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What changed in Primoris Services Corp's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of Primoris Services Corp's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+213 added−223 removedSource: 10-K (2024-02-27) vs 10-K (2023-02-28)

Top changes in Primoris Services Corp's 2023 10-K

213 paragraphs added · 223 removed · 189 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

33 edited+3 added−2 removed61 unchanged
Biggest changeThe remainder of our services are generated from contracts for specific construction or installation projects. ​ Reportable Segments ​ The following is an overview of the types of services provided by each of our reportable segments: ​ The Utilities segment operates throughout the United States and specializes in a range of services, including the installation and maintenance of new and existing natural gas and electric utility distribution and transmission systems, and communications systems. ​ The Energy/Renewables segment operates throughout the United States and Canada and specializes in a range of services that include engineering, procurement, construction, retrofits, highway and bridge construction, demolition, site work, soil stabilization, excavation, flood control, upgrades, repairs, outages, and maintenance services for entities in renewable energy, including utility and distributed generation scale solar facilities, and energy storage, renewable fuels, and petroleum and petrochemical industries, as well as state departments of transportation. ​ The Pipeline segment operates throughout the United States and specializes in a range of services, including pipeline construction and maintenance, carbon capture and storage services, pipeline facility and integrity services, installation of compressor and pump stations, and metering facilities for entities in the petroleum and petrochemical industries, as well as gas, water, and sewer utilities. ​ 4 Table of Contents Acquisitions ​ See Note 4 — “ Business Combinations ” of the Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K for additional detail. ​ PLH Group, Inc.
Biggest changeThe Utilities segment operates throughout the United States and specializes in a range of services, including the installation and maintenance of new and existing natural gas and electric utility distribution and transmission systems, and communications systems. ​ The Energy segment operates throughout the United States and Canada and specializes in a range of services that include engineering, procurement, construction, retrofits, highway and bridge construction, demolition, site work, soil stabilization, mass excavation, flood control, upgrades, repairs, outages, pipeline construction and maintenance, pipeline integrity services, and maintenance services for entities in the renewable energy and energy storage, renewable fuels, and petroleum and petrochemical industries, as well as state departments of transportation. ​ ​ 4 Table of Contents Acquisitions ​ See Note 4 — “ Business Combinations ” of the Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K for additional detail. ​ PLH Group, Inc.
Physical risks associated with climate 9 Table of Contents change have also increased hazards associated with certain of our operations, which in turn has increased the potential for liability and increased the costs associated with such operations. Additionally, new legislation or regulation related to climate change could increase our costs.
Physical risks associated with climate change have also increased hazards associated with certain of our operations, which in turn has increased the potential for liability and increased the costs associated with such operations. Additionally, new legislation or regulation related to 9 Table of Contents climate change could increase our costs.
However, due to climate change risks some utility customers are transitioning toward more sustainable sources of power generation, such as renewables, which can provide additional opportunities for our Energy/Renewables segment. For additional information regarding the risks and opportunities described above, see Risks Related to Operating Our Business in Item 1A.
However, due to climate change risks some utility customers are transitioning toward more sustainable sources of power generation, such as renewables, which can provide additional opportunities for our Energy segment. For additional information regarding the risks and opportunities described above, see Risks Related to Operating Our Business in Item 1A.
All of our employees are subject to our Code of Conduct, which includes guidance and requirements concerning, among other things, general business ethics, including policies concerning the environment, conflicts of interest, anti-corruption, harassment and discrimination, data security and privacy, and insider trading, and Anti-Bribery & Corruption Policy, which includes guidance and requirements concerning, among other things, interactions with government officials; provision of gifts, entertainment and hospitality; and charitable and political contributions ​ Website Access and Other Information ​ Our website address is www.prim.com.
All of our employees are subject to our Code of Conduct, which includes guidance and requirements concerning, among other things, general business ethics, including policies concerning the environment, conflicts of interest, anti-corruption, harassment and discrimination, data security and privacy, insider trading and the Anti-Bribery & Corruption Policy, which includes guidance and requirements concerning, among other things, interactions with government officials; provision of gifts, entertainment and hospitality; and charitable and political contributions. ​ Website Access and Other Information ​ Our website address is www.prim.com.
To date, we have obtained the level of surety bonds necessary to support our business. ​ 8 Table of Contents Regulation and Environmental Requirements ​ Our operations are subject to compliance with regulatory requirements of federal, state, and municipal agencies and authorities, and international laws and regulations including with respect to: ​ ● Licensing, permitting and inspection requirements; ● Worker safety, including regulations established by the Occupational Safety and Health Administration; ● Permitting and inspection requirements applicable to construction projects; ● Wage and hour regulations and regulations associated with our collective bargaining agreements and unionized workforce; ● Transportation of equipment and materials, including licensing and permitting requirements, as well as aviation activities; ● Building and electrical codes; ● Applicable U.S. and non-U.S. anti-corruption regulations; ● Contractor licensing requirements; ● Immigration regulations applicable to the U.S. and cross-border employment; ● Labor relations and affirmative action; ● Special bidding, procurement and other requirements on government projects; and ● Protection of the environment, including regulations established by the Environmental Protection Agency, state agencies and other foreign environmental regulators. ​ We believe that we have all the licenses required to conduct our operations and that we are in substantial compliance with applicable regulatory requirements. ​ We are subject to numerous federal, state, local and international environmental laws and regulations governing our operations, including the handling, transportation and disposal of non-hazardous and hazardous substances and wastes, as well as emissions and discharges into the environment, including discharges to air, surface water, groundwater and soil.
To date, we have obtained the level of surety bonds necessary to support our business. ​ 8 Table of Contents Regulation and Environmental Requirements ​ Our operations are subject to compliance with regulatory requirements of federal, state, and municipal agencies and authorities, and international laws and regulations including with respect to: ​ ● Licensing, permitting and inspection requirements applicable to construction projects; ● Worker safety, including regulations established by the Occupational Safety and Health Administration; ● Wage and hour regulations and regulations associated with our collective bargaining agreements and unionized workforce; ● Transportation of equipment and materials, including licensing and permitting requirements, as well as aviation activities; ● Building and electrical codes; ● Applicable U.S. and non-U.S. anti-corruption regulations; ● Immigration regulations applicable to the U.S. and cross-border employment; ● Labor relations and affirmative action; ● Special bidding, procurement and other requirements on government projects; and ● Protection of the environment, including regulations established by the Environmental Protection Agency, state agencies and other foreign environmental regulators. ​ We believe that we have all the licenses and permits required to conduct our operations and that we are in substantial compliance with applicable regulatory requirements. ​ We are subject to numerous federal, state, local and international environmental laws and regulations governing our operations, including the handling, transportation and disposal of non-hazardous and hazardous substances and wastes, as well as emissions and discharges into the environment, including discharges to air, surface water, groundwater and soil.
Results from one quarter may not be indicative of financial condition, or operating results for any other quarter, or for an entire year. ​ Competition ​ We face competition on large construction projects from both regional and national contractors, including competition from larger companies that have financial and other resources in excess of those available to us.
Results from one quarter may not be indicative of our financial condition, or operating results for any other quarter, or for an entire year. ​ Competition ​ We face competition on large construction projects from both regional and national contractors, including competition from larger companies that have financial and other resources in excess of those available to us.
We often provide services under long term Master Services Agreements (MSAs), which are generally multi-year agreements for specific types of work. Work performed under these contracts is typically generated through project specific work orders, ranging from repairs and new installations, to maintenance and upgrade services.
We often provide services under long term MSAs, which are generally multi-year agreements for specific types of work. Work performed under these contracts is typically generated through project specific work orders, ranging from repairs and new installations, to maintenance and upgrade services.
Our business model emphasizes self-performance of a significant portion of our work. In each of our segments, we maintain a stable work force of skilled, experienced craft professionals, many of whom are cross-trained on projects such as pipeline and facility construction, refinery maintenance, gas and electrical distribution, and piping systems. ​ 5 Table of Contents ● Selective Bidding.
Our business model emphasizes self-performance of a significant portion of our work. In both of our segments, we maintain a stable work force of skilled, experienced craft professionals, many of whom are cross-trained on projects such as pipeline and facility construction, refinery maintenance, gas and electrical distribution, and piping systems. ​ 5 Table of Contents ● Selective Bidding.
Because of the cyclical and seasonal nature of our business, the financial results for any period may fluctuate from prior periods, and our financial condition and operating results may vary from quarter to quarter.
Because of the cyclical nature of our business, the financial results for any period may fluctuate from prior periods, and our financial condition and operating results may vary from quarter to quarter.
Some of the variation is the result of weather, particularly rain, ice, snow, and named storms, which can impact our ability to perform construction and specialty services. These seasonal impacts can affect revenue and profitability in all of our businesses. Any quarter can be affected either negatively, or positively by atypical weather patterns in any part of the country.
Some of the variation is the result of weather, particularly rain, ice, snow, and named storms, which can impact our ability to perform construction and infrastructure services. These seasonal impacts can affect revenue and profitability in all of our businesses. Any quarter can be affected either negatively, or positively by atypical weather patterns in any part of the country.
From Foreman Foundations where employees learn the fundamentals of transitioning from a crew member to a crew leader all the way through The Leadership Experience where emerging leaders explore values-based leadership and sharpen their strategic leadership skills, our Learning and Development programs are designed to support Primoris’ vision, mission, and values and promote the growth of our greatest assets, our employees. ​ Safety, Health and Wellness .
From Foreman Foundations where employees learn the fundamentals of transitioning from a crew member to a crew leader through The Leadership Experience where emerging leaders explore values-based leadership and sharpen their strategic leadership skills, our Learning and Development programs are designed to support Primoris’ vision, mission, and values and promote the growth of our greatest assets, our employees. ​ Safety, Health and Wellness .
These reports are available on our website as soon as reasonably practicable after we electronically file them with, or furnish them to, the SEC. In addition, the charters of our Audit Committee, Compensation Committee, Nominating and Corporate Governance Committee, and Strategy and Risk Committee are posted on our website under the “Investors/Governance” tab.
These reports are available on our website as soon as reasonably practicable after we electronically file them with, or furnish them to, the SEC. In addition, the charters of our Audit Committee, Compensation Committee, Nominating and Corporate Governance Committee, and Strategy and Risk Committee are posted on our website under the “Investors/Governance Documents” tab.
We selectively bid projects that we believe offer an opportunity to meet our profitability objectives or that offer the opportunity to enter promising new markets. In addition, we review our bidding opportunities to attempt to minimize concentration of work with any one customer, in any one industry, or in stressed labor markets.
We selectively bid projects that we believe offer an opportunity to meet our profitability objectives and that may offer the opportunity to enter promising new markets. In addition, we review our bidding opportunities to attempt to minimize concentration of work with any one customer, in any one industry, or in stressed labor markets.
However, we realize that future opportunities also require cost effective bids, as pricing is a key element for most construction projects and service agreements. ​ Seasonality, cyclicality and variability ​ Our results of operations are subject to quarterly variations.
However, we realize that future opportunities also require cost effective, high value bids, as pricing is a key element for most construction projects and service agreements. ​ Seasonality, Cyclicality and Variability ​ Our results of operations are subject to quarterly variations.
For additional information regarding our executive compensation, please see the information required in Item 11 “Executive Compensation,” which will be incorporated by reference from our definitive proxy statement related to our 2023 Annual Meeting of Stockholders. ​ We also provide additional benefits to our employees, including a Company matched 401(k) Plan, healthcare and insurance benefits, health savings and flexible spending accounts, paid time off, family leave, flexible work schedules, and employee assistance programs. ​ Code of Conduct.
For additional information regarding our executive compensation, please see the information required in Item 11 “Executive Compensation,” which will be incorporated by reference from our definitive proxy statement related to our 2024 Annual Meeting of Stockholders. ​ We also provide additional benefits to our non-union employees, including a Company matched 401(k) Plan, healthcare and insurance benefits, health savings and flexible spending accounts, paid time off, family leave, flexible work schedules, and employee assistance programs. ​ Code of Conduct.
Lost Time Injury Rate (“LTIR”) tracks the rate of injuries in the workplace which results in the employee having to take a minimum of one full working day away from work. For the year ended December 31, 2022 our LTIR rate was 0.1 compared to an industry average of 1.1 per the U.S. Bureau of Labor construction industry statistics.
Lost Time Injury Rate (“LTIR”) tracks the rate of injuries in the workplace which results in the employee having to take a minimum of one full working day away from work. For the year ended December 31, 2023, our LTIR rate was 0.07 compared to an industry average of 1.0 per the U.S. Bureau of Labor construction industry statistics.
In each of the years, a different group of customers comprised the top ten customers by revenue. ​ Management at each of our business units is responsible for developing and maintaining successful long-term relationships with customers.
In each of the years, a different group of customers comprised the top ten customers by revenue. ​ Management in each of our segments and business units is responsible for developing and maintaining successful long-term relationships with customers.
Segment and business unit managers are also responsible for working with our business development group in pursuing growth opportunities with prospective new customers. ​ 6 Table of Contents We believe that our strategic relationships with customers will result in future opportunities. Some of our strategic relationships are in the form of long-term MSAs.
Segment and business unit managers are also responsible for working with our business development group in pursuing growth opportunities with prospective new customers. ​ 6 Table of Contents We believe that developing and fostering strategic relationships with customers will result in increased future opportunities. Some of our strategic relationships are in the form of long-term MSAs.
The total number of hourly personnel employed is subject to the volume of specialty services and construction work in progress. ​ Diversity and Inclusion . We employ a dynamic mix of people to create the strongest company possible. Our policy forbids discrimination in employment on the basis of age, culture, gender, national origin, sexual orientation, physical appearance, race or religion.
The total number of hourly personnel employed is subject to the volume of infrastructure services and construction work in progress. ​ Diversity and Inclusion . We employ a dynamic mix of people to create the strongest company possible. Our policy prohibits discrimination in employment on the basis of age, culture, gender, national origin, sexual orientation, physical appearance, race or religion.
A large construction project for a customer may result in significant revenue in one year, with significantly less revenue in subsequent years after project completion. For the years ended December 31, 2022, 2021 and 2020, 46.1%, 42.9% and 47.0%, respectively, of total revenue was generated from our top ten customers in each year.
A large construction project for a customer may result in significant revenue in one year, with significantly less revenue in subsequent years after project completion. For the years ended December 31, 2023, 2022 and 2021, 41.1%, 46.1% and 42.9%, respectively, of total revenue was generated from our top ten customers in each year.
In addition, we have partnerships with technical schools where we recruit and hire craft employees. ​ Several of our subsidiaries have operations that are unionized through the negotiation and execution of collective bargaining agreements. As of December 31, 2022, approximately 23.8% of our hourly employees, primarily consisting of field laborers, were covered by collective bargaining agreements.
In addition, we have partnerships with technical schools where we recruit and hire craft employees. ​ Several of our subsidiaries have operations that are unionized through the negotiation and execution of collective bargaining agreements. As of December 31, 2023, approximately 30.6% of our hourly employees, primarily consisting of field laborers, were covered by collective bargaining agreements.
For the year ended December 31, 2022 our TRIR rate was 0.5 compared to an industry average of 2.5 per the U.S. Bureau of Labor construction industry statistics. ​ 10 Table of Contents Compensation and Benefits.
For the year ended December 31, 2023, our TRIR rate was 0.46 compared to an industry average of 2.4 per the U.S. Bureau of Labor construction industry statistics. ​ 10 Table of Contents Compensation and Benefits.
Also posted on our website under the “Investors/Governance” tab are our Code of Conduct and charters for our Environmental, Social and Governance Committee, Enterprise Risk Management Committee, and Diversity and Inclusion Committee along with our Human Rights and Corporate Environmental policies.
Also posted on our website under the “Investors/Governance Documents” tab are our Code of Conduct and charters for our Environmental, Social and Governance Committee, Enterprise Risk Management Committee, Cyber Security Steering Committee, and Diversity and Inclusion Committee along with our Human Rights and Corporate Environmental policies.
For the years ended December 31, 2022, 2021 and 2020, revenue derived from projects performed under MSAs was 45.8%, 45.9%, and 39.0%, respectively. ​ Our customers have included the Texas Department of Transportation and Louisiana Department of Transportation and Development in the Southern United States as well as many of the leading energy and utility companies in the United States, including, among others, Enterprise Pipeline, Xcel Energy, Pacific Gas & Electric, Southern California Gas, Oncor Electric, Duke Energy, Sempra Energy, Williams, NRG, Chevron, Kinder Morgan, Dominion, Valero, Enel Green Power North America, ExxonMobil and Phillips 66. ​ Our top ten customers vary from year to year due to the nature of our business.
For the years ended December 31, 2023, 2022 and 2021, revenue derived from projects performed under MSAs was 36.7%, 45.8%, and 45.9 %, respectively. ​ Our customers have included the Texas Department of Transportation and Louisiana Department of Transportation and Development in the Southern United States as well as many of the leading energy and utility companies in the United States, including, among others, Enterprise Pipeline, Xcel Energy, Pacific Gas & Electric, Southern California Gas, Oncor Electric, Duke Energy, Sempra Energy, Williams, Hecate Energy, Consumers Energy, Dominion, Valero, Enel Green Power North America, ExxonMobil and Phillips 66. ​ Our top ten customers vary from year to year due to the nature of our business.
On August 1, 2022, we acquired PLH Group, Inc. (“PLH”) in an all-cash transaction valued at approximately $438.3 million, net of cash acquired (the “PLH acquisition”). PLH is a utility-focused specialty construction company with concentrations in growing regions of the United States.
On August 1, 2022, we acquired PLH Group, Inc. (“PLH”) in an all-cash transaction valued at approximately $429.0 million, net of cash acquired (the “PLH acquisition”). PLH is a utility-focused infrastructure services company with concentrations in growing regions of the United States.
These collective bargaining agreements have varying terms and are subject to renegotiation upon expiration. We have not experienced recent work stoppages and believe our employee and union relations are good. ​ As of December 31, 2022, we employed 2,509 salaried employees and 10,293 hourly employees.
These collective bargaining agreements have varying terms and are subject to renegotiation upon expiration. We have not experienced recent work stoppages and believe our employee and union relations are good. ​ As of December 31, 2023, we employed 2,773 salaried employees and 11,285 hourly employees.
Total Recordable Incident Rate (“TRIR”) tracks the total number of workplace safety incidents, whether leading to time away from work or not. TRIR is reported as the number of workplace safety incidents per 100 full-time workers during a one-year period.
Total Recordable Incident Rate (“TRIR”) tracks the total number of workplace injuries which rise to the level of Occupational Safety and Health Administration recordability, whether leading to time away from work or not. TRIR is reported as the number of workplace safety incidents per 100 full-time workers during a one-year period.
We have company-owned training facilities that support continuous skills training, including several locations where we train electric apprentices to become journeymen. We offer multiple levels of leadership programs designed to meet the needs of our employees and support the development of best-in-class talent. Our four cornerstone programs are Foreman Foundations, Extreme Ownership, Hunt for Leadership Success, and The Leadership Experience.
We have company-owned training facilities that support continuous skills training, including several locations where we train electric apprentices to become journeymen. We offer multiple levels of leadership programs designed to meet the needs of our employees and support the development of best-in-class talent.
Each business unit faces varied competition depending on the types of projects, project locations, and services offered. ​ We compete with different companies in different end markets.
Each business unit faces varied competition depending on the types of projects, project locations, and services offered. ​ We compete with different companies in different end markets. For example, competitors in our utilities markets include Quanta Services, Inc.
For example, competitors in our utilities markets include Quanta Services, Inc. and MasTec, Inc.; competitors in our industrial markets include PCL, Cajun Construction, and Boh Brothers; competitors in the renewables market include Blattner Energy and Mortenson; and competitors in our highway services markets include Sterling Construction Company and Zachry Construction Company.
Dycom Industries, MYR Group, and MasTec, Inc.; competitors in our industrial markets include PCL, Kiewit, Granite Construction, Performance Contractors and Boh Brothers; competitors in the renewables market include Blattner Energy, and Mortenson; and competitors in our highway services markets include Sterling Construction Company and Zachry Construction Company.
ITEM 1. BUSINESS ​ Business Overview ​ Primoris Services Corporation (“Primoris”, the “Company”, “we”, “us”, or “our”) is one of the leading providers of specialty contracting services operating mainly in the United States and Canada.
ITEM 1. BUSINESS ​ Business Overview ​ Primoris Services Corporation (“Primoris”, the “Company”, “we”, “us”, or “our”) is one of the leading providers of infrastructure services operating mainly in the United States and Canada. We provide a wide range of construction, maintenance, replacement, fabrication, and engineering services to a diversified base of customers through our two segments: Utilities and Energy.
All of our policies have been procured with limits and deductibles or self-insured retention amounts of up to $500,000 per occurrence.
All of our policies have been procured with limits and deductibles or self-insured retention amounts up to $1,000,000 per occurrence. In addition, we maintain certain self-insured retentions in our insurance policies in excess of our general and auto liability policies. ​ We maintain a diligent safety and risk management program that has resulted in a favorable loss experience factor.
A portion of our services are provided under Master Service Agreements (“MSA”), which are generally multi-year agreements.
A portion of our services are provided under Master Service Agreements (“MSA”), which are generally multi-year agreements. The remainder of our services are generated from contracts for specific construction or installation projects. ​ Reportable Segments ​ Through the end of 2022, we segregated our business into three reportable segments: the Utilities segment, the Energy/Renewables segment, and the Pipeline segment.
Removed
We provide a wide range of specialty construction services, maintenance, replacement, fabrication, and engineering services to a diversified base of customers through our three segments: Utilities, Energy/Renewables and Pipeline Services (“Pipeline”).
Added
In the first quarter of 2023, we changed our reportable segments in connection with the realignment of our internal organization and management structure. The segment changes reflect the focus of our Chief Operating Decision Maker (“CODM”) on the range of services we provide to our end user markets.
Removed
We believe that our insurance program is more than adequate to protect us from all casualty and other types of insurance losses. ​ We maintain a diligent safety and risk management program that has resulted in a favorable loss experience factor.
Added
Our CODM regularly reviews our operating and financial performance based on these new segments. ​ The current reportable segments include the Utilities segment and the Energy segment, which is made up of our former Energy/Renewables and Pipeline Services segments.
Added
Our five cornerstone programs are Foreman Foundations, Extreme Ownership, Hunt for Leadership Success, Next Level Leadership, and The Leadership Experience.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

44 edited+10 added−4 removed123 unchanged
Biggest changeAny cyber security attack (including denial of service attacks, ransomware, phishing attacks, payment fraud or others) that affects our facilities, our systems, our partners, our customers or any of our financial data could have a material adverse effect on our business.
Biggest changeAny of these, or similar, events could cause system disruptions, delays and loss of critical information, delays in processing transactions and delays in the reporting of financial information. ​ Security breaches, cyber security attacks or other disruptions to our information technology systems and networks could adversely impact our operations or compromise the confidentiality of private customer data or our own proprietary information. ​ Any cyber security attack (including denial of service attacks, ransomware, phishing attacks, payment fraud or others) that affects our facilities, our systems, our partners, our customers or any of our financial data could have a material adverse effect on our business.
For example, utility customers are transitioning toward more sustainable sources of power generation, such as renewables, which can provide additional opportunities for our Energy/Renewables segment. Additionally, increased electrification of new technologies may lead to continued and additional demand for new and expanded electric power infrastructure and reengineering of existing electric power infrastructure.
For example, utility customers are transitioning toward more sustainable sources of power generation, such as renewables, which can provide additional opportunities for our Energy segment. Additionally, increased electrification of new technologies may lead to continued and additional demand for new and expanded electric power infrastructure and reengineering of existing electric power infrastructure.
For projects for which a loss is expected, future revenue will be recorded with no margin, which may reduce the overall margin percentage for work performed. ​ 16 Table of Contents Our actual cost may be greater than expected in performing our contracts causing us to realize significantly lower profit or losses on our projects. ​ We currently generate, and expect to continue to generate, a substantial portion of our revenue from fixed price and unit price contracts.
For projects for which 16 Table of Contents a loss is expected, future revenue will be recorded with no margin, which may reduce the overall margin percentage for work performed. ​ Our actual cost may be greater than expected in performing our contracts causing us to realize significantly lower profit or losses on our projects. ​ We currently generate, and expect to continue to generate, a substantial portion of our revenue from fixed price and unit price contracts.
If we are unable to continue to maintain the equipment in our fleet, we may be forced to obtain additional third-party repair services at a higher cost or be unable to bid on contracts. ​ Our business may be affected by difficult work sites and environments which may adversely affect our ability to procure materials and labor. ​ We perform our work under a variety of conditions, including, but not limited to, difficult and hard to reach terrain, difficult site conditions, and busy urban centers, where delivery of materials and availability of labor may be impacted.
If we are unable to maintain the equipment in our fleet, we may be forced to obtain additional third-party repair services at a higher cost or be unable to bid on contracts. ​ Our business may be affected by difficult work sites and environments which may adversely affect our ability to procure materials and labor. ​ We perform our work under a variety of conditions, including, but not limited to, difficult and hard to reach terrain, difficult site conditions, and busy urban centers, where delivery of materials and availability of labor may be impacted.
Many factors, including the financial condition of the industry, could adversely affect our customers and their willingness to fund capital expenditures in the future. ​ Economic, regulatory and market conditions affecting our specific end markets may adversely impact the demand for our services, resulting in the delay, reduction or cancellation of certain projects and these conditions may continue to adversely affect us in the future.
Many factors, including the financial condition of the industry, could adversely affect our customers and their willingness to fund capital expenditures in the future. ​ Economic, political, regulatory and market conditions affecting our specific end markets may adversely impact the demand for our services, resulting in the delay, reduction or cancellation of certain projects and these conditions may continue to adversely affect us in the future.
Acquisitions may expose us to operational challenges and risks, including, among others: ​ ● The diversion of management’s attention from the day-to-day operations of the combined company; ● Managing a significantly larger company than before completion of an acquisition; ● The assimilation of new employees and the integration of business cultures; ● Training and facilitating our internal control processes within the acquired organization; ● Retaining key personnel; ● The integration of information, accounting, finance, sales, billing, payroll and regulatory compliance systems; ● Challenges in keeping existing customers and obtaining new customers; ● Challenges in combining service offerings and sales and marketing activities; ● The assumption of unknown liabilities of the acquired business for which there are inadequate reserves; ● The potential impairment of acquired goodwill and intangible assets; and ● The inability to enforce covenants not to compete. ​ Failure to effectively manage the integration process could adversely impact our business, financial condition, results of operations, and cash flows. ​ We may incur higher costs to lease, acquire and maintain equipment necessary for our operations. ​ A significant portion of our contracts is built utilizing our own construction equipment rather than rented equipment.
Acquisitions may expose us to operational challenges and risks, including, among others: ​ ● The diversion of management’s attention from the day-to-day operations of the combined company; ● Managing a significantly larger company than before completion of an acquisition; ● The assimilation of new employees and the integration of business cultures; ● Training and facilitating our internal control processes within the acquired organization; ● Retaining key personnel; ● The integration of information, accounting, finance, sales, billing, payroll and regulatory compliance systems; ● Challenges in keeping existing customers and obtaining new customers; ● Challenges in combining service offerings and sales and marketing activities; ● The assumption of unknown liabilities of the acquired business for which there are inadequate reserves; ● The potential impairment of acquired goodwill and intangible assets; and ● The inability to enforce covenants not to compete. ​ Failure to effectively manage the integration process could adversely impact our business, financial condition, results of operations, and cash flows. ​ We may incur higher costs on equipment necessary for our operations. ​ A significant portion of our contracts is built utilizing our own construction equipment rather than rented equipment.
For each plan, our liability is the total unfunded vested benefits of the plan multiplied by a fraction: the numerator of the fraction is the sum of our contributions to the plan for the past ten years and the denominator is the sum of all contributions made by all employers for the past ten years.
For each plan, our potential liability is the total unfunded vested benefits of the plan multiplied by a fraction: the numerator of the fraction is the sum of our contributions to the plan for the past ten years and the denominator is the sum of all contributions made by all employers for the past ten years.
If additional funds were not available on acceptable terms, we may not be able to make future investments, take advantage of acquisitions or pursue other opportunities. ​ 22 Table of Contents Risks Related Primarily to the Financial Accounting of our Business ​ Our financial results are based upon estimates and assumptions that may differ from actual results. ​ In preparing our consolidated annual and quarterly financial statements in conformity with generally accepted accounting principles, many estimates and assumptions are used in determining the reported revenue, costs and expenses recognized during the periods presented, and disclosures of contingent assets and liabilities known to exist as of the date of the financial statements.
If additional funds were not available on acceptable terms, we may not be able to make future investments, take advantage of acquisitions or pursue other opportunities. ​ Risks Related Primarily to the Financial Accounting of our Business ​ Our financial results are based upon estimates and assumptions that may differ from actual results. ​ In preparing our consolidated annual and quarterly financial statements in conformity with generally accepted accounting principles, many estimates and assumptions are used in determining the reported revenue, costs and expenses recognized during the periods presented, and disclosures of contingent assets and liabilities known to exist as of the date of the financial statements.
Payments of significant amounts, even if reserved, could adversely affect our reputation, our cash flows, and our business. ​ We are self-insured up to certain limits. ​ Although we maintain insurance policies with respect to employer’s liability, general liability, auto and workers compensation claims, those policies are subject to deductibles or self-insured retention amounts of $500,000 per occurrence.
Payments of significant amounts, even if reserved, could adversely affect our reputation, our cash flows, and our business. ​ We are self-insured up to certain limits. ​ Although we maintain insurance policies with respect to employer’s liability, general liability, auto and workers compensation claims, those policies are subject to deductibles or self-insured retention amounts up to $1,000,000 per occurrence.
Annual and quarterly results may also be adversely affected by: ​ ● Changes in our mix of customers, projects, contracts and business; ● Regional or national and/or general economic conditions and demand for our services; ● Variations and changes in the margins of projects performed during any particular quarter; ● Increases in the costs to perform services caused by changing conditions; ● The termination, or expiration of existing agreements or contracts; ● The budgetary spending patterns of customers; ● Increases in construction costs that we may be unable to pass through to our customers; ● Cost or schedule overruns on fixed-price contracts; ● Availability of qualified labor for specific projects; ● Changes in bonding requirements and bonding availability for existing and new agreements; ● The need and availability of letters of credit; ● Costs we incur to support growth, whether organic or through acquisitions; ● The timing and volume of work under contract; and ● Losses experienced in our operations. ​ As a result, our operating results in any particular quarter may not be indicative of the operating results expected for any other quarter, or for an entire year. ​ Demand for our services may decrease during economic recessions or volatile economic cycles, and a reduction in demand in end markets may adversely affect our business. ​ A substantial portion of our revenue and profit is generated from construction projects, the awarding of which we do not directly control.
Annual and quarterly results may also be adversely affected by: ​ ● Changes in our mix of customers, projects, contracts and business; ● Regional or national and/or general economic conditions and demand for our services; ● Variations and changes in the margins of projects performed during any particular quarter; ● Increases in the costs to perform services caused by changing conditions; ● The termination, or expiration of existing agreements or contracts; ● The budgetary spending patterns of customers; ● Increases in construction costs, including due to inflation or supply chain challenges, that we may be unable to pass through to our customers; ● Cost or schedule overruns on fixed-price contracts; ● Availability of qualified labor for specific projects; ● Changes in bonding requirements and bonding availability for existing and new agreements; ● The need and availability of letters of credit; ● Costs we incur to support growth, whether organic or through acquisitions; ● The timing and volume of work under contract; and ● Losses experienced in our operations. ​ As a result, our operating results in any particular quarter may not be indicative of the operating results expected for any other quarter, or for an entire year. ​ Demand for our services may decrease during economic recessions or volatile economic cycles, and a reduction in demand in end markets may adversely affect our business. ​ A substantial portion of our revenue and profit is generated from construction projects, the awarding of which we do not directly control.
Accordingly, if we were to experience an interruption or reduction in the availability of bonding capacity, we may be unable to compete for, or work on certain projects. ​ 18 Table of Contents Our bonding requirements may limit our ability to incur indebtedness, which would limit our ability to refinance our existing credit facilities or to execute our business plan. ​ Our ability to obtain surety bonds depends upon various factors including our capitalization, working capital, tangible net worth and amount of our indebtedness.
Accordingly, if we were to experience an interruption or reduction in the availability of bonding capacity, we may be unable to compete for, or work on certain projects. ​ Our bonding requirements may limit our ability to incur indebtedness, which would limit our ability to refinance our existing credit facilities or to execute our business plan. ​ Our ability to obtain surety bonds depends upon various factors including our capitalization, working capital, tangible net worth and amount of our indebtedness.
These actions could be taken on short notice. If our surety providers were to limit or eliminate our access to bonding, our alternatives would include seeking bonding capacity from other sureties, finding more business that does not require bonds and posting other forms of collateral for project performance, such as letters of credit or cash.
These actions could be taken on short notice. If our surety providers were to limit or eliminate our access to bonding, our alternatives would include seeking bonding 18 Table of Contents capacity from other sureties, finding more business that does not require bonds and posting other forms of collateral for project performance, such as letters of credit or cash.
If we cannot reduce the liability through exemptions or negotiations, the withdrawal from a plan could have a material adverse impact on our business. ​ 20 Table of Contents We depend on key personnel and we may not be able to operate and grow our business effectively if we lose the services of any of our key persons or are unable to attract qualified and skilled personnel in the future. ​ We are dependent upon the efforts of our key personnel, and our ability to retain them and hire other qualified employees.
If we cannot reduce the alleged fractional exposure through exemptions or negotiations, the withdrawal from a plan could have a material adverse impact on our business. ​ 20 Table of Contents We depend on key personnel and we may not be able to operate and grow our business effectively if we lose the services of any of our key persons or are unable to attract qualified and skilled personnel in the future. ​ We are dependent upon the efforts of our key personnel, and our ability to retain them and hire other qualified employees.
The additional cost or project delays could negatively impact project profitability. ​ Failure of a subcontractor or supplier to comply with laws, rules or regulations could negatively affect our reputation and our business. ​ We periodically enter into joint ventures which require satisfactory performance by our venture partners of their obligations.
The additional cost or project delays could negatively impact project profitability. ​ Failure of a subcontractor or supplier to comply with laws, rules or regulations could negatively affect our reputation and our business. ​ 17 Table of Contents We periodically enter into joint ventures which require satisfactory performance by our venture partners of their obligations.
In certain circumstances, it is possible that such adjustments could be significant and could have an adverse effect on our business. ​ Our reported results of operations could be adversely affected as a result of impairments of goodwill, other identifiable intangible assets or investments. ​ When we acquire a business, we record an asset called “goodwill” for the excess amount we pay for the business over the net fair value of the tangible and identifiable intangible assets of the business we acquire.
In certain circumstances, it is possible that such adjustments could be significant and could have an adverse effect on our business. ​ 23 Table of Contents Our reported results of operations could be adversely affected as a result of impairments of goodwill or other identifiable intangible assets. ​ When we acquire a business, we record an asset called “goodwill” for the excess amount we pay for the business over the net fair value of the tangible and identifiable intangible assets of the business we acquire.
If we were to lose one of these customers, our revenue could significantly decline.
If we were to lose one of these customers, our revenue could decline.
In addition, insurers may cancel our coverage or determine to exclude certain items from coverage, or we may elect not to obtain certain types or incremental levels of insurance based on the potential benefits considered relative to the cost of such insurance, or coverage may not be available at reasonable and competitive rates.
In addition, insurers may cancel our coverage or determine to exclude certain items from coverage, or we may elect not to obtain certain types or incremental levels of insurance based on the potential benefits 19 Table of Contents considered relative to the cost of such insurance, or coverage may not be available at reasonable and competitive rates.
If our joint venture partners fail to satisfactorily perform their joint 17 Table of Contents venture obligations, the joint venture may be unable to adequately perform or deliver its contracted services. Under these circumstances, we may be required to make additional investments or provide additional services to ensure the adequate performance and delivery of the contracted services.
If our joint venture partners fail to satisfactorily perform their joint venture obligations, the joint venture may be unable to adequately perform or deliver its contracted services. Under these circumstances, we may be required to make additional investments or provide additional services to ensure the adequate performance and delivery of the contracted services.
We could be adversely affected by our failure to comply with laws applicable to our foreign activities, such as the U.S. Foreign Corrupt Practices Act. ​ During 2022, 2021 and 2020, revenue attributable to our services outside of the United States, principally in Canada, was 6.7%, 4.5% and 3.5% of our total revenue, respectively.
We could be adversely affected by our failure to comply with laws applicable to our foreign activities, such as the U.S. Foreign Corrupt Practices Act. ​ During 2023, 2022 and 2021, revenue attributable to our services outside of the United States, principally in Canada, was 5.8%, 6.7% and 4.5% of our total revenue, respectively.
Finally, the winding down or completion of work on significant projects will reduce our revenue and earnings if these projects have not been replaced. ​ We derive a significant portion of our revenue from a few customers, and the loss of one or more of these customers could have significant effects on our revenue, resulting in adverse effects on our financial condition, results of operations and cash flows. ​ Our customer base is reasonably concentrated, with our top ten customers accounting for approximately 46.1% of our revenue in 2022, 42.9% of our revenue in 2021 and 47.0% of our revenue in 2020.
Finally, the winding down or completion of work on significant projects will reduce our revenue and earnings if these projects have not been replaced. ​ We derive a meaningful portion of our revenue from a few customers, and the loss of one or more of these customers could have significant effects on our revenue, resulting in adverse effects on our financial condition, results of operations and cash flows. ​ Our customer base is reasonably concentrated, with our top ten customers accounting for approximately 41.1% of our revenue in 2023, 46.1% of our revenue in 2022 and 42.9% of our revenue in 2021.
In any such event, our overall risk exposure would increase, which could negatively affect our results of operations, financial condition and cash flows. ​ 19 Table of Contents Our business is labor intensive.
In any such event, our overall risk exposure would increase, which could negatively affect our results of operations, financial condition and cash flows. ​ Our business is labor intensive.
If we are unable to hire employees with the requisite skills, we may also be forced to incur significant training expenses. ​ Our unionized workforce may commence work stoppages or impact our ability to complete certain acquisitions, which could adversely affect our operations. ​ As of December 31, 2022, approximately 23.8% of our hourly employees, primarily consisting of field laborers, were covered by collective bargaining agreements.
If we are unable to hire employees with the requisite skills, we may also be forced to incur significant training expenses. ​ Our unionized workforce may commence work stoppages or impact our ability to complete certain acquisitions, which could adversely affect our operations. ​ As of December 31, 2023, approximately 30.6% of our hourly employees, primarily consisting of field laborers, were covered by collective bargaining agreements.
We compete with other general and specialty contractors, both regional and national, as well as small local contractors. The strong competition in our markets requires maintaining skilled personnel and investing in technology, and puts pressure on profit margins.
We compete with other infrastructure services contractors, both regional and national, as well as small local contractors. The strong competition in our markets requires maintaining skilled personnel and investing in technology, and puts pressure on profit margins.
In addition, our equipment requires continuous maintenance, which we generally provide through our own repair facilities.
In addition, our equipment requires regular maintenance, which we generally provide through our own repair facilities.
In addition, certain provisions 24 Table of Contents of our Certificate of Incorporation and Bylaws also may impose an impediment or discourage others from a takeover.
In addition, certain provisions of our Certificate of Incorporation and Bylaws also may impose an impediment or discourage others from a takeover.
The portion of revenue generated from the competitive bid process for 2022, 2021 and 2020 was approximately 26.3%, 31.2%, and 51.7%, respectively. It is generally very difficult to predict the timing and geographic distribution of the projects that we will be awarded.
The portion of revenue generated from the competitive bid process for 2023, 2022 and 2021 was approximately 30.1%, 26.3%, and 31.2%, respectively. It is generally very difficult to predict the timing and geographic distribution of the projects that we will be awarded.
These standards have initiated significant growth in the renewable energy industry and a potential demand for renewable energy infrastructure construction services.
These standards have initiated significant growth in the renewable energy industry and increased demand for renewable energy infrastructure construction services.
Most contracts may be terminated by our customers on short notice. Reductions in backlog due to cancellation by a customer, or for other reasons, could significantly reduce the revenue that we actually receive from contracts in backlog.
Backlog is not a comprehensive indicator of future revenue. Most contracts may be terminated by our customers on short notice. Reductions in backlog due to cancellation by a customer, or for other reasons, could significantly reduce the revenue that we actually receive from contracts in backlog.
In addition, if our safety record were to substantially deteriorate over time or we were to suffer substantial penalties or criminal prosecution for violation of health and safety regulations, our customers could cancel our contracts and not award us future business. ​ Interruptions in our operational systems or successful cyber security attacks on any of our systems could adversely impact our operations, our ability to report financial results and our business. ​ We rely on computer, information and communication technology and related systems to operate our business and to protect sensitive company information.
In addition, if our safety record were to substantially deteriorate over time or we were to suffer substantial penalties or criminal prosecution for violation of health and safety regulations, our customers could cancel our contracts and not award us future business. ​ Disruptions to our operational systems could adversely impact our operations, our ability to report financial results and our business. ​ We rely on computer, information and communication technology and related systems to operate our business and to protect confidential, sensitive company, customer and partner information.
Our Certificate of Incorporation permits us to issue up to 90.0 million shares of common stock of which approximately 53.1 million were outstanding at December 31, 2022. While Nasdaq rules require that we obtain stockholder approval to issue more than 20% additional shares, stockholder approval is not required below that level.
Our Certificate of Incorporation permits us to issue up to 90.0 million shares of common stock of which approximately 53.4 million were outstanding at December 31, 2023. While New York Stock Exchange rules require that we obtain stockholder approval to issue more than 20% additional shares, stockholder approval is not required below that level.
Our current director compensation plan, our bonus incentive plan, and our management long-term incentive plan and any additional equity awards made will have the effect of diluting our earnings per share and stockholders’ percentage of ownership. ​ Delaware law and our charter documents may impede or discourage a takeover or change in control. ​ As a Delaware corporation, anti-takeover provisions may impose an impediment to the ability of others to acquire control of us, even if a change of control would be of benefit to our stockholders.
Equity awards made to our directors and employees will have the effect of diluting our earnings per share and stockholders’ percentage of ownership. ​ Delaware law and our charter documents may impede or discourage a takeover or change in control. ​ As a Delaware corporation, anti-takeover provisions may impose an impediment to the ability of others to acquire control of us, even if a change of control would be of benefit to our stockholders.
These provisions include: ​ ● Stockholders may not act by written consent; ● There are restrictions on the ability of a stockholder to call a special meeting, or nominate a director for election; and ● Our Board of Directors can authorize the issuance of preferred shares. ​ These types of provisions may limit the ability of stockholders to obtain a premium for their shares. ​ ITEM 1B.
These provisions include: restrictions on the ability of a stockholder to call a special meeting, or nominate a director for election and our Board of Directors’ ability to authorize the issuance of preferred shares. ​ These types of provisions may limit the ability of stockholders to obtain a premium for their shares. ​ ITEM 1B.
For some pension plans to which we contribute, the total unfunded vested benefits are in the billions of dollars.
For some pension plans to which we contribute, the total unfunded vested benefits for the entire plan could be in the billions of dollars.
At December 31, 2022, our balance sheet included goodwill of $871.8 million and intangible assets of $249.4 million resulting from previous acquisitions. Fair value is determined using a combination of the discounted cash flow, market multiple and market capitalization valuation approaches.
At December 31, 2023, our balance sheet included goodwill of $857.7 million and intangible assets of $227.6 million resulting from previous acquisitions. Fair value is determined using a combination of the discounted cash flow, market multiple and market capitalization valuation approaches.
We refer to “backlog” as our anticipated revenue from the uncompleted portions of existing contracts where scope is adequately defined, and therefore we can reasonably estimate total contract value, and the estimated revenue on MSA work for the next four quarters. Backlog is not a comprehensive indicator of future revenue.
We refer to “backlog” as our anticipated revenue from the uncompleted portions of existing contracts where scope is adequately defined, and therefore we can reasonably estimate total contract value, and the estimated revenue on MSA work.
Our insurance coverage may not be adequate to cover all the costs related to cyber security attacks or disruptions resulting from such events. ​ While we have taken steps to mitigate persistent and continuously evolving cyber security threats by implementing network security and internal control measures, implementing policies and procedures for managing risk to our information systems, periodically testing our information technology systems, and conducting employee training on cyber security, there can be no assurance that a system or network failure or data security breach would not adversely affect our business.
We also currently maintain a cyber insurance policy; however, such insurance coverage may not be adequate to cover all the costs related to cyber security attacks or disruptions resulting from such events. 22 Table of Contents ​ While we have taken steps to mitigate persistent and continuously evolving cyber security threats by implementing network security and internal control measures, implementing policies and procedures for managing risk to our information systems, periodically testing our information technology systems, and conducting employee training on cyber security, a system or network failure or data security breach could have negative consequences for our company, customers, or partners and adversely affect our business.
From time to time, we may use certain derivative instruments to hedge our exposure to variable interest rates. As of December 31, 2022, $121.7 million of our variable rate debt outstanding was economically hedged and the remaining $911.5 million was unhedged.
From time to time, we may use certain derivative instruments to hedge our exposure to variable interest rates. As of December 31, 2023, $300.0 million of our variable rate debt outstanding was economically hedged. The remaining $574.1 million of variable rate debt was unhedged.
The anticipation by utilities that coal-fueled power plants may become uneconomical to operate because of potential environmental regulations or low natural gas prices could increase demand for gas pipeline construction for utility customers. ​ Our business may be materially adversely impacted by regional, national and/or global requirements related to climate change and the impact of greenhouse gas emissions in the future. ​ Greenhouse gases that result from human activities, including burning of fossil fuels, are the focus of increased scientific and political scrutiny and may be subject to changing legal requirements.
Recent pipeline safety legislation could increase demand for our pipeline facility, maintenance, integrity and repair services. ​ Our business may be materially adversely impacted by regional, national and/or global requirements related to climate change and the impact of greenhouse gas emissions in the future. ​ Greenhouse gases that result from human activities, including burning of fossil fuels, are the focus of increased scientific and political scrutiny and may be subject to changing legal requirements.
Of the 89 collective bargaining agreements to which we are a party, 22 expire during 2023 and require renegotiation. Although the majority of these agreements prohibit strikes and work stoppages, we cannot be certain that strikes or work stoppages will not occur in the future.
Although the majority of these agreements prohibit strikes and work stoppages, we cannot be certain that strikes or work stoppages will not occur in the future.
In addition, we can issue shares of preferred stock which could cause further dilution to the stockholder, resulting in reduced net income and cash flow available to common stockholders. ​ In 2013, our stockholders adopted our 2013 Equity Incentive Plan (“Equity Plan”). The Equity Plan replaced a previous plan.
In addition, we can issue shares of preferred stock which could cause further dilution to the stockholder, resulting in reduced net income and cash flow available to common stockholders. ​ In 2022, our stockholders adopted the 2022 Employee Stock Purchase Plan (the “ESPP”), under which eligible full-time employees can purchase shares of our common stock at a discount on a semi-annual basis.
Any of these, or similar, events could cause system disruptions, delays and loss of critical information, delays in processing transactions and delays in the reporting of financial information. ​ We have experienced cyber security threats, such as viruses and attacks targeting our systems, and expect the frequency and sophistication of such incidents will continue to grow.
Any of these events could result in, among other things, the loss of proprietary data, interruptions or delays in our business operations and damage to our reputation. ​ We have experienced cyber security threats, such as viruses and attacks targeting our systems, and expect the frequency and sophistication of such incidents will continue to increase.
The interest rate swap matures on January 31, 2025. ​ Risks Related to our Common Stock ​ Our common stock is subject to potential dilution to our stockholders. ​ As part of our acquisition strategy, we have issued and used shares of common stock as a part of contingent earn-out consideration, which have resulted in dilution to our stockholders.
Based on our variable rate debt outstanding as of December 31, 2023, a 1.0% increase or decrease in interest rates would change annual interest expense by approximately $5.7 million. ​ Risks Related to our Common Stock ​ Our common stock is subject to potential dilution to our stockholders. ​ As part of our acquisition strategy, we have issued and used shares of common stock as a part of contingent earn-out consideration, which have resulted in dilution to our stockholders.
The Equity Plan authorized the Board of Directors to issue equity awards totaling 2,526,275 shares of our common stock.
The Equity Plan authorized the Board of Directors to issue equity awards totaling 6.5 million shares of our common stock. As of December 31, 2023, there were 6.2 million shares of common stock remaining available for issuance under our 2023 Equity Plan.
In making this determination, factors such as the ability to recover the carrying amount of the investment and the inability of the investee to sustain future earnings capacity are evaluated in determining whether an impairment should be recognized. 23 Table of Contents ​ Compliance with and changes in tax laws could adversely affect our performance. ​ We are subject to extensive tax liabilities imposed by multiple jurisdictions, including federal, state, local and international jurisdictions.
Any impairment of goodwill, or identifiable intangible assets recorded in connection with the various acquisitions, or for any future acquisitions, would negatively impact our results of operations. ​ Compliance with and changes in tax laws could adversely affect our performance. ​ We are subject to extensive tax liabilities imposed by multiple jurisdictions, including federal, state, local and international jurisdictions.
Removed
Any impairment of goodwill, or identifiable intangible assets recorded in connection with the various acquisitions, or for any future acquisitions, would negatively impact our results of operations. ​ In addition, we may enter into various types of investment arrangements, such as an equity interest we hold in a business entity.
Added
We present two measures of backlog; one that includes fixed backlog and estimated revenue on MSA work for the next four quarters, and total backlog that includes all fixed backlog and estimated revenue on MSA work to the end of the MSA agreement. We do not consider renewals when estimating total backlog.
Removed
Our equity method investments are carried at original cost and are included in other assets in our Consolidated Balance Sheet and are adjusted for our proportionate share of the investees’ income, losses and distributions. Equity investments are reviewed for impairment by assessing whether any decline in the fair value of the investment below its carrying value is other than temporary.
Added
We rely on information technology systems, some of which are managed by third parties, to process, transmit and store electronic information and to manage or support a variety of our business processes, activities and services.
Removed
Based on our variable rate debt outstanding as of December 31, 2022, a 1.0% increase or decrease in interest rates would change annual interest expense by approximately $9.1 million. ​ On January 31, 2023, we entered into a second interest rate swap agreement to manage our exposure to the fluctuations in variable interest rates.
Added
Additionally, we collect and store sensitive data, including intellectual property and proprietary business information, as well as personally identifiable information of our customers and employees, in data centers and on information technology networks (including networks that may be controlled or maintained by third parties).
Removed
The swap effectively exchanged the interest rate on $300.0 million of the debt outstanding under our New Term Loan from variable to a fixed rate of 4.095% per annum, plus an applicable margin.
Added
The secure operation of these systems and products, and the processing and maintenance of the information processed by these systems and products, is critical to our business operations and strategy.
Added
Further, customers using our systems rely on the security of our infrastructure, including hardware, software and other elements provided by third parties, to ensure the reliability of our products and the protection of their data.
Added
We also face the risk of operational disruption, failure, termination or capacity constraints of any of the third parties that facilitate our business activities, including vendors, service providers, suppliers, customers, counterparties or other financial intermediaries.
Added
Such third parties who provide us services or with whom we communicate could also be the source of a cyberattack on, or breach of, our operational systems, network, data or infrastructure.
Added
Despite our security measures and business continuity plans, our information technology systems and networked and connected products may be vulnerable to damage, disruptions or shutdowns caused by attacks by hackers, computer viruses, or breaches due to errors or malfeasance by employees, contractors or others who have access to these systems and products.
Added
The number of shares authorized and available for purchase under the ESPP is 1.0 million. As of December 31, 2023, there were 24 Table of Contents 977,000 shares of common stock remaining available for purchase.
Added
Additional purchases made under the ESPP will have the effect of diluting our earnings per share and stockholders’ percentage of ownership. ​ In 2023, our stockholders adopted our 2023 Equity Incentive Plan (“2023 Equity Plan”). The 2023 Equity Plan replaced a previous plan.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeMaintenance facilities exist at most of our regional offices, as well as on-site on major projects to properly service and repair equipment. Major equipment not currently utilized is rented to third parties or sold whenever possible. ​ ​
Biggest changeMaintenance facilities exist at most of our regional offices, as well as on-site on major projects to properly service and repair equipment. Major equipment not currently utilized is rented to third parties or sold whenever possible. ​ ​ 26 Table of Contents
ITEM 2. PROPERTIES ​ Facilities ​ We lease our executive offices in Dallas, Texas and own and lease other facilities throughout the United States and Canada. Our facilities include offices, production yards, maintenance shops, and training and education facilities that are used in our operations. As of December 31, 2022, we owned 51 of our facilities and leased the remainder.
ITEM 2. PROPERTIES ​ Facilities ​ We lease our executive offices in Dallas, Texas and own and lease other facilities throughout the United States and Canada. Our facilities include offices, production yards, maintenance shops, and training and education facilities that are used in our operations. As of December 31, 2023, we owned 54 of our facilities and leased the remainder.
Total construction equipment purchases in 2022 were $48.5 million. ​ We believe the ownership or long-term leasing of equipment is generally preferable to renting to ensure the equipment is available as needed. In addition, this approach has historically resulted in lower overall equipment costs. All equipment is subject to scheduled maintenance to help ensure reliability.
Total construction equipment purchases in 2023 were $34.0 million. ​ We believe the ownership or long-term leasing of equipment is generally preferable to renting to ensure the equipment is available as needed. In addition, this approach has historically resulted in lower overall equipment costs. All equipment is subject to scheduled maintenance to help ensure reliability.
We believe that our facilities are adequate to meet our current and foreseeable requirements. ​ Property, Plant and Equipment ​ The construction industry is capital intensive, and we expect to continue making capital expenditures to meet anticipated needs for our services. In 2022, capital expenditures were approximately $94.7 million.
We believe that our facilities are adequate to meet our current and foreseeable requirements. ​ Property, Plant and Equipment ​ The construction industry is capital intensive, and we expect to continue making capital expenditures to meet anticipated needs for our services. In 2023, capital expenditures were approximately $103.0 million.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeMINE SAFETY DISCLOSURES ​ Not applicable. ​ 25 Table of Contents PART II ​
Biggest changeMINE SAFETY DISCLOSURES ​ Not applicable. ​ 27 Table of Contents PART II ​

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

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Biggest changeItem 4. Mine Safety Disclosures 25 ​ ​ ​ Part II ​ ​ Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 26 Item 6. Reserved 27 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 28 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 51 Item 8.
Biggest changeItem 4. Mine Safety Disclosures 27 ​ ​ ​ Part II ​ ​ Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 28 Item 6. Reserved 29 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 30 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 50 Item 8.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeWhen taken as a whole, management believes the Peer Group more closely resembles our total business than any individual company in the group. ​ The returns are calculated assuming that an investment with a value of $100 was made in our common stock and in each stock in the Peer Group, and in the S&P 500 as of December 31, 2017.
Biggest changeThe Peer Group was modified in 2023 to replace Quanta Services, Inc. and Matrix Service Company with Dycom Industries, Inc. and MYR Group, Inc. as the overall composition of our business has changed and we believe this new peer group more closely resembles us from both an operations and market capitalization perspective. ​ The returns are calculated assuming that an investment with a value of $100 was made in our common stock, the S&P 500 and the Peer Group as of December 31, 2018.
The declaration and payment of future dividends is contingent upon our revenue and earnings, capital requirements, and general financial conditions, as well as contractual restrictions and other considerations deemed to be relevant by the Board of Directors. 26 Table of Contents Performance Graph ​ The following Performance Graph and related information shall not be deemed to be filed with the SEC, nor shall such information be incorporated by reference into any future filing under the Securities Act of 1933 or Securities Exchange Act of 1934, each as amended, except to the extent that we specifically incorporate it by reference into such filing. ​ The following graph compares the cumulative total return to holders of our common stock during the five-year period from December 31, 2017, and in each quarter up through December 31, 2022.
The declaration and payment of future dividends is contingent upon our revenue and earnings, capital requirements, and general financial conditions, as well as contractual restrictions and other considerations deemed to be relevant by the Board of Directors. 28 Table of Contents Performance Graph ​ The following Performance Graph and related information shall not be deemed to be filed with the SEC, nor shall such information be incorporated by reference into any future filing under the Securities Act of 1933 or Securities Exchange Act of 1934, each as amended, except to the extent that we specifically incorporate it by reference into such filing. ​ The following graph compares the cumulative total return to holders of our common stock during the five-year period from December 31, 2018, and in each quarter up through December 31, 2023.
The stock performance shown on the graph is not intended to be indicative of future stock performance. ​ COMPARISON OF DECEMBER 31, 2017 THROUGH DECEMBER 31, 2022 CUMULATIVE TOTAL RETURN Among Primoris Services Corporation (“PRIM”), the S&P 500 and the Peer Group ​ ​ ​ ​
The stock performance shown on the graph is not intended to be indicative of future stock performance. ​ COMPARISON OF DECEMBER 31, 2018 THROUGH DECEMBER 31, 2023 CUMULATIVE TOTAL RETURN Among Primoris Services Corporation (“PRIM”), the S&P 500 and the Peer Group ​ ​ ​ ​
All dividends were reinvested in additional shares of common stock. The Peer Group investment is calculated based on a weighted average of the five company share prices. The graph lines merely connect the measuring dates and do not reflect fluctuations between those dates.
All dividends were reinvested in additional shares of common stock. The Peer Group investment is weighted based on the market capitalization of each company at the measurement period. The graph lines merely connect the measuring dates and do not reflect fluctuations between those dates.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES ​ Market Information ​ Our common stock is listed on the Nasdaq Global Market under the symbol “PRIM”. We had outstanding 53,135,487 shares of common stock and 407 stockholders of record as of February 21, 2023.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES ​ Market Information ​ Our common stock is listed on the New York Stock Exchange under the symbol “PRIM”. We had outstanding 53,436,884 shares of common stock and 439 stockholders of record as of February 19, 2024.
The Peer Group is composed of MasTec, Inc., Matrix Service Company, Quanta Services, Inc., Sterling Construction Company, Inc. and Granite Construction, Inc. The companies in the Peer Group were selected because they comprise a broad group of publicly held corporations, each of which has some operations similar to ours.
The companies in the Peer Group were selected because they comprise a broad group of publicly held corporations, each of which has some operations similar to ours. When taken as a whole, management believes the Peer Group more closely resembles our total business than any individual company in the group.
Added
The Peer Group is composed of MasTec, Inc., MYR Group, Inc., Dycom Industries, Inc., Sterling Construction Company, Inc. and Granite Construction, Inc.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeWe estimate MSA revenue based on historical trends, anticipated seasonal impacts and estimates of customer demand based on information from our customers. ​ The following table shows our estimated MSA Backlog at December 31, 2022, 2021 and 2020 by reportable segment (in millions): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ MSA Backlog ​ MSA Backlog ​ MSA Backlog ​ ​ at December 31, ​ at December 31, ​ at December 31, Reportable Segment: 2022 (1) ​ 2021 ​ 2020 Utilities ​ $ 1,649.9 ​ $ 1,346.6 ​ $ 1,008.4 Energy/Renewables ​ ​ 161.5 ​ ​ 127.0 ​ ​ 97.2 Pipeline ​ 97.1 ​ 50.0 ​ 31.4 Total ​ $ 1,908.5 ​ $ 1,523.6 ​ $ 1,137.0 (1) Includes approximately $262.7 million, $11.8 million and $37.5 million of MSA Backlog as a result of the PLH acquisition included in the Utilities, Energy/Renewables and Pipeline segments, respectively. ​ Total Backlog ​ The following table shows total backlog (Fixed Backlog plus MSA Backlog) by reportable segment at December 31, 2022, 2021 and 2020 (in millions): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total Backlog Total Backlog Total Backlog ​ ​ at December 31, ​ at December 31, ​ at December 31, Reportable Segment: 2022 2021 ​ 2020 Utilities ​ $ 1,833.2 ​ $ 1,383.6 ​ $ 1,045.2 ​ Energy/Renewables ​ ​ 3,164.1 ​ ​ 2,455.3 ​ ​ 1,353.7 ​ Pipeline ​ 486.2 ​ 163.9 ​ 377.7 ​ Total ​ $ 5,483.5 ​ $ 4,002.8 ​ $ 2,776.6 ​ (1) Includes approximately $322.1 million, $26.8 million and $220.5 million of total Backlog as a result of the PLH acquisition included in the Utilities, Energy/Renewables and Pipeline segments, respectively. ​ We expect that during 2023, we will recognize as revenue approximately 73% of the total backlog at December 31, 2022, comprised of backlog of approximately: 100% of the Utilities segment; 56% of the Energy/Renewables segment; and 85% of the Pipeline segment. ​ Backlog should not be considered a comprehensive indicator of future revenue, as a percentage of our revenue is derived from projects that are not part of a backlog calculation.
Biggest changeWe estimate MSA Backlog based on historical trends, anticipated seasonal impacts and estimates of customer demand based on information from our customers. ​ 49 Table of Contents Fixed and MSA Backlog by reporting segment for the periods ending December 31, 2023 and 2022 were as follows (in millions): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2023 ​ December 31, 2022 ​ ​ ​ Next 12 Months ​ Total ​ Next 12 Months ​ Total 00 Utilities ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fixed Backlog ​ $ 96.3 ​ $ 96.3 ​ $ 183.3 ​ $ 183.3 ​ MSA Backlog ​ ​ 1,776.5 ​ ​ 5,093.6 ​ ​ 1,649.9 ​ ​ 4,967.1 ​ Backlog ​ $ 1,872.8 ​ $ 5,189.9 ​ $ 1,833.2 ​ $ 5,150.4 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Energy ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fixed Backlog ​ $ 2,599.0 ​ $ 5,102.6 ​ $ 1,920.8 ​ $ 3,391.8 ​ MSA Backlog ​ ​ 308.2 ​ ​ 602.4 ​ ​ 258.5 ​ ​ 552.8 ​ Backlog ​ $ 2,907.2 ​ $ 5,705.0 ​ $ 2,179.3 ​ $ 3,944.6 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fixed Backlog ​ $ 2,695.3 ​ $ 5,198.9 ​ $ 2,104.1 ​ $ 3,575.1 ​ MSA Backlog ​ ​ 2,084.7 ​ ​ 5,696.0 ​ ​ 1,908.4 ​ ​ 5,519.9 ​ Backlog ​ $ 4,780.0 ​ $ 10,894.9 ​ $ 4,012.5 ​ $ 9,095.0 ​ ​ Backlog should not be considered a comprehensive indicator of future revenue, as a percentage of our revenue is derived from projects that are not part of a backlog calculation.
For these contracts, revenue is recognized over time as work is completed because of the continuous transfer of control to the customer (typically using an input measure such as costs incurred to date relative to total estimated costs at completion to measure progress).
For these contracts, revenue is recognized over time as work is completed because of the continuous transfer of control to the customer (typically using an input measure such as costs incurred to date relative to total estimated costs at completion to measure progress).
However, the annual adjustment provided by certain contracts is typically subject to a cap and there can be an extended period of time between the impact of inflation on our costs and when billing rates are adjusted. In some cases, our actual cost increases have exceeded the contractual caps, and therefore negatively impacted our operations.
However, the annual adjustment provided by certain contracts is typically subject to a cap and there can be an extended period of time between the impact of inflation on our costs and when billing rates are adjusted. In some cases, our actual cost increases have exceeded the contractual caps, and therefore negatively impacted our operations.
However, production from the shale formations and increased demand for exporting liquified natural gas (“LNG”) could strain the current capacity limitations between production and processing locations which would provide opportunities for our Pipeline segment. ​ ● Inspection, maintenance and replacement of pipeline infrastructure — We believe that regulatory measures around the frequency or stringency of pipeline integrity testing requirements provides growth opportunity in our Pipeline segment.
However, production from the shale formations and increased demand for exporting liquified natural gas (“LNG”) could strain the current capacity limitations between production and processing locations which would provide opportunities for our Energy segment. ​ ​ ● Inspection, maintenance and replacement of pipeline infrastructure — We believe that regulatory measures around the frequency or stringency of pipeline integrity testing requirements provides growth opportunity in our Energy segment.
We believe that based on continuing population growth, the intermittency of renewable power resources, and the environmental requirements limiting using ocean water for cooling, power plants will be needed in spite of vocal opposition to these “non-green” generation sources.
We believe that based on continuing population growth, the intermittency of renewable power resources, and the environmental requirements limiting using ocean water for cooling, gas power plants will be needed in spite of vocal opposition to these “non-green” generation sources.
If the carrying amount of a reporting unit is in excess of its fair value, goodwill is considered impaired and an impairment loss is recognized in an amount equal to that excess, limited to the total amount of goodwill of the reporting unit. ​ There were no impairments of goodwill for the years ended December 31, 2022, 2021 and 2020. ​ Income taxes —We account for income taxes under the asset and liability method as set forth in ASC 740, “ Income Taxes ”, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements.
If the carrying amount of a reporting unit is in excess of its fair value, goodwill is considered impaired and an impairment loss is recognized in an amount equal to that excess, limited to the total amount of goodwill of the reporting unit. ​ There were no impairments of goodwill for the years ended December 31, 2023, 2022 and 2021. ​ Income taxes —We account for income taxes under the asset and liability method as set forth in ASC 740, “ Income Taxes ”, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements.
These opportunities would benefit our Energy/Renewables segment. ​ ● Construction of petroleum, natural gas, natural gas liquid, and other liquid pipelines — We expect that the volatility in the price of oil could reduce activities in most, if not all of the shale basins.
These opportunities would benefit our Energy segment. ​ ​ ● Construction of petroleum, natural gas, natural gas liquid, and other liquid pipelines — We expect that the volatility in the price of oil could reduce activities in most, if not all of the shale basins.
Gross profit as a percentage of revenue decreased to 10.3% from 11.9% in the same period in 2021 primarily as a result of negative gross margins in our Pipeline segment in 2022, increased labor and fuel costs in our Utilities segment, and the closeout of multiple pipeline projects in our Pipeline segment in 2021, as more fully described in the segment results below. ​ In addition, we had a favorable impact from the change in useful lives of certain equipment, which reduced our depreciation expense for the year ended December 31, 2022 by $19.3 million compared to the same period in 2021.
Gross profit as a percentage of revenue decreased to 10.3% from 11.9% in the same period in 2021 primarily as a result of negative gross margins experienced on pipeline projects in 2022, increased labor and fuel costs in our Utilities segment, and the favorable impact from the closeout of multiple pipeline projects in 2021, as more fully described in the segment results below. ​ In addition, we had a favorable impact from the change in useful lives of certain equipment, which reduced our depreciation expense for the year ended December 31, 2022 by $19.3 million compared to the same period in 2021.
Management is unable to ascertain the ultimate outcome of other claims and legal proceedings; however, after review and consultation with counsel and taking into consideration relevant insurance coverage and related deductibles/self-insurance retention, management believes that it has meritorious defense to the claims and believes that the reasonably possible outcome of such claims will not, individually or in the aggregate, have a material adverse effect on our consolidated results of operations, financial condition or cash flows.
Management is unable to ascertain the ultimate outcome of other claims and legal proceedings; however, after review and consultation with counsel and taking into consideration relevant insurance coverage and related deductibles/self-insurance retention, management believes that it has meritorious defenses to the claims and believes that the reasonably possible outcome of such claims will not, individually or in the aggregate, have a material adverse effect on our consolidated results of operations, financial condition or cash flows.
We incorporated the operations of ASP into our Energy/Renewables segment. ​ Acquisition of Future Infrastructure Holdings, LLC. ​ On January 15, 2021, we acquired Future Infrastructure Holdings, LLC (“FIH”) for approximately $604.7 million, net of cash acquired.
We incorporated the operations of ASP into our Energy segment. ​ Acquisition of Future Infrastructure Holdings, LLC. ​ On January 15, 2021, we acquired Future Infrastructure Holdings, LLC (“FIH”) for approximately $604.7 million, net of cash acquired.
The effect of changes in tax rates on net deferred tax assets or liabilities is recognized as an increase or decrease in net income in the period the tax change is enacted. ​ 35 Table of Contents Deferred tax assets may be reduced by a valuation allowance if, in the judgment of management, it is more likely than not that all or a portion of a deferred tax asset will not be realized.
The 37 Table of Contents effect of changes in tax rates on net deferred tax assets or liabilities is recognized as an increase or decrease in net income in the period the tax change is enacted. ​ Deferred tax assets may be reduced by a valuation allowance if, in the judgment of management, it is more likely than not that all or a portion of a deferred tax asset will not be realized.
The Employee Retirement Income Security Act of 1974 (ERISA), as amended by the Multi-Employer Pension Amendments Act of 1980, subjects employers to potential liabilities in the event of an employer’s complete or partial withdrawal of an underfunded multi-employer pension plan. The Pension Protection Act of 2006 added new funding rules that are classified as “endangered”, “seriously endangered”, or “critical” status.
The Employee Retirement Income Security Act of 1974 (“ERISA”), as amended by the Multi-Employer Pension Amendments Act of 1980, subjects employers to potential liabilities in the event of an employer’s complete or partial withdrawal of an underfunded multi-employer pension plan. The Pension Protection Act of 2006 added new funding rules that are classified as “endangered”, “seriously endangered”, or “critical” status.
Due to the inflationary environment we have experienced in 2022, our actual cost increases have exceeded the contractual caps, and therefore have negatively impacted gross margins.
Due to the inflationary environment we experienced in 2022, our actual cost increases exceeded the contractual caps, and therefore negatively impacted gross margins.
Additionally, we are experiencing new opportunities as utilities providers invest in renewable energy and upgrading their transmission infrastructure. ​ ● Inspection, maintenance and replacement of electric utility infrastructure — We expect the demand for electricity in the United States to grow over the long-term and believe enhancements to the electric utility infrastructure are needed to efficiently serve the power needs of the future.
Additionally, we are experiencing new opportunities as utilities providers invest in renewable energy and upgrade their transmission infrastructure. ​ ​ ● Inspection, maintenance and replacement of electric utility infrastructure — We expect the demand for electricity in the United States to grow over the long-term and believe enhancements to the electric utility infrastructure are needed to efficiently serve the power needs of the future.
We do not believe that it is likely that any material claims will be made under a letter of credit. 47 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.
We do not believe that it is likely that any material claims will be made under a letter of credit. ​ 48 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.
Our Credit Agreement bears interest at variable market rates, and estimated payments are based on the interest rate in effect as of December 31, 2022, including the impact of our interest rate swap. ​ The summary does not include potential obligations under multi-employer pension plans in which some of our employees participate.
Our Credit Agreement bears interest at variable market rates, and estimated payments are based on the interest rate in effect as of December 31, 2023, including the impact of our interest rate swap. ​ The summary does not include potential obligations under multi-employer pension plans in which some of our employees participate.
For certain contracts, where scope is not adequately defined and we can’t reasonably estimate total contract value, revenue is recognized either on an input basis, based on contract costs incurred as defined within the 28 Table of Contents respective contracts, or an output basis based on units completed.
For certain contracts, where scope is not adequately defined and we can’t reasonably estimate total contract value, revenue is recognized either on an input basis, based on contract costs incurred as defined within the respective 30 Table of Contents contracts, or an output basis based on units completed.
While the construction of gathering lines within the oil shale formations may remain at lower levels for an extended period, we believe that over time, the need for pipeline infrastructure for mid-stream and gas utility companies will result in a continuing need for our services. ​ The continuing changes in the regulatory environment have affected the demand for our services, either by increasing our work, delaying projects, or cancelling projects.
While the construction of gathering lines within the oil shale formations may remain at lower levels for an extended period, we believe that over 33 Table of Contents time, the need for pipeline infrastructure for mid-stream and gas utility companies will result in a continuing need for our services. ​ The continuing changes in the regulatory environment have affected the demand for our services, either by increasing our work, delaying projects, or cancelling projects.
Risk Factors , we believe, with our full-service operations, broad geographic reach, financial position and technical expertise, we are well positioned to capitalize on opportunities and trends in our industries. ​ We have seen and continue to anticipate potential changes to the already stringent regulatory and environmental requirements for many of our clients’ infrastructure projects, which may improve the timing and certainty of the projects.
Risk Factors , we believe, with our full-service operations, broad geographic reach, financial position and technical expertise, we are well positioned to capitalize on opportunities and trends in our industries. ​ 31 Table of Contents We have seen and continue to anticipate potential changes to the already stringent regulatory and environmental requirements for many of our clients’ infrastructure projects, which may improve the timing and certainty of the projects.
Our current view of the outlook for our major end markets is as follows: ​ ​ ● Construction of alternative energy facilities, chemical processing facilities, renewable natural gas facilities, solar power facilities, wind farms, battery storage — We believe state and federal governments, investors and utilities remain committed to a changing fuel generation mix that is moving toward more alternative energy sources.
Our current view of the outlook for our major end markets is as follows: ​ ​ ● Construction of alternative energy facilities, chemical processing facilities, renewable natural gas facilities, solar power facilities, wind farms, battery storage — We believe state and federal governments, investors and utilities remain committed to a changing fuel generation mix that continues to move toward more alternative energy sources.
While permitting and other regulatory challenges create uncertainty as to the timing of some of our opportunities, we continue to see bidding activity for numerous midstream pipeline projects. We believe that we have the financial and 29 Table of Contents operational strength to meet the challenge of either short-term delays or the impact of significant increases in work.
While permitting and other regulatory challenges create uncertainty as to the timing of some of our opportunities, we continue to see bidding activity for numerous midstream pipeline projects. We believe that we have the financial and operational strength to meet the challenge of either short-term delays or the impact of significant increases in work.
Some of the variation is the result of weather, particularly rain, ice, snow, and named storms, which can impact our ability to perform construction and specialty services. These seasonal impacts can affect revenue and profitability in all of our businesses. Any quarter can be affected either negatively, or positively by atypical weather patterns in any part of the country.
Some of the variation is the result of weather, particularly rain, ice, snow, and named storms, which can impact our ability to perform infrastructure services. These seasonal impacts can affect revenue and profitability in all of our businesses. Any quarter can be affected either negatively, or positively by atypical weather patterns in any part of the country.
We also expect that ongoing gas utility repair and maintenance opportunities will continue. ​ ● Construction of natural gas-fired power plants and industrial plants — We expect continued construction opportunities for both base-load and peak shaving power plants; however, we are aware that environmental concerns over gas fired power plants may impact the timing and location of near-term construction opportunities in certain states.
We also expect that ongoing gas utility repair and maintenance opportunities will continue. ​ ​ 32 Table of Contents ● Construction of natural gas-fired power plants and industrial plants — We expect continued construction opportunities for both base-load and peak shaving power plants; however, we are aware that environmental concerns over gas fired power plants may impact the timing and location of near-term construction opportunities in certain states.
As a result, we expect demand to continue to grow for our pipeline integrity services. ​ Material trends and uncertainties ​ We generate our revenue from construction and engineering projects, as well as from providing a variety of specialty construction services.
As a result, we expect demand to continue to grow for our pipeline integrity services. ​ Material Trends and Uncertainties ​ We generate our revenue from construction and engineering projects, as well as from providing a variety of infrastructure services.
The Amended Credit Agreement is scheduled to mature on August 1, 2027. ​ 45 Table of Contents In addition to the New Term Loan, the Amended Credit Agreement increased the existing $200.0 million Revolving Credit Facility, whereby the Lenders agreed to make loans on a revolving basis from time to time and to issue letters of credit, to $325.0 million.
The Amended Credit Agreement is scheduled to mature on August 1, 2027. ​ In addition to the New Term Loan, the Amended Credit Agreement increased the existing $200.0 million Revolving Credit Facility, whereby the Lenders agreed to make loans on a revolving basis from time to time and to issue letters of credit, to $325.0 million.
Future revenue from projects where scope, and therefore contract value, is not adequately defined may not be included in our estimated backlog amount. 50 Table of Contents ​ Effects of Inflation and Changing Prices ​ Our operations are affected by increases in prices, whether caused by inflation or other economic factors.
Future revenue from projects where scope, and therefore contract value, is not adequately defined may not be included in our estimated backlog amount. ​ Effects of Inflation and Changing Prices ​ Our operations are affected by increases in prices, whether caused by inflation or other economic factors.
The determination of fair value requires estimates and judgments of future cash flow expectations for the assignment of the fair values to the identifiable tangible and intangible assets. ​ Identifiable Tangible Assets. Significant identifiable tangible assets acquired would include accounts receivable, contract assets, leases and fixed assets (generally consisting of facilities and construction equipment).
The determination of fair value requires estimates and judgments of future cash flow expectations for the assignment of the fair values to the identifiable tangible and intangible assets. ​ 36 Table of Contents Identifiable Tangible Assets. Significant identifiable tangible assets acquired would include accounts receivable, contract assets, leases and fixed assets (generally consisting of facilities and construction equipment).
Costs associated with contract modifications are included in the estimated costs to complete the contracts and are treated as project costs when incurred. In most instances, contract modifications are for goods or services that are not distinct, and, therefore, are accounted for as part of the existing contract.
Costs associated with contract modifications are included in the estimated costs to complete the contracts and are treated as project costs when incurred. In most instances, contract modifications are for 35 Table of Contents goods or services that are not distinct, and, therefore, are accounted for as part of the existing contract.
Based on our results for the year ended December 31, 2022, a one-percentage point increase in our effective tax rate would have resulted in an increase in our income tax expense of approximately $1.6 million. ​ Litigation and contingencies — Litigation and contingencies are included in our consolidated financial statements based on our assessment of the expected outcome of litigation proceedings or the expected resolution of the contingency.
Based on our results for the year ended December 31, 2023, a one-percentage point increase in our effective tax rate would have resulted in an increase in our income tax expense of approximately $1.8 million. ​ Litigation and contingencies — Litigation and contingencies are included in our consolidated financial statements based on our assessment of the expected outcome of litigation proceedings or the expected resolution of the contingency.
To determine reportable segment gross profit, certain allocations, including allocations of shared and indirect costs, such as facility costs, equipment costs and indirect operating expenses were made. ​ Acquisition of PLH ​ On August 1, 2022, we acquired PLH Group, Inc. (“PLH”) in an all-cash transaction valued at approximately $438.3 million, net of cash acquired.
To determine reportable segment gross profit, certain allocations, including allocations of shared and indirect costs, such as facility costs, equipment costs and indirect operating expenses were made. ​ Acquisition of PLH ​ On August 1, 2022, we acquired PLH Group, Inc. (“PLH”) in an all-cash transaction valued at approximately $429.0 million, net of cash acquired.
The effect of a contract modification on the transaction price, and our measure of progress for the performance obligation to which it 33 Table of Contents relates, is recognized as an adjustment to revenue on a cumulative catch-up basis.
The effect of a contract modification on the transaction price, and our measure of progress for the performance obligation to which it relates, is recognized as an adjustment to revenue on a cumulative catch-up basis.
In addition, the generally historically low price of natural gas could result in the continued replacement of 30 Table of Contents coal-fired power plants and the conversion and expansion at chemical plants and industrial facilities in other parts of the United States.
In addition, the generally historically low price of natural gas could result in the continued replacement of coal-fired power plants and the conversion and expansion at chemical plants and industrial facilities in other parts of the United States.
Actual results could materially differ from those that result from using the estimates under different assumptions or conditions. ​ An accounting policy is deemed to be critical if it requires an accounting estimate to be based on assumptions about matters that are highly uncertain at the time the estimate is made, and different estimates that reasonably could have been used, or changes in the accounting estimates that are reasonably likely to occur periodically, could materially impact our consolidated financial statements. ​ The following accounting policies require critical accounting estimates that are based on, among other things, judgments and assumptions made by management that include inherent risks and uncertainties.
Actual results could materially differ from those that result from using the estimates under different assumptions or conditions. ​ An accounting policy is deemed to be critical if i) it requires an accounting estimate to be based on assumptions about matters that are highly uncertain at the time the estimate is made, ii) different estimates could have reasonably been used, or iii) changes in the accounting estimates that are reasonably likely to occur periodically could materially impact our consolidated financial statements. ​ 34 Table of Contents The following accounting policies require critical accounting estimates that are based on, among other things, judgments and assumptions made by management that include inherent risks and uncertainties.
We determine the fair value of these assets as of the acquisition date. For current assets and current liabilities of an acquisition, we will 34 Table of Contents evaluate whether the book value is equivalent to fair value due to their short term nature.
We determine the fair value of these assets as of the acquisition date. For current assets and current liabilities of an acquisition, we will evaluate whether the book value is equivalent to fair value due to their short term nature.
We conclude with a discussion of our outlook and backlog. ​ Introduction ​ We are one of the leading providers of specialty contracting services operating mainly in the United States and Canada.
We conclude with a discussion of our outlook and backlog. ​ Introduction ​ We are one of the leading providers of infrastructure services operating mainly in the United States and Canada.
We incorporated the majority of the PLH operations into our Utilities segment with the remaining operations going to our Energy/Renewables and Pipeline segments. ​ Acquisition of B Comm, LLC ​ On June 8, 2022, we acquired B Comm, LLC (“B Comm”) in an all-cash transaction of approximately $36.0 million, net of cash acquired.
We incorporated the majority of the PLH operations into our Utilities segment with the remaining operations going to our Energy segment. ​ Acquisition of B Comm Holdco, LLC ​ On June 8, 2022, we acquired B Comm Holdco, LLC (“B Comm”) in an all-cash transaction of approximately $36.0 million, net of cash acquired.
In addition, the Amended Credit Agreement includes restrictions on investments, change of control provisions and provisions in the event we dispose of more than 20% of our total assets. ​ We were in compliance with the covenants for the Amended Credit Agreement at December 31, 2022. ​ On September 13, 2018, we entered into an interest rate swap agreement to manage our exposure to the fluctuations in variable interest rates.
In addition, the Amended Credit Agreement includes restrictions on investments, change of control provisions and provisions in the event we dispose of more than 20% of our total assets. ​ We were in compliance with the covenants for the Amended Credit Agreement at December 31, 2023. ​ On January 31, 2023, we entered into an interest rate swap agreement to manage our exposure to the fluctuations in variable interest rates.
Additionally, we received net proceeds of $49.9 million from a sale and leaseback transaction of land and buildings during the year ended December 31, 2022. ​ Financing activities ​ Financing activities provided cash of $452.0 million in 2022, which was primarily due to the following: ​ ● Proceeds from the entry into an amended and upsized term loan of $432.9 million, net of debt issuance costs paid; ● Net borrowings on our credit facilities of $100.0 million; ● Proceeds from the issuance of debt secured by our equipment of $30.0 million; ● Payment of long-term debt of $86.8 million; and ● Dividend payments to our stockholders of $12.8 million. ​ Financing activities provided cash of $485.8 million in 2021, which was primarily due to the following: ​ ● Proceeds from the entry into an amended and upsized term loan of $395.1 million, net of debt issuance costs paid; ● Proceeds from the issuance of common stock $178.7 million; ● Proceeds from the issuance of debt secured by our equipment of $61.7 million; ● Payment of long-term debt of $113.9 million; ● Purchase of common stock of $14.7 million; and ● Dividend payments to our stockholders of $12.6 million. ​ Financing activities used cash of $62.8 million in 2020, which was primarily due to the following: ​ ● Payment of long-term debt of $68.9 million; ● Dividend payments to our stockholders of $11.6 million; ● Purchase of common stock of $11.5 million; and ● Proceeds from the issuance of debt secured by our equipment and real estate of $33.9 million. ​ Debt Activities ​ Credit Agreement ​ On August 1, 2022, we entered into the Amended Credit Agreement with CIBC Bank USA, as administrative agent (the “Administrative Agent”) and co-lead arranger, and the financial parties thereto (collectively, the “Lenders”) that increased the Term Loan by $439.5 million to an aggregate principal amount of $945.0 million.
Additionally, we received net proceeds of $49.9 million from a sale and leaseback transaction of land and buildings during the year ended December 31, 2022. ​ Financing activities ​ Financing activities used cash of $205.3 million in 2023, which was primarily due to the following: ​ ● Net payments on our revolving credit facilities of $100.0 million; and ● Payment of long-term debt of $97.0 million. ​ Financing activities provided cash of $452.0 million in 2022, which was primarily due to the following: ​ ● Proceeds from the entry into an amended and upsized term loan of $432.9 million, net of debt issuance costs paid; ● Net borrowings on our credit facilities of $100.0 million; ● Proceeds from the issuance of debt secured by our equipment of $30.0 million; ● Payment of long-term debt of $86.8 million; and ● Dividend payments to our stockholders of $12.8 million. ​ Financing activities provided cash of $485.8 million in 2021, which was primarily due to the following: ​ ● Proceeds from the entry into an amended and upsized term loan of $395.1 million, net of debt issuance costs paid; ● Proceeds from the issuance of common stock $178.7 million; ● Proceeds from the issuance of debt secured by our equipment of $61.7 million; 46 Table of Contents ● Payment of long-term debt of $113.9 million; ● Purchase of common stock of $14.7 million; and ● Dividend payments to our stockholders of $12.6 million. ​ Debt Activities ​ Credit Agreement ​ On August 1, 2022, we entered into the Amended Credit Agreement with CIBC Bank USA, as administrative agent (the “Administrative Agent”) and co-lead arranger, and the financial parties thereto (collectively, the “Lenders”) that increased the Term Loan by $439.5 million to an aggregate principal amount of $945.0 million.
We anticipate that our cash and investments on hand, existing borrowing capacity under our credit facility, access to and capacity under a shelf registration statement, and our future cash flows from operations will provide sufficient funds to enable us to meet our operating needs, our planned capital expenditures, and settle our commitments and contingencies for the next twelve months and the foreseeable future. ​ The construction industry is capital intensive, and we expect to continue to make capital expenditures to meet anticipated needs for our services.
We anticipate that our cash and investments on hand, existing borrowing capacity under our credit facilities, and our future cash flows from operations will provide sufficient funds to enable us to meet our operating needs, our planned capital expenditures, and settle our commitments and contingencies for the next twelve months and the foreseeable future. ​ The construction industry is capital intensive, and we expect to continue to make capital expenditures to meet anticipated needs for our services.
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 new businesses. ​ Our cash and cash equivalents totaled $248.7 million at December 31, 2022, compared to $200.5 million at December 31, 2021.
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 new businesses. ​ Our cash and cash equivalents totaled $217.8 million at December 31, 2023, compared to $248.7 million at December 31, 2022.
Renewable generation will require substations and transmission lines to connect the new generation sources to customers. In addition, current federal legislation also requires the power industry to meet federal reliability standards for its transmission and distribution systems. We also expect to benefit from the spending authorized in the Infrastructure Bill to improve the electric grid.
Renewable generation will require substations and transmission lines to connect the new generation sources to customers. In addition, current federal legislation also requires the power industry to meet federal reliability standards for its transmission and distribution systems. We also expect to benefit from the spending authorized in the 2021 Infrastructure Investment and Jobs Act intended to improve the electric grid.
There were no such comparable transactions for the year ended December 31, 2021. ​ Other income and expense ​ Non-operating income and expense items for the years ended December 31, 2022, 2021 and 2020 were as follows (in millions): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ 2022 2021 2020 Foreign exchange gain (loss), net ​ $ 1.1 ​ $ (0.1) ​ $ 0.4 Other income, net ​ 2.1 ​ 0.3 ​ 1.2 Interest expense, net ​ (39.2) ​ (18.5) ​ (19.9) Total other expense ​ $ (36.1) ​ $ (18.3) ​ $ (18.3) ​ Interest expense, net for the year ended December 31, 2022 was $39.2 million compared to $18.5 million for the year ended December 31, 2021.
There were no such comparable transactions for the years ended December 31, 2023 and 2021. ​ Other income and expense ​ Non-operating income and expense items for the years ended December 31, 2023, 2022 and 2021 were as follows (in millions): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ 2023 2022 2021 Foreign exchange gain (loss), net $ 1.2 ​ $ 1.1 ​ $ (0.1) Other income, net 1.6 ​ 2.1 ​ 0.3 Interest expense, net (78.2) ​ (39.2) ​ (18.5) Total other expense $ (75.4) ​ $ (36.0) ​ $ (18.3) ​ Interest expense, net for the year ended December 31, 2023 was $78.2 million compared to $39.2 million for the year ended December 31, 2022.
We may be obligated to make payments under the terms of these agreements. ​ ● From time to time we make other guarantees, such as guaranteeing the obligations of our subsidiaries. ​ 48 Table of Contents Backlog ​ For specialty contractors, backlog can be an indicator of future revenue streams. Different companies define and calculate backlog in different manners.
We may be obligated to make payments under the terms of these agreements. ​ ● From time to time we make other guarantees, such as guaranteeing the obligations of our subsidiaries. ​ Backlog ​ For infrastructure services contractors, backlog can be an indicator of future revenue streams. Different companies define and calculate backlog in different manners.
PLH is a utility-focused specialty construction company with concentration in key fast-growing regions of the United States. The transaction directly aligns with our strategic focus on higher-growth, higher margin markets and expands our capabilities in the utility markets including power delivery, communications, and gas utilities.
PLH is a utility-focused infrastructure services company with concentrations in key fast-growing regions of the United States. The transaction directly aligns with our strategic focus on higher-growth, higher margin markets and expands our capabilities in the utility markets including power delivery, communications, and gas utilities.
As this trend grows, along with the demand for power, we expect an increase in new power generation facilities powered by renewable energy sources, as well as energy storage systems. We also expect to benefit from the increased spending and long-term tax incentives in the Inflation Reduction Act (“IRA”) signed by the President in August of 2022.
As this trend grows, along with the demand for power, we are seeing an increase in new power generation facilities powered by renewable energy sources, as well as energy storage systems. We are benefitting from the increased spending and long-term tax incentives in the Inflation Reduction Act (“IRA”) signed by the President in August of 2022.
We have no off-balance sheet financing arrangement with VIEs. The following represents transactions, obligations or relationships that could be considered material off-balance sheet arrangements. ​ ● At December 31, 2022, we had letters of credit outstanding of $47.8 million under the terms of our credit agreements.
We have no off-balance sheet financing arrangement with VIEs. The following represents transactions, obligations or relationships that could be considered material off-balance sheet arrangements. ​ ● At December 31, 2023, we had letters of credit outstanding of $52.3 million under the terms of our credit agreements.
For contract revenue recognized over time, the accrued loss provision is adjusted so that the gross profit for the contract remains zero in future periods. ​ At December 31, 2022, we had approximately $110.0 million of unapproved contract modifications included in the aggregate transaction prices.
For contract revenue recognized over time, the accrued loss provision is adjusted so that the gross profit for the contract remains zero in future periods. ​ At December 31, 2023, we had approximately $203.5 million of unapproved contract modifications included in the aggregate transaction prices.
Approximately $99.2 million of the unapproved contract modifications had been recognized as revenue on a cumulative catch-up basis through December 31, 2022. ​ In all forms of contracts, we estimate the collectability of contract amounts at the same time that we estimate project costs.
Approximately $175.7 million of the unapproved contract modifications had been recognized as revenue on a cumulative catch-up basis through December 31, 2023. ​ In all forms of contracts, we estimate the collectability of contract amounts at the same time that we estimate project costs.
Letters of credit reduce our borrowing availability under our Amended Credit Agreement and Canadian Credit Facility. If these letters of credit were drawn on by the beneficiary, we would be required to reimburse the issuer of the letter of credit, and we may be required to record a charge to earnings for the reimbursement.
Letters of credit reduce our borrowing availability under our Amended Credit Agreement and Canadian Credit Facility. If a beneficiary were to successfully draw on any letter of credit, we would be required to reimburse the issuer of the letter of credit, and we may be required to record a charge to earnings for the reimbursement.
Capital expenditures are expected to total between $80.0 million and $100.0 million for 2023, which includes $40.0 million to $60.0 million for construction equipment. ​ Cash Flows ​ Cash flows during the years ended December 31, 2022, 2021 and 2020 are summarized as follows (in millions): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ 2022 2021 2020 Change in cash: ​ ​ ​ ​ ​ ​ ​ ​ ​ Net cash provided by operating activities ​ $ 83.3 ​ $ 79.7 ​ $ 313.0 Net cash used in investing activities ​ (481.9) ​ (691.3) ​ (42.5) Net cash provided by (used in) financing activities ​ 452.0 ​ 485.8 ​ (62.9) Effect of exchange rate changes ​ ​ (0.1) ​ ​ 0.5 ​ ​ (0.1) Net change in cash, cash equivalents and restricted cash ​ $ 53.3 ​ $ (125.3) ​ $ 207.5 ​ 43 Table of Contents Operating Activities ​ The sources and uses of cash flow associated with operating activities for the years ended December 31, 2022, 2021 and 2020 were as follows (in millions): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ 2022 2021 2020 Operating Activities: ​ ​ ​ ​ ​ ​ ​ ​ ​ Net income ​ $ 133.0 ​ $ 115.7 ​ $ 105.0 Depreciation and amortization ​ 99.2 ​ 105.6 ​ 82.4 Gain on sale and leaseback transaction ​ ​ (40.1) ​ ​ — ​ ​ — Changes in assets and liabilities ​ (79.0) ​ (132.7) ​ 128.2 Gain on sale of property and equipment ​ ​ (31.9) ​ ​ (15.9) ​ ​ (8.1) Other ​ 2.1 ​ 7.0 ​ 5.5 Net cash provided by operating activities ​ $ 83.3 ​ $ 79.7 ​ $ 313.0 ​ 2022 and 2021 ​ Net cash provided by operating activities for 2022 was $83.3 million, an increase of $3.6 million compared to 2021.
Capital expenditures are expected to total between $80.0 million and $100.0 million for 2024, which includes $20.0 million to $40.0 million for construction equipment. ​ Cash Flows ​ Cash flows during the years ended December 31, 2023, 2022 and 2021 are summarized as follows (in millions): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ 2023 2022 2021 Change in cash: ​ ​ ​ ​ ​ ​ ​ ​ Net cash provided by operating activities $ 198.6 ​ $ 83.3 ​ $ 79.7 Net cash used in investing activities (30.0) ​ (481.9) ​ (691.3) Net cash (used in) provided by financing activities (205.3) ​ 452.0 ​ 485.8 Effect of exchange rate changes ​ 1.3 ​ ​ (0.1) ​ ​ 0.5 Net change in cash, cash equivalents and restricted cash $ (35.4) ​ $ 53.3 ​ $ (125.3) ​ 44 Table of Contents Operating Activities ​ The sources and uses of cash flow associated with operating activities for the years ended December 31, 2023, 2022 and 2021 were as follows (in millions): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ 2023 2022 2021 Operating Activities: ​ ​ ​ ​ ​ ​ ​ ​ Net income $ 126.1 ​ $ 133.0 ​ $ 115.7 Depreciation and amortization 107.0 ​ 99.2 ​ 105.6 Gain on sale and leaseback transaction — ​ (40.1) ​ — Changes in assets and liabilities ​ (0.1) ​ ​ (79.0) ​ ​ (132.7) Gain on sale of property and equipment ​ (48.1) ​ ​ (31.9) ​ ​ (15.9) Other 13.6 ​ 2.1 ​ 7.0 Net cash provided by operating activities $ 198.6 ​ $ 83.3 ​ $ 79.7 ​ 2023 and 2022 ​ Net cash provided by operating activities for 2023 was $198.6 million, an increase of $115.3 million compared to 2022.
Management’s estimates 32 Table of Contents are based on the relevant information available at the end of each period.
Management’s estimates are based on the relevant information available at the end of each period.
See Note 12 — “ Commitments and Contingencies ” of the Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K for further information. ​ Recently Issued Accounting Pronouncements ​ See Note 2 — “ Summary of Significant Accounting Policies - Recently Issued Accounting Pronouncements” of the Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K for a discussion of recently issued accounting pronouncements. ​ Results of Operations ​ Consolidated Results ​ Revenue ​ 2022 and 2021 ​ Revenue for the year ended December 31, 2022 increased by $923.0 million, or 26.4%, compared to 2021.
See Note 12 — “ Commitments and Contingencies ” of the Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K for further information. ​ Recently Issued Accounting Pronouncements ​ See Note 2 — “ Summary of Significant Accounting Policies – Recently Issued Accounting Pronouncements” of the Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K for a discussion of recently issued accounting pronouncements. ​ Results of Operations ​ Consolidated Results ​ Revenue ​ 2023 and 2022 ​ Revenue for the year ended December 31, 2023 increased by $1.3 billion, or 29.3%, compared to 2022.
Economic and other factors outside of our control may affect the amount and size of contracts we are awarded in any particular period. ​ We have been actively monitoring the impact of the dynamic macroeconomic environment, including the impact of inflation, on all aspects of our business.
Economic and other factors outside of our control may affect the amount and size of contracts we are awarded in any particular period. ​ We actively monitor the impact of the dynamic macroeconomic environment, including the impact of inflation and the instability in the banking sector, on all aspects of our business.
We define backlog as a combination of: (1) anticipated revenue from the uncompleted portions of existing contracts where scope is adequately defined, and therefore we can reasonably estimate total contract value (“Fixed Backlog”), and (2) the estimated revenue on MSA work for the next four quarters (“MSA Backlog”).
We define backlog as anticipated revenue from the uncompleted portions of existing contracts where scope is adequately defined, and therefore we can reasonably estimate total contract value (“Fixed Backlog”), and the estimated revenue on MSA work (“MSA Backlog”).
We do not believe that it is likely that we would have to fund material claims under our surety arrangements. ​ ● Certain of our subsidiaries are parties to collective bargaining agreements with unions. In most instances, these agreements require that we contribute to multi-employer pension and health and welfare plans.
We do not believe that it is likely that a material claim will be made under our surety arrangements. ​ ● Certain of our subsidiaries are parties to collective bargaining agreements with unions. In most instances, these agreements require that we contribute to multi-employer pension and health and welfare plans.
The swap effectively exchanged the interest rate on $300.0 million of the debt outstanding under our New Term Loan from variable to a fixed rate of 4.095% per annum, plus an applicable margin.
The swap effectively exchanged the interest rate on $300.0 million of the debt outstanding under our New Term Loan from variable to a fixed rate of 4.095% per annum, plus an applicable margin which was 2.25% at December 31, 2023.
We depend in part on spending by companies in the communications, gas and electric utilities, energy, chemical, and oil and gas industries, as well as state departments of transportation and municipal water and wastewater customers.
We depend in part on spending by companies in the communications, gas and electric utilities, energy, chemical, and pipeline industries, as well as state departments of transportation.
We currently do not anticipate withdrawal from any multi-employer pension plans. Withdrawal liabilities or requirements for increased future contributions could negatively impact our results of operations and liquidity. ​ ● We enter into employment agreements with certain employees which provide for compensation and benefits under certain circumstances and which may contain a change of control clause.
Withdrawal liabilities or requirements for increased future contributions could negatively impact our results of operations and liquidity. ​ ● We enter into employment agreements with certain employees which provide for compensation and benefits under certain circumstances and which may contain a change of control clause.
At December 31, 2022, there was $100.0 million of outstanding borrowings under the Revolving Credit Facility, commercial letters of credit outstanding were $47.3 million, and available borrowing capacity was $177.7 million. ​ Under the Amended Credit Agreement, we must make quarterly principal payments on the New Term Loan in an amount equal to approximately $11.8 million, with the balance due on August 1, 2027.
At December 31, 2023, there were no outstanding borrowings under the Revolving Credit Facility, commercial letters of credit outstanding were $51.6 million, and available borrowing capacity was $273.4 million. ​ Under the Amended Credit Agreement, we must make quarterly principal payments on the New Term Loan in an amount equal to approximately $11.8 million, with the balance due on August 1, 2027.
While we have seen a recovery in the price of oil and natural gas, the volatility in the prices of oil, gas, and liquid natural gas that has occurred in the past few years could create uncertainty with respect to demand for our oil and gas pipeline services, specifically in our pipeline services operations, both in the near term and for future projects.
Volatility in the prices of oil, gas, and liquid natural gas that has occurred in the past few years could create uncertainty with respect to demand for our pipeline services, both in the near term and for future projects.
We provide a wide range of specialty construction services, maintenance, replacement, fabrication, and engineering services to a diversified base of customers. ​ The current reportable segments include the Utilities segment, the Energy/Renewables segment and the Pipeline Services (“Pipeline”) segment. ​ The Utilities segment operates throughout the United States and specializes in a range of services, including installation and maintenance of new and existing natural gas and electric utility distribution and transmission systems, and communication systems. ​ The Energy/Renewables segment operates throughout the United States and in Canada and specializes in a range of services that include engineering, procurement, and construction, retrofits, highway and bridge construction, demolition, site work, soil stabilization, mass excavation, flood control, upgrades, repairs, outages, and maintenance services for entities in the renewable energy and energy storage, renewable fuels, and petroleum and petrochemical industries, as well as state departments of transportation. ​ The Pipeline segment operates throughout the United States and specializes in a range of services, including pipeline construction and maintenance, carbon capture and storage services, pipeline facility and integrity services, installation of compressor and pump stations, and metering facilities for entities in the petroleum and petrochemical industries, as well as gas, water, and sewer utilities. ​ We have completed major underground and industrial projects for a number of large natural gas transmission and petrochemical companies in the United States, major electrical and gas projects for a number of large utility companies in the United States, significant renewable energy projects for energy companies, as well as projects for our engineering customers.
The Utilities segment operates throughout the United States and specializes in a range of services, including the installation and maintenance of new and existing natural gas and electric utility distribution and transmission systems, and communication systems. ​ The Energy segment operates throughout the United States and in Canada and specializes in a range of services that include engineering, procurement, and construction, retrofits, highway and bridge construction, demolition, site work, soil stabilization, mass excavation, flood control, upgrades, repairs, outages, pipeline construction and maintenance, pipeline integrity services, and maintenance services for entities in the renewable energy and energy storage, renewable fuels, and petroleum and petrochemical industries, as well as state departments of transportation. ​ We have completed major underground and industrial projects for a number of large natural gas transmission and petrochemical companies in the United States, major electrical and gas projects for a number of large utility companies in the United States, significant renewable energy projects for energy companies, as well as projects for our engineering customers.
We received proceeds from the sale of assets of $41.3 million, $49.5 million and $21.9 million for 2022, 2021 and 2020, respectively.
We received proceeds from the sale of assets of $63.7 million, $41.3 million and $49.5 million for 2023, 2022 and 2021, respectively.
At December 31, 2022, we had bid and completion bonds issued and outstanding totaling approximately $4.3 billion. The remaining performance obligation on those bonded projects totaled approximately $1.7 billion at December 31, 2022.
At December 31, 2023, we had bid and completion bonds issued and outstanding totaling approximately $5.9 billion. The remaining performance obligation on those bonded projects totaled approximately $2.7 billion at December 31, 2023.
Gross profit as a percentage of revenue decreased to (2.2%) in 2022 compared to 18.6% in 2021, primarily due to higher costs on a pipeline project in the Mid-Atlantic from unfavorable weather conditions experienced in 2022 and lower than anticipated volumes in 2022, which led to higher relative carrying costs for equipment and personnel.
Gross profit as a percentage of revenue decreased to 10.3% in 2022 compared to 12.5% in 2021, primarily due to the favorable impact from the closeout of multiple pipeline projects in 2021, higher costs on a project in the Mid-Atlantic from unfavorable weather conditions experienced in 2022 and lower than anticipated volumes in 2022, which lead to higher relative carrying costs for equipment and personnel.
However, the increased demand for renewable resources is also creating demand for our construction and specialty services, such as the need for battery storage and the construction of utility scale and distributed generation solar facilities. ​ We are exposed to certain market risks related to changes in interest rates.
However, the increased demand for renewable resources is also creating demand for our infrastructure services, such as the need for battery storage and the construction of utility scale solar facilities. ​ We are exposed to certain market risks related to changes in interest rates. To monitor and manage these market risks, we have established risk management policies and procedures.
To the extent this dynamic continues, we anticipate continued engineering, procurement, and construction opportunities, primarily benefitting our Energy/Renewables segment. ​ ● Communications construction opportunities — We believe the federal government remains committed to improving or expanding communications access.
Other trends we are seeing are major investments in industrial gases and agricultural chemicals. To the extent this dynamic continues, we anticipate continued engineering, procurement, and construction opportunities, primarily benefitting our Energy segment. ​ ​ ● Communications construction opportunities — We believe the federal government remains committed to improving or expanding broadband communications access.
The increase was primarily due to growth in our Energy/Renewables and Utilities segments, and the acquisitions of PLH and B Comm ($406.2 million combined), partially offset by a decline in our Pipeline segment as described in the segment results below. ​ 2021 and 2020 ​ Revenue for the year ended December 31, 2021 increased by $6.1 million, or 0.2%, compared to 2020.
The increase was primarily due to growth in our Energy and Utilities segments, and the acquisitions of PLH and B Comm ($406.2 million combined) as described in the segment results below. ​ Gross Profit ​ 2023 and 2022 ​ For the year ended December 31, 2023, gross profit increased by $130.6 million, or 28.6%, compared to 2022.
Over the past several years, each segment has benefited from demand for more efficient and more environmentally friendly energy and power facilities, more reliable gas and electric utility infrastructure, local highway and bridge needs, and from the activity level in the oil and gas industry. However, periodically, each of these industries and government agencies is adversely affected by macroeconomic conditions.
Over the past several years, each segment has benefited from demand for more efficient and more environmentally friendly energy and power facilities, more reliable gas and electric utility infrastructure, upgraded and expanded local highway and bridge needs, and from the activity level in the pipeline industry.
The increase of $20.7 million was due primarily to higher average debt balances from the borrowings related to the PLH acquisition as well as a higher average interest rate. ​ Interest expense, net for the year ended December 31, 2021 was $18.5 million compared to $19.9 million for the year ended December 31, 2020.
The increase of $39.0 million was due primarily to higher average debt balances from the borrowings related to the PLH acquisition and higher average interest rates. ​ Interest expense, net for the year ended December 31, 2022 was $39.2 million compared to $18.5 million for the year ended December 31, 2021.
We have experienced increased fuel and labor costs from the inflationary environment and anticipate that significantly elevated levels of cost inflation could persist throughout 2023.
We have experienced increased fuel and labor costs and anticipate that elevated levels of cost inflation could persist in 2024.
The change year-over-year was primarily due to improvement in the impact from the changes in assets and liabilities, partially offset by a decrease in net income (after adjusting for cash from gains reported in investing activities). ​ The significant components of the $79.0 million change in assets and liabilities for the year ended December 31, 2022 are summarized as follows: ​ ● Accounts payable and accrued liabilities increased $197.2 million from December 31, 2021 primarily due to revenue growth and the timing of our payments to vendors; ​ ● Contract assets increased by $118.8 million from December 31, 2021 primarily due to significant revenue growth in 2022; ​ ● Accounts receivable increased by $98.7 million from December 31, 2021 primarily due to increased revenue; and ​ ● Other current assets increased by $70.3 million from December 31, 2021 primarily due to prepaid material purchases related to solar projects. ​ 2021 and 2020 ​ Net cash provided by operating activities for 2021 was $79.7 million, a decrease of $233.3 million compared to 2020.
The change year-over-year was primarily due to improvement in the impact from the changes in assets and liabilities, partially offset by a decrease in net income (after adjusting for cash from gains reported in investing activities). ​ The significant components of the $79.0 million change in assets and liabilities for the year ended December 31, 2022 are summarized as follows: ​ ● Accounts payable and accrued liabilities increased $197.2 million from December 31, 2021 primarily due to revenue growth and the timing of our payments to vendors; ​ 45 Table of Contents ​ ● Contract assets increased by $118.8 million from December 31, 2021 primarily due to significant revenue growth in 2022; ​ ​ ● Accounts receivable increased by $98.7 million from December 31, 2021 primarily due to increased revenue; and ​ ​ ● Other current assets increased by $70.3 million from December 31, 2021 primarily due to prepaid material purchases related to solar projects. ​ Investing activities ​ Net cash used in investing activities was $30.0 million, $481.9 million, and $691.3 million in the years ended December 31, 2023, 2022 and 2021, respectively. ​ During 2023, we received $9.3 million from a net working capital true-up related to the PLH acquisition. ​ During 2022, we used $478.4 million for acquisitions, primarily for the acquisitions of PLH and B Comm. ​ During 2021, we used $607.0 million for the acquisition of FIH. ​ We purchased property and equipment for $103.0 million, $94.7 million and $133.8 million in the years ended December 31, 2023, 2022 and 2021, respectively, principally for our construction activities and facilities investment.
Our primary sources of liquidity are our cash balances at the beginning of each period and our cash flows from operating activities.
Our primary sources of liquidity are our cash balances at the beginning of each period and our cash flows from operating activities. If needed, we have availability under our lines of credit to augment liquidity needs.
This decrease was partially offset by higher average debt balances in 2021 from the borrowings incurred related to the FIH acquisition. ​ The weighted average interest rate on total debt outstanding at December 31, 2022, 2021 and 2020 was 6.2%, 2.8% and 3.7%, respectively. ​ 38 Table of Contents Provision for income taxes ​ Our provision for income taxes decreased $9.8 million to $26.3 million for 2022 compared to 2021.
The increase of $20.7 million was due primarily to higher average debt balances from the borrowings related to the PLH acquisition and a higher average interest rate. ​ The weighted average interest rate on total debt outstanding at December 31, 2023, 2022 and 2021 was 6.8%, 6.2% and 2.8%, respectively. ​ 40 Table of Contents Provision for income taxes ​ Our provision for income taxes increased $25.3 million to $51.5 million for 2023 compared to 2022.
In addition, the regulatory environment in certain states has resulted in delays for the 31 Table of Contents construction of gas-fired power plants, while regulators continue to search for significant renewable resources.
In addition, the regulatory environment in certain states has resulted in delays for the construction of gas-fired power plants.
SG&A expense as a percentage of revenue for the year ended December 31, 2021 increased to 6.6% compared to 5.8% for the year ended December 31, 2020, primarily due to increased expense as we integrate FIH into our operations, as well as lower revenue from our legacy operations. ​ 37 Table of Contents Transaction and related costs ​ 2022 and 2021 ​ Transaction and related costs for the year ended December 31, 2022 were $20.1 million, an increase of $3.7 million or 22.3% compared to 2021, primarily due to an increase in professional fees paid to advisors for the acquisitions of PLH and B Comm. ​ 2021 and 2020 ​ Transaction and related costs for the year ended December 31, 2021 were $16.4 million, primarily related to our acquisition of FIH, as well as the expense incurred in 2021 associated with the purchase of Primoris common stock by certain employees of FIH at a 15% discount. ​ Gain on Sale and Leaseback Transaction ​ On June 22, 2022, we completed a sale and leaseback transaction of land and buildings located in Carson, California for an aggregate sales price, net of closing costs, of $49.9 million.
The decrease was due to professional fees paid to advisors for the acquisitions of B Comm and PLH in 2022. ​ 2022 and 2021 ​ Transaction and related costs for the year ended December 31, 2022 were $20.1 million, an increase of $3.7 million or 22.3% compared to 2021, primarily due to an increase in professional fees paid to advisors for the acquisitions of PLH and B Comm. ​ Gain on Sale and Leaseback Transaction ​ On June 22, 2022, we completed a sale and leaseback transaction of land and buildings located in Carson, California for an aggregate sales price, net of closing costs, of $49.9 million.
Gross profit as a percentage of revenue increased to 11.9% from 10.6% in the same period in 2020 as described in the segment results below. ​ Selling, general and administrative expenses ​ Selling, general and administrative expenses (“SG&A”) consist primarily of compensation and benefits to executive, management level and administrative employees, marketing and communications, professional fees, rent for facilities and utilities. ​ 2022 and 2021 ​ SG&A expenses were $281.6 million for the year ended December 31, 2022, an increase of $51.5 million, or 22.4% compared to 2021, primarily due to the increases in headcount from the acquisitions of PLH and B Comm ($28.3 million) and increased costs to support our strong organic growth.
SG&A expense as a percentage of revenue for the year ended December 31, 2023 decreased to 5.8% compared to 6.4% for the year ended December 31, 2022, primarily due to increased revenue. ​ 2022 and 2021 ​ SG&A expenses were $281.6 million for the year ended December 31, 2022, an increase of $51.5 million, or 22.4% compared to 2021, primarily due to the increases in headcount from the acquisitions of PLH and B Comm ($28.3 million) and increased costs to support our strong organic growth.
In 2022, we spent approximately $94.7 million for capital expenditures, which included $48.5 million for construction equipment.
In 2023, we spent approximately $103.0 million for capital expenditures, which included $34.0 million for construction equipment.
To monitor and manage these market risks, we have established risk management policies and procedures. Our Revolving Credit Facility and New Term Loan bear interest at a variable rate which exposes us to interest rate risk. From time to time, we may use certain derivative instruments to hedge our exposure to variable interest rates.
Our Revolving Credit Facility and New Term Loan bear interest at a variable rate which exposes us to interest rate risk. From time to time, we may use certain derivative instruments to hedge our exposure to variable interest rates. As of December 31, 2023, $300.0 million of our variable rate debt outstanding was economically hedged.
The decrease was primarily driven by the release of valuation allowances during the second and third quarters of 2022 , partially offset by tax on increased pre-tax profits.
The 2023 effective tax rate was 29%. ​ Our provision for income taxes decreased $9.8 million to $26.3 million for 2022 compared to 2021. The decrease was primarily driven by the release of valuation allowances during the second and third quarters of 2022 , partially offset by tax on increased pre-tax profits.
The interest rate swap matures on January 31, 2025. ​ Canadian Credit Facilities ​ We have a demand credit facility for $4.0 million in Canadian dollars with a Canadian bank for purposes of issuing commercial letters of credit in Canada (“Canadian Credit Facility”).
The interest rate swap matures on January 31, 2025. ​ 47 Table of Contents Canadian Credit Facilities ​ We have credit facilities totaling $14.0 million in Canadian dollars for the purposes of issuing commercial letters of credit and providing funding for working capital.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

3 edited+0 added−1 removed2 unchanged
Biggest changeBased on our variable rate debt outstanding as of December 31, 2022, a 1.0% increase or decrease in interest rates would change annual interest expense by approximately $9.1 million. ​ On January 31, 2023, we entered into a second interest rate swap agreement to manage our exposure to the fluctuations in variable interest rates.
Biggest changeBased on our variable rate debt outstanding as of December 31, 2023, a 1.0% increase or decrease in interest rates would change annual interest expense by approximately $5.7 million. ​ We do not execute transactions or use financial derivative instruments for trading or speculative purposes.
These instruments have in the past included interest rate swaps and may in the future include foreign currency exchange contracts, interest rate swaps and hedges against commodity price fluctuations. ​ The carrying amounts for cash and cash equivalents, accounts receivable, short term investments, short-term debt, accounts payable and accrued liabilities shown in the Consolidated Balance Sheets approximate fair value at December 31, 2022, due to the generally short maturities of these items. ​ Our revolving credit facility and term loan bear interest at a variable rate and exposes us to interest rate risk.
These instruments have in the past included interest rate swaps and may in the future include foreign currency exchange contracts, interest rate swaps and hedges against commodity price fluctuations. ​ The carrying amounts for cash and cash equivalents, accounts receivable, short term investments, short-term debt, accounts payable and accrued liabilities shown in the Consolidated Balance Sheets approximate fair value at December 31, 2023, due to the generally short maturities of these items. ​ 50 Table of Contents Our Revolving Credit Facility and Term Loan bear interest at a variable rate which exposes us to interest rate risk.
From time to time, we may use certain derivative instruments to hedge our exposure to variable interest rates. As of December 31, 2022, $121.7 million of our variable rate debt outstanding was economically hedged, with a maturity date of July 10, 2023.
From time to time, we may use certain derivative instruments to hedge our exposure to variable interest rates. As of December 31, 2023, $300.0 million of our variable rate debt outstanding was economically hedged.
Removed
The swap effectively exchanged the interest rate on $300.0 million of the debt outstanding under our New Term Loan from variable to a fixed rate of 4.095% per annum, plus an applicable margin. The interest rate swap matures on January 31, 2025. ​ We do not execute transactions or use financial derivative instruments for trading or speculative purposes.

Other PRIM 10-K year-over-year comparisons