News Column

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

September 3, 2014

Record fiscal 2014 earnings per share of $1.33 including $0.28 in the fourth quarterBacklog increased by 46.1% in fiscal 2014 to a new high of $915.8 million on project awards of over $1.3 billionRevenues increased 46.2% in the fourth quarter to $344.4 million and 41.5% in the fiscal year to $1.263 billionLiquidity 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 EndedTwelve Months Ended
 June 30,June 30,June 30,June 30,
 2014201320142013
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,
 20142013
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,
 20142013
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)
           
 ElectricalOil Gas &Storage    
 InfrastructureChemicalSolutionsIndustrialTotal
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:

 ElectricalOil Gas &Storage    
 InfrastructureChemicalSolutionsIndustrialTotal
 (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:

 ElectricalOil Gas &Storage    
 InfrastructureChemicalSolutionsIndustrialTotal
 (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 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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