Primoris Services Corporation
Aug 6, 2015

Primoris Services Corporation Announces 2015 Second Quarter Financial Results

Board of Directors Authorizes Quarterly Cash Dividend

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, 2015.

The Company also announced that on August 4, 2015, its Board of Directors authorized payment of a $0.055 per share cash dividend to stockholders of record September 30, 2015, payable on or about October 15, 2015.

David King, President and Chief Executive Officer of Primoris, commented, "Our financial results were not at all what we would have liked, as unusually severe weather conditions in the second quarter impacted us and all of our peers. The rainfall on our Texas projects was greater than anything seen in over a century. I am proud of the results we were still able to achieve, which is a continued testament to the strength of the men and women who make up Primoris and the solid foundation on which our company is built."

Mr. King continued, "The weather impact of the second quarter has not reduced our bidding opportunities for the remainder of this year and next. The drivers for our business remain positive and the size of the opportunities are increasing across our major end markets: industrial, power, distribution, large diameter pipeline, and LNG facilities. We remain encouraged and have confidence that we will continue to increase our backlog in the second half of this year, into 2016 and beyond, and that we will execute both the remainder of this year and in 2016 with the level of excellence our shareholders expect of us. I am honored to follow in Brian Pratt's footsteps and to continue the work he has done making Primoris a leader in the energy and infrastructure focused construction industry."

2015 SECOND QUARTER RESULTS OVERVIEW

Revenues in the second quarter 2015 decreased by $31.7 million to $483.5 million compared to the same period in 2014. The primary reason for the decrease was the impact of unusually severe wet weather during the quarter. As a result of heavy rainfall, the Company suspended operations on various projects and incurred additional costs to recover from the weather conditions. The rain affected the ability of our work crews to progress projects in three of our major business units. Gross profit for the second quarter 2015 decreased by $14.7 million compared to the same period in 2014, primarily due to the decrease in revenues and to the inefficiencies associated with stopping and starting projects as a result of the weather delays. While there is no guaranty, some of the recovery and inefficiency costs due to the heavy rainfall may be recovered in future periods.

From an end-market perspective, our revenues during the second quarter 2015 decreased by $21.0 million for underground capital projects and decreased by $92.1 million for the industrial end-market, as compared to the second quarter 2014. Revenues increased for the second quarter 2015 in our heavy civil end-market by $39.1 million, in our underground utility end-market by $30.9 million, in the engineering end-market by $10.9 million, and by $0.5 million in our other end-markets, as compared to the second quarter 2014.

SEGMENT RESULTS

In the third quarter of 2014, the Company reorganized its business segments to match the change in the Company's internal organization and management structure. The current operating segments include: the West Construction Services Segment, the East Construction Services Segment, and the Energy Segment (which includes the previous Engineering segment). All prior period amounts related to segment operations have been reclassified throughout this press release to reflect the new operating segments.

 

Segment Revenues

(in thousands, except %)

 
      For the three months ended June 30,
2015

Unaudited

    2014

Unaudited

    % of     % of
Total Total

Segment

Revenue Revenue Revenue Revenue
 
West $ 239,999 49.6 % $ 224,391 43.5 %
East 154,887 32.0 % 118,554 23.0 %
Energy   88,659 18.4 %   172,346 33.5 %
Total $ 483,545 100.0 % $ 515,291 100.0 %
 
 
For the six months ended June 30,
2015

Unaudited

2014

Unaudited

% of % of
Total Total

Segment

Revenue Revenue Revenue Revenue
 
West $ 426,384 48.7 % $ 458,418 46.5 %
East 278,587 31.8 % 225,524 22.9 %
Energy   171,354 19.5 %   301,423 30.6 %
Total $ 876,325 100.0 % $ 985,365 100.0 %
 
 
 

Segment Gross Profit

(in thousands, except %)

 
For the three months ended June 30,
2015

Unaudited

2014

Unaudited

% of % of
Gross Segment Gross Segment

Segment

Profit Revenue Profit Revenue
 
West $ 30,444 12.7 % $ 37,809 16.8 %
East 9,115 5.9 % 8,727 7.4 %
Energy   6,937 7.8 %   14,658 8.5 %
Total $ 46,496 9.6 % $ 61,194 11.9 %
 
 
For the six months ended June 30,
2015

Unaudited

2014

Unaudited

% of % of
Gross Segment Gross Segment

Segment

Profit Revenue Profit Revenue
 
West $ 51,908 12.2 % $ 69,483 15.2 %
East 18,223 6.5 % 15,485 6.9 %
Energy   14,370 8.4 %   25,983 8.6 %
Total $ 84,501 9.6 % $ 110,951 11.3 %
 
 

West Segment: Revenues for the West segment increased by $15.6 million in the second quarter 2015, compared to the same period in 2014. The primary reason for the increase was increased revenue in our large diameter pipeline and distribution end-markets. These increases were somewhat offset by revenue decreases in our industrial end-market, primarily due to the completion of two solar projects. Gross profit for the West segment decreased by $7.4 million in the second quarter 2015, compared to the same period in 2014. The primary reason for the decrease was the impact of the unusually wet weather on Rockford's projects as well as decreases in revenue in the industrial end-markets.

East Segment: Revenues in the East segment increased by $36.3 million in the second quarter 2015, compared to the same period in 2014. The primary reason for the increase was increased revenue from a large petrochemical project in Louisiana. This was slightly offset by a decline in the heavy civil end-market, primarily from lower TX DOT revenues. Gross profit for the East segment increased by $0.4 million in the second quarter 2015, compared to the same period in 2014. The primary reason for the increase was the increased volume from the large petrochemical project in Louisiana. This increase was largely offset by decreases in gross profit in the heavy civil end-market, primarily related to the impact of weather delays on the TX DOT projects.

Energy Segment: Revenues in the Energy segment decreased by $83.7 million in the second quarter 2015, compared to the same period in 2014. The primary reason for the decrease was decreased revenues in the industrial and pipeline end-markets. The industrial end-market decline was related to the completion of a large fertilizer plant project in 2014 and the impact of the unusual rainy weather in the second quarter 2015, which limited revenues for their new large petrochemical project in Louisiana to $3.8 million for the quarter. For the pipeline end-market, the revenue reduction was largely from the completion of a pipeline project in 2014, which we have not replaced with another major capital pipeline projects, a consequence of the uncertainties associated with the lower price of oil. Gross profit for the Energy segment decreased by $7.7 million in the second quarter 2015, compared to the same period in 2014, primarily as a result of the decline in revenues.

Selling, general and administrative expenses ("SG&A") were $38.5 million, or 8.0% of revenues for the second quarter 2015, compared to $33.2 million, or 6.5% of revenues for the second quarter 2014. The increase in SG&A for the quarter is primarily due to an increase of $2.8 million in legal costs associated with the disputed receivables on two projects and expenses associated with the Company's internal review of methods used to recognize revenues and estimate contingencies for ongoing projects. An additional $1.1 million of the increase was from the acquisitions of Vadnais and Primoris AV.

Operating income for the second quarter 2015 was $7.9 million, or 1.6% of total revenues, compared to $28.0 million, or 5.4% of total revenues, for the same period last year.

Net non-operating items in the second quarter 2015 resulted in expense of $1.9 million, compared to $1.4 million of expense in the second quarter 2014.

The provision for income taxes for the second quarter 2015 was $2.3 million, compared to $10.6 million in the second quarter 2014. The effective tax rate on income attributable to Primoris for the first six months of 2015 was 39.0%, compared to 39.8%, in the first six months of 2014.

Net income attributable to Primoris for the second quarter 2015 was $3.6 million, or $0.07 per diluted share, compared to net income attributable to Primoris of $16.0 million, or $0.31 per diluted share, in the same period in 2014.

Fully diluted weighted average shares outstanding for the second quarter increased slightly to 51.82 million from 51.80 million in the second quarter 2014.

OTHER FINANCIAL INFORMATION

Primoris' balance sheet at June 30, 2015 included cash, cash equivalents, and short-term investments of $86.0 million, working capital of $226.5 million, total debt and capital leases of $234.9 million and stockholders' equity of $456.7 million. Primoris' tangible net worth at June 30, 2015 was $292.2 million. The balance sheet included a $1.8 million liability representing the estimated fair value of earnout payments for the financial performance of the Vadnais and Surber acquisitions.

Based on current projects in backlog and anticipated levels of customer maintenance, MSA spending, and new project awards, the Company estimates that for the four quarters ending June 30, 2016, net income attributable to Primoris will be between $1.15 and $1.30 per fully diluted share.

 

BACKLOG

 
      Backlog at June 30, 2015 (in millions)

Segment

Fixed Backlog       MSA Backlog       Total Backlog
 
West $ 579 $ 394 $ 973
East 930 5 936
Energy   258   32   291
Total $ 1,767   431   2,199
 

At June 30, 2015, Fixed Backlog was $1.77 billion, compared to $1.55 billion at December 31, 2014. During the first six months of 2015, approximately $228.0 million of revenue was recognized from non-Fixed Backlog projects.

At June 30, 2015, MSA Backlog was $431.6 million, compared to $444.9 million at December 31, 2014. MSA Backlog represents estimated MSA revenue for the next four quarters.

Total Backlog at June 30, 2015 was $2.20 billion, compared to $1.99 billion at December 31, 2014. We expect that during the next four quarters, we will recognize as revenue approximately 69% of the West segment Total Backlog, approximately 52% of the East segment Total Backlog, and approximately 96% 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 derived from projects that are not part of backlog, including time-and-equipment, time-and-materials, and cost-reimbursable-plus-fee contracts. All projects that are considered a part of Total Backlog may still be cancelled by our customers.

CONFERENCE CALL

Brian Pratt, Chairman of the Board, David King, President and Chief Executive Officer, and Peter J. Moerbeek, Executive Vice President and Chief Financial Officer, will host a conference call today, Thursday, August 6, 2015 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 will be available for approximately two weeks and may be accessed by dialing (877) 660-6853, passcode 13614563. The conference call will also be broadcast live over the Internet and can be accessed and replayed through the Investor Relations section of Primoris' 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 publicly traded specialty construction 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, state departments of transportation, and other customers. Growing both organically and through acquisitions, the Company's national footprint now extends nearly nationwide and into 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, 2014, 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 Share Amounts)

(Unaudited)

 
     

Three Months Ended

June 30,

   

Six Months Ended

June 30,

2015

   

2014

2015

   

2014

 
Revenue $ 483,545 $ 515,291 $ 876,325 $ 985,365
Cost of revenue   437,049     454,097     791,824     874,414  
Gross profit 46,496 61,194 84,501 110,951
Selling, general and administrative expenses   38,547     33,213     72,307     62,925  
Operating income 7,949 27,981 12,194 48,026
 
Other income (expense):
Income (loss) from non-consolidated entities - - - 14
Foreign exchange gain (loss) (140 ) 149 296 175
Other expense (45 ) (327 ) (89 ) (441 )
Interest income 6 14 18 66
Interest expense   (1,738 )   (1,196 )   (3,660 )   (2,864 )
 
Income before provision for income taxes 6,032 26,621 8,759 44,976
 
Provision for income taxes   (2,340 )   (10,618 )   (3,395 )   (17,708 )
Net income 3,692 16,003 5,364 27,268
 
Net income attributable to noncontrolling interests (54 ) - (54 ) (432 )
 
Net income attributable to Primoris 3,638 16,003 5,310 26,836
 
Earnings per share:
Basic: $ 0.07 $ 0.31 $ 0.10 $ 0.52
Diluted: $ 0.07 $ 0.31 $ 0.10 $ 0.52
 
 
Weighted average common shares outstanding:
Basic 51,666 51,655 51,619 51,631
Diluted 51,815 51,804 51,770 51,759
 
 
 
 
 

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

 
      June 30,       December 31,
2015 2014
ASSETS
 
Current assets:
Cash and cash equivalents $ 85,970 $ 139,465
Short-term investments - 30,992
Customer retention deposits and restricted cash 1,385 481
Accounts receivable, net 318,513 337,382
Costs and estimated earnings in excess of billings 109,537 68,654
Inventory and uninstalled contract materials 65,248 58,116
Deferred tax assets 13,555 13,555
Prepaid expenses and other current assets   32,488   31,720  
Total current assets 626,696 680,365
Property and equipment, net 286,275 271,431
Intangible assets, net 39,860 39,581
Goodwill 124,562 119,410
Other long-term assets   2,200   400  
Total assets $ 1,079,593 $ 1,111,187  
 
 
LIABILITIES AND STOCKHOLDERS' EQUITY
 
Current liabilities:
Accounts payable $ 129,892 $ 128,793
Billings in excess of costs and estimated earnings 138,176 158,595
Accrued expenses and other current liabilities 85,960 83,401
Dividends payable 2,841 2,062
Current portion of capital leases 1,319 1,650
Current portion of long-term debt 41,249 38,909
Current portion of contingent earnout liabilities   737   5,901  
Total current liabilities 400,174 419,311
Long-term capital leases, net of current portion 274 657
Long-term debt, net of current portion 192,054 204,029
Deferred tax liabilities 19,484 19,484
Long-term contingent earnout liabilities, net of current portion 1,075 1,021
Other long-term liabilities   9,852   12,899  
Total liabilities   622,913   657,401  
Stockholders' equity
Common stock 5 5
Additional paid-in capital 162,624 160,186
Retained earnings 294,030 293,628
Noncontrolling interests   21   (33 )
Total stockholders' equity   456,680   453,786  
Total liabilities and stockholders' equity $ 1,079,593 $ 1,111,187  
 
 
 
 
 

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
(Unaudited)

 
      Six months Ended
June 30,
2015     2014
Cash flows from operating activities:
Net income 5,364 27,268
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation 28,512 23,941
Amortization of intangible assets 3,370 3,687
Loss (gain) on sale of property and equipment (24 ) (809 )
Income from non-consolidated entities (14 )
Stock—based compensation expense 524 409
Changes in assets and liabilities:
Customer retention deposits and restricted cash (904 ) 5,248
Accounts receivable 21,603 (6,366 )
Costs and estimated earnings in excess of billings (40,581 ) (30,965 )
Other current assets (6,726 ) (9,846 )
Accounts payable 356 3,273
Billings in excess of costs and estimated earnings (21,318 ) (15,268 )
Contingent earnout liabilities (4,910 ) (4,559 )
Accrued expenses and other current liabilities 3,820 3,232
Other long-term assets (1,800 ) -
Other long-term liabilities   (4,547 )   (2,068 )
Net cash provided by (used in) operating activities   (17,261 )   (2,837 )
Cash flows from investing activities:
Purchase of property and equipment (35,674 ) (38,625 )
Proceeds from sale of property and equipment 3,602 3,017
Purchase of short-term investments (2,280 )
Sale of short-term investments 30,992 18,686
Cash received for the sale of Alvah minority interest 1,189
Cash paid for acquisitions   (22,302 )   (6,354 )
Net cash used in investing activities   (23,382 )   (24,367 )
Cash flows from financing activities:
Proceeds from issuance of long-term debt 11,000 15,400
Repayment of capital leases (714 ) (1,967 )
Repayment of long-term debt (20,635 ) (18,673 )
Proceeds from issuance of common stock purchased under a long-term incentive plan 1,621 1,671
Dividends paid (4,124 ) (3,612 )
Cash distribution to non-controlling interest holder       (1,515 )
Net cash provided by (used in) financing activities   (12,852 )   (8,696 )
Net change in cash and cash equivalents (53,495 ) (35,900 )
Cash and cash equivalents at beginning of the period   139,465     196,077  
Cash and cash equivalents at end of the period $ 85,970   $ 160,177  
 
 
 
 

Primoris
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

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