Primoris Services Corporation
Aug 8, 2012

Primoris Services Corporation Announces 2012 Second Quarter Financial Results

DALLAS--(BUSINESS WIRE)-- Primoris Services Corporation (NASDAQ GS: PRIM):

Q2 2012 Financial Highlights

Primoris Services Corporation (NASDAQ GS: PRIM) ("Primoris" or "Company") today announced financial results for its second quarter ended June 30, 2012.

Brian Pratt, Chairman, President and Chief Executive Officer of Primoris, commented, "Primoris' second quarter benefited from strong performances by our ARB Industrial and Underground groups in the West segment and James Construction Group in the East segment. Our revenues increased by 15.7% from the first quarter of 2012 and by 28.6% compared to the 2011 second quarter excluding the impact of the completed Ruby project. While most of this revenue growth was organic, the Sprint acquisition added a $12.8 million benefit in the current quarter. Compared to the first quarter of 2012, we increased our operating margin and our net income improved by 11.9%."

Mr. Pratt continued, "Based on our prospect flow and project opportunities, we believe that we will experience good backlog growth both for the remainder of this year and into next year. Last month we announced new contract awards valued at over $370 million, much of which will be completed in 2012. As expected for our diverse group of specialized construction and infrastructure companies, the awards were spread across our subsidiaries and end markets. For the longer term, we remain excited about the opportunities in the large diameter pipeline, the pipeline integrity and the power generation markets. Against a backdrop of increasing macroeconomic and political uncertainty, we are proud of the people who have helped us grow this far and encouraged by the continued growth opportunities in our markets in the coming quarters."

2012 SECOND QUARTER RESULTS OVERVIEW

Revenues for the 2012 second quarter declined 4.1% to $337.4 million from $352.0 million for the same period last year. The 2011 second quarter included revenue of $89.5 million for the Ruby pipeline project, substantially completed in 2011. Excluding the Ruby revenue impact, revenues for the 2012 second quarter increased by $75.0 million, or 28.6%. The increased revenues are primarily as a result of increased project work in the West Construction Services segment for both industrial and underground projects, as well as the impact of the March 2012 acquisition of Sprint, which contributed $12.8MM in revenue for the three months ended June 30, 2012. Gross profit for the 2012 second quarter rose by 6.3% to $44.0 million, or 13.0% of revenues, from $41.4 million, or 11.8% of 2011 second quarter revenue. Gross profit for the 2011 second quarter included gross profit for the Ruby project of $14.4 million. Excluding the impact of the Ruby project, gross profit for the 2012 second quarter increased by $17.4 million compared to the same period in the previous year. Higher gross profit was due primarily to the increased project work in the West Construction Services Segment as well as the gross profit contribution from the March 2012 acquisition of Sprint, which contributed $3.8 million to gross profit for the 2012 second quarter.

SEGMENT RESULTS

Segment Revenues
(in thousands, except %)

 

 

 

For the three months ended June 30,
2012

Unaudited

  2011

Unaudited

  % of   % of
Segment Segment

Segment

Revenue Revenue Revenue Revenue
 
East Construction Services $ 156,057 46.2 % $ 144,538 41.0 %
West Construction Services 167,287 49.6 % 196,623 55.9 %
Engineering   14,092 4.2 %   10,795 3.1 %
Total $ 337,436 100.0 % $ 351,956 100.0 %
  For the six months ended June 30,
2012

Unaudited

  2011

Unaudited

  % of   % of
Segment Segment
Segment Revenue Revenue Revenue Revenue
 
East Construction Services $ 277,907 44.2 % $ 272,617 38.3 %
West Construction Services 325,318 51.7 % 416,737 58.6 %
Engineering   25,784 4.1 %   22,247 3.1 %
Total $ 629,009 100.0 % $ 711,601 100.0 %

Segment Gross Margin

(in thousands, except %)

 
 
For the three months ended June 30,
2012

Unaudited

  2011

Unaudited

  % of   % of
Gross Segment Gross Segment
Segment Profit Revenue Profit Revenue
 
East Construction Services $ 17,360 11.1 % $ 17,295 12.0 %
West Construction Services 24,294 14.5 % 21,687 11.0 %
Engineering   2,350 16.7 %   2,424 22.5 %
Total $ 44,004 13.0 % $ 41,406 11.8 %
  For the six months ended June 30,
2012

Unaudited

  2011

Unaudited

  % of   % of
Gross Segment Gross Segment

Segment

Profit Revenue Profit Revenue
 
East Construction Services $

28,778

10.4 % $ 30,338 11.1 %
West Construction Services 48,695 15.0 % 46,450 11.1 %
Engineering   4,127 16.0 %   5,248 23.6 %
Total $ 81,600 13.0 % $ 82,036 11.5 %

East Construction Services: Revenues increased by $11.5 million in the 2012 second quarter, primarily due to the March 2012 acquisition of Sprint, which generated $12.8 million in revenue for the quarter. Excluding the impact of Sprint, the $1.3 million revenue decline was due to decreased petrochemical work in the Gulf Coast area and the substantial completion of a large causeway project in Louisiana in 2011. Offsetting this were increases in infrastructure and maintenance work. The $0.1 million increase in gross profit was driven by the Sprint acquisition, which contributed $3.8 million to gross profit, offset by lower margins on heavy civil projects, primarily due to the startup of the I-35 projects in Texas as well as the impact from the substantial completion of a large causeway project in Louisiana in 2011.

West Construction Services: Revenues decreased by $29.3 million in the 2012 second quarter. The 2011 second quarter included $89.5 million in revenues from the Ruby project. Excluding the Ruby project revenues, revenues increased by $60.2 million in the 2012 second quarter, due primarily to a $22.8 million increase in the California underground business and a $19.2 million increase in the California industrial business. A significant contributor to the underground business was pipeline integrity work for the major gas utilities, while work on power plants provided a major increase to the industrial business. Excluding the 2011 second quarter Ruby project gross profit of $14.4 million, gross profit for the 2012 second quarter increased by $17.4 million, driven by the significant increase in volume in both the underground and industrial projects.

Engineering: Revenues increased by $3.3 million, mainly due to the completion of several furnace upgrade and refurbishment projects for two major U.S. chemical companies. Gross profit decreased by $0.1 million, primarily as the result of lower profit margins achieved on international projects at our Canadian location and higher margin projects closeouts in the prior year.

Selling, general and administrative expenses ("SG&A") were $23.4 million, or 6.9% of revenues for the second quarter of 2012, compared to $20.5 million, or 5.8% of revenues for the second quarter of 2011, an increase of $2.9 million. The increased SG&A included $2.0 million as a result of the Sprint acquisition, a $0.5 million increase in legal expenses, a $0.2 million increase in amortization of intangible assets and an increase of $0.8 million in other overhead expenses, offset by a reduction in compensation expenses of $0.6 million. Excluding the impact of Sprint, SG&A as a percentage of revenues were 6.6% for the 2012 second quarter.

Operating income for the 2012 second quarter $20.6 million, or 6.1% of total revenues, compared to $20.9 million, or 6.0% of total revenues, for the same period last year.

Net other income and expenses in the 2012 second quarter was an expense of $1.5 million, a $4.3 million decline from net other income of $2.8 million in the 2011 second quarter. The decline was primarily due to the near completion of the St. Bernard Levee Partners joint venture.

The provision for income taxes for the 2012 second quarter was $7.4 million, for an effective tax rate of 38.5%, compared to $9.2 million, for an effective tax rate of 39.0%, in the prior year quarter.

Net income for the 2012 second quarter was $11.7 million, or $0.23 per diluted share, compared to net income of $14.5 million, or $0.28 per diluted share, in the same period in 2011.

Fully diluted shares outstanding for the 2012 second quarter increased by 0.5% to 51.4 million from 51.2 million in last year's second quarter. The increase was mainly due to shares issued as a result of Rockford meeting a defined performance target in 2011. During the 2012 second quarter, the Company purchased 89,600 shares of stock under the previously announced share repurchase program, for a total of $1.0 million.

OTHER FINANCIAL INFORMATION

Primoris's balance sheet at June 30, 2012 included cash and cash equivalents of $119.3 million, working capital of $97.2 million, total debt and capital leases secured by equipment of $81.8 million, subordinated acquisition debt of $5.0 million and stockholders' equity of $299.5 million. The balance sheet included a $12.6 million liability representing the estimated fair value for potential earn-out payments for Rockford's financial performance for 2012 and Sprint's performance for 2012 and 2013.

BACKLOG

At June 30, 2012, total backlog was $1.09 billion compared to $1.17 billion at December 31, 2011. Primoris expects that approximately 61% of total backlog at June 30, 2012 will be recognized as revenue during the remainder of 2012, with $420 million expected for the East Construction Services segment, $228 million for the West Construction Services segment and $14 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 six months ended June 30, 2012, approximately $124.7 million of revenue 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, Wednesday, August 8, 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:

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, 2012, 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,

2012     2011   2012     2011  
 
Revenues $ 337,436 $ 351,956 $ 629,009 $ 711,601
Cost of revenues   293,432     310,550     547,409     629,565  
Gross profit 44,004 41,406 81,600 82,036
Selling, general and administrative expenses   23,396     20,477     43,670     40,322  
Operating income 20,608 20,929 37,930 41,714
 
Other income (expense):
Income (loss) from non-consolidated entities (171 ) 4,400 886 5,226
Foreign exchange loss (6 ) (72 ) (48 ) (36 )
Other expense (371 ) (306 ) (579 ) (603 )
Interest income 25 100 47 258
Interest expense   (1,006 )   (1,353 )   (2,107 )   (2,724 )
Income before provision for income taxes 19,079 23,698 36,129 43,835

 

 

Provision for income taxes   (7,346 )   (9,236 )   (13,910 )   (17,095 )
Net income 11,733 14,462 22,219 26,740
 
Earnings per share:
Basic: $ 0.23 $ 0.28 $ 0.43 $ 0.53
Diluted: $ 0.23 $ 0.28 $ 0.43 $ 0.52
 
 
Weighted average common shares outstanding:
Basic 51,435 51,044 51,386 50,363
Diluted 51,435 51,154 51,386 51,111

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

(Unaudited)

 

   
June 30, December 31,
2012 2011
ASSETS
 
Current assets:
Cash and cash equivalents $ 119,286 $ 120,306
Short term investments 23,000
Customer retention deposits and restricted cash 40,168 31,490
Accounts receivable, net 175,082 187,378
Costs and estimated earnings in excess of billings 45,473 41,866
Inventory and uninstalled contract materials 34,881 31,926
Deferred tax assets 10,659 10,659
Prepaid expenses and other current assets   10,715   13,252
Total current assets 436,264 459,877
Property and equipment, net 151,345 129,649
Investment in non-consolidated entities 12,481 12,687
Intangible assets, net 32,428 32,021
Goodwill   103,569   94,179
Total assets $ 736,087 $ 728,413
 
LIABILITIES AND STOCKHOLDERS' EQUITY
 
Current liabilities:
Accounts payable $ 107,752 $ 106,725
Billings in excess of costs and estimated earnings 131,688 137,729
Accrued expenses and other current liabilities 66,292 59,923
Dividends payable 1,542 1,532
Current portion of capital leases 3,535 6,623
Current portion of long-term debt 15,244 13,870
Current portion of subordinated debt 3,223 15,167
Current portion of contingent earnout liabilities   9,755   3,450
Total current liabilities 339,031 345,019
Long-term capital leases, net of current portion 4,089 4,047
Long-term debt, net of current portion 58,970 55,852
Long-term subordinated debt, net of current portion 1,777 7,334
Long-term contingent earnout liabilities, net of current portion 2,842 9,268
Deferred tax liabilities 21,079 21,079
Other long-term liabilities   8,813   10,882
Total liabilities   436,601   453,481

Stockholders' equity

Common stock-$.0001 par value; 90,000,000 shares authorized, 51,388,406 and 51,059,132 issued and outstanding at June 30, 2012 and December 31, 2011  

5

5
Additional paid-in capital 155,417 150,003
Retained earnings 144,064   124,924
Total stockholders' equity 299,486   274,932
Total liabilities and stockholders' equity $ 736,087 $ 728,413

Primoris Services Corporation
Peter J. Moerbeek, 214-740-5602
Executive Vice President, Chief Financial Officer
pmoerbeek@prim.com
or
Kate Tholking, 214-740-5615
Director of Investor Relations
ktholking@prim.com

Source: Primoris Services Corporation

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