Primoris Services Corporation
Feb 25, 2016

Primoris Services Corporation Announces 2015 Fourth Quarter and Full Year Financial Results

Board of Directors Declares $0.055 Per Share Cash Dividend

Financial Highlights

DALLAS--(BUSINESS WIRE)-- Primoris Services Corporation (NASDAQ GS:PRIM) ("Primoris" or "Company") today announced financial results for its fourth quarter and year ended December 31, 2015.

The Company also announced that on February 22, 2016, its Board of Directors declared a $0.055 per share cash dividend to stockholders of record on March 31, 2016, payable on or about April 15, 2016.

David King, President and Chief Executive Officer of Primoris, commented, "We have finished a year during which the headline news seemed to foretell doom for part of our industry. I am pleased that Primoris is proving that our strategic business model, with a focus on diverse end markets, can weather the storm. We remained profitable in each quarter, and we ended the year in a strong financial position, with a cash balance at twelve month highs and a backlog of $2.1 billion."

Mr. King continued, "I see multiple avenues of growth for Primoris in 2016, which will allow us to generate better financial results. We remain confident of a mid-year start to projects in the large diameter pipeline market, kicking off a multi-year expansion cycle delivering natural gas to utility customers along the East Coast. The industrial, power, LNG, and heavy civil markets all have opportunities for organic growth in the year. Our Master Service Agreements ("MSAs") in the distribution market will continue to provide a dependable and growing base of business. Primoris's opportunities for new awards continue to expand, and we believe we can grow our bottom line in 2016 while at the same time increasing our backlog."

2015 FOURTH QUARTER RESULTS OVERVIEW

Revenues in the fourth quarter 2015 increased by $9.5 million, or 2.0%, to $497.1 million from $487.6 million for the same period in 2014. The increased revenues were mainly due to increases in the East and West Construction services segments. Gross profit for the fourth quarter 2015 increased by $14.1 million, or 28.2%, to $63.7 million from $49.6 million for the same period in 2014. The increase in gross profit was due to improved margins in both the East and West Construction Services segments.

SEGMENT RESULTS

       

Segment Revenues

(in thousands, except %)

 
For the three months ended December 31,
2015 2014
Unaudited Unaudited
% of % of
Total Total

Segment

Revenue Revenue Revenue Revenue
 
West $ 228,828 46.0 % $ 216,270 44.4 %
East 149,952 30.2 % 128,951 26.4 %
Energy   118,365 23.8 %   142,371 29.2 %
Total $ 497,145 100.0 % $ 487,592 100.0 %
 
       

Segment Gross Profit

(in thousands, except %)

 
For the three months ended December 31,
2015 2014
Unaudited Unaudited
% of % of
Gross Segment Gross Segment

Segment

Profit Revenue Profit Revenue
 
West $ 38,536 16.8 % $ 27,745 12.8 %
East 8,901 5.9 % 1,154 0.9 %
Energy   16,288 13.8 %   20,717 14.6 %
Total $ 63,725 12.8 % $ 49,616 10.2 %
 

West Segment: Revenues in the West segment increased by $12.6 million in the fourth quarter 2015 compared to the fourth quarter 2014, as increases at ARB, ARB Structures and Q3C totaling $39.9 million more than offset a decrease of $30.0 million at Rockford. Gross profit for the West segment increased by $10.8 million in the fourth quarter 2015 compared to the fourth quarter 2014, primarily due to the increased revenues for the higher margin utility work and an increase at Rockford. As a substantial amount of Rockford's prior year fourth quarter revenues were from a project in a loss position, gross profit increased even with the substantial decline in revenue.

East Segment: Revenues in the East segment increased by $21.0 million in the fourth quarter 2015 compared to the fourth quarter 2014, driven primarily by an increase at the JCG I&M division from work at a major petrochemical project in Southern Louisiana. The gross profit for the East segment increased by $7.7 million in the quarter, primarily due to the increased revenues and improved profitability in the JCG I&M division.

Energy Segment: Revenues in the Energy segment decreased by $24.0 million in the fourth quarter 2015 compared to the fourth quarter 2014, driven primarily by decreases at the Saxon division of Primoris Energy Services and at OnQuest, as neither business unit was able to replace large projects that were active in the fourth quarter of 2014. The gross profit for Energy decreased by $4.4 million in the quarter, mainly due to the decline in revenues.

OTHER INCOME STATEMENT INFORMATION

Selling, general and administrative expenses ("SG&A") were $41.3 million, or 8.3% of revenues for the 2015 fourth quarter, compared to $33.2 million, or 6.8% of revenues for the 2014 fourth quarter. The increase in SG&A for the quarter is due primarily to increased personnel expense and increased professional fees.

Operating income for the 2015 fourth quarter was $22.5 million, or 4.5% of total revenues, compared to $16.5 million, or 3.4% of total revenues, for the same period last year.

Net non-operating items in the 2015 fourth quarter resulted in expenses of $1.0 million, compared to $1.6 million in net expenses in the 2014 fourth quarter.

The provision for income taxes for the 2015 fourth quarter was $8.8 million, for an effective tax rate on income attributable to Primoris of 41.2%, compared to $5.8 million, for an effective tax rate on income attributable to Primoris of 39.5%, in the 2014 fourth quarter.

Net income attributable to Primoris for the 2015 fourth quarter was $12.6 million, or $0.24 per diluted share, compared to net income attributable to Primoris of $8.9 million, or $0.17 per diluted share, in the same period in 2014.

Fully diluted weighted average shares outstanding for the 2015 fourth quarter increased slightly to 51.82 million from 51.71 million in the fourth quarter of 2014. 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.

       

2015 FULL YEAR RESULTS OVERVIEW

 

Segment Revenues

(in thousands, except %)

 

 
For the twelve months ended December 31,
2015 2014
Unaudited Unaudited
% of % of
Total Total

Segment

Revenue Revenue Revenue Revenue
 
West $ 913,626 47.4 % $ 964,093 46.2 %
East 612,174 31.7 % 489,926 23.5 %
Energy   403,615 20.9 %   632,175 30.3 %
Total $ 1,929,415 100.0 % $ 2,086,194 100.0 %
 
       

Segment Gross Profit

(in thousands, except %)

 
For the twelve months ended December 31,
2015 2014
Unaudited Unaudited
% of % of
Gross Segment Gross Segment

Segment

Profit Revenue Profit Revenue
 
West $ 130,255 14.3 % $ 143,468 14.9 %
East 42,523 6.9 % 25,749 5.3 %
Energy   47,095

11.7

%

  66,823 10.6 %
Total $ 219,873 11.4 % $ 236,040 11.3 %
 

OTHER FINANCIAL INFORMATION

Primoris's balance sheet at December 31, 2015, included cash and cash equivalents of $161.1 million, working capital of $270.7 million, total debt and capital leases of $275.3 million and stockholders' equity of $483.5 million. Primoris's tangible net worth at December 31, 2015, was $322.6 million.

Based on expected start dates for current projects in backlog, anticipated levels of customer maintenance, MSA spending, and new project awards, and given the recent uncertainty caused by the energy markets, the Company estimates that for the four quarters ending December 31, 2016, net income attributable to Primoris will be between $1.15 and $1.30 per fully diluted share.

       

BACKLOG

 
Backlog at December 31, 2015 (in millions)

Segment

Fixed Backlog MSA Backlog Total Backlog

Expected Next Four
Quarters Total
Backlog Revenue
Recognition

 
West $ 577 $ 500 $ 1,077 86 %
East 752 4 756 52 %
Energy   188     67     255   99 %
Total $ 1,517   $ 571   $ 2,088      
 

At December 31, 2015, Fixed Backlog was $1.52 billion, compared to $1.55 billion at December 31, 2014. During 2015, more than $1.3 billion of revenues was recognized from Fixed Backlog.

At December 31, 2015, MSA Backlog was $571 million, compared to $445 million at December 31, 2014. During 2015, approximately $565 million of revenues was recognized from MSA projects. MSA Backlog represents estimated MSA revenues for the next four quarters.

Total Backlog at December 31, 2015, was $2.09 billion, compared to $1.99 billion at December 31, 2014.

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, Thursday, February 25, 2016, at 11:00 am Eastern Time / 10:00 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 13623801, 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, 2014, as updated through the Quarterly Report on Form 10-Q for the period ended September 30, 2015, 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,

2015 2014 2015 2014
 
Revenue $ 497,145 $ 487,592 $ 1,929,415 $ 2,086,194
Cost of revenue   433,420     437,976     1,709,542     1,850,154  
Gross profit 63,725 49,616 219,873 236,040
Selling, general and administrative expenses   41,252     33,161     152,104     132,248  
Operating income 22,473 16,455 67,769 103,792
 
Other income (expense):
Income from non-consolidated entities - - - 5,250
Foreign exchange gain (loss) (338 ) 300 (763 ) 374
Other income (expense) 1,451 (115 ) 1,723 (743 )
Interest income 34 8 56 88
Interest expense   (2,125 )   (1,791 )   (7,688 )   (6,433 )
 
Income before provision for income taxes 21,495 14,857 61,097 102,328
 
Provision for income taxes   (8,787 )   (5,833 )   (23,946 )   (38,646 )
Net income $ (12,708 ) $ 9,024 $ 37,151 $ 63,682
 
Net income attributable to noncontrolling interests (153 ) (94 ) (279 ) (526 )
 
Net income attributable to Primoris $ 12,555 $ 8,930 $ 36,872 $ 63,156
 
Earnings per share:
Basic: $ 0.24 $ 0.17 $ 0.71 $ 1.22
Diluted: $ 0.24 $ 0.17 $ 0.71 $ 1.22
 
 
Weighted average common shares outstanding:
Basic 51,676 51,561 51,647 51,607
Diluted 51,825 51,710 51,798 51,747
 
   
CONDENSED CONSOLIDATED BALANCE SHEETS
(In Thousands, Except Share Amounts)
(Unaudited)
 
December 31, December 31,
2015 2014
ASSETS
 
Current assets:
Cash and cash equivalents $ 161,122 $ 139,465
Short-term investments - 30,992
Customer retention deposits and restricted cash 2,598 481
Accounts receivable, net 320,588 337,382
Costs and estimated earnings in excess of billings 116,455 68,654
Inventory and uninstalled contract materials 67,796 58,116
Prepaid expenses and other current assets   18,265   31,720  
Total current assets 686,824 666,810
Property and equipment, net 283,545 271,431
Deferred tax assets - long-term 1,075 -
Intangible assets, net 36,438 39,581
Goodwill 124,161 119,410
Other long-term assets   211   400  
Total assets $ 1,132,254 $ 1,097,632  
 
LIABILITIES AND STOCKHOLDERS' EQUITY
 
Current liabilities:
Accounts payable $ 124,450 $ 128,793
Billings in excess of costs and estimated earnings 139,875 158,595
Accrued expenses and other current liabilities 93,596 83,401
Dividends payable 2,842 2,062
Current portion of capital leases 974 1,650
Current portion of long-term debt 54,436 38,909
Current portion of contingent earnout liabilities   -   5,901  
Total current liabilities 416,173 419,311
Long-term capital leases, net of current portion 22 657
Long-term debt, net of current portion 219,853 204,029
Deferred tax liabilities - long-term - 5,929
Long-term contingent earnout liabilities, net of current portion - 1,021
Other long-term liabilities   12,741   12,899  
Total liabilities   648,789   643,846  
Stockholders' equity
Common stock 5 5
Additional paid-in capital 163,344 160,186
Retained earnings 319,899 293,628
Noncontrolling interests   217   (33 )
Total stockholders' equity   483,465   453,786  
Total liabilities and stockholders' equity $ 1,132,254 $ 1,097,632  
 
   
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
(Unaudited)
 
Twelve Months Ended
December 31,
2015 2014
Cash flows from operating activities:
Net income $ 37,151 $ 63,682
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation 58,408 50,918
Amortization of intangible assets 6,793 7,504
Goodwill & intangible asset impairment 401 -
Stock—based compensation expense 1,050 934
Gain on sale of property and equipment (2,116 ) (1,895 )
(Income) from non-consolidated entities - (5,264 )
Net deferred tax liabilities (assets) (7,004 ) 8,970
Changes in assets and liabilities:
Customer retention deposits and restricted cash (2,117 ) 4,823
Accounts receivable 19,528 (29,659 )
Costs and estimated earnings in excess of billings (47,499 ) (11,508 )
Other current assets 4,949 (25,767 )
Other long-term assets 189 72
Accounts payable (5,086 ) 921
Billings in excess of costs and estimated earnings (19,619 ) (14,770 )
Contingent earnout liabilities (6,722 ) (4,145 )
Accrued expenses and other current liabilities 11,729 (7,354 )
Other long-term liabilities   (1,658 )   (1,361 )
Net cash provided by operating activities 48,377 36,101
 
Cash flows from investing activities:
Purchase of property and equipment (67,097 ) (87,954 )
Proceeds from sale of property and equipment 9,889 5,814
Purchase of short-term investments - (33,770 )
Sale of short-term investments 30,992 21,464
Cash received for the sale of Alvah minority interest - 6,439
Cash paid for acquisitions   (22,302 )   (14,596 )
Net cash used in investing activities (48,518 ) (102,603 )
 
Cash flows from financing activities:
Proceeds from issuance of long-term debt 75,278 58,519
Repayment of capital leases (1,336 ) (3,276 )
Repayment of long-term debt (43,927 ) (35,107 )
Proceeds from issuance of common stock purchased under a long-term incentive plan 1,621 1,671
Cash distribution to non-controlling interest holder (29 ) (1,590 )
Repurchase of Common Stock - (2,844 )
Dividends paid   (9,809 )   (7,483 )
Net cash provided by financing activities 21,798 9,890
 
Net change in cash and cash equivalents 21,657 (56,612 )
Cash and cash equivalents at beginning of the period   139,465     196,077  
Cash and cash equivalents at end of the period $ 161,122   $ 139,465  

Primoris Services Corporation
Peter J. Moerbeek, 214-740-5602
Executive Vice President, Chief Financial Officer
pmoerbeek@prim.com
or
Kate Tholking, 214-740-5615
Director of Investor Relations
ktholking@prim.com

Source: Primoris Services Corporation

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