Primoris Services Corporation
Feb 28, 2017

Primoris Services Corporation Announces 2016 Fourth Quarter and Full Year Financial Results

Board of Directors Declares $0.055 Per Share Cash Dividend and Authorizes $5 Million Share Repurchase Plan

DALLAS, TX -- (Marketwired) -- 02/28/17 -- Financial Highlights

Primoris Services Corporation (NASDAQ: PRIM) ("Primoris" or "Company") today announced financial results for its fourth quarter and year ended December 31, 2016.

The Company also announced that on February 21, 2017 its Board of Directors declared a $0.055 per share cash dividend to stockholders of record on March 31, 2017, payable on or about April 15, 2017.

David King, President and Chief Executive Officer of Primoris, commented, "We ended 2016 in a stronger position than we entered it. The growth in our backlog reflects strength across our end-markets, as our customers continue to release major infrastructure projects, especially in the pipeline, utility & distribution, and industrial markets. Over the course of the year, we have seen improved visibility on start dates for large projects in our backlog. In the fourth quarter we continued to improve our cash flow while carefully managing expenses."

Mr. King continued, "As we move forward in 2017, we will be changing our segment reporting to match the way that we are now managing our business. The new segments will help our shareholders more clearly see the growth opportunities available to Primoris as we look for growth in 2017. The pipeline market should be strong for several years, driven by large diameter natural gas pipelines for utility customers. We continue growing our MSA work with new utility customers in new geographies. Large industrial infrastructure and mid-size LNG peak shaving projects are moving forward, driven by the continued low cost and dependability of natural gas. Those projects will also provide growth opportunities for our Civil group, similar to the type of work we performed in Lake Charles in 2016. Primoris' unique ability to offer services across a diverse range of end-markets sets us apart from our peers. The positive momentum we are seeing across our markets gives us confidence in continued success for 2017."

2016 FOURTH QUARTER RESULTS OVERVIEW

Revenues in the fourth quarter 2016 increased by $104.7 million, or 21.1%, to $601.9 million from $497.2 million for the same period in 2015. The increased revenues were due to increases in the West Construction services segment. Gross profit for the fourth quarter 2016 increased by $4.9 million, or 7.7%, to $68.6 million from $63.7 million for the same period in 2015. The increase in gross profit was due to increased revenues in the West Construction Services segment.

SEGMENT RESULTS

Segment Revenues
(in thousands, except %)

    For the three months ended December 31,  
    2016 
Unaudited
    2015 
Unaudited
 
        % of         % of  
        Total         Total  
Segment   Revenue   Revenue     Revenue   Revenue  
                 
West   $ 388,491   64.6 %   $ 228,828   46.0 %
East     122,997   20.4 %     149,952   30.2 %
Energy     90,375   15.0 %     118,365   23.8 %
  Total   $ 601,863   100.0 %   $ 497,145   100.0 %
                           

Segment Gross Profit
(in thousands, except %)

    For the three months ended December 31,  
    2016 
Unaudited
    2015 
Unaudited
 
          % of         % of  
    Gross     Segment     Gross   Segment  
Segment   Profit     Revenue     Profit   Revenue  
                   
West   $ 57,849     14.9 %   $ 38,536   16.8 %
East     (581 )   -0.5 %     8,901   5.9 %
Energy     11,348     12.6 %     16,288   13.8 %
  Total   $ 68,616     11.4 %   $ 63,725   12.8 %
                             

West Segment: Revenues in the West segment increased by $159.7 million in the fourth quarter 2016 compared to the fourth quarter 2015, mainly as a result of increased revenues at Rockford from two large diameter pipeline projects in Florida which started in the third quarter of 2016. Gross profit for the West segment increased by $19.3 million in the fourth quarter 2016 compared to the fourth quarter 2015, primarily due to the increased revenues at Rockford as well as higher margin utility work at Q3C thanks to mild fourth quarter weather.

East Segment: Revenues in the East segment declined by $27.0 million in the fourth quarter 2016 compared to the fourth quarter 2015, driven primarily by declines at the JCG I&M division from work at a major petrochemical project in Southern Louisiana, as well as declines in civil work for Louisiana and Mississippi Departments of Transportation. The gross profit for the East segment decreased by $9.5 million in the quarter, primarily due to the reduced revenues and profitability in the JCG I&M division.

Energy Segment: Revenues in the Energy segment decreased by $28.0 million in the fourth quarter 2016 compared to the fourth quarter 2015, driven primarily by reduced revenues for the PES facilities and industrial divisions and OnQuest. The gross profit for Energy decreased by $4.9 million in the quarter, mainly due to the decline in revenues.

OTHER INCOME STATEMENT INFORMATION

Selling, general and administrative expenses ("SG&A") were $39.7 million, or 6.6% of revenues for the 2016 fourth quarter, compared to $40.9 million, or 8.2% of revenues for the 2015 fourth quarter. The decrease in SG&A for the quarter is primarily the result of a $2.6 million prior year one-time valuation adjustment for the value of a long-term asset.

Operating income for the 2016 fourth quarter was $28.9 million, or 4.8% of total revenues, compared to $22.5 million, or 4.5% of total revenues, for the same period last year.

Net non-operating items in the 2016 fourth quarter resulted in expenses of $2.3 million, compared to $1.0 million in net expenses in the 2015 fourth quarter.

The provision for income taxes for the 2016 fourth quarter was $11.9 million, for an effective tax rate on income attributable to Primoris of 45.1%, compared to $8.8 million, for an effective tax rate on income attributable to Primoris of 41.2%, in the 2015 fourth quarter. The increased tax rate is the result of an increased full year tax rate to 44.2% (from 43% at the end of the third quarter 2016). The increased tax rate for 2016 is primarily the result of an increase in the effective state tax rate and the impact of tax planning.

Net income attributable to Primoris for the 2016 fourth quarter was $14.5 million, or $0.28 per diluted share, compared to net income attributable to Primoris of $12.6 million, or $0.24 per diluted share, in the same period in 2015.

Fully diluted weighted average shares outstanding for the 2016 fourth quarter increased slightly to 52.0 million from 51.8 million in the fourth quarter of 2015. 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.

2016 FULL YEAR RESULTS OVERVIEW

Segment Revenues
(in thousands, except %)

    For the twelve months ended December 31,  
    2016
Unaudited
    2015 
Unaudited
 
        % of         % of  
        Total         Total  
Segment   Revenue   Revenue     Revenue   Revenue  
                 
West   $ 1,041,341   52.2 %   $ 913,626   47.4 %
East     521,301   26.1 %     612,174   31.7 %
Energy     434,306   21.7 %     403,615   20.9 %
  Total   $ 1,996,948   100.0 %   $ 1,929,415   100.0 %
                           

Segment Gross Profit
(in thousands, except %)

    For the twelve months ended December 31,  
    2016
Unaudited
    2015 
Unaudited
 
          % of         % of  
    Gross     Segment     Gross   Segment  
Segment   Profit     Revenue     Profit   Revenue  
                   
West   $ 145,239     13.9 %   $ 130,255   14.3 %
East     (15,938 )   (3.1 %)     42,523   6.9 %
Energy     72,006     16.6 %     47,095   11.7 %
  Total   $ 201,307     10.1 %   $ 219,873   11.4 %
                             

OTHER FINANCIAL INFORMATION

Primoris' balance sheet at December 31, 2016 included cash and cash equivalents of $135.8 million, working capital of $281.4 million, total debt and capital leases of $261.8 million and stockholders' equity, excluding noncontrolling interest, of $497.4 million. Primoris's tangible net worth at December 31, 2016 was $337.3 million.

Based on expected start dates for current projects in backlog, anticipated levels of customer maintenance, MSA spending, and new project awards, the Company estimates that for the four quarters ending December 31, 2017, net income attributable to Primoris will be between $1.00 and $1.20 per fully diluted share.

BACKLOG

    Backlog at December 31, 2016 (in millions)      
Segment   Fixed Backlog   MSA 
Backlog
  Total Backlog   Expected Next
Four Quarters
Total Backlog
Revenue
Recognition
 
                         
West   $ 1,271   $ 616   $ 1,887   58 %
East     641     21     662   70 %
Energy     214     35     249   100 %
  Total   $ 2,126   $ 672   $ 2,798      
                           

At December 31, 2016, Fixed Backlog was $2.13 billion, compared to $1.52 billion at December 31, 2015.

At December 31, 2016, MSA Backlog was $672 million, compared to $571 million at December 31, 2015. During 2016, approximately $576 million of revenues was recognized from MSA projects. MSA Backlog represents estimated MSA revenues for the next four quarters.

Total Backlog at December 31, 2016 was $2.80 billion, compared to $2.09 billion at December 31, 2015.

Backlog, including estimated MSA revenues, should not be considered a comprehensive indicator of future revenues. There is a certain percentage of total revenues, from projects such as cost reimbursable and time-and-materials projects, that do not flow through backlog. Any project may still be cancelled at the convenience of our customers.

SHARE REPURCHASE PLAN

The Company's Board of Directors has authorized a share repurchase program under which Primoris may, from time to time and depending on market conditions, share price and other factors, acquire shares of its common stock on the open market or in privately negotiated transactions up to an aggregate purchase price of $5 million. The share repurchase program expires December 31, 2017.

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 today, Tuesday, February 28, 2017 at 9:30 am Eastern Time / 8:30 am Central Time to discuss the results.

Interested parties may participate in the call by dialing:

If you are unable to participate in the live call, a replay may be accessed by dialing (877) 660-6853, conference ID 13656164, 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, 2016, 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,  
    2016     2015     2016     2015  
                                 
Revenues   $ 601,863     $ 497,145     $ 1,996,948     $ 1,929,415  
Cost of revenues     533,247       433,420       1,795,641       1,709,542  
  Gross profit     68,616       63,725       201,307       219,873  
Selling, general & administrative expenses     39,692       40,851       140,842       151,703  
Impairment of Goodwill     -       401       2,716       401  
  Operating income     28,924       22,473       57,749       67,769  
                                 
Other income (expense):                                
  Foreign exchange gain (loss)     (86 )     (338 )     202       (763 )
  Other income (expense)     (37 )     1,451       (315 )     1,723  
  Interest income     27       34       149       56  
  Interest expense     (2,160 )     (2,125 )     (8,914 )     (7,688 )
Income before provision for income taxes     26,668       21,495       48,871       61,097  
                                 
Provision for income taxes     (11,902 )     (8,787 )     (21,146 )     (23,946 )
Net income     14,766       12,708       27,725       37,151  
                                 
Net income attributable to noncontrolling interests     (296 )     (153 )     (1,002 )     (279 )
Net income attributable to Primoris   $ 14,470     $ 12,555     $ 26,723     $ 36,872  
                                 
Earnings per share:                                
Basic:   $ 0.28     $ 0.24     $ 0.52     $ 0.71  
Diluted:   $ 0.28     $ 0.24     $ 0.51     $ 0.71  
                                 
                                 
Weighted average common shares outstanding:                                
Basic     51,771       51,676       51,762       51,647  
Diluted     52,021       51,825       51,989       51,798  
                                 

CONDENSED CONSOLIDATED BALANCE SHEETS
(In Thousands, Except Share Amounts)
(Unaudited)

    December 31,   December 31,
    2016   2015
ASSETS            
             
Current assets:            
  Cash and cash equivalents   $ 135,823   $ 161,122
  Customer retention deposits and restricted cash     481     2,598
  Accounts receivable, net     388,000     320,588
  Costs and estimated earnings in excess of billings     138,618     116,455
  Inventory and uninstalled contract materials     49,201     67,796
  Prepaid expenses and other current assets     19,258     18,265
    Total current assets     731,381     686,824
  Property and equipment, net     277,346     283,545
  Deferred tax asset - long-term     -     1,075
  Intangible assets, net     32,841     36,438
  Goodwill     127,226     124,161
  Other long-term assets     2,004     211
    Total assets   $ 1,170,798   $ 1,132,254
             
LIABILITIES AND STOCKHOLDERS' EQUITY            
             
Current liabilities:            
  Accounts payable   $ 168,110   $ 124,450
  Billings in excess of costs and estimated earnings     112,606     139,875
  Accrued expenses and other current liabilities     108,006     93,596
  Dividends payable     2,839     2,842
  Current portion of capital leases     188     974
  Current portion of long-term debt     58,189     54,436
    Total current liabilities     449,938     416,173
  Long-term capital leases, net of current portion     15     22
  Long-term debt, net of current portion     203,381     219,853
  Deferred tax liabilities     9,830     -
  Other long-term liabilities     9,064     12,741
    Total liabilities     672,228     648,789
Stockholders' equity            
Common stock     5     5
  Additional paid-in capital     162,128     163,344
  Retained earnings     335,218     319,899
  Non-controlling interest     1,219     217
    Total stockholders' equity     498,570     483,465
    Total liabilities and stockholders' equity   $ 1,170,798   $ 1,132,254
                 

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
(Unaudited)

    Twelve Months Ended  
    December 31,  
    2016     2015  
Cash flows from operating activities:                
  Net income   $ 27,725     $ 37,151  
  Adjustments to reconcile net income to net cash provided by (used in) operating activities:                
    Depreciation     61,433       58,408  
    Amortization of intangible assets     6,597       6,793  
    Goodwill and intangible asset impairment     2,716       401  
    Stock-based compensation expense     1,627       1,050  
    Gain on sale of property and equipment     (4,677 )     (2,116 )
    Net deferred tax liabilities (assets)     10,905       (7,004 )
    Changes in assets and liabilities:                
      Customer retention deposits and restricted cash     2,117       (2,117 )
      Accounts receivable     (65,806 )     19,528  
      Costs and estimated earnings in excess of billings     (22,163 )     (47,499 )
      Other current assets     17,665       4,949  
      Other long-term assets     (1,792 )     189  
      Accounts payable     42,934       (5,086 )
      Billings in excess of costs and estimated earnings     (27,519 )     (19,619 )
      Contingent earnout liabilities     -       (6,722 )
      Accrued expenses and other current liabilities     14,492       11,729  
      Other long-term liabilities     (3,677 )     (1,658 )
    Net cash provided by operating activities   $ 62,577     $ 48,377  
                 
Cash flows from investing activities:                
  Purchase of property and equipment     (58,027 )     (67,097 )
  Proceeds from sale of property and equipment     9,603       9,889  
  Sale of short-term investments     -       30,992  
  Cash paid for acquisitions     (10,997 )     (22,302 )
    Net cash used in investing activities   $ (59,421 )   $ (48,518 )
                 
Cash flows from financing activities:                
  Proceeds from issuance of long-term debt     45,000       75,278  
  Repayment of capital leases     (793 )     (1,336 )
  Repayment of long-term debt     (57,719 )     (43,927 )
  Proceeds from issuance of common stock purchased by management under long-term incentive plan     1,440       1,621  
  Cash distribution to non-controlling interest holder     -       (29 )
  Repurchase of common stock     (4,999 )     -  
  Dividends paid     (11,384 )     (9,809 )
    Net cash provided by (used in) financing activities   $ (28,455 )   $ 21,798  
                 
Net change in cash and cash equivalents     (25,299 )     21,657  
Cash and cash equivalents at beginning of the period     161,122       139,465  
Cash and cash equivalents at end of the period   $ 135,823     $ 161,122  

Image Available: http://www.marketwire.com/library/MwGo/2017/2/28/11G131595/Images/PSC_Primoris_300-0687e664c7ecb853a64aa5a6ba9af41f.jpg

Company Contact

Peter J. Moerbeek
Executive Vice President, Chief Financial Officer
(214) 740-5602
pmoerbeek@prim.com

Kate Tholking
Director of Investor Relations
(214) 740-5615
ktholking@prim.com

Source: Primoris Services Corporation

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