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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) November 4, 2015
___________________ 
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 500, 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 November 4, 2015, Matrix Service Company (the “Company”) issued a press release announcing financial results for the first quarter ended September 30, 2015. 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 November 4, 2015, announcing financial results for the first quarter ended September 30, 2015.






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: November 4, 2015
 
By:
 
/s/ Kevin S. Cavanah
 
 
 
 
 
 
 
 
 
Kevin S. Cavanah
 
 
 
 
Vice President and Chief Financial Officer






EXHIBIT INDEX
 
 
 
 
Exhibit No.
  
Description
99
  
Press Release dated November 4, 2015, announcing financial results for the first quarter ended September 30, 2015.


Exhibit
Exhibit 99


MATRIX SERVICE COMPANY REPORTS SOLID FIRST QUARTER RESULTS; MAINTAINS GUIDANCE

•
Fully diluted earnings per share increased to $0.37 compared to $0.22 in the first quarter of fiscal 2015
•
Consolidated gross profit increased 21.9% to $34.6 million
•
Revenue increased in the Electrical Infrastructure, Storage Solutions, and Oil Gas & Chemical segments, offset by the expected reduction in the Industrial Segment
•
Backlog remains strong at $1.28 billion with an additional $183.4 million in new project awards

TULSA, OK – November 4, 2015 – Matrix Service Company (Nasdaq: MTRX) today reported its financial results for the first quarter ended September 30, 2015.

"Despite continued challenges in the energy and industrial markets overall, Matrix Service Company performed well in the first quarter," said John Hewitt, President and CEO. "It is the quality of our performance that drives results. First quarter earnings per share were up more than 68% compared to the same period in fiscal 2015. Backlog is strong and our bid funnel is healthy. Increased revenue in all but one of our segments proves the strength of our business and the value of our strategic diversification. Overall, we are very pleased with our first quarter results."

Hewitt added that the two foundational projects announced in fiscal 2015 - the Napanee Generating Station and the gathering terminals for Dakota Access Pipeline - are also on plan. "As we evaluate our performance on both existing and future projects, as well as opportunities on the horizon, we're confident in our ability to continue to deliver solid results," he said.
First Quarter Fiscal 2016 Results
Consolidated revenue was $319.3 million for the three months ended September 30, 2015, compared to consolidated revenue of $321.7 million in the same period in the prior fiscal year. On a segment basis, consolidated revenue increased in the Electrical Infrastructure, Storage Solutions and Oil Gas & Chemical segments by $9.9 million, $10.9 million and $15.0 million, respectively. These increases were offset by a reduction in the Industrial segment of $38.2 million.

Consolidated gross profit increased from $28.4 million in the three months ended September 30, 2014 to $34.6 million in the three months ended September 30, 2015. Gross margins were 10.8% in the three months ended September 30, 2015 compared to 8.8% for the three months ended September 30, 2014. Prior year margins were reduced 1.8% to 8.8% due to a $3.3 million project charge on an acquired EPC joint venture project.

Consolidated SG&A expenses were $19.5 million in the three months ended September 30, 2015 compared to $19.8 million in the same period a year earlier. SG&A expense as a percentage of revenue was 6.1% in the three months ended September 30, 2015 compared to 6.2% for the three months ended September 30, 2014.
Backlog
Backlog at September 30, 2015 totaled $1.28 billion compared to $1.42 billion at June 30, 2015. Project awards totaled $183.4 million in the three months ended September 30, 2015.
Financial Position
Availability under the Company's credit facility of $125.2 million along with the Company's cash balance of $69.2 million provided liquidity of $194.4 million at September 30, 2015, a quarterly increase of $19.6 million or 11.2%.
Earnings Guidance
The Company is maintaining fiscal 2016 revenue guidance of between $1.4 billion and $1.6 billion and is maintaining fiscal 2016 earnings guidance of between $1.45 and $1.75 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 Thursday, November 5, 2015 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, except as required by law.
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
(unaudited)
(In thousands, except per share data) 
 
 
Three Months Ended
 
 
September 30,
2015
 
September 30,
2014
Revenues
 
$
319,331

 
$
321,683

Cost of revenues
 
284,747

 
293,304

Gross profit
 
34,584

 
28,379

Selling, general and administrative expenses
 
19,483

 
19,832

Operating income
 
15,101

 
8,547

Other income (expense):
 
 
 
 
Interest expense
 
(263
)
 
(351
)
Interest income
 
31

 
42

Other
 
(54
)
 
57

Income before income tax expense
 
14,815

 
8,295

Provision for federal, state and foreign income taxes
 
5,076

 
3,624

Net income
 
9,739

 
4,671

Less: Net loss attributable to noncontrolling interest
 
(202
)
 
(1,243
)
Net income attributable to Matrix Service Company
 
$
9,941

 
$
5,914

 
 
 
 
 
Basic earnings per common share
 
$
0.38

 
$
0.22

Diluted earnings per common share
 
$
0.37

 
$
0.22

Weighted average common shares outstanding:
 
 
 
 
Basic
 
26,476

 
26,470

Diluted
 
27,050

 
27,134




Matrix Service Company
Consolidated Balance Sheets
(unaudited)
(In thousands) 

 
September 30,
2015
 
June 30,
2015
Assets
 
 
 
Current assets:

 

Cash and cash equivalents
$
69,180

 
$
79,239

Accounts receivable, less allowances (September 30, 2015— $895 and June 30, 2015—$561)
182,634

 
199,149

Costs and estimated earnings in excess of billings on uncompleted contracts
83,604

 
86,071

Deferred income taxes
7,274

 
8,298

Inventories
2,863

 
2,773

Income taxes receivable
459

 
579

Other current assets
8,494

 
5,660

Total current assets
354,508

 
381,769

Property, plant and equipment at cost:

 

Land and buildings
32,609

 
32,746

Construction equipment
88,131

 
87,561

Transportation equipment
47,196

 
47,468

Office equipment and software
28,072

 
28,874

Construction in progress
8,095

 
5,196

Total property, plant and equipment - at cost
204,103

 
201,845

Accumulated depreciation
(120,150
)
 
(116,782
)
Property, plant and equipment - net
83,953

 
85,063

Goodwill
70,940

 
71,518

Other intangible assets
22,926

 
23,961

Deferred income taxes - noncurrent
2,118

 
2,073

Other assets
2,126

 
3,947

Total assets
$
536,571

 
$
568,331

 
 
 
 




Matrix Service Company
Consolidated Balance Sheets (continued)
(unaudited)
(In thousands, except share data)
 
September 30,
2015
 
June 30,
2015
Liabilities and stockholders’ equity
 
 
 
Current liabilities:
 
 
 
Accounts payable
$
99,759

 
$
125,792

Billings on uncompleted contracts in excess of costs and estimated earnings
75,275

 
96,704

Accrued wages and benefits
22,719

 
26,725

Accrued insurance
8,736

 
8,100

Income taxes payable
4,494

 
3,268

Deferred income taxes
863

 
473

Other accrued expenses
5,686

 
6,498

Total current liabilities
217,532

 
267,560

Deferred income taxes - noncurrent
7,244

 
7,413

Borrowings under senior credit facility
9,766

 
8,804

Total liabilities
234,542

 
283,777

Commitments and contingencies


 


Stockholders’ equity:
 
 
 
Matrix Service Company stockholders' equity:
 
 
 
Common stock—$.01 par value; 60,000,000 shares authorized; 27,888,217 shares issued as of September 30, 2015, and June 30, 2015; 26,531,657 and 26,440,823 shares outstanding as of September 30, 2015 and June 30, 2015
279

 
279

Additional paid-in capital
124,146

 
123,038

Retained earnings
204,335

 
194,394

Accumulated other comprehensive loss
(8,375
)
 
(5,926
)
 
320,385

 
311,785

Less: Treasury stock, at cost— 1,356,560 shares as of September 30, 2015, and 1,447,394 shares as of June 30, 2015
(17,845
)
 
(18,489
)
Total Matrix Service Company stockholders’ equity
302,540

 
293,296

Noncontrolling interest
(511
)
 
(8,742
)
Total stockholders' equity
302,029

 
284,554

Total liabilities and stockholders’ equity
$
536,571

 
$
568,331

 
 
 
 





Matrix Service Company
Results of Operations
(unaudited)
(In thousands)
 

 
Three Months Ended
 
September 30,
2015
 
September 30,
2014
Gross revenues
 
 
 
Electrical Infrastructure
$
65,625

 
$
55,673

Oil Gas & Chemical
68,959

 
54,199

Storage Solutions
144,570

 
133,350

Industrial
41,335

 
79,360

Total gross revenues
$
320,489

 
$
322,582

Less: Inter-segment revenues
 
 
 
Electrical Infrastructure
$
—

 
$
—

Oil Gas & Chemical
648

 
840

Storage Solutions
334

 
59

Industrial
176

 
—

Total inter-segment revenues
$
1,158

 
$
899

Consolidated revenues
 
 
 
Electrical Infrastructure
$
65,625

 
$
55,673

Oil Gas & Chemical
68,311

 
53,359

Storage Solutions
144,236

 
133,291

Industrial
41,159

 
79,360

Total consolidated revenues
$
319,331

 
$
321,683

Gross profit (loss)
 
 
 
Electrical Infrastructure
$
4,708

 
$
(489
)
Oil Gas & Chemical
5,683

 
4,386

Storage Solutions
20,232

 
14,518

Industrial
3,961

 
9,964

Total gross profit
$
34,584

 
$
28,379

Operating income (loss)
 
 
 
Electrical Infrastructure
$
1,200

 
$
(3,656
)
Oil Gas & Chemical
1,416

 
578

Storage Solutions
11,549

 
7,103

Industrial
936

 
4,522

Total operating income
$
15,101

 
$
8,547





Matrix Service Company
Consolidated Statements of Cash Flows
(unaudited)
(In thousands)
 
Three Months Ended
 
September 30,
2015

September 30,
2014
Operating activities:
 
 
 
Net income
$
9,739

 
$
4,671

Adjustments to reconcile net income to net cash provided (used) by operating activities:
 
 
 
Depreciation and amortization
5,429

 
5,771

Deferred income tax
1,380

 
(1,994
)
Gain on sale of property, plant and equipment
(74
)
 
(122
)
Provision for uncollectible accounts
334

 
465

Stock-based compensation expense
1,658

 
1,457

Excess tax benefit of exercised stock options and vesting of deferred shares
(20
)
 
(660
)
Other
60

 
59

Changes in operating assets and liabilities increasing (decreasing) cash, net of effects from acquisitions:
 
 
 
Accounts receivable
16,181

 
30,379

Costs and estimated earnings in excess of billings on uncompleted contracts
2,467

 
(16,811
)
Inventories
(90
)
 
39

Other assets and liabilities
293

 
10,726

Accounts payable
(26,197
)
 
(17,531
)
Billings on uncompleted contracts in excess of costs and estimated earnings
(21,429
)
 
(4,732
)
Accrued expenses
(4,182
)
 
(6,605
)
Net cash provided (used) by operating activities
(14,451
)
 
5,112

Investing activities:
 
 
 
Acquisition of property, plant and equipment
(3,941
)
 
(3,656
)
Acquisition
—

 
(5,250
)
Proceeds from asset sales
135

 
148

Net cash used by investing activities
$
(3,806
)
 
$
(8,758
)




Matrix Service Company
Consolidated Statements of Cash Flows (continued)
(Unaudited)
(In thousands)

 
Three Months Ended
 
September 30,
2015
 
September 30,
2014
Financing activities:
 
 
 
Capital contributions from noncontrolling interest
$
8,433

 
$
—

Issuances of common stock
384

 
193

Excess tax benefit of exercised stock options and vesting of deferred shares
20

 
660

Advances under credit agreement
962

 
5,817

Repayments of advances under credit agreement
—

 
(6,094
)
Proceeds from issuance of common stock under employee stock purchase plan
72

 
58

Repurchase of common stock for payment of statutory taxes due on equity-based compensation
(382
)
 
(913
)
Net cash provided (used) by financing activities
9,489

 
(279
)
Effect of exchange rate changes on cash
(1,291
)
 
(436
)
Net decrease in cash and cash equivalents
(10,059
)
 
(4,361
)
Cash and cash equivalents, beginning of period
79,239

 
77,115

Cash and cash equivalents, end of period
$
69,180

 
$
72,754

Supplemental disclosure of cash flow information:
 
 
 
Cash paid (received) during the period for:
 
 
 
Income taxes
$
1,747

 
$
(1,972
)
Interest
$
311

 
$
524

Non-cash investing and financing activities:
 
 
 
Purchases of property, plant and equipment on account
$
603

 
$
370






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 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 revenue recognized as of the reporting date.

Three Months Ended September 30, 2015

The following table provides a summary of changes in our backlog for the three months ended September 30, 2015:

 
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
38,440

 
64,364

 
67,565

 
13,074

 
183,443

Revenue recognized
(65,625
)
 
(68,311
)
 
(144,236
)
 
(41,159
)
 
(319,331
)
Backlog as of September 30, 2015
$
466,788

 
$
129,038

 
$
593,822

 
$
95,062

 
$
1,284,710