12.31.13 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) February 5, 2014
___________________ 
Matrix Service Company
(Exact Name of Registrant as Specified in Its Charter)
___________________ 
 
 
 
 
 
DELAWARE
 
001-15461
 
73-1352174
(State or Other Jurisdiction
of Incorporation)
 
(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 5, 2014, Matrix Service Company (the “Company”) issued a press release announcing financial results for the second quarter and six months ended December 31, 2013. 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 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 exhibit is furnished herewith:
 
 
 
 
Exhibit No.
  
Description
99
  
Press Release dated February 5, 2014, announcing financial results for the second quarter and six months ended December 31, 2013.







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 5, 2014
 
By:
 
/s/ Kevin S. Cavanah
 
 
 
 
 
 
 
 
 
Kevin S. Cavanah
 
 
 
 
Vice President and Chief Financial Officer







EXHIBIT INDEX
 
 
 
 
Exhibit No.
  
Description
99
  
Press Release dated February 5, 2014, announcing financial results for the second quarter and six months ended December 31, 2013.


12.31.13 Exhibit 99
Exhibit 99


MATRIX SERVICE COMPANY ANNOUNCES STRONG SECOND QUARTER RESULTS AND INCREASES FISCAL 2014 REVENUE AND EARNINGS GUIDANCE

Matrix Service Company closed on its acquisition of Kvaerner North American Construction
Quarterly revenues of $311.0 million were a record and increased by 40.5% over the prior year
Second quarter fully diluted earnings per share was $0.38 compared to $0.21 in the same period a year earlier
Record backlog of $882.6 million on project awards of $278.8 million and acquired backlog of $242.0 million

TULSA, OK – February 5, 2014 – Matrix Service Company (Nasdaq: MTRX) today reported its financial results for the second quarter and six months ended December 31, 2013. The trend of strong revenue, earnings and backlog growth continued in the second quarter of fiscal 2014 with quarterly revenues of $311.0 million, $0.38 of earnings per fully diluted share and period end backlog of $882.6 million.
Impact of Previously Announced Acquisition to Earnings
As previously announced, on December 21, 2013 the Company completed the acquisition of Kvaerner North American Construction, a premier provider of capital construction and maintenance services to power generation, integrated iron and steel, and industrial process facilities in North America. Since this acquisition occurred late in the fiscal quarter, acquisition related revenues and earnings were not significant. However, the Company recorded a charge to selling, general and administrative costs of $2.0 million for transaction related fees.
John Hewitt, President and CEO of Matrix Service Company said, "Our second quarter results are visible indications of the progress we are achieving toward our strategic plan and the hard work of our talented employees, which is clearly demonstrated by our record revenues and improving margins. Our liquidity position remains strong and continues to provide us with the necessary resources to achieve both our short and long-term business objectives. The recent acquisition significantly enhances our capabilities and geographic footprint and will enable us to continue to grow the business, particularly in the Electrical Infrastructure and Industrial segments."
Second Quarter Fiscal 2014 Results
Revenues for the second quarter ended December 31, 2013 were $311.0 million compared to $221.4 million in the same period a year earlier, an increase of $89.6 million, or 40.5%. Net income for the second quarter of fiscal 2014 was $10.3 million, or $0.38 per fully diluted share. In the same period a year earlier, the Company earned $5.4 million, or $0.21 per fully diluted share.
Revenues increased in our Storage Solutions and Industrial segments by $82.9 million and $24.1 million, respectively. Revenues in the Electrical Infrastructure and Oil Gas & Chemical segments declined by $12.9 million and $4.5 million, respectively. Strong project execution enabled the Company to achieve a fiscal 2014 gross margin of 11.0% despite a Storage Solutions project charge of $4.4 million, which reduced margins by 1.5%. Gross margins were 10.1% in the second quarter of fiscal 2013. Consolidated gross profit was $34.2 million in the second quarter of fiscal 2014 compared to $22.3 million in the same period a year earlier due to higher revenues and higher gross margins. Selling, general and administrative costs were $19.3 million, in the second quarter of fiscal 2014 compared to $13.6 million in the same period a year earlier. Acquisition related expenses of $2.0 million increased selling, general and administrative costs as a percent of revenue by 0.6% to 6.2% in fiscal 2014 compared to 6.1% in the same period a year earlier.
Six Month Fiscal 2014 Results
Revenues for the six months ended December 31, 2013 were $537.2 million compared to $431.0 million in the same period a year earlier, an increase of $106.2 million, or 24.6%. Net income for the first six months of fiscal 2014 was $16.9 million, or $0.63 per fully diluted share. In the same period a year earlier, the Company earned $10.1 million, or $0.39 per fully diluted share.




Revenues increased in our Storage Solutions and Industrial segments by $86.8 million and $41.8 million, respectively. Revenues in the Electrical Infrastructure and Oil Gas & Chemical segments declined by $13.3 million and $9.1 million, respectively. Strong project execution enabled the Company to achieve a fiscal 2014 gross margin of 11.1% despite a Storage Solutions project charge of $4.0 million, which reduced margins by 0.9%. In the same period a year earlier gross margins were 10.3%. Consolidated gross profit was $59.6 million in the first six months of fiscal 2014 compared to $44.6 million in the same period a year earlier due to higher revenues and higher gross margins. Selling, general and administrative costs were $34.0 million in fiscal 2014 compared to $27.9 million in the same period a year earlier. Acquisition related expenses of $2.0 million increased selling, general and administrative costs as a percent of revenue by 0.4% to 6.3% in fiscal 2014 compared to 6.5%, in the same period a year earlier.
Backlog
Backlog at December 31, 2013 totaled $882.6 million, an increase of $255.9 million, or 40.8%, compared to the backlog at June 30, 2013 of $626.7 million, and increased $209.8 million, or 31.2%, compared to September 30, 2013 backlog of $672.8 million. Project awards totaled $278.8 million and $551.1 million in the three and six months ended December 31, 2013. Backlog at December 31, 2013 also includes acquired backlog of $242.0 million.
Income Tax Expense
The effective tax rates in the three and six months ended December 31, 2013 was 28.4% and 32.2%, respectively. The rates were lower than the comparable periods in the prior year primarily due to a revision to the estimated benefit of the federal R&D tax credit available to the Company.
Financial Position
The net purchase price of Kvaerner North American Construction was $51.4 million and was funded with cash on hand and $15.0 million in borrowings under the the senior credit facility. At December 31, 2013, the Company’s cash balance was $73.3 million. The cash balance along with availability under the senior credit facility gives the Company liquidity of $162.0 million.
Earnings Guidance
The Company is increasing its fiscal 2014 revenue guidance to between $1.20 billion and $1.25 billion and its earnings per fully diluted share guidance to between $1.15 and $1.30.









Conference Call Details
In conjunction with the earnings release, Matrix Service Company will host a conference call with John R. Hewitt, President and CEO, and Kevin S. Cavanah, Vice President and CFO. The call will take place at 11:00 a.m. (Eastern) / 10:00 a.m. (Central) on Thursday, February 6, 2014 and will be simultaneously broadcast live over the Internet which can be accessed at the Company’s website at matrixservicecompany.com on the Investors’ page under Conference Calls/Events. 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 conference call will be recorded and will be available for replay within one hour of completion of the live call and can be accessed following the same link as the live call.
About Matrix Service Company
Matrix Service Company provides engineering, fabrication, construction and repair and maintenance services to the Electrical Infrastructure, Oil Gas & Chemical, Storage Solutions and Industrial markets.
The Company is headquartered in Tulsa, Oklahoma, with regional operating facilities throughout the United States and 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
Kevin S. Cavanah
Vice President and CFO
T: 918-838-8822
Email:kcavanah@matrixservicecompany.com




Matrix Service Company
Consolidated Statements of Income
(In thousands, except per share data)
 
 
 
Three Months Ended
 
Six Months Ended
 
 
December 31,
2013
 
December 31,
2012
 
December 31,
2013
 
December 31,
2012
Revenues
 
$
310,998

 
$
221,436

 
$
537,215

 
$
431,044

Cost of revenues
 
276,848

 
199,103

 
477,589

 
386,467

Gross profit
 
34,150

 
22,333

 
59,626

 
44,577

Selling, general and administrative expenses
 
19,333

 
13,561

 
34,047

 
27,881

Operating income
 
14,817

 
8,772

 
25,579

 
16,696

Other income (expense):
 
 
 
 
 
 
 
 
Interest expense
 
(351
)
 
(217
)
 
(574
)
 
(400
)
Interest income
 
8

 
12

 
13

 
20

Other
 
(68
)
 
(7
)
 
(156
)
 
50

Income before income tax expense
 
14,406

 
8,560

 
24,862

 
16,366

Provision for federal, state and foreign income taxes
 
4,095

 
3,124

 
7,999

 
6,246

Net income
 
$
10,311

 
$
5,436

 
$
16,863

 
$
10,120

Less: Net income attributable to noncontrolling interest
 
5

 

 
5

 

Net income attributable to Matrix Service Company
 
$
10,306

 
$
5,436

 
$
16,858

 
$
10,120

 
 
 
 
 
 
 
 
 
Basic earnings per common share
 
$
0.39

 
$
0.21

 
$
0.64

 
$
0.39

Diluted earnings per common share
 
$
0.38

 
$
0.21

 
$
0.63

 
$
0.39

Weighted average common shares outstanding:
 
 
 
 
 
 
 
 
Basic
 
26,245

 
25,939

 
26,180

 
25,863

Diluted
 
26,884

 
26,204

 
26,772

 
26,172





Matrix Service Company
Consolidated Balance Sheets
(In thousands)
 

 
 
December 31,
2013
 
June 30,
2013
Assets
 
 
 
 
Current assets:
 
 
 
 
Cash and cash equivalents
 
$
73,292

 
$
63,750

Accounts receivable, less allowances (December 31, 2013— $82 and June 30, 2013—$795)
 
161,502

 
140,840

Costs and estimated earnings in excess of billings on uncompleted contracts
 
92,212

 
73,773

Deferred income taxes
 
7,458

 
5,657

Inventories
 
3,193

 
2,988

Income taxes receivable
 
2,709

 
3,032

Other current assets
 
5,981

 
6,234

Total current assets
 
346,347

 
296,274

Property, plant and equipment at cost:
 
 
 
 
Land and buildings
 
31,075

 
29,649

Construction equipment
 
78,115

 
69,998

Transportation equipment
 
41,214

 
34,366

Office equipment and software
 
20,900

 
18,426

Construction in progress
 
11,376

 
9,080

 
 
182,680

 
161,519

Accumulated depreciation
 
(95,868
)
 
(90,218
)
 
 
86,812

 
71,301

Goodwill
 
67,122

 
30,836

Other intangible assets
 
31,091

 
7,551

Other assets
 
4,535

 
4,016

Total assets
 
$
535,907

 
$
409,978





Matrix Service Company
Consolidated Balance Sheets (continued)
(In thousands, except share data)
 
 
 
December 31,
2013
 
June 30,
2013
Liabilities and stockholders’ equity
 
 
 
 
Current liabilities:
 
 
 
 
Accounts payable
 
$
115,894

 
$
68,961

Billings on uncompleted contracts in excess of costs and estimated earnings
 
95,773

 
62,848

Accrued wages and benefits
 
23,894

 
21,919

Accrued insurance
 
7,751

 
7,599

Other accrued expenses
 
3,619

 
3,039

Total current liabilities
 
246,931

 
164,366

Deferred income taxes
 
7,643

 
7,450

Borrowings under senior credit facility
 
23,191

 

Total liabilities
 
277,765

 
171,816

Commitments and contingencies
 
 
 
 
Stockholders’ equity:
 
 
 
 
Common stock—$.01 par value; 60,000,000 shares authorized; 27,888,217 shares issued as of December 31, 2013, and June 30, 2013
 
279

 
279

Additional paid-in capital
 
117,043

 
118,190

Retained earnings
 
158,285

 
141,427

Accumulated other comprehensive income
 
52

 
227

 
 
275,659

 
260,123

Less: Treasury stock, at cost— 1,549,518 shares as of December 31, 2013, and 1,779,593 shares as of June 30, 2013
 
(18,222
)
 
(21,961
)
Total Matrix Service Company stockholders’ equity
 
257,437

 
238,162

Noncontrolling interest
 
705

 

Total stockholders' equity
 
258,142

 
238,162

Total liabilities and stockholders’ equity
 
$
535,907

 
$
409,978





Matrix Service Company

Results of Operations

(In thousands)
 
 
 
Three Months Ended
 
Six Months Ended
 
 
December 31,
2013
 
December 31,
2012
 
December 31,
2013
 
December 31,
2012
Gross revenues
 
 
 
 
 
 
 
 
Electrical Infrastructure
 
$
37,180

 
$
50,123

 
$
70,057

 
$
83,393

Oil Gas & Chemical
 
62,121

 
66,635

 
124,913

 
133,732

Storage Solutions
 
180,655

 
98,183

 
289,201

 
203,601

Industrial
 
31,130

 
7,033

 
53,821

 
12,008

Total gross revenues
 
$
311,086

 
$
221,974

 
$
537,992

 
$
432,734

Less: Inter-segment revenues
 
 
 
 
 
 
 
 
Electrical Infrastructure
 
$

 
$

 
$

 
$

Oil Gas & Chemical
 
10

 

 
307

 

Storage Solutions
 
78

 
538

 
470

 
1,690

Industrial
 

 

 

 

Total inter-segment revenues
 
$
88

 
$
538

 
$
777

 
$
1,690

Consolidated revenues
 
 
 
 
 
 
 
 
Electrical Infrastructure
 
$
37,180

 
$
50,123

 
$
70,057

 
$
83,393

Oil Gas & Chemical
 
62,111

 
66,635

 
124,606

 
133,732

Storage Solutions
 
180,577

 
97,645

 
288,731

 
201,911

Industrial
 
31,130

 
7,033

 
53,821

 
12,008

Total consolidated revenues
 
$
310,998

 
$
221,436

 
$
537,215

 
$
431,044

Gross profit (loss)
 
 
 
 
 
 
 
 
Electrical Infrastructure
 
$
3,854

 
$
6,629

 
$
7,184

 
$
11,335

Oil Gas & Chemical
 
6,686

 
8,045

 
14,217

 
15,912

Storage Solutions
 
19,788

 
7,748

 
32,625

 
17,717

Industrial
 
3,822

 
(89
)
 
5,600

 
(387
)
Total gross profit
 
$
34,150

 
$
22,333

 
$
59,626

 
$
44,577

Operating income (loss)
 
 
 
 
 
 
 
 
Electrical Infrastructure
 
$
860

 
$
3,696

 
$
2,160

 
$
6,015

Oil Gas & Chemical
 
2,407

 
3,927

 
5,670

 
7,702

Storage Solutions
 
10,760

 
1,550

 
16,592

 
4,999

Industrial
 
790

 
(401
)
 
1,157

 
(2,020
)
Total operating income
 
$
14,817

 
$
8,772

 
$
25,579

 
$
16,696





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, notice to proceed or other type of assurance that we consider firm. The following arrangements are considered firm:

fixed-price awards;
minimum customer commitments on cost plus arrangements; and
certain time and material arrangements in which the estimated value is firm or can be estimated with a reasonable amount of certainty in both timing and amounts.
For long-term maintenance contracts and other established arrangements, 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.
Three Months Ended December 31, 2013
The following table provides a summary of changes in our backlog for the three months ended December 31, 2013:
 
 
Electrical
Infrastructure
 
Oil Gas &
Chemical
 
Storage
Solutions
 
Industrial
 
Total
 
(In thousands)
Backlog as of September 30, 2013
$
97,087

 
$
118,920

 
$
382,001

 
$
74,809

 
$
672,817

Backlog acquired
123,492

 
2,825

 

 
115,723

 
242,040

Net awards
29,096

 
82,729

 
152,056

 
14,890

 
278,771

Revenue recognized
(37,180
)
 
(62,111
)
 
(180,577
)
 
(31,130
)
 
(310,998
)
Backlog as of December 31, 2013
$
212,495

 
$
142,363

 
$
353,480

 
$
174,292

 
$
882,630

Six Months Ended December 31, 2013

The following table provides a summary of changes in our backlog for the six months ended December 31, 2013:


 
Electrical
Infrastructure
 
Oil Gas &
Chemical
 
Storage
Solutions
 
Industrial
 
Total
 
(In thousands)
Backlog as of June 30, 2013
$
103,520

 
$
120,138

 
$
319,718

 
$
83,361

 
$
626,737

Backlog acquired
123,492

 
2,825

 

 
115,723

 
242,040

Net awards
55,540

 
144,006

 
322,493

 
29,029

 
551,068

Revenue recognized
(70,057
)
 
(124,606
)
 
(288,731
)
 
(53,821
)
 
(537,215
)
Backlog as of December 31, 2013
$
212,495

 
$
142,363

 
$
353,480

 
$
174,292

 
$
882,630