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Business Combinations
 6 Months Ended
Jun. 30, 2014
Business Combinations  
Business Combinations

Note 8 — Business Combinations

 

The Company purchased the assets of FSSI on March 11, 2013.  The fair value of the consideration was $2,377, which consisted of cash payments and three future potential payments to a key employee, contingent upon FSSI meeting certain performance targets for the remainder of calendar year 2013 and for calendar years 2014 and 2015.

 

The contingent consideration was defined as:  (1) a payment of $500 in cash for the achievement of pretax income of at least $553 for the remainder of the year ending December 31, 2013; (2) a payment of $500 in cash if pretax income for the year 2014 is at least $2,502; and (3), a payment of $500 in cash if pretax income for the year 2015 is at least $4,227.  The estimated fair value of the potential contingent consideration on the acquisition date was $702.  At December 31, 2013, the Company determined that the operations of FSSI had not met the 2013 performance target nor was it probable that FSSI would meet any of the future targets; therefore, the full amount of the accrued contingent consideration was credited to non-operating income at December 31, 2013.

 

The purchase agreement also included a provision of an initial payment of $1,000 for a five-year employment, non-competition and non-solicitation agreement with the key employee.  The agreement provided that if the employee terminated his employment or violated the agreement prior to the end of the five-year period, he would be required to repay the unamortized amount of the initial payment.  This agreement was accounted for as a prepaid asset and was being amortized equally over a five-year period.

 

Because the operating performance of FSSI did not meet expected targets, the Company made changes in FSSI management which resulted in adjustments to the value of certain FSSI assets (including the write-down of the unamortized portion of the prepaid employment asset) and liabilities at December 31, 2013.

 

In May 2014, the Company created a wholly owned subsidiary, Vadnais Trenchless Services, Inc., a California company (“Vadnais”), which is a part of the West Construction Services segment.  On June 5, 2014, the Company purchased certain assets from Vadnais Corporation, a general contractor specializing in micro-tunneling.  The assets were purchased for their estimated fair value of $6.4 million in cash and included equipment, building and land.  In addition, if Vadnais achieves at least $2.8 million in EBIT from date of closing through December 31, 2014 the sellers will receive a contingent earnout of $0.9 million.  The estimated fair value of the potential contingent consideration on the acquisition date was $729.  The purchase was accounted for using the acquisition method of accounting and, due to the short period of time between the acquisition date and quarter end, the estimated values are preliminary and subject to change.

 

Supplemental Unaudited Pro Forma Information for the three and six months ended June 30, 2014 and 2013

 

Pro forma information for the three and six months ended June 30, 2014 and 2013 presents the results of operations of the Company as if the FSSI and Vadnais acquisitions had occurred at the beginning of 2013. The FSSI acquisition was completed on March 11, 2013 and the Vadnais on June 5, 2014.  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 allocations;

 

·                     the pro forma impact of the expense associated with the amortization of the discount for the fair value of the contingent consideration for potential earnout liabilities that may be achieved in 2013 and 2014 for the FSSI and Vadnais acquisitions;

 

·                     the pro forma tax effect of both the income before income taxes and the pro forma adjustments, calculated using a tax rate of 39.0% for the three and six months ended June 30, 2014 and the same period in 2013.

 

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 FSSI and Vadnais acquisitions been completed on January 1, 2013.  For example, the pro forma results do not reflect any operating efficiencies and associated cost savings that the Company might have achieved with respect to the FSSI acquisition.

 

 

 

Three months
ended June 30,

 

Six months
ended June 30,

 

 

 

2014

 

2013

 

2014

 

2013

 

 

 

 

 

 

 

 

 

 

 

Revenues

 

517,276

 

446,817

 

988,955

 

860,893

 

Income before provision for income taxes

 

26,804

 

25,122

 

44,726

 

39,633

 

Net income attributable to Primoris

 

16,115

 

15,100

 

26,684

 

23,810

 

 

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding:

 

 

 

 

 

 

 

 

 

Basic

 

51,655

 

51,562

 

51,631

 

51,510

 

Diluted

 

51,804

 

51,626

 

51,759

 

51,547

 

 

 

 

 

 

 

 

 

 

 

Earnings per share:

 

 

 

 

 

 

 

 

 

Basic

 

$

0.31

 

$

0.29

 

$

0.52

 

$

0.46

 

Diluted

 

$

0.31

 

$

0.29

 

$

0.52

 

$

0.46