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Matrix Service Company Announces Strong Finish to Fiscal 2016; Provides Guidance for Fiscal 2017

  • Company achieves fourth quarter earnings per share of $0.34; full year earnings per share of $1.07
  • Strong quarterly revenue of $359.6 million despite a challenging business environment
  • In fiscal 2016, the Company purchased over 650 thousand shares totaling $10.5 million
  • Fiscal 2017 guidance for revenue of $1.30 billion to $1.45 billion and fully diluted EPS of $1.10 to $1.40

TULSA, Okla., Aug. 30, 2016 (GLOBE NEWSWIRE) -- Matrix Service Company (Nasdaq:MTRX) today reported its financial results for the fourth quarter and year ended June 30, 2016.

“Despite continued market pressure on our customers as a result of current commodity pricing, our financial performance in this quarter provided a strong close to the fiscal year," said the Company's President and CEO John R. Hewitt. "Looking forward, the construction of TransCanada's Napanee Generating Station and all six terminals for Energy Transfer's Dakota Access Pipeline continue to progress and underpin the outlook for the coming year. We begin fiscal 2017 with an historically normal level of backlog and, even in this difficult market environment, expect a strong level of project awards by the end of the calendar year. Additionally, our balance sheet remains strong and Company liquidity is nearly $231 million - 32 percent higher than year-end fiscal 2015."

In addition to sound financial performance, the Company achieved record safety results for the fiscal year, with a Total Recordable Incident Rate of 0.55.  "In this business, nothing is more important than the safety of our employees, customers and fellow contractors," said Hewitt. "These results are a tribute to our employees' commitment to our core values and their focus on providing quality and leadership in the work we do."

Fourth Quarter Fiscal 2016 Results

Revenue for the fourth quarter ended June 30, 2016 was $359.6 million compared to $364.4 million in the same period a year earlier, a decrease of $4.8 million, or 1.3%.  In the fourth quarter ended June 30, 2016, the Company generated net income of $9.1 million, or $0.34 per fully diluted share.  In the same period a year earlier, the Company earned $10.9 million, or $0.40 per fully diluted share.

On a segment basis, revenue increased $31.6 million and $2.1 million in the Storage Solutions and Electrical Infrastructure segments, driven largely by our major projects. These increases were offset by decreases in the Industrial and Oil Gas & Chemical segments of $21.9 million and $16.6 million, as a result of continued commodity price pressure.

Consolidated gross profit was $34.1 million in the three months ended June 30, 2016 compared to $40.4 million in the three months ended June 30, 2015, primarily as a result of lower gross profit in the Industrial segment.  Fiscal 2016 gross margins were 9.5% compared to 11.1% in the same period a year earlier.

Selling, general and administrative costs were $19.6 million in the fourth quarter of fiscal 2016, compared to $22.0 million in the same period a year earlier due largely to a reduction in incentive compensation as well as efficiency improvements.  SG&A expense as a percentage of revenue decreased to 5.5% in the three months ended June 30, 2016 as compared to 6.0% for the three months ended June 30, 2015.

Fiscal 2016 Results

Revenue for the year ended June 30, 2016 was $1.312 billion compared to $1.343 billion in the same period a year earlier, a decrease of $31.2 million, or 2.3%.  In fiscal 2016, the Company earned net income of $28.9 million, or $1.07 per fully diluted share.  In the same period a year earlier, the Company earned $17.2 million, or $0.63 per fully diluted share. The Company's portion of the acquired joint venture project charges recorded in fiscal 2015, which have been discussed in previous earnings releases, totaled $34.7 million. The charges, which were partially offset by lower incentive compensation, reduced earnings for the period by $0.67 per fully diluted share.

On a segment basis, revenue decreased in the Industrial and Oil Gas & Chemical segments by $127.1 million and $55.6 million, respectively, partially offset by increases of $91.1 million and $60.4 million in the Electrical Infrastructure and Storage Solutions segments, respectively.   In the Industrial segment, lower commodity prices caused decreased business volumes in the iron and steel and mining markets.  In the Oil Gas & Chemical segment, low prevailing commodity prices in fiscal 2016 and a significant turnaround in fiscal 2015 led to lower revenues in fiscal 2016.  The increases in the Electrical Infrastructure and Storage Solutions segments is attributable to work on the major projects mentioned above.

Consolidated gross profit was $126.0 million in the year ended June 30, 2016 compared to $87.4 million in same period a year earlier.  Fiscal 2016 gross margins were 9.6%.  Fiscal 2015 gross margins were reduced by 4.3% to 6.5% due to charges related to the acquired joint venture project.

Consolidated SG&A expenses were $85.1 million in the year ended June 30, 2016 compared to $78.6 million in the same period a year earlier.  The increase in fiscal 2016 SG&A expense is primarily related to a bad debt charge of $5.2 million and $1.2 million of costs related to the Baillie Tank Equipment, Ltd. acquisition completed in February 2016.  SG&A, inclusive of the bad debt charge and acquisition expense, was 6.5% of revenue in the year ended June 30, 2016 compared to 5.8% in the same period a year earlier.

Income Tax Expense

The effective tax rates were 35.6% for the three months and fiscal year ended June 30, 2016.  The Company estimates that its fiscal 2017 effective tax rate will approximate 36.0%.

Backlog

Backlog at June 30, 2016 totaled $868.7 million compared to record backlog of $1.421 billion at June 30, 2015, due to two major multi-year project awards in the second half of fiscal 2015. Project awards in the three months and for the fiscal year ended June 30, 2016 totaled $195.8 million and $793.6 million, respectively.

Financial Position

The Company’s cash balance was $71.7 million at June 30, 2016.  In fiscal 2016, the Company generated $30.3 million from operations, funded capital expenditures of $13.9 million, acquired a company for $13.0 million and repurchased shares for $10.5 million. In addition, the Company expended $8.8 million to pay off the outstanding balance under the senior credit facility. The cash balance along with availability under the senior credit facility gives the Company liquidity of $230.8 million at June 30, 2016.

Earnings Guidance

The Company expects that fiscal 2017 revenue will be between $1.30 billion and $1.45 billion and that earnings will be between $1.10 and $1.40 per fully diluted share.

/EIN News/ -- 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 10:30 a.m. (Eastern) / 9:30 a.m. (Central) on Wednesday, August 31, 2016 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, Canada and other international locations.

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 Ended   Twelve Months Ended
    June 30,
 2016
  June 30,
 2015
  June 30,
 2016
  June 30,
 2015
Revenues   $ 359,635     $ 364,417     $ 1,311,917     $ 1,343,135  
Cost of revenues   325,536     324,013     1,185,926     1,255,765  
Gross profit   34,099     40,404     125,991     87,370  
Selling, general and administrative expenses   19,600     22,030     85,109     78,568  
Operating income   14,499     18,374     40,882     8,802  
Other income (expense):                
Interest expense   (96 )   (290 )   (852 )   (1,236 )
Interest income   43     78     190     468  
Other   (256 )   (123 )   (567 )   158  
Income before income tax expense   14,190     18,039     39,653     8,192  
Provision for federal, state and foreign income taxes   5,056     6,819     14,116     10,090  
Net income (loss)   9,134     11,220     25,537     (1,898 )
Less: Net income (loss) attributable to noncontrolling interest       304     (3,326 )   (19,055 )
Net income attributable to Matrix Service Company   $ 9,134     $ 10,916     $ 28,863     $ 17,157  
Basic earnings per common share   $ 0.35     $ 0.41     $ 1.09     $ 0.64  
Diluted earnings per common share   $ 0.34     $ 0.40     $ 1.07     $ 0.63  
Weighted average common shares outstanding:                
Basic   26,434     26,633     26,597     26,603  
Diluted   26,774     27,132     27,100     27,177  


Matrix Service Company

Consolidated Balance Sheets

(In thousands)

 
    June 30,
 2016
  June 30,
 2015
Assets        
Current assets:        
Cash and cash equivalents   $ 71,656     $ 79,239  
Accounts receivable, less allowances (2016 - $8,403; 2015 - $561)   190,434     199,149  
Costs and estimated earnings in excess of billings on uncompleted contracts   104,001     86,071  
Inventories   3,935     2,773  
Income taxes receivable   9     579  
Other current assets   5,411     5,660  
Total current assets   375,446     373,471  
Property, plant and equipment, at cost:        
Land and buildings   39,224     32,746  
Construction equipment   90,386     87,561  
Transportation equipment   49,046     47,468  
Office equipment and software   29,577     28,874  
Construction in progress   7,475     5,196  
 Total property, plant and equipment - at cost   215,708     201,845  
Accumulated depreciation   (130,977 )   (116,782 )
 Property, plant and equipment - net   84,731     85,063  
Goodwill   78,293     71,518  
Other intangible assets   20,999     23,961  
Deferred income taxes   3,719     3,729  
Other assets   1,779     3,947  
Total assets   $ 564,967     $ 561,689  


Matrix Service Company

Consolidated Balance Sheets (continued)

(In thousands, except share data)

    June 30,
 2016
  June 30,
 2015
Liabilities and stockholders’ equity        
Current liabilities:        
Accounts payable   $ 141,445     $ 125,792  
Billings on uncompleted contracts in excess of costs and estimated earnings   58,327     96,704  
Accrued wages and benefits   27,716     26,725  
Accrued insurance   9,246     8,100  
Income taxes payable   2,675     3,268  
Other accrued expenses   6,621     6,498  
Total current liabilities   246,030     267,087  
Deferred income taxes   3,198     1,244  
Borrowings under senior revolving credit facility       8,804  
Other liabilities   173      
Total liabilities   249,401     277,135  
Commitments and contingencies        
Matrix Service Company Stockholders’ equity:        
Common stock—$.01 par value; 60,000,000 shares authorized; 27,888,217 shares issued as of June 30, 2016 and June 30, 2015; 26,297,145 and 26,440,823 shares outstanding as of June 30, 2016 and June 30, 2015   279     279  
Additional paid-in capital   126,958     123,038  
Retained earnings   223,257     194,394  
Accumulated other comprehensive income   (6,845 )   (5,926 )
    343,649     311,785  
Less treasury stock, at cost — 1,591,072 and 1,447,394 shares as of June 30, 2016 and June 30, 2015   (26,907 )   (18,489 )
Total Matrix Service Company stockholders' equity   316,742     293,296  
Noncontrolling interest   (1,176 )   (8,742 )
Total stockholders' equity   315,566     284,554  
Total liabilities and stockholders’ equity   $ 564,967     $ 561,689  

Results of Operations
(In thousands)

             
    Electrical
Infrastructure
  Oil Gas &
Chemical
  Storage
Solutions
  Industrial   Total
Three Months Ended June 30, 2016                    
Gross revenues   $ 97,574     $ 64,291     $ 164,664     $ 33,369     $ 359,898  
Less: inter-segment revenues       76     186     1     263  
Consolidated revenues   97,574     64,215     164,478     33,368     359,635  
Gross profit   10,165     4,283     18,077     1,574     34,099  
Operating income (loss)   $ 5,719     $ 74     $ 9,144     $ (438 )   $ 14,499  
                     
Three Months Ended June 30, 2015                    
Gross revenues   $ 95,496     $ 82,596     $ 133,178     $ 57,146     $ 368,416  
Less: inter-segment revenues       1,810     314     1,875     3,999  
Consolidated revenues   95,496     80,786     132,864     55,271     364,417  
Gross profit   7,532     6,395     18,089     8,388     40,404  
Operating income   $ 2,191     $ 1,241     $ 10,284     $ 4,658     $ 18,374  
                     
Twelve Months Ended June 30, 2016                    
Gross revenues   $ 349,011     $ 252,973     $ 564,738     $ 149,744     $ 1,316,466  
Less: inter-segment revenues       3,178     1,226     145     4,549  
Consolidated revenues   349,011     249,795     563,512     149,599     1,311,917  
Gross profit   29,301     18,553     67,843     10,294     125,991  
Operating income (loss)   $ 11,144     $ (3,503 )   $ 33,449     $ (208 )   $ 40,882  
                     
Twelve Months Ended June 30, 2015                    
Gross revenues   $ 257,930     $ 310,826     $ 504,155     $ 281,319     $ 1,354,230  
Less: inter-segment revenues       5,466     1,032     4,597     11,095  
Consolidated revenues   257,930     305,360     503,123     276,722     1,343,135  
Gross profit (loss)   (31,444 )   25,394     58,085     35,335     87,370  
Operating income (loss)   $ (44,293 )   $ 7,064     $ 29,069     $ 16,962     $ 8,802  

Backlog

We define backlog as the total dollar amount of revenue 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 amount.

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, 2016

The following table provides a summary of changes in our backlog for the three months ended June 30, 2016:

    Electrical
Infrastructure
  Oil Gas &
Chemical
  Storage
Solutions
  Industrial   Total
    (In thousands)
Backlog as of March 31, 2016       $ 383,929     $ 101,047     $ 482,867     $ 64,630     $ 1,032,473  
Project awards   83,436     54,646     40,624     17,128     195,834  
Revenue recognized   (97,574 )   (64,215 )   (164,478 )   (33,368 )   (359,635 )
Backlog as of June 30, 2016   $ 369,791     $ 91,478     $ 359,013     $ 48,390     $ 868,672  

Twelve Months Ended June 30, 2016

The following table provides a summary of changes in our backlog for the twelve months ended June 30, 2016:

    Electrical
Infrastructure
  Oil Gas &
Chemical
  Storage
Solutions
  Industrial   Total
    (In thousands)
Backlog as of June 30, 2015   $ 493,973     $ 132,985     $ 670,493     $ 123,147     $ 1,420,598  
Project awards   224,829     208,288     274,045     86,448     793,610  
Project delays and cancellations           (22,013 )   (11,606 )   (33,619 )
Revenue recognized   (349,011 )   (249,795 )   (563,512 )   (149,599 )   (1,311,917 )
Backlog as of June 30, 2016   $ 369,791     $ 91,478     $ 359,013     $ 48,390     $ 868,672  

 

Matrix Service Company
Kevin S. Cavanah
Vice President and CFO
T: 918-838-8822
Email:kcavanah@matrixservicecompany.com

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