Primoris Services Corporation
Aug 7, 2014

Primoris Services Corporation Announces 2014 Second Quarter Financial Results

Board of Directors Increases Quarterly Cash Dividend by 14%

Q2 2014 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, 2014.

The Company also announced that on August 5, 2014, the Board of Directors authorized a 14.3% increase in the quarterly cash dividend to $0.04 per share from $0.035 per share. The cash dividend will be paid to stockholders of record on September 30, 2014 and is payable on or about October 15, 2014.

Brian Pratt, Chairman, President and Chief Executive Officer of Primoris commented, "We had a solid second quarter, with strong revenue growth in several of our end markets, especially our operations on the Gulf Coast. Our revenue growth was accompanied by increased gross margin, operating income and net income compared to last quarter, and I am expecting our traditionally strong second half of the year.

Mr. Pratt continued, "Environmental constraints, such as a longer permitting process, continue to affect the energy business and have delayed a significant number of our projects. The tailwinds driving our business remain strong, and the abundance of shale gas and its impact is driving the need for new energy and petrochemical infrastructure. Our business units continue to be preferred providers of the services our customers need to facilitate their growth. The opportunities are there, and we will make the most of them."

2014 SECOND QUARTER RESULTS OVERVIEW

Revenue for the 2014 second quarter increased by 15.8% to $515.3 million, compared to the same period last year. Revenue increased by $102.7 million in the East Construction Services segment and $1.4 million in the Engineering segment and decreased by $33.8 million in the West Construction Services segment.

From an end-market perspective for the three months ended June 30, 2014, compared to the second quarter 2013, our industrial business increased by $63.0 million, our heavy civil work increased by $16.5 million, and our engineering business increased by $1.4 million. Our other end-market (primarily our parking structures business) decreased by $6.2 million.

Gross profit increased by $1.7 million, or 2.8%, compared to the same period last year. A reduction in gross profit as a percentage of revenues from the second quarter of 2013 to the second quarter of 2014 reduced the benefit of the increased revenue. The primary reason for the reduction in the gross profit as a percentage of revenues was the increase in revenue in the East, which are traditionally lower-margin revenues than in the West.

SEGMENT RESULTS

   

Segment Revenues

(in thousands, except %)

For the three months ended June 30,
2014

Unaudited

    2013

Unaudited

Segment

Revenue     % of
Segment
Revenue
Revenue     % of
Segment
Revenue
 
East Construction Services 278,066 54.0% 175,398 39.4%
West Construction Services $ 224,391 43.5% $ 258,194 58.0%
Engineering 12,834 2.5% 11,421 2.6%
Total $ 515,291 100.0% $ 445,013 100.0%
 
   
For the six months ended June 30,
2014

Unaudited

    2013

Unaudited

Segment

Revenue     % of
Segment
Revenue
Revenue     % of
Segment
Revenue
 
East Construction Services 501,138 50.9% 365,609 42.8%
West Construction Services $ 458,417 46.5% $ 465,880 54.4%
Engineering 25,810 2.6% 23,519 2.8%
Total $ 985,365 100.0% $ 855,008 100.0%
 
   

Segment Gross Margin

(in thousands, except %)

For the three months ended June 30,
2014

Unaudited

    2013

Unaudited

Segment

Gross
Profit
    % of
Segment
Revenue
Gross
Profit
    % of
Segment
Revenue
 
East Construction Services 21,309 7.7% 15,215 8.7%
West Construction Services $ 37,809 16.9% $ 41,926 16.2%
Engineering 2,076 16.2% 2,396 21.0%
Total $ 61,194 10.6% $ 59,537 13.4%
 
   
For the six months ended June 30,
2014

Unaudited

    2013

Unaudited

Segment

Gross
Profit
    % of
Segment
Revenue
Gross
Profit
    % of
Segment
Revenue
 
East Construction Services 37,325 7.5% 30,210 8.3%
West Construction Services $ 69,483 15.2% $ 70,675 15.2%
Engineering 4,143 16.1% 4,748 20.2%
Total $ 110,951 11.3% $ 105,633 12.4%
 

East Construction Services: Revenue increased by $102.7 million in the 2014 second quarter compared to the same period last year. Revenue at the PES Sprint Pipeline division increased by $30.4 million from pipeline projects in south Texas, and at the PES James Industrial Contractors division revenue increased by $50.0 million from petrochemical projects in Louisiana and Texas. Revenue for the PES Saxon Construction division increased by $3.1 million as a result of a petrochemical project in Texas. JCG's Heavy Civil division revenue increased by $17.2 million as increases of $23.0 million from TXDOT projects and $7.5 million from Mississippi projects were offset by a decrease of $13.3 million from LADOT projects. Revenue at the JCG Infrastructure & Maintenance division increased by $2.0 million. Gross profit increased by $6.1 million in the 2014 second quarter compared to the same period last year. The gross profit increase was primarily at the PES James Industrial Contractors division, which increased $5.0 million due to increased volume.

West Construction Services: Revenue decreased by $33.8 million in the 2014 second quarter compared to the same period last year. Decreases in revenue of $22.4 million at the ARB Underground division, primarily from gas utility projects, and of $34.4 million at Rockford were partially offset by increases at Q3C of $21.5 million. Gross profit decreased by $4.1 million in the 2014 second quarter compared to the same period last year. The decreases in gross profit at the ARB Underground division of $4.0 million and of $8.5 million at the ARB Industrial division were partially offset by a gross profit increase of $7.3 million at Q3C and at Rockford of $1.2 million. Profit at Rockford increased, despite a decrease in revenue, due to project close-outs.

Engineering: Revenue increased by $1.4 million in the 2014 second quarter compared to the same quarter last year. The increase is mainly due to the increase in revenue from two new LNG plant projects. Gross profit declined by $0.3 million. The decline results from the lower margins on the LNG plant projects associated with their beginning stages.

Selling, general and administrative expenses ("SG&A") were $33.2 million, or 6.5% of revenue for the second quarter of 2014, compared to $31.6 million, or 7.1% of revenue for the second quarter of 2013, an increase of $1.7 million. The increase in SG&A was primarily as a result of increased compensation and compensation-related expenses of $1.3 million and increased expenses of $0.4 million for legal, consulting and other SG&A expenses.

Operating income for the 2014 second quarter was $28.0 million, or 5.4% of total revenue, compared to $28.0 million, or 6.3% of total revenue, for the same period last year.

Net other income and expenses in the 2014 second quarter was an expense of $1.4 million, a $0.7 million decrease from net other expense of $2.1 million in the 2013 second quarter.

The provision for income taxes for the 2014 second quarter was $10.6 million, or an effective tax rate on net income attributable to Primoris of 39.9%, compared to $10.0 million, or an effective tax rate on net income attributable to Primoris of 39.1%, in the prior year quarter.

Net income attributable to Primoris for the 2014 second quarter was $16.0 million, or $0.31 per diluted share, compared to net income attributable to Primoris of $15.6 million, or $0.30 per diluted share, in the same period in 2013.

Fully diluted weighted average shares outstanding for the 2014 second quarter increased by 0.3% to 51.8 million from 51.6 million in last year's second quarter.

OTHER FINANCIAL INFORMATION

Primoris' balance sheet at June 30, 2014 included cash, cash equivalents, and short-term investments of $162.5 million, working capital of $226.3 million, total debt and capital leases secured by equipment of $219.9 million, and stockholders' equity of $423.7 million. The balance sheet included a $5.4 million liability representing the estimated fair value for unpaid earnout amounts from acquisitions.

     

BACKLOG

Backlog at June 30, 2014 (in millions)
 

Segment

Fixed Backlog     MSA Backlog       Total Backlog
 
East Construction Services $ 1,079 $ 91 $ 1,170
West Construction Services 194 389 583
Engineering   81       -       81
Total $ 1,354       480       1,834
 

At June 30, 2014, Fixed Backlog was $1.35 billion, compared to $1.48 billion at December 31, 2013. In the first six months of 2014, approximately $199.2 million of revenue was recognized by non-Fixed Backlog projects.

At June 30, 2014, MSA Backlog was $480.1 million, compared to $460.3 million at December 31, 2013. As previously discussed, MSA Backlog includes estimated MSA revenue for the next four quarters.

Total Backlog at June 30, 2014 was $1.83 billion, compared to $1.94 billion at December 31, 2013. We expect that during the next four quarters, we will recognize as revenue approximately 50% of the East Construction Services segment Total Backlog, approximately 93% of the West Construction Services segment Total Backlog, and approximately 40% of the Engineering segment Total Backlog.

Backlog, including estimated MSA revenues, should not be considered a comprehensive indicator of future revenue, as a portion of Primoris' revenue is still derived from projects that are not part of backlog, including time-and-equipment, time-and-materials, and cost-reimbursable-plus-fee contracts. Projects that are considered a part of Total Backlog may be still 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, Thursday, August 7 at 11:30 am Eastern Time / 10:30 am Central Time to discuss the results.

Interested parties may participate in the call by dialing:

If you are unable to participate in the live call, a replay may be accessed by dialing (877) 660-6853, passcode 13587472, and will be available for approximately two weeks. The conference call will also be broadcast live over the Internet and can be accessed and replayed through the Investor Relations section of Primoris's website at www.prim.com. Once at the Investor Relations section, please click on "Events & Presentations".

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 Annual Report on Form 10-K for the period ended December 31, 2013, and other filings with the Securities and Exchange Commission. Given these uncertainties, you should not place undue reliance on forward-looking statements. 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,

2014

     

2013

2014

     

2013

 
Revenue $ 515,291 $ 445,013 $ 985,365 $ 855,008
Cost of revenue   454,097     385,476     874,414     749,375  
Gross profit 61,194 59,537 110,951 105,633
Selling, general and administrative expenses   33,213     31,560     62,925     60,179  
Operating income 27,981 27,977 48,026 45,454
 
Other income (expense):

Income (loss) from non-consolidated entities

- (213 ) 14 56
Foreign exchange gain (loss) 149 (29 ) 175 (88 )
Other expense (327 ) (377 ) (441 ) (433 )
Interest income 14 23 66 63
Interest expense   (1,196 )   (1,498 )   (2,864 )   (2,922 )
Income before provision for income taxes 26,621 25,883 44,976 42,130
 
Provision for income taxes   (10,618 )   (9,990 )   (17,708 )   (16,197 )
Net income 16,003 15,893 27,268 25,933
 
Net income attributable to noncontrolling interests - (329 ) (432 ) (599 )
 
Net income attributable to Primoris 16,003 15,564 26,836 25,334
 
Earnings per share:
Basic: $ 0.31 $ 0.30 $ 0.52 $ 0.49
Diluted: $ 0.31 $ 0.30 $ 0.52 $ 0.49
 
 
Weighted average common shares outstanding:
Basic 51,655 51,562 51,631 51,510
Diluted 51,804 51,626 51,759 51,547
 
             

CONDENSED CONSOLIDATED BALANCE SHEETS

(In Thousands, Except Share Amounts)

(Unaudited)

 
June 30,
2014
December 31,
2013
ASSETS
 
Current assets:
Cash and cash equivalents $ 160,177 $ 196,077
Short-term investments 2,280 18,686
Customer retention deposits and restricted cash 56 5,304
Accounts receivable, net 311,321 304,955
Costs and estimated earnings in excess of billings 88,111 57,146
Inventory and uninstalled contract materials 61,230 51,829
Deferred tax assets 13,133 13,133
Prepaid expenses and other current assets     12,003     12,654
Total current assets 648,311 659,784
Property and equipment, net 245,342 226,512
Intangible assets, net 42,345 45,303
Goodwill 118,626 118,626
Other long-term assets     382     468
Total assets   $ 1,055,006   $ 1,050,693
 
 
LIABILITIES AND STOCKHOLDERS' EQUITY
 
Current liabilities:
Accounts payable $ 130,575 $ 127,302
Billings in excess of costs and estimated earnings 158,097 173,365
Accrued expenses and other current liabilities 93,258 91,079
Dividends payable 1,808 1,805
Current portion of capital leases 2,230 3,288
Current portion of long-term debt 30,683 28,475
Current portion of contingent earnout liabilities     5,403     5,000
Total current liabilities 422,054 430,314
Long-term capital leases, net of current portion 1,386 2,295
Long-term debt, net of current portion 185,570 191,051
Deferred tax liabilities 10,092 10,092
Long-term contingent earnout liabilities, net of current portion - 4,233
Other long-term liabilities     12,192     14,260
Total liabilities     631,294     652,245
Stockholders' equity
Common stock 5 5
Additional paid-in capital

 

162,322

159,196
Retained earnings

 

261,437

238,216
Noncontrolling interests

 

 

(52)

    1,031
Total stockholders' equity     423,712     398,448
Total liabilities and stockholders' equity   $ 1,055,006   $ 1,050,693

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

News Provided by Acquire Media