Primoris Services Corporation
May 5, 2016

Primoris Services Corporation Announces 2016 First Quarter Financial Results

Board of Directors Declares $0.055 per Share Cash Dividend

DALLAS, TX -- (Marketwired) -- 05/05/16 --  Primoris Services Corporation (NASDAQ: PRIM)

Financial Highlights

Primoris Services Corporation (NASDAQ: PRIM) ("Primoris" or "Company") today announced financial results for its first quarter ended March 31, 2016.

The Company also announced that on May 2, 2016 its Board of Directors declared a $0.055 per share cash dividend to stockholders of record on June 30, 2016, payable on or about July 15, 2016.

David King, President and Chief Executive Officer of Primoris, commented, "We are pleased with our year-over-year first quarter results, demonstrating both solid execution and strong new award wins. Our industrial work in the Gulf Coast helped drive our results, and we also increased Master Service Agreement ("MSA") revenues with our utility customers. We expect those end-markets to remain strong for the year, and we are preparing for summer start dates for two large pipeline projects, which will kick off an extremely robust pipeline season. We ended the quarter with near record backlog of $2.2 billion, aided by pipeline and MSA awards."

Mr. King continued, "Our SG&A expense declined to the lowest quarterly level in two years, and we continue to look for additional ways to reduce our overhead costs. Our healthy balance sheet gives us the flexibility to pursue growth with both our current subsidiaries and through acquisitions, and our focus remains on strategic, long-term growth for Primoris."

2016 FIRST QUARTER RESULTS OVERVIEW

Revenues in the first quarter 2016 increased by $37.7 million to $430.4 million from approximately $393 million for the same period in 2015. The primary reason for the increase was the lack of severe winter weather and the benefit from a large construction project in southern Louisiana. Gross profit for the first quarter 2016 increased by $1.3 million to $39.3 million from $38.0 million for the same period in 2015. Gross profit as a percentage of revenue decreased to 9.1% for the first quarter 2016, compared to 9.7% for the same period in 2015, reflecting the impact of changes in the mix of work done for two large utility customers in California.

From an end-market perspective, our end-market revenues increased by $22.4 million from industrial projects, $9.5 million from underground utility projects, $20.1 million from heavy civil projects, and $20.0 million from other projects in the first quarter 2016 compared to the first quarter 2015. Revenues decreased by $20.7 million in the underground capital end-market and by $13.6 million in the engineering end-market.

SEGMENT RESULTS

Segment Revenues
(in thousands, except %)

    For the three months ended March 31,
    2016
Unaudited
  2015
Unaudited
        % of       % of
        Total       Total
Segment   Revenue   Revenue   Revenue   Revenue
                 
West   $ 165,955   38.6 %   $ 186,385   47.5 %
East     147,971   34.3 %     123,700   31.5 %
Energy     116,520   27.1 %     82,695   21.0 %
  Total   $ 430,446   100.0 %   $ 392,780   100.0 %
                           
                           
                           

Segment Gross Profit
(in thousands, except %)

    For the three months ended March 31,
    2016
Unaudited
  2015
Unaudited
        % of       % of
    Gross   Segment   Gross   Segment
Segment   Profit   Revenue   Profit   Revenue
                 
West   $ 13,798   8.3 %   $ 21,464   11.5 %
East     11,522   7.8 %     9,108   7.4 %
Energy     13,957   12.0 %     7,433   9.0 %
  Total   $ 39,277   9.1 %   $ 38,005   9.7 %
                         
                         

West Segment: Revenues for the West segment decreased by $20.4 million in the first quarter 2016, compared to the same period in 2015. The primary reason for the decline in revenues was Rockford's completion of an 88-mile pipeline project in 2015. Gross profit for the West segment decreased by $7.7 million in the first quarter 2016, compared to the same period in 2015. The decrease in gross profit was primarily the result of lower revenue at Rockford, lower margin mix of work by two large utility customers for ARB Underground, and an increase in expected costs to complete a California power plant during 2016.

East Segment: Revenues in the East segment increased by $24.3 million in the first quarter 2016, compared to the same period in 2015. The increase in revenues was from all three East segment operating units. The gross profit for the East segment increased by $2.4 million in the first quarter 2016, compared to the same period in 2015, primarily from the higher margin petrochemical work at the JCG I&M division.

Energy Segment: Revenues in the Energy segment increased by $33.8 million in the first quarter of 2016, compared to the same period in 2015. The primary reasons for the increase were increased capital projects for the PES Pipeline division and increased revenue from a large petrochemical project for the PES Industrial division. The gross profit for the Energy segment increased by $6.5 million in the first quarter 2016, compared to the same period in 2015, primarily as a result of the increased revenues.

Selling, general and administrative expenses ("SG&A") were $32.7 million, or 7.6% of revenues for the first quarter 2016, compared to $33.8 million, or 8.6% of revenues for the first quarter 2015. The decrease in SG&A for the quarter is largely due to a reduction in pension withdrawal liability of $0.8 million. The remainder of the decrease is primarily from reductions in administration and payroll-related expenses.

Operating income for the first quarter 2016 was $6.6 million, or 1.5% of total revenues, compared to $4.2 million, or 1.1% of total revenues, for the same period last year.

Net non-operating items in the first quarter 2016 resulted in expense of $1.9 million, compared to $1.5 million in net expense in the first quarter 2015.

The provision for income taxes for the first quarter 2016 was $1.8 million, for an effective tax rate on income attributable to Primoris of 40.5%, compared to $1.1 million, for an effective tax rate on income attributable to Primoris of 38.7%, in the first quarter 2015.

Net income attributable to Primoris for the first quarter 2016 was $2.7 million, or $0.05 per diluted share, compared to net income attributable to Primoris of $1.7 million, or $0.03 per diluted share, in the same period in 2015.

Fully diluted weighted average shares outstanding for the first quarter 2016 increased slightly to 51.88 million from 51.73 million in the first quarter 2015.

OTHER FINANCIAL INFORMATION

Primoris' balance sheet at March 31, 2016 included cash and cash equivalents of $98.8 million, working capital of $265.2 million, total debt and capital leases of $263.0 million and stockholders' equity of $485.7 million. Primoris' tangible net worth at March 31, 2016 was $324.3 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 continued uncertainty caused by the energy markets, the Company estimates that for the four quarters ending March 31, 2017, net income attributable to Primoris will remain between $1.15 and $1.30 per fully diluted share.

BACKLOG

    Backlog at March 31, 2016 (in millions)  
Segment   Fixed Backlog   MSA Backlog   Total Backlog Expected Next Four Quarters Total Backlog Revenue Recognition
                       
West   $ 719   $ 565   $ 1,284 85 %
East     720     4     724 56 %
Energy     125     62     187 99 %
  Total   $ 1,564   $ 631   $ 2,195 76 %
                         

At March 31, 2016, Fixed Backlog was $1.56 billion, compared to $1.52 billion at December 31, 2015.

At March 31, 2016, MSA Backlog was $631 million, compared to $571 million at December 31, 2015. MSA Backlog represents estimated MSA revenues for the next four quarters.

Total Backlog at March 31, 2016 was $2.19 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.

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, May 5, 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 13635848, 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, 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
March 31,
    2016   2015
             
Revenue   $ 430,446   $ 392,780
Cost of revenue     391,169     354,775
Gross profit     39,277     38,005
Selling, general and administrative expenses     32,658     33,760
  Operating income     6,619     4,245
             
Other income (expense):            
Foreign exchange gain (loss)     359     436
Other income (expense)     -     (44)
Interest income     39     12
Interest expense     (2,268)     (1,922)
             
Income before provision for income taxes     4,749     2,727
             
Provision for income taxes     (1,833)     (1,055)
Net income   $ 2,916   $ 1,672
             
Net income attributable to noncontrolling interests     (223)     -
             
Net income attributable to Primoris   $ 2,693   $ 1,672
             
Earnings per share:            
Basic:   $ 0.05   $ 0.03
Diluted:   $ 0.05   $ 0.03
             
             
Weighted average common shares outstanding:            
Basic     51,725     51,572
Diluted     51,881     51,726
             
             
             
CONDENSED CONSOLIDATED BALANCE SHEETS
(In Thousands, Except Share Amounts)
(Unaudited)
 
    March 31,   December 31,
    2016   2015
ASSETS            
             
Current assets:            
  Cash and cash equivalents   $ 98,809   $ 161,122
  Customer retention deposits and restricted cash     2,839     2,598
  Accounts receivable, net     341,101     320,588
  Costs and estimated earnings in excess of billings     140,610     116,455
  Inventory and uninstalled contract materials     67,285     67,796
  Prepaid expenses and other current assets     22,104     18,265
    Total current assets     672,748     686,824
  Property and equipment, net     279,994     283,545
  Deferred tax assets - long-term     1,075     1,075
  Intangible assets, net     34,814     36,438
  Goodwill     126,161     124,161
  Other long-term assets     606     211
    Total assets   $ 1,115,398   $ 1,132,254
             
LIABILITIES AND STOCKHOLDERS' EQUITY            
             
Current liabilities:            
  Accounts payable   $ 136,428   $ 124,450
  Billings in excess of costs and estimated earnings     125,658     139,875
  Accrued expenses and other current liabilities     89,642     93,596
  Dividends payable     2,847     2,842
  Current portion of capital leases     699     974
  Current portion of long-term debt     52,290     54,436
    Total current liabilities     407,564     416,173
  Long-term capital leases, net of current portion     29     22
  Long-term debt, net of current portion     210,022     219,853
  Other long-term liabilities     12,063     12,741
    Total liabilities     629,678     648,789
Stockholders' equity            
  Common stock     5     5
  Additional paid-in capital     165,534     163,344
  Retained earnings     319,740     319,899
  Noncontrolling interests     441     217
    Total stockholders' equity     485,720     483,465
    Total liabilities and stockholders' equity   $ 1,115,398   $ 1,132,254
             
             
             
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
(Unaudited)
 
    Three Months Ended
    March 31,
    2016   2015
Cash flows from operating activities:            
  Net income   $ 2,916   $ 1,672
  Adjustments to reconcile net income to net cash provided by (used in) operating activities:            
    Depreciation     15,281     13,854
    Amortization of intangible assets     1,624     1,651
    Loss (gain) on sale of property and equipment     (736)     510
    Stock-based compensation expense     262     262
    Changes in assets and liabilities:            
      Customer retention deposits and restricted cash     (241)     (342)
      Accounts receivable     (20,513)     41,236
      Costs and estimated earnings in excess of billings     (24,155)     (16,164)
      Other current assets     (3,265)     (7,065)
      Other long-term assets     (395)     -
      Accounts payable     11,978     (8,487)
      Billings in excess of costs and estimated earnings     (14,217)     (13,453)
      Contingent earnout liabilities     -     (4,955)
      Accrued expenses and other current liabilities     (3,469)     (6,421)
      Other long-term liabilities     (678)     (280)
    Net cash provided by (used in) operating activities     (35,608)     2,018
             
Cash flows from investing activities:            
  Purchase of property and equipment     (12,255)     (16,581)
  Proceeds from sale of property and equipment     3,306     2,823
  Sale of short-term investments     -     498
  Cash paid for acquisitions     (4,108)     (22,302)
    Net cash used in investing activities     (13,057)     (35,562)
             
Cash flows from financing activities:            
  Proceeds from issuance of long-term debt     -     11,000
  Repayment of capital leases     (268)     (367)
  Repayment of long-term debt     (11,977)     (10,095)
  Proceeds from issuance of common stock purchased under a long-term incentive plan     1,439     1,621
  Dividends paid     (2,842)     (2,062)
    Net cash provided by (used in) financing activities     (13,648)     97
             
Net change in cash and cash equivalents     (62,313)     (33,447)
  Cash and cash equivalents at beginning of the period     161,122     139,465
  Cash and cash equivalents at end of the period   $ 98,809   $ 106,018
             

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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