Primoris Services Corporation
May 10, 2011

Primoris Services Corporation Announces 2011 First Quarter Financial Results

Board of Directors Declares $0.025 Per Share Cash Dividend

Q1 2011 Financial Highlights

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

The Company also announced that on May 6, 2011, its Board of Directors declared a $0.025 per share cash dividend to stockholders of record as of June 30, 2011, payable on or about July 15, 2011.

Brian Pratt, Chairman, President and Chief Executive Officer of Primoris, commented, "We are pleased to follow a successful 2010 with strong results for the 2011 first quarter. The quarter reflects the continuing success of our approach to growth and our ability to successfully operate our businesses in diverse end markets. We have grown both via strategic acquisitions and organically. Our recent acquisitions of James Construction Group (JCG) and Rockford Corporation (Rockford) made significant contributions to our operating results, and all three of our operating segments generated improved revenues and profits over the prior year period. We look to continue our evolution to the premier, national specialty contracting and infrastructure company."

Mr. Pratt continued, "We ended the first quarter in a strong financial position, with cash and short term investments of $154.4 million, a debt to equity ratio of 38.1%, and operating cash flow of $30.7 million. Our total backlog at March 31, 2011 grew to $1.06 billion, an increase of $161.5 million from December 31, 2010. We are proud of our growth and optimistic about our prospects; however, as always, our optimism is tempered by the competitive markets in which we operate and the lingering uncertainty surrounding the nation's economic recovery."

2011 FIRST QUARTER RESULTS OVERVIEW

Revenues for the 2011 first quarter rose 105.5% to $359.6 million from $175.0 million in the same period last year. This increase was primarily attributable to a $127.8 million revenue contribution from Rockford, which was acquired in the fourth quarter 2010. Substantially all the Rockford revenue was generated by work on the Ruby pipeline contract, part of a larger project for the construction of a natural gas pipeline from Wyoming to Oregon. Excluding the impact of Rockford, revenues for the 2011 first quarter rose by $56.9 million, or 32.5%, from the first quarter of 2010.

Gross profit for the 2011 first quarter rose by 66.0% to $40.6 million, or 11.3% of revenues, from $24.5 million, or 14.0% of revenues, in the first quarter of 2010. Rockford‘s $11.1 million profit was a primary cause for the $16.2 million increase.

SEGMENT RESULTS

Segment Revenues
(in thousands, except %)

  For the three months ended March 31,
2011

Unaudited

  2010

Unaudited

Segment

Revenue

  % of
Segment
Revenue
Revenue   % of
Segment
Revenue
(Unaudited)
East Construction Services $128,079 35.6% $104,236 59.6%
West Construction Services 220,114 61.2% 59,887 34.2%
Engineering 11,452 3.2% 10,859 6.2%
Total $359,645 100.0% $174,982 100.0%
 

Segment Gross Margin
(in thousands, except %)

 
For the three months ended March 31,
2011

Unaudited

  2010

Unaudited

Segment

Gross
Profit
  % of
Segment
Revenue
Gross
Profit
  % of
Segment
Revenue
(Unaudited)
East Construction Services $13,042 10.2% $9,621 9.2%
West Construction Services 24,764 11.3% 12,211 20.4%
Engineering 2,824 24.7% 2,641 24.3%
Total $40,630 11.3% $24,473 14.0%

East Construction Services: The $23.8 million increase in revenues for the quarter was attributable to the combination of increased work on heavy civil projects in Louisiana and Texas, increased revenue from infrastructure and maintenance projects and the impact of the purchase of a small rock quarry in Texas. The $3.4 million improvement in gross profit was a result of higher revenues and improved performance on heavy civil and infrastructure and maintenance projects. Gross profit as a percent of revenues increased to 10.2% for the quarter compared to 9.2% in the prior year quarter. The increased margin percentages were realized on heavy civil projects in southern Louisiana.

West Construction Services: The $160.2 million increase in revenues for the quarter was attributable to a $127.8 million revenue contribution from Rockford, primarily for the Ruby pipeline project, as well as increases of $15.8 million at the California underground business and increases of $10.4 million at the California industrial business. Gross profit more than doubled in this segment to $24.8 million, primarily due to the $11.1 million profit contribution from Rockford. The remaining increase of $1.5 million was the result of increased gross margins for underground and structures work which were offset by lower margins associated with the start of large power plant projects at the industrial group. The decline in gross profit margin to 11.3% in the first quarter of 2011 reflected unusually high margins in the previous year, primarily as a result of the completion of several projects and the lower margins at the start of major construction projects.

Engineering: Revenues increased by $0.6 million from the first quarter of 2010. Gross profit increased modestly to $2.8 million from $2.6 million for the same period in 2010. The increase, both in revenue and margin, was due primarily to the contribution from several small service type projects in the Company's Canadian subsidiary for the first quarter of 2011.

Selling, general and administrative expenses ("SG&A") increased $6.4 million, or 47.6%, for the 2011 first quarter from the comparable prior year period. Of the increased amount, approximately $1.7 million was as a result of Rockford's operations and $1.1 million was the result of a gain on the sale of equipment in the first quarter of 2010 compared to no gain in 2011. The remaining change in SG&A expenses of $3.6 million was incurred as follows: an increase of $1.6 million at the West Construction Services segment (excluding Rockford), an increase of $1.5 million at the East Construction Services segment and an increase of $0.5 million at the Engineering segment. SG&A as a percentage of revenue decreased to 5.5% for the 2011 quarter, from 7.7% for the same period in 2010 primarily as a result of the significant increase in revenues. Excluding the impact of Rockford, SG&A as a percentage of revenues was 7.8%.

Operating income for the 2011 first quarter was $20.8 million, or 5.8% of total revenues, compared to $11.0 million, or 6.3% of total revenues, for the same period last year.

Net other expense in the 2011 first quarter of $0.6 million compared to net other expense of $0.4 million in the first quarter of 2010. This was due primarily to lower income from non-consolidated investments associated with the St.-Bernard Levee Partners joint venture, which is completing a levee project near New Orleans, Louisiana.

The provision for income taxes for the first quarter of 2011 was $7.9 million, for an effective tax rate of 39.0%, compared to $4.0 million, for an effective tax rate of 37.1%, in the prior year quarter.

Net income for the first quarter of 2011 was $12.3 million, or $0.24 per diluted share, compared to net income of $6.7 million, or $0.15 per diluted share, in the same period in 2010.

Fully diluted shares outstanding for the first quarter of 2011 increased by 12.1% to 51.1 million from 45.5 million in last year's first quarter, due primarily to the impact of the 1.6 million shares issued as part of the Rockford acquisition, the effect of the conversion of the Company's warrants in October 2010 and the effect of the 1.6 million shares issued as a result of JCG and Rockford meeting contingent earnout targets in 2010.

OTHER FINANCIAL INFORMATION

Primoris's balance sheet at March 31, 2011 included cash and cash equivalents of $131.4 million, short-term investments of $23.0 million, working capital of $48.7 million, total debt and capital leases secured by equipment of $56.2 million, subordinated acquisition debt of $33.3 million and stockholders' equity of $234.9 million. The balance sheet included a $10.1 million liability representing the estimated fair value for potential earn-out payments for Rockford's financial performance for the next two years.

BACKLOG

At March 31, 2011, total backlog was $1.06 billion, an increase of $161.5 million, or 18.0%, from total backlog of $895.8 million at December 31, 2010. Primoris expects that approximately $546 million, or 52%, of total backlog at March 31, 2011 will be recognized as revenue in 2011, with $334.0 million expected for the East Construction Services segment, $183.0 million for the West Construction Services segment, and $29.0 million for the Engineering segment.

No substantial backlog was recorded from the Rockford acquisition because the current work in progress consists primarily of the Ruby pipeline project, which is a reimbursable cost plus fixed fee contract.

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 in backlog may be cancelled by our customers. For the three months ended March 31, 2011, approximately $161.9 million of revenues 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, Tuesday, May 10, 2011 at 11:30 am Eastern Time / 10:30 am Central Time to discuss the results.

Interested parties may participate in the call by dialing:

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. Since December 2009, Primoris has doubled its size and the Company's national footprint now extends from Florida, along the Gulf Coast, through California, into the Pacific Northwest and Canada. 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 Quarterly Report on Form 10-Q for the period ended March 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)
(Unaudited)

 

Three Months Ended
March 31,

2011

 

2010

 
Revenues $ 359,645 $ 174,982
Cost of revenues   319,015     150,509  
Gross profit 40,630 24,473
Selling, general and administrative expenses   19,845     13,446  
Operating income 20,785 11,027
Other income (expense):
Income from non-consolidated entities 826 968
Foreign exchange gain 36 92
Other expenses (297 ) (309 )
Interest income 158 180
Interest expense   (1,371 )   (1,307 )
 
Income before provision for income taxes 20,137 10,651
 
Provision for income taxes   (7,859 )   (3,953 )
Net income $ 12,278   $ 6,698  
 
Earnings per share:
Basic: $ 0.25   $ 0.20  
Diluted: $ 0.24   $ 0.15  
 
Weighted average common shares outstanding:
Basic 49,675 33,202
Diluted 51,051 45,544
 
 

CONDENSED CONSOLIDATED BALANCE SHEETS
(In Thousands, Except Share Amounts)
(Unaudited)

   
March 31,
2011
December 31,
2010
ASSETS
 
Current assets:
Cash and cash equivalents $ 131,388 $ 115,437
Short term investments 23,000 26,000
Customer retention deposits 15,599 12,518
Accounts receivable, net 146,819 208,145
Costs and estimated earnings in excess of billings 25,447 17,275
Inventory 22,248 25,599
Deferred tax assets 9,533 9,533
Prepaid expenses and other current assets   8,967   12,925
Total current assets 383,001 427,432
Property and equipment, net 121,015 123,167
Investment in non-consolidated entities 18,543 18,805
Intangible assets, net 37,868 40,633
Goodwill   94,179   94,179
Total assets $ 654,606 $ 704,216
 
LIABILITIES AND STOCKHOLDERS' EQUITY
 
Current liabilities:
Accounts payable $ 82,239 $ 89,484
Billings in excess of costs and estimated earnings 168,379 205,268
Accrued expenses and other current liabilities 53,541 55,126
Dividends payable 1,276 1,234
Current portion of capital leases 3,957 4,286
Current portion of long-term debt 9,680 9,623
Current portion of subordinated debt 14,479 15,833
Current liabilities of discontinued operations   733   733
Total current liabilities 334,284 381,587
Long-term capital leases, net of current portion 6,511 7,354
Long-term debt, net of current portion 36,007 38,428
Long-term subordinated debt, net of current portion 18,799 27,378
Deferred tax liabilities 12,500 12,500
Contingent earnout liabilities 10,088 24,591
Other long-term liabilities   1,562   4,147
Total liabilities   419,751   495,985
Commitments and contingencies

Stockholders' equity

 

Common stock-$.0001 par value, 90,000,000 shares
 authorized, 51,044,307 and 49,359,600 issued and
 outstanding at March 31, 2011 and December 31, 2010

5

5

Additional paid-in capital 151,867 136,245
Retained earnings   82,983   71,981
Total stockholders' equity   234,855   208,231
Total liabilities and stockholders' equity $ 654,606 $ 704,216

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

Source: Primoris Services Corporation

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