What changed in this filing

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Item 1. Financial Statements

2022-02-08 compared with 2021-11-09 · 161 added, 114 removed, 425 unchanged (39% of the section changed)

3 unchanged sentences

(In thousands, except per share data)

Three Months Ended

September 30,

2021 September 30,

Three Months Ended Six Months Ended

2021 December 31,

2020 December 31,

2021 December 31,

Revenue $ 161,965 $ 167,468 $ 330,058 $ 350,239

8 unchanged sentences

Other ( 60 ) 973 ( 143 ) 2,006

Loss before income tax benefit ( 22,803 ) ( 2,767 )

Provision (benefit) from federal, state and foreign income taxes ( 5,265 ) 270

Loss before income tax expense (benefit) ( 13,943 ) ( 5,803 ) ( 36,746 ) ( 8,570 )

Provision (benefit) for federal, state and foreign income taxes 10,976 ( 1,212 ) 5,711 ( 942 )

Net loss $ ( 24,919 ) $ ( 4,591 ) $ ( 42,457 ) $ ( 7,628 )

8 unchanged sentences

(In thousands)

Three Months Ended

September 30,

2021 September 30,

Three Months Ended Six Months Ended

2021 December 31,

2020 December 31,

2021 December 31,

Net loss $ ( 24,919 ) $ ( 4,591 ) $ ( 42,457 ) $ ( 7,628 )

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

Foreign currency translation gain (loss) (net of tax expense (benefit) of $(8) and $46 for the three and six months ended December 31, 2021, respectively, and $41 and $53 for the three and six months ended December 31, 2020, respectively) 99 819 ( 696 ) 1,223

Comprehensive loss $ ( 24,820 ) $ ( 3,772 ) $ ( 43,153 ) $ ( 6,405 )

3 unchanged sentences

(In thousands)

September 30,

2021 June 30,

2 unchanged sentences

Restricted cash (Note 1) 2,600 —

Accounts receivable, less allowances (September 30, 2021—$586 and June 30, 2021—$898) 144,892 148,030

Accounts receivable, less allowances (December 31, 2021—$547 and June 30, 2021—$898) 121,601 148,030

Costs and estimated earnings in excess of billings on uncompleted contracts 34,503 30,774

23 unchanged sentences

(In thousands, except share data)

September 30,

2021 June 30,

16 unchanged sentences

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

27,888,217 shares issued as of December 31, 2021 and June 30, 2021;

26,773,975 and 26,549,438 shares outstanding as of December 31, 2021 and June 30, 2021 279 279

Additional paid-in capital 135,913 137,575

2 unchanged sentences

261,468 306,283

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 )

Treasury stock, at cost — 1,114,242 shares as of December 31, 2021, and 1,338,779 shares as of June 30, 2021 ( 15,858 ) ( 20,744 )

Total stockholders' equity 245,610 285,539

4 unchanged sentences

(In thousands)

Three Months Ended

September 30,

2021 September 30,

Six Months Ended

2021 December 31,

Operating activities:

Net loss $ ( 42,457 ) $ ( 7,628 )

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

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

Depreciation and amortization 7,841 9,287

13 unchanged sentences

Accrued expenses ( 10,657 ) 3,549

Net cash used by operating activities ( 19,153 ) ( 15,020 )

Net cash provided by operating activities 11,385 5,824

Investing activities:

6 unchanged sentences

(In thousands)

Three Months Ended

September 30,

2021 September 30,

Six Months Ended

2021 December 31,

Financing activities:

Advances under senior secured revolving credit facility $ — $ 1,125

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

Payment of debt amendment fees ( 1,010 ) ( 663 )

Issuances of common stock 199 —

Proceeds from issuance of common stock under employee stock purchase plan 143 155

3 unchanged sentences

Effect of exchange rate changes on cash, cash equivalents and restricted cash ( 405 ) 900

Decrease in cash, cash equivalents and restricted cash ( 21,600 ) ( 17,861 )

Increase (decrease) in cash, cash equivalents and restricted cash 8,762 ( 6,555 )

Cash, cash equivalents and restricted cash, beginning of period (Note 1) 83,878 100,036

1 unchanged sentence

Supplemental disclosure of cash flow information:

Cash paid during the period for:

Cash paid (received) during the period for:

Income taxes $ ( 341 ) $ 197

11 unchanged sentences

Comprehensive

Balances, July 1, 2021 $ 279 $ 137,575 $ 175,178 $ ( 20,744 ) $ ( 6,749 ) $ 285,539

Balances, September 30, 2021 $ 279 $ 135,308 $ 157,640 $ ( 17,385 ) $ ( 7,544 ) $ 268,298

Net loss — — ( 24,919 ) — — ( 24,919 )

Other comprehensive income — — — — 99 99

Exercise of stock options (19,550 shares) — ( 189 ) — 388 — 199

Issuance of deferred shares (51,319 shares) — ( 1,018 ) — 1,018 — —

Treasury shares sold to Employee Stock Purchase Plan (6,078 shares) — ( 54 ) — 121 — 67

Stock-based compensation expense — 1,866 — — — 1,866

Balances, December 31, 2021 $ 279 $ 135,913 $ 132,721 $ ( 15,858 ) $ ( 7,445 ) $ 245,610

Balances, September 30, 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

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

Balances, June 30, 2021 $ 279 $ 137,575 $ 175,178 $ ( 20,744 ) $ ( 6,749 ) $ 285,539

Net loss — — ( 42,457 ) — — ( 42,457 )

Other comprehensive loss — — — — ( 696 ) ( 696 )

Exercise of stock options (19,550 shares) — ( 189 ) — 388 — 199

Issuance of deferred shares (268,403 shares) — ( 5,102 ) — 5,102 — —

2 unchanged sentences

Stock-based compensation expense — 3,735 — — — 3,735

Balances, September 30, 2021 $ 279 $ 135,308 $ 157,640 $ ( 17,385 ) $ ( 7,544 ) $ 268,298

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

Balances, December 31, 2021 $ 279 $ 135,913 $ 132,721 $ ( 15,858 ) $ ( 7,445 ) $ 245,610

Balances, June 30, 2020 $ 279 $ 138,966 $ 206,402 $ ( 29,385 ) $ ( 8,373 ) $ 307,889

Net loss — — ( 7,628 ) — — ( 7,628 )

4 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

Matrix Service Company

8 unchanged sentences

The accompanying condensed consolidated financial statements should be read in conjunction with the audited financial statements for the year ended June 30, 2021, included in our Annual Report on Form 10-K for the year then ended.

The results of operations for the three month period ended September 30, 2021 may not necessarily be indicative of the results of operations for the full year ending June 30, 2022.

The results of operations for the three and six month periods ended December 31, 2021 may not necessarily be indicative of the results of operations for the full year ending June 30, 2022.

Significant Accounting Policies

4 unchanged sentences

Since this cash must be restricted through the maturity date of the ABL Facility, which is beyond one year, we have classified this restricted cash as non-current in our Condensed Consolidated Balance Sheets.

In addition, we must maintain a restricted cash balance of $2.6 million in support of the purchase card program that is associated with our prior card administrator.

We have included this restricted cash in current assets in our Condensed Consolidated Balance Sheets since we expect to dissolve the prior purchase card program during fiscal 2022.

In addition, we must maintain a restricted cash balance of $2.6 million in support of the purchase card program that is associated with our prior card administrator while we transition to our new card administrator.

We have included this restricted cash in current assets in our Condensed Consolidated Balance Sheets since we expect to terminate the prior purchase card program during fiscal 2022.

The following table provides a reconciliation of cash, cash equivalents and restricted cash in the Condensed Consolidated Balance Sheets to the total cash, cash equivalents and restricted cash shown in the Condensed Consolidated Statements of Cash Flows (in thousands):

September 30,

2021 June 30,

5 unchanged sentences

Remaining Performance Obligations

We had $ 365.4 million of remaining performance obligations yet to be satisfied as of September 30, 2021 .

We had $ 396.8 million of remaining performance obligations yet to be satisfied as of December 31, 2021 .

We expect to recognize $ 326.6 million of our remaining performance obligations as revenue within the next twelve months.

2 unchanged sentences

Contract Balances

Contract terms with customers include the timing of billing and payment, which usually differs from the timing of revenue recognition.

Contract terms with customers include the timing of billing and payments, which usually differs from the timing of revenue recognition.

As a result, we carry contract assets and liabilities in our balance sheet.

5 unchanged sentences

The following table provides information about CIE and BIE:

September 30,

2021 June 30,

4 unchanged sentences

The difference between the beginning and ending balances of our 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, 2021 that was included in the June 30, 2021 BIE balance was $ 44.3 million.

The amount of revenue recognized during the six months ended December 31, 2021 that was included in the June 30, 2021 BIE balance was $ 48.4 million.

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

Progress billings in accounts receivable at September 30, 2021 and June 30, 2021 included retentions to be collected within one year of $ 12.8 million and $ 19.9 million, respectively.

Contract retentions collectible beyond one year are included in other assets, non-current in the Condensed Consolidated Balance Sheet and totaled $ 2.6 million as of September 30, 2021 and $ 3.1 million as of June 30, 2021.

Progress billings in accounts receivable at December 31, 2021 and June 30, 2021 included retentions to be collected within one year of $ 13.6 million and $ 19.9 million, respectively.

Contract retentions collectible beyond one year are included in other assets, non-current in the Condensed Consolidated Balance Sheet and totaled $ 2.1 million as of December 31, 2021 and $ 3.1 million as of June 30, 2021.

Disaggregated Revenue

2 unchanged sentences

Geographic Disaggregation:

Three Months Ended

September 30,

2021 September 30,

Three Months Ended Six Months Ended

2021 December 31,

2020 December 31,

2021 December 31,

(In thousands)

4 unchanged sentences

Contract Type Disaggregation:

Three Months Ended

September 30,

2021 September 30,

Three Months Ended Six Months Ended

2021 December 31,

2020 December 31,

2021 December 31,

(In thousands)

7 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.

Our results of operations were materially impacted by an increase in the forecasted costs to complete a large capital project in the Utility and Power Infrastructure segment, which resulted in a decrease in gross profit of $ 5.9 million in the three months ended September 30, 2021.

The change in estimate was principally due to unexpected equipment repairs during commissioning that delayed the scheduled completion and increased the estimated costs to complete.

We achieved a critical performance milestone in the second quarter of fiscal 2022, which significantly reduced our financial exposure.

Our results of operations for the first quarter of fiscal 2022 were materially impacted by an increase in the forecasted costs to complete a large capital project in the Utility and Power Infrastructure segment, which resulted in a decrease in gross profit of $ 5.9 million.

The change in forecasted costs was principally due to unexpected equipment repairs during commissioning that delayed the scheduled completion and increased the estimated costs to complete.

We achieved a critical performance milestone in the second quarter of fiscal 2022, which significantly reduced our financial exposure and resulted in no change to the expected outcome of the project.

Our results of operations were materially impacted by an increase in the costs required to complete a thermal energy storage tank repair and maintenance project in the Storage and Terminal Solutions segment, which resulted in a decrease in gross profit of $ 2.8 million and $ 5.5 million in the three and six months ended December 31, 2021, respectively.

The increase in costs was primarily due to changes in repair scope, expanded client weld testing and associated schedule delays.

We expect to complete these repairs in the second half of fiscal 2022.

Note 3 – Leases

We enter into lease arrangements for real estate, construction equipment and information technology equipment in the normal course of business.

Real estate leases accounted for approximately 93 % of all right-of-use assets as of September 30, 2021 .

Real estate leases accounted for approximately 94 % of all right-of-use assets as of December 31, 2021 .

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 14 years.

1 unchanged sentence

The components of lease expense in the Condensed Consolidated Statements of Income are as follows:

Three Months Ended

September 30, 2021 September 30, 2020

Three Months Ended Six Months Ended

December 31, 2021 December 31, 2020 December 31, 2021 December 31, 2020

Lease expense Location of Expense (in thousands)

4 unchanged sentences

(1) Primarily represents the lease expense of construction equipment that is subject to month-to-month rental agreements with expected rental durations of less than one year.

Matrix Service Company

Notes to Condensed Consolidated Financial Statements

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

September 30, 2021

December 31, 2021

Maturity Analysis:

11 unchanged sentences

Non-current operating lease liabilities $ 18,925

Matrix Service Company

Notes to Condensed Consolidated Financial Statements

The following is a summary of the weighted average remaining operating lease term and weighted average discount rate as of September 30, 2021 :

The following is a summary of the weighted average remaining operating lease term and weighted average discount rate as of December 31, 2021 :

Weighted-average remaining lease term (in years) 7.3 years

1 unchanged sentence

Supplemental cash flow information related to leases is as follows:

Three Months Ended

September 30, 2021

Six Months Ended

December 31, 2021

(in thousands)

3 unchanged sentences

Operating leases $ 1,344

Note 4 – Intangible Assets Including Goodwill

Note 4 – Goodwill and Other Intangible Assets

The changes in the carrying value of goodwill by segment are as follows:

4 unchanged sentences

( 28 ) ( 7 ) ( 55 ) ( 90 )

Net balance at September 30, 2021 $ 6,954 $ 26,870 $ 26,716 $ 60,540

Net balance at December 31, 2021 $ 6,956 $ 26,871 $ 26,719 $ 60,546

(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.

Matrix Service Company

Notes to Condensed Consolidated Financial Statements

We test our goodwill for impairment annually as of May 31st.

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 and the timing of the economic recovery in certain energy markets, we concluded, that based on the totality of both positive and negative factors, no impairment indicators existed at September 30, 2021.

However, if customer spending levels do not improve or if the outlook in certain key markets deteriorates, we may need to perform an interim goodwill impairment test, which could result in an impairment.

However, based on future operating performance and economic factors, including our future share price, we may need to perform an interim goodwill impairment test, which could result in an impairment.

Other Intangible Assets

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

At September 30, 2021

At December 31, 2021

Useful Life Gross Carrying

5 unchanged sentences

Total amortizing intangible assets $ 19,757 $ ( 14,097 ) $ 5,660

Matrix Service Company

Notes to Condensed Consolidated Financial Statements

At June 30, 2021

6 unchanged sentences

Total amortizing intangible assets $ 19,837 $ ( 13,223 ) $ 6,614

Amortization expense totaled $ 0.5 million and $ 0.6 million during the three months ended September 30, 2021 and September 30, 2020, respectively.

We estimate that the remaining amortization expense related to September 30, 2021 amortizing intangible assets will be as follows (in thousands):

Amortization expense totaled $ 0.4 million and $ 1.0 million during the three and six months ended December 31, 2021 and $ 0.5 million and $ 1.1 million during the three and six months ended December 31, 2020, respectively.

We estimate that the remaining amortization expense related to December 31, 2021 amortizing intangible assets will be as follows (in thousands):

Period ending:

4 unchanged sentences

Fiscal 2026 555

Total estimated remaining amortization expense at September 30, 2021 $ 6,094

Total estimated remaining amortization expense at December 31, 2021 $ 5,660

Note 5 – Debt

7 unchanged sentences

Our obligations under the ABL Facility are secured by a first lien on all our assets and the assets of our co-borrowers and guarantors under the ABL Facility.

Matrix Service Company

Notes to Condensed Consolidated Financial Statements

The maximum amount that we may borrow under the ABL Facility is subject to a borrowing base, which is based on restricted cash plus a percentage of the value of certain accounts receivable, inventory and equipment, reduced for certain reserves.

We are required to maintain a minimum of $25.0 million of restricted cash at all times, but such amounts are also included in the borrowing base.

At September 30, 2021, availability under the ABL Facility was $ 32.1 million and there were $ 43.1 million in letters of credit outstanding.

The ABL Facility matures and any outstanding amounts become due and payable on September 9, 2026 .

At December 31, 2021 , our borrowing base was $ 70.1 million and we had $ 33.4 million in letters of credit outstanding issued by Bank of Montreal, which resulted in availability of $ 36.7 million under the ABL Facility.

In addition, there were $ 9.5 million in letters of credit outstanding issued by JPMorgan Chase Bank, N.A.

("JPMorgan").

JPMorgan was the administrative agent of our former senior secured revolving credit facility, which was terminated and replaced with the ABL Facility.

The JPMorgan letters of credit outstanding as of December 31, 2021 were in the process of being replaced by Bank of Montreal letters of credit, and that process was substantially complete at the end of January.

The letters of credit outstanding from Bank of Montreal had reduced from $ 33.4 million as of December 31, 2021 to $ 23.6 million as of January 31, 2022.

In addition, the letters of credit outstanding from JPMorgan had reduced from $ 9.5 million as of December 31, 2021 to $ 0.2 million as of January 31, 2022.

Borrowings under the ABL Facility bear interest through maturity at a variable rate based upon, at our option, an annual rate equal to any of a base rate (“Base Rate”), Canadian prime rate, CDOR rate or a LIBOR rate, plus an applicable margin.

8 unchanged sentences

The fee for undrawn amounts is 0.25 % per annum and is due quarterly.

Matrix Service Company

Notes to Condensed Consolidated Financial Statements

The ABL Facility contains customary conditions to borrowings, events of default and covenants, including, but not limited to, covenants that restrict our ability to sell assets, engage in mergers and acquisitions, incur, assume or permit to exist additional indebtedness and guarantees, create or permit to exist liens, pay cash dividends, issue equity instruments, make distribution or redeem or repurchase capital stock.

In the event that our availability is less than the greater of (i) $ 15.0 million and (ii) 15.00 % of the lesser of (1) the current borrowing base and (2) the commitments under the ABL Facility then in effect, a consolidated Fixed Charge Coverage Ratio of at least 1.00 to 1.00 must be maintained.

In the event that our availability is less than the greater of (i) $ 15.0 million and (ii) 15.00 % of the commitments under the ABL Facility then in effect, a consolidated Fixed Charge Coverage Ratio of at least 1.00 to 1.00 must be maintained.

We are in compliance with all covenants of the ABL Facility as of December 31, 2021.

Senior Secured Revolving Credit Facility

The ABL Facility replaced the Fifth Amended and Restated Credit Agreement (the "Prior Credit Agreement"), that was entered into on November 2, 2020, and subsequently amended on May 4, 2021, by and among us and certain foreign subsidiaries, as Borrowers, various subsidiaries of ours, as Guarantors, JPMorgan Chase Bank, N.A., as Administrative Agent, Sole Lead Arranger and Sole Book Runner, and the other Lenders party thereto.

The Prior Credit Agreement provided for a three-year senior secured revolving credit facility of $ 200.0 million that expired November 2, 2023 .

The ABL Facility replaced the Fifth Amended and Restated Credit Agreement (the "Prior Credit Agreement"), that was entered into on November 2, 2020, and subsequently amended on May 4, 2021, by and among us and certain foreign subsidiaries, as Borrowers, various subsidiaries of ours, as Guarantors, JPMorgan, as Administrative Agent, Sole Lead Arranger and Sole Book Runner, and the other Lenders party thereto.

The Prior Credit Agreement provided for a three-year senior secured revolving credit facility of $ 200.0 million that was set to expire November 2, 2023 .

We had no borrowings and $ 41.3 million of letters of credit outstanding under the Prior Credit Agreement as of the date we commenced the ABL Facility.

Interest expense during the three months ended September 30, 2021 included $1.5 million of accelerated amortization of deferred debt amendment fees associated with the Prior Credit Agreement.

As of December 31, 2021 there were $ 9.5 million in letters of credit outstanding under the Prior Credit Agreement, which decreased to $ 0.2 million outstanding as of January 31, 2022.

Interest expense during the six months ended December 31, 2021 included $1.5 million of accelerated amortization of deferred debt amendment fees associated with the Prior Credit Agreement.

Note 6 – Income Taxes

Effective Tax Rate

Our effective tax rates were 23.1 % and ( 9.8 )% for the three months ended September 30, 2021 and September 30, 2020, respectively.

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

Net Operating Loss Carryback and Refund of Prior Years Overpayment

Through provisions in the CARES Act, we had income tax benefits of $ 5.2 million during fiscal 2021 and $ 0.3 million during the three months ended September 30, 2021 from the ability to carryback the fiscal 2021 federal net operating loss to a period with a higher statutory federal income tax rate.

Our effective tax rates were ( 78.7 )% and ( 15.5 )% for the three and six months ended December 31, 2021 , compared to 20.9 % and 11.0 % during the three and six months ended December 31, 2020, respectively.

The effective tax rates in fiscal 2022 were negatively impacted by a $ 14.2 million valuation allowance placed on our deferred tax assets during the second quarter.

The effective tax rates in fiscal 2021 were 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

Notes to Condensed Consolidated Financial Statements

In determining the need for a valuation allowance on deferred tax assets, the accounting standards provide that the existence of a cumulative loss over a three-year period generally precludes the use of management’s projections of future taxable income.

Consequently, we have recorded a full valuation allowance against the deferred tax assets in the U.S.

taxable jurisdiction in the amount of $14.2 million.

These assets are primarily comprised of federal net operating losses, which have an indefinite carryforward, federal tax credits and those state net operating losses for which a valuation allowance did not previously exist.

To the extent the Company generates taxable income in the future, or cumulative losses are no longer present and our future projections for growth or tax planning strategies are demonstrated, we will realize the benefit associated with the net operating losses for which the valuation allowance has been provided.

Net Operating Loss Carryback Refund

Through provisions in the CARES Act, we had an income tax benefit from the ability to carryback the fiscal 2021 federal net operating loss to a period with a higher statutory federal income tax rate.

We estimate that we will receive a $ 12.6 million tax refund in connection with this carryback, which is included in income taxes receivable in the Condensed Consolidated Balance Sheets.

In addition, we expect to receive a $ 2.4 million tax refund in connection with overpayments from prior years, which is included in income taxes receivable in the Condensed Consolidated Balance Sheets.

Refund of Overpayment of Estimated Taxes

In January 2022, we received a $ 2.4 million tax refund in connection with overpayments of estimated taxes from prior years, which was included in income taxes receivable in the Condensed Consolidated Balance Sheets as of December 31, 2021.

Deferred Payroll Taxes

We have deferred $ 11.1 million of U.S.

payroll tax as of September 30, 2021 through provisions of CARES Act.

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

The current portion of deferred payroll taxes is included within accrued wages and benefits and the non-current portion is included within other liabilities, non-current in the Condensed Consolidated Balance Sheets.

As of September 30, 2021, we deferred a total of $ 11.1 million of U.S.

payroll tax through provisions of CARES Act.

We repaid half of the deferred payroll tax outstanding during the three months ended December 31, 2021 and must repay the remaining balance by December 31, 2022.

The remaining balance of deferred payroll taxes is included within accrued wages and benefits in the Condensed Consolidated Balance Sheets.

Note 7 – Commitments and Contingencies

Insurance Reserves

We maintain insurance coverage for various aspects of its operations.

However, exposure to potential losses is retained through the use of deductibles, self-insured retentions and coverage limits.

Matrix Service Company

Notes to Condensed Consolidated Financial Statements

We maintain insurance coverage for various aspects of our operations.

However, we retain exposure to potential losses through the use of deductibles, self-insured retentions and coverage limits.

Typically, our contracts require us to indemnify our customers for injury, damage or loss arising from the performance of our services and provide warranties for materials and workmanship.

5 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 $ 15.3 million at September 30, 2021 and $ 14.6 million at June 30, 2021.

Costs and estimated earnings in excess of billings on uncompleted contracts included revenues for unpriced change orders and claims of $ 10.1 million at December 31, 2021 and $ 14.6 million at June 30, 2021.

The amounts ultimately realized may be significantly different than the recorded amounts resulting in a material adjustment to future earnings.

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.

Matrix Service Company

Notes to Condensed Consolidated Financial Statements

During the third quarter of fiscal 2020, we 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 September 30, 2021 was $ 17.0 million.

The unpaid receivable balance at December 31, 2021 was $ 17.0 million.

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

We and our subsidiaries are participants in various legal actions.

It is the opinion of management that none of the other known legal actions, including a contract dispute with a customer involving the construction of a crude terminal, will have a material impact on our financial position, results of operations or liquidity.

It is the opinion of management that none of the other known legal actions will have a material impact on our financial position, results of operations or liquidity.

Note 8 – Earnings per Common Share

1 unchanged sentence

Diluted earnings per share (“Diluted EPS”) includes the dilutive effect of stock options and nonvested deferred shares.

In the event we report a loss, stock options and nonvested deferred shares are not included since they are anti-dilutive.

In the event we report a loss, stock options

and nonvested deferred shares are not included since they are anti-dilutive.

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

Three Months Ended

September 30,

2021 September 30,

Three Months Ended Six Months Ended

2021 December 31,

2020 December 31,

2021 December 31,

(In thousands, except per share data)

4 unchanged sentences

Diluted loss per share $ ( 0.93 ) $ ( 0.17 ) $ ( 1.59 ) $ ( 0.29 )

Matrix Service Company

Notes to Condensed Consolidated Financial Statements

Note 9 – Segment Information

3 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.

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

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

• Process and Industrial Facilities :

2 unchanged sentences

Our services include plant maintenance, turnarounds, industrial cleaning services, engineering, fabrication, and capital construction.

Matrix Service Company

Notes to Condensed Consolidated Financial Statements

• Storage and Terminal Solutions :

consists of work related to aboveground storage tanks and terminals.

consists of work related to aboveground crude oil and refined product storage tanks and terminals.

We also include work related to cryogenic and other specialty storage tanks and terminals, including LNG, liquid nitrogen/liquid oxygen, liquid petroleum, hydrogen and other specialty vessels such as spheres in this segment, as well as work related to marine structures and truck and rail loading/offloading facilities.

10 unchanged sentences

(In thousands)

Three Months Ended

September 30,

2021 September 30,

Three Months Ended Six Months Ended

2021 December 31,

2020 December 31,

2021 December 31,

Gross revenue

39 unchanged sentences

Total assets by segment were as follows:

September 30,

2021 June 30,

5 unchanged sentences

Note 10 – Restructuring Costs

In fiscal 2020, we initiated a business improvement plan to increase profitability and reduce our cost structure due to our strategic initiative to exit the domestic iron and steel industry and 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 our staff and bring the cost structure of the business in line with revenue volumes.

We incurred $0.6 million of restructuring costs during the three months ended September 30, 2021 and $21.4 million of restructuring costs since inception of the plan.

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

We expect to substantially complete this initiative in fiscal 2022.

In fiscal 2020, we initiated a business improvement plan to increase profitability and reduce our cost structure in order to help us become more competitive and deliver higher quality service.

As a result of specific events, including the effects of the COVID-19 pandemic and related market disruptions, the Company expanded its business improvement plan.

The business improvement plan consisted of an initial phase 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 our staff and bring the cost structure of the business in line with revenue volumes.

In fiscal 2022, we commenced a second phase of our plan to focus on centralization of support functions, including business development, accounting, human resources, procurement and project services into shared service centers.

We incurred $0.7 million and $1.3 million of restructuring costs during the three and six months ended December 31, 2021 and $22.1 million of restructuring costs since inception of the plan.

The restructuring costs consist primarily of severance costs, facility closure costs, consulting fees and other liabilities.

Matrix Service Company

1 unchanged sentence

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

Three Months Ended Since Inception of Business Improvement Plan

September 30, 2021 September 30, 2020

Three Months Ended Six Months Ended Since Inception of Business Improvement Plan

December 31, 2021 December 31, 2020 December 31, 2021 December 31, 2020

(In thousands)

3 unchanged sentences

Other intangible asset impairments — — — — 1,150

Other costs 1 — 1 — 1

Total Utility and Power Infrastructure $ 37 $ 812 $ 46 $ 823 $ 4,083

8 unchanged sentences

Facility costs — 1 — 1 879

Other costs 5 — 5 — 5

Total Storage and Terminal Solutions $ 107 $ 641 $ 74 $ 654 $ 2,531

9 unchanged sentences

Total restructuring costs $ 695 $ 5,045 $ 1,300 $ 4,725 $ 22,066

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, 2021 $ 2,435

Cash payments ( 272 )

Balance as of September 30, 2021 $ 2,192

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