Primoris Services Corporation Announces 2013 First Quarter Financial Results

Primoris Services Corporation Announces 2013 First Quarter Financial Results

Board of Directors Increases Quarterly Cash Dividend by 17%


Q1 2013 Financial Highlights

  • Revenues increased by 40.6% to $410.0 million from the first quarter of 2012

  • Net income attributable to Primoris of $9.8 million, or $0.19 per diluted share, compared to Q1 2012 net income attributable to Primoris of $10.5 million, or $0.20 per diluted share

  • At March 31, 2013:

    • $144.7 million in cash, cash equivalents, and short-term investments

    • Total backlog of $1.22 billion, an increase of 9.1% from March 31, 2012

DALLAS--(BUSINESS WIRE)-- Primoris Services Corporation (NASDAQ GS: PRIM) ("Primoris" or "Company") today announced financial results for its first quarter ended March 31, 2013.

The company also declared a 16.7% increase in the quarterly cash dividend to $0.035 per share from $0.03 per share. The $0.035 per share cash dividend is payable to stockholders of record as of June 28, 2013, payable on or about July 15, 2013.

Brian Pratt, Chairman, President and Chief Executive Officer of Primoris commented, "Overall we are pleased with our first quarter results as our quarterly revenue grew over 40% from the 2012 first quarter. We are progressing well in assimilation of our 2012 acquisitions and continue to see strength in revenues and profits in our legacy business. Our operating margins were less than we would have liked, but they were still within a very respectable range for our industry. As I have mentioned previously, several of our new companies' results will exacerbate the seasonality of our overall performance. That was certainly the case for this winter quarter. With the very recent arrival of better weather, we expect strong contributions from our recent acquisitions, as well as our legacy group, for the rest of the year."

Mr. Pratt continued, "We remain very optimistic about almost all of our business lines both in the near term and beyond, and we are increasing our investment in our construction fleet to take advantage of the opportunities. The upstream market remains robust, the midstream market continues to exhibit strength with long haul projects returning and the downstream market is really becoming very exciting, with contractor capacity constraints already evident. The power and industrial market in the West continues to present mid- and long-term opportunities while the highway business in our geographic markets remains ample. Even the water and wastewater markets are beginning to show some signs of recovery. 2013 has the potential for a great year of both revenue and profitability growth."

2013 FIRST QUARTER RESULTS OVERVIEW

Revenues for the 2013 first quarter increased 40.6% to $410.0 million from $291.6 million for the same period last year. Organic growth accounted for 18.6% of the increase, and the remaining 22.0% increase was from the acquisitions of Sprint, Saxon, Q3C, and FSSI. Gross profit increased by $8.5 million, or 22.6% , compared to the same period in 2012. The profit increase from the organic growth was $5.7 million and the acquisitions of Sprint, Saxon, Q3C, and FSSI contributed $2.8 million to the increase in gross profit.

In March 2013, we purchased the assets of Force Specialty Services, Inc. ("FSSI") which specializes in turn-around work at refineries and chemical plants in the Gulf Coast area.

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; the services provided by the three 2012 acquisitions (Sprint, Silva and Saxon) and the results of FSSI, acquired in March 2013.

  • 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, and the 2012 acquisition of Q3C Contracting, 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 March 31,

2013
Unaudited

2012
Unaudited

% of

% of

Segment

Segment

Segment

Revenue

Revenue

Revenue

Revenue

East Construction Services

$

190,211

46.4

%

$

121,850

41.8

%

West Construction Services

207,686

50.6

%

158,031

54.2

%

Engineering

12,098

3.0

%

11,692

4.0

%

Total

$

409,995

100.0

%

$

291,573

100.0

%

Segment Gross Margin

(in thousands, except %)

For the three months ended March 31,

2013
Unaudited

2012
Unaudited

% of

% of

Gross

Segment

Gross

Segment

Segment

Profit

Revenue

Profit

Revenue

East Construction Services

$

14,995

7.9

%

$

11,418

9.4

%

West Construction Services

28,749

13.8

%

24,401

15.4

%

Engineering

2,352

19.4

%

1,777

15.2

%

Total

$

46,096

11.2

%

$

37,596

12.9

%

East Construction Services: Revenues increased by $68.4 million in the 2013 first quarter, primarily due to the 2012 acquisition of Sprint. For the quarter, Sprint increased revenue by $39.8 million compared to the first quarter of 2012, driven by increased gas and crude-oil pipeline activity in the Eagle Ford area located in south Texas. Additional increases in revenues came from JCG's Industrial Group, Cardinal Contractors and Saxon. These increases were somewhat offset by declines in the JCG Heavy Civil and Infrastructure & Maintenance divisions. The $3.6 million increase in gross profit was driven by the Sprint acquisition, which increased gross profit by $2.1 million, as well as a $0.8 million contribution from Saxon. The reduction in gross margin as a percentage of revenues is primarily related to the startup costs associated with the I-35 projects in Belton, Texas area.

West Construction Services: Revenues increased by $49.7 million in the 2013 first quarter. Excluding the acquisition of Q3C, the revenue increase was $34.2 million, of which $32.2 million is from increased revenues at Rockford, which saw significant work for major gas utilities in the Pennsylvania shale area. This was offset by a revenue decline of $4.6 million for the ARB Industrial division, reflecting the substantial completion of work on two power plants at the end of 2012. Segment gross profit increased by $4.3 million. Gross profit at Q3C was slightly less than breakeven primarily due to the seasonality of the business, as the winter weather severely limits work opportunities and results in under-utilization of equipment. Excluding Q3C, gross profit increased by $4.6 million. The increased gross profit was spread across our subsidiaries, with $2.1 million coming from underground projects, $1.8 million from industrial projects, and $0.8 million from parking infrastructure projects. While increased revenues contributed to the underground gross profit increase, the gross profit was also impacted by a decrease in the comparable gross profit attributable to a large pipeline project at Rockford in the prior year 2012. Gross profit as a percent of revenue decreased to 13.8% during the three months ended March 31, 2013 from 15.4% in the same period in 2012, reflecting primarily the impact of Q3C. Excluding the effect of Q3C, gross profit as a percentage of revenues was 15.1%, compared to 15.4% in the same period in 2012.

Engineering: Revenues increased by $0.4 million, and gross profit increased by $0.6 million. Gross profit as a percentage of revenues was 19.4%, compared to 15.2% for the same period in 2012. The increase was due primarily to projects closeouts in the current year.

Selling, general and administrative expenses ("SG&A") were $28.6 million, or 7.0% of revenues for the first quarter of 2013, compared to $20.3 million, or 7.0% of revenues for the first quarter of 2012, an increase of $8.3 million. The increased SG&A was primarily a result of the Sprint, Saxon, Q3C, and FSSI acquisitions. SG&A expenses at the acquired companies were $5.9 million in the first quarter of 2013, an increase of $5.1 million from the first quarter of 2012 which included the Sprint acquisition for less than one month. Of the remaining $3.2 million increase from the first quarter of 2012 to the first quarter of 2013, compensation and compensation related expenses were $2.6 million.

Operating income for the 2013 first quarter was $17.5 million, or 4.3% of total revenues, compared to $17.3 million, or 5.9% of total revenues, for the same period last year.

Net other income and expenses in the 2013 first quarter was an expense of $1.2 million, a $1.0 million decline from net other expense of $0.2 million in the 2012 first quarter. The decline was primarily due to the near completion of work by the St. Bernard Levee Partners joint venture.

The provision for income taxes for the 2013 first quarter was $6.2 million, or an effective tax rate on net income attributable to Primoris of 38.9%, compared to $6.6 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 first quarter was $9.8 million, or $0.19 per diluted share, compared to net income attributable to Primoris of $10.5 million, or $0.20 per diluted share, in the same period in 2012.

Fully diluted shares outstanding for the 2013 first quarter increased by 0.3% to 51.5 million from 51.3 million in last year's first quarter.

OTHER FINANCIAL INFORMATION

Primoris's balance sheet at March 31, 2013 included cash and cash equivalents of $141.5 million, working capital of $140.8 million, total debt and capital leases secured by equipment of $165.5 million, and stockholders' equity of $344.2 million. The balance sheet included a $24.6 million liability representing the estimated fair value for unpaid earnout amounts from acquisitions.

BACKLOG

Segment

Backlog at
March 31, 2013
(in millions)

East Construction Services

$

922

West Construction Services

286

Engineering

16

Total

$

1,224

At March 31, 2013, total backlog using our historical calculation was $1.22 billion compared to $1.35 billion at December 31, 2012. Primoris expects that during the next four quarters, using the historic calculation for backlog, we will recognize as revenue approximately 49% of the East Construction Services segment backlog, approximately 96% of the West Construction Services segment backlog, and approximately 98% of the Engineering segment backlog at March 31, 2013. For the three months ended March 31, 2013, approximately $73.0 million of revenue was generated by projects that were not included in the historical backlog calculation.

As discussed in the Quarterly Report on Form 10-Q for the period ended March 31, 2013, we are changing 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. Beginning this quarter, the new calculation adds estimated annual MSA revenues. With this addition to the backlog calculation, the new total backlog at March 31, 2013 was $1.7 billion.

Backlog 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 a backlog calculation, including time-and-equipment, time-and-materials, and cost-reimbursable-plus-fee contracts, and projects that are considered a part of backlog 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, May 7 at 12:00 pm Eastern Time / 11:00 am Central Time to discuss the results.

Interested parties may participate in the call by dialing:

  • (877) 407-8029 (Domestic)

  • (201) 689-8029 (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 specialty contractors 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, and other customers. Since December 2009, Primoris has tripled its revenue and the Company's national footprint now 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, our Quarterly Report on Form 10-Q for the period ended March 31, 2013, those detailed in the "Risk Factors" section and other portions of our Annual Report on Form 10-K for the period ended December 31, 2012, 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
March 31,

2013

2012

Revenues

$

409,995

$

291,573

Cost of revenues

363,899

253,977

Gross profit

46,096

37,596

Selling, general and administrative expenses

28,619

20,274

Operating income

17,477

17,322

Other income (expense):

Income from non-consolidated entities

269

1,101

Foreign exchange loss

(59

)

(42

)

Other expense

(56

)

(208

)

Interest income

40

22

Interest expense

(1,424

)

(1,101

)

Income before provision for income taxes

16,247

17,094

Provision for income taxes

(6,207

)

(6,564

)

Net income

10,040

10,530

Net income attributable to noncontrolling interests

(270

)

(44

)

Net income attributable to Primoris

9,770

10,486

Earnings per share:

Basic:

$

0.19

$

0.21

Diluted:

$

0.19

$

0.20

Weighted average common shares outstanding:

Basic

51,456

51,096

Diluted

51,467

51,337

CONDENSED CONSOLIDATED BALANCE SHEETS

(In Thousands, Except Share Amounts)

(Unaudited)

March 31,

December 31,

2013

2012

ASSETS

Current assets:

Cash and cash equivalents

$

141,527

$

157,551

Short term investments

3,179

3,441

Customer retention deposits and restricted cash

27,371

35,377

Accounts receivable, net

249,621

268,095

Costs and estimated earnings in excess of billings

48,164

41,701

Inventory and uninstalled contract materials

37,917

37,193

Deferred tax assets

10,477

10,477

Prepaid expenses and other current assets

10,810

10,800

Total current assets

529,066

564,635

Property and equipment, net

195,258

184,840

Investment in non-consolidated entities

13,082

12,813

Intangible assets, net

50,984

51,978

Goodwill

118,964

116,941

Other long-term assets

1,181

-

Total assets

$

908,535

$

931,207

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:

Accounts payable

$

105,876

$

151,546

Billings in excess of costs and estimated earnings

160,944

158,892

Accrued expenses and other current liabilities

75,996

76,152

Dividends payable

1,547

--

Current portion of capital leases

4,273

3,733

Current portion of long-term debt

20,944

19,446

Current portion of contingent earnout liabilities

18,728

10,900

Total current liabilities

388,308

420,669

Long-term capital leases, net of current portion

3,469

3,831

Long-term debt, net of current portion

136,764

128,367

Long-term contingent earnout liabilities, net of current portion

5,897

12,531

Deferred tax liabilities

20,018

20,018

Other long-term liabilities

9,913

13,153

Total liabilities

$

564,369

$

598,569

Stockholders' equity

Common stock

5

5

Additional paid-in capital

158,639

155,605

Retained earnings

183,741

175,517

Noncontrolling interests

1,781

1,511

Total stockholders' equity

344,166

332,638

Total liabilities and stockholders' equity

$

908,535

$

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

KEYWORDS: United States North America Texas

INDUSTRY KEYWORDS:

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