Primoris Services Corporation
Nov 5, 2013

Primoris Services Corporation Announces Record 2013 Third Quarter Financial Results

Board of Directors Announces Quarterly Cash Dividend

Q3 2013 Financial Highlights

DALLAS--(BUSINESS WIRE)-- Primoris Services Corporation (NASDAQ GS: PRIM) ("Primoris" or "Company") today announced financial results for its third quarter ended September 30, 2013.

The company also announced that on October 30, 2013, its Board of Directors declared a $0.035 per share cash dividend to stockholders of record as of December 31, 2013, payable on or about January 15, 2014.

Brian Pratt, Chairman, President and Chief Executive Officer of Primoris commented, "Primoris's third quarter results were the strongest in the company's history. Our top and bottom line benefitted from our emphasis on growing the company by targeting energy-focused markets. We announced nearly $600 million in new awards over the past two months, and our backlog grew to a record of $1.9 billion. Our new awards highlight the expanded range of our offerings, a direct benefit of our strategic acquisition strategy.

Mr. Pratt continued, "We are in a gratifying stage of the construction cycle, as we are now seeing bids and awards for our industrial and engineering businesses in markets we have been talking about for several quarters. Persistent low natural gas prices along with long overdue maintenance and upgrades are driving demand for our services in the Gulf Coast region, and we believe this is a multi-year opportunity. Additionally, sustained increases in oil and gas production from U.S. shale plays are maintaining national demand for new pipelines. While the macroeconomic environment can occasionally stifle these drivers, we have confidence that our proven ability to execute on projects will support us as we strive to deliver outstanding results to our shareholders."

2013 THIRD QUARTER RESULTS OVERVIEW

Revenues for the 2013 third quarter increased 27.7% to $551.3 million from $431.8 million for the same period last year. Growth at legacy companies accounted for 10.0% of the increase, and the remaining 17.7% increase was from the acquisitions of Saxon, Q3C, and FSSI. Gross profit increased by $19.2 million, or 34.1% , compared to the same period in 2012. The gross profit increase from legacy companies' growth was $3.7 million and the acquisitions of Saxon, Q3C, and FSSI contributed $15.5 million to the increase in profit.

SEGMENT RESULTS

 

Segment Revenues

(in thousands, except %)

 
For the three months ended September 30,
2013

Unaudited

  2012

Unaudited

  % of   % of
Total Total

Segment

Revenue Revenue Revenue Revenue
 
East Construction Services $ 178,716 32.4 % $ 181,260 42.0 %
West Construction Services 362,362 65.7 % 242,033 56.0 %
Engineering   10,255 1.9 %   8,549 2.0 %
Total $ 551,333 100.0 % $ 431,842 100.0 %
 
 
For the nine months ended September 30,
2013

Unaudited

2012

Unaudited

% of % of
Total Total

Segment

Revenue Revenue Revenue Revenue
 
East Construction Services $ 544,325 38.7 % $ 459,167 43.3 %
West Construction Services 828,242 58.9 % 567,351 53.5 %
Engineering   33,774 2.4 %   34,333 3.2 %
Total $ 1,406,341 100.0 % $ 1,060,851 100.0 %
 
 

Segment Gross Margin

(in thousands, except %)

 
For the three months ended September 30,
2013

Unaudited

  2012

Unaudited

  % of   % of
Gross Segment Gross Segment

Segment

Profit Revenue Profit Revenue
 
East Construction Services $ 10,600 5.9 % $ 18,664 10.3 %
West Construction Services 62,520 17.3 % 35,602 14.7 %
Engineering   2,345 22.9 %   2,025 23.7 %
Total $ 75,465 13.7 % $ 56,291 13.0 %
 
 
 
For the nine months ended September 30,
2013

Unaudited

2012

Unaudited

% of % of
Gross Segment Gross Segment

Segment

Profit Revenue Profit Revenue
 
East Construction Services $ 40,810 7.5 % $ 47,442 10.3 %
West Construction Services 133,195 16.1 % 84,297 14.9 %
Engineering   7,093 21.0 %   6,152 17.9 %
Total $ 181,098 12.9 % $ 137,891 13.0 %
 

East Construction Services: Revenues decreased by $2.5 million in the 2013 third quarter compared to the same period in the prior year. The acquisitions of Saxon and FSSI contributed $14.4 million. Cardinal Contractors revenues increased by $4.5 million due to work on water treatment facilities in Florida and Texas, JCG Industrial division revenues increased $2.8 million due to additional projects in the Gulf Coast area, and JCG Infrastructure & Maintenance division revenues increased $2.4 million. These increased revenues were offset by decreases of $15.2 million on the JCG Heavy Civil division projects as the result of a $31.9 million decrease in Louisiana Department of Transportation work offset primarily by increases in Texas Department of Transportation highway projects in Belton, Texas. Sprint Pipeline revenues decreased by $11.5 million due to larger projects being completed in the previous quarters. Overall gross profit decreased by $8.1 million in the 2013 third quarter compared to the same period in the prior year. Gross profit from the JCG Heavy Civil division decreased by $6.0 million due primarily from the reduced revenues and the transition from completed projects with higher margins in Louisiana in 2012 and the startup of the Belton, Texas area projects in 2013. Sprint Pipeline gross profit decreased $2.4 million due to its reduced revenue. Gross profit at the JCG Industrial division increased by $0.6 million.

West Construction Services: Revenues increased by $120.3 million in the 2013 third quarter compared to the same period in the prior year. The Q3C acquisition accounted for $62.0 million of the revenue increase. The remainder of the revenue increase came from a $67.0 million increase at Rockford, primarily from increased pipeline construction projects in the Pennsylvania and Ohio region, and a $1.2 million increase at ARB Structures. These increases in revenues were offset by a decrease in the ARB Underground division of $8.0 million that was primarily a result of fewer MSA work authorizations from its largest customer and a decrease of $1.8 million in the ARB Industrial division due to completion of power plant projects at the end of 2012 and during the quarter ended September 30, 2013. Gross profit increased by $26.9 million in the 2013 third quarter compared to the same period in the prior year. This includes a gross profit contribution of $16.1 million from the acquisition of Q3C, as well as increased gross profit of $17.6 million at ARB Industrial as a result of the completion of a major power plant project. Offsetting these was a decline at ARB Underground in gross profit of $4.2 million, mainly due to lower revenues, and a decline at Rockford in gross profit of $2.6 million because of weather and technical complications on a large Ohio project.

Engineering: Revenues increased by $1.7 million, and gross profit increased by $0.3 million in the 2013 third quarter compared to the same period in the prior year. The revenues increase is mainly due to the increase in new sales bookings, which is expected to continue for the balance of 2013.

Selling, general and administrative expenses ("SG&A") were $36.5 million, or 6.6% of revenues for the third quarter of 2013, compared to $26.0 million, or 6.0% of revenues for the third quarter of 2012, an increase of $10.5 million. The third quarter of 2013 SG&A expenses included a $3.3 million impairment charge of the WesPac investment basis difference, a charge of $0.5 million to recognize achievement of the 2013 Q3C earn-out target, and $5.6 million in expenses from the acquired companies of Saxon, Q3C, and FSSI.

Operating income for the 2013 third quarter was $39.0 million, or 7.1% of total revenues, compared to $30.3 million, or 7.0% of total revenues, for the same period last year.

Net other income and expenses in the 2013 third quarter was an expense of $1.7 million, a $0.3 million increase from net other expense of $1.4 million in the 2012 third quarter. The increase was primarily due to increased interest expense from the $50 million 3.65% Senior Secured Notes, dated December 29, 2012, and the $25 million Senior Secured Notes, dated July 25, 2013.

The provision for income taxes for the 2013 third quarter was $14.1 million, or an effective tax rate on net income attributable to Primoris of 39.2%, compared to $11.0 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 third quarter was $21.8 million, or $0.42 per diluted share, compared to net income attributable to Primoris of $17.5 million, or $0.34 per diluted share, in the same period in 2012.

Fully diluted shares outstanding for the 2013 third quarter increased by 0.5% to 51.7 million from 51.4 million in last year's third quarter.

OTHER FINANCIAL INFORMATION

Primoris's balance sheet at September 30, 2013 included cash, cash equivalents, and short-term investments of $177.2 million, working capital of $213.8 million, total debt and capital leases secured by equipment of $222.3 million, and stockholders' equity of $377.6 million. The balance sheet included a $14.8 million liability representing the estimated fair value for unpaid earnout amounts from acquisitions. Primoris' tangible net worth at September 30, 2013, was $210.9 million.

 

BACKLOG

 
Backlog at September 30, 2013 (in millions)
   
Segment

Historic
Calculation

Estimated
Annual MSA
Revenues

Revised Backlog
 
East Construction Services $ 1,097 $ 96 $ 1,193
West Construction Services 315 379 694
Engineering   36     -     36
Total $ 1,448     475     1,923
 

At September 30, 2013, total backlog using our historical calculation was $1.45 billion compared to $1.35 billion at December 31, 2012. For the three months ended September 30, 2013, approximately $213 million of revenue was generated by projects that were not included in the historical backlog calculation.

As previously discussed, we have changed 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 September 30, 2013 was $1.9 billion. We expect that during the next four quarters, using the revised backlog calculation, we will recognize as revenue approximately 64% of the East Construction Services segment backlog, approximately 99% of the West Construction Services segment backlog, and approximately 91% 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, Tuesday, November 5 at 10:00 am Eastern Time / 9:00 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 construction service enterprises 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. The Company's national footprint 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 September 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

September 30,

Nine Months Ended,

September 30,

2013

 

2012

2013

 

2012

 
Revenues $ 551,333 $ 431,842 $ 1,406,341 $ 1,060,851
Cost of revenues

475,868

375,551

1,225,243

922,960

Gross profit 75,465 56,291 181,098 137,891
Selling, general and administrative expenses

36,478

26,014

96,657

69,684

Operating income 38,987 30,277 84,441 68,207
 
Other income (expense):
Income (loss) from non-consolidated entities 113 (159 ) 169 895
Foreign exchange gain (loss) 91 18 3 (30 )
Other expense (376 ) (382 ) (809 ) (961 )
Interest income 32 96 95 143
Interest expense

(1,579

)

(937

)

(4,501

)

(3,044

)

Income before provision for income taxes 37,268 28,913 79,398 65,210
 
Provision for income taxes

(14,075

)

(10,965

)

(30,272

)

(24,875

)

Net income 23,193 17,948 49,126 40,335
 
Net income attributable to noncontrolling interests (1,348 ) (432 ) (1,947 ) (600 )
 
Net income attributable to Primoris 21,845 17,516 47,179 39,735
 
Earnings per share:
Basic: $ 0.42 $ 0.34 $ 0.92 $ 0.77
Diluted: $ 0.42 $ 0.34 $ 0.91 $ 0.77
 
 
Weighted average common shares outstanding:
Basic 51,568 51,398 51,529 51,387
Diluted 51,671 51,404 51,595 51,402
 
   

CONDENSED CONSOLIDATED BALANCE SHEETS

(In Thousands, Except Share Amounts)

(Unaudited)

 
September 30, December 31,
2013 2012
ASSETS
 
Current assets:
Cash and cash equivalents $ 174,034 $ 157,551
Short term investments 3,179 3,441
Customer retention deposits and restricted cash 15,377 35,377
Accounts receivable, net 284,497 268,095
Costs and estimated earnings in excess of billings 80,434 41,701
Inventory and uninstalled contract materials 43,616 37,193
Deferred tax assets 10,477 10,477
Prepaid expenses and other current assets   12,830   10,800
Total current assets 624,444 564,635
Property and equipment, net 220,179 184,840
Investment in non-consolidated entities 6,546 12,813
Intangible assets, net 48,002 51,978
Goodwill 118,626 116,941
Other long-term assets   1,214   -
Total assets $ 1,019,011 $ 931,207
 
 
LIABILITIES AND STOCKHOLDERS' EQUITY
 
Current liabilities:
Accounts payable $ 119,882 $ 151,546
Billings in excess of costs and estimated earnings 147,464 158,892
Accrued expenses and other current liabilities 101,881 76,152
Dividends payable 1,805 --
Current portion of capital leases 3,928 3,733
Current portion of long-term debt 26,910 19,446
Current portion of contingent earnout liabilities   8,763   10,900

Total current liabilities

410,633 420,669
Long-term capital leases, net of current portion 2,760 3,831
Long-term debt, net of current portion 188,713 128,367
Deferred tax liabilities 20,018 20,018
Long-term contingent earnout liabilities, net of current portion 6,083 12,531
Other long-term liabilities   13,243   13,153
Total liabilities $ 641,450 $ 598,569
Stockholders' equity
Common stock 5 5
Additional paid-in capital 159,058 155,605
Retained earnings 217,540 175,517
Noncontrolling interests   958   1,511
Total stockholders' equity   377,561   332,638
Total liabilities and stockholders' equity $ 1,019,011 $ 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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