UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported) February 4, 2010
Matrix Service Company
(Exact Name of Registrant as Specified in Its Charter)
DELAWARE
(State or Other Jurisdiction of Incorporation)
| 001-15461 | 73-1352174 | |
| (Commission File Number) |
(IRS Employer Identification No.) |
| 5100 E Skelly Dr., Suite 700, TULSA, OK | 74135 | |
| (Address of Principal Executive Offices) | (Zip Code) |
918-838-8822
(Registrant’s Telephone Number, Including Area Code)
NOT APPLICABLE
(Former Name or Former Address, if Changed Since Last Report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
| ¨ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
| ¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| ¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| ¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
| Item 2.02 | Results of Operations and Financial Condition. |
On February 4, 2010, Matrix Service Company (the “Company”) issued a press release announcing financial results for the second quarter and first six months of the fiscal year ending December 31, 2009. The full text of the press release is attached as Exhibit 99 to this Current Report on Form 8-K.
The information in this Item 2.02 and Exhibit 99.1 attached hereto is being furnished pursuant to Item 2.02 and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.
| Item 9.01 | Financial Statements and Exhibits. |
The following exhibits are filed or furnished herewith:
| Exhibit No. |
Description | |
| 99 | Press Release dated February 4, 2010, announcing financial results for the second quarter ending December 31, 2009 and the first six months of fiscal year 2010. | |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| Matrix Service Company | ||||
| Dated: February 4, 2010 | By: | /S/ KEVIN S. CAVANAH | ||
| Kevin S. Cavanah | ||||
| Vice President – Accounting & Financial Reporting and Principal Accounting Officer | ||||
EXHIBIT INDEX
| Exhibit No. |
Description | |
| 99 | Press Release dated February 4, 2010, announcing financial results for the second quarter ending December 31, 2009 and the first six months of fiscal year 2010. | |
Exhibit 99
FOR IMMEDIATE RELEASE
MATRIX SERVICE ANNOUNCES SECOND QUARTER FISCAL 2010 RESULTS OF $0.17 PER
FULLY DILUTED SHARE
Second Quarter Fiscal 2010 Highlights:
| • | Revenues were $150.4 million, |
| • | Gross margins were 12.3%, |
| • | Net income was $4.5 million, |
| • | Fully diluted EPS was $0.17 per share, |
| • | Backlog was $323.7 million as of December 31, 2009, and |
| • | Cash was $61.4 million as of December 31, 2009. |
Six Month Fiscal 2010 Highlights:
| • | Revenues were $288.1 million, |
| • | Gross margins were 12.4%, and |
| • | Fully diluted EPS was $0.34 per share. |
TULSA, OK – February 4, 2010 – Matrix Service Co. (Nasdaq: MTRX), a leading industrial services company, today reported its financial results for the three and six months ended December 31, 2009.
Second Quarter of Fiscal 2010 Results
Net income for the second quarter of fiscal 2010 was $4.5 million, or $0.17 per fully diluted share on total revenues of $150.4 million. Second quarter operating results included a charge related to collection costs on claims acquired in a recent acquisition of $0.9 million or $0.02 per fully diluted share. Total revenues were $176.9 million and net income was $10.1 million, or $0.38 per fully diluted share, in the comparable period a year earlier.
“As we expected, the market environment continued to be challenging through the end of calendar 2009,” said Michael J. Bradley, president and CEO of Matrix Service Company. “The Matrix Service team executed at a high level while further strengthening our financial condition. Although some awards are occurring later than expected, we continue to see strong bid flow, especially in our Construction Services segment where second quarter backlog awards were at their highest quarterly amount in almost two years and totaled over $100 million. The growth in our Electrical and Instrumentation business contributed significantly to second quarter awards and demonstrates our diversification and expanded capabilities which is allowing us to pursue projects of greater scale and complexity.”
Revenues for the Construction Services segment were $80.6 million, compared with $100.1 million in fiscal 2009. The decrease of $19.5 million was primarily due to delays in project awards and a decline in our customers’ capital spending. Revenues for the Repair and Maintenance Services segment were $69.8 million in fiscal 2010 compared to $76.8 million in fiscal 2009. The decline was due to customers applying discretion to the scope and timing of maintenance programs.
Consolidated gross profit decreased from $26.4 million in fiscal 2009 to $18.4 million in fiscal 2010. The decrease of $8.0 million was due to lower revenues in fiscal 2010 and lower gross margins, which
decreased to 12.3% in fiscal 2010 compared to 14.9% a year earlier. Gross margins in the Repair and Maintenance Services segment were 9.4% in the current fiscal year compared to 17.7% in the prior fiscal year. Construction Services segment gross margins were 14.8% in the current fiscal year compared to 12.7% in fiscal 2009. Gross margins in both segments were negatively affected by a lower volume of business available to recover construction overhead costs. Consolidated SG&A expenses decreased 3.4% to $11.4 million in fiscal 2010 compared to $11.8 million for fiscal 2009. The decline in SG&A expenses is due to our on-going cost reduction efforts related primarily to employee related costs and professional fees, partially offset by a charge of $0.9 million in fiscal 2010 related to the collection of claims acquired in a recent acquisition.
Six Month Fiscal 2010 Results
Net income for fiscal 2010 was $9.0 million, or $0.34 per fully diluted share, on total revenues of $288.1 million. Fiscal 2010 operating results include charges related to a legal matter of $1.3 million, or $.03 per fully diluted share, and $0.9 million, or $0.02 per fully diluted share, related to collection costs on claims acquired in a recent acquisition. Total revenues were $363.6 million and net income was $19.6 million or $0.74 per fully diluted share in fiscal 2009.
Revenues for the Construction Services segment were $158.3 million compared with $214.9 million in fiscal 2009. The decrease of $56.6 million was primarily due to delays in project awards and a decline in our customers’ capital spending. Revenues for the Repair and Maintenance Services segment were $129.8 million in fiscal 2010 compared to $148.7 million in fiscal 2009. The decline was due to customers applying discretion to the scope and timing of maintenance programs.
Consolidated gross profit decreased from $53.0 million in fiscal 2009 to $35.9 million in fiscal 2010. The reduction of $17.1 million was due primarily to the decrease in revenues and lower gross margins of 12.4% in fiscal 2010 compared to 14.6% in fiscal 2009. Gross margins in the Repair and Maintenance Services segment were 9.9% in the current fiscal year versus 17.0% in the prior fiscal year. Construction Services segment gross margins were 14.5% in the current fiscal year compared to 12.9% in fiscal 2009. Gross margins in both segments were negatively affected by a lower volume of business available to recover construction overhead costs. Consolidated SG&A expenses decreased $2.3 million to $21.5 million fiscal 2010 compared to $23.8 million for fiscal 2009. The decline in SG&A expenses is due to our on-going cost reduction efforts related primarily to employee related costs and professional fees, partially offset by a charge of $0.9 million incurred in fiscal 2010 related to the collection of claims acquired in a recent acquisition.
Backlog
Consolidated backlog as of December 31, 2009 was $323.7 million compared to $328.1 million as of September 30, 2009.
Financial Position
During the second quarter, the Company increased its cash balance from $56.5 million as of September 30, 2009, to $61.4 million as of December 31, 2009. The Company did not borrow under its $75.0 million revolving credit facility during the six months ended December 31, 2009.
Earnings Guidance
The outlook for the Construction Services segment is improving, but the timing of project awards continues to lag expectations. The Repair and Maintenance Services segment continues to be affected by the lingering weakness in the economy and energy sector which has caused an overall softening of the Aboveground Storage Tank market and weak fundamentals within the refining industry. As a result, Matrix Service expects to achieve earnings toward the lower end our of our previously stated EPS guidance of $0.80 to $1.10 per fully diluted share, excluding the legal charge previously announced of $0.03 per fully diluted share and the charge related to collection costs on claims acquired in a recent acquisition of $0.02 per fully diluted share.
Conference Call Details
In conjunction with the press release, Matrix Service will host a conference call with Michael J. Bradley, president and CEO, and Thomas E. Long, vice president and CFO. The call will take place at 11:00 a.m. (Eastern) / 10:00 a.m. (Central) today and will be simultaneously broadcast live over the Internet at www.matrixservice.com or www.vcall.com. Please allow extra time prior to the call to visit the site and download the streaming media software required to listen to the Internet broadcast. The online archive of the broadcast will be available within one hour of completion of the live call.
About Matrix Service Company
Matrix Service Company provides engineering, construction and repair and maintenance services principally to the petroleum, petrochemical, power, bulk storage terminal, pipeline and industrial gas industries.
The Company is headquartered in Tulsa, Oklahoma, with regional operating facilities located in California, Delaware, Illinois, Michigan, New Jersey, Oklahoma, Pennsylvania, Texas, and Washington in the U.S. and in Canada.
This release contains forward-looking statements that are made in reliance upon the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements are generally accompanied by words such as “anticipate,” “continues,” “expect,” “forecast,” “outlook,” “believe,” “estimate,” “should” and “will” and words of similar effect that convey future meaning, concerning the Company’s operations, economic performance and management’s best judgment as to what may occur in the future. Future events involve risks and uncertainties that may cause actual results to differ materially from those we currently anticipate. The actual results for the current and future periods and other corporate developments will depend upon a number of economic, competitive and other influences, including those factors discussed in the “Risk Factors” and “Forward Looking Statements” sections and elsewhere in the Company’s reports and filings made from time to time with the Securities and Exchange Commission. Many of these risks and uncertainties are beyond the control of the Company, and any one of which, or a combination of which, could materially and adversely affect the results of the Company’s operations and its financial condition. We undertake no obligation to update information contained in this release.
For more information, please contact:
Matrix Service Company
Tom Long
Vice President and CFO
T: 918-838-8822
E: telong@matrixservice.com
Matrix Service Company
Consolidated Statements of Income
(In thousands, except per share data)
(unaudited)
| Three Months Ended | Six Months Ended | One Month Ended |
||||||||||||||||||
| December 31, 2009 |
November 30, 2008 |
December 31, 2009 |
November 30, 2008 |
June 30, 2009 |
||||||||||||||||
| Revenues |
$ | 150,425 | $ | 176,937 | $ | 288,075 | $ | 363,587 | $ | 45,825 | ||||||||||
| Cost of revenues |
131,983 | 150,568 | 252,215 | 310,547 | 40,676 | |||||||||||||||
| Gross profit |
18,442 | 26,369 | 35,860 | 53,040 | 5,149 | |||||||||||||||
| Selling, general and administrative expenses |
11,376 | 11,776 | 21,463 | 23,838 | 3,570 | |||||||||||||||
| Operating income |
7,066 | 14,593 | 14,397 | 29,202 | 1,579 | |||||||||||||||
| Other income (expense): |
||||||||||||||||||||
| Interest expense |
(188 | ) | (123 | ) | (362 | ) | (237 | ) | (91 | ) | ||||||||||
| Interest income |
17 | 104 | 60 | 213 | 17 | |||||||||||||||
| Other |
461 | 175 | 544 | 911 | 98 | |||||||||||||||
| Income before income tax expense |
7,356 | 14,749 | 14,639 | 30,089 | 1,603 | |||||||||||||||
| Provision for federal, state and foreign income taxes |
2,823 | 4,621 | 5,597 | 10,457 | 609 | |||||||||||||||
| Net income |
$ | 4,533 | $ | 10,128 | $ | 9,042 | $ | 19,632 | $ | 994 | ||||||||||
| Basic earnings per common share |
$ | 0.17 | $ | 0.39 | $ | 0.34 | $ | 0.75 | $ | 0.04 | ||||||||||
| Diluted earnings per common share |
$ | 0.17 | $ | 0.38 | $ | 0.34 | $ | 0.74 | $ | 0.04 | ||||||||||
| Weighted average common shares outstanding: |
||||||||||||||||||||
| Basic |
26,273 | 26,102 | 26,234 | 26,087 | 26,192 | |||||||||||||||
| Diluted |
26,459 | 26,400 | 26,449 | 26,456 | 26,434 | |||||||||||||||
Matrix Service Company
Consolidated Balance Sheets
(In thousands)
| December 31, 2009 |
May 31, 2009 |
|||||||
| Assets |
||||||||
| Current assets: |
||||||||
| Cash and cash equivalents |
$ | 61,367 | $ | 34,553 | ||||
| Accounts receivable, less allowances (December 31, 2009 – $811 and May 31, 2009 – $710) |
76,175 | 122,283 | ||||||
| Costs and estimated earnings in excess of billings on uncompleted contracts |
36,813 | 35,619 | ||||||
| Inventories |
4,284 | 4,926 | ||||||
| Income taxes receivable |
— | 647 | ||||||
| Deferred income taxes |
3,926 | 4,843 | ||||||
| Prepaid expenses |
4,562 | 3,935 | ||||||
| Other current assets |
2,322 | 3,044 | ||||||
| Total current assets |
189,449 | 209,850 | ||||||
| Property, plant and equipment at cost: |
||||||||
| Land and buildings |
27,580 | 27,319 | ||||||
| Construction equipment |
55,311 | 53,925 | ||||||
| Transportation equipment |
18,563 | 17,971 | ||||||
| Furniture and fixtures |
15,042 | 14,527 | ||||||
| Construction in progress |
1,155 | 812 | ||||||
| 117,651 | 114,554 | |||||||
| Accumulated depreciation |
(61,751 | ) | (55,745 | ) | ||||
| 55,900 | 58,809 | |||||||
| Goodwill |
27,248 | 25,768 | ||||||
| Other intangible assets |
4,317 | 4,571 | ||||||
| Other assets |
1,349 | 4,453 | ||||||
| Total assets |
$ | 278,263 | $ | 303,451 | ||||
Matrix Service Company
Consolidated Balance Sheets
(In thousands, except share data)
| December 31, 2009 |
May 31, 2009 |
|||||||
| Liabilities and stockholders’ equity |
||||||||
| Current liabilities: |
||||||||
| Accounts payable |
$ | 36,190 | $ | 48,668 | ||||
| Billings on uncompleted contracts in excess of costs and estimated earnings |
35,539 | 51,305 | ||||||
| Accrued insurance |
7,236 | 7,612 | ||||||
| Accrued wages and benefits |
10,223 | 16,566 | ||||||
| Income taxes payable |
12 | — | ||||||
| Current capital lease obligation |
943 | 1,039 | ||||||
| Other accrued expenses |
2,295 | 2,200 | ||||||
| Total current liabilities |
92,438 | 127,390 | ||||||
| Long-term capital lease obligation |
588 | 850 | ||||||
| Deferred income taxes |
4,095 | 4,822 | ||||||
| Stockholders’ equity: |
||||||||
| Common stock – $.01 par value; 60,000,000 shares authorized; 27,888,217 shares issued as of December 31, 2009 and May 31, 2009 |
279 | 279 | ||||||
| Additional paid-in capital |
110,740 | 110,272 | ||||||
| Retained earnings |
85,429 | 75,393 | ||||||
| Accumulated other comprehensive income |
834 | 596 | ||||||
| 197,282 | 186,540 | |||||||
| Less: Treasury stock, at cost – 1,582,261 shares as of December 31, 2009 and 1,696,517 shares as of May 31, 2009 |
(16,140 | ) | (16,151 | ) | ||||
| Total stockholders’ equity |
181,142 | 170,389 | ||||||
| Total liabilities and stockholders’ equity |
$ | 278,263 | $ | 303,451 | ||||
Results of Operations
(In thousands)
| Construction Services |
Repair & Maintenance Services |
Other | Total | |||||||||
| Three Months Ended December 31, 2009 |
||||||||||||
| Gross revenues |
$ | 84,511 | $ | 69,849 | $ | — | $ | 154,360 | ||||
| Less: Inter-segment revenues |
3,929 | 6 | — | 3,935 | ||||||||
| Revenues |
80,582 | 69,843 | — | 150,425 | ||||||||
| Gross profit |
11,894 | 6,548 | — | 18,442 | ||||||||
| Operating income |
5,006 | 2,060 | — | 7,066 | ||||||||
| Income before income tax expense |
5,139 | 2,217 | — | 7,356 | ||||||||
| Net income |
3,224 | 1,309 | — | 4,533 | ||||||||
| Segment assets |
120,697 | 88,760 | 68,806 | 278,263 | ||||||||
| Capital expenditures |
234 | 719 | 863 | 1,816 | ||||||||
| Depreciation and amortization expense |
1,647 | 1,300 | — | 2,947 | ||||||||
| Three Months Ended November 30, 2008 |
||||||||||||
| Gross revenues |
$ | 108,084 | $ | 77,499 | $ | — | $ | 185,583 | ||||
| Less: Inter-segment revenues |
7,955 | 691 | — | 8,646 | ||||||||
| Revenues |
100,129 | 76,808 | — | 176,937 | ||||||||
| Gross profit |
12,761 | 13,608 | — | 26,369 | ||||||||
| Operating income |
5,618 | 8,975 | — | 14,593 | ||||||||
| Income before income tax expense |
5,680 | 9,069 | — | 14,749 | ||||||||
| Net income |
4,434 | 5,694 | — | 10,128 | ||||||||
| Segment assets |
135,887 | 96,865 | 31,771 | 264,523 | ||||||||
| Capital expenditures |
932 | 814 | 1,739 | 3,485 | ||||||||
| Depreciation and amortization expense |
1,359 | 1,121 | — | 2,480 | ||||||||
| Six Months Ended December 31, 2009 |
||||||||||||
| Gross revenues |
$ | 165,090 | $ | 130,025 | $ | — | $ | 295,115 | ||||
| Less: Inter-segment revenues |
6,837 | 203 | — | 7,040 | ||||||||
| Revenues |
158,253 | 129,822 | — | 288,075 | ||||||||
| Gross profit |
22,990 | 12,870 | — | 35,860 | ||||||||
| Operating income |
10,272 | 4,125 | — | 14,397 | ||||||||
| Income before income tax expense |
10,351 | 4,288 | — | 14,639 | ||||||||
| Net income |
6,517 | 2,525 | — | 9,042 | ||||||||
| Segment assets |
120,697 | 88,760 | 68,806 | 278,263 | ||||||||
| Capital expenditures |
502 | 806 | 1,541 | 2,849 | ||||||||
| Depreciation and amortization expense |
3,330 | 2,636 | — | 5,966 | ||||||||
| Six Months Ended November 30, 2008 |
||||||||||||
| Gross revenues |
$ | 230,445 | $ | 149,666 | $ | — | $ | 380,111 | ||||
| Less: Inter-segment revenues |
15,558 | 966 | — | 16,524 | ||||||||
| Revenues |
214,887 | 148,700 | — | 363,587 | ||||||||
| Gross profit |
27,806 | 25,234 | — | 53,040 | ||||||||
| Operating income |
13,110 | 16,092 | — | 29,202 | ||||||||
| Income before income tax expense |
13,383 | 16,706 | — | 30,089 | ||||||||
| Net income |
8,813 | 10,819 | — | 19,632 | ||||||||
| Segment assets |
135,887 | 96,865 | 31,771 | 264,523 | ||||||||
| Capital expenditures |
1,973 | 1,744 | 2,873 | 6,590 | ||||||||
| Depreciation and amortization expense |
2,771 | 2,090 | — | 4,861 | ||||||||
| One Month Ended June 30, 2009 |
||||||||||||
| Gross revenues |
$ | 29,224 | $ | 17,297 | $ | — | $ | 46,521 | ||||
| Less: Inter-segment revenues |
693 | 3 | — | 696 | ||||||||
| Revenues |
28,531 | 17,294 | — | 45,825 | ||||||||
| Gross profit |
3,251 | 1,898 | — | 5,149 | ||||||||
| Operating income |
1,141 | 438 | — | 1,579 | ||||||||
| Income before income tax expense |
1,116 | 487 | — | 1,603 | ||||||||
| Net income |
720 | 274 | — | 994 | ||||||||
| Capital expenditures |
121 | 64 | 163 | 348 | ||||||||
| Depreciation and amortization expense |
543 | 451 | — | 994 | ||||||||
Backlog
We define backlog as the total dollar amount of revenues that we expect to recognize as a result of performing work that has been awarded to us through a signed contract that we consider firm. The following contract types are considered firm:
| • | fixed-price arrangements; |
| • | minimum customer commitments on cost plus arrangements; and |
| • | certain time and material contracts in which the estimated contract value is firm or can be estimated with a reasonable amount of certainty in both timing and amounts. |
For long-term maintenance contracts we include only the amounts that we expect to recognize into revenue over the next 12 months. For all other arrangements, we calculate backlog as the estimated contract amount less revenues recognized as of the reporting date.
The following table provides a rollforward of our backlog for the three-months ended December 31, 2009:
| Construction Services |
Repair and Maintenance Services |
Total | ||||||||||
| (In thousands) | ||||||||||||
| Backlog as of September 30, 2009 |
$ | 167,852 | $ | 160,266 | $ | 328,118 | ||||||
| New backlog awarded |
100,759 | 50,862 | 151,621 | |||||||||
| Backlog cancelled |
(5,600 | ) | — | (5,600 | ) | |||||||
| Revenue recognized on contracts in backlog |
(80,582 | ) | (69,843 | ) | (150,425 | ) | ||||||
| Backlog as of December 31, 2009 |
$ | 182,429 | $ | 141,285 | $ | 323,714 | ||||||
The following table provides a rollforward of our backlog for the six-months ended December 31, 2009:
| Construction Services |
Repair and Maintenance Services |
Total | ||||||||||
| (In thousands) | ||||||||||||
| Backlog as of June 30, 2009 |
$ | 224,260 | $ | 167,837 | $ | 392,097 | ||||||
| New backlog awarded |
134,660 | 103,270 | 237,930 | |||||||||
| Backlog cancelled |
(18,238 | ) | — | (18,238 | ) | |||||||
| Revenue recognized on contracts in backlog |
(158,253 | ) | (129,822 | ) | (288,075 | ) | ||||||
| Backlog as of December 31, 2009 |
$ | 182,429 | $ | 141,285 | $ | 323,714 | ||||||