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

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 (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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