Upgrade to SI Premium - Free Trial

Primoris Services Corporation Announces 2019 Fourth Quarter and Full Year Financial Results

February 25, 2020 6:30 AM

2019 Full Year Financial Highlights

2019 Q4 Financial Highlights

DALLAS, Feb. 25, 2020 (GLOBE NEWSWIRE) -- Primoris Services Corporation (NASDAQ GS: PRIM) (“Primoris” or “Company”) today announced financial results for its fourth quarter and year ended December 31, 2019.

The Company also announced that on February 21, 2020 its Board of Directors declared a $0.06 per share cash dividend to stockholders of record on March 31, 2020, payable on or about April 15, 2020.

Tom McCormick, President and Chief Executive Officer of Primoris, commented, “I’m very pleased with Primoris’ finish to 2019, marking our first fiscal year with revenue above $3 billion and revenue from Master Service Agreements (“MSA’s”) accounting for an impressive 44% of our total 2019 revenue, all in line with our Strategic Plan. We saw strong execution on projects across a range of end markets, from our solar project in West Texas, to pipeline field services projects and our Canadian operations. We also continue to see improving performance in the Civil segment. Our total backlog remains strong at $3.2 billion, with a healthy mix of MSA and project-based work. As expected, our fourth quarter cash flow was impressive, allowing us to complete our entire $50 million share repurchase and still end the year with a strong cash balance and a healthy balance sheet.”

Mr. McCormick continued, “As we look to 2020, we continue to be excited about the opportunities for both gas and electric utility work. While acknowledging that our 2019 results in the electric utility market did not meet our initial expectations, we believe that we have addressed the issues and we enter 2020 with our electric utility business ready for a more successful year. We also remain very positive on pipeline opportunities in 2020. Primoris has large pipeline projects already underway, and we continue to see active demand and new awards for both our pipeline and field services work. The bidding activity remains extremely strong. With the heavy civil claims resolution largely behind us, the Civil segment is poised to return to our targeted margin range and be a positive contributor in 2020. And finally, the growth potential in the renewables market is immense. Our team has built an outstanding resume of successful, large-scale solar projects and is poised for continued growth. The opportunities for our recurring, service-oriented revenue and for targeted projects lay the foundation for 2020 to be another successful year for Primoris.”

2019 FOURTH QUARTER RESULTS OVERVIEW

Revenue for the fourth quarter 2019 was $789.8 million, compared to $877.7 million in the fourth quarter 2018. The decrease was primarily due to lower revenue in the Pipeline segment, partially offset by increased revenue in the Power and Civil segments. Gross profit in the fourth quarter 2019 was $89.5 million, compared to $103.3 million in the fourth quarter 2018. The decrease was primarily due to lower gross profit in the Power and Transmission segments, partially offset by an increase in the Civil segment. Gross profit as a percentage of revenue was 11.3% in the fourth quarter 2019, compared to 11.8% in the fourth quarter 2018.

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

For the three months ended December 31,
2019 2018
% of % of
Total Total
Segment Revenue Revenue Revenue Revenue
Power $211,138 26.7% $178,670 20.3%
Pipeline 99,509 12.6% 229,676 26.2%
Utilities 236,425 30.0% 237,558 27.1%
Transmission 114,721 14.5% 122,769 14.0%
Civil 127,985 16.2% 108,997 12.4%
Total $789,778 100.0% $877,670 100.0%

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

For the three months ended December 31,
2019 2018
% of % of
Segment Segment
Segment Gross Profit Revenue Gross Profit Revenue
Power $17,229 8.2% $33,115 18.5%
Pipeline 15,346 15.4% 23,034 10.0%
Utilities 28,646 12.1% 32,862 13.8%
Transmission 916 0.8% 12,225 10.0%
Civil 27,377 21.4% 2,017 1.9%
Total $89,514 11.3% $103,253 11.8%

Power, Industrial, & Engineering Segment (“Power”): Revenue in the Power segment increased by $32.5 million in the fourth quarter 2019, compared to the same period in 2018. The increase in revenue was primarily due to increases from a major solar project in West Texas and from the Company’s Canadian operations, partially offset by the 2018 substantial completion of our Carlsbad joint venture project and refinery projects in Southern California and the collection on a disputed receivable in the fourth quarter 2018 related to a major project completed in 2014. Segment gross profit decreased by $15.9 million in the fourth quarter 2019, compared to the same period in 2018, primarily due to the 2018 collection of the disputed receivable and the completion of the Carlsbad joint venture, as well as higher costs associated with two industrial projects in the Gulf Coast. The decline in gross profit was partially offset by higher gross profit on our solar project. Gross profit as a percentage of revenue decreased to 8.2% in the fourth quarter 2019, compared to 18.5% in the same period in 2018, primarily due to the reasons noted above. As previously stated, we did not expect the profit margins for the Power segment to remain at the elevated levels seen in the fourth quarter 2018.

Pipeline & Underground Segment (“Pipeline”): Revenue in the Pipeline segment decreased by $130.2 million in the fourth quarter 2019, compared to the same period in 2018, primarily due to reduced activity on major pipeline projects in the Mid-Atlantic and West Texas that began in 2018. Segment gross profit decreased by $7.7 million in the fourth quarter 2019, compared to the same period in 2018, primarily as the result of the decreased revenue, partially offset by higher margins. Gross profit as a percentage of revenue increased to 15.4% in the fourth quarter 2019, compared to 10.0% in the same period in 2018. The increase in gross profit as a percentage of revenue is primarily due to the favorable impact from closeout of pipeline projects and favorable payment terms on a project in the Mid-Atlantic.

Utilities & Distribution Segment (“Utilities”): Revenue in the Utilities segment decreased $1.1 million in the fourth quarter 2019 compared to the same period in 2018, primarily due to decreased activity with two major utility customers in California, mostly offset by increased activity with utility customers in Texas and the Midwest. Segment gross profit decreased by $4.2 million in the fourth quarter 2019, compared to the same period in 2018, primarily as a result of extreme weather conditions experienced in certain regions in the fourth quarter 2019. Gross profit as a percentage of revenue decreased to 12.0% in the fourth quarter 2019, compared to 13.8% in the same period in 2018, primarily due to the reasons noted above.

Transmission & Distribution Segment (“Transmission”): Revenue in the Transmission segment decreased by $8.0 million in the fourth quarter 2019, compared to the same period in 2018, primarily due to a major project in the Southeast that completed during 2018. Segment gross profit decreased by $11.3 million in the fourth quarter 2019, compared to the same period in 2018. The decrease in gross profit was primarily due to higher equipment and labor costs in the fourth quarter 2019, as well as the strong performance on the major project in the Southeast and Hurricane Michael storm work in the fourth quarter 2018. Gross profit as a percentage of revenue decreased to 0.8% in the fourth quarter 2019, compared to 10.0% in the same period in 2018, primarily due to the reasons noted above. Civil Segment (“Civil”): Revenue in the Civil segment increased by $19.0 million in the fourth quarter 2019, compared to the same period in 2018, primarily due to a liquified natural gas plant project and a methanol plant project that both began in 2019, and higher Louisiana Department of Transportation & Development volumes. The overall increase was partially offset by the substantial completion of an ethylene plant project in the second quarter of 2019. Segment gross profit increased by $25.4 million in the fourth quarter 2019, compared to the same period in 2018, primarily due to increases in expected claims recovery on the two remaining Belton corridor projects and increased revenue on higher margin industrial projects. Gross profit as a percentage of revenue increased to 21.4% in the fourth quarter 2019, compared to 1.9% in the same period in 2018, primarily due to the reasons noted above.

OTHER INCOME STATEMENT INFORMATION

Selling, general and administrative (“SG&A”) expenses were $48.6 million during the fourth quarter 2019, a decrease of $1.4 million, compared to the fourth quarter 2018. SG&A expense as a percentage of revenue increased to 6.2% compared to 5.7% for the corresponding period in 2018 due to decreased revenue.

Interest expense for the three months ended December 31, 2019, decreased by $4.5 million compared to the same period in 2018, due primarily to a $1.3 million unrealized gain on the change in the fair value of our interest rate swap agreement during the three months ended December 31, 2019 compared to a $2.8 million unrealized loss during the same period in 2018.

The effective tax rate on income attributable to Primoris (excluding noncontrolling interests) was 29.3% for the three months ended December 31, 2019. The rate differs from the U.S. federal statutory rate of 21% primarily due to state income taxes and nondeductible components of per diem expenses.

2019 FULL YEAR RESULTS OVERVIEW

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

For the year ended December 31,
2019 2018
% of % of
Total Total
Segment Revenue Revenue Revenue Revenue
Power $729,348 23.5% $694,048 23.6%
Pipeline 505,156 16.3% 590,937 20.1%
Utilities 886,504 28.5% 902,772 30.7%
Transmission 497,302 16.0% 286,749 9.8%
Civil 488,019 15.7% 464,972 15.8%
Total $3,106,329 100.0% $2,939,478 100.0%

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

For the year ended December 31,
2019 2018
% of % of
Segment Segment
Segment Gross Profit Revenue Gross Profit Revenue
Power $76,119 10.4% $109,789 15.8%
Pipeline 61,550 12.2% 66,602 11.3%
Utilities 116,645 13.2% 111,825 12.4%
Transmission 22,580 4.5% 31,904 11.1%
Civil 54,032 11.1% 5,617 1.2%
Total $330,926 10.7% $325,737 11.1%

BACKLOG

Expected Next Four
Quarters Total
Backlog at December 31, 2019 (in millions) Backlog Revenue
SegmentFixed Backlog MSA Backlog Total Backlog Recognition
Power$401 $114 $515 88%
Pipeline 743 119 862 42%
Utilities 37 737 774 100%
Transmission 23 444 467 100%
Civil 555 4 559 62%
Total$1,759 $1,418 $3,177 76%

At December 31, 2019, Fixed Backlog was $1.76 billion, compared to $1.48 billion at December 31, 2018.

At December 31, 2019, MSA Backlog was $1.42 billion, compared to $1.28 billion at December 31, 2018. During 2019, approximately $1.36 billion of revenue was recognized from MSA projects, a 20.2% increase over 2018 MSA revenue. MSA Backlog represents estimated MSA revenue for the next four quarters.

Total Backlog at December 31, 2019 was $3.18 billion, compared to $2.76 billion at December 31, 2018.

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.

SHARE REPURCHASE PLAN

On October 31, 2019, the Company’s Board of Directors authorized a share repurchase program for up to $50.0 million of our outstanding common stock. As of December 31, 2019, we had repurchased all $50.0 million of common stock authorized under the share repurchase program.

The Company’s Board of Directors has authorized a new 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 $25 million. The share repurchase program expires December 31, 2020.

OUTLOOK

Based on current backlog, the level of bidding activity, and an anticipated corporate tax rate of 29%, the Company estimates that for the fiscal year ending December 31, 2020, net income attributable to Primoris is expected to be between $1.70 and $1.90 per fully diluted share. This estimate excludes the potential positive impact of a third quarter 2020 remobilization date for a major pipeline project in backlog.

CONFERENCE CALL

Tom McCormick, President and Chief Executive Officer, and Ken Dodgen, Executive Vice President and Chief Financial Officer will host a conference call, Tuesday, February 25, 2020 at 10:00 am Eastern Time / 9:00 am Central Time to discuss the results.

Interested parties may participate in the call by dialing:

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 13699137, 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 leading providers of specialty contracting services operating mainly in the United States and Canada. Primoris provides a wide range of specialty construction services, fabrication, maintenance, replacement, and engineering services to a diversified base of 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, 2019, 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 Kate Tholking
Executive Vice President, Chief Financial Officer Vice President, Investor Relations
(214) 740-5608 (214) 740-5615
[email protected] [email protected]

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

Three Months Ended Year Ended
December 31, December 31,
2019 2018 2019 2018
Revenue $789,778 $877,670 $3,106,329 $2,939,478
Cost of revenue 700,264 774,417 2,775,403 2,613,741
Gross profit 89,514 103,253 330,926 325,737
Selling, general and administrative expenses 48,574 49,957 190,051 182,006
Merger and related costs — 70 — 13,260
Operating income 40,940 53,226 140,875 130,471
Other income (expense):
Foreign exchange (loss) gain 34 (756) (690) 688
Other income (expense), net (13) (57) (3,134) (808)
Interest income 345 209 955 1,753
Interest expense (2,603) (7,109) (20,097) (18,746)
Income before provision for income taxes 38,703 45,513 117,909 113,358
Provision for income taxes (11,192) (11,132) (33,812) (25,765)
Net income 27,511 34,381 84,097 87,593
Less net income attributable to noncontrolling interests (566) (2,014) (1,770) (10,132)
Net income attributable to Primoris $26,945 $32,367 $82,327 $77,461
Dividends per common share $0.06 $0.06 $0.24 $0.24
Earnings per share:
Basic $0.53 $0.63 $1.62 $1.51
Diluted $0.53 $0.63 $1.61 $1.50
Weighted average common shares outstanding:
Basic 50,478 50,993 50,784 51,350
Diluted 50,711 51,397 51,084 51,670

CONDENSED CONSOLIDATED BALANCE SHEETS (In Thousands)(Unaudited)

December 31, December 31,
2019 2018
ASSETS
Current assets:
Cash and cash equivalents $120,286 $151,063
Accounts receivable, net 404,911 372,695
Contract assets 344,806 364,245
Prepaid expenses and other current assets 42,704 36,444
Total current assets 912,707 924,447
Property and equipment, net 375,888 375,884
Operating lease assets 242,385 —
Deferred tax assets 1,100 1,457
Intangible assets, net 69,829 81,198
Goodwill 215,103 206,159
Other long-term assets 13,453 5,002
Total assets $1,830,465 $1,594,147
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable $235,972 $249,217
Contract liabilities 192,397 189,539
Accrued liabilities 183,501 117,527
Dividends payable 2,919 3,043
Current portion of long-term debt 55,659 62,488
Total current liabilities 670,448 621,814
Long-term debt, net of current portion 295,642 305,669
Noncurrent operating lease liabilities, net of current portion 171,225 —
Deferred tax liabilities 17,819 8,166
Other long-term liabilities 45,801 51,515
Total liabilities 1,200,935 987,164
Commitments and contingencies
Stockholders’ equity
Common stock 5 5
Additional paid-in capital 97,130 144,048
Retained earnings 531,291 461,075
Accumulated other comprehensive income (loss) 76 (908)
Noncontrolling interest 1,028 2,763
Total stockholders’ equity 629,530 606,983
Total liabilities and stockholders’ equity $1,830,465 $1,594,147

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

Year Ended
December 31,
2019 2018
Cash flows from operating activities:
Net income $84,097 $87,593
Adjustments to reconcile net income to net cash provided by operating activities (net of effect of acquisitions):
Depreciation 74,031 67,948
Amortization of intangible assets 11,369 11,302
Stock-based compensation expense 1,579 1,253
Gain on sale of property and equipment (11,947) (3,556)
Other non-cash items 320 275
Changes in assets and liabilities:
Accounts receivable (28,240) 20,912
Contract assets 19,677 (67,593)
Other current assets (7,248) (2,278)
Net deferred tax liabilities (assets) 13,947 17,155
Other long-term assets 1,249 244
Accounts payable (13,894) 32,323
Contract liabilities (1,221) (43,801)
Operating lease assets and liabilities, net (3,191) —
Accrued liabilities (22,924) 5,933
Other long-term liabilities 377 (895)
Net cash provided by operating activities 117,981 126,815
Cash flows from investing activities:
Purchase of property and equipment (94,494) (110,189)
Issuance of a note receivable — (15,000)
Proceeds from a note receivable — 15,000
Proceeds from sale of property and equipment 28,621 11,657
Cash paid for acquisitions, net of cash and restricted cash acquired — (110,620)
Net cash used in investing activities (65,873) (209,152)
Cash flows from financing activities:
Borrowings under revolving line of credit 212,880 190,000
Payments on revolving line of credit (212,880) (190,000)
Proceeds from issuance of long-term debt 55,008 255,967
Repayment of long-term debt (72,077) (145,726)
Proceeds from issuance of common stock purchased under a long-term incentive plan 1,804 1,498
Payment of taxes on conversion of Restricted Stock Units (1,519) —
Payment of contingent earnout liability — (1,200)
Cash distribution to noncontrolling interest holders (3,505) (13,084)
Repurchase of common stock from a related party (50,000) —
Repurchase of common stock — (20,000)
Dividends paid (12,211) (12,343)
Other (784) (1,173)
Net cash (used in) provided by financing activities (83,284) 63,939
Effect of exchange rate changes on cash and cash equivalents 399 (924)
Net change in cash and cash equivalents (30,777) (19,322)
Cash and cash equivalents at beginning of the year 151,063 170,385
Cash and cash equivalents at end of the year $120,286 $151,063

PSC_Primoris.jpg

Source: Primoris Services Corporation

Categories

Globe Newswire Press Releases

Next Articles