Matrix Service Announces Results for the Third Quarter Ended March 31, 2011

News provided by

Matrix Service Co.

May 03, 2011, 08:00 ET

TULSA, Okla., May 3, 2011 /PRNewswire/ -- Matrix Service Co. (Nasdaq: MTRX) today reported its financial results for the three and nine months ended March 31, 2011.

Third Quarter of Fiscal 2011 Results

Consolidated revenues for the third quarter ended March 31, 2011 were $136.3 million, an increase of $14.3 million, or 11.7%, from revenues of $122.0 million in the same period a year earlier. Net income for the third quarter of fiscal 2011 was $4.9 million, or $0.18 per fully diluted share. Net income was $0.1 million, or $0.00 per fully diluted share, in the same period a year earlier.

Michael J. Hall, Chairman of the Board of Directors of Matrix Service Company, said, "We are pleased with the results for the quarter and the first nine months of fiscal 2011. We continue to see a number of attractive project opportunities across our core markets and are encouraged by the volume of bid activity and improving market conditions in both the Construction Services and Repair and Maintenance Services segments."

Consolidated gross profit was $18.6 million in the third quarter of fiscal 2011 compared to $13.3 million in the third quarter of fiscal 2010. The increase of $5.3 million was due to higher revenues and higher gross margins which increased to 13.6% in the third quarter of fiscal 2011 compared to 10.9% in the same period a year earlier. The increase in gross margins was primarily due to the favorable effect of improved recovery of construction overhead costs in the third quarter of fiscal 2011 when compared to the same period a year earlier. Selling, general and administrative expenses for the third quarter of fiscal 2011 were $10.9 million compared to $13.2 million in the third quarter of fiscal 2010.  The third quarter of fiscal 2010 selling, general and administrative expenses included non-routine charges totaling $3.5 million related to acquired claim receivables.  The third quarter of fiscal 2011 selling, general and administrative expenses included higher incentive compensation costs due to improved operating results when compared to the same period a year earlier.  

Nine Month Fiscal 2011 Results

Consolidated revenues for the nine months ended March 31, 2011 were $463.4 million, an increase of $53.3 million, or 13.0%, from consolidated revenues of $410.1 million in the same period a year earlier. Net income for the nine months ended March 31, 2011 was $13.3 million, or $0.50 per fully diluted share. Net income was $9.1 million, or $0.34 per fully diluted share, in the comparable period a year earlier.

Consolidated gross profit was $54.0 million in the nine months ended March 31, 2011 compared to $49.2 million in the same period a year earlier. The increase of $4.8 million was largely due to the effect of higher revenues, partially offset by the effect of lower gross margins which decreased to 11.7% in the nine months ended March 31, 2011 compared to 12.0% in the same period a year earlier. The change in gross margins was due to lower direct margins largely offset by the favorable effect of improved recovery of construction overhead costs. Selling, general and administrative expenses for the nine months ended March 31, 2011 were $32.7 million compared to $34.7 million for the nine months ended March 31, 2010. Selling, general and administrative expenses for the nine months ended March 31, 2010 included non-routine charges totaling $4.4 million related to acquired claim receivables. Selling, general and administrative expenses in the nine months ended March 31, 2011 included non-routine charges of $0.6 million related to an internal fraud investigation, and higher incentive compensation costs due to improved operating results when compared to the same period a year earlier.

Financial Position

At March 31, 2011, Matrix Service's cash balance was $63.4 million. The Company did not borrow under its revolving credit facility during the nine months ended March 31, 2011.

Backlog

The consolidated backlog at March 31, 2011 totaled $383.9 million, an increase of $17.9 million, or 4.9%, compared to the backlog at December 31, 2010, and an increase of $30.7 million, or 8.7%, compared to the backlog at June 30, 2010.  

Earnings and Revenue Guidance

Matrix Service expects that fiscal 2011 consolidated revenues will be between $630 million and $650 million.  In addition, the Company now expects fiscal 2011 earnings to be in the upper end of  its previously announced guidance of $0.60 to $0.75 per fully diluted share.

Conference Call Details

In conjunction with the earnings release, Matrix Service will host a conference call with Michael J. Hall, Chairman of the Board of Directors, John R. Hewitt, incoming 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) today 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 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, petrochemical, power, bulk storage terminal, pipeline and industrial gas industries.

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

Matrix Service Company
Kevin Cavanah
Vice President and CFO
T: 918-838-8822
E: [email protected]

Matrix Service Company


Condensed Consolidated Statements of Income


(In thousands, except per share data)


(unaudited)

Three Months Ended

Nine Months Ended

March 31,

2011

March 31,

2010

March 31,

2011

March 31,

2010




Revenues

$  136,333

$  122,013

$  463,423

$  410,088

Cost of revenues

117,763

108,720

409,383

360,935








Gross profit

18,570

13,293

54,040

49,153

Selling, general and administrative expenses

10,930

13,248

32,655

34,711








Operating income

7,640

45

21,385

14,442








Other income (expense):






   Interest expense

(227)

(163)

(594)

(525)

   Interest income

43

10

65

70

   Other

485

208

595

752








Income before income tax expense

7,941

100

21,451

14,739

Provision for federal, state and foreign income taxes

3,018

37

8,152

5,634








Net income

$  4,923

$  63

$  13,299

$  9,105








Basic earnings per common share

$        0.19

$  0.00

$        0.50

$        0.35








Diluted earnings per common share

$   0.18

$  0.00

$   0.50

$   0.34








Weighted average common shares outstanding:






  Basic

26,425

26,307

26,389

26,258

  Diluted

26,723

26,521

26,636

26,477

Matrix Service Company


Condensed Consolidated Balance Sheets


(In thousands)


(unaudited)

March 31,

June 30,

2011

2010


Assets






Current assets:


  Cash and cash equivalents

$  63,375

$  50,899

  Accounts receivable, less allowances

      (March 31, 2011 - $1,553 and June 30,

        2010 - $1,404)

91,287

87,327

  Costs and estimated earnings in excess

         of billings on uncompleted contracts

40,642

40,920

  Inventories

2,596

3,451

  Income taxes receivable

-

1,779

  Deferred income taxes

5,872

8,073

  Other current assets

2,752

6,076

Total current assets

206,524

198,525




Property, plant and equipment at cost:


  Land and buildings

28,230

27,859

  Construction equipment

54,754

52,086

  Transportation equipment

19,703

19,192

  Office equipment and software

14,876

14,358

  Construction in progress

2,434

1,251

119,997

114,746

  Accumulated depreciation

(67,410)

(61,817)

52,587

52,929




Goodwill

27,460

27,216

Other intangible assets

3,973

4,141

Other assets

2,263

1,997




Total assets

$  292,807

$   284,808

Matrix Service Company


Condensed Consolidated Balance Sheets (continued)


(In thousands, except share data)


(unaudited)

March 31,

June 30,

2011

2010


Liabilities and stockholders' equity






Current liabilities:


  Accounts payable

$  28,767

$   44,769

  Billings on uncompleted contracts in

       excess of costs and estimated earnings

36,897

28,877

  Accrued insurance

7,477

8,257

  Income taxes payable

800

-

  Accrued wages and benefits

18,173

13,538

  Current capital lease obligation

401

772

  Other accrued expenses

2,479

6,572

Total current liabilities

94,994

102,785




  Long-term capital lease obligation

46

259

  Deferred income taxes

4,478

4,179

Total liabilities

99,518

107,223




Commitments and contingencies

-

-




Stockholders' equity:


  Common stock - $.01 par value; 60,000,000

       shares authorized; 27,888,217 shares  

         issued as of March 31, 2011, and June 30, 2010

279

279

  Additional paid-in capital

113,124

111,637

  Retained earnings

94,548

81,252

  Accumulated other comprehensive income

1,364

495

209,315

193,663

  Less:  Treasury stock, at cost – 1,450,800 shares

        as of March 31, 2011, and 1,546,512 shares

        as of June 30, 2010

(16,026)

(16,078)




Total stockholders' equity

193,289

177,585




Total liabilities and stockholders' equity

$  292,807

$  284,808


Results of Operations

(in thousands)

Construction

Services

Repair and

Maintenance

Services


Other

Total


Three Months Ended March 31, 2011






Gross revenues

$  77,797

$  60,923

$  -

$  138,720

Less: Inter-segment revenues

2,114

273

-

2,387

Consolidated revenues

75,683

60,650

-

136,333

Gross profit

13,192

5,378

-

18,570

Operating income

6,886

754

-

7,640

Segment assets

125,275

99,261

68,271

292,807

Capital expenditures

2,300

562

177

3,039

Depreciation and amortization expense

1,547

1,180

-

2,727








Three Months Ended March 31, 2010






Gross revenues

$   79,394

$   45,701

$  -

$ 125,095

Less: Inter-segment revenues

3,073

9

-

3,082

Consolidated revenues

76,321

45,692

-

122,013

Gross profit

10,098

3,195

-

13,293

Operating income (loss)

880

(835)

-

45

Segment assets

117,974

89,214

62,508

269,696

Capital expenditures

63

276

871

1,210

Depreciation and amortization expense

1,646

1,268

-

2,914








Nine Months Ended March 31, 2011






Gross revenues

$  285,303

$  185,209

$  -

$  470,512

Less: Inter-segment revenues

6,502

587

-

7,089

Consolidated revenues

278,801

184,622

-

463,423

Gross profit

37,351

16,689

-

54,040

Operating income

17,809

3,576

-

21,385

Segment assets

125,275

99,261

68,271

292,807

Capital expenditures

4,458

893

2,217

7,568

Depreciation and amortization expense

4,612

3,638

-

8,250








Nine Months Ended March 31, 2010






Gross revenues

$ 244,484

$ 175,726

$  -

$ 420,210

Less: Inter-segment revenues

9,910

212

-

10,122

Consolidated revenues

234,574

175,514

-

410,088

Gross profit

33,088

16,065

-

49,153

Operating income

11,152

3,290

-

14,442

Segment assets

117,974

89,214

62,508

269,696

Capital expenditures

565

1,082

2,412

4,059

Depreciation and amortization expense

4,976

3,904

-

8,880


Segment revenue from external customers by market is as follows:

Construction

Services

Repair and

Maintenance

Services

Total

(In thousands)

Three Months Ended March 31, 2011




Aboveground Storage Tanks

$  40,120

$  17,667

$  57,787

Downstream Petroleum

13,974

25,464

39,438

Electrical and Instrumentation

14,493

17,519

32,012

Specialty

7,096

-

7,096

Total

$  75,683

$  60,650

$  136,333






Three Months Ended March 31, 2010




Aboveground Storage Tanks

$  28,305

$  17,957

$  46,262

Downstream Petroleum

24,286

22,086

46,372

Electrical and Instrumentation

18,251

5,649

23,900

Specialty

5,479

-

5,479

Total

$  76,321

$  45,692

$  122,013






Nine Months Ended March 31, 2011




Aboveground Storage Tanks

$  130,444

$  60,766

$  191,210

Downstream Petroleum

57,550

76,257

133,807

Electrical and Instrumentation

71,800

47,599

119,399

Specialty

19,007

-

19,007

Total

$  278,801

$  184,622

$  463,423






Nine Months Ended March 31, 2010




Aboveground Storage Tanks

$  95,736

$  69,824

$  165,560

Downstream Petroleum

69,250

89,293

158,543

Electrical and Instrumentation

47,726

16,397

64,123

Specialty

21,862

-

21,862

Total

$  234,574

$  175,514

$  410,088

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 March 31, 2011


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


Construction

Services


Repair and

Maintenance

Services


Total


(In thousands)

Backlog as of December 31, 2010

$   204,468

$  161,499

$  365,967

New awards

78,709

75,539

154,248

Revenue recognized


(75,683)

(60,650)

(136,333)

Backlog as of March 31, 2011

$   207,494

$  176,388

$  383,882

Nine Months Ended March 31, 2011


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


Construction

Services


Repair and

Maintenance

Services


Total


(In thousands)

Backlog as of June 30, 2010

$  197,675

$    155,541

$   353,216

New awards

288,620

205,469

494,089

Revenue recognized


(278,801)

(184,622)

(463,423)

Backlog as of March 31, 2011

$   207,494

$  176,388

$  383,882

SOURCE Matrix Service Co.

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