Primoris Services Corporation Announces 2011 Fourth Quarter and Full Year Financial Results

Board of Directors Declares $0.03 Per Share Cash Dividend

Financial Highlights

• Q4 2011 revenues increased 12% to $373.1 million from $333.2 million in Q4 2010
• Q4 2011 net income of $12.5 million, or $0.24 per diluted share, compared to Q4 2010 net income of $12.3 million, or $0.24 per diluted share
  • Q4 2011 net income included non-routine charges of approximately $9.4 million, or $0.11 per diluted share
• 2011 annual revenues of $1.5 billion, up 55% from 2010
• 2011 net income rose to $58.6 million, or $1.14 per diluted share, from net income of $33.6 million, or $0.72 per diluted share, in 2010.
• At December 31, 2011:
  • $143.3 million in cash, cash equivalents, and short-term investments
  • Total backlog of $1.16 billion

DALLAS--(BUSINESS WIRE)-- Primoris Services Corporation (NASDAQ GS: PRIM) ("Primoris" or "Company") today announced financial results for its fourth quarter and year ended December 31, 2011.

The Company also announced that on February 24, 2012, its Board of Directors declared a $0.03 per share cash dividend to stockholders of record as of March 30, 2012, payable on or about April 16, 2012.

Brian Pratt, Chairman, President and Chief Executive Officer of Primoris, commented, "We completed a very good quarter and a great year. Full year revenues of $1.5 billion were a record for our Company, as we benefitted from both organic growth and the favorable impact of prior year acquisitions. Despite one-time charges of $9.4 million recorded in the fourth quarter, our net income for both the fourth quarter and year improved significantly. We generated cash flow from operations of $40.1 million during 2011, and our balance sheet at December 31, 2011 included $143.3 million in cash and short-term investments and a debt to equity ratio of 37.4%. During the year, we increased our backlog from $895.8 million to $1.16 billion, a 30% organic increase."

Mr. Pratt concluded, "Primoris is a group of specialized construction and infrastructure companies serving diverse end markets across the United States. At present, we are focused on projects and opportunities in underground pipeline integrity, in conventional and alternative energy industrial facilities, in heavy highway and bridge construction, and in underground pipelines. We intend to continue our emphasis on maintaining a strong balance sheet and on building upon our 65-year legacy of service and project success. As we enter 2012, macro-economic uncertainties persist; however, we are confident that we can continue to execute against our plan and are optimistic about our future opportunities."

2011 FOURTH QUARTER RESULTS OVERVIEW

Revenues for the 2011 fourth quarter rose 12% to $373.1 million from $333.2 million for the same period last year. The increase was primarily attributable to higher revenues at the West Construction Services segment, led by the California-based Underground group at which revenues increased by $66.3 million from the fourth quarter of 2010. Gross profit for the 2011 fourth quarter rose by 16.5% to $51.0 million, or 13.7% of revenues, from $43.8 million, or 13.1% of revenues, in the fourth quarter of 2010.

SEGMENT RESULTS

• East Construction Services — located primarily in the southeastern United States, incorporates the construction business of James Construction Group (JCG), Cardinal Contractors, Inc.'s water and wastewater facility construction business, and Cardinal Mechanical, Inc.'s (now a division of JCG) shored excavation for thermal utilities businesses.
• West Construction Services — includes construction services performed by companies headquartered in the western United States including ARB, Inc., ARB Structures, Inc., and, effective November 1, 2010, Rockford.
• Engineering — incorporates the results of Onquest, Inc. and Born Heaters Canada, ULC.

Segment Revenues
(in thousands, except %)
		For the three months ended December 31,
		2011					2010
		(Unaudited)					(Unaudited)
					% of					% of
Segment		Revenue			Revenue		Revenue			Revenue
East Construction Services		$	125,446		33.6%		$	128,950		38.7%
West Construction Services			234,093		62.8%			185,971		55.8%
Engineering			13,527		3.6%			18,318		5.5 %
Total		$	373,066		100.0%		$	333,239		100.0%

Segment Gross Margin
(in thousands, except %)
		For the three months ended December 31,
		2011					2010
		(Unaudited)					(Unaudited)
					% of					% of
		Gross			Segment		Gross			Segment
Segment		Profit			Revenue		Profit			Revenue
East Construction Services		$	11,460		9.1%		$	12,667		9.8%
West Construction Services			37,557		16.0%			26,816		14.4%
Engineering			2,029		15.0%			4,317		23.6%
Total		$	51,046		13.7%		$	43,800		13.1%

East Construction Services: The decline in revenues for the quarter was primarily due to a decrease in Industrial group revenues of $11.2 million attributable to temporary slowdowns in construction activity within the petrochemical sector along the Gulf Coast. Lower gross profit was due to reduced volume on a large causeway project in South Louisiana and lower Industrial group revenues. Similarly, gross profit as a percent of revenues declined to 9.1% compared to 9.8% in last year's fourth quarter, primarily due to the reduced revenues from the causeway project and the reduced revenues in the Industrial group.

West Construction Services: The $48.1 million increase in revenues for the quarter was primarily attributable to increases at the California-based Underground group of $66.3 million and the West Coast Industrial group of $17.8 million which offset a decline in Rockford revenues from $85.3 million to $48.2 million, reflecting the substantial completion of the Ruby project. Gross profit rose by $10.7 million to $37.6 million, primarily benefiting by $9.6 million from the increased revenue levels at the Underground and Industrial groups and an increase of $1.0 million at Rockford. Gross profit margins rose to 16.0% in the fourth quarter of 2011 from 14.4% in last year's fourth quarter reflecting the increase in higher margin Underground group projects.

Engineering: Revenues declined to $13.5 million from $18.3 million reflecting the start of a new U.S. refinery project in last year's fourth quarter and a lower level of international activity at our Canadian subsidiary. Gross profit declined to $2.0 million from $4.3 million for the same period in 2010, as a result of the decrease in revenues. Similarly, the slight decrease in gross profit margin reflected the lower revenue level.

Selling, general and administrative expenses increased by $4.6 million to $25.8 million, or 6.9% of revenues, for the fourth quarter of 2011, from $21.1 million, or 6.3% of revenues, for the fourth quarter of 2010. The increase was mainly attributable to the recording of a non-routine charge of $5 million in the fourth quarter of 2011. The charge represents the estimated net liability arising from the withdrawal by Rockford from the Central States Southeast and Southwest Areas Pension Plan in November 2011.

Operating income for the fourth quarter of 2011 was $25.3 million, or 6.8% of total revenues, compared to $22.7 million, or 6.8% of total revenues, for the same period last year.

Net other expense in the fourth quarter of 2011 was $4.5 million compared to an expense of $2.1 million in the fourth quarter of 2010. The total of interest income, interest expense, foreign exchange and other income was an expense of $1.2 million in the fourth quarter of 2011 compared to an expense of $2.7 million in the same quarter of 2010. The reduction in net expense between years was due primarily to a reduction in interest expense as a result of refinancing equipment secured loans which reduced rates and lower subordinated debt balances. Additionally, the loss from non-consolidated entities of $3.3 million in 2011 was due primarily to a non-routine charge of $4.4 million for the WesPac energy joint venture. This loss was reduced by a gain of $1.1 million from the St. Bernard Levee Partners joint venture in Louisiana. During the quarter, WesPac recorded non reimbursed development project costs and reserves for assets not recoverable for two projects. The Company's share of the losses was $2.7 million. In addition, the Company recorded a non-cash other than temporary decrease of $1.7 million for the WesPac investment. Primoris believes that its investment in WesPac will offer a number of long-term benefits by broadening its exposure to a variety of pipeline, terminal, and energy-related infrastructure opportunities across North America.

The provision for income taxes for the fourth quarter of 2011 was $8.3 million, for an effective tax rate of 40.1%, compared to $8.3 million, for an effective tax rate of 40.3%, in the prior year quarter.

Net income for the fourth quarter of 2011 was $12.5 million, or $0.24 per diluted share, compared to net income of $12.3 million, or $0.24 per diluted share, in the same period in 2010. The 2011 net income included $9.4 million, or $0.11 per share, of non routine charges.

2011 FULL YEAR RESULTS OVERVIEW
Segment Revenues
(in thousands, except %)
		For the twelve months ended December 31,
		2011					2010
					% of					% of
Segment		Revenue			Revenue		Revenue			Revenue
East Construction Services		$	528,745		36.2%		$	480,533		51.0%
West Construction Services			881,733		60.4%			402,273		42.7%
Engineering			49,672		3.4%			58,959		6.3%
Total		$	1,460,150		100.0%		$	941,765		100.0%

Segment Gross Margin
(in thousands, except %)
		For the twelve months ended December 31,
		2011					2010
					% of					% of
		Gross			Segment		Gross			Segment
Segment		Profit			Revenue		Profit			Revenue
East Construction Services		$	57,118		10.8%		$	48,770		10.1%
West Construction Services			118,385		13.4%			61,897		15.4%
Engineering			9,700		19.5%			12,122		20.6%
Total		$	185,203		12.7%		$	122,789		13.0%

Revenues in 2011 rose 55% to $1.5 billion from $941.8 million in 2010, primarily reflecting the acquisition of Rockford in November 2010, which contributed $267.8 million of the revenue increase. In addition to Rockford, revenues rose by $150.1 million in the California Underground group and by $59.5 million in the California Industrial group.

Gross profit in 2011 rose 50.8%, or $62.4 million, to $185.2 million from $122.8 million in 2010, due to a $37.0 million increase from Rockford, a $10.0 million increase from the California Underground and Industrial groups, and a $9.7 million increase at JCG's Heavy Civil group. Gross profit as a percent of revenues decreased to 12.7% for 2011 compared to 13.0% in 2010. The decrease was primarily due to the impact of recognizing a lower profit percentage for a large power plant project by the California Industrial group.

Net income for 2011 rose 74.2% to $58.6 million, or $1.14 per diluted share, from $33.6 million, or $0.72 per diluted share, in 2010. Net income for 2011 included the non-routine charges of $9.4 million, or $0.11 per diluted share, in the fourth quarter.

OTHER FINANCIAL INFORMATION

Primoris's balance sheet at December 31, 2011 included cash and cash equivalents of $120.3 million, short-term investments of $23.0 million, working capital of $114.9 million, total debt and capital leases secured by equipment of $80.4 million, subordinated acquisition debt of $22.5 million, and stockholders' equity of $274.9 million. The balance sheet included a $12.7 million liability for Rockford representing the $6.9 million in payments of cash and common stock that will be made in March 2012 for attaining the 2011 earn-out target and the estimated fair value for the potential earn-out payments for Rockford's financial performance in 2012.

BACKLOG

At December 31, 2011, total backlog was $1.16 billion, representing an increase of $269.8 million, or 30.1%, from $895.8 million as of December 31, 2010 and a modest increase from the September 30, 2011 backlog of $1.09 billion. Primoris expects that approximately $596.1 million, or 51.1%, of total backlog at December 31, 2011 will be recognized as revenue during 2012, with $333 million expected for the East Construction Services segment, $238.9 million for the West Construction Services segment, and $24.2 million for the Engineering segment.

Backlog should not be considered a comprehensive indicator of future revenues, as a significant portion of Primoris's revenues are derived from projects that are not part of a backlog calculation, and projects that are considered a part of backlog may be cancelled by our customers. For the full year ended December 31, 2011, approximately $498.3 million of revenue (which included $292.7 million attributable to the Rockford acquisition) was generated by projects that were not included in backlog.

CONFERENCE CALL

Brian Pratt, Chairman, President and Chief Executive Officer, and Peter J. Moerbeek, Executive Vice President and Chief Financial Officer, will host a conference call today, Thursday, March 1, 2012 at 11:30 am Eastern Time / 10:30 am Central Time to discuss the results.

Interested parties may participate in the call by dialing:

• (877) 423-9820 (Domestic)
• (201) 493-6749 (International)

The conference call will also be broadcasted live via the Investor Relations section of Primoris's website at www.prim.com. Once at the Investor Relations section, please click on "Events & Presentations". If you are unable to participate in the live call, the conference call will be archived and can be accessed for approximately 90 days.

ABOUT PRIMORIS

Founded in 1946, Primoris, through various subsidiaries, has grown to become one of the largest specialty contractors 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, and other customers. For additional information, please visit www.prim.com

FORWARD LOOKING STATEMENTS

This press release contains certain forward-looking statements, including with regard to the Company's future performance. Words such as "estimated," "believes," "expects," "projects," "may," and "future" or similar expressions are intended to identify forward-looking statements. Forward-looking statements inherently involve risks and uncertainties, including without limitation, those described in this press release and those detailed in the "Risk Factors" section and other portions of our Annual Report on Form 10-K for the period ended December 31, 2011, and other filings with the Securities and Exchange Commission. Primoris does not undertake any obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In Thousands, Except Per Share Amounts)
		Three Months Ended						Twelve Months Ended
		December 31,						December 31,
			2011			2010			2011			2010
		(Unaudited)
Revenues		$	373,066		$	333,239		$	1,460,150		$	941,765
Cost of Revenues			322,020			289,439			1,274,947			818,976
Gross Profit			51,046			43,800			185,203			122,789
Selling, general and administrative expenses			25,779			21,136			86,204			64,985
Operating Income			25,267			22,664			98,999			57,804
Other income (expense):
Income (Loss) from non-consolidated entities			(3,287)			540			4,018			4,630
Foreign exchange gain (loss)			154			(16)			(96)			250
Other income (expense)			(171)			(465)			(1,088)			(1,429)
Interest income			34			132			331			616
Interest expense			(1,191)			(2,324)			(5,431)			(6,196)
Income before provision for income taxes			20,806			20,531			96,733			55,675
Provision for income taxes			(8,335)			(8,277)			(38,174)			(22,059)
Net income			12,471			12,254			58,559			33,616
Earnings per share:
Basic:		$	0.24		$	0.25		$	1.15		$	0.79
Diluted:		$	0.24		$	0.24		$	1.14		$	0.72
Weighted average common shares outstanding
Basic:			51,059			49,360			50,707			42,694
Diluted:			51,292			50,928			51,153			46,878

CONSOLIDATED BALANCE SHEETS
(In Thousands, Except Share Amounts)
		December 31,			December 31,
		2011			2010
ASSETS
Current assets:
Cash and cash equivalents		$	120,306		$	115,437
Short term investments			23,000			26,000
Customer retention deposits and restricted cash			31,490			12,518
Accounts receivable, net			187,378			208,145
Costs and estimated earnings in excess of billings			41,866			17,275
Inventory			31,926			25,599
Deferred tax assets			10,659			9,533
Prepaid expenses and other current assets			13,252			12,925
Total current assets			459,877			427,432
Property and equipment, net			129,649			123,167
Investment in non-consolidated entities			12,687			18,805
Intangible assets, net			32,021			40,633
Goodwill			94,179			94,179
Total assets		$	728,413		$	704,216
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable		$	106,725		$	89,484
Billings in excess of costs and estimated earnings			137,729			205,268
Accrued expenses and other current liabilities			59,923			55,859
Distributions and Dividends payable			1,532			1,234
Current portion of capital leases			6,623			4,286
Current portion of long-term debt			13,870			9,623
Current portion of subordinated debt			15,167			15,833
Current portion of contingent earnout liabilities			3,450			—
Total current liabilities			345,019			381,587
Long-term capital leases, net of current portion			4,047			7,354
Long-term debt, net of current portion			55,852			38,428
Long-term subordinated debt, net of current portion			7,334			27,378
Deferred tax liabilities			21,079			12,500
Contingent earnout liabilities			9,268			24,591
Other long-term liabilities			10,882			4,147
Total liabilities			453,481			495,985
Stockholders' equity
Common stock-$.0001 par value; 90,000,000 shares authorized, 51,059,132 and 49,359,600 issued and outstanding at December 31, 2011 and 2010, respectively			5			5
Additional paid-in capital			150,003			136,245
Retained earnings			124,924			71,981
Accumulated other comprehensive income			—			—
Total stockholders' equity			274,932			208,231
Total liabilities and stockholders' equity		$	728,413		$	704,216

Primoris Services Corporation
Peter J. Moerbeek
Executive Vice President, Chief Financial Officer
(214) 740-5602
pmoerbeek@prim.com
or
The Equity Group Inc.
Devin Sullivan, Senior Vice President
(212) 836-9608
dsullivan@equityny.com
or
Thomas Mei, Account Executive
(212) 836-9614
tmei@equityny.com

Source: Primoris Services Corporation

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