|
x
|
Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
|
o
|
Transition Report Pursuant to Section 13 or 15 (d) of the Securities Exchange Act of 1934
|
DELAWARE
|
|
73-1352174
|
(State of incorporation)
|
|
(I.R.S. Employer Identification No.)
|
Large accelerated filer
|
|
¨
|
Accelerated filer
|
|
ý
|
|
|
|
|
||
Non-accelerated filer
|
|
o
|
Smaller reporting company
|
|
¨
|
|
|
|
PAGE
|
FINANCIAL INFORMATION
|
|
|
|
|
|
Item 1.
|
|
|
|
|
|
|
||
|
|
|
|
||
|
|
|
|
||
|
|
|
|
||
|
|
|
|
||
|
|
|
|
||
|
|
|
Item 2.
|
||
|
|
|
Item 3.
|
||
|
|
|
Item 4.
|
||
|
|
|
OTHER INFORMATION
|
|
|
|
|
|
Item 1.
|
||
|
|
|
Item 1A.
|
||
|
|
|
Item 2.
|
||
|
|
|
Item 3.
|
||
|
|
|
Item 4.
|
||
|
|
|
Item 5.
|
||
|
|
|
Item 6.
|
||
|
|
|
|
|
|
Three Months Ended
|
||||||
|
|
September 30,
2016 |
|
September 30,
2015 |
||||
Revenues
|
|
$
|
341,781
|
|
|
$
|
319,331
|
|
Cost of revenues
|
|
309,503
|
|
|
284,747
|
|
||
Gross profit
|
|
32,278
|
|
|
34,584
|
|
||
Selling, general and administrative expenses
|
|
17,977
|
|
|
19,483
|
|
||
Operating income
|
|
14,301
|
|
|
15,101
|
|
||
Other income (expense):
|
|
|
|
|
||||
Interest expense
|
|
(243
|
)
|
|
(263
|
)
|
||
Interest income
|
|
12
|
|
|
31
|
|
||
Other
|
|
7
|
|
|
(54
|
)
|
||
Income before income tax expense
|
|
14,077
|
|
|
14,815
|
|
||
Provision for federal, state and foreign income taxes
|
|
4,735
|
|
|
5,076
|
|
||
Net income
|
|
9,342
|
|
|
9,739
|
|
||
Less: Net loss attributable to noncontrolling interest
|
|
—
|
|
|
(202
|
)
|
||
Net income attributable to Matrix Service Company
|
|
$
|
9,342
|
|
|
$
|
9,941
|
|
|
|
|
|
|
||||
Basic earnings per common share
|
|
$
|
0.35
|
|
|
$
|
0.38
|
|
Diluted earnings per common share
|
|
$
|
0.35
|
|
|
$
|
0.37
|
|
Weighted average common shares outstanding:
|
|
|
|
|
||||
Basic
|
|
26,387
|
|
|
26,476
|
|
||
Diluted
|
|
26,796
|
|
|
27,050
|
|
|
|
Three Months Ended
|
||||||
|
|
September 30,
2016 |
|
September 30,
2015 |
||||
Net income
|
|
$
|
9,342
|
|
|
$
|
9,739
|
|
Other comprehensive loss, net of tax:
|
|
|
|
|
||||
Foreign currency translation loss (net of tax of $37 and $180 for the three months ended September 30, 2016 and 2015, respectively)
|
|
(279
|
)
|
|
(2,449
|
)
|
||
Comprehensive income
|
|
9,063
|
|
|
7,290
|
|
||
Less: Comprehensive loss attributable to noncontrolling interest
|
|
—
|
|
|
(202
|
)
|
||
Comprehensive income attributable to Matrix Service Company
|
|
$
|
9,063
|
|
|
$
|
7,492
|
|
|
|||||||
|
September 30,
2016 |
|
June 30,
2016 |
||||
Assets
|
|
|
|
||||
Current assets:
|
|
|
|
||||
Cash and cash equivalents
|
$
|
35,579
|
|
|
$
|
71,656
|
|
Accounts receivable, less allowances (September 30, 2016— $8,457 and June 30, 2016—$8,403)
|
230,975
|
|
|
190,434
|
|
||
Costs and estimated earnings in excess of billings on uncompleted contracts
|
105,094
|
|
|
104,001
|
|
||
Inventories
|
3,767
|
|
|
3,935
|
|
||
Income taxes receivable
|
5
|
|
|
9
|
|
||
Other current assets
|
8,855
|
|
|
5,411
|
|
||
Total current assets
|
384,275
|
|
|
375,446
|
|
||
Property, plant and equipment at cost:
|
|
|
|
||||
Land and buildings
|
39,545
|
|
|
39,224
|
|
||
Construction equipment
|
90,957
|
|
|
90,386
|
|
||
Transportation equipment
|
48,466
|
|
|
49,046
|
|
||
Office equipment and software
|
33,194
|
|
|
29,577
|
|
||
Construction in progress
|
4,285
|
|
|
7,475
|
|
||
Total property, plant and equipment - at cost
|
216,447
|
|
|
215,708
|
|
||
Accumulated depreciation
|
(134,031
|
)
|
|
(130,977
|
)
|
||
Property, plant and equipment - net
|
82,416
|
|
|
84,731
|
|
||
Goodwill
|
78,274
|
|
|
78,293
|
|
||
Other intangible assets
|
20,151
|
|
|
20,999
|
|
||
Deferred income taxes
|
2,712
|
|
|
3,719
|
|
||
Other assets
|
1,395
|
|
|
1,779
|
|
||
Total assets
|
$
|
569,223
|
|
|
$
|
564,967
|
|
|
|
|
|
|
September 30,
2016 |
|
June 30,
2016 |
||||
Liabilities and stockholders’ equity
|
|
|
|
||||
Current liabilities:
|
|
|
|
||||
Accounts payable
|
$
|
127,734
|
|
|
$
|
141,445
|
|
Billings on uncompleted contracts in excess of costs and estimated earnings
|
52,382
|
|
|
58,327
|
|
||
Accrued wages and benefits
|
23,212
|
|
|
27,716
|
|
||
Accrued insurance
|
9,649
|
|
|
9,246
|
|
||
Income taxes payable
|
3,676
|
|
|
2,675
|
|
||
Other accrued expenses
|
7,439
|
|
|
6,621
|
|
||
Total current liabilities
|
224,092
|
|
|
246,030
|
|
||
Deferred income taxes
|
3,198
|
|
|
3,198
|
|
||
Borrowings under senior revolving credit facility
|
17,186
|
|
|
—
|
|
||
Other liabilities
|
215
|
|
|
173
|
|
||
Total liabilities
|
244,691
|
|
|
249,401
|
|
||
Commitments and contingencies
|
|
|
|
|
|
||
Stockholders’ equity:
|
|
|
|
||||
Matrix Service Company stockholders' equity:
|
|
|
|
||||
Common stock—$.01 par value; 60,000,000 shares authorized; 27,888,217 shares issued as of September 30, 2016, and June 30, 2016; 26,528,060 and 26,297,145 shares outstanding as of September 30, 2016 and June 30, 2016
|
279
|
|
|
279
|
|
||
Additional paid-in capital
|
124,464
|
|
|
127,058
|
|
||
Retained earnings
|
232,499
|
|
|
223,157
|
|
||
Accumulated other comprehensive loss
|
(7,124
|
)
|
|
(6,845
|
)
|
||
|
350,118
|
|
|
343,649
|
|
||
Less: Treasury stock, at cost — 1,360,157 shares as of September 30, 2016, and 1,591,072 shares as of June 30, 2016
|
(24,410
|
)
|
|
(26,907
|
)
|
||
Total Matrix Service Company stockholders’ equity
|
325,708
|
|
|
316,742
|
|
||
Noncontrolling interest
|
(1,176
|
)
|
|
(1,176
|
)
|
||
Total stockholders' equity
|
324,532
|
|
|
315,566
|
|
||
Total liabilities and stockholders’ equity
|
$
|
569,223
|
|
|
$
|
564,967
|
|
|
|
|
|
|
Three Months Ended
|
||||||
|
September 30,
2016 |
|
September 30,
2015 |
||||
Operating activities:
|
|
|
|
||||
Net income
|
$
|
9,342
|
|
|
$
|
9,739
|
|
Adjustments to reconcile net income to net cash used by operating activities:
|
|
|
|
||||
Depreciation and amortization
|
4,904
|
|
|
5,429
|
|
||
Deferred income tax
|
1,044
|
|
|
1,380
|
|
||
Gain on sale of property, plant and equipment
|
(138
|
)
|
|
(74
|
)
|
||
Provision for uncollectible accounts
|
54
|
|
|
334
|
|
||
Stock-based compensation expense
|
1,652
|
|
|
1,658
|
|
||
Other
|
63
|
|
|
60
|
|
||
Changes in operating assets and liabilities increasing (decreasing) cash:
|
|
|
|
||||
Accounts receivable
|
(40,595
|
)
|
|
16,181
|
|
||
Costs and estimated earnings in excess of billings on uncompleted contracts
|
(1,093
|
)
|
|
2,467
|
|
||
Inventories
|
168
|
|
|
(90
|
)
|
||
Other assets and liabilities
|
(2,206
|
)
|
|
293
|
|
||
Accounts payable
|
(13,597
|
)
|
|
(26,197
|
)
|
||
Billings on uncompleted contracts in excess of costs and estimated earnings
|
(5,945
|
)
|
|
(21,429
|
)
|
||
Accrued expenses
|
(3,241
|
)
|
|
(4,182
|
)
|
||
Net cash used by operating activities
|
(49,588
|
)
|
|
(14,431
|
)
|
||
Investing activities:
|
|
|
|
||||
Acquisition of property, plant and equipment
|
(1,826
|
)
|
|
(3,941
|
)
|
||
Proceeds from asset sales
|
153
|
|
|
135
|
|
||
Net cash used by investing activities
|
$
|
(1,673
|
)
|
|
$
|
(3,806
|
)
|
|
Three Months Ended
|
||||||
|
September 30,
2016 |
|
September 30,
2015 |
||||
Financing activities:
|
|
|
|
||||
Advances under senior revolving credit facility
|
$
|
27,186
|
|
|
$
|
962
|
|
Repayments of advances under senior revolving credit facility
|
(10,000
|
)
|
|
—
|
|
||
Issuances of common stock
|
46
|
|
|
384
|
|
||
Proceeds from issuance of common stock under employee stock purchase plan
|
83
|
|
|
72
|
|
||
Repurchase of common stock for payment of statutory taxes due on equity-based compensation
|
(1,878
|
)
|
|
(382
|
)
|
||
Capital contributions from noncontrolling interest
|
—
|
|
|
8,433
|
|
||
Net cash provided by financing activities
|
15,437
|
|
|
9,469
|
|
||
Effect of exchange rate changes on cash and cash equivalents
|
(253
|
)
|
|
(1,291
|
)
|
||
Decrease in cash and cash equivalents
|
(36,077
|
)
|
|
(10,059
|
)
|
||
Cash and cash equivalents, beginning of period
|
71,656
|
|
|
79,239
|
|
||
Cash and cash equivalents, end of period
|
$
|
35,579
|
|
|
$
|
69,180
|
|
Supplemental disclosure of cash flow information:
|
|
|
|
||||
Cash paid during the period for:
|
|
|
|
||||
Income taxes
|
$
|
2,997
|
|
|
$
|
1,747
|
|
Interest
|
$
|
238
|
|
|
$
|
311
|
|
Non-cash investing and financing activities:
|
|
|
|
||||
Purchases of property, plant and equipment on account
|
$
|
79
|
|
|
$
|
603
|
|
|
Common
Stock
|
|
Additional
Paid-In
Capital
|
|
Retained
Earnings
|
|
Treasury
Stock
|
|
Accumulated
Other
Comprehensive
Income(Loss)
|
|
Non-Controlling Interest
|
|
Total
|
||||||||||||||
Balances, July 1, 2016
|
$
|
279
|
|
|
$
|
126,958
|
|
|
$
|
223,257
|
|
|
$
|
(26,907
|
)
|
|
$
|
(6,845
|
)
|
|
$
|
(1,176
|
)
|
|
$
|
315,566
|
|
Retrospective adjustment upon adoption of ASU 2016-09 (see Note 1)
|
—
|
|
|
100
|
|
|
(100
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||||
Balances, July 1, 2016, as adjusted
|
279
|
|
|
127,058
|
|
|
223,157
|
|
|
(26,907
|
)
|
|
(6,845
|
)
|
|
(1,176
|
)
|
|
315,566
|
|
|||||||
Capital contributions from noncontrolling interest
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||||
Net income
|
—
|
|
|
—
|
|
|
9,342
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
9,342
|
|
|||||||
Other comprehensive loss
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(279
|
)
|
|
—
|
|
|
(279
|
)
|
|||||||
Treasury shares sold to Employee Stock Purchase Plan (4,982 shares)
|
—
|
|
|
38
|
|
|
—
|
|
|
45
|
|
|
—
|
|
|
—
|
|
|
83
|
|
|||||||
Exercise of stock options (4,400 shares)
|
—
|
|
|
(25
|
)
|
|
—
|
|
|
71
|
|
|
—
|
|
|
—
|
|
|
46
|
|
|||||||
Issuance of deferred shares (335,295 shares)
|
—
|
|
|
(4,259
|
)
|
|
—
|
|
|
4,259
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||||
Treasury shares purchased to satisfy tax withholding obligations (113,762 shares)
|
—
|
|
|
—
|
|
|
—
|
|
|
(1,878
|
)
|
|
—
|
|
|
—
|
|
|
(1,878
|
)
|
|||||||
Stock-based compensation expense
|
—
|
|
|
1,652
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,652
|
|
|||||||
Balances, September 30, 2016
|
$
|
279
|
|
|
$
|
124,464
|
|
|
$
|
232,499
|
|
|
$
|
(24,410
|
)
|
|
$
|
(7,124
|
)
|
|
$
|
(1,176
|
)
|
|
$
|
324,532
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Balances, July 1, 2015
|
$
|
279
|
|
|
$
|
123,038
|
|
|
$
|
194,394
|
|
|
$
|
(18,489
|
)
|
|
$
|
(5,926
|
)
|
|
$
|
(8,742
|
)
|
|
$
|
284,554
|
|
Capital contributions from noncontrolling interest
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
8,433
|
|
|
8,433
|
|
|||||||
Net income (loss)
|
—
|
|
|
—
|
|
|
9,941
|
|
|
—
|
|
|
—
|
|
|
(202
|
)
|
|
9,739
|
|
|||||||
Other comprehensive loss
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(2,449
|
)
|
|
—
|
|
|
(2,449
|
)
|
|||||||
Treasury shares sold to Employee Stock Purchase Plan (3,993 shares)
|
—
|
|
|
35
|
|
|
—
|
|
|
37
|
|
|
—
|
|
|
—
|
|
|
72
|
|
|||||||
Exercise of stock options (43,137 shares)
|
—
|
|
|
(15
|
)
|
|
—
|
|
|
399
|
|
|
—
|
|
|
—
|
|
|
384
|
|
|||||||
Issuance of deferred shares (63,809 shares)
|
—
|
|
|
(590
|
)
|
|
—
|
|
|
590
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||||
Treasury shares purchased to satisfy tax withholding obligations (20,105 shares)
|
—
|
|
|
—
|
|
|
—
|
|
|
(382
|
)
|
|
—
|
|
|
—
|
|
|
(382
|
)
|
|||||||
Tax effect of exercised stock options and vesting of deferred shares
|
—
|
|
|
20
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
20
|
|
|||||||
Stock-based compensation expense
|
—
|
|
|
1,658
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,658
|
|
|||||||
Balances, September 30, 2015
|
$
|
279
|
|
|
$
|
124,146
|
|
|
$
|
204,335
|
|
|
$
|
(17,845
|
)
|
|
$
|
(8,375
|
)
|
|
$
|
(511
|
)
|
|
$
|
302,029
|
|
Current assets
|
$
|
5,574
|
|
Property, plant and equipment
|
4,347
|
|
|
Goodwill
|
7,030
|
|
|
Other intangible assets
|
720
|
|
|
Other assets
|
233
|
|
|
Total assets acquired
|
17,904
|
|
|
Current liabilities
|
1,669
|
|
|
Deferred income taxes
|
329
|
|
|
Long-term debt
|
1,858
|
|
|
Other liabilities
|
407
|
|
|
Net assets acquired
|
13,641
|
|
|
Cash acquired
|
592
|
|
|
Net purchase price
|
$
|
13,049
|
|
|
September 30,
2016 |
|
June 30,
2016 |
||||
|
(in thousands)
|
||||||
Costs incurred and estimated earnings recognized on uncompleted contracts
|
$
|
2,107,546
|
|
|
$
|
1,875,014
|
|
Billings on uncompleted contracts
|
2,054,834
|
|
|
1,829,340
|
|
||
|
$
|
52,712
|
|
|
$
|
45,674
|
|
Shown in balance sheet as:
|
|
|
|
||||
Costs and estimated earnings in excess of billings on uncompleted contracts
|
$
|
105,094
|
|
|
$
|
104,001
|
|
Billings on uncompleted contracts in excess of costs and estimated earnings
|
52,382
|
|
|
58,327
|
|
||
|
$
|
52,712
|
|
|
$
|
45,674
|
|
|
Electrical
Infrastructure
|
|
Oil Gas &
Chemical
|
|
Storage
Solutions
|
|
Industrial
|
|
Total
|
||||||||||
|
(In thousands)
|
||||||||||||||||||
Net balance at June 30, 2016
|
$
|
42,170
|
|
|
$
|
14,008
|
|
|
$
|
16,681
|
|
|
$
|
5,434
|
|
|
$
|
78,293
|
|
Purchase price adjustment for BTE (Note 2)
|
—
|
|
|
—
|
|
|
88
|
|
|
—
|
|
|
88
|
|
|||||
Translation adjustment (1)
|
(92
|
)
|
|
—
|
|
|
2
|
|
|
(17
|
)
|
|
(107
|
)
|
|||||
Net balance at September 30, 2016
|
$
|
42,078
|
|
|
$
|
14,008
|
|
|
$
|
16,771
|
|
|
$
|
5,417
|
|
|
$
|
78,274
|
|
(1)
|
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 September 30, 2016
|
||||||||||
|
Useful Life
|
|
Gross Carrying
Amount
|
|
Accumulated
Amortization
|
|
Net Carrying
Amount
|
||||||
|
(Years)
|
|
(In thousands)
|
||||||||||
Intellectual property
|
9 to 15
|
|
$
|
2,579
|
|
|
$
|
(1,291
|
)
|
|
$
|
1,288
|
|
Customer-based
|
1.5 to 15
|
|
28,113
|
|
|
(10,227
|
)
|
|
17,886
|
|
|||
Non-compete agreements
|
4 to 5
|
|
1,453
|
|
|
(1,138
|
)
|
|
315
|
|
|||
Trade names
|
3 to 5
|
|
1,615
|
|
|
(953
|
)
|
|
662
|
|
|||
Total amortizing intangible assets
|
|
|
$
|
33,760
|
|
|
$
|
(13,609
|
)
|
|
$
|
20,151
|
|
|
|
|
At June 30, 2016
|
||||||||||
|
Useful Life
|
|
Gross Carrying
Amount
|
|
Accumulated
Amortization
|
|
Net Carrying
Amount
|
||||||
|
(Years)
|
|
(In thousands)
|
||||||||||
Intellectual property
|
9 to 15
|
|
$
|
2,579
|
|
|
$
|
(1,246
|
)
|
|
$
|
1,333
|
|
Customer-based
|
1.5 to 15
|
|
28,179
|
|
|
(9,655
|
)
|
|
18,524
|
|
|||
Non-compete agreements
|
4 to 5
|
|
1,453
|
|
|
(1,102
|
)
|
|
351
|
|
|||
Trade names
|
3 to 5
|
|
1,615
|
|
|
(824
|
)
|
|
791
|
|
|||
Total amortizing intangible assets
|
|
|
$
|
33,826
|
|
|
$
|
(12,827
|
)
|
|
$
|
20,999
|
|
Period ending:
|
|
||
Remainder of Fiscal 2017
|
$
|
2,482
|
|
Fiscal 2018
|
2,935
|
|
|
Fiscal 2019
|
2,582
|
|
|
Fiscal 2020
|
2,572
|
|
|
Fiscal 2021
|
2,552
|
|
|
Fiscal 2022
|
1,705
|
|
|
Thereafter
|
5,323
|
|
|
Total estimated remaining amortization expense at September 30, 2016
|
$
|
20,151
|
|
•
|
Our Senior Leverage Ratio, as defined in the agreement, may not exceed
2.50
to
1.00
, determined as of the end of each fiscal quarter.
|
•
|
We are required to maintain a Fixed Charge Coverage Ratio, as defined in the agreement, greater than or equal to
1.25
to
1.00
, determined as of the end of each fiscal quarter.
|
•
|
Asset dispositions (other than inventory and obsolete or unneeded equipment disposed of in the ordinary course of business) are limited to
$20.0 million
per 12-month period.
|
|
September 30,
2016 |
|
June 30,
2016 |
||||
|
(In thousands)
|
||||||
Senior revolving credit facility
|
$
|
200,000
|
|
|
$
|
200,000
|
|
Capacity constraint due to the Senior Leverage Ratio
|
24,395
|
|
|
20,138
|
|
||
Capacity under the credit facility
|
175,605
|
|
|
179,862
|
|
||
Borrowings outstanding
|
17,186
|
|
|
—
|
|
||
Letters of credit
|
20,784
|
|
|
20,755
|
|
||
Availability under the senior revolving credit facility
|
$
|
137,635
|
|
|
$
|
159,107
|
|
|
Three Months Ended
|
||||||
|
September 30,
2016 |
|
September 30,
2015 |
||||
|
(In thousands, except per share data)
|
||||||
Basic EPS:
|
|
|
|
||||
Net income attributable to Matrix Service Company
|
$
|
9,342
|
|
|
$
|
9,941
|
|
Weighted average shares outstanding
|
26,387
|
|
|
26,476
|
|
||
Basic earnings per share
|
$
|
0.35
|
|
|
$
|
0.38
|
|
Diluted EPS:
|
|
|
|
||||
Weighted average shares outstanding – basic
|
26,387
|
|
|
26,476
|
|
||
Dilutive stock options
|
50
|
|
|
86
|
|
||
Dilutive nonvested deferred shares
|
359
|
|
|
488
|
|
||
Diluted weighted average shares
|
26,796
|
|
|
27,050
|
|
||
Diluted earnings per share
|
$
|
0.35
|
|
|
$
|
0.37
|
|
|
Three Months Ended
|
||||
|
September 30,
2016 |
|
September 30,
2015 |
||
|
(In thousands)
|
||||
Nonvested deferred shares
|
78
|
|
|
56
|
|
|
Three Months Ended
|
||||||
|
September 30,
2016 |
|
September 30,
2015 |
||||
Gross revenues
|
|
|
|
||||
Electrical Infrastructure
|
$
|
88,025
|
|
|
$
|
65,625
|
|
Oil Gas & Chemical
|
37,828
|
|
|
68,959
|
|
||
Storage Solutions
|
199,650
|
|
|
144,570
|
|
||
Industrial
|
22,727
|
|
|
41,335
|
|
||
Total gross revenues
|
$
|
348,230
|
|
|
$
|
320,489
|
|
Less: Inter-segment revenues
|
|
|
|
||||
Oil Gas & Chemical
|
$
|
5,286
|
|
|
$
|
648
|
|
Storage Solutions
|
128
|
|
|
334
|
|
||
Industrial
|
1,035
|
|
|
176
|
|
||
Total inter-segment revenues
|
$
|
6,449
|
|
|
$
|
1,158
|
|
Consolidated revenues
|
|
|
|
||||
Electrical Infrastructure
|
$
|
88,025
|
|
|
$
|
65,625
|
|
Oil Gas & Chemical
|
32,542
|
|
|
68,311
|
|
||
Storage Solutions
|
199,522
|
|
|
144,236
|
|
||
Industrial
|
21,692
|
|
|
41,159
|
|
||
Total consolidated revenues
|
$
|
341,781
|
|
|
$
|
319,331
|
|
Gross profit
|
|
|
|
||||
Electrical Infrastructure
|
$
|
5,250
|
|
|
$
|
4,708
|
|
Oil Gas & Chemical
|
1
|
|
|
5,683
|
|
||
Storage Solutions
|
26,453
|
|
|
20,232
|
|
||
Industrial
|
574
|
|
|
3,961
|
|
||
Total gross profit
|
$
|
32,278
|
|
|
$
|
34,584
|
|
Operating income (loss)
|
|
|
|
||||
Electrical Infrastructure
|
$
|
1,057
|
|
|
$
|
1,200
|
|
Oil Gas & Chemical
|
(2,905
|
)
|
|
1,416
|
|
||
Storage Solutions
|
16,773
|
|
|
11,549
|
|
||
Industrial
|
(624
|
)
|
|
936
|
|
||
Total operating income
|
$
|
14,301
|
|
|
$
|
15,101
|
|
|
|
September 30,
2016 |
|
June 30,
2016 |
||||
Electrical Infrastructure
|
|
$
|
143,699
|
|
|
$
|
135,298
|
|
Oil Gas & Chemical
|
|
78,474
|
|
|
91,350
|
|
||
Storage Solutions
|
|
238,205
|
|
|
201,875
|
|
||
Industrial
|
|
61,826
|
|
|
67,569
|
|
||
Unallocated assets
|
|
47,019
|
|
|
68,875
|
|
||
Total segment assets
|
|
$
|
569,223
|
|
|
$
|
564,967
|
|
•
|
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 June 30, 2016
|
$
|
369,791
|
|
|
$
|
91,478
|
|
|
$
|
359,013
|
|
|
$
|
48,390
|
|
|
$
|
868,672
|
|
Project awards
|
72,520
|
|
|
120,338
|
|
|
38,650
|
|
|
28,213
|
|
|
259,721
|
|
|||||
Revenue recognized
|
(88,025
|
)
|
|
(32,542
|
)
|
|
(199,522
|
)
|
|
(21,692
|
)
|
|
(341,781
|
)
|
|||||
Backlog as of September 30, 2016
|
$
|
354,286
|
|
|
$
|
179,274
|
|
|
$
|
198,141
|
|
|
$
|
54,911
|
|
|
$
|
786,612
|
|
•
|
It does not include interest expense. Because we have borrowed money to finance our operations, 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
|
||||||
|
September 30,
2016 |
|
September 30,
2015 |
||||
|
(In thousands)
|
||||||
Net income attributable to Matrix Service Company
|
$
|
9,342
|
|
|
$
|
9,941
|
|
Interest expense
|
243
|
|
|
263
|
|
||
Provision for income taxes
|
4,735
|
|
|
5,076
|
|
||
Depreciation and amortization
|
4,904
|
|
|
5,429
|
|
||
EBITDA
|
$
|
19,224
|
|
|
$
|
20,709
|
|
•
|
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 significant retentions or security in the form of letters of credit.
|
•
|
Other changes in working capital
|
•
|
Capital expenditures
|
•
|
Acquisitions of new 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 credit facility and remaining in compliance with all covenants contained in the credit agreement
|
•
|
A default by one of the major financial institutions for which our deposits exceed insured deposit limits
|
•
|
Cash on hand outside of the United States that cannot be repatriated without incremental taxation.
|
Net income
|
$
|
9,342
|
|
Non-cash expenses
|
6,472
|
|
|
Deferred income tax
|
1,044
|
|
|
Cash effect of changes in working capital
|
(66,509
|
)
|
|
Other
|
63
|
|
|
Net cash used by operating activities
|
$
|
(49,588
|
)
|
•
|
Accounts receivable, net of bad debt expense recognized during the period, increased by
$40.6 million
during the
three months ended
September 30, 2016
. The variance is primarily attributable to the timing of billing and collections in connection with the previously announced Dakota Access Project.
|
•
|
Accounts payable decreased by
$13.6 million
during the
three months ended
September 30, 2016
. The variance is primarily attributable to the timing of vendor payments. Costs and estimated earnings in excess of billings on uncompleted contracts ("CIE") increased $1.1 million million while billings on uncompleted contracts in excess of costs and estimated earnings ("BIE") decreased $5.9 million. The net change in CIE and BIE decreased cash
$7.0 million
for the three months ended September 30, 2016. CIE and BIE balances can experience significant fluctuations based on the timing of when job costs are incurred, the invoicing of those job costs to the customer, and other working capital management factors.
|
•
|
Our Senior Leverage Ratio, as defined in the agreement, may not exceed 2.50 to 1.00, determined as of the end of each fiscal quarter.
|
•
|
We are required to maintain a Fixed Charge Coverage Ratio, as defined in the agreement, greater than or equal to 1.25 to 1.00, determined as of the end of each fiscal quarter.
|
•
|
Asset dispositions (other than inventory and obsolete or unneeded equipment disposed of in the ordinary course of business) are limited to $20.0 million per 12-month period.
|
|
September 30,
2016 |
|
June 30,
2016 |
||||
|
(In thousands)
|
||||||
Senior revolving credit facility
|
$
|
200,000
|
|
|
$
|
200,000
|
|
Capacity constraint due to the Senior Leverage Ratio
|
24,395
|
|
|
20,138
|
|
||
Capacity under the credit facility
|
175,605
|
|
|
179,862
|
|
||
Borrowings outstanding
|
17,186
|
|
|
—
|
|
||
Letters of credit
|
20,784
|
|
|
20,755
|
|
||
Availability under the senior revolving credit facility
|
$
|
137,635
|
|
|
$
|
159,107
|
|
•
|
the impact to our business of crude oil and other commodity prices;
|
•
|
amounts and nature of future revenues and margins from each of our segments;
|
•
|
trends in the industries we serve;
|
•
|
our ability to generate sufficient cash from operations or to raise cash in order to meet our short and long-term capital requirements;
|
•
|
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, 2016
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 and mining industries in particular;
|
•
|
reduced creditworthiness of our customer base and the higher risk of non-payment of receivables due to low prevailing crude oil and other commodity prices;
|
•
|
the inherently uncertain outcome of current and future litigation;
|
•
|
the adequacy of our reserves for contingencies;
|
•
|
changes in laws or regulations; 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)
|
|||||
July 1 to July 31, 2016
|
|
|
|
|
|
|
|
|||||
Share Repurchase Program (A)
|
—
|
|
|
$
|
—
|
|
|
—
|
|
|
1,714,669
|
|
Employee Transactions (B)
|
429
|
|
|
$
|
16.69
|
|
|
—
|
|
|
|
|
August 1 to August 31, 2016
|
|
|
|
|
|
|
|
|||||
Share Repurchase Program (A)
|
—
|
|
|
$
|
—
|
|
|
—
|
|
|
1,714,669
|
|
Employee Transactions (B)
|
110,709
|
|
|
$
|
16.47
|
|
|
—
|
|
|
|
|
September 1 to September 30, 2016
|
|
|
|
|
|
|
|
|||||
Share Repurchase Program (A)
|
—
|
|
|
$
|
—
|
|
|
—
|
|
|
1,714,669
|
|
Employee Transactions (B)
|
2,624
|
|
|
$
|
17.67
|
|
|
—
|
|
|
|
(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)
|
On November 4, 2014 the Board of Directors approved a stock buyback program. The program, which expires on December 31, 2016, allows the Company to purchase up to $25.0 million of common stock annually if sufficient liquidity exists and management believes the purchase would be beneficial to the Company's stockholders. The annual $25.0 million limitation is applied on a calendar year basis. The cumulative number of shares repurchased cannot exceed 2,653,399, which represents 10% of the shares outstanding on the date the new repurchase program was approved.
|
Exhibit 10.1*:
|
|
Form of Long-Term Incentive Award Agreement (Matrix Service Company 2012 Stock and Incentive Compensation Plan).
|
|
|
|
Exhibit 10.2*:
|
|
Form of Restricted Stock Unit Award Agreement for employees (Matrix Service Company 2012 Stock and Incentive Compensation Plan).
|
|
|
|
Exhibit 31.1:
|
|
Certification Pursuant to Section 302 of Sarbanes-Oxley Act of 2002 – CEO.
|
|
|
|
Exhibit 31.2:
|
|
Certification Pursuant to Section 302 of Sarbanes-Oxley Act of 2002 – CFO.
|
|
|
|
Exhibit 32.1:
|
|
Certification Pursuant to 18 U.S.C. 1350 (section 906 of Sarbanes-Oxley Act of 2002) – CEO.
|
|
|
|
Exhibit 32.2:
|
|
Certification Pursuant to 18 U.S.C. 1350 (section 906 of Sarbanes-Oxley Act of 2002) – CFO.
|
|
|
|
Exhibit 95:
|
|
Mine Safety Disclosure.
|
|
|
|
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:
|
November 7, 2016
|
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
|
Exhibit 10.1*:
|
|
Form of Long-Term Incentive Award Agreement (Matrix Service Company 2012 Stock and Incentive Compensation Plan).
|
|
|
|
Exhibit 10.2*:
|
|
Form of Restricted Stock Unit Award Agreement for employees (Matrix Service Company 2012 Stock and Incentive Compensation Plan).
|
|
|
|
Exhibit 31.1:
|
|
Certification Pursuant to Section 302 of Sarbanes-Oxley Act of 2002 – CEO.
|
|
|
|
Exhibit 31.2:
|
|
Certification Pursuant to Section 302 of Sarbanes-Oxley Act of 2002 – CFO.
|
|
|
|
Exhibit 32.1:
|
|
Certification Pursuant to 18 U.S.C. 1350 (section 906 of Sarbanes-Oxley Act of 2002) – CEO.
|
|
|
|
Exhibit 32.2:
|
|
Certification Pursuant to 18 U.S.C. 1350 (section 906 of Sarbanes-Oxley Act of 2002) – CFO.
|
|
|
|
Exhibit 95:
|
|
Mine Safety Disclosure.
|
|
|
|
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.
|
Shareholder
Return Goal
|
Total
Shareholder Return
|
Percentage of Performance Units for Which
Conditions are Satisfied
|
|
|
|
Threshold Total Shareholder Return Goal
|
___ percentile of Peer Group
|
___%
|
Above Threshold Total Shareholder Return Goal
|
___ percentile of Peer Group
|
___%
|
Target Total Shareholder Return Goal
Above Target Total Shareholder Return Goal
Maximum Total Shareholder Return Goal
|
___ percentile of Peer Group
___ percentile of Peer Group
___ percentile of Peer Group
|
___%
___%
___%
|
ROIC Level
|
|
Average ROIC
|
Percentage of Performance Cash Award for Which
Conditions are Satisfied
|
|
|
|
|
|
|
Threshold ROIC Goal
|
|
___%
|
___%
|
|
|
|
|
|
|
Target ROIC Goal
|
|
___%
|
___%
|
|
Maximum ROIC Goal
|
|
___%
|
___%
|
1.
|
I have reviewed this quarterly report on Form 10-Q of Matrix Service Company;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
a.
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b.
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
c.
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
d.
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
5.
|
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
a.
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
b.
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
Date:
|
November 7, 2016
|
|
|
|
|
/s/ John R. Hewitt
|
|
|
John R. Hewitt
|
|
|
President and Chief Executive Officer
|
1.
|
I have reviewed this quarterly report on Form 10-Q of Matrix Service Company;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
a.
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b.
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
c.
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
d.
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
5.
|
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
a.
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
b.
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
Date:
|
November 7, 2016
|
|
|
|
|
/s/ Kevin S. Cavanah
|
|
|
Kevin S. Cavanah
|
|
|
Vice President and Chief Financial Officer
|
(1)
|
The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934 as amended; and
|
(2)
|
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
|
Date:
|
November 7, 2016
|
|
|
|
|
/s/ John R. Hewitt
|
|
|
John R. Hewitt
|
|
|
President and Chief Executive Officer
|
(1)
|
The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934 as amended; and
|
(2)
|
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
|
Date:
|
November 7, 2016
|
|
|
|
|
/s/ Kevin S. Cavanah
|
|
|
Kevin S. Cavanah
|
|
|
Vice President and Chief Financial Officer
|
Mine or Operating Name/MSHA Identification Number
|
Section 104 S&S Citations
(1)
|
Section 104(b) Orders
(2)
|
Section 104(d) Citations and Orders
(3)
|
Section 110(b)(2) Violations
(4)
|
Section 107(a) Orders
(5)
|
Total Dollar Value of MSHA Assessments Proposed ($)
|
Total Number of Mining Related Fatalities
|
Received Notice of Pattern of Violations Under Section 104(e)
(6)
(yes/no)
|
Received Notice of Potential to Have Pattern of Violations Under Section 104(e)
(7)
(yes/no)
|
Total Number of Legal Actions Pending as of Last Day of Period
|
Total Number of Legal Actions Initiated During Period
|
Total Number of Legal Actions Resolved During Period
|
Freeport McMoran Morenci Inc. 02-00024 5CP
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
No
|
No
|
—
|
—
|
—
|
Solvay Chemicals Inc. 48-01295
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
No
|
No
|
—
|
—
|
—
|
Big Island Mine & Refinery 48-00154
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
No
|
No
|
—
|
—
|
—
|
Freeport McMoran Safford Inc. 02-03131 5CP
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
No
|
No
|
—
|
—
|
—
|