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Matrix Service Company Announces Strong Second Quarter Results

February 8, 2012

TULSA, Okla., Feb. 8, 2012 /PRNewswire/ – Matrix Service Company (Nasdaq: MTRX) today reported its financial results for the three and six months ended December 31, 2011.

Second Quarter of Fiscal 2012 Results

Revenues for the second quarter ended December 31, 2011 were $201.0 million, an increase of $25.7 million, or 14.7%, from $175.3 million in the same period a year earlier. Net income for the second quarter of fiscal 2012 was $7.0 million, or $0.27 per fully diluted share. In the comparable period a year earlier, net income was $5.3 million, or $0.20 per fully diluted share.

Consolidated gross profit was $23.1 million in the second quarter of fiscal 2012 compared to $19.8 million in the same period a year earlier. The increase of $3.3 million was due to higher revenues in the second quarter of fiscal 2012 when compared to the same period a year earlier and slightly higher gross margins, which increased to 11.5% in the second quarter of fiscal 2012 compared to 11.3% in the same period a year earlier. Selling, general and administrative expenses were $11.9 million, or 5.9% of revenue, in the second quarter of fiscal 2012 compared to $11.1 million, or 6.4% of revenue, in the second quarter of fiscal 2011.

John R. Hewitt, President and CEO of Matrix Service Company, said “We are pleased with our second quarter results and feel very good about our year. We are seeing strength return to the majority of our markets with increased opportunities in all business lines..”

Six Month Fiscal 2012 Results

Revenues for the six months ended December 31, 2011 were $370.3 million, an increase of $43.2 million, or 13.2%, from $327.1 million in the same period a year earlier. Net income for the six months ended December 31, 2011 was $10.5 million, or $0.40 per fully diluted share. In the comparable period a year earlier, net income was $8.4 million, or $0.32 per fully diluted share.

Consolidated gross profit was $41.2 million in the six months ended December 31, 2011 compared to $35.5 million in the same period a year earlier. The increase of $5.7 million was due to higher revenues in the six months ended December 31, 2011 when compared to the same period a year earlier and slightly higher gross margins which increased to 11.1% in the first half of fiscal 2012 compared to 10.8% the same period a year earlier. Selling, general and administrative expenses were $23.4 million, or 6.3% of revenue, in the six months ended December 31, 2011 compared to $21.7 million, or 6.6% of revenue, in the same period a year earlier.

Backlog

Consolidated backlog increased $28.5 million, or 7.0%, to $433.6 million as of December 31, 2011 compared to $405.1 million as of June 30, 2011. The Company continues to see strong bid flow and booked approximately $400 million of new work in the six months ended December 31, 2011. Backlog has increased in four consecutive quarters and is at its highest level since the third quarter of fiscal 2009.

Financial Position

At December 31, 2011, Matrix Service’s cash balance was $37.4 million with no borrowings outstanding on its senior credit facility.

Share Buyback

The Company purchased approximately 370,000 shares of Matrix Service common stock in the three months ended December 31, 2011 for $3.3 million under the Company’s stock buyback plan. Through the first six months of fiscal 2012, the Company has purchased approximately 887,000 shares for a total of $8.1 million. The Company has the authority to purchase an additional 2.1 million shares under the stock buyback plan through the end of calendar 2012. The share buyback was financed with cash on hand.

Earnings Guidance

The Company is increasing its revenue guidance for fiscal 2012 to between $725.0 million and $775.0 million from the previously announced range of $675.0 million to $725.0 million and is increasing the lower end of its earnings guidance from the previously announced $0.80 per fully diluted share to $0.85 per fully diluted share. The upper end of the Company’s fiscal 2012 earnings guidance is unchanged at $0.95 per fully diluted share.

Conference Call Details

In conjunction with the press release, Matrix Service 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 February 9, 2012 and will be simultaneously broadcast live over the Internet which can be accessed at the Company’s website at www.matrixservice.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, construction and repair and maintenance services principally to the petroleum, power, bulk storage terminal, pipeline and industrial gas industries.

The Company is headquartered in Tulsa, Oklahoma, with regional operating facilities located 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.

For more information, please contact:

Matrix Service Company
Kevin Cavanah
Vice President and CFO
T: 918-838-8822
E: kcavanah@matrixservice.com


    Matrix Service Company

    Condensed Consolidated Statements of Income

    (In thousands, except per share data)

    (unaudited)

                                        Three Months Ended         Six Months Ended
                                      ------------------       ----------------
                                    December        December       December        December
                                       31,             31,            31,             31,
                                   ---------       ---------      ---------       ---------
                                         2011            2010           2011            2010
                                         ----            ----           ----            ----

    Revenues                         $200,964        $175,252       $370,285        $327,090
    Cost of
     revenues                         177,866         155,484        329,094         291,620
                                      -------         -------        -------         -------

    Gross
     profit                            23,098          19,768         41,191          35,470
    Selling,
     general
     and
     administrative
     expenses                          11,898        11,136       23,381        21,725
                                       ------          ------         ------          ------

     Operating
     income                            11,200           8,632         17,810          13,745

    Other income
     (expense):
        Interest
         expense                         (166)           (197)          (443)           (367)
        Interest
         income                             3               9              6              22
        Other                             301              83           (375)            110
                                          ---             ---           ----             ---

    Income
     before
     income
     tax
     expense                           11,338         8,527       16,998        13,510
     Provision
     for
     federal,
     state
     and
     foreign
     income
     taxes                              4,307         3,240        6,458         5,134
                                        -----           -----          -----           -----

    Net
     income                            $7,031          $5,287        $10,540          $8,376
                                       ======          ======        =======          ======

    Basic
     earnings
     per
     common
     share                              $0.27         $0.20        $0.40         $0.32

    Diluted
     earnings
     per
     common
     share                              $0.27         $0.20        $0.40         $0.32

    Weighted average
     common shares
     outstanding:
       Basic                           25,819          26,400         26,110          26,372
        Diluted                        26,111          26,628         26,420          26,584


                                     Matrix Service Company

                              Condensed Consolidated Balance Sheets

                                         (In thousands)

                                           (unaudited)
                                                     December 31,    June 30,
                                                               2011          2011
                                                               ----          ----

    Assets

    Current assets:
       Cash and cash equivalents                            $37,442       $59,357
       Accounts receivable, less allowances                 115,695       103,483
            (December 31, 2011 -$1,457 and June 30,  2011 -
             $1,428)
       Costs and estimated earnings in
        excess                                               56,530        40,056
             of billings on uncompleted contracts
       Inventories                                            2,581         2,249
       Deferred income taxes                                  5,672         5,607
       Other current assets                                   3,363         4,798
                                                              -----         -----
    Total current assets                                    221,283       215,550

    Property, plant and equipment at cost:
       Land and buildings                                    28,355        28,287
       Construction equipment                                58,133        55,272
       Transportation equipment                              24,488        21,690
       Office equipment and software                         15,915        15,442
       Construction in progress                               1,342         2,465
                                                              -----         -----
                                                            128,233       123,156
       Accumulated depreciation                             (74,138)      (69,845)
                                                            -------       -------
                                                             54,095        53,311

    Goodwill                                                 28,905        29,058
    Other intangible assets                                   6,727         6,953
    Other assets                                              4,588         1,564
                                                              -----         -----

    Total assets                                           $315,598      $306,436
                                                           ========      ========


                                     Matrix Service Company

                              Condensed Consolidated Balance Sheets

                                (In thousands, except share data)

                                           (unaudited)

                                                     December 31,    June 30,
                                                               2011          2011
                                                               ----          ----

    Liabilities and stockholders' equity

    Current liabilities:
       Accounts payable                                     $48,814       $36,377
       Billings on uncompleted
        contracts in                                         31,816        35,485
              excess of costs and estimated earnings
       Accrued insurance                                      7,254         7,514
       Accrued wages and benefits                            13,331        18,099
       Other accrued expenses                                 5,089         2,701
                                                              -----         -----
    Total current liabilities                               106,304       100,176

       Deferred income taxes                                  5,877         5,789
       Acquisition payable                                      800           800
                                                                ---           ---
    Total liabilities                                       112,981       106,765

    Commitments and
     contingencies                                                -             -

    Stockholders' equity:
         Common stock -$.01 par
          value; 60,000,000                                     279           279
           shares authorized; 27,888,217 shares
              issued as of December 31, 2011, and June
               30, 2011
       Additional paid-in
        capital                                             114,913       113,686
       Retained earnings                                    110,771       100,231
       Accumulated other
        comprehensive income                                    715         1,436
                                                                ---         -----
                                                            226,678       215,632
            Less:  Treasury stock, at
             cost - 2,169,927 shares                        (24,061)      (15,961)
              as of December 31, 2011,
               and 1,417,539 shares                         -------       -------
                as of June 30, 2011

    Total stockholders' equity                              202,617       199,671
                                                            -------       -------

    Total liabilities and
     stockholders' equity                                  $315,598      $306,436
                                                           ========      ========


                            Results of Operations
                               (in thousands)
                                            Repair and
                                            ----------
                          Construction      Maintenance
                          ------------      -----------
                            Services          Services  Other   Total
                            --------          --------  -----   -----

    Three Months Ended
     December 31, 2011
    Gross revenues            $122,532          $82,076     $- $204,608
    Less: Inter-segment
     revenues                    3,634               10      -    3,644
                                 -----              ---    ---    -----
    Consolidated revenues      118,898           82,066      -  200,964
    Gross profit                13,598            9,500      -   23,098
    Operating income             6,086            5,114      -   11,200
    Segment assets             163,654          104,170 47,774  315,598
    Capital expenditures         1,543            1,100  1,128    3,771
    Depreciation and
     amortization expense        1,736            1,176      -    2,912

    Three Months Ended
     December 31, 2010
    Gross revenues            $107,886          $69,855     $- $177,741
    Less: Inter-segment
     revenues                    2,282              207      -    2,489
                                 -----              ---    ---    -----
    Consolidated revenues      105,604           69,648      -  175,252
    Gross profit                12,815            6,953      -   19,768
    Operating income             6,144            2,488      -    8,632
    Segment assets             141,477          101,964 47,504  290,945
    Capital expenditures         1,286               93    891    2,270
    Depreciation and
     amortization expense        1,516            1,209      -    2,725

    Six Months Ended
     December 31, 2011
    Gross revenues            $225,397         $152,098     $- $377,495
    Less: Inter-segment
     revenues                    6,902              308      -    7,210
                                 -----              ---    ---    -----
    Consolidated revenues      218,495          151,790      -  370,285
    Gross profit                24,469           16,722      -   41,191
    Operating income             9,996            7,814      -   17,810
    Segment assets             163,654          104,170 47,774  315,598
    Capital expenditures         3,329            1,791  1,639    6,759
    Depreciation and
     amortization expense        3,407            2,331      -    5,738

    Six Months Ended
     December 31, 2010
    Gross revenues            $207,506         $124,286     $- $331,792
    Less: Inter-segment
     revenues                    4,388              314      -    4,702
                                 -----              ---    ---    -----
    Consolidated revenues      203,118          123,972      -  327,090
    Gross profit                24,159           11,311      -   35,470
    Operating income            10,923            2,822      -   13,745
    Segment assets             141,477          101,964 47,504  290,945
    Capital expenditures         2,158              331  2,040    4,529
    Depreciation and
     amortization expense        3,065            2,458      -    5,523


    Segment revenue from external customers by market is as follows:

                                                            Repair and
                                                            ----------
                                         Construction      Maintenance
                                         ------------      -----------
                                           Services          Services      Total
                                           --------          --------      -----
                                                            (In thousands)
    Three Months Ended
     December 31, 2011
    Aboveground Storage
     Tanks                                    $55,090           $28,435      $83,525
    Downstream Petroleum                       33,317            31,267       64,584
    Electrical and
     Instrumentation                           24,836            22,364       47,200
    Specialty                                   5,655                 -        5,655
                                                -----               ---        -----
    Total                                    $118,898           $82,066     $200,964
                                             ========           =======     ========

    Three Months Ended
     December 31, 2010
    Aboveground Storage
     Tanks                                    $49,545           $21,868      $71,413
    Downstream Petroleum                       22,648            28,386       51,034
    Electrical and
     Instrumentation                           27,385            19,394       46,779
    Specialty                                   6,026                 -        6,026
                                                -----               ---        -----
    Total                                    $105,604           $69,648     $175,252
                                             ========           =======     ========

    Six Months Ended
     December 31, 2011
    Aboveground Storage
     Tanks                                   $113,744           $53,034     $166,778
    Downstream Petroleum                       52,938            63,155      116,093
    Electrical and
     Instrumentation                           39,875            35,601       75,476
    Specialty                                  11,938                 -       11,938
                                               ------               ---       ------
    Total                                    $218,495          $151,790     $370,285
                                             ========          ========     ========

    Six Months Ended
     December 31, 2010
    Aboveground Storage
     Tanks                                    $90,325           $43,100     $133,425
    Downstream Petroleum                       43,575            50,792       94,367
    Electrical and
     Instrumentation                           57,307            30,080       87,387
    Specialty                                  11,911                 -       11,911
                                               ------               ---       ------
    Total                                    $203,118          $123,972     $327,090
                                             ========          ========     ========

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 that we consider firm. The following contract types are considered firm:

  • fixed-price arrangements;
  • minimum customer commitments on cost plus arrangements; and
  • certain time and material contracts in which the estimated contract 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 the revenue recognized as of the reporting date.

Three Months Ended December 31, 2011

The following table provides a summary of changes in our backlog for the three months ended December 31, 2011:


                                     Construction     Repair and   Total
                                     ------------     ----------   -----
                                       Services      Maintenance
                                       --------      -----------
                                                       Services
                                                       --------
                                                   (In thousands)
    Backlog as of September 30, 2011     $251,132        $175,468  $426,600
    Net awards                            132,328          75,616   207,944
    Revenue recognized                   (118,898)        (82,066) (200,964)
    Backlog as of December 31, 2011      $264,562        $169,018  $433,580
                                         ========        ========  ========

Six Months Ended December 31, 2011

The following table provides a summary of changes in our backlog for the six months ended December 31, 2011:


                                    Construction    Repair and   Total
                                    ------------    ----------   -----
                                     Services      Maintenance
                                     --------      -----------
                                                     Services
                                                     --------
                                                  (In thousands)
    Backlog as of June 30, 2011         $225,733       $179,385  $405,118
    Net awards                           257,324        141,423   398,747
    Revenue recognized                  (218,495)      (151,790) (370,285)
    Backlog as of December 31, 2011     $264,562       $169,018  $433,580
                                        ========       ========  ========

SOURCE Matrix Service Company


Source: PR Newswire