What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2022-05-10 compared with 2022-02-08 · 126 added, 117 removed, 469 unchanged (34% of the section changed)

3 unchanged sentences

(In thousands, except per share data)

Three Months Ended Six Months Ended

2021 December 31,

2020 December 31,

2021 December 31,

Three Months Ended Nine Months Ended

2022 March 31,

2021 March 31,

2022 March 31,

Revenue $ 177,003 $ 148,260 $ 507,061 $ 498,499

2 unchanged sentences

Selling, general and administrative expenses 17,041 17,179 49,592 52,031

Restructuring costs 695 5,045 1,300 4,725

Goodwill impairment (Note 4) 18,312 — 18,312 —

Restructuring costs (Note 10) ( 1,578 ) 1,860 ( 278 ) 6,585

Operating loss ( 35,538 ) ( 17,479 ) ( 69,690 ) ( 27,393 )

15 unchanged sentences

(In thousands)

Three Months Ended Six Months Ended

2021 December 31,

2020 December 31,

2021 December 31,

Three Months Ended Nine Months Ended

2022 March 31,

2021 March 31,

2022 March 31,

Net loss $ ( 34,899 ) $ ( 12,873 ) $ ( 77,356 ) $ ( 20,501 )

Other comprehensive income (loss), net of tax:

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

Foreign currency translation gain (loss) (net of tax expense (benefit) of $(16) and $30 for the three and nine months ended March 31, 2022, respectively, and $(33) and $20 for the three and nine months ended March 31, 2021, respectively) ( 32 ) 68 ( 728 ) 1,291

Comprehensive loss $ ( 34,931 ) $ ( 12,805 ) $ ( 78,084 ) $ ( 19,210 )

6 unchanged sentences

Cash and cash equivalents (Note 1) $ 34,092 $ 83,878

Restricted cash (Note 1) 2,600 —

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

Accounts receivable, less allowances (March 31, 2022—$634 and June 30, 2021—$898) 137,690 148,030

Costs and estimated earnings in excess of billings on uncompleted contracts 46,393 30,774

12 unchanged sentences

Property, plant and equipment - net 60,478 69,407

Restricted cash, non-current (Note 1) 25,000 —

Restricted cash (Note 1) 25,000 —

Operating lease right-of-use assets 20,811 22,412

26 unchanged sentences

60,000,000 shares authorized;

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

27,888,217 shares issued as of March 31, 2022 and June 30, 2021;

26,783,265 and 26,549,438 shares outstanding as of March 31, 2022 and June 30, 2021, respectively 279 279

Additional paid-in capital 137,886 137,575

2 unchanged sentences

228,510 306,283

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 )

Treasury stock, at cost — 1,104,952 shares as of March 31, 2022, and 1,338,779 shares as of June 30, 2021 ( 15,674 ) ( 20,744 )

Total stockholders' equity 212,836 285,539

4 unchanged sentences

(In thousands)

Six Months Ended

2021 December 31,

Nine Months Ended

2022 March 31,

Operating activities:

Net loss $ ( 77,356 ) $ ( 20,501 )

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

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

Depreciation and amortization 11,557 13,639

Goodwill impairment 18,312 —

Stock-based compensation expense 5,823 6,413

4 unchanged sentences

Accelerated amortization of deferred debt amendment fees (Note 5) 1,518 —

Other 103 317

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

6 unchanged sentences

Accrued expenses ( 6,734 ) 6,907

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

Net cash used by operating activities ( 22,517 ) ( 13,212 )

Investing activities:

6 unchanged sentences

(In thousands)

Six Months Ended

2021 December 31,

Nine Months Ended

2022 March 31,

Financing activities:

8 unchanged sentences

Effect of exchange rate changes on cash, cash equivalents and restricted cash ( 334 ) 1,220

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

Decrease in cash, cash equivalents and restricted cash ( 24,786 ) ( 26,285 )

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

15 unchanged sentences

Comprehensive

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

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

Net loss — — ( 34,899 ) — — ( 34,899 )

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 — —

Other comprehensive loss — — — — ( 32 ) ( 32 )

Treasury shares sold to Employee Stock Purchase Plan (9,290 shares) — ( 115 ) — 184 — 69

Stock-based compensation expense — 2,088 — — — 2,088

Balances, March 31, 2022 $ 279 $ 137,886 $ 97,822 $ ( 15,674 ) $ ( 7,477 ) $ 212,836

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

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

Net loss — — ( 12,873 ) — — ( 12,873 )

Other comprehensive income — — — — 68 68

Exercise of stock options (9,000 shares) — ( 68 ) — 160 — 92

Issuance of deferred shares (900 shares) — ( 16 ) — 16 — —

2 unchanged sentences

Stock-based compensation expense — 2,214 — — — 2,214

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

Balances, March 31, 2021 $ 279 $ 136,042 $ 185,901 $ ( 21,280 ) $ ( 7,082 ) $ 293,860

Matrix Service Company

14 unchanged sentences

Stock-based compensation expense — 5,823 — — — 5,823

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

Balances, March 31, 2022 $ 279 $ 137,886 $ 97,822 $ ( 15,674 ) $ ( 7,477 ) $ 212,836

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

1 unchanged sentence

Other comprehensive income — — — — 1,291 1,291

Exercise of stock options (9,000 shares) — ( 68 ) — 160 — 92

Issuance of deferred shares (515,218 shares) — ( 9,083 ) — 9,083 — —

2 unchanged sentences

Stock-based compensation expense — 6,413 — — — 6,413

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

Balances, March 31, 2021 $ 279 $ 136,042 $ 185,901 $ ( 21,280 ) $ ( 7,082 ) $ 293,860

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 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.

The results of operations for the three and nine months ended March 31, 2022 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 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.

During the third quarter, restrictions were released on $ 2.6 million of cash that supported a prior purchase card program.

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):

1 unchanged sentence

Cash and cash equivalents $ 34,092 $ 83,878

Restricted cash, current 2,600 —

Restricted cash, non-current 25,000 —

Restricted cash 25,000 —

Total cash, cash equivalents and restricted cash shown in the Condensed Consolidated Statements of Cash Flows $ 59,092 $ 83,878

1 unchanged sentence

Remaining Performance Obligations

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

We had $ 433.6 million of remaining performance obligations yet to be satisfied as of March 31, 2022 .

We expect to recognize $ 368.9 million of our remaining performance obligations as revenue within the next twelve months.

16 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 six months ended December 31, 2021 that was included in the June 30, 2021 BIE balance was $ 48.4 million.

The amount of revenue recognized during the nine months ended March 31, 2022 that was included in the June 30, 2021 BIE balance was $ 48.2 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 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.

Progress billings in accounts receivable at March 31, 2022 and June 30, 2021 included retentions to be collected within one year of $ 14.1 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 $ 2.8 million as of March 31, 2022 and $ 3.1 million as of June 30, 2021.

Disaggregated Revenue

Revenue disaggregated by reportable segment is presented in Note 9 - Segment Information.

The following series of tables presents revenue disaggregated by geographic area where the work was performed and by contract type:

The following tables presents revenue disaggregated by geographic area where the work was performed and by contract type:

Geographic Disaggregation:

Three Months Ended Six Months Ended

2021 December 31,

2020 December 31,

2021 December 31,

Three Months Ended Nine Months Ended

2022 March 31,

2021 March 31,

2022 March 31,

(In thousands)

4 unchanged sentences

Contract Type Disaggregation:

Three Months Ended Six Months Ended

2021 December 31,

2020 December 31,

2021 December 31,

Three Months Ended Nine Months Ended

2022 March 31,

2021 March 31,

2022 March 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 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.

Revisions in Estimates

Our results of operations were materially impacted by an increase in the forecasted costs to complete a midstream gas processing project in the Process and Industrial Facilities segment, which resulted in a decrease in gross profit of $ 4.8 million in the three and nine months ended March 31, 2022.

The increase in forecasted costs was primarily due to performance of a, now terminated, subcontractor, which will require rework in order to meet our client's expectations.

Our results of operations were materially impacted by changes in the forecasted costs to complete a large capital project in the Utility and Power Infrastructure segment.

Improved project execution resulted in an increase in gross profit of $ 0.8 million during the three months ended March 31, 2022.

However, increases in the forecasted costs to complete the project during the first half of fiscal 2022 resulted in the project reducing gross profit by $ 5.1 million during the nine months ended March 31, 2022.

The increase in forecasted costs during the first half of the fiscal year 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 during the second quarter of fiscal 2022, which significantly reduced our financial exposure on the project.

We expect to complete the project during the fourth quarter of fiscal 2022.

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.

We expect to complete these repairs in the fourth quarter 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 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.

Real estate leases accounted for approximately 96 % of all right-of-use assets as of March 31, 2022 .

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

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

Three Months Ended Six Months Ended

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

Three Months Ended Nine Months Ended

March 31, 2022 March 31, 2021 March 31, 2022 March 31, 2021

Lease expense Location of Expense (in thousands)

7 unchanged sentences

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

December 31, 2021

March 31, 2022

Maturity Analysis:

11 unchanged sentences

Non-current operating lease liabilities $ 19,630

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

The following is a summary of the weighted average remaining operating lease term and weighted average discount rate as of March 31, 2022 :

Weighted-average remaining lease term (in years) 7.2 years

1 unchanged sentence

Supplemental cash flow information related to leases is as follows:

Six Months Ended

December 31, 2021

Nine Months Ended

March 31, 2022

(in thousands)

8 unchanged sentences

Net balance at June 30, 2021 $ 6,984 $ 26,878 $ 26,774 $ 60,636

Goodwill impairment ( 2,659 ) ( 8,445 ) ( 7,208 ) ( 18,312 )

Translation adjustment (1)

( 27 ) ( 6 ) ( 51 ) ( 84 )

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

Net balance at March 31, 2022 $ 4,298 $ 18,427 $ 19,515 $ 42,240

(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.

1 unchanged sentence

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 December 31, 2021.

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.

In the third quarter, we concluded that goodwill impairment indicators existed based on the decline in the price of our stock and operating results that have underperformed our forecasts during the year.

Accordingly, we performed an interim impairment test as of March 31, 2022 and concluded that there was $18.3 million of total impairment to goodwill, which was recorded as follows:

• $8.4 million in the Process and Industrial Facilities segment;

• $7.2 million in the Storage and Terminal Solutions segment;

• $2.7 million in the Utility and Power Infrastructure segment.

The estimated fair value of each segment was derived by utilizing a discounted cash flow analysis.

The key assumptions used are described in Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations, Critical Accounting Policies, Goodwill.

Other Intangible Assets

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

At December 31, 2021

At March 31, 2022

Useful Life Gross Carrying

13 unchanged sentences

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

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):

Amortization expense totaled $ 0.4 million and $ 1.4 million during the three and nine months ended March 31, 2022 , respectively;

and $ 0.6 million and $ 1.7 million during the three and nine months ended March 31, 2021, respectively.

We estimate that the remaining amortization expense related to March 31, 2022 amortizing intangible assets will be as follows (in thousands):

Period ending:

4 unchanged sentences

Fiscal 2026 555

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

Total estimated remaining amortization expense at March 31, 2022 $ 5,228

Matrix Service Company

Notes to Condensed Consolidated Financial Statements

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.

1 unchanged sentence

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.

At March 31, 2022 , our borrowing base was $ 76.4 million and we had $ 23.7 million in letters of credit outstanding issued by Bank of Montreal, which resulted in availability of $ 52.7 million under the ABL Facility.

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.

10 unchanged sentences

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.

We are in compliance with all covenants of the ABL Facility as of March 31, 2022.

Senior Secured Revolving Credit Facility

2 unchanged sentences

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.

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 ( 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.

Interest expense during the nine months ended March 31, 2022 included $1.5 million of accelerated amortization of deferred debt amendment fees associated with the Prior Credit Agreement.

Matrix Service Company

Notes to Condensed Consolidated Financial Statements

Note 6 – Income Taxes

Effective Tax Rate

Our effective tax rates were 0.4 % and ( 7.8 )% for the three and nine months ended March 31, 2022 , compared to 28.2 % and 22.6 % during the three and nine months ended March 31, 2021, respectively.

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

The tax benefit resulting from additional losses during the three months ended March 31, 2022 was offset by additional valuation allowances of $ 7.7 million.

The income tax benefit recorded for the three months ended March 31, 2022 was the result of a change in estimate of our uncertain tax positions.

The effective tax rates were negatively impacted by $ 1.9 million of valuation allowances on certain deferred tax assets in the third quarter of fiscal 2021, and $ 1.2 million of other deferred tax adjustments in the first half of fiscal 2021.

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.

taxable jurisdiction in the amount of $ 21.9 million during fiscal 2022.

These assets are primarily comprised of federal net operating losses, which have an indefinite carryforward, federal tax credits and state net operating losses.

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.

3 unchanged sentences

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.

In January 2022, we received a $ 2.4 million tax refund in connection with overpayments of estimated taxes from prior years.

Deferred Payroll Taxes

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.

As of March 31, 2022, we have a balance of $ 5.6 million remaining on U.S.

payroll taxes we deferred through provisions of CARES Act.

We paid half of the original deferred payroll tax balance during the second quarter of fiscal 2022 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.

9 unchanged sentences

There can be no assurance that our insurance and the additional insurance coverage provided by our subcontractors will fully protect us against a valid claim or loss under the contracts with our customers.

Matrix Service Company

Notes to Condensed Consolidated Financial Statements

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 $ 10.1 million at December 31, 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 $ 9.3 million at March 31, 2022 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.

1 unchanged sentence

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 December 31, 2021 was $ 17.0 million.

The unpaid receivable balance at March 31, 2022 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.

4 unchanged sentences

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 Six Months Ended

2021 December 31,

2020 December 31,

2021 December 31,

Three Months Ended Nine Months Ended

2022 March 31,

2021 March 31,

2022 March 31,

(In thousands, except per share data)

4 unchanged sentences

Diluted loss per share $ ( 1.30 ) $ ( 0.49 ) $ ( 2.90 ) $ ( 0.78 )

Matrix Service Company

Notes to Condensed Consolidated Financial Statements

Note 9 – Segment Information

8 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 :

4 unchanged sentences

We evaluate performance and allocate resources based on operating income.

We record intersegment sales and transfers at cost;

We eliminate intersegment sales;

therefore, no intercompany profit or loss is recognized.

In addition, corporate selling, general and administrative expenses are reported separately from the three reportable segments.

Corporate selling, general and administrative expenses are excluded from our three reportable segments in order to better align controllable costs with the responsibility of segment management, and to be consistent with how our chief operating decision-maker assesses segment performance and allocates resources.

Segment assets consist primarily of accounts receivable, costs and estimated earnings in excess of billings on uncompleted contracts, property, plant and equipment, right-of-use lease assets, goodwill and other intangible assets.

3 unchanged sentences

(In thousands)

Three Months Ended Six Months Ended

2021 December 31,

2020 December 31,

2021 December 31,

Three Months Ended Nine Months Ended

2022 March 31,

2021 March 31,

2022 March 31,

Gross revenue

24 unchanged sentences

Total selling, general and administrative expenses $ 17,041 $ 17,179 $ 49,592 $ 52,031

Restructuring costs

Goodwill impairment and restructuring costs

Utility and Power Infrastructure $ 2,659 $ 403 $ 2,705 $ 1,226

2 unchanged sentences

Corporate — 86 1,197 470

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

Total goodwill impairment and restructuring costs $ 16,734 $ 1,860 $ 18,034 $ 6,585

Operating income (loss)

16 unchanged sentences

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.

The business improvement plan consists 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.

2 unchanged sentences

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

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

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

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

March 31, 2022 March 31, 2021 March 31, 2022 March 31, 2021

(In thousands)

10 unchanged sentences

Other costs (1)

( 1,601 ) 202 ( 1,597 ) 461 ( 1,171 )

Total Process and Industrial Facilities $ ( 1,589 ) $ 781 $ ( 1,606 ) $ 3,645 $ 11,501

14 unchanged sentences

Total restructuring costs $ ( 1,578 ) $ 1,860 $ ( 278 ) $ 6,585 $ 20,488

(1) Other costs in the Process and Industrial Facilities segment consisted of a $1.6 million credit in the three and nine months ended March 31, 2022.

The credit was due to a favorable settlement of a restructuring obligation related to our exit from the domestic iron and steel industry in fiscal 2020.

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