Market Overview

Primoris Services Corporation Announces 2018 Second Quarter Financial Results

Share:

Financial Highlights

  • 2018 Q2 revenues of $648.8 million
    • For month of June 2018, revenues were $61 million for acquired Willbros entities

  • 2018 Q2 operating income of $20.3 million
    • For month of June 2018, operating income, excluding merger and related costs, was $2.9 million for acquired Willbros entities
    • Q2 one-time deal and merger costs were $7.7 million

  • 2018 Q2 net income attributable to Primoris of $11.7 million, or $0.23 per fully diluted share
    • Pro-forma adjusted net income attributable to Primoris(1), excluding the impact of the Willbros acquisition, of $15.7 million or $0.31 per fully diluted share

  • Total backlog of $2.8 billion at June 30, 2018
    • June 30, 2018 backlog was $432 million for acquired Willbros entities
(1) A non-GAAP measure. See accompanying schedule that reconciles GAAP to non-GAAP measures along with a statement indicating why the Company believes the non-GAAP measure provides useful information for investors.

DALLAS, Aug. 07, 2018 (GLOBE NEWSWIRE) -- Primoris Services Corporation (NASDAQ GS: PRIM) ("Primoris" or "Company") today announced financial results for its second quarter ended June 30, 2018.

The Company also announced that on August 2, 2018 its Board of Directors declared a $0.06 per share cash dividend to stockholders of record on September 28, 2018, payable on or about October 15, 2018. 

David King, President and Chief Executive Officer of Primoris, commented, "In the second quarter, Primoris completed the acquisition of Willbros.  We are pleased that during our one month of ownership, Willbros contributed positively to our revenues and earnings, excluding one-time expenses associated with the acquisition.  We expect that the acquisition will be accretive to our earnings during the second half of this year.

"With the delay in the start date for our large East Coast pipeline project to the end of the second quarter, our pipeline results were less than we had hoped, but we have started work on the project and are looking to much better results from the segment in the second half of the year.  The second quarter also included strong performance from our power jobs and continued positive results in our natural gas utility work."

Mr. King concluded, "As we look to the remainder of this year and in to 2019, we continue to see an extremely positive pipeline market, not just for large diameter work but also for smaller diameter projects in the Permian Basin where we have an established presence.  Our gas utility work and the addition of the electric T&D segment should allow us to grow our MSA revenue, providing a stable revenue base as we pursue LNG and petrochemical opportunities on the Gulf Coast.  We have maintained a strong balance sheet and have over $2.8 billion in backlog.  We expect excellent financial performance not only for the next two quarters, but also for 2019."

2018 SECOND QUARTER RESULTS OVERVIEW

Revenue was $648.8 million for the three months ended June 30, 2018, an increase of $17.6 million, or 2.8%, compared to the same period in 2017. The increase was primarily due to incremental revenue in the three months ended June 30, 2018 from acquisitions ($79.5 million combined), initial progress on a major pipeline project on the Atlantic coast, higher Louisiana DOT volumes, and a West Texas solar electric facility project. The overall increase was partially offset by the substantial completion of two large Florida pipeline projects and a petrochemical plant project in 2017. Gross profit was $71.4 million for the three months ended June 30, 2018, a decrease of $13.1 million, or 15.5%, compared to the same period in 2017.  The decrease was primarily due to the substantial completion in 2017 of two large Florida pipeline projects and a petrochemical plant project, partially offset by an increase in expected claim recovery on the Belton, Texas area Civil projects.  Incremental gross profit in the three months ended June 30, 2018 from acquisitions totaled $11.6 million. Gross profit as a percentage of revenue decreased to 11.0% in the three months ended June 30, 2018 from 13.4% 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.  This segment includes the operations of Willbros Canada segment.

  • 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.  This segment includes the operations of Willbros oil and gas segment.

  • 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.

  • Transmission and Distribution ("Transmission") – The newly formed Transmission segment operates primarily in the Southeastern and Gulf Coast regions of the United States and specializes in a range of services in electric and gas transmission and distribution, including comprehensive engineering, procurement, maintenance and construction, repair, and restoration of utility infrastructure.  This segment represents the operations of Willbros T&D segment.

  • 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 June 30,
    2018   2017
          % of         % of
          Total         Total
Segment   Revenue   Revenue   Revenue   Revenue
Power   $ 167,001   25.7%     $ 157,773   25.0%  
Pipeline     90,605   14.0%       134,623   21.3%  
Utilities     228,852   35.3%       212,942   33.8%  
Transmission     42,454   6.5%         0.0%  
Civil     119,875   18.5%       125,827   19.9%  
Total   $ 648,787   100.0%     $ 631,165   100.0%  


    For the six months ended June 30, 
    2018   2017
          % of         % of
          Total         Total
Segment   Revenue   Revenue   Revenue   Revenue
Power   $ 333,556   28.9%     $ 289,013   24.2%  
Pipeline     148,188   12.9%       318,068   26.7%  
Utilities     395,562   34.3%       329,922   27.7%  
Transmission     42,454   3.7%         0.0%  
Civil     233,146   20.2%       255,664   21.4%  
Total   $ 1,152,906   100.0%     $ 1,192,667   100.0%  
 

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

    For the three months ended June 30, 
    2018   2017
          % of         % of
          Segment         Segment
Segment   Gross Profit   Revenue   Gross Profit   Revenue
Power   $ 20,526     12.3%     $ 18,132     11.5%  
Pipeline     10,678     11.8%       39,366     29.2%  
Utilities     34,564     15.1%       32,347     15.2%  
Transmission     5,721     13.5%           0.0%  
Civil     (70)     (0.1%)       (5,362)     (4.3%)  
Total   $ 71,419     11.0%     $ 84,483     13.4%  
                             
                             
    For the six months ended June 30,
    2018   2017
            % of           % of
            Segment           Segment
Segment   Gross Profit   Revenue   Gross Profit   Revenue
Power   $ 44,597     13.4%     $ 33,656     11.6%  
Pipeline     18,569     12.5%       67,491     21.2%  
Utilities     43,615     11.0%       40,620     12.3%  
Transmission     5,721     13.5%           0.0%  
Civil     3,477     1.5%       (2,231)     (0.9%)  
Total   $ 115,979     10.1%     $ 139,536     11.7%  

Power, Industrial, & Engineering Segment:  Revenue increased by $9.2 million, or 5.8%, for the three months ended June 30, 2018, compared to the same period in 2017. The growth is primarily due to a West Texas solar electric facility project that started in 2018, a refinery project in Southern California, and a monoethylene glycol plant project in Texas. In addition, a LNG plant engineering and construction project in the Northeast, and the acquisition of Willbros increased revenue for the second quarter of 2018. The overall increase was partially offset by the substantial completion of a large petrochemical plant in Louisiana and our Wilmington joint venture power plant project in 2017. Gross profit for the three months ended June 30, 2018, increased by $2.4 million, or 13.2% compared to the same period in 2017.  The increase is primarily due to the revenue growth and slightly higher margins.  Gross profit as a percentage of revenue increased to 12.3% during the three months ended June 30, 2018, compared to 11.5% in the same period in 2017 primarily due to a strong performance and favorable margins realized by our Carlsbad joint venture project.

Pipeline & Underground Segment:  Revenue decreased by $44.0 million, or 32.7%, for the three months ended June 30, 2018, compared to the same period in 2017. The decrease is primarily due to the completion of two large pipeline jobs in Florida and a pipeline job in West Texas in 2017, partially offset by the initial work on a major pipeline project on the Atlantic Coast and incremental revenue from the Willbros and Coastal acquisitions. Gross profit for the three months ended June 30, 2018 decreased by $28.7 million, or 72.9%, compared to the same period in 2017. The decrease is primarily attributable to the higher revenue and gross profit from the two pipeline jobs in Florida in 2017.  Gross profit as a percent of revenue decreased to 11.8% during the three months ended June 30, 2018, compared to 29.2% in the same period in 2017. The decrease is primarily due to our strong performance on the two Florida jobs in 2017, which benefited from good weather conditions and no weather delays and high productivity. The higher gross margins experienced in 2017 is not common and not expected to occur again in the future.
   
Utilities & Distribution Segment:  Revenue increased by $15.9 million, or 7.5%, for the three months ended June 30, 2018, compared to the same period in 2017. The increase is primarily attributable to higher revenue with a major utility customer in the Midwest and the impact of the acquired FGC operations late in the second quarter of 2017. The overall increase was partially offset by lower revenue from a collaboration Master Service Agreement ("MSA") for a major utility customer in California. Gross profit for the three months ended June 30, 2018 increased by $2.2 million, or 6.9%, compared to the same period in 2017. The increase is primarily due to the impact of higher revenue.  Gross profit as a percentage of revenue decreased slightly to 15.1% during the three months ended June 30, 2018, compared to 15.2% in the same period in 2017.

Transmission & Distribution Segment: The Transmission segment was created in connection with the acquisition of Willbros. Revenue and gross profit represent results from the June 1, 2018 acquisition date to June 30, 2018.

Civil Segment:  Revenue decreased by $6.0 million, or 4.7%, for the three months ended June 30, 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.  Gross profit increased by $5.3 million for the three months ended June 30, 2018, compared to the same period in 2017 primarily due to higher profit on Louisiana DOT projects and increases in expected claim recovery on the Belton area projects. The overall increase was partially offset by higher costs on an airport project in the second quarter of 2018.  Gross profit as a percent of revenue increased to (0.1%) during the three months ended June 30, 2018, compared to (4.3%) in the same period in 2017 primarily due to the reasons noted above.

OTHER INCOME STATEMENT INFORMATION

Selling, general and administrative ("SG&A") expenses were $43.5 million during the three months ended June 30, 2018, a decrease of $1.4 million, or 3.1%, compared to the second quarter of 2017. The primary reason for the decrease was a reduction in compensation related expenses, including incentive compensation accruals and a decrease in legal fees. The overall decrease is partially offset by incremental expense from businesses acquired. SG&A expense as a percentage of revenue decreased to 6.7% compared to 7.1% for the corresponding period in 2017 due to lower expenses and increased revenue.

Merger and related costs were $7.7 million for the three months ended June 30, 2018, compared to $1.1 million in the same period in 2017. The increase is primarily related to higher costs associated with the acquisition of Willbros. Such costs primarily consisted of severance and retention bonus costs for certain employees of Willbros and professional fees paid to advisors.

The effective tax rate on income attributable to Primoris (excluding noncontrolling interests) was 24.0% for the six months ended June 30, 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.

OUTLOOK

Based on anticipated levels of customer maintenance spending, MSA spending, new project awards, and an expected corporate tax rate of 24.0%, 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 receiving timely notices to proceed for a major pipeline project in backlog which would allow for a significant increase in revenues and profitability in the second half of 2018.

BACKLOG

                    Expected Next Four
                    Quarters Total
  Backlog at June 30, 2018 (in millions)   Backlog Revenue
Segment Fixed Backlog   MSA Backlog   Total Backlog   Recognition
Power $ 275   $ 112   $ 387     92%  
Pipeline   863     48     911     85%  
Utilities   31     652     683     100%  
Transmission   25     301     326     100%  
Civil   527         527     74%  
Total $ 1,721   $ 1,113   $ 2,834     89%  

At June 30, 2018, Fixed Backlog was $1.7 billion, compared to $1.8 billion at December 31, 2017.

At June 30, 2018, MSA Backlog was $1.1 billion, compared to $775 million at December 31, 2017.  MSA Backlog represents estimated MSA revenues for the next four quarters.

At June 30, 2018, Total Backlog was $2.8 billion, compared to $2.6 billion at December 31, 2017. 

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.

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, August 7, 2018 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 13682319, 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, 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 Kate Tholking
Executive Vice President, Chief Financial Officer Vice President, Investor Relations
(214) 740-5602 (214) 740-5615
pmoerbeek@prim.com ktholking@prim.com
   
   

 

 
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In Thousands, Except Per Share Amounts)
(Unaudited)
 
  Three Months Ended    Six Months Ended 
  June 30,   June 30,
  2018   2017   2018   2017
Revenue $ 648,787     $ 631,165     $ 1,152,906     $ 1,192,667  
Cost of revenue   577,368       546,682       1,036,927       1,053,131  
Gross profit   71,419       84,483       115,979       139,536  
Selling, general and administrative expenses   43,489       44,881       80,445       84,514  
Merger and related costs   7,668       1,096       9,363       1,317  
Operating income   20,262       38,506       26,171       53,705  
Other income (expense):                      
Foreign exchange gain   1,256       109       1,513       132  
Other income (expense), net   (771 )     (13 )     (783 )     (13 )
Interest income   340       114       612       183  
Interest expense   (3,191 )     (2,145 )     (5,189 )     (4,407 )
Income before provision for income taxes   17,896       36,571       22,324       49,600  
Provision for income taxes   (3,705 )     (14,175 )     (3,917 )     (18,692 )
Net income $ 14,191     $ 22,396     $ 18,407     $ 30,908  
                       
Less net income attributable to noncontrolling interests   (2,476 )     (851 )   $ (6,004 )   $ (1,672 )
                       
Net income attributable to Primoris $ 11,715     $ 21,545     $ 12,403     $ 29,236  
                       
Dividends per common share $ 0.060     $ 0.055     $ 0.120     $ 0.110  
                       
Earnings per share:                      
Basic $ 0.23     $ 0.42     $ 0.24     $ 0.57  
Diluted $ 0.23     $ 0.42     $ 0.24     $ 0.56  
Weighted average common shares outstanding:                      
Basic   51,531       51,437       51,505       51,515  
Diluted   51,793       51,688       51,770       51,771  
 

 

 
CONDENSED CONSOLIDATED BALANCE SHEETS
(In Thousands)
(Unaudited)
 
  June 30,   December 31, 
  2018   2017
ASSETS          
Current assets:          
Cash and cash equivalents $ 139,404   $ 170,385
Restricted cash   35,492    
Accounts receivable, net   375,763     291,589
Contract assets   360,710     265,902
Prepaid expenses and other current assets   40,103     15,338
Total current assets   951,472     743,214
Property and equipment, net   356,843     311,777
Deferred tax assets   8,887    
Intangible assets, net   94,089     44,800
Goodwill   197,071     153,374
Other long-term assets   5,639     2,575
Total assets $ 1,614,001   $ 1,255,740
LIABILITIES AND STOCKHOLDERS' EQUITY          
Current liabilities:          
Accounts payable $ 219,180   $ 140,943
Contract liabilities   195,326     169,377
Accrued liabilities   130,479     76,027
Dividends payable   3,092     3,087
Current portion of long-term debt   65,376     65,464
Total current liabilities   613,453     454,898
Long-term debt, net of current portion   354,910     193,351
Deferred tax liabilities       13,571
Other long-term liabilities   68,451     31,737
Total liabilities   1,036,814     693,557
Commitments and contingencies          
Stockholders' equity          
Common stock   5     5
Additional paid-in capital   162,928     160,502
Retained earnings   402,158     395,961
Accumulated other comprehensive income   377    
Non-controlling interest   11,719     5,715
Total stockholders' equity   577,187     562,183
Total liabilities and stockholders' equity $ 1,614,001   $ 1,255,740
 

 

 
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
(Unaudited)
 
  Six Months Ended
  June 30,
  2018   2017
Cash flows from operating activities:          
Net income $ 18,407     $ 30,908  
Adjustments to reconcile net income to net cash (used in) provided by operating activities (net of effect
of acquisition):
         
Depreciation   30,014       28,139  
Amortization of intangible assets   5,161       3,611  
Intangible asset impairment         477  
Stock-based compensation expense   430       690  
Gain on sale of property and equipment   (1,580 )     (3,208 )
Other non-cash items   68       87  
Changes in assets and liabilities:          
Accounts receivable   18,331       53,650  
Contract assets   (64,074 )     (22,627 )
Other current assets   (6,036 )     4,604  
Other long-term assets   (499 )     381  
Accounts payable   2,115       (37,060 )
Contract liabilities   (18,220 )     45,647  
Accrued liabilities   13,647       8,298  
Other long-term liabilities   1,520       2,692  
Net cash (used in) provided by operating activities   (716 )     116,289  
Cash flows from investing activities:          
Purchase of property and equipment   (46,107 )     (44,697 )
Issuance of a note receivable   (15,000 )      
Proceeds from a note receivable   15,000        
Proceeds from sale of property and equipment   5,811       4,664  
Cash paid for acquisitions, net of cash and restricted cash acquired   (111,030 )     (66,205 )
Net cash used in investing activities   (151,326 )     (106,238 )
Cash flows from financing activities:          
Borrowings under revolving line of credit   170,000        
Proceeds from issuance of long-term debt   19,467        
Repayment of long-term debt and capital leases   (28,048 )     (24,679 )
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   (6,179 )     (5,668 )
Net cash provided by (used in) financing activities   156,738       (34,198 )
Effect of exchange rate changes on cash, cash equivalents and restricted cash   (185 )      
Net change in cash, cash equivalents and restricted cash   4,511       (24,147 )
Cash, cash equivalents and restricted cash at beginning of the period   170,385       135,823  
Cash, cash equivalents and restricted cash at end of the period $ 174,896     $ 111,676  
           

SUPPLEMENTAL NON-GAAP FINANCIAL MEASURE
(In Thousands, Except Per Share Amounts)
 (Unaudited)

Reconciliation of net income attributable to Primoris (GAAP measure) to pro-forma adjusted net income attributable to Primoris (non-GAAP measure)

Pro-forma adjusted net income attributable to Primoris is a non-GAAP measure provided as a supplement to present an alternative net income measure which excludes the impact of Willbros' operations and merger and related costs. Management believes that pro-forma adjusted net income attributable to Primoris provides useful information to investors in assessing the comparability of the Company's ongoing operational results and trends. Pro-forma adjusted net income should not be considered in isolation, as a substitute for, or more meaningful than, net income or any other measure reported in accordance with GAAP, but rather to provide additional information useful in evaluating the Company's operational trends and performance.

       
  Three Months Ended June 30,
  2018   2017
  Amount   Per Diluted
Share
  Amount   Per Diluted
Share
Net income attributable to Primoris (GAAP measure) $   11,715     $   0.23     $   21,545   $   0.42
Adjustments to reconcile to pro-forma net income attributable to Primoris (non-GAAP measure)                      
Willbros operations, net of tax (1)     (2,201 )       (0.04 )       —       —
Merger and related costs, net of tax (2)     6,178         0.12         669       0.01
Pro-form adjusted net income attributable to Primoris (non-GAAP measure) $   15,692     $   0.31     $   22,214   $   0.43
                       
                       
                       
  Six Months Ended June 30,
  2018   2017
  Amount   Per Diluted
Share
  Amount   Per Diluted
Share
Net income attributable to Primoris (GAAP measure) $   12,403     $   0.24     $   29,236   $   0.56
Adjustments to reconcile to pro-forma net income attributable to Primoris (non-GAAP measure)                      
Willbros operations, net of tax (1)     (2,201 )       (0.04 )       —       —
Merger and related costs, net of tax (2)     7,466         0.14         803       0.02
Pro-form adjusted net income attributable to Primoris (non-GAAP measure) $   17,668     $   0.34     $   30,039   $   0.58


   
(1) Represents results from the June 1, 2018 acquisition date of Willbros to June 30, 2018, net of our estimated effective tax rate of 24%.
(2) For the three and six months ended June 30, 2018, merger and related costs represents primarily one-time severance and retention bonus costs for certain employees of Willbros, professional fees paid to advisors, and the net interest expense impact of financing the acquisition, net of our estimated effective tax rate of 24%. For the three and six months ended June 30, 2017, merger and related costs represents primarily professional fees paid to advisors, net of our estimated effective tax rate of 39%.

Primary Logo

View Comments and Join the Discussion!