Primoris Services Corporation
Aug 4, 2016

Primoris Services Corporation Announces 2016 Second Quarter Financial Results

Board of Directors Declares $0.055 per Share Cash Dividend

DALLAS, TX -- (Marketwired) -- 08/04/16 -- Primoris Services Corporation (NASDAQ: PRIM)

Financial Highlights

Primoris Services Corporation (NASDAQ: PRIM) ("Primoris" or "Company") today announced financial results for its second quarter ended June 30, 2016.

The Company also announced that on August 3, 2016 its Board of Directors declared a $0.055 per share cash dividend to stockholders of record on September 30, 2016, payable on or about October 14, 2016.

David King, President and Chief Executive Officer of Primoris, commented, "While our bottom line improved over 2015's second quarter results, I will be the first to tell you that we are not pleased with our performance this quarter. The biggest earnings impact on the quarter was a significant write-down on two Texas Heavy Civil projects that have struggled with completion issues. Our backlog, which is down from the first quarter, suffered from the timing of final contracts due to customer award delays. Looking forward, we share the same challenges others in our industry are facing: project awards are being pushed back, and after being awarded, start dates are being delayed. Environmental concerns, permitting struggles, and the continuing pressure from low oil prices are all contributing to a challenging operating environment. Even with these challenges, we believe our backlog will grow by year's end."

Mr. King continued, "In the face of these headwinds, we are focusing on what we can control. We have followed through on our commitment to lower our SG&A expenses, and we will continue with this effort. We are continuing to develop new clients and locations to offer our services. Our balance sheet remains strong, and our operating cash flow this quarter was the best second quarter cash flow since we went public in 2008. Although they do fluctuate from year to year, we continue to pursue Master Service Agreements, which give us a revenue base that distinguishes us from many of our peers."

2016 SECOND QUARTER RESULTS OVERVIEW

Revenues in the second quarter 2016 decreased by $26.7 million to $456.8 million from $483.5 million for the same period in 2015. Gross profit for the second quarter 2016 decreased by $3.2 million to $43.3 million from $46.5 million for the same period in 2015. Gross profit as a percentage of revenue decreased to 9.5% for the second quarter 2016, compared to 9.6% for the same period in 2015.

From an end-market perspective, our end-market revenues during the second quarter of 2016 compared to the prior year increased by $28.0 million for the industrial end-market, $3.2 million for the underground utility end-market, and $9.1 million for other markets. Revenues decreased by $19.5 million for the underground capital end-market, by $17.1 million for the engineering end-market, and by $30.4 million for the heavy civil end-market.

SEGMENT RESULTS

Segment Revenues

(in thousands, except %)

       
    For the three months ended June 30,  
    2016
Unaudited
    2015
Unaudited
 
        % of         % of  
        Total         Total  
Segment   Revenue   Revenue     Revenue   Revenue  
                 
West   $ 222,432   48.7 %   $ 239,999   49.6 %
East     127,479   27.9 %     154,887   32.0 %
Energy     106,900   23.4 %     88,659   18.4 %
  Total   $ 456,811   100.0 %   $ 483,545   100.0 %
         
         
    For the six months ended June 30,  
    2016
Unaudited
    2015
Unaudited
 
        % of         % of  
        Total         Total  
Segment   Revenue   Revenue     Revenue   Revenue  
                 
West   $ 388,387   43.8 %   $ 426,384   48.7 %
East     275,450   31.0 %     278,587   31.8 %
Energy     223,420   25.2 %     171,354   19.5 %
  Total   $ 887,257   100.0 %   $ 876,325   100.0 %
                           

Segment Gross Profit

(in thousands, except %)

       
    For the three months ended June 30,  
    2016
Unaudited
    2015
Unaudited
 
        % of         % of  
    Gross   Segment     Gross   Segment  
Segment   Profit   Revenue     Profit   Revenue  
                 
West   $ 31,401   14.1 %   $ 30,444   12.7 %
East     374   0.3 %     9,115   5.9 %
Energy     11,510   10.8 %     6,937   7.8 %
  Total   $ 43,285   9.5 %   $ 46,496   9.6 %
                         
         
         
    For the six months ended June 30,  
    2016
Unaudited
    2015
Unaudited
 
        % of         % of  
    Gross   Segment     Gross   Segment  
Segment   Profit   Revenue     Profit   Revenue  
                 
West   $ 45,199   11.6 %   $ 51,908   12.2 %
East     11,896   4.3 %     18,223   6.5 %
Energy     25,467   11.4 %     14,370   8.4 %
  Total   $ 82,562   9.3 %   $ 84,501   9.6 %
                         

West Segment: Revenues for the West segment decreased by $17.6 million in the second quarter 2016, compared to the same period in 2015. The decrease was primarily the result of a decrease in volume at Rockford, the result of the 2015 completion of an 88-mile pipeline project in the Houston, Texas area. The decrease was partially offset by increased revenues at the ARB Structures division from the construction of several parking structures in southern California; increased revenues at Q3C as the weather improved earlier in 2016 and increased revenue at the ARB Underground division, primarily from work for its two largest utility customers. Gross profit for the West segment increased by $1.0 million in the second quarter 2016, compared to the same period in 2015. The increase in gross profit was primarily the result of increased revenues for Q3C, as well as second quarter 2015 impact of adverse weather conditions on Rockford's gross profit. These increases were offset by a decrease in gross margin at the ARB Underground division, primarily from a change in the mix of work done for its two largest utility customers and a delay in expected work in the quarter.

East Segment: Revenues in the East segment decreased by $27.4 million in the second quarter 2016, compared to the same period in 2015. The decrease was largely due to a decrease in revenue from a large petrochemical project in Louisiana for JCG's Infrastructure & Maintenance division. The gross profit for the East segment decreased by $8.7 million in the second quarter 2016, compared to the same period in 2015, primarily because of lower revenues at JCG's Infrastructure and Maintenance division and the impact of weather and productivity issues on JCG Heavy Civil TXDOT projects, including the reduction for two Belton area jobs.

Energy Segment: Revenues in the Energy segment increased by $18.2 million in the second quarter of 2016, compared to the same period in 2015. Increased revenues for the PES Industrial division related to the large petrochemical project in Louisiana were partially offset by declines at OnQuest due to the general decrease in work volume caused by project delays and an overall energy industry slowdown. The gross profit for the Energy segment increased by $4.6 million in the second quarter 2016, compared to the same period in 2015. The increase in gross profit is mainly attributable to the increased revenues at the PES Industrial division.

Selling, general and administrative expenses ("SG&A") were $32.5 million, or 7.1% of revenues for the second quarter 2016, compared to $38.5 million, or 8.0% of revenues for the second quarter 2015.

Operating income for the second quarter 2016 was $10.8 million, or 2.4% of total revenues, compared to $7.9 million, or 1.6% of total revenues, for the same period last year.

Net non-operating items in the second quarter 2016 resulted in expense of $2.2 million, compared to $1.9 million in net expense in the second quarter 2015.

The provision for income taxes for the second quarter 2016 was $3.3 million, for an effective tax rate on income attributable to Primoris of 39.7%, compared to $2.3 million, for an effective tax rate on income attributable to Primoris of 39.1%, in the second quarter 2015.

Net income attributable to Primoris for the second quarter 2016 was $5.1 million, or $0.10 per diluted share, compared to net income attributable to Primoris of $3.6 million, or $0.07 per diluted share, in the same period in 2015.

Fully diluted weighted average shares outstanding for the second quarter 2016 increased slightly to 52.02 million from 51.82 million in the second quarter 2015.

OTHER FINANCIAL INFORMATION

Primoris' balance sheet at June 30, 2016 included cash and cash equivalents of $97.1 million, working capital of $245.6 million, total debt and capital leases of $250.6 million and stockholders' equity of $488.6 million. Primoris' tangible net worth at June 30, 2016 was $328.6 million.

Based on expected start dates for the power plant and major pipeline 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 June 30, 2017, net income attributable to Primoris will be between $0.90 and $1.10 per fully diluted share.

BACKLOG

           
    Backlog at June 30, 2016
(in millions)
     
Segment   Fixed Backlog   MSA Backlog   Total Backlog   Expected Next Four Quarters Total Backlog Revenue Recognition  
                         
West   $ 673   $ 487   $ 1,160   68 %
East     641     4     645   64 %
Energy     66     42     108   97 %
  Total   $ 1,380   $ 533   $ 1,913   69 %
                         

At June 30, 2016, Fixed Backlog was $1.38 billion, compared to $1.52 billion at December 31, 2015.

At June 30, 2016, MSA Backlog was $533 million, compared to $571 million at December 31, 2015. MSA Backlog represents estimated MSA revenues for the next four quarters.

Total Backlog at June 30, 2016 was $1.91 billion, compared to $2.09 billion at December 31, 2015.

After quarter end, we received the release of an additional $46.6 million on a previously announce $290 million industrial and civil award. This amount was not included in the June 30th backlog number.

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, August 4, 2016 at 11:30 am Eastern Time / 10:30 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 13641808, 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     Six Months Ended  
June 30,     June 30,  
    2016     2015     2016     2015  
                                 
Revenues   $ 456,811     $ 483,545     $ 887,257     $ 876,325  
Cost of revenues     413,526       437,049       804,695       791,824  
  Gross profit     43,285       46,496       82,562       84,501  
Selling, general and administrative expenses     32,498       38,547       65,156       72,307  
  Operating income     10,787       7,949       17,406       12,194  
                                 
Other income (expense):                                
  Foreign exchange gain     21       (140 )     380       296  
  Other income (expense)     -       (45 )     -       (89 )
  Interest income     52       6       91       18  
  Interest expense     (2,240 )     (1,738 )     (4,508 )     (3,660 )
Income before provision for income taxes     8,620       6,032       13,369       8,759  
                                 
Provision for income taxes     (3,333 )     (2,340 )     (5,166 )     (3,395 )
Net income     5,287       3,692       8,203       5,364  
                                 
Net income attributable to noncontrolling interests     (231 )     (54 )     (454 )     (54 )
Net income attributable to Primoris   $ 5,056     $ 3,638     $ 7,749     $ 5,310  
                                 
Earnings per share:                                
Basic:   $ 0.10     $ 0.07     $ 0.15     $ 0.10  
Diluted:   $ 0.10     $ 0.07     $ 0.15     $ 0.10  
                                 
                                 
Weighted average common shares outstanding:                                
Basic     51,772       51,666       51,749       51,619  
Diluted     52,022       51,815       51,950       51,770  
                                 
 
 
CONDENSED CONSOLIDATED BALANCE SHEETS
(In Thousands, Except Share Amounts)
(Unaudited)
         
    June 30,   December 31,
    2016   2015
ASSETS            
             
Current assets:            
  Cash and cash equivalents   $ 97,115   $ 161,122
  Customer retention deposits and restricted cash     3,033     2,598
  Accounts receivable, net     318,074     320,588
  Costs and estimated earnings in excess of billings     133,606     116,455
  Inventory and uninstalled contract materials     61,833     67,796
  Prepaid expenses and other current assets     21,583     18,265
    Total current assets     635,244     686,824
  Property and equipment, net     293,450     283,545
  Deferred tax asset - long-term     1,075     1,075
  Intangible assets, net     33,199     36,438
  Goodwill     126,161     124,161
  Other long-term assets     958     211
    Total assets   $ 1,090,087   $ 1,132,254
             
LIABILITIES AND STOCKHOLDERS' EQUITY            
             
Current liabilities:            
  Accounts payable   $ 113,385   $ 124,450
  Billings in excess of costs and estimated earnings     122,291     139,875
  Accrued expenses and other current liabilities     100,449     93,596
  Dividends payable     2,847     2,842
  Current portion of capital leases     510     974
  Current portion of long-term debt     50,159     54,436
    Total current liabilities     389,641     416,173
  Long-term capital leases, net of current portion     18     22
  Long-term debt, net of current portion     199,868     219,853
  Other long-term liabilities     11,953     12,741
    Total liabilities     601,480     648,789
Stockholders' equity            
Common stock     5     5
  Additional paid-in capital     165,987     163,344
  Retained earnings     321,944     319,899
  Non-controlling interest     671     217
    Total stockholders' equity     488,607     483,465
    Total liabilities and stockholders' equity   $ 1,090,087   $ 1,132,254
                 
 
 
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
(Unaudited)
       
    Six Months Ended  
    June 30,  
    2016     2015  
Cash flows from operating activities:                
  Net income   $ 8,203     $ 5,364  
  Adjustments to reconcile net income to net cash provided by (used in) operating activities:                
    Depreciation     30,850       28,512  
    Amortization of intangible assets     3,239       3,370  
    Gain on sale of property and equipment     (2,293 )     (24 )
    Stock-based compensation expense     710       524  
    Changes in assets and liabilities:                
      Customer retention deposits and restricted cash     (435 )     (904 )
      Accounts receivable     2,514       21,603  
      Costs and estimated earnings in excess of billings     (17,151 )     (40,581 )
      Other current assets     2,708       (6,726 )
      Accounts payable     (11,065 )     356  
      Billings in excess of costs and estimated earnings     (17,584 )     (21,318 )
      Contingent earnout liabilities     -       (4,910 )
      Accrued expenses and other current liabilities     7,337       3,820  
      Other long-term assets     (747 )     (1,800 )
      Other long-term liabilities     (788 )     (4,547 )
    Net cash provided by (used in) operating activities     5,498       (17,261 )
                 
Cash flows from investing activities:                
  Purchase of property and equipment     (42,140 )     (35,674 )
  Proceeds from sale of property and equipment     5,723       3,602  
  Sale of short-term investments     -       30,992  
  Cash paid for acquisitions     (4,108 )     (22,302 )
    Net cash used in investing activities     (40,525 )     (23,382 )
                 
Cash flows from financing activities:                
  Proceeds from issuance of long-term debt     -       11,000  
  Repayment of capital leases     (468 )     (714 )
  Repayment of long-term debt     (24,262 )     (20,635 )
  Proceeds from issuance of common stock purchased by management under long-term incentive plan     1,439       1,621  
  Dividends paid     (5,689 )     (4,124 )
    Net cash used in financing activities     (28,980 )     (12,852 )
                 
Net change in cash and cash equivalents     (64,007 )     (53,495 )
Cash and cash equivalents at beginning of year     161,122       139,465  
Cash and cash equivalents at end of the year   $ 97,115     $ 85,970  
                 

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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