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Primoris Services Corporation Announces 2017 Second Quarter Financial Results

Board of Directors Declares $0.055 Per Share Cash Dividend

Financial Highlights

  • 2017 Q2 revenues of $631.2 million, a 38% increase over 2016 Q2

  • 2017 Q2 gross profit of $84.5 million, a 95% increase over 2016 Q2

  • 2017 Q2 net income attributable to Primoris of $21.5 million, a 326% increase over 2016 Q2.  Earnings per share of $0.42 increased by $0.32 from 2016 Q2.

  • 2017 Q2 cash flow from operations of $67.2 million, a 63% increase over 2016 Q2

  • Total backlog of $2.8 billion at June 30, 2017, a 44% increase over backlog at June 30, 2016

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.

  • Power, Industrial, and Engineering (“Power”) - The Power division of the Power segment includes ARB Industrial, Primoris Power, ARB Structures, and Primoris Renewable Energy.  The Industrial division of this segment includes Primoris Industrial Constructors, Primoris Fabrication, Primoris Mechanical Contractors, and Primoris Coastal Field Services.  The Engineering division of this segment includes OnQuest and PD&C.
  • Pipeline and Underground (“Pipeline”) – The Pipeline segment includes Rockford, Vadnais Trenchless, Primoris Field Services, and Primoris Pipeline.
  • Utilities and Distribution (“Utilities”) – The Utilities segment includes ARB Underground, Q3C, Primoris AV, and Primoris Distribution Services.
  • Civil – The Civil segment includes Primoris Heavy Civil, Primoris I&M, and BW Primoris.

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 %

/EIN News/ --

    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 Backlog Expected Next Four
Quarters Total
Backlog Revenue
Recognition
                 
Power   $ 449 $ 42 $ 491 82%
Pipeline     848   79   927 38%
Utilities     94   570   664 100%
Civil     665   3   668 66%
Total   $ 2,056 $ 694 $ 2,750 68%

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:

  • (877) 407-8293 (Domestic)

  • (201) 689-8349 (International)

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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