Income

$
0.20

$
0.19

Diluted:

Income from continuing operations

$
0.15

$
0.17

Income on discontinued operations

$
—

$
—

Net Income

$
0.15

$
0.17

Weighted average common shares outstanding

Basic

33,202

30,116

Diluted

45,544

32,477

Revenue for the three ~~and six~~ months ended ~~June 30, 2009 were $126.9 and $255.6~~March 31, 2010 (“First Quarter 2010”) was $175.0 million, ~~respectively, a decrease~~an increase of ~~$15.5 and $56.2~~$51.4 million, or ~~10.9% and 18.0%~~41.6%, ~~respectively,~~ compared to the same ~~periods~~period in ~~2008. During~~2009.   The increase in revenues was due primarily to the ~~year 2008, we attained record levels~~addition of ~~revenue and operating income, and have seen a decrease~~new businesses in ~~both the Construction Services and Engineering segments during the three and six months ended June 30,~~late 2009, which iscontributed $96.0 million in ~~part a result~~revenues for the First Quarter 2010. Excluding the impact of the ~~current economic issues in~~new businesses, revenues for the ~~marketplace, especially in the United States. The decrease in revenues~~First Quarter 2010 declined by $44.6 million compared to the same period a year ~~ago were due primarily to~~ago. The decreased revenues were across all business lines, but especially in ~~refining sector~~pipeline and industrial projects, ~~and water and wastewater sector projects and~~reflecting the ~~performance of an unusually large engineering~~slowdown in project ~~during 2008, partially offset by increased revenue~~awards in ~~underground projects, and from our Ecuador subsidiary.~~2009.

Gross profit increased by ~~$6.3 and $4.8~~$10.0 million, or ~~43.0% and 15.6%~~68.7%, for the ~~three and six months ended June 30, 2009~~First Quarter 2010 compared to the same ~~periods~~period in ~~2008~~2009 due primarily ~~as a result~~to an $8.7 million profit contribution of ~~increased profitability~~our recent acquisitions in ~~underground~~the East Construction Services segment and ~~power projects. This gain is partially offset by reduced revenues~~the successful close out of some pipeline and ~~margins in refining sector~~industrial projects ~~and third party equipment rentals.~~compared to the first quarter of 2009. Gross profit as a percent of revenues increased to ~~16.5% and~~ 14.0% during the ~~three and six months ended June 30, 2009~~First Quarter 2010 from 10.3% and 9.9 % in the same periods of 2008. The three and six months ended June 30, 2009 benefited from higher margin industrial work in the petroleum and power sectors as compared to lower margin work on industrial projects in the refining sector11.7% in the prior year ~~periods.~~quarter.
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Table of Contents

Geographic areas financial information

Revenue by geographic area for the ~~six~~three months ended ~~June 30,~~March 31, 2010 and 2009 ~~and 2008~~ was as follows:

Six Months Ended June 30,

2009

2008

(Thousands)

% of
Revenue

(Thousands)

% of
Revenue

Country:

United States

$
230,826

90.3
%
$
302,521

97.0
%
Canada

12,334

4.8
%
9,112

2.9
%
Ecuador

12,478

4.9
%
201

0.1
%
Total Revenue

$
255,638

100.0
%
$
311,835

100.0
%

Three Months Ended March 31,

2010

2009

(Thousands)

% of
Revenue

(Thousands)

% of
Revenue

Country:

United States

$
172,044

98.3
%
$
116,010

93.9
%
Non- United States

2,938

1.7
%
7,540

6.1
%
Total revenues

$
174,982

100.0
%
$
123,550

100.0
%

Note that revenue is attributed to the countries based on our reporting entity that records the ~~transaction and not the location of the client or job site.~~transaction.

Segment ~~Results~~results
In prior periods, the Company reported two operating segments: the Construction Services segment and the Engineering segment. As a result of the acquisition of JCG and to changes in the management structure, the Company changed the reportable operating segments effective on January 1, 2010, by splitting the former Construction Services segment into two separate segments. The prior year information for the Construction Services segment has been reclassified into the two new segments. The three new segments are East Construction Services, West Construction Services and Engineering.

The following discussion describes the significant factors contributing to the results of our ~~two~~three operating segments.

East Construction Services Segment

Revenue and gross profit for the East Construction Services segment for the three months ending March 31, 2010 and ~~six months ended June 30,~~ 2009 ~~and 2008~~ were as follows:

Three Months Ended June 30,

2009

2008

(Thousands)

% of
Revenue

(Thousands)

% of
Revenue

Construction Services

Revenue

$
113,538

$
120,329

Gross Profit

$
19,656

17.3
%
$
13,203

11.0
%

Six Months Ended June 30,

2009

2008

(Thousands)

% of
Revenue

(Thousands)

% of
Revenue

Construction Services

Revenue

$
223,509

$
266,696

Gross Profit

$
32,675

14.6
%
$
27,999

10.5
%

Three Months Ended March 31,

2010

2009

(Thousands)

% of
Revenue

(Thousands)

% of
Revenue

East Construction Services

Revenue

$
104,236

59.6
%
$
14,739

11.9
%
Gross profit

9,621

9.2
%
1,710

11.6
%

20Revenue for the East Construction Services segment increased by $89.5 million, or 607.2%, for the First Quarter 2010 compared to the same period in 2009. This increase was due to the addition of $96.0 million in revenues from JCG and, to a lesser extent, Cravens, and was partially reduced by a $6.5 million decrease in revenue primarily from water and wastewater projects.
Gross profit for the East Construction Services increased by $7.9 million for the First Quarter 2010 primarily as a result of the $8.6 million gross margin contribution from the JCG acquisition compared to the same period in 2009. Included in the gross profit amount is intangible amortization expense related to the JCG acquisition of $0.5 million.
Gross profit as a percent of revenues decreased to 9.2% during the First Quarter 2010 from 11.6% in the prior year quarter, reflecting the typically lower margin percentages on JCG’s heavy civil projects during wetter, winter months.
23

Table of Contents

West Construction Services Segment
Revenue and gross profit for the West Construction Services segment for the three months ending March 31, 2010 and 2009 were as follows:

Three Months Ended March 31,

2010

2009

(Thousands)

% of
Revenue

(Thousands)

% of
Revenue

West Construction Services

Revenue

$
59,887

34.2
%
$
90,044

72.9
%
Gross profit

12,211

20.4
%
11,087

12.3
%
Revenue for the West Construction Services segment decreased by ~~$6.8 and $43.2~~$30.2 million, or ~~5.6% and 16.2%~~33.5%, ~~respectively,~~ for the three and six months ended June 30, 2009, compared to the same periods in 2008. These revenue decreases were due primarily to reduced revenues for projects in the refining and water and wastewater sectorsFirst Quarter 2010 compared to the same period in ~~2008.~~2009. The revenue decrease ~~for~~was across all parts of the ~~six months ended June 30, 2009 were offset by increased~~segment: our underground business (a 35% reduction), our industrial business (an 18% reduction) and our structures business (a 64% reduction). In addition, we recognized virtually no third party equipment rental revenue ~~of $29.8 million~~during the First Quarter 2010. These decreases reflect the reduction in ~~underground projects, including pipeline, cable and conduit projects, reflecting significant work begun at~~project rewards in 2009. As shown in the ~~end of 2008 and early 2009. Revenue generated by our subsidiary in Ecuador for~~“Backlog” section below, project awards improved during the ~~six months ended June 30, 2009 increased by $12.3 million due to two ongoing projects.~~First Quarter 2010.

~~Despite lower revenues, the~~West Construction Services segment gross profit increased by ~~$6.5 and $4.7~~$1.1 million, or ~~48.9% and 16.7%~~10.1%, ~~respectively,~~ for the ~~three and six months ended June 30, 2009,~~First Quarter 2010 compared to the same period of ~~2008.~~2009.   The ~~increase resulted primarily from improved margins~~increased gross profit as a percent of revenues was the result of the impact that smaller, higher margin jobs have on our overall margin percentages in a declining revenue ~~on completed or near completed projects. The margins improved~~environment. In addition, as discussed in the “Backlog” section below, we recognized a positive impact from ~~11.0% and 10.5% for~~converting the ~~three and six months ended June 30, 2008~~Richmond Refinery Project from a fixed-priced contract to ~~17.3% and 14.6% for~~a reimbursable cost plus margin project. Without the ~~three and six months ended June 30, 2009. Of the $6.5 million~~positive impact of this project, our West Construction Services segment gross profit increase in the three months ended June 30, 2009 (“Second Quarter 2009”) as compared to the same period in 2008, approximately $2.8 million was due to increased profitability in underground projects, and approximately $3.8 million was due to increased profitability in industrial projects, which were partially offset by $0.9 million in reduced third party equipment rentals. The gross profit margins increased primarily due to a shift in business mix from lower margin industrial projects in the refining sector, to higher margin industrial projects in the petroleum and power sectors, during the three and six months ended June 30, 2009.percentage of revenue would have been at historical levels.

Engineering Segment

Revenue and gross profit for the Engineering segment for the three months ended March 31, 2010 and ~~six months ended June 30,~~ 2009 ~~and 2008~~ were as follows:

Three Months Ended June 30,

2009

2008

(Thousands)

% of
Revenue

(Thousands)

% of
Revenue

Engineering

Revenue

$
13,362

$
22,115

Gross Profit

$
1,267

9.5
%
$
1,431

6.5
%

Six Months Ended June 30,

Three Months Ended March 31,

2009

2008

2010

2009

(Thousands)

% of
Revenue

(Thousands)

% of
Revenue

(Thousands)

% of
Revenue

(Thousands)

% of
Revenue

Engineering

Revenue

$
32,129

$
45,138

$
10,859

6.2
%
$
18,767

15.2
%
Gross Profit

$
2,976

9.3
%
$
2,848

6.3
%
Gross profit

2,641

24.3
%
1,709

9.1
%

Revenue decreased by ~~$8.8 and $13.0~~$7.9 million, or ~~39.6% and 28.8%~~42.1%, ~~respectively,~~ for the ~~three and six months ended June 30, 2009,~~First Quarter 2010 compared to the same ~~periods~~period in ~~2008. These decreases were~~2009. The decrease was due primarily to ~~the impact of an unusually large project in~~a $4.6 million decrease at Born Heaters compared to the prior year ~~whereas very little activity~~from customer acceptance of an international project and ~~revenue was recorded in~~a $3.3 million decrease at Onquest reflecting completion of several projects including the ~~first six months ended June 30, 2009, during which we provided startup assistance to the client. We anticipate final project acceptance in 2009.~~Clean Energy project.

Engineering segment gross profit ~~decreased~~increased by ~~$0.2~~$0.9 million, or ~~11.5%~~54.5%, for the ~~Second~~First Quarter ~~2009,~~2010 compared to the same period in ~~2008, and~~2009. As a percent of revenues, gross profit increased ~~by $0.1 million or 4.5% for the six months ended June 30,~~from 9.1% as of March 31, 2009 compared to ~~the same period in 2008. The decrease~~24.3% of revenues for the ~~Second~~First Quarter ~~2009, compared~~2010. Customer acceptance of the international project added approximately 4% to the ~~same period in 2008, is due to lower margins and~~first quarter’s gross profit ~~write-backs on certain alliance projects partially offset by a~~percentage. In addition, gross profit ~~improvement on a larger project, nearing completion later in 2009. The increase~~percent for the ~~six months ended June 30, 2009, compared~~current quarter reflected the impact of the completion of the Onquest projects as well as the impact of a $0.7 million lower overhead expense allocation. As engineering activity increases during the remainder of 2010, we expect engineering margins to ~~the same period in 2008 is due to higher gross profit margins in the Canadian operation, despite a decrease in revenues.~~
21

~~Table of Contents~~trend toward historical levels.

Selling, general and administrative expenses

Selling, general and administrative expenses (“SG&A”) increased ~~by $1.8~~$6.3 million, or ~~26.7%~~85.5%, for the ~~Second~~First Quarter ~~2009~~2010 compared to the same period in ~~2008. The change~~2009. Of the increased amount, $3.9 million was ~~mainly due~~added by the acquisitions of JCG and Cravens and $1.1 million was the result of amortizing intangible assets and liabilities created by the acquisitions. While engineering SG&A expenses decreased compared to the same quarter last year, the reduction in activity in the segment resulted in a difference in net ~~increase in reporting~~expenses allocated to cost of revenues of $0.7 million. Audit and ~~compliance costs associated with being a public company of $0.8 million, an increase in long-term incentive compensation costs of $0.6~~consulting fees increased by $0.4 million, and other SG&A expenses netted to an increase of $0.2 ~~million in depreciation expense.~~
The SG&A increase of $1.4 million for the six months ended June 30, 2009 was net of a gain on the sale of operating equipment of $1.5 million recorded in SG&A as part of our fleet upgrade program. Under this program, we routinely turn over our equipment during the first part of the fiscal year. A gain on sale of $0.5 million was recorded during the same period in the prior year. Excluding the increased gain on sale, the increase in SG&A was $2.4 million for the six months ended June 30, 2009. The increase was due primarily to increased long-term incentive compensation of $1.2 million, an increase of $0.5 in public company reporting and compliance costs, and an increase of $0.3 million in depreciation expense.million.

SG&A as a percentage of revenue increased to ~~6.6%~~7.8% for the ~~Second~~First Quarter ~~2009,~~2010, from ~~4.6%~~6.0% for the same period in ~~2008 and 6.3% for the six months ended June 30, 2009 compared to 4.7% for the same period in the prior year.~~2009. The increased percentage for ~~both~~ the ~~Second~~First Quarter ~~2009 and the six months ended June 30, 2009,~~2010 was due to the increased costs discussed above as well as due to the relatively fixed nature of administrative and management expenses, which did not decrease proportionally with the decreased revenues. Excluding the impact of the recent acquisitions, SG&A as a percentage of sales was 11.1% and 6.0%, respectively, for the three months ended March 31, 2010 and 2009.
24

Table of Contents

Other income and expense

Non-operating income and expense items for the three ~~and six~~ months ended ~~June 30,~~March 31, 2010 and 2009 ~~and 2008~~ were as follows:

Three Months
Ended June 30,

2009

2008

(Thousands)

Other income (expense)

Income from non-consolidated investments

$
1,736

$
1,204

Foreign exchange gain (loss)

(26
)
(41
)
Interest income (expense), net

(334
)
(147
)
Total other income

$
1,376

$
1,016

Six Months
Ended June 30,

Three Months
Ended March 31,

2009

2008

2010

2009

(Thousands)

(Thousands)

Other income (expense)

Income from non-consolidated investments

$
3,903

$
3,027

$
968

$
2,167

Foreign exchange gain (loss)

203

(22
)

92

229

Interest income (expense), net

(594
)
(224
)

(1,127
)
(267
)
Total other income

$
3,512

$
2,781

$
(67
)
$
2,129

For the ~~Second~~First Quarter ~~2009,~~2010, we recognized income of ~~$2.7~~$1.2 million from the ~~Otay Mesa Power~~St.—Bernard Levee Partners ~~(“OMPP”)~~ joint venture, a ~~power plant~~ construction project near ~~San Diego, California, which we expect to complete later in 2009. We also recognized~~New Orleans, Louisiana. This income was reduced by a loss of ~~$0.1~~$0.2 million from the All Day Electric joint venture, ~~(“All Day”),~~ an electrical construction ~~project~~company in Northern California. The income recognized for OMPP and All Day was offset by an impairment charge of $1.0 million on certain advances made to ARB Arendal, SRL de CF (“ARB Arendal”). The Company has a 49% interest in ARB Arendal and accounts for this investment under the equity method. Because of uncertainty on the outcome of the continuing negotiations of ARB Arendal with a major customer in Mexico, the Company determined there was an other than temporary impairment of its investment in and advances to ARB Arendal, recording an impairment charge in prior periods. Under a separate agreement with ARB Arendal, the Company was required to make an advance of working capital funds to the venture during the three months ended June 30, 2009. The Company believes the investment in the venture remains impaired, pending the outcome of the customer negotiations, and recorded an impairment charge of $1.0 million during the Second Quarter.
22

~~Table of Contents~~
~~Comparing the same three month period in 2008, income~~Income from non-consolidated joint ventures for the same period in 2009 consisted of income of ~~$1.2~~$2.4 million from the OMPP joint ~~venture. The total income for the first six months of 2009 from OMPP was $5.1~~venture, reduced by a $0.2 million ~~as compared with $3.0 million for the same period in 2008. The total~~ loss from All ~~Day for the first six months of 2009 was $0.2 million.~~Day.

Foreign exchange ~~results~~gains for both the ~~three and six months ended June 30, 2009~~First Quarter 2010 and for the same period in ~~2008~~2009 reflect currency exchange fluctuations of the United States dollar compared to the Canadian dollar. Our contracts in Calgary, Canada are sold based on United States dollars, but a portion of the work is paid for with Canadian dollars, which can create a currency exchange difference.

~~Interest income decreased~~For the First Quarter 2010, interest expense increased by ~~$0.2~~$0.8 million ~~and $0.5 million for the three and six months ended June 30, 2009~~ compared to the same period in ~~2008.~~2009. This was primarily due to ~~declining~~ interest ~~rates, as well as our decision to invest excess cash balances in Treasury bills and certificates~~payments due on the subordinated debt of ~~deposit (“CDs”) rather than commercial paper. Interest expense for both the three and six months ended June 30, 2009 was approximately the same, compared~~$0.7 million related to the ~~same period in 2008.~~JCG acquisition.

Provision for income taxes

Our provision for income tax increased ~~$5.1~~$0.4 million for the ~~three months ended June 30, 2009~~First Quarter 2010 to ~~$5.3~~$4.0 million ~~and $8.5 million for the six months ended June 30, 2009 to $8.9 million, compared to~~from the same period in ~~2008, as a result of a change in our~~2009. The tax status from that of Subchapter S of the Internal Revenue Code (“S-Corporation”) to that of Subchapter C of the Internal Revenue Code (“C-Corporation”) as part of the Merger. Thereafter, the combined entity became subject to federal and state income taxrate applied in the ~~jurisdictions~~first quarter of 2010 was 37.1% as opposed to 39.0% for the same period in ~~which we do business, including California. With the~~2009. This change in tax ~~status,~~rate depends on our ~~effective~~estimated full year results, coupled with assumptions on our mix in revenues and profits in the various tax ~~rate for~~jurisdictions throughout the ~~Second Quarter 2009 was 38.3%. Prior to the Merger, as an S-Corporation, we had no provision for federal income tax~~USA and ~~only minimal provision for state income tax.~~
~~Pro forma net income data~~
Pro forma information concerning the income tax provision as if we were taxed as a C-Corporation for the three and six months ended June 30, 2008 compared to the actual three and six months ended June 30, 2009 is shown as follows:

Three Months Ended
June 30,

As reported
2009

Pro forma
2008

(Thousands, except
per share amounts)

Income before provision for income tax, as reported

$
13,911

$
9,028

Provision for income tax

(5,331
)
(3,593
)
Net income

$
8,580

$
5,435

Earnings per share:

Basic

$
0.26

$
0.23

Diluted

$
0.26

$
0.23

Six Months Ended
June 30,

As reported
2009

Pro forma
2008

(Thousands, except
per share amounts)

Income before provision for income tax, as reported

$
23,161

$
19,005

Provision for income tax

(8,941
)
(7,564
)
Net income

$
14,220

$
11,441

Earnings per share:

Basic

$
0.45

$
0.49

Diluted

$
0.44

$
0.49

~~The estimated pro forma tax provision amount was calculated at an effective statutory tax rate of approximately 39.8% for the three and six months ended June 30, 2008, respectively.~~
23

~~Table of Contents~~Canada.

Liquidity and Capital Resources

~~Recent global market~~Liquidity represents our ability to pay our liabilities when they become due, fund business operations and ~~economic conditions~~meet our contractual obligations. Our primary sources of liquidity are our cash balances at the beginning of each period and our net cash flow. In addition to cash flow from operations, we have ~~been, and continue~~availability under our lines of credit to ~~be, disruptive and volatile, having an adverse impact~~augment liquidity needs. In order to maintain sufficient liquidity, we evaluate our working capital requirements on ~~financial markets in general. The volatility has reached unprecedented levels. As~~ a ~~result~~regular basis. We may elect to raise additional capital by issuing common stock, convertible notes, term debt or increasing our credit facility as necessary to fund our operations or to fund the acquisition of concern about the stability of the markets and the strength of counterparties, many lenders and institutional investors have reduced and, in some cases, ceased to provide funding to borrowers resulting in severely diminished liquidity and credit availability. At this time, the extent to which these conditions will persist is unclear. To date, the Company’s cost and availability of funding has not been adversely affected by illiquid credit markets, and we do not expect it to be materially impacted in the near future.new businesses.

At ~~June 30, 2009,~~March 31, 2010, our balance sheet included a net cash balance of ~~$59.8~~$83.3 million, and an additional ~~$15.1~~$29.0 million in short-term investments. We ~~continue to~~also have borrowing capacity ~~for~~to help meet our foreseeable needs based on our current cash flow forecast. We currently have a ~~$30~~$20 million credit facility which expires on ~~March 31,~~October 28, 2012, under which we can issue letter of credit for up to $15 million, We also have a credit facility of $15 million, which expires on October 27, 2010, and a $10 million (Canadian dollars) facility for commercial letters of credit in Canada with an expiration date of December 31, 2012. At ~~June 30, 2009, $5.5~~March 31, 2010, $8.3 million was outstanding on these two facilities representing issued letters of credit.

~~Cash Flows~~25
~~Cash flows during the six months ended June 30, 2009 and 2008 are summarized as follows:~~

Six Months Ended
June 30,

2009

2008

(Thousands)

Change in cash:

Net cash provided (used) by operating activities

$
793

$
41,382

Net cash provided (used) in investing activities

(2,516
)
(2,878
)
Net cash provided (used) in financing activities

(11,514
)
(21,198
)
Net change in cash

$
(13,237
)
$
17,306

24

Table of Contents

Cash Flows
Cash flows during the three months ended March 31, 2010 and 2009 are summarized as follows:

Three Months Ended
March 31,

2010

2009

(Thousands)

Change in cash:

Net cash provided by (used in) operating activities

$
(1,112
)
$
6,773

Net cash used in investing activities

(60
)
(10,051
)
Net cash used in financing activities

(4,669
)
(8,748
)
Net cash used by discontinued operations

(874
)
(2,710
)
Net change in cash

$
(6,715
)
$
(14,736
)
Operating ~~Activities~~activities

The source ~~and use~~ of our cash flow from operating activities and the use of a portion of that cash in our operations for the ~~six~~three months ended ~~June 30,~~March 31, 2010 and 2009 ~~and 2008~~ were as follows:

Six Months Ended
June 30,

2009

2008

(Thousands)

Operating Activities:

Operating income

$
19,649

$
16,224

Depreciation and amortization

3,990

2,967

Amortization of other intangible assets

18

18

Gain on sale of property and equipment

(1,499
)
(484
)
Changes in assets and liabilities

(15,433
)
22,791

Non-consolidated entity distributions

3,400

566

Foreign exchange gain (loss)

203

(22
)
Interest income (expense), net

(594
)
(224
)
Provision for income taxes

(8,941
)
(454
)
Net cash provided (used) by operating activities

$
793

$
41,382

Capital expenditures – Cash

$
(3,077
)
$
(3,665
)
Capital expenditures - Financed

$
(3,023
)
$
(7,075
)

Three Months Ended
March 31,

2010

2009

(Thousands)

Operating Activities:

Operating Income

$
10,718

$
7,090

Depreciation

4,172

1,835

Amortization of intangible assets

1,381

9

Gain on sale of property and equipment

(1,139
)
(1,124
)
Changes in assets and liabilities

(15,649
)
(820
)
Non-consolidated entity distributions

4,393

3,400

Foreign exchange gain

92

229

Interest income (expense), net

(1,127
)
(267
)
Provision for income taxes

(3,953
)
(3,599
)
Net cash provided by (used in) operating activities

$
(1,112
)
$
6,753

Capital expenditures

$
(2,566
)
$
(4,194
)
Cash flow from operating activities for the First Quarter 2010 decreased by $7.9 million compared to the same period in 2009 due primarily to the increased use of cash of $14.8 million for changes in assets and liabilities, offset by an increase of $3.6 million in operating income and $3.7 million in depreciation and amortization of intangible assets.

The changes in assets and liabilities decreased operating cash flow by ~~$15.4~~$15.6 million ~~during~~in the ~~six months ended June 30, 2009.~~First Quarter 2010. The components of this change are included in the consolidated statements of cash flow. The significant changes include:

·                  a ~~$4.7~~$9.1 million increase in accounts receivable;

·                  a ~~$7.6~~$3.3 million ~~decrease~~increase in accounts payable;

·                  billings in excess of costs and estimated earnings decreased by ~~$5.4~~$0.6 million;
·costs and estimated earnings in excess of billings increased by $4.8 million;

·                  accrued expenses and other current liabilities ~~decreased~~increased by ~~$2.1~~$0.7 million;

·                  inventory, ~~prepaids~~prepaid expenses and other current assets ~~decreased~~increased by ~~$1.5~~$6.9 million; and

·                  ~~restricted cash decreased~~other long-term liabilities increased by ~~$2.8~~$2.1 million.
The decrease in billings in excess of costs and estimated earnings was principally due to the timing of the billings on certain projects and the nature and type of projects.

As of ~~June 30, 2009,~~March 31, 2010, accounts receivable represented ~~39.4%~~24.6% of total assets. We have an excellent collection history stemming from many factors, including performing work for recurring customers and substantial pre-acceptance review of the financial worthiness and credit history of new customers. We bill customers on an ongoing basis as projects are being constructed. As a contractor, we have certain lien rights that can provide additional security on the accounts receivable that are generated, which may give priority to us over lenders or certain other creditors of the
26

Table of Contents
project. The ~~increases~~increase in both accounts receivable and ~~the reductions in~~ accounts payable as of ~~June 30, 2009~~March 31, 2010, are due primarily to the timing of our billings to clients and payments to our vendors related to various construction ~~projects.~~
~~The decrease in billings in excess~~projects, as well as the addition of ~~costs and estimated earnings was principally due~~new acquisitions during the last quarter of 2009, offset by reduced revenues of our legacy business during the First Quarter 2010 compared to the ~~timing of the billings on certain projects and the nature and type of projects.~~same period in 2009.

Investing activities

We purchased property and equipment for ~~$6.1~~$2.6 million during the ~~six months ended June 30, 2009, as compared to $10.7~~First Quarter 2010 and $4.2 million during the same period in ~~2008.~~2009. These purchases were principally for our construction activities. WeFor the First Quarter 2010 purchases, we paid ~~$3.1~~$2.6 million in cash ~~for the purchases~~ and incurred ~~$3.0 million in~~no additional loan ~~obligations, secured by the underlying equipment.~~obligations. We believe the ownership of equipment is generally preferable to renting equipment on a project by project basis, as ownership helps to ensure the ~~availability of~~ equipment is available for our workloads when needed. In addition, ownership has historically resulted in lower overall equipment costs.

As part of our cash management program, we sold ~~$10.1~~$1.1 million ~~of short-term~~in short term investments during the ~~Second~~First Quarter ~~2009, which~~2010. Our short term investments consist primarily ~~consisted~~ of CDs purchased through the CDARS (Certificate of Deposit Account Registry Service) process to provide FDIC backing of the CDs.

25

~~Table of Contents~~
Financing activities

Financing activities required the use of ~~$11.5~~$5.1 million of cash during the ~~six months ended June 30, 2009.~~First Quarter 2010. Significant transactions using cash flows from financing activities included:

·                  Cash distributions of ~~$4.9~~$2.0 million were paid to the ~~Former Primoris stockholders~~former members of JCG during the ~~six months ended June 30, 2009.~~First Quarter 2010. We provided ~~distributions~~this distribution to the ~~Former Primoris stockholders during the period that the Company was an S-Corporation,~~former members of JCG, principally to allow them to pay their personal income tax liability stemming from the JCG profits ofprior to the ~~Company.~~December 2009 acquisition. This final distribution to ~~Former Primoris stockholders~~the former members of JCG was made in accordance with the terms of the ~~merger agreement as part of the Merger.~~acquisition agreement.

·                  $~~4.0~~1.6 million ~~during the six months ended June 30, 2009~~and $2.5 million in repayment of long-term debt ~~as compared to $3.2 for~~during the ~~same period of 2008,~~First Quarter 2010 and 2009, respectively, based on scheduled maturities of such debt.

·                  $~~0.8~~1.0 and $0.8 million was paid as dividends to our stockholders during the ~~Second~~First Quarter 2010 and 2009, respectfully (representing a dividend of $0.025 per share) ~~with a total of $1.6 million paid during the six months ended June 30, 2009.~~.

·                  $~~0.1~~3.1 million was collected for the ~~re-purchase~~conversion of ~~our~~620,699 warrants to common stock during the ~~six months ended June 30, 2009.~~First Quarter 2010.

Capital ~~Requirements~~requirements

We believe that we will be able to support our ongoing working capital needs through cash on hand, ~~short-term~~short term investments, operating cash flows and the availability under our existing credit facilities ~~which~~ will be adequate to cover our operational and business needs for the next twelve months.

During the six months ended June 30, 2009, our operations used net cash of $0.2 million, compared to $41.4 million of cash provided in the same period of 2008. For the six months ended June 30, 2008, we experienced a substantial cash inflow of $12.1 million relating to billings in excess of costs and estimated earnings, meaning that we received cash prior to performing the required construction or engineering work. For the six months ended June 30, 2009, we experienced a decrease in cash as we used $5.4 million to pay in advance to complete the work to be performed. This change in cash typically will vary based on the timing of work and the related contractual billings on our projects.
Common ~~Stock~~stock

~~Prior to~~On July 31, 2008, the Merger, Former Primoris was a non-publicly traded entity with 4,368 shares outstanding. At the time of the Merger, each Former Primoris share was converted into 5,400 shares of our common stock, totaling 23,587,200 shares. Additionally, as part ofCompany completed the merger ~~agreement, two foreign managers~~(“Merger”) of Rhapsody Acquisition Corp. (the Company’s former name) and Primoris Corporation, a privately held Nevada corporation (“Former ~~Primoris were issued 507,600 shares of common stock. All of these shares were subject to a sale restriction that expired on~~Primoris”). The July ~~31, 2009.~~
~~In addition, the~~2008 merger agreement provided ~~for a potential issuance of 5,000,000 shares of common stock to~~that the Former Primoris stockholders ~~for~~would receive up to an additional 5,000,000 shares of the ~~years ended December 31,~~Company’s common stock, contingent upon the combined company attaining certain financial targets in 2008 and ~~2009, if the~~2009. The Company ~~achieves specific annual financial targets. We~~ achieved the ~~2008~~specified financial ~~target in the third quarter of 2008~~milestones for both 2009 and 2008. As a result, 2,500,025 shares of common stock were issued to ~~the~~ Former Primoris stockholders ~~during~~in March ~~2009.~~2009 and 2,499,975 shares of common stock were issued to Former Primoris stockholders in March 2010.

~~The~~27

Table of Contents
As part of the consideration for the acquisition of JCG, the Company ~~has~~issued 81,852.78 shares of Preferred Stock to JCG’s former members. On April 12, 2010, at a special meeting of the stockholders, the stockholders approved the conversion of the 81,852.78 shares of Preferred Stock into an aggregate of 8,185,278 shares of common stock.
As of March 31, 2010, there were 3,996,800 warrants outstanding ~~4,705,956 redeemable warrants, each of which~~to purchase the Company’s common stock. Each warrant entitles the holder to purchase one share of common stock at a price of $5.00 per share and is exercisable at any time on or prior to October 2, 2010, unless earlier redeemed by the ~~Company (“Warrant”). Additionally,~~Company. During the ~~Company’s underwriter has~~first quarter 2010, a ~~Unit Purchase Option that includes the right to purchase 450,000 Units at $8.80 per share. For the period up to October 2, 2010, each Unit is comprised~~total of one share of common stock and one Warrant. For the period from October 3, 2010 to October 2, 2011, the expiration date of the Unit Purchase Option, each Unit is comprised of one share of common stock.620,699 warrants were exercised.

Credit agreements

InOn October ~~2008,~~28, 2009, we ~~borrowed $3.0 million from~~entered into a ~~bank at an interest rate~~Loan and Security Agreement (the “Agreement”) with The PrivateBank and Trust Company (the “Lender”) for a revolving line of ~~5.5%. The terms~~credit in the total aggregate amount of $35.0 million. Under the ~~signed note call for 60 consecutive monthly payments of principal and interest~~Agreement, the Lender provides two revolving loans to us:
·a revolving loan in the amount of ~~$58,000 which commenced on November 3, 2008,~~$20.0 million (the “Revolving Loan A”), with a maturity date of October ~~3, 2013. The note is secured by certain construction equipment. The note is guaranteed by our largest subsidiary, ARB, Inc.~~
26

~~Table of Contents~~28, 2012; and

~~In October 2008, we terminated~~ ·a ~~lease on an older airplane, and on October 17, 2008, we entered into a note agreement through our subsidiary, Stellaris, LLC, for $3.8~~revolving loan in the amount of $15.0 million (the “Revolving Loan B”), with a ~~bank~~maturity date of October 27, 2010.
The Lender has agreed to ~~finance~~issue for our account letters of credit of up to $15.0 million, under Revolving Loan A. As of March 31, 2010 and December 31, 2009, total commercial letters of credit outstanding under this credit facility totaled $3,634 and $849, respectively. The principal amount of each of Revolving Loan A and Revolving Loan B will bear interest at either: (i) LIBOR plus an applicable margin as specified in the ~~purchase of a replacement airplane for business use. The note is secured~~Agreement, or (ii) the prime rate announced by the ~~airplane and all related parts and equipment.~~Lender plus an applicable margin as specified in the Agreement. The ~~terms~~principal amount of ~~the note calls for 59 monthly payments of principal and~~any loan bearing interest of $43,000 which began November 10, 2008, followed by one installment payment of $2.1 million in addition to any accrued and outstanding interest due. The note accrues interest at a rate of 5.6% annually. The note allows for prepayment with certain prepayment penalties if exercised in less than 36 months, and after that, the loan can be paid in full without penalty.
~~In March 2007, we entered into a revolving line of credit agreement payable to Bank of America, N.A. (successor by merger to LaSalle Bank National Association) with an interest rate of prime or~~ at LIBOR plus an applicable ~~margin. The revolving line~~margin may not be prepaid in whole or in part at any time. However, if any such loan is ~~secured~~prepaid, we will be subject to certain prepayment penalties. There is no prepayment penalty for any loan bearing interest at the prime rate announced by ~~substantially all of our assets. Under~~ the ~~line of credit agreement, we can borrow up to $30.0 million, and all amounts borrowed under the line of credit are due March 31, 2010.~~Lender plus an applicable margin.

In January 2008, we entered into a credit facility (as amended) for purposes of issuing commercial letters of credit in Canada, for an amount up to 10 million in Canadian dollars. The credit facility with a Canadian bank is for a term of 5 years, and provides for an annual fee of 1% for any issued and outstanding commercial letters of credit. Letters of credit can be denominated in either Canadian or U.S. dollars.

~~Our~~All loans made by the Lender under the Agreement are secured by certain of our assets, including, among others, our cash, inventory, goods, equipment (excluding equipment subject to certain permitted liens) and accounts receivable. Certain of our subsidiaries have executed joint and weseveral guaranties in favor of the Lender for all amounts under the Agreement. The Agreement and the line of credit facilities contain various restrictive covenants, including, among others, restrictions on investments, capital expenditures, minimum tangible net worth and debt service coverage requirements. The Company was in compliance with its restrictive covenants as of March 31, 2010.
At the time of the JCG acquisition on December 18, 2009, the Company assumed outstanding letters of credit of $5,565 under an amended credit agreement that expired on February 28, 2010. Upon termination of the credit agreement, the Company made a cash deposit as replacement for the letters of credit.
We enter into agreements with banks for the banks to issue letters of credit to clients or potential clients for ~~the following purposes:~~two separate purposes as follows:

·                  Born Heaters Canada, one of our subsidiaries, has entered into contracts for the delivery of engineered equipment, which require letters of credit. These letters of credit may be drawn upon by the client in instances where Born Heaters Canada fails to provide the contracted services or equipment. Most of these letters of credit are for Canadian exports, ~~90%~~ of ~~that amount~~which 90% is guaranteed by the Economic Development Bank of Canada against “unfair” calling.

·                  Insurance companies may from time to time require letters of credit to cover the risk of insurance deductible programs. These letters of credit can be drawn upon by the insurance company if we fail to pay the deductible of certain insurance policies in case of a claim.

~~The Bank~~28

Table of America line of credit agreement and the Canadian credit facility dated January 2008 contain restrictive covenants, including, among others, restrictions on investments, minimum working capital and tangible net worth requirements. We were in compliance with all restrictive covenants during and as of the six months ended June 30, 2009. None of these covenants are considered restrictive to our business.Contents

Related ~~Party Transactions~~party transactions

We have entered into various transactions with Stockdale Investment Group, Inc. (“SIGI”). Our ~~largest~~majority stockholder, Chief Executive Officer, President and Chairman of the Board of Directors, Brian Pratt, also holds a majority interest in SIGI. In addition, two of our officers and/or directors also serve as officers and/or directors of SIGI (with their respective positions with SIGI reflected in parentheses): Brian Pratt (chairman and director) and John M. Perisich (secretary).

Two of our officers and/or directors also served as officers and directors of SIGI inprior to the ~~past,~~Merger, including John P. Schauerman (president and director) and Scott Summers (vice president and director).

We lease properties from SIGI located in Bakersfield, Pittsburg and San Dimas, California, as well as a property in Pasadena, Texas. During the ~~six months ended June 30,~~First Quarter 2010 and 2009, ~~and 2008,~~ we paid ~~$394~~$221 and ~~$373,~~$190, respectively, in lease payments to SIGI for the use of these properties. Prior to the Merger, we also leased certain construction and transportation equipment from SIGI. This equipment was purchased from SIGI on the closing date of the Merger and the leases were terminated.

~~The Company~~We leased an airplane from SIGI for business ~~use, from May 1, 2004 until~~use. During the ~~airplane was sold on~~three months ended March 31, ~~2009. During the six months ended June 30,~~ 2009, ~~and 2008,~~ we paid ~~$70 and $119, respectively,~~$60 in lease payments to SIGI for the use of the airplane.
27

~~Table of Contents~~ This lease was terminated on March 31, 2009 when SIGI sold the plane.

We lease a property from Roger Newnham, a manager at our subsidiary, Born Heaters Canada. The property is located in Calgary, Canada. This lease was entered into on similar terms as negotiated with an independent third party. During the ~~six months ended June 30,~~First Quarter 2010 and 2009, ~~and 2008,~~ we paid ~~$171~~$62 and ~~$149,~~$86, respectively, in lease payments to Mr. Newnham for the use of this property. The three-year lease for the Calgary property commenced in October 2005 and was renewed and extended until September ~~2009.~~2010.

Contractual ~~Obligations~~obligations

As of ~~June 30, 2009,~~March 31, 2010, we had ~~$33.0~~$42.3 million of outstanding ~~long-term~~ debt and capital lease ~~obligations.~~obligations, and $51.0 million of subordinated debt.

A summary of contractual obligations as of ~~June 30, 2009 is~~March 31, 2010 were as follows:

Payments due by period

Total

1 Year
��
2-3 Years

4-5 Years

After
5 Years

Total

1 Year

2-3 Years

4-5 Years

After
5 Years

(Thousands)

(Thousands)

Long-term debt and capital lease obligations

$
32,952

$
7,628

$
13,226

$
12,098

$
—

Debt and capital lease obligations

$
42,251

$
10,428

$
17,813

$
14,010

$
—

Interest on long-term debt

4,632

1,739

2,276

617

—

5,241

2,097

2,550

494

—

Subordinated debt

51,028

9,165

19.634

22,229

—

Interest on subordinated debt

8,909

2,656

4,762

1,491

—

Equipment operating leases

6,901

3,067

3,751

83

—

4,019

2,393

1,626

—

—

Equipment operating leases—related parties

—

—

—

—

—

Real property leases

4,657

1,470

2,138

1,049

—

4,890

1,776

2,791

323

—

Real property leases—related parties

7,147

931

1,743

1,816

2,657

6,559

988

1,769

1,708

2,094

$
56,289

$
14,835

$
23,134

$
15,663

$
2,657

$
122,897

$
29,603

$
50,945

$
40,255

$
2,094

Stand-by letters of credit

$
5,498

$
1,337

$
4,161

$
—

$
—

$
8,265

$
3,474

$
4,114

$
677

$
—

The interest amount above represents interest payments for our fixed rate debt assuming that principal payments are made as originally scheduled.

Off ~~Balance Sheet Transactions~~balance sheet transactions

The following represent transactions, obligations or relationships that could be considered material off-balance sheet arrangements.

·                  Letters of credit issued under our lines of credit. At ~~June 30, 2009,~~March 31, 2010, we had letters of credit outstanding of ~~$5.5~~$8.3 million.

·                  Equipment operating leases with a balance of ~~$6.9~~$4.0 million at ~~June 30, 2009.~~March 31, 2010.
29

Table of Contents

·                  In the ordinary course of our business, we may be required by our customers to post surety bid or completion bonds in connection with services that we provide. At ~~June 30, 2009,~~March 31, 2010 we had ~~$255~~$767 million in outstanding bonds.

Backlog

In the industries in which we operate, backlog can be considered an indicator of potential future performance because it represents a portion of the future revenue stream. Different companies in our industry define backlog differently. We consider backlog as the anticipated revenue from the uncompleted portions of existing contracts. We calculate backlog differently for different types of contracts. For our fixed price and fixed unit price contracts, we include the full remaining portion of the contract in our calculation. ~~Since their ultimate revenue amount is difficult to determine, we~~We do not include unit-price, time-and-equipment, time-and-materials and cost-plus contracts in the calculation of ~~backlog.~~backlog, as their ultimate revenue amount is difficult to determine.

~~Most~~Any contract, including fixed price contracts, may be terminated by our customers on relatively short notice. In the event of a project cancellation, we may be reimbursed for certain costs, but typically, we have no contractual right to the total revenues reflected in backlog. Projects may remain in backlog for extended periods of ~~time.~~time, especially with the longer-term nature of the JCG heavy civil highway projects.

At ~~June 30, 2009,~~March 31, 2010, our total backlog of ~~$271.0~~$824.4 million ~~decreased $71.6~~increased $29.0 million, or ~~20.9%~~3.6%, from ~~$342.7~~$795.4 million as of June 30, 2008. The backlog includes approximately $ 52.0 million related to the recently announced demobilization at Chevron Corp’s Richmond Refinery project located in Contra Costa, California. The project had been halted by a judge’s ruling following opposition from environmental groups and what the judge identified as inadequacies in Chevron’s environmental impact report. Chevron filed an appeal to overturn the judge’s order. The future of the project remains in question until the appeals court can decide the issues. The project, under contract from Praxair, Inc, was in process since September 2008. Excluding the $52.0 million impact on backlog for the Chevron project, net backlog would be $219.0 million.December 31, 2009. We expect that approximately ~~$149.0~~$492.2 million, or ~~68.0%~~59.7%, of the ~~net~~total backlog at ~~June 30, 2009,~~March 31, 2010, will be recognized as revenue during the remainder of ~~2009.~~
28

~~Table of Contents~~2010, with $340.0 million expected for the East Construction segment, $111.3 million for the West Construction segment and $40.9 million for the Engineering segment.

Backlog by operating segment at ~~June 30,~~March 31, 2010 and December 31, 2009 ~~and 2008~~ was as follows:

As of June 30,

Restated (1)

As Reported

2009

2008

March 31, 2010

December 31, 2009

December 31, 2009

Amount

Percentage

Amount

Percentage

Amount

Percentage

Amount

Percentage

Amount

Percentage

(Thousands)

(Thousands, except % amounts)

Segment:

Construction Services

$
233,165

86.0
%
$
252,234

73.6
%
East Construction Services

$
536,445

65.1
%
$
572,545

74.8
%
$
572,545

72.0
%
West Construction Services

222,859

27.0
%
136,722

17.9
%
166,822

21.0
%
Engineering

37,872

14.0
%
90,449

26.4
%

65,105

7.9
%
56,012

7.3
%
56,012

7.0
%

$
271,037

100.0
%
$
342,683

100.0
%

$
824,409

100.0
%
$
765,279

100.0
%
$
795,379

100.0
%
(1)In July 2009, we announced demobilization of a construction project at Chevron Corp’s Richmond Refinery located on Contra Costa, California. The project was performed under a contract from Praxair, Inc. At December 31, 2009, approximately $40 million was included in the backlog amount shown for West Construction Services segment.
In April 2010, the California Court of Appeals ruled that there were deficiencies in the Environment Impact Report for the project, and at the same time, Praxair, Inc. provided us with a notice of termination for the project. In accordance with the terms of our contract, the project converted from a fixed price contract to a reimbursed cost plus margin contract. Due to the termination, we adjusted our cost estimates for the contract and reduced the contingent amounts normally associated with fixed price contracts, which resulted in a reduction of approximately $30 million in our backlog amount as of December 31, 2009, as restated in the table above. In the First Quarter 2010, we recognized revenues of $9.5 million and at March 31, 2010 have a remaining backlog amount of less than $1 million for this project.
In accordance with the terms of the contract, Praxair, Inc. has engaged a firm to perform an audit of some of the costs related to the project. We do not anticipate that the results of the audit will have a material impact on our financial condition, results of operations and cash flows.

Our backlog at any point in time may not accurately represent the revenue that we expect to realize during any period. Additionally, our backlog at the end of the period may not be indicative of the revenue we expect to earn over the course of the following twelve months.
30

Table of Contents

Item 3. Quantitative and Qualitative Disclosures About Market Risk

In the ordinary course of business, we are exposed to risks related to market conditions. These risks primarily include fluctuations in foreign currency exchange rates, interest rates and commodity prices. We may seek to manage these risks through the use of financial derivative instruments. These instruments may include foreign currency exchange contracts and interest rate swaps.

We do not execute transactions or use financial derivative instruments for trading or speculative purposes. We enter into transactions with counter parties that are generally financial institutions in a matter to limit significant exposure with any one party.

The carrying amounts for cash and cash equivalents, accounts receivable, long-term debt and accounts payable and accrued liabilities shown in the condensed consolidated balance sheets approximate fair value at ~~June 30, 2009~~March 31, 2010 and December 31, ~~2008~~2009 due to the generally short maturities of these items. At ~~June 30, 2009,~~March 31, 2010, we invested primarily in short-term dollar denominated bank deposits. We expect to hold our investments to maturity.

At ~~June 30, 2009,~~March 31, 2010, all of our long-term debt was under fixed interest rates.

As of ~~June 30, 2009,~~March 31, 2010, we had ~~one~~four derivative financial ~~instrument~~instruments for the purpose of hedging future currency exchange in Canadian dollars. The ~~contract enables~~contracts enable us to purchase Canadian dollars before certain dates in 2010 at certain exchange rates. These contracts expire in ~~January~~April, June and September 2010. The related Canadian dollars purchased ~~under~~are one contract ~~were~~ for ~~$2.0~~$1.5 million CAD, two contracts for each $0.75 million CAD and one contract for $0.5 million CAD. The related gain or loss on ~~this contract~~these contracts is not significant at ~~June 30, 2009.~~March 31, 2010. We intend to continue to hedge foreign currency risks in those situations where we believe such transactions are prudent.

Item ~~4T.~~4. Controls and Procedures

~~(a)~~~~Evaluation of~~ Disclosure Controls and Procedures

~~We maintain~~As of March 31, 2010, we carried out an evaluation, under the supervision and with the participation of our management, including our chief executive officer (“CEO”) and chief financial officer (“CFO”), of the effectiveness of the design and operation of our “disclosure controls and procedures”, as such term is defined under Exchange Act Rules 13a-15(e) and 15d-15(e).
Based on this evaluation, our CEO and CFO concluded that, as of March 31, 2010, the disclosure controls and procedures ~~that are designed~~were effective to ensure that information required to be disclosed by us in ~~our~~the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the ~~SEC’s~~ rules and forms of the SEC, and ~~that such information is~~ accumulated and communicated to our management, including our ~~Chief Executive Officer (“CEO”)~~CEO and ~~Executive Vice President, Chief Financial Officer (“CFO”),~~CFO, as appropriate to allow ~~for~~ timely decisions regarding required disclosure.
In designing and evaluating ~~our~~the disclosure controls and procedures, our management recognized that any ~~system of~~ controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives ~~as ours are designed to do,~~ and in reaching a reasonable level of assurance our management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

In connection with the preparation of this Quarterly Report on Form 10-Q, as of June 30, 2009, an evaluation was performed under the supervision and with the participation of our management, including our CEO and CFO, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d -15(e) under the Exchange Act). Based on that evaluation, our CEO and CFO concluded that our disclosure controls and
29

~~Table of Contents~~
procedures were effective as of the end of the period covered by this Quarterly Report on Form 10-Q to ensure that the information required to be disclosed by us in our reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and to ensure that the information required to be disclosed by us in reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our CEO and CFO, as appropriate, to allow timely decisions regarding required disclosures.
~~(b)~~Changes in Internal Control Over Financial Reporting

During ~~our last fiscal~~the quarter ended March 31, 2010, there were no changes in our internal control over financial reporting that ~~would~~ materially ~~affect,~~affected, or ~~are~~is reasonably likely to materially affect, our internal control over financial reporting.

Part II. Other Information

Item 1. Legal Proceedings

~~We are from~~From time to time, we are subject to claims and legal proceedings arising out of our business. Our management believes that we have meritorious defenses to such claims. Although we are unable to ascertain the ultimate outcome of such matters, after review and consultation with counsel and taking into consideration relevant insurance coverage and related deductibles, our management believes that the outcome of these matters will not have a materially adverse effect on our financial condition or results of operations.
31

Table of Contents

Item 1A. Risk ~~Factors~~Factors.

~~A description of~~In addition to the ~~risk~~other information set forth in this Report, you should carefully consider the factors ~~associated with our business is contained~~discussed in ~~Part I, Item 1A,~~the section entitled “Risk Factors,” ofin our Annual Report on Form 10-K for the year ended December 31, ~~2008. These cautionary statements are~~2009, which to ~~be used as a reference in connection with any forward-looking statements. The factors,~~our knowledge have not materially changed. Those risks, ~~and uncertainties identified in these cautionary statements are in addition to those contained in any other cautionary statements, written or oral,~~ which may be made or otherwise addressed in connection with a forward-looking statement or contained in any of our subsequent filings with the Securities and Exchange Commission (“SEC”). You should carefully consider the risk factors discussed in our Annual Report on Form 10-K, as well as the other information in this Quarterly Report on Form 10-Q, before deciding whether to invest in shares of our common stock. The occurrence of any of the risk factors discussed in our filings with the SEC could ~~harm~~materially affect our business, financial condition or future results, ~~of operations~~are not the only risks we face. Additional risks and uncertainties not currently known to us or ~~growth prospects.~~that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or operating results.

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

On ~~March 27,~~October 14, 2009, we announced that we ~~entered into~~had acquired certain assets and assumed certain liabilities of Cravens Partners, Ltd. (“Cravens Partners”), a ~~Rule 10b5-1 trading plan with CJS Securities, Inc. to facilitate the repurchase~~Texas-based provider of ~~up to $1 million of our common stock purchase warrants (“Warrants”). Each Warrant entitles the holder to purchase one share of our common stock at a price of $5.00 per share~~civil and ~~is exercisable at any time on or prior to October 2, 2010, unless earlier redeemed.~~
~~From and including March 27, 2009 through May 15, 2009, CJS Securities completed the purchase of the Warrants subject to the limitations set forth in the plan.~~
~~The following lists the purchases made during the period March 27, 2009 through June 30, 2009:~~

(a)

(b)

(c)

(d)

Period

Total Number
of Warrants
Purchased

Average Price
Paid per Warrant

Total Number of
Warrants
Purchased as Part
of Publicly
Announced Plans
or Programs

Maximum Number
(or Approximate
Dollar Value) of
Shares that May
Yet Be Purchased
Under the Plans
or Programs

March 27, 2009 through March 31, 2009(1)

169,400

$
0.48

169,400

$
918,181

April 1, 2009 through April 30, 2009(1)

19,100

$
0.63

19,100

$
—

May 1, 2009 through May 15, 2009(1)

—

$
—

—

$
—

~~(1)           The purchase offer was announced and commenced on March 27, 2009 and concluded at the close of business on May 15, 2009, pursuant to~~utility infrastructure construction services. Under the terms of the ~~plan. The Warrants purchased represented approximately 3.9%~~purchase agreement, and in addition to the consideration paid at closing, we agreed to pay the seller certain additional earn-out payments based on Cravens Partners’ attaining specified financial goals for the 3-year period 2009 to 2011. On March 30, 2010, upon the achievement of a 2009 performance target, we issued to the seller 74,906 shares of Common Stock in earn-out consideration. These securities were issued pursuant to Section 4(2) of the ~~4,894,456 redeemable Warrants outstanding~~Securities Act of 1933, as ~~of March 26, 2009.~~
30

~~Table of Contents~~amended.

Item 3. Defaults Upon Senior ~~Securities~~Securities.

~~None~~None.

Item 4. ~~Submission of Matters to a Vote of Security Holders~~(Removed and Reserved).
The Company’s Annual Meeting of Stockholders was held on May 19, 2009. The total number of shares of the Company’s common stock issued, outstanding and entitled to vote at the meeting was 32,477,364 shares of which 27,415,806 were present at the meeting either in person or by proxy. The results of the votes for the following proposals were as follows:
~~Proposal 1~~. To elect three Class A Directors to hold office for a three-year term expiring at the Annual Meeting of the Stockholders to be held in 2012 or until their respective successors are elected and qualified:
·~~Brian Pratt — votes “For” — 26,015,942; votes “Withheld” — 1,399,864~~
·~~Thomas E. Tucker — votes “For” — 27,399,704; votes “Withheld” — 16,102~~
·~~Peter C. Brown — votes “For” — 27,399,704; votes “Withheld” — 16,102~~
~~In addition to the directors elected above, the following directors’ term of office continued after the meeting until subsequent annual meetings of stockholders:~~
~~Class B — Directors with terms expiring at the 2010 annual meeting of stockholders: :~~
·~~John P. Schauerman~~
·~~Stephen C. Cook~~
·~~Peter J. Moerbeek~~
~~Class C — Directors with terms expiring at the 2011 annual meeting of stockholders: :~~
·~~Eric S. Rosenfeld~~
·~~David D. Sgro~~
~~Proposal 2.~~ ~~Approval of the Amendment and Restatement of our Third Amended and Restated Certificate of Incorporation to increase Authorized Shares:~~
·~~Votes “For” — 27,385,539~~
·~~Votes “Against” — 18,965~~
·~~Votes “Abstained” — 11,302~~
·~~Broker “Non-Votes” — 0~~
~~Proposal 3.~~ ~~Ratify change of corporate name to “Primoris Services Corporation” and ratify corresponding change to our Certificate of Incorporation:~~
·~~Votes “For” — 27,404,604~~
·~~Votes “Against” — 0~~
·~~Votes “Abstained” — 11,202~~
·~~Broker “Non-Votes” — 0~~
~~Proposal 4.~~ ~~Ratification of the appointment of Moss Adams LLP as our Independent Registered Public Account Firm for 2009:~~
·~~Votes “For” — 27,404,604~~
·~~Votes “Against” —0~~
·~~Votes “Abstained” — 11,202~~
·~~Broker “Non-Votes” — 0~~
31

~~Table of Contents~~

Item 5. Other ~~Information~~Information.

~~None~~None.

Item 6. ~~Exhibits~~Exhibits.

The following exhibits are filed as part of ~~or incorporated by reference into,~~ this Quarterly Report on Form 10-Q.

Exhibit
Number

Description
~~2.1~~
~~Agreement and Plan of Merger dated as of February 19, 2008 by and among Rhapsody Acquisition Corp., Primoris Corporation and certain stockholders of Primoris Corporation(1)~~
~~3.1~~
~~Fourth Amended and Restated Certificate of Incorporation of Primoris Services Corporation(*)~~
~~3.2~~
~~Amended and Restated Bylaws of Primoris Services Corporation(2)~~
~~4.1~~
~~Specimen Unit Certificate(3)~~
~~4.2~~
~~Specimen Common Stock Certificate(3)~~
~~4.3~~
~~Specimen Warrant Certificate(4)~~
~~4.4~~
~~Form of Unit Purchase Option granted to Representative(5)~~
~~4.5~~
~~Form of Warrant Agreement between Continental Stock Transfer & Trust Company and the Registrant(4)~~
31.1

Rule 13a-14(a)/15d-14(a) Certification by the Registrant’s Chief Executive Officer(*Officer (*)
31.2

Rule 13a-14(a)/15d-14(a) Certification by the Registrant’s Chief Financial Officer(*Officer (*)
32.1

Section 1350 Certification by the Registrant’s Chief Executive Officer(*Officer (*)
32.2

Section 1350 Certification by the Registrant’s Chief Financial Officer(*Officer (*)

(*)                                 Filed herewith

~~(1)~~32Attached as an annex to the Registrant’s Registration Statement on Form S-4/A (File No. 333-150343) filed with the Securities and Exchange Commission on July 9, 2008 and incorporated herein by reference.
~~(2)~~Filed as an exhibit to the Initial Filing of the Current Report on Form 8-K for July 31, 2008 (File No. 001-34145) filed with the Securities and Exchange Commission on August 6, 2008 and incorporated herein by reference.
~~(3)~~Filed as an exhibit to the Registrant’s Registration Statement on Form S-1 (File No. 333-134694) filed with the Securities and Exchange Commission on June 2, 2006 and incorporated herein by reference.
~~(4)~~Filed as an exhibit to the Registrant’s Registration Statement on Form S-1/A (File No. 333-134694) filed with the Securities and Exchange Commission on August 28, 2006 and incorporated herein by reference.
~~(5)~~Filed as an exhibit to Registrant’s Registration Statement on Form S-1/A (File No. 333-134694) filed with the Securities and Exchange Commission on July 14, 2006 and incorporated herein by reference.
32

Table of Contents

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

PRIMORIS SERVICES CORPORATION

Date: ~~August 11, 2009~~May 10, 2010
/s/ PETER J. MOERBEEK

Peter J. Moerbeek

Executive Vice President, Chief Financial Officer

33

Table of Contents

EXHIBITS ATTACHED TO THIS QUARTERLY REPORT ON FORM 10-Q

Exhibit
Number

Description
~~3.1~~
~~Fourth Amended and Restated Certificate of Incorporation of Primoris Services Corporation~~
31.1

Rule 13a-14(a)/15d-14(a) Certification by the Registrant’s Chief Executive Officer
31.2

Rule 13a-14(a)/15d-14(a) Certification by the Registrant’s Chief Financial Officer
32.1

Section 1350 Certification by the Registrant’s Chief Executive Officer
32.2

Section 1350 Certification by the Registrant’s Chief Financial Officer

34

	June 30, 2009		December 31, 2008
	(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	59,781	$	73,018
Short-term investments	15,091		15,036
Restricted cash	8,326		11,111
Accounts receivable, net	95,483		90,826
Costs and estimated earnings in excess of billings	20,870		21,017
Deferred income taxes	5,591		5,591
Prepaid expenses, inventory and other current assets	4,385		5,856
Total current assets	209,527		222,455
Property and equipment, net	28,181		26,224
Other assets	255		139
Investment in non-consolidated entities	1,333		500
Other intangible assets, net	34		52
Goodwill	2,842		2,842
Total assets	$	242,172	$	252,212
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	48,471	$	56,088
Billings in excess of costs and estimated earnings	67,309		72,664
Accrued expenses and other current liabilities	23,266		26,067
Distributions and dividends payable	812		5,696
Current portion of capital leases	1,582		2,198
Current portion of long-term debt	6,046		5,679
Total current liabilities	147,486		168,392
Long-term debt, net of current portion	25,324		26,624
Long-term capital leases, net of current portion	—		341
Deferred tax liabilities	1,429		1,425
Total liabilities	174,239		196,782
Commitments and contingencies
Stockholders’ equity
Preferred stock—$.0001 par value, 1,000,000 shares authorized, 0 outstanding	—		—
Common stock—$.0001 par value; authorized: 90,000,000 shares; 32,477,364 and 29,977,339 issued and outstanding at June 30, 2009 and December 31, 2008	3		3
Additional paid-in capital	34,796		34,796
Retained earnings	33,031		20,528
Accumulated other comprehensive income	103		103
Total stockholders’ equity	67,933		55,430
Total liabilities and stockholders’ equity	$	242,172	$	252,212

			Fair Value Measurements at Reporting Date						Fair Value Measurements at Reporting Date
	Amount Recorded on Balance Sheet		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)	Significant Unobservable Inputs (Level 3)	Amount Recorded on Balance Sheet		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets as of June 30, 2009:
Assets as of March 31, 2010:
Cash and cash equivalents	$	59,781	$	59,781	—	—	$	83,289	$	83,289	—		—
Short-term investments	$	15,091	$	15,091	—	—	$	29,000	$	29,000	—		—
Assets as of December 31, 2008:
Other assets — hedge contracts							$	203	—		$	203	—
Assets as of December 31, 2009:
Cash and cash equivalents	$	73,018	$	73,018	—	—	$	90,004	$	90,004	—		—
Short-term investments	$	15,036	$	15,036	—	—	$	30,058	$	30,058	—		—
Other assets — hedge contracts							$	266	—		$	266	—

	Three months ended June 30				Six months ended June 30,				Three months ended March 31,
	2009		2008		2009		2008		2010		2009
	(Unaudited)				(Unaudited)				(Unaudited)
Earnings data:
Revenue	$	34,494	$	26,140	$	78,386	$	48,176	$	—	$	43,892
Gross profit	$	4,473	$	2,944	$	15,558	$	7,324	$	—	$	11,085
Earnings before taxes	$	4,475	$	3,010	$	15,563	$	7,568	$	—	$	11,088
Company’s equity in earnings	$	2,700	$	1,204	$	5,085	$	3,027	$	—	$	2,385

	Three months ended March 31, 2009

Revenues	$	217,293
Income from continuing operations, before provision for income taxes	$	13,573
Income from continuing operations	$	8,241
Net income	$	8,261

Weighted average common shares outstanding:
Basic — (1)	37,112
Diluted — (1)	40,662

Earnings per share:
Basic — income from continuing operations	$	0.22
Basic — net income	$	0.20
Diluted — income from continuing operations	$	0.22
Diluted — net income	$	0.20

	Amortization		March 31,		December 31,
	Period		2010		2009
Tradename	5 to 10 years		$	15,365	$	15,785
Non-compete agreements	5 years		$	5,130	$	5,403
Customer relationships	5 to 10 years		$	6,624	$	6,793
Backlog	0.75 to 2.25 years		$	4,195	$	4,714
		Total	$	31,314	$	32,695

For the Years Ending December 31,	Estimated Intangible Amortization Expense
2010 (remaining nine months)	$	4,297
2011	5,544
2012	3,873
2013	3,455
2014	3,360
Thereafter	10,785
	$	31,314

	Three months ended June 30,				Six months ended June 30,
	2009		2008		2009		2008		Three months ended March 31,
	(Unaudited)				(Unaudited)				2010		2009
									(Unaudited)
Numerator:
Net income	$	8,580	$	8,769	$	14,220	$	18,551	$	6,698	$	5,640
Net income (pro forma – 2008) – (1)	$	8,580	$	5,435	$	14,220	$	11,441
Denominator:
Weighted average shares for computation of basic earnings per share	32,477		23,587		31,303		23,587		33,202		30,116

Dilutive effect of warrants and units (2)	358		—		—		—

Dilutive effect of contingently issuable shares (3)	—		—		1,174		—

Dilutive effect of warrants and units									1,751		—
Dilutive effect of contingently issuable shares (1) (2)									2,406		2,361
Dilutive effect of conversion of Preferred Stock (3)									8,185		—
Weighted average shares for computation of diluted earnings per share	32,835		23,587		32,477		23,587		45,544		32,477

Basic earnings per share	$	0.26	$	0.37	$	0.45	$	0.79	$	0.20	$	0.19

Diluted earnings per share	$	0.26	$	0.37	$	0.44	$	0.79	$	0.15	$	0.17

Basic earnings per share (pro forma – 2008) – (1)	$	0.26	$	0.23	$	0.45	$	0.49

Diluted earnings per share (pro forma – 2008) – (1)	$	0.26	$	0.23	$	0.44	$	0.49

	For the three months ended June 30,								For the three months ended March 31,
	2009				2008				2010				2009
Segment	Revenue		% of Segment Revenue		Revenue		% of Segment Revenue		Revenue		% of Segment Revenue		Revenue		% of Segment Revenue
	(Unaudited)								(Unaudited)
Construction Services	$	113,538	89.5	%	$	120,329	84.5	%
East Construction Services									$	104,236	59.6	%	$	14,739	11.9	%
West Construction Services									59,887		34.2	%	90,044		72.9	%
Engineering	13,362		10.5	%	22,115		15.5	%	10,859		6.2	%	18,767		15.2	%
Total	$	126,900	100.0	%	$	142,444	100.0	%	$	174,982	100.0	%	$	123,550	100.0	%

	For the six months ended June 30,
	2009				2008
Segment	Revenue		% of Segment Revenue		Revenue		% of Segment Revenue
	(Unaudited)
Construction Services	$	223,509	87.4	%	$	266,697	85.5	%
Engineering	32,129		12.6	%	45,138		14.5	%
Total	$	255,638	100.0	%	$	311,835	100.0	%

	Revenues
	For the three months ended March 31,
	2010				2009				Total Assets
Country:	Revenue		% of Revenue		Revenue		% of Revenue		March 31, 2010		December 31, 2009
	(Unaudited)								(Unaudited)
United States	$	172,044	98.3	%	$	116,010	93.9	%	$	471,064	$	465,025
Non-United States	2,938		1.7		7,540		6.1		6,114		11,002
Total	$	174,982	100.0	%	$	123,550	100.0	%	$	477,178	$	476,027

	Three Months Ended June 30,
	2009					2008
	(Thousands, except per share amounts)			% of Revenue		(Thousands, except per share amounts)			% of Revenue
Revenues	$	126,900		100.0	%	$	142,444		100.0	%
Gross profit	20,923			16.5	%	14,634			10.3	%
Selling, general and administrative expense	8,388			6.6	%	6,622			4.6	%
Operating income	12,535			9.9	%	8,012			5.6	%
Other income (expense)	1,376			1.1	%	1,016			0.7	%
Income before income taxes	13,911			11.0	%	9,028			6.3	%
Income tax provision (1)	(5,331		)	(4.2	)%	(259		)	(0.2	)%
Net income	$	8,580		6.8	%	$	8,769		6.2	%
Net income per share:
Basic	$	0.26				$	0.37
Diluted	$	0.26				$	0.37
Weighted average common shares outstanding
Basic	32,477					23,587
Diluted	32,835					23,587

	Six Months Ended June 30,
	2009					2008
	(Thousands, except per share amounts)			% of Revenue		(Thousands, except per share amounts)			% of Revenue
Revenues	$	255,638		100.0	%	$	311,835		100.0	%
Gross profit	35,651			14.0	%	30,847			9.9	%
Selling, general and administrative expense	16,002			6.3	%	14,623			4.7	%
Operating income	19,649			7.7	%	16,224			5.2	%
Other income (expense)	3,512			1.4	%	2,781			0.9	%
Income before income taxes	23,161			9.1	%	19,005			6.1	%
Income tax provision (1)	(8,941		)	(3.5	)%	(454		)	(0.1	)%
Net income	$	14,220		5.6	%	$	18,551		5.9	%
Net income per share:
Basic	$	0.45				$	0.79
Diluted	$	0.44				$	0.79
Weighted average common shares outstanding
Basic	31,303					23,587
Diluted	32,477					23,587

	Three Months Ended March 31,
	2010					2009
	(Thousands, except per share amounts)			% of Revenue		(Thousands, except per share amounts)			% of Revenue
Revenues	$	174,982		100.0	%	$	123,550		100.0	%
Gross profit	24,473			14.0	%	14,506			11.7	%
Selling, general and administrative expense	13,755			7.9	%	7,416			6.0	%
Operating income	10,718			6.1	%	7,090			5.7	%
Other income (expense)	(67		)	—	%	2,129			1.7	%
Income before income taxes	10,651			6.1	%	9,219			7.4	%
Income tax provision	(3,953		)	(2.3	)%	(3,599		)	(2.9	)%
Net income from continuing operations	$	6,698		3.8	%	$	5,620		4.5	%
Profit from discontinued operations	—					20				%
Net income	$	6,698		3.8	%	$	5,640		4.5	%
Earnings per share:
Basic:
Income from continuing operations	$	0.20				$	0.19
Income on discontinued operations	$	—				$	—
Net Income	$	0.20				$	0.19

Diluted:
Income from continuing operations	$	0.15				$	0.17
Income on discontinued operations	$	—				$	—
Net Income	$	0.15				$	0.17

Weighted average common shares outstanding
Basic	33,202					30,116
Diluted	45,544					32,477

	Six Months Ended June 30,						Three Months Ended March 31,
	2009			2008			2010			2009
	(Thousands)						(Thousands)
*Other income (expense)*
Income from non-consolidated investments	$	3,903		$	3,027		$	968		$	2,167
Foreign exchange gain (loss)	203			(22		)	92			229
Interest income (expense), net	(594		)	(224		)	(1,127		)	(267		)
Total other income	$	3,512		$	2,781		$	(67	)	$	2,129

	Three Months Ended June 30,
	As reported 2009			Pro forma 2008
	(Thousands, except per share amounts)
Income before provision for income tax, as reported	$	13,911		$	9,028
Provision for income tax	(5,331		)	(3,593		)
Net income	$	8,580		$	5,435
Earnings per share:
Basic	$	0.26		$	0.23
Diluted	$	0.26		$	0.23

	Six Months Ended June 30,
	As reported 2009			Pro forma 2008
	(Thousands, except per share amounts)
Income before provision for income tax, as reported	$	23,161		$	19,005
Provision for income tax	(8,941		)	(7,564		)
Net income	$	14,220		$	11,441
Earnings per share:
Basic	$	0.45		$	0.49
Diluted	$	0.44		$	0.49

Payments due by period	Total		1 Year		��	2-3 Years		4-5 Years		After 5 Years		Total		1 Year		2-3 Years		4-5 Years		After 5 Years
	(Thousands)											(Thousands)
Long-term debt and capital lease obligations	$	32,952	$	7,628		$	13,226	$	12,098	$	—
Debt and capital lease obligations												$	42,251	$	10,428	$	17,813	$	14,010	$	—
Interest on long-term debt	4,632		1,739			2,276		617		—		5,241		2,097		2,550		494		—
Subordinated debt												51,028		9,165		19.634		22,229		—
Interest on subordinated debt												8,909		2,656		4,762		1,491		—
Equipment operating leases	6,901		3,067			3,751		83		—		4,019		2,393		1,626		—		—
Equipment operating leases—related parties	—		—			—		—		—
Real property leases	4,657		1,470			2,138		1,049		—		4,890		1,776		2,791		323		—
Real property leases—related parties	7,147		931			1,743		1,816		2,657		6,559		988		1,769		1,708		2,094
	$	56,289	$	14,835		$	23,134	$	15,663	$	2,657	$	122,897	$	29,603	$	50,945	$	40,255	$	2,094
Stand-by letters of credit	$	5,498	$	1,337		$	4,161	$	—	$	—	$	8,265	$	3,474	$	4,114	$	677	$	—

	As of June 30,												Restated (1)				As Reported
	2009				2008				March 31, 2010				December 31, 2009				December 31, 2009
	Amount		Percentage		Amount		Percentage		Amount		Percentage		Amount		Percentage		Amount		Percentage
	(Thousands)								(Thousands, except % amounts)
*Segment:*
Construction Services	$	233,165	86.0	%	$	252,234	73.6	%
East Construction Services									$	536,445	65.1	%	$	572,545	74.8	%	$	572,545	72.0	%
West Construction Services									222,859		27.0	%	136,722		17.9	%	166,822		21.0	%
Engineering	37,872		14.0	%	90,449		26.4	%	65,105		7.9	%	56,012		7.3	%	56,012		7.0	%
	$	271,037	100.0	%	$	342,683	100.0	%	$	824,409	100.0	%	$	765,279	100.0	%	$	795,379	100.0	%

	(a)	(b)		(c)	(d)
Period	Total Number of Warrants Purchased	Average Price Paid per Warrant		Total Number of Warrants Purchased as Part of Publicly Announced Plans or Programs	Maximum Number (or Approximate Dollar Value) of Shares that May Yet Be Purchased Under the Plans or Programs
March 27, 2009 through March 31, 2009(1)	169,400	$	0.48	169,400	$	918,181
April 1, 2009 through April 30, 2009(1)	19,100	$	0.63	19,100	$	—
May 1, 2009 through May 15, 2009(1)	—	$	—	—	$	—

Exhibit Number		Description
~~2.1~~		~~Agreement and Plan of Merger dated as of February 19, 2008 by and among Rhapsody Acquisition Corp., Primoris Corporation and certain stockholders of Primoris Corporation(1)~~
~~3.1~~		~~Fourth Amended and Restated Certificate of Incorporation of Primoris Services Corporation(*)~~
~~3.2~~		~~Amended and Restated Bylaws of Primoris Services Corporation(2)~~
~~4.1~~		~~Specimen Unit Certificate(3)~~
~~4.2~~		~~Specimen Common Stock Certificate(3)~~
~~4.3~~		~~Specimen Warrant Certificate(4)~~
~~4.4~~		~~Form of Unit Purchase Option granted to Representative(5)~~
~~4.5~~		~~Form of Warrant Agreement between Continental Stock Transfer & Trust Company and the Registrant(4)~~
31.1		Rule 13a-14(a)/15d-14(a) Certification by the Registrant’s Chief Executive Officer(Officer ()
31.2		Rule 13a-14(a)/15d-14(a) Certification by the Registrant’s Chief Financial Officer(Officer ()
32.1		Section 1350 Certification by the Registrant’s Chief Executive Officer(Officer ()
32.2		Section 1350 Certification by the Registrant’s Chief Financial Officer(Officer ()

	PRIMORIS SERVICES CORPORATION

Date: ~~August 11, 2009~~May 10, 2010	/s/ PETER J. MOERBEEK
	Peter J. Moerbeek
	Executive Vice President, Chief Financial Officer