Q1 2010 Financial Highlights
- Revenues increased 41.6% to $175.0 million from $123.6 million in Q1 2009
- Gross margin rose to 14.0% of revenues from 11.7% of revenues in Q1 2009
- Operating margin increased to 6.1% of revenues from 5.7% of revenues in Q1 2009
- Net income of $6.7 million, or $0.15 per diluted share, compared to Q1 2009 net income of $5.6 million, or $0.17 per diluted share
- $112.3 million in cash and short-term investments at March 31, 2010
LAKE FOREST, Calif., May 10, 2010 (GLOBE NEWSWIRE) -- Primoris Services Corporation (Nasdaq:PRIM) (Nasdaq:PRIMW) ("Primoris" or "Company") today announced financial results for its first quarter ended March 31, 2010. Primoris's results for the first quarter of 2010 include the results of James Construction Group (JCG), which was acquired on December 18, 2009, and Cravens Services, Inc., which was acquired on October 3, 2009.
Brian Pratt, Chairman, President and Chief Executive Officer of Primoris, commented, "Our results for the first quarter of 2010 reflect the benefits of our acquisitions and show the promise of our recently expanded service platform and geographic presence with the addition of JCG. As shown by the decrease in revenues for our legacy businesses, we are still feeling the impact of the economic issues that affected our markets and operating results in 2009; however, we are encouraged by what appears to have been a bottoming of the backlog for our legacy businesses in the fourth quarter of 2009 and by the current active bidding environment. We believe that our end markets will continue to show improvement in the second half of 2010 and will evolve into a more robust operating environment by year end and into 2011. We remain positioned to capitalize on the opportunities that an improving economic environment can present to experienced, well-capitalized, and well-managed companies."
Q1 2010 Financial Results Overview
Consolidated revenues for the first quarter of 2010 increased by $51.4 million, or 41.6%, to $175.0 million from the first quarter of 2009, due primarily to a $96.0 million revenue contribution from JCG and, to a much lesser extent, Cravens Services. Excluding the impact of these acquired businesses, revenues declined by $44.6 million from the same quarter a year ago, reflecting reduced revenues across all business lines, especially in underground and industrial projects. This reduction in revenues was the result of a reduced level of new work acquired last year.
Gross profit for the first quarter of 2010 rose to $24.5 million, or 14.0% of revenues, from $14.5 million, or 11.7% of revenues, in the first quarter of 2009. This increase was primarily attributable to an $8.7 million profit contribution from the recent acquisitions, the successful close out of underground and industrial projects compared to the first quarter of 2009 and the recent conversion of a fixed-price contract to a reimbursable cost contract.
Segment Results
In prior periods, the Company reported two operating segments: "Construction Services" and "Engineering." Following the acquisition of JCG, we made a change in our management structure, and effective January 1, 2010, the reportable operating segments are:
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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, Cardinal Mechanical, and Cravens.
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West Construction Services – includes construction performed in the western United States, primarily in California and Nevada, by ARB, ARB Structures and Stellaris LLC.
- Engineering – incorporates the results of Onquest, Inc. and Born Heaters Canada, ULC.
| For the three months ended March 31, | |||||
| 2010 | 2009 | ||||
| Segment |
Revenue |
% of Segment Revenue |
Revenue |
% of Segment Revenue |
|
| (Unaudited) | |||||
| East Construction Services | $104,236 | 59.6% | $14,739 | 11.9% | |
| West Construction Services | 59,887 | 34.2% | 90,044 | 72.9% | |
| Engineering | 10,859 | 6.2% | 18,767 | 15.2% | |
| Total | $174,982 | 100.0% | $123,550 | 100.0% | |
| For the three months ended March 31, | |||||
| 2010 | 2009 | ||||
| Segment |
Gross Profit |
% of Segment Revenue |
Gross Profit |
% of Segment Revenue |
|
| (Unaudited) | |||||
| East Construction Services | $9,621 | 9.2% | $1,710 | 11.6% | |
| West Construction Services | $12,211 | 20.4% | $11,087 | 12.3% | |
| Engineering | 2,641 | 24.3% | 1,709 | 9.1% | |
| Total | $24,473 | 14.0% | $14,506 | 11.7% | |
East Construction Services: the $89.5 million increase in revenue was attributable to the 2009 additions of JCG and Cravens Services in the fourth quarter 2009. These acquisitions contributed $96.0 million in revenue, which was partially offset by a $6.5 million revenue decline primarily in water and wastewater projects. The $7.9 million gross profit increase was due primarily to JCG's $8.6 million gross margin contribution compared to the first quarter of 2009.
West Construction Services: the $30.2 million decline in revenues for the first quarter 2010 from the same period last year was primarily attributable to lower project revenues across the Company's major business lines due to the continuing general industry downturn. The $1.1 million gross profit increase for the first quarter of 2010 from the prior year's quarter was due to the impact of smaller, higher margin jobs and the impact of converting a fixed-price contract to a cost reimbursable contract.
Engineering: revenues decreased by $7.9 million from the first quarter of 2009, primarily attributable to the completion of one large international project and several smaller projects which reduced revenues in the current quarter. The segment margin benefitted from the completion of the international project and from lower allocation of overhead expenses due to the lower activity level in the segment.
Selling, general and administrative expenses of $13.8 million for the first quarter of 2010 increased $6.3 million, or 85.5%, from $7.4 million in the same period last year. This increase was primarily attributable to the addition of the acquired businesses in the fourth quarter of 2009, as well as lower activity and overhead absorption in the Engineering segment, and increased audit and consulting fees.
Operating income for the 2010 first quarter increased to $10.7 million, or 6.1% of total revenues, from $7.1 million, or 5.7% of total revenues, for the same period last year.
Net other expense for the first quarter of 2010 was $0.1 million compared to net other income of $2.1 million for the first quarter of 2009, due to lower income from non-consolidated entities and higher interest expense in the first quarter of 2010. Interest expense for the first quarter of 2010 increased to $1.3 million from $0.5 million in the first quarter of 2009 primarily due to the interest expense associated with subordinated debt incurred in the JCG acquisition of $0.7 million.
Income from continuing operations before provision for income taxes for the first quarter of 2010 was $10.7 million, or 6.1% of revenues, as compared to $9.2 million, or 7.5% of revenues, in the first quarter of 2009.
The provision for income taxes for the first quarter of 2010 increased to $4.0 million, for an effective tax rate of 37.1%, from $3.6 million, for an effective tax rate of 39.0%, in the prior year quarter.
Net income for the first quarter of 2010 rose to $6.7 million, or $0.15 per diluted share, from net income of $5.6 million, or $0.17 per diluted share, in the same period in 2009. Fully diluted shares outstanding for the first quarter of 2010 increased by 40.2% to 45.5 million from 32.5 million in last year's first 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, the conversion in the quarter of 0.6 million warrants and the dilutive impact of the remaining 4.0 million warrants.
Other Financial Information
Primoris's balance sheet at March 31, 2010 reported cash and cash equivalents of $83.3 million, short-term investments of $29.0 million, working capital of $57.3 million, total debt and capital leases secured by equipment of $42.2 million, subordinated acquisition debt of $51.0 million and stockholders' equity of $153.5 million. Additionally, the balance sheet included a $9.6 million liability representing the estimated fair value for earn-out payments relating to the 2009 acquisitions.
Backlog
Total backlog at March 31, 2010 was $824.4 million, an increase of $29.0 million from $795.4 million at December 31, 2009. The March 31, 2010 amount includes $514.6 million added by the acquisitions of JCG and Cravens Services. Primoris expects that approximately $492.2 million, or 59.7% of the total backlog at March 31, 2010, will be recognized as revenue during 2010.
Backlog should not be considered a comprehensive indicator of future revenues, as a significant portion of Primoris' revenues are derived from projects that are not part of a backlog calculation.
Conference Call
Brian Pratt, Chairman, President and Chief Executive Officer, and Peter J. Moerbeek, Executive Vice President, Chief Financial Officer, will host a conference call today, May 10, 2010 at 11:30 am Eastern Time / 8:30 am Pacific Time to discuss the 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.primoriscorp.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.globenewswire.com/newsroom/ctr%3Fd=178782%26amp;l=13%26amp;a=www.primoriscorp.com%26amp;u=http%253A%252F%252Fwww.primoriscorp.com" target="_top" rel="nofollow">www.primoriscorp.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," 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 to be filed on May 10, 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.
| CONDENSED CONSOLIDATED STATEMENTS OF INCOME | |||
| (Unaudited) | |||
| (In Thousands, Except Per Share Amounts) | |||
| Three Months Ended | |||
|
March 31, 2010 |
March 31, 2009 |
||
| Revenues | $174,982 | $123,550 | |
| Cost of revenues | 150,509 | 109,044 | |
| Gross profit | 24,473 | 14,506 | |
| Selling, general and administrative expenses | 13,755 | 7,416 | |
| Operating income | 10,718 | 7,090 | |
| Other income (expense): | |||
| Income from non-consolidated entities | 968 | 2,167 | |
| Foreign exchange gain | 92 | 229 | |
| Interest income | 180 | 259 | |
| Interest expense | (1,307) | (526) | |
| Income from continuing operations, before provision for income taxes | 10,651 | 9,219 | |
| Provision for income taxes | (3,953) | (3,599) | |
| Income from continuing operations | 6,698 | 5,620 | |
| Income on discontinued operations, net of income taxes | -- | 20 | |
| Net income | $6,698 | $5,640 | |
| Earnings per share: | |||
| Basic: | |||
| Income from continuing operations | $0.20 | $0.19 | |
| Income on discontinued operations | $ -- | $ -- | |
| Net income | $0.20 | $0.19 | |
| Diluted: | |||
| Income from continuing operations | $0.15 | $0.17 | |
| Income on discontinued operations | $ -- | $ -- | |
| Net income | $0.15 | $0.17 | |
| Weighted average common shares outstanding: | |||
| Basic | 33,202 | 30,116 | |
| Diluted | 45,544 | 32,477 | |
| CONDENSED CONSOLIDATED BALANCE SHEETS | ||
| (Unaudited) | ||
| (In Thousands) | ||
|
March 31, 2010 |
December 31, 2009 |
|
| ASSETS | (Unaudited) | |
| Current assets: | ||
| Cash and cash equivalents | $83,289 | $90,004 |
| Short-term investments | 29,000 | 30,058 |
| Restricted cash | 6,931 | 6,845 |
| Accounts receivable, net | 117,610 | 108,492 |
| Costs and estimated earnings in excess of billings | 16,187 | 11,378 |
| Inventory | 24,683 | 22,275 |
| Deferred tax assets | 5,630 | 5,630 |
| Prepaid expenses and other current assets | 10,029 | 5,501 |
| Current assets from discontinued operations | -- | 5,304 |
| Total current assets | 293,359 | 285,487 |
| Property and equipment, net | 90,653 | 92,568 |
| Investment in non-consolidated entities | 2,174 | 5,599 |
| Intangible assets, net | 31,314 | 32,695 |
| Goodwill | 59,678 | 59,678 |
| Total assets | $477,178 | $476,027 |
| LIABILITIES AND STOCKHOLDERS' EQUITY | ||
| Current liabilities: | ||
| Accounts payable | $65,888 | $62,568 |
| Billings in excess of costs and estimated earnings | 113,397 | 114,035 |
| Accrued expenses and other current liabilities | 35,716 | 34,992 |
| Distributions and dividends payable | 1,102 | 2,987 |
| Current portion of capital leases | 3,859 | 4,220 |
| Current portion of long-term debt | 6,568 | 6,482 |
| Current portion of subordinated debt | 9,165 | 10,397 |
| Current liabilities of discontinued operations | 333 | 6,511 |
| Total current liabilities | 236,028 | 242,192 |
| Long-term debt, net of current portion | 24,694 | 26,368 |
| Long-term capital leases, net of current portion | 7,130 | 7,734 |
| Long-term subordinated debt, net of current portion | 41,863 | 43,853 |
| Deferred tax liabilities | 2,643 | 2,643 |
| Other long-term liabilities | 11,350 | 9,278 |
| Total liabilities | 323,708 | 332,068 |
| Commitments and contingencies | ||
| Stockholders' equity | ||
| Common stock | 3 | 3 |
| Additional paid-in capital | 104,738 | 100,644 |
| Retained earnings | 48,577 | 42,982 |
| Accumulated other comprehensive income | 152 | 330 |
| Total stockholders' equity | 153,470 | 143,959 |
| Total liabilities and stockholders' equity | $477,178 | $476,027 |