Primoris Services Corporation
Aug 4, 2011

Primoris Services Corporation Announces 2011 Second Quarter Financial Results

Q2 2011 Financial Highlights

DALLAS--(BUSINESS WIRE)-- Primoris Services Corporation (NASDAQ GS: PRIM) ("Primoris" or "Company") today announced financial results for its second quarter ended June 30, 2011.

Brian Pratt, Chairman, President and Chief Executive Officer of Primoris, commented, "We continued our strong performance in the second quarter of 2011 as we report the highest quarterly net income and earnings per share numbers since Primoris became a public company three years ago. At that time, we said that we intended to use our public company shares as part of a strategy to carefully grow the company. We have done so, and both of our larger acquisitions, James Construction Group in December 2009 and Rockford Corporation in November 2010, made strong contributions to our quarterly results. The performance of our California-based underground and industrial groups was also instrumental in achieving our financial results.

"During the past few months, we have announced new projects for underground pipeline construction and repairs and maintenance, including our first contract in the Marcellus Shale region, for heavy highway and infrastructure and for the modernization of a natural gas-fired electric generation facility. Our financial position remains strong as our balance sheet showed $158.3 million in cash and short-term investments at June 30, 2011, we generated operating cash flow of $51.9 million during the first half of 2011 and our backlog at June 30, 2011 was $1.03 billion. The current macroeconomic outlook for both our industry and our end-markets remains somewhat opaque, but to date we have performed well, and we remain optimistic about our future opportunities."

2011 SECOND QUARTER RESULTS OVERVIEW

Revenues for the 2011 second quarter rose 73.2% to $352.0 million from $203.2 million for the same period last year. The increase was primarily attributable to a $91.2 million revenue contribution from Rockford, which was acquired in the fourth quarter of 2010, higher revenues at the Company's ARB subsidiary, and a $24.1 million rise in revenues at the East Construction Services segment. 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 second quarter rose by 28.3% from the second quarter of 2010. Gross profit for the 2011 second quarter rose by 55.5% to $41.4 million, or 11.8% of revenues, from $26.6 million, or 13.1% of revenues, in the second quarter of 2010. Higher gross profit was due primarily to a $14.4 million profit contribution from Rockford, with the decline in gross margin attributable to lower margins associated with certain underground and industrial projects at ARB.

SEGMENT RESULTS

 

Segment Revenues
(in thousands, except %)

 
       

For the three months ended June 30,

2011
Unaudited

 

2010
Unaudited

Segment

Revenue   % of
Segment
Revenue
Revenue   % of
Segment
Revenue
 
East Construction Services $ 144,538 41.0 % $ 120,471 59.3 %
West Construction Services 196,623 55.9 % 69,821 34.4 %
Engineering   10,795 3.1 %   12,895 6.3 %
Total $ 351,956 100.0 % $ 203,187 100.0 %
 
 

For the six months ended June 30,

2011
Unaudited

2010
Unaudited

Segment

Revenue % of
Segment
Revenue
Revenue % of
Segment
Revenue
 
East Construction Services $ 272,617 38.3 % $ 224,707 59.4 %
West Construction Services 416,737 58.6 % 129,708 34.3 %
Engineering   22,247 3.1 %   23,754 6.3 %
Total $ 711,601 100.0 % $ 378,169 100.0 %
 
 

Segment Gross Margin
(in thousands, except %)

       

For the three months ended June 30,

2011
Unaudited

 

2010
Unaudited

Segment

Gross
Profit
  % of
Segment
Revenue
Gross
Profit
  % of
Segment
Revenue
 
East Construction Services $ 17,295 12.0 % $ 13,593 11.3 %
West Construction Services 21,687 11.0 % 10,181 14.6 %
Engineering   2,424 22.5 %   2,862 22.2 %
Total $ 41,406 11.8 % $ 26,636 13.1 %
 
 

For the six months ended June 30,

2011
Unaudited

2010
Unaudited

Segment

Gross
Profit
% of
Segment
Revenue
Gross
Profit
% of
Segment
Revenue
 
East Construction Services

$

30,338

11.1 % $ 23,214 10.3 %
West Construction Services 46,450 11.1 % 22,392 17.3 %
Engineering   5,248 23.6 %   5,503 23.2 %
Total $ 82,036 11.5 % $ 51,109 13.5 %
 

East Construction Services: The $24.1 million increase in revenues for the quarter was primarily attributable to JCG's heavy civil group. The $3.7 million improvement in gross profit was a result of higher revenues and improved performance with large construction projects of the heavy civil division. Gross profit as a percent of revenues rose to 12.0% from 11.3% in last year's second quarter, due primarily to improved margin percentages realized on heavy civil projects, which reflected the benefit of improved efficiency on a large causeway project in South Louisiana.

West Construction Services: The $126.8 million increase in revenues for the quarter was primarily attributable to a $91.2 million revenue contribution from Rockford, primarily for the Ruby pipeline project, as well as a $36.7 million increase in revenues at ARB. Gross profit rose by $11.5 million to $21.7 million, primarily benefiting from a $14.4 million profit contribution from Rockford. The decline in gross profit margin to 11.0% in the second quarter of 2011 reflected a significant increase in contingency amounts associated with engineering delays of one of our power plant construction projects during the quarter.

Engineering: Revenues declined by $2.1 million from the second quarter of 2010, reflecting completion of an international project and a U.S.-based refinery project during the same period in the prior year. Gross profit declined to $2.4 million from $2.9 million for the same period in 2010, as a result of the lower revenues for the segment, with gross profit as a percentage of revenue rising modestly to 22.5%.

Selling, general and administrative expenses ("SG&A") were $20.5 million, or 5.8% of revenues for the second quarter of 2011, compared to $15.8 million, or 7.8% of revenues for the second quarter of 2011, an increase of $4.7 million. Of the increased amount, approximately $1.6 million was as a result of the Rockford acquisition, $1.0 million related to a change made in the East Construction segment in its method of allocating overhead expenses to construction projects to conform to the method used by the other two segments, with the remaining change primarily from employee compensation and related expenses. Excluding the impact of Rockford, SG&A as a percentage of revenues declined to 7.3%.

Operating income for the second quarter of 2011 was $20.9 million, or 5.9% of total revenues, compared to $10.8 million, or 5.3% of total revenues, for the same period last year.

Net other income in the second quarter of 2011 rose to $2.8 million from $0.5 million in the second quarter of 2010. This increase was due primarily to a $2.6 million increase in income from the St.-Bernard Levee Partners joint venture in Louisiana.

The provision for income taxes for the second quarter of 2011 was $9.2 million, for an effective tax rate of 39.0%, compared to $4.2 million, for an effective tax rate of 37.1%, in the prior year quarter.

Net income for the second quarter of 2011 was $14.5 million, or $0.28 per diluted share, compared to net income of $7.1 million, or $0.16 per diluted share, in the same period in 2010.

Fully diluted shares outstanding for the second quarter of 2011 increased by 12.7% to 51.2 million from 45.4 million in last year's second 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 earnout targets in 2010.

OTHER FINANCIAL INFORMATION

Primoris's balance sheet at June 30, 2011 included cash and cash equivalents of $135.3 million, short-term investments of $23.0 million, working capital of $56.3 million, total debt and capital leases secured by equipment of $51.6 million, subordinated acquisition debt of $29.7 million and stockholders' equity of $246.0 million. The balance sheet included a $10.4 million liability representing the estimated fair value for potential earn-out payments for Rockford's financial performance for the next 18 months.

BACKLOG

At June 30, 2011, total backlog was $1.03 billion, an increase of $132.3 million, or 14.8%, from total backlog of $895.8 million at December 31, 2010. Primoris expects that approximately $471 million, or 46%, of total backlog at June 30, 2011 will be recognized as revenue in 2011, with $277 million expected for the East Construction Services segment, $171 million for the West Construction Services segment and $23 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 that are considered a part of backlog may be cancelled by our customers. For the six months ended June 30, 2011, approximately $275 million of revenue (which included $218 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, August 4, 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 June 30, 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
June 30,

Six Months Ended
June 30,

2011

 

2010

2011

 

2010

(Unaudited) (Unaudited)
 
Revenues $ 351,956 $ 203,187 $ 711,601 $ 378,169
Cost of revenues   310,550     176,551     629,565     327,060  
Gross profit 41,406 26,636 82,036 51,109
Selling, general and administrative expenses   20,477     15,823     40,322     29,269  
Operating income 20,929 10,813 41,714 21,840
 
Other income (expense):
Income from non-consolidated entities 4,400 1,756 5,226 2,724
Foreign exchange gain (loss) (72 ) 94 (36 ) 186
Other expense (306 ) (322 ) (603 ) (631 )
Interest income 100 153 258 333
Interest expense   (1,353 )   (1,220 )   (2,724 )   (2,527 )
Income before provision for income taxes 23,698 11,274 43,835 21,925

 

 

Provision for income taxes   (9,236 )   (4,187 )   (17,095 )   (8,140 )
Net income 14,462 7,087 26,740 13,785
 

Earnings per share:

Basic: $ 0.28 $ 0.16 $ 0.53 $ 0.36
Diluted: $ 0.28 $ 0.16 $ 0.52 $ 0.30
 
 

Weighted average common shares outstanding:

Basic 51,044 43,163 50,363 38,210
Diluted 51,154 45,407 51,111 45,451
 
             

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

 

June 30,
2011

December 31,
2010

ASSETS
 
Current assets:
Cash and cash equivalents $ 135,289 $ 115,437
Short term investments 23,000 26,000
Customer retention deposits and restricted cash 17,519 12,518
Accounts receivable, net 155,122 208,145
Costs and estimated earnings in excess of billings 33,584 17,275
Inventory 28,735 25,599
Deferred tax assets 9,533 9,533
Prepaid expenses and other current assets   11,255   12,925
Total current assets 414,037 427,432
Property and equipment, net 120,974 123,167
Investment in non-consolidated entities 18,034 18,805
Intangible assets, net 35,101 40,633
Goodwill   94,179   94,179
Total assets $ 682,325 $ 704,216
 
LIABILITIES AND STOCKHOLDERS' EQUITY
 
Current liabilities:
Accounts payable $ 90,787 $ 89,484
Billings in excess of costs and estimated earnings 171,545 205,268
Accrued expenses and other current liabilities 65,869 55,126
Dividends payable 1,276 1,234
Current portion of capital leases 3,304 4,286
Current portion of long-term debt 9,546 9,623
Current portion of subordinated debt 14,700 15,833
Liabilities of discontinued operations   733   733
Total current liabilities 357,760 381,587
Long-term capital leases, net of current portion 5,656 7,354
Long-term debt, net of current portion 33,105 38,428
Long-term subordinated debt, net of current portion 15,037 27,378
Deferred tax liabilities 12,500 12,500
Contingent earnout liabilities 10,394 24,591
Other long-term liabilities   1,862   4,147
Total liabilities   436,314   495,985

Stockholders' equity

Common stock-$.0001 par value; 90,000,000 shares authorized, 51,044,307 and 49,359,600 issued and outstanding at June 30, 2011 and December 31, 2010

5

5
Additional paid-in capital 149,837 136,245
Retained earnings   96,169   71,981
Total stockholders' equity   246,011   208,231
Total liabilities and stockholders' equity $ 682,325 $ 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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