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) October 2, 2008
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 October 2, 2008, Matrix Service Company (the “Company”) issued a press release announcing its financial results for the first quarter of fiscal 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 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 filed or furnished herewith:
| Exhibit No. |
Description | |
| 99 | Press Release dated October 2, 2008, announcing financial results for the first quarter of fiscal 2009. |
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: October 2, 2008 | 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 October 2, 2008, announcing financial results for the first quarter of fiscal 2009. |
Exhibit 99
FOR IMMEDIATE RELEASE
MATRIX SERVICE REPORTS RECORD OPERATING INCOME AND FULLY DILUTED
EARNINGS PER SHARE IN THE FIRST QUARTER FISCAL 2009
First Quarter Fiscal 2009 Highlights:
| • | Operating income was a record $14.6 million, up from $10.9 million a year earlier; |
| • | Revenues increased 15.7% to $186.7 million from $161.3 million a year earlier; |
| • | Net income was $9.5 million compared to $6.3 million in the first quarter a year ago; |
| • | Gross margins improved to 14.3% from 11.7% for the first quarter a year earlier; and |
| • | Fully diluted EPS was a record $0.36 per share, up from $0.23 per share in the same quarter a year ago. |
TULSA, OK – October 2, 2008 – Matrix Service Co. (Nasdaq: MTRX), a leading industrial services company, today reported its financial results for the first quarter ended August 31, 2008.
Total revenues for the first quarter increased 15.7% to $186.7 million from the $161.3 million recorded in the first quarter of fiscal 2008.
Net income for the first quarter of fiscal 2009 was $9.5 million, or $0.36 per fully diluted share, which compares favorably to prior year first quarter net income of $6.3 million, or $0.23 per fully diluted share.
Michael J. Bradley, president and chief executive officer of Matrix Service, said, “We are very proud of our overall performance in the first quarter of fiscal 2009. Our financial results continue to demonstrate our focus on execution and the Company’s strong growth potential.”
Consolidated SG&A expenses increased to $12.1 million from $8.0 million in the same quarter of fiscal 2008 with the addition of key resources necessary to execute the Company’s growth strategy.
EBITDA(1) increased to $17.7 million, from $12.6 million in the same period last year. Gross margins on a consolidated basis for the current quarter increased to 14.3% from 11.7% reported in the same quarter a year ago. The lower margin in the prior fiscal period resulted from a $1.5 million pre-tax charge for a liquefied natural gas (LNG) construction project in the Gulf Coast Region.
Construction Services revenues improved by 16.2% to $114.8 million from $98.8 million in the same period a year earlier. The $16.0 million increase was a result of higher Aboveground Storage Tank (AST) revenues, which increased 41.5% to $55.9 million in fiscal 2009, up from $39.5 million a year earlier, higher revenues in Electrical and Instrumentation (E&I), which increased $9.3 million to $11.5 million in fiscal 2009, up from $2.2 million a year earlier, and higher Downstream Petroleum revenues, which increased 14.6% to $38.5 million in fiscal 2009 from $33.6 million a year earlier. These increases were partially offset by lower Specialty revenues, which decreased $14.7 million due to the completion of our Gulf Coast LNG project in fiscal 2008.
| (1) | The Company uses EBITDA (earnings before net interest, income taxes, depreciation and amortization) as part of its overall assessment of financial performance by comparing EBITDA between accounting periods. Matrix Service believes that EBITDA is used by the financial community as a method of measuring the Company’s performance and of evaluating the market value of companies considered to be in similar businesses. EBITDA should not be considered as an alternative to net income or cash provided by operating activities, as defined by accounting principles generally accepted in the United States (“GAAP”). A reconciliation of EBITDA to net income is included at the end of this release. |
Matrix Service Company
October 2, 2008
Page 2
Construction Services’ gross margins improved to 13.1% from 8.8%, primarily as a result of the $1.5 million charge taken on the LNG project in the first quarter of fiscal 2008. Moreover, the gross margins in the first quarter of fiscal 2009 benefited from the 16.2% increase in revenues, which led to further absorption of fixed costs.
Revenues for the Repair and Maintenance Services segment increased 15.0% to $71.9 million, up from $62.5 million a year earlier. The $9.4 million improvement resulted from higher AST revenues in this segment, which increased 15.4% to $47.9 million in fiscal 2009 from $41.5 million in the prior fiscal year and higher Downstream Petroleum revenues in this segment, which increased 21.1% to $21.2 million in fiscal 2009 from $17.5 million a year earlier. Gross margins in the first quarter of fiscal 2009 were 16.2% as compared to 16.4% earned in the first quarter of fiscal 2008.
Mr. Bradley added, “We continue to lay the groundwork to expand our geographic reach and diversify our service and product offerings to achieve sustainable and profitable long-term growth. We will also continue to look for acquisition opportunities that fit our strategy, strengths and culture.”
Mr. Bradley continued, “We are maintaining our fiscal 2009 guidance of $800 million to $850 million in consolidated revenues, earnings of $1.35 per fully diluted share to $1.60 per fully diluted share and SG&A of 5.5% to 6.0% of revenues.”
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 general industrial 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, Pennsylvania, Illinois, Washington, 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 | Investors and Financial Media: | |
| Tom Long | Trúc Nguyen | |
| Vice President and CFO | Managing Director | |
| T: 918-838-8822 | Grayling Global | |
| E: telong@matrixservice.com | T: 646-284-9418 | |
| E: tnguyen@hfgcg.com |
Matrix Service Company
October 2, 2008
Page 3
Matrix Service Company
Consolidated Statements of Income
(In thousands, except per share data)
| Three Months Ended | ||||||||
| August 31, 2008 |
August 31, 2007 |
|||||||
| (unaudited) | ||||||||
| Revenues |
$ | 186,650 | $ | 161,327 | ||||
| Cost of revenues |
159,979 | 142,423 | ||||||
| Gross profit |
26,671 | 18,904 | ||||||
| Selling, general and administrative expenses |
12,062 | 8,046 | ||||||
| Operating income |
14,609 | 10,858 | ||||||
| Other income (expense): |
||||||||
| Interest expense |
(114 | ) | (304 | ) | ||||
| Interest income |
109 | 16 | ||||||
| Other |
736 | (10 | ) | |||||
| Income before income taxes |
15,340 | 10,560 | ||||||
| Provision for federal, state and foreign income taxes |
5,836 | 4,224 | ||||||
| Net income |
$ | 9,504 | $ | 6,336 | ||||
| Basic earnings per common share |
$ | 0.36 | $ | 0.24 | ||||
| Diluted earnings per common share |
$ | 0.36 | $ | 0.23 | ||||
| Weighted average common shares outstanding: |
||||||||
| Basic |
26,073 | 26,592 | ||||||
| Diluted |
26,473 | 27,083 | ||||||
Matrix Service Company
October 2, 2008
Page 4
Matrix Service Company
Consolidated Balance Sheets
(In thousands)
| August 31, 2008 |
May 31, 2008 |
|||||||
| (unaudited) | ||||||||
| Assets |
||||||||
| Current assets: |
||||||||
| Cash and cash equivalents |
$ | 18,819 | $ | 21,989 | ||||
| Accounts receivable, less allowances (August 31, 2008—$315 and May 31, 2008—$269) |
111,028 | 105,858 | ||||||
| Costs and estimated earnings in excess of billings on uncompleted contracts |
47,126 | 49,940 | ||||||
| Inventories |
5,870 | 4,255 | ||||||
| Deferred income taxes |
4,993 | 4,399 | ||||||
| Prepaid expenses |
4,426 | 3,357 | ||||||
| Other current assets |
809 | 809 | ||||||
| Total current assets |
193,071 | 190,607 | ||||||
| Property, plant and equipment at cost: |
||||||||
| Land and buildings |
24,147 | 24,268 | ||||||
| Construction equipment |
47,861 | 47,370 | ||||||
| Transportation equipment |
17,081 | 16,927 | ||||||
| Furniture and fixtures |
11,840 | 11,781 | ||||||
| Construction in progress |
8,610 | 6,712 | ||||||
| 109,539 | 107,058 | |||||||
| Accumulated depreciation |
(51,174 | ) | (49,811 | ) | ||||
| 58,365 | 57,247 | |||||||
| Goodwill |
23,103 | 23,329 | ||||||
| Other assets |
2,781 | 3,410 | ||||||
| Total assets |
$ | 277,320 | $ | 274,593 | ||||
Matrix Service Company
October 2, 2008
Page 5
Matrix Service Company
Consolidated Balance Sheets
(In thousands, except share data)
| August 31, 2008 |
May 31, 2008 |
|||||||
| (unaudited) | ||||||||
| Liabilities and stockholders’ equity |
||||||||
| Current liabilities: |
||||||||
| Accounts payable |
$ | 51,236 | $ | 53,560 | ||||
| Billings on uncompleted contracts in excess of costs and estimated earnings |
43,110 | 48,709 | ||||||
| Accrued insurance |
8,771 | 8,451 | ||||||
| Accrued wages and benefits |
10,361 | 14,976 | ||||||
| Income tax payable |
6,047 | 2,028 | ||||||
| Current capital lease obligation |
1,107 | 1,042 | ||||||
| Other accrued expenses |
2,046 | 1,015 | ||||||
| Total current liabilities |
122,678 | 129,781 | ||||||
| Long-term capital lease obligation |
947 | 1,000 | ||||||
| Deferred income taxes |
4,950 | 5,112 | ||||||
| Stockholders’ equity: |
||||||||
| Common stock—$.01 par value; 60,000,000 shares authorized; 27,888,217 shares issued as of August 31, 2008 and May 31, 2008 |
279 | 279 | ||||||
| Additional paid-in capital |
109,528 | 108,402 | ||||||
| Retained earnings |
54,312 | 44,809 | ||||||
| Accumulated other comprehensive income |
947 | 1,584 | ||||||
| 165,066 | 155,074 | |||||||
| Less: Treasury stock, at cost – 1,806,150 and 1,825,600 shares as of August 31, 2008 and May 31, 2008 |
(16,321 | ) | (16,374 | ) | ||||
| Total stockholders’ equity |
148,745 | 138,700 | ||||||
| Total liabilities and stockholders’ equity |
$ | 277,320 | $ | 274,593 | ||||
Matrix Service Company
October 2, 2008
Page 6
Results of Operations
(In thousands)
| Construction Services |
Repair & Maintenance Services |
Other | Total | ||||||||||
| Three Months Ended August 31, 2008 |
|||||||||||||
| Gross revenues |
$ | 122,361 | $ | 72,167 | $ | — | $ | 194,528 | |||||
| Less: Inter-segment revenues |
7,603 | 275 | — | 7,878 | |||||||||
| Consolidated revenues |
114,758 | 71,892 | — | 186,650 | |||||||||
| Gross profit |
15,045 | 11,626 | — | 26,671 | |||||||||
| Operating income |
7,492 | 7,117 | — | 14,609 | |||||||||
| Income before income tax expense |
7,703 | 7,637 | — | 15,340 | |||||||||
| Net income |
4,379 | 5,125 | — | 9,504 | |||||||||
| Segment assets |
150,322 | 91,116 | 35,882 | 277,320 | |||||||||
| Capital expenditures |
1,039 | 930 | 1,136 | 3,105 | |||||||||
| Depreciation expense |
1,412 | 969 | — | 2,381 | |||||||||
| Three Months Ended August 31, 2007 |
|||||||||||||
| Gross revenues |
$ | 103,017 | $ | 63,985 | $ | — | $ | 167,002 | |||||
| Less: Inter-segment revenues |
4,238 | 1,437 | — | 5,675 | |||||||||
| Consolidated revenues |
98,779 | 62,548 | — | 161,327 | |||||||||
| Gross profit |
8,673 | 10,231 | — | 18,904 | |||||||||
| Operating income (loss) |
3,924 | 7,019 | (85 | ) | 10,858 | ||||||||
| Income (loss) before income tax expense |
3,713 | 6,932 | (85 | ) | 10,560 | ||||||||
| Net income (loss) |
2,227 | 4,160 | (51 | ) | 6,336 | ||||||||
| Segment assets |
135,094 | 86,732 | 19,301 | 241,127 | |||||||||
| Capital expenditures |
1,506 | 672 | 710 | 2,888 | |||||||||
| Depreciation and amortization expense |
1,053 | 721 | — | 1,774 | |||||||||
Segment revenue from external customers by market is as follows:
| Construction Services |
Repair & Maintenance Services |
Total | |||||||
| (In thousands) | |||||||||
| Three Months Ended August 31, 2008 |
|||||||||
| Aboveground Storage Tanks |
$ | 55,869 | $ | 47,897 | $ | 103,766 | |||
| Downstream Petroleum |
38,547 | 21,245 | 59,792 | ||||||
| Electrical and Instrumentation |
11,474 | 2,750 | 14,224 | ||||||
| Specialty |
8,868 | — | 8,868 | ||||||
| Total |
$ | 114,758 | $ | 71,892 | $ | 186,650 | |||
| Three Months Ended August 31, 2007 |
|||||||||
| Aboveground Storage Tanks |
$ | 39,474 | $ | 41,529 | $ | 81,003 | |||
| Downstream Petroleum |
33,551 | 17,537 | 51,088 | ||||||
| Electrical and Instrumentation |
2,172 | 3,482 | 5,654 | ||||||
| Specialty |
23,582 | — | 23,582 | ||||||
| Total |
$ | 98,779 | $ | 62,548 | $ | 161,327 | |||
Matrix Service Company
October 2, 2008
Page 7
Non-GAAP Financial Measure
EBITDA is a supplemental, non-GAAP financial measure. EBITDA is defined as earnings before net interest expense, income taxes, depreciation and amortization. We have presented EBITDA because it is used by the financial community as a method of measuring our performance and of evaluating the market value of companies considered to be in similar businesses. We believe that the line item on our Consolidated Statements of Income entitled “Net Income” is the most directly comparable GAAP measure to EBITDA. Since EBITDA is not a measure of performance calculated in accordance with GAAP, it should not be considered in isolation of, or as a substitute for, net earnings as an indicator of operating performance. EBITDA, as we calculate it, may not be comparable to similarly titled measures employed by other companies. In addition, this measure is not necessarily a measure of our ability to fund our cash needs. As EBITDA excludes certain financial information compared with net income, the most directly comparable GAAP financial measure, users of this financial information should consider the type of events and transactions that are excluded. Our non-GAAP performance measure, EBITDA, has certain material limitations as follows:
| • | It does not include interest income or expense. Because we borrow money from time to time to finance our operations, interest expense is a necessary and ongoing part of our costs and has assisted us in generating revenue. Therefore, any measure that excludes interest expense has material limitations. |
| • | It does not include income taxes. Because the payment of income taxes is a necessary and ongoing part of our operations, any measure that excludes income taxes has material limitations. |
| • | It does not include depreciation expense. Because we use capital assets to generate revenue, depreciation expense is a necessary element of our cost structure. Therefore, any measure that excludes depreciation expense has material limitations. |
A reconciliation of EBITDA to net income follows:
| Three Months Ended | ||||||
| August 31, 2008 |
August 31, 2007 | |||||
| (In thousands) | ||||||
| Net income |
$ | 9,504 | $ | 6,336 | ||
| Interest expense, net |
5 | 288 | ||||
| Provision for income taxes |
5,836 | 4,224 | ||||
| Depreciation and amortization |
2,381 | 1,774 | ||||
| EBITDA |
$ | 17,726 | $ | 12,622 | ||