Form 8-K

 

 

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) May 7, 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 May 7, 2010, Matrix Service Company (the “Company”) issued a press release announcing financial results for the third quarter ending March 31, 2010 and first nine months of fiscal year 2010. The full text of the press release is attached as Exhibit 99.1 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 8.01 Other Events.

On May 7, 2010, the Company issued a press release announcing that its wholly owned subsidiary, Matrix Service Inc. has been awarded a turnkey project in excess of $20 million to construct and install a thermal vacuum chamber test facility at the GPS III Test Facility, owned and operated by Lockheed Martin Space Systems Co., a business unit of Lockheed Martin Corp. The full text of this press release is attached as Exhibit 99.2 to this Current Report on Form 8-K.

 

Item 9.01 Financial Statements and Exhibits.

The following exhibits are filed or furnished herewith:

 

Exhibit No.

  

Description

99.1    Press Release dated May 7, 2010, announcing financial results for the third quarter ending March 31, 2010 and the first nine months of fiscal year 2010.
99.2    Press Release dated May 7, 2010, announcing a turnkey project in excess of $20 million to construct and install a thermal vacuum chamber test facility.


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: May 7, 2010

    By:  

/s/ Kevin S. Cavanah

      Kevin S. Cavanah
      Vice President – Accounting & Financial Reporting and Principal Accounting Officer


EXHIBIT INDEX

 

Exhibit No.

  

Description

99.1    Press Release dated May 7, 2010, announcing financial results for the third quarter ending March 31, 2010 and the first nine months of fiscal year 2010.
99.2    Press Release dated May 7, 2010, announcing a turnkey project in excess of $20 million to construct and install a thermal vacuum chamber test facility.
Press Release

Exhibit 99.1

LOGO

 

 

 

FOR IMMEDIATE RELEASE

MATRIX SERVICE ANNOUNCES RESULTS FOR THE THIRD QUARTER OF FISCAL 2010

ENDED MARCH 31, 2010

Third Quarter Fiscal 2010 Highlights:

 

   

Revenues were $122.0 million

 

   

Gross margins were 10.9%

 

   

Fully diluted EPS was $0.00

 

   

Backlog was $302.4 million

 

   

Cash was $53.3 million

Nine Month Fiscal 2010 Highlights:

 

   

Revenues were $410.1 million

 

   

Gross margins were 12.0%

 

   

Fully diluted EPS was $0.34

TULSA, OK – May 7, 2010 – Matrix Service Co. (Nasdaq: MTRX), a leading industrial services company, today reported its financial results for the three and nine months ended March 31, 2010.

Third Quarter of Fiscal 2010 Results

Net income for the third quarter of fiscal 2010 was $0.1 million, or $0.00 per fully diluted share on total revenues of $122.0 million. Third quarter operating results included non-routine charges of $0.10 per fully diluted share related to write-offs of $2.9 million on acquired claim receivables, a charge of $0.7 million related to a legal matter and a charge of $0.6 million related to collection costs on claims acquired in a recent acquisition. Total revenues were $146.3 million and net income was $4.2 million, or $0.16 per fully diluted share, in the comparable period a year earlier.

Michael J. Bradley, president and CEO of Matrix Service Company said, “Although our markets and customers are continuing to experience the effects of the recession, our financial position is strong and has not limited our ability to pursue new awards, or to execute projects safely and effectively. We believe our long-term growth strategy and cost structure have positioned us to capitalize on opportunities that we see emerging when our core markets improve.”

Revenues for the Construction Services segment were $76.3 million, compared with $79.9 million in fiscal 2009. The decrease of $3.6 million was primarily due to continued delays in project awards and a decline in our customers’ capital spending. Revenues for the Repair and Maintenance Services segment were $45.7 million in fiscal 2010 compared to $66.4 million in fiscal 2009; the decline was due to a lower volume of recurring repair and maintenance work.

Consolidated gross profit decreased from $18.0 million in fiscal 2009 to $13.3 million in fiscal 2010. The decrease of $4.7 million was due to lower business volume, lower direct gross margins and a non-routine charge relating to a legal matter of $0.7 million, which decreased gross margins to 10.9% in fiscal 2010 compared to 12.3% a year earlier. Consolidated SG&A expenses were $13.2 million in fiscal 2010 compared to $10.9 million for fiscal 2009. The change in SG&A expenses is due to write-offs of $2.9 million on acquired claim receivables and a charge of $0.6 million related to collection costs on claims acquired in a recent acquisition, partially offset by cost reductions.


Nine Month Fiscal 2010 Results

Net income for fiscal 2010 was $9.1 million, or $0.34 per fully diluted share, on total revenues of $410.1 million. Fiscal 2010 operating results included non-routine charges of $0.15 per fully diluted share related to write-offs of $2.9 million on acquired claim receivables, a charge of $2.0 million related to a legal matter and a charge of $1.5 million related to collection costs on claims acquired in a recent acquisition. Total revenues were $509.8 million and net income was $23.8 million, or $0.90 per fully diluted share, in fiscal 2009.

Revenues for the Construction Services segment were $234.6 million compared with $294.7 million in fiscal 2009. The decrease of $60.1 million was primarily due to continued delays in project awards and a decline in our customers’ capital spending. Revenues for the Repair and Maintenance Services segment were $175.5 million in fiscal 2010 compared to $215.1 million in fiscal 2009. The decline was due to lower volume of recurring repair and maintenance work.

Consolidated gross profit decreased from $71.0 million in fiscal 2009 to $49.2 million in fiscal 2010. The reduction of $21.8 million was due to lower business volume, lower direct gross margins and a non-routine charge related to a legal matter of $2.0 million, which decreased gross margins to 12.0% in fiscal 2010 compared to 13.9% in fiscal 2009. Consolidated SG&A expenses were $34.7 million in fiscal 2010 compared to $34.8 million for fiscal 2009. The change in SG&A expenses is due to write-offs of $2.9 million on acquired claim receivables and a charge of $1.5 million related to collection costs on claims acquired in a recent acquisition which were fully offset by cost reductions.

Backlog

Consolidated backlog as of March 31, 2010 was $302.4 million compared to $323.7 million as of December 31, 2009.

Financial Position

At March 31, 2010, the Company’s cash balance was $53.3 million. The Company did not borrow under its $75.0 million revolving credit facility during the nine months ended March 31, 2010.

Earnings Guidance

The Company now expects fiscal 2010 earnings to be in a range of $0.55 to $0.65 per fully diluted share. This guidance excludes the impact of non-routine charges (1) and is consistent with guidance included in the press release issued by the Company on April 23, 2010.

 

(1) To supplement our financial results presented on a GAAP basis, we used the Non-GAAP measure indicated in the table below, which excludes certain non-routine accounting entries related to acquired claim receivables and certain other legal matters that we believe are helpful in understanding our past and future financial performance. Our Non-GAAP financial measure is not meant to be considered in isolation or as a substitute for comparable GAAP measures and should be read only in conjunction with our consolidated financial statements prepared in accordance with GAAP. Our management regularly uses our supplemental Non-GAAP financial measure internally to understand, manage, and evaluate our business and to make operating decisions.


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     Nine Months Ended     One Month
Ended
 
     March 31,
2010
    February 28,
2009
    March 31,
2010
    February 28,
2009
    June 30,
2009
 

Revenues

   $ 122,013      $ 146,262      $ 410,088      $ 509,849      $ 45,825   

Cost of revenues

     108,720        128,301        360,935        438,848        40,676   
                                        

Gross profit

     13,293        17,961        49,153        71,001        5,149   

Selling, general and administrative expenses

     13,248        10,916        34,711        34,754        3,570   
                                        

Operating income

     45        7,045        14,442        36,247        1,579   

Other income (expense):

          

Interest expense

     (163     (139     (525     (376     (91

Interest income

     10        68        70        281        17   

Other

     208        (179     752        732        98   
                                        

Income before income tax expense

     100        6,795        14,739        36,884        1,603   

Provision for federal, state and foreign income taxes

     37        2,583        5,634        13,040        609   
                                        

Net income

   $ 63      $ 4,212      $ 9,105      $ 23,844      $ 994   
                                        

Basic earnings per common share

   $ 0.00      $ 0.16      $ 0.35      $ 0.91      $ 0.04   

Diluted earnings per common share

   $ 0.00      $ 0.16      $ 0.34      $ 0.90      $ 0.04   

Weighted average common shares outstanding:

          

Basic

     26,307        26,147        26,258        26,107        26,192   

Diluted

     26,521        26,322        26,477        26,426        26,434   


Matrix Service Company

Consolidated Balance Sheets

(In thousands)

(Unaudited)

 

     March 31,
2010
    May 31,
2009
 

Assets

    

Current assets:

    

Cash and cash equivalents

   $ 53,298      $ 34,553   

Accounts receivable, less allowances (March 31, 2010 - $756 and May 31, 2009 - $710)

     73,574        122,283   

Costs and estimated earnings in excess of billings on uncompleted contracts

     39,761        35,619   

Inventories

     4,479        4,926   

Income taxes receivable

     2,075        647   

Deferred income taxes

     4,162        4,843   

Prepaid expenses

     3,886        3,935   

Other current assets

     1,647        3,044   
                

Total current assets

     182,882        209,850   

Property, plant and equipment at cost:

    

Land and buildings

     27,862        27,319   

Construction equipment

     52,927        53,925   

Transportation equipment

     19,117        17,971   

Furniture and fixtures

     13,648        14,527   

Construction in progress

     1,750        812   
                
     115,304        114,554   

Accumulated depreciation

     (60,978     (55,745
                
     54,326        58,809   

Goodwill

     27,336        25,768   

Other intangible assets

     4,215        4,571   

Other assets

     937        4,453   
                

Total assets

   $ 269,696      $ 303,451   
                


Matrix Service Company

Consolidated Balance Sheets

(In thousands, except share data)

(Unaudited)

 

     March 31,
2010
    May 31,
2009
 

Liabilities and stockholders’ equity

    

Current liabilities:

    

Accounts payable

   $ 28,084      $ 48,668   

Billings on uncompleted contracts in excess of costs and estimated earnings

     28,403        51,305   

Accrued insurance

     7,833        7,612   

Accrued wages and benefits

     15,338        16,566   

Current capital lease obligation

     945        1,039   

Other accrued expenses

     2,618        2,200   
                

Total current liabilities

     83,221        127,390   

Long-term capital lease obligation

     290        850   

Deferred income taxes

     4,101        4,822   

Stockholders’ equity:

    

Common stock - $.01 par value; 60,000,000 shares authorized; 27,888,217 shares issued as of March 31, 2010 and May 31, 2009

     279        279   

Additional paid-in capital

     111,295        110,272   

Retained earnings

     85,492        75,393   

Accumulated other comprehensive income

     1,158        596   
                
     198,224        186,540   

Less: Treasury stock, at cost – 1,580,481 shares as of March 31, 2010 and 1,696,517 shares as of May 31, 2009

     (16,140     (16,151
                

Total stockholders’ equity

     182,084        170,389   
                

Total liabilities and stockholders’ equity

   $ 269,696      $ 303,451   
                


Results of Operations

(In thousands)

(Unaudited)

 

     Construction
Services
   Repair and
Maintenance
Services
    Other    Total

Three Months Ended March 31, 2010

          

Gross revenues

   $ 79,394    $ 45,701      $ —      $ 125,095

Less: Inter-segment revenues

     3,073      9        —        3,082
                            

Revenues

     76,321      45,692        —        122,013

Gross profit

     10,098      3,195        —        13,293

Operating income (loss)

     880      (835     —        45

Income (loss) before income tax expense

     797      (697     —        100

Net income (loss)

     369      (306     —        63

Segment assets

     117,974      89,214        62,508      269,696

Capital expenditures

     63      276        871      1,210

Depreciation and amortization expense

     1,646      1,268        —        2,914

Three Months Ended February 28, 2009

          

Gross revenues

   $ 85,607    $ 66,520      $ —      $ 152,127

Less: Inter-segment revenues

     5,740      125        —        5,865
                            

Revenues

     79,867      66,395        —        146,262

Gross profit

     9,332      8,629        —        17,961

Operating income

     2,641      4,404        —        7,045

Income before income tax expense

     2,365      4,430        —        6,795

Net income

     1,451      2,761        —        4,212

Segment assets

     148,078      115,887        32,124      296,089

Capital expenditures

     388      81        1,559      2,028

Depreciation and amortization expense

     1,572      1,184        —        2,756

Nine Months Ended March 31, 2010

          

Gross revenues

   $ 244,484    $ 175,726      $ —      $ 420,210

Less: Inter-segment revenues

     9,910      212        —        10,122
                            

Revenues

     234,574      175,514        —        410,088

Gross profit

     33,088      16,065        —        49,153

Operating income

     11,152      3,290        —        14,442

Income before income tax expense

     11,148      3,591        —        14,739

Net income

     6,886      2,219        —        9,105

Segment assets

     117,974      89,214        62,508      269,696

Capital expenditures

     565      1,082        2,412      4,059

Depreciation and amortization expense

     4,976      3,904        —        8,880

Nine Months Ended February 28, 2009

          

Gross revenues

   $ 316,052    $ 216,186      $ —      $ 532,238

Less: Inter-segment revenues

     21,298      1,091        —        22,389
                            

Revenues

     294,754      215,095        —        509,849

Gross profit

     37,138      33,863        —        71,001

Operating income

     15,751      20,496        —        36,247

Income before income tax expense

     15,748      21,136        —        36,884

Net income

     10,264      13,580        —        23,844

Segment assets

     148,078      115,887        32,124      296,089

Capital expenditures

     2,361      1,825        4,432      8,618

Depreciation and amortization expense

     4,343      3,274        —        7,617

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 the revenue recognized as of the reporting date.

The following table provides a summary of changes in our backlog for the three months ended March 31, 2010:

 

     Construction
Services
    Repair and
Maintenance
Services
    Total  
     (In thousands)  

Backlog as of December 31, 2009

   $ 182,429      $ 141,285      $ 323,714   

New backlog awarded

     44,305        56,416        100,721   

Revenue recognized on contracts in backlog

     (76,321     (45,692     (122,013
                        

Backlog as of March 31, 2010

   $ 150,413      $ 152,009      $ 302,422   
                        

The following table provides a summary of changes in our backlog for the nine months ended March 31, 2010:

 

     Construction
Services
    Repair and
Maintenance
Services
    Total  
     (In thousands)  

Backlog as of June 30, 2009

   $ 224,260      $ 167,837      $ 392,097   

New backlog awarded

     178,965        159,686        338,651   

Revenue recognized on contracts in backlog

     (234,574     (175,514     (410,088

Backlog cancelled

     (18,238     —          (18,238
                        

Backlog as of March 31, 2010

   $ 150,413      $ 152,009      $ 302,422   
                        


Fiscal 2010 Diluted Earnings Per Share Guidance Range Reconciliation

GAAP to Non-GAAP Reconciliation

 

     Low     High  

Diluted earnings per share - GAAP

   $ 0.40      $ 0.50   

Write-off of acquired claim receivables

     0.11        0.11   

Collection costs on acquired claim receivables

     0.06        0.06   

Legal charge

     0.07        0.07   
                
     0.24        0.24   

Income tax effect

     (0.09     (0.09

Effect on net income

     0.15        0.15   
                

Diluted earnings per share - Non-GAAP

   $ 0.55      $ 0.65   
                
Press Release

Exhibit 99.2

LOGO

 

 

MATRIX SERVICE SUBSIDIARY TEAMS WITH DYNAVAC ON A THERMAL VACUUM CHAMBER

PROJECT FOR LOCKHEED MARTIN

TULSA, OK – May 7, 2010 — Matrix Service Co. (Nasdaq: MTRX) announced today that its subsidiary, Matrix Service Inc. has been awarded a turnkey project in excess of $20 million to construct and install a thermal vacuum chamber test facility at the GPS III Test Facility, owned and operated by Lockheed Martin Space Systems Co., a business unit of Lockheed Martin Corp., one of the largest U.S. aerospace companies. Matrix Service, Inc. will utilize DynaVac, based in Hingham, MA, as a subcontractor on the project.

The Matrix Service/DynaVac scope of work for the GPS III Thermal Vacuum Test Facility covers the engineering, procurement, construction and commissioning of a thermal vacuum chamber, vacuum pumping systems, gaseous nitrogen thermal shroud and systems along with all related mechanical, electrical and control systems. Matrix Service will design, fabricate and construct the vacuum chamber and install all components and systems. DynaVac will design, procure and fabricate the thermal shroud, vacuum pumping systems, control systems and thermal control units to be installed by Matrix Service. The project is scheduled to be complete and fully commissioned by November 2011.

“We are pleased that Lockheed Martin has chosen Matrix Service and its subcontractor DynaVac to provide this important thermal vacuum test facility,” said Michael J. Bradley, president and CEO of Matrix Service. “This project is a direct reflection of our continued emphasis on diversification and total capability expansion.”

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 Oklahoma, Texas, California, Michigan, New Jersey, Pennsylvania, Illinois, Washington, New Jersey and Delaware 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