Board of Directors Declares $0.04 Per Share Cash
Dividend
Primoris Services Corporation (NASDAQ:PRIM):
Financial Highlights
- 2014 revenues of $2,086 million, a 7.3%
increase over 2013 revenues and the first time Primoris has
exceeded the $2 billion mark
- 2014 net income attributable to
Primoris of $63.2 million, a 9.3% decrease over 2013 net income
attributable to Primoris
- A record tangible net worth of $294.8
million at December 31, 2014
- A record total backlog of $2.0 billion
at December 31, 2014
- A 2.6% increase over 2013’s year-end
$1.9 billion backlog and
- An 11.0% sequential quarterly increase
over third quarter 2014’s $1.8 billion backlog
Primoris Services Corporation (NASDAQ GS: PRIM)
(“Primoris” or “Company”) today announced financial results for its
fourth quarter and year ended December 31, 2014.
The Company also announced that on February 24, 2015, its Board
of Directors declared a $0.04 per share cash dividend to
stockholders of record on March 31, 2015, payable on or about April
15, 2015.
Following the close of the fourth quarter 2014, the Company
entered into the following two agreements:
- The Company announced today that it is
acquiring the assets of Aevenia, an energy and electrical
construction company. The details of the acquisition are outlined
in a separate press release.
- The Company settled the North Texas
Tollway Authority (“NTTA”) lawsuit. The agreement settles all
claims and disputes related to 1999 work on the George Bush
Turnpike.
Brian Pratt, Chairman, President and Chief Executive Officer of
Primoris, commented, “When we went public in 2008, had you told me
that just six years later we would earn over $2 billion in revenues
and $1.22 per share in net income, I would have been thrilled. Our
balance sheet is as strong as ever, we own a construction fleet of
several thousand units, and our backlog is at an all-time high of
$2 billion. These are all things of which I am inordinately proud.
The growth Primoris has experienced is a testament to the hard work
of our outstanding employees.”
Mr. Pratt continued, “We are all disappointed with our fourth
quarter performance, which was below our expectations and below
last year’s fourth quarter results, and caused a reduction in net
income from the previous year. For the quarter, our overall revenue
was down, but more disappointing was the challenge we faced with
our margins. Some of our margins were down as a result of the mix
of jobs in the quarter, a factor that we cannot control. Where we
do have control, we are making or have made changes that we expect
will improve our performance. No one is more frustrated than I am
when we don’t perform to the level of excellence I expect of us. We
do not expect that the results from the fourth quarter are
indicative of our expectations for the coming years. The demand for
improved and expanded oil & gas and petrochemical
infrastructure, the need for new power generation that meets the
increasing environmental regulations, these are all continuing to
drive multi-year demand for our services.”
2014 FOURTH QUARTER RESULTS
OVERVIEW
Revenues in the fourth quarter 2014 decreased by $50.3 million
to $487.6 million from $537.9 million for the same period in 2013.
The decreased revenues were mainly due to decreases in the West
Construction Services segment. Gross profit for the fourth quarter
2014 declined by $25.3 million to $49.6 million from $74.9 million
for the same period in 2013. The decline in gross margin was due to
decreases in both the West and the East Construction Services
segments.
SEGMENT RESULTS
In the third quarter 2014, 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 segment
operations have been retrospectively reclassified throughout this
press release to reflect the new operating segments.
- West Construction
Services (“West segment”) – The West 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 (“East segment”) – The East segment includes the
James Construction Group (“JCG”) Heavy Civil division, the JCG
Infrastructure and Maintenance division, BW Primoris, and Cardinal
Contractors, located primarily in the southeastern United States
and in the Gulf Coast region of the United States, and performs
heavy civil construction, infrastructure, and maintenance
operations.
- Energy (“Energy
segment”) – 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 December 31, 2014
2013 Unaudited Unaudited % of %
of Total Total Segment
Revenue Revenue Revenue Revenue
West $ 216,270 44.4 % $ 323,191 60.1 % East 128,951 26.4 % 114,221
21.2 % Energy
142,371 29.2
% 100,467 18.7
% Total $
487,592 100.0
% $ 537,879
100.0 %
Segment Gross
Profit
(in thousands,
except %)
For the three months ended December 31, 2014
2013 Unaudited Unaudited % of %
of Gross Segment Gross Segment
Segment Profit Revenue
Profit Revenue West $ 27,745 12.8 % $ 57,551
17.8 % East 1,154 0.9 % 4,734 4.1 % Energy
20,717 14.6 %
12,632 12.6 % Total
$
49,616 10.2 % $
74,917 13.9 %
West Segment: Revenues in the West segment decreased by
$106.9 million in the fourth quarter 2014 compared to the fourth
quarter 2013, driven largely by declines at the ARB Industrial
division and Rockford, somewhat offset by a revenue increase at
Q3C. The ARB Industrial division saw revenues decrease by $44.5
million, primarily reflecting the impact of a large power project
in 2013 and a solar project that was substantially completed
earlier in 2014. Rockford revenues decreased by $70.8 million, as a
new pipeline project that began in fourth quarter 2013 was
completed prior to fourth quarter 2014 and revenues from gathering
line projects decreased. Revenues at Q3C increased by $7.5 million
largely due to increased work for a large utility customer. Gross
profit for the West segment decreased by $29.8 million in the
fourth quarter 2014 compared to the fourth quarter 2013, primarily
due to declines at ARB and Rockford, somewhat offset by increased
gross margin at ARB Structures. Gross profit at ARB decreased both
as a result of lower revenues and due to the closeout of a major
power plant and substantial completion of the Blythe joint venture
in 2013. Gross profit at Rockford decreased mainly as a result of
lower revenues.
East Segment: Revenues in the East segment increased by
$14.7 million in the fourth quarter 2014 compared to the fourth
quarter 2013, driven primarily by increases at the JCG Heavy Civil
division. The increased JCG Heavy Civil division revenue was
largely driven by increased revenues from TXDOT and MS
Transportation Commission. The gross profit for the East segment
decreased by $3.6 million in the quarter, due largely to the costs
associated with the settlement of the NTTA lawsuit and due to a
lower gross margin realized on TXDOT projects as we adjusted
several Belton jobs to reflect the impact of inefficiencies caused
by delays in obtaining rights of way.
Energy Segment: Revenues in the Energy segment increased
by $41.9 million in the fourth quarter 2014 compared to the fourth
quarter 2013 as a result of widespread increases across the various
Energy segment subsidiaries. PES JCG Industrial division increased
revenues by $13.2 million primarily from work at petrochemical
projects in Louisiana. OnQuest increased revenues by $12.4 million,
primarily from two Liquefied Natural Gas micro plant projects.
Primoris Pipelines Services increased revenues by $8.1 million. The
third quarter 2014 acquisitions of Surber and Ram-Fab combined to
add $4.3 million in revenues in the fourth quarter 2014. The gross
profit for Energy increased by $8.1 million in the quarter, due
both to the increased revenues and also increased profitability at
the PES JCG Industrial division and PES Saxon.
OTHER INCOME STATEMENT
INFORMATION
Selling, general and administrative expenses (“SG&A”) were
$33.2 million, or 6.8% of revenues for the 2014 fourth quarter,
compared to $34.1 million, or 6.3% of revenues for the 2013 fourth
quarter. The decrease in SG&A for the quarter is due primarily
to the higher expenses incurred in the prior year from the
impairment of the WesPac joint venture and the impairment of the
FSSI intangible assets.
Operating income for the 2014 fourth quarter was $16.5 million,
or 3.4% of total revenues, compared to $40.8 million, or 7.6% of
total revenues, for the same period last year.
Net non-operating items in the 2014 fourth quarter resulted in
expenses of $1.6 million, compared to $0.6 million in net expenses
in the 2013 fourth quarter. Included in the prior year fourth
quarter 2013 items was a $6.5 million reduction in the liability
for contingent earn-outs as a result of several acquisitions not
meeting performance targets, offset by $4.9 million of losses for
the WesPac joint venture.
The provision for income taxes for the 2014 fourth quarter was
$5.8 million, for an effective tax rate on income attributable to
Primoris of 39.5%, compared to $14.6 million, for an effective tax
rate on income attributable to Primoris of 39.4%, in the 2013
fourth quarter.
Net income attributable to Primoris for the 2014 fourth quarter
was $8.9 million, or $0.17 per diluted share, compared to net
income attributable to Primoris of $22.5 million, or $0.44 per
diluted share, in the same period in 2013.
Fully diluted weighted average shares outstanding for the 2014
fourth quarter increased slightly to 51.71 million from 51.67
million in 2013’s fourth quarter. The increase in shares was due to
shares issued to certain senior managers and executives as part of
the Primoris Long-Term Retention Plan and as compensation to the
non-employee members of the Board of Directors. The increase in
shares was offset by the repurchase of 100,000 shares by the
Company in August 2014.
2014 FULL YEAR RESULTS
OVERVIEW
Segment
Revenues
(in thousands,
except %)
For the twelve months ended December
31, 2014 2013 Unaudited Unaudited
% of % of Total Total
Segment Revenue Revenue
Revenue Revenue West $ 964,093 46.2 % $
1,151,433 59.2 % East 489,926 23.5 % 430,438 22.1 % Energy
632,175 30.3 % 362,349 18.7 % Total $ 2,086,194 100.0 % $
1,944,220 100.0 %
Segment Gross
Profit
(in thousands,
except %)
For the twelve months ended December 31, 2014
2013 Unaudited Unaudited % of %
of Gross Segment Gross Segment
Segment Profit Revenue
Profit Revenue West $ 143,468 14.9 % $ 190,747
16.6 % East 25,749 5.3 % 24,309 5.6 % Energy 66,823
10.6
%
40,959 11.3 % Total $ 236,040 11.3 % $ 256,015 13.2 %
OTHER FINANCIAL
INFORMATION
Primoris’ balance sheet at December 31, 2014, included cash,
cash equivalents, and short-term investments of $170.5 million,
working capital of $261.1 million, total debt and capital leases of
$245.2 million and stockholders’ equity of $453.8 million.
Primoris’ tangible net worth at December 31, 2014, was $294.8
million. The balance sheet included a $6.9 million liability
representing the estimated fair value earnout payments for the
financial performance of the Q3C, Vadnais, Surber, and Ram-Fab
acquisitions.
BACKLOG
Backlog at December 31, 2014 (in millions) Segment
Fixed Backlog MSA Backlog Total Backlog West $ 237 $ 396 $
633 East 1,010 4 1,014 Energy 301 45
346 Total $ 1,548 445 1,993
At December 31, 2014, Fixed Backlog was $1.55 billion, compared
to $1.48 billion at December 31, 2013. During 2014,
approximately $489.6 million of revenue was recognized by non-Fixed
Backlog projects.
At December 31, 2014, MSA Backlog was $444.9 million, compared
to $460.3 million at December 31, 2013. As previously discussed,
MSA Backlog represents estimated MSA revenue for the next four
quarters.
Total Backlog at December 31, 2014, was $1.99 billion, compared
to $1.94 billion at December 31, 2013. We expect that during the
next four quarters, we will recognize as revenue approximately 100%
of the West segment Total Backlog, approximately 40% of the East
segment Total Backlog, and approximately 95% 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.
FORM 10-K
Starting in the fourth quarter of 2014 and through the date of
this release, the Company’s management, independent outside counsel
and the Audit Committee of the Board of Directors have spent
considerable time and resources reviewing and analyzing various
issues relating to the methods used by the Company’s subsidiaries
to recognize revenues and estimate contingencies for ongoing
projects. The review is not yet completed, but based on the results
to date, the Company does not anticipate any adjustments to its
previously reported financial results. The Company is unable to
determine at this time whether the results of the review will
indicate that its internal controls over financial reporting were
operating effectively or the impact of the review on the Company’s
annual report on internal control over financial reporting included
in the Form 10-K. As permitted by the Securities and Exchange
Commission rules, the Company is extending the filing date of its
Annual Report on Form 10-K for the year ended December 31, 2014,
until March 17, 2015.
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, March 3, 2015,
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 13602654, 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'
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, as updated through the Quarterly Report on Form 10-Q for the
period ended September 30, 2014, 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.
CONDENSED CONSOLIDATED STATEMENTS OF
INCOME (In Thousands, Except Per Share Amounts)
(Unaudited) Three Months Ended Twelve
Months Ended, December 31, December 31,
2014 2013
2014 2013 Revenues $
487,592 $ 537,879 $ 2,086,194 $ 1,944,220 Cost of revenues
437,976 462,962 1,850,154
1,688,205 Gross profit 49,616 74,917 236,040 256,015
Selling, general and administrative expenses 33,161
34,121 132,248 130,778
Operating income 16,455 40,796 103,792 125,237 Other income
(expense): Income (loss) from non-consolidated entities - (5,005 )
5,264 (4,836 ) Foreign exchange gain (loss) 300 150 374 153 Other
income (expense) (115 ) 5,613 (757 ) 4,804 Interest income 8 15 88
110 Interest expense (1,791 ) (1,391 ) (6,433
) (5,892 ) Income before provision for income taxes 14,857
40,178 102,328 119,576 Provision for income taxes
(5,833 ) (14,624 ) (38,646 ) (44,896 ) Net
income 9,024 25,554 63,682 74,680 Net income attributable to
noncontrolling interests (94 ) (3,073 ) (526 ) (5,020 ) Net
income attributable to Primoris 8,930 22,481 63,156 69,660
Dividends per common share $ 0.035 $ 0.035 $ 0.150 $ 0.135
Earnings per share attributable to Primoris: Basic: $ 0.17 $
0.44 $ 1.22 $ 1.35 Diluted: $ 0.17 $ 0.44 $ 1.22 $ 1.35
Weighted average common shares outstanding: Basic
51,561 51,571 51,607 51,540 Diluted 51,710
51,671 51,747
51,610
CONDENSED CONSOLIDATED
BALANCE SHEETS (In Thousands, Except Share Amounts)
(Unaudited) December 31, December 31,
2014 2013 ASSETS Current assets:
Cash and cash equivalents $ 139,465 $ 196,077 Short-term
investments 30,992 18,686 Customer retention deposits and
restricted cash 481 5,304 Accounts receivable, net 337,382 304,955
Costs and estimated earnings in excess of billings 68,654 57,146
Inventory and uninstalled contract materials 58,116 51,829 Deferred
tax assets 13,555 13,133 Prepaid expenses and other current assets
31,720 12,654 Total current assets 680,365
659,784 Property and equipment, net 271,431 226,512 Intangible
assets, net 39,581 45,303 Goodwill 119,410 118,626 Other long-term
assets 400 468 Total assets $ 1,111,187
$ 1,050,693
LIABILITIES AND STOCKHOLDERS’
EQUITY Current liabilities: Accounts payable $ 128,793 $
127,302 Billings in excess of costs and estimated earnings 158,595
173,365 Accrued expenses and other current liabilities 83,401
91,079 Dividends payable 2,062 1,805 Current portion of capital
leases 1,650 3,288 Current portion of long-term debt 38,909 28,475
Current portion of contingent earnout liabilities 5,901
5,000 Total current liabilities 419,311 430,314
Long-term capital leases, net of current portion 657 2,295
Long-term debt, net of current portion 204,029 191,051 Deferred tax
liabilities 19,484 10,092 Long-term contingent earnout liabilities,
net of current portion 1,021 4,233 Other long-term liabilities
12,899 14,260 Total liabilities 657,401
652,245 Stockholders’ equity Common stock 5 5
Additional paid-in capital 160,186 159,196 Retained earnings
293,628 238,216 Noncontrolling interests (33
)
1,031 Total stockholders’ equity 453,786
398,448 Total liabilities and stockholders’ equity $
1,111,187 $ 1,050,693
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS (In Thousands)
(Unaudited) Twelve Months Ended, December
31, 2014 2013 Cash flows from operating
activities: Net income $ 63,682 $ 74,680 Adjustments to reconcile
net income to net cash provided by (used in) operating activities:
Depreciation 50,918 42,421 Amortization of intangible assets 7,504
7,467 Intangible asset impairment — 808 Stock-based compensation
expense 934 367 Loss (gain) on sale of property and equipment
(1,895 ) (1,406 ) (Income) loss from non-consolidated entities
(5,264 ) (97 ) Impairment expense for non-consolidated entities —
4,932
Other than temporary basis difference for
non-consolidated entities
— 3,975 Distributions received from non-consolidated entities —
2,821 Net deferred tax liabilities (assets) 8,970 (12,582 ) Changes
in assets and liabilities: Customer retention deposits and
restricted cash 4,823 30,073 Accounts receivable (29,659 ) (36,860
) Costs and estimated earnings in excess of billings (11,508 )
(15,445 ) Other current assets (25,767 ) (14,774 ) Other long term
assets 72 — Accounts payable 921 (25,131 ) Billings in excess of
costs and estimated earnings (14,770 ) 14,473 Contingent earnout
liabilities (4,145 ) (14,900 ) Accrued expenses and other current
liabilities (7,354 ) 15,824 Other long-term liabilities
(1,361 ) 1,107 Net cash provided by operating
activities 36,101 77,753 Cash flows
from investing activities: Purchase of property and equipment
(87,954 ) (87,050 ) Proceeds from sale of property and equipment
5,814 7,865 Purchase of short-term investments (33,770 ) (23,110 )
Sale of short-term investments 21,464 7,448
Cash received from the sale of equity
method investments
6,439 -- Cash paid for acquisitions (14,596 ) (2,273
) Net cash used in investing activities (102,603 )
(97,120 ) Cash flows from financing activities: Proceeds from
issuance of long-term debt 58,519 107,609 Repayment of capital
leases (3,276 ) (4,618 ) Repayment of long-term debt (35,107 )
(35,896 ) Repayment of subordinated debt — — Purchase of Unit
Purchase Option — — Proceeds from issuance of common stock
purchased by management under long-term incentive plan 1,671 1,455
Cash distribution to non-controlling interest holder (1,590 )
(5,500 ) Repurchase of common stock (2,844 ) — Dividends paid
(7,483 ) (5,157 ) Net cash provided by (used in)
financing activities 9,890 57,893
Net change in cash and cash equivalents (56,612 ) 38,526
Cash and cash equivalents at beginning of year 196,077
157,551 Cash and cash equivalents at
end of the year $ 139,465 $ 196,077
Primoris Services CorporationPeter J. Moerbeek,
214-740-5602Executive Vice President, Chief Financial
Officerpmoerbeek@prim.comorKate Tholking, 214-740-5615Director of
Investor Relationsktholking@prim.com
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