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Matrix Service Company Announces Strong Second Quarter Results and Increases Fiscal 2014 Revenue and Earnings Guidance

(February 05, 2014)



  • Matrix Service Company closed on its acquisition of Kvaerner North American Construction


  • Quarterly revenues of $311.0 million were a record and increased by 40.5% over the prior year


  • Second quarter fully diluted earnings per share was $0.38 compared to $0.21 in the same period a year earlier


  • Record backlog of $882.6 million on project awards of $278.8 million and acquired backlog of $242.0 million



TULSA, Okla., Feb. 5, 2014 (GLOBE NEWSWIRE) -- Matrix Service Company (Nasdaq:MTRX) today reported its financial results for the second quarter and six months ended December 31, 2013. The trend of strong revenue, earnings and backlog growth continued in the second quarter of fiscal 2014 with quarterly revenues of $311.0 million, $0.38 of earnings per fully diluted share and period end backlog of $882.6 million.



Impact of Previously Announced Acquisition to Earnings



As previously announced, on December 21, 2013 the Company completed the acquisition of Kvaerner North American Construction, a premier provider of capital construction and maintenance services to power generation, integrated iron and steel, and industrial process facilities in North America. Since this acquisition occurred late in the fiscal quarter, acquisition related revenues and earnings were not significant. However, the Company recorded a charge to selling, general and administrative costs of $2.0 million for transaction related fees.


John Hewitt, President and CEO of Matrix Service Company said, "Our second quarter results are visible indications of the progress we are achieving toward our strategic plan and the hard work of our talented employees, which is clearly demonstrated by our record revenues and improving margins. Our liquidity position remains strong and continues to provide us with the necessary resources to achieve both our short and long-term business objectives. The recent acquisition significantly enhances our capabilities and geographic footprint and will enable us to continue to grow the business, particularly in the Electrical Infrastructure and Industrial segments."




Second Quarter Fiscal 2014 Results



Revenues for the second quarter ended December 31, 2013 were $311.0 million compared to $221.4 million in the same period a year earlier, an increase of $89.6 million, or 40.5%. Net income for the second quarter of fiscal 2014 was $10.3 million, or $0.38 per fully diluted share. In the same period a year earlier, the Company earned $5.4 million, or $0.21 per fully diluted share.



Revenues increased in our Storage Solutions and Industrial segments by $82.9 million and $24.1 million, respectively. Revenues in the Electrical Infrastructure and Oil Gas & Chemical segments declined by $12.9 million and $4.5 million, respectively. Strong project execution enabled the Company to achieve a fiscal 2014 gross margin of 11.0% despite a Storage Solutions project charge of $4.4 million, which reduced margins by 1.5%. Gross margins were 10.1% in the second quarter of fiscal 2013. Consolidated gross profit was $34.2 million in the second quarter of fiscal 2014 compared to $22.3 million in the same period a year earlier due to higher revenues and higher gross margins. Selling, general and administrative costs were $19.3 million, in the second quarter of fiscal 2014 compared to $13.6 million in the same period a year earlier. Acquisition related expenses of $2.0 million increased selling, general and administrative costs as a percent of revenue by 0.6% to 6.2% in fiscal 2014 compared to 6.1% in the same period a year earlier.



Six Month Fiscal 2014 Results



Revenues for the six months ended December 31, 2013 were $537.2 million compared to $431.0 million in the same period a year earlier, an increase of $106.2 million, or 24.6%. Net income for the first six months of fiscal 2014 was $16.9 million, or $0.63 per fully diluted share. In the same period a year earlier, the Company earned $10.1 million, or $0.39 per fully diluted share.



Revenues increased in our Storage Solutions and Industrial segments by $86.8 million and $41.8 million, respectively. Revenues in the Electrical Infrastructure and Oil Gas & Chemical segments declined by $13.3 million and $9.1 million, respectively. Strong project execution enabled the Company to achieve a fiscal 2014 gross margin of 11.1% despite a Storage Solutions project charge of $4.0 million, which reduced margins by 0.9%. In the same period a year earlier gross margins were 10.3%. Consolidated gross profit was $59.6 million in the first six months of fiscal 2014 compared to $44.6 million in the same period a year earlier due to higher revenues and higher gross margins. Selling, general and administrative costs were $34.0 million in fiscal 2014 compared to $27.9 million in the same period a year earlier. Acquisition related expenses of $2.0 million increased selling, general and administrative costs as a percent of revenue by 0.4% to 6.3% in fiscal 2014 compared to 6.5%, in the same period a year earlier. 



Backlog



Backlog at December 31, 2013 totaled $882.6 million, an increase of $255.9 million, or 40.8%, compared to the backlog at June 30, 2013 of $626.7 million, and increased $209.8 million, or 31.2%, compared to September 30, 2013 backlog of $672.8 million. Project awards totaled $278.8 million and $551.1 million in the three and six months ended December 31, 2013. Backlog at December 31, 2013 also includes acquired backlog of $242.0 million.



Income Tax Expense



The effective tax rates in the three and six months ended December 31, 2013 was 28.4% and 32.2%, respectively. The rates were lower than the comparable periods in the prior year primarily due to a revision to the estimated benefit of the federal R&D tax credit available to the Company.



Financial Position



The net purchase price of Kvaerner North American Construction was $51.4 million and was funded with cash on hand and $15.0 million in borrowings under the senior credit facility. At December 31, 2013, the Company's cash balance was $73.3 million. The cash balance along with availability under the senior credit facility gives the Company liquidity of $162.0 million.



Earnings Guidance



The Company is increasing its fiscal 2014 revenue guidance to between $1.20 billion and $1.25 billion and its earnings per fully diluted share guidance to between $1.15 and $1.30.



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 6, 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

Six Months Ended

 

December 31,

December 31,

December 31,

December 31,

 

2013

2012

2013

2012

Revenues

 $ 310,998

 $ 221,436

 $ 537,215

 $ 431,044

Cost of revenues

276,848

199,103

477,589

386,467

Gross profit

34,150

22,333

59,626

44,577

Selling, general and administrative expenses

19,333

13,561

34,047

27,881

Operating income

14,817

8,772

25,579

16,696

Other income (expense):

 

 

 

 

Interest expense

(351)

(217)

(574)

(400)

Interest income

8

12

13

20

Other

(68)

(7)

(156)

50

Income before income tax expense

14,406

8,560

24,862

16,366

Provision for federal, state and foreign income taxes

4,095

3,124

7,999

6,246

Net income

 $ 10,311

 $ 5,436

 $ 16,863

 $ 10,120

Less: Net income attributable to noncontrolling interest

5


5


Net income attributable to Matrix Service Company

 $ 10,306

 $ 5,436

 $ 16,858

 $ 10,120

 

 

 

 

 

Basic earnings per common share

 $ 0.39

 $ 0.21

 $ 0.64

 $ 0.39

Diluted earnings per common share

 $ 0.38

 $ 0.21

 $ 0.63

 $ 0.39

Weighted average common shares outstanding:

 

 

 

 

Basic

26,245

25,939

26,180

25,863

Diluted

26,884

26,204

26,772

26,172

 

 

 

 

 


























































































































































 

 

 

Matrix Service Company

Consolidated Balance Sheets

(In thousands)

 

 

 

 

December 31,

June 30,

 

2013

2013

Assets

 

 

Current assets:

 

 

Cash and cash equivalents

 $ 73,292

 $ 63,750

Accounts receivable, less allowances (December 31, 2013— $82 and June 30, 2013—$795)

161,502

140,840

Costs and estimated earnings in excess of billings on uncompleted contracts

92,212

73,773

Deferred income taxes

7,458

5,657

Inventories

3,193

2,988

Income taxes receivable

2,709

3,032

Other current assets

5,981

6,234

Total current assets

346,347

296,274

Property, plant and equipment at cost:

 

 

Land and buildings

31,075

29,649

Construction equipment

78,115

69,998

Transportation equipment

41,214

34,366

Office equipment and software

20,900

18,426

Construction in progress

11,376

9,080

 

182,680

161,519

Accumulated depreciation

(95,868)

(90,218)

 

86,812

71,301

Goodwill

67,122

30,836

Other intangible assets

31,091

7,551

Other assets

4,535

4,016

Total assets

 $ 535,907

 $ 409,978

 

 

 


























































































































































 

 

 

Matrix Service Company

Consolidated Balance Sheets (continued)

(In thousands, except share data)

 

 

 

 

December 31,

June 30,

 

2013

2013

Liabilities and stockholders' equity

 

 

Current liabilities:

 

 

Accounts payable

 $ 115,894

 $ 68,961

Billings on uncompleted contracts in excess of costs and estimated earnings

95,773

62,848

Accrued wages and benefits

23,894

21,919

Accrued insurance

7,751

7,599

Other accrued expenses

3,619

3,039

Total current liabilities

246,931

164,366

Deferred income taxes

7,643

7,450

Borrowings under senior credit facility

23,191


Total liabilities

277,765

171,816

Commitments and contingencies

 

 

Stockholders' equity:

 

 

Common stock—$.01 par value; 60,000,000 shares authorized; 27,888,217 shares issued as of December 31, 2013, and June 30, 2013

279

279

Additional paid-in capital

117,043

118,190

Retained earnings

158,285

141,427

Accumulated other comprehensive income

52

227

 

275,659

260,123

Less: Treasury stock, at cost— 1,549,518 shares as of December 31, 2013, and 1,779,593 shares as of June 30, 2013

(18,222)

(21,961)

Total Matrix Service Company stockholders' equity

257,437

238,162

Noncontrolling interest

705


Total stockholders' equity

258,142

238,162

Total liabilities and stockholders' equity

 $ 535,907

 $ 409,978

 

 

 






















































































































































































































































































 

 

 

 

 

Matrix Service Company

 

 

 

 

 

Results of Operations

 

 

 

 

 

(In thousands)

 

 

 

 

 

 

Three Months Ended

Six Months Ended

 

December 31,

December 31,

December 31,

December 31,

 

2013

2012

2013

2012

Gross revenues

 

 

 

 

Electrical Infrastructure

 $ 37,180

 $ 50,123

 $ 70,057

 $ 83,393

Oil Gas & Chemical

62,121

66,635

124,913

133,732

Storage Solutions

180,655

98,183

289,201

203,601

Industrial

31,130

7,033

53,821

12,008

Total gross revenues

 $ 311,086

 $ 221,974

 $ 537,992

 $ 432,734

Less: Inter-segment revenues

 

 

 

 

Electrical Infrastructure

 $ —

$ —

$ —

$ —

Oil Gas & Chemical

10


307


Storage Solutions

78

538

470

1,690

Industrial





Total inter-segment revenues

 $ 88

 $ 538

 $ 777

 $ 1,690

Consolidated revenues

 

 

 

 

Electrical Infrastructure

 $ 37,180

 $ 50,123

 $ 70,057

 $ 83,393

Oil Gas & Chemical

62,111

66,635

124,606

133,732

Storage Solutions

180,577

97,645

288,731

201,911

Industrial

31,130

7,033

53,821

12,008

Total consolidated revenues

 $ 310,998

 $ 221,436

 $ 537,215

 $ 431,044

Gross profit (loss)

 

 

 

 

Electrical Infrastructure

 $ 3,854

 $ 6,629

 $ 7,184

 $ 11,335

Oil Gas & Chemical

6,686

8,045

14,217

15,912

Storage Solutions

19,788

7,748

32,625

17,717

Industrial

3,822

(89)

5,600

(387)

Total gross profit

 $ 34,150

 $ 22,333

 $ 59,626

 $ 44,577

Operating income (loss)

 

 

 

 

Electrical Infrastructure

$ 860

$ 3,696

$ 2,160

$ 6,015

Oil Gas & Chemical

2,407

3,927

5,670

7,702

Storage Solutions

10,760

1,550

16,592

4,999

Industrial

790

(401)

1,157

(2,020)

Total operating income

 $ 14,817

 $ 8,772

 $ 25,579

 $ 16,696

 

 

 

 

 


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 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 revenues recognized as of the reporting date.



Three Months Ended December 31, 2013



The following table provides a summary of changes in our backlog for the three months ended December 31, 2013:


































































 

Electrical

Oil Gas &

Storage

 

 

 

Infrastructure

Chemical

Solutions

Industrial

Total

 

(In thousands)

Backlog as of September 30, 2013

 $ 97,087

 $ 118,920

 $ 382,001

 $ 74,809

 $ 672,817

Backlog acquired

123,492

2,825


115,723

242,040

Net awards

29,096

82,729

152,056

14,890

278,771

Revenue recognized

(37,180)

(62,111)

(180,577)

(31,130)

(310,998)

Backlog as of December 31, 2013

 $ 212,495

 $ 142,363

 $ 353,480

 $ 174,292

 $ 882,630


Six Months Ended December 31, 2013



The following table provides a summary of changes in our backlog for the six months ended December 31, 2013:


































































 

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

Backlog acquired

123,492

2,825


115,723

242,040

Net awards

55,540

144,006

322,493

29,029

551,068

Revenue recognized

(70,057)

(124,606)

(288,731)

(53,821)

(537,215)

Backlog as of December 31, 2013

 $ 212,495

 $ 142,363

 $ 353,480

 $ 174,292

 $ 882,630

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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