Matrix

Matrix Service Company Announces Third Quarter Results Along With Changes In Operating Segments And Full Year Guidance

Press release




Matrix Service Company Announces Third Quarter Results Along With Changes In Operating Segments And Full Year Guidance

TULSA, Okla., May 7, 2012 (GLOBE NEWSWIRE) -- Matrix Service Company (Nasdaq:MTRX) today announced changes to its operating segments to align with the Company's strategic plans. Historically, the Company has reported two operating segments, Construction Services and Repair and Maintenance Services. Going forward, the Company will report four operating segments:

 

  • Electrical Infrastructure,
  • Oil Gas & Chemical,
  • Storage Solutions, and
  • Industrial.

These new operating segments are consistent with the Company's current management focus and organizational structure, and will provide greater transparency into the business. Detailed descriptions of the new operating segments will be included in the Company's Quarterly Report on Form 10-Q and will be discussed further on the Company's conference call on May 8, 2012.

The Company completed an update of its long-term strategic plan in the third quarter and is investing in many high growth areas including mining and metals, material handling, industrial cleaning, high voltage electrical and shale energy opportunities. The Company is also investing in support infrastructure areas such as safety, marketing, corporate development, systems and training. While these investments are expected to have a negative effect on earnings in the short-term, the Company believes they are necessary to achieve its strategic goals and will result in improved operating results over the long-term.

John R. Hewitt, President and CEO of Matrix Service Company, said "These new reporting segments provide a better description of our business and align with our vision for the future. Consistent with our strategic plan, Matrix Service Company will continue to invest in growth opportunities in order to deliver increased shareholder value."

Financial results for the three and nine months ended March 31, 2012 reflect strong revenue growth as core markets improve and strategic initiatives begin to contribute to backlog growth. Matrix Service Company continues to grow its backlog and the opportunity pipeline in all operating segments remains very strong. Consolidated backlog increased to $454.9 million as of March 31, 2012 compared to $433.6 million as of the end of the second quarter and $405.1 million as of June 30, 2011. The Company continues to see strong bid flow and booked in excess of $600 million of new work in the nine months ended March 31, 2012. Backlog has increased in five consecutive quarters and is at its highest level since the third quarter of fiscal 2009.

John R. Hewitt added "We are pleased with the solid revenue and backlog growth in the quarter and year to date, which reflects the quality of our people and services, as well as the impact of our ongoing investments in the business."

Third Quarter of Fiscal 2012 Results

Revenues for the third quarter ended March 31, 2012 were $183.9 million, an increase of $47.6 million, or 34.9%, from $136.3 million in the same period a year earlier.  Net income for the third quarter of fiscal 2012 was $4.9 million, or $0.19 per fully diluted share.  In the comparable period a year earlier, net income was $4.9 million, or $0.18 per fully diluted share.

Consolidated gross profit was $19.8 million in the third quarter of fiscal 2012 compared to $18.6 million in the same period a year earlier. The increase of $1.2 million was due to higher revenues in the third quarter of fiscal 2012 in our Oil Gas & Chemical and Storage Solutions segments when compared to the same period a year earlier largely offset by the impact of lower gross margins. Gross margins decreased to 10.8% in the third quarter of fiscal 2012 compared to 13.6% in the same period a year earlier largely due to lower margins in the Storage Solutions segment, an increase in the proportion of lower margin revenues in the Oil Gas & Chemical segment, a lower than anticipated volume of Electrical Infrastructure activity, and investments in strategic growth areas.  Selling, general and administrative expenses were $12.4 million, or 6.7% of revenue, in the third quarter of fiscal 2012 compared to $10.9 million, or 8.0% of revenue, in the third quarter of fiscal 2011. 

Nine Month Fiscal 2012 Results

Revenues for the nine months ended March 31, 2012 were $554.2 million, an increase of $90.8 million, or 19.6%, from $463.4 million in the same period a year earlier.  Net income for the nine months ended March 31, 2012 was $15.4 million, or $0.58 per fully diluted share.  In the comparable period a year earlier, net income was $13.3 million, or $0.50 per fully diluted share.

Consolidated gross profit was $61.0 million in the nine months ended March 31, 2012 compared to $54.0 million in the same period a year earlier. The increase of $7.0 million was due to higher revenues in the nine months ended March 31, 2012 when compared to the same period a year earlier partially offset by the impact of lower gross margins which decreased to 11.0% in the first nine months of fiscal 2012 compared to 11.7% in the same period a year earlier.  Selling, general and administrative expenses were $35.7 million, or 6.4% of revenue, in the nine months ended March 31, 2012 compared to $32.7 million, or 7.0% of revenue, in the same period a year earlier. 

Financial Position

At March 31, 2012, Matrix Service's cash balance was $43.1 million. The cash balance along with availability under the senior credit facility gives the Company liquidity of $157.0 million.

Earnings Guidance

Conditions in our east coast operations including instability in local refinery operations, warm winter weather, and the impact of low natural gas prices, as well as timing delays of various project start dates and contract awards have negatively affected the Electrical Infrastructure segment.  These factors combined with the strategic investments discussed above are impacting the last half of our fiscal year.  Matrix Service Company is therefore reducing its full year EPS guidance to a range of $0.77 to $0.85 and its revenue guidance to $725 million to $750 million.

Conference Call Details

In conjunction with the earnings release, Matrix Service 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 May 8, 2012 and will be simultaneously broadcast live on the Internet, which can be accessed at the Company's website at www.matrixservice.com on the Investors' page under Events & Presentations.  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 maintenance services to Electrical Infrastructure, Oil Gas & Chemical, Storage Solutions and Industrial markets.

The Company is headquartered in Tulsa, Oklahoma, with regional operating facilities in 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.

 

 
Matrix Service Company
 
Condensed Consolidated Statements of Income
 
(In thousands, except per share data)
 
(unaudited)
 
  Three Months Ended Nine Months Ended
  March 31, 2012 March 31, 2011 March 31, 2012 March 31, 2011
         
Revenues  $ 183,899   $ 136,333   $ 554,184  $ 463,423
Cost of revenues 164,128 117,763 493,222 409,383
         
Gross profit 19,771 18,570 60,962 54,040
Selling, general and administrative  expenses 12,356 10,930 35,737 32,655
         
Operating income 7,415 7,640 25,225 21,385
         
Other income (expense):        
 Interest expense (174) (227) (617) (594)
 Interest income 12 43 18 65
 Other (55) 485 (430) 595
         
Income before income tax expense 7,198 7,941 24,196 21,451
Provision for federal, state and foreign income taxes 2,336 3,018 8,794 8,152
         
Net income  $ 4,862  $ 4,923  $ 15,402  $ 13,299
         
Basic earnings per common share  $  0.19  $  0.19   $  0.59  $  0.50
         
Diluted earnings per common share  $  0.19  $  0.18  $  0.58  $  0.50
         
Weighted average common shares   outstanding:        
 Basic  25,723  26,425  25,982  26,389
 Diluted     26,079  26,723  26,333  26,636 
 
Matrix Service Company
 
Condensed Consolidated Balance Sheets
 
(In thousands)
 
(unaudited)
 
  March 31, June 30,
  2012 2011
     
Assets    
     
Current assets:    
 Cash and cash equivalents  $ 43,132  $ 59,357
 Accounts receivable, less allowances (March 31, 2012 -- $1,174 and June 30,   2011 -- $1,428) 113,830 103,483
 Costs and estimated earnings in excess of billings on uncompleted contracts 55,052 40,056
 Inventories 2,547 2,249
 Deferred income taxes 5,706 5,607
 Other current assets 3,697 4,798
Total current assets 223,964 215,550
     
Property, plant and equipment at cost:    
 Land and buildings 28,401 28,287
 Construction equipment 58,573 55,272
 Transportation equipment 24,760 21,690
 Office equipment and software 16,632 15,442
 Construction in progress 2,591 2,465
  130,957 123,156
 Accumulated depreciation (76,719) (69,845)
  54,238 53,311
     
Goodwill 28,725 29,058
Other intangible assets 6,614 6,953
Other assets 2,235 1,564
     
Total assets  $ 315,776  $  306,436
 
Matrix Service Company
 
Condensed Consolidated Balance Sheets
 
(In thousands, except share data)
 
(unaudited)
 
  March 31, June 30,
  2012 2011
     
Liabilities and stockholders' equity    
     
Current liabilities:    
 Accounts payable  $ 42,760  $ 36,377
 Billings on uncompleted contracts in excess of costs and estimated earnings 28,262 35,485
 Accrued insurance 7,228 7,514
 Accrued wages and benefits 17,373 18,099
 Other accrued expenses 2,633 2,701
Total current liabilities 98,256 100,176
     
 Deferred income taxes 6,188 5,789
 Long-term debt 1,757 --
 Acquisition payable 800 800
Total liabilities 107,001 106,765
     
Commitments and contingencies    
     
Stockholders' equity:    
 Common stock -- $.01 par value; 60,000,000 shares authorized; 27,888,217 shares issued as of March 31, 2012, and June 30, 2011 279 279
 Additional paid-in capital 115,844 113,686
 Retained earnings 115,633 100,231
 Accumulated other comprehensive income 1,087 1,436
  232,843 215,632
 Less: Treasury stock, at cost – 2,157,906 shares as of March 31, 2012, and 1,417,539 shares as of June 30, 2011 (24,068) (15,961)
     
Total stockholders' equity 208,775 199,671
     
Total liabilities and stockholders' equity  $ 315,776  $ 306,436
 
Results of Operations
 
(In thousands)
 
  Electrical
Infrastructure
Oil Gas &
Chemical
Storage
Solutions

Industrial
 
 Other
 
 Total
             
Three Months Ended March 31, 2012            
Gross revenues $  37,621 $ 55,569 $ 88,326 $ 3,112 $ -- $ 184,628
Less: Inter-segment  revenues -- -- 729 -- -- 729
Consolidated revenues 37,621 55,569 87,597 3,112 -- 183,899
Gross profit 4,809 5,015 9,999 (52) -- 19,771
Operating income 2,540 1,922  3,745 (792) -- 7,415
Segment assets 53,961 63,222  131,673 13,744 53,176 315,776
             
Three Months Ended March 31, 2011            
Gross revenues $ 28,825 $ 32,501 $ 68,616 $ 6,785 $ -- $ 136,727
Less: Inter-segment  revenues -- 255  139 -- -- 394
Consolidated revenues 28,825 32,246  68,477 6,785 -- 136,333
Gross profit 3,846 3,480  10,245 999 -- 18,570
Operating income 1,661 846  4,654 479 -- 7,640
Segment assets 50,950 40,935  118,793 14,046 68,083 292,807
             
Nine Months Ended March 31, 2012            
Gross revenues $ 103,261 $ 151,318 $ 283,958 $ 17,763 $ -- $ 556,300
Less: Inter-segment  revenues --  208  1,908  --  --  2,116
Consolidated revenues 103,261 151,110  282,050 17,763 -- 554,184
Gross profit 12,585 14,298  33,075 1,004 -- 60,962
Operating income 5,761 5,744  14,518 (798) -- 25,225
Segment assets 53,961 63,222  131,673 13,744 53,176 315,776
             
Nine Months Ended March 31, 2011            
Gross revenues  $ 126,158  $ 96,186 $ 215,922 $ 26,065 $ -- $ 464,331
Less: Inter-segment  revenues 7 376  525 -- -- 908
Consolidated revenues 126,151 95,810  215,397 26,065 -- 463,423
Gross profit 15,004 9,109  27,202 2,725 -- 54,040
Operating income 7,801 1,494  10,879 1,211 -- 21,385
Segment assets 50,950 40,935  118,793 14,046 68,083 292,807

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 signed contracts 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.

Three Months Ended March 31, 2012

The following table provides a summary of changes in our backlog for the three months ended March 31, 2012:

 

           
  Electrical
Infrastructure
Oil Gas &
Chemical
Storage
Solutions

Industrial

Total
  (In thousands)
Backlog as of December 31,  2011   $ 119,954  $ 69,038  $ 240,227  $  4,361  $  433,580
Net awards  28,242  61,105  100,337  15,567  205,251
Revenue recognized  (37,621)  (55,569)  (87,597)  (3,112)  (183,899)
Backlog as of  March 31, 2012  $ 110,575  $ 74,574  $ 252,967  $ 16,816  $ 454,932

Nine Months Ended March 31, 2012

The following table provides a summary of changes in our backlog for the nine months ended March 31, 2012:

 

           
  Electrical
Infrastructure
Oil Gas &
Chemical
Storage
Solutions

Industrial

Total
  (In thousands)
Backlog as of June 30, 2011   $ 85,551  $ 92,162  $ 218,073  $  9,332  $  405,118
Net awards  128,285  133,522  316,944  25,247  603,998
Revenue recognized  (103,261)  (151,110)  (282,050)  (17,763)  (554,184)
Backlog as of  March 31, 2012  $ 110,575  $ 74,574  $ 252,967  $ 16,816  $ 454,932
CONTACT: Matrix Service Company
         Kevin Cavanah
         Vice President and CFO
         T: 918-838-8822
         E: kcavanah@matrixservice.com