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Matrix Service Company Announces Record Fiscal 2014 Results and Sets 2015 Guidance

(September 03, 2014)



  • Record fiscal 2014 earnings per share of $1.33 including $0.28 in the fourth quarter


  • Backlog increased by 46.1% in fiscal 2014 to a new high of $915.8 million on project awards of over $1.3 billion


  • Revenues increased 46.2% in the fourth quarter to $344.4 million and 41.5% in the fiscal year to $1.263 billion


  • Liquidity hits record high of $242.5 million with cash generated from operating activities totaling $77.0 million



TULSA, Okla., Sept. 3, 2014 (GLOBE NEWSWIRE) -- Matrix Service Company (Nasdaq:MTRX) today reported its financial results for the fourth quarter and year ended June 30, 2014.



"We experienced a record year in terms of revenue, earnings per share and backlog, with strong organic and acquisition related growth, while continuing to strengthen our balance sheet" said John Hewitt, President and CEO of Matrix Service Company.



Hewitt emphasized that the Company continues to build on its internal infrastructure while integrating the people and processes related to the Company's acquisition of Kvaerner North American Construction. In addition, the Company is increasing its portfolio with balance of plant terminal work and expanding opportunities in power generation and delivery, gas value chain as well as mining and metals projects. In addition, the recently announced August acquisition of HDB Ltd., an upstream construction contractor in central California, advances a key strategic objective of increasing the Company's presence with upstream oil and gas clients.


Fourth Quarter Fiscal 2014 Results




Revenues for the fourth quarter ended June 30, 2014 were $344.4 million compared to $235.6 million in the same period a year earlier, an increase of $108.8 million, or 46.2%. Net income for the fourth quarter of fiscal 2014 was $7.6 million, or $0.28 per fully diluted share compared to $7.4 million, or $0.28 per fully diluted share a year earlier.



Revenues increased in the Industrial, Storage Solutions and Electrical Infrastructure segments by $52.1 million, $43.9 million, and $27.3 million, respectively. Revenues in the Oil, Gas and Chemical segment were $52.1 million in the fourth quarter of fiscal 2014 compared to $66.5 million in the same period a year earlier. Consolidated gross profit was $36.9 million in the fourth quarter of fiscal 2014 compared to $27.0 million in the same period a year earlier. Gross margins were 10.7% in the fourth quarter of fiscal 2014 versus 11.5% in the fourth quarter of fiscal 2013. Selling, general and administrative costs were $22.7 million in the fourth quarter of fiscal 2014 compared to $15.4 million in the same period a year earlier. Integration costs of $1.3 million increased selling, general and administrative expense as a percent of revenue by 0.4% to 6.6% compared to 6.5% in the same period a year earlier.



Fiscal 2014 Results



Fiscal 2014 revenues were $1.263 billion compared to $892.6 million in fiscal 2013, an increase of $370.6 million, or 41.5%. Net income for fiscal 2014 was $35.8 million, or $1.33 per fully diluted share. In fiscal 2013 the Company earned $24.0 million, or $0.91 per fully diluted share.



Revenues increased in the Storage Solutions, Industrial and Electrical Infrastructure segments by $217.7 million, $152.6 million, and $34.4 million, respectively. Revenues in the Oil, Gas and Chemical segment were $239.7 million in fiscal 2014 compared to $273.8 million in fiscal 2013. Consolidated gross profit was $136.5 million in fiscal 2014 compared to $94.7 million in fiscal 2013. Gross margins were 10.8% in fiscal 2014 versus 10.6% in fiscal 2013. Selling, general and administrative costs were $77.9 million in fiscal 2014 compared to $58.0 million in fiscal 2013. Acquisition and integration costs of $3.8 million increased selling, general and administrative expense as a percent of revenue by 0.3% to 6.2%. Selling, general and administrative costs as a percentage of revenue were 6.5% in the same period a year earlier.



Income Tax Expense



The effective tax rates were 38.6% and 35.1% for the three months and fiscal year ended June 30, 2014. The Company estimates that its fiscal 2015 effective tax rate will approximate 37.0%.



Backlog



Backlog at June 30, 2014 totaled $915.8 million, an increase of $289.1 million, or 46.1%, compared to the backlog at June 30, 2013 of $626.7 million and increased by $10.7 million, compared to the March 31, 2014 backlog of $905.1 million. Project awards totaled $355.1 million and $1.3 billion in the three months and fiscal year ended June 30, 2014. Backlog acquired in the fiscal year ended June 30, 2014 was $242.0 million.



Financial Position



The Company's cash balance increased to $77.1 million at June 30, 2014 as compared to $63.8 million a year earlier. The cash balance along with availability under the senior credit facility gives the Company liquidity of $242.5 million. In fiscal 2014, the Company generated $77.0 million from operations, which allowed it to fund the Kvaerner North American Construction acquisition, $23.6 million of capital expenditures and the organic growth of the business while borrowing only $11.6 million at June 30, 2014.



Earnings Guidance



The Company expects that fiscal 2015 revenues will be between $1.425 billion and $1.525 billion and earnings to be between $1.40 and $1.60 per fully diluted share. The Company is anticipating normal quarterly variability with the first quarter being the lowest as activity in the Electrical Infrastructure and Oil Gas and Chemical segments are typically slower in the summer months.



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, September 4, 2014 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.




























































































































































































Matrix Service Company

Consolidated Statements of Income

(In thousands, except per share data)

 

 

 

 

 

 

Three Months Ended

Twelve Months Ended

 

June 30,

June 30,

June 30,

June 30,

 

2014

2013

2014

2013

Revenues

 $ 344,358

 $ 235,560

 $ 1,263,089

 $ 892,574

Cost of revenues

307,455

208,561

1,126,616

797,872

Gross profit

36,903

26,999

136,473

94,702

Selling, general and administrative expenses

22,694

15,412

77,866

57,988

Operating income

14,209

11,587

58,607

36,714

Other income (expense):

 

 

 

 

Interest expense

(538)

(195)

(1,436)

(800)

Interest income

55

7

112

32

Other

(325)

(123)

(472)

(30)

Income before income tax expense

13,401

11,276

56,811

35,916

Provision for federal, state and foreign income taxes

5,179

3,909

19,934

11,908

Net income

8,222

7,367

36,877

24,008

Less: Net income attributable to noncontrolling interest

666


1,067


Net income attributable to Matrix Service Company

$7,556

$7,367

$35,810

$24,008

Basic earnings per common share

 $ 0.29

 $ 0.28

 $ 1.36

 $ 0.92

Diluted earnings per common share

 $ 0.28

 $ 0.28

 $ 1.33

 $ 0.91

Weighted average common shares outstanding:

 

 

 

 

Basic

26,423

26,086

26,288

25,962

Diluted

27,115

26,548

26,976

26,358

 

 

 

 

 

 

 

 

 

 


























































































































































Matrix Service Company

Consolidated Balance Sheets

(In thousands)

 

 

 

 

June 30,

June 30,

 

2014

2013

Assets

 

 

Current assets:

 

 

Cash and cash equivalents

 $ 77,115

 $ 63,750

Accounts receivable, less allowances (2014 -- $204 ; 2013—$795)

204,692

140,840

Costs and estimated earnings in excess of billings on uncompleted contracts

73,008

73,773

Inventories

3,045

2,988

Income taxes receivable

2,797

3,032

Deferred income taxes

5,994

5,657

Other current assets

8,897

6,234

Total current assets

375,548

296,274

Property, plant and equipment at cost:

 

 

Land and buildings

31,737

29,649

Construction equipment

82,745

69,998

Transportation equipment

42,087

34,366

Office equipment and software

26,026

18,426

Construction in progress

9,892

9,080

 

192,487

161,519

Accumulated depreciation

(103,315)

(90,218)

 

89,172

71,301

Goodwill

69,837

30,836

Other intangible assets

28,676

7,551

Other assets

5,699

4,016

Total assets

 $ 568,932

 $ 409,978

 

 

 

 

 

 





















































































































































Matrix Service Company

Consolidated Balance Sheets (continued)

(In thousands, except share data)

 

 

 

 

June 30,

June 30,

 

2014

2013

Liabilities and stockholders' equity

 

 

Current liabilities:

 

 

Accounts payable

 $ 111,863

 $ 68,961

Billings on uncompleted contracts in excess of costs and estimated earnings

108,440

62,848

Accrued wages and benefits

36,226

21,919

Accrued insurance

8,605

7,599

Other accrued expenses

4,727

3,039

Total current liabilities

269,861

164,366

Deferred income taxes

5,167

7,450

Borrowings under senior credit facility

11,621


Total liabilities

286,649

171,816

Commitments and contingencies

 

 

Stockholders' equity:

 

 

Common stock—$.01 par value; 60,000,000 shares authorized; 27,888,217 shares issued as of June 30, 2014 and June 30, 2013

279

279

Additional paid-in capital

119,777

118,190

Retained earnings

177,237

141,427

Accumulated other comprehensive income

(182)

227

 

297,111

260,123

Less treasury stock, at cost— 1,453,770 and 1,779,593 shares as of June 30, 2014 and June 30, 2013

(16,595)

(21,961)

Total Matrix Service Company stockholders' equity

280,516

238,162

Noncontrolling interest

1,767


Total liabilities and stockholders' equity

 $ 568,932

 $ 409,978

 

 

 

 

 

 



































































































































































































































































Results of Operations

(In thousands)

 

 

 

 

 

 

 

Electrical

Oil Gas &

Storage

 

 

 

Infrastructure

Chemical

Solutions

Industrial

Total

Three Months Ended June 30, 2014

 

 

 

 

 

Gross revenues

 $ 73,369

 $ 52,106

 $ 140,496

 $ 78,535

 $ 344,506

Less: inter-segment revenues


16

132


148

Consolidated revenues

73,369

52,090

140,364

78,535

344,358

Gross profit

7,474

5,298

16,554

7,577

36,903

Operating income (loss)

3,045

1,017

7,634

2,513

14,209

 

 

 

 

 

 

Three months ended June 30, 2013

 

 

 

 

 

Gross revenues

 $ 46,102

 $ 66,609

 $ 96,993

 $ 26,472

 $ 236,176

Less: inter-segment revenues


87

529


616

Consolidated revenues

46,102

66,522

96,464

26,472

235,560

Gross profit

5,425

8,951

10,910

1,713

26,999

Operating income (loss)

2,746

4,428

4,458

(45)

11,587

 

 

 

 

 

 

Twelve Months Ended June 30, 2014

 

 

 

 

 

Gross revenues

 $ 205,570

 $ 240,131

 $ 611,826

 $ 206,933

 $ 1,264,460

Less: inter-segment revenues


441

930


1,371

Consolidated revenues

205,570

239,690

610,896

206,933

1,263,089

Gross profit

20,629

26,912

68,448

20,484

136,473

Operating income (loss)

7,703

9,939

34,310

6,655

58,607

 

 

 

 

 

 

Twelve Months Ended June 30, 2013

 

 

 

 

 

Gross revenues

 $ 171,204

 $ 273,979

 $ 395,794

 $ 54,321

 $ 895,298

Less: inter-segment revenues


131

2,593


2,724

Consolidated revenues

171,204

273,848

393,201

54,321

892,574

Gross profit

21,754

32,879

37,455

2,614

94,702

Operating income (loss)

11,185

15,415

11,904

(1,790)

36,714

 

 

 

 

 

 


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 June 30, 2014



The following table provides a summary of changes in our backlog for the three months ended June 30, 2014:


























































 

Electrical

Oil Gas &

Storage

 

 

 

Infrastructure

Chemical

Solutions

Industrial

Total

 

(In thousands)

Backlog as of March 31, 2014

 $ 196,421

 $ 128,853

 $ 413,878

 $ 165,919

 $ 905,071

Net awards

39,084

33,454

209,117

73,458

355,113

Revenue recognized

(73,369)

(52,090)

(140,364)

(78,535)

(344,358)

Backlog as of June 30, 2014

 $ 162,136

 $ 110,217

 $ 482,631

 $ 160,842

 $ 915,826


Twelve Months Ended June 30, 2014



The following table provides a summary of changes in our backlog for the twelve months ended June 30, 2014:


































































 

Electrical

Oil Gas &

Storage

 

 

 

Infrastructure

Chemical

Solutions

Industrial

Total

 

(In thousands)

Backlog as of June 30, 2013

 $ 103,520

 $ 120,138

 $ 319,718

 $ 83,361

 $ 626,737

Net awards

140,694

226,944

773,809

168,691

1,310,138

Backlog acquired

123,492

2,825


115,723

242,040

Revenue recognized

(205,570)

(239,690)

(610,896)

(206,933)

(1,263,089)

Backlog as of June 30, 2014

 $ 162,136

 $ 110,217

 $ 482,631

 $ 160,842

 $ 915,826

CONTACT: For more information, please contact:

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



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