Primoris Services Corp (PRIM) 2015 Q1 法說會逐字稿

Greetings and welcome to the Primoris Services Corporation first-quarter 2015 financial results conference call. At this time all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. (Operator Instructions) As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Kate Tholking, Director of Investor Relations. Thank you. You may begin.

Thank you, Jessica. Hello, everyone, and thank you for joining us today. Our speakers for the day will be Brian Pratt, our Chairman, President, and Chief Executive Officer of Primoris Services Corporation; Pete Moerbeek, Executive Vice President and Chief Financial Officer; and David King, our Chief Operating Officer.

Before we start, I would like to remind everyone that statements made during today's call may contain certain forward-looking statements including with regard to the Company's future performance. Words such as estimated, believes, expects, projects, may, and future or similar expressions are intended to identify forward-looking statements. Forward-looking statements inherently involve risks and uncertainties including without limitation those discussed in this morning's press release and those detailed in the risk factors section and other portions in our annual report on Form 10-K for the period ended December 31, 2014, and our quarterly report on Form 10-Q, which we plan to file later this week, and other filings with the Securities and Exchange Commission. Primoris does not undertake any obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise, except as may be required under applicable securities laws.

I would now like to turn the call over to our CEO, Brian Pratt.

Thank you, Kate. And good morning to everyone. Well, we had another tough quarter. I would like to excuse it away, but the number is what the number is. I will, however, try to explain our disappointing results. Our just [about] breakeven income can be attributed to two significant factors, neither of which should come as a surprise to you -- weather and market uncertainty.

As to the weather, it was cold in the Rockies in the Midwest, where Q3C operates. Q3C in Denver, unlike last year, when we had a considerable number of workdays available to us in the area, we didn't this year. The upper Midwest was about normal this year with zero available workdays. And too wet in the Southeast, where we are working with two of our three segments, east and energy. By way of example, we had 55 days of rainfall in (technical difficulty) Houston area, where much of our work is performed. If you can't put work in place or provide maintenance services to your client, you obviously don't generate revenue and therefore profit. So not only did poor weather inhibit revenue but it also did so for some of our most profitable groups.

The second challenge was market uncertainty, which created a degree of malaise for some of our clients. The precipitous drop in crude prices created tough market conditions even with clients fairly disconnected from crude prices. Some clients in the industry's most affected are sincerely struggling with prospective project returns and/or current cash flows while others are exploiting a quote-unquote buyers' market to attempt to extract better terms or pricing. These factors certainly contributed to our first-quarter results with revenues $77 million less than last year. To date we have not seen major project cancellations as a result of lower crude prices, nor would we expect to in most of our end markets. Instead it is the general uncertainty that seemed to cause some clients to pause and take a closer look before moving ahead with their projects.

As crude prices appear to have stabilized and our clients are using the current price metrics for hydrocarbons and project evaluations, we feel that the markets affected are somewhat firming. While these factors produced a first-quarter below our expectations, the firming energy markets and other markets insulated from the oil and gas prices produced proposal wins, increasing our backlog to the highest level in our history of $2.1 billion. Before I am asked the question, I'd like to say I do like the quality of our backlog.

Now, before I discuss the segments, I would like to introduce David King, our COO. David has joined us on the call to act as my human shield in the Q&A period. David?

Thanks, Brian. As Brian has mentioned on the past several earnings calls, I am Primoris's Chief Operating Officer, having come on board late last year. As many of you know, I come from an operations background, having worked for more than 35 years in this business. This last year has been an exciting year for me inside the Company, getting to know everyone and all of the different business units inside this great organization. The entrepreneurial spirit and the capability of this organization has been very exciting for me to experience firsthand. Although I've already had the opportunity to meet many of you and many of our end customers, I do look forward to the opportunity to interface even more in the coming years. Thanks, Brian.

Okay. Now to the segments -- in the West, Scott's ARB underground division enjoyed a reasonable revenue and profitability in the first quarter with a $5 million increase in gross profit. His group not only had a better than average first quarter but saw good flow of prospective work and wins. By the way, as you may have noticed, there wasn't any rain in Cali -- it's the only stated didn't rain in was California. This group continues to perform more and more varied services for its traditional clients, expanding those relationships. Rockford is performing their projects well in spite of difficult weather. We're hoping to increase our workload in the second half while bidding and winning work to be performed well into 2017.

On the industrial side in the West, Tim's group, while facing a dearth of immediate work, are in final discussions on several significant projects that hopefully will provide attractive work in the intermediate future. Finally, in the West our structures group, headed by Mark Thurman, has turned the corner and is seeing vigorous market and we are enjoying a strong position in it. Mark's recent wins indicate his traditional market is returning to more normal levels and our patience with it will be rewarded.

In the East services segment, we produced mixed results. While the James industrial team group is laboring to replace their larger projects from last year, like CF, we are seeing good seeing good project flow. Along with new projects we look to book, the group will be a significant contributor on the Sasol project. Although the size of their portion is larger than I&M's, their work will be performed mostly in the later stages of the project.

Other work in the market has changed from largely more reimbursable environment to one of increased component of competitive bid. This is an environment in which we do better, as I think we are very competitive as a Company and competition is something we thrive on.

Saxon continued their profitable run and made positive contribution for the quarter. A major consideration in the purchase of Saxon was that, as the power market heats up in the Southeast, we look for them to become more of a player in that market. Ram-Fab performed okay for the quarter as they are struggling with closing out a legacy project. Some of their issues relate to our acquisition of this business, and we are dealing with those issues with the client. They are not the type of problems we expect to encounter in the future. We remain very excited about this group and are looking to build a larger presence in the fabrication market. This is indicated by our purchase just recently of an additional shop facility in the New Iberia, Louisiana area to enhance this operation.

And final to the group is OnQuest. This group's heater business is expanding with significant new orders in process. This rebound in the heater business is occurring while their LNG business continues to blossom. We commissioned the George West facility for Stabilis in the first quarter. The Florida LNG project we are building for a different client is proceeding as scheduled. I'm very optimistic for the small-scale LNG processing construction industry, and we remain the preferred provider of these plants.

In the East, where most of our projects involve moving dirt, weather is especially impactful. That being said, our I&M group was finally able to kick off the Sasol project in a substantial manner, and we look for sizable contribution from this job over the next several years. Jonas Beatty has done a great job of shepherding this group, and we believe he is more than up to the challenge of performing a large job like the Sasol one while maintaining our relationships with our ongoing maintenance clients.

Heavy civil was impacted by the weather; is maintaining progress on their multiyear projects throughout the Southeast. Mike Kilgore, who recently moved to head of the organization, is doing a good job in effectuating the changes needed. Rodney James has assumed the role of operations manager for heavy civil and is settling into his new responsibilities well. I have great confidence in both of these gentlemen.

Cardinal, our water and wastewater team under the leadership of Richard Holt, is moving towards better markets due to the improvement of legacy markets and our focus on new and upscale markets. We think they will be a better and better contributor to our total results.

Now to M&A -- the recent downturn in valuations of companies in our space has been dramatic. It has obviously created pain for our investors but also opportunity. As the historic and successful acquirer, it is times like this that allow us to create opportunity for our shareholders by purchasing the right kind of companies to help us grow and add value. Environments like this allow us to add strong companies at reasonable prices, bringing a new or a larger dimension to an already great Company. We are working hard to find these accretive companies and feel like there are several within our grasp, as evidenced by our purchase of Aevenia. We are hoping to have an announcement or two in the next several months that will demonstrate our ability to find and secure these companies.

Now, I would like to turn the call over to Pete to provide his normally enthralling analysis of our numbers. Pete?

Thank you, Brian. As Kate mentioned, we anticipate filing our Form 10-Q at the end of the day tomorrow. Without repeating too much of the information that was in our press release this morning, I will try to add some color to a rather drab quarter.

First quarter of 2015 revenues declined to $393 million compared to $470 million in last year's first quarter. We earned $1.7 million or $0.03 per fully diluted share compared to $10.8 million or $0.21 per diluted share last year.

As Brian has discussed, our total decrease in revenue of $77 million was due primarily to poor weather in the Midwest and Texas Gulf Coast regions as well as completion of projects that were active in the prior year. The revenue decrease was $48 million in our West segment, $46 million in our energy segment, with an increase of $17 million in our East segment.

In the West the completion of a large solar project reduced revenue by $58 million compared to the prior year while the completion of the BridgeTex pipeline project reduced revenue in the energy segment by $37 million. The poor weather inhibited our ability to make significant progress in replacing these two jobs. For example, our Sasol project, which will far exceed the combined revenue of these two jobs, generated revenue of less than $15 million in the quarter.

For the quarter, we derived 13.9% of our revenue from a large midstream pipeline company, and our second largest customer was TxDOT with 10.9% of total revenue. Gross profit was down $12 million for the quarter, both as a result of the lower revenue and the impact of weather that Brian discussed. The gross profit decrease was $10 million in the West segment, $4 million in the energy segment, while gross profit in the East improved by $2 million.

The gross profit reduction did not arise from the ending of the two large jobs, for which we recognized no profit last year. Instead, the gross profit decrease was $4 million at Q3C, reflecting our inability to perform any meaningful work in the first quarter because of the weather. The gross profit decrease was $6 million at Rockford, reflecting a favorable settlement of change orders for a large pipeline project in the first quarter of 2014, and the gross profit decrease was $5 million at Primoris Energy Services, reflecting the impact of two pipeline project and the construction of a large fertilizer facility, all of which were completed in 2014. Gross profit as a percentage of revenue in the quarter declined to 9.7% from 10.6% in the first quarter of 2014.

During the first quarter, depreciation was $13.9 million and amortization was $1.7 million. Our intangibles balance at the end of the quarter was $38 million, and we expect to amortize $4.7 million during the remainder of 2015. We spent $16.6 million on capital expenditures and received $2.8 million from proceeds of the sale of equipment for a net CapEx of $13.8 million. We anticipate for the full year our net capital expenditures will be somewhere in the $65 million range. The effective tax rate for net income attributable to Primoris was 38.7%, and we do not expect the rate to change materially for the remainder of the year.

Our balance sheet remains strong with $137 million in cash and short-term investments at the end of the quarter. Our total debt was $246 million, resulting in a 53.9% debt to equity ratio. The weighted average interest rate on our total debt was 2.7%.

At quarter end we had $299 million in net accounts receivable. We remain in dispute resolution, mandatory arbitration in one case and a lawsuit in the other, with two customers over collection for two construction projects completed in 2014. In April, we received $11 million from one of the customers, reducing the total receivable amount for the two projects to $51 million. At this time we cannot predict when the disputes will be resolved nor the timing of any additional collections and potential future profits.

Our cash flow from operations in the first quarter was $2 million. We will continue to use our cash to invest in equipment, make acquisitions, and pay dividends. The Board's decision to increase the quarterly dividend by 37.5% should demonstrate our confidence in our ability to generate strong and consistent cash flow. During the quarter, we invested $23 million to acquire the assets of Primoris AV. And so that we retain the ability to quickly complete an acquisition, we recently added $50 million capacity to our shelf facility.

Total backlog at quarter end was a record $2.1 billion, consisting of $1.7 billion of fixed backlog and $456 million of MSA backlog. Our fixed backlog includes only contracts for which we have a known revenue amount, while our MSA backlog includes four quarters of estimated MSA revenues. By segment, total backlog was $849 million in the West, $963 million in the East, and $332 million in the energy segment.

As you may have noticed, in the other financial section of the press release we added a sentence which is our first attempt at guidance since we became a public company in 2008. Based upon the current projects in backlog and anticipated levels of customer maintenance and MSA spending, we expect that 2015 revenues should approximate 2014 revenues of $2.1 billion and that 2015 earnings per share should approximate 2014 earnings per share of $1.22. Unfortunately, we are starting the last three quarters of 2015 $0.18 below where we were at the end of the first quarter in 2014. So we do have a challenge ahead of us.

With that, we will now move on to your questions.

(Operator Instructions) Lee Jagoda with CJS Securities.

So just looking at your guidance, specifically the EPS guidance, it actually implies flat to slightly lower margins on average for the balance of the year. And given that there were a number of operational headwinds last year, specifically related to the two projects where you had difficulty collecting, what is causing the additional caution or pause on a year-over-year basis?

Well, it's not only the margin that you are looking at, Lee. You also need to remember that we had a $5 million, a little bit over $5 million gain last year on the sale of WesPac. So that's a reasonably significant impact in the total dollars. I think we are at a point right now that we are trying to be cautious, recognizing that we have quite a bit of work to do to get to the $1.22. And it is a number out there, which means that of all the numbers we hit, that is not it. Our goal is obviously to do better. But it's going to be an interesting year.

The other thing that impacts that, Lee, is that we have got some larger projects starting up and we are pretty conservative in our revenue recognition on larger projects at the start, the front end, not knowing how they are going to turn out. So we got a lot of big stuff starting up.

That's very helpful. And Pete, just on Sasol, how is the backlog split up between the East and the energy segments on the Sasol piece?

We have so far recorded $290 million. $125 million is energy and whatever the difference is, $175 million -- that doesn't add up -- is the other piece. And Kate is telling me that I've got them backwards.

No, you said energy. The larger component is the industrial and the smaller component (multiple speakers) and there is about a $40 million difference. But keep in mind when they gave us this purchase order we had given them budget estimates well in excess of what the purchase orders are or purchase order is. But they wanted to keep purchase orders under $300 million so they wrote smaller purchase order. So as I said in previous calls, we anticipate the numbers to get quite larger than that.

And then there's quite a bit of services. They are still groping around in how they want to execute this project. So there's quite a bit of services that we think we can take up in excess of that scope like pipe fabrication and equipment setting, things like that.

But I think if I heard you correctly in the prepared remarks, the energy piece will be first and then the industrial piece would be later stage. Is that right?

The heavy civil piece or the East I&M piece will be first. They are basically importing -- I don't know how many millions of yards of dirt from off-site. And they have to put the dirt in place before the industrial group, the energy group, comes in and installs the foundations and things and underground piping.

But if I look at your backlog and your expectations for backlog for the balance of the year, it implies that the $125 million in energy, even though it's later stage, is expected to be completed this year. Is that to say that the entire $290 million would be completed this year, then?

No, it's a 22- to 26-month job for both entities.

Right. But again, in the energy portion of your backlog discussion I think you say 98% of that backlog is going to be completed over the next 12 months.

Of that job, specifically?

In total, for energy.

Well, yes. That job isn't -- should be less than half.

And it's also 12 months, which gets you into next year.

Keep in mind that -- let me go backwards a minute. The purchase orders in aggregate were $290 million. We anticipate that the job is going to grow substantially from there, based on the unit prices and the numbers we gave them. So to say that 98% of it would he done in the next 12 months would imply that 98% of only that portion of the work will be done in the next 12 months. So if the job grows by 100%, then 98% or half of that would be done in the next 12 months. Have you got me?

I do, and that's exactly where I was going. I appreciate it. I'll hop back in queue. Thank you.

Tahira Afzal with KeyBanc Capital Markets.

The first question is, you know that $1.22 guidance -- first of all, thanks a lot, that's very helpful. I'm sure it has delayed some sales today, given the quarter. It seems like you are putting in that your estimate for MSAs. But I guess a couple of things I'd love to get some color around in terms of what is included and what's not -- number one, claims, recoveries from stuff you have outstanding. It seems that's not built-in, I assume. And to the extent you win new projects but not MSA work but project, I would love to get a sense if what you are looking at in the pipeline could add to that $1.22 to some extent as well?

I'll answer the first one. No, we are not expecting -- in these numbers we are expecting at best minimal recovery of the amount that's out there that's in dispute. I'll let Brian answer the question about what he's looking at in the pipeline.

Well, and I want to point out to something. You said there was an increase, a substantial increase in MSA anticipated revenues or revenue. We haven't changed any policies. We've use the same. We are very conservative. We only recognize the one year that we see inuring to us through MSA work. And that's very conservative. We have some MSAs with clients that we don't do any work under because they just -- it's a license to do work for them and they don't give us any work. But we don't include any of that. We are very confident that we will meet or exceed those MSA numbers when we put them in our backlog or when we put them in our estimate.

There's still a lot of opportunity out there. The West Coast continues to grow and the PG&E work that we picked up -- in essence, two new lines of business with them over the last quarter or two. One of them is they are now beginning their Aldyl service replacement, which we've talked about laboriously. And also we picked up this -- we call it TV-ing of drilled services where, when you drill a hole to that a new service into the ground you run a small TV camera inside of it to make sure you haven't drilled through anything, inadvertently, you don't want to drill through. And that could be a great expanding business for us. It's with a good client. But the larger component of the work is the Aldyl services. And we think that those services are going to grow dramatically from, based on what we know and our experience with the copper services that we perform for them, we think that work will grow dramatically.

Q3C has set a great run. They are picking up new clients, they are picking up new geography. And a lot of the new MSA work we have is coming from them. And their clients continue to have buildouts, continue to grow, continue to have issue with integrity and trying to prove up the integrity and replacements and their system. So that has been a big boost for the MSA work. We continue to grow those businesses. Our management is a strong as anybody's in the business. And look for them to add new MSA work.

Sprint -- which is no longer Sprint, incidentally; we have to give the name back to the people we purchased it from. But Primoris Pipeline Services -- they do quite a bit of MSA work too. Their model is to do about 50% of their revenue from maintenance. And that's all done on MSA work. A lot of that is fairly unpredictable but we are combining that. They reached out geographically and picked up the middle Atlantic. They continue to grow. And we think we will see more and more MSA work from them and those clients is that integrity issue hits them, and then the new build out because a lot of these geographies that we are in, by design, are in the Sun Belt, which are exhibiting great growth. And that growth means the utilities have to serve them, and so that means a lot of new packages to come out. So, we are in the right area with the right people, and we look for that business to grow pretty strongly.

So Brian and Pete, in summary it seems MSA you feel comfortable around in terms of what you are putting that $1.22. And if you are backlog, pipeline and prospects are strong, does that add potentially to that $1.22 if the incremental work you are booking from now on -- could it come in fast enough to really add to this number?

Got you. You guys have been on me for years to give guidance, so I give guidance and you want me to drill down below that. We are fairly comfortable with the number we gave because, you know us, we are very conservative. One of the reasons we gave guidance is because we looked around at our peers and there were only a couple of us that didn't give. So we are reluctantly going down this road. And we know we've had some pretty volatile results over the last three, four quarters. And we wanted to make sure that we take care of the guys that feel strongly enough to own our stock. But we are comfortable with where we are going. To drill down below that, I don't think it's appropriate.

Fair enough. And I'll just ask one follow-up. Brian, even yesterday a utility client announced that they are going to be awarding $5 billion pipeline project this summer. So we've started to see some of these mainline projects roll out. When you look at your M&A pipeline, are you refocusing in that area some of the energy prospects out there? Or do you want to diversify going forward?

We have got a fairly full plate of prospects for the pipeline group. Part of your problem is it's pretty lumpy. You've got a huge amount of buildout that coming in 2016 and 2017 and even a little into 2018. And that's all related, which is the announcement of the job we have in Florida, which is 2016-2017 work -- there's work north of that that has to be completed to provide the gas going to that part of Florida. And that's a huge project. But guess what? It all has to be built about at the same time.

We have our traditional clients. As I've said in the past, we live either mantra never trade an old friend for a new one. And we're going to take care of those guys. We're not really looking to expand that business tremendously. But obviously, those side booms will lay pipe for any client out there. So we are going to continue to revolve through the clients and gravitate towards the ones that have work. But never will we ever give up an old client or provide poor service to an old client to take on a new one, which -- I'm speaking to the guys like Williams, which you do a lot of work in the Northeast.

So we will get our share. We always have. Rockford is an extremely competitive company. They know what they are doing. They are true journeymen. That's why we bought them; we didn't like competing with them. So, I have very high confidence we're going to get more than our share of the work, no matter where it is or who the client is.

Thanks a lot, folks. And I'll jump back in the queue.

Jason Wangler with Wunderlich Securities.

Just curious -- you were talking a little bit about the energy work firming up as we all get used to these oil prices. And I think you also said it was obviously going to be more competitive. But can you just talk about what it looks like as far as are you seeing more things come to bid or at least more interest in getting things done, and then how it's looking from your side as far as your competition and what you are seeing? Is it a price issue? Is it a timing? Or where those pushes and pulls are at?

That's a good question, Jason. It's a mixed bag. On the larger pipeline work you are not going to see a lot of people jump into that business. There's only so many contractors that are capable, that are equipped, that have the people. I would chuckle when I hear these guys talk about how many spreads they can stand up. A spread of equipment is pretty worthless if you don't have the superintendent and the people to put the pipe together. The major pipeline business is -- I think there's enough work out there that prices are going to hold and that we're going to continue to see a good market.

The major industrial work, particularly in the ship channel and the Southeast up through the Baton Rouge area -- it's a little bit of a mixed bag. I think the larger projects -- again, you have fewer big dogs that can do it. I think the clients are driving a little harder bargain, even the ones that aren't subject to the price of oil. There has been some hesitancy and I think that has stuttered everybody, just in the fact that nobody knew for sure where the price of oil was going to end up. And we still don't. Somebody asked me, well, this is a very precipitous drop in the price of oil. And I said I've never seen anything but that. They are always precipitous. They are precipitous up, precipitous down. These things don't move slowly, it seems like.

Where we are seeing some issues is on the smaller work, where other contractors coming out of the oil fields, things like that, we'll try and solicit work for more traditional clients, smaller jobs, maintenance, things like that, that they weren't competitive or didn't want to try and compete in prior to that. And so, we are seeing more guys that we've never heard of show up on job walks and things like that. The more astute clients won't give them to work. Some of the guys that aren't or they are just lowball guys will give them some work even though they are not qualified or they don't have a track record.

But in general we are seeing a little downward pressure on pricing. Terms are about the same. I look at terms as an indication of pricing. The clients haven't gotten a lot tougher on terms. You have a few of them that say, here are the terms, take it or leave it. But traditionally those are the same guys it has always been. So in general the pricing is maybe got little downward pressure but I don't see anything dramatic. We have a lot of clients bragging about it. Particularly, the producers are saying I'm getting my services for 30% less. We are not going to do that. And we haven't had to, to get the work, based on our reputation and our relationships. But there is some pressure. I won't deny that.

That's really helpful, thanks. And then just maybe -- you mentioned also the LNG work. You guys are still working on the small-scale LNG projects. Are you seeing much of an uptick, given what we have seen with oil and things, one way or the other, in terms of interest in those projects? Because you have obviously been talking a lot about how this can be pretty lucrative at higher oil prices, or anywhere else.

Well, you have three distinct markets at play right now, or you did. One of them was the transportation fuel for the guys like clean energy and people like that, for trucks and trains and things. And then you have the marine market. Based on EPA requirements that these boats meet air pollution standards, a lot of conversions are going to have to occur on the existing boats and engines.

And then you have the oilfield market where you had guys like Stabilis looking to power their fracking operations and things like that with LNG, with flare gas. It's a good use for that gas instead of making CO2 with it by burning it.

The fracking business, so far, doesn't seem to be as greatly impacted as you'd expect. We are still talking to guys about performing projects in that space. The transportation business really has been quite dead except I think there will be a great impetus at some point for high horsepower transportation like trains and things like that. But that's still in the making, because those are major conversions that have to occur. And that's not regulatory driven.

But the marine business is regulatory driven, and that has stayed strong. So we continue to see a fairly good demand for a ways out in the small plants. And since we have been pretty successful in building them I think we have the process pre-much dialed in. I truly believe we are the preferred provider of these plants.

So other than that, I really can't see a general trend one way or the other. But we are still very optimistic our services are in need.

I appreciate the color. I'll turn it back. Thank you.

Mike Shlisky with Global Hunter Securities.

I just wanted to clarify something from an earlier question, and this was asked three different ways. I want to ask it a fourth way here. Your guidance that you put out here in your release -- it says that it's based on your current backlog. So if you were to book anything else this year and break ground on it, does that an upside to your current estimate? Or is it basically $1.22 assumes you will win a few more things as you go through the rest of the year?

The intent of the $1.22 is not to make it so precise that you think that is a number that we have totally gotten down to the very penny. I think that if we were to get something significant that we could put both in the backlog and start prior to the end of the year, you can see that $1.22 improve. I think the bigger challenge will be that for us to get in a significant projects and have them contribute to this year would be quite challenging. If you look at an underground -- or, excuse me, if you look at an industrial power plant, if we win one of those awards, we certainly are going to see a lot of revenue and profitability out of that this year, but it will make the backlog look great going into next year. So I think that if we announced something significant that didn't start fairly quickly, you are probably not going to see much of an impact on the $1.22.

Yes, and I wouldn't want you to take every job announcement we make as accretive. We have anticipated normal awards throughout the year of the smaller projects that we normally get. So don't read every announcement we do and add it to the $1.22. You might be pretty disappointed.

Sure, sure. Got it. I also want to ask about something I think you said during your remarks, Brian. Where their customers that are not in oil and gas that are also giving you some pressure on pricing because they feel that they can take advantage of the current environment? Is that what you are trying to get at? And if so, are you at some points just [locking] work, saying this is too low of a price for us right now?

We bid our price when we bid work. We obviously respond to the market. And we are able to cut better deals when you have our suppliers are focused in the same industries. We bid to the market, but I don't think we get down to the point -- we're not actually ever at a point where we walk away from work. If they don't like our price, then they don't like our price; they give it to somebody else. There are a few customers that are ancillary to the business that aren't subject to the price of oil and gas that really -- some of them actually make money when the price of oil goes down because they are dependent on gasoline to run their trucks or diesel to run their trucks. But there are some ancillary that have used it as an impetus to try and drive prices down from their suppliers. Yes, that's for sure.

Okay. Just one last one here. I wanted to just touch on your Cardinal wastewater business. You had mentioned you are looking to take that business and grow it a bit here with some new stuff that's out there, new projects, and whatnot. I wonder if you could just tell us a little bit more color as to what's out there and where you want to take it from here.

Well, I don't want to get too specific. But the major thrust that we have done with Cardinal -- Bill McDevitt did a great job for us. And he's retired now. And we've got Mr. Holt now, and he's doing a great job. His experience is more on the higher end and more expensive projects, more design-build. So we're going to exploit his experience better, although Bill was pretty good at that also. I don't want to say anything bad about Bill because he's a great partner. And I won't say anything bad about him.

But our growth is thrust in two different directions. One of them is geography. We are bidding more and more work across the Southeast, not just in Florida. And secondly, we are going to bid larger projects with the wrinkle of design-build. When you go upscale, when you go to the larger projects, you end up with fewer competitors because a lot of the little guys can't write bonds and things like that or they are financially incapable of doing the larger jobs. And then the suppliers, because a lot of that business is based on supply cost -- your suppliers will give you a better price because they know they are going to get paid, versus a smaller guy that is doubtful.

So geography and larger projects is the thrust we are taking the business. But it's pretty much across the Southeast.

That's great color. Thanks very much. I'll pass it along.

John Rogers with D.A. Davidson.

A couple of things. And you've gone over this a little bit but maybe to try it again, in terms of the way that 2015 plays out, the weather impact, the oil impact, and now you've got prices coming up -- Brian, does this snap back very quickly into the second quarter? Did you just push a lot of revenue and earnings out a couple of months? Or is this you make it up through the year and ramp through the year? Because directionally profitability has been trailing off. And I'm just trying to understand how you see this recovery happening.

Yes. You know, God didn't part the clouds and the rain stopped at the end of March. It dribbled into the second quarter. And then you have the cold weather. Q3C, which is a great contributor -- they begin to accelerate in second quarter but they are not at speed. You have some clients that are going to get their money spent, which means it's really going to get crowded towards the back half of the year like your utilities. But in general, when you have jobs that get hit with weather, in general the schedule just gets pushed out. So you don't see a great acceleration on highway work or -- because you get a day for day on the rain. So you don't see this great acceleration.

So it's kind of a mix bag. I don't think you will see a vigorous snap back. And the problem is, what people don't realize -- well, a lot of people don't realize is when it rains on a pipeline job you are out that day. You can't work. We have to pay the workers anyway because they are living out of town in trailers or hotel rooms. And then it takes a couple days to get back up to speed because the right of way is muddy and wet and soggy. And if you get recurring rain it's even worse because it just never dries out. And fighting that mud is an efficiency issue as well as a schedule issue.

So I think what has happened, though, in a broader sense is you've got the clients that have put their projects on delay because of the uncertainty over the price of the hydrocarbons or the way that they interact with each other. And it will take them a while to get those geared up again, possibly, if they are committed to go at this price, for two reasons. Once you slow something down it's hard to re-accelerate it. But secondly, as we talked about many times, the engineering side of the business is really stressed. And so to stop engineering or slow engineering down and then to restart it and try to accelerate it will be a difficult task for these guys. So it's a mixed bag. I think it will push it out, but some of it will be accelerated.

Okay. And then in terms of the recovery that you mentioned or settlement in the quarter, which projects was that related to? Can you say? And how much is -- because you had two big claims there. And I just wanted to get an update on which are --

We collect to the retention on the BridgeTex job, the $11 million.

That was a non-P&L issue, thought. We haven't settled with anybody yet.

Okay. All right, so the P&L impact, and that was not included --

There was no P&L impact.

And Pete, that's not included in any of your comments relative to 2015?

At this point, we would love to be able to make it additive to the numbers that we gave you. But no, it is not in there.

And the only impact to the quarter was the ongoing legal expense, which -- we are pretty efficient at these things. We've done enough of them where we keep the costs down. But that does have an impact, obviously.

Brian, in terms of your comments on M&A and opportunities out there, it sounds like you are at least in some discussions. Are you seeing better opportunities in your existing areas of expertise, whether it's the pipeline, the civil work? But in the past you have also talked about getting into some new markets where you thought there was growth over the next couple of years.

Yes. No, I don't mean to be flippant, John. We have been only looking at smaller companies because of the large multiples and large valuations over the last couple years. So the downturn in all the larger companies in the public market, which ultimately sorts down to the smaller companies in the private market or the larger companies in the private market -- because of valuations we just haven't been able to look at these larger companies because we just didn't want to take the dilution. We just didn't see where the numbers made sense in some of these deals.

Well, now the numbers make sense pretty much across the board. To be honest with you, though, there's a few areas we are not currently in. But there aren't too many. So most of the businesses we are looking at are in our areas of expertise or small expansions of that or small step-outs so that. But we are seeing great opportunity across the board. You've got guys that are my age and they don't know whether the opportunity to sell their company at a 10 or 11 times is ever going to be there again. They don't want to wait 10 years, when they are 65 years old. You see that there's all kinds of reasons. When you have these kinds of downturns, it financially stresses a lot of companies, even good companies, because they have grown so fast and so much that their balance sheet hasn't stayed up with them. And they understand the risks now that they are seeing some of their clients. We are seeing the first small iterations of bankruptcies in some of the oil producers.

So we are looking across the board, but I think the big change for us is the lower valuations is going to allow us to look at larger companies. And that's a real positive for us. I've got a friend in the business; he says you make your money buying something, not selling it. And there's opportunity now to buy good companies that fit well, some of them in the oil and gas business, some not in the oil and gas business. And we are going to weigh that, of course, because we are pretty concentrated in energy. But the opportunities here and we're going to take advantage of it. We are good at it. And people like doing deals with us because we are honest and we do the deal. And we don't jerk them around and bait and switch. And we write the check. And there are people who love working for us, so we are a good buyer.

And how far away are we from some power projects?

You know, there are some that could go -- be active to buy year end, some of them that will be in engineering by year end that are prospects. We are doing bits and pieces now with the Saxons and those people. A lot of the power -- the immediate prospects are refiners and processors, chemical processors that want to generate their own power and then sell it over the fence when they don't need it. But we can see bits and pieces by the end of the year in engineering or in construction. But I think the big surge is going to be first/second quarter of 2016.

Thanks a lot, I'll get back in the queue.

Dan Mannes with Avondale Partners.

So, I'm not going to ask about guidance. I think you've already -- we've belabored that. So let's talk a little bit about the bidding side. So you guys did announce the Florida Southeast contract. It was interesting to us that it doesn't even start to mid- to late next year. So could you maybe talk a little bit about the pricing structure, given that the project doesn't even have a final route?

And then, two, can you talk about maybe some of the implications as it relates to bidding generally, when you are seeing the developers bidding this far in advance?

Well, in terms of pricing we got as much as we could. That's kind of our motto. No, we have been working with these guys for a while. The route is somewhat selected. It's fairly wide in where the pipe will go, but that's advantageous for us because we can have input on route selection, which can save the client money and, obviously, save us money. But in general we know where the route is. We bid a lot of projects like that where you don't exactly know where it's going to go. We had one client that picked out every rock on the right-of-way and put the pipe right through the middle of it, but that wasn't a very good job for either one of us.

But it's a bit of a struggle. They wanted to make sure we were committed. They were worried about capacity in the contracting community. So we've got some fairly aggressive terms if we don't move forward with them, going both ways. If they don't build it, we get paid -- some money, not the whole thing, obviously. If we don't build it for them, then they get paid. So that indicates that the business is going to be pretty frothy into that year. But we bid a lot of them that way.

And they were very good to work with. They had some units that they weren't sure about that we had in the contract so they came out to one of our jobs and we showed them exactly why our units where they were. And they were appreciative of that. So we were able to work out a very fair agreement for them. And they are historically very fair. We've done a lot of work for them over the years. So the rest of it will be traditional but you are just going to have a really, really rambunctious market in 2016/2017.

And it's going to be fairly good this year. We could use some more work in the second half. We are working hard to get that. And typically, as you know, Dan -- you follow the pipeline business as good as anybody -- you don't have a lot of work that's going to burn off by -- unless it's a big project, you book your work now and you burn it by the end of the year in that business.

Got it. And then real quick, on the power plant side, obviously there's the big job we're waiting on the regulatory side of. But outside of that, can you give us a little bit more color on what some of those guys are looking at, and maybe some of the things they are looking at outside of power, in the broader industrial sense in California?

Well, Chevron won their legal battle with the project in Richmond. And so they are talking about reinvigorating that. We had halfway completed the hydrogen plants there for Praxair. And you have that coming down the pike. We've done a little bit of work re-inventorying what is there. It has been sitting there for four or five -- five years now, I guess. So you've got that project. You have some other refinery work that needs to be done out there. You've got some small power plants that they want to build in several of them that we are pursuing. Very few contractors work power and refinery. And in the refineries they want guys that are attuned with their safety and how to work in an existing plant where a lot of your power guys are out there building greenfield plants that don't have that safety awareness and history. And since we have good relationships with all the refiners and the power guys, we are in a good spot.

You've got a lot more power to come. You are talking about the Carlsbad one, which -- just really, California showed their dyslexic (expletive) on that one, just really silly the process that they are going through out there. But we're confident they are going to reach resolution and maybe build a project there, albeit a bit downsized. But there's still a lot of replacement and rehabilitation that needs to be done, repowering that needs to be done in that market. And there are several developers that play in that market. And we are preferred guys with most of them. So, I'm pretty confident we're going to get our share. But if they follow the path that this Carlsbad project has, only God knows when they will never get kicked off. I guess when we start having brownouts out there again will be when they start kicking off.

Understood. And then one last quick one for Pete -- I think there were some comments as it relates to the energy segment that there was maybe a project deferral that resulted in a payment to you. Can you give us a little bit more color both on the project and the sizing?

Be specific, Dan, on the issue.

Yes. This was in the PR, in your press release. There was some commentary about you guys benefiting, I think, from a project deferral.

I'm sorry, I'm sorry. It is a project, a heater project for OnQuest. And the owner decided to delay the project into next year or suspend it, actually. And that project -- we were able to pick up some cancellation or some suspension charges to pay us for the parts that we had already bought. And it's kind of surprising because it's a refinery project, and we were surprised that they were suspending it. But we were able to get all the fab paid for.

Got it, thank you very much.

(Operator Instructions) Tahira Afzal with KeyBanc Capital Markets.

Brian, just had a couple of follow-ups on the end markets again. We started to see some midsized LNG projects coming out. I know you folks are bidding and I think have won a portion of a pipeline on the West Coast, and in the Oregon area as well, tied to that. So can you talk a bit? I know the bookings for some of the larger guys might be ebbing out. But that typically follows with a lag in terms of your fabrication services on the pipeline industrial side. So if you really [couple] some of them midsized activity with maybe some subcontracts on some of these larger jobs, I would love to get an idea of where you directionally see that backlog headed over the next year versus where it might have been at this time last year.

If I can, I will try to address that. On some of the larger LNG projects that we are seeing in the Gulf coast area, we actually see that work coming from us in really three main areas. And we've obviously been bidding that as subcontractors to some of the larger EPC organizations. One of the bigger areas we see is obviously in the I&M work that Jonas does, a lot of the dirt work that has to be done. We also see in the Conrad's area on the industrial side because we are getting a lot of opportunities that are cropping up there. And then the pure fabrication side, as Brian mentioned, we have our Ram-Fab facility but we also opened a new shop in New Iberia. So we actually see that work also picking up.

Relative to your question on the pipeline side, we also see those pipeline feeds to a lot of those facilities spurring opportunities for us on what we call now our Primoris Pipeline Group, which was Sprint, and then is obviously some potential on our Rockford Pipeline Group also. So those are areas that we are tracking pretty carefully.

Got it, David. That is pretty helpful. Thanks.

And does the Ram-fab or the New Iberia facilities -- can they do pretty advanced steel structures? Is there a chance you can even do tank work, or that would be out of the realm of what you guys can do?

In those facilities at this time that would be outside the realm of what we could do. Those facilities right now for us are more on the pure pipe fabrication and some modular capabilities.

All right, David. And last question there -- who do you end up -- I assume CB&I is the big fabricator out there. But would love to get a bit more commentary from you on who else really competes with you there, if there are more mom-and-pop stores or is your competition more some of the larger folks out there that might be private?

Well, on the type of work we are talking about their it's more the mom-and-pop and smaller entities. CBI is not the only entity, obviously, we are looking at. KBR, there's a lot of the LNG companies out there that do LNG work. So we are getting opportunities cropping up from each one of those entities.

Thank you very much.

You've got guys like Fluor that become program managers like on Sasol that will parse out the work, too. But the biggest one is obviously CB&I with their Shaw acquisition. That really put them into pipe business in a big way.

Got it. Thanks a lot, folks.

It appears we have no additional questions at this time. I would like to turn the floor back over to Mr. Pratt for any additional or concluding comments.

As customary, I would like to thank everyone for their participation in this call and their interest in our Company. Our results may not be as you had hoped, but I assure you the men and women of Primoris companies are working hard, very hard, to make you as proud of them as I am. Goodbye.

Ladies and gentlemen, this does conclude today's teleconference. Again, we thank you for your participation, and you may disconnect your lines at this time.