Primoris Services Corporation Announces 2018 First Quarter Financial Results

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| Source: Primoris Services Corporation

Board of Directors Declares $0.06 Per Share Cash Dividend and Authorizes $5 Million Share Repurchase Plan

Financial Highlights

  • 2018 Q1 revenue of $504.1 million
  • 2018 Q1 net income attributable to Primoris of $0.7 million, or $0.01 per fully diluted share
  • 2018 Q1 cash flow from operations of $3.7 million
  • Total Backlog of $2.6 billion at March 31, 2018

DALLAS, May 08, 2018 (GLOBE NEWSWIRE) -- Primoris Services Corporation (NASDAQ GS:PRIM) (“Primoris” or “Company”) today announced financial results for its first quarter ended March 31, 2018.

The Company also announced that on May 4, 2018 its Board of Directors declared a $0.06 per share cash dividend to stockholders of record on June 29, 2018, payable on or about July 13, 2018. 

David King, President and Chief Executive Officer of Primoris, commented, “Primoris’ first quarter results are in line with our expectations, as growth in Master Service Agreement (“MSA”) revenue from our California utility customers and increased revenue from power and petrochemical projects helped offset the negative impact of the worse than normal weather conditions in several markets. In spite of the obvious headwinds from the seasonal nature of our work, we delivered profitable margins in each of our operating segments.”

Mr. King continued, “We are seeing robust markets for services from most of our business units, and during the quarter we added sufficient new work to maintain our backlog at $2.6 billion. We remain on pace to have another record year of revenue. We expect our major pipeline project to kick off at the end of the second quarter; the power job in California to continue into the second half of the year; and we have started construction of a large solar installation in Texas. Our planned acquisition of Willbros, which we anticipate closing in the second quarter, will appreciably bolster our utility MSA revenue and provide an entry into the growing transmission and distribution market. We have successfully integrated many acquisitions during the past few years, and we expect that Willbros will provide additional opportunities for the strategic growth of Primoris.”

2018 FIRST QUARTER RESULTS OVERVIEW

Revenues for three months ended March 31, 2018 decreased by $57.4 million, or 10.2%, compared to the same period in 2017. The decrease was primarily due to the substantial completion of two large Florida pipeline projects and a petrochemical plant project in 2017. The overall decrease was partially offset by higher activity with major utility clients in California and the Midwest, progress on our Carlsbad joint venture power plant project, and a refinery project in Southern California. Gross profit was $44.6 million for the three months ended March 31, 2018, a decrease of $10.5 million, or 19.1%, compared to the same period in 2017. The decrease was primarily due to the substantial completion of two large Florida pipeline projects and a petrochemical plant project in 2017, partially offset by progress on our Carlsbad joint venture power plant project. Gross profit as a percentage of revenues decreased to 8.8% in the three months ended March 31, 2018 from 9.8% in the same period in 2017 due primarily to favorable performance on the two Florida pipeline projects in 2017.

SEGMENT RESULTS

  • 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, the Midwest, and the 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 Southeastern 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 March 31,
  2018 2017
     % of    % of
     Total    Total
Segment Revenue Revenue Revenue Revenue
Power $166,555 33.0% $131,240 23.4%
Pipeline  57,583 11.4%  183,445 32.7%
Utilities  166,710 33.1%  116,980 20.8%
Civil  113,271 22.5%  129,837 23.1%
Total $504,119 100.0% $561,502 100.0%

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

  For the three months ended March 31,
  2018 2017
     % of    % of
     Segment    Segment
Segment Gross Profit Revenue Gross Profit Revenue
Power $24,071 14.5% $15,524 11.8%
Pipeline  7,891 13.7%  28,125 15.3%
Utilities  9,051 5.4%  8,273 7.1%
Civil  3,547 3.1%  3,131 2.4%
Total $44,560 8.8% $55,053 9.8%

Power, Industrial, & Engineering Segment: Revenue increased by $35.3 million, or 26.9%, for the three months ended March 31, 2018, compared to the same period in 2017. The growth is primarily due to our Carlsbad joint venture power plant project and a monoethylene glycol plant project in Texas that started in the third quarter of 2017. In addition, a refinery project in Southern California, a LNG peak shaving plant construction project in the Northeast, and a West Texas solar electric facility increased revenue in the first quarter of 2018. The overall increase was partially offset by the substantial completions of a large petrochemical plant in Louisiana and our Wilmington joint venture power plant project in 2017. Gross profit for the three months ended March 31, 2018, increased by $8.5 million, or 55.1%, compared to the same period in 2017. The increase is primarily due to the revenue growth. Gross profit as a percentage of revenue increased to 14.5% during the three months ended March 31, 2018 compared to 11.8% in the same period in 2017 primarily due to a higher margin percentage realized by our Carlsbad joint venture project.

Pipeline & Underground Segment: Revenue decreased by $125.9 million, or 68.6%, for the three months ended March 31, 2018, compared to the same period in 2017. The decrease is primarily due to the completion of two large pipeline jobs in Florida in 2017, partially offset by incremental revenue from the acquisition of Coastal during the second quarter of 2017. Gross profit for the three months ended March 31, 2018 decreased by $20.2 million, or 71.9%, compared to the same period in 2017. The decrease is primarily attributable to the completion of the two pipeline jobs in Florida in 2017. Gross profit as a percent of revenues decreased to 13.7% during the three months ended March 31, 2018 compared to 15.3% in the same period in 2017. The decrease is primarily due to the impact of start up costs on a micro-tunneling project in Southern California.

Utilities & Distribution Segment: Revenue increased by $49.7 million, or 42.5%, for the three months ended March 31, 2018, compared to the same period in 2017. The increase is primarily attributable to higher revenue from a collaboration MSA arrangement for a major utility customer in California, higher activity with another major utility customer in California, and increased activity with two major utility customers in the Midwest. In addition, the impact of the acquired FGC operations in the second quarter of 2017 also benefited 2018. Gross profit for the three months ended March 31, 2018 increased by $0.8 million, or 9.4%, compared to the same period in 2017. The increase is primarily due to the growth in revenue and the impact of acquired operations, partially offset by decreases related to a client delay and unfavorable weather conditions for major utility customers in the Midwest. Gross profit as a percentage of revenues decreased to 5.4% during the three months ended March 31, 2018 compared to 7.1% in the same period in 2017 primarily as a result of lower gross margins on the collaboration MSA work, the client delay, and the unfavorable weather conditions experienced by the major utility customers in the Midwest.

Civil Segment: Revenue decreased by $16.6 million, or 12.8%, for the three months ended March 31, 2018, compared to the same period in 2017. The decrease is primarily due to the substantial completion of a methanol plant project and a large petrochemical plant project as well as lower Texas DOT volumes. The overall decrease was partially offset by higher Louisiana DOT volumes and an increase from a Louisiana power station project that began in the fourth quarter of 2017. Gross profit increased by $0.4 million for the three months ended March 31, 2018, compared to the same period in 2017 primarily due to higher costs on Arkansas DOT projects in the three months ended March 31, 2017. The overall increase was partially offset by the substantial completions of the methanol plant and petrochemical plant projects in 2017 and unfavorable weather conditions experienced in Texas and Louisiana during the three months ended March 31, 2018. Gross profit as a percent of revenue increased to 3.1% during the three months ended March 31, 2018, compared to 2.4% in the same periods in 2017 primarily due to the reasons noted above.

OTHER INCOME STATEMENT INFORMATION

Selling, general and administrative (“SG&A”) expenses of $38.7 million during the three months ended March 31, 2018 decreased by $1.2 million, or 3.0%, compared to the first quarter of 2017. The primary reason for the decrease was a $3.7 million reduction in compensation related expenses, including incentive compensation accruals, and a $0.9 million decrease in legal fees. The overall decrease was partially offset by $2.6 million of incremental expense from the businesses acquired in the second quarter of 2017 and $1.6 million of expenses related to the pending Willbros merger. SG&A expense as a percentage of revenue increased to 7.7% compared to 7.1% for the corresponding period in 2017 due to the decrease in revenue. Excluding the impact of acquisitions, SG&A as a percentage of revenue increased slightly to 7.4% compared to 7.1% for the corresponding period in 2017.

The provision for income taxes for the first quarter 2018 was $0.2 million, for an effective tax rate on income attributable to Primoris of 23.5%, compared to $4.5 million, for an effective tax rate on income attributable to Primoris of 37.0%, in the first quarter 2017. The $4.3 million decrease in income tax expense was primarily driven by an $11.3 million decrease in pre-tax income (excluding noncontrolling interests) and the Tax Cuts and Jobs Act’s reduction of the U.S. federal corporate income tax rate from 35% to 21% effective January 1, 2018.

Net income attributable to Primoris for the first quarter 2018 was $0.7 million, or $0.01 per fully diluted share, compared to $7.7 million, or $0.15 per fully diluted share, in the same period in 2017.

Fully diluted weighted average shares outstanding for the 2018 first quarter decreased slightly to 51.7 million from 51.9 million in the first quarter 2017.

OUTLOOK

Based on anticipated levels of customer maintenance, MSA spending, new project awards, and an expected corporate tax rate of 23.5%, the Company re-affirms our estimate that for the fiscal year ending December 31, 2018, net income attributable to Primoris will be between $1.50 and $1.70 per fully diluted share. This estimate anticipates a late second quarter 2018 start date for a major pipeline project in backlog.

BACKLOG

          Expected Next Four
          Quarters Total
 Backlog at March 31, 2018 (in millions) Backlog Revenue
SegmentFixed Backlog MSA Backlog Total Backlog Recognition
Power$342 $37 $379  89%
Pipeline 763  26  789  55%
Utilities 54  787  841  100%
Civil 597  -  597  52%
Total$1,756 $850 $2,606  74%

At March 31, 2018, Fixed Backlog was $1.76 billion, compared to $1.82 billion at December 31, 2017.

At March 31, 2018, MSA Backlog was $850 million, compared to $775 million at December 31, 2017. During the first quarter of 2018, approximately $146 million of revenue was recognized from MSA projects, a 38.8% increase over first quarter 2017 MSA revenue. MSA Backlog represents estimated MSA revenues for the next four quarters.

Total Backlog at March 31, 2018 was $2.61 billion, compared to $2.60 billion at December 31, 2017. 

Backlog, including estimated MSA revenue, 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.

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, 2018.

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, May 8, 2018 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)

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 13679112, 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
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  
  March 31, 
  2018  2017 
Revenue $  504,119  $  561,502 
Cost of revenue    459,559     506,449 
Gross profit     44,560     55,053 
Selling, general and administrative expenses     38,651     39,854 
Operating income     5,909     15,199 
Other income (expense):        
Foreign exchange gain    257     23 
Other income (expense), net    (12)    — 
Interest income     272     69 
Interest expense     (1,998)    (2,262)
Income before provision for income taxes     4,428     13,029 
Provision for income taxes     (212)    (4,517)
Net income  $  4,216  $  8,512 
         
Less net income attributable to noncontrolling interests     (3,528) $  (821)
         
Net income attributable to Primoris  $  688  $  7,691 
         
Dividends per common share  $  0.060  $  0.055 
         
Earnings per share:        
Basic  $  0.01  $  0.15 
Diluted  $  0.01  $  0.15 
Weighted average common shares outstanding:        
Basic     51,479     51,594 
Diluted     51,747     51,857 

 


CONDENSED CONSOLIDATED BALANCE SHEETS

(In Thousands)
(Unaudited)

  March 31,  December 31, 
  2018 2017
ASSETS      
Current assets:      
Cash and cash equivalents $  134,172 $  170,385
Accounts receivable, net    260,920    291,589
Contract assets    262,932    265,902
Note receivable    10,000    —
Prepaid expenses and other current assets     21,694    15,338
Total current assets     689,718    743,214
Property and equipment, net     313,937    311,777
Intangible assets, net     42,376    44,800
Goodwill     153,374    153,374
Other long-term assets     3,042    2,575
Total assets  $  1,202,447 $  1,255,740
LIABILITIES AND STOCKHOLDERS’ EQUITY      
Current liabilities:      
Accounts payable $  130,956 $  140,943
Contract liabilities    137,380    169,101
Accrued liabilities     99,909    102,168
Dividends payable     3,092    3,087
Current portion of long-term debt     63,975    65,464
Total current liabilities     435,312    480,763
Long-term debt, net of current portion     181,972    193,351
Deferred tax liabilities    13,577    13,571
Other long-term liabilities     6,090    5,872
Total liabilities     636,951    693,557
Commitments and contingencies      
Stockholders’ equity      
Common stock    5    5
Additional paid-in capital     162,701    160,502
Retained earnings     393,547    395,961
Non-controlling interest     9,243    5,715
Total stockholders’ equity     565,496    562,183
Total liabilities and stockholders’ equity  $  1,202,447 $  1,255,740

 


CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In Thousands)
(Unaudited)

  Three Months Ended  
  March 31,  
  2018 2017
Cash flows from operating activities:        
Net income $  4,216  $  8,512 
Adjustments to reconcile net income to net cash provided by operating activities:        
Depreciation     14,368     14,134 
Amortization of intangible assets    2,424     1,727 
Stock-based compensation expense    215     459 
Gain on sale of property and equipment    (1,104)    (1,308)
Other non-cash items    40     44 
Changes in assets and liabilities:        
Accounts receivable    30,669     36,383 
Contract assets    2,970     (4,671)
Other current assets    (6,356)    1,102 
Other long-term assets    (499)    (147)
Accounts payable    (9,987)    (43,997)
Contract liabilities    (31,721)    38,525 
Accrued expenses and other current liabilities    (1,806)    (1,752)
Other long-term liabilities    231     77 
Net cash provided by operating activities    3,660     49,088 
Cash flows from investing activities:        
Purchase of property and equipment    (19,125)    (19,222)
Issuance of a note receivable    (10,000)    — 
Proceeds from sale of property and equipment    3,734     1,984 
Net cash used in investing activities    (25,391)    (17,238)
Cash flows from financing activities:        
Repayment of long-term debt and capital leases    (12,893)    (12,498)
Proceeds from issuance of common stock purchased under a long-term incentive plan    1,498     1,148 
Repurchase of common stock    —     (4,999)
Dividends paid     (3,087)    (2,839)
Net cash used in financing activities    (14,482)    (19,188)
Net change in cash and cash equivalents    (36,213)    12,662 
Cash and cash equivalents at beginning of the period    170,385     135,823 
Cash and cash equivalents at end of the period $  134,172  $  148,485