Primoris Services Corporation
Aug 7, 2013

Primoris Services Corporation Announces 2013 Second Quarter Financial Results

Board of Directors Authorizes Quarterly Cash Dividend

Q2 2013 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, 2013.

The company also announced that on August 2, 2013, its Board of Directors authorized payment of a $0.035 per share cash dividend to stockholders of record as of September 30, 2013, payable on or about October 15, 2013.

Brian Pratt, Chairman, President and Chief Executive Officer of Primoris commented, "Our strong second quarter results highlight the success of Primoris's strategy to focus on specialized end markets, as our revenue growth was split almost evenly between our recent acquisitions and our legacy businesses. As expected, our operating margins improved from the first quarter, aided by both our pipeline and our industrial work. With a solid balance sheet and a growing backlog, we are confident that our growing momentum will provide for a strong second half."

Mr. Pratt continued, "This is an exciting time for our business as there are abundant prospects for continued growth across our end markets. The demand for improvements to the U.S. energy infrastructure provides us with multiple opportunities, and there will be a need to strengthen our U.S. domestic capabilities as the country strives for energy independence. In addition, we believe our industrial and water end markets are poised for significant growth in the coming years. While we are not insulated from changes in the macroeconomic environment, we are focused on end markets that we believe offer exciting prospects for enhancing shareholder value."

2013 SECOND QUARTER RESULTS OVERVIEW

Revenues for the 2013 second quarter increased 31.9% to $445.0 million from $337.4 million for the same period last year. Growth at legacy companies accounted for 15.4% of the increase, and the remaining 16.5% increase was from the acquisitions of Silva, Saxon, Q3C, and FSSI. Gross profit increased by $15.5 million, or 35.2% , compared to the same period in 2012. The gross profit increase from legacy companies' growth was $9.9 million and the acquisitions of Silva, Saxon, Q3C, and FSSI contributed $5.6 million to the increase in profit.

SEGMENT RESULTS

   

Segment Revenues

(in thousands, except %)

 
For the three months ended June 30,
2013

Unaudited

  2012

Unaudited

  % of   % of

Total

Total

Segment

Revenue Revenue Revenue 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 %
 
For the six months ended June 30,
2013

Unaudited

2012

Unaudited

% of % of

Total

Total

Segment

Revenue Revenue Revenue 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 Margin

(in thousands, except %)

 
For the three months ended June 30,
2013

Unaudited

  2012

Unaudited

  % of   % of
Gross Segment Gross Segment

Segment

Profit Revenue Profit 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 %
 
For the six months ended June 30,
2013

Unaudited

2012

Unaudited

% of % of
Gross Segment Gross Segment

Segment

Profit Revenue Profit 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 %
 

East Construction Services: Revenues increased by $19.3 million in the 2013 second quarter compared to the same period in the prior year. The acquisitions of Saxon and FSSI accounted for $14.8 million of the revenue increase. The remainder of the revenue increase came from a $20.7 million increase at Sprint from increased activity in the Eagle Ford area, a $4.0 million increase at Cardinal Contractors from increased water facility treatment work in Florida and Texas, and a $5.7 million increase at the JCG Industrial division, offset by decreases of $17.7 million at the JCG Heavy Civil division and $8.2 million at the JCG Infrastructure and Maintenance division. The decline in revenues at the JCG Heavy Civil division is largely due to a $25.8 million decline in Louisiana DOT revenues that was only partially offset by a $12.2 million increase in Texas DOT revenues. Overall gross profit decreased by $2.1 million in the 2013 second quarter compared to the same period in the prior year. Gross profit contributions included $0.2 from the acquisitions of Saxon and FSSI, as well as increased gross profit of $0.8 million at Cardinal Contractors and $1.0 million at the JCG Industrial division. The decline in gross profit is mainly attributable to a $4.3 million decrease at the JCG Heavy Civil division, due largely to the reduced revenues and the transition from completed projects with higher margins in Louisiana in 2012 to the startup of the Belton,TX area projects.

West Construction Services: Revenues increased by $90.9 million in the 2013 second quarter compared to the same period in the prior year. The Q3C acquisition accounted for $40.7 million of the revenue increase. The remainder of the revenue increase came from a $60.6 million increase at Rockford, primarily from increased pipeline construction projects in the Pennsylvania shale area, and a $2.3 million increase at ARB Structures. These increases in revenues were offset by a decrease in the ARB Underground division of $9.3 million that was primarily a result of fewer MSA work authorizations for its largest customer and a decrease of $3.3 million in the ARB Industrial division due to completion of power plant projects in 2012 and a current power plant project nearing completion. Gross profit increased by $17.6 million in the 2013 second quarter compared to the same period in the prior year. This includes a gross profit contribution of $5.4 million from the acquisition of Q3C, as well as increased gross profit of $5.6 million at Rockford as a result of its increased revenues, an increase of $9.7 million at ARB Industrial as the result of the approaching completion of a major power plant project, and an increase of $0.6 million at ARB Structures. Offsetting these was a decline at ARB Underground in gross profit of $3.7 million, mainly due to lower revenues.

Engineering: Revenues decreased by $2.7 million, and gross profit remained nearly unchanged. Gross profit as a percentage of revenues was 21.0%, compared to 16.7% for the same period in 2012. The increase was due primarily to project closeouts in the current year.

Selling, general and administrative expenses ("SG&A") were $31.6 million, or 7.1% of revenues for the second quarter of 2013, compared to $23.4 million, or 6.9% of revenues for the second quarter of 2012, an increase of $8.2 million. The acquisitions of Silva, Saxon, Q3C, and FSSI accounted for roughly half the increase in SG&A expense, while the other half was primarily due to increased compensation and compensation-related expenses.

Operating income for the 2013 second quarter was $28.0 million, or 6.3% of total revenues, compared to $20.6 million, or 6.1% of total revenues, for the same period last year.

Net other income and expenses in the 2013 second quarter was an expense of $2.1 million, a $0.7 million increase from net other expense of $1.4 million in the 2012 second quarter. The decline was primarily due to a loss recorded at the WesPac joint venture.

The provision for income taxes for the 2013 second quarter was $10.0 million, or an effective tax rate on net income attributable to Primoris of 39.1%, compared to $7.3 million, or an effective tax rate on net income attributable to Primoris of 38.5%, in the prior year quarter.

Net income attributable to Primoris for the 2013 second quarter was $15.6 million, or $0.30 per diluted share, compared to net income attributable to Primoris of $11.7 million, or $0.23 per diluted share, in the same period in 2012.

Fully diluted shares outstanding for the 2013 second quarter increased by 0.3% to 51.6 million from 51.4 million in last year's second quarter.

OTHER FINANCIAL INFORMATION

Primoris's balance sheet at June 30, 2013 included cash and cash equivalents of $117.2 million, working capital of $146.5 million, total debt and capital leases secured by equipment of $174.4 million, and stockholders' equity of $358.3 million. The balance sheet included a $14.0 million liability representing the estimated fair value for unpaid earnout amounts from acquisitions. Primoris' tangible net worth at June 30, 2013, was $190.4 million.

BACKLOG

   
Backlog at June 30, 2013 (in millions)
Segment

Historic

Calculation

 

Estimated

Annual MSA

Revenues

  Revised Backlog
 
East Construction Services $ 999 $ 92 $ 1,091
West Construction Services 361 329 690
Engineering   22     -     22
Total $ 1,382     421     1,803
 

At June 30, 2013, total backlog using our historical calculation was $1.38 billion compared to $1.35 billion at December 31, 2012. For the three months ended June 30, 2013, approximately $82.0 million of revenue was generated by projects that were not included in the historical backlog calculation.

As previously discussed, we are changing our backlog calculation to better reflect the company's increasing percentage of revenues derived from MSAs as a result of the acquisitions of Sprint and Q3C. The new calculation includes estimated MSA revenues for the next four quarters. With this addition to the backlog calculation, the new total backlog at June 30, 2013 was $1.8 billion. We expect that during the next four quarters, using the revised backlog calculation, we will recognize as revenue approximately 50% of the East Construction Services segment backlog, approximately 98% of the West Construction Services segment backlog, and approximately 100% of the Engineering segment.

Backlog, including estimated MSA revenues, should not be considered a comprehensive indicator of future revenues, as a portion of Primoris's revenues are still derived from projects that are not part of backlog and the estimated MSA revenues calculation, including time-and-equipment, time-and-materials, and cost-reimbursable-plus-fee contracts. Additionally, projects that are considered a part of backlog or MSA contracts may be cancelled by our customers.

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 7 at 11:00 am Eastern Time / 10:00 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 tripled its revenue 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 known and unknown risks, uncertainties, and other factors, 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, 2013, and other filings with the Securities and Exchange Commission. Given these uncertainties, you should not place undue reliance on forward-looking statement. 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,

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
 
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
     

CONDENSED CONSOLIDATED BALANCE SHEETS

(In Thousands, Except Share Amounts)

(Unaudited)

 
June 30, December 31,
2013   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
Stockholders' equity
Common stock 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

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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