PRIMU Primoris Services - Units (MM)

Rhapsody Acquisition Corp. (NasdaqGM: PRIM; PRIMW; PRIMU), which on July 31, 2008 completed a merger with Primoris Corporation (�Primoris�), one of the largest specialty contractors and engineering companies in the Western United States primarily serving the growing power and energy sectors, today announced that it filed a Form 8-K/A with the Securities and Exchange Commission that includes Primoris�s financial results for the three and six months ended June 30, 2008 (see attached tables) and Primoris�s financial results for the years ended December 31, 2007, 2006 and 2005, which annual results were recast for informational purposes solely to reflect a change from five reportable operating segments to two reportable operating segments: �Construction Services� and �Engineering.� The Company also announced that its Board of Directors has declared a $0.025 per share cash dividend to stockholders of record as of September 23, 2008. Brian Pratt, the Chairman, President and Chief Executive Officer of the Company, commented, �We are pleased with Primoris�s results for the second quarter of 2008 and for the first half of the year. Growth in both of Primoris�s reportable segments continues to reflect a strong demand for its services. We remain optimistic about the Company�s outlook, given the strength of its end markets, an elevated profile from Primoris�s newly-obtained public company status, a fortified balance sheet, and an industry reputation that spans more than 60 years.� Consolidated 2008 Second Quarter Results Primoris�s revenues for the second quarter of 2008 rose 29.2% to $142.4 million from $110.2 million for the second quarter of 2007. Both the Construction Services and Engineering segments generated higher revenues compared to the second quarter of 2007, with the improvement for the 2008 second quarter due primarily to an increase in refining industry projects, as well as work performed on an alliance agreement entered into in November 2007, partially offset by a decrease in Underground group revenue within the Construction Services segment, primarily due to more selective bidding of water and sewer projects in the second quarter of 2008. Gross profit rose 18.2% to $14.6 million from $12.4 million for the same period last year, primarily as a result of an increase in volume in the Construction Services segment and an increase in revenue in the Engineering segment. Gross profit as a percentage of revenues declined to 10.3% from 11.2% for the second quarter of 2007, due primarily to lower gross profit in the Engineering segment. Operating income for the second quarter of 2008 rose 42.9% to $8.0 million, or 5.6% of total revenues, from operating income of $5.6 million, or 5.1 % of total revenues, for the same period last year. Improved operating income was primarily the result of higher revenues and gross profit, partially offset by an increase in selling, general and administrative expenses. Other income for the second quarter of 2008 was $1.2 million compared to other income of $0.4 million for the second quarter of 2007, due primarily to income from the Otay Mesa Power Partners joint venture, an energy plant construction project in California which is anticipated to be completed in 2009. Income before provision for income taxes for the second quarter of 2008 was $9.0 million compared to income before provision for income taxes of $5.9 million for the second quarter of 2007. Prior to the completion of the merger with Rhapsody on July 31, 2008, Primoris had been taxed under Subchapter S of the Internal Revenue Code. Following the merger, the Company will be taxed under Subchapter C of the Internal Revenue Code. As a result of this change, the Company expects to incur an effective tax rate of approximately 40%. Net income for the second quarter of 2008 increased 52.7% to $8.8 million from net income of $5.7 million for the same period last year. EBITDA from continuing operations for the three months ended June 30, 2008 increased 49.1% to $10.7 million from EBITDA of $7.2 million for the three months ended June 30, 2007. EBITDA as a percentage of revenue increased to 7.5% during the 2008 second quarter from 6.5% during the 2007 second quarter. Construction Services The �Construction Services� segment consists of Primoris�s Underground, Industrial, Structures, and Water and Wastewater groups, and specializes in: installing, replacing and repairing underground piping and transmission cables; retrofits, upgrades, repairs, and maintenance of industrial plants and facilities; the design and construction of water and wastewater treatment facilities; and the design and construction of complex commercial and industrial concrete structures. Construction Services revenues for the second quarter of 2008 increased 27.5% to $120.3 million from $94.4 million for the second quarter of 2007, due primarily to increased refining industry work. Construction Services gross profit rose 22.3% to $13.2 million, or 11.0% of revenue, from $10.8 million, or 11.4% of revenue, for the second quarter of 2007. The rise in gross profit was due to higher revenue due to increased volume. Engineering The �Engineering� segment specializes in designing, supplying, and installing high-performance furnaces, heaters, burner management systems, and related combustion technologies for clients in the oil refining, petrochemical and power generation industries. Engineering revenues increased 39.6% to $22.1 million for the second quarter of 2008 from $15.8 million for the second quarter of 2007, due primarily to entry into an alliance agreement with a client in November 2007, as well as an expansion in the refinery sector. Engineering gross profit was $1.4 million, or 6.5% of revenues, for the second quarter of 2008 compared to $1.6 million, or 10% of revenues, for the second quarter of 2007. The 9.7% decline in gross profit was due to lower profitability on a new project, as anticipated. Primoris expects the profitability in this segment to generally increase back to historical levels. Other Financial Data Primoris�s balance sheet at June 30, 2008 reflected cash and cash equivalents of $80.3 million, working capital of $51.3 million, total debt of $27.9 million and stockholders� equity of $53.6 million. Primoris generated $27.3 million and $40.8 million in operating cash flow for the three and six months ended June 30, 2008, respectively. Use of EBITDA EBITDA is a supplemental, non-generally accepted accounting principle (GAAP) financial measure. Primoris uses EBITDA (earnings before net interest, income taxes, depreciation and amortization) as part of its overall assessment of financial performance by comparing EBITDA between accounting periods. Primoris believes that EBITDA will be used by the financial community as a method of measuring its performance and of evaluating the market value of companies considered to be in similar businesses. Since EBITDA is not a measure of performance calculated in accordance with GAAP, it should not be considered in isolation from, or as a substitute for, net earnings as an indicator of operating performance. EBITDA, as Primoris calculates it, may not be comparable to similarly titled measures employed by other companies. In addition, this measure is not necessarily a measure of Primoris�s ability to fund its cash needs. As EBITDA excludes certain financial information that would be included in net income (loss), the most directly comparable GAAP financial measure, users of this financial information should consider the type of material events and transactions that are excluded from EBITDA, and the material limitations of EBITDA, such as: EBITDA does not include net interest expense. Because Primoris has borrowed money to finance its operations, interest expense is a necessary and ongoing part of its costs and has assisted Primoris in generating revenue; EBITDA does not include taxes, although payment of taxes is a necessary and ongoing part of Primoris�s operations; and EBITDA does not include depreciation and amortization expense. Because Primoris uses capital assets to generate revenue, depreciation and amortization expense is a necessary element of its cost structure. In light of the above limitations, Primoris has provided a reconciliation of EBITDA from continuing operations to net income from continuing operations below. About the Company Headquartered in Lake Forest, California, the Company is a holding company of various subsidiaries which cumulatively form one of the largest specialty contractors and engineering companies in the Western United States, primarily serving the growing power and energy sectors. The Company 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. The Company is also a leading water and wastewater contractor in Florida, and a specialist in designing and constructing complex commercial and industrial concrete structures in California. Forward-Looking Statements This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, which statements generally include the plans and objectives of management for future operations, including plans and objectives relating to the Company�s future economic performance and the Company�s current beliefs regarding revenues the Company might earn if demand for its services remains strong and it is successful in implementing its business strategies. The forward-looking statements are based on current expectations or beliefs. For this purpose, statements of historical fact may be deemed to be forward-looking statements. Forward-looking statements include statements which are predictive in nature, which depend upon or refer to future events or conditions, or which include words such as �continue,� �efforts,� �expects,� �anticipates,� �intends,� �plans,� �believes,� �estimates,� �projects,� �forecasts,� �strategy,� �will,� �goal,� �target,� �prospects,� �optimistic,� �confident� or similar expressions. In addition, any statements concerning future financial performance (including future revenues, gross profit, and earnings, growth and tax rates), on-going business strategies or prospects, payment of a dividend, and possible future Company actions, that may be provided by management, are also forward-looking statements. The Company cautions that these statements by their nature involve risks and uncertainties, and actual results may differ materially depending on a variety of important factors, including level of demand for the Company�s services, conditions in the power and energy sectors and other sectors within which the Company provides services, the availability of a legal source of funds for the payment of a dividend, and other factors described in this press release and/or detailed in the �Risk Factors� sections and other portions of the Company�s filings with the Securities and Exchange Commission. The Company undertakes no obligation to revise or update publicly any forward-looking statement for any reason, except as may otherwise be required under applicable securities laws. CONSOLIDATED STATEMENTS OF INCOME ($ in thousands) (unaudited) � � Three Months Ended Six Months Ended June 30, � June 30, June 30, � June 30, 2008 2007 2008 2007 � � Revenues $ 142,444 $ 110,211 $ 311,835 $ 224,048 Cost of revenues � 127,810 � � 97,833 � � 280,988 � � 201,917 � Gross profit 14,634 12,378 30,847 22,131 � Selling, general and administrative expenses � 6,622 � � 6,773 � � 14,623 � � 13,399 � � Operating income 8,012 5,605 16,224 8,732 � � Other income (expense): � Income from non-consolidated entities 1,204 370 3,027 770 Foreign exchange gain (loss) (41 ) (15 ) (22 ) (40 ) Interest income 374 399 983 786 Interest expense � (521 ) � (435 ) � (1,207 ) � (887 ) Income before provision for income taxes 9,028 5,924 19,005 9,361 � Provision for income taxes � (259 ) � (180 ) � (454 ) � (374 ) Net income 8,769 5,744 18,551 8,987 CONSOLIDATED BALANCE SHEET (unaudited) ($ in thousands) � � June 30, December 31, 2008 2007 ASSETS � Current assets: Cash and cash equivalents $ 80,272 $ 62,966 Restricted cash 9,203 9,984 Accounts receivable, net 83,275 113,307 Costs and estimated earnings in excess of billings 18,914 11,085 Inventory 2,269 2,458 Prepaid expenses and other current assets � 1,913 � 1,793 Total current assets 195,846 201,593 Property and equipment, net 23,613 16,143 Other assets 430 922 Investment in non-consolidated joint ventures 1,811 -- Other intangible assets, net 70 88 Goodwill � 2,485 � 2,227 Total assets $ 224,255 $ 220,973 � � LIABILITIES AND STOCKHOLDERS� EQUITY � Current liabilities: Accounts payable $ 53,264 $ 66,792 Billings in excess of costs and estimated earnings 66,223 54,143 Accrued expenses and other current liabilities 18,488 18,215 Distributions payable -- 6,115 Current portion of capital leases 1,888 892 Current portion of long-term debt � 4,670 � 3,966 Total current liabilities 144,533 150,123 Long-term debt, net of current portion 23,254 21,433 Long-term capital leases, net of current portion 1,582 1,208 Other long-term liabilities � 1,315 � 1,286 Total liabilities � 170,684 � 174,050 � Stockholders� equity Additional paid-in capital 1,307 1,307 Retained earnings 52,161 45,513 Accumulated other comprehensive income � 103 � 103 Total stockholders� equity � 53,571 � 46,923 Total liabilities and stockholders� equity $ 224,255 $ 220,973 SELECTED SEGMENT DATA (unaudited) ($ in thousands) � � Three Months Ended Six Months Ended June 30, June 30, 2008 � 2007 2008 � 2007 � Construction Services: Revenue $ 120,329 $ 94,364 $ 266,696 $ 192,989 Gross profit $ 13,206 $ 10,793 $ 27,999 $ 19,354 Gross profit margin 11.0 % 11.4 % 10.5 % 10.0 % � � Engineering: Revenue $ 22,115 $ 15,847 $ 45,138 $ 31,059 Gross profit $ 1,431 $ 1,585 $ 2,848 $ 2,777 Gross profit margin 6.5 % 10.0 % 6.3 % 8.9 % RECONCILIATION OF NON-GAAP FINANCIAL MEASURE A reconciliation of EBITDA from continuing operations to net income from continuing operations is provided below: � Three Months Ended � Six Months Ended June 30, June 30, 2008 � 2007 2008 � 2007 Net income from continuing operations $ 8,769 $ 5,744 $ 18,551 $ 8,987 Interest, net 147 36 224 101 Provision for income taxes 259 180 454 374 Depreciation and amortization � 1,538 � 1,225 � 2,985 � 2,417 � EBITDA from continuing operations $ 10,713 $ 7,185 $ 22,214 $ 11,879