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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
(X) Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the quarterly period ended August 31, 2001
---------------
or
( ) Transition Report Pursuant to Section 13 or 15 (d) of the
Securities Exchange Act of 1934
For the transition period from ____________ to ___________
Commission File number 0-l87l6
MATRIX SERVICE COMPANY
(Exact name of registrant as specified in its charter)
DELAWARE 73-1352l74
(State of incorporation) (I.R.S. Employer
Identification No.)
l070l E. Ute St., Tulsa, Oklahoma 74ll6-l5l7
(Address of principal executive offices and zip code)
Registrant's telephone number, including area code: (9l8) 838-8822
Indicate by check mark whether the registrant (l) has filed all reports
required to be filed by Section l3 or l5(d) of the Securities Exchange Act of
l934 during the preceding l2 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
-----
As of October 9, 2001, there were 9,642,638 shares of the Company's common
stock, $.0l par value per share, issued and 7,665,586 shares outstanding.
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INDEX
PART I FINANCIAL INFORMATION PAGE
--------------------- ----
NO.
---
ITEM 1. Financial Statements (Unaudited)
Consolidated Statements of Income for the Three
Months Ended August 31, 2001 and 2000............................ 1
Consolidated Balance Sheets August 31, 2001 and May 31, 2001....... 2
Consolidated Statements of Cash Flow for the
Three Months Ended August 31, 2001 and 2000...................... 4
Notes to Consolidated Financial Statements......................... 6
ITEM 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations........................................ 9
ITEM 3. Quantitative and Qualitative Disclosures about Market Risk......... N/A
PART II OTHER INFORMATION
-----------------
ITEM 1. Legal Proceedings.................................................. N/A
ITEM 2. Changes in Securities.............................................. N/A
ITEM 3. Defaults Upon Senior Securities.................................... N/A
ITEM 4. Submission of Matters to a Vote of Security Holders................ N/A
ITEM 5. Other Information.................................................. N/A
ITEM 6. Exhibits and Reports on Form 8-K................................... 14
Signature.................................................................... 14
PART I
FINANCIAL INFORMATION
ITEM 1. Financial Statements
Matrix Service Company
Consolidated Statements of Income
(in thousands, except share and per share data)
Three Months Ended
August 31,
(unaudited)
----------------------------------
2001 2000
------------ -------------
Revenues $ 47,739 $ 37,862
Cost of revenues 41,860 34,042
------------ -------------
Gross profit 5,879 3,820
Selling, general and administrative expenses 3,681 3,656
Goodwill and non-compete amortization 82 90
Restructuring, impairment and
abandonment cost 49 -
------------ -------------
Operating income 2,067 74
Other income (expense):
Interest expense (328) (64)
Interest income 235 54
Other (26) (52)
------------ -------------
Income before income tax expense 1,948 12
Provision for federal, state and
foreign income tax expense 755 4
------------ -------------
Net income $ 1,193 $ 8
============ =============
Earnings per share of common stock:
Basic $ 0.16 $ 0.00
Diluted $ 0.15 $ 0.00
Weighted average number of common shares:
Basic 7,643,025 8,668,941
Diluted 8,003,463 8,776,433
See Notes to Consolidated Financial Statements
-1-
Matrix Service Company
Consolidated Balance Sheets
(in thousands)
August 31, May 31,
----------------------------------------
2001 2001
--------------- -----------------
ASSETS: (unaudited)
Current assets:
Cash and cash equivalents $ 719 $ 835
Accounts receivable, less allowances
(August 31 - $153, May 31 - $375) 25,320 29,184
Costs and estimated earnings in excess
of billings on uncompleted contracts 14,664 12,951
Inventories 2,540 2,772
Deferred income taxes 245 442
Prepaid expenses 2,436 2,573
--------------- -----------------
Total current assets 45,924 48,757
Property, plant and equipment at cost:
Land and buildings 10,205 10,108
Construction equipment 19,923 19,550
Transportation equipment 8,061 7,560
Furniture and fixtures 4,870 4,841
Construction in progress 6,677 2,306
--------------- -----------------
49,736 44,365
Less accumulated depreciation 23,422 22,507
--------------- -----------------
Net property, plant and equipment 26,314 21,858
Goodwill, net of accumulated amortization
(August 31 - $2,511, May 31 - $2,427) 11,163 11,258
--------------- -----------------
Other assets 1,824 1,848
Total assets $ 85,225 $ 83,721
=============== =================
-2-
Matrix Service Company
Consolidated Balance Sheets
(in thousands)
August 31, May 31,
-----------------------------------------
2001 2001
--------------- -----------------
(unaudited)
LIABILITIES AND STOCKHOLDERS' EDUITY:
Current liabilities:
Accounts payable $ 6,186 $ 10,229
Billings on uncompleted contracts in
excess of costs and estimated earnings 6,336 7,148
Accrued insurance 2,145 2,362
Accrued environmental reserves 42 471
Income tax payable 686 400
Other accrued expenses 2,096 4,307
--------------- -----------------
Total current liabilities 17,491 24,917
Long-term debt 11,344 3,515
Deferred income taxes 1,929 1,983
Stockholders' equity:
Common stock 96 96
Additional paid-in capital 51,596 51,596
Retained earnings 13,459 12,245
Accumulated other comprehensive income (976) (813)
--------------- -----------------
64,175 63,124
Less: Treasury stock, at cost -
1,995,922 and 2,021,972 at August 31
and May 31, respectively (9,714) (9,818)
--------------- -----------------
Total stockholders' equity 54,461 53,306
--------------- -----------------
Total liabilities and stockholders' equity $ 85,225 $ 83,721
=============== =================
See Notes to Consolidated Financial Statements
-3-
Matrix Service Company
Consolidated Statements of Cash Flow
(in thousands)
Three Months Ended
August 31,
(unaudited)
-------------------------------
2001 2000
----------- -----------
Cash flow from operating activities:
Net income $ 1,193 $ 8
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 1,205 1,125
Deferred income tax 143 -
(Gain) loss on sale of equipment (27) (28)
Changes in current assets and liabilities increasing
(decreasing) cash:
Accounts receivable 3,864 1,812
Costs and estimated earnings in excess
of billings on uncompleted contracts (1,713) (2,458)
Inventories 232 140
Prepaid expenses 137 65
Accounts payable (4,043) (4,448)
Billings on uncompleted contracts in
excess of costs and estimated earnings (812) 5,440
Accrued expenses (2,857) (2,571)
Income taxes receivable/payable 286 (178)
Other 24 8
----------- -----------
Net cash used by operating activities (2,368) (1,085)
Cash flow from investing activities:
Capital expenditures (5,603) (802)
Investment in Joint Venture - (87)
Proceeds from other investing activities 48 34
----------- -----------
Net cash used in investing activities $ (5,555) $ (855)
See Notes to Consolidated Financial Statements
-4-
Matrix Service Company
Consolidated Cash Flow Statements
(in thousands)
Three Months Ended
August 31,
(unaudited)
----------------------------------
2001 2000
------------- ------------
Cash flows from financing activities:
Repayment of acquisition payables $ - $ (16)
Repayment of equipment notes - (5)
Issuance of long-term debt 26,150 7,400
Repayments of long-term debt (18,525) (6,565)
Purchase of treasury stock - (522)
Issuance of stock 125 10
------------- ------------
Net cash provided in financing activities 7,750 302
Effect of exchange rate changes on cash 57 16
------------- ------------
Decrease in cash and cash equivalents (116) (1,622)
Cash and cash equivalents at beginning of period 835 1,806
------------- ------------
Cash and cash equivalents at end of period $ 719 $ 184
============= ============
See Notes to Consolidated Financial Statements
-5-
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
NOTE A - BASIS OF PRESENTATION
The consolidated financial statements include the accounts of Matrix Service
Company ("Matrix") and its subsidiaries, all of which are wholly owned. All
significant inter-company balances and transactions have been eliminated in
consolidation.
The accompanying unaudited consolidated financial statements have been prepared
in accordance with Rule 10-0l of Regulation S-X for interim financial statements
required to be filed with the Securities and Exchange Commission and do not
include all information and footnotes required by generally accepted accounting
principles for complete financial statements. However, the information
furnished reflects all adjustments, consisting only of normal recurring
adjustments that are, in the opinion of management, necessary for a fair
statement of the results for the interim periods.
The accompanying financial statements should be read in conjunction with the
audited financial statements for the year ended May 3l, 2001, included in
Matrix's Annual Report on Form 10-K for the year then ended. Matrix's business
is seasonal; therefore, results for any interim period may not necessarily be
indicative of future operating results.
-6-
NOTE B - SEGMENT INFORMATION
Matrix operates primarily in the United States and has operations in Canada.
Matrix's industry segments are Aboveground Storage Tank (AST) Services,
Construction Services, Plant Services, and Other Services.
Matrix Service Company
1/st/ Quarter Results of Operations
($ Amounts in millions)
----------------------------------------------------------------------------------------------------------------
AST Construction Plant Other Combined
Services Services Services Services Total
----------------------------------------------------------------------------------------------------------------
Three Months ended August 31, 2001
Gross revenues 38.5 3.9 5.4 0.0 47.8
Less: Inter-segment revenues (0.1) 0.0 0.0 0.0 (0.1)
Consolidated revenues 38.4 3.9 5.4 0.0 47.7
Gross profit 5.2 0.3 0.4 0.0 5.9
Operating income (loss) 2.4 0.0 (0.3) 0.0 2.1
Income (loss) before income tax expense 2.3 0.0 (0.4) 0.0 1.9
Net income (loss) 1.4 0.0 (0.2) 0.0 1.2
Identifiable assets 68.6 5.7 9.3 1.8 85.4
Capital expenditures 5.3 0.1 0.2 0.0 5.6
Depreciation expense 1.0 0.0 0.1 0.0 1.1
Three Months ended August 31, 2000
Gross revenues 31.4 3.7 3.5 0.0 38.6
Less: Inter-segment revenues (0.7) 0.0 0.0 0.0 (0.7)
Consolidated revenues 30.7 3.7 3.5 0.0 37.9
Gross profit 3.9 0.1 0.0 (0.2) 3.8
Operating income (loss) 1.0 (0.3) (0.5) (0.1) 0.1
Income (loss) before income tax expense 1.0 (0.4) (0.5) (0.1) 0.0
Net income (loss) 0.7 (0.3) (0.3) (0.1) 0.0
Identifiable assets 61.0 3.1 8.9 4.0 77.0
Capital expenditures 0.7 0.0 0.1 0.0 0.8
Depreciation expense 0.9 0.0 0.1 0.0 1.0
NOTE C - REPORTING ACCUMULATED OTHER COMPREHENSIVE INCOME/LOSS
For the quarter ended August 31, 2001, total comprehensive loss was $245
thousand as compared to $58 thousand for the same three month period ended
August 31, 2000. Other comprehensive income or loss and accumulated other
comprehensive loss consisted of foreign currency translation adjustments and
fair value adjustments of derivative instruments. There was no accumulated gain
or loss on derivative instruments at May 31, 2001.
NOTE D - INCOME TAXES
Deferred income taxes are computed using the liability method whereby deferred
tax assets and liabilities are recognized based on temporary differences between
financial statement and tax basis of assets and liabilities using presently
enacted tax rates.
-7-
NOTE E - NEW ACCOUNTING STANDARDS
In June of 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, Accounting for Derivative Instruments
and Hedging Activities, which was subsequently amended in June of 2000 by
Financial Accounting Standards No. 138. The statement requires the Company to
recognize all derivatives on the balance sheet at fair value. Derivatives that
are not hedged must be adjusted to fair value through income. If the derivative
is a hedge, depending on the nature of the hedge, changes in the fair value of
the derivative are either offset against the change in fair value of assets,
liabilities, or firm commitments through earnings or recognized in other
comprehensive income until the hedge item is recognized in earnings. The
ineffective portion of a derivative's change in fair value will be immediately
recognized in earnings. On June 1, 2001, the Company entered into an interest
rate swap agreement to manage interest rate exposure and modify interest
characteristics of its long-term debt. The agreement is designated with specific
debt obligations, and involves the exchange of amounts based on the difference
between variable and fixed interest rates calculated by reference to an agreed-
upon notional amount. The interest rate swap currently in place effectively
modifies the Company's exposure to interest rates by converting a portion of the
Company's variable rate debt to a fixed rate. The derivative has been designated
as a cash flow hedge and is effective. As a result, there is no current impact
to earnings due to hedge ineffectiveness or due to the exclusion of a component
of the derivative from the assessment of effectiveness. The fair value of the
cash flow hedge at August 31, 2001 is a liability of $204 thousand.
NOTE F - SUBSEQUENT EVENTS
On September 26, 2001, Matrix amended its credit agreement with a commercial
bank under which a total of $20.0 million may be borrowed on a revolving basis
based on the level of Matrix's eligible receivables and $5.9 million was
borrowed as a term loan.
-8-
ITEM 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
Forward Looking Statements
Certain matters discussed in this report include forward-looking statements.
Matrix is making these forward-looking statements in reliance on the "safe
harbor" protections provided under the Private Securities Litigation Reform Act
of 1995.
Such statements are subject to a number of uncertainties that could cause actual
results to differ materially from any results projected, forecasted, estimated,
or budgeted, including the following:
. The timing and planning of maintenance projects at customer facilities in the
refinery industry which could cause adjustments for seasonal shifts in
product demands.
. Changes in general economic conditions in the United States.
. Changes in laws and regulations to which Matrix is subject, including tax,
environmental, and employment laws and regulations.
. The cost and effects of legal and administrative claims and proceedings
against Matrix or its subsidiaries.
. Conditions of the capital markets Matrix utilizes to access capital to
finance operations.
. The ability to raise capital in a cost-effective way.
. The effect of changes in accounting policies.
. The ability to manage growth and to assimilate personnel and operations of
acquired businesses.
. The ability to control costs.
. Changes in foreign economies, currencies, laws, and regulations, especially
in Canada where Matrix has made direct investments.
. Political developments in foreign countries, especially in Canada where
Matrix has made direct investments.
. The ability of Matrix to develop expanded markets and product or service
offerings as well as its ability to maintain existing markets.
. Technological developments, high levels of competition, lack of customer
diversification, and general uncertainties of governmental regulation in the
energy industry.
. The ability to recruit, train, and retain project supervisors with
substantial experience.
. A downturn in the petroleum storage operations or hydrocarbon processing
operations of the petroleum and refining industries.
. Changes in the labor market conditions that could restrict the availability
of workers or increase the cost of such labor.
. The negative effects of a strike or work stoppage.
. Exposure to construction hazards related to the use of heavy equipment with
attendant significant risks of liability for personal injury and property
damage.
. The use of significant production estimates for determining percent complete
on construction contracts could produce different results upon final
determination of project scope.
. The inherent inaccuracy of estimates used to project the timing and cost of
exiting operations of non-core businesses.
. Fluctuations in quarterly results.
-9-
Results of Operations
AST Services Fiscal Year 2002 vs. 2001
Gross revenues for AST Services in the quarter ended August 31, 2001 were $38.5
million, compared to $31.4 million in the comparable quarter of the prior year,
an increase of $7.1 million or 22.6% due to a strong business environment in all
tank repair and maintenance regions and in the new tank construction group.
Gross margins for the quarter ended August 31, 2001 of 13.5% was better than the
12.4% for the quarter ended August 31, 2000 as a direct result of the good
business environment, the effective utilization of fixed cost and a shift in
business to more lump-sum work. These margin improvements along with the
increased sales volumes resulted in gross profit for the quarter ended August
31, 2001 of $5.2 million exceeding the $3.9 million for the quarter ended August
31, 2000 by $1.3 million or 33.3%.
Selling, general and administrative expense as a percent of revenues decreased
to 7.1% in the quarter ended August 31, 2001 vs. 9.2% in the quarter ended
August 31, 2000 primarily due to fixed salary costs being spread over a larger
revenue base.
Operating income and income before income tax expense for the quarter ended
August 31, 2001 of $2.4 million and $2.3 million respectively, were
significantly better than the $1.0 million and $1.0 million respectively
produced for the quarter ended August 31, 2000 primarily as a result of higher
gross profits and the slight decrease in selling, general and administrative
expenses discussed above.
Construction Services Fiscal Year 2002 vs. 2001
Gross revenues for Construction Services in the quarter ended August 31, 2001
were $3.9 million, compared to $3.7 million in the comparable quarter of the
prior year, an increase of $0.2 million or 5.4% due to continued business
development efforts. Gross margins for the quarter ended August 31, 2001 of 7.7%
was significantly better than the 2.7% produced for the quarter ended August 31,
2000 as a direct result of higher margin work and the favorable impact of a $0.2
million cost overrun on a joint venture project in fiscal year 2001. These
margin improvements along with the increased sales volumes resulted in gross
profit for the quarter ended August 31, 2001 of $0.3 million exceeding the $0.1
million for the quarter ended August 31, 2000 by $0.2 million or 200%.
Operating income and income before income tax expense for the quarter ended
August 31, 2001 of $0.0 million and $0.0 million respectively, were slightly
better than the ($0.3) million and ($0.4) million respectively produced for the
quarter ended August 31, 2000 primarily as a result of higher gross profits
discussed above.
Plant Services Fiscal Year 2002 vs. 2001
Gross revenues for Plant Services in the quarter ended August 31, 2001 were $5.4
million, compared to $3.5 million in the comparable quarter of the prior year,
an increase of $1.9 million or 54.3% due to an increase in maintenance work and
the completion of the summer turnarounds. Gross margins for the quarter ended
August 31, 2001 of 7.4% was significantly better than the 0.0% produced for the
quarter ended August 31,
-10-
2000 as a direct result of higher margin jobs in fiscal 2002 versus fiscal 2001.
These margin improvements along with the increased sales volumes resulted in
gross profit for the quarter ended August 31, 2001 of $0.4 million exceeding the
$0.0 million for the quarter ended August 31, 2000 by $0.4 million.
Operating income and income before income tax expense for the quarter ended
August 31, 2001 of ($0.3) million and ($0.4) million respectively, were slightly
better than the ($0.5) million and ($0.5) million respectively produced for the
quarter ended August 31, 2000 primarily as a result of the increase in gross
profits discussed above.
Exited Operations
Other Services Fiscal Year 2002 vs. 2001
Other Services consists of Brown Steel Contractors, Inc. ("Brown") (which was
sold in August 1999) and San Luis Tank Piping Construction Company, Inc. (which
was shut down in April 2000). Activity for the quarter ended August 31, 2001
was not significant.
Financial Condition & Liquidity
Matrix's cash and cash equivalents totaled approximately $0.7 million at August
31, 2001 and $0.8 million at May 31, 2001.
Matrix has financed its operations recently with cash from operations and from
advances under a credit agreement. On September 26, 2001, Matrix amended its
credit agreement with a commercial bank under which a total of $20.0 million may
be borrowed on a revolving basis based on the level of Matrix's eligible
receivables and $5.9 million was borrowed as a term loan. Matrix can elect
revolving loans which bear interest at a Prime Rate or a LIBOR based option and
mature on October 31, 2004. At August 31, 2001, $11.1 million was outstanding
under the revolver with $2.0 million at LIBOR interest rates of 4.58% to 4.71%,
$3.1 million at a prime interest rate of 5.875% and $6.0 million at a fixed
interest rate of 7.23%. The agreement requires maintenance of certain financial
ratios, limits the amount of additional borrowings and the payment of dividends.
The credit facility is secured by all accounts receivable, inventory,
intangibles, certain real property, and proceeds related thereto.
On June 1, 2001, Matrix entered into an interest rate agreement with a
commercial bank, effectively providing a fixed interest rate of 7.23% for a
five-year period on $6.0 million of debt with a 15-year amortization. This debt
was initially drawn under the credit agreement revolving loan and was rolled
into the term loan on September 26, 2001 in the amount of $5.9 million. The term
loan is subject to certain mortgage restrictions on the Port of Catoosa facility
currently under construction.
Operations of Matrix used $2.4 million of cash for the three months ended August
31, 2001 as compared with $1.1 million of cash for the three months ended August
31, 2000, representing an increase of approximately $1.3 million. The increase
was due primarily to an increase in net working capital needs.
Capital expenditures during the quarter ended August 31, 2001 totaled
approximately $5.6 million. Of this amount, approximately $3.8 million was used
in the construction of
-11-
the Anaheim facility, $0.8 million was used in the construction of the Port of
Catoosa facility, $0.5 million was used to purchase transportation equipment for
field operations, and approximately $0.4 million was used to purchase welding,
construction, and fabrication equipment. Matrix invested approximately $0.1
million in office equipment, computer hardware and software, furniture and
fixtures during the quarter. Matrix has budgeted approximately $19.8 million for
capital expenditures for fiscal 2002. Of this amount, approximately $1.6 million
would be used to purchase transportation equipment for field operations, and
approximately $2.5 million would be used to purchase welding, construction, and
fabrication equipment. Matrix signed a 40-year lease for a 50-acre facility
planned in Tulsa, Oklahoma in order to consolidate Matrix's four facilities in
the Tulsa market now containing fabrication, operations and administration. This
consolidation should take 18 to 24 months at an estimated cost of approximately
$11.0 million. The cost would be offset by the sale of the existing three
facilities in Tulsa for approximately $5.4 million.
Matrix believes that its existing funds, amounts available from borrowings under
its existing credit agreement and cash generated by operations will be
sufficient to meet the working capital needs through fiscal 2001 and for the
foreseeable time thereafter.
The preceding discussion contains forward-looking statements including, without
limitation, statements relating to Matrix's plans, strategies, objectives,
expectations, intentions, and adequate resources, that are made pursuant to the
"safe harbor" provisions of the Private Securities Litigation Reform Act of
1995. Readers are cautioned that such forward-looking statements contained in
the financial condition and liquidity section are based on certain assumptions,
which may vary from actual results. Specifically, the capital expenditure
projections are based on management's best estimates, which were derived
utilizing numerous assumptions of future events, including the successful
remediation of environmental issues relating to the Brown sale and other
factors. However, there can be no guarantee that these estimates will be
achieved, or that there will not be a delay in, or increased costs associated
with, the successful remediation of the remaining Brown property.
Outlook
The current backlog in the Construction Services suggests that the second
quarter will show stronger sales volumes and higher profitability. The
strengthening experienced in Matrix's AST Services Division in the first quarter
should continue as our customers' maintenance budgets are spent during the last
four months of the calendar year. It is unclear, however, whether or not these
maintenance budgets will be approved at levels comparable, greater, or lower in
the upcoming calendar year of 2002 in light of the current state of war that
exists. Management believes, however, that its strategic alliances put Matrix
in a more favorable position than our competition if budgets are either reduced
or increased.
Environmental
Matrix is a participant in certain environmental activities in various stages
involving assessment studies, cleanup operations and/or remedial processes.
-12-
In connection with the Company's sale of Brown and affiliated entities in 1999,
an environmental assessment was conducted at Brown's Newnan, Georgia facilities.
The assessment turned up a number of deficiencies relating to storm water
permitting, air permitting and waste handling and disposal. An inspection of
the facilities also showed friable asbestos that needed to be removed. In
addition, Phase II soil testing indicated a number of VOC's, SVOC's and metals
above the State of Georgia notification limits. Ground water testing also
indicated a number of contaminants above the State of Georgia notification
limits.
Appropriate State of Georgia agencies have been notified of the findings and
corrective and remedial actions have been completed, are currently underway, or
plans for such actions have been submitted to the State of Georgia for approval.
The current estimated total cost for cleanup and remediation is $1.7 million,
$40 thousand of which remains accrued at August 31, 2001. Additional testing,
however, could result in greater costs for cleanup and remediation than is
currently accrued.
Matrix closed or sold the business operations of its San Luis Tank Piping
Construction Company, Inc. and West Coast Industrial Coatings, Inc.
subsidiaries, which are located in California. Although Matrix does not own the
land or building, it would be liable for any environmental exposure while
operating at the facility, a period from June 1, 1991 to the present. At the
present time, the environmental liability that could result from the testing is
unknown, however, Matrix has purchased a pollution liability insurance policy
with $5.0 million of coverage.
Matrix has other fabrication operations in Tulsa, Oklahoma; Bristol,
Pennsylvania; and Anaheim, California which could subject the Company to
environmental liability. It is unknown at this time if any such liability
exists but based on the types of fabrication and other manufacturing activities
performed at these facilities and the environmental monitoring that the Company
undertakes, Matrix does not believe it has any material environmental
liabilities at these locations.
Matrix builds aboveground storage tanks and performs maintenance and repairs on
existing aboveground storage tanks. A defect in the manufacturing of new tanks
or faulty repair and maintenance on an existing tank could result in an
environmental liability if the product stored in the tank leaked and
contaminated the environment. Matrix currently has liability insurance with
pollution coverage of $1 million, but the amount could be insufficient to cover
a major claim. Matrix is currently involved in one claim which occurred before
pollution coverage was obtained. The Company does not believe that its repair
work was defective and is not liable for any subsequent environmental damage.
-13-
PART II
OTHER INFORMATION
ITEM 6. Exhibits and Reports on Form 8-K:
A. Exhibit 10.1: Third Amended and Restated Credit Agreement, dated September
26, 2001, by and among the Company and its subsidiaries and Bank One,
Oklahoma, N.A.
B. Exhibit 11 - Computation of Earnings Per Share
C. Reports on Form 8-K: None.
Signature
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
MATRIX SERVICE COMPANY
Date: October 9, 2001 By: /s/ Michael J. Hall
--------------------------------------
Michael J. Hall Vice President-Finance
Chief Financial Officer signing on
behalf of the registrant and as the
registrant's chief accounting officer.
-14-