Primoris Services Corporation
Nov 6, 2014

Primoris Services Corporation Announces 2014 Third Quarter Financial Results

Board of Directors Authorizes Quarterly Cash Dividend

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

Q3 2014 Financial Highlights

Primoris Services Corporation (NASDAQ GS: PRIM) ("Primoris" or "Company") today announced financial results for its third quarter ended September 30, 2014.

The company also announced that on November 4, 2014, its Board of Directors authorized payment of a $0.04 per share cash dividend to stockholders of record December 31, 2014, payable on or about January 15, 2015.

Brian Pratt, Chairman, President and Chief Executive Officer of Primoris, commented, "We are pleased with our third quarter. Our Gulf Coast operations continue to pick up steam, Midwest utility underground work remains strong, and our engineering business has seen the micro LNG market begin to bear significant fruit. We achieved record high revenue of $613 million and record net income of $27 million."

Mr. Pratt continued, "While permitting issues continue to delay project starts, many are moving forward. With the long-term supply of domestic natural gas at a fraction of the cost of international supplies, we expect that our customers will take advantage of the continuing investment opportunities in our end markets. We re-segmented the businesses this quarter to better reflect our management structure, and we believe this will give investors a better understanding of the nuances of our markets. As the year comes to a close, we see the strong trends of 2014 carrying over into next year."

2014 THIRD QUARTER RESULTS OVERVIEW

Revenue for the 2014 third quarter increased by 11.2% to $613.2 million, compared to the same period last year. Revenue increased by $17.9 million in the East Construction Services segment and $116.9 million in the Energy segment and decreased by $73.0 million in the West Construction Services segment.

From an end-market perspective for the three months ended September 30, 2014, compared to the third quarter 2013, our industrial business increased by $34.3 million, our heavy civil work increased by $23.4 million, and our engineering business increased by $6.7 million. Our other end-market (primarily our parking structures business and electrical contracting business) declined by $2.5 million.

Gross profit was essentially unchanged in the 2014 third quarter compared to the same period last year. The primary reason for the reduction in the gross profit as a percentage of revenue was the impact of a large power project in the West segment in 2013.

SEGMENT RESULTS

In the third quarter, the Company reorganized its business segments to match the change in the Company's internal organization and management structure. The new operating segments include: The West Construction Services Segment (which is unchanged from the previous West segment), the East Construction Services Segment (which is realigned from the previous East Construction Services segment), and the Energy Segment (which includes the previous Engineering segment). All prior period amounts related to the segment change have been retrospectively reclassified throughout this press release.

       

Segment Revenues

(in thousands, except %)

 
For the three months ended September 30,
2014 2013
Unaudited Unaudited
% of % of
Segment Segment

Segment

Revenue Revenue Revenue Revenue
 
West Construction Services $ 289,405 47.2 % $ 362,362 65.7 %
East Construction Services 135,450 22.1 % 117,537 21.3 %
Energy   188,382 30.7 %   71,434 13.0 %
Total $ 613,237 100.0 % $ 551,333 100.0 %
 
 
For the nine months ended September 30,
2014 2013
Unaudited Unaudited
% of % of
Segment Segment

Segment

Revenue Revenue Revenue Revenue
 
West Construction Services $ 747,823 46.8 % $ 828,242 58.9 %
East Construction Services 360,975 22.6 % 316,218 22.5 %
Energy   489,804 30.6 %   261,881 18.6 %
Total $ 1,598,602 100.0 % $ 1,406,341 100.0 %
 
       

Segment Gross Margin

(in thousands, except %)

 
For the three months ended September 30,
2014 2013
Unaudited Unaudited
% of % of
Gross Segment Gross Segment

Segment

Profit Revenue Profit Revenue
 
West Construction Services $ 46,240 16.0 % $ 62,520 17.3 %
East Construction Services 9,110 6.7 % 4,527 3.9 %
Energy   20,123 10.7 %   8,418 11.8 %
Total $ 75,473 12.3 % $ 75,465 13.7 %
 
 
For the nine months ended September 30,
2014 2013
Unaudited Unaudited
% of % of
Gross Segment Gross Segment

Segment

Profit Revenue Profit Revenue
 
West Construction Services $ 115,723 15.5 % $ 133,195 16.1 %
East Construction Services 24,595 6.8 % 19,575 6.2 %
Energy   46,106 9.4 %   28,328 10.8 %
Total $ 186,424 11.7 % $ 181,098 12.9 %
 

West Construction Services: Revenue decreased by $73.0 million in the 2014 third quarter compared to the same period last year. Revenue at Rockford decreased by $64.5 million as new pipeline project revenue was less than revenue from a large project in 2013 and revenue from gathering line projects decreased. At the ARB Industrial division, revenue decreased by $27.6 million primarily reflecting the impact of a large power project in 2013. Revenue increased at Q3C by $18.9 million and revenue decreased by $2.5 million at the ARB Underground division. Gross profit for the West decreased by $16.3 million in the 2014 third quarter compared to the same period last year. The decrease in gross profit as a percentage of revenue is primarily a reflection of the impact of the large power plant project in 2013.

East Construction Services: Revenue increased by $17.9 million in the 2014 third quarter compared to the same period last year. Revenue at the JCG Heavy Civil division increased by $24.8 million. Revenue at the JCG Infrastructure & Maintenance division decreased by $1.3 million, and at Cardinal Contractors revenue decreased by $5.5 million. Gross profit for the East increased by $4.6 million in the 2014 third quarter compared to the same period last year. The increase in gross profit as a percent of revenue is a reflection of better utilization of equipment and personnel realized on LADOT and Mississippi projects at the JCG Heavy Civil division.

Energy: Revenue increased by $116.9 million in the 2014 third quarter compared to the same period last year. Revenue at the PES James Industrial Contractors division increased $57.7 million primarily from work at petrochemical projects in Louisiana. PES Sprint Pipeline division revenue increased by $52.6 million from pipeline projects in south Texas. Revenue increased at OnQuest and OnQuest Canada by $6.7 million primarily from two Liquefied Natural Gas ("LNG") micro plant projects. Gross profit increased by $11.7 million in the 2014 third quarter compared to the same period last year. The decrease in gross profit as a percentage of revenue to 10.7% was a reflection of decreased margin percentages realized from a PES Sprint Pipeline division project and from OnQuest LNG projects that were in their lower margin beginning stages.

Selling, general and administrative expenses ("SG&A") were $36.2 million, or 5.9% of revenue, for the 2014 third quarter, compared to $36.5 million, or 6.6% of revenue for the 2013 third quarter, a decrease of $0.3 million.

Operating income for the 2014 third quarter was $39.3 million, or 6.4% of total revenue, compared to $39.0 million, or 7.1% of total revenue, for the same period last year.

Net other income and expenses in the 2014 third quarter was income of $3.2 million, a $4.9 million increase from net other expense of $1.7 million in the 2013 third quarter. The largest contributor to the increase in net other income was $5.2 million received in August 2014 for the sale of the Company's remaining ownership interest in WesPac.

The provision for income taxes for the 2014 third quarter was $15.1 million, or an effective tax rate on net income attributable to Primoris of 35.6%, compared to $14.1 million, or an effective tax rate on net income attributable to Primoris of 39.1%, in the prior year quarter. The decrease in effective tax rate was primarily comprised of a 1.3% decrease from an IRS examination settlement and a 1.4% decrease from current and future state taxes.

Net income attributable to Primoris for the 2014 third quarter was $27.4 million, or $0.53 per diluted share, compared to net income attributable to Primoris of $21.8 million, or $0.42 per diluted share, in the same period in 2013.

Fully diluted weighted average shares outstanding for the 2014 third quarter increased by 0.2% to 51.8 million from 51.7 million in last year's third quarter.

OTHER FINANCIAL INFORMATION

Primoris' balance sheet at September 30, 2014, included cash, cash equivalents, and short-term investments of $146.2 million, working capital of $246.6 million, total debt and capital leases secured by equipment of $235.7 million, and stockholders' equity of $446.6 million. The balance sheet included a $6.9 million liability representing the estimated fair value for unpaid earnout amounts from acquisitions.

     

BACKLOG

 

Backlog at September 30, 2014 (in millions)

 

Segment

Fixed Backlog MSA Backlog Total Backlog
 

West Construction Services

$ 163 $ 394 $ 557
East Construction Services 1,009 14 1,023
Energy   161   54   215
Total $ 1,333   462   1,795
 

At September 30, 2014, Fixed Backlog was $1.33 billion, compared to $1.48 billion at December 31, 2013. In the first nine months of 2014, approximately $371.0 million of revenue was recognized by non-Fixed Backlog projects.

At September 30, 2014, MSA Backlog was $462.4 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 September 30, 2014, was $1.80 billion, compared to $1.94 billion at December 31, 2013. We expect that during the next four quarters, we will recognize as revenue approximately 95% of the West Construction Services segment Total Backlog, approximately 43% of the East Construction Services segment Total Backlog, and approximately 72% of the Energy 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, November 6, at 10:00 am Eastern Time / 9:00 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 13594816, 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 1960, 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

Nine Months Ended

September 30,

September 30,

2014

2013

2014

2013

 
Revenue $ 613,237 $ 551,333 $ 1,598,602 $ 1,406,341
Cost of revenue   537,764     475,868     1,412,178     1,225,243  
Gross profit 75,473 75,465 186,424 181,098
Selling, general and administrative expenses   36,162     36,478     99,087     96,657  
Operating income 39,311 38,987 87,337 84,441
 
Other income (expense):
Income (loss) from non-consolidated entities 5,250 113 5,264 169
Foreign exchange gain (loss) (101 ) 91 74 3
Other expense (201 ) (376 ) (642 ) (809 )
Interest income 14 32 80 95
Interest expense   (1,778 )   (1,579 )   (4,642 )   (4,501 )
 
Income before provision for income taxes 42,495 37,268 87,471 79,398
 
Provision for income taxes   (15,105 )   (14,075 )   (32,813 )   (30,272 )
Net income 27,390 23,193 54,658 49,126
 
Net income attributable to noncontrolling interests   -     (1,348 )   (432 )   (1,947 )
 
Net income attributable to Primoris 27,390 21,845 54,226 47,179
 
Earnings per share:
Basic: $ 0.53 $ 0.42 $ 1.05 $ 0.92
Diluted: $ 0.53 $ 0.42 $ 1.05 $ 0.91
 
 
Weighted average common shares outstanding:
Basic 51,606 51,568 51,622 51,529
Diluted 51,759 51,671 51,759 51,595
 
   
CONDENSED CONSOLIDATED BALANCE SHEETS
(In Thousands, Except Share Amounts)
(Unaudited)
 
September 30, December 31,
2014 2013
ASSETS
 
Current assets:
Cash and cash equivalents $ 144,150 $ 196,077
Short-term investments 2,080 18,686
Customer retention deposits and restricted cash 411 5,304
Accounts receivable, net 388,381 304,955
Costs and estimated earnings in excess of billings 96,150 57,146
Inventory and uninstalled contract materials 58,271 51,829
Deferred tax assets 13,133 13,133
Prepaid expenses and other current assets   11,653     12,654
Total current assets 714,229 659,784
Property and equipment, net 262,835 226,512
Intangible assets, net 42,471 45,303
Goodwill 118,626 118,626
Other long-term assets   404     468
Total assets $ 1,138,565   $ 1,050,693
 
 
LIABILITIES AND STOCKHOLDERS' EQUITY
 
Current liabilities:
Accounts payable $ 158,118 $ 127,302
Billings in excess of costs and estimated earnings 164,428 173,365
Accrued expenses and other current liabilities 100,052 91,079
Dividends payable 2,062 1,805
Current portion of capital leases 1,796 3,288
Current portion of long-term debt 35,024 28,475
Current portion of contingent earnout liabilities   6,136     5,000
Total current liabilities 467,616 430,314
Long-term capital leases, net of current portion 1,009 2,295
Long-term debt, net of current portion 197,857 191,051
Deferred tax liabilities 10,092 10,092
Long-term contingent earnout liabilities, net of current portion 810 4,233
Other long-term liabilities   14,543     14,260
Total liabilities   691,927     652,245
Stockholders' equity
Common stock 5 5
Additional paid-in capital 159,920 159,196
Retained earnings 286,765 238,216
Noncontrolling interests   (52 )   1,031
Total stockholders' equity   446,638     398,448
Total liabilities and stockholders' equity $ 1,138,565   $ 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

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