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Primoris Services Corporation Announces 2018 Fourth Quarter and Full Year Financial Results

Board of Directors Declares $0.06 Per Share Cash Dividend

Financial Highlights

  • Record 2018 revenue of $2.9 billion, compared to $2.4 billion in 2017
  • 2018 Q4 revenue of $877.7 million, compared to $579.0 million in 2017 Q4
  • Record 2018 net income attributable to Primoris of $77.5 million, or $1.50 per fully diluted share, compared to $72.4 million, or $1.40 per fully diluted share, in 2017

    • 2018 results include $13.3 million in one-time, merger-related costs, compared to $1.8 million in 2017
  • 2018 Q4 net income attributable to Primoris of $32.4 million, or $0.63 per fully diluted share, compared to $22.5 million, or $0.44 per fully diluted share, in 2017 Q4
  • Total backlog of $2.8 billion at December 31, 2018

    • Record MSA Backlog of $1.3 billion at December 31, 2018
  • Cash balance of $151.1 million at December 31, 2018
  • 2018 cash flow from operations of $126.8 million

DALLAS, Feb. 28, 2019 (GLOBE NEWSWIRE) -- Primoris Services Corporation (NASDAQ GS: PRIM) (“Primoris” or “Company”) today announced financial results for its fourth quarter and year ended December 31, 2018.

The Company also announced that on February 26, 2019 its Board of Directors declared a $0.06 per share cash dividend to stockholders of record on March 29, 2019, payable on or about April 15, 2019. 

David King, President and Chief Executive Office of Primoris, commented, “2018 was another record year for Primoris, as we achieved our strategic goal of growing revenue to nearly $3 billion by 2019 and achieved our largest annual revenue, operating income, and EPS in the Company’s history while growing our MSA revenue to all-time records.  As we continue to execute our strategic plan and growth initiatives, we are well positioned to continue delivering value to our shareholders.  The Power & Industrial segment was particularly strong, with our teams in the field delivering impressive margins on multiple projects.  The Utilities & Distribution segment continued their record of steady growth and geographic expansion, and combined with our new Transmission & Distribution segment, our MSA backlog has reached an all-time high.  We have grown our presence in the Southwest small diameter pipeline and field services markets, and our Pipeline & Underground segment performance remains solid in the face of permitting challenges and weather headwinds.  The Civil segment has made progress on legacy projects and we have the right team in place for successful execution on new awards.”

Mr. King continued, “We believe we are well positioned to continue to capitalize on the increasing need for infrastructure services that allow for multi-year growth cycles in all of our business segments.  As Primoris has grown revenue and backlog, we have also achieved our goal of containing overhead spending, with SG&A as a percentage of revenue now at its lowest level in four years.  We controlled spending without sacrificing our focus on safety, or quality, and we are immensely proud of our total recordable incident rate of 0.51 for the year, which is well below the industry average.  As we look at the opportunities in 2019, our gas and electric MSA work provides a reliable recurring base of revenue on which we can build continued growth.  While the timing of large project work can be uncertain, we believe we have the right balance between recurring and project based opportunities.  Our business units are working together to pursue projects across the renewable, petrochemical, utilities, power, and refining industries.   We are encouraged by our client’s staunch support for a major pipeline project that has faced considerable legal challenges, and opportunities for small diameter pipeline work remain strong.  We have a breadth of opportunity across our end markets to support another robust year for Primoris in 2019.”

2018 FOURTH QUARTER RESULTS OVERVIEW

Revenue for the fourth quarter 2018 increased by $298.7 million, or 51.6%, compared to the fourth quarter 2017.  The increase was primarily due to incremental revenue in the fourth quarter 2018 from acquisitions and organic growth in our Pipeline segment.  Gross profit in the fourth quarter 2018 increased by $34.8 million, or 50.8%, compared to fourth quarter 2017. The increase was primarily due to incremental gross profit from acquisitions, the settlement of a disputed receivable related to a project completed in 2014, and the increased revenue in the Pipeline segment.  Gross profit as a percentage of revenue was 11.8% in both the 2018 and 2017 fourth quarters.

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

    For the three months ended December 31, 
    2018   2017
            % of           % of
            Total           Total
Segment   Revenue   Revenue   Revenue   Revenue
Power   $   178,670     20.3 %   $   162,934     28.1 %
Pipeline       229,676     26.2 %       63,145     10.9 %
Utilities       237,558     27.1 %       230,077     39.8 %
Transmission       122,769     14.0 %       —       —  
Civil       108,997     12.4 %       122,861     21.2 %
Total   $   877,670     100.0 %   $   579,017     100.0 %

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

    For the three months ended December 31, 
    2018   2017
            % of           % of
            Segment           Segment
Segment   Gross Profit   Revenue   Gross Profit   Revenue
Power   $   33,115     18.5 %   $   13,177     8.1 %
Pipeline       23,034     10.0 %       12,512     19.8 %
Utilities       32,862     13.8 %       36,336     15.8 %
Transmission        12,225     10.0 %       —       —  
Civil       2,017     1.9 %       6,452     5.3 %
Total   $   103,253     11.8 %   $   68,477     11.8 %

Power, Industrial, & Engineering Segment (“Power”):  Revenue in the Power segment increased by $15.7 million in the fourth quarter 2018, compared to the same period in 2017.  The increase in revenue was primarily due to increases from an oil field maintenance services program and a refinery project, both in Southern California, as well as revenue from the Canadian operations of the Willbros acquisition.  Revenue gains were partially offset by declining revenue from the Carlsbad joint venture, as that project achieved substantial completion in the fourth quarter 2018.   In addition, we collected on a disputed receivable in the fourth quarter 2018 related to a major project completed in 2014, which resulted in recognizing revenue of approximately $11.9 million.  Segment gross profit increased by $19.9 million in the fourth quarter 2018, compared to the same period in 2017, primarily from the Southern California refinery project and the Carlsbad joint venture project, as well as the collection of the disputed receivable.  Gross profit as a percentage of revenue increased to 18.5% in the fourth quarter 2018, compared to 8.1% in the same period in 2017.  The increase in gross profit as a percentage of revenue is primarily due to strong performance and favorable margins realized by our Carlsbad joint venture project, as well as the collection of the disputed receivable.  We do not expect profit margins to remain at  this elevated level in 2019.

Pipeline & Underground Segment (“Pipeline”):  Revenue in the Pipeline segment increased by $166.5 million in the fourth quarter 2018, compared to the same period in 2017, primarily due to increased revenue from large pipeline projects in the Mid Atlantic and West Texas. Segment gross profit increased by $10.5 million in the fourth quarter 2018, compared to the same period in 2017, primarily as the result of the increased revenue.  Gross profit as a percentage of revenue decreased to 10.0% in the fourth quarter 2018, compared to 19.8% in the same period in 2017.  The decrease in gross profit as a percentage of revenue 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. 

Utilities & Distribution Segment (“Utilities”):  Revenue in the Utilities segment increased by $7.5 million in the fourth quarter 2018, compared to the same period in 2017.  Revenue increased with major utility customers in California and the MidWest.  Segment gross profit decreased by $3.5 million in the fourth quarter 2018, compared to the same period in 2017, primarily as a result of a wet December and project mix.  Gross profit as a percentage of revenue decreased to 13.8% in the fourth quarter 2018, compared to 15.8% in the same period in 2017. The decline in gross profit as a percentage of revenue is primarily due to weather and mix.

Transmission & Distribution Segment (“Transmission”): The Transmission segment was created in connection with the acquisition of Willbros. All revenue and gross profit figures represent results from June 1, 2018, the acquisition date, to December 31, 2018.

Civil Segment (“Civil”):  Revenue in the Civil segment decreased by $13.9 million in the fourth quarter 2018, compared to the same period in 2017.  The decreased revenue primarily came from the decision to exit an airport project in the second quarter of 2018, the substantial completion of a large petrochemical plant project in 2017 and decreases from Arkansas DOT projects.  Segment gross profit decreased by $4.4 million in the fourth quarter 2018, compared to the same period in 2017, primarily as the result of decreased revenue. Gross profit as a percentage of revenue decreased to 1.9% in the fourth quarter 2018, compared to 5.3% the same period in 2017. The decrease in gross profit as a percentage of revenue is primarily due to the substantial completion of a large petrochemical plant project in 2017.

OTHER INCOME STATEMENT INFORMATION

Selling, general and administrative (“SG&A”) expenses were $50.0 million during the fourth quarter 2018, an increase of $6.4 million, compared to the fourth quarter 2017.  SG&A expense as a percentage of revenue decreased to 5.7% compared to 7.5% for the corresponding period in 2017 due to increased revenue.

The effective tax rate on income attributable to Primoris (excluding noncontrolling interests) was 25.0% for full year 2018.  The rate differs from the U.S. federal statutory rate of 21% primarily due to state income taxes, investment tax credits, and nondeductible components of per diem expenses.

2018 FULL YEAR RESULTS OVERVIEW

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

    For the year ended December 31, 
    2018   2017
            % of           % of
            Total           Total
Segment   Revenue   Revenue   Revenue   Revenue
Power   $   694,048     23.6 %   $   606,125     25.5 %
Pipeline       590,937     20.1 %       465,570     19.5 %
Utilities       902,772     30.7 %       806,523     33.9 %
Transmission       286,749     9.8 %       —       —  
Civil       464,972     15.8 %       501,777     21.1 %
Total   $   2,939,478     100.0 %   $   2,379,995     100.0 %

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

    For the year ended December 31, 
    2018   2017
            % of           % of
            Segment           Segment
Segment   Gross Profit   Revenue   Gross Profit   Revenue
Power   $   109,789     15.8 %   $   65,675     10.8 %
Pipeline       66,602     11.3 %       92,087     19.8 %
Utilities       111,825     12.4 %       113,037     14.0 %
Transmission       31,904     11.1 %       —       —  
Civil       5,617     1.2 %       7,635     1.5 %
Total   $   325,737     11.1 %   $   278,434     11.7 %

OUTLOOK

Based on an expected third quarter 2019 remobilization date for a major pipeline project in backlog, anticipated MSA spending, and an expected corporate tax rate of 28%, the Company estimates that for the fiscal year ending December 31, 2019, net income attributable to Primoris is expected to be between $1.60 and $1.80 per fully diluted share. 

BACKLOG

                          Expected Next Four
                          Quarters Total
  Backlog at December 31, 2018 (in millions)   Backlog Revenue
Segment Fixed Backlog   MSA Backlog   Total Backlog   Recognition
Power $   245     $   122     $   367     91 %
Pipeline     673         30         703     63 %
Utilities     37         752         789     100 %
Transmission     15         380         395     100 %
Civil     506         —          506     69 %
Total $   1,476     $   1,284     $   2,760     84 %

At December 31, 2018, Fixed Backlog was $1.48 billion, compared to $1.82 billion at December 31, 2017.

At December 31, 2018, MSA Backlog was $1.28 billion, compared to $775 million at December 31, 2017.  During 2018, approximately $1.13 billion of revenue was recognized from MSA projects, a 69.6% increase over 2017 MSA revenue.  MSA Backlog represents estimated MSA revenue for the next four quarters.

Total Backlog at December 31, 2018 was $2.76 billion, compared to $2.60 billion at December 31, 2017. 

Backlog, including estimated MSA revenue, should not be considered a comprehensive indicator of future revenue.  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 Ken Dodgen, Executive Vice President and Chief Financial Officer will host a conference call, Thursday, February 28, 2019 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 13687559, 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, 2018, 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 
Ken Dodgen   
Executive Vice President, Chief Financial Officer
(214) 740-5608
kdodgen@prim.com
Kate Tholking
Vice President, Investor Relations
(214) 740-5615
ktholking@prim.com
   


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

    Three Months Ended    Year Ended 
    December 31,    December 31, 
    2018   2017   2018   2017
Revenue   $   877,670     $   579,017     $   2,939,478     $   2,379,995  
Cost of revenue       774,417         510,540         2,613,741         2,101,561  
Gross profit        103,253         68,477         325,737         278,434  
Selling, general and administrative expenses        49,957         43,537         182,006         170,372  
Merger and related costs       70         219         13,260         1,774  
Operating income        53,226         24,721         130,471         106,288  
Other income (expense):                        
Investment income       —         (249 )       —         5,817  
Foreign exchange (loss) gain       (756 )       (46 )       688         253  
Other income (expense), net       (57 )       536         (808 )       484  
Interest income        209         176         1,753         587  
Interest expense        (7,109 )       (1,541 )       (18,746 )       (8,146 )
Income before provision for income taxes        45,513         23,597         113,358         105,283  
Provision for income taxes        (11,132 )       211         (25,765 )       (28,433 )
Net income    $   34,381     $   23,808     $   87,593     $   76,850  
                         
Less net income attributable to noncontrolling interests        (2,014 )       (1,287 )   $   (10,132 )   $   (4,496 )
                         
Net income attributable to Primoris    $   32,367     $   22,521     $   77,461     $   72,354  
                         
Dividends per common share    $   0.060     $   0.060     $   0.240     $   0.225  
                         
Earnings per share:                        
Basic    $   0.63     $   0.44     $   1.51     $   1.41  
Diluted    $   0.63     $   0.44     $   1.50     $   1.40  
Weighted average common shares outstanding:                        
Basic        50,993         51,449         51,350         51,481  
Diluted        51,397         51,711         51,670         51,741  
                         


CONDENSED CONSOLIDATED BALANCE SHEETS
(In Thousands)
(Unaudited)

    December 31,      December 31, 
    2018   2017
ASSETS            
Current assets:            
Cash and cash equivalents   $   151,063     $   170,385
Accounts receivable, net       372,695         291,589
Contract assets       364,245         265,902
Prepaid expenses and other current assets        36,444         15,338
Total current assets        924,447         743,214
Property and equipment, net        375,884         311,777
Deferred tax assets       1,457         —
Intangible assets, net        81,198         44,800
Goodwill        206,159         153,374
Other long-term assets        5,002         2,575
Total assets    $   1,594,147     $   1,255,740
LIABILITIES AND STOCKHOLDERS’ EQUITY            
Current liabilities:            
Accounts payable   $   249,217     $   140,943
Contract liabilities       189,539         169,377
Accrued liabilities       117,527         76,027
Dividends payable        3,043         3,087
Current portion of long-term debt        62,488         65,464
Total current liabilities        621,814         454,898
Long-term debt, net of current portion        305,669         193,351
Deferred tax liabilities       8,166         13,571
Other long-term liabilities        51,515         31,737
Total liabilities        987,164         693,557
Commitments and contingencies            
Stockholders’ equity            
Common stock       5         5
Additional paid-in capital        144,048         160,502
Retained earnings        461,075         395,961
Accumulated other comprehensive income       (908 )       —
Non-controlling interest        2,763         5,715
Total stockholders’ equity        606,983         562,183
Total liabilities and stockholders’ equity    $   1,594,147     $   1,255,740
             


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

    Year Ended
    December 31,
    2018   2017
Cash flows from operating activities:            
Net income   $   87,593     $   76,850  
Adjustments to reconcile net income to net cash provided by operating activities (net of effect of acquisitions):            
Depreciation        67,948         57,614  
Amortization of intangible assets       11,302         8,689  
Intangible asset impairment       —         477  
Stock-based compensation expense       1,253         1,126  
Gain on short-term investments       —         (5,817 )
Gain on sale of property and equipment       (3,556 )       (4,434 )
Other non-cash items       275         203  
Changes in assets and liabilities:            
Accounts receivable       20,912         60,739  
Contract assets       (67,593 )       (32,137 )
Other current assets       (2,278 )       7,507  
Net deferred tax liabilities (assets)       17,155         3,741  
Other long-term assets       244         28  
Accounts payable       32,323         (30,547 )
Contract liabilities       (43,801 )       42,610  
Accrued liabilities       5,933         1,915  
Other long-term liabilities       (895 )       378  
Net cash provided by operating activities       126,815         188,942  
Cash flows from investing activities:            
Purchase of property and equipment       (110,189 )       (79,782 )
Issuance of a note receivable       (15,000 )       —  
Proceeds from a note receivable       15,000         —  
Proceeds from sale of property and equipment       11,657         8,736  
Purchase of short-term investments       —         (13,588 )
Sale of short-term investments       —         19,405  
Cash paid for acquisitions, net of cash and restricted cash acquired       (110,620 )       (66,205 )
Net cash used in investing activities       (209,152 )       (131,434 )
Cash flows from financing activities:            
Borrowings under revolving line of credit       190,000         —  
Payments on revolving line of credit       (190,000 )       —  
Proceeds from issuance of long-term debt        255,967         55,000  
Repayment of long-term debt       (145,726 )       (61,816 )
Proceeds from issuance of common stock purchased under a long-term incentive plan       1,498         1,148  
Payment of contingent earnout liability       (1,200 )       —  
Cash distribution to non-controlling interest holders       (13,084 )       —  
Repurchase of common stock       (20,000 )       (4,999 )
Dividends paid        (12,343 )       (11,326 )
Other       (1,173 )       (953 )
Net cash provided by (used in) financing activities       63,939         (22,946 )
Effect of exchange rate changes on cash and cash equivalents       (924 )       —  
Net change in cash and cash equivalents       (19,322 )       34,562  
Cash and cash equivalents at beginning of the period       170,385         135,823  
Cash and cash equivalents at end of the period   $   151,063     $   170,385