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EX-99.2 - EX-99.2 - Primoris Services Corpa14-23946_1ex99d2.htm

Exhibit 99.1

 

GRAPHIC

 

PRIMORIS SERVICES CORPORATION ANNOUNCES 2014 THIRD QUARTER FINANCIAL RESULTS

BOARD OF DIRECTORS AUTHORIZES QUARTERLY CASH DIVIDEND

 

Q3 2014 Financial Highlights

 

·                  Revenue of $613 million in the third quarter of 2014 compared to $551 million in the third quarter of 2013

 

·                  Net income attributable to Primoris of $27.4 million, or $0.53 per diluted share, in the third quarter of 2014 compared to $21.8 million, or $0.42 per diluted share, in the third quarter of 2013

 

·                  At September 30, 2014:

 

·            $146 million in cash, cash equivalents and short-term investments

 

·            Total backlog of $1.80 billion

 

Dallas, TX — November 6, 2014— 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.

 

·              West Construction Services — The West Construction Services segment includes the underground and industrial operations and construction services performed by ARB, ARB Structures, Rockford, Q3 Contracting, and Vadnais, acquired in June 2014.  Most of the entities perform work primarily in California; however, Rockford operates throughout the Unites States and Q3C operates in Colorado and the upper Midwest United States.  The segment also includes the operations of the Blythe Power Constructors joint venture.

 

·              East Construction Services — The East Construction Services segment includes the James Construction Group (“JCG”) Heavy Civil division, the JCG Infrastructure and Maintenance division, BW Primoris, and Cardinal Contractors construction business, located primarily in the southeastern United States and in the Gulf Coast region of the United States and which perform heavy civil construction, infrastructure, and maintenance operations.

 

·              Energy — The Energy segment businesses are located primarily in the southeastern United States and in the Gulf Coast region of the United States. The segment includes the PES pipeline and gas facility construction and maintenance operations, the JCG Industrial division and the newly acquired Surber and Ram-Fab operations. Additionally, the segment includes the California-based OnQuest, Inc. and OnQuest Canada, ULC operations for the design and installation of high-performance furnaces and heaters for the oil refining, petrochemical and power generation industries.

 

Segment Revenues

(in thousands, except %)

 

 

 

For the three months ended September 30,

 

 

 

2014
Unaudited

 

2013
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
Unaudited

 

2013
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
Unaudited

 

2013
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
Unaudited

 

2013
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:

 

·                  (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 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.

 

Company Contact

 

Peter J. Moerbeek

Kate Tholking

Executive Vice President, Chief Financial Officer

Director of Investor Relations

(214) 740-5602

(214) 740-5615

pmoerbeek@prim.com

ktholking@prim.com

 



 

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(In Thousands, Except Per Share Amounts)

 

(Unaudited)

 

 

 

Three Months Ended
September 30,

 

Nine Months Ended
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