Market Overview

Primoris Services Corporation Announces 2017 Fourth Quarter and Full Year Financial Results

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Financial Highlights

  • 2017 net income attributable to Primoris of $72.4 million, or $1.40 per fully diluted share, compared to $26.7 million, or $0.51 per fully diluted share, in 2016
  • 2017 Q4 net income attributable to Primoris of $22.5 million, or $0.44 per fully diluted share, compared to $14.5 million, or $0.28 per fully diluted share, in 2016 Q4
  • As a result of a tax law change, we remeasured our deferred tax assets and liabilities, which provided a one-time benefit of $9.4 million for the three months and year ended December 31, 2017, or $0.18 per fully diluted share
  • 2017 revenues of $2.4 billion, compared to $2.0 billion in 2016
  • 2017 Q4 revenues of $579.0 million, compared to $601.9 million in 2016 Q4
  • Total backlog of $2.60 billion at December 31, 2017
  • Cash balance of $170.4 million at December 31, 2017
  • Record 2017 cash flow from operations of $188.9 million, compared to $62.6 million in 2016

DALLAS, Feb. 26, 2018 (GLOBE NEWSWIRE) -- Primoris Services Corporation (NASDAQ:PRIM) ("Primoris" or "Company") today announced financial results for its fourth quarter and year ended December 31, 2017.

The Company also announced that on February 21, 2018 its Board of Directors declared a $0.06 per share cash dividend to stockholders of record on March 30, 2018, payable on or about April 13, 2018. 

David King, President and Chief Executive Officer of Primoris, commented, "Primoris continued delivering solid results, reaching company record revenues and earnings for the year.  Strong execution on pipeline and petrochemical projects, aided by growing MSA revenue and new acquisitions, gave us financial improvements in all four of our operating segments.  We are pleased to see our revenue break well past the $2 billion.  We continue to focus on our solid principals of safety, quality, superior execution, and dependable results.  We believe the strength of our backlog combined with considerable future project opportunities will drive continued growth."

Mr. King continued, "As we have focused on recurring revenue, our MSA backlog has grown to an all-time high.  Our MSAs will provide a baseline revenue stream while we pursue additional avenues of growth.  While burning revenue at record levels, our backlog growth has been lumpy; however, our December 31, 2017 backlog has grown by 24% over the past two years.  We expect the large diameter pipeline market to continue its strength in 2018 and into the next several years.  We also expect growth opportunities in 2018 from renewable power, small diameter pipeline, industrial, and mid-scale EPC projects.  We are confident in our ability to compete in diverse end markets so that we can build on the success of 2017."

2017 FOURTH QUARTER RESULTS OVERVIEW

Revenues in the fourth quarter 2017 decreased by $22.9 million, or 3.8%, to $579.0 million from $601.9 million for the same period in 2016.  The decreased revenues were primarily due to a decrease in the Pipeline & Underground segment as we reached substantial completion on two Florida pipeline projects in the second quarter 2017.  Gross profit for the fourth quarter 2017 decreased by $0.1 million, or 0.2%, to $68.5 million from $68.6 million for the same period in 2016.  The decrease in gross profit was due primarily due to decreased revenues in the Pipeline & Underground segment.  Gross profit as a percentage of revenue increased to 11.8% in the fourth quarter 2017, compared to 11.4% for the same period in 2016.  The increased profitability was due to improved margins in the Pipeline & Underground and Civil segments.

SEGMENT RESULTS

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 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 and the Midwest and 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 Southeast 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 December 31, 
    2017     2016  
          % of         % of
          Total         Total
Segment   Revenue   Revenue   Revenue   Revenue
Power   $   162,934   28.1 %   $   111,628   18.4 %
Pipeline       63,145   10.9 %       184,749   30.7 %
Utilities       230,077   39.8 %       189,354   31.5 %
Civil       122,861   21.2 %       116,132   19.4 %
Total   $   579,017   100.0 %   $   601,863   100.0 %



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

    For the three months ended December 31, 
    2017     2016  
          % of         % of
          Segment         Segment
Segment   Gross Profit   Revenue   Gross Profit   Revenue
Power   $   13,177   8.1 %   $   13,237     11.9 %
Pipeline       12,512   19.8 %       24,230     13.1 %
Utilities       36,336   15.8 %       31,420     16.6 %
Civil       6,452   5.3 %       (271 )   (0.2 %)
Total   $   68,477   11.8 %   $   68,616     11.4 %

Power, Industrial, & Engineering Segment:  Revenues in the Power segment increased by $51.3 million in the fourth quarter 2017, compared to the same period in 2016.  The increase in revenues was primarily due to increases from two power plant projects as well as increased renewables revenue.  Segment gross profit decreased by $0.1 million in the fourth quarter 2017, compared to the same period in 2017, primarily from a petrochemical plant that achieved substantial completion in the second quarter 2017, partially offset by increased gross profit from the two power plant projects.  Gross profit as a percentage of revenues decreased to 8.1% in the fourth quarter 2017, compared to 11.9% in the same period in 2016.  The decline in gross profit as a percentage of revenues is primarily due to higher costs on a compressor substation project in the fourth quarter 2017.

Pipeline & Underground Segment Revenues in the Pipeline segment decreased by $121.6 million in the fourth quarter 2017, compared to the same period in 2016, primarily due to decreased revenues from two large pipeline projects that achieved substantial completion in the second quarter 2017. Segment gross profit in the Pipeline segment decreased by $11.7 million, primarily as the result of the decreased revenues.  Gross profit as a percentage of revenues increased to 19.8% in the fourth quarter 2017, compared to 13.1% in the same period in 2016.  The increase in gross profit as a percentage of revenues 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.  We do not expect profit margins for this segment to remain at this elevated level in 2018. 
   
Utilities & Distribution Segment:  Revenues in the Utilities segment increased by $40.7 million in the fourth quarter 2017, compared to the same period in 2016.  Approximately half of the increase came from increased revenues with California utilities, with increased revenues with Midwest utility customers and the second quarter 2017 acquisition of Florida Gas Contractors (now operating as Primoris Distribution Services) accounting for the remainder.  Segment gross profit increased by $4.9 million in the fourth quarter 2017, compared to the same period in 2016, primarily as a result of the increased revenues.  Gross profit as a percentage of revenues decreased to 15.8% in the fourth quarter 2017, compared to 16.6% in the same period in 2016. The decline in gross profit as a percentage of revenues is primarily due to an earlier start of winter weather in the fourth quarter 2017 compared to the fourth quarter 2016.

Civil Segment:  Revenues in the Civil segment increased by $6.7 million in the fourth quarter 2017, compared to the same period in 2016.  The increased revenues primarily came from Louisiana DOT and Houston area projects.  Segment gross profit increased by $6.7 million in the fourth quarter 2017, compared to the same period in 2016, primarily as the result of increased gross profit on Texas and Louisiana DOT projects. Gross profit as a percentage of revenues increased to 5.3% in the fourth quarter 2017, compared to (0.2%) in the same period in 2016. The increase in gross profit as a percentage of revenues is primarily due to the substantial completion of several challenging highway jobs in Texas and Arkansas.

OTHER INCOME STATEMENT INFORMATION

Selling, general and administrative expenses ("SG&A") were $43.8 million, or 7.6% of revenues for the fourth quarter 2017, compared to $39.7 million, or 6.6% of revenues for the fourth quarter 2016.  The increase in SG&A for the quarter is primarily the result of increased SG&A from businesses acquired in 2017.

Operating income for the fourth quarter 2017 was $24.7 million, or 4.3% of total revenues, compared to $28.9 million, or 4.8% of total revenues, for the same period in 2016.

Net non-operating items in the fourth quarter 2017 resulted in net expenses of $1.1 million, compared to $2.3 million in net expenses in the fourth quarter 2016. 

As a result of the enactment of the Tax Cuts and Jobs Act in December 2017 and the requirement to remeasure deferred tax assets and liabilities using enacted tax rates, we recorded a one-time net tax benefit of $9.4 million in the fourth quarter 2017.  Excluding this one-time benefit, our provision for income taxes for the fourth quarter 2017 would have been $9.2 million, for an effective tax rate on income attributable to Primoris of 41.0%, compared to a provision for income taxes of $11.9 million, for an effective tax rate on income attributable to Primoris of 45.1%, in the fourth quarter 2016. 

Net income attributable to Primoris for the fourth quarter 2017 was $22.5 million, or $0.44 per diluted share, compared to $14.5 million, or $0.28 per diluted share, in the same period in 2016.  Excluding the one-time net tax benefit from the remeasurement of deferred tax assets and liabilities using enacted tax rates, net income attributable to Primoris for the fourth quarter 2017 would have been $13.1 million, or $0.25 per diluted share.

Fully diluted weighted average shares outstanding for the 2017 fourth quarter decreased slightly to 51.7 million from 52.0 million in the fourth quarter 2016.

2017 FULL YEAR RESULTS OVERVIEW

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

    For the year ended December 31, 
    2017     2016  
          % of         % of
          Total         Total
Segment   Revenue   Revenue   Revenue   Revenue
Power   $   606,125   25.5 %   $
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