Primoris Services Corporation Announces 2014 First Quarter Financial Results

Board of Directors Authorizes Quarterly Cash Dividend

Q1 2014 Financial Highlights

  • Revenue increased by 15% to $470 million from the first quarter of 2013
  • Net income attributable to Primoris grew by 11% to $10.8 million, or $0.21 per diluted share, compared to Q1 2013 net income attributable to Primoris of $9.8 million, or $0.19 per diluted share
  • At March 31, 2014:
    • $167 million in cash, cash equivalents, and short-term investments
    • Total backlog of $1.85 billion

DALLAS--()--Primoris Services Corporation (NASDAQ GS: PRIM) (“Primoris” or “Company”) today announced financial results for its first quarter ended March 31, 2014.

The company also announced that on May 2, 2014, its Board of Directors authorized payment of a $0.035 per share cash dividend to stockholders of record June 30, 2014, payable on or about July 15, 2014.

Brian Pratt, Chairman, President and Chief Executive Officer of Primoris commented, “We are encouraged by our first quarter results, which saw double-digit growth in both the top and bottom line. With the difficult weather conditions encountered in this quarter, it was not a surprise that our overall margin percentage declined, but this decrease was more than offset by our revenue increase. As a note, for the first time in Primoris’ history, our trailing twelve month revenue surpassed $2 billion. Our balance sheet remains robust with cash and available credit giving us flexibility to continue to invest in external and internal opportunities.”

Mr. Pratt continued, “These first quarter results validate the growth and market diversification strategies we have followed over the past several years. While some of our groups were challenged in the quarter, other operations delivered outstanding results. It remains our intention to build a diverse company providing our customers different specialties in different markets and geographies. There are multiple tailwinds, such as the aging pipeline system, oil and natural gas pricing differentials, and environmental regulation, driving demand in our end-markets and providing Primoris multiple avenues for growth both in the near and mid-term.”

2014 FIRST QUARTER RESULTS OVERVIEW

Revenue for the 2014 first quarter increased by 14.7% to $470.1 million, compared to the same period last year. Revenue increased in each of our operating segments.

From an end-market perspective, our industrial end-markets experienced the greatest growth, with revenue increasing by $56.9 million compared to the same period last year, followed by the heavy civil end-markets with a $10.6 million increase, the underground capital projects end-markets increase of $7.6 million, and the engineering end-market increase of $0.9 million. The utility services end-markets revenue declined $7.2 million, and revenue in our other end-market (primarily our parking structures business) declined by $8.7 million.

Gross profit increased by $3.7 million, or 8.0%, compared to the same period last year.

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 and Infrastructure & Maintenance divisions; Cardinal Contractor’s water and wastewater construction activities; and Sprint, Saxon, FSS, and James Industrial Contractors, divisions of Primoris Energy Services (“PES”).
  • West Construction Services – The West Construction Services segment consists of businesses located primarily in the western United States. The segment primarily includes the constructions services provided by ARB, Inc., ARB Structures, Inc., Rockford, and Q3 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,

2014
Unaudited

   

2013
Unaudited

    % of     % of
Segment Segment

Segment

Revenue Revenue Revenue Revenue
 
East Construction Services $ 223,072 47.5 % $ 190,211 46.4 %
West Construction Services 234,026 49.7 % 207,686 50.6 %
Engineering   12,976 2.8 %   12,098 3.0 %
Total $ 470,074 100.0 % $ 409,995 100.0 %
 
     

Segment Gross Margin
(in thousands, except %)

 

 
For the three months ended March 31,

2014
Unaudited

   

2013
Unaudited

    % of     % of
Gross Segment Gross Segment

Segment

Profit Revenue Profit Revenue
 
East Construction Services $ 16,017 7.2 % $ 14,995 7.9 %
West Construction Services 31,673 13.5 % 28,749 13.8 %
Engineering   2,067 15.9 %   2,352 19.4 %
Total $ 49,757 10.6 % $ 46,096 11.2 %
 

East Construction Services: Revenue increased by $32.9 million in the 2014 first quarter compared to the same period last year. Revenue increased by $9.4 million at the PES Sprint division, by $8.2 million at the PES James Industrial division, and by $3.8 million at the PES Saxon division. Revenue at the JCG Heavy Civil division increased by $12.5 million, as $28.9 million in increased revenue from TXDOT and Mississippi projects was partially offset by a decrease of $16.0 million in LADOT projects. Revenue at the JCG Infrastructure & Maintenance division decreased by $2.2 million. The $1.0 million increase in gross profit was primarily at the PES Sprint division. For the other companies and divisions in the segment, costs associated with the unusual weather in the Gulf Coast region during the first quarter of 2014, especially lengthy periods below freezing temperature, offset the benefit of the increase in revenue. The reduction in gross margin as a percentage of revenue is a reflection of decreased margin on heavy civil projects, primarily the startup of the I-35 projects in Texas and the Mississippi projects, and the costs associated with the weather.

West Construction Services: Revenue increased by $26.3 million in the 2014 first quarter compared to the same period last year. Revenue increased by $44.7 million at the ARB Industrial division and $11.3 million at Q3C. These increases were partially offset by decreases at the ARB Underground division of $17.6 million, ARB Structures of $6.0 million, and Rockford of $5.9 million. The ARB Underground division was impacted primarily by a reduction in revenue from its large northern California utility customer. The $2.9 million increase in gross profit resulted from increased gross profit at Q3C of $5.2 million, Rockford of $2.2 million, and the ARB Industrial division of $1.2 million, partially offset by a decrease in gross profit at the ARB Underground division of $5.7 million as the result of decreased revenue. The reduction in gross margin as a percentage of revenue was the result of both the low margins on a solar project for the ARB Industrial division and the reduction in MSA revenue at the ARB Underground division.

Engineering: Revenue increased by $0.9 million in the 2014 first quarter compared to the same quarter last year. Gross profit declined by $0.3 million. The decline in gross profit resulted from several projects that were in their lower margin beginning stages.

Selling, general and administrative expenses (“SG&A”) were $29.7 million, or 6.3% of revenue for the first quarter of 2014, compared to $28.6 million, or 6.9% of revenue for the first quarter of 2013, an increase of $1.1 million. Of the increase, $0.5 million was from the March 2013 acquisition of FSSI, with the remaining increase primarily from normal increases in compensation and compensation-related expenses.

Operating income for the 2014 first quarter was $20.0 million, or 4.3% of total revenue, compared to $17.5 million, or 4.3% of total revenue, for the same period last year.

Net other income and expenses in the 2014 first quarter was an expense of $1.7 million, a $0.5 million increase from net other expense of $1.2 million in the 2013 first quarter.

The provision for income taxes for the 2014 first quarter was $7.1 million, or an effective tax rate on net income attributable to Primoris of 39.6%, compared to $6.2 million, or an effective tax rate on net income attributable to Primoris of 38.8%, in the prior year quarter.

Net income attributable to Primoris for the 2014 first quarter was $10.8 million, or $0.21 per diluted share, compared to net income attributable to Primoris of $9.8 million, or $0.19 per diluted share, in the same period in 2013.

Fully diluted weighted average shares outstanding for the 2014 first quarter increased by 0.5% to 51.7 million from 51.5 million in last year’s first quarter.

OTHER FINANCIAL INFORMATION

Primoris’ balance sheet at March 31, 2014 included cash, cash equivalents, and short-term investments of $166.9 million, working capital of $221.3 million, total debt and capital leases secured by equipment of $212.7 million, and stockholders’ equity of $409.6 million. The balance sheet included a $4.3 million liability representing the estimated fair value for unpaid earnout amounts from acquisitions.

     

BACKLOG

 
 
Backlog at March 31, 2014 (in millions)
 
 
Segment Fixed Backlog   MSA Backlog   Total Backlog
 
East Construction Services $ 1,141

$

111 $ 1,252
West Construction Services 158 385 543
Engineering   54     -     54
Total $ 1,353  

$

496  

$

1,849
 

At March 31, 2014, Fixed Backlog was $1.35 billion, compared to $1.48 billion at December 31, 2013. In the first quarter of 2014, approximately $78.8 million of revenue was recognized by non-Fixed Backlog projects.

At March 31, 2014, MSA Backlog was $496.0 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 March 31, 2014 was $1.85 billion, compared to $1.94 billion at December 31, 2013. We expect that during the next four quarters, we will recognize as revenue approximately 43% of the East Construction Services segment Total Backlog, approximately 98% of the West Construction Services segment Total Backlog, and approximately 90% 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 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, Tuesday, May 6 at 11:30 am Eastern Time / 10:30 am Central Time to discuss the results.

Interested parties may participate in the call by dialing:

  • (877) 407-8293 (Domestic)
  • (201) 689-8349 (International)

If you are unable to participate in the live call, a replay may be accessed by dialing (877) 660-6853, passcode 13581348, 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 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,

 

2014     2013
 
Revenue $ 470,074 $ 409,995
Cost of revenue   420,317     363,899  
Gross profit 49,757 46,096
Selling, general and administrative expenses   29,712     28,619  
Operating income 20,045 17,477
 
Other income (expense):
Income from non-consolidated entities 14 269
Foreign exchange gain (loss) 26 (59 )
Other expense (114 ) (56 )
Interest income 52 40
Interest expense   (1,668 )   (1,424 )
Income before provision for income taxes 18,355 16,247
 
Provision for income taxes   (7,090 )   (6,207 )
Net income 11,265 10,040
 
Net income attributable to noncontrolling interests (432 ) (270 )
 
Net income attributable to Primoris 10,833 9,770
 
Earnings per share:
Basic: $ 0.21 $ 0.19
Diluted: $ 0.21 $ 0.19
 
 
Weighted average common shares outstanding:
Basic 51,610 51,456
Diluted 51,714 51,467
 
 
CONDENSED CONSOLIDATED BALANCE SHEETS
(In Thousands, Except Share Amounts)
(Unaudited)
         
 
March 31, December 31,
2014 2013
ASSETS
 
Current assets:
Cash and cash equivalents $ 149,620 $ 196,077
Short-term investments 17,326 18,686
Customer retention deposits and restricted cash 55 5,304
Accounts receivable, net 289,124 304,955
Costs and estimated earnings in excess of billings 75,067 57,146
Inventory and uninstalled contract materials 58,681 51,829
Deferred tax assets 13,133 13,133
Prepaid expenses and other current assets   12,610   12,654
Total current assets 615,616 659,784
Property and equipment, net 228,834 226,512
Intangible assets, net 43,460 45,303
Goodwill 118,626 118,626
Other long-term assets   416   468
Total assets $ 1,006,952 $ 1,050,693
 
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
 
Current liabilities:
Accounts payable $ 119,089 $ 127,302
Billings in excess of costs and estimated earnings 147,301 173,365
Accrued expenses and other current liabilities 91,559 91,079
Dividends payable 1,808 1,805
Current portion of capital leases 2,681 3,288
Current portion of long-term debt 27,559 28,475
Current portion of contingent earnout liabilities   4,347   5,000
Total current liabilities 394,344 430,314
Long-term capital leases, net of current portion 1,823 2,295
Long-term debt, net of current portion 180,653 191,051
Deferred tax liabilities 10,092 10,092
Long-term contingent earnout liabilities, net of current portion - 4,233
Other long-term liabilities   10,405   14,260
Total liabilities   597,317   652,245
Stockholders’ equity
Common stock 5 5
Additional paid-in capital

 

162,050

159,196
Retained earnings

 

247,242

238,216
Noncontrolling interests

 

 

338

  1,031
Total stockholders’ equity   409,635   398,448
Total liabilities and stockholders’ equity $ 1,006,952 $ 1,050,693
 

Contacts

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

Release Summary

Primoris Services Corporation announces 2014 first quarter revenue of $470 million and net income attributable to Primoris of $10.8 million, or $0.21 per diluted share.

Sharing

Contacts

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