August 30, 2016

Matrix Service Company Announces Strong Finish to Fiscal 2016; Provides Guidance for Fiscal 2017

  • Company achieves fourth quarter earnings per share of $0.34; full year earnings per share of $1.07
  • Strong quarterly revenue of $359.6 million despite a challenging business environment
  • In fiscal 2016, the Company purchased over 650 thousand shares totaling $10.5 million
  • Fiscal 2017 guidance for revenue of $1.30 billion to $1.45 billion and fully diluted EPS of $1.10 to $1.40

TULSA, Okla., Aug. 30, 2016 (GLOBE NEWSWIRE) -- Matrix Service Company (Nasdaq:MTRX) today reported its financial results for the fourth quarter and year ended June 30, 2016.

"Despite continued market pressure on our customers as a result of current commodity pricing, our financial performance in this quarter provided a strong close to the fiscal year," said the Company's President and CEO John R. Hewitt. "Looking forward, the construction of TransCanada's Napanee Generating Station and all six terminals for Energy Transfer's Dakota Access Pipeline continue to progress and underpin the outlook for the coming year. We begin fiscal 2017 with an historically normal level of backlog and, even in this difficult market environment, expect a strong level of project awards by the end of the calendar year. Additionally, our balance sheet remains strong and Company liquidity is nearly $231 million - 32 percent higher than year-end fiscal 2015."

In addition to sound financial performance, the Company achieved record safety results for the fiscal year, with a Total Recordable Incident Rate of 0.55.  "In this business, nothing is more important than the safety of our employees, customers and fellow contractors," said Hewitt. "These results are a tribute to our employees' commitment to our core values and their focus on providing quality and leadership in the work we do."

Fourth Quarter Fiscal 2016 Results

Revenue for the fourth quarter ended June 30, 2016 was $359.6 million compared to $364.4 million in the same period a year earlier, a decrease of $4.8 million, or 1.3%.  In the fourth quarter ended June 30, 2016, the Company generated net income of $9.1 million, or $0.34 per fully diluted share.  In the same period a year earlier, the Company earned $10.9 million, or $0.40 per fully diluted share.

On a segment basis, revenue increased $31.6 million and $2.1 million in the Storage Solutions and Electrical Infrastructure segments, driven largely by our major projects. These increases were offset by decreases in the Industrial and Oil Gas & Chemical segments of $21.9 million and $16.6 million, as a result of continued commodity price pressure.

Consolidated gross profit was $34.1 million in the three months ended June 30, 2016 compared to $40.4 million in the three months ended June 30, 2015, primarily as a result of lower gross profit in the Industrial segment.  Fiscal 2016 gross margins were 9.5% compared to 11.1% in the same period a year earlier.

Selling, general and administrative costs were $19.6 million in the fourth quarter of fiscal 2016, compared to $22.0 million in the same period a year earlier due largely to a reduction in incentive compensation as well as efficiency improvements.  SG&A expense as a percentage of revenue decreased to 5.5% in the three months ended June 30, 2016 as compared to 6.0% for the three months ended June 30, 2015.

Fiscal 2016 Results

Revenue for the year ended June 30, 2016 was $1.312 billion compared to $1.343 billion in the same period a year earlier, a decrease of $31.2 million, or 2.3%.  In fiscal 2016, the Company earned net income of $28.9 million, or $1.07 per fully diluted share.  In the same period a year earlier, the Company earned $17.2 million, or $0.63 per fully diluted share. The Company's portion of the acquired joint venture project charges recorded in fiscal 2015, which have been discussed in previous earnings releases, totaled $34.7 million. The charges, which were partially offset by lower incentive compensation, reduced earnings for the period by $0.67 per fully diluted share.

On a segment basis, revenue decreased in the Industrial and Oil Gas & Chemical segments by $127.1 million and $55.6 million, respectively, partially offset by increases of $91.1 million and $60.4 million in the Electrical Infrastructure and Storage Solutions segments, respectively.   In the Industrial segment, lower commodity prices caused decreased business volumes in the iron and steel and mining markets.  In the Oil Gas & Chemical segment, low prevailing commodity prices in fiscal 2016 and a significant turnaround in fiscal 2015 led to lower revenues in fiscal 2016.  The increases in the Electrical Infrastructure and Storage Solutions segments is attributable to work on the major projects mentioned above.

Consolidated gross profit was $126.0 million in the year ended June 30, 2016 compared to $87.4 million in same period a year earlier.  Fiscal 2016 gross margins were 9.6%.  Fiscal 2015 gross margins were reduced by 4.3% to 6.5% due to charges related to the acquired joint venture project.

Consolidated SG&A expenses were $85.1 million in the year ended June 30, 2016 compared to $78.6 million in the same period a year earlier.  The increase in fiscal 2016 SG&A expense is primarily related to a bad debt charge of $5.2 million and $1.2 million of costs related to the Baillie Tank Equipment, Ltd. acquisition completed in February 2016.  SG&A, inclusive of the bad debt charge and acquisition expense, was 6.5% of revenue in the year ended June 30, 2016 compared to 5.8% in the same period a year earlier.

Income Tax Expense

The effective tax rates were 35.6% for the three months and fiscal year ended June 30, 2016.  The Company estimates that its fiscal 2017 effective tax rate will approximate 36.0%.

Backlog

Backlog at June 30, 2016 totaled $868.7 million compared to record backlog of $1.421 billion at June 30, 2015, due to two major multi-year project awards in the second half of fiscal 2015. Project awards in the three months and for the fiscal year ended June 30, 2016 totaled $195.8 million and $793.6 million, respectively.

Financial Position

The Company's cash balance was $71.7 million at June 30, 2016.  In fiscal 2016, the Company generated $30.3 million from operations, funded capital expenditures of $13.9 million, acquired a company for $13.0 million and repurchased shares for $10.5 million. In addition, the Company expended $8.8 million to pay off the outstanding balance under the senior credit facility. The cash balance along with availability under the senior credit facility gives the Company liquidity of $230.8 million at June 30, 2016.

Earnings Guidance

The Company expects that fiscal 2017 revenue will be between $1.30 billion and $1.45 billion and that earnings will be between $1.10 and $1.40 per fully diluted share.

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 10:30 a.m. (Eastern) / 9:30 a.m. (Central) on Wednesday, August 31, 2016 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, Canada and other international locations.

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.


Matrix Service Company

Consolidated Statements of Income

(In thousands, except per share data)

  Three Months Ended Twelve Months Ended
  June 30,
 2016
 June 30,
 2015
 June 30,
 2016
 June 30,
 2015
Revenues $359,635  $364,417  $1,311,917  $1,343,135 
Cost of revenues 325,536  324,013  1,185,926  1,255,765 
Gross profit 34,099  40,404  125,991  87,370 
Selling, general and administrative expenses 19,600  22,030  85,109  78,568 
Operating income 14,499  18,374  40,882  8,802 
Other income (expense):        
Interest expense (96) (290) (852) (1,236)
Interest income 43  78  190  468 
Other (256) (123) (567) 158 
Income before income tax expense 14,190  18,039  39,653  8,192 
Provision for federal, state and foreign income taxes 5,056  6,819  14,116  10,090 
Net income (loss) 9,134  11,220  25,537  (1,898)
Less: Net income (loss) attributable to noncontrolling interest   304  (3,326) (19,055)
Net income attributable to Matrix Service Company $9,134  $10,916  $28,863  $17,157 
Basic earnings per common share $0.35  $0.41  $1.09  $0.64 
Diluted earnings per common share $0.34  $0.40  $1.07  $0.63 
Weighted average common shares outstanding:        
Basic 26,434  26,633  26,597  26,603 
Diluted 26,774  27,132  27,100  27,177 


Matrix Service Company

Consolidated Balance Sheets

(In thousands)

 
  June 30,
 2016
 June 30,
 2015
Assets    
Current assets:    
Cash and cash equivalents $71,656  $79,239 
Accounts receivable, less allowances (2016 - $8,403; 2015 - $561) 190,434  199,149 
Costs and estimated earnings in excess of billings on uncompleted contracts 104,001  86,071 
Inventories 3,935  2,773 
Income taxes receivable 9  579 
Other current assets 5,411  5,660 
Total current assets 375,446  373,471 
Property, plant and equipment, at cost:    
Land and buildings 39,224  32,746 
Construction equipment 90,386  87,561 
Transportation equipment 49,046  47,468 
Office equipment and software 29,577  28,874 
Construction in progress 7,475  5,196 
 Total property, plant and equipment - at cost 215,708  201,845 
Accumulated depreciation (130,977) (116,782)
 Property, plant and equipment - net 84,731  85,063 
Goodwill 78,293  71,518 
Other intangible assets 20,999  23,961 
Deferred income taxes 3,719  3,729 
Other assets 1,779  3,947 
Total assets $564,967  $561,689 


Matrix Service Company

Consolidated Balance Sheets (continued)

(In thousands, except share data)

  June 30,
 2016
 June 30,
 2015
Liabilities and stockholders' equity    
Current liabilities:    
Accounts payable $141,445  $125,792 
Billings on uncompleted contracts in excess of costs and estimated earnings 58,327  96,704 
Accrued wages and benefits 27,716  26,725 
Accrued insurance 9,246  8,100 
Income taxes payable 2,675  3,268 
Other accrued expenses 6,621  6,498 
Total current liabilities 246,030  267,087 
Deferred income taxes 3,198  1,244 
Borrowings under senior revolving credit facility   8,804 
Other liabilities 173   
Total liabilities 249,401  277,135 
Commitments and contingencies    
Matrix Service Company Stockholders' equity:    
Common stock—$.01 par value; 60,000,000 shares authorized; 27,888,217 shares issued as of June 30, 2016 and June 30, 2015; 26,297,145 and 26,440,823 shares outstanding as of June 30, 2016 and June 30, 2015 279  279 
Additional paid-in capital 126,958  123,038 
Retained earnings 223,257  194,394 
Accumulated other comprehensive income (6,845) (5,926)
  343,649  311,785 
Less treasury stock, at cost — 1,591,072 and 1,447,394 shares as of June 30, 2016 and June 30, 2015 (26,907) (18,489)
Total Matrix Service Company stockholders' equity 316,742  293,296 
Noncontrolling interest (1,176) (8,742)
Total stockholders' equity 315,566  284,554 
Total liabilities and stockholders' equity $564,967  $561,689 

Results of Operations
(In thousands)

       
  Electrical
Infrastructure
 Oil Gas &
Chemical
 Storage
Solutions
 Industrial Total
Three Months Ended June 30, 2016          
Gross revenues $97,574  $64,291  $164,664  $33,369  $359,898 
Less: inter-segment revenues   76  186  1  263 
Consolidated revenues 97,574  64,215  164,478  33,368  359,635 
Gross profit 10,165  4,283  18,077  1,574  34,099 
Operating income (loss) $5,719  $74  $9,144  $(438) $14,499 
           
Three Months Ended June 30, 2015          
Gross revenues $95,496  $82,596  $133,178  $57,146  $368,416 
Less: inter-segment revenues   1,810  314  1,875  3,999 
Consolidated revenues 95,496  80,786  132,864  55,271  364,417 
Gross profit 7,532  6,395  18,089  8,388  40,404 
Operating income $2,191  $1,241  $10,284  $4,658  $18,374 
           
Twelve Months Ended June 30, 2016          
Gross revenues $349,011  $252,973  $564,738  $149,744  $1,316,466 
Less: inter-segment revenues   3,178  1,226  145  4,549 
Consolidated revenues 349,011  249,795  563,512  149,599  1,311,917 
Gross profit 29,301  18,553  67,843  10,294  125,991 
Operating income (loss) $11,144  $(3,503) $33,449  $(208) $40,882 
           
Twelve Months Ended June 30, 2015          
Gross revenues $257,930  $310,826  $504,155  $281,319  $1,354,230 
Less: inter-segment revenues   5,466  1,032  4,597  11,095 
Consolidated revenues 257,930  305,360  503,123  276,722  1,343,135 
Gross profit (loss) (31,444) 25,394  58,085  35,335  87,370 
Operating income (loss) $(44,293) $7,064  $29,069  $16,962  $8,802 

Backlog

We define backlog as the total dollar amount of revenue 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 amount.

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.

Three Months Ended June 30, 2016

The following table provides a summary of changes in our backlog for the three months ended June 30, 2016:

  Electrical
Infrastructure
 Oil Gas &
Chemical
 Storage
Solutions
 Industrial Total
  (In thousands)
Backlog as of March 31, 2016     $383,929  $101,047  $482,867  $64,630  $1,032,473 
Project awards 83,436  54,646  40,624  17,128  195,834 
Revenue recognized (97,574) (64,215) (164,478) (33,368) (359,635)
Backlog as of June 30, 2016 $369,791  $91,478  $359,013  $48,390  $868,672 

Twelve Months Ended June 30, 2016

The following table provides a summary of changes in our backlog for the twelve months ended June 30, 2016:

  Electrical
Infrastructure
 Oil Gas &
Chemical
 Storage
Solutions
 Industrial Total
  (In thousands)
Backlog as of June 30, 2015 $493,973  $132,985  $670,493  $123,147  $1,420,598 
Project awards 224,829  208,288  274,045  86,448  793,610 
Project delays and cancellations     (22,013) (11,606) (33,619)
Revenue recognized (349,011) (249,795) (563,512) (149,599) (1,311,917)
Backlog as of June 30, 2016 $369,791  $91,478  $359,013  $48,390  $868,672 

 

Matrix Service Company
Kevin S. Cavanah
Vice President and CFO
T: 918-838-8822
Email:kcavanah@matrixservicecompany.com


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