PRIMORIS SERVICES CORPORATION 
By 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
- East Construction Services - The East Construction Services segment consists of businesses located primarily in the southeastern United States and along the Gulf Coast. Included in this segment are the operations of JCG's Heavy Civil, Industrial and Infrastructure & Maintenance divisions; Cardinal Contractor's water and wastewater construction activities; and the services provided by the 2012 and 2013 acquisitions (Sprint, Silva, Saxon, and FSSI).
- West Construction Services - The West Construction Services segment consists of businesses located primarily in the western United States. The segment primarily includes the underground and industrial operations of ARB, Inc., the operations of Rockford (which performs its major capital underground work throughout the United States), the operations of ARB Structures, the 2012 acquisition of Q3 Contracting, Inc., and Primoris Renewables, Inc. The segment also includes the operations of the Blythe Power Constructors joint venture.
- Engineering - The Engineering segment includes the results of OnQuest, Inc. and OnQuest Canada, ULC.
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 |
Estimated | 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:
- (877) 407-8293 (Domestic)
- (201) 689-8349 (International)
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
