What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2021-02-09 compared with 2020-11-05 · 184 added, 112 removed, 433 unchanged (41% of the section changed)

3 unchanged sentences

(In thousands, except per share data)

Three Months Ended

September 30,

2020 September 30,

Three Months Ended Six Months Ended

2020 December 31,

2019 December 31,

2020 December 31,

Revenue $ 167,468 $ 318,677 $ 350,239 $ 656,774

2 unchanged sentences

Selling, general and administrative expenses 16,724 23,165 34,852 46,856

Goodwill and other intangible asset impairments — 38,515 — 38,515

Restructuring costs 5,045 — 4,725 —

Operating income (loss) ( 3,458 ) 8,774

Operating loss ( 6,456 ) ( 31,679 ) ( 9,914 ) ( 22,905 )

Other income (expense):

2 unchanged sentences

Other 973 396 2,006 399

Income (loss) before income tax expense ( 2,767 ) 8,862

Provision for federal, state and foreign income taxes 270 2,711

Net income (loss) $ ( 3,037 ) $ 6,151

Basic earnings (loss) per common share $ ( 0.12 ) $ 0.23

Diluted earnings (loss) per common share $ ( 0.12 ) $ 0.22

Loss before income tax benefit ( 5,803 ) ( 31,310 ) ( 8,570 ) ( 22,448 )

Benefit from federal, state and foreign income taxes ( 1,212 ) ( 3,302 ) ( 942 ) ( 591 )

Net loss $ ( 4,591 ) $ ( 28,008 ) $ ( 7,628 ) $ ( 21,857 )

Basic loss per common share $ ( 0.17 ) $ ( 1.04 ) $ ( 0.29 ) $ ( 0.81 )

Diluted loss per common share $ ( 0.17 ) $ ( 1.04 ) $ ( 0.29 ) $ ( 0.81 )

Weighted average common shares outstanding:

5 unchanged sentences

(In thousands)

Three Months Ended

September 30,

2020 September 30,

Net income (loss) $ ( 3,037 ) $ 6,151

Other comprehensive gain (loss), net of tax:

Foreign currency translation gain (loss) (net of tax expense (benefit) of $12 and ($22) for the three months ended September 30, 2020, and 2019, respectively) 404 ( 394 )

Comprehensive income (loss) $ ( 2,633 ) $ 5,757

Three Months Ended Six Months Ended

2020 December 31,

2019 December 31,

2020 December 31,

Net loss $ ( 4,591 ) $ ( 28,008 ) $ ( 7,628 ) $ ( 21,857 )

Other comprehensive loss, net of tax:

Foreign currency translation gain (net of tax expense of $41 and $53 for the three and six months ended December 31, 2020, respectively, and $59 and $37 for the three and six months ended December 31, 2019, respectively) 819 523 1,223 129

Comprehensive loss $ ( 3,772 ) $ ( 27,485 ) $ ( 6,405 ) $ ( 21,728 )

See accompanying notes.

2 unchanged sentences

(In thousands)

September 30,

2020 June 30,

1 unchanged sentence

Cash and cash equivalents $ 93,481 $ 100,036

Accounts receivable, less allowances (September 30, 2020—$830 and June 30, 2020—$905) 171,504 160,671

Accounts receivable, less allowances (December 31, 2020—$853 and June 30, 2020—$905) 151,068 160,671

Costs and estimated earnings in excess of billings on uncompleted contracts 41,398 59,548

22 unchanged sentences

(In thousands, except share data)

September 30,

2020 June 30,

17 unchanged sentences

60,000,000 shares authorized;

27,888,217 shares issued as of September 30, 2020 and June 30, 2020;

26,460,196 and 26,141,528 shares outstanding as of September 30, 2020 and June 30, 2020 279 279

27,888,217 shares issued as of December 31, 2020 and June 30, 2020;

26,502,960 and 26,141,528 shares outstanding as of December 31, 2020 and June 30, 2020 279 279

Additional paid-in capital 133,957 138,966

2 unchanged sentences

325,860 337,274

Treasury stock, at cost — 1,428,021 shares as of September 30, 2020, and 1,746,689 shares as of June 30, 2020 ( 22,342 ) ( 29,385 )

Treasury stock, at cost — 1,385,257 shares as of December 31, 2020, and 1,746,689 shares as of June 30, 2020 ( 21,571 ) ( 29,385 )

Total stockholders' equity 304,289 307,889

4 unchanged sentences

(In thousands)

Three Months Ended

September 30,

2020 September 30,

Six Months Ended

2020 December 31,

Operating activities:

Net income (loss) $ ( 3,037 ) $ 6,151

Adjustments to reconcile net income (loss) to net cash provided (used) by operating activities:

Net loss $ ( 7,628 ) $ ( 21,857 )

Adjustments to reconcile net loss to net cash provided by operating activities:

Depreciation and amortization 9,287 9,702

Goodwill and other intangible asset impairment — 38,515

Stock-based compensation expense 4,199 5,813

3 unchanged sentences

Provision for uncollectible accounts ( 41 ) 1,193

Other 200 ( 213 )

Changes in operating assets and liabilities increasing (decreasing) cash:

6 unchanged sentences

Accrued expenses 3,549 ( 17,475 )

Net cash provided (used) by operating activities ( 15,020 ) 56,104

Net cash provided by operating activities 5,824 38,625

Investing activities:

6 unchanged sentences

(In thousands)

Three Months Ended

September 30,

2020 September 30,

Six Months Ended

2020 December 31,

Financing activities:

1 unchanged sentence

Repayments of advances under senior secured revolving credit facility ( 10,913 ) ( 8,126 )

Payment of debt amendment fees ( 663 ) —

Open market purchase of treasury shares — ( 9,913 )

Proceeds from issuance of common stock under employee stock purchase plan 155 157

Repurchase of common stock for payment of statutory taxes due on equity-based compensation ( 1,549 ) ( 3,491 )

Net cash provided (used) by financing activities ( 1,454 ) 2,801

Net cash used by financing activities ( 11,845 ) ( 3,978 )

Effect of exchange rate changes on cash and cash equivalents 900 248

18 unchanged sentences

Income(Loss) Total

Balances, October 1, 2020 $ 279 $ 132,687 $ 203,365 $ ( 22,342 ) $ ( 7,969 ) $ 306,020

Net loss — — ( 4,591 ) — — ( 4,591 )

Other comprehensive income — — — — 819 819

Issuance of deferred shares (35,615 shares) — ( 632 ) — 632 — —

Treasury shares sold to Employee Stock Purchase Plan (8,585 shares) — ( 79 ) — 152 — 73

Treasury shares purchased to satisfy tax withholding obligations (1,436 shares) — — — ( 13 ) — ( 13 )

Stock-based compensation expense — 1,981 — — — 1,981

Balances, December 31, 2020 $ 279 $ 133,957 $ 198,774 $ ( 21,571 ) $ ( 7,150 ) $ 304,289

Balances, October 1, 2019 $ 279 $ 132,936 $ 245,627 $ ( 13,270 ) $ ( 8,145 ) $ 357,427

Net loss — — ( 28,008 ) — — ( 28,008 )

Other comprehensive income — — — — 523 523

Issuance of deferred shares (40,786 shares) — ( 673 ) — 673 — —

Treasury shares sold to Employee Stock Purchase Plan (4,468 shares) — 5 — 69 — 74

Open market purchase of treasury shares (500,000 shares) — — — ( 9,913 ) — ( 9,913 )

Treasury shares purchased to satisfy tax withholding obligations (4,586 shares) — — — ( 97 ) — ( 97 )

Stock-based compensation expense — 2,789 — — — 2,789

Balances, December 31, 2019 $ 279 $ 135,057 $ 217,619 $ ( 22,538 ) $ ( 7,622 ) $ 322,795

Matrix Service Company

Condensed Consolidated Statements of Changes in Stockholders’ Equity

(In thousands, except share data)

Stock Additional

Capital Retained

Earnings Treasury

Stock Accumulated

Comprehensive

Income(Loss) Total

Balances, July 1, 2020 $ 279 $ 138,966 $ 206,402 $ ( 29,385 ) $ ( 8,373 ) $ 307,889

5 unchanged sentences

Stock-based compensation expense — 4,199 — — — 4,199

Balances, September 30, 2020 $ 279 $ 132,687 $ 203,365 $ ( 22,342 ) $ ( 7,969 ) $ 306,020

Balances, December 31, 2020 $ 279 $ 133,957 $ 198,774 $ ( 21,571 ) $ ( 7,150 ) $ 304,289

Balances, July 1, 2019 $ 279 $ 137,712 $ 239,476 $ ( 17,759 ) $ ( 7,751 ) $ 351,957

Net income — — 6,151 — — 6,151

Other comprehensive loss — — — — ( 394 ) ( 394 )

Net loss — — ( 21,857 ) — — ( 21,857 )

Other comprehensive income — — — — 129 129

Issuance of deferred shares (535,060 shares) — ( 8,486 ) — 8,486 — —

Treasury shares sold to Employee Stock Purchase Plan (8,521 shares) — 18 — 139 — 157

Open market purchase of treasury shares (500,000 shares) — — — ( 9,913 ) — ( 9,913 )

Treasury shares purchased to satisfy tax withholding obligations (178,670 shares) — — — ( 3,491 ) — ( 3,491 )

Stock-based compensation expense — 5,813 — — — 5,813

Balances, September 30, 2019 $ 279 $ 132,936 $ 245,627 $ ( 13,270 ) $ ( 8,145 ) $ 357,427

Balances, December 31, 2019 $ 279 $ 135,057 $ 217,619 $ ( 22,538 ) $ ( 7,622 ) $ 322,795

See accompanying notes.

9 unchanged sentences

The accompanying condensed financial statements should be read in conjunction with the audited financial statements for the year ended June 30, 2020, included in the Company’s Annual Report on Form 10-K for the year then ended.

The results of operations for the three month period ended September 30, 2020 may not necessarily be indicative of the results of operations for the full year ending June 30, 2021.

The results of operations for the three and six month periods ended December 31, 2020 may not necessarily be indicative of the results of operations for the full year ending June 30, 2021.

Significant Accounting Policies

The Company has updated its significant accounting policies to include its accounting policy for recognizing credit losses as a result of adopting the Financial Accounting Standards Board ("FASB") Accounting Standards Update ("ASU") No.

The Company has updated its significant accounting policies as a result of adopting the Financial Accounting Standards Board ("FASB") Accounting Standards Update ("ASU") No.

2016-13, Financial Instruments-Credit Losses (Topic 326) on July 1, 2020, and our change in reportable segments effective July 1, 2020.

17 unchanged sentences

consists of power delivery services provided to investor owned utilities, including construction of new substations, upgrades of existing substations, transmission and distribution line installations, upgrades and maintenance, as well as emergency and storm restoration services.

The Company also provides construction and maintenance services to a variety of power generation facilities, including gas fired facilities in simple or combined cycle design, and provides engineering, fabrication, and construction services for liquefied natural gas ("LNG") utility peak shaving facilities.

The Company also provides construction and maintenance services to a variety of power generation facilities, including gas fired facilities in simple or combined cycle configuration, and provides engineering, fabrication, and construction services for liquefied natural gas ("LNG") utility peak shaving facilities.

• Process and Industrial Facilities :

4 unchanged sentences

consists of work related to aboveground storage tanks and terminals.

Also included in this segment are cryogenic and other specialty storage tanks and terminals, including LNG, liquid nitrogen/liquid oxygen, liquid petroleum and other specialty vessels such as spheres, as well as marine structures and truck and rail loading/offloading facilities.

Also included in this segment are cryogenic and other specialty storage tanks and terminals, including LNG, liquid nitrogen/liquid oxygen, liquid petroleum, hydrogen and other specialty vessels such as spheres, as well as marine structures and truck and rail loading/offloading facilities.

The Company's services include engineering, fabrication, construction, and maintenance and repair, which includes planned and emergency services for both tanks and full terminals.

5 unchanged sentences

Remaining Performance Obligations

The Company had $ 490.4 million of remaining performance obligations yet to be satisfied as of September 30, 2020 .

The Company had $ 418.0 million of remaining performance obligations yet to be satisfied as of December 31, 2020 .

The Company expects to recognize $ 315.3 million of its remaining performance obligations as revenue within the next twelve months.

8 unchanged sentences

The following table provides information about CIE and BIE:

September 30,

2020 June 30,

4 unchanged sentences

The difference between the beginning and ending balances of the Company's CIE and BIE primarily results from the timing of revenue recognized relative to its billings.

The amount of revenue recognized during the three months ended September 30, 2020 that was included in the June 30, 2020 BIE balance was $ 41.2 million.

The amount of revenue recognized during the six months ended December 31, 2020 that was included in the June 30, 2020 BIE balance was $ 52.8 million.

This revenue consists primarily of work performed during the period on contracts with customers that had advance billings.

1 unchanged sentence

Notes to Condensed Consolidated Financial Statements

Progress billings in accounts receivable at September 30, 2020 and June 30, 2020 included retentions to be collected within one year of $ 33.0 million and $ 37.3 million, respectively.

Contract retentions collectible beyond one year are included in other assets in the Condensed Consolidated Balance Sheet and totaled $ 3.8 million as of September 30, 2020 and $ 1.6 million as of June 30, 2020.

Progress billings in accounts receivable at December 31, 2020 and June 30, 2020 included retentions to be collected within one year of $ 35.4 million and $ 37.3 million, respectively.

Contract retentions collectible beyond one year are included in other assets in the Condensed Consolidated Balance Sheet and totaled $ 2.2 million as of December 31, 2020 and $ 1.6 million as of June 30, 2020.

Disaggregated Revenue

2 unchanged sentences

Geographic Disaggregation:

Three Months Ended

September 30,

2020 September 30,

Three Months Ended Six Months Ended

2020 December 31,

2019 December 31,

2020 December 31,

(In thousands)

4 unchanged sentences

Contract Type Disaggregation:

Three Months Ended

September 30,

2020 September 30,

Three Months Ended Six Months Ended

2020 December 31,

2019 December 31,

2020 December 31,

(In thousands)

5 unchanged sentences

The profitability of time and materials and other cost reimbursable contracts is typically lower than fixed-price contracts and is usually less volatile than fixed-price contracts since the profit component is factored into the rates charged for labor, equipment and materials, or is expressed in the contract as a percentage of the reimbursable costs incurred.

In the three and six months ended December 31, 2020, our results of operations were materially impacted by changes in estimate of the forecasted costs to complete a large crude oil storage terminal capital project.

The changes in estimate resulted in decreases in operating income of $ 5.8 million and $ 7.7 million during the three and six months ended December 31, 2020, respectively.

The Company has achieved mechanical completion and is demobilizing from the project.

We continue to work through final closeout and outstanding change orders with the client.

Matrix Service Company

Notes to Condensed Consolidated Financial Statements

Note 3 – Leases

The Company enters into lease arrangements for real estate, construction equipment and information technology equipment in the normal course of business.

Real estate leases accounted for approximately 90 % of all right-of-use assets as of September 30, 2020 .

Real estate leases accounted for approximately 92 % of all right-of-use assets as of December 31, 2020 .

Most real estate and information technology equipment leases generally have fixed payments that follow an agreed upon payment schedule and have remaining lease terms ranging from less than a year to 15 years.

Construction equipment leases generally have "month-to-month" lease terms that automatically renew as long as the equipment remains in use.

During the three months ended September 30, 2020, the Company recognized a $ 0.2 million impairment of a right-of-use asset in connection with the closure of a leased office space.

The impairment is included in restructuring costs in the condensed consolidated statements of income.

Matrix Service Company

Notes to Condensed Consolidated Financial Statements

During the six months ended December 31, 2020, the Company recognized $ 0.2 million of impairments of a right-of-use asset in connection with the closure of a leased office space.

The impairments are included in restructuring costs in the condensed consolidated statements of income.

The components of lease expense in the condensed consolidated statements of income are as follows:

Three Months Ended

September 30, 2020 September 30, 2019

Lease expense Location of Expense in Statements of Income (in thousands)

Three Months Ended Six Months Ended

December 31, 2020 December 31, 2019 December 31, 2020 December 31, 2019

Lease expense Location of Expense (in thousands)

Operating lease expense Cost of revenue and selling, general and administrative expenses $ 2,310 $ 3,256 $ 4,798 $ 6,372

4 unchanged sentences

The future undiscounted lease payments, as reconciled to the discounted operating lease liabilities presented in the Company's Condensed Consolidated Balance Sheets, were as follows:

September 30, 2020

December 31, 2020

Maturity Analysis:

11 unchanged sentences

Non-current operating lease liabilities $ 17,521

The following is a summary of the weighted average remaining operating lease term and weighted average discount rate as of September 30, 2020 :

The following is a summary of the weighted average remaining operating lease term and weighted average discount rate as of December 31, 2020 :

Weighted-average remaining lease term (in years) 6.8 years

Weighted-average discount rate 5.6 %

Matrix Service Company

Notes to Condensed Consolidated Financial Statements

Supplemental cash flow information related to leases is as follows:

Three Months Ended

September 30, 2020

Six Months Ended

December 31, 2020

(in thousands)

3 unchanged sentences

Operating leases $ 1,098

Matrix Service Company

Notes to Condensed Consolidated Financial Statements

Note 4 – Intangible Assets Including Goodwill

4 unchanged sentences

Translation adjustment (1)

Net balance at September 30, 2020 $ 6,926 $ 26,853 $ 26,658 $ 60,437

72 22 142 236

Net balance at December 31, 2020 $ 6,977 $ 26,868 $ 26,760 $ 60,605

(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.

The Company tests its goodwill for impairment annually in May.

While there continues to be uncertainty around the near-term level of spending by some of our customers due to the impacts of the COVID-19 pandemic on our markets and the economy, this uncertainty did not result in any impairment indicators as of September 30, 2020 .

We will continue to monitor the latest developments and perform interim tests for goodwill impairment as needed.

1 unchanged sentence

Information on the carrying value of other intangible assets is as follows:

At September 30, 2020

At December 31, 2020

Useful Life Gross Carrying

13 unchanged sentences

Total amortizing intangible assets $ 24,419 $ ( 15,582 ) $ 8,837

Amortization expense totaled $ 0.6 million and $ 0.9 million during the three months ended September 30, 2020 and September 30, 2019, respectively.

Amortization expense totaled $ 0.5 million and $ 1.1 million during the three and six months ended December 31, 2020 and $ 0.9 million and $ 1.9 million during the three and six months ended December 31, 2019, respectively.

Matrix Service Company

Notes to Condensed Consolidated Financial Statements

We estimate that the remaining amortization expense related to September 30, 2020 amortizing intangible assets will be as follows (in thousands):

We estimate that the remaining amortization expense related to December 31, 2020 amortizing intangible assets will be as follows (in thousands):

Period ending:

5 unchanged sentences

Fiscal 2026 167

Total estimated remaining amortization expense at September 30, 2020 $ 8,287

Thereafter 358

Total estimated remaining amortization expense at December 31, 2020 $ 7,743

Note 5 – Debt

On November 2, 2020, the Company entered into the Fifth Amended and Restated Credit Agreement (the "Credit Agreement"), by and among the Company and certain foreign subsidiaries, as Borrowers, various subsidiaries of the Company, as Guarantors, JPMorgan Chase Bank, N.A., as Administrative Agent, Sole Lead Arranger and Sole Bookrunner, and the other Lenders party thereto, which replaced the Fourth Amended and Restated Credit Agreement (the "Prior Credit Agreement") that was in place at September 30, 2020, and which is described in Part II, Item 8.

On November 2, 2020, the Company entered into the Fifth Amended and Restated Credit Agreement (the "Credit Agreement"), by and among the Company and certain foreign subsidiaries, as Borrowers, various subsidiaries of the Company, as Guarantors, JPMorgan Chase Bank, N.A., as Administrative Agent, Sole Lead Arranger and Sole Bookrunner, and the other Lenders party thereto, which replaced the Fourth Amended and Restated Credit Agreement (the "Prior Credit Agreement") that was in place at June 30, 2020, which is described in Part II, Item 8.

Financial Statements and Supplementary Data, Note 5 - Debt, in the Company's Annual Report on Form 10-K for the year ended June 30, 2020.

3 unchanged sentences

Dollar equivalent sublimit of $ 75.0 million for revolving loans denominated in Australian Dollars, Canadian Dollars, Euros and Pounds Sterling and letters of credit in Australian Dollars, Euros, and Pounds Sterling.

The credit facility also includes a $ 200.0 million sublimit for total letters of credit.

Each revolving borrowing under the Credit Agreement will bear interest at a rate per annum equal to:

7 unchanged sentences

The unused credit facility fee is between 0.35 % and 0.50 % based on the Leverage Ratio.

Covenants and limitations under the Credit Agreement are effective for the quarter ended September 30, 2020 and include the following:

Covenants and limitations under the Credit Agreement include the following:

• Our Leverage Ratio, determined as of the end of each fiscal quarter, may not exceed 3.00 to 1.00 .

10 unchanged sentences

• Share repurchases are limited to $ 30.0 million per calendar year.

As of September 30, 2020, the Company is in compliance with all affirmative, negative, and financial covenants under the Credit Agreement.

Availability at September 30, 2020 under the senior secured revolving credit facility established under the Prior Credit Agreement was as follows:

September 30,

As of December 31, 2020 , the Company is in compliance with all affirmative, negative, and financial covenants under the Credit Agreement.

Availability at December 31, 2020 and June 30, 2020 under the new and prior senior secured revolving credit facilities, respectively, were as follows:

2020 June 30,

6 unchanged sentences

Availability under the senior secured revolving credit facility $ 33,411 $ 93,399

Availability under the new $200.0 million senior secured revolving credit facility at September 30, 2020 would have been the same if the Credit Agreement had been in place on such date due to the capacity constraint.

Availability under the new $200.0 million senior secured revolving credit facility at June 30, 2020 would have been the same if the Credit Agreement had been in place on such date due to the capacity constraint.

Note 6 – Income Taxes

Effective Tax Rate

Our effective tax rates for the three months ended September 30, 2020 and September 30, 2019 were ( 9.8 )% and 30.6 %, respectively.

We expect our effective tax rate to be approximately 27.0 % in fiscal 2021.

The effective tax rate for the three months ended September 30, 2020 was negatively impacted by a $ 1.0 million deferred tax asset adjustment.

Our effective tax rates for the three and six months ended December 31, 2020 were 20.9 % and 11.0 %, respectively;

compared to 10.5 % and 2.6 % for the three and six months ended December 31, 2019, respectively.

We expect our effective tax rate to be approximately 27.0 % for the remainder of fiscal 2021.

The effective tax rate in fiscal 2021 was negatively impacted by deferred tax asset adjustments of $ 0.2 million and $ 1.2 million during the three and six months ended December 31, 2020, respectively.

Matrix Service Company

2 unchanged sentences

The Company has deferred $ 11.1 million of U.S.

payroll tax as of September 30, 2020 through provisions of the Coronavirus Aid, Relief, and Economic Security (CARES) Act (the "CARES Act").

The deferred payroll taxes are included within other liabilities in the consolidated balance sheets.

payroll tax as of December 31, 2020 through provisions of the Coronavirus Aid, Relief, and Economic Security (CARES) Act (the "CARES Act").

The deferred payroll taxes are included within other accrued expenses and other liabilities in the consolidated balance sheets.

The Company must repay half of the deferred payroll tax by December 31, 2021 and the remainder by December 31, 2022.

10 unchanged sentences

Unpriced Change Orders and Claims

Costs and estimated earnings in excess of billings on uncompleted contracts included revenues for unpriced change orders and claims of $ 13.9 million at September 30, 2020 and $ 14.5 million at June 30, 2020.

Costs and estimated earnings in excess of billings on uncompleted contracts included revenues for unpriced change orders and claims of $ 13.0 million at December 31, 2020 and $ 14.5 million at June 30, 2020.

Generally, collection of amounts related to unpriced change orders and claims is expected within twelve months.

However, since customers may not pay these amounts until final resolution of related claims, collection of these amounts may extend beyond one year.

During the third quarter of fiscal 2020, the Company commenced litigation in an effort to collect $ 17.8 million in accounts receivable from an iron and steel customer following the deterioration of the relationship in the second quarter of fiscal 2020.

During the third quarter of fiscal 2020, the Company commenced litigation in an effort to collect accounts receivable from an iron and steel customer following the deterioration of the relationship in the second quarter of fiscal 2020.

The unpaid receivable balance at December 31, 2020 was $ 16.9 million.

Litigation is unpredictable, however, based on the terms of the contract with this customer, the Company is entitled to collect the full amount owed under the contract.

8 unchanged sentences

The computation of basic and diluted earnings per share is as follows:

Three Months Ended

September 30,

2020 September 30,

Three Months Ended Six Months Ended

2020 December 31,

2019 December 31,

2020 December 31,

(In thousands, except per share data)

Net income (loss) $ ( 3,037 ) $ 6,151

Net loss $ ( 4,591 ) $ ( 28,008 ) $ ( 7,628 ) $ ( 21,857 )

Weighted average shares outstanding 26,489 26,925 26,377 26,930

Basic earnings (loss) per share $ ( 0.12 ) $ 0.23

Weighted average shares outstanding – basic 26,265 26,935

Dilutive stock options — 25

Dilutive nonvested deferred shares — 615

Basic loss per share $ ( 0.17 ) $ ( 1.04 ) $ ( 0.29 ) $ ( 0.81 )

Diluted weighted average shares 26,489 26,925 26,377 26,930

Diluted earnings (loss) per share $ ( 0.12 ) $ 0.22

Diluted loss per share $ ( 0.17 ) $ ( 1.04 ) $ ( 0.29 ) $ ( 0.81 )

The following securities are considered antidilutive and have been excluded from the calculation of Diluted EPS:

Three Months Ended

September 30,

2020 September 30,

Three Months Ended Six Months Ended

2020 December 31,

2019 December 31,

2020 December 31,

(In thousands)

10 unchanged sentences

The Company also provides construction and maintenance services to a variety of power generation facilities, including gas fired facilities in simple or combined cycle configuration and provides engineering, fabrication, and construction services for LNG utility peak shaving facilities.

• Process and Industrial Facilities :

4 unchanged sentences

consists of work related to aboveground storage tanks and terminals.

The Company's services include engineering, fabrication, construction, and maintenance and repair, which includes planned and emergency services for both tanks and full terminals.

10 unchanged sentences

(In thousands)

Three Months Ended

September 30,

2020 September 30,

Three Months Ended Six Months Ended

2020 December 31,

2019 December 31,

2020 December 31,

Gross revenue

24 unchanged sentences

Total selling, general and administrative expenses $ 16,724 $ 23,165 $ 34,852 $ 46,856

Restructuring costs

Intangible asset impairments and restructuring costs

Utility and Power Infrastructure $ 812 $ 24,900 $ 823 $ 24,900

2 unchanged sentences

Corporate 228 — 384 —

Total restructuring costs $ ( 320 ) $ —

Total asset impairments and restructuring costs $ 5,045 $ 38,515 $ 4,725 $ 38,515

Operating income (loss)

3 unchanged sentences

Corporate ( 7,070 ) ( 6,848 ) ( 13,939 ) ( 14,682 )

Total operating income (loss) $ ( 3,458 ) $ 8,774

Total operating loss $ ( 6,456 ) $ ( 31,679 ) $ ( 9,914 ) $ ( 22,905 )

Matrix Service Company

1 unchanged sentence

Total assets by segment were as follows:

September 30,

2020 June 30,

5 unchanged sentences

Note 10 – Restructuring Costs

During the second half of fiscal 2020, the Company implemented a business improvement plan related to:

During the third quarter of fiscal 2020, the Company initiated a business improvement plan to increase profitability and reduce its cost structure related to:

• its strategic initiative to exit the domestic iron and steel industry;

• the implementation of business improvements in the power delivery portion of the Utility and Power Infrastructure segment;

• the reduction of its cost structure following the decline in revenue caused by the COVID-19 pandemic and related market disruption and the decline in the price of crude oil.

The business improvement plan consisted of discretionary cost reductions, workforce reductions and closures of certain offices in order to increase the utilization of the Company's staff and bring the cost structure of the business in line with the expected near-term decrease in revenue.

The Company incurred $ 14.0 million of restructuring costs during fiscal 2020 and substantially completed its restructuring activities under the business improvement plan.

However, the Company recognized a $0.3 million gain on restructuring activities during the three months ended September 30, 2020 as a result of various trailing restructuring expenses and credits.

The restructuring reserve was $ 0.9 million as of September 30, 2020, which primarily relates to the unpaid portion of severance costs.

• the decline in revenue caused by the ongoing effects of the COVID-19 pandemic and related market disruptions.

The business improvement plan consists of discretionary cost reductions, workforce reductions, reduction of capital expenditures and the reduction in size or closure of certain offices in order to increase the utilization of the Company's staff and bring the cost structure of the business in line with revenue volumes.

The Company incurred $ 14.0 million of restructuring costs during fiscal 2020 and $4.7 million during the first half of fiscal 2021.

The restructuring costs consist primarily of severance costs, facility closure costs, intangible asset impairments and other liabilities as a result of exiting certain operations.

Activities under this plan are essentially complete with remaining costs of $ 1.0 million to $ 1.5 million expected in the third quarter.

Matrix Service Company

Notes to Condensed Consolidated Financial Statements

Restructuring costs under our business improvement plan are classified as follows:

Three months ended December 31, 2020 Six months ended December 31, 2020 Since Inception of Business Improvement Plan

(In thousands)

Utility and Power Infrastructure

Severance and other personnel-related costs $ 811 $ 818 $ 2,158

Facility costs 1 5 240

Other intangible asset impairments — — 1,150

Total Utility and Power Infrastructure $ 812 $ 823 $ 3,548

Process and Industrial Facilities

Severance and other personnel-related costs $ 3,082 $ 2,590 $ 8,758

Facility costs 134 15 2,770

Other intangible asset impairments — — 375

Other costs 148 259 259

Total Process and Industrial Facilities $ 3,364 $ 2,864 $ 12,162

Storage and Terminal Solutions

Severance and other personnel-related costs $ 640 $ 653 $ 1,000

Facility costs 1 1 721

Total Storage and Terminal Solutions $ 641 $ 654 $ 1,721

Severance and other personnel-related costs $ 155 $ 161 $ 1,081

Facility costs 73 223 223

Total Corporate $ 228 $ 384 $ 1,304

Restructuring Costs by Type:

Severance and other personnel-related costs $ 4,688 $ 4,222 $ 12,997

Facility costs 209 244 3,954

Other intangible asset impairments — — 1,525

Other costs 148 259 259

Total restructuring costs $ 5,045 $ 4,725 $ 18,735

The restructuring reserve is included in other accrued expenses and other liabilities in the condensed consolidated balance sheets.

The table below is a reconciliation of the beginning and ending restructuring reserve balance under the business improvement plan (in thousands):

Balance as of June 30, 2020 $ 2,403

Restructuring costs incurred 3,422

Cash payments ( 1,214 )

Adjustment to liability ( 510 )

Balance as of December 31, 2020 $ 4,101

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements