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Feb 26, 2018

Primoris Services Corporation Announces 2017 Fourth Quarter and Full Year Financial Results

Board of Directors Declares $0.06 Per Share Cash Dividend

Financial Highlights

  • 2017 net income attributable to Primoris of $72.4 million, or $1.40 per fully diluted share, compared to $26.7 million, or $0.51 per fully diluted share, in 2016
  • 2017 Q4 net income attributable to Primoris of $22.5 million, or $0.44 per fully diluted share, compared to $14.5 million, or $0.28 per fully diluted share, in 2016 Q4
  • As a result of a tax law change, we remeasured our deferred tax assets and liabilities, which provided a one-time benefit of $9.4 million for the three months and year ended December 31, 2017, or $0.18 per fully diluted share
  • 2017 revenues of $2.4 billion, compared to $2.0 billion in 2016
  • 2017 Q4 revenues of $579.0 million, compared to $601.9 million in 2016 Q4
  • Total backlog of $2.60 billion at December 31, 2017
  • Cash balance of $170.4 million at December 31, 2017
  • Record 2017 cash flow from operations of $188.9 million, compared to $62.6 million in 2016

DALLAS, Feb. 26, 2018 (GLOBE NEWSWIRE) -- Primoris Services Corporation(NASDAQ:PRIM) (“Primoris” or “Company”) today announced financial results for its fourth quarter and year ended December 31, 2017.

The Company also announced that on February 21, 2018 its Board of Directors declared a $0.06 per share cash dividend to stockholders of record on March 30, 2018, payable on or about April 13, 2018. 

David King, President and Chief Executive Officer of Primoris, commented, “Primoris continued delivering solid results, reaching company record revenues and earnings for the year.  Strong execution on pipeline and petrochemical projects, aided by growing MSA revenue and new acquisitions, gave us financial improvements in all four of our operating segments.  We are pleased to see our revenue break well past the $2 billion.  We continue to focus on our solid principals of safety, quality, superior execution, and dependable results.  We believe the strength of our backlog combined with considerable future project opportunities will drive continued growth.”

Mr. King continued, “As we have focused on recurring revenue, our MSA backlog has grown to an all-time high.  Our MSAs will provide a baseline revenue stream while we pursue additional avenues of growth.  While burning revenue at record levels, our backlog growth has been lumpy; however, our December 31, 2017 backlog has grown by 24% over the past two years.  We expect the large diameter pipeline market to continue its strength in 2018 and into the next several years.  We also expect growth opportunities in 2018 from renewable power, small diameter pipeline, industrial, and mid-scale EPC projects.  We are confident in our ability to compete in diverse end markets so that we can build on the success of 2017.”

2017 FOURTH QUARTER RESULTS OVERVIEW

Revenues in the fourth quarter 2017 decreased by $22.9 million, or 3.8%, to $579.0 million from $601.9 million for the same period in 2016.  The decreased revenues were primarily due to a decrease in the Pipeline & Underground segment as we reached substantial completion on two Florida pipeline projects in the second quarter 2017.  Gross profit for the fourth quarter 2017 decreased by $0.1 million, or 0.2%, to $68.5 million from $68.6 million for the same period in 2016.  The decrease in gross profit was due primarily due to decreased revenues in the Pipeline & Underground segment.  Gross profit as a percentage of revenue increased to 11.8% in the fourth quarter 2017, compared to 11.4% for the same period in 2016.  The increased profitability was due to improved margins in the Pipeline & Underground and Civil segments.

SEGMENT RESULTS

In the first quarter 2017, Primoris changed its reportable segments to match the changes in the Company’s realigned internal organization and management structure.  A Form 8-K was filed on April 7, 2017 containing historical revenue, margin, and backlog information for the new segments.

  • Power, Industrial, and Engineering (“Power”) - The Power segment operates throughout the United States and specializes in a range of services that include full EPC project delivery, turnkey construction, retrofits, upgrades, repairs, outages, and maintenance for entities in the petroleum, petrochemical, water, and other industries.
  • Pipeline and Underground (“Pipeline”) – The Pipeline segment operates throughout the United States and specializes in a range of services, including pipeline construction, pipeline maintenance, pipeline facility work, compressor stations, pump stations, metering facilities, and other pipeline-related services for entities in the petroleum and petrochemical industries.
  • Utilities and Distribution (“Utilities”) – The Utilities segment operates primarily in California and the Midwest and Southeast regions of the United States and specializes in a range of services, including utility line installation and maintenance, gas and electric distribution, streetlight construction, substation work, and fiber optic cable installation.
  • Civil – The Civil segment operates primarily in the Southeast and Gulf Coast regions of the United States and specializes in highway and bridge construction, airport runway and taxiway construction, demolition, heavy earthwork, soil stabilization, mass excavation, and drainage projects.

Segment Revenues
(in thousands, except %)
(unaudited)

    For the three months ended December 31, 
    2017     2016  
          % of         % of
          Total         Total
Segment   Revenue   Revenue   Revenue   Revenue
Power   $   162,934   28.1 %   $   111,628   18.4 %
Pipeline       63,145   10.9 %       184,749   30.7 %
Utilities       230,077   39.8 %       189,354   31.5 %
Civil       122,861   21.2 %       116,132   19.4 %
Total   $   579,017   100.0 %   $   601,863   100.0 %



Segment Gross Profit
(in thousands, except %)
(unaudited)

    For the three months ended December 31, 
    2017     2016  
          % of         % of
          Segment         Segment
Segment   Gross Profit   Revenue   Gross Profit   Revenue
Power   $   13,177   8.1 %   $   13,237     11.9 %
Pipeline       12,512   19.8 %       24,230     13.1 %
Utilities       36,336   15.8 %       31,420     16.6 %
Civil       6,452   5.3 %       (271 )   (0.2 %)
Total   $   68,477   11.8 %   $   68,616     11.4 %

Power, Industrial, & Engineering Segment:  Revenues in the Power segment increased by $51.3 million in the fourth quarter 2017, compared to the same period in 2016.  The increase in revenues was primarily due to increases from two power plant projects as well as increased renewables revenue.  Segment gross profit decreased by $0.1 million in the fourth quarter 2017, compared to the same period in 2017, primarily from a petrochemical plant that achieved substantial completion in the second quarter 2017, partially offset by increased gross profit from the two power plant projects.  Gross profit as a percentage of revenues decreased to 8.1% in the fourth quarter 2017, compared to 11.9% in the same period in 2016.  The decline in gross profit as a percentage of revenues is primarily due to higher costs on a compressor substation project in the fourth quarter 2017.

Pipeline & Underground Segment Revenues in the Pipeline segment decreased by $121.6 million in the fourth quarter 2017, compared to the same period in 2016, primarily due to decreased revenues from two large pipeline projects that achieved substantial completion in the second quarter 2017. Segment gross profit in the Pipeline segment decreased by $11.7 million, primarily as the result of the decreased revenues.  Gross profit as a percentage of revenues increased to 19.8% in the fourth quarter 2017, compared to 13.1% in the same period in 2016.  The increase in gross profit as a percentage of revenues is primarily due to the completion of a pipeline project in West Texas and the rental of large diameter pipeline equipment to third parties in the fourth quarter 2017.  We do not expect profit margins for this segment to remain at this elevated level in 2018. 
   
Utilities & Distribution Segment:  Revenues in the Utilities segment increased by $40.7 million in the fourth quarter 2017, compared to the same period in 2016.  Approximately half of the increase came from increased revenues with California utilities, with increased revenues with Midwest utility customers and the second quarter 2017 acquisition of Florida Gas Contractors (now operating as Primoris Distribution Services) accounting for the remainder.  Segment gross profit increased by $4.9 million in the fourth quarter 2017, compared to the same period in 2016, primarily as a result of the increased revenues.  Gross profit as a percentage of revenues decreased to 15.8% in the fourth quarter 2017, compared to 16.6% in the same period in 2016. The decline in gross profit as a percentage of revenues is primarily due to an earlier start of winter weather in the fourth quarter 2017 compared to the fourth quarter 2016.

Civil Segment:  Revenues in the Civil segment increased by $6.7 million in the fourth quarter 2017, compared to the same period in 2016.  The increased revenues primarily came from Louisiana DOT and Houston area projects.  Segment gross profit increased by $6.7 million in the fourth quarter 2017, compared to the same period in 2016, primarily as the result of increased gross profit on Texas and Louisiana DOT projects. Gross profit as a percentage of revenues increased to 5.3% in the fourth quarter 2017, compared to (0.2%) in the same period in 2016. The increase in gross profit as a percentage of revenues is primarily due to the substantial completion of several challenging highway jobs in Texas and Arkansas.

OTHER INCOME STATEMENT INFORMATION

Selling, general and administrative expenses (“SG&A”) were $43.8 million, or 7.6% of revenues for the fourth quarter 2017, compared to $39.7 million, or 6.6% of revenues for the fourth quarter 2016.  The increase in SG&A for the quarter is primarily the result of increased SG&A from businesses acquired in 2017.

Operating income for the fourth quarter 2017 was $24.7 million, or 4.3% of total revenues, compared to $28.9 million, or 4.8% of total revenues, for the same period in 2016.

Net non-operating items in the fourth quarter 2017 resulted in net expenses of $1.1 million, compared to $2.3 million in net expenses in the fourth quarter 2016. 

As a result of the enactment of the Tax Cuts and Jobs Act in December 2017 and the requirement to remeasure deferred tax assets and liabilities using enacted tax rates, we recorded a one-time net tax benefit of $9.4 million in the fourth quarter 2017.  Excluding this one-time benefit, our provision for income taxes for the fourth quarter 2017 would have been $9.2 million, for an effective tax rate on income attributable to Primoris of 41.0%, compared to a provision for income taxes of $11.9 million, for an effective tax rate on income attributable to Primoris of 45.1%, in the fourth quarter 2016. 

Net income attributable to Primoris for the fourth quarter 2017 was $22.5 million, or $0.44 per diluted share, compared to $14.5 million, or $0.28 per diluted share, in the same period in 2016.  Excluding the one-time net tax benefit from the remeasurement of deferred tax assets and liabilities using enacted tax rates, net income attributable to Primoris for the fourth quarter 2017 would have been $13.1 million, or $0.25 per diluted share.

Fully diluted weighted average shares outstanding for the 2017 fourth quarter decreased slightly to 51.7 million from 52.0 million in the fourth quarter 2016.

2017 FULL YEAR RESULTS OVERVIEW

Segment Revenues
(in thousands, except %)
(unaudited)

    For the year ended December 31, 
    2017     2016  
          % of         % of
          Total         Total
Segment   Revenue   Revenue   Revenue   Revenue
Power   $   606,125   25.5 %   $   478,653   24.0 %
Pipeline       465,570   19.5 %       401,931   20.1 %
Utilities       806,523   33.9 %       637,212   31.9 %
Civil       501,777   21.1 %       479,152   24.0 %
Total   $   2,379,995   100.0 %   $   1,996,948   100.0 %



Segment Gross Profit
(in thousands, except %)
(unaudited)

    For the year ended December 31, 
    2017     2016  
          % of         % of
          Segment         Segment
Segment   Gross Profit   Revenue   Gross Profit   Revenue
Power   $   65,675   10.8 %   $   49,807     10.4 %
Pipeline       92,087   19.8 %       68,100     16.9 %
Utilities       113,037   14.0 %       100,071     15.7 %
Civil       7,635   1.5 %       (16,671 )   (3.5 %)
Total   $   278,434   11.7 %   $   201,307     10.1 %

OUTLOOK

Based on an expected second quarter 2018 start date for a major pipeline project in backlog, anticipated levels of customer maintenance, MSA spending, new project awards, and an expected corporate tax rate of 28%, the Company estimates that for the four quarters ending December 31, 2018, net income attributable to Primoris will be between $1.50 and $1.70 per fully diluted share.

BACKLOG

                    Expected Next Four
                    Quarters Total
  Backlog at December 31, 2017 (in millions)   Backlog Revenue
Segment Fixed Backlog   MSA Backlog   Total Backlog   Recognition
Power $ 382   $   41   $ 423     86 %
Pipeline   778     35     813     53 %
Utilities   58     681     739     100 %
Civil   606     18     624     55 %
Total $ 1,824   $ 775   $ 2,599     72 %

At December 31, 2017, Fixed Backlog was $1.82 billion, compared to $2.13 billion at December 31, 2016.

At December 31, 2017, MSA Backlog was $775 million, compared to $672 million at December 31, 2016.  During 2017, approximately $665 million of revenues was recognized from MSA projects, a 15.5% increase over 2016 MSA revenues.  MSA Backlog represents estimated MSA revenues for the next four quarters.

Total Backlog at December 31, 2017 was $2.60 billion, compared to $2.80 billion at December 31, 2016. 

Backlog, including estimated MSA revenues, should not be considered a comprehensive indicator of future revenues.  Revenue from certain projects, such as cost reimbursable and time-and-materials projects, do not flow through backlog.  At any time, any project may be cancelled at the convenience of our customers.

CONFERENCE CALL

David King, President and Chief Executive Officer, and Peter J. Moerbeek, Executive Vice President and Chief Financial Officer will host a conference call, Tuesday, February 27, 2018 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)

Presentation slides to accompany the conference call are available for download in the Investor Relations section of Primoris’ 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, a replay may be accessed by dialing (877) 660-6853, conference ID 13676786, 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.

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, 2017, 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.

Company Contact    
Peter J. Moerbeek    Kate Tholking
Executive Vice President, Chief Financial Officer   Director of Investor Relations
(214) 740-5602    (214) 740-5615
pmoerbeek@prim.com    ktholking@prim.com               
     


 
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In Thousands, Except Per Share Amounts)
(Unaudited)
 
    Three Months Ended    Year Ended
    December 31,   December 31,
    2017   2016   2017   2016
Revenue   $   579,017   $   601,863   $   2,379,995   $   1,996,948
Cost of revenue       510,540       533,247       2,101,561       1,795,641
Gross profit        68,477       68,616       278,434       201,307
Selling, general and administrative expenses        43,756       39,692       172,146       140,842
Impairment of goodwill       —       —       —       2,716
Operating income        24,721       28,924       106,288       57,749
Other income (expense):                        
Investment (loss) income       (249)       —       5,817       —
Foreign exchange gain (loss)       (46)       (86)       253       202
Other income (expense):       536       (37)       484       (315)
Interest income        176       27       587       149
Interest expense        (1,541)       (2,160)       (8,146)       (8,914)
Income before provision for income taxes        23,597       26,668       105,283       48,871
                         
Provision for income taxes        (9,151)       (11,902)       (37,795)       (21,146)
Income tax benefit from remeasurement under Tax Act       9,362       —       9,362       —
        211       (11,902)       (28,433)       (21,146)
Net income    $   23,808   $   14,766   $   76,850   $   27,725
                         
Less net income attributable to noncontrolling interests        (1,287)       (296)   $   (4,496)   $   (1,002)
                         
Net income attributable to Primoris    $   22,521   $   14,470   $   72,354   $   26,723
                         
Dividends per common share    $   0.060   $   0.055   $   0.225   $   0.220
                         
Earnings per share:                        
Basic    $   0.44   $   0.28   $   1.41   $   0.52
Diluted    $   0.44   $   0.28   $   1.40   $   0.51
Weighted average common shares outstanding:                        
Basic        51,449       51,771       51,481       51,762
Diluted        51,711       52,021       51,741       51,989
                         


 
CONDENSED CONSOLIDATED BALANCE SHEETS
(In Thousands)
(Unaudited)
 
    December 31,     December 31, 
    2017   2016
ASSETS            
Current assets:            
Cash and cash equivalents   $   170,385   $   135,823
Customer retention deposits       1,000       481
Accounts receivable, net       358,175       388,000
Costs and estimated earnings in excess of billings        160,092       138,618
Inventory and uninstalled contract materials        40,922       49,201
Prepaid expenses and other current assets        12,640       18,985
Total current assets        743,214       731,108
Property and equipment, net        311,777       277,346
Intangible assets, net        44,800       32,841
Goodwill        153,374       127,226
Other long-term assets        2,575       2,046
Total assets    $   1,255,740   $   1,170,567
LIABILITIES AND STOCKHOLDERS’ EQUITY            
Current liabilities:            
Accounts payable   $   140,943   $   168,110
Billings in excess of costs and estimated earnings       159,034       112,606
Accrued expenses and other current liabilities        107,754       108,006
Dividends payable        3,087       2,839
Current portion of capital leases        132       188
Current portion of long-term debt        65,464       58,189
Current portion of contingent earnout liabilities        716       —
Total current liabilities        477,130       449,938
Long-term capital leases, net of current portion        196       15
Long-term debt, net of current portion        193,351       203,150
Deferred tax liabilities       13,571       9,830
Other long-term liabilities        9,309       9,064
Total liabilities        693,557       671,997
Commitments and contingencies            
Stockholders’ equity            
Common stock       5       5
Additional paid-in capital        160,502       162,128
Retained earnings        395,961       335,218
Non-controlling interest        5,715       1,219
Total stockholders’ equity        562,183       498,570
Total liabilities and stockholders’ equity    $   1,255,740   $   1,170,567
             
             


CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
(Unaudited)
 
    Year Ended 
    December 31, 
    2017   2016
Cash flows from operating activities:            
Net income   $   76,850   $   27,725
Adjustments to reconcile net income to net cash provided by operating activities:            
Depreciation        57,614       61,433
Amortization of intangible assets       8,689       6,597
Goodwill and intangible asset impairment       477       2,716
Stock-based compensation expense       1,126       1,627
Gain on short-term investments       (5,817)       —
Gain on sale of property and equipment       (4,434)       (4,677)
Net deferred tax liabilities (assets)       3,741       10,905
Other non-cash items       203       174
Changes in assets and liabilities:            
Customer retention deposits       (519)       2,117
Accounts receivable       40,546       (65,806)
Costs and estimated earnings in excess of billings       (20,894)       (22,163)
Other current assets       16,976       17,491
Other long-term assets       28       (1,792)
Accounts payable       (30,547)       42,934
Billings in excess of costs and estimated earnings       45,981       (27,519)
Contingent earnout liabilities       (484)       —
Accrued expenses and other current liabilities       (972)       14,492
Other long-term liabilities       378       (3,677)
Net cash provided by operating activities       188,942       62,577
Cash flows from investing activities:            
Purchase of property and equipment       (79,782)       (58,027)
Proceeds from sale of property and equipment       8,736       9,603
Purchase of short-term investments       (13,588)       —
Sale of short-term investments       19,405       —
Cash paid for acquisitions       (66,205)       (10,997)
Net cash used in investing activities       (131,434)       (59,421)
Cash flows from financing activities:            
Proceeds from issuance of long-term debt        55,000       45,000
Repayment of capital leases       (322)       (793)
Repayment of long-term debt       (61,816)       (57,719)
Payment of debt issuance costs       (631)       —
Proceeds from issuance of common stock purchased under a long-term incentive plan       1,148       1,440
Repurchase of common stock       (4,999)       (4,999)
Dividends paid        (11,326)       (11,384)
Net cash used in financing activities       (22,946)       (28,455)
Net change in cash and cash equivalents       34,562       (25,299)
Cash and cash equivalents at beginning of the period       135,823       161,122
Cash and cash equivalents at end of the period   $   170,385   $   135,823
             

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Source: Primoris Services Corporation