Primoris Services Corp (Form: 10-Q, Received: 08/07/2013 07:46:53)

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended June 30, 2013

o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.

For the transition period from to .

Commission file number 0001-34145

Primoris Services Corporation

(Exact name of registrant as specified in its charter)

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

2100 McKinney Avenue, Suite 1500
Dallas, Texas		75201
(Address of Principal Executive Offices)		(Zip Code)

Registrant’s telephone number, including area code: (214) 740-5600

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No o

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

Large accelerated filer o		Accelerated filer x

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

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

At August 6, 2013, 51,571,394 shares of the registrant’s common stock were outstanding.

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PRIMORIS SERVICES CORPORATION

INDEX

	Page No.

Part I. Financial Information

Item 1. Financial Statements:

—Condensed Consolidated Balance Sheets at June 30, 2013 and December 31, 2012	3

—Condensed Consolidated Statements of Income for the three months and six months ended June 30, 2013 and 2012	4

— Condensed Consolidated Statements of Cash Flows for the three months and six months ended June 30, 2013 and 2012	5

—Notes to Condensed Consolidated Financial Statements	7

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	23

Item 3. Quantitative and Qualitative Disclosures About Market Risk	38

Item 4. Controls and Procedures	38

Part II. Other Information

Item 1. Legal Proceedings	39

Item 1A. Risk Factors	39

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	39

Item 3. Defaults Upon Senior Securities	39

Item 4. (Removed and Reserved)	39

Item 5. Other Information	39

Item 6. Exhibits	40

Signatures	41

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PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

PRIMORIS SERVICES CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(In Thousands, Except Share Amounts)

(Unaudited)

	June 30, 2013		December 31, 2012
ASSETS
Current assets:
Cash and cash equivalents	$	113,777	$	157,551
Short term investments	3,428		3,441
Customer retention deposits and restricted cash	27,503		35,377
Accounts receivable, net	251,092		268,095
Costs and estimated earnings in excess of billings	70,288		41,701
Inventory and uninstalled contract materials	38,339		37,193
Deferred tax assets	10,477		10,477
Prepaid expenses and other current assets	12,719		10,800
Total current assets	527,623		564,635
Property and equipment, net	215,659		184,840
Investment in non-consolidated entities	12,724		12,813
Intangible assets, net	49,893		51,978
Goodwill	118,028		116,941
Other long-term assets	1,158		—
Total assets	$	925,085	$	931,207
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	102,026	$	151,546
Billings in excess of costs and estimated earnings	162,570		158,892
Accrued expenses and other current liabilities	80,349		76,152
Dividends payable	1,805		—
Current portion of capital leases	4,335		3,733
Current portion of long-term debt	21,967		19,446
Current portion of contingent earnout liabilities	8,048		10,900
Total current liabilities	381,100		420,669
Long-term capital leases, net of current portion	3,584		3,831
Long-term debt, net of current portion	144,546		128,367
Deferred tax liabilities	20,018		20,018
Long-term contingent earnout liabilities, net of current portion	5,924		12,531
Other long-term liabilities	11,568		13,153
Total liabilities	566,740		598,569
Commitments and contingencies
Stockholders’ equity
Common stock—$.0001 par value, 90,000,000 shares authorized, 51,562,284 and 51,403,686 issued and outstanding at June 30, 2013 and December 31, 2012	5		5
Additional paid-in capital	158,730		155,605
Retained earnings	197,500		175,517
Noncontrolling interests	2,110		1,511
Total stockholders’ equity	358,345		332,638
Total liabilities and stockholders’ equity	$	925,085	$	931,207

See Accompanying Notes to Condensed Consolidated Financial Statements

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PRIMORIS SERVICES CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(In Thousands, Except Per Share Amounts)

(Unaudited)

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2013			2012			2013			2012
Revenues	$	445,013		$	337,436		$	855,008		$	629,009
Cost of revenues	385,476			293,432			749,375			547,409
Gross profit	59,537			44,004			105,633			81,600
Selling, general and administrative expenses	31,560			23,396			60,179			43,670
Operating income	27,977			20,608			45,454			37,930
Other income (expense):
Income (loss) from non-consolidated entities	(213		)	(47		)	56			1,054
Foreign exchange loss	(29		)	(6		)	(88		)	(48		)
Other expense	(377		)	(371		)	(433		)	(579		)
Interest income	23			25			63			47
Interest expense	(1,498		)	(1,006		)	(2,922		)	(2,107		)

Income before provision for income taxes	25,883			19,203			42,130			36,297
Provision for income taxes	(9,990		)	(7,346		)	(16,197		)	(13,910		)
Net income	$	15,893		$	11,857		$	25,933		$	22,387

Less net income attributable to noncontrolling interests	(329		)	(124		)	(599		)	(168		)

Net income attributable to Primoris	$	15,564		$	11,733		$	25,334		$	22,219

Earnings per share:
Basic	$	0.30		$	0.23		$	0.49		$	0.43
Diluted	$	0.30		$	0.23		$	0.49		$	0.43
Weighted average common shares outstanding:
Basic	51,562			51,435			51,510			51,386
Diluted	51,626			51,435			51,547			51,386

See Accompanying Notes to Condensed Consolidated Financial Statements

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PRIMORIS SERVICES CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In Thousands)

(Unaudited)

	Six Months Ended
	June 30,
	2013			2012
Cash flows from operating activities:
Net income	$	25,933		$	22,387
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation	19,912			13,557
Amortization of intangible assets	3,685			3,193
Gain on sale of property and equipment	(202		)	(1,776		)
Income from non-consolidated entities	(56		)	(1,054		)
Non-consolidated entity distributions	145			1,260
Stock—based compensation expense	91			—
Changes in assets and liabilities:
Customer retention deposits and restricted cash	7,874			(8,678		)
Accounts receivable	17,003			20,813
Costs and estimated earnings in excess of billings	(28,587		)	(2,983		)
Other current assets	(3,221		)	206
Accounts payable	(50,407		)	(2,056		)
Billings in excess of costs and estimated earnings	3,678			(6,455		)
Contingent earnout liabilities	(10,161		)	(2,871		)
Accrued expenses and other current liabilities	4,254			6,397
Other long-term liabilities	(1,585		)	(2,237		)
Net cash provided by (used in) operating activities	(11,644		)	39,703
Cash flows from investing activities:
Purchase of property and equipment	(49,256		)	(12,409		)
Proceeds from sale of property and equipment	1,675			6,731
Purchase of short-term investments	(4,175		)	—
Sale of short-term investments	4,188			23,000
Cash paid for acquisitions	(1,025		)	(35,131		)
Net cash used in investing activities	(48,593		)	(17,809		)
Cash flows from financing activities:
Proceeds from issuance of long-term debt	42,364			12,776
Repayment of capital leases	(2,145		)	(7,075		)
Repayment of long-term debt	(23,664		)	(8,284		)
Repayment of subordinated debt	—			(17,501		)
Proceeds from issuance of common stock purchased by management under long-term incentive plan	1,455			1,240
Dividends paid	(1,547		)	(3,069		)
Repurchase of common stock	—			(1,001		)
Net cash provided by (used in) financing activities	16,463			(22,914		)
Net change in cash and cash equivalents	(43,774		)	(1,020		)
Cash and cash equivalents at beginning of the period	157,551			120,306
Cash and cash equivalents at end of the period	$	113,777		$	119,286

See Accompanying Notes to Condensed Consolidated Financial Statements

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SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION

	Six Months Ended
	June 30,
	2013			2012
	(Unaudited)
Cash paid during the period for:
Interest	$	2,559		$	1,588

Income taxes, net of refunds received	$	18,016		$	11,081

Components of cash paid for acquisitions:

Fair value of assets acquired — FSSI	$	2,377		$	—
Fair value of assets acquired — Sprint	—			28,377
Fair value of assets acquired — Silva	—			14,109
Cash payment to sellers after closing	(650		)	(175		)
Contingent liabilities	(702		)	(6,200		)
Common stock issued for acquisition	—			(980		)
Cash paid for acquisitions	$	1,025		$	35,131

SUPPLEMENTAL DISCLOSURES OF NONCASH INVESTING AND FINANCING ACTIVITIES

	Six Months Ended
	June 30,
	2013		2012
	(Unaudited)

Obligations incurred for the acquisition of property and equipment	$	2,500	$	1,046

Dividends declared and not yet paid	$	1,805	$	1,542

See Accompanying Notes to Condensed Consolidated Financial Statements

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PRIMORIS SERVICES CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars In Thousands, Except Share and Per Share Amounts)

(Unaudited)

Note 1—Nature of Business

Organization and operations — Primoris Services Corporation is a holding company of various subsidiaries which, collectively, are engaged in various construction and product engineering activities. The Company’s underground and directional drilling operations install, replace and repair natural gas, petroleum, telecommunications and water pipeline systems, including large diameter pipeline systems. The Company’s industrial, civil and engineering operations build and provide maintenance services to industrial facilities including power plants, petrochemical facilities, and other processing plants; construct multi-level parking structures; and engage in the construction of highways, bridges and other environmental construction activities. The Company is incorporated in the State of Delaware and its corporate headquarters are located at 2100 McKinney Avenue, Suite 1500, Dallas, Texas 75201.

The wholly-owned subsidiaries of Primoris include ARB, Inc. (“ARB”), ARB Structures, Inc., All Day Electric Company, Inc., OnQuest, Inc. (parent of OnQuest Canada, ULC, prior to January 1, 2013 Born Heaters Canada, ULC), Cardinal Contractors, Inc., Stellaris, LLC, James Construction Group LLC (“JCG”), Rockford Corporation (“Rockford”) and Primoris Energy Services Corporation (“PES”). Primoris has been acquisitive over the last several years expanding both service capabilities and geographic footprint. The acquisitions in 2012 included the purchase of Sprint Pipeline Services, L.P. (“Sprint”), the purchase of certain assets of Silva Contracting Company, Inc., Tarmac Materials, LLC and C3 Interest, LLC (collectively “Silva”), The Saxon Group (“Saxon”) and the acquisition of Q3 Contracting, Inc. (“Q3C”).

The Company is a party to the Blythe Power Constructors joint venture for the installation of a parabolic trough solar field and steam generation system in California.

Unless specifically noted otherwise, as used throughout these consolidated financial statements, “Primoris”, “the Company”, “we”, “our”, “us” or “its” refers to the business, operations and financial results of the Company and its wholly-owned subsidiaries.

Note 2—Basis of Presentation

Interim consolidated financial statements — The interim condensed consolidated financial statements for the three-month and six-month periods ended June 30, 2013 and 2012 have been prepared in accordance with Rule 10-01 of Regulation S-X of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). As such, certain disclosures, which would substantially duplicate the disclosures contained in the Company’s latest audited consolidated financial statements, have been omitted.

This Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2013 (the “Second Quarter 2013 Report”) should be read in concert with the Company’s Annual Report on Form 10-K, filed on March 7, 2013, which contains the Company’s audited consolidated financial statements for the year ended December 31, 2012. The interim financial information is unaudited. In the opinion of management, the unaudited information includes all adjustments (consisting of normal recurring adjustments) necessary for the fair presentation of the interim financial information.

Revenue recognition

Fixed-price contracts — Historically, a substantial portion of the Company’s revenue has been generated under fixed-price contracts. For fixed-price contracts, the Company recognizes revenues using the percentage-of-completion method, which may result in uneven and irregular results. Unforeseen events and circumstances can alter the estimate of the costs and potential profit associated with a particular contract. Total estimated costs, and thus contract revenues and income, can be impacted by changes in any of the following: productivity, scheduling, the unit cost of labor, subcontracts, materials and equipment. Additionally, external factors such as weather, client needs, client delays in providing permits and approvals, labor availability, governmental regulation and politics may affect the progress of a project’s completion and thus the timing of revenue recognition. To the extent that original cost estimates are modified, estimated costs to complete increase, delivery schedules are delayed, or progress under a contract is otherwise impeded, cash flow, revenue recognition and profitability from a particular contract may be adversely affected.

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In the percentage-of-completion method, estimated revenues and resulting contract income is calculated based on the total costs incurred to date as a percentage of total estimated costs. If an estimate of total contract cost indicates a loss on a contract, the projected loss is recognized in full at the time of the estimate. The loss amount is recognized as an “accrued loss provision” and is included in the accrued expenses and other liabilities amount on the balance sheet. As the percentage-of-completion method is used to calculate revenues, the accrued loss provision is changed so that the gross profit for the contract is zero.

Other contract forms — The Company also uses unit-price, time and material, and cost reimbursable plus fee contracts. For these jobs, revenue is recognized based on contractual terms. For example, time and material contract revenues are recognized based on purchasing and employee time records. Similarly, unit price contracts recognize revenue based on accomplishment of specific units at a specified unit price.

For all of its contracts, the Company includes the provision for estimated losses on uncompleted contracts in accrued expenses. Changes in job performance, job conditions and estimated profitability, including those arising from final contract settlements, may result in revisions to costs and income. These revisions are recognized in the period in which the revisions are identified. Claims are included in the calculation of revenues when realization is probable and amounts can be reliably determined. Revenues in excess of contract costs incurred on claims are recognized when the amounts have been agreed upon with the customer.

The caption “ Costs and estimated earnings in excess of billings ” represents unbilled receivables which arise when revenues have been recorded but the amount has not been billed under the terms of the contract until a later date. Balances may represent: (a) unbilled amounts arising from the use of the percentage-of-completion method of accounting which may not be billed under the terms of the contract until a later date, (b) incurred costs to be billed under cost reimbursement type contracts, or (c) amounts arising from routine lags in billing. For those contracts in which billings exceed contract revenues recognized to date, excesses are included in the caption “ Billings in excess of costs and estimated earnings ”.

The Company considers unapproved change orders to be contract variations for which we have customer approval for a change in scope but for which we do not have an agreed upon price change. Costs associated with unapproved change orders are included in the estimated cost to complete the contracts and are treated as project costs as incurred. The Company recognizes revenue equal to costs incurred on unapproved change orders when realization of price approval is probable and the estimated revenue amount is equal to or greater than the costs related to the unapproved change order. Unapproved change orders involve the use of estimates, and it is reasonably possible that revisions to the estimated costs and recoverable amounts may be required in future reporting periods to reflect changes in estimates or final agreements with customers.

The Company considers claims to be amounts Primoris seeks, or will seek, to collect from customers or others for customer-caused changes in contract specifications or design, or other customer-related causes of unanticipated additional contract costs on which there is no agreement with customers on both scope and price changes. Revenue in excess of contract costs from claims is recognized when agreement is reached with customers as to the value of the claims, which in some instances may not occur until after completion of work under the contract. Costs associated with claims are included in the estimated costs to complete the contracts and are treated as project costs when incurred.

In accordance with applicable terms of construction contracts, certain retainage amounts may be withheld by customers until completion and acceptance of the project. Some payments of the retainage may not be received for a significant period after completion of our portion of a project.

Significant revision in contract estimate — As previously discussed, revenue recognition is based on the percentage-of-completion method for firm fixed-price contracts. Under this method, the costs incurred to date as a percentage of total estimated costs are used to calculate the revenue to be recognized. Total estimated costs, and thus contract income, are impacted by many factors.

For projects that were in process in the prior year, but are either completed or continue to be in process during the current year, there can be a difference in revenues and profits related to the prior year, had current year estimates of costs to complete been known in the prior year.

Customer Concentration — The Company operates in multiple industry segments encompassing the construction of commercial, industrial and public works infrastructure assets throughout primarily the United States. Typically, the top ten customers in any one calendar year generate revenues in excess of 50% of total revenues and consist of a different group of customers in each year.

During the three-months and six-months ending June 30, 2013, revenues generated by the top ten customers were $216 million and $443 million, respectively, which represented 48.6% and 51.9%, respectively, of total revenues during the periods. During the three and six month periods ending June 30, 2013, a large gas and electric utility represented 7.6% and 8.0%, respectively, of total revenues and a large pipeline company represented 8.2% and 5.0%, respectively, of total revenues.

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During the three and six months ending June 30, 2012, revenues generated by the top ten customers were $185 million and $364 million, respectively, which represented 54.8% and 57.9%, respectively, of total revenues during the periods. During the three and six month periods ending June 30, 2012, the Louisiana DOT represented 11.6% and 13.3%, respectively, of total revenues and a large gas and electric utility represented 12.1% and 11.9%, respectively, of total revenues.

At June 30, 2013, approximately 6.5% of the Company’s accounts receivable were due from one customer, and that customer provided 6.4% of the Company’s revenues for the six months ended June 30, 2013. At June 30, 2012, approximately 6.8% of the Company’s accounts receivable were due from one customer, and that customer provided 4.1% of the Company’s revenues for the six months ended June 30, 2012.

Multiemployer Plans — The Company participates and contributes to a number of multiemployer benefit plans for its union employees at rates determined by the various collective bargaining agreements. The trustees for each multiemployer plan determines the eligibility and allocations of contributions and benefit amounts, determines the types of benefits and administers the plan. The potential withdrawal obligation may be significant. Any withdrawal liability would be recorded when it is probable that a liability exists and can be reasonably estimated, in accordance with GAAP. In November 2011, the Company withdrew from the Central States Southeast and Southwest Areas Pension Fund multiemployer pension plan. At June 30, 2013, the Company had recorded a withdrawal liability of $7.5 million on its balance sheet. The Company has no plans to withdraw from any other agreements. See Note 19 — Commitments and Contingencies.

Inventory and uninstalled contract materials — Inventory consists of expendable construction materials and small tools that will be used in construction projects and is valued at the lower of cost, using first-in, first-out method, or market. Uninstalled contract materials include certain job specific materials not yet installed which are valued using the specific identification method.

Note 3—Recent Accounting Pronouncements

In January 2013, the FASB issued ASU 2013-01, which clarifies which instruments and transactions are subject to the offsetting disclosure requirements established by ASU 2011-11 , “Balance Sheet (Topic 210): Disclosures about Offsetting Assets and Liabilities” . The ASU is effective for the fiscal years beginning on or after January 1, 2013, and interim periods within. Retrospective application is required for any period presented that begins before the entity’s initial application of the new requirements. The adoption of this guidance did not have a material impact on the Company’s financial statements.

In February 2013, the FASB issued ASU 2013-04, Liabilities (Topic 405): Obligations Resulting from Joint and Several Liability Arrangements for Which the Total Amount of the Obligation Is Fixed at the Reporting Date (a consensus of the FASB Emerging Issues Task Force) (“ASU 2013-04”). ASU 2013-04 provides guidance for the recognition, measurement, and disclosure of obligations resulting from joint and several liability arrangements for which the total amount of the obligation within the scope of this guidance is fixed at the reporting date. This ASU is an update to FASB ASC Topic 405, “ Liabilities” . The amendments in this ASU are effective for fiscal years, and interim periods within those years, beginning after December 15, 2013. The Company is currently evaluating the impact of this guidance on its financial statements.

Note 4—Fair Value Measurements

ASC Topic 820, “Fair Value Measurements and Disclosures ”, defines fair value in GAAP, establishes a framework for measuring fair value and requires certain disclosures about fair value measurements. ASC Topic 820 requires that certain financial assets and financial liabilities be re-measured and reported at fair value each reporting period and that other non-financial assets and liabilities be re-measured and reported at fair value on a non-recurring basis. ASC Topic 820 also establishes three reporting levels for fair value measurements.

In general, fair values determined by Level 1 use quoted prices (unadjusted) in active markets for identical assets or liabilities. Fair values determined by Level 2 inputs use data points that are observable such as quoted prices, interest rates and yield curves. Fair values determined by Level 3 inputs are “unobservable data points” for an asset or liability and include situations where there is little, if any, market activity for the asset or liability.

The following table presents, for each of the fair value hierarchy levels identified under ASC Topic 820, the Company’s financial assets that are required to be measured at fair value at June 30, 2013 and December 31, 2012:

			Fair Value Measurements at Reporting Date
	Amount Recorded on Balance Sheet		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)	Significant Unobservable Inputs (Level 3)
Assets as of June 30, 2013:
Cash and cash equivalents	$	113,777	$	113,777	—	—
Short-term investments	$	3,428	$	3,428	—	—
Liabilities as of June 30, 2013:
Contingent consideration	$	13,972	—		—	$	13,972

Assets as of December 31, 2012:
Cash and cash equivalents	$	157,551	$	157,551	—	—
Short-term investments	$	3,441	$	3,441	—	—
Liabilities as of December 31, 2012:
Contingent consideration	$	23,431	—		—	$	23,431

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Short-term investments consist primarily of Certificates of Deposit (“CDs”) purchased through the CDARS (Certificate of Deposit Account Registry Service) process and U.S. Treasury bills with various financial institutions that are backed by the federal government FDIC program.

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

The following table provides a rollforward of the Company’s contingent consideration liability Level 3 fair value measurements during the six months ended June 30, 2013:

Contingent Consideration
Balance at December 31, 2012	$	23,431
Additions:
FSSI acquisition on March 11, 2013	702
Change in fair value of contingent consideration	739
Reductions:
Payment to Rockford sellers	(6,900		)
Payment to Sprint sellers	(4,000		)
Balance at June 30, 2013	$	13,972

On a quarterly basis, the Company assesses the estimated fair value of the contractual obligation to pay the contingent consideration and any changes in estimated fair value are recorded as other non-operating expense or income in the Company’s statement of operations. Fluctuations in the fair value of contingent consideration are impacted by two unobservable inputs, management’s estimate of the probability (which range from 33% to 95%) of the acquired company meeting the contractual operating performance target and the estimated discount rate (a rate that approximates the Company’s cost of capital). Significant changes in either of those inputs in isolation would result in a significantly different fair value measurement. Generally, a change in the assumption of the probability of meeting the performance target is accompanied by a directionally similar change in the fair value of contingent consideration liability, whereas a change in assumption of the estimated discount rate is accompanied by a directionally opposite change in the fair value of contingent consideration liability.

Note 5—Accounts Receivable

The following is a summary of the Company’s accounts receivable:

	June 30, 2013		December 31, 2012

Contracts receivable, net of allowance for doubtful accounts of $ 497 for June 30, 2013 and $432 for December 31, 2012	$	211,184	$	227,548
Retention	39,826		39,710
	251,010		267,258
Other accounts receivable	82		837
	$	251,092	$	268,095

Note 6—Costs and Estimated Earnings on Uncompleted Contracts

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

	June 30, 2013			December 31, 2012

Costs incurred on uncompleted contracts	$	3,744,678		$	3,882,968
Reserve for estimated losses on uncompleted contracts	522			764
Gross profit recognized	446,369			448,928
	4,191,569			4,332,660
Less: billings to date	(4,283,851		)	(4,449,851		)
	$	(92,282	)	$	(117,191	)

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

	June 30, 2013			December 31, 2012

Costs and estimated earnings in excess of billings	$	70,288		$	41,701
Billings in excess of costs and estimated earnings	(162,570		)	(158,892		)
	$	(92,282	)	$	(117,191	)

Note 7—Equity Method Investments

WesPac Energy LLC

On July 1, 2010, the Company acquired a 50% membership interest in WesPac Energy LLC, a Nevada limited liability company (“WesPac”), from Kealine Holdings, LLC (“Kealine”), a Nevada limited liability company. Kealine holds the remaining 50% membership interest in WesPac. WesPac develops pipeline and terminal projects in the United States, Canada and Mexico. We have no future obligation to make any additional investments into WesPac. All key investment, management and operating decisions of WesPac require unanimous approval from a management committee equally represented by Kealine and us. The Company believes the ownership interest in WesPac broadens its exposure to construction opportunities across North America.

The following is a summary of the financial position and results as of and for the periods ended:

	June 30, 2013		December 31, 2012

WesPac Energy, LLC
Balance sheet data
Assets	$	16,176	$	16,896
Liabilities	773		1,063
Net assets	$	15,403	$	15,833
Company’s equity investment	$	11,248	$	11,463

	Three months ended June 30,						Six months ended June 30,
	2013			2012			2013			2012

Earnings data:
Revenue	$	50		$	111		$	89		$	511
Expenses	$	288		$	428		$	519		$	644
Earnings before taxes	$	(238	)	$	(317	)	$	(430	)	$	(133	)
Company’s equity in earnings	$	(119	)	$	(159	)	$	(215	)	$	(67	)

St.—Bernard Levee Partners

The Company purchased a 30% interest in St.—Bernard Levee Partners (“Bernard”) in the fourth quarter 2009 for $300 and accounts for this investment under the equity method. Bernard engaged in construction activities in Louisiana, and all work was completed January 2013. Bernard distributed $490 and $4,200 to its equity holders during the six months ended June 30, 2013 and 2012, respectively, of which, the Company’s share, as calculated under the joint venture agreement, was $145 and $1,260 for the same periods in 2013 and 2012, respectively. The following is a summary of the financial position and results as of and for the periods ended:

	June 30, 2013		December 31, 2012

*St. — Bernard Levee Partners*
Balance sheet data
Assets	$	22	$	592
Liabilities	22		86
Net assets	$	—	$	506
Company’s equity investment	$	—	$	150

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	Three months ended June 30,					Six months ended June 30,
	2013			2012		2013			2012

Earnings data:
Revenue	$	—		$	499	$	—		$	3,934
Expenses	$	16		$	126	$	16		$	198
Earnings before taxes	$	(16	)	$	373	$	(16	)	$	3,736
Company’s equity in earnings	$	(5	)	$	112	$	(5	)	$	1,121

Alvah, Inc.

As part of the acquisition of Q3C, the Company acquired a 49% membership interest in Alvah, Inc., a California corporation (“Alvah”). Alvah is engaged in electrical contracting activities, primarily in Northern California and worked as a subcontractor for ARB prior to the Q3C acquisition. Alvah has continued to work for ARB subsequent to the acquisition. In December 2012, Alvah distributed $200, of which the Company’s share was $98. During the three and six months ending June 30, 2013, payments made by ARB to Alvah were $1,423 and $2,909, respectively, and payments made by Q3C were $0 and $212, respectively. For the same periods in the prior year, ARB made payments of $908 and $2,153, respectively and Q3C made payments of $115 and $233, respectively.

The following is a summary of the financial position and results as of and for the period ended:

	June 30, 2013		December 31, 2012

Balance sheet data
Assets	$	3,009	$	2,177
Liabilities	1,477		1,208
Net assets	$	1,532	$	969
Company’s equity investment in venture	$	1,476	$	1,200

	Three months ended June 30,					Six months ended June 30,
	2013			2012		2013		2012

Earnings data:
Revenue	$	3,292		$	—	$	6,008	$	—
Expenses	$	3,474		$	—	$	5,445	$	—
Earnings before taxes	$	(182	)	$	—	$	563	$	—
Company’s equity in earnings	$	(89	)	$	—	$	276	$	—

Because Alvah was not acquired until November 2012, there was no activity in the prior year.

Note 8 — Business Combinations

2013 Acquisition - FSSI

On March 11, 2013, the Company’s subsidiary, PES, purchased the assets of Force Specialty Services Inc. (“FSSI”) which specializes in turn-around work at refineries and chemical plants in the Gulf Coast area. Based in the greater Houston, Texas area, FSSI’s location provides a presence and convenient access to refineries in south Texas, the Houston ship channel and Louisiana.

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The fair value of the consideration for the acquisition was $2,377. Consideration consisted of cash totaling $1,675, of which $1,025 was paid at closing and $650 was paid in the second quarter 2013. The agreement provides for three future potential payments, contingent upon FSSI meeting certain operating performance targets for the remainder of calendar year 2013 and calendar years 2014 and 2015.

The contingent consideration is as follows: (1) $500 in cash for the achievement of pretax income of at least $553 for the remainder of the year ending December 31, 2013; (2) a payment of $500 in cash if pretax income for the year 2014 is at least $2,502; and (3), a payment of $500 in cash if pretax income for the year 2015 is at least $4,227. The estimated fair value of the potential contingent consideration on the acquisition date was $702 and at June 30, 2013 was $721.

The asset purchase agreement also included a provision that PES pay $1,000 for a five-year employment, non-competition and non-solicitation agreement with a key employee. If the employee violates the agreement or terminates his employment prior to the end of the five-year period, he is required to repay the unamortized amount of the $1,000 payment. This agreement has been accounted for as a prepaid asset and is being amortized equally over the five-year period.

At closing the Company received $302 in small tools inventory, $448 in property, plant and equipment, and recorded accounts payable of $1,060.

The acquisition was accounted for using the acquisition method of accounting. The assets acquired and liabilities assumed were measured at their estimated fair value at the acquisition date. The FSSI purchase was included in the Company’s consolidated balance sheet as of June 30, 2013. During the period subsequent to its March 11, 2013 acquisition date, FSSI contributed revenues of $2,990 and $3,473 and gross profit of $183 and $311, for the three and six months ended June 30, 2013, respectively.

During the second quarter 2013, the Company finalized its estimates of the fair value of the contingent consideration, intangible assets and goodwill for the acquisition. The final revision resulted in a change from the estimated values recorded at March 31, 2013, including a decrease in the fair value of the contingent consideration of $136, increases in intangible assets of $800 and a decrease of $936 for goodwill.

The customer relationships were valued at $950 utilizing the “excess earnings method” of the income approach. The estimated discounted cash flows associated with existing customers and projects were based on historical and market participant data. Such discounted cash flows were net of fair market returns on the various tangible and intangible assets that are necessary to realize the potential cash flows.

The fair value of the tradename of $550 was determined based on the “relief from royalty” method. A royalty rate was selected based on consideration of several factors, including external research of third party tradename licensing agreements and their royalty rate levels, and management estimates. The useful life was estimated at five years based on management’s expectation for continuing value of the tradename in the future.

The fair value for the non-compete agreement of $100 was based on a discounted “income approach” model, including estimated financial results with and without the non-compete agreement in place. The agreement was analyzed based on the potential impact of competition that certain individuals could have on the financial results, assuming the agreement was not in place. An estimate of the probability of competition was applied and the results were compared to a similar model assuming the agreement was in place.

Goodwill of $1,087 largely consists of expected benefits from the greater presence and convenient access to south Texas, the Houston ship channel and Louisiana and FSSI’s expertise in turn-around work for refineries and chemical plants. Goodwill also includes the value of the assembled workforce of the FSSI business. Based on the current tax treatment, goodwill and other intangible assets will be deductible for income tax purposes over a fifteen-year period.

2012 Acquisition - Sprint Pipeline Services, L.P.

The March 12, 2012 acquisition of Sprint was accounted for using the acquisition method of accounting. The fair value of the consideration totaled $28,377, which included cash payments of $21,197, Company stock valued at $980 (or 62,052 shares of restricted common stock) and contingent consideration of $6,200.

The contingent consideration was as follows: If income before interest, taxes, depreciation and amortization (“EBITDA”) for 2012, as defined in the purchase agreement, was at least $7,000, we would pay $4,000 in cash to the sellers. The earnout target was achieved in 2012 and was paid in April 2013.

The 2013 earnout target provides for an additional cash payment of $4,000 to the sellers if 2013 EBITDA is at least $7,750. The estimated fair value of the 2013 contingent consideration as of the acquisition date was $2,745 and at June 30, 2013 and December 31, 2012, the estimated fair value of the contingent consideration was $3,205 and $3,020, respectively.

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2012 Acquisition - Silva Companies

The May 30, 2012 acquisition of Silva was accounted for using the acquisition method of accounting. The fair value of the consideration was $14,090.

2012 Acquisition - The Saxon Group

The September 28, 2012 acquisition of Saxon was accounted for using the acquisition method of accounting. The fair value of the consideration was $550 in cash, payment of a banknote for $2,429, and contingent consideration valued at $1,950 for total consideration of $4,929.

The contingent consideration included an earnout where the Company would pay $2,500 to the sellers, contingent upon Saxon meeting one of the following two targets: (1) EBITDA for the fifteen month period ending December 31, 2013 of at least $4,000 or; (2) EBITDA for the twenty-one month period ending June 30, 2014 of at least $4,750. The estimated fair value of the contingent consideration on the acquisition date was $1,950. The estimated fair value of the contingent consideration was $2,184 and $2,028 at June 30, 2013 and December 31, 2012, respectively.

2012 Acquisition — Q3 Contracting

The November 17, 2012 acquisition of Q3C was accounted for using the acquisition method of accounting. The fair value of the consideration totaled $55,994, and included a cash payment of $48,116, a contingent earnout with a fair value of $7,448 and payment of $430 in Company common stock. In January 2013, we issued 29,273 shares of unregistered stock.

The contingent consideration included an earnout whereby the Company would pay additional cash to the sellers contingent on Q3C meeting certain operating performance targets. The targets were based on obtaining certain levels of Q3C’s EBITDA as that term is defined in the stock purchase agreement. The targets are as follows:

1. If EBITDA for the period November 18, 2012 through December 31, 2013 is at least $17,700, the Company agreed to pay $3,750 in cash to the sellers, with an additional cash payment of $1,250 if EBITDA exceeds $19,000.

2. If EBITDA for the calendar year 2014 is at least $19,000, the Company agreed to pay $3,750 in cash to the sellers, with an additional cash payment of $1,250 if EBITDA exceeds $22,000.

The fair value of the contingent consideration was estimated at $7,450 as of the purchase date and is included on the Company’s balance sheet as a liability. The fair value is based on management’s evaluation of the probability of Q3C meeting the EBITDA targets for the two periods, discounted at the Company’s estimated average cost of capital. The estimated fair value at June 30, 2013 and December 31, 2012 was $7,862 and $7,490, respectively.

Supplemental Unaudited Pro Forma Information for the three and six months ended June 30, 2013 and 2012

In accordance with ASC Topic 805 we are combining the pro forma information for the FSSI, Sprint, Silva, Saxon and Q3C acquisitions (“the Acquisitions”). The following pro forma information for the three and six months ended June 30, 2013 and 2012 presents the combined results of operations of the Acquisitions combined, as if the Acquisitions had each occurred at the beginning of 2012. The supplemental pro forma information has been adjusted to include:

· the pro forma impact of amortization of intangible assets and depreciation of property, plant and equipment, based on the purchase price allocations;

· the pro forma impact of the expense associated with the amortization of the discount for the fair value of the contingent consideration for potential earnout liabilities that may be achieved in 2013 for the Sprint and FSSI acquisitions and 2013 or 2014 for the Saxon, Q3C and FSSI acquisitions;

· the pro forma tax effect of both the income before income taxes and the pro forma adjustments, calculated using a tax rate of 39.0% for the three and six months ended June 30, 2012 and the applicable periods in 2013; and

· the pro forma increase in weighted average shares outstanding including 62,052 unregistered shares of common stock issued as part of the Sprint acquisition and 29,273 shares of unregistered common stock issued as part of the Q3C acquisition.

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The pro forma results are presented for illustrative purposes only and are not necessarily indicative of, or intended to represent, the results that would have been achieved had the Acquisitions been completed on January 1, 2012. For example, the pro forma results do not reflect any operating efficiencies and associated cost savings that the Company might have achieved with respect to the combined companies.

	Three months ended June 30,				Six months ended June 30,
	2013		2012		2013		2012

Revenues	445,013		357,368		857,807		675,783
Income before provision for income taxes	25,883		16,583		42,015		31,158
Net income attributable to Primoris	15,564		10,135		25,264		19,084

Weighted average common shares outstanding:
Basic	51,562		51,526		51,511		51,440
Diluted	51,626		51,526		51,575		51,440

Earnings per share:
Basic	$	0.30	$	0.20	$	0.49	$	0.37
Diluted	$	0.30	$	0.20	$	0.49	$	0.37

Note 9—Intangible Assets

At June 30, 2013 and December 31, 2012, intangible assets totaled $49,893 and $51,978, respectively, net of amortization. The June 30, 2013 balance includes the effect of the FSSI acquisition (See Note 8). The table below summarizes the intangible asset categories, amounts and the average amortization periods, which are generally on a straight-line basis, as follows:

	Amortization	June 30,		December 31,
	Period	2013		2012
Tradename	3 to 10 years	$	22,593	$	23,586
Non-compete agreements	2 to 5 years	$	3,407	$	4,130
Customer relationships	5 to 15 years	$	23,893	$	24,212
Backlog	0.75 years	$	—	$	50
Total		$	49,893	$	51,978

Amortization expense of intangible assets was $1,891 and $1,447 for the three months ended June 30, 2013 and 2012, respectively, and amortization expense for the six months ended June 30, 2013 and 2012 was $3,685 and $3,193, respectively. Estimated future amortization expense for intangible assets is as follows:

For the Years Ending December 31,	Estimated Intangible Amortization Expense
2013 (remaining six months)	$	3,655
2014	7,489
2015	7,220
2016	6,274
2017	5,909
Thereafter	19,346
	$	49,893

Note 10—Accounts Payable and Accrued Liabilities

At June 30, 2013 and December 31, 2012, accounts payable included retention amounts of approximately $12,171 and $15,946, respectively. These amounts are due to subcontractors but have been retained pending contract completion and customer acceptance of jobs.

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

	June 30, 2013		December 31, 2012

Payroll and related employee benefits	$	40,147	$	33,086
Insurance, including self-insurance reserves	27,800		22,982
Reserve for estimated losses on uncompleted contracts	522		764
Corporate income taxes and other taxes	2,173		3,779
Accrued overhead cost	1,266		2,007
Other	8,441		13,534
	$	80,349	$	76,152

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Note 11—Credit Arrangements

Revolving Credit Facility

As of June 30, 2013, the Company had a revolving credit facility (the “Credit Agreement”). The Credit Agreement was entered into by and among the Company, The PrivateBank and Trust Company, as administrative agent (the “Administrative Agent”) and co-lead arranger, The Bank of the West, as co-lead arranger and IBERIABANK Corporation (the “Lenders”). The Credit Agreement is a $75 million revolving credit facility whereby the lenders agree to make loans on a revolving basis from time to time and to issue letters of credit for up to the $75 million committed amount. The Credit Agreement also provides for an incremental facility of up to $50 million. The termination date of the Credit Agreement is December 28, 2017.

The principal amount of any loans under the Credit Agreement will bear interest at either: (i) LIBOR plus an applicable margin as specified in the Credit Agreement (based on the Company’s senior debt to EBITDA ratio), or (ii) the Base Rate (which is the greater of (a) the Federal Funds Rate plus 0.5% or (b) the prime rate as announced by the Administrative Agent). Quarterly non-use fees, letter of credit fees and administrative agent fees are payable at rates specified in the Credit Agreement.

The principal amount of any loan drawn under the Credit Agreement may be prepaid in whole or in part, with a minimum prepayment of $5 million, at any time, potentially subject to make-whole provisions.

The Credit Agreement includes customary restrictive covenants for facilities of this type, as discussed below.

Commercial letters of credit amounted to $5,659 at June 30, 2013 and $4,808 at December 31, 2012. Other than the commercial letters of credit, there were no borrowings under this line of credit during the six months ended June 30, 2013, leaving available borrowing capacity at $69,341 at June 30, 2013.

As part of the execution of the Credit Agreement, the previous Loan and Security Agreement dated October 29, 2009, as amended, between the Company and The Private Bank and Trust Company (the “PrivateBank Agreement”), was terminated. There were no borrowings outstanding at the time of the termination and all letter of credit amounts issued and outstanding under the terminated agreement were transferred to the Lenders under the Credit Agreement discussed above.

Senior Secured Notes and Shelf Agreement

On December 28, 2012, the Company entered into a $50 million Senior Secured Notes purchase (“Senior Notes”) and a $25 million private shelf agreement (the “Notes Agreement”) by and among the Company and The Prudential Investment Management, Inc. and certain Prudential affiliates (the “Noteholders”).

A total of $50 million in Senior Notes was funded on December 28, 2012. The Senior Notes are due December 28, 2022 and bear interest at an annual rate of 3.65%, paid quarterly in arrears. Annual principal payments of $7.1 million are required beginning December 28, 2016 through December 28, 2021 with a final payment due on December 28, 2022. The principal amount may be prepaid in whole or in part, with a minimum prepayment of $5 million, at any time, subject to make-whole provisions.

The Notes Agreement provides for the issuance of additional notes of up to $25 million, during the first three years of the Notes Agreement with maturity dates no more than 10 years from the date issued, at the market interest rate for notes with equivalent terms and conditions.

All loans made under both the Credit Agreement and the Notes Agreement are secured by our assets, including, among others, our cash, inventory, goods, equipment (excluding equipment subject to permitted liens) and accounts receivable. All of our domestic subsidiaries have issued joint and several guaranties in favor of the Lenders and Noteholders for all amounts under the Credit Agreement and Notes Agreement.

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Both the Credit Agreement and the Notes Agreement contain various restrictive and financial covenants including among others, minimum tangible net worth, senior debt/EBITDA ratio, debt service coverage requirements and a minimum balance for unencumbered net book value for fixed assets. In addition, the agreements include restrictions on investments, change of control provisions and provisions in the event the Company disposes more than 20% of its total assets.

The Company was in compliance with the covenants for the Credit Agreement and Senior Notes at June 30, 2013.

Canadian Credit Facility

The Company has a credit facility for $10,000 in Canadian dollars with a Canadian bank for purposes of issuing commercial letters of credit in Canada. The credit facility has an annual renewal and provides for the issuance of commercial letters of credit for a term of up to five years. The facility provides for an annual fee of 1% for any issued and outstanding commercial letters of credit. Letters of credit can be denominated in either Canadian or U.S. dollars. At June 30, 2013 and December 31, 2012, letters of credit outstanding totaled $3,539 and $1,364 in Canadian dollars, respectively. At June 30, 2013, the available borrowing capacity was $6,461 in Canadian dollars. The credit facility contains a working capital restrictive covenant for our Canadian subsidiary, OnQuest Canada, and at June 30, 2013, OnQuest Canada, ULC was in compliance.

Subordinated Promissory Notes

Subordinated Promissory Note — Rockford . In connection with the 2010 acquisition of Rockford, the Company executed an unsecured promissory note with an initial principal amount of $16,712. As a result of a dispute related to a certain liability at the time of the closing of the transaction, the Company ceased making principal and interest payments in May 2012, when the outstanding balance reached $5,000. In December 2012, the parties came to a resolution and the Company paid $1,500 to cancel the subordinated note.

Subordinated Promissory Note — JCG . In connection with the 2009 acquisition of JCG, the Company executed an unsecured promissory note on December 18, 2009 in favor of the sellers with an initial principal amount of $53,500. The JCG note was paid in full on March 12, 2012.

Note 12 — Noncontrolling Interests

The Company applies the provisions of ASC Topic 810-10-45, which establishes accounting and reporting standards for ownership interests of parties other than the Company in subsidiaries, such as joint ventures and partnerships.

The Company determined that the Blythe joint venture was a variable interest entity (“VIE”) and that the Company was the primary beneficiary as a result of its significant influence over the joint venture operations.

The Blythe joint venture operating activities were included in the Company’s consolidated statements of income as follows:

	Three months ended June 30,		Six months ended June 30,
	2013	2012	2013	2012

Revenues	15,631	3,793	31,903	5,414
Net income attributable to noncontrolling interests	329	124	599	168

Since Blythe is a partnership, no tax effect was recognized for the income. There were no distributions to noncontrolling interests and no capital contributions made by noncontrolling interests during the six months ended June 30, 2013 and 2012.

The carrying value of the assets and liabilities associated with the operations of the Blythe joint venture are included in the Company’s consolidated balance sheets as follows:

	June 30, 2013		December 31, 2012

Cash	$	4,442	$	3,565
Accounts receivable	11,464		8,843
Current liabilities	11,680		9,379

The net assets of the joint venture are restricted for use by the project and are not available for general operations of the Company.

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Note 13 — Contingent Earnout Liabilities

As part of the Rockford acquisition in November 2010, the Company agreed to issue additional cash and common stock to the sellers, contingent upon Rockford meeting certain operating performance targets for the fourth quarter 2010, for the five quarters ending December 31, 2011 and for the year ended December 31, 2012. The contingent earnout liability for 2012 was achieved and in April 2013, the Company made a $6,900 cash payment.

The Company has recorded additional contingent earnout consideration liabilities related to the acquisitions of FSSI, Sprint, Saxon and Q3C as discussed in Note 8 — Business Combinations.

Note 14—Related Party Transactions

Primoris has entered into leasing transactions with Stockdale Investment Group, Inc. (“SIGI”). Brian Pratt, our Chief Executive Officer, President and Chairman of the Board of Directors and our largest stockholder, holds a majority interest and is the chairman, president and chief executive officer and a director of SIGI. John M. Perisich, our Executive Vice President and General Counsel, is secretary of SIGI.

Primoris leases properties from SIGI at the following locations:

1. Bakersfield (lease expires October 2022)

2. Pittsburg (lease expires April 2023)

3. San Dimas in California (lease expires March 2019)

4. Pasadena, Texas (leases expire in July 2019 and 2021)

During the six months ended June 30, 2013 and 2012, the Company paid $471 and $462, respectively, in lease payments to SIGI for the use of these properties.

The Company entered into a $6.1 million agreement in 2010 to construct a wastewater facility for Pluris, LLC, a private company in which Brian Pratt holds the majority interest. The transaction was reviewed and approved by the Audit Committee of the Board of Directors of the Company. The project was substantially completed in December 2011. The Company recognized no revenues in 2013 and recognized revenues of $355 for the six months ended June 30, 2012, at normal margins.

Primoris leases a property from Roger Newnham, a former owner and current manager of our subsidiary, OnQuest Canada, ULC. The property is located in Calgary, Canada. During the six months ended June 30, 2013 and 2012, Primoris paid $150 and $141, respectively, in lease payments. The current term of the lease is through December 31, 2014.

Primoris leases a property from Lemmie Rockford, one of the Rockford sellers, which commenced November 1, 2011. The property is located in Toledo, Washington. During the six months ended June 30, 2013 and 2012, Primoris paid $45 and $45, respectively, in lease payments. The lease expires in January 2015.

As a result of the November 2012 acquisition of Q3C, the Company became party to leased property from Quality RE Partners, owned by three of the Q3C selling shareholders, of whom two are current employees, including Jay Osborn, President of Q3C. The property is located in Little Canada, Minnesota. During the six months ended June 30, 2013, the Company paid $132, in lease payments to Quality RE Partners for the use of this property. The lease commenced October 28, 2012 and expires in October 2022.

As discussed in Note 7— “ Equity Method Investments ”, the Company owns several non-consolidated investments and has recognized revenues on work performed by the Company for those joint ventures.

Note 15—Stock-Based Compensation

On May 3, 2013, the Board of Directors granted 100,000 Restricted Stock Units (“Units”) under the 2013 Equity Incentive Plan (the “2013 Plan”). The Units vest over a service period of four equal installments in 2014 through 2017, subject to earlier acceleration, termination, cancellation or forfeiture as provided in the underlying award agreement. Each Unit represents the right to receive one share of the Company’s common stock when vested.

The fair value of the Units was based on the closing market price of our common stock on the day prior to the date of the grant, or $21.98 per Unit. Stock compensation expense for the Units is being amortized using the straight-line method over the service vesting period. For the three and six months ended June 30, 2013 the Company recognized $91 in compensation expense. The Company had approximately $2.1 million of unrecognized compensation expense related to the Units at June 30, 2013, which will be recognized over a period of 3.8 years.

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Vested Units accrue “Dividend Equivalents” (as defined in the 2013 Plan) which will be accrued as additional Units. At June 30, 2013, there were no accrued Dividend Equivalent Units.

Note 16—Income Taxes

The effective tax rate on income before taxes and noncontrolling interests for the six months ended June 30, 2013 was 38.22%. The effective tax rate for income attributable to Primoris is 39.0%. The rate differs from the U.S. federal statutory rate of 35% due primarily to state income taxes, the “Domestic Production Activity Deduction” and nondeductible meals and incidental per diems common in the construction industry.

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

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

In September 2012, the Internal Revenue Service (“IRS”) concluded an examination of our federal income tax returns for 2008 and 2009, which did not have a material impact on our financial statements. The tax years 2010 through 2011 remain open to examination by the IRS. The statute of limitations of state and foreign jurisdictions vary generally between 3 to 5 years. Accordingly, the tax years 2007 through 2011 generally remain open to examination by the other major taxing jurisdictions in which the Company operates.

Note 17—Dividends and Earnings Per Share

The Company has paid or declared cash dividends during 2013 as follows:

· On March 5, 2013, the Company declared a cash dividend of $0.03 per common share, payable to stockholders of record on March 29, 2013. The dividend, totaling $1,547, was paid on April 15, 2013.

· On May 3, 2013, the Company declared a cash dividend of $0.035 per common share, payable to stockholders of record on June 28, 2013. The dividend, totaling $1,805, was paid on July 15, 2013.

The table below presents the computation of basic and diluted earnings per share for the three and six months ended June 30, 2013 and 2012:

	Three months ended June 30,				Six months ended June 30,
	2013		2012		2013		2012
Numerator:
Net income attributable to Primoris	$	15,564	$	11,733	$	25,334	$	22,219
Denominator (shares in thousands):
Weighted average shares for computation of basic earnings per share	51,562		51,435		51,510		51,386
Dilutive effect of shares issued to independent directors	—		—		4		—
Dilutive effect of shares issued as part of Q3C acquisition	—		—		1		—
Dilutive effect of unvested restricted stock units	64		—		32		—
Weighted average shares for computation of diluted earnings per share	51,626		51,435		51,547		51,386

Earnings per share:
Basic earnings per share	$	0.30	$	0.23	$	0.49	$	0.43
Diluted earnings per share	$	0.30	$	0.23	$	0.49	$	0.43

Note 18—Stockholders’ Equity

Common stock — In March 2013, the Company received $1,455 for 131,989 shares of common stock issued, under a purchase arrangement within the Company’s Long-Term Incentive Plan (“LTI Plan”) for managers and executives. The LTI Plan allows participants to purchase Company common stock at a discount from the market price. The shares purchased in March 2013 were for bonuses earned in 2012 and were calculated at 75% of the average market closing price of December 2012. In March 2012, the Company received $1,240 for 111,790 shares of common stock issued under the LTI Plan for bonuses earned in the prior year.

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In March 2013, the Company issued 12,480 shares of common stock as part of the quarterly compensation of the non-employee members of the Board of Directors.

As part of the acquisition of Q3C, the Company agreed to issue shares of common stock with a value of $430 based on the average December 2012 closing prices, or $14.69 per share. On January 7, 2013, we issued 29,273 unregistered shares of stock.

Note 19—Commitments and Contingencies

Leases — The Company leases certain property and equipment under non-cancellable operating leases which expire at various dates through 2019. The leases require the Company to pay all taxes, insurance, maintenance and utilities and are classified as operating leases in accordance with ASC Topic 840 “Leases”.

Total lease expense during the three and six months ended June 30, 2013 was $3,700 and $7,545, respectively, compared to $2,517 and $4,759 for the same periods in 2012. The amounts for the three and six months ended June 30, 2013 included lease payments made to related parties of $398 and $797, respectively, and $323 and $648 for the three and six months ended June 30, 2012, respectively.

Letters of credit — At June 30, 2013, the Company had letters of credit outstanding of $9,023 and at December 31, 2012, the Company had letters of credit outstanding of $6,168. The outstanding amounts include the U.S. dollar equivalents for letters of credit issued in Canadian dollars.

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

Bonding— At June 30, 2013 and December 31, 2012, the Company had bid and completion bonds issued and outstanding totaling approximately $1,388,279 and $1,298,589, respectively.

Withdrawal liability for multiemployer pension plan — In November 2011, Rockford and ARB, along with other members of the Pipe Line Contractors Association (“PLCA”), withdrew from the Central States Southeast and Southwest Areas Pension Fund multiemployer pension plan (the “Plan”). In connection with the withdrawal, the Company has recorded an estimated liability of $7,500 based on information provided by the Plan. The Company withdrew from the Plan in order to mitigate its liability in connection with the Plan, which is significantly underfunded. The Plan has asserted that the PLCA members did not affect a withdrawal in 2011, although the Company believes that a legally effective withdrawal occurred in November 2011 and has recorded the withdrawal liability on that basis. If the Plan were to prevail in its assertion and the withdrawal of the Company were deemed to occur after 2011, the amount of any withdrawal liability could increase.

Prior to its acquisition, Q3C had also withdrawn from the Plan. In November 2012, Q3C estimated a withdrawal liability of $85. Subsequently, in the first quarter of 2013, the Plan asserted that the liability was $119. Without agreeing to the amount, Q3C is making payments toward the liability amount.

Contingent Consideration — Earnouts related to acquisitions are discussed in Note 8 — Business Combinations and Note 13 — Contingent Earnout Liabilities.

Note 20—Reportable Operating Segments

The Company segregates its business into three operating segments: the East Construction Services segment, the West Construction Services segment and the Engineering segment.

The East Construction Services segment includes the JCG construction business, located primarily in the southeastern United States and the businesses located in the Gulf Coast region of the United States, including Cardinal Contractors, Inc. The segment also includes the operating results relating to the acquisitions of Sprint, Silva and Saxon in 2012 and FSSI in 2013.

The West Construction Services segment includes the construction services performed by ARB, ARB Structures, Inc., Rockford, Alaska Continental Pipeline, Inc., All Day Electric Company, Inc., Primoris Renewables, Inc., Juniper Rock, Inc. and Stellaris, LLC. While most of the entities perform work primarily in California, Rockford operates throughout the United States and Q3C operates in the upper Midwest United States. The Blyth joint venture is also included as a part of the segment.

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The Engineering segment includes the results of Onquest, Inc. and OnQuest Canada, ULC.

All intersegment revenues and gross profit, which were immaterial, have been eliminated in the following tables.

Segment Revenues

Revenue by segment for the three months ended June 30, 2013 and 2012 were as follows:

	For the three months ended June 30,
	2013				2012
Segment	Revenue		% of Segment Revenue		Revenue		% of Segment Revenue

East Construction Services	$	175,398	39.4	%	$	156,057	46.2	%
West Construction Services	258,194		58.0	%	167,287		49.6	%
Engineering	11,421		2.6	%	14,092		4.2	%
Total	$	445,013	100.0	%	$	337,436	100.0	%

Revenue by segment for the six months ended June 30, 2013 and 2012 were as follows:

	For the six months ended June 30,
	2013				2012
Segment	Revenue		% of Segment Revenue		Revenue		% of Segment Revenue

East Construction Services	$	365,609	42.8	%	$	277,907	44.2	%
West Construction Services	465,880		54.4	%	325,318		51.7	%
Engineering	23,519		2.8	%	25,784		4.1	%
Total	$	855,008	100.0	%	$	629,009	100.0	%

Segment Gross Profit

Gross profit by segment for the three months ended June 30, 2013 and 2012 were as follows:

	For the three months ended June 30,
	2013				2012
Segment	Gross Profit		% of Segment Revenue		Gross Profit		% of Segment Revenue

East Construction Services	$	15,215	8.7	%	$	17,360	11.1	%
West Construction Services	41,926		16.2	%	24,294		14.5	%
Engineering	2,396		21.0	%	2,350		16.7	%
Total	$	59,537	13.4	%	$	44,004	13.0	%

Gross profit by segment for the six months ended June 30, 2013 and 2012 were as follows:

	For the six months ended June 30,
	2013				2012
Segment	Gross Profit		% of Segment Revenue		Gross Profit		% of Segment Revenue

East Construction Services	$	30,210	8.3	%	$	28,778	10.4	%
West Construction Services	70,675		15.2	%	48,695		15.0	%
Engineering	4,748		20.2	%	4,127		16.0	%
Total	$	105,633	12.4	%	$	81,600	13.0	%

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Segment Goodwill

The following presents the amount of goodwill recorded by segment at June 30, 2013 and at December 31, 2012.

Segment	June 30, 2013		December 31, 2012

East Construction Services	$	70,946	$	69,859
West Construction Services	44,641		44,641
Engineering	2,441		2,441
Total	$	118,028	$	116,941

Geographic Region — Revenues and Total Assets

Revenue and total assets by geographic area for the six months ended June 30, 2013 and 2012 were as follows:

	Revenues
	For the six months ended June 30,
	2013				2012				Total Assets
Country:	Revenue		% of Revenue		Revenue		% of Revenue		June 30, 2013		December 31, 2012

United States	$	845,461	98.9	%	$	624,293	99.3	%	$	914,123	$	920,872
Non-United States	9,547		1.1		4,716		0.7		10,962		10,335
Total	$	855,008	100.0	%	$	629,009	100.0	%	$	925,085	$	931,207

All non-United States revenue has been generated in the Engineering Segment. For the table above, revenues generated by OnQuest Canada, ULC, were used to determine non-United States revenues.

Note 21—Subsequent Event

On July 25, 2013, the Company exercised its option to draw down the remaining $25 million under the Notes Agreement, as described in Note 11 — Credit Arrangements. The notes are due July 25, 2023 and bear interest at an annual rate of 3.85% paid quarterly in arrears. Seven annual principal payments of $3.6 million are required beginning July 25, 2017 with a final payment due on July 25, 2023. All other terms and conditions under the Notes Agreement remain unchanged.

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PRIMORIS SERVICES CORPORATION

MANAGEMENT’S DISCUSSION AND ANALYSIS

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

Forward Looking Statements

This Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2013 (“Second Quarter 2013 Report”) contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), which are subject to the “safe harbor” created by those sections. Forward-looking statements include information concerning our possible or assumed future results of operations, business strategies, financing plans, competitive position, industry environment, potential growth opportunities, the effects of regulation and the economy, generally. Forward-looking statements include all statements that are not historical facts and can be identified by terms such as “anticipates”, “believes”, “could”, “estimates”, “expects”, “intends”, “may”, “plans”, “potential”, “predicts”, “projects”, “should”, “will”, “would” or similar expressions.

Forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. We discuss many of these risks in detail in Part I, Item 1A “Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, 2012 and our other filings with the Securities and Exchange Commission (“SEC”). Also, forward-looking statements represent our management’s beliefs and assumptions only as of the date of this Second Quarter 2013 Report. You should read this Second Quarter 2013 Report, our Annual Report on Form 10-K for the year ended December 31, 2012 and our other filings with the SEC completely and with the understanding that our actual future results may be materially different from what we expect.

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

The following discussion and analysis should be read in conjunction with the unaudited financial statements and the accompanying notes included in Part 1, Item 1 of this Second Quarter 2013 Report and our Annual Report on Form 10-K for the year ended December 31, 2012.

Introduction

Primoris Services Corporation (“Primoris”, the “Company”, “we”, “us” or “our”) is a holding company of various subsidiaries, which form one of the largest publicly traded specialty contractor and infrastructure companies in the United States. Serving diverse end-markets, Primoris provides a wide range of construction, fabrication, maintenance, replacement, water and wastewater, and engineering services to major public utilities, petrochemical companies, energy companies, municipalities, state departments of transportation and other customers. We install, replace, repair and rehabilitate natural gas, refined product, water and wastewater pipeline systems, large diameter gas and liquid pipeline facilities, heavy civil projects, earthwork and site development and also construct mechanical facilities and other structures, including power plants, petrochemical facilities, refineries and parking structures. In addition, we provide maintenance services, including inspection, overhaul and emergency repair services, to cogeneration plants, refineries and similar mechanical facilities. One of our subsidiaries provides engineering and design services for fired heaters and furnaces primarily used in refinery applications.

Including our predecessor companies, we have been in business for more than 65 years. We became a publicly traded company in 2008. At that time, our operations were focused primarily on the West Coast through our subsidiaries ARB, Inc. (“ARB”) and ARB Structures, Inc. We also provided product engineering services through a subsidiary, OnQuest, Inc. and its wholly owned subsidiary, OnQuest Canada, ULC (formerly Born Heaters Canada, ULC) to international customers and water and waste water construction services in Florida through Cardinal Contractors, Inc. ARB and ARB Structures are headquartered in Lake Forest, CA, OnQuest is headquartered in San Dimas, CA, OnQuest Canada, ULC is headquartered in Calgary, Canada and Cardinal Contractors is headquartered in Sarasota, FL.

Since July 2008, we have continued to strategically expand both our capabilities and our geographic presence. This expansion has resulted in significant increases in revenues and profitability. The following is a discussion of the major acquisitions.

· On December 18, 2009, we acquired James Construction Group, LLC, a privately-held Florida limited liability company (“JCG”). JCG is one of the largest general contractors based in the Gulf Coast states and is engaged in highway, industrial and environmental construction, primarily in Louisiana, Texas and Florida. JCG is the successor company to T. L. James and Company, Inc., a Louisiana company that has been in business for over 80 years. Headquartered in Baton Rouge, Louisiana, JCG serves government and private clients in a broad geographical region that includes the entire Gulf Coast region of the United States.

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· On November 8, 2010, we acquired privately-held Rockford Corporation (“Rockford). Based in Hillsboro (outside Portland), Oregon, Rockford specializes in construction of large diameter natural gas and liquid pipeline projects and related facilities throughout most of North America.

· In 2012, we made four acquisitions:

· On March 12, 2012, we purchased certain assets of Sprint Pipeline Services, L.P. (“Sprint”), headquartered in Pearland (outside Houston), Texas. Sprint provides a comprehensive range of pipeline construction, maintenance, upgrade, fabrication and specialty services primarily in Texas and the southeastern United States.

· On May 30, 2012, we purchased certain assets of Silva Contracting Company, Inc., Tarmac Materials, LLC and C3 Interest, LLC (collectively, “Silva”). Based outside of Houston, Texas, Silva provides transportation infrastructure maintenance, asphalt paving, and material sales in the Gulf Coast region of the United States. Following this acquisition, Silva was merged with the operations of JCG.

· On September 28, 2012, we purchased certain assets of The Saxon Group, Inc. (“Saxon”). Based in Suwannee, Georgia (outside Atlanta), Saxon is a full service industrial construction enterprise with special expertise in the industrial gas processing and power plant sectors.

· On November 17, 2012, we purchased all of the stock of Q3 Contracting, Inc., a privately-held Minnesota corporation (“Q3C”). The sellers agreed to treat the acquisition as an asset purchase under Section 338(h)(10) of the Internal Revenue Code. Based in Little Canada, Minnesota, north of St. Paul, Minnesota, Q3C specializes in small diameter pipeline and gas distribution construction, restoration and other services, primarily for utilities in the upper Midwest region of the United States.

· In March 2013, the Company’s subsidiary, Primoris Energy Services Inc. (PES) purchased the assets of Force Specialty Services, Inc. (“FSSI”) which specializes in turn-around work at refineries and chemical plants in the Gulf Coast area.

The Company is a party to the Blythe Power Constructors joint venture (“Blythe”) for the installation of a parabolic trough solar field and steam generation system in California.

During the past five years, we have also created legal entities to consolidate or focus our efforts. For example, in 2009 we created Primoris Renewables, Inc. to focus on alternative energy projects, and in 2012, we created PES which is the legal entity that owns Sprint, Saxon and FSSI. Additionally, some of our subsidiaries have increased their focus on certain industries or geographies. For example, during the past year, Cardinal Contractors has opened a facility near Dallas to better serve water and wastewater construction opportunities in Texas.

Historically, we have longstanding relationships with major utility, refining, petrochemical, power and engineering companies. We have completed major underground and industrial projects for a number of large natural gas transmission and petrochemical companies. With our acquisitions of JCG and Q3C we have expanded our ability to provide services to our historical customers in additional geographies. Our diversified customer base includes many of the leading pipeline, power generation and utility companies in the United States. We often provide services under multi-year master service agreements (“MSA”).

In the second quarter of 2013, we closed two of our small subsidiaries, Calidus and All Day Electric Company, Inc. For 2012, their combined revenue was less than 0.3% of total consolidated Primoris revenue and the costs of closure were not material.

Additional information about us can be found in our press releases and other public filings. We make our press releases, our Annual Reports on Form 10-K, our Quarterly Reports on Form 10-Q, our Current Reports on Form 8-K and all other required filings with the SEC available free of charge through our Internet website, as soon as reasonably practical after they are electronically filed with, or furnished to, the SEC. Our principal executive offices are located at 2100 McKinney Avenue, Suite 1500, Dallas, Texas 75201, and our telephone number is (214) 740-5600. Our website address is www.prim.com . The information on our Internet website is neither part of nor incorporated by reference into this Second Quarter 2013 Report.

End-Markets

We are a diversified specialty construction company, and our strategy is to serve customers in different end markets. Our primary focus is on the following end markets:

· Underground construction. This market consists of two types of projects. The first is the construction of major capital projects primarily underground infrastructure for the oil and gas, telecommunication and water and wastewater industries. The second is installation, repair and maintenance of underground services, typically for utility customers. Our subsidiaries ARB, Rockford and Sprint provide construction services to the major capital projects market while ARB, Q3C and Sprint provide services to utility customers.

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· Industrial construction. In this market we provide construction services in such facilities as power plants, refineries and industrial gas and petrochemical facilities. Our subsidiaries ARB, JCG and Saxon are providers of services in this market.

· Heavy civil construction. We provide construction for highways and bridges, primarily to state agencies. We also sell aggregates and asphalt. Our subsidiary JCG is focused on this market, primarily in the states of Louisiana, Texas and Mississippi.

· Water and wastewater construction. Our subsidiary Cardinal Contractors provides construction services to the water and wastewater industry, primarily in Florida and Texas.

· Engineering services. We provide product engineering services primarily for the energy industry. Our Engineering group specializes in designing, supplying, and installing high-performance furnaces, heaters, burner management systems, and related combustion and process technologies for clients in the oil refining, petrochemical, and power generation industries. It furnishes turnkey project management with technical expertise and the ability to deliver custom engineering solutions worldwide.

· Other construction services. Our subsidiary ARB Structures builds poured-in-place parking structures in Southern California and our subsidiary FSSI provides turnaround services in the Houston market at refineries and chemical plants.

As opportunities change in our end markets and as we have grown the company, the amount of work we do in any of our end markets fluctuates. The following table shows the percentage of revenues derived from the major end markets for the twelve-month periods listed:

	Twelve Months Ended June 2013		Twelve Months Ended December 2012		Twelve Months Ended December 2011

Underground
Capital projects	19.3	%	13.6	%	22.9	%
Utility services	28.5	%	27.6	%	21.0	%
Industrial	24.0	%	24.6	%	18.4	%
Heavy Civil	17.2	%	21.3	%	24.8	%
Engineering	2.5	%	3.0	%	3.4	%
Other	8.5	%	9.9	%	9.5	%
Total	100.0	%	100.0	%	100.0	%

Reportable Segments

We present our operations in three reportable segments: West Construction Services (West), East Construction Services (East) and Engineering. Our segment structure has been determined in accordance with ASC 280, Segment Reporting. All of our segments derive their revenues primarily from construction and product engineering in the United States.

Our two Construction Services segments provide the following:

· installation of underground pipeline, cable and conduits for entities in the petroleum, petrochemical and water industries;

· installation and maintenance of industrial facilities for entities in the petroleum, petrochemical and water industries;

· installation of complex commercial and industrial cast-in-place structures; and

· construction of highways and industrial and environmental construction.

East Construction Services

The East Construction Services segment consists of businesses located primarily in the southeastern United States and along the Gulf Coast. Included in this segment are the operations of JCG’s Heavy Civil, Industrial and Infrastructure & Maintenance divisions; Cardinal Contractor’s water and wastewater construction activities; and the services provided by the 2012 and 2013 acquisitions (Sprint; Silva, Saxon and FSSI).

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West Construction Services

The West Construction Services segment consists of businesses located primarily in the western United States. The segment includes the underground and industrial operations of ARB, Inc.; the operations of Rockford (which performs its major capital underground work throughout the United States); the operations of ARB Structures, Alaska Continental Pipeline, Inc., All Day Electric Company, Inc. (100% owned in 2011 and 50% in prior years), the 2012 acquisition of Q3C, Stellaris, LLC, Primoris Renewables, Inc. and Juniper Rock, Inc. The segment also includes the operations of the Blythe Power Constructors joint venture.

Engineering

The Engineering segment includes the results of OnQuest, Inc. and OnQuest Canada, ULC.

Material trends and uncertainties

We generate our revenue from both large and small construction and engineering projects. The award of these contracts is dependent on a number of factors, many of which are not within our control. Business in the construction industry is cyclical. We depend in part on spending by companies in the energy and oil and gas industries, as well as on municipal water and wastewater customers. Over the past several years, each segment has benefited from demand for more efficient and more environmentally friendly energy and power facilities, local highway and bridge needs and from the strength of the oil and gas industry; however, each of these industries and the government agencies periodically are adversely affected by macroeconomic conditions. Economic factors outside of our control affect the amount and size of contracts in any particular period.

We and our customers are operating in a challenging business environment in light of the on-going economic uncertainty, fluctuations in capital markets and potential regulatory changes and uncertainties. We are closely monitoring our customers and the effect that changes in economic and market conditions and regulatory environment may have on them. We have experienced delays in project awards and the start of awarded projects as customers carefully consider their overall environment prior to investing in new infrastructure. However, we believe that most of our customers, some of whom are regulated utilities, remain financially stable and will be able to continue with their business plans in the long-term without substantial constraints.

Within these trends for the economy in general, we believe that there are positive opportunities within our end markets over the next five-year horizon. The development of shale oil and gas has a positive impact on the capital projects in our underground market both in large diameter pipeline projects and the well fields. The increased emphasis on pipeline integrity by utility companies provides growth potential in our utility underground markets. The apparent long-term nature of reduced natural gas prices should lead to increased opportunities for our industrial markets in the Gulf Coast region, and the impact of regulatory rules in California provides an opportunity for continuing upgrades to power plants. At present, the heavy civil market growth is moderate as state funding is restrained and the timing of any federal funding growth is uncertain. Finally, the continuing drought in the western United States may lead to future opportunities in the water and wastewater market.

We believe that we are positioned to take advantage of the opportunities in our end market segments; however, these opportunities may not occur in a linear fashion. As a contractor, we are dependent on the owners for project development, project funding and project timing. Owners’ decisions and market opportunities tend to cause significant fluctuations in revenues, profits and cash flows.

Seasonality and cyclicality

Our results of operations can be subject to quarterly variations. Some of the variation is the result of weather, particularly rain, which can impact our ability to perform construction services. The weather also limits our ability to bid for and perform pipeline integrity testing and routine maintenance for our utility customers’ underground systems since the systems are used for heating. The acquisitions of Sprint and Q3C have added to the seasonality of our business. Q3C’s primary operations are in the Midwest United States, an area usually affected by inclement weather during the first quarter. Similarly, a significant portion of Sprint’s revenues is derived from utility customers. In most years, utility owners obtain bids and award contracts for major maintenance, integrity and replacement work after the heating season, and the work must be completed by the following winter. In addition, demand for new projects can be lower during the early part of the year due to clients’ internal budget cycles. As a result, we usually experience higher revenues and earnings in the third and fourth quarters of the year as compared to the first two quarters.

We are also dependent on large construction projects which tend not to be seasonal, but can fluctuate from year to year based on general economic conditions. 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.

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Our volume of business may be adversely affected by declines or delays in new projects in various geographic regions in the United States. Project schedules, in particular in connection with larger, longer-term projects, can also create fluctuations in the services provided, which may adversely affect us in a given period. The financial condition of our customers and their access to capital, variations in the margins of projects performed during any particular period, regional, national and global economic and market conditions, timing of acquisitions, the timing and magnitude of acquisition assimilation costs, interest rate fluctuations and other factors may also materially affect our periodic results. Accordingly, our operating results for any particular period may not be indicative of the results that can be expected for any other period.

Critical Accounting Policies and Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities as of the date of the financial statements and also affect the amounts of revenues and expenses reported for each period. These estimates and assumptions must be made because certain information that is used in the preparation of our financial statements cannot be calculated with a high degree of precision from data available, is dependent on future events, or is not capable of being readily calculated based on generally accepted methodologies. Often, these estimates are particularly difficult to determine, and we must exercise significant judgment. We use estimates in our assessments of revenue recognition under percentage-of-completion accounting, the allowance for doubtful accounts, useful lives of property and equipment, fair value assumptions in analyzing goodwill and long-lived asset impairments, self-insured claims liabilities and deferred income taxes. Actual results could differ significantly from our estimates, and our estimates could change if there were made under different assumptions or conditions.

Our critical accounting policies, as described in our Annual Report on Form 10-K for the year ended December 31, 2012, relate primarily to revenue recognition for fixed price contracts, income taxes, goodwill, long-lived assets, reserves for uninsured risks and litigation and contingencies. There have been no material changes to our critical accounting policies since December 31, 2012.

Results of operations

In the discussion of our results of operations, we provide separate information for the results of the companies that we have acquired since June 2012. Silva, Saxon, Q3C and FSSI are identified as “Acquired Companies.” For the business units that were part of Primoris at the end of June 2012, results of operations are identified as “Comparable Companies.”

Revenues, gross profit, operating income and net income for the three months ended June 30, 2013 and 2012 were as follows:

	Three Months Ended June 30,
	2013					2012
	(Thousands)			% of Revenue		(Thousands)			% of Revenue
Revenues	$	445,013		100.0	%	$	337,436		100.0	%
Gross profit	59,537			13.4	%	44,004			13.0	%
Selling, general and administrative expense	31,560			7.1	%	23,396			6.9	%
Operating income	27,977			6.3	%	20,608			6.1	%
Other income (expense)	(2,094		)	(0.5	)%	(1,405		)	(0.4	)%
Income before income taxes	25,883			5.8	%	19,203			5.7	%
Income tax provision	(9,990		)	(2.2	)%	(7,346		)	(2.2	)%
Net income	$	15,893		3.6	%	$	11,857		3.5	%
Net income attributable to noncontrolling interests	(329		)	(0.1	)%	(124		)	—	%
Net income attributable to Primoris	$	15,564		3.5	%	$	11,733		3.5	%

Revenues, gross profit, operating income and net income for the six months ended June 30, 2013 and 2012 were as follows:

	Six Months Ended June 30,
	2013					2012
	(Thousands)			% of Revenue		(Thousands)			% of Revenue
Revenues	$	855,008		100.0	%	$	629,009		100.0	%
Gross profit	105,633			12.4	%	81,600			13.0	%
Selling, general and administrative expense	60,179			7.0	%	43,670			7.0	%
Operating income	45,454			5.4	%	37,930			6.0	%
Other income (expense)	(3,324		)	(0.4	)%	(1,633		)	(0.3	)%
Income before income taxes	42,130			5.0	%	36,297			5.7	%
Income tax provision	(16,197		)	(1.9	)%	(13,910		)	(2.2	)%
Net income	$	25,933		3.1	%	$	22,387		3.5	%
Net income attributable to noncontrolling interests	(599		)	(0.1	)%	(168		)	—	%
Net income attributable to Primoris	$	25,334		3.0	%	$	22,219		3.5	%

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Revenues

Revenues for the three months ended June 30, 2013 increased by $107.6 million, or 31.9%, compared to the same period in 2012. The Acquired Companies contributed $55.5 million, or 16.5%, while the Comparable Companies contributed growth of $52.1 million, or 15.4%. Revenues increased at our two construction segments while decreasing in our engineering segment. The primary increases were in underground pipeline revenue for Rockford, which saw a $60.6 million increase primarily in its work in Pennsylvania, and Sprint, which had a $20.7 million increase, while the Blythe joint venture revenue increased by $11.8 million. These increases were partially offset by a decrease of $17.7 million at the JCG Heavy Civil division and of $9.3 million in ARB Underground projects.

Revenues for the six months ended June 30, 2013 increased by $226.0 million, or 35.9%, compared to the same period in 2012. Growth from Comparable Companies contributed $146.1 million, or 23.2%, and the Acquired Companies contributed $79.9 million, or 12.7%. Revenues increased at our two construction segments while decreasing at our engineering segment. The primary increases were in underground pipeline, where Rockford saw a $94.9 million increase, Sprint, which had a revenue increase of $60.5 million (we acquired Sprint during the first quarter of 2012), and the Blythe joint venture, where revenues increased by $26.5 million. These increases were somewhat offset by a reduction in revenues at ARB of $42.8 million.

Gross Profit

Gross profit increased by $15.5 million, or 35.2%, for the three months ended June 30, 2013 compared to the same period in 2012. The Acquired Companies contributed $5.6 million, or 12.9%, while the profit increase from growth at the Comparable Companies was $9.9 million, or 22.5%. The Comparable Companies growth increase included $12.2 million from the West segment primarily attributable to the increase in underground pipeline revenues at Rockford and the approaching completion of a major power project at the ARB Industrial division. Gross profit for the Comparable Companies in the East segment declined by $2.4 million, due primarily to lower volume and lower gross profit margins at the JCG Heavy Civil division.

Gross profit increased by $24.0 million, or 29.4%, for the six months ended June 30, 2013 compared to the same period in 2012. The Acquired Companies contributed $6.2 million, or 7.6%, while the profit increase from growth at the Comparable Companies was $17.8 million, or 21.8%. The Comparable Companies growth increase was $16.9 million from the West segment primarily attributable to the benefit of nearing completion of a major power project and increases in Rockford pipeline revenues. The Comparable Companies of the East and Engineering segments combined gross profit increased by $0.9 million.

Selling, general and administrative expenses

Selling, general and administrative expenses (“SG&A”) increased $8.2 million, or 34.9%, for the three months ended June 30, 2013, compared to the same period in 2012. The increase of SG&A expenses as a result of the Acquired Companies was $4.2 million, or 18.0%, with the balance of the increase of $4.0 million due primarily to a $3.3 million increase in compensation and compensation-related expenses, and increases in other SG&A expenses of $0.7 million.

For the six months ended June 30, 2013, the increase was $16.5 million, or 37.8% compared to the first six months of 2012. The amount of the increase attributable to the Acquired Companies was $7.3 million, or 16.7%. The Comparable Companies increase of $9.2 million, or 21.1%, compared to the same period in 2012, was primarily due to $6.3 million of compensation and compensation-related expenses. These costs increased as a result of increased administrative support costs related to labor-intensive pipeline integrity work and service-related projects, increased incentive compensation expense for a larger number of participants in the management incentive compensation program and cost of living increases. Expenses also increased due to increased transportation expenses of $1.1 million, and consulting, legal and other SG&A expenses of $1.8 million.

SG&A as a percentage of revenue was 7.1% and 7.0% for the three and six months ended June 30, 2013, respectively, compared to 6.9% for both the corresponding periods in 2012. Excluding the impact of the Acquired Companies, SG&A as a percentage of revenue was 7.0% and 6.8% for the three and six months ended June 30, 2013, respectively.

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Other income and expense

Non-operating income and expense items for the three and six months ended June 30, 2013 and 2012 were as follows:

	Three months ended June 30,						Six months ended June 30,
	2013			2012			2013			2012
	(Thousands)						(Thousands)
Income (loss) from non-consolidated entities	$	(213	)	$	(47	)	$	56		$	1,054
Foreign exchange loss	(29		)	$	(6	)	$	(88	)	$	(48	)
Other expense	(377		)	(371		)	(433		)	(579		)
Interest income	23			25			63			47
Interest expense	(1,498		)	$	(1,006	)	$	(2,922	)	$	(2,107	)
Total other income (expense)	$	(2,094	)	$	(1,405	)	$	(3,324	)	$	(1,633	)

For the three months ended June 30, 2013, the loss from non-consolidated investments was primarily due to a loss recorded at WesPac while for the six months ended June 30, 2013, $0.6 million income from the investment in Alvah offset WesPac losses.

The Company uses the U.S. dollar as its functional currency in Canada since most monetary transactions are made in U.S. dollars. For accounting purposes, transactions made in Canadian dollars are converted to U.S. dollars and we recorded foreign exchange losses for the periods presented.

Other expense represents the increase in the estimated fair value of the contingent earnout liabilities for the acquisitions of Sprint, Saxon, Q3C and FSSI.

For the three and six months ended June 30, 2013, interest expense was $1.5 million and $2.9 million, respectively, compared to $1.0 million and $2.1 million for the same periods in 2012. The increases were due primarily to interest on the $50 million 3.65% Senior Secured Notes, dated December 29, 2012.

Provision for income taxes

Our provision for income taxes increased $2.6 million for the three months ended June 30, 2013 to $10.0 million compared to $7.4 million in the same period in 2012 primarily as a result of higher income before taxes.

Our provision for income taxes increased $2.3 million for the six months ended June 30, 2013 to $16.2 million, compared to $13.9 million for the same period in 2012. The $2.3 million increase results from higher income before taxes and a higher effective tax rate, which contributed to the increase by $2.1 million and $0.2 million, respectively. The tax rate applied to income attributable to Primoris in the six months ended June 30, 2013 was 39.0%, compared to 38.5% for the same period in 2012. The 0.5% increase in the effective tax rate results primarily from the variability of estimated nondeductible per diems.

To determine our quarterly provision for income taxes, we use an estimated annual effective tax rate, which is based on expected annual income, statutory tax rates and tax planning opportunities available in the various jurisdictions in which we operate. Certain significant or unusual items are separately recognized in the quarter in which they occur and can be a source of variability in the effective tax rate from quarter to quarter.

Segment results

East Segment

Revenue and gross profit for the East segment for the three and six months ended June 30, 2013 and 2012 were as follows:

	Three Months Ended June 30,
	2013				2012
	(Thousands)		% of Revenue		(Thousands)		% of Revenue

Revenue	$	175,398			$	156,057
Gross profit	15,215		8.7	%	17,360		11.1	%

	Six Months Ended June 30,
	2013				2012
	(Thousands)		% of Revenue		(Thousands)		% of Revenue

Revenue	$	365,609			$	277,907
Gross profit	30,210		8.3	%	28,778		10.4	%

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Revenues for the East segment increased by $19.3 million, or 12.4%, for the three months ended June 30, 2013 compared to the same period in the prior year. The acquisitions of Saxon and FSSI added $14.8 million of this increase in revenues. For the quarter, Sprint revenues increased by $20.7 million from increased activity in gas and crude-oil pipeline capital projects in the Eagle Ford area located in south Texas. Cardinal Contractors revenues increased by $4.0 million due to increased work on water treatment facilities in Florida and Texas, and revenues increased by $5.7 million at the JCG Industrial division. These revenue increases were offset by decreases of $17.7 million at the JCG Heavy Civil division and $8.2 million at the JCG Infrastructure and Maintenance division. Compared to the previous year quarter, revenues at Louisiana DOT decreased by $25.8 million which was only partially offset by an increase of $12.2 million from Texas DOT revenues.

Revenues increased by $87.7 million, or 31.6%, for the six months ended June 30, 2013 compared to the same period of the prior year. The acquisitions of Saxon and FSSI contributed $23.7 million, or 8.5%, in revenues. Sprint provided an increase in revenues of $60.5 million, Cardinal Contractors revenues increased by $7.6 million and revenues for the JCG Industrial division increased by $32.9 million. These increases were offset by revenue decreases at the JCG Heavy Civil division of $25.4 million and at the JCG Infrastructure and Maintenance division of $11.7 million due to weather and delays on project startup. Compared to the first six months of 2012, revenues from Louisiana DOT decreased by $46.3 million while revenues from Texas DOT increased by $26.1 million.

Gross profit for the East segment decreased by $2.1 million, or 12.4%, for the three months ended June 30, 2013 compared to the same period in the prior year. This includes a gross profit contribution of $0.2 million from Saxon and FSSI. The gross profit at Cardinal Contractors increased by $0.8 million and the gross profit at the JCG Industrial division increased by $1.0 million. Gross profit from the JCG Heavy Civil division decreased by $4.3 million due primarily from the reduced revenues and the transition from completed projects with higher margins in Louisiana in 2012 and the startup of the Belton area projects.

Gross profit increased by $1.4 million, or 5.0%, for the six months ended June 30, 2013 compared to the same period of the prior year. The acquisitions of Saxon and FSSI contributed $1.1 million in gross profit Sprint contributed $2.2 million in increased gross profit, Cardinal Contractors increased gross profit by $1.5 million and the JCG Industrial division gross profit increased by $3.8 million due to completion of a large industrial facility in south Louisiana. These increases in gross profit were offset by a decrease of $6.8 million at the JCG Heavy Civil division and $0.4 million at the JCG Infrastructure and Maintenance division. The decrease for the JCG Heavy Civil division resulted from the startup of the I-35 projects in Texas and a gross profit reduction for three projects in North Louisiana due to weather conditions and the handling of embankment materials.

Gross profit as a percent of revenues decreased to 8.7% compared to 11.1% in the prior year quarter and decreased to 8.3% for the six months ended June 30, 2013 compared to 10.4% in the same period in the previous year. Gross profit margins at Sprint’s pipeline projects for the first six months of 2013 were at 8.2% due to reduced productivity, adverse weather conditions and project delays. The JCG Heavy Civil division gross profit margins for the first six months of 2013 were at 6.5% due to startup of the I-35 projects in Texas and the impact of the North Louisiana projects.

West Segment

Revenue and gross profit for the West segment for the three and six months ended June 30, 2013 and 2012 were as follows:

	Three Months Ended June 30,
	2013				2012
	(Thousands)		% of Revenue		(Thousands)		% of Revenue

Revenue	$	258,194			$	167,287
Gross profit	41,926		16.2	%	24,294		14.5	%

	Six Months Ended June 30,
	2013				2012
	(Thousands)		% of Revenue		(Thousands)		% of Revenue

Revenue	$	465,880			$	325,318
Gross profit	70,675		15.2	%	48,695		15.0	%

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Revenue for the West segment increased by $90.9 million, or 54.3%, for the three months ended June 30, 2013, compared to the same period in 2012. The Q3C acquisition added revenues of $40.7 million during the three months ended June 30, 2013. Excluding Q3C, the revenue increase was $50.2 million or 30.0% for the three months ended June 30, 2013, compared to the same period in 2012. Rockford revenues increased by $60.6 million, and parking structure projects adding $2.3 million. The Rockford increase is primarily attributable to pipeline construction projects for major gas utilities in the Pennsylvania shale area. These increases were offset by decreases in the ARB Underground division of $9.3 million and a decrease of $3.3 million for the ARB Industrial division. The reduced revenues at ARB Underground are primarily the result of a $6.9 million reduction in revenues from fewer MSA work authorizations at its largest customer, and the reduction at ARB Industrial reflects the completion of power projects at the end of 2012 and reduced revenues at a large power plant project nearing completion.

Revenue for the West segment increased by $140.6 million, or 43.2%, for the six months ended June 30, 2013, compared to the same period in 2012. Of this increase, $56.2 million was attributable to the acquisition of Q3C. Excluding Q3C, the revenue increase was $84.3 million, or 25.9%, for the six months ended June 30, 2013, compared to the same period in 2012. The increase in revenues was from Rockford’s increase of $94.9 million and parking structure projects adding $6.7 million. These increases were offset by decreases at ARB Underground of $9.4 million and at ARB Industrial of $7.9 million.

Gross profit for the West segment increased by $17.6 million, or 72.6%, during the three months ended June 30, 2013, compared to the same period in 2012. Of this increase, gross profit at Q3C contributed $5.4 million while gross profit excluding Q3C increased by $12.2 million, or 50.2%, for the three months ended June 30, 2013 compared to the same period in 2012. The increases were mainly due to gross profit growth of $5.6 million at Rockford as a result of its increased revenues, increased profit at the ARB Industrial division of $9.7 million as a result of the approaching completion of a major power project and increased gross profit in parking structure projects of $0.6 million For the second quarter of 2013, the gross profit for the ARB Underground business decreased by $3.7 million compared to the same period in 2012, mainly due to the lower revenues.

Gross profit for the West segment increased by $22.0 million, or 45.1%, during the six months ended June 30, 2013, compared to the same period in 2012. Of this increase, gross profit at Q3C contributed $5.1 million for the period. Excluding Q3C, gross profit increased by $16.9 million, or 34.7%, for the six months ended June 30, 2013, compared to the first six months of 2012. The total increase was due to gross profit contributions at ARB Industrial of $11.5 million, Rockford of $3.2 million, ARB Structures of $1.4 million and ARB Underground of $0.8 million. While the ARB Industrial major power plant project is nearing completion, successful completion of the total project could result in a benefit from remaining contingent cost items.

Gross profit as a percent of revenue increased to 16.2% and 15.2% during the three and six months ended June 30, 2013, respectively, from 14.5% and 15.0%, in the same periods of 2012. These increased percentages were due primarily to the impact of the near completion of the ARB Industrial power plant project.

Engineering Segment

Revenue and gross profit for the Engineering segment for the three and six months ended June 30, 2013 and 2012 were as follows:

	Three Months Ended June 30,
	2013				2012
	(Thousands)		% of Revenue		(Thousands)		% of Revenue

Revenue	$	11,421			$	14,092
Gross profit	2,396		21.0	%	2,350		16.7	%

	Six Months Ended June 30,
	2013				2012
	(Thousands)		% of Revenue		(Thousands)		% of Revenue

Revenue	$	23,519			$	25,784
Gross profit	4,748		20.2	%	4,127		16.0	%

Revenue for the Engineering segment decreased by $2.7 million, or 19.0%, for the three months ended June 30, 2013, and by $2.3 million, or 8.8%, for the six months ended June 30, 2013, compared to the same periods in 2012. This decrease is mainly due to delays in the start date of certain capital projects but which are expected to begin later in 2013.

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Gross profit for the Engineering segment for the three months ended June 30, 2013 increased as a percentage of revenue from 16.7% to 21.0%, compared to the same period in 2012, due to the close-out of smaller projects in the period. For the six months ended June 30, 2013, gross profit increased by $0.6 million, or 15.0%, compared to the same period in 2012.

Geographic area financial information

Revenue by geographic area for the six months ended June 30, 2013 and 2012 was as follows:

	Six Months Ended June 30,
	2013				2012
	(Thousands)		% of Revenue		(Thousands)		% of Revenue

*Country:*
United States	$	845,461	98.9	%	$	624,293	99.3	%
Non—United States	9,547		1.1	%	4,716		0.7	%
Total revenues	$	855,008	100.0	%	$	629,009	100.0	%

All non-United States revenue has been generated in the Engineering Segment. For the table above, we use revenues generated by OnQuest’s Canadian subsidiary, OnQuest Canada, ULC, to estimate non-United States revenues. Traditionally, much of that work was done in the Far East and Australia.

Backlog

For companies in the construction industry backlog can be an indicator of the future revenue stream. Different companies define and calculate backlog in different manners. For the past few years, we considered backlog as the anticipated revenue from the uncompleted portions of existing contracts for which we had known revenue amounts. Thus, we included in our backlog amount the unearned revenue from our fixed price and fixed unit price contracts. We did not include time-and-equipment, time-and-materials and cost-plus contracts in the calculation of backlog, since their ultimate revenue amount is difficult to determine. We also did not include any anticipated revenue from our master service agreements (“MSA”) until we had been given a specific work order or contract. An MSA provides a framework for future work in that contractual terms and conditions have been agreed on, but there is not a minimum amount to which a customer commits. In some instances, a signed MSA has led to no revenues from the customer.

Using the calculations as we have in the past, the following table shows backlog by operating segment at December 31, 2012 and June 30, 2013 and the changes in backlog for the six months ended June 30, 2013 (in millions):

Segment	Backlog at December 31, 2012		Contract Additions to Backlog		Revenue Recognized from Backlog		Backlog at June 30, 2013		Revenue Recognized from Non-Backlog Projects		Total Revenue for 6 months ended June 30, 2013

East	$	970	$	342	$	313	$	999	$	53	$	366
West	361		368		368		361		98		466
Engineering	15		26		19		22		4		23
Total	$	1,346	$	736	$	700	$	1,382	$	155	$	855

At June 30, 2013, our total backlog was $1.38 billion representing an increase of $36 million, or 2.7%, from $1.35 billion at December 31, 2012. We expect that during the next four quarters, we will recognize as revenue approximately 45% of the East backlog at June 30, 2013; approximately 97% of the West backlog and approximately 100% of the Engineering backlog.

With the acquisitions of Sprint and Q3C, we have increased the percentage of revenues derived from MSAs which we historically have not included in our backlog calculations. For the first six months of 2013, Q3C derived approximately 77% of its revenue from MSAs, Sprint derived approximately 26% of its revenue from MSAs and ARB derived approximately 55% of its revenue from MSAs.

The following table shows MSA revenue ($ in millions) for the past six quarters:

Quarter		MSA Revenue
2012 Q1		73
2012 Q2		88
2012 Q3		111
2012 Q4		139
2013 Q1		98
2013 Q2		123

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Based on the historical information and to better reflect the transition to an increased level of MSA contract revenue, we believe that changing our backlog calculation to include an estimated MSA level provides a better indication of our future revenue stream. The following table shows the revised backlog by operating segment at June 30, 2013 (in millions). The estimated MSA revenues for the next four quarters, shown in the table below are net of approximately $50 million for MSA projects already included in the traditional backlog calculation.

Segment:	Backlog at June 30, 2013 — As Reported Above		Estimated Annual MSA Revenues at June 30, 2013		Revised Backlog at June 30, 2013

East	$	999	$	92	$	1,091
West	361		329		690
Engineering	22		—		22
Total	$	1,382	$	421	$	1,803

We expect that during the next four quarters, we will recognize as revenue approximately 50% of the East revised backlog at June 30, 2013; approximately 98% of the West revised backlog and approximately 100% of the Engineering revised backlog.

Backlog should not be considered a comprehensive indicator of future revenues. The backlog estimates include amounts from estimated MSA revenues, but our customers are not contractually obligated to purchase an amount of services from us under the MSAs. Any of our contracts, MSA, fixed price or fixed unit price, may be terminated by our customers on relatively short notice. In the event of a project cancellation, we may be reimbursed for certain costs, but typically we have no contractual right to the total revenues reflected in backlog. Projects may remain in backlog for extended periods of time as a result of customer delays, regulatory requirements or project specific issues. Even with the inclusion of estimated MSA amounts, future revenues from projects completed under time-and-equipment, time-and-materials and cost-reimbursable-plus-fee contracts are not included in our estimated backlog amount.

Our estimated backlog amount does not include anticipated contract awards

Liquidity and Capital Resources

Liquidity represents our ability to pay our liabilities when they become due, fund business operations, meet our contractual obligations and execute our business plan. Specifically, we need liquidity for working capital, income taxes, debt service, capital expenditures and earn-out obligations. Our primary sources of liquidity are our cash balances at the beginning of each period and our net cash flow; however, we have availability under our lines of credit and shelf facility to meet additional liquidity needs. In order to maintain sufficient liquidity, we evaluate our working capital requirements on a regular basis. We may elect to raise additional capital by issuing common stock, convertible notes, term debt or increasing our credit facility as necessary to fund our operations or to fund the acquisition of new businesses.

At June 30, 2013, our balance sheet included cash and cash equivalents of $113.8 million. We currently have the following credit facilities:

· a $75 million credit facility that expires on December 28, 2017, under which we can issue letters of credit for up to the full amount of the facility. At June 30, 2013, we have issued letters of credit of $5.7 million on this facility, resulting in $69.3 million in available borrowing capacity. The credit agreement also provides for an incremental facility of up to $50 million.

· the Company entered into $50 million Senior secured Notes purchase, funded on December 28, 2012, and a $25 million shelf agreement credit facility, which could be funded during the first three years of the Note Agreement with a maturity no more than 10 years from the date issued. On July 25, 2013, the Company exercised its option to draw down the remaining $25 million under the shelf agreement credit facility, and;

· a $10 million (Canadian dollars) facility for commercial letters of credit in Canada. The credit facility has an annual renewal and provides for the issuance of commercial letters of credit for a term of up to five years. At June 30, 2013, $3.5 million of letters of credit (Canadian dollars) were outstanding, with $6.5 million available under this credit facility for additional letters of credit.

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We believe that with our cash on hand, short-term investments, operating cash flows and availability under our existing credit facilities, that we will be able to support our ongoing working capital needs for the next twelve month period.

Cash Flows

Cash flows during the six months ended June 30, 2013 and 2012 are summarized as follows:

	Six Months Ended June 30,
	2013			2012
	(Thousands)
*Change in cash:*
Net cash (used in) provided by operating activities	$	(11,644	)	$	39,703
Net cash (used in) provided by investing activities	(48,593		)	(17,809		)
Net cash provided by (used in) financing activities	16,463			(22,914		)
Net change in cash and cash equivalents	$	(43,774	)	$	(1,020	)

Operating activities

The sources and uses of our cash flow from operating activities for the six months ended June 30, 2013 are as follows:

	Six Months Ended
	June 30,
	2013			2012			Change
				(Thousands)
*Operating Activities:*
Operating income	$	45,454		$	37,930		$	7,524
Depreciation	19,912			13,557			6,355
Amortization of intangible assets	3,685			3,193			492
Gain on sale of property and equipment	(202		)	(1,776		)	1,574
Stock-based compensation expense	91			—			91
Changes in assets and liabilities	(61,152		)	2,136			(63,288		)
Non-consolidated entity distributions	145			1,260			(1,115		)
Foreign exchange loss	(88		)	(48		)	(40		)
Other expense	(433		)	(579		)	146
Interest income	63			47			16
Interest expense	(2,922		)	(2,107		)	(815		)
Provision for income taxes	(16,197		)	(13,910		)	(2,287		)
Net cash provided by (used in) operating activities	$	(11,644	)	$	39,703		$	(51,347	)

The most significant components of the $11.6 million use of cash from operations was the $61.2 million change in assets and liabilities from the December 31, 2012 balance sheet to the June 30, 2013 balance sheet. The change is summarized as follows:

· accounts payable decreased by $50.4 million. As noted in both the 2012 Annual Report and the Form 10-Q for the quarter ended March 31, 2013, increased operating activity at the end of the year had resulted in an unusually high level of accounts payable at the end of 2012. Accounts payable aging at the end of June 2013 reflect more historical aging of accounts payable;

· a $17.0 million decrease in accounts receivable. At June 30, 2013, accounts receivable represented 27.1% of our total assets compared to 28.8% at the end of 2012. We continue to maintain an excellent collection history, and we have certain lien rights that can provide additional security for collections;

· a $28.6 million increase in costs and estimated earnings in excess of billings. This increase is the offset to the decrease in the accounts receivable. The increase was approximately $5.1 million for the ARB Underground division, $4.6 million for Q3C and $1.4 million for Sprint primarily representing a time lag from when revenues were earned until the utility customer can be billed. At Rockford, the increase was approximately $15.8 million for a fixed fee contract with billing allowed at certain milestones.

· a $10.1 million decrease in contingent earn-out liabilities, as a result of payments made in April 2013 for $10.9 million to the former owners of Rockford and Sprint upon achievement of 2012 operating targets;

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· a $7.9 million decrease in customer retention deposits representing both normal retention payments and release of the $5 million escrow associated with the Rockford note;

· and a net increase in liabilities resulting from small increases in accrued expenses and billings in excess of costs and estimated earnings offset by small increases in inventory and other current assets and other long term liabilities.

During the first six months of 2013, we paid $18.0 million for income taxes compared to $11.1 million in the same period of the previous year, as a result of taxes on increased income for the six months ended June 30, 2013, compared to the same period in 2012, which included the additional activities of the acquisitions of Sprint, Saxon, Q3C and FSSI.

Investing activities

During the six months ended June 30, 2013, we purchased property and equipment for $49.3 million in cash, compared to $12.4 million during the same period in 2012. These purchases were principally for construction equipment. For the past few years, it has been our practice to invest in property and equipment on a net basis at a level approximating our combined depreciation and amortization expense levels. In the first six months of 2013, we invested $22.4 million in equipment at Q3C. This investment was made to allow Q3C to expand its operations for both new and ongoing customer opportunities. Excluding the Q3C purchases, our purchases level is not far from our past practice. With the Q3C purchases, we expect that our net purchases for 2013 will be approximately $65 million.

We believe the ownership of equipment is generally preferable to renting equipment on a project by project basis, as ownership helps to ensure the equipment is available for our workloads when needed. In addition, ownership has historically resulted in lower overall equipment costs.

As part of our normal equipment upgrade program, during the six months ended June 30, 2013, we received proceeds from the sale of used equipment of $1.7 million compared to $6.7 million for same period in 2012.

We invest excess cash in short-term investments consisting primarily of CDs purchased through the CDARS (Certificate of Deposit Account Registry Service) process and U.S. Treasury bills with various financial institutions that are backed by the federal government. During the first six months of 2013, our sale of short-term investments and movement to cash was $4.2 million compared to sales and movements to cash of $23.0 million in the same period of 2012.

In March 2013, we used $1.0 million in cash for the acquisition of FSSI.

Financing activities

Financing activities provided $16.5 million of cash during the six months ended June 30, 2013. Significant transactions providing and using cash flows from financing activities included:

· $42.4 million proceeds from the issuance of long term debt for equipment financing.

· $25.8 million in repayment of long-term debt and capital leases.

· $1.45 million in proceeds from the issuance of 131,989 shares purchased by the participants in the Primoris Long-Term Retention Plan.

· Dividends paid of $1.55 million.

Credit agreements

For a description of our credit agreements, see Note 11 — “Credit Arrangements” in Item I of the Financial Statements.

Related party transactions

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Primoris leases properties from SIGI at the following locations:

5. Bakersfield (lease expires October 2022)

6. Pittsburg (lease expires April 2023)

7. San Dimas in California (lease expires March 2019)

8. Pasadena, Texas (leases expire in July 2019 and 2021)

During the six months ended June 30, 2013 and 2012, the Company paid $471,000 and $462,000, respectively, in lease payments to SIGI for the use of these properties.

The Company entered into a $6.1 million agreement in 2010 to construct a wastewater facility for Pluris, LLC, a private company in which Brian Pratt holds the majority interest. The transaction was reviewed and approved by the Audit Committee of the Board of Directors of the Company. The project was substantially completed in December 2011. The Company recognized no revenues in 2013 and recognized revenues of $355,000 for the six months ended June 30, 2012, at normal margins.

Primoris leases a property from Roger Newnham, a former owner and current manager of our subsidiary, OnQuest Canada, ULC. The property is located in Calgary, Canada. During the six months ended June 30, 2013 and 2012, Primoris paid $150,000 and $141,000, respectively, in lease payments. The current term of the lease is through December 31, 2014.

Primoris leases a property from Lemmie Rockford, one of the Rockford sellers, which commenced November 1, 2011. The property is located in Toledo, Washington. During the six months ended June 30, 2013 and 2012, Primoris paid $45,000 and $45,000, respectively, in lease payments. The lease expires in January 2015.

As a result of the November 2012 acquisition of Q3C, the Company became party to leased property from Quality RE Partners, owned by three of the Q3C selling shareholders, of whom two are current employees, including Jay Osborn, President of Q3C. The property is located in Little Canada, Minnesota. During the six months ended June 30, 2013, the Company paid $132,000, in lease payments to Quality RE Partners for the use of this property. The lease commenced October 28, 2012 and expires in October 2022.

The Company owns several non-consolidated investments and has recognized revenues on work performed for those joint ventures. The Company recognized $21,000 and $0 in related party revenues for the six months ended June 30, 2013 and 2012, respectively, from the WesPac joint venture. On November 17, 2012, the Company acquired a 49% interest in Alvah, Inc. as part of the Q3C acquisition. During the six months ended 2013, payments made to Alvah as a subcontractor by ARB and Q3C were $2,909,000 and $212,000, respectively.

Common stock

In March 2013, the Company received $1,455,000 and issued 131,989 shares of common stock under a purchase arrangement within the Company’s Long-Term Incentive Plan for managers and executives.

In March 2013, the Company issued 12,480 shares and in July 2013, we issued 9,110 shares of common stock, both as part of the compensation of the non-employee members of the Board of Directors.

With the acquisition of Q3C, the Company agreed to issue shares of common stock with a value of $430,000 based on the average December 2012 closing price, or $14.69 per share. The Company issued 29,273 unregistered shares of stock in February 2013.

Contractual obligations

A summary of contractual obligations at June 30, 2013 were as follows:

Payments due by period	Total		1 Year		2-3 Years		4-5 Years		After 5 Years
	(Thousands)
Debt and capital lease obligations	$	174,432	$	26,302	$	48,679	$	45,710	$	53,741
Interest on debt and capital lease obligations (1)	20,055		4,446		7,182		4,667		3,760
Equipment operating leases	14,884		6,009		7,637		1,238		—
Real property leases	11,906		2,871		3,912		2,830		2,293
Real property leases—related parties	7,134		1,611		2,063		1,553		1,907
	$	228,411	$	41,239	$	69,473	$	55,998	$	61,701

Stand-by letters of credit	$	9,023	$	9,023	$	—	$	—	$	—

(1) The interest amount assumes principal payments are made as originally scheduled in the obligations.

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Off-balance sheet transactions

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

· Letters of credit issued under our lines of credit. At June 30, 2013, we had letters of credit outstanding of $9.0 million, primarily for international projects in our Engineering segment and for providing security to our insurance carriers.

· Equipment operating leases with a balance of $14.9 million at June 30, 2013.

· Employment agreements which provide for compensation and benefits under certain circumstances and which may contain a change of control clause. We may be obligated to make payments under the terms of these agreements.

· In the ordinary course of our business, we may be required by our customers to post surety bid or completion bonds in connection with services that we provide. At June 30, 2013, we had $1.4 billion in outstanding bonds.

· 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. For many plans, the contributions are determined annually and required future contributions cannot be determined since contribution rates depend on the total number of union employees and actuarial calculations based on the demographics of all participants. The Employee Retirement Income Security Act of 1974 (ERISA), as amended by the Multi-Employer Pension Amendments Act of 1980, subject 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 for plan years after 2007 for multi-employer plans that are classified as “endangered”, “seriously endangered”, or “critical” status. As discussed in footnote 19 of the Financial Statements in Item 1, we have recognized a withdrawal liability for one plan. We currently do not anticipate withdrawal from any other multi-employer pension plans. Withdrawal liabilities or requirements for increased future contributions could negatively impact our results of operations and liquidity.

· Other guarantees that we make from time to time, such as guaranteeing the obligations of our subsidiaries.

Impact of Inflation

The primary inflationary factors affecting our operations are labor and fuel costs. The price of fuel is subject to fluctuations for factors beyond our control, but we closely monitor changes and include the available information in our bidding activities. Some of our longer-term contracts with state departments of transportation include clauses which allow us to recover some of the additional costs incurred due to inflation. To date, we have not had a significant impact from inflationary pressures on our cost of labor; and at this time, we cannot estimate the impact of government fiscal policies on wage rates in future periods. In some of our contracts we are responsible for procurement of materials or equipment. For these contracts, we attempt to reduce the risk of inflation by placing firm price purchase orders, or in some cases, purchasing the materials or equipment at the time of the contract.

Table of Contents

Item 3. Quantitative and Qualitative Disclosures About Market Risk

In the ordinary course of business, we are exposed to risks related from financial market conditions. For us, these risks primarily include fluctuations in foreign currency exchange rates, interest rates and commodity prices. From time to time, we may seek to manage these risks through the use of financial derivative instruments such as foreign currency exchange contracts and interest rate swaps. At June 30, 2013, we had no such derivative financial instruments.

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

Due to their generally short maturities, the carrying amounts for cash and cash equivalents, accounts receivable, short-term debt and accounts payable and accrued liabilities shown in the consolidated balance sheets approximate fair value at June 30, 2013 and December 31, 2012. At June 30, 2013 and December 31, 2012, we held short term investments which were primarily in four to six month certificates of deposits (“CDs”) through the CDARS (Certificate of Deposit Account Registry Service) program and U. S. Treasury bills with various financial institutions that are backed by the federal government FDIC program. We expect to hold our investments to maturity.

At June 30, 2013, all of our long-term debt was under fixed interest rates.

Item 4. Controls and Procedures

Disclosure Controls and Procedures

As of June 30, 2013, we carried out an evaluation, under the supervision and with the participation of our management, including our chief executive officer (“CEO”) and chief financial officer (“CFO”), of the effectiveness of the design and operation of our “disclosure controls and procedures”, as such term is defined under Exchange Act Rules 13a-15(e) and 15d-15(e).

Based on this evaluation, our CEO and CFO concluded that, at June 30, 2013, the disclosure controls and procedures were effective at the reasonable assurance level to ensure that information required to be disclosed by us in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC, and accumulated and communicated to our management, including our CEO and CFO, as appropriate to allow timely decisions regarding required disclosure.

In designing and evaluating the disclosure controls and procedures, our management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives and in reaching a reasonable level of assurance our management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. The Company’s disclosure controls and procedures are designed to provide reasonable assurance of achieving their stated objectives.

Changes in Internal Control Over Financial Reporting

During the fiscal quarter ended June 30, 2013, there were no changes in our internal control over financial reporting that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Table of Contents

Part II. Other Information

Item 1. Legal Proceedings

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

Item 1A. Risk Factors.

In addition to the other information set forth in this Report, you should carefully consider the factors discussed in the section entitled “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2012, which to our knowledge have not materially changed. Those risks, which could materially affect our business, financial condition or future results, are not the only risks we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or operating results.

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

As part of the consideration for the acquisition of Q3C, the Company issued 29,273 shares of unregistered common stock in February 2013.

Item 3. Defaults Upon Senior Securities.

None.

Item 4. (Removed and Reserved).

Item 5. Other Information.

None.

Table of Contents

Item 6. Exhibits.

The following exhibits are filed as part of this Quarterly Report on Form 10-Q.

Exhibit Number		Description
10.1		Promissory Note, dated June 11, 2013, by and among Stellaris, LLC and Fifth Third Bank pursuant to the Master Loan and Security Agreement dated August 31, 2009 (*)
10.2		Master Loan and Security Agreement, dated June 13, 2013, by and among Stellaris, LLC, James Construction Group, LLC, Rockford Corporation and Wells Fargo Equipment Finance, Inc. and Loan Schedules, dated June 13, 2013 (*)
10.3		Confirmation of Acceptance Agreement, dated June 13, 2013, by and among Primoris Services Corporation and Prudential Investment Management, Inc. and certain Prudential affiliates pursuant to the Note Purchase and Private Shelf Agreement, dated December 28, 2012 and five 3.85% Senior Secured Notes, Series B, due July 25, 2023 (*)
31.1		Rule 13a-14(a)/15d-14(a) Certification by the Registrant’s Chief Executive Officer (*)
31.2		Rule 13a-14(a)/15d-14(a) Certification by the Registrant’s Chief Financial Officer (*)
32.1		Section 1350 Certification by the Registrant’s Chief Executive Officer (*)
32.2		Section 1350 Certification by the Registrant’s Chief Financial Officer (*)
101 INS		XBRL Instance Document (**)
101 SCH		XBRL Taxonomy Extension Schema Document (**)
101 CAL		XBRL Taxonomy Extension Calculation Linkbase Document (**)
101 LAB		XBRL Taxonomy Extension Label Linkbase Document (**)
101 PRE		XBRL Taxonomy Extension Presentation Linkbase Document (**)
101 DEF		XBRL Taxonomy Extension Definition Linkbase Document (**)

(*)		Filed herewith
(**)		Furnished with this Quarterly Report on Form 10-Q and included in Exhibit 101 to this report are the following documents formatted in XBRL (Extensible Business Reporting Language): i) the Condensed Consolidated Balance Sheets as of June 30, 2013 and December 31, 2012, ii) the Condensed Consolidated Statements of Income for the three months and six months ended June 30, 2013 and 2012 and iii) the Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2013 and 2012. Users of the XBRL data are advised that pursuant to Rule 406T of Regulation S-T, this interactive data file is deemed not filed or part of a registration statement or prospectus for purposes of sections 11 or 12 of the Securities Act of 1933, is deemed not filed for purposes of section 18 of the Securities and Exchange Act of 1934, and therefore is not subject to liability under these sections.

Table of Contents

SIGNATURES

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

		PRIMORIS SERVICES CORPORATION

Date: August 7, 2013		/s/ PETER J. MOERBEEK
		Peter J. Moerbeek
		Executive Vice President, Chief Financial Officer (Principal Financial and Accounting Officer)

Table of Contents

EXHIBITS ATTACHED TO THIS QUARTERLY REPORT ON FORM 10-Q

Exhibit Number		Description
10.1		Promissory Note, dated June 11, 2013, by and among Stellaris, LLC and Fifth Third Bank pursuant to the Master Loan and Security Agreement dated August 31, 2009 (*)
10.2		Master Loan and Security Agreement, dated June 13, 2013, by and among Stellaris, LLC, James Construction Group, LLC, Rockford Corporation and Wells Fargo Equipment Finance, Inc. and Loan Schedules, dated June 13, 2013 (*)
10.3		Confirmation of Acceptance Agreement, dated June 13, 2013, by and among Primoris Services Corporation and Prudential Investment Management, Inc. and certain Prudential affiliates pursuant to the Note Purchase and Private Shelf Agreement, dated December 28, 2012 and five 3.85% Senior Secured Notes, Series B, due July 25, 2023 (*)
31.1		Rule 13a-14(a)/15d-14(a) Certification by the Registrant’s Chief Executive Officer
31.2		Rule 13a-14(a)/15d-14(a) Certification by the Registrant’s Chief Financial Officer
32.1		Section 1350 Certification by the Registrant’s Chief Executive Officer
32.2		Section 1350 Certification by the Registrant’s Chief Financial Officer
101 INS		XBRL Instance Document (**)
101 SCH		XBRL Taxonomy Extension Schema Document (**)
101 CAL		XBRL Taxonomy Extension Calculation Linkbase Document (**)
101 LAB		XBRL Taxonomy Extension Label Linkbase Document (**)
101 PRE		XBRL Taxonomy Extension Presentation Linkbase Document (**)
101 DEF		XBRL Taxonomy Extension Definition Linkbase Document (**)

(**)

Furnished with this Quarterly Report on Form 10-Q and included in Exhibit 101 to this report are the following documents formatted in XBRL (Extensible Business Reporting Language): i) the Condensed Consolidated Balance Sheets as of June 30, 2013 and December 31, 2012, ii) the Condensed Consolidated Statements of Income for the three months and six months ended June 30, 2013 and 2012 and iii) the Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2013 and 2012. Users of the XBRL data are advised that pursuant to Rule 406T of Regulation S-T, this interactive data file is deemed not filed or part of a registration statement or prospectus for purposes of sections 11 or 12 of the Securities Act of 1933, is deemed not filed for purposes of section 18 of the Securities and Exchange Act of 1934, and therefore is not subject to liability under these sections.

Exhibit 10.1

PROMISSORY NOTE

$10,000,000.00

Promissory Note Date: June 11, 2013

Date of Advance: (to be inserted by Lender)

FOR VALUE RECEIVED, STELLARIS LLC , a limited liability company organized under the laws of the State of Nevada and having a principal place of business at 26000 Commercentre Drive, Lake Forest, California 92630 (“Borrower”) hereby promises to pay to the order of FIFTH THIRD BANK , an Ohio banking corporation, for itself and as agent for any affiliate of Fifth Third Bancorp (together with its successors and assigns, the “Lender”) the principal amount of Ten Million Dollars ($10,000,000.00), with interest at the Interest Rate (as defined below) and all other Obligations on or before June 15, 2018 (“Maturity Date”) pursuant to the Loan Agreement (as defined below).

Lender and Borrower have entered into that certain Master Loan and Security Agreement dated as of August 31, 2009 (the “Loan Agreement”), pursuant to which Lender has agreed to make the Loan to Borrower. The Obligations of Borrower are secured by the Collateral as provided in the Loan Agreement and this Note shall be subject to the terms and conditions of the Loan Agreement. Capitalized terms used herein and not otherwise defined shall have the meaning attributed thereto in the Loan Agreement. This Note relates to the Equipment described on Schedule A hereto.

Borrower agrees that Lender may insert the date(s) of “Advance” (above) after Borrower executes this Promissory Note as the date(s) on which the proceeds of this Note are disbursed by Lender.

As used herein, “Interest Rate” shall mean the percentage per annum equal to one and 84/100 percent (1.84%); provided, however, that (A) such Interest Rate is based on an interest rate swap rate for a term most closely corresponding to the maturity of this Note as quoted in the Bloomberg SWAP Rate report) as of the date of this Note and (B) if this Note is not funded by Lender on or before June 19, 2013, then such Interest Rate may be adjusted by Lender based upon a corresponding increase in the interest rate swap rate quoted in such Release as in effect on the date of the Advance. Lender will provide Borrower with written notice of any such adjustment. Interest shall be computed on the basis of a year of 360 days consisting of twelve 30-day months, and shall accrue on the outstanding principal amount hereunder from and including the date each Advance is made to but excluding the date the entire principal amount hereunder is paid in full.

Except as otherwise provided in the Loan Agreement, principal and interest due hereunder shall be payable as follows:

Principal and interest shall be payable in 60 equal monthly installments, each on the 15 th day of each calendar month, of $174,587.44 commencing on the 15th day of July, 2013, with the entire unpaid principal amount hereof, together with all accrued and unpaid interest, charges, fees or other Advances, if any, due on the Maturity Date. Interest that accrues from the date of each Advance through but not including the above payment commencement date shall be payable in arrears on the fifteenth day of the calendar month following the date of Advance.

Borrower may prepay this Note only (1) pursuant to Section 8 of the Loan and Security Agreement following the occurrence of an Event of Loss; or (2) from and after the first (1st) anniversary of the date the Loan is made hereunder, Borrower may prepay, in whole but not in part, the principal

outstanding hereunder by paying to Lender such outstanding principal, together with all accrued and unpaid interest thereon at the Interest Rate and other Obligations, plus, as liquidated damages for the cost of making funds available to Borrower hereunder and not as a penalty, a prepayment premium equal to the applicable corresponding percentage below multiplied by the principal outstanding at the time of prepayment:

Date of Prepayment (from Date of Advance):	Premium

Prior to the 1 st anniversary	3.00	%
On or after the 1st anniversary, but prior to the 2nd anniversary	2.00	%
On or after 2nd anniversary, but prior to the 3rd anniversary	1.00	%
On or after 3rd anniversary	0.00	%

The first anniversary date occurs on the date, which is twelve (12) months from the date of the Advance.

Upon the occurrence of an Event of Default, Lender shall have all the rights and remedies specified in the Loan Agreement.

Borrower waives presentment for payment, demand, notice of demand, notice of nonpayment or dishonor, protest and notice of protest of this Note, and all other notices in connection with the delivery, acceptance, performance, default or enforcement of the payment of this Note.

This Note shall be governed by and construed in accordance with the laws of the State of Ohio. Any judicial proceeding arising out of or relating to this Note may be brought in any court of competent jurisdiction in Hamilton County, Ohio and each of the parties hereto (i) accepts the nonexclusive jurisdiction of such courts and any related appellate court and agrees to be bound by any judgment rendered by any such court in connection with any such proceeding and (ii) waives any objection it may now or hereafter have as to the venue of any such proceeding brought in such court or that such court is an inconvenient forum. EACH OF THE BORROWER AND LENDER HEREBY WAIVES THE RIGHT TO TRIAL BY JURY IN ANY LAWSUIT OR PROCEEDING ARISING OUT OF OR IN ANY WAY RELATING TO THIS NOTE.

All notices delivered hereunder shall be made and delivered in accordance with the terms of the Loan Agreement.

Borrower acknowledges and agrees that time is of the essence with respect to its performance under this Note. Any failure of Lender to require strict performance by Borrower or any waiver by Lender of any provision herein shall not be construed as a consent or waiver of any provision of this Note. This Note shall be binding upon, and inure to the benefit of, the parties hereto, their permitted successors and assigns; provided, however that Borrower may not assign or transfer any of its rights, interest or obligations hereunder without the prior written consent of Lender.

Notwithstanding any provision to the contrary in this Note, in no event shall the interest rate charged on this Note exceed the maximum rate of interest permitted under applicable state and/or federal usury law. Any payment of interest that would be deemed unlawful under applicable law for any reason shall be deemed received on account of, and will automatically be applied to reduce, the principal sum outstanding and any other sums (other than interest) due and payable to Lender under this Note, and the provisions hereof shall be deemed amended to provide for the highest rate of interest permitted under applicable law.

Any provision of this Note which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability shall not invalidate or render unenforceable such provision in any other jurisdiction. Captions are intended for convenience or reference only, and shall not be construed to define, limit or describe the scope or intent of any provisions hereof.

IN WITNESS WHEREOF, the Borrower has executed this Note as of the 11th day of June, 2013.

	BORROWER:

	STELLARIS LLC


	By:	/s/ Alfons Theeuwes
	Name:	Alfons Theeuwes
	Title:	CFO

SCHEDULE A

PROMISSORY NOTE DATED JUNE 11, 2013

DESCRIPTION OF EQUIPMENT

(SEE ATTACHED)

SCHDULE A FOR PROMISORY NOTE

EQUIP

OU OR

LIEN

ASSET #

YEAR

DESCRIPTION

AMOUNT

SERIAL NUMBER

LOCATION

JCG

BNC0006

1980

ROSS MOBILINER 250 - 10 CY

180,000.00

9024

37110 Hwy 30, Geismar, LA 70734

JCG

BNC0009

2001

MG12CP ERIE CONCRETE PLANT

400,000.00

MG-7400

37110 Hwy 30, Geismar, LA 70734

JCG

CM0113

1986

C-150-F-VA ROUGH TERRAIN CRANE

30,000.00

GDCC-9548

37110 Hwy 30, Geismar, LA 70734

JCG

CM0127

1991

C-150-F ROUGH TERRAIN CRANE

40,000.00

2000008U-010056

37110 Hwy 30, Geismar, LA 70734

JCG

CM0138

1999

GROVE RT530 ROUGH TERRAIN CRANE

70,000.00

220848

37110 Hwy 30, Geismar, LA 70734

JCG

CM0139

2005

GROVE RT530 ROUGH TERRAIN CRANE

95,000.00

223856

37110 Hwy 30, Geismar, LA 70734

JCG

CM0142

2007

GROVE RT530E ROUGH TERRAIN CRANE

145,000.00

227142

37110 Hwy 30, Geismar, LA 70734

JCG

CM0146

2009

IC80-1H BRODERSON CARRY DECK

100,000.00

615204

37110 Hwy 30, Geismar, LA 70734

JCG

D0373

1978

LINKBELT CRANE CRAWLER

75,000.00

4E-730

37110 Hwy 30, Geismar, LA 70734

JCG

D0438

1981

LINKBELT CRANE CRAWLER

130,000.00

21 HI-547-G

37110 Hwy 30, Geismar, LA 70734

JCG

D0448

1988

AMERICAN CRANE CRAWLER

200,000.00

88006-AT-3442

37110 Hwy 30, Geismar, LA 70734

JCG

D0449

1977

9270 AMERICAN CRANE-CRAWLER 2 DRUM

200,000.00

GS-19090

37110 Hwy 30, Geismar, LA 70734

JCG

D0454

1991

M50-W MANITOWOC CRANE-CRAWLER

125,000.00

510677

37110 Hwy 30, Geismar, LA 70734

JCG

D0456

1991

M50-W MANITOWOC CRANE-CRAWLER

125,000.00

510503

37110 Hwy 30, Geismar, LA 70734

JCG

D0466

2007

14000 MANITOWOC CRANE-CRAWLER

1,000,000.00

140001041

37110 Hwy 30, Geismar, LA 70734

JCG

D0467

2008

CK1600 KOBELOC CRANE-CRAWLER

600,000.00

GN03-02187

37110 Hwy 30, Geismar, LA 70734

JCG

EB0167

2006

CAT M318C WHEELED EXCAVATOR

80,000.00

OH2D00647

37110 Hwy 30, Geismar, LA 70734

JCG

EB0174

2008

CAT 345CL EXCAVATOR

180,000.00

PJW1786

37110 Hwy 30, Geismar, LA 70734

JCG

EB0188

2008

CAT 325DL EXCAVATOR

125,000.00

SCR00722

37110 Hwy 30, Geismar, LA 70734

JCG

EB0189

2008

CAT 320DL EXCAVATOR

95,000.00

PAB07453

37110 Hwy 30, Geismar, LA 70734

JCG

EB0192

2009

336D CAT EXCAVATOR

200,000.00

W3K00668

37110 Hwy 30, Geismar, LA 70734

JCG

EB0193

2009

336D CAT EXCAVATOR

200,000.00

W3K00666

37110 Hwy 30, Geismar, LA 70734

JCG

EB0197

2010

LIEBHERR R954CHD-976 EXCAVATOR

380,000.00

28119

37110 Hwy 30, Geismar, LA 70734

JCG

EP0174

1998

CAT 3412 GENERATOR

50,000.00

81Z22804

37110 Hwy 30, Geismar, LA 70734

JCG

FBS0027

2006

BIDWELL 4800 SCREED

60,000.00

48-20061116-2-XB

37110 Hwy 30, Geismar, LA 70734

JCG

FBS0028

1999

BIDWELL HD36FT BRIDGE SCREED

30,000.00

48-99926-2-HD

37110 Hwy 30, Geismar, LA 70734

JCG

FC0057

1999

GOMACO TC600 CURE MACHINE

40,000.00

904400045

37110 Hwy 30, Geismar, LA 70734

JCG

FS0002

1990

CMI PS350 CONCRETE PLACER SPREADER

50,000.00

527050

37110 Hwy 30, Geismar, LA 70734

JCG

G0453

2004

CAT 140H MOTOR GRADER

115,000.00

CCA01144

37110 Hwy 30, Geismar, LA 70734

JCG

G0464

2008

CAT 140M MOTOR GRADER

190,000.00

B9D01066

37110 Hwy 30, Geismar, LA 70734

JCG

G0466

2008

CAT 140M MOTOR GRADER W/GPS

190,000.00

B9D01202

37110 Hwy 30, Geismar, LA 70734

JCG

G0469

2008

CAT 140M MOTOR GRADER

190,000.00

B9D00773

37110 Hwy 30, Geismar, LA 70734

JCG

G0470

2008

CAT 140M MOTOR GRADER

190,000.00

B9D00729

37110 Hwy 30, Geismar, LA 70734

JCG

H0044

1981

D46 HAMMER-DIESEL-DELMAG

30,856.87

533

37110 Hwy 30, Geismar, LA 70734

JCG

H0066

2006

D30 HAMMER-DIESEL-DELMAG

45,000.00

0604391

37110 Hwy 30, Geismar, LA 70734

JCG

H0067

2006

D25-32 HAMMER-DIESEL-DELMAG

45,000.00

0604414

37110 Hwy 30, Geismar, LA 70734

JCG

H0073

2008

HAMMER-DIESEL

45,000.00

0704493

37110 Hwy 30, Geismar, LA 70734

JCG

H0074

2007

D30 HAMMER-DIESEL-DELMAG

40,000.00

200704497

37110 Hwy 30, Geismar, LA 70734

JCG

LH0084

2005

CAT 420D BACKHOE IT 4X4

30,000.00

BLN11510

37110 Hwy 30, Geismar, LA 70734

JCG

LH0085

2005

CAT 420D BACKHOE IT 4X4

30,000.00

BLN11837

37110 Hwy 30, Geismar, LA 70734

JCG

LH0093

2007

CAT 420E BACKHOE IT 4X4

40,000.00

KMW00929

37110 Hwy 30, Geismar, LA 70734

JCG

LH0094

2008

CAT 420E BACKHOE IT 4X4

45,000.00

KMW2381

37110 Hwy 30, Geismar, LA 70734

JCG

LH0103

2011

BACKHOE 420E

70,000.00

DAN01650

37110 Hwy 30, Geismar, LA 70734

JCG

LW0396

2006

TH360B CAT FORKLIFT

30,000.00

SLE04849

37110 Hwy 30, Geismar, LA 70734

JCG

LW0401

2007

HL740 HYUNDAI WHEEL LOADER

45,000.00

LF0210368

37110 Hwy 30, Geismar, LA 70734

JCG

LW0413

2008

CAT 930H WHEEL LOADER

95,000.00

DHC00601

37110 Hwy 30, Geismar, LA 70734

JCG

LW0414

2008

CAT 930H WHEEL LOADER

95,000.00

DHC00603

37110 Hwy 30, Geismar, LA 70734

JCG

LW0418

2008

CAT 930H WHEEL LOADER

95,000.00

DHC00674

37110 Hwy 30, Geismar, LA 70734

JCG

LW0423

2008

CAT 930H WHEEL LOADER

95,000.00

DHC00602

37110 Hwy 30, Geismar, LA 70734

JCG

M0080

2009

PUGMILL SYSTEMS 500 BASE

200,000.00

1586-500B-2

37110 Hwy 30, Geismar, LA 70734

JCG

MC0072

2007

GOMACO GHP2800 PAVER

500,000.00

905200-146

37110 Hwy 30, Geismar, LA 70734

JCG

MC0073

2005

GOMACO PAVER COMMANDER III

125,000.00

900100-650

37110 Hwy 30, Geismar, LA 70734

JCG

PS0007

2000

CMI MATERIAL PLACER MTP-4004

100,000.00

537188

37110 Hwy 30, Geismar, LA 70734

JCG

R0234

2005

CAT ROLLER PNUE PS360C

65,000.00

PJF00304

37110 Hwy 30, Geismar, LA 70734

JCG

RA0142

1983

CAT ROLLER COMPACTOR 815B

60,000.00

17Z00402

37110 Hwy 30, Geismar, LA 70734

JCG

RA0156

1988

CAT ROLLER COMPACTOR 815B

70,000.00

17Z00952

37110 Hwy 30, Geismar, LA 70734

JCG

RA0214

1999

CAT ROLLER W/SHELL CS563

35,000.00

4LN00951

37110 Hwy 30, Geismar, LA 70734

JCG

RA0215

1999

CAT ROLLER W/SHELL CS563

35,000.00

4LN00912

37110 Hwy 30, Geismar, LA 70734

JCG

RA0250

2007

CAT ROLLER W/SHELL CS533

65,000.00

DAK00617

37110 Hwy 30, Geismar, LA 70734

JCG

SP0124

1999

BLAW KNOX ROAD WIDENER RW195

60,000.00

19527

37110 Hwy 30, Geismar, LA 70734

JCG

T0475

2007

CAT D6N DOZER LGP

115,000.00

ALY03169

37110 Hwy 30, Geismar, LA 70734

JCG

T0476

2007

CAT D6N DOZER LGP

115,000.00

ALY03175

37110 Hwy 30, Geismar, LA 70734

JCG

T0482

2007

CAT DOZER D5G LGP

50,000.00

RKG02996

37110 Hwy 30, Geismar, LA 70734

JCG

T0483

2007

CAT DOZER D5G LGP

50,000.00

RKG03614

37110 Hwy 30, Geismar, LA 70734

JCG	T0502	2007	CAT DOZER D5G LGP	50,000.00	RKG03613	37110 Hwy 30, Geismar, LA 70734
JCG	T0506	2009	CAT DOZER D6N LGP	160,000.00	DJY01626	37110 Hwy 30, Geismar, LA 70734
JCG	T0546	2012	CAT DOZER D6T W/GPS	315,000.00	GMK00698	37110 Hwy 30, Geismar, LA 70734
STE	264023	2007	JLG SKYTRAK 10K REACH LIFT	60,000.00	0160027354	26000 Commercentre Drive, Lake Forest CA 92630
STE	264027	2007	JLG SKYTRAK 10K REACH LIFT	60,000.00	0160029697	26000 Commercentre Drive, Lake Forest CA 92630
STE	264005	2007	SKYTRAK 10K REACH LIFT	60,000.00	0160027192	26000 Commercentre Drive, Lake Forest CA 92630
STE	264006	2007	SKYTRAK 10K REACH LIFT	60,000.00	0160027107	26000 Commercentre Drive, Lake Forest CA 92630
STE	264007	2007	SKYTRAK 10K REACH LIFT	60,000.00	0160027197	26000 Commercentre Drive, Lake Forest CA 92630
STE	264008	2007	SKYTRAK 10K REACH LIFT	60,000.00	0160027316	26000 Commercentre Drive, Lake Forest CA 92630
STE	264009	2007	SKYTRAK 10K REACH LIFT	60,000.00	0160027389	26000 Commercentre Drive, Lake Forest CA 92630
STE	264010	2007	SKYTRAK 10K REACH LIFT	60,000.00	0160027119	26000 Commercentre Drive, Lake Forest CA 92630
STE	264011	2007	SKYTRAK 10K REACH LIFT	60,000.00	0160027185	26000 Commercentre Drive, Lake Forest CA 92630
STE	264012	2007	SKYTRAK 10K REACH LIFT	60,000.00	0160027182	26000 Commercentre Drive, Lake Forest CA 92630
STE	264013	2007	SKYTRAK 10K REACH LIFT	60,000.00	0160027073	26000 Commercentre Drive, Lake Forest CA 92630
STE	264015	2007	SKYTRAK 10K REACH LIFT	60,000.00	0160027386	26000 Commercentre Drive, Lake Forest CA 92630
STE	264016	2007	SKYTRAK 10K REACH LIFT	60,000.00	0160027423	26000 Commercentre Drive, Lake Forest CA 92630
STE	264017	2007	SKYTRAK 10K REACH LIFT	60,000.00	0160027356	26000 Commercentre Drive, Lake Forest CA 92630
STE	264018	2007	SKYTRAK 10K REACH LIFT	60,000.00	0160027229	26000 Commercentre Drive, Lake Forest CA 92630
STE	264019	2007	SKYTRAK 10K REACH LIFT	60,000.00	0160027392	26000 Commercentre Drive, Lake Forest CA 92630
STE	264020	2007	SKYTRAK 10K REACH LIFT	60,000.00	0160027102	26000 Commercentre Drive, Lake Forest CA 92630
STE	264021	2007	SKYTRAK 10K REACH LIFT	60,000.00	0160027188	26000 Commercentre Drive, Lake Forest CA 92630
STE	264022	2007	SKYTRAK 10K REACH LIFT	60,000.00	0160027396	26000 Commercentre Drive, Lake Forest CA 92630
STE	264024	2007	SKYTRAK 10K REACH LIFT	60,000.00	0160029703	26000 Commercentre Drive, Lake Forest CA 92630
STE	264025	2007	SKYTRAK 10K REACH LIFT	60,000.00	0160029694	26000 Commercentre Drive, Lake Forest CA 92630
STE	264026	2007	SKYTRAK 10K REACH LIFT	60,000.00	0160029714	26000 Commercentre Drive, Lake Forest CA 92630
STE	264014	2008	JLG SKYTRAK 10K REACH LIFT	70,000.00	0160033249	26000 Commercentre Drive, Lake Forest CA 92630
STE	264028	2008	JLG SKYTRAK 10K REACH LIFT	70,000.00	0160033258	26000 Commercentre Drive, Lake Forest CA 92630
STE	264029	2008	JLG SKYTRAK 10K REACH LIFT	70,000.00	0160033256	26000 Commercentre Drive, Lake Forest CA 92630

			TOTAL LIEN AMOUNT	10,455,856.87
			TOTAL LOAN AMOUNT	10,000,000.00

Exhibit 10.2

Master Loan and Security Agreement

Wells Fargo Equipment Finance, Inc. | 733 Marquette Avenue, Suite 700 | MAC N9306-070 | Minneapolis, MN 55402

Master Loan and Security Agreement Number 283010 dated as of June 13, 2013

Names and Addresses of Borrower:
Stellaris LLC	James Construction Group, L.L.C.	Rockford Corporation
26000 Commerce Centre Dr	11200 Industriplex Boulevard, Suite	22845 NW Bennett St 150
Lake Forest , CA 92630	150	Hillsboro, OR 97124
	Baton Rouge , LA 70809

Master Loan and Security Agreement Provisions

1. INTRODUCTION. In consideration of the mutual covenants set forth herein, Borrower and Lender hereby enter into this Master Loan and Security Agreement and agree to the terms and conditions set forth herein. Each Loan Schedule that is executed by Borrower and Lender from time to time pursuant to this Master Loan and Security Agreement shall be deemed to be a separate loan transaction incorporating all of the terms and conditions of this Master Loan and Security Agreement. References in this Master Loan and Security Agreement to “Agreement”, “hereunder” and “herein” shall mean a Loan Schedule which incorporates this Master Loan and Security Agreement. References in this Master Loan and Security Agreement to “Loan” shall mean the loan transaction evidenced by a Loan Schedule.

2. LOAN SCHEDULES. Borrower shall evidence its agreement to enter into a loan transaction incorporating the terms hereof by executing and delivering to Lender a Loan Schedule. Borrower’s execution of a Loan Schedule shall obligate Borrower to make all of the payments set forth in the Loan Schedule. The Loan Schedule shall set forth the amount of the Loan, the term of the Loan, the number of payments to be made and the amount and dates upon which such payments are due (each a “Payment Date”). Lender shall have no obligation to enter into or accept any Loan Schedule and no Loan Schedule shall be binding upon Lender until accepted by Lender, which acceptance shall be evidenced only by the execution of such Loan Schedule by Lender. The Borrower’s obligation to repay the principal amount of each Loan together with interest and all other amounts payable by Borrower as set forth in the applicable Loan Schedule is absolute, unconditional and irrevocable, and all such amounts shall be paid by Borrower in accordance with the terms thereof without any abatement, reduction, setoff or defense of any kind.

3. SECURITY INTEREST. To secure the payment and performance of each and every debt, liability and obligation of every type and description which Borrower may now or at any time hereafter owe to Lender (whether such debt, liability or obligation now exists or is hereafter created, acquired or incurred, arises out of a lease, installment sale contract or loan, swap, derivative, foreign exchange, hedge or other similar agreement, whether or not it is currently contemplated by the Borrower and Lender, whether or not any documents evidencing it refer to this Master Loan and Security Agreement, and whether it is or may be direct or indirect, due or to become due, absolute or contingent, primary or secondary, liquidated or unliquidated, joint, several or joint and several, and all costs and expenses incurred by Lender to obtain, preserve, perfect and enforce the security interest granted herein and to maintain, preserve and collect the property subject to the security interest; all such debts, liabilities and obligations being herein collectively referred to as the “Obligations”), Borrower hereby grants to Lender a first-priority security interest in all of the property described in each Loan Schedule, together with all substitutions, replacements, parts, accessories, supplies, improvements, additions and accessions now or hereafter affixed thereto or used in connection therewith, and all proceeds and products thereof (referred to collectively as the “Collateral” and individually as an “Item”), and all books and records of Borrower pertaining to the Collateral.

4. BORROWER COVENANTS; REPRESENTATIONS AND WARRANTIES. (a) Affirmative Covenants. Borrower shall: (i) have, at the time Borrower acquires rights in the Collateral, absolute title to each Item of Collateral free and clear of all security interests, liens and encumbrances except the security interest of Lender and will defend the Collateral against all claims or demands of all persons other than Lender; (ii) use the Collateral primarily for business purposes as opposed to personal, family or household purposes; (iii) pay all shipping and delivery charges and other expenses incurred in connection with the Collateral and pay all lawful claims, whether for labor, materials, supplies, rent, assessments, taxes or services, which might or could if unpaid become a lien on the Collateral; (iv) comply with all laws and regulations and rules, all manufacturer’s instructions and warranty requirements, and the conditions and requirements of all policies of insurance relating to the Collateral and its use, and use reasonable care to prevent any portion of the Collateral from being damaged or depreciating at an excessive rate (normal wear and tear excepted); (v) mark and identify the Collateral with all information and in such manner as Lender may request from time to time and replace promptly any such markings or identification which are removed, defaced or destroyed; (vi) at any and all times during business hours, grant Lender free access to enter upon the premises wherein the Collateral shall be located or used and permit Lender to audit and inspect the Collateral; (vii) pay when due or reimburse Lender on demand for all costs of collection of any of the Obligations and all other out-of-pocket expenses (including in each case all reasonable attorneys’ fees) incurred by Lender in connection with the creation, perfection, satisfaction, protection, liquidation,

THIS AGREEMENT INCLUDES THE TERMS ON THE ATTACHED PAGE(S).

Lender: Wells Fargo Equipment Finance, Inc.	Borrower: Stellaris LLC	Borrower: James Construction Group, L.L.C.

/s/ Janae Ayala	/s/ Alfons Theeuwes
By	By	/s/ John Perisich
Janae Ayala	Alfons Theeuwes	By
Title Vice President	Title Chief Financial Officer	John Perisich
		Title Manager

	Borrower: Rockford Corporation
	/s/ John Perisich
	By
	John Perisich
	Title Secretary

defense or enforcement of Lender’s security interest in the Collateral or the creation, continuance, protection, defense or enforcement of this Agreement or any or all of the Obligations, including expenses incurred in any litigation or bankruptcy or insolvency proceedings; (viii) maintain a system of accounts established and administered in accordance with generally accepted accounting principles and practices consistently applied; (ix) within forty-five (45) days after the end of each fiscal quarter other than the final fiscal quarter of each fiscal year, deliver to Lender a balance sheet and statement of income as at the end of such quarter, each setting forth in comparative form the corresponding figures for the comparable period in the preceding fiscal year and, within one hundred and twenty (120) days after the end of each fiscal year, deliver to Lender a balance sheet as at the end of such year and statements of income and cash flows for such year, each setting forth in comparative form the corresponding figures for the preceding year, in each case prepared in accordance with generally accepted accounting principles and practices consistently applied and certified by Borrower’s chief financial officer as fairly presenting the financial position and results of operations of Borrower, and, in the case of year-end financial statements, certified by an independent accounting firm acceptable to Lender; (x) with reasonable promptness, Borrower shall furnish Lender with such other information, financial or otherwise, relating to Borrower or the Collateral as Lender shall reasonably request; and (xi) indemnify Lender against all losses, claims, demands, liabilities and expenses of every kind (including, without limitation, attorneys’ fees) arising out of, related to, or caused by, an Item or Items of Collateral.

(b) Negative Covenants. Borrower shall not (i) voluntarily or involuntarily create, incur, assume or suffer to exist any mortgage, lien, security interest, pledge or other encumbrance or attachment of any kind whatsoever upon, affecting or with respect to the Collateral or the Agreement or any of Borrower’s interest under the Agreement; (ii) permit the name of any person, association or corporation other than Borrower or Lender to be placed on the Collateral as a designation that might be interpreted as a claim of ownership or security interest; (iii) part with possession or control of or suffer or allow to pass out of its possession or control any Item or change the location of the Collateral or any part thereof from the address shown on the Loan Schedule; (iv) ASSIGN OR IN ANY WAY DISPOSE OF ALL OR ANY PART OF ITS RIGHTS OR OBLIGATIONS UNDER THE AGREEMENT OR ENTER INTO ANY LEASE OR SALE OF ALL OR ANY PART OF THE COLLATERAL (and any attempt by Borrower to assign shall be null and void); (v) change its name or address from that set forth above unless it shall have given Lender no less than thirty (30) days’ prior written notice thereof; (vi) permit the sale or transfer of any shares of its capital stock or of any ownership interest in the Borrower to any person, persons, entity or entities (whether in one single transaction or in multiple transactions) which results in a transfer of a majority interest in the ownership and/or the control of the Borrower from the person, persons, entity or entities who hold ownership or control of the Borrower as of the date of this Master Loan and Security Agreement, or otherwise change its corporate/organizational structure or the jurisdiction in which it is organized; (vii) consolidate with or merge into or with any other entity, or purchase or otherwise acquire all or substantially all of the assets or stock or other ownership interest of any person or entity or sell, transfer, lease or otherwise dispose of all or substantially all of Borrower’s assets to any person or entity.

(c) Representations and Warranties. Borrower represents and warrants to Lender, that effective on the date on which Borrower executes this Master Loan and Security Agreement and each Loan Schedule: (i) if Borrower is a partnership, corporation, limited liability company or other legal entity, the execution and delivery of this Master Loan and Security Agreement, each Loan Schedule and the performance of Borrower’s obligations hereunder and thereunder have been duly authorized by all necessary action on the part of the Borrower and are not in contravention of, and will not result in a breach of, any of the terms of Borrower’s charter, by-laws, articles of incorporation or other organic documents or any loan agreements or indentures of Borrower, or any other contract, agreement or instrument to which Borrower is a party or by which it is bound; (ii) the person signing the Master Loan and Security Agreement and each Loan Schedule on behalf of Borrower is duly authorized; (iii) Borrower’s exact legal name as it appears on its charter or other organic documents, including as to punctuation and capitalization, and its principal place of business or chief executive office is as set forth in the heading of this Master Loan and Security Agreement; (iv) Borrower is duly organized, validly existing and in good standing under the laws of the state of its incorporation or formation and is duly qualified and authorized to transact business in, and is in good standing under the laws of, each other state in which the Collateral is or will be located; (v) there has been no change in the name of the Borrower, or the name under which Borrower conducts business within the one year preceding the date hereof except as previously reported in writing to Lender; (vi) Borrower has not moved its principal place of business or chief executive office, or has not changed the jurisdiction of its organization within the one year preceding the date hereof except as previously reported in writing to Lender; (vii) this Master Loan and Security Agreement and each Loan Schedule constitute a legal, valid and binding obligation of Borrower, enforceable against Borrower in accordance with its terms; (viii) all information provided by Borrower to Lender in connection with a Loan is true and correct; (ix) the Collateral will be used primarily for business purposes as opposed to personal, family or household purposes; and (x) there are no suits pending or threatened against Borrower or any guarantor of the Borrower’s obligations (each, a “Guarantor”) which, if decided adversely, might materially adversely affect Borrower’s or such Guarantor’s financial condition, the value, utility or remaining useful life of the Collateral, the rights intended to be afforded to Lender hereunder or under any guarantee or the ability of Borrower or any Guarantor to perform its obligations under the Master Loan and Security Agreement or any document delivered in connection with a Loan.

5. ASSIGNMENT. Lender may sell or assign, or grant a security interest in, its interest in one or more Agreements, or in this Master Loan and Security Agreement, or any Loan, and assign its security interest in all or any part of the Collateral, in whole or in part, without notice to or the consent of Borrower. Borrower agrees not to assert against any assignee of Lender any claim or defense Borrower may have against Lender.

6. COLLATERAL PERSONALTY. The Collateral shall remain personal property regardless of its attachment to realty, and Borrower agrees to take such action at its expense as may be necessary to prevent any third party from acquiring any interest in the Collateral as a result of its attachment to realty. If requested by Lender with respect to any Item, Borrower will obtain and deliver to Lender waivers of interest or liens in recordable form, satisfactory to Lender, from all persons claiming any interest in the real property on which such Item is installed or located.

7. USE AND MAINTENANCE. Borrower will use the Collateral with due care and for the purpose for which it is intended. Borrower will maintain the Collateral in good repair, condition and working order and will furnish all parts and services required therefor, all at its expense, ordinary wear and tear excepted. Borrower shall, at its expense, make all modifications and improvements to the Collateral required by law, and shall not make other modifications or improvements to the Collateral without the prior written consent of Lender. All parts, modifications and improvements to the Collateral shall, when installed or made, immediately become part of the Collateral for all purposes and subject to Lender’s security interest under the Agreement. The Collateral shall not be used outside of the United States without Lender’s prior written consent.

8. LOSS OR DAMAGE. Borrower shall bear all risk of damage, loss, theft, destruction, condemnation or seizure with respect to the Collateral, and no damage, loss, theft, destruction of, condemnation or seizure with respect to the Collateral or any part thereof shall affect any obligation of Borrower under the Agreement, which shall continue in full force and effect. Borrower shall advise Lender in writing within ten (10) days of the occurrence of any damage, loss, theft, destruction or governmental commandeering of any Item (an “Event of Loss”) and of the circumstances and extent of such Event of Loss. Borrower shall, at Lender’s option, either (a) replace such Item with collateral acceptable to Lender within 30 days after the Event of Loss and such replacement collateral shall automatically become Collateral subject to Lender’s security interest under the Agreement or (b) pay down the Obligations by an amount representing the unpaid portion of the Obligations funded in reliance of the affected Items as reasonably determined by Lender. Any insurance or condemnation proceeds received shall be paid to Lender and credited to Borrower’s obligation under this paragraph. Whenever the Collateral is damaged and such damage can be repaired, Borrower shall, at its expense, promptly effect such repairs as Lender shall deem necessary for compliance with paragraph 7, above. Proceeds of insurance shall be paid to Lender with respect to such reparable damage to the Collateral and shall, at the election of Lender, be applied either to the repair of the Collateral by payment by Lender directly to the party completing the repairs, or to the reimbursement of Borrower for the cost of such repairs; provided, however, that Lender shall have no obligation to make such payment or any part thereof until receipt of such evidence as Lender shall deem satisfactory that such repairs have been completed and further provided that Lender may apply such proceeds to the payment of any installment or other sum due or to become due under the Agreement if at the time such proceeds are received by Lender there shall have occurred and be continuing any Event of Default or any event which with lapse of time or notice, or both, would become an Event of Default.

9. INSURANCE. Borrower shall obtain and maintain on or with respect to the Collateral at its own expense all-risk physical damage insurance, including the risks normally included in extended coverage, malicious mischief and vandalism, insuring against loss or damage to the Collateral in an amount not less than the full replacement value of the Collateral. Borrower shall furnish Lender with a certificate of insurance evidencing the issuance of a policy to Borrower in at least the minimum amount required herein naming Lender as loss payee. Such policy shall be in such form and with such insurers as may be satisfactory to Lender, and shall contain a clause specifying that no action or misrepresentation by Borrower shall invalidate such policy and a clause requiring the insurer to give to Lender at least thirty (30) days prior written notice of (a) the cancellation or non-renewal of such policy or (b) any amendment to the terms of such policy if such amendment would cause the policy no longer to conform to the policy requirements stated in this paragraph, and at least ten (10) days prior written notice for non-payment of premium, and that the coverage of Lender shall not be terminated, reduced or affected in any manner regardless of any breach or violation by Borrower or any of its affiliates of any warranties, declarations or conditions of such insurance policy or policies. Borrower shall deliver to Lender annually and at any time that there is a change in insurance carrier, evidence satisfactory to Lender of the required insurance coverage. Borrower hereby assigns to Lender the proceeds of all insurance and directs any insurer to make payments directly to Lender. Lender shall be under no duty to ascertain the existence of or to examine any such policy or to advise Borrower in the event any such policy shall not comply with the requirements hereof.

10. ADDITIONAL ACTION; EXPENSES. Borrower will promptly execute and deliver to Lender such further documents and take such further action as Lender may request in order to carry out more effectively the intent and purpose of the Agreement, including any action deemed necessary to protect fully Lender’s interest under the Agreement in accordance with the Uniform Commercial Code or other applicable law. Lender and any assignee of Lender is authorized to file one or more Uniform Commercial Code financing statements without the signature of Borrower or signed by Lender or any assignee of Lender as attorney-in-fact for Borrower. Borrower hereby grants to Lender a power of attorney in Borrower’s name, to apply for a certificate of title for any Item that is required to be titled under the laws of any jurisdiction where the Collateral is or may be used and/or to transfer title thereto upon the exercise by Lender of its remedies upon an Event of Default by Borrower under the Agreement. Borrower acknowledges that Lender may incur out-of-pocket costs and expenses in connection with the Loans contemplated by this Master Loan and Security Agreement, and accordingly agrees to pay (or reimburse Lender for) the reasonable costs and expenses related to (a) filing any financing, continuation or termination statements, (b) any title and lien searches with respect to the Agreement and the Collateral, (c) documentary stamp taxes relating thereto, and (d) procuring certified charter documents and good standing certificates of Borrower and any Guarantor. Borrower will do whatever may be necessary to have a statement of the interest of Lender and any assignee of Lender in the Collateral noted on any certificate of title relating to the Collateral and will deliver said certificate to Lender. If Borrower fails to perform or comply with any of its agreements, Lender may perform or comply with such agreements in its own name or in Borrower’s name as attorney-in-fact and the amount of any payments and expenses of Lender incurred in connection with such performance or compliance, together with interest thereon at the rate provided below, shall be deemed payable by Borrower upon demand.

11. LATE CHARGES. In the event any amount payable under the Agreement shall not be paid within ten (10) days of when due, Lender shall have the right to assess and Borrower shall pay to Lender, as a late charge, 5% of such overdue amount or the maximum late charge allowed by law, whichever is less. Payments thereafter received shall be applied first to delinquent installments and then to current installments.

12. DEFAULT. Each of the following events shall constitute an “Event of Default” under the Agreement: (a) Borrower shall fail to make any required payment within ten (10) days of when due under this Agreement; (b) any certificate, statement, representation, warranty or financial or credit information heretofore or hereafter made or furnished by or on behalf of Borrower or any Guarantor proves to have been false or misleading in any material respect or omitted any material fact, contingent or unliquidated liability or claim against Borrower or any such Guarantor; (c) Borrower shall fail to observe or perform any other agreement to be observed or performed by Borrower under the Agreement and the continuance thereof for ten (10) days following written notice thereof by Lender to Borrower; (d) Borrower or any Guarantor or any partner of Borrower if Borrower is a partnership shall cease doing business as a going concern or make an assignment for the benefit of creditors; (e) Borrower or any Guarantor or any partner of Borrower if Borrower is a partnership or the holder(s) of the majority ownership interests of Borrower shall voluntarily file, or have filed against it involuntarily, a petition for liquidation, reorganization, adjustment of debt, or similar relief under the federal Bankruptcy Code or any other present or future federal or state bankruptcy or insolvency law, or a trustee, receiver, or liquidator shall be appointed of it or of all or a substantial part of its assets; (f) Borrower or any Guarantor shall be in breach of or in default in the payment or performance of any material obligation under any credit agreement, conditional sales contract, lease or other contract with Lender, an affiliate of Lender or any other person or entity, howsoever arising; (g) any individual Borrower, guarantor, or partner of Borrower if Borrower is a partnership shall die; (h) Borrower or Guarantor shall suffer a material adverse change in its financial condition from the date hereof, and as a result thereof Lender deems itself or any of the Collateral to be insecure; or (i) any Guarantor fails to pay or perform any obligation owing to Lender, or breaches or fails to observe or perform any term, condition, covenant, representation or warranty contained in any agreement made by such Guarantor in favor of Lender and such failure or breach continues beyond the applicable grace or cure period set forth in such agreement, if any.

13. REMEDIES. At any time after the occurrence of an Event of Default, Lender shall have the remedies of a secured party under the Uniform Commercial Code and other applicable laws and may also exercise one or more of the following remedies:

(a) Lender may declare all unmatured obligations, including but not limited to, all unpaid amounts due and to become due under this Agreement and under each and every other Loan Schedule to this Master Loan and Security Agreement to be immediately due and payable and thereupon all such amounts including, without limitation, the full principal balance of each Loan and any additional amount due upon the prepayment of any Loan prior to its scheduled maturity date, whether denominated as a prepayment premium or otherwise, together with accrued but unpaid interest through and including the date of payment in full, shall be and become immediately due and payable (collectively, the “Accelerated Balance”). Interest on the Accelerated Balance shall be calculated from the date of such Event of Default, both before and after judgment, at a rate equal to the lesser of 12% per annum or the highest rate permitted by law (the “Default Rate”).

(b) Lender may require Borrower, at Lender’s request and at Borrower’s own cost, to promptly deliver possession of the Collateral to Lender in such manner and to such place as Lender shall direct, or Lender may at any hour, without notice to Borrower and without liability except for malicious acts by its agents, enter upon Borrower’s premises or any other premises and take possession of or render unusable any Item and attachments thereon, whether or not part of the Collateral, and hold, lease or sell at public or private sale any such Item and attachments, which sale may, at Lender’s option, be held on Borrower’s premises. If Lender leases or sells the Collateral, Lender shall have the right to recover from Borrower any deficiency remaining after the application of the proceeds to the Accelerated Balance and all other amounts due under the Agreement. At any such sale, Lender may disclaim any warranties of title or the like. If Lender sells any of the Collateral upon credit, Borrower will be credited only with the payments actually made by the purchaser. Any notice of sale, disposition or other action by Lender required by law and sent to Borrower at Borrower’s address shown above, or at such other address as Borrower may from time to time be shown on the records of Lender, at least five (5) days prior to such action, shall constitute reasonable notice to Borrower. Lender shall be entitled to apply the proceeds of any sale or other disposition of the Collateral to the Obligations in such order and manner as Lender may determine. Borrower waives any and all rights to notice or hearing prior to Lender taking immediate possession of the Collateral or any portion thereof, and Borrower waives any and all rights to a bond or security which may be required by applicable law prior to the exercise of any of Lender’s remedies against the Collateral or any portion thereof. Borrower waives any and all requirements that the Lender sell or dispose of all or any part of the Collateral at any particular time, regardless of whether Borrower has requested such sale or disposition.

(c) In addition to any amounts recoverable under this paragraph 13, Lender shall be entitled to recover all expenses and collection costs which Lender shall have incurred by reason of any Event of Default, including but not limited to expenses of repossession, repair, storage, transportation, and disposition of the Collateral and including expenses incurred by employees and reasonable attorneys’ fees, including attorneys’ fees on appeal.

(d) Lender’s remedies shall be cumulative and may be exercised singularly or concurrently at Lender’s option, and shall be in addition to all other remedies at law or in equity or by agreement, but only to the extent necessary to permit Lender to recover amounts for which Borrower is liable under the Agreement. Borrower waives any requirements of law that might limit any of the remedies herein to the extent permitted by law. No express or implied waiver by Lender of any breach of Borrower’s obligations under the Agreement shall constitute a waiver of any other breach of Borrower’s obligations under the Agreement. Lender’s failure or delay in exercising any rights shall not be a waiver of any such right upon the continuation or recurrence of any Event of Default. Any single or partial exercise of any right by Lender shall not exhaust the same or be a waiver of any other right. To the extent permitted by applicable law, Borrower hereby waives the benefit and advantage of, and covenants not to assert against Lender, any valuation, inquisition, stay, appraisement, extension or redemption laws now existing or which may hereafter exist which, but for this provision, might be applicable to any sale or lease made under the judgment, order or decree of any court or under the powers of sale and leasing conferred by the Agreement or otherwise. To the extent permitted by applicable law, Borrower hereby waives any rights now or hereafter conferred by statute or otherwise which may require Lender to sell, lease or otherwise use any Collateral in mitigation of Lender’s damages.

14. NOTICES. Any written notice under the Agreement to Borrower or Lender shall be deemed to have been given when delivered personally or deposited with a nationally recognized overnight courier service or in the United States mails, postage prepaid, addressed to recipient at its address set forth above or at such other address as may be last known to the sender. In the event Borrower changes its address at any time prior to the date the Obligations are paid in full, Borrower agrees to promptly give written notice of said change of address in the manner set forth herein.

15. NON-WAIVER. No course of dealing between Lender and Borrower or any delay or omission on the part of Lender in exercising any rights under the Agreement shall operate as a waiver of any rights of Lender. A waiver on any one occasion shall not be construed as a bar to or waiver of any right or remedy on any future occasion. No waiver or consent shall be binding upon Lender unless it is in writing and signed by Lender.

16. MISCELLANEOUS. This Master Loan and Security Agreement and the Loan Schedules represent the entire agreement between the parties with respect to the transactions contemplated hereby. This Agreement can be modified, amended, terminated or discharged, and the Security Interest can be released, only explicitly in a writing signed by Lender. Lender’s duty of care with respect to Collateral in its possession (as imposed by law) shall be deemed fulfilled if Lender exercises reasonable care in physically safekeeping such Collateral or, in the case of Collateral in the custody or possession of a bailee or other third person, exercises reasonable care in the selection of the bailee or other third person, and Lender need not otherwise preserve, protect, insure or care for any Collateral. Lender shall not be obligated to exercise or reserve any rights Borrower may have against prior parties, to realize on the Collateral at all or in any particular manner or order, or to apply any cash proceeds of Collateral in any particular order of application. This Agreement shall be binding upon and inure to the benefit of Borrower and Lender and their respective heirs, representatives and assigns and shall take effect when signed by Borrower and delivered to Lender, and Borrower waives notice of Lender’s acceptance hereof. Lender may execute this Agreement if appropriate for the purpose of filing, but the failure of Lender to execute this Agreement shall not affect or impair the validity or effectiveness of this Agreement. Except to the extent otherwise required by law, this Agreement shall be governed by the internal laws of the State of Minnesota. If any provision or application of this Agreement is held unlawful or unenforceable in any respect, such illegality or unenforceability shall not affect other provisions or applications which can be given effect, and this Agreement shall be construed as if the unlawful or unenforceable provision or application had never been contained herein or prescribed hereby. All representations and warranties contained in this Agreement shall survive the execution, delivery and performance of this Agreement

and the creation and payment of the Obligations. If this Agreement is signed by more than one person as Borrower, the term “Borrower” shall refer to each of them separately and to both or all of them jointly; all such persons shall be bound both severally and jointly with the other(s); and the Obligations shall include all debts, liabilities and obligations owed to Lender by any Borrower solely or by both or several or all Borrowers jointly or jointly and severally, and all property described in paragraph 3 shall be included as part of the Collateral, whether it is owned jointly by both or all Borrowers or is owned in whole or in part by one (or more) of them. The captions contained herein or in any Loan Schedule are inserted for convenience only and shall not affect the meaning or interpretation of this Master Loan and Security Agreement or any Loan Schedule. Lender may in its sole discretion, accept a photocopy, electronically transmitted facsimile or other reproduction of this Agreement and/or a Loan Schedule (a “Counterpart”) as the binding and effective record of this Agreement and/or a Loan Schedule whether or not an ink signed copy hereof or thereof is also received by Lender from Borrower, provided, however, that if Lender accepts a Counterpart as the binding and effective record of this Agreement or a Loan Schedule, the Counterpart acknowledged in writing by Lender shall constitute the record hereof or thereof. Borrower represents to Lender that the signature that appears on the Counterpart that is transmitted by Borrower to Lender in any manner described above is intended by Borrower to authenticate the Counterpart notwithstanding that such signature is electronic, facsimile or a reproduction and Debtor further agrees that a Counterpart of this Agreement or a Loan Schedule received by Lender, shall, when acknowledged in writing by Lender, constitute an original document for the purposes of establishing the provisions hereof and thereof and shall be legally admissible under the best evidence rule and binding on and enforceable against Borrower. If Lender accepts a Counterpart of a Loan Schedule as the binding and effective record thereof only such Counterpart acknowledged in writing by Lender shall be marked “Original” and to the extent that a Loan Schedule constitutes chattel paper, a security interest may only be created in the Loan Schedule that bears Lender’s ink signed acknowledgement and is marked “Original.” TIME IS OF THE ESSENCE WITH RESPECT TO THE OBLIGATIONS OF BORROWER UNDER THIS AGREEMENT. BORROWER AGREES THAT IN NO EVENT SHALL IT HAVE A REMEDY OF, AND IN NO EVENT SHALL LENDER BE LIABLE TO BORROWER FOR, INDIRECT, SPECIAL OR CONSEQUENTIAL DAMAGES OR PUNITIVE OR EXEMPLARY DAMAGES, AND BORROWER HEREBY EXPRESSLY WAIVES ANY RIGHT OR CLAIM TO PUNITIVE OR EXEMPLARY DAMAGES.

ARBITRATION:

(a) Arbitration. The parties hereto agree, upon demand by any party, whether made before the institution of a judicial proceeding or not more than 60 days after service of a complaint, third party complaint, cross-claim, counterclaim or any answer thereto or any amendment to any of the above, to submit to binding arbitration all claims, disputes and controversies between or among them (and their respective employees, officers, directors, attorneys, and other agents), whether in tort, contract or otherwise arising out of or relating to in any way (i) the loan and related loan and security documents which are the subject of this Agreement and its negotiation, execution, collateralization, administration, repayment, modification, extension, substitution, formation, inducement, enforcement, default or termination; or (ii) requests for additional credit. In the event of a court ordered arbitration, the party requesting arbitration shall be responsible for timely filing the demand for arbitration and paying the appropriate filing fee within the 30 days of the abatement order or the time specified by the court. Failure to timely file the demand for arbitration as ordered by the court will result in that party’s right to demand arbitration being automatically terminated.

(b) Governing Rules. Any arbitration proceeding will (i) proceed in a location selected by the American Arbitration Association (“AAA”); (ii) be governed by the Federal Arbitration Act (Title 9 of the United States Code), notwithstanding any conflicting choice of law provision in any of the documents between the parties; and (iii) be conducted by the AAA, or such other administrator as the parties shall mutually agree upon, in accordance with the AAA’s commercial dispute resolution procedures, unless the claim or counterclaim is at least $1,000,000.00 exclusive of claimed interest, arbitration fees and costs in which case the arbitration shall be conducted in accordance with the AAA’s optional procedures for large, complex commercial disputes (the commercial dispute resolution procedures or the optional procedures for large, complex commercial disputes referred to herein, as applicable, as the “Rules”). If there is any inconsistency between the terms hereof and the Rules, the terms and procedures set forth herein shall control. Any party who fails or refuses to submit to arbitration following a demand by any other party shall bear all costs and expenses incurred by such other party in compelling arbitration of any dispute. Nothing contained herein shall be deemed to be a waiver by any party that is a bank of the protections afforded to it under 12 U.S.C. §91 or any similar applicable state law.

(c) No Waiver of Provisional Remedies, Self-Help and Foreclosure. The arbitration requirement does not limit the right of any party to (i) foreclose against real or personal property collateral; (ii) exercise self-help remedies relating to collateral or proceeds of collateral such as setoff or repossession; or (iii) obtain provisional or ancillary remedies such as replevin, injunctive relief, attachment or the appointment of a receiver, before during or after the pendency of any arbitration proceeding. This exclusion does not constitute a waiver of the right or obligation of any party to submit any dispute to arbitration or reference hereunder, including those arising from the exercise of the actions detailed in sections (i), (ii) and (iii) of this paragraph.

(d) Arbitrator Qualifications and Powers. Any arbitration proceeding in which the amount in controversy is $5,000,000.00 or less will be decided by a single arbitrator selected according to the Rules, and who shall not render an award of greater than $5,000,000.00. Any dispute in which the amount in controversy exceeds $5,000,000.00 shall be decided by majority vote of a panel of three arbitrators; provided however, that all three arbitrators must actively participate in all hearings and deliberations. The arbitrator will be a neutral attorney licensed in, or a neutral retired judge of the state or federal judiciary of the state in which the arbitration proceeding takes place, in either case with a minimum of ten years experience in the substantive law applicable to the subject matter of the dispute to be arbitrated. The arbitrator will determine whether or not an issue is arbitratable and will give effect to the statutes of limitation in determining any claim. In any arbitration proceeding the arbitrator will decide (by documents only or with a hearing at the arbitrator’s discretion) any pre-hearing motions which are similar to motions to dismiss for failure to state a claim or motions for summary adjudication. The arbitrator shall resolve all disputes in accordance with the substantive law of Minnesota and may grant any remedy or relief that a court of such state could order or grant within the scope hereof and such ancillary relief as is necessary to make effective any award. The arbitrator shall also have the power to award recovery of all costs and fees, to impose sanctions and to take such other action as the arbitrator deems necessary to the same extent a judge could pursuant to the Federal Rules of Civil Procedure, the Minnesota Rules of Civil Procedure or other applicable law. Judgment upon the award rendered by the arbitrator may be entered in any court having jurisdiction. The institution and maintenance of an action for judicial relief or pursuit of a provisional or ancillary remedy shall not constitute a waiver of the right of any party, including the plaintiff, to submit the controversy or claim to arbitration if any other party contests such action for judicial relief.

(e) Discovery. In any arbitration proceeding discovery will be permitted in accordance with the Rules. All discovery shall be expressly limited to matters directly relevant to the dispute being arbitrated and must be completed no later than 20 days before the hearing date. Any requests for an extension of the discovery periods, or any discovery disputes, will be subject to final determination by the arbitrator upon a showing that the request for discovery is essential for the party’s presentation and that no alternative means for obtaining information is available.

(f) Class Proceedings and Consolidations. Neither party shall be entitled to join or consolidate disputes by or against others in any arbitration, or to include in any arbitration any dispute as a representative or member of a class or to act in any arbitration in the interest of the general public or in a private attorney general capacity.

(g) Payment of Arbitration Costs and Fees. The arbitrator shall award all costs and expenses of the arbitration proceeding.

(h) Miscellaneous. To the maximum extent practicable, the AAA, the arbitrators and the parties shall take all action required to conclude any arbitration proceeding within 180 days of the filing of the dispute with the AAA. No arbitrator or other party to an arbitration proceeding may disclose the existence, content or results thereof, except for disclosures of information by a party required in the ordinary course of its business or by applicable law or regulation. If more than one agreement for arbitration by or between the parties potentially applies to a dispute, the arbitration provision most directly related to the documents between the parties or the subject matter of the dispute shall control. This arbitration provision shall survive termination, amendment or expiration of any of the documents or any relationship between the parties.

(i) Small Claims Suits. Notwithstanding anything herein to the contrary, each party retains the right to pursue in Small Claims Court any dispute in which the remedy sought is entirely within that court’s jurisdiction.

Loan Schedule
to Master Loan and Security Agreement

Wells Fargo Equipment Finance, Inc. | 733 Marquette Avenue, Suite 700 | MAC N9306-070 | Minneapolis, MN 55402

Loan Schedule Number 283010-700 dated as of June 13, 2013 to
Master Loan and Security Agreement Number 283010 dated as of June 13, 2013

Names and Addresses of Borrower:
Stellaris LLC 26000 Commerce Centre Dr Lake Forest , CA 92630	James Construction Group, L.L.C. 11200 Industriplex Boulevard, Suite 150 Baton Rouge , LA 70809	Rockford Corporation 22845 NW Bennett St 150 Hillsboro, OR 97124

Notice: Lender reserves the right to withdraw the terms of this Loan Schedule and issue a modified Loan Schedule without notice to Borrower if Lender is not in receipt of a fully executed original or facsimile of this document within five (5) business days of the date of this Loan Schedule. However, in that event, no such modifications will be binding on Borrower unless and until Borrower executes the modified document containing all such modifications.

This Loan Schedule to Master Loan and Security Agreement is entered into pursuant to the Master Loan and Security Agreement identified above between Wells Fargo Equipment Finance, Inc., as Lender, and the undersigned Borrower, whether one or more, (herein referred to separately as the “Master Agreement” and together with each Loan Schedule thereunder as the “Agreement”) and constitutes a separate loan (the “Loan”) thereunder. All terms and conditions of the Master Agreement are incorporated herein and made a part hereof. Lender and Borrower hereby reaffirm on and as of the date hereof all terms, representations and warranties contained in the Master Agreement.

1. Promise to Pay: For value received, Borrower promises to pay to Lender at such address as may be designated from time to time by Lender, the sum of $ 9,776,720.40 in installments according to the schedule set forth below; provided, however, that Borrower and Lender may agree to any other payment schedule, in which case any variations shall be set forth in the space provided for Additional Provisions. The first payment period shall begin on the 15th day of the month in which Lender disburses the loan proceeds if disbursement is made on or before the 15th day of such month, and the first payment period shall begin on the last day of such month if disbursement is made during the balance of such month. The first installment shall be payable on the first payment due date set forth below (which may be the same as the date the first payment period begins). Subsequent installments shall be payable on the first day of each payment period beginning after the first payment period. Borrower agrees that the date the first payment period begins and the first payment due date may be left blank when this Loan Schedule is executed and hereby authorizes Lender to insert such dates based upon the date the loan proceeds are disbursed.

Payment Schedule:

Date first payment period begins:	First payment due:
Number of Installments: 60	Amount of each installment: $162,945.34
Payment Period: Monthly	Annual Interest rate used in computing payment schedule: 1.78%
Principal amount of loan proceeds disbursed: $ 9,347,654.00

In addition to installment payments as set forth above, Borrower agrees to pay Lender interim interest on the loan proceeds disbursed hereunder from the date of disbursement to the date the first payment period begins at the annual interest rate set forth above used in computing the payment schedule. Interim interest shall be due and payable on the date the first payment period begins.

If any installment is not paid within ten (10) days of when due, then in addition to any other remedy Lender may have hereunder, Lender may impose and, if imposed, Borrower shall pay a late charge of 5% of the amount of the delinquent installment but in any event not more than permitted by applicable law. Payments thereafter received shall be applied first to delinquent installments and then to current installments.

This Loan may be prepaid in whole at any time by paying to Lender the unpaid principal balance of this Loan, together with accrued but unpaid interest and late charges, plus a prepayment premium of 3% of the principal amount prepaid if prepaid during months 1 - 12, 2% during months 13 - 24, 1% during months 25 - 36 and 0% thereafter.

THIS AGREEMENT INCLUDES THE TERMS ON THE ATTACHED PAGE(S).

Lender: Wells Fargo Equipment Finance, Inc.	Borrower: Stellaris LLC	Borrower: James Construction Group, L.L.C.

/s/ Janae Ayala	/s/ Alfons Theeuwes
By	By	/s/ John Perisich
Janae Ayala	Alfons Theeuwes	By
Title Vice President	Title Chief Financial Officer	John Perisich
		Title Manager
	Borrower: Rockford Corporation
	/s/ John Perisich
	By
	John Perisich
	Title Secretary

This Loan shall not be prepaid in part except as a result of a disposition of an item of collateral which secures this Loan. The amount of such partial prepayment relative to an item of collateral shall be equal to a principal amount, as reasonably determined in Lender’s sole discretion, together with accrued but unpaid interest, plus a prepayment premium calculated in accordance with the preceding paragraph with respect to the principal amount prepaid. Nothing contained in this paragraph shall be construed as an authorization by Lender to the undersigned to sell or otherwise dispose of an item of collateral which secures this Loan. Such sale or disposition of an item of collateral by the undersigned shall be made solely in accordance with the terms of the Loan or other agreement pursuant to which the undersigned pledged such item of collateral to Lender.

Borrower may remit to Lender amounts in excess of an installment that is due hereunder and Lender shall apply such amounts to the next maturing installment or installments. Payment of amounts in excess of the installment that is due or installments prior to the due date thereof shall not be treated as a prepayment or result in a change to either the total number of installments or the total sum of all installments payable under this Loan.

2. Collateral Description:

See Schedule A attached hereto and made a part hereof.

together with all accessories, attachments, parts, repairs, additions and replacements attached thereto. After Borrower signs this Loan Schedule, Borrower authorizes Lender to insert any missing information or change any inaccurate information (such as the model year of the Collateral or its serial number or VIN) into this Collateral Description.

3. Collateral Location:

26000 Commerce Centre Dr, Lake Forest, CA 92630

4. Waiver; Liability. Borrower hereby waives presentment, notice of dishonor, and protest. The holder hereof may change the terms of payment of the Loan by extension, renewal or otherwise, and release any security for, or party to, the Loan and such action shall not release any accommodation maker, endorser, or guarantor from liability on the Loan. If this Loan Schedule is signed by more than one person as Borrower, then the term “Borrower” shall refer to each of them separately and to all of them jointly, and each such person shall be liable hereunder individually in full and jointly with the others.

5. Miscellaneous. Notwithstanding anything to the contrary contained herein, if the rate of interest, late payment fee, prepayment premium or any other charges or fees due hereunder are determined by a court of competent jurisdiction to be usurious, then said interest rate, fees or charges shall be reduced to the maximum amount permissible under applicable law and any excess amounts shall be applied towards the reduction of the principal balance of the Loan.

Schedule A

Wells Fargo Equipment Finance, Inc.| 733 Marquette Avenue, Suite 700 | MAC N9306-070 | Minneapolis, MN 55402

Contract No. 283010-700 dated as of June 13, 2013

Debtor/Borrower: Stellaris LLC, James Construction Group, L.L.C. and ROCKFORD CORPORATION

MAKE & MODEL		SERIAL NUMBER
One (1) LINKBELT LS-418A CRANE-CRAWLER 3 DRUM		4EV-621
One (1) LINKBELT LS-418A CRANE-CRAWLER 2 DRUM		4EV-726
One (1) AMERICAN 5299-A CRANE CRAWLER 3 DRUM		84-01-A033257
One (1) ROSS MOBILINER 250 - 10 CY		9025
One (1) G & Z S-1000 CONCRETE PAVER		547-101
One (1) BOMAG MPH-100 S STABILIZER		85812
One (1) AMERICAN 5299-A CRANE CRAWLER 3 DRUM		8901AC-3456
One (1) AMERICAN 5299-A CRANE CRAWLER 3 DRUM		8901AC-3496
One (1) CAT 815B ROLLER-COMPACTOR		17Z-1118
One (1) AMERICAN 5299-A CRANE CRAWLER 3 DRUM		9004AC-3513
One (1) HAMMER-VIBRO-ICE 44-50		186511
One (1) POWER CURBER BARRIER PAVER		57209723
One (1) MILLER FORMLESS BARRIER PAVER		SN81291LR
One (1) CMI TR4503 AUTOGRADE TRIMMER		544-306
One (1) GOMACO TC600 CURE MACHINE		904400030
One (1) GROVE RT-650 CRANE MOTOR		220723
One (1) CMI RS-650 RECLAIMER/STABILIZER		543230
One (1) MAGNUS GRINDER W/BLADE SPACERS		628990010
One (1) CAT CS563 ROLLER W/SHELL KIT		4LN00948
One (1) CAT CS563C ROLLER W/SHELL KIT		4LN01000
One (1) CAT 613C SCRAPER		8LJ01877
One (1) GOMACO GHP-2800 SLIPFORM PAVER		905200076
One (1) CAT ROLLER PNUE PS360B		9SL00313
One (1) CAT D5N DOZER LGP		AKD01491
One (1) CAT 420D BACKHOE IT 4X4		BLN11509
One (1) CAT 420D BACKHOE IT 4X4		BLN12275
One (1) CAT 420D BACKHOE IT 2WD		BLN13109
One (1) CASE WH TRACTOR STX325		JEE0107800
One (1) IMPACTOR 2000 CONCRETE BREAKER		KG95R5013
One (1) GROVE RT530E CRANE MOTOR GRADER		225071
One (1) CAT 966H WHEEL LOADER W/MILL FORKS		A6D00576
One (1) DELMAG HAMMER D46-32		200707511
One (1) DELMAG HAMMER D46-32		200708504
One (1) CASE IH DRILL MODEL 50		20071166/200712165
One (1) AMERICAN HC 165 CRAWLER CRANE		AC-4212
One (1) CAT 140H MOTOR GRADER		CCA04020
One (1) CAT CP563E ROLLER, NO SHELL		CNT01577
One (1) CAT D6K LGP DOZER		DHA00313
One (1) CAT D6N LGP DOZER W/WINCH		DJY00170
One (1) CAT 329DL EXCAVATOR		JHJ00218
One (1) CAT 324DL EXCAVATOR		JJG00397
One (1) CAT ROLLER PNUE PS360C		PJF00396
One (1) CAT DOZER D5G LGP		RKG03450
One (1) CAT 930G WHEEL LOADER		TWR03346
One (1) CAT 930G WHEEL LOADER		TWR03427
One (1) BIDWELL SCREED 4800		48-200881163-2-HD
One (1) CAT 140M MOTOR GRADER		B9D00756
One (1) CAT 140M MOTOR GRADER		B9D00781
One (1) CAT 140M MOTOR GRADER		B9D01128
One (1) CAT 930H WHEEL LOADER		DHC00606
One (1) CAT 930H WHEEL LOADER		DHC00607
One (1) CAT 930H WHEEL LOADER		DHC00609
One (1) CAT 324DL EXCAVATOR		JJG00908
One (1) CAT 420E BACKHOE IT 4X4		KMW02645
One (1) CAT 320DL EXCAVATOR		PHX01293
One (1) CAT 320DL EXCAVATOR		PHX01566
One (1) CAT D5K LGP DOZER		YYY00425
One (1) CAT D5K LGP DOZER W/GPS		YYY00444
One (1) AMES 6200 PROFILOGRAPH W/LASER		10004
One (1) GENERATOR CORPORATE BLDG		313945-1-1-100
One (1) CAT 966H WHEEL LOADER		A6D02406

One (1) CAT 623G SCRAPER		DBY00492
One (1) CAT D6N LGP DOZER		DJY01620
One (1) VERMEER MX125		L07230H605876
One (1) MANITOWAC 1200 CRAWLER CRANE		12001099
One (1) CAT D5K LGP DOZER		YYY00724
One (1) CAT D5K LGP DOZER		YYY00725
One (1) CAT D5K LGP DOZER		YYY00755
One (1) LIEBHERR R954CHD EXCAVATOR		976-28095
One (1) CAT WATER WAGON 613C W 2000 GALLON TANK		8LJ03427

MAKE & MODEL		VIN#
One (1) 2013 CHEVY S1500 CC PICKUP 4X4		3GCPKTE78DG279456
One (1) 2013 CHEVY S1500 CC PICKUP 4X4		3GCPKTE7XDG234678
One (1) 2013 FORD F250 CC PICKUP 4X4		1FT7W2B67DEA86684
One (1) 2013 FORD F250 CC PICKUP 4X4		1FT7W2B69DEA86685
One (1) 2013 FORD F250 CC PICKUP 4X4		1FT7W2B60DEA86686
One (1) 2013 FORD F250 CC PICKUP 4X4		1FT7W2B62DEA86687
One (1) 2013 FORD F250 CC PICKUP 4X4		1FT7W2B64DEA86688
One (1) 2013 FORD F250 CC PICKUP 4X4		1FT7W2B69DEA86704
One (1) 2013 FORD F250 CC PICKUP 4X4		1FT7W2B60DEA86705
One (1) 2013 FORD F250 CC PICKUP 4X4		1FT7W2B62DEA86706
One (1) 2013 FORD F250 CC PICKUP 4X4		1FT7W2B64DEA86707
One (1) 2013 FORD F250 CC PICKUP 4X4		1FT7W2B66DEA86708
One (1) 2013 FORD F250 PICKUP 4X4		1FTBF2B61DEA86674
One (1) 2013 FORD F250 PICKUP 4X4		1FTBF2B63DEA86675
One (1) 2013 FORD F250 PICKUP 4X4		1FTBF2B65DEA86676
One (1) 2013 FORD F250 PICKUP 4X4		1FTBF2B67DEA86677
One (1) 2013 FORD F250 PICKUP 4X4		1FTBF2B69DEA86678
One (1) 2013 FORD F250 PICKUP 4X4		1FTBF2B60DEA86679
One (1) 2013 FORD F250 PICKUP 4X4		1FTBF2B67DEA86680
One (1) 2013 FORD F250 PICKUP 4X4		1FTBF2B69DEA86681
One (1) 2013 FORD F250 PICKUP 4X4		1FTBF2B60DEA86682
One (1) 2013 FORD F250 PICKUP 4X4		1FTBF2B62DEA86683
One (1) 2013 FORD F250 PICKUP 4X4		1FTBF2B67DEA86694
One (1) 2013 FORD F250 PICKUP 4X4		1FTBF2B69DEA86695
One (1) 2013 FORD F250 PICKUP 4X4		1FTBF2B60DEA86696
One (1) 2013 FORD F250 PICKUP 4X4		1FTBF2B64DEA86698
One (1) 2013 FORD F250 PICKUP 4X4		1FTBF2B66DEA86699
One (1) 2013 FORD F250 PICKUP 4X4		1FTBF2B69DEA86700
One (1) 2013 FORD F250 PICKUP 4X4		1FTBF2B60DEA86701
One (1) 2013 FORD F250 PICKUP 4X4		1FTBF2B62DEA86702
One (1) 2013 FORD F250 PICKUP 4X4		1FTBF2B64DEA86703
One (1) 2013 FORD F250 PICKUP 4X4		1FTBF2B62DEA86697
One (1) 2013 FORD F550 FLATBED 4X4		1FDOW5HT2DEA81596
One (1) 2013 FORD F550 FLATBED 4X4		1FDOW5HT9DEA81594
One (1) 2013 FORD F550 FLATBED 4X4		1FDOW5HT4DEA81597
One (1) 2013 FORD F550 FLATBED 4X4		1FDOW5HT2DEA81601
One (1) 2013 FORD F550 FLATBED 4X4		1FDOW5HT8DEA81599
One (1) 2013 FORD F550 FLATBED 4X4		1FDOW5HT7DEA81593
One (1) 2013 FORD F550 FLATBED 4X4		1FDOW5HTODEA81600
One (1) 2013 FORD F550 FLATBED 4X4		1FDOW5HT6DEA81598
One (1) 2013 FORD F550 FLATBED 4X4		1FDOW5HTODEA81595
One (1) 2013 FORD F550 FLATBED 4X4		1FDOW5HT4DEA81602

All of the above to include attachments, replacements, substitutions, additions and accessions thereof, plus the proceeds of all the foregoing,

Dated: June 10, 2013

Debtor/Borrower: Stellaris LLC	Debtor/Borrower: James Construction Group, L.L.C.	Debtor/Borrower: Rockford Corporation

/s/ Alfons Theeuwes	/s/ John Perisich	/s/ John Perisich
By	By	By
Alfons Theeuwes	John Perisich	John Perisich
Title Chief Financial Officer	Title Manager	Title Secretary

Exhibit 10.3

CONFIRMATION OF ACCEPTANCE

PRIMORIS SERVICES CORPORATION

Reference is made to the Note Purchase and Private Shelf Agreement, dated as of December 28, 2012 (as from time to time amended, restated or otherwise modified, the “Shelf Agreement” ), between the Company, on the one hand, and Prudential Investment Management, Inc. ( “Prudential” ), each Prudential Affiliate which becomes party thereto and the other holders from time to time of the Notes, on the other hand. All terms used herein that are defined in the Agreement have the respective meanings specified in the Shelf Agreement.

Prudential or the Prudential Affiliate which is named below as a Purchaser of Shelf Notes hereby confirms the representations as to such Shelf Notes set forth in Section 6 of the Agreement, and agrees to be bound by the provisions of the Agreement applicable to the Purchasers or holders of the Notes.

Pursuant to Section 2.2(f) of the Agreement, an Acceptance with respect to the following Accepted Notes is hereby confirmed:

I. Accepted Notes: Aggregate principal amount $25,000,000

(A) (a) Name of Purchaser: The Prudential Insurance Company of America

(b) Principal amount: $7,100,000

(d) Principal prepayment dates and amounts: 25th day of July in each year commencing in 2017

(e) Interest rate: 3.85%

(f) Interest payment period: quarterly in arrears on the 25th day of January, April, July and October in each year commencing in October 2013

(g) Payment and notice instructions: As set forth on attached Purchaser Schedule:

(B) (a) Name of Purchaser: The Prudential Insurance Company of America

(b) Principal amount: $3,400,000

(d) Principal prepayment dates and amounts: 25th day of July in each year commencing in 2017

(e) Interest rate: 3.85%

(f) Interest payment period: quarterly in arrears on the 25th day of January, April, July and October in each year commencing in October 2013

(g) Payment and notice instructions: As set forth on attached Purchaser Schedule:

(b) Principal amount: $5,400,000

(d) Principal prepayment dates and amounts: 25th day of July in each year commencing in 2017

(e) Interest rate: 3.85%

(f) Interest payment period: quarterly in arrears on the 25th day of January, April, July and October in each year commencing in October 2013

(g) Payment and notice instructions: As set forth on attached Purchaser Schedule:

(D) (a) Name of Purchaser: Farmers Insurance Exchange

(b) Principal amount: $6,370,000

(d) Principal prepayment dates and amounts: 25th day of July in each year commencing in 2017

(e) Interest rate: 3.85%

(f) Interest payment period: quarterly in arrears on the 25th day of January, April, July and October in each year commencing in October 2013

(g) Payment and notice instructions: As set forth on attached Purchaser Schedule:

(E) (a) Name of Purchaser: Mid Century Insurance Company

(b) Principal amount: $2,730,000

(d) Principal prepayment dates and amounts: 25th day of July in each year commencing in 2017

(e) Interest rate: 3.85%

(f) Interest payment period: quarterly in arrears on the 25th day of January, April, July and October in each year commencing in October 2013

(g) Payment and notice instructions: As set forth on attached Purchaser Schedule:

II. Closing Day: July 25, 2013

III. Issuance Fee: $25,000

				PRIMORIS SERVICES CORPORATION


				By:	/s/ John Perisich
				Name:	John Perisich
				Title:	Executive Vice President and General Counsel

				Dated: June 13, 2013


PRUDENTIAL INVESTMENT
MANAGEMENT, INC .


By:	/s/ Tim Laczkowski
	Tim Laczkowski
	Vice President


THE PRUDENTIAL INSURANCE
COMPANY OF AMERICA


By:	/s/ Tim Laczkowski
	Tim Laczkowski
	Vice President


PRUDENTIAL ANNUITIES LIFE
ASSURANCE CORPORATION

By:		Prudential Investment Management, Inc.,
		as investment manager


		By:	/s/ Tim Laczkowski
			Tim Laczkowski
			Vice President

Signature Page to Confirmation of Acceptance

FARMERS INSURANCE EXCHANGE

By:	Prudential Private Placement Investors,
	L.P. (as Investment Advisor)

By:	Prudential Private Placement Investors, Inc.
	(as its General Partner)


	By:	/s/ Tim Laczkowski
		Tim Laczkowski
		Vice President


MID CENTURY INSURANCE COMPANY

By:	Prudential Private Placement Investors,
	L.P. (as Investment Advisor)

By:	Prudential Private Placement Investors, Inc.
	(as its General Partner)


	By:	/s/ Tim Laczkowski
		Tim Laczkowski
		Vice President

Signature Page to Confirmation of Acceptance

PURCHASER SCHEDULE

Primoris Services Corporation

3.85% Senior Secured Notes, Series B, due 2023

		Aggregate Principal Amount of Notes to be Purchased		Note Denomination(s)

	THE PRUDENTIAL INSURANCE COMPANY OF AMERICA	$	10,500,000	$	7,100,000
				$	3,400,000
(1)	All payments on account of Notes held by such purchaser shall be made by wire transfer of immediately available funds for credit to:

	JPMorgan Chase Bank New York, NY ABA No.: 021-000-021

	Account Name: Prudential Managed Portfolio Account No.: P86188 (please do not include spaces) (in the case of payments on account of the Note originally issued in the principal amount of $7,100,000)

	Each such wire transfer shall set forth the name of the Company, a reference to “3.85% Senior Secured Notes, Series B, due 2023, Security No. INV11582, PPN “ and the due date and application (as among principal, interest and Make-Whole Amount) of the payment being made.

(2)	Address for all notices relating to payments:

	The Prudential Insurance Company of America c/o Investment Operations Group Gateway Center Two, 10th Floor 100 Mulberry Street Newark, NJ 07102-4077

	Attention: Manager, Billings and Collections

(3)	Address for all other communications and notices:

	The Prudential Insurance Company of America c/o Prudential Capital Group 2200 Ross Avenue, Suite 4300 Dallas, TX 75201 Attention: Managing Director, Corporate Finance

(4)	Recipient of telephonic prepayment notices:

	Manager, Trade Management Group Telephone: (973) 367-3141 Facsimile: (888) 889-3832

Purchaser Schedule to Confirmation of Acceptance

(5)		Address for Delivery of Notes:

		Send physical security by nationwide overnight delivery service to: Prudential Capital Group 2200 Ross Avenue, Suite 4300 Dallas, TX 75201 Attention: Jaya McClure Telephone: (214) 720-6207

(6)		Tax Identification No.: 22-1211670

Purchaser Schedule to Confirmation of Acceptance

		Aggregate Principal Amount of Notes to be Purchased		Note Denomination(s)

	PRUDENTIAL ANNUITIES LIFE ASSURANCE CORPORATION	$	5,400,000	$	5,400,000

(1)	All payments on account of Notes held by such purchaser shall be made by wire transfer of immediately available funds for credit to:

	JPMorgan Chase Bank New York, NY ABA No.: 021-000-021 Account Name: Prudential Annuities Life Assurance Corporation Account No.: P01309 (please do not include spaces)

	Each such wire transfer shall set forth the name of the Company, a reference to “3.85% Senior Secured Notes, Series B, due 2023, Security No. INV11582, PPN “ and the due date and application (as among principal, interest and Make-Whole Amount) of the payment being made.

(2)	Address for all notices relating to payments:

	Prudential Annuities Life Assurance Corporation c/o The Prudential Insurance Company of America c/o Investment Operations Group Gateway Center Two, 10th Floor 100 Mulberry Street Newark, NJ 07102-4077 Attention: Manager, Billings and Collections

(3)	Address for all other communications and notices:

	Prudential Annuities Life Assurance Corporation c/o Prudential Capital Group 2200 Ross Avenue, Suite 4300 Dallas, TX 75201 Attention: Managing Director, Corporate Finance

(4)	Recipient of telephonic prepayment notices:

	Manager, Trade Management Group Telephone: (973) 367-3141 Facsimile: (888) 889-3832

Purchaser Schedule to Confirmation of Acceptance

(5)		Address for Delivery of Notes:

		Send physical security by nationwide overnight delivery service to: Prudential Capital Group 2200 Ross Avenue, Suite 4300 Dallas, TX 75201 Attention: Jaya McClure Telephone: (214) 720-6207

(6)		Tax Identification No.: 06-1241288

Purchaser Schedule to Confirmation of Acceptance

		Aggregate Principal Amount of Notes to be Purchased		Note Denomination(s)

	FARMERS INSURANCE EXCHANGE	$	6,370,000	$	6,370,000

(1)	All payments on account of Notes held by such purchaser shall be made by wire transfer of immediately available funds for credit to:

	JPMorgan Chase Bank ABA: 021000021 Beneficiary Account No: 9009000200 Beneficiary Account Name: JPMorgan Income Ultimate Beneficiary: P13939 Farmers Insurance Exchange

	Each such wire transfer shall set forth the name of the Company, a reference to “3.85% Senior Secured Notes, Series B, due 2023, PPN “ and the due date and application (as among principal, interest and Make-Whole Amount) of the payment being made.

(2)	Address for all notices relating to payments:

	Farmers 4680 Wilshire Blvd. Los Angeles, CA 90010

	Attention: Treasury

	Treasury: Treasury Manager 323-932-3450 usw.treasury.farmers@farmersinsurance.com

(3)	Address for all other communications and notices:

	Prudential Private Placement Investors, L.P. c/o Prudential Capital Group 2200 Ross Avenue, Suite 4300 Dallas, TX 75201

	Attention: Managing Director, Corporate Finance

Purchaser Schedule to Confirmation of Acceptance

(4)	Address for Delivery of Notes:

	(a)	Send physical security by nationwide overnight delivery service to:

		Mailing Address (for overnight mail) JPMorgan Chase Bank, N.A. Physical Receive Department 4 Chase Metrotech Center 3rd Floor Brooklyn, NY 11245-0001 Attention: Brian Cavanaugh, Tel. 718-242-0264

		Street Deliveries (via messenger or walk up) JPMorgan Chase Bank, N.A. 4 Chase Metrotech Center 1st Floor, Window 5 Brooklyn, NY 11245-0001 Attention: Physical Receive Department

		(Use Willoughby Street Entrance)

	(b)	Send copy by nationwide overnight delivery service to:

		Prudential Capital Group Gateway Center 2, 10th Floor 100 Mulberry Newark, NJ 07102

		Attention: Trade Management, Manager Telephone: (973) 367-3141

(5)	Tax Identification No.: 95-2575893

Purchaser Schedule to Confirmation of Acceptance

		Aggregate Principal Amount of Notes to be Purchased		Note Denomination(s)

	MID CENTURY INSURANCE COMPANY	$	2,730,000	$	2,730,000

(1)	All payments on account of Notes held by such purchaser shall be made by wire transfer of immediately available funds for credit to:

	JPMorgan Chase Bank ABA: 021000021 Beneficiary Account No: 9009000200 Beneficiary Account Name: JPMorgan Income Ultimate Beneficiary: G23628 Mid Century Insurance Company

	Each such wire transfer shall set forth the name of the Company, a reference to “3.85% Senior Secured Notes, Series B, due 2023, PPN “ and the due date and application (as among principal, interest and Make-Whole Amount) of the payment being made.

(2)	Address for all notices relating to payments:

	Farmers 4680 Wilshire Blvd. Los Angeles, CA 90010 Attention: Treasury Treasury: Treasury Manager 323-932-3450 usw.treasury.farmers@farmersinsurance.com

(3)	Address for all other communications and notices:

	Prudential Private Placement Investors, L.P. c/o Prudential Capital Group 2200 Ross Avenue, Suite 4300 Dallas, TX 75201 Attention: Managing Director, Corporate Finance

Purchaser Schedule to Confirmation of Acceptance

(4)	Address for Delivery of Notes:

	(a)	Send physical security by nationwide overnight delivery service to:

		Mailing Address (for overnight mail) JPMorgan Chase Bank, N.A. Physical Receive Department 4 Chase Metrotech Center 3rd Floor Brooklyn, NY 11245-0001 Attention: Brian Cavanaugh, Tel. 718-242-0264

		Street Deliveries (via messenger or walk up) JPMorgan Chase Bank, N.A. 4 Chase Metrotech Center 1st Floor, Window 5 Brooklyn, NY 11245-0001 Attention: Physical Receive Department (Use Willoughby Street Entrance)

	(b)	Send copy by nationwide overnight delivery service to: Prudential Capital Group Gateway Center 2, 10th Floor 100 Mulberry Newark, NJ 07102 Attention: Trade Management, Manager Telephone: (973) 367-3141

(5)	Tax Identification No.: 95-6016640

Purchaser Schedule to Confirmation of Acceptance

PRIMORIS SERVICES CORPORATION

3.85% SENIOR SECURED NOTE, SERIES B, DUE JULY 25, 2023

No. R-B-5

PPN 74164F A@2

ORIGINAL PRINCIPAL AMOUNT: $2,730,000

ORIGINAL ISSUE DATE: July 25, 2013

INTEREST RATE: 3.85%

INTEREST PAYMENT DATES: Quarterly, in arrears, on the 25th day of each of January, April, July and October beginning October 25, 2013

FINAL MATURITY DATE: July 25, 2023

PRINCIPAL PREPAYMENT DATES AND AMOUNTS: Annually in the principal amount of $390,000.00, beginning July 25, 2017, and on the 25th day of July of each year thereafter through and including July 25, 2022

For Value Received, the undersigned, PRIMORIS SERVICES CORPORATION, (the “Company” ), a corporation organized and existing under the laws of the State of Delaware, hereby promises to pay to MID CENTURY INSURANCE COMPANY , or registered assigns, the principal sum of TWO MILLION SEVEN HUNDRED THIRTY THOUSAND AND 00/100 DOLLARS ($2,730,000) , payable on the Principal Prepayment Dates and in the amounts specified above, and on the Final Maturity Date specified above in an amount equal to the unpaid balance of the principal hereof, with interest (computed on the basis of a 360-day year of twelve 30-day months) (a) on the unpaid balance hereof at the Interest Rate per annum specified above, payable on each Interest Payment Date specified above and on the Final Maturity Date specified above, commencing with the Interest Payment Date next succeeding the date hereof, until the principal hereof shall have become due and payable, and (b) to the extent permitted by law, on any overdue payment of interest and, during the continuance of an Event of Default, on such unpaid balance and on any overdue payment of any Make-Whole Amount, at a rate per annum (the “Default Rate” ) from time to time equal to the greater of (i) 2% over the Interest Rate specified above or (ii) 2% over the rate of interest publicly announced by JPMorgan Chase Bank, N.A., in New York, New York as its “base” or “prime” rate, payable on each Interest Payment Date as aforesaid (or, at the option of the registered holder hereof, on demand).

Payments of principal of, interest on and any Make-Whole Amount with respect to this Note are to be made in lawful money of the United States of America at the principal office of JPMorgan Chase Bank, N.A. in New York, New York, or at such other place in the State of New York as the Company shall have designated by written notice to the holder of this Note as provided in the Note Purchase Agreement referred to below.

This Note is one of a series of Senior Secured Notes (herein called the “Notes” ) issued pursuant to the Note Purchase and Private Shelf Agreement, dated as of December 28, 2012 (as from time to time amended, the “Note Purchase Agreement” ), among the Company, Prudential and the respective Purchasers named therein and is entitled to the benefits thereof. Each holder

of this Note will be deemed, by its acceptance hereof, to have (i) agreed to the confidentiality provisions set forth in Section 20 of the Note Purchase Agreement and (ii) made the representation set forth in Section 6.2 of the Note Purchase Agreement. Unless otherwise indicated, capitalized terms used in this Note shall have the respective meanings ascribed to such terms in the Note Purchase Agreement.

This Note is a registered Note and, as provided in the Note Purchase Agreement, upon surrender of this Note for registration of transfer accompanied by a written instrument of transfer duly executed, by the registered holder hereof or such holder’s attorney duly authorized in writing, a new Note for a like principal amount will be issued to, and registered in the name of, the transferee. Prior to due presentment for registration of transfer, the Company may treat the person in whose name this Note is registered as the owner hereof for the purpose of receiving payment and for all other purposes, and the Company will not be affected by any notice to the contrary.

The Company will make required prepayments of principal on the dates and in the amounts specified in the Note Purchase Agreement. This Note is also subject to optional prepayment, in whole or from time to time in part, at the times and on the terms specified in the Note Purchase Agreement, but not otherwise.

This Note is guaranteed by the Guarantors pursuant to the Guaranty Agreement, and this Note is secured by the Security Documents.

If an Event of Default occurs and is continuing, the principal of this Note may be declared or otherwise become due and payable in the manner, at the price (including any applicable Make-Whole Amount) and with the effect provided in the Note Purchase Agreement.

This Note shall be construed and enforced in accordance with, and the rights of the Company and the holder of this Note shall be governed by, the law of the State of New York excluding choice-of-law principles of the law of such State that would permit the application of the laws of a jurisdiction other than such State.

	PRIM ORIS SERVICES CORPORATION


	By:	/s/ Pete Moerbeek
	Name:	Pete Moerbeek
	Title:	Chief Financial Officer

PRIMORIS SERVICES CORPORATION

3.85% SENIOR SECURED NOTE, SERIES B, DUE JULY 25, 2023

No. R-B-4

PPN 74164F A@2

ORIGINAL PRINCIPAL AMOUNT: $6,370,000

ORIGINAL ISSUE DATE: July 25, 2013

INTEREST RATE: 3.85%

INTEREST PAYMENT DATES: Quarterly, in arrears, on the 25th day of each of January, April, July and October beginning October 25, 2013

FINAL MATURITY DATE: July 25, 2023

PRINCIPAL PREPAYMENT DATES AND AMOUNTS: Annually in the principal amount of $910,000.00, beginning July 25, 2017, and on the 25th day of July of each year thereafter through and including July 25, 2022

For Value Received, the undersigned, PRIMORIS SERVICES CORPORATION, (the “Company” ), a corporation organized and existing under the laws of the State of Delaware, hereby promises to pay to FARMERS INSURANCE EXCHANGE , or registered assigns, the principal sum of SIX MILLION THREE HUNDRED SEVENTY THOUSAND AND 00/100 DOLLARS ($6,370,000) , payable on the Principal Prepayment Dates and in the amounts specified above, and on the Final Maturity Date specified above in an amount equal to the unpaid balance of the principal hereof, with interest (computed on the basis of a 360-day year of twelve 30-day months) (a) on the unpaid balance hereof at the Interest Rate per annum specified above, payable on each Interest Payment Date specified above and on the Final Maturity Date specified above, commencing with the Interest Payment Date next succeeding the date hereof, until the principal hereof shall have become due and payable, and (b) to the extent permitted by law, on any overdue payment of interest and, during the continuance of an Event of Default, on such unpaid balance and on any overdue payment of any Make-Whole Amount, at a rate per annum (the “Default Rate” ) from time to time equal to the greater of (i) 2% over the Interest Rate specified above or (ii) 2% over the rate of interest publicly announced by JPMorgan Chase Bank, N.A., in New York, New York as its “base” or “prime” rate, payable on each Interest Payment Date as aforesaid (or, at the option of the registered holder hereof, on demand).

This Note is guaranteed by the Guarantors pursuant to the Guaranty Agreement, and this Note is secured by the Security Documents.

	PRIMORIS SERVICES CORPORATION


	By:	/s/ Pete Moerbeek
	Name:	Pete Moerbeek
	Title:	Chief Financial Officer

PRIMORIS SERVICES CORPORATION

3.85% SENIOR SECURED NOTE, SERIES B, DUE JULY 25, 2023

No. R-B-3

PPN 74164F A@2

ORIGINAL PRINCIPAL AMOUNT: $5,400,000

ORIGINAL ISSUE DATE: July 25, 2013

INTEREST RATE: 3.85%

INTEREST PAYMENT DATES: Quarterly, in arrears, on the 25th day of each of January, April, July and October beginning October 25, 2013

FINAL MATURITY DATE: July 25, 2023

PRINCIPAL PREPAYMENT DATES AND AMOUNTS: Annually in the principal amount of $771,428.57, beginning July 25, 2017, and on the 25th day of July of each year thereafter through and including July 25, 2022

For Value Received, the undersigned, PRIMORIS SERVICES CORPORATION, (the “Company” ), a corporation organized and existing under the laws of the State of Delaware, hereby promises to pay to PRUDENTIAL ANNUITIES LIFE ASSURANCE CORPORATION , or registered assigns, the principal sum of FIVE MILLION FOUR HUNDRED THOUSAND AND 00/100 DOLLARS ($5,400,000) , payable on the Principal Prepayment Dates and in the amounts specified above, and on the Final Maturity Date specified above in an amount equal to the unpaid balance of the principal hereof, with interest (computed on the basis of a 360-day year of twelve 30-day months) (a) on the unpaid balance hereof at the Interest Rate per annum specified above, payable on each Interest Payment Date specified above and on the Final Maturity Date specified above, commencing with the Interest Payment Date next succeeding the date hereof, until the principal hereof shall have become due and payable, and (b) to the extent permitted by law, on any overdue payment of interest and, during the continuance of an Event of Default, on such unpaid balance and on any overdue payment of any Make-Whole Amount, at a rate per annum (the “Default Rate” ) from time to time equal to the greater of (i) 2% over the Interest Rate specified above or (ii) 2% over the rate of interest publicly announced by JPMorgan Chase Bank, N.A., in New York, New York as its “base” or “prime” rate, payable on each Interest Payment Date as aforesaid (or, at the option of the registered holder hereof, on demand).

and the respective Purchasers named therein and is entitled to the benefits thereof. Each holder of this Note will be deemed, by its acceptance hereof, to have (i) agreed to the confidentiality provisions set forth in Section 20 of the Note Purchase Agreement and (ii) made the representation set forth in Section 6.2 of the Note Purchase Agreement. Unless otherwise indicated, capitalized terms used in this Note shall have the respective meanings ascribed to such terms in the Note Purchase Agreement.

This Note is guaranteed by the Guarantors pursuant to the Guaranty Agreement, and this Note is secured by the Security Documents.

	PRIMORIS SERVICES CORPORATION


	By:	/s/ Pete Moerbeek
	Name:	Pete Moerbeek
	Title:	Chief Financial Officer

PRIMORIS SERVICES CORPORATION

3.85% SENIOR SECURED NOTE, SERIES B, DUE JULY 25, 2023

No. R-B-2

PPN 74164F A@2

ORIGINAL PRINCIPAL AMOUNT: $3,400,000

ORIGINAL ISSUE DATE: July 25, 2013

INTEREST RATE: 3.85%

INTEREST PAYMENT DATES: Quarterly, in arrears, on the 25th day of each of January, April, July and October beginning October 25, 2013

FINAL MATURITY DATE: July 25, 2023

PRINCIPAL PREPAYMENT DATES AND AMOUNTS: Annually in the principal amount of $485,714.29, beginning July 25, 2017, and on the 25th day of July of each year thereafter through and including July 25, 2022

For Value Received, the undersigned, PRIMORIS SERVICES CORPORATION, (the “Company” ), a corporation organized and existing under the laws of the State of Delaware, hereby promises to pay to THE PRUDENTIAL INSURANCE COMPANY OF AMERICA , or registered assigns, the principal sum of THREE MILLION FOUR HUNDRED THOUSAND AND 00/100 DOLLARS ($3,400,000) , payable on the Principal Prepayment Dates and in the amounts specified above, and on the Final Maturity Date specified above in an amount equal to the unpaid balance of the principal hereof, with interest (computed on the basis of a 360-day year of twelve 30-day months) (a) on the unpaid balance hereof at the Interest Rate per annum specified above, payable on each Interest Payment Date specified above and on the Final Maturity Date specified above, commencing with the Interest Payment Date next succeeding the date hereof, until the principal hereof shall have become due and payable, and (b) to the extent permitted by law, on any overdue payment of interest and, during the continuance of an Event of Default, on such unpaid balance and on any overdue payment of any Make-Whole Amount, at a rate per annum (the “Default Rate” ) from time to time equal to the greater of (i) 2% over the Interest Rate specified above or (ii) 2% over the rate of interest publicly announced by JPMorgan Chase Bank, N.A., in New York, New York as its “base” or “prime” rate, payable on each Interest Payment Date as aforesaid (or, at the option of the registered holder hereof, on demand).

This Note is guaranteed by the Guarantors pursuant to the Guaranty Agreement, and this Note is secured by the Security Documents.

	PRIMORIS SERVICES CORPORATION


	By:	/s/ Pete Moerbeek
	Name:	Pete Moerbeek
	Title:	Chief Financial Officer

PRIMORIS SERVICES CORPORATION

3.85% SENIOR SECURED NOTE, SERIES B, DUE JULY 25, 2023

No. R-B-1

PPN 74164F A@2

ORIGINAL PRINCIPAL AMOUNT: $7,100,000

ORIGINAL ISSUE DATE: July 25, 2013

INTEREST RATE: 3.85%

INTEREST PAYMENT DATES: Quarterly, in arrears, on the 25th day of each of January, April, July and October beginning October 25, 2013

FINAL MATURITY DATE: July 25, 2023

PRINCIPAL PREPAYMENT DATES AND AMOUNTS: Annually in the principal amount of $1,014,285.71, beginning July 25, 2017, and on the 25th day of July of each year thereafter through and including July 25, 2022

For Value Received, the undersigned, PRIMORIS SERVICES CORPORATION, (the “Company” ), a corporation organized and existing under the laws of the State of Delaware, hereby promises to pay to THE PRUDENTIAL INSURANCE COMPANY OF AMERICA , or registered assigns, the principal sum of SEVEN MILLION ONE HUNDRED THOUSAND AND 00/100 DOLLARS ($7,100,000) , payable on the Principal Prepayment Dates and in the amounts specified above, and on the Final Maturity Date specified above in an amount equal to the unpaid balance of the principal hereof, with interest (computed on the basis of a 360-day year of twelve 30-day months) (a) on the unpaid balance hereof at the Interest Rate per annum specified above, payable on each Interest Payment Date specified above and on the Final Maturity Date specified above, commencing with the Interest Payment Date next succeeding the date hereof, until the principal hereof shall have become due and payable, and (b) to the extent permitted by law, on any overdue payment of interest and, during the continuance of an Event of Default, on such unpaid balance and on any overdue payment of any Make-Whole Amount, at a rate per annum (the “Default Rate” ) from time to time equal to the greater of (i) 2% over the Interest Rate specified above or (ii) 2% over the rate of interest publicly announced by JPMorgan Chase Bank, N.A., in New York, New York as its “base” or “prime” rate, payable on each Interest Payment Date as aforesaid (or, at the option of the registered holder hereof, on demand).

This Note is guaranteed by the Guarantors pursuant to the Guaranty Agreement, and this Note is secured by the Security Documents.

	PRIMORIS SERVICES CORPORATION


	By:	/s/ Pete Moerbeek
	Name:	Pete Moerbeek
	Title:	Chief Financial Officer

Exhibit 31.1

RULE 13a-14(a)/15d-14(a) CERTIFICATION PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Brian Pratt, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q for the period ended June 30, 2013 of Primoris Services Corporation;

2. Based on my knowledge, this Quarterly Report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this Quarterly Report;

3. Based on my knowledge, the financial statements, and other financial information included in this Quarterly Report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this Quarterly Report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this Quarterly Report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this Quarterly Report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this Quarterly Report based on such evaluation; and

(d) Disclosed in this Quarterly Report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 7, 2013

/s/ BRIAN PRATT
Brian Pratt
Chairman of the Board, Chief Executive Officer and President (Principal Executive Officer)

Exhibit 31.2

RULE 13a-14(a)/15d-14(a) CERTIFICATION PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Peter J. Moerbeek, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q for the period ended June 30, 2013, of Primoris Services Corporation;

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 7, 2013

/s/ PETER J. MOERBEEK
Peter J. Moerbeek
Executive Vice President, Chief Financial Officer and Director (Principal Financial and Accounting Officer)

Exhibit 32.1

Certification Pursuant to Section 906

of the Sarbanes-Oxley Act of 2002 (18 U.S.C. Section 1350)

In connection with the Quarterly Report of Primoris Services Corporation (the “Company”) on Form 10-Q for the period ended June 30, 2013, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Brian Pratt, Chairman of the Board, Chief Executive Officer and President of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:

1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

In witness whereof, the undersigned has executed and delivered this certificate as of the date set forth opposite his signature below.

Date: August 7, 2013	/s/ BRIAN PRATT
	Brian Pratt
	Chairman of the Board, Chief Executive Officer and President (Principal Executive Officer)

Exhibit 32.2

Certification Pursuant to Section 906

of the Sarbanes-Oxley Act of 2002 (18 U.S.C. Section 1350)

In connection with the Quarterly Report of Primoris Services Corporation (the “Company”) on Form 10-Q for the period ended June 30, 2013, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Peter J. Moerbeek, Executive Vice President, Chief Financial Officer and Director of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:

1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

In witness whereof, the undersigned has executed and delivered this certificate as of the date set forth opposite his signature below.

Date: August 7, 2013	/s/ PETER J. MOERBEEK
	Peter J. Moerbeek
	Executive Vice President, Chief Financial Officer and Director (Principal Financial and Accounting Officer)