EX-99 2 a33114exhibit99.htm EXHIBIT 3.31.14 Exhibit 99
Exhibit 99


MATRIX SERVICE COMPANY ANNOUNCES RECORD THIRD QUARTER RESULTS AND INCREASES FISCAL 2014 REVENUE AND EARNINGS GUIDANCE

•
Quarterly revenues increased 68.8% to a record $381.5 million
•
Record 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 million
•
Matrix Service Company celebrated its 30th anniversary in April

TULSA, OK – May 8, 2014 – 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.
For more information, please contact:
Matrix Service Company
Kevin S. Cavanah
Vice President and CFO
T: 918-838-8822
Email:kcavanah@matrixservicecompany.com



Matrix Service Company
Consolidated Statements of Income
(In thousands, except per share data)
 
 
 
Three Months Ended
 
Nine 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 Ended
 
Nine 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
 
Industrial
 
Total
 
(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
 
Industrial
 
Total
 
(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