Matrix Service Announces Results for the Fourth Quarter and Fiscal Year Ended June 30, 2010
TULSA, Okla., Sept. 28 /PRNewswire-FirstCall/ -- Matrix Service Co. (Nasdaq: MTRX) today reported its financial results for the fourth quarter and fiscal year ended June 30, 2010.
Revenues for the fourth quarter ended June 30, 2010 were $140.7 million compared to $179.9 million in fiscal 2009. The decrease was primarily due to a lower overall level of spending by customers caused by weak industry conditions. Net income for the fourth quarter of fiscal 2010, adjusted for the charges discussed below, was $0.9 million, or $0.03 per fully diluted share(1). Net income was $6.7 million, or $0.26 per fully diluted share, in the comparable period a year earlier.
Fiscal year 2010 revenues were $550.8 million compared to $689.7 million in fiscal 2009. The decrease was primarily due to a lower overall level of spending in our core markets due to weak industry conditions that became evident in the third quarter of fiscal year 2009. Net income for fiscal 2010, adjusted for the charges discussed below, was $14.4 million, or $0.54 per fully diluted share (1). Net income was $30.6 million, or $1.16 per fully diluted share, in fiscal 2009.
Adjusted results for fiscal year 2010 exclude the following charges:
- Loss on projects at a Gulf Coast site – We recorded a pretax charge of $4.6 million in the fourth quarter of fiscal 2010 and $5.4 million for the fiscal year ended June 30, 2010 caused by increased cost estimates on a series of projects at a customer site.
- California pay practice class action lawsuits – We recorded a pretax charge of $3.1 million in the fourth quarter of fiscal 2010 and $5.1 million for the fiscal year ended June 30, 2010 related to the settlement of this legal matter.
- Claims receivable write-down – We recorded pretax charges totaling $2.9 million in fiscal 2010 caused by a write-down of the value of claim receivables acquired in the February 2009 acquisition of S.M. Electric Company, Inc. ("SME").
- Claims receivable collection costs – Costs incurred to collect the claims acquired in the SME acquisition were higher than estimated and resulted in a pretax charge of $0.4 million in the fourth quarter of fiscal 2010 and $1.9 million for the fiscal year ended June 30, 2010.
GAAP net income (loss), fully reflecting these charges, was ($4.2) million, or ($0.16) per fully diluted share for the fourth quarter fiscal 2010, and $4.9 million, or $0.18 for the fiscal year ended June 30, 2010.
Backlog
Consolidated backlog increased $50.8 million, or 16.8% to $353.2 million as of June 30, 2010 compared to $302.4 million as of March 31, 2010.
Financial Position
At June 30, 2010, Matrix Service's cash balance was $50.9 million. The Company did not borrow under its revolving credit facility during the twelve months ended June 30, 2010.
Earnings Guidance
"We are pleased with the recent backlog growth and are optimistic given the improvements we are seeing in our core markets," said Michael J. Bradley, President and CEO of Matrix Service Company. "In fiscal 2011, our focus will be on growing profitable backlog, maintaining a strong financial position and continuing our cost optimization efforts as part of our long-term growth strategy. Our earnings for fiscal 2011 is expected to be in a range from $0.60 per fully diluted share to $0.80 per fully diluted share."
Fraud Investigation Update
The Company will provide an update on its investigation into recently discovered fraudulent activities by current and former employees in one operating location in the United States in its Annual Report on Form 10-K to be filed with the Securities and Exchange Commission.
(1) Adjusted net income is a non-GAAP financial measure that excludes the impact of the charges specifically discussed in this earnings release and the related earnings conference call. Management believes that results excluding these items are more meaningful and comparable to estimates provided by securities analysts and are useful in comparing 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 press release, Matrix Service will host a conference call with Michael J. Bradley, president and CEO, and Thomas E. Long, vice president and CFO. The call will take place at 5:00 p.m. (Eastern) / 4:00 p.m. (Central) today and will be simultaneously broadcast live over the Internet at www.matrixservice.com or www.vcall.com. 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 online archive of the broadcast will be available within one hour of completion of the live call.
About Matrix Service Company
Matrix Service Company provides engineering, construction and repair and maintenance services principally to the petroleum, petrochemical, power, bulk storage terminal, pipeline and industrial gas industries.
The Company is headquartered in Tulsa, Oklahoma, with regional operating facilities located in California, Delaware, Illinois, Michigan, New Jersey, Oklahoma, Pennsylvania, Texas, and Washington in the U.S. and in 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: |
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Matrix Service Company |
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Tom Long |
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Vice President and CFO |
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T: 918-838-8822 |
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Matrix Service Company |
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Consolidated Statements of Income |
|||||||||
(In thousands, except per share data) |
|||||||||
Twelve Months Ended |
One Month |
||||||||
June 30, |
May 31, |
May 31, |
June 30, |
||||||
2010 |
2009 |
2008 |
2009 |
||||||
Revenues |
$ 550,814 |
$ 689,720 |
$ 731,301 |
$ 45,825 |
|||||
Cost of revenues |
497,892 |
595,397 |
656,184 |
40,676 |
|||||
Gross profit |
52,922 |
94,323 |
75,117 |
5,149 |
|||||
Selling, general and administrative expenses |
45,169 |
47,006 |
40,566 |
3,570 |
|||||
Operating income |
7,753 |
47,317 |
34,551 |
1,579 |
|||||
Other income (expense): |
|||||||||
Interest expense |
(672) |
(563) |
(890) |
(91) |
|||||
Interest income |
79 |
330 |
82 |
17 |
|||||
Other |
250 |
675 |
(27) |
98 |
|||||
Income before income tax expense |
7,410 |
47,759 |
33,716 |
1,603 |
|||||
Provision for federal, state and foreign income taxes |
2,534 |
17,170 |
12,302 |
609 |
|||||
Net income |
$ 4,876 |
$ 30,589 |
$ 21,414 |
$ 994 |
|||||
Basic earnings per common share |
$ 0.19 |
$ 1.17 |
$ 0.81 |
$ 0.04 |
|||||
Diluted earnings per common share |
$ 0.18 |
$ 1.16 |
$ 0.80 |
$ 0.04 |
|||||
Weighted average common shares outstanding: |
|||||||||
Basic |
26,275 |
26,121 |
26,427 |
26,192 |
|||||
Diluted |
26,499 |
26,390 |
26,875 |
26,434 |
|||||
Matrix Service Company |
|||||
Consolidated Balance Sheets |
|||||
(In thousands) |
|||||
June 30, |
May 31, |
||||
Assets |
|||||
Current assets: |
|||||
Cash and cash equivalents |
$ 50,899 |
$ 34,553 |
|||
Accounts receivable, less allowances (2010 - $1,404; 2009 - $710) |
87,327 |
122,283 |
|||
Costs and estimated earnings in excess of billings on uncompleted contracts |
40,920 |
35,619 |
|||
Inventories |
3,451 |
4,926 |
|||
Income tax receivable |
1,779 |
647 |
|||
Deferred income taxes |
8,073 |
4,843 |
|||
Prepaid expenses |
4,557 |
3,935 |
|||
Other current assets |
1,519 |
3,044 |
|||
Total current assets |
198,525 |
209,850 |
|||
Property, plant and equipment, at cost: |
|||||
Land and buildings |
27,859 |
27,319 |
|||
Construction equipment |
52,086 |
53,925 |
|||
Transportation equipment |
19,192 |
17,971 |
|||
Furniture and fixtures |
14,358 |
14,527 |
|||
Construction in progress |
1,251 |
812 |
|||
114,746 |
114,554 |
||||
Accumulated depreciation |
(61,817) |
(55,745) |
|||
52,929 |
58,809 |
||||
Goodwill |
27,216 |
25,768 |
|||
Other intangible assets |
4,141 |
4,571 |
|||
Other assets |
1,997 |
4,453 |
|||
Total assets |
$ 284,808 |
$ 303,451 |
|||
Matrix Service Company |
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Consolidated Balance Sheets (continued) |
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(In thousands, except share data) |
|||||
June 30, |
May 31, |
||||
Liabilities and stockholders' equity |
|||||
Current liabilities: |
|||||
Accounts payable |
$ 44,769 |
$ 48,668 |
|||
Billings on uncompleted contracts in excess of costs and estimated earnings |
28,877 |
51,305 |
|||
Accrued insurance |
8,257 |
7,612 |
|||
Accrued wages and benefits |
13,538 |
16,566 |
|||
Current capital lease obligation |
772 |
1,039 |
|||
Other accrued expenses |
6,572 |
2,200 |
|||
Total current liabilities |
102,785 |
127,390 |
|||
Long-term capital lease obligation |
259 |
850 |
|||
Deferred income taxes |
4,179 |
4,822 |
|||
Commitments and contingencies |
- |
- |
|||
Stockholders' equity: |
|||||
Common stock - $.01 par value; 60,000,000 shares authorized; 27,888,217 shares issued as of June 30, 2010 and May 31, 2009 |
279 |
279 |
|||
Additional paid-in capital |
111,637 |
110,272 |
|||
Retained earnings |
81,252 |
75,393 |
|||
Accumulated other comprehensive income |
495 |
596 |
|||
193,663 |
186,540 |
||||
Less treasury stock, at cost – 1,546,512 and 1,696,517 shares as of June 30, 2010 and May 31, 2009 |
(16,078) |
(16,151) |
|||
Total stockholders' equity |
177,585 |
170,389 |
|||
Total liabilities and stockholders' equity |
$ 284,808 |
$ 303,451 |
|||
Results of Operations |
||||||||
(In thousands) |
||||||||
|
Repair and |
Other |
Total |
|||||
Three Months Ended June 30, 2010 |
||||||||
Gross revenues |
$ 89,453 |
$ 54,048 |
$ - |
$ 143,501 |
||||
Less: Inter-segment revenues |
2,773 |
2 |
- |
2,775 |
||||
Consolidated revenues |
86,680 |
54,046 |
- |
140,726 |
||||
Gross profit |
1,287 |
2,483 |
- |
3,770 |
||||
Operating income (loss) |
(5,195) |
(1,494) |
- |
(6,689) |
||||
Segment assets |
131,079 |
93,224 |
60,505 |
284,808 |
||||
Capital expenditures |
60 |
151 |
1,032 |
1,243 |
||||
Depreciation and amortization expense |
1,602 |
1,269 |
- |
2,871 |
||||
Three Months Ended May 31, 2009 |
||||||||
Gross revenues |
$ 106,171 |
$ 79,393 |
$ - |
$ 185,564 |
||||
Less: Inter-segment revenues |
5,685 |
8 |
- |
5,693 |
||||
Consolidated revenues |
100,486 |
79,385 |
- |
179,871 |
||||
Gross profit |
13,821 |
9,501 |
- |
23,322 |
||||
Operating income |
6,360 |
4,710 |
- |
11,070 |
||||
Segment assets |
154,817 |
112,929 |
35,705 |
303,451 |
||||
Capital expenditures |
225 |
491 |
649 |
1,365 |
||||
Depreciation and amortization expense |
1,928 |
1,215 |
- |
3,143 |
||||
Twelve Months Ended June 30, 2010 |
||||||||
Gross revenues |
$ 333,937 |
$ 229,774 |
$ - |
$ 563,711 |
||||
Less: Inter-segment revenues |
12,683 |
214 |
- |
12,897 |
||||
Consolidated revenues |
321,254 |
229,560 |
- |
550,814 |
||||
Gross profit |
34,374 |
18,548 |
- |
52,922 |
||||
Operating income |
5,957 |
1,796 |
- |
7,753 |
||||
Segment assets |
131,079 |
93,224 |
60,505 |
284,808 |
||||
Capital expenditures |
625 |
1,233 |
3,444 |
5,302 |
||||
Depreciation and amortization expense |
6,578 |
5,173 |
- |
11,751 |
||||
Twelve Months Ended May 31, 2009 |
||||||||
Gross revenues |
$ 422,223 |
$ 295,579 |
$ - |
$ 717,802 |
||||
Less: Inter-segment revenues |
26,983 |
1,099 |
- |
28,082 |
||||
Consolidated revenues |
395,240 |
294,480 |
- |
689,720 |
||||
Gross profit |
50,959 |
43,364 |
- |
94,323 |
||||
Operating income |
22,111 |
25,206 |
- |
47,317 |
||||
Segment assets |
154,817 |
112,929 |
35,705 |
303,451 |
||||
Capital expenditures |
2,586 |
2,316 |
5,081 |
9,983 |
||||
Depreciation and amortization expense |
6,271 |
4,489 |
- |
10,760 |
||||
One Month Ended June 30, 2009 |
||||||||
Gross revenues |
$ 29,224 |
$ 17,297 |
$ - |
$ 46,521 |
||||
Less: Inter-segment revenues |
693 |
3 |
- |
696 |
||||
Consolidated revenues |
28,531 |
17,294 |
- |
45,825 |
||||
Gross profit |
3,251 |
1,898 |
- |
5,149 |
||||
Operating income |
1,141 |
438 |
- |
1,579 |
||||
Capital expenditures |
121 |
64 |
163 |
348 |
||||
Depreciation and amortization expense |
543 |
451 |
- |
994 |
||||
Segment Revenue from External Customers by Industry Type |
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(In thousands) |
||||||
Construction |
Repair and |
Total |
||||
Three Months Ended June 30, 2010 |
||||||
Aboveground Storage Tanks |
$ 40,147 |
$ 21,261 |
$ 61,408 |
|||
Downstream Petroleum |
17,753 |
25,683 |
43,436 |
|||
Electrical and Instrumentation |
24,273 |
7,102 |
31,375 |
|||
Specialty |
4,507 |
- |
4,507 |
|||
Total |
$ 86,680 |
$ 54,046 |
$ 140,726 |
|||
Three Months Ended May 31, 2009 |
||||||
Aboveground Storage Tanks |
$ 40,049 |
$ 29,950 |
$ 69,999 |
|||
Downstream Petroleum |
29,962 |
41,545 |
71,507 |
|||
Electrical and Instrumentation |
21,808 |
7,890 |
29,698 |
|||
Specialty |
8,667 |
- |
8,667 |
|||
Total |
$ 100,486 |
$ 79,385 |
$ 179,871 |
|||
Twelve Months Ended June 30, 2010 |
||||||
Aboveground Storage Tanks |
$ 135,883 |
$ 91,085 |
$ 226,968 |
|||
Downstream Petroleum |
87,003 |
114,976 |
201,979 |
|||
Electrical and Instrumentation |
71,999 |
23,499 |
95,498 |
|||
Specialty |
26,369 |
- |
26,369 |
|||
Total |
$ 321,254 |
$ 229,560 |
$ 550,814 |
|||
Twelve Months Ended May 31, 2009 |
||||||
Aboveground Storage Tanks |
$ 177,821 |
$ 166,348 |
$ 344,169 |
|||
Downstream Petroleum |
144,179 |
106,149 |
250,328 |
|||
Electrical and Instrumentation |
45,874 |
21,983 |
67,857 |
|||
Specialty |
27,366 |
- |
27,366 |
|||
Total |
$ 395,240 |
$ 294,480 |
$ 689,720 |
|||
One Month Ended June 30, 2009 |
||||||
Aboveground Storage Tanks |
$ 10,267 |
$ 8,634 |
$ 18,901 |
|||
Downstream Petroleum |
8,593 |
7,039 |
15,632 |
|||
Electrical and Instrumentation |
7,459 |
1,621 |
9,080 |
|||
Specialty |
2,212 |
- |
2,212 |
|||
Total |
$ 28,531 |
$ 17,294 |
$ 45,825 |
|||
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 revenues recognized as of the reporting date.
The following table provides a summary of changes in our backlog for the three months ended June 30, 2010:
Construction |
Repair and |
Total |
|||||
(In thousands) |
|||||||
Backlog as of March 31, 2010 |
$ 150,413 |
$ 152,009 |
$ 302,422 |
||||
New backlog awarded |
133,942 |
57,578 |
191,520 |
||||
Backlog cancelled |
- |
- |
- |
||||
Revenue recognized on contracts in backlog |
(86,680) |
(54,046) |
(140,726) |
||||
Backlog as of June 30, 2010 |
$ 197,675 |
$ 155,541 |
$ 353,216 |
||||
The following table provides a summary of changes in our backlog for the twelve months ended June 30, 2010:
Construction |
Repair and |
Total |
|||||
(In thousands) |
|||||||
Backlog as of June 30, 2009 |
$ 224,260 |
$ 167,837 |
$ 392,097 |
||||
New backlog awarded |
312,907 |
217,264 |
530,171 |
||||
Backlog cancelled |
(18,238) |
- |
(18,238) |
||||
Revenue recognized on contracts in backlog |
(321,254) |
(229,560) |
(550,814) |
||||
Backlog as of June 30, 2010 |
$ 197,675 |
$ 155,541 |
$ 353,216 |
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Reconciliation of Non-GAAP Financial Measures - Quarter and Year Ended June 30, 2010 |
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Year Ended June 30, 2010 |
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Construction Services |
Repair and Maintenance Services |
Consolidated |
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As Reported |
Special Items (1) |
Adjusted |
As Reported |
Special Items (1) |
Adjusted |
As Reported |
Special Items (1) |
Adjusted |
|||||||||||
(In thousands, except percentages and earnings per share) |
|||||||||||||||||||
Gross profit |
$ 34,374 |
$ 7,671 |
(2) |
$ 42,045 |
$ 18,548 |
$ 2,793 |
(4) |
$ 21,341 |
$ 52,922 |
$ 10,464 |
$ 63,386 |
||||||||
Gross margin |
10.7% |
13.4% |
8.1% |
9.3% |
9.6% |
11.7% |
|||||||||||||
Operating income |
$ 5,957 |
$ 12,528 |
(3) |
$ 18,485 |
$ 1,796 |
$ 2,816 |
(4) |
$ 4,612 |
$ 7,753 |
$ 15,344 |
$ 23,097 |
||||||||
Net income |
$ 4,876 |
$ 9,513 |
$ 14,389 |
||||||||||||||||
Earnings per share - diluted |
$ 0.18 |
$ 0.36 |
$ 0.54 |
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Quarter Ended June 30, 2010 |
|||||||||||||||||||
Construction Services |
Repair and Maintenance Services |
Consolidated |
|||||||||||||||||
As Reported |
Special Items (1) |
Adjusted |
As Reported |
Special Items (1) |
Adjusted |
As Reported |
Special Items (1) |
Adjusted |
|||||||||||
(In thousands, except percentages and earnings per share) |
|||||||||||||||||||
Gross profit |
$ 1,287 |
$ 6,045 |
(5) |
$ 7,332 |
$ 2,482 |
$ 1,716 |
(4) |
$ 4,198 |
$ 3,769 |
$ 7,761 |
$ 11,530 |
||||||||
Gross margin |
1.5% |
8.4% |
4.6% |
7.8% |
2.7% |
8.1% |
|||||||||||||
Operating income(loss) |
$ (5,195) |
$ 6,485 |
(6) |
$ 1,290 |
$ (1,494) |
$ 1,716 |
(4) |
$ 222 |
$ (6,689) |
$ 8,201 |
$ 1,512 |
||||||||
Net income(loss) |
$ (4,229) |
$ 5,085 |
$ 856 |
||||||||||||||||
Earnings(loss) per share - diluted |
$ (0.16) |
$ 0.19 |
$ 0.03 |
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(1) These items are referred to as "Non-routine Charges" and "Significant Loss on Projects" in Part II, Item 7. of the June 30, 2010 Annual Report on Form 10-K filed with the Securities and Exchange Commission. |
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(2) Includes $5.4 million related to the loss on projects at a Gulf Coast site and $2.3 million related to the California pay practice class action lawsuits. |
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(3) Includes $5.4 million related to the loss on projects at a Gulf Coast site, $2.3 million related to the California pay practice class action lawsuits, $2.9 million related to a claims receivable write-down and $1.9 million for excess collection costs on claims receivable. |
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(4) Charge related to California pay practice class action lawsuits. |
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(5) Includes $4.6 million related to the loss on projects at a Gulf Coast site and $1.4 million related to the California pay practice class action lawsuits. |
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(6) Includes $4.6 million related to the loss on projects at a Gulf Coast site, $1.4 million related to the California pay practice class action lawsuits and $0.4 million for excess collection costs on claims receivable. |
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SOURCE Matrix Service Company
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