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Business Combinations
 9 Months Ended
Sep. 30, 2015
Business Combinations  
Business Combinations

 

Note 7 — Business Combinations

 

On February 28, 2015, the Company acquired the net assets of Aevenia, Inc. for $22.7 million, consisting of $22.3 million in cash and a payable of $0.4 million to the sellers. Aevenia, Inc. has been re-branded as Primoris Aevenia, Inc. (“Aevenia”), and operates as part of Primoris’ Energy segment.

 

The purchase was accounted for using the acquisition method of accounting. During the second quarter of 2015, the Company finalized its estimate of fair value of the acquired assets and assumed liabilities of Aevenia, which included $4.2 million in current assets, $2.1 million in current liabilities, plant and equipment of $11.2 million, intangible assets of $3.85 million and goodwill of $5.15 million.

 

The customer relationships were valued at $2.5 million utilizing the “excess earnings method” of the income approach. The estimated discounted cash flows associated with existing customers and projects were based on historical and market participant data. Such discounted cash flows were net of fair market returns on the various tangible and intangible assets that are necessary to realize the potential cash flows.

 

The fair value for the non-compete agreement of $1.35 million was based on a discounted “income approach model,” including estimated financial results with and without the non-compete agreement in place.  The agreement was analyzed based on the potential impact of competition that certain individuals could have on the financial results, assuming the agreement was not in place. An estimate of the probability of competition was applied and the results were compared to a similar model assuming the agreement was in place.

 

Goodwill of $5.15 million largely consists of expected benefits from providing electrical construction expertise for the Company and the greater presence and convenient access to the central plains area of the United States.  Goodwill also includes the value of the assembled workforce of the Aevenia business. Based on the current tax treatment, goodwill and other intangible assets will be deductible for income tax purposes over a fifteen-year period.

 

Supplemental Unaudited Pro Forma Information for the three and nine months ended September 30, 2015 and 2014

 

The following pro forma information for the three and nine months ended September 30, 2015 and 2014 presents the results of operations of the Company as if the Aevenia acquisition and the 2014 acquisitions of Vadnais, Surber, Ram-Fab and Williams had all occurred at the beginning of 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 amortization of the discount for the fair value of the contingent consideration (related to the 2014 Vadnais, Surber and Ram-fab acquisitions) for potential earnout liabilities that may be achieved during the years 2015 through 2017; and

 

·

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 nine months ended September 30, 2015 and the same period in 2014.

 

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 various acquisitions been completed on January 1, 2014.  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 Aevenia acquisition.

 

 

 

Three months
ended September 30,

 

Nine months
ended September 30,

 

 

 

2015

 

2014

 

2015

 

2014

 

Revenues

 

$
555,945 

 

$
633,195 

 

$
1,435,268 

 

$
1,655,472 

 

Income before provision for income taxes

 
30,843 

 
44,803 

 
37,814 

 
88,398 

 

Net income attributable to Primoris

 
19,007 

 
28,798 

 
23,226 

 
54,792 

 

 

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding:

 

 

 

 

 

 

 

 

 

Basic

 
51,672 

 
51,606 

 
51,637 

 
51,622 

 

Diluted

 
51,824 

 
51,759 

 
51,789 

 
51,759 

 

 

 

 

 

 

 

 

 

 

 

Earnings per share:

 

 

 

 

 

 

 

 

 

Basic

 

$
0.37 

 

$
0.56 

 

$
0.45 

 

$
1.06 

 

Diluted

 

$
0.37 

 

$
0.56 

 

$
0.45 

 

$
1.06