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Primoris Services Corporation Announces 2017 Fourth Quarter and Full Year Financial Results

Financial Highlights

  • 2017 net income attributable to Primoris of $72.4 million, or $1.40 per fully diluted share, compared to $26.7 million, or $0.51 per fully diluted share, in 2016
  • 2017 Q4 net income attributable to Primoris of $22.5 million, or $0.44 per fully diluted share, compared to $14.5 million, or $0.28 per fully diluted share, in 2016 Q4
  • As a result of a tax law change, we remeasured our deferred tax assets and liabilities, which provided a one-time benefit of $9.4 million for the three months and year ended December 31, 2017, or $0.18 per fully diluted share
  • 2017 revenues of $2.4 billion, compared to $2.0 billion in 2016
  • 2017 Q4 revenues of $579.0 million, compared to $601.9 million in 2016 Q4
  • Total backlog of $2.60 billion at December 31, 2017
  • Cash balance of $170.4 million at December 31, 2017
  • Record 2017 cash flow from operations of $188.9 million, compared to $62.6 million in 2016

DALLAS, Feb. 26, 2018 (GLOBE NEWSWIRE) -- Primoris Services Corporation (NASDAQ:PRIM) (“Primoris” or “Company”) today announced financial results for its fourth quarter and year ended December 31, 2017.

The Company also announced that on February 21, 2018 its Board of Directors declared a $0.06 per share cash dividend to stockholders of record on March 30, 2018, payable on or about April 13, 2018.

David King, President and Chief Executive Officer of Primoris, commented, “Primoris continued delivering solid results, reaching company record revenues and earnings for the year. Strong execution on pipeline and petrochemical projects, aided by growing MSA revenue and new acquisitions, gave us financial improvements in all four of our operating segments. We are pleased to see our revenue break well past the $2 billion. We continue to focus on our solid principals of safety, quality, superior execution, and dependable results. We believe the strength of our backlog combined with considerable future project opportunities will drive continued growth.”

Mr. King continued, “As we have focused on recurring revenue, our MSA backlog has grown to an all-time high. Our MSAs will provide a baseline revenue stream while we pursue additional avenues of growth. While burning revenue at record levels, our backlog growth has been lumpy; however, our December 31, 2017 backlog has grown by 24% over the past two years. We expect the large diameter pipeline market to continue its strength in 2018 and into the next several years. We also expect growth opportunities in 2018 from renewable power, small diameter pipeline, industrial, and mid-scale EPC projects. We are confident in our ability to compete in diverse end markets so that we can build on the success of 2017.”

2017 FOURTH QUARTER RESULTS OVERVIEW

Revenues in the fourth quarter 2017 decreased by $22.9 million, or 3.8%, to $579.0 million from $601.9 million for the same period in 2016. The decreased revenues were primarily due to a decrease in the Pipeline & Underground segment as we reached substantial completion on two Florida pipeline projects in the second quarter 2017. Gross profit for the fourth quarter 2017 decreased by $0.1 million, or 0.2%, to $68.5 million from $68.6 million for the same period in 2016. The decrease in gross profit was due primarily due to decreased revenues in the Pipeline & Underground segment. Gross profit as a percentage of revenue increased to 11.8% in the fourth quarter 2017, compared to 11.4% for the same period in 2016. The increased profitability was due to improved margins in the Pipeline & Underground and Civil segments.

SEGMENT RESULTS

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.

  • Power, Industrial, and Engineering (“Power”) - The Power segment operates throughout the United States and specializes in a range of services that include full EPC project delivery, turnkey construction, retrofits, upgrades, repairs, outages, and maintenance for entities in the petroleum, petrochemical, water, and other industries.
  • Pipeline and Underground (“Pipeline”) – The Pipeline segment operates throughout the United States and specializes in a range of services, including pipeline construction, pipeline maintenance, pipeline facility work, compressor stations, pump stations, metering facilities, and other pipeline-related services for entities in the petroleum and petrochemical industries.
  • Utilities and Distribution (“Utilities”) – The Utilities segment operates primarily in California and the Midwest and Southeast regions of the United States and specializes in a range of services, including utility line installation and maintenance, gas and electric distribution, streetlight construction, substation work, and fiber optic cable installation.
  • Civil – The Civil segment operates primarily in the Southeast and Gulf Coast regions of the United States and specializes in highway and bridge construction, airport runway and taxiway construction, demolition, heavy earthwork, soil stabilization, mass excavation, and drainage projects.

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

For the three months ended December 31,
2017 2016
% of % of
Total Total
Segment Revenue Revenue Revenue Revenue
Power $ 162,934 28.1% $ 111,628 18.4%
Pipeline 63,145 10.9% 184,749 30.7%
Utilities 230,077 39.8% 189,354 31.5%
Civil 122,861 21.2% 116,132 19.4%
Total $ 579,017 100.0% $ 601,863 100.0%



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

For the three months ended December 31,
2017 2016
% of % of
Segment Segment
Segment Gross Profit Revenue Gross Profit Revenue
Power $ 13,177 8.1% $ 13,237 11.9%
Pipeline 12,512 19.8% 24,230 13.1%
Utilities 36,336 15.8% 31,420 16.6%
Civil 6,452 5.3% (271) (0.2%)
Total $ 68,477 11.8% $ 68,616 11.4%

Power, Industrial, & Engineering Segment: Revenues in the Power segment increased by $51.3 million in the fourth quarter 2017, compared to the same period in 2016. The increase in revenues was primarily due to increases from two power plant projects as well as increased renewables revenue. Segment gross profit decreased by $0.1 million in the fourth quarter 2017, compared to the same period in 2017, primarily from a petrochemical plant that achieved substantial completion in the second quarter 2017, partially offset by increased gross profit from the two power plant projects. Gross profit as a percentage of revenues decreased to 8.1% in the fourth quarter 2017, compared to 11.9% in the same period in 2016. The decline in gross profit as a percentage of revenues is primarily due to higher costs on a compressor substation project in the fourth quarter 2017.

Pipeline & Underground Segment: Revenues in the Pipeline segment decreased by $121.6 million in the fourth quarter 2017, compared to the same period in 2016, primarily due to decreased revenues from two large pipeline projects that achieved substantial completion in the second quarter 2017. Segment gross profit in the Pipeline segment decreased by $11.7 million, primarily as the result of the decreased revenues. Gross profit as a percentage of revenues increased to 19.8% in the fourth quarter 2017, compared to 13.1% in the same period in 2016. The increase in gross profit as a percentage of revenues is primarily due to the completion of a pipeline project in West Texas and the rental of large diameter pipeline equipment to third parties in the fourth quarter 2017. We do not expect profit margins for this segment to remain at this elevated level in 2018.

Utilities & Distribution Segment: Revenues in the Utilities segment increased by $40.7 million in the fourth quarter 2017, compared to the same period in 2016. Approximately half of the increase came from increased revenues with California utilities, with increased revenues with Midwest utility customers and the second quarter 2017 acquisition of Florida Gas Contractors (now operating as Primoris Distribution Services) accounting for the remainder. Segment gross profit increased by $4.9 million in the fourth quarter 2017, compared to the same period in 2016, primarily as a result of the increased revenues. Gross profit as a percentage of revenues decreased to 15.8% in the fourth quarter 2017, compared to 16.6% in the same period in 2016. The decline in gross profit as a percentage of revenues is primarily due to an earlier start of winter weather in the fourth quarter 2017 compared to the fourth quarter 2016.

Civil Segment: Revenues in the Civil segment increased by $6.7 million in the fourth quarter 2017, compared to the same period in 2016. The increased revenues primarily came from Louisiana DOT and Houston area projects. Segment gross profit increased by $6.7 million in the fourth quarter 2017, compared to the same period in 2016, primarily as the result of increased gross profit on Texas and Louisiana DOT projects. Gross profit as a percentage of revenues increased to 5.3% in the fourth quarter 2017, compared to (0.2%) in the same period in 2016. The increase in gross profit as a percentage of revenues is primarily due to the substantial completion of several challenging highway jobs in Texas and Arkansas.

OTHER INCOME STATEMENT INFORMATION

Selling, general and administrative expenses (“SG&A”) were $43.8 million, or 7.6% of revenues for the fourth quarter 2017, compared to $39.7 million, or 6.6% of revenues for the fourth quarter 2016. The increase in SG&A for the quarter is primarily the result of increased SG&A from businesses acquired in 2017.

Operating income for the fourth quarter 2017 was $24.7 million, or 4.3% of total revenues, compared to $28.9 million, or 4.8% of total revenues, for the same period in 2016.

Net non-operating items in the fourth quarter 2017 resulted in net expenses of $1.1 million, compared to $2.3 million in net expenses in the fourth quarter 2016.

As a result of the enactment of the Tax Cuts and Jobs Act in December 2017 and the requirement to remeasure deferred tax assets and liabilities using enacted tax rates, we recorded a one-time net tax benefit of $9.4 million in the fourth quarter 2017. Excluding this one-time benefit, our provision for income taxes for the fourth quarter 2017 would have been $9.2 million, for an effective tax rate on income attributable to Primoris of 41.0%, compared to a provision for income taxes of $11.9 million, for an effective tax rate on income attributable to Primoris of 45.1%, in the fourth quarter 2016.

Net income attributable to Primoris for the fourth quarter 2017 was $22.5 million, or $0.44 per diluted share, compared to $14.5 million, or $0.28 per diluted share, in the same period in 2016. Excluding the one-time net tax benefit from the remeasurement of deferred tax assets and liabilities using enacted tax rates, net income attributable to Primoris for the fourth quarter 2017 would have been $13.1 million, or $0.25 per diluted share.

Fully diluted weighted average shares outstanding for the 2017 fourth quarter decreased slightly to 51.7 million from 52.0 million in the fourth quarter 2016.

2017 FULL YEAR RESULTS OVERVIEW

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

For the year ended December 31,
2017 2016
% of % of
Total Total
Segment Revenue Revenue Revenue Revenue
Power $ 606,125 25.5% $ 478,653 24.0%
Pipeline 465,570 19.5% 401,931 20.1%
Utilities 806,523 33.9% 637,212 31.9%
Civil 501,777 21.1% 479,152 24.0%
Total $ 2,379,995 100.0% $ 1,996,948 100.0%



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

For the year ended December 31,
2017 2016
% of % of
Segment Segment
Segment Gross Profit Revenue Gross Profit Revenue
Power $ 65,675 10.8% $ 49,807 10.4%
Pipeline 92,087 19.8% 68,100 16.9%
Utilities 113,037 14.0% 100,071 15.7%
Civil 7,635 1.5% (16,671) (3.5%)
Total $ 278,434 11.7% $ 201,307 10.1%

OUTLOOK

Based on an expected second quarter 2018 start date for a major pipeline project in backlog, anticipated levels of customer maintenance, MSA spending, new project awards, and an expected corporate tax rate of 28%, the Company estimates that for the four quarters ending December 31, 2018, net income attributable to Primoris will be between $1.50 and $1.70 per fully diluted share.

BACKLOG

Expected Next Four
Quarters Total
Backlog at December 31, 2017 (in millions) Backlog Revenue
SegmentFixed Backlog MSA Backlog Total Backlog Recognition
Power$382 $ 41 $423 86%
Pipeline 778 35 813 53%
Utilities 58 681 739 100%
Civil 606 18 624 55%
Total$1,824 $775 $2,599 72%

At December 31, 2017, Fixed Backlog was $1.82 billion, compared to $2.13 billion at December 31, 2016.

At December 31, 2017, MSA Backlog was $775 million, compared to $672 million at December 31, 2016. During 2017, approximately $665 million of revenues was recognized from MSA projects, a 15.5% increase over 2016 MSA revenues. MSA Backlog represents estimated MSA revenues for the next four quarters.

Total Backlog at December 31, 2017 was $2.60 billion, compared to $2.80 billion at December 31, 2016.

Backlog, including estimated MSA revenues, should not be considered a comprehensive indicator of future revenues. Revenue from certain projects, such as cost reimbursable and time-and-materials projects, do not flow through backlog. At any time, any project may 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, Tuesday, February 27, 2018 at 10:00 am Eastern Time / 9:00 am Central Time to discuss the results.

Interested parties may participate in the call by dialing:

  • (877) 407-8293 (Domestic)
  • (201) 689-8349 (International)

Presentation slides to accompany the conference call are available for download in the Investor Relations section of Primoris’ website at www.prim.com. Once at the Investor Relations section, please click on “Events & Presentations”.

If you are unable to participate in the live call, a replay may be accessed by dialing (877) 660-6853, conference ID 13676786, 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.

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, 2017, 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 Kate Tholking
Executive Vice President, Chief Financial Officer Director of Investor Relations
(214) 740-5602 (214) 740-5615
pmoerbeek@prim.com ktholking@prim.com


CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In Thousands, Except Per Share Amounts)
(Unaudited)
Three Months Ended Year Ended
December 31, December 31,
2017 2016 2017 2016
Revenue $ 579,017 $ 601,863 $ 2,379,995 $ 1,996,948
Cost of revenue 510,540 533,247 2,101,561 1,795,641
Gross profit 68,477 68,616 278,434 201,307
Selling, general and administrative expenses 43,756 39,692 172,146 140,842
Impairment of goodwill 2,716
Operating income 24,721 28,924 106,288 57,749
Other income (expense):
Investment (loss) income (249) 5,817
Foreign exchange gain (loss) (46) (86) 253 202
Other income (expense): 536 (37) 484 (315)
Interest income 176 27 587 149
Interest expense (1,541) (2,160) (8,146) (8,914)
Income before provision for income taxes 23,597 26,668 105,283 48,871
Provision for income taxes (9,151) (11,902) (37,795) (21,146)
Income tax benefit from remeasurement under Tax Act 9,362 9,362
211 (11,902) (28,433) (21,146)
Net income $ 23,808 $ 14,766 $ 76,850 $ 27,725
Less net income attributable to noncontrolling interests (1,287) (296) $ (4,496) $ (1,002)
Net income attributable to Primoris $ 22,521 $ 14,470 $ 72,354 $ 26,723
Dividends per common share $ 0.060 $ 0.055 $ 0.225 $ 0.220
Earnings per share:
Basic $ 0.44 $ 0.28 $ 1.41 $ 0.52
Diluted $ 0.44 $ 0.28 $ 1.40 $ 0.51
Weighted average common shares outstanding:
Basic 51,449 51,771 51,481 51,762
Diluted 51,711 52,021 51,741 51,989


CONDENSED CONSOLIDATED BALANCE SHEETS
(In Thousands)
(Unaudited)
December 31, December 31,
2017 2016
ASSETS
Current assets:
Cash and cash equivalents $ 170,385 $ 135,823
Customer retention deposits 1,000 481
Accounts receivable, net 358,175 388,000
Costs and estimated earnings in excess of billings 160,092 138,618
Inventory and uninstalled contract materials 40,922 49,201
Prepaid expenses and other current assets 12,640 18,985
Total current assets 743,214 731,108
Property and equipment, net 311,777 277,346
Intangible assets, net 44,800 32,841
Goodwill 153,374 127,226
Other long-term assets 2,575 2,046
Total assets $ 1,255,740 $ 1,170,567
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable $ 140,943 $ 168,110
Billings in excess of costs and estimated earnings 159,034 112,606
Accrued expenses and other current liabilities 107,754 108,006
Dividends payable 3,087 2,839
Current portion of capital leases 132 188
Current portion of long-term debt 65,464 58,189
Current portion of contingent earnout liabilities 716
Total current liabilities 477,130 449,938
Long-term capital leases, net of current portion 196 15
Long-term debt, net of current portion 193,351 203,150
Deferred tax liabilities 13,571 9,830
Other long-term liabilities 9,309 9,064
Total liabilities 693,557 671,997
Commitments and contingencies
Stockholders’ equity
Common stock 5 5
Additional paid-in capital 160,502 162,128
Retained earnings 395,961 335,218
Non-controlling interest 5,715 1,219
Total stockholders’ equity 562,183 498,570
Total liabilities and stockholders’ equity $ 1,255,740 $ 1,170,567


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

Year Ended
December 31,
2017 2016
Cash flows from operating activities:
Net income $ 76,850 $ 27,725
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation 57,614 61,433
Amortization of intangible assets 8,689 6,597
Goodwill and intangible asset impairment 477 2,716
Stock-based compensation expense 1,126 1,627
Gain on short-term investments (5,817)
Gain on sale of property and equipment (4,434) (4,677)
Net deferred tax liabilities (assets) 3,741 10,905
Other non-cash items 203 174
Changes in assets and liabilities:
Customer retention deposits (519) 2,117
Accounts receivable 40,546 (65,806)
Costs and estimated earnings in excess of billings (20,894) (22,163)
Other current assets 16,976 17,491
Other long-term assets 28 (1,792)
Accounts payable (30,547) 42,934
Billings in excess of costs and estimated earnings 45,981 (27,519)
Contingent earnout liabilities (484)
Accrued expenses and other current liabilities (972) 14,492
Other long-term liabilities 378 (3,677)
Net cash provided by operating activities 188,942 62,577
Cash flows from investing activities:
Purchase of property and equipment (79,782) (58,027)
Proceeds from sale of property and equipment 8,736 9,603
Purchase of short-term investments (13,588)
Sale of short-term investments 19,405
Cash paid for acquisitions (66,205) (10,997)
Net cash used in investing activities (131,434) (59,421)
Cash flows from financing activities:
Proceeds from issuance of long-term debt 55,000 45,000
Repayment of capital leases (322) (793)
Repayment of long-term debt (61,816) (57,719)
Payment of debt issuance costs (631)
Proceeds from issuance of common stock purchased under a long-term incentive plan 1,148 1,440
Repurchase of common stock (4,999) (4,999)
Dividends paid (11,326) (11,384)
Net cash used in financing activities (22,946) (28,455)
Net change in cash and cash equivalents 34,562 (25,299)
Cash and cash equivalents at beginning of the period 135,823 161,122
Cash and cash equivalents at end of the period $ 170,385 $ 135,823

Source:Primoris Services Corporation