Board of Directors Declares $0.025
Per Share Cash Dividend
Relocating Headquarters to Dallas,
TX
Q3 2010 Financial Highlights
- Revenues increased 116.1% to $230.4 million from $106.6 million
in Q3 2009
- Net income of $7.6 million, or $0.17 per diluted share,
compared to Q3 2009 net income of $7.9 million, or $0.23 per
diluted share
- $107.6 million in cash and short-term investments at September
30, 2010
- Total backlog at September 30, 2010 of $967.5 million
Primoris Services Corporation (Nasdaq:PRIM)
("Primoris" or "Company") today announced financial results for its
third quarter ended September 30, 2010. Primoris's results for the
third quarter of 2010 included the results of James Construction
Group (JCG) and Cravens Services, Inc. (Cravens), which were
acquired in the fourth quarter 2009.
The Company also announced that on November 5, 2010, its Board
of Directors declared a $0.025 per share cash dividend to
stockholders of record as of December 31, 2010, payable on or about
January 14, 2011.
Brian Pratt, Chairman, President and Chief Executive Officer of
Primoris, commented, "We continue to realize the benefits of our
diverse geographic reach, services platform and our acquisition
activities. Each of our three operating segments posted
quarter-over-quarter growth in revenues and each contributed to our
profitability. While we are not seeing quite as robust a market as
we saw in 2006-2008, we believe that there has been some
strengthening in our end markets as evidenced by the significant
increase in our backlog. During the third quarter, we announced
four major contracts with a total value of approximately $218
million related to heavy civil, hurricane protection, and
traditional power generation projects.
"We have maintained our focus on the strength of our balance
sheet, and at the end of the quarter, our cash and cash equivalents
were approximately $107 million. In October, we completed our
warrant repurchase program. From July 1, 2010 through October 2,
2010, approximately 3.5 million common stock purchase warrants were
exercised, resulting in cash proceeds to the Company of $17.6
million.
"With this morning's announcement of the acquisition of Rockford
Corporation, we are expanding our portfolio of services by
enhancing our mainline pipeline and facilities construction
capabilities and extending our national reach. Upon closing,
Primoris will operate across the southern United States, throughout
the Gulf Coast region, and into California and the Pacific
Northwest. The pursuit of new opportunities along these
geographic and service fronts is supported by a strong financial
position, a commitment to prudent fiscal and operational
management, and a proven, experienced team of industry
professionals."
2010 THIRD QUARTER RESULTS OVERVIEW
Revenues for the 2010 third quarter rose 116.1% to $230.4
million from $106.6 million the same period last year, reflecting a
$120.2 million contribution from the businesses acquired in the
fourth quarter of 2009. Excluding the impact of the acquired
businesses, revenues for the third quarter of 2010 rose by $3.6
million compared to the same period a year ago.
Gross profit increased by $7.7 million, or 38.3%, to $27.9
million for the 2010 third quarter from $20.2 million in the same
period in 2009. This was primarily due to a $12.3 million
profit contribution from the acquired businesses.
Gross profit as a percent of revenues decreased to 12.1% during
the 2010 third quarter from 18.9% in the same period last year,
reflecting the typically lower margin percentages on JCG's heavy
civil projects and lower utilization of equipment and manpower in
the West Construction segment.
SEGMENT RESULTS
Since January 1, 2010 our reportable operating segments have
been:
- East Construction Services – incorporates JCG's construction
business, located primarily in the southeastern United States, as
well as businesses along the Gulf Coast region, including Cardinal
Contractors, Inc., Cardinal Mechanical, Inc. and Cravens.
- West Construction Services – includes construction services
performed in the western United States, primarily in California and
Nevada, by ARB, Inc., ARB Structures, Inc., and Stellaris
LLC.
- Engineering – incorporates the results of Onquest, Inc. and
Born Heaters Canada, ULC.
| Segment Revenues |
|
|
|
|
| (in thousands, except
%) |
|
|
|
|
| |
|
|
|
|
| |
For the three
months ended September 30, |
| |
2010 |
2009 |
| Segment |
Revenue |
% of Segment
Revenue |
Revenue |
% of Segment
Revenue |
| |
(Unaudited) |
| East Construction Services |
$126,876 |
55.1% |
$13,830 |
13.0% |
| West Construction Services |
86,594 |
37.6% |
80,933 |
75.9% |
| Engineering |
16,887 |
7.3% |
11,848 |
11.1% |
| Total |
$230,357 |
100.0% |
$106,611 |
100.0% |
| |
|
|
|
|
| |
|
|
|
|
| |
For the nine
months ended September 30, |
| |
2010 |
2009 |
| Segment |
Revenue |
% of Segment
Revenue |
Revenue |
% of Segment
Revenue |
| |
(Unaudited) |
| East Construction Services |
$351,583 |
57.8% |
$42,028 |
12.0% |
| West Construction Services |
216,302 |
35.5% |
263,765 |
75.4% |
| Engineering |
40,641 |
6.7% |
43,978 |
12.6% |
| Total |
$608,526 |
100.0% |
$349,771 |
100.0% |
| |
|
|
|
|
| |
|
|
|
|
| Segment Gross
Margin |
|
|
|
|
| (in thousands, except
%) |
|
|
|
|
| |
For the three
months ended September 30, |
| |
2010 |
2009 |
| Segment |
Gross Profit |
% of Segment
Revenue |
Gross Profit |
% of Segment
Revenue |
| |
(Unaudited) |
| East Construction Services |
$12,889 |
10.2% |
$1,383 |
10.0% |
| West Construction Services |
12,689 |
14.7% |
17,449 |
21.6% |
| Engineering |
2,302 |
13.6% |
1,322 |
11.2% |
| Total |
$27,880 |
12.1% |
$20,154 |
18.9% |
| |
|
|
|
|
| |
|
|
|
|
| |
For the nine
months ended September 30, |
| |
2010 |
2009 |
| Segment |
Gross Profit |
% of Segment
Revenue |
Gross Profit |
% of Segment
Revenue |
| |
(Unaudited) |
| East Construction Services |
$36,103 |
10.3% |
$4,441 |
10.6% |
| West Construction Services |
35,081 |
16.2% |
46,664 |
17.7% |
| Engineering |
7,805 |
19.2% |
4,299 |
9.8% |
| Total |
$78,989 |
13.0% |
$55,403 |
15.8% |
East Construction Services: The $113.0 million
increase in revenues for the quarter was attributable to the 2009
acquisitions, offset by a $7.2 million revenue decline primarily in
Florida water and wastewater projects. The $11.5 million gross
profit increase for the quarter was due to the gross margin
contribution from the acquisitions. The 2009 quarter gross
profit was primarily from water and wastewater projects. Gross
margin for the third quarter of 2010 included $0.5 million of
intangible amortization expense related to the
acquisitions.
West Construction Services: The $5.7 million
increase in revenues for the third quarter 2010 was primarily
attributable to an increase in California underground water and
sewer project work, partially offset by a decline in horizontal
directional drilling and parking structure project work. The
$4.8 million decline in gross profit for the third quarter of 2010
was primarily due to a decline in gross profit related to oil &
gas pipeline projects, and the comparative impact of higher gross
profits associated with the completion of several projects in the
third quarter of 2009.
Engineering: Revenues increased by $5.0 million
from the third quarter of 2009, reflecting the impact of several
new projects that commenced in the first six months of
2010. Gross profit rose by $1.0 million, reflecting the
contribution from several higher margin projects. These
projects also improved gross profit margin as a percent of revenues
to over 13.6% for the quarter.
Selling, general and administrative expenses ("SG&A")
increased by $7.3 million, or 100.7%, for the 2010 third quarter
compared to the prior year period. However, SG&A as a
percentage of revenues declined to 6.3% in the 2010 third quarter
from 6.8% in the same period last year. Approximately $4.8
million of the increased amount was attributable to the 2009 fourth
quarter acquisitions with an additional $0.9 million of the
increase the result of amortization of intangible assets. The
impact of a $1.6 million reduction in the gain on the sale of
equipment compared to the same period last year resulted in most of
the remaining increase.
Operating income for the 2010 third quarter was $13.3 million,
or 5.8% of total revenues, compared to $12.9 million, or 12.1% of
total revenues, for the same period last year.
Other income and expense during the third quarter 2010 were
impacted by the following:
- Income from non-consolidated investments of $1.4 million for
the third quarter 2010 was nearly unchanged from the same period in
2009; however, the current year earnings resulted primarily from
the St.-Bernard Levee Partners investment while the prior year
earnings were primarily from the Otay Mesa Power Partners
investment.
- Interest expense of $1.3 million for the third quarter 2010
increased by $0.9 million primarily as a result of higher interest
attributable to the subordinated debt associated with the December
2009 acquisition of JCG.
- Additionally, an expense of $0.3 million during the third
quarter 2010 reflected the change in the fair value of the
contingent acquisition earnout liabilities.
Income from continuing operations before provision for income
taxes for the third quarter of 2010 was $13.2 million, or 5.8% of
revenues, as compared to $13.8 million, or 13.0% of revenues, in
the third quarter of 2009.
The provision for income taxes for the third quarter of 2010 was
$5.6 million, for an effective tax rate of 42.7%, compared to $5.1
million, for an effective tax rate of 37.0%, in the prior year
quarter. The effective tax rate for the 2010 third quarter
included a one-time tax charge of $0.8 million, consisting of
truing up the tax returns filed for the year ended December 31,
2009 and calculating the look back interest payable on completed
lump-sum projects with a sales price in excess of $1 million and a
duration of more than two years.
Net income for the third quarter of 2010 was $7.6 million, or
$0.17 per diluted share, compared to net income of $7.9 million, or
$0.23 per diluted share, in the same period in 2009. Fully
diluted shares outstanding for the third quarter of 2010 increased
by 33.7% to 45.5 million from 34.1 million in last year's third
quarter, due to the impact of 8.2 million shares issued for the JCG
acquisition, 2.5 million shares issued as a final earn-out portion
of the Rhapsody and Primoris merger and to the conversion to common
stock of warrants exercised during the quarter.
OTHER FINANCIAL INFORMATION
Primoris's balance sheet at September 30, 2010 reported cash and
cash equivalents of $81.6 million, short-term investments of $26.0
million, working capital of $51.0 million, total debt and capital
leases secured by equipment of $54.7 million, subordinated
acquisition debt of $43.1 million and stockholders' equity of
$179.7 million. Additionally, the balance sheet included a
$10.2 million liability representing the estimated fair value for
earn-out payments relating to the 2009 acquisitions.
BACKLOG
At September 30, 2010, total backlog was
$967.5 million, an increase of $172.1 million, or 21.6%,
from total backlog of $795.4 million at December 31,
2009. Primoris expects that approximately $187.3 million,
or 19.4%, of the total backlog at September 30, 2010, will be
recognized as revenue during the remainder of 2010, with $107.2
million expected for the East Construction segment, $67.6 million
for the West Construction segment, and $12.5 million for the
Engineering segment.
Backlog should not be considered a comprehensive indicator of
future revenues, as a portion of Primoris's revenues are derived
from projects that are not part of a backlog calculation and
projects in backlog may be cancelled by our customers.
RELOCATION OF CORPORATE HEADQUARTERS
Primoris also announced that, following approval by the
Company's Board of Directors, it will relocate its corporate
headquarters from Lake Forest, California to Dallas, Texas
effective January 17, 2011. The new corporate headquarters will be
located at 2100 McKinney Avenue, Suite 1500, Dallas, Texas
75201.
The move will involve the Company's Chief Executive Officer,
Chief Financial Officer, Executive Vice President of Corporate
Development and certain other senior executives and staff
members. The headquarters and operations of ARB and ARB
Structures and other Company departments will remain in Lake
Forest, California.
Mr. Pratt commented, "The move to the central United States
reflects Primoris's evolution from a company with a predominant
presence on the west coast to a national provider of specialty
contracting, infrastructure, and water and wastewater
services. Our new headquarters in Dallas will allow our
executive team to better coordinate the activities of our
operations from Florida to California and the Pacific
Northwest."
ACQUISITION OF ROCKFORD CORPORATION
As announced earlier today, Primoris signed a definitive
agreement to acquire privately held Rockford Corporation
("Rockford"). Based in Hillsboro (Portland), Oregon, Rockford
specializes in large diameter natural gas and liquid pipeline
projects and related facilities construction. Closing of the
transaction, which is subject to customary conditions, is expected
to occur on or before November 12, 2010, with the effective date of
the acquisition retroactive to October 1, 2010. As discussed
in the earlier press release, due in large part to Rockford's
participation in the Ruby Pipeline Project, the acquisition is
expected to add approximately $65 million in revenues to the fourth
quarter 2010 and approximately $135 million in revenues to
2011, and the acquisition is also expected to be accretive to
earnings. Rockford will extend Primoris's service reach into
the Pacific Northwest, and complement the Company's specialized
underground pipeline capabilities by adding larger scale mainline
pipeline and facilities construction services.
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, November 9, 2010 at
11:30 am Eastern Time / 8:30 am Pacific Time to discuss the
financial results. Interested parties may participate in the
call by dialing (866) 255-7436 (Domestic) or (706) 634-4739
(International). The conference call will also be broadcast 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
Primoris, through various subsidiaries, is 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 and replacement
services, as well as engineering services to major public
utilities, petrochemical companies, energy companies,
municipalities and other customers. With the recent acquisition of
James Construction Group, Primoris has a significant presence in
the Gulf States region where it provides heavy civil construction
services. Primoris is also a leading water and wastewater
contractor in the state of Florida, and a specialist in designing
and constructing complex commercial and industrial concrete
structures in California. For additional information on Primoris,
please visit www.prim.com.
The Primoris Services Corporation logo is available at
http://www.globenewswire.com/newsroom/prs/?pkgid=5527
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 risks and uncertainties, 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 year ended December 31, 2009 and
other filings with the Securities and Exchange Commission,
including the Company's Form 10-Q expected to be filed on November
9, 2010. 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.
| CONSOLIDATED STATEMENTS
OF INCOME |
|
(Unaudited) |
| (In Thousands, Except
Per Share Amounts) |
| |
|
|
|
|
| |
Three Months
Ended |
Nine Months
Ended |
| |
September
30, |
September
30, |
| |
2010 |
2009 |
2010 |
2009 |
| |
|
|
|
|
| Revenues |
$230,357 |
$106,611 |
$608,526 |
$349,771 |
| Cost of revenues |
202,477 |
86,457 |
529,537 |
294,368 |
| Gross profit |
27,880 |
20,154 |
78,989 |
55,403 |
| Selling, general and administrative
expenses |
14,580 |
7,266 |
43,849 |
22,825 |
| Operating income |
13,300 |
12,888 |
35,140 |
32,578 |
| Other income (expense): |
|
|
|
|
| Income from non-consolidated
entities |
1,366 |
1,439 |
4,090 |
5,342 |
| Foreign exchange gain
(loss) |
80 |
(170) |
266 |
33 |
| Other expense |
(333) |
-- |
(964) |
-- |
| Interest income |
151 |
90 |
484 |
554 |
| Interest expense |
(1,345) |
(398) |
(3,872) |
(1,463) |
| |
|
|
|
|
| |
|
|
|
|
| Income from continuing operations, before
provision for income taxes |
13,219 |
13,849 |
35,144 |
37,044 |
| Provision for taxes |
(5,642) |
(5,123) |
(13,782) |
(14,077) |
| Income from continuing
operations |
7,577 |
8,726 |
21,362 |
22,967 |
| Loss on discontinued operations, net of
income taxes |
-- |
(779) |
-- |
(800) |
| Net income |
$7,577 |
$7,947 |
$21,362 |
$22,167 |
| |
|
|
|
|
| Earnings per share: |
|
|
|
|
| Basic: |
|
|
|
|
| Income from continuing operations |
$ 0.17 |
$ 0.27 |
$ 0.53 |
$ 0.72 |
| Loss on discontinued operations |
$ -- |
$ (0.03) |
$ -- |
$ (0.02) |
| Net income |
$ 0.17 |
$ 0.24 |
$ 0.53 |
$ 0.70 |
| |
|
|
|
|
| Diluted: |
|
|
|
|
| Income from continuing operations |
$ 0.17 |
$ 0.26 |
$ 0.47 |
$ 0.69 |
| Loss on discontinued operations |
$ -- |
$ (0.03) |
$ -- |
$ (0.02) |
| Net income |
$ 0.17 |
$ 0.23 |
$ 0.47 |
$ 0.67 |
| Weighted average common shares
outstanding: |
|
|
|
|
| Basic |
44,887 |
32,477 |
40,499 |
31,699 |
| Diluted |
45,528 |
34,048 |
45,486 |
33,128 |
| CONSOLIDATED BALANCE
SHEETS |
|
(Unaudited) |
| (In Thousands, Except
Share Amounts) |
| |
|
| |
September 30,
2010 |
December 31,
2009 |
| ASSETS |
|
|
| |
|
|
| Current assets: |
|
|
| Cash and cash equivalents |
$81,594 |
$90,004 |
| Short term investments |
26,000 |
30,058 |
| Customer retention deposits |
9,178 |
6,845 |
| Accounts receivable, net |
148,981 |
108,492 |
| Costs and estimated earnings in excess of
billings |
23,299 |
11,378 |
| Inventory |
22,618 |
22,275 |
| Deferred tax assets |
6,068 |
5,630 |
| Prepaid expenses and other current
assets |
9,521 |
5,501 |
| Current assets from discontinued
operations |
-- |
5,304 |
| Total current assets |
327,259 |
285,487 |
| Property and equipment, net |
96,818 |
92,568 |
| Investment in non-consolidated
entities |
19,274 |
5,599 |
| Intangible assets, net |
28,404 |
32,695 |
| Goodwill |
61,713 |
59,678 |
| Total assets |
$533,468 |
$476,027 |
| |
|
|
| LIABILITIES AND STOCKHOLDERS'
EQUITY |
|
|
| |
|
|
| Current liabilities: |
|
|
| Accounts payable |
$76,814 |
$62,568 |
| Billings in excess of costs and estimated
earnings |
122,311 |
114,035 |
| Accrued expenses and other current
liabilities |
39,205 |
34,992 |
| Distributions and dividends payable |
1,173 |
2,987 |
| Current portion of long-term debt |
8,894 |
6,482 |
| Current portion of capital leases |
3,153 |
4,220 |
| Current portion of subordinated
debt |
23,952 |
10,397 |
| Current liabilities of discontinued
operations |
733 |
6,511 |
| Total current liabilities |
276,235 |
242,192 |
| Long-term debt, net of current
portion |
36,665 |
26,368 |
| Long-term capital leases, net of current
portion |
5,948 |
7,734 |
| Long-term subordinated debt, net of
current portion |
19,164 |
43,853 |
| Deferred tax liabilities |
1,483 |
2,643 |
| Contingent earnout liabilities |
10,243 |
9,278 |
| Other long-term liabilities |
3,985 |
-- |
| Total liabilities |
353,723 |
332,068 |
| |
|
|
| Commitments and contingencies |
|
|
| Stockholders' equity |
| Preferred stock--$.0001 par
value, 1,000,000 shares authorized, none issued and outstanding at
September 30, 2010 and 81,852.78 at December 31, 2009 |
-- |
-- |
| Common stock--$.0001 par value,
90,000,000 shares authorized, 46,980,765 and 32,704,903 issued and
outstanding at September 30,2010 and December 31, 2009 |
5 |
3 |
| Additional paid-in
capital |
118,779 |
100,644 |
| Retained earnings |
60,961 |
42,982 |
| Accumulated other comprehensive
income |
-- |
330 |
| Total stockholders' equity |
179,745 |
143,959 |
| Total liabilities and stockholders'
equity |
$533,468 |
$476,027 |
CONTACT: Primoris Services Corporation
Peter J. Moerbeek, Executive Vice President,
Chief Financial Officer
(949) 454-7121
pmoerbeek@prim.com
The Equity Group Inc.
Devin Sullivan, Senior Vice President
(212) 836-9608
dsullivan@equityny.com
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