×

Matrix Service Company Announces Results for the Second Quarter and Six Months Ended December 31, 2012

Matrix Service Company Logo

Second Quarter Highlights:

  • Backlog increased to $605.1 million on project awards of $291.9 million
  • Revenues were $221.4 million and fully diluted earnings per share were $0.21
  • Recognized a project charge of $3.3 million, or $0.08 per fully diluted share
  • Adjusted earnings per share, exclusive of the above charge was $0.29(A)

TULSA, Okla., Feb. 6, 2013 (GLOBE NEWSWIRE) -- Matrix Service Company (Nasdaq:MTRX) today reported its financial results for the second quarter and six months ended December 31, 2012. In the quarter, the Company recorded a charge of $3.3 million related to an aboveground storage tank project in western Canada. The project contained some estimated elements related to field labor productivity and associated costs that did not accurately represent the project costs that we are experiencing in this geographic area. The charge takes into account the expected costs to complete the project and total revenues to be recognized.

John Hewitt, President and CEO of Matrix Service Company, said, "We are disappointed with the charge on the aboveground storage tank project in western Canada. However, this region is an area of growth and opportunity for our organization and is a major focus of our long term strategy. Growth and expansion is not without its risks and we continue to work hard to minimize these risks and challenges with diligence in our risk management process, upgrades and improvements to our systems and processes, and continued focus on employee recruitment, development and training."

John Hewitt added, "Revenue and opportunities continue to increase in both the core business and strategic growth areas with new awards in the first six months of fiscal 2013 totaling $538.7 million, resulting in record backlog of $605.1 million. With the exception of the charge in our western Canadian operations, financial performance exceeded our expectations and we see favorable business conditions across most of our end markets."

Second Quarter Financial Results

Revenues for the second quarter ended December 31, 2012 were $221.4 million compared to $201.0 million in the same period a year earlier, an increase of $20.4 million, or 10.1%. Net income for the second quarter of fiscal 2013 was $5.4 million, or $0.21 per fully diluted share. Adjusted net income and fully diluted earnings per share, which excludes the project charge, were $7.6(A) million and $0.29(A). In the same period a year earlier, the Company earned $7.0 million, or $0.27 per fully diluted share.

Consolidated gross profit was $22.3 million in the second quarter of fiscal 2013 compared to $23.1 million in the same period a year earlier. Revenues increased in our Oil Gas & Chemical and Electrical Infrastructure segments by $16.9 million and $6.5 million while revenues in the Storage Solutions and Industrial segments decreased by $1.9 million and $1.1 million, respectively. The project charge reduced second quarter gross margins by 1.7% to 10.1% versus 11.5% in the second quarter of fiscal 2012. In line with our plan, selling, general and administrative costs increased by $1.7 million, or 14.3%. This increase is primarily related to our planned investments in strategic growth areas and related support functions.

Six Month Fiscal 2013 Results

Revenues for the six months ended December 31, 2012 were $431.0 million compared to $370.3 million in the same period a year earlier, an increase of $60.7 million, or 16.4%. Net income for the first six months of fiscal 2013 was $10.1 million, or $0.39 per fully diluted share. Adjusted net income and fully diluted earnings per share, which excludes the project charge, were $12.1(A) million and $0.46(A). In the same period a year earlier the Company earned $10.5 million, or $0.40 per fully diluted share.

Consolidated gross profit was $44.6 million in the first six months of fiscal 2013 compared to $41.2 million in the same period a year earlier. Revenues increased in our Oil Gas & Chemical, Electrical Infrastructure and Storage Solutions segments by $38.2 million, $17.8 million and $7.4 million while revenues in the Industrial segment decreased by $2.7 million. The project charge reduced fiscal 2013 gross margins by 0.9% to 10.3% in the first six months of fiscal 2013 versus 11.1% in the same period a year earlier. In line with our plan, selling, general and administrative costs increased by $4.5 million, or 19.2%. This increase is primarily related to planned investments in our branding initiative, strategic growth areas and related support functions. The Company also incurred a bad debt charge of $0.7 million in the first quarter of fiscal 2013.

Backlog

Backlog at December 31, 2012 totaled $605.1 million, an increase of $107.6 million, or 21.6%, compared to the backlog at June 30, 2012 of $497.5 million and increased $70.5 million, or 13.2%, compared to the September 30, 2012 backlog of $534.6 million. Project awards totaled $291.9 million and $538.7 million in the three and six months ended December 31, 2012.

Financial Position

At December 31, 2012, the Company's cash balance was $33.2 million. The cash balance along with availability under the senior credit facility gives the Company liquidity of $135.3 million.

Earnings Guidance

The Company is raising its fiscal 2013 revenue guidance to between $840 million and $890 million and maintaining earnings per fully diluted share guidance of between $0.83 and $0.98.

(A) These items are non-GAAP financial measures that exclude the impact of the project charge specifically discussed in this earnings release and the related earnings conference call. Management believes that results that exclude this charge provide more meaningful and comparable information to securities analysts and is useful in comparing the operational trends of Matrix Service Company relative to its competitors. A reconciliation to the applicable GAAP measures is included at the end of this press release.

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 7, 2013 and will be simultaneously broadcast live over the Internet which can be accessed at the Company's website at www.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.

Matrix Service Company
Consolidated Statements of Income
(In thousands, except per share data)
Three Months Ended Six Months Ended
December 31,
2012
December 31,
2011
December 31,
2012
December 31,
2011
Revenues $ 221,436 $ 200,964 $ 431,044 $ 370,285
Cost of revenues 199,103 177,866 386,467 329,094
Gross profit 22,333 23,098 44,577 41,191
Selling, general and administrative expenses 13,561 11,898 27,881 23,381
Operating income 8,772 11,200 16,696 17,810
Other income (expense):
Interest expense (217) (166) (400) (443)
Interest income 12 3 20 6
Other (7) 301 50 (375)
Income before income tax expense 8,560 11,338 16,366 16,998
Provision for federal, state and foreign income taxes 3,124 4,307 6,246 6,458
Net income $ 5,436 $ 7,031 $ 10,120 $ 10,540
Basic earnings per common share $ 0.21 $ 0.27 $ 0.39 $ 0.40
Diluted earnings per common share $ 0.21 $ 0.27 $ 0.39 $ 0.40
Weighted average common shares outstanding:
Basic 25,939 25,819 25,863 26,110
Diluted 26,204 26,111 26,172 26,420
Matrix Service Company
Consolidated Balance Sheets
(In thousands)
December 31,
2012
June 30,
2012
Assets
Current assets:
Cash and cash equivalents $ 33,209 $ 39,726
Accounts receivable, less allowances (December 31, 2012—$785 and June 30, 2012—$1,201) 152,754 108,034
Costs and estimated earnings in excess of billings on uncompleted contracts 66,151 68,562
Deferred income taxes 5,487 6,024
Inventories 3,683 2,482
Income Taxes receivable 1,060
Other current assets 4,974 5,688
Total current assets 267,318 230,516
Property, plant and equipment at cost:
Land and buildings 29,357 28,846
Construction equipment 64,076 59,176
Transportation equipment 31,524 25,865
Office equipment and software 17,793 16,892
Construction in progress 6,824 2,910
149,574 133,689
Accumulated depreciation (84,100) (78,814)
65,474 54,875
Goodwill 30,975 28,675
Other intangible assets 8,134 6,504
Other assets 4,173 2,565
Total assets $ 376,074 $ 323,135
Matrix Service Company
Consolidated Balance Sheets (continued)
(In thousands, except share data)
December 31,
2012
June 30,
2012
Liabilities and stockholders' equity
Current liabilities:
Accounts payable $ 59,709 $ 48,931
Billings on uncompleted contracts in excess of costs and estimated earnings 57,606 30,293
Accrued wages and benefits 15,779 15,298
Accrued insurance 7,390 6,912
Income taxes payable 1,115
Other accrued expenses 3,971 3,414
Total current liabilities 144,455 105,963
Deferred income taxes 5,814 6,075
Long term debt 3,425
Total liabilities 153,694 112,038
Commitments and contingencies
Stockholders' equity:
Common stock—$.01 par value; 60,000,000 shares authorized; 27,888,217 shares issued as of December 31, 2012, and June 30, 2012 279 279
Additional paid-in capital 117,059 116,693
Retained earnings 127,539 117,419
Accumulated other comprehensive income 1,086 771
245,963 235,162
Less: Treasury stock, at cost—1,869,558 shares as of December 31, 2012, and 2,141,990 shares as of June 30, 2012 (23,583) (24,065)
Total stockholders' equity 222,380 211,097
Total liabilities and stockholders' equity $ 376,074 $ 323,135
Results of Operations
(In thousands)
Three Months Ended Six Months Ended
December 31,
2012
December 31,
2011
December 31,
2012
December 31,
2011
Gross revenues
Electrical Infrastructure $ 50,123 $ 43,628 $ 83,393 $ 65,640
Oil Gas & Chemical 66,635 49,750 133,732 95,749
Storage Solutions 98,183 99,710 203,601 195,632
Industrial 7,033 8,076 12,008 14,651
Total gross revenues $ 221,974 $ 201,164 $ 432,734 $ 371,672
Less: Inter-segment revenues
Electrical Infrastructure $ — $ — $ — $ —
Oil Gas & Chemical 33 208
Storage Solutions 538 167 1,690 1,179
Industrial
Total inter-segment revenues $ 538 $ 200 $ 1,690 $ 1,387
Consolidated revenues
Electrical Infrastructure $ 50,123 $ 43,628 $ 83,393 $ 65,640
Oil Gas & Chemical 66,635 49,717 133,732 95,541
Storage Solutions 97,645 99,543 201,911 194,453
Industrial 7,033 8,076 12,008 14,651
Total consolidated revenues $ 221,436 $ 200,964 $ 431,044 $ 370,285
Gross profit (loss)
Electrical Infrastructure $ 6,629 $ 4,991 $ 11,335 $ 7,776
Oil Gas & Chemical 8,045 4,936 15,912 9,283
Storage Solutions 7,748 12,689 17,717 23,076
Industrial (89) 482 (387) 1,056
Total gross profit $ 22,333 $ 23,098 $ 44,577 $ 41,191
Operating income (loss)
Electrical Infrastructure $ 3,696 $ 2,492 $ 6,015 $ 3,221
Oil Gas & Chemical 3,927 2,410 7,702 3,822
Storage Solutions 1,550 6,547 4,999 10,773
Industrial (401) (249) (2,020) (6)
Total operating income $ 8,772 $ 11,200 $ 16,696 $ 17,810
Segment assets
Electrical Infrastructure $ 72,229 $ 59,919 $ 72,229 $ 59,919
Oil Gas & Chemical 76,044 50,479 76,044 50,479
Storage Solutions 163,906 138,550 163,906 138,550
Industrial 14,555 18,904 14,555 18,904
Other 49,340 47,746 49,340 47,746
Total segment assets $ 376,074 $ 315,598 $ 376,074 $ 315,598

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 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, 2012

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

Electrical
Infrastructure
Oil Gas &
Chemical
Storage
Solutions
Industrial Total
(In thousands)
Backlog as of September 30, 2012 $ 135,318 $ 116,857 $ 264,908 $ 17,563 $ 534,646
Net awards 32,846 65,246 169,818 24,001 291,911
Revenue recognized (50,123) (66,635) (97,645) (7,033) (221,436)
Backlog as of December 31, 2012 $ 118,041 $ 115,468 $ 337,081 $ 34,531 $ 605,121

Six Months Ended December 31, 2012

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

Electrical
Infrastructure
Oil Gas &
Chemical
Storage
Solutions
Industrial Total
(In thousands)
Backlog as of June 30, 2012 $ 127,699 $ 117,862 $ 236,571 $ 15,320 $ 497,452
Net awards 73,735 131,338 302,421 31,219 538,713
Revenue recognized (83,393) (133,732) (201,911) (12,008) (431,044)
Backlog as of December 31, 2012 $ 118,041 $ 115,468 $ 337,081 $ 34,531 $ 605,121
Reconciliation of Non-GAAP Financial Measures - Quarter and Six Months Ended December 31, 2012
Three Months Ended December 31, 2012
As reported Special Item (1) Non GAAP basis
(In thousands, except per share data)
Gross profit $ 22,333 $ 3,255 $ 25,588
Gross margin 10.1% 1.7% 11.8%
Income before income tax expense $ 8,560 $ 3,255 $ 11,815
Provision for federal, state and foreign income taxes 3,124 1,139 4,263
Net income 5,436 2,116 7,552
Earnings per share - diluted 0.21 0.08 0.29
Six Months Ended December 31, 2012
As reported Special Item (1) Non GAAP basis
(In thousands, except per share data)
Gross profit $ 44,577 $ 3,039 $ 47,616
Gross margin 10.3% 0.9% 11.2%
Income before income tax expense $ 16,366 $ 3,039 $ 19,405
Provision for federal, state and foreign income taxes 6,246 1,064 7,310
Net income 10,120 1,975 12,095
Earnings per share - diluted 0.39 0.07 0.46
(1) Represents the charge recorded on the aboveground storage tank project in western Canada. This item is discussed in greater detail in Part 1, Item 1 of the Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission.

CONTACT: For more information, please contact: Matrix Service Company Kevin S. Cavanah Vice President and CFO T: 918-838-8822 Email:kcavanah@matrixservicecompany.com

Source:Matrix Service Company