Exhibit 99
MATRIX SERVICE ANNOUNCES RESULTS FOR THE THIRD QUARTER ENDED
MARCH 31, 2011
TULSA, OK – May 3, 2011 – 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 disclosed in prior quarters, 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: kcavanah@matrixservice.com
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, 2011 |
June 30, 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, 2011 |
June 30, 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 | ||||||