News Column

Matrix Service Company Announces Record Third Quarter Results and Increases Fiscal 2014 Revenue and Earnings Guidance

May 8, 2014

Quarterly revenues increased 68.8% to a record $381.5 millionRecord quarterly earnings of $0.42 per fully diluted share compared to $0.25 in the same period a year earlier Record backlog of $905.1 millionMatrix Service Company celebrated its 30th anniversary in April

TULSA, Okla., May 8, 2014 (GLOBE NEWSWIRE) -- Matrix Service Company (Nasdaq:MTRX) today reported its financial results for the third quarter and nine months ended March 31, 2014. The strong operating trends continued in the third quarter with quarterly revenues totaling $381.5 million, fully diluted earnings per share totaling $0.42 and period end backlog of $905.1 million.

John Hewitt, President and CEO of Matrix Service Company said, "In April we celebrated the first thirty years of Matrix Service Company. As we transition to the next thirty years, this quarter's performance continues to demonstrate the potential of the business and the great leadership provided by our employees. The performance demonstrates both the soundness of our strategy and our ability to achieve our strategic objectives. We look forward to building on this strategy long into the future."

Third Quarter Fiscal 2014 Results

Revenues for the third quarter ended March 31, 2014 were $381.5 million compared to $226.0 million in the same period a year earlier, an increase of $155.5 million, or 68.8%. Net income for the third quarter of fiscal 2014 was $11.4 million, or $0.42 per fully diluted share. In the same period a year earlier, the Company earned $6.5 million, or $0.25 per fully diluted share.

Revenues increased in our Storage Solutions, Industrial, and Electrical Infrastructure segments by $87.0 million, $58.7 million, and $20.4 million, respectively. Revenues in the Oil Gas & Chemical segment declined by $10.6 million. Fiscal 2014 gross margins improved to 10.5% compared to 10.2% in the same period a year earlier. Consolidated gross profit was $39.9 million in the third quarter of fiscal 2014 compared to $23.1 million in the same period a year earlier due to significantly higher revenues and slightly higher gross margins. Selling, general and administrative costs were $21.1 million in the third quarter of fiscal 2014 compared to $14.7 million in the same period a year earlier. Selling, general and administrative costs as a percent of revenue declined to 5.5% in fiscal 2014 compared to 6.5% in the same period a year earlier.

Nine Month Fiscal 2014 Results

Revenues for the nine months ended March 31, 2014 were $918.7 million compared to $657.0 million in the same period a year earlier, an increase of $261.7 million, or 39.8%. Net income for the first nine months of fiscal 2014 was $28.3 million, or $1.05 per fully diluted share. In the same period a year earlier, the Company earned $16.6 million, or $0.63 per fully diluted share.

Revenues increased in our Storage Solutions, Industrial and Electrical Infrastructure segments by $173.8 million, $100.5 million and $7.1 million, respectively. Revenues in the Oil Gas & Chemical segment declined by $19.7 million. Strong project execution enabled the Company to achieve a fiscal 2014 gross margin of 10.8% despite a Storage Solutions project charge of $5.4 million, which reduced margins by 0.8%. In the same period a year earlier gross margins were 10.3%. Consolidated gross profit was $99.6 million in the first nine months of fiscal 2014 compared to $67.7 million in the same period a year earlier due to higher revenues and higher gross margins. Selling, general and administrative costs were $55.1 million in fiscal 2014 compared to $42.6 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 0.2% to 6.0% in fiscal 2014 compared to 6.5% in the same period a year earlier.

Backlog

Backlog at March 31, 2014 totaled $905.1 million, an increase of $278.4 million, or 44.4%, compared to the backlog at June 30, 2013 of $626.7 million, and increased $22.5 million, or 2.5%, compared to December 31, 2013 backlog of $882.6 million. Project awards totaled $404.0 million and $955.0 million in the three and nine months ended March 31, 2014.

Financial Position

As previously announced, the Company increased the capacity of its credit facility from $125.0 million to $200.0 million during the third quarter. Availability under the expanded credit facility of $137.9 million along with the Company's cash balance of $59.8 million provided liquidity of $197.7 million at March 31, 2014.

Earnings Guidance

The Company is increasing its fiscal 2014 revenue guidance to between $1.25 billion and $1.30 billion and its earnings per fully diluted share guidance to between $1.34 and $1.42.

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 Friday, May 9, 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, except as required by law.

Matrix Service Company
Consolidated Statements of Income
(In thousands, except per share data)
         
 Three Months EndedNine Months Ended
 March 31,

2014
March 31,

2013
March 31,

2014
March 31,

2013
Revenues  $ 381,516  $ 225,970  $ 918,731  $ 657,014
Cost of revenues 341,572 202,844 819,161 589,311
Gross profit 39,944 23,126 99,570 67,703
Selling, general and administrative expenses 21,125 14,695 55,172 42,576
Operating income 18,819 8,431 44,398 25,127
Other income (expense):        
Interest expense (324) (205) (898) (605)
Interest income 44 5 57 25
Other 9 43 (147) 93
Income before income tax expense 18,548 8,274 43,410 24,640
Provision for federal, state and foreign income taxes 6,756 1,753 14,755 7,999
Net income  $ 11,792  $ 6,521  $ 28,655  $ 16,641
Less: Net income attributable to noncontrolling interest 396 401
Net income attributable to Matrix Service Company  $ 11,396  $ 6,521  $ 28,254  $ 16,641
         
Basic earnings per common share  $ 0.43  $ 0.25  $ 1.08  $ 0.64
Diluted earnings per common share  $ 0.42  $ 0.25  $ 1.05  $ 0.63
Weighted average common shares outstanding:        
Basic 26,374 26,039 26,244 25,921
Diluted 27,040 26,411 26,898 26,269
 
Matrix Service Company
Consolidated Balance Sheets
(In thousands)
     
 March 31,

2014
June 30,

2013
Assets    
Current assets:    
Cash and cash equivalents  $ 59,758  $ 63,750
Accounts receivable, less allowances (March 31, 2014— $126 and June 30, 2013—$795) 232,167 140,840
Costs and estimated earnings in excess of billings on uncompleted contracts 98,278 73,773
Deferred income taxes 8,898 5,657
Inventories 3,143 2,988
Income taxes receivable 3,032
Other current assets 5,007 6,234
Total current assets 407,251 296,274
Property, plant and equipment at cost:    
Land and buildings 31,195 29,649
Construction equipment 80,247 69,998
Transportation equipment 41,008 34,366
Office equipment and software 21,392 18,426
Construction in progress 13,939 9,080
  187,781 161,519
Accumulated depreciation (99,684) (90,218)
  88,097 71,301
Goodwill 66,589 30,836
Other intangible assets 29,705 7,551
Other assets 6,173 4,016
Total assets  $ 597,815  $ 409,978
 
Matrix Service Company
Consolidated Balance Sheets (continued)
(In thousands, except share data)
     
 March 31,

2014
June 30,

2013
Liabilities and stockholders' equity    
Current liabilities:    
Accounts payable  $ 121,802  $ 68,961
Billings on uncompleted contracts in excess of costs and estimated earnings 100,614 62,848
Accrued wages and benefits 39,671 21,919
Accrued insurance 8,595 7,599
Income taxes payable 1,471
Other accrued expenses 3,641 3,039
Total current liabilities 275,794 164,366
Deferred income taxes 6,365 7,450
Borrowings under senior credit facility 45,103
Total liabilities 327,262 171,816
Commitments and contingencies    
Stockholders' equity:    
Common stock—$.01 par value; 60,000,000 shares authorized; 27,888,217 shares issued as of March 31, 2014, and June 30, 2013 279 279
Additional paid-in capital 118,164 118,190
Retained earnings 169,681 141,427
Accumulated other comprehensive income (1,713) 227
  286,411 260,123
Less: Treasury stock, at cost— 1,476,765 shares as of March 31, 2014, and 1,779,593 shares as of June 30, 2013 (16,959) (21,961)
Total Matrix Service Company stockholders' equity 269,452 238,162
Noncontrolling interest 1,101
Total stockholders' equity 270,553 238,162
Total liabilities and stockholders' equity  $ 597,815  $ 409,978
 
Matrix Service Company
Results of Operations
(In thousands)
         
 Three Months EndedNine Months Ended
 March 31,

2014
March 31,

2013
March 31,

2014
March 31,

2013
Gross revenues        
Electrical Infrastructure  $ 62,144  $ 41,709  $ 132,201  $ 125,102
Oil Gas & Chemical 63,112 73,638 188,025 207,370
Storage Solutions 182,129 95,200 471,330 298,801
Industrial 74,577 15,841 128,398 27,849
Total gross revenues  $ 381,962  $ 226,388  $ 919,954  $ 659,122
Less: Inter-segment revenues        
Electrical Infrastructure $ —  $ —  $ —  $ — 
Oil Gas & Chemical 118 44 425 44
Storage Solutions 328 374 798 2,064
Industrial
Total inter-segment revenues  $ 446  $ 418  $ 1,223  $ 2,108
Consolidated revenues        
Electrical Infrastructure  $ 62,144  $ 41,709  $ 132,201  $ 125,102
Oil Gas & Chemical 62,994 73,594 187,600 207,326
Storage Solutions 181,801 94,826 470,532 296,737
Industrial 74,577 15,841 128,398 27,849
Total consolidated revenues  $ 381,516  $ 225,970  $ 918,731  $ 657,014
Gross profit (loss)        
Electrical Infrastructure  $ 5,971  $ 4,994  $ 13,155  $ 16,329
Oil Gas & Chemical 7,397 8,016 21,614 23,928
Storage Solutions 19,269 8,828 51,894 26,545
Industrial 7,307 1,288 12,907 901
Total gross profit  $ 39,944  $ 23,126  $ 99,570  $ 67,703
Operating income (loss)        
Electrical Infrastructure  $ 2,498  $ 2,424  $ 4,658  $ 8,439
Oil Gas & Chemical 3,252 3,285 8,922 10,987
Storage Solutions 10,084 2,447 26,676 7,446
Industrial 2,985 275 4,142 (1,745)
Total operating income  $ 18,819  $ 8,431  $ 44,398  $ 25,127


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 March 31, 2014

The following table provides a summary of changes in our backlog for the three months ended March 31, 2014:

 Electrical

Infrastructure
Oil Gas &

Chemical
Storage

Solutions
IndustrialTotal
 (In thousands)
Backlog as of December 31, 2013  $ 212,495  $ 142,363  $ 353,480  $ 174,292  $ 882,630
Net awards 46,070 49,484 242,199 66,204 403,957
Revenue recognized (62,144) (62,994) (181,801) (74,577) (381,516)
Backlog as of March 31, 2014  $ 196,421  $ 128,853  $ 413,878  $ 165,919  $ 905,071


Nine Months Ended March 31, 2014

The following table provides a summary of changes in our backlog for the nine months ended March 31, 2014:

 Electrical

Infrastructure
Oil Gas &

Chemical
Storage

Solutions
IndustrialTotal
 (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 101,610 193,490 564,692 95,233 955,025
Revenue recognized (132,201) (187,600) (470,532) (128,398) (918,731)
Backlog as of March 31, 2014  $ 196,421  $ 128,853  $ 413,878  $ 165,919  $ 905,071

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



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Source: Matrix Service Company


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