SOURCE: Primoris Services Corporation

Primoris Services Corporation

February 28, 2017 06:30 ET

Primoris Services Corporation Announces 2016 Fourth Quarter and Full Year Financial Results

Board of Directors Declares $0.055 Per Share Cash Dividend and Authorizes $5 Million Share Repurchase Plan

DALLAS, TX--(Marketwired - February 28, 2017) -

Financial Highlights

  • 2016 Q4 revenues of $601.9 million, compared to 2015 Q4 revenues of $497.1 million
  • 2016 Q4 net income attributable to Primoris of $14.5 million, compared to 2015 Q4 net income attributable to Primoris of $12.6 million
  • 2016 revenues of $1,996.9 million, compared to 2015 revenues of $1,929.4 million
  • 2016 net income attributable to Primoris of $26.7 million, compared to 2015 net income attributable to Primoris of $36.9 million
  • A total backlog of $2.80 billion at December 31, 2016
    • A 34% increase over 2015's year-end total backlog and
    • A 4% sequential quarterly increase over third quarter 2016's total backlog
  • A cash balance of $135.8 million at December 31, 2016
  • A record tangible net worth of $337.3 million at December 31, 2016, a 5% increase over tangible net worth at December 31, 2015.

Primoris Services Corporation (NASDAQ: PRIM) ("Primoris" or "Company") today announced financial results for its fourth quarter and year ended December 31, 2016.

The Company also announced that on February 21, 2017 its Board of Directors declared a $0.055 per share cash dividend to stockholders of record on March 31, 2017, payable on or about April 15, 2017.

David King, President and Chief Executive Officer of Primoris, commented, "We ended 2016 in a stronger position than we entered it. The growth in our backlog reflects strength across our end-markets, as our customers continue to release major infrastructure projects, especially in the pipeline, utility & distribution, and industrial markets. Over the course of the year, we have seen improved visibility on start dates for large projects in our backlog. In the fourth quarter we continued to improve our cash flow while carefully managing expenses."

Mr. King continued, "As we move forward in 2017, we will be changing our segment reporting to match the way that we are now managing our business. The new segments will help our shareholders more clearly see the growth opportunities available to Primoris as we look for growth in 2017. The pipeline market should be strong for several years, driven by large diameter natural gas pipelines for utility customers. We continue growing our MSA work with new utility customers in new geographies. Large industrial infrastructure and mid-size LNG peak shaving projects are moving forward, driven by the continued low cost and dependability of natural gas. Those projects will also provide growth opportunities for our Civil group, similar to the type of work we performed in Lake Charles in 2016. Primoris' unique ability to offer services across a diverse range of end-markets sets us apart from our peers. The positive momentum we are seeing across our markets gives us confidence in continued success for 2017."

2016 FOURTH QUARTER RESULTS OVERVIEW

Revenues in the fourth quarter 2016 increased by $104.7 million, or 21.1%, to $601.9 million from $497.2 million for the same period in 2015. The increased revenues were due to increases in the West Construction services segment. Gross profit for the fourth quarter 2016 increased by $4.9 million, or 7.7%, to $68.6 million from $63.7 million for the same period in 2015. The increase in gross profit was due to increased revenues in the West Construction Services segment.

SEGMENT RESULTS

  • West Construction Services ("West segment") -- The West segment includes the underground and industrial operations and construction services performed by ARB, ARB Structures, Inc., Rockford, Q3C, and Vadnais. ARB and ARB Structures perform work primarily in California; while, Rockford operates throughout the United States and Q3C operates in Colorado and the upper Midwest United States. The segment also includes two joint venture operations. The West segment consists of business headquartered primarily in the Western United States.
  • East Construction Services ("East segment") -- The East segment includes the JCG Heavy Civil division, JCG Infrastructure and Maintenance division, BW Primoris and Cardinal Contractors, Inc. construction businesses, located primarily in the southeastern United States and the Gulf Coast region of the United States.
  • Energy ("Energy segment") -- The Energy segment includes the operations of the Primoris Energy Services ("PES") pipeline and gas facility construction and maintenance operations and the PES Industrial division, whose operations are located primarily in the southeastern United States and in the Gulf Coast region. Also included are the Primoris Aevenia,Inc. ("Aevenia"), Mueller, Northern, Surber and Ram-Fab operations and the OnQuest, Inc. and OnQuest Canada, ULC operations, which provide for the design and installation of liquid natural gas ("LNG") facilities and high-performance furnaces and heaters for the oil refining, petrochemical and power generation industries.

Segment Revenues
(in thousands, except %)

   For the three months ended December 31,  
   2016 
Unaudited
  2015 
Unaudited
 
      % of      % of  
      Total      Total  
Segment  Revenue  Revenue   Revenue  Revenue  
             
West  $388,491  64.6 % $228,828  46.0 %
East   122,997  20.4 %  149,952  30.2 %
Energy   90,375  15.0 %  118,365  23.8 %
 Total  $601,863  100.0 % $497,145  100.0 %
              

Segment Gross Profit
(in thousands, except %)

   For the three months ended December 31,  
   2016 
Unaudited
  2015 
Unaudited
 
       % of      % of  
   Gross   Segment   Gross  Segment  
Segment  Profit   Revenue   Profit  Revenue  
              
West  $57,849   14.9 % $38,536  16.8 %
East   (581 ) -0.5 %  8,901  5.9 %
Energy   11,348   12.6 %  16,288  13.8 %
 Total  $68,616   11.4 % $63,725  12.8 %
               

West Segment: Revenues in the West segment increased by $159.7 million in the fourth quarter 2016 compared to the fourth quarter 2015, mainly as a result of increased revenues at Rockford from two large diameter pipeline projects in Florida which started in the third quarter of 2016. Gross profit for the West segment increased by $19.3 million in the fourth quarter 2016 compared to the fourth quarter 2015, primarily due to the increased revenues at Rockford as well as higher margin utility work at Q3C thanks to mild fourth quarter weather.

East Segment: Revenues in the East segment declined by $27.0 million in the fourth quarter 2016 compared to the fourth quarter 2015, driven primarily by declines at the JCG I&M division from work at a major petrochemical project in Southern Louisiana, as well as declines in civil work for Louisiana and Mississippi Departments of Transportation. The gross profit for the East segment decreased by $9.5 million in the quarter, primarily due to the reduced revenues and profitability in the JCG I&M division.

Energy Segment: Revenues in the Energy segment decreased by $28.0 million in the fourth quarter 2016 compared to the fourth quarter 2015, driven primarily by reduced revenues for the PES facilities and industrial divisions and OnQuest. The gross profit for Energy decreased by $4.9 million in the quarter, mainly due to the decline in revenues.

OTHER INCOME STATEMENT INFORMATION

Selling, general and administrative expenses ("SG&A") were $39.7 million, or 6.6% of revenues for the 2016 fourth quarter, compared to $40.9 million, or 8.2% of revenues for the 2015 fourth quarter. The decrease in SG&A for the quarter is primarily the result of a $2.6 million prior year one-time valuation adjustment for the value of a long-term asset.

Operating income for the 2016 fourth quarter was $28.9 million, or 4.8% of total revenues, compared to $22.5 million, or 4.5% of total revenues, for the same period last year.

Net non-operating items in the 2016 fourth quarter resulted in expenses of $2.3 million, compared to $1.0 million in net expenses in the 2015 fourth quarter.

The provision for income taxes for the 2016 fourth quarter was $11.9 million, for an effective tax rate on income attributable to Primoris of 45.1%, compared to $8.8 million, for an effective tax rate on income attributable to Primoris of 41.2%, in the 2015 fourth quarter. The increased tax rate is the result of an increased full year tax rate to 44.2% (from 43% at the end of the third quarter 2016). The increased tax rate for 2016 is primarily the result of an increase in the effective state tax rate and the impact of tax planning.

Net income attributable to Primoris for the 2016 fourth quarter was $14.5 million, or $0.28 per diluted share, compared to net income attributable to Primoris of $12.6 million, or $0.24 per diluted share, in the same period in 2015.

Fully diluted weighted average shares outstanding for the 2016 fourth quarter increased slightly to 52.0 million from 51.8 million in the fourth quarter of 2015. 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.

2016 FULL YEAR RESULTS OVERVIEW

Segment Revenues
(in thousands, except %)

   For the twelve months ended December 31,  
   2016
Unaudited
  2015 
Unaudited
 
      % of      % of  
      Total      Total  
Segment  Revenue  Revenue   Revenue  Revenue  
             
West  $1,041,341  52.2 % $913,626  47.4 %
East   521,301  26.1 %  612,174  31.7 %
Energy   434,306  21.7 %  403,615  20.9 %
 Total  $1,996,948  100.0 % $1,929,415  100.0 %
              

Segment Gross Profit
(in thousands, except %)

   For the twelve months ended December 31,  
   2016
Unaudited
  2015 
Unaudited
 
       % of      % of  
   Gross   Segment   Gross  Segment  
Segment  Profit   Revenue   Profit  Revenue  
              
West  $145,239   13.9 % $130,255  14.3 %
East   (15,938 ) (3.1 %)  42,523  6.9 %
Energy   72,006   16.6 %  47,095  11.7 %
 Total  $201,307   10.1 % $219,873  11.4 %
               

OTHER FINANCIAL INFORMATION

Primoris' balance sheet at December 31, 2016 included cash and cash equivalents of $135.8 million, working capital of $281.4 million, total debt and capital leases of $261.8 million and stockholders' equity, excluding noncontrolling interest, of $497.4 million. Primoris's tangible net worth at December 31, 2016 was $337.3 million.

Based on expected start dates for current projects in backlog, anticipated levels of customer maintenance, MSA spending, and new project awards, the Company estimates that for the four quarters ending December 31, 2017, net income attributable to Primoris will be between $1.00 and $1.20 per fully diluted share.

BACKLOG

   Backlog at December 31, 2016 (in millions)     
Segment  Fixed Backlog  MSA 
Backlog
 Total Backlog  Expected Next
Four Quarters
Total Backlog
Revenue
Recognition
 
                  
West  $1,271  $616  $1,887  58 %
East   641   21   662  70 %
Energy   214   35   249  100 %
 Total  $2,126  $672  $2,798     
              

At December 31, 2016, Fixed Backlog was $2.13 billion, compared to $1.52 billion at December 31, 2015.

At December 31, 2016, MSA Backlog was $672 million, compared to $571 million at December 31, 2015. During 2016, approximately $576 million of revenues was recognized from MSA projects. MSA Backlog represents estimated MSA revenues for the next four quarters.

Total Backlog at December 31, 2016 was $2.80 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.

SHARE REPURCHASE PLAN

The Company's Board of Directors has authorized a share repurchase program under which Primoris may, from time to time and depending on market conditions, share price and other factors, acquire shares of its common stock on the open market or in privately negotiated transactions up to an aggregate purchase price of $5 million. The share repurchase program expires December 31, 2017.

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, February 28, 2017 at 9:30 am Eastern Time / 8:30 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 13656164, 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.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In Thousands, Except Per Share Amounts)
(Unaudited)

   Three Months Ended   Twelve Months Ended  
  December 31,   December 31,  
   2016  2015   2016  2015  
                      
Revenues  $601,863   $497,145   $1,996,948   $1,929,415  
Cost of revenues   533,247    433,420    1,795,641    1,709,542  
 Gross profit   68,616    63,725    201,307    219,873  
Selling, general & administrative expenses   39,692    40,851    140,842    151,703  
Impairment of Goodwill   -    401    2,716    401  
 Operating income   28,924    22,473    57,749    67,769  
                      
Other income (expense):                     
 Foreign exchange gain (loss)   (86 )  (338 )  202    (763 )
 Other income (expense)   (37 )  1,451    (315 )  1,723  
 Interest income   27    34    149    56  
 Interest expense   (2,160 )  (2,125 )  (8,914 )  (7,688 )
Income before provision for income taxes   26,668    21,495    48,871    61,097  
                      
Provision for income taxes   (11,902 )  (8,787 )  (21,146 )  (23,946 )
Net income   14,766    12,708    27,725    37,151  
                      
Net income attributable to noncontrolling interests   (296 )  (153 )  (1,002 )  (279 )
Net income attributable to Primoris  $14,470   $12,555   $26,723   $36,872  
                      
Earnings per share:                     
Basic:  $0.28   $0.24   $0.52   $0.71  
Diluted:  $0.28   $0.24   $0.51   $0.71  
                      
                      
Weighted average common shares outstanding:                     
Basic   51,771    51,676    51,762    51,647  
Diluted   52,021    51,825    51,989    51,798  
                 

CONDENSED CONSOLIDATED BALANCE SHEETS
(In Thousands, Except Share Amounts)
(Unaudited)

   December 31,  December 31,
   2016  2015
ASSETS        
         
Current assets:        
 Cash and cash equivalents  $135,823  $161,122
 Customer retention deposits and restricted cash   481   2,598
 Accounts receivable, net   388,000   320,588
 Costs and estimated earnings in excess of billings   138,618   116,455
 Inventory and uninstalled contract materials   49,201   67,796
 Prepaid expenses and other current assets   19,258   18,265
  Total current assets   731,381   686,824
 Property and equipment, net   277,346   283,545
 Deferred tax asset - long-term   -   1,075
 Intangible assets, net   32,841   36,438
 Goodwill   127,226   124,161
 Other long-term assets   2,004   211
  Total assets  $1,170,798  $1,132,254
         
LIABILITIES AND STOCKHOLDERS' EQUITY        
         
Current liabilities:        
 Accounts payable  $168,110  $124,450
 Billings in excess of costs and estimated earnings   112,606   139,875
 Accrued expenses and other current liabilities   108,006   93,596
 Dividends payable   2,839   2,842
 Current portion of capital leases   188   974
 Current portion of long-term debt   58,189   54,436
  Total current liabilities   449,938   416,173
 Long-term capital leases, net of current portion   15   22
 Long-term debt, net of current portion   203,381   219,853
 Deferred tax liabilities   9,830   -
 Other long-term liabilities   9,064   12,741
  Total liabilities   672,228   648,789
Stockholders' equity        
Common stock   5   5
 Additional paid-in capital   162,128   163,344
 Retained earnings   335,218   319,899
 Non-controlling interest   1,219   217
  Total stockholders' equity   498,570   483,465
  Total liabilities and stockholders' equity  $1,170,798  $1,132,254
         

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

   Twelve Months Ended  
   December 31,  
   2016   2015  
Cash flows from operating activities:           
 Net income  $27,725   $37,151  
 Adjustments to reconcile net income to net cash provided by (used in) operating activities:           
  Depreciation   61,433    58,408  
  Amortization of intangible assets   6,597    6,793  
  Goodwill and intangible asset impairment   2,716    401  
  Stock-based compensation expense   1,627    1,050  
  Gain on sale of property and equipment   (4,677 )  (2,116 )
  Net deferred tax liabilities (assets)   10,905    (7,004 )
  Changes in assets and liabilities:           
   Customer retention deposits and restricted cash   2,117    (2,117 )
   Accounts receivable   (65,806 )  19,528  
   Costs and estimated earnings in excess of billings   (22,163 )  (47,499 )
   Other current assets   17,665    4,949  
   Other long-term assets   (1,792 )  189  
   Accounts payable   42,934    (5,086 )
   Billings in excess of costs and estimated earnings   (27,519 )  (19,619 )
   Contingent earnout liabilities   -    (6,722 )
   Accrued expenses and other current liabilities   14,492    11,729  
   Other long-term liabilities   (3,677 )  (1,658 )
  Net cash provided by operating activities  $62,577   $48,377  
            
Cash flows from investing activities:           
 Purchase of property and equipment   (58,027 )  (67,097 )
 Proceeds from sale of property and equipment   9,603    9,889  
 Sale of short-term investments   -    30,992  
 Cash paid for acquisitions   (10,997 )  (22,302 )
  Net cash used in investing activities  $(59,421 ) $(48,518 )
            
Cash flows from financing activities:           
 Proceeds from issuance of long-term debt   45,000    75,278  
 Repayment of capital leases   (793 )  (1,336 )
 Repayment of long-term debt   (57,719 )  (43,927 )
 Proceeds from issuance of common stock purchased by management under long-term incentive plan   1,440    1,621  
 Cash distribution to non-controlling interest holder   -    (29 )
 Repurchase of common stock   (4,999 )  -  
 Dividends paid   (11,384 )  (9,809 )
  Net cash provided by (used in) financing activities  $(28,455 ) $21,798  
            
Net change in cash and cash equivalents   (25,299 )  21,657  
Cash and cash equivalents at beginning of the period   161,122    139,465  
Cash and cash equivalents at end of the period  $135,823   $161,122  

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Contact Information

  • 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