Primoris Services Corporation
Aug 8, 2017

Primoris Services Corporation Announces 2017 Second Quarter Financial Results

Board of Directors Declares $0.055 Per Share Cash Dividend

Financial Highlights

DALLAS, Aug. 08, 2017 (GLOBE NEWSWIRE) -- Primoris Services Corporation (NASDAQ:PRIM) ("Primoris" or "Company") today announced financial results for its second quarter ended June 30, 2017.

The Company also announced that on August 2, 2017 its Board of Directors declared a $0.055 per share cash dividend to stockholders of record on September 29, 2017, payable on or about October 14, 2017

David King, President and Chief Executive Officer of Primoris, commented, "Primoris' second quarter revenue was the highest quarterly revenue in the Company's history.  The main driver behind both our top and bottom line growth was the outstanding work performed by our Pipeline & Underground segment's Rockford division.  We also saw significant year-over-year revenue growth in our Utility & Distribution and Power, Industrial & Engineering segments.  The new awards we announced in the quarter highlight markets where we continue to see growth, such as utility Master Service Agreements and heavy civil airport and port facility work.  Even with the significant improvement in revenue, our backlog remained at approximately $2.8 billion as we continue to see demand for our services.

"Our strong operating cash flow this year allowed us to invest for internal growth and invest over $66 million in acquisitions.  The primary acquisitions were a Florida-based utility contractor in the Utility & Distribution segment and a Texas-based pipeline maintenance contractor in the Pipeline & Underground segment.  We are proud that Primoris can achieve growth without sacrificing our balance sheet."

Mr. King continued, "As we look forward to the remainder of this year and into 2018, we continue to see tremendous opportunity for Primoris.  The recent acquisitions give us access to new geographies and new clients, and our strong backlog provides our legacy companies with a solid base of work on which to grow." 

2017 SECOND QUARTER RESULTS OVERVIEW

Revenues in the second quarter 2017 increased by $174.4 million to $631.2 million from $456.8 million for the same period in 2016.  Gross profit for the second quarter 2017 increased by $41.2 million to $84.5 million from $43.3 million for the same period in 2016.  Gross profit as a percentage of revenue increased to 13.4% for the second quarter 2017, compared to 9.5% for the same period in 2016.

SEGMENT RESULTS

Through the end of the year 2016, Primoris segregated its business into three reportable segments: the Energy segment, the East Construction Services segment, and the West Construction Services segment.  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.

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

  For the three months ended June 30,
   2017    2016 
    % of   % of
    Total   Total
Segment Revenue Revenue Revenue Revenue
       
Power $157,773 25.0% $126,576 27.7%
Pipeline  134,623 21.3%  56,804 12.4%
Utilities  212,942 33.8%  157,119 34.4%
Civil  125,827 19.9%  116,312 25.5%
Total $ 631,165 100.0% $456,811 100.0%


  For the six months ended June 30,
   2017    2016 
     % of   % of
    Total   Total
Segment Revenue Revenue Revenue Revenue
       
Power $289,013 24.2% $265,214 29.9%
Pipeline  318,068 26.7%  111,140 12.5%
Utilities  329,922 27.7%  260,873 29.4%
Civil  255,664 21.4%  250,030 28.2%
Total $1,192,667 100.0% $887,257 100.0%


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

  For the three months ended June 30,
   2017    2016 
    % of   % of
  Gross Segment Gross Segment
Segment  Profit Revenue Profit Revenue
       
Power $18,132  11.5% $14,092  11.1%
Pipeline  39,366  29.2%  6,469  11.4%
Utilities  32,347  15.2%  22,841  14.5%
Civil  (5,362) (4.3%)  (117) (0.1%)
Total $84,483  13.4% $43,285  9.5%
         


  For the six months ended June 30,
   2017    2016 
    % of   % of
  Gross Segment Gross Segment
Segment Profit Revenue Profit Revenue
       
Power $33,656  11.6% $25,677  9.7%
Pipeline  67,491  21.2%  11,468 10.3%
Utilities  40,620  12.3%  34,726 13.3%
Civil  (2,231) (0.9%)  10,691 4.3%
Total $139,536  11.7% $82,562 9.3%
         

Power, Industrial, & Engineering Segment:  Revenue in the Power segment increased by $31.2 million in the second quarter 2017, compared to the same period in 2016.  The majority of the increase came from the ARB Industrial division, where revenue increased by $26.1 million as a result of the two power plant projects in Southern California.  In addition, the Primoris Power division realized an increase in revenue of $9.6 million, primarily related to their power plant project in the mid-Atlantic region.  Gross profit in the Power segment increased by $4.0 million in the second quarter 2017, compared to the same period in 2016.  The increase is primarily due to the increased revenue.  Gross profit as a percentage of revenue increased to 11.5% in the second quarter 2017, compared to 11.1% in the same period in 2016, primarily as a result of the progress on the Southern California power plants.

Pipeline & Underground Segment:  Revenue in the Pipeline segment increased by $77.8 million in the second quarter 2017, compared to the same period in 2016.  The increase is primarily from the Rockford division's two large pipeline projects in Florida.  Gross profit in the Pipeline segment increased by $32.9 million in the second quarter 2017, compared to the same period in 2016 on higher revenue.  Gross profit as a percentage of revenue increased to 29.2% in the second quarter 2017, compared to 11.4% in the same period in 2016.  The increase is primarily due to the increased gross profit at the Rockford division.

Utilities & Distribution Segment:  Revenue in the Utilities segment increased by $55.8 million in the second quarter 2017, compared to the same period in 2016.  Approximately $46.9 million is due to increased volumes at the ARB Underground division, and $8.1 million is due to increased volumes at the Q3C division.  Gross profit in the Utilities segment increased by $9.5 million in the second quarter 2017, compared to the same period in 2016.  The increase is primarily due to the increased revenue at the ARB Industrial and Q3C divisions.  Gross profit as a percentage of revenue increased to 15.2% in the second quarter 2017, compared to 14.5% in the same period in 2016.  The increase is primarily due to increased profitability in the ARB Underground division.

Civil Segment:  Revenue in the Civil segment increased by $9.5 million in the second quarter 2017, compared to the same period in 2016.  The majority of the increase came from the Primoris I&M division, as increased revenue at a new Louisiana methanol project more than offset declines at a large southern Louisiana petrochemical project that had been a revenue driver for several quarters.  Gross profit in the Civil segment decreased by $5.2 million in the second quarter 2017, compared to the same period in 2016.  The decrease was primarily the result of productivity issues at the Primoris Heavy Civil division in Arkansas and Louisiana.  Gross profit as a percentage of revenue decreased to (4.3%)  in the second quarter 2017, compared to (0.1%) in the same period in 2016, as a result of the Arkansas DOT and Louisiana DOT productivity issues at Primoris Heavy Civil.

OUTLOOK

Based on an expected second quarter 2018 start date for a major pipeline project in backlog, anticipated levels of customer maintenance, MSA spending, and new project awards, and given the continued uncertainty caused by the energy markets, the Company estimates that for the four quarters ending June 30, 2018, net income attributable to Primoris will be between $1.05 and $1.25 per fully diluted share.

BACKLOG

  Backlog at June 30, 2017 (in millions) 
Segment Fixed Backlog MSA Backlog Total BacklogExpected Next Four
Quarters Total
Backlog Revenue
Recognition
         
Power $449$42$49182%
Pipeline  848 79  92738%
Utilities  94 570 664100%
Civil  665 3 66866%
Total $2,056$694$2,75068%

At June 30, 2017, Fixed Backlog was $2.1 billion, compared to $2.1 billion at December 31, 2016.

At June 30, 2017, MSA Backlog was $694 million, compared to $672 million at December 31, 2016.  MSA Backlog represents estimated MSA revenues for the next four quarters.

Total Backlog at June 30, 2017 was $2.8 billion, compared to $2.8 billion at December 31, 2016

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.

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, August 8, 2016 at 10:00 am Eastern Time / 9:00 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 13666612, 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.

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                                              

                                                            

CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In Thousands, Except Per Share Amounts)
(Unaudited)
      
  Three Months Ended  Six Months Ended
 June 30,   June 30,
  2017   2016   2017   2016 
            
Revenue$631,165  $456,811  $1,192,667  $887,257 
Cost of revenue 546,682   413,526   1,053,131   804,695  
Gross profit 84,483   43,285   139,536   82,562 
Selling, general and administrative
expenses
 45,977   32,498   85,831   65,156 
Operating income 38,506   10,787   53,705   17,406 
            
Other income (expense):           
Foreign exchange gain 109   21   132   380 
Other expense (13)     (13)   
Interest income 114   52   183   91 
Interest expense (2,145)  (2,240)  (4,407)  (4,508)
            
Income before provision for
income taxes
 36,571   8,620   49,600   13,369 
            
Provision for income taxes (14,175)  (3,333)  (18,692)  (5,166)
Net income$22,396  $5,287  $30,908  $8,203 
            
Less net income attributable to
noncontrolling interests
 (851)  (231)  (1,672)  (454)
             
Net income attributable to Primoris$21,545  $5,056  $29,236  $7,749 
            
Earnings per share:           
Basic:$0.42  $0.10  $0.57  $0.15 
Diluted:$0.42  $0.10  $0.56  $0.15 
             
            
Weighted average common
shares outstanding:
           
Basic 51,437   51,772   51,515   51,749 
Diluted 51,688   52,022    51,771   51,950 


CONDENSED CONSOLIDATED BALANCE SHEETS
 (In Thousands, Except Share Amounts)
(Unaudited)
      
  June 30,  December 31,
  2017  2016
ASSETS     
      
Current assets:     
Cash and cash equivalents$111,676 $135,823
Customer retention deposits 906  481
Accounts receivable, net 355,231  388,000
Costs and estimated earnings in excess of billings 158,741  138,618
Inventory and uninstalled contract materials 42,318  49,201
Prepaid expenses and other current assets 16,082  19,258
Total current assets 684,954  731,381
Property and equipment, net 309,013  277,346
Intangible assets, net 51,228  32,841
Goodwill 150,672  127,226
Other long-term assets 1,624  2,004
Total assets$1,197,491 $ 1,170,798
      
LIABILITIES AND STOCKHOLDERS' EQUITY     
      
Current liabilities:     
Accounts payable$134,091 $168,110
Billings in excess of costs and estimated earnings 158,698  112,606
Accrued expenses and other current liabilities 116,244  108,006
Dividends payable 2,829  2,839
Current portion of capital leases 186  188
Current portion of long-term debt 58,031  58,189
Current portion of contingent earnout liabilities 1,213  -
Total current liabilities 471,292  449,938
Long-term capital leases, net of current portion 170  15
Long-term debt, net of current portion 183,140   203,381
Deferred tax liabilities 9,830  9,830
Other long-term liabilities 11,623  9,064
Total liabilities 676,055  672,228
Commitments and contingencies     
Stockholders' equity     
Common stock 5  5
Additional paid-in capital 159,761  162,128
Retained earnings 358,779  335,218
Non-controlling interest 2,891  1,219
Total stockholders' equity 521,436  498,570
Total liabilities and stockholders' equity$1,197,491 $1,170,798


CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 (In Thousands)
(Unaudited)
   
  Six Months Ended
  June 30,
  2017   2016
Cash flows from operating activities:     
Net income$30,908  $8,203 
Adjustments to reconcile net income to net cash provided by operating
activities:
     
Depreciation 28,139   30,850 
Amortization of intangible assets 3,611   3,239 
Intangible asset impairment 477   - 
Stock-based compensation expense 690   710 
Gain on sale of property and equipment (3,208)  (2,293)
Changes in assets and liabilities:     
Customer retention deposits (425 )  (435)
Accounts receivable 43,792   2,514 
Costs and estimated earnings in excess of billings (19,572)  (17,151)
Other current assets 11,920   2,708 
Other long-term assets 380   (747)
Accounts payable (37,060)  (11,065)
Billings in excess of costs and estimated earnings  45,791   (17,584)
Accrued expenses and other current liabilities 8,154   7,337 
Other long-term liabilities 2,692   (788)
Net cash provided by operating activities 116,289   5,498 
      
Cash flows from investing activities:     
Purchase of property and equipment (44,697)  (42,140)
Proceeds from sale of property and equipment 4,664   5,723 
Cash paid for acquisitions (66,205)  (4,108)
Net cash used in investing activities (106,238)  (40,525)
      
Cash flows from financing activities:     
Repayment of capital leases (117)  (468)
Repayment of long-term debt (24,562)  (24,262)
Proceeds from issuance of common stock purchased under a long-term
incentive plan
 1,148   1,439 
Repurchase of common stock (4,999)  - 
Dividends paid (5,668)  (5,689)
Net cash used in financing activities (34,198)  (28,980)
      
Net change in cash and cash equivalents (24,147)  (64,007)
Cash and cash equivalents at beginning of the period 135,823   161,122 
Cash and cash equivalents at end of the period$111,676  $97,115 

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Source: Primoris Services Corporation

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