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
LAKE FOREST, Calif., Nov. 9, 2010 (GLOBE NEWSWIRE) -- 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.
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 . 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 .
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.
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