mtrx-20210930

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

_______________________________________

FORM 10-Q

_______________________________________

(Mark One)


☒			Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended September 30, 2021


☐			Transition Report Pursuant to Section 13 or 15 (d) of the Securities Exchange Act of 1934

For the transition period from to

Commission File No. 1-15461

__________________________________________

MATRIX SERVICE COMPANY

(Exact name of registrant as specified in its charter)

__________________________________________


Delaware						73-1352174
(State of incorporation)						(I.R.S. Employer Identification No.)

5100 East Skelly Drive, Suite 500, Tulsa, Oklahoma 74135

(Address of principal executive offices and zip code)

Registrant’s telephone number, including area code: (918) 838-8822

Not Applicable

(Former name, former address and former fiscal year, if changed since last report)

___________________________

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.01 per share	MTRX	NASDAQ Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company”, and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer

☐

Accelerated Filer

☒

Non-accelerated Filer

☐

Smaller Reporting Company

☐

Emerging Growth Company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of November 8, 2021 there were 27,888,217 shares of the Company’s common stock, $0.01 par value per share, issued and 26,765,025 shares outstanding.

Table of Contents

TABLE OF CONTENTS


		PAGE
PART I	FINANCIAL INFORMATION

Item 1.	Financial Statements (Unaudited)

	Condensed Consolidated Statements of Income for the Three Months Ended September 30, 2021 and 2020	1

	Condensed Consolidated Statements of Comprehensive Income for the Three Months Ended September 30, 2021 and 2020	2

	Condensed Consolidated Balance Sheets as of September 30, 2021 and June 30, 2021	3

	Condensed Consolidated Statements of Cash Flows for the Three Months Ended September 30, 2021 and 2020	5

	Condensed Consolidated Statements of Changes in Stockholders’ Equity for the Three Months Ended September 30, 2021 and 2020	7

	Notes to Condensed Consolidated Financial Statements	8

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	19

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	31

Item 4.	Controls and Procedures	31

PART II	OTHER INFORMATION

Item 1.	Legal Proceedings	33

Item 1A.	Risk Factors	33

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	34

Item 3.	Defaults Upon Senior Securities	34

Item 4.	Mine Safety Disclosures	34

Item 5.	Other Information	34

Item 6.	Exhibits	35

Signature		36

Table of Contents

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

Matrix Service Company

Condensed Consolidated Statements of Income

(In thousands, except per share data)

(unaudited)


	Three Months Ended
	September 30, 2021		September 30, 2020
Revenue	$	168,093	$	182,771
Cost of revenue	171,601		168,421
Gross profit (loss)	(3,508)		14,350
Selling, general and administrative expenses	16,629		18,128

Restructuring costs	605		(320)
Operating loss	(20,742)		(3,458)
Other income (expense):
Interest expense (Note 5)	(1,999)		(375)
Interest income	21		33
Other	(83)		1,033
Loss before income tax benefit	(22,803)		(2,767)
Provision (benefit) from federal, state and foreign income taxes	(5,265)		270
Net loss	$	(17,538)	$	(3,037)

Basic loss per common share	$	(0.66)	$	(0.12)
Diluted loss per common share	$	(0.66)	$	(0.12)
Weighted average common shares outstanding:
Basic	26,611		26,265
Diluted	26,611		26,265

See accompanying notes.

-1-

Table of Contents

Matrix Service Company

Condensed Consolidated Statements of Comprehensive Income

(In thousands)

(unaudited)


	Three Months Ended
	September 30, 2021		September 30, 2020
Net loss	$	(17,538)	$	(3,037)
Other comprehensive income (loss), net of tax:
Foreign currency translation gain (loss) (net of tax expense of $54 and $12 for the three months ended September 30, 2021 and 2020, respectively	(795)		404
Comprehensive loss	$	(18,333)	$	(2,633)

See accompanying notes.

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Table of Contents

Matrix Service Company

Condensed Consolidated Balance Sheets

(In thousands)

(unaudited)


	September 30, 2021		June 30, 2021
Assets
Current assets:
Cash and cash equivalents (Note 1)	$	34,678	$	83,878
Restricted cash (Note 1)	2,600		—
Accounts receivable, less allowances (September 30, 2021—$586 and June 30, 2021—$898)	144,892		148,030
Costs and estimated earnings in excess of billings on uncompleted contracts	33,766		30,774
Inventories	6,314		7,342
Income taxes receivable	16,845		16,965
Other current assets	11,180		4,230
Total current assets	250,275		291,219
Property, plant and equipment at cost:
Land and buildings	41,556		41,633
Construction equipment	94,209		94,453
Transportation equipment	50,068		50,510
Office equipment and software	43,010		42,706
Construction in progress	126		493
Total property, plant and equipment - at cost	228,969		229,795
Accumulated depreciation	(163,171)		(160,388)
Property, plant and equipment - net	65,798		69,407
Restricted cash, non-current (Note 1)	25,000		—
Operating lease right-of-use assets	21,515		22,412
Goodwill	60,540		60,636
Other intangible assets, net of accumulated amortization	6,094		6,614
Deferred income taxes	10,687		5,295
Other assets, non-current	10,368		11,973
Total assets	$	450,277	$	467,556

See accompanying notes.

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Table of Contents

Matrix Service Company

Condensed Consolidated Balance Sheets

(In thousands, except share data)

(unaudited)


	September 30, 2021		June 30, 2021
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	65,973	$	60,920
Billings on uncompleted contracts in excess of costs and estimated earnings	50,973		53,832
Accrued wages and benefits	20,216		21,008

Accrued insurance	6,627		6,568
Operating lease liabilities	5,570		5,747

Other accrued expenses	4,918		5,327
Total current liabilities	154,277		153,402
Deferred income taxes	29		34
Operating lease liabilities	19,951		20,771

Other liabilities, non-current	7,722		7,810
Total liabilities	181,979		182,017
Commitments and contingencies
Stockholders’ equity:

Common stock—$.01 par value; 60,000,000 shares authorized; 27,888,217 shares issued as of September 30, 2021 and June 30, 2021; 26,697,028 and 26,549,438 shares outstanding as of September 30, 2021 and June 30, 2021	279		279
Additional paid-in capital	135,308		137,575
Retained earnings	157,640		175,178
Accumulated other comprehensive loss	(7,544)		(6,749)
	285,683		306,283
Less: Treasury stock, at cost — 1,191,189 shares as of September 30, 2021, and 1,338,779 shares as of June 30, 2021	(17,385)		(20,744)
Total stockholders' equity	268,298		285,539
Total liabilities and stockholders’ equity	$	450,277	$	467,556

See accompanying notes.

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Table of Contents

Matrix Service Company

Condensed Consolidated Statements of Cash Flows

(In thousands)

(unaudited)


	Three Months Ended
	September 30, 2021		September 30, 2020
Operating activities:
Net loss	$	(17,538)	$	(3,037)
Adjustments to reconcile net loss to net cash used by operating activities:
Depreciation and amortization	4,052		4,639

Stock-based compensation expense	1,869		2,218
Operating lease impairment due to restructuring	—		150
Deferred income tax	(5,343)		289

Gain on sale of property, plant and equipment	(101)		(941)
Provision for uncollectible accounts	4		(64)
Accelerated amortization of deferred debt amendment fees (Note 5)	1,518		—
Other	—		101
Changes in operating assets and liabilities increasing (decreasing) cash:
Accounts receivable	3,134		(10,769)
Costs and estimated earnings in excess of billings on uncompleted contracts	(2,992)		1,854
Inventories	1,028		(291)
Other assets and liabilities	(5,921)		(8,018)
Accounts payable	5,108		(4,431)
Billings on uncompleted contracts in excess of costs and estimated earnings	(2,859)		(366)
Accrued expenses	(1,112)		3,646
Net cash used by operating activities	(19,153)		(15,020)
Investing activities:
Capital expenditures	(219)		(2,777)


Proceeds from asset sales	103		1,074
Net cash used by investing activities	$	(116)	$	(1,703)

See accompanying notes.

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Table of Contents

Matrix Service Company

Condensed Consolidated Statements of Cash Flows

(In thousands)

(unaudited)


	Three Months Ended
	September 30, 2021		September 30, 2020
Financing activities:


Payment of debt amendment fees	$	(922)	$	—



Proceeds from issuance of common stock under employee stock purchase plan	76		82
Repurchase of common stock for payment of statutory taxes due on equity-based compensation	(853)		(1,536)
Other	(118)		—



Net cash used by financing activities	(1,817)		(1,454)
Effect of exchange rate changes on cash, cash equivalents and restricted cash	(514)		316
Decrease in cash, cash equivalents and restricted cash	(21,600)		(17,861)
Cash, cash equivalents and restricted cash, beginning of period (Note 1)	83,878		100,036
Cash, cash equivalents and restricted cash, end of period (Note 1)	$	62,278	$	82,175
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Income taxes	$	—	$	122
Interest, including payment of debt amendment fees	$	1,603	$	470

Non-cash investing and financing activities:
Purchases of property, plant and equipment on account	$	51	$	—

See accompanying notes.

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Table of Contents

Matrix Service Company

Condensed Consolidated Statements of Changes in Stockholders’ Equity

(In thousands, except share data)

(unaudited)


	Common Stock		Additional Paid-In Capital		Retained Earnings		Treasury Stock		Accumulated Other Comprehensive Loss		Total
Balances, July 1, 2021	$	279	$	137,575	$	175,178	$	(20,744)	$	(6,749)	$	285,539
Net loss	—		—		(17,538)		—		—		(17,538)
Other comprehensive loss	—		—		—		—		(795)		(795)


Issuance of deferred shares (217,084 shares)	—		(4,084)

SEC Form 10-Q filed by Matrix Service Company