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Share Name | Share Symbol | Market | Type |
---|---|---|---|
Matrix Service Co | NASDAQ:MTRX | NASDAQ | Common Stock |
Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|---|---|
-0.12 | -1.01% | 11.81 | 11.79 | 11.82 | 12.00 | 11.76 | 11.93 | 96,855 | 20:45:18 |
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ý
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Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
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o
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Transition Report Pursuant to Section 13 or 15 (d) of the Securities Exchange Act of 1934
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DELAWARE
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73-1352174
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(State of incorporation)
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(I.R.S. Employer Identification No.)
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Large accelerated filer
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¨
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Accelerated filer
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ý
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Non-accelerated filer
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¨
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Smaller reporting company
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¨
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Emerging growth company
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¨
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PAGE
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FINANCIAL INFORMATION
|
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Item 1.
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Item 2.
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Item 3.
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Item 4.
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OTHER INFORMATION
|
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Item 1.
|
||
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Item 1A.
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||
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Item 2.
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Item 3.
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||
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Item 4.
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Item 5.
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Item 6.
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Three Months Ended
|
|
Six Months Ended
|
||||||||||||
|
December 31,
2018 |
|
December 31,
2017 |
|
December 31,
2018 |
|
December 31,
2017 |
||||||||
Revenues
|
$
|
340,568
|
|
|
$
|
282,911
|
|
|
$
|
659,079
|
|
|
$
|
552,821
|
|
Cost of revenues
|
312,682
|
|
|
256,208
|
|
|
607,772
|
|
|
497,227
|
|
||||
Gross profit
|
27,886
|
|
|
26,703
|
|
|
51,307
|
|
|
55,594
|
|
||||
Selling, general and administrative expenses
|
22,359
|
|
|
21,529
|
|
|
43,560
|
|
|
43,099
|
|
||||
Operating income
|
5,527
|
|
|
5,174
|
|
|
7,747
|
|
|
12,495
|
|
||||
Other income (expense):
|
|
|
|
|
|
|
|
||||||||
Interest expense
|
(361
|
)
|
|
(819
|
)
|
|
(653
|
)
|
|
(1,437
|
)
|
||||
Interest income
|
274
|
|
|
65
|
|
|
556
|
|
|
104
|
|
||||
Other
|
(22
|
)
|
|
(135
|
)
|
|
524
|
|
|
14
|
|
||||
Income before income tax expense
|
5,418
|
|
|
4,285
|
|
|
8,174
|
|
|
11,176
|
|
||||
Provision (benefit) for federal, state and foreign income taxes
|
1,486
|
|
|
(247
|
)
|
|
1,937
|
|
|
2,820
|
|
||||
Net income
|
$
|
3,932
|
|
|
$
|
4,532
|
|
|
$
|
6,237
|
|
|
$
|
8,356
|
|
|
|
|
|
|
|
|
|
||||||||
Basic earnings per common share
|
$
|
0.15
|
|
|
$
|
0.17
|
|
|
$
|
0.23
|
|
|
$
|
0.31
|
|
Diluted earnings per common share
|
$
|
0.14
|
|
|
$
|
0.17
|
|
|
$
|
0.23
|
|
|
$
|
0.31
|
|
Weighted average common shares outstanding:
|
|
|
|
|
|
|
|
||||||||
Basic
|
27,043
|
|
|
26,771
|
|
|
26,982
|
|
|
26,713
|
|
||||
Diluted
|
27,582
|
|
|
27,078
|
|
|
27,628
|
|
|
26,933
|
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
|
December 31,
2018 |
|
December 31,
2017 |
|
December 31,
2018 |
|
December 31,
2017 |
||||||||
Net income
|
$
|
3,932
|
|
|
$
|
4,532
|
|
|
$
|
6,237
|
|
|
$
|
8,356
|
|
Other comprehensive income, net of tax:
|
|
|
|
|
|
|
|
||||||||
Foreign currency translation gain (loss) (net of tax benefit of $238 and $176 for the three and six months ended December 31, 2018, respectively, and $20 and $36 for the three and six months ended December 31, 2017, respectively)
|
(1,069
|
)
|
|
429
|
|
|
(668
|
)
|
|
1,536
|
|
||||
Comprehensive income
|
$
|
2,863
|
|
|
$
|
4,961
|
|
|
$
|
5,569
|
|
|
$
|
9,892
|
|
|
|||||||
|
December 31,
2018 |
|
June 30,
2018 |
||||
Assets
|
|
|
|
||||
Current assets:
|
|
|
|
||||
Cash and cash equivalents
|
$
|
71,489
|
|
|
$
|
64,057
|
|
Accounts receivable, less allowances (December 31, 2018— $6,249 and June 30, 2018—$6,327)
|
203,574
|
|
|
203,388
|
|
||
Costs and estimated earnings in excess of billings on uncompleted contracts
|
72,694
|
|
|
76,632
|
|
||
Inventories
|
7,961
|
|
|
5,152
|
|
||
Income taxes receivable
|
1,543
|
|
|
3,359
|
|
||
Other current assets
|
7,578
|
|
|
4,458
|
|
||
Total current assets
|
364,839
|
|
|
357,046
|
|
||
Property, plant and equipment at cost:
|
|
|
|
||||
Land and buildings
|
40,517
|
|
|
40,424
|
|
||
Construction equipment
|
89,321
|
|
|
89,036
|
|
||
Transportation equipment
|
48,805
|
|
|
48,339
|
|
||
Office equipment and software
|
42,297
|
|
|
41,236
|
|
||
Construction in progress
|
3,040
|
|
|
1,353
|
|
||
Total property, plant and equipment - at cost
|
223,980
|
|
|
220,388
|
|
||
Accumulated depreciation
|
(152,387
|
)
|
|
(147,743
|
)
|
||
Property, plant and equipment - net
|
71,593
|
|
|
72,645
|
|
||
Goodwill
|
93,263
|
|
|
96,162
|
|
||
Other intangible assets
|
21,096
|
|
|
22,814
|
|
||
Deferred income taxes
|
5,598
|
|
|
4,848
|
|
||
Other assets
|
13,163
|
|
|
4,518
|
|
||
Total assets
|
$
|
569,552
|
|
|
$
|
558,033
|
|
|
December 31,
2018 |
|
June 30,
2018 |
||||
Liabilities and stockholders’ equity
|
|
|
|
||||
Current liabilities:
|
|
|
|
||||
Accounts payable
|
$
|
90,712
|
|
|
$
|
79,439
|
|
Billings on uncompleted contracts in excess of costs and estimated earnings
|
115,366
|
|
|
120,740
|
|
||
Accrued wages and benefits
|
24,735
|
|
|
24,375
|
|
||
Accrued insurance
|
8,921
|
|
|
9,080
|
|
||
Income taxes payable
|
—
|
|
|
7
|
|
||
Other accrued expenses
|
4,698
|
|
|
4,824
|
|
||
Total current liabilities
|
244,432
|
|
|
238,465
|
|
||
Deferred income taxes
|
1,272
|
|
|
429
|
|
||
Other liabilities
|
258
|
|
|
296
|
|
||
Total liabilities
|
245,962
|
|
|
239,190
|
|
||
Commitments and contingencies
|
|
|
|
|
|
||
Stockholders’ equity:
|
|
|
|
||||
Common stock—$.01 par value; 60,000,000 shares authorized; 27,888,217 shares issued as of December 31, 2018 and June 30, 2018; 26,778,398 and 26,853,823 shares outstanding as of December 31, 2018 and June 30, 2018
|
279
|
|
|
279
|
|
||
Additional paid-in capital
|
131,889
|
|
|
132,198
|
|
||
Retained earnings
|
217,731
|
|
|
211,494
|
|
||
Accumulated other comprehensive loss
|
(8,079
|
)
|
|
(7,411
|
)
|
||
|
341,820
|
|
|
336,560
|
|
||
Less: Treasury stock, at cost — 1,109,819 shares as of December 31, 2018, and 1,034,394 shares as of June 30, 2018
|
(18,230
|
)
|
|
(17,717
|
)
|
||
Total stockholders' equity
|
323,590
|
|
|
318,843
|
|
||
Total liabilities and stockholders’ equity
|
$
|
569,552
|
|
|
$
|
558,033
|
|
|
Six Months Ended
|
||||||
|
December 31,
2018 |
|
December 31,
2017 |
||||
Operating activities:
|
|
|
|
||||
Net income
|
$
|
6,237
|
|
|
$
|
8,356
|
|
Adjustments to reconcile net income to net cash provided by operating activities, net of effects from acquisitions and disposals:
|
|
|
|
||||
Depreciation and amortization
|
9,126
|
|
|
10,906
|
|
||
Stock-based compensation expense
|
5,738
|
|
|
4,353
|
|
||
Deferred income tax
|
(83
|
)
|
|
1,657
|
|
||
Gain on disposal of business (Note 3)
|
(427
|
)
|
|
—
|
|
||
Gain on sale of property, plant and equipment
|
(727
|
)
|
|
(103
|
)
|
||
Provision for uncollectible accounts
|
(34
|
)
|
|
12
|
|
||
Other
|
202
|
|
|
194
|
|
||
Changes in operating assets and liabilities increasing (decreasing) cash, net of effects from acquisitions and disposals:
|
|
|
|
||||
Accounts receivable
|
(177
|
)
|
|
25,489
|
|
||
Costs and estimated earnings in excess of billings on uncompleted contracts
|
3,580
|
|
|
26,959
|
|
||
Inventories
|
(2,816
|
)
|
|
(788
|
)
|
||
Other assets and liabilities
|
(10,551
|
)
|
|
(475
|
)
|
||
Accounts payable
|
8,622
|
|
|
(34,018
|
)
|
||
Billings on uncompleted contracts in excess of costs and estimated earnings
|
(5,243
|
)
|
|
(8,751
|
)
|
||
Accrued expenses
|
37
|
|
|
(4,211
|
)
|
||
Net cash provided by operating activities
|
13,484
|
|
|
29,580
|
|
||
Investing activities:
|
|
|
|
||||
Acquisition of property, plant and equipment
|
(6,055
|
)
|
|
(4,051
|
)
|
||
Acquisitions
|
—
|
|
|
(1,687
|
)
|
||
Proceeds from disposal of business (Note 3)
|
3,885
|
|
|
—
|
|
||
Proceeds from asset sales
|
923
|
|
|
420
|
|
||
Net cash used by investing activities
|
$
|
(1,247
|
)
|
|
$
|
(5,318
|
)
|
|
Six Months Ended
|
||||||
|
December 31,
2018 |
|
December 31,
2017 |
||||
Financing activities:
|
|
|
|
||||
Advances under senior secured revolving credit facility
|
$
|
8,383
|
|
|
$
|
85,669
|
|
Repayments of advances under senior secured revolving credit facility
|
(8,243
|
)
|
|
(79,443
|
)
|
||
Payment of debt amendment fees
|
—
|
|
|
(364
|
)
|
||
Open market purchase of treasury shares (Note 10)
|
(3,230
|
)
|
|
—
|
|
||
Issuances of common stock
|
128
|
|
|
—
|
|
||
Proceeds from issuance of common stock under employee stock purchase plan
|
153
|
|
|
144
|
|
||
Repurchase of common stock for payment of statutory taxes due on equity-based compensation
|
(1,651
|
)
|
|
(612
|
)
|
||
Net cash provided (used) by financing activities
|
(4,460
|
)
|
|
5,394
|
|
||
Effect of exchange rate changes on cash and cash equivalents
|
(345
|
)
|
|
626
|
|
||
Increase in cash and cash equivalents
|
7,432
|
|
|
30,282
|
|
||
Cash and cash equivalents, beginning of period
|
64,057
|
|
|
43,805
|
|
||
Cash and cash equivalents, end of period
|
$
|
71,489
|
|
|
$
|
74,087
|
|
Supplemental disclosure of cash flow information:
|
|
|
|
||||
Cash paid during the period for:
|
|
|
|
||||
Income taxes
|
$
|
255
|
|
|
$
|
665
|
|
Interest
|
$
|
849
|
|
|
$
|
1,340
|
|
Non-cash investing and financing activities:
|
|
|
|
||||
Purchases of property, plant and equipment on account
|
$
|
820
|
|
|
$
|
105
|
|
Accrual for unsettled stock repurchases (Note 10)
|
$
|
1,960
|
|
|
$
|
—
|
|
|
Common
Stock
|
|
Additional
Paid-In
Capital
|
|
Retained
Earnings
|
|
Treasury
Stock
|
|
Accumulated
Other
Comprehensive
Income(Loss)
|
|
Total
|
||||||||||||
Balances, July 1, 2018
|
$
|
279
|
|
|
$
|
132,198
|
|
|
$
|
211,494
|
|
|
$
|
(17,717
|
)
|
|
$
|
(7,411
|
)
|
|
$
|
318,843
|
|
Net income
|
—
|
|
|
—
|
|
|
6,237
|
|
|
—
|
|
|
—
|
|
|
6,237
|
|
||||||
Other comprehensive loss
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(668
|
)
|
|
(668
|
)
|
||||||
Open market purchases of treasury shares (310,532 shares)
|
—
|
|
|
—
|
|
|
—
|
|
|
(5,190
|
)
|
|
—
|
|
|
(5,190
|
)
|
||||||
Treasury shares sold to Employee Stock Purchase Plan (7,447 shares)
|
—
|
|
|
19
|
|
|
—
|
|
|
134
|
|
|
—
|
|
|
153
|
|
||||||
Exercise of stock options (12,500 shares)
|
—
|
|
|
(126
|
)
|
|
—
|
|
|
254
|
|
|
—
|
|
|
128
|
|
||||||
Issuance of deferred shares (292,578 shares)
|
—
|
|
|
(5,940
|
)
|
|
—
|
|
|
5,940
|
|
|
—
|
|
|
—
|
|
||||||
Treasury shares purchased to satisfy tax withholding obligations (77,418 shares)
|
—
|
|
|
—
|
|
|
—
|
|
|
(1,651
|
)
|
|
—
|
|
|
(1,651
|
)
|
||||||
Stock-based compensation expense
|
—
|
|
|
5,738
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
5,738
|
|
||||||
Balances, December 31, 2018
|
$
|
279
|
|
|
$
|
131,889
|
|
|
$
|
217,731
|
|
|
$
|
(18,230
|
)
|
|
$
|
(8,079
|
)
|
|
$
|
323,590
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Balances, July 1, 2017
|
$
|
279
|
|
|
$
|
128,419
|
|
|
$
|
222,974
|
|
|
$
|
(22,539
|
)
|
|
$
|
(7,324
|
)
|
|
$
|
321,809
|
|
Net income
|
—
|
|
|
—
|
|
|
8,356
|
|
|
—
|
|
|
—
|
|
|
8,356
|
|
||||||
Other comprehensive income
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,536
|
|
|
1,536
|
|
||||||
Treasury shares sold to Employee Stock Purchase Plan (12,283 shares)
|
—
|
|
|
(109
|
)
|
|
—
|
|
|
253
|
|
|
—
|
|
|
144
|
|
||||||
Issuance of deferred shares (250,874 shares)
|
—
|
|
|
(4,428
|
)
|
|
—
|
|
|
4,428
|
|
|
—
|
|
|
—
|
|
||||||
Treasury shares purchased to satisfy tax withholding obligations (52,043 shares)
|
—
|
|
|
—
|
|
|
—
|
|
|
(612
|
)
|
|
—
|
|
|
(612
|
)
|
||||||
Stock-based compensation expense
|
—
|
|
|
4,353
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
4,353
|
|
||||||
Balances, December 31, 2017
|
$
|
279
|
|
|
$
|
128,235
|
|
|
$
|
231,330
|
|
|
$
|
(18,470
|
)
|
|
$
|
(5,788
|
)
|
|
$
|
335,586
|
|
|
December 31,
2018 |
|
June 30,
2018 |
|
Change
|
||||||
|
(in thousands)
|
||||||||||
Costs and estimated earnings in excess of billings on uncompleted contracts
|
$
|
72,694
|
|
|
$
|
76,632
|
|
|
$
|
(3,938
|
)
|
Billings on uncompleted contracts in excess of costs and estimated earnings
|
(115,366
|
)
|
|
(120,740
|
)
|
|
5,374
|
|
|||
Net contract liabilities
|
$
|
(42,672
|
)
|
|
$
|
(44,108
|
)
|
|
$
|
1,436
|
|
|
December 31,
2018 |
|
June 30,
2018 |
||||
|
(in thousands)
|
||||||
Costs incurred and estimated earnings recognized on uncompleted contracts
|
$
|
2,089,319
|
|
|
$
|
2,081,799
|
|
Billings on uncompleted contracts
|
2,131,991
|
|
|
2,125,907
|
|
||
Net contract liabilities
|
$
|
(42,672
|
)
|
|
$
|
(44,108
|
)
|
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
|
|
December 31,
2018 |
|
December 31,
2017 |
|
December 31,
2018 |
|
December 31,
2017 |
||||||||
|
|
(In thousands)
|
||||||||||||||
United States
|
|
$
|
329,513
|
|
|
$
|
259,072
|
|
|
$
|
639,650
|
|
|
$
|
480,845
|
|
Canada
|
|
9,714
|
|
|
22,996
|
|
|
16,795
|
|
|
69,855
|
|
||||
Other international
|
|
1,341
|
|
|
843
|
|
|
2,634
|
|
|
2,121
|
|
||||
Total Revenue
|
|
$
|
340,568
|
|
|
$
|
282,911
|
|
|
$
|
659,079
|
|
|
$
|
552,821
|
|
|
Electrical
Infrastructure
|
|
Oil Gas &
Chemical
|
|
Storage
Solutions
|
|
Industrial
|
|
Total
|
||||||||||
|
(In thousands)
|
||||||||||||||||||
Net balance at June 30, 2018
|
$
|
24,826
|
|
|
$
|
33,604
|
|
|
$
|
16,760
|
|
|
$
|
20,972
|
|
|
$
|
96,162
|
|
Disposal of business
(1)
|
—
|
|
|
(2,775
|
)
|
|
—
|
|
|
—
|
|
|
(2,775
|
)
|
|||||
Translation adjustment
(2)
|
(43
|
)
|
|
—
|
|
|
(73
|
)
|
|
(8
|
)
|
|
(124
|
)
|
|||||
Net balance at December 31, 2018
|
$
|
24,783
|
|
|
$
|
30,829
|
|
|
$
|
16,687
|
|
|
$
|
20,964
|
|
|
$
|
93,263
|
|
|
|
|
|
|
(1)
|
In August 2018, the Company disposed of a business that marketed process heating equipment. See Note 3 - Disposals for more information about the disposal. The business disposed of constituted its own reporting unit and the amount of goodwill written off was all of the goodwill assigned to that reporting unit. None of the goodwill was considered impaired since the Company recorded a gain on the disposal.
|
(2)
|
The translation adjustments relate to the periodic translation of Canadian Dollar and South Korean Won denominated goodwill recorded as a part of prior acquisitions in Canada and South Korea, in which the local currency was determined to be the functional currency.
|
|
|
|
At December 31, 2018
|
||||||||||
|
Useful Life
|
|
Gross Carrying
Amount
|
|
Accumulated
Amortization
|
|
Net Carrying
Amount
|
||||||
|
(Years)
|
|
(In thousands)
|
||||||||||
Intellectual property
|
10 to 15
|
|
$
|
2,579
|
|
|
$
|
(1,691
|
)
|
|
$
|
888
|
|
Customer-based
|
6 to 15
|
|
38,416
|
|
|
(18,235
|
)
|
|
20,181
|
|
|||
Non-compete agreements
|
4
|
|
1,453
|
|
|
(1,426
|
)
|
|
27
|
|
|||
Total amortizing intangible assets
|
|
|
$
|
42,448
|
|
|
$
|
(21,352
|
)
|
|
$
|
21,096
|
|
|
|
|
At June 30, 2018
|
||||||||||
|
Useful Life
|
|
Gross Carrying
Amount
|
|
Accumulated
Amortization
|
|
Net Carrying
Amount
|
||||||
|
(Years)
|
|
(In thousands)
|
||||||||||
Intellectual property
|
9 to 15
|
|
$
|
2,579
|
|
|
$
|
(1,603
|
)
|
|
$
|
976
|
|
Customer-based
|
6 to 15
|
|
38,562
|
|
|
(16,763
|
)
|
|
21,799
|
|
|||
Non-compete agreements
|
4
|
|
1,453
|
|
|
(1,414
|
)
|
|
39
|
|
|||
Total amortizing intangible assets
|
|
|
$
|
42,594
|
|
|
$
|
(19,780
|
)
|
|
$
|
22,814
|
|
Period ending:
|
|
||
Remainder of Fiscal 2019
|
$
|
1,858
|
|
Fiscal 2020
|
3,706
|
|
|
Fiscal 2021
|
3,686
|
|
|
Fiscal 2022
|
2,854
|
|
|
Fiscal 2023
|
2,405
|
|
|
Fiscal 2024
|
2,113
|
|
|
Thereafter
|
4,474
|
|
|
Total estimated remaining amortization expense at December 31, 2018
|
$
|
21,096
|
|
•
|
Our Leverage Ratio, determined as of the end of each fiscal quarter, may not exceed
3.00
to
1.00
.
|
•
|
We are required to maintain a Fixed Charge Coverage Ratio, determined as of the end of each fiscal quarter, greater than or equal to
1.25
to
1.00
.
|
•
|
Asset dispositions (other than dispositions in which all of the net cash proceeds therefrom are reinvested into the Company and dispositions of inventory and obsolete or unneeded equipment in the ordinary course of business) are limited to
$20.0 million
per 12-month period.
|
•
|
The ABR or the Adjusted LIBO Rate, in the case of revolving loans denominated in U.S. Dollars;
|
•
|
The Canadian Prime Rate or the CDOR rate, in the case of revolving loans denominated in Canadian Dollars;
|
•
|
The Adjusted LIBO Rate, in the case of revolving loans denominated in Pounds Sterling or Australian Dollars; or
|
•
|
The EURIBO Rate, in the case of revolving loans denominated in Euros,
|
|
December 31,
2018 |
|
June 30,
2018 |
||||
|
(In thousands)
|
||||||
Senior secured revolving credit facility
|
$
|
300,000
|
|
|
$
|
300,000
|
|
Capacity constraint due to the Leverage Ratio
|
205,437
|
|
|
189,741
|
|
||
Capacity under the credit facility
|
94,563
|
|
|
110,259
|
|
||
Borrowings outstanding
|
—
|
|
|
—
|
|
||
Letters of credit
|
28,716
|
|
|
37,073
|
|
||
Availability under the senior secured revolving credit facility
|
$
|
65,847
|
|
|
$
|
73,186
|
|
•
|
eliminating the deduction for domestic production activity;
|
•
|
limiting the annual deduction for business interest;
|
•
|
taxing global intangible low-tax income;
|
•
|
allowing a deduction for domestically earned foreign intangible income; and
|
•
|
establishing a new base erosion and anti-abuse tax on payments between U.S. taxpayers and foreign related parties.
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
|
December 31,
2018 |
|
December 31,
2017 |
|
December 31,
2018 |
|
December 31,
2017 |
||||||||
|
(In thousands, except per share data)
|
||||||||||||||
Basic EPS:
|
|
|
|
|
|
|
|
||||||||
Net income
|
$
|
3,932
|
|
|
$
|
4,532
|
|
|
$
|
6,237
|
|
|
$
|
8,356
|
|
Weighted average shares outstanding
|
27,043
|
|
|
26,771
|
|
|
26,982
|
|
|
26,713
|
|
||||
Basic earnings per share
|
$
|
0.15
|
|
|
$
|
0.17
|
|
|
$
|
0.23
|
|
|
$
|
0.31
|
|
Diluted EPS:
|
|
|
|
|
|
|
|
||||||||
Weighted average shares outstanding – basic
|
27,043
|
|
|
26,771
|
|
|
26,982
|
|
|
26,713
|
|
||||
Dilutive stock options
|
27
|
|
|
34
|
|
|
29
|
|
|
24
|
|
||||
Dilutive nonvested deferred shares
|
512
|
|
|
273
|
|
|
617
|
|
|
196
|
|
||||
Diluted weighted average shares
|
27,582
|
|
|
27,078
|
|
|
27,628
|
|
|
26,933
|
|
||||
Diluted earnings per share
|
$
|
0.14
|
|
|
$
|
0.17
|
|
|
$
|
0.23
|
|
|
$
|
0.31
|
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||
|
December 31,
2018 |
|
December 31,
2017 |
|
December 31,
2018 |
|
December 31,
2017 |
||||
|
(In thousands)
|
||||||||||
Nonvested deferred shares
|
1,543
|
|
|
342
|
|
|
1,458
|
|
|
442
|
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
|
December 31,
2018 |
|
December 31,
2017 |
|
December 31,
2018 |
|
December 31,
2017 |
||||||||
Gross revenues
|
|
|
|
|
|
|
|
||||||||
Electrical Infrastructure
|
$
|
58,173
|
|
|
$
|
64,852
|
|
|
$
|
102,874
|
|
|
$
|
144,823
|
|
Oil Gas & Chemical
|
87,521
|
|
|
88,396
|
|
|
163,083
|
|
|
174,257
|
|
||||
Storage Solutions
|
126,198
|
|
|
71,233
|
|
|
239,965
|
|
|
142,805
|
|
||||
Industrial
|
70,385
|
|
|
59,260
|
|
|
155,942
|
|
|
92,531
|
|
||||
Total gross revenues
|
$
|
342,277
|
|
|
$
|
283,741
|
|
|
$
|
661,864
|
|
|
$
|
554,416
|
|
Less: Inter-segment revenues
|
|
|
|
|
|
|
|
||||||||
Oil Gas & Chemical
|
$
|
1,234
|
|
|
$
|
37
|
|
|
$
|
1,305
|
|
|
$
|
245
|
|
Storage Solutions
|
475
|
|
|
792
|
|
|
1,480
|
|
|
1,349
|
|
||||
Industrial
|
—
|
|
|
1
|
|
|
—
|
|
|
1
|
|
||||
Total inter-segment revenues
|
$
|
1,709
|
|
|
$
|
830
|
|
|
$
|
2,785
|
|
|
$
|
1,595
|
|
Consolidated revenues
|
|
|
|
|
|
|
|
||||||||
Electrical Infrastructure
|
$
|
58,173
|
|
|
$
|
64,852
|
|
|
$
|
102,874
|
|
|
$
|
144,823
|
|
Oil Gas & Chemical
|
86,287
|
|
|
88,359
|
|
|
161,778
|
|
|
174,012
|
|
||||
Storage Solutions
|
125,723
|
|
|
70,441
|
|
|
238,485
|
|
|
141,456
|
|
||||
Industrial
|
70,385
|
|
|
59,259
|
|
|
155,942
|
|
|
92,530
|
|
||||
Total consolidated revenues
|
$
|
340,568
|
|
|
$
|
282,911
|
|
|
$
|
659,079
|
|
|
$
|
552,821
|
|
Gross profit
|
|
|
|
|
|
|
|
||||||||
Electrical Infrastructure
|
$
|
3,562
|
|
|
$
|
5,541
|
|
|
$
|
6,945
|
|
|
$
|
13,808
|
|
Oil Gas & Chemical
|
9,157
|
|
|
11,768
|
|
|
14,782
|
|
|
22,806
|
|
||||
Storage Solutions
|
11,147
|
|
|
5,298
|
|
|
20,700
|
|
|
12,838
|
|
||||
Industrial
|
4,020
|
|
|
4,096
|
|
|
8,880
|
|
|
6,142
|
|
||||
Total gross profit
|
$
|
27,886
|
|
|
$
|
26,703
|
|
|
$
|
51,307
|
|
|
$
|
55,594
|
|
Operating income (loss)
|
|
|
|
|
|
|
|
||||||||
Electrical Infrastructure
|
$
|
438
|
|
|
$
|
1,079
|
|
|
$
|
1,095
|
|
|
$
|
4,656
|
|
Oil Gas & Chemical
|
3,585
|
|
|
5,198
|
|
|
4,099
|
|
|
9,332
|
|
||||
Storage Solutions
|
1,356
|
|
|
(2,609
|
)
|
|
1,641
|
|
|
(2,684
|
)
|
||||
Industrial
|
148
|
|
|
1,506
|
|
|
912
|
|
|
1,191
|
|
||||
Total operating income
|
$
|
5,527
|
|
|
$
|
5,174
|
|
|
$
|
7,747
|
|
|
$
|
12,495
|
|
|
|
December 31,
2018 |
|
June 30,
2018 |
||||
Electrical Infrastructure
|
|
$
|
147,246
|
|
|
$
|
161,207
|
|
Oil Gas & Chemical
|
|
96,801
|
|
|
111,064
|
|
||
Storage Solutions
|
|
176,634
|
|
|
149,695
|
|
||
Industrial
|
|
61,250
|
|
|
58,816
|
|
||
Unallocated assets
|
|
87,621
|
|
|
77,251
|
|
||
Total segment assets
|
|
$
|
569,552
|
|
|
$
|
558,033
|
|
•
|
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.
|
|
Electrical
Infrastructure
|
|
Oil Gas &
Chemical
|
|
Storage
Solutions
|
|
Industrial
|
|
Total
|
||||||||||
|
(In thousands)
|
||||||||||||||||||
Backlog as of September 30, 2018
|
$
|
108,845
|
|
|
$
|
189,492
|
|
|
$
|
585,737
|
|
|
$
|
225,398
|
|
|
$
|
1,109,472
|
|
Project awards
|
52,066
|
|
|
74,656
|
|
|
85,190
|
|
|
65,580
|
|
|
277,492
|
|
|||||
Revenue recognized
|
(58,173
|
)
|
|
(86,287
|
)
|
|
(125,723
|
)
|
|
(70,385
|
)
|
|
(340,568
|
)
|
|||||
Backlog as of December 31, 2018
|
$
|
102,738
|
|
|
$
|
177,861
|
|
|
$
|
545,204
|
|
|
$
|
220,593
|
|
|
$
|
1,046,396
|
|
Book-to-bill ratio
(1)
|
0.9
|
|
|
0.9
|
|
|
0.7
|
|
|
0.9
|
|
|
0.8
|
|
|
|
|
|
|
(1)
|
Calculated by dividing project awards by revenue recognized during the period.
|
|
Electrical
Infrastructure
|
|
Oil Gas &
Chemical
|
|
Storage
Solutions
|
|
Industrial
|
|
Total
|
||||||||||
|
(In thousands)
|
||||||||||||||||||
Backlog as of June 30, 2018
|
$
|
113,957
|
|
|
$
|
227,452
|
|
|
$
|
613,360
|
|
|
$
|
263,827
|
|
|
1,218,596
|
|
|
Project awards
|
91,655
|
|
|
112,187
|
|
|
170,329
|
|
|
112,708
|
|
|
486,879
|
|
|||||
Revenue recognized
|
(102,874
|
)
|
|
(161,778
|
)
|
|
(238,485
|
)
|
|
(155,942
|
)
|
|
(659,079
|
)
|
|||||
Backlog as of December 31, 2018
|
$
|
102,738
|
|
|
$
|
177,861
|
|
|
$
|
545,204
|
|
|
$
|
220,593
|
|
|
$
|
1,046,396
|
|
Book-to-bill ratio
(1)
|
0.9
|
|
|
0.7
|
|
|
0.7
|
|
|
0.7
|
|
|
0.7
|
|
|
|
|
|
|
(1)
|
Calculated by dividing project awards by revenue recognized during the period.
|
•
|
It does not include interest expense. Because we have borrowed money to finance our operations and acquisitions, pay commitment fees to maintain our credit facility, and incur fees to issue letters of credit under the credit facility, interest expense is a necessary and ongoing part of our costs and has assisted us in generating revenue. Therefore, any measure that excludes interest expense has material limitations.
|
•
|
It does not include income taxes. Because the payment of income taxes is a necessary and ongoing part of our operations, any measure that excludes income taxes has material limitations.
|
•
|
It does not include depreciation or amortization expense. Because we use capital and intangible assets to generate revenue, depreciation and amortization expense is a necessary element of our cost structure. Therefore, any measure that excludes depreciation or amortization expense has material limitations.
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
|
December 31,
2018 |
|
December 31,
2017 |
|
December 31,
2018 |
|
December 31,
2017 |
||||||||
|
(In thousands)
|
||||||||||||||
Net income
|
$
|
3,932
|
|
|
$
|
4,532
|
|
|
$
|
6,237
|
|
|
$
|
8,356
|
|
Interest expense
|
361
|
|
|
819
|
|
|
653
|
|
|
1,437
|
|
||||
Provision for income taxes
|
1,486
|
|
|
(247
|
)
|
|
1,937
|
|
|
2,820
|
|
||||
Depreciation and amortization
|
4,583
|
|
|
5,313
|
|
|
9,126
|
|
|
10,906
|
|
||||
EBITDA
|
$
|
10,362
|
|
|
$
|
10,417
|
|
|
$
|
17,953
|
|
|
$
|
23,519
|
|
Liquidity as of September 30, 2018
|
$
|
129,295
|
|
Net decrease in cash
|
(3,247
|
)
|
|
Decrease in credit facility capacity constraint
|
771
|
|
|
Net repayments on credit facility
|
1,393
|
|
|
Decrease in letters of credit outstanding
|
8,968
|
|
|
Foreign currency translation of outstanding borrowings
|
156
|
|
|
Liquidity as of December 31, 2018
|
$
|
137,336
|
|
Liquidity as of June 30, 2018
|
$
|
137,243
|
|
Net increase in cash
|
7,432
|
|
|
Increase in credit facility capacity constraint
|
(15,696
|
)
|
|
Net borrowings on credit facility
|
(140
|
)
|
|
Decrease in letters of credit outstanding
|
8,357
|
|
|
Foreign currency translation of outstanding borrowings
|
140
|
|
|
Liquidity as of December 31, 2018
|
$
|
137,336
|
|
•
|
Changes in costs and estimated earnings in excess of billings on uncompleted contracts and billings on uncompleted contracts in excess of costs due to contract terms that determine the timing of billings to customers and the collection of those billings:
|
•
|
Some cost plus and fixed price customer contracts are billed based on milestones which may require us to incur significant expenditures prior to collections from our customers.
|
•
|
Time and material contracts are normally billed in arrears. Therefore, we are routinely required to carry these costs until they can be billed and collected.
|
•
|
Some of our large construction projects may require security in the form of letters of credit or significant retentions. The timing of collection of retentions is often uncertain.
|
•
|
Other changes in working capital
|
•
|
Capital expenditures
|
•
|
Acquisitions and disposals of businesses
|
•
|
Strategic investments in new operations
|
•
|
Purchases of shares under our stock buyback program
|
•
|
Contract disputes, which can be significant
|
•
|
Collection issues, including those caused by weak commodity prices or other factors which can lead to credit deterioration of our customers
|
•
|
Capacity constraints under our senior secured revolving credit facility and remaining in compliance with all covenants contained in the credit agreement
|
•
|
Cash on hand outside of the United States that cannot be repatriated without incremental taxation.
|
Net income
|
$
|
6,237
|
|
Non-cash expenses
|
13,676
|
|
|
Deferred income tax
|
(83
|
)
|
|
Cash effect of changes in working capital
|
(6,548
|
)
|
|
Other
|
202
|
|
|
Net cash provided by operating activities
|
$
|
13,484
|
|
•
|
Costs and estimated earnings in excess of billings on uncompleted contracts ("CIE") decreased $3.6 million, which increased cash flows from operating activities. Billings on uncompleted contracts in excess of costs and estimated earnings ("BIE") decreased $5.2 million, which decreased cash flows from operating activities. The net change in CIE and BIE decreased cash $1.6 million for the
six months ended
December 31, 2018
. CIE and BIE balances can experience significant fluctuations based on the timing of when job costs are incurred and the invoicing of those job costs to the customer.
|
•
|
Inventories increased $2.8 million, which decreased cash flows from operating activities. The increase in inventories is primarily related to aluminum coil purchased to support our storage tank products business.
|
•
|
Other assets and liabilities increased $10.6 million, which decreased cash flows from operating activities. The increase is primarily related to an increase in retentions that are expected to be collected beyond one year in connection with large projects and the annual prepayment of insurance that occurs during the first fiscal quarter.
|
•
|
Accounts payable increased by
$8.6 million
, net of a $2.0 million accrual for unsettled stock repurchases, during the
six months ended
December 31, 2018
, which increased cash flows from operating activities. The variance is primarily attributable to the timing of vendor payments.
|
•
|
Our Leverage Ratio, determined as of the end of each fiscal quarter, may not exceed
3.00
to
1.00
.
|
•
|
We are required to maintain a Fixed Charge Coverage Ratio, determined as of the end of each fiscal quarter, greater than or equal to
1.25
to
1.00
.
|
•
|
Asset dispositions (other than dispositions in which all of the net cash proceeds therefrom are reinvested into the Company and dispositions of inventory and obsolete or unneeded equipment in the ordinary course of business) are limited to
$20.0 million
per 12-month period.
|
•
|
The ABR or the Adjusted LIBO Rate, in the case of revolving loans denominated in U.S. Dollars;
|
•
|
The Canadian Prime Rate or the CDOR rate, in the case of revolving loans denominated in Canadian Dollars;
|
•
|
The Adjusted LIBO Rate, in the case of revolving loans denominated in Pounds Sterling or Australian Dollars; or
|
•
|
The EURIBO Rate, in the case of revolving loans denominated in Euros,
|
•
|
exclude non-cash stock-based compensation expense,
|
•
|
include pro forma EBITDA of acquired businesses as if the acquisition occurred at the beginning of the previous four quarters, and
|
•
|
exclude certain other extraordinary items, as defined in the Credit Agreement.
|
|
December 31,
2018 |
|
June 30,
2018 |
||||
|
(In thousands)
|
||||||
Senior secured revolving credit facility
|
$
|
300,000
|
|
|
$
|
300,000
|
|
Capacity constraint due to the Senior Leverage Ratio
|
205,437
|
|
|
189,741
|
|
||
Capacity under the credit facility
|
94,563
|
|
|
110,259
|
|
||
Borrowings outstanding
|
—
|
|
|
—
|
|
||
Letters of credit
|
28,716
|
|
|
37,073
|
|
||
Availability under the senior secured revolving credit facility
|
$
|
65,847
|
|
|
$
|
73,186
|
|
•
|
our ability to generate sufficient cash from operations, access our credit facility, or raise cash in order to meet our short and long-term capital requirements;
|
•
|
the impact to our business of crude oil, natural gas and other commodity prices;
|
•
|
amounts and nature of future revenues and margins from each of our segments;
|
•
|
the potential impact of the Tax Cuts and Jobs Act on our business;
|
•
|
trends in the industries we serve;
|
•
|
the likely impact of new or existing regulations or market forces on the demand for our services;
|
•
|
expansion and other trends of the industries we serve;
|
•
|
our expectations with respect to the likelihood of a future impairment; and
|
•
|
our ability to comply with the covenants in our credit agreement.
|
•
|
the risk factors discussed in our Form 10-K for the fiscal year ended
June 30, 2018
and listed from time to time in our filings with the Securities and Exchange Commission;
|
•
|
economic, market or business conditions in general and in the oil, gas, power, iron and steel, agricultural and mining industries in particular;
|
•
|
delays in the commencement of major projects, whether due to permitting issues or other factors;
|
•
|
reduced creditworthiness of our customer base and the higher risk of non-payment of receivables due to volatility of crude oil and other commodity prices which affect our customers' businesses;
|
•
|
the inherently uncertain outcome of current and future litigation;
|
•
|
the adequacy of our reserves for claims and contingencies;
|
•
|
changes in laws or regulations, including the imposition, cancellation or delay of tariffs on imported goods; and
|
•
|
other factors, many of which are beyond our control.
|
|
Total Number
of Shares
Purchased
|
|
Average Price
Paid
Per Share
|
|
Total Number
of Shares
Purchased as
Part of Publicly
Announced
Plans or
Programs
|
|
Maximum
Number of
Shares That
May Yet Be
Purchased
Under the Plans
or Programs (C)
|
|||||
October 1 to October 31, 2018
|
|
|
|
|
|
|
|
|||||
Share Repurchase Program (A)
|
—
|
|
|
$
|
—
|
|
|
—
|
|
|
1,229,709
|
|
Employee Transactions (B)
|
293
|
|
|
$
|
20.56
|
|
|
—
|
|
|
—
|
|
November 1 to November 30, 2018
|
|
|
|
|
|
|
|
|||||
Share Repurchase Program (A)
|
—
|
|
|
$
|
—
|
|
|
—
|
|
|
2,707,175
|
|
Employee Transactions (B)
|
275
|
|
|
$
|
20.44
|
|
|
—
|
|
|
—
|
|
December 1 to December 31, 2018
|
|
|
|
|
|
|
|
|||||
Share Repurchase Program (A)
|
310,532
|
|
|
$
|
16.71
|
|
|
310,532
|
|
|
2,396,643
|
|
Employee Transactions (B)
|
4,246
|
|
|
$
|
18.92
|
|
|
—
|
|
|
—
|
|
(A)
|
Represents shares purchased under our stock buyback program.
|
(B)
|
Represents shares withheld to satisfy the employee’s tax withholding obligation that is incurred upon the vesting of deferred shares granted under the Company’s stock incentive plans.
|
(C)
|
In December 2016, the Board of Directors approved a stock buyback program (the "December 2016 Program"). Under the December 2016 Program, the Company may repurchase common stock of the Company in any calendar year commencing with calendar year 2016 and continuing through calendar year 2018, up to a maximum of $25.0 million per calendar year. The Company may repurchase its stock from time to time in the open market at prevailing market prices or in privately negotiated transactions. As described under the caption “Stock Repurchase Program and Treasury Shares” in the Liquidity and Capital Resources section of Part I, Item 2 of this Form 10-Q, on November 6, 2018, the Board of Directors approved a new stock buyback program (the “November 2018 Program”), which replaced the December 2016 Program. Under the November 2018 Program, the Company may repurchase common stock of the Company in any calendar year commencing with calendar year 2018, up to a maximum of $30.0 million per calendar year provided that the aggregate number of shares repurchased may not exceed 10%, or approximately 2.7 million, of the Company's shares outstanding as of November 6, 2018. The November 2018 Program will continue unless and until it is modified or revoked by the Board of Directors. The amount shown as the maximum number of shares that may yet be purchased at October 31, 2018 was calculated using the closing price of our stock on the last trading day of October and the cumulative limit of $25.0 million remaining under the December 2016 Program, which was still in place as of the end of October. The amount shown as the maximum number of shares that may yet be purchased at November 30, 2018 and December 31, 2018 is equal to the total number of shares which may be purchased under the November 2018 Program, less the total number of shares that have previously been purchased under the November 2018 Program.
|
Exhibit No.
|
|
Description
|
|
|
|
Exhibit 10:
|
|
|
|
|
|
Exhibit 31.1:
|
|
|
|
|
|
Exhibit 31.2:
|
|
|
|
|
|
Exhibit 32.1:
|
|
|
|
|
|
Exhibit 32.2:
|
|
|
|
|
|
Exhibit 95:
|
|
|
|
|
|
Exhibit 101.INS:
|
|
XBRL Instance Document.
|
|
|
|
Exhibit 101.SCH:
|
|
XBRL Taxonomy Schema Document.
|
|
|
|
Exhibit 101.CAL:
|
|
XBRL Taxonomy Extension Calculation Linkbase Document.
|
|
|
|
Exhibit 101.DEF:
|
|
XBRL Taxonomy Extension Definition Linkbase Document.
|
|
|
|
Exhibit 101.LAB:
|
|
XBRL Taxonomy Extension Labels Linkbase Document.
|
|
|
|
Exhibit 101.PRE:
|
|
XBRL Taxonomy Extension Presentation Linkbase Document.
|
|
|
MATRIX SERVICE COMPANY
|
|
|
|
Date:
|
February 7, 2019
|
By: /s/ Kevin S. Cavanah
|
|
|
Kevin S. Cavanah Vice President and Chief Financial Officer signing on behalf of the registrant and as the registrant’s principal financial officer
|
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