Newspaper article THE JOURNAL RECORD

Cost Overruns Slash Profits for Tulsa-Based Matrix Service

Newspaper article THE JOURNAL RECORD

Cost Overruns Slash Profits for Tulsa-Based Matrix Service

Article excerpt

Continued cost overruns on an LNG tank construction project derailed by Hurricane Katrina almost eliminated fiscal second- quarter profits for Matrix Service Co.

The Tulsa-based construction and maintenance contractor for the energy sector would have doubled year-ago results if not for a $16 million pre-tax charge to offset cost overruns on a Cheniere Energy/ Bechtel Corp. contract to build liquefied natural gas tanks at Sabine Pass, La.

Matrix had taken $11.3 million in charges during fiscal 2007 due to delays in this project, and $1.5 million in the first quarter of fiscal 2008.

After the latest write-down, combined with a $900,000 charge linked to a customer bankruptcy, a $900,000 charge for employee benefit costs and a $700,000 tax benefit for state investment tax credits, Matrix reported a fiscal second-quarter net income of $210,000, or 1 cent per diluted share, down from $8.1 million, or 31 cents per diluted share, the prior year. Revenues for the three months ended Nov. 30 rose 17 percent to $194.7 million from $166.4 million.

Despite Wednesday's plunging profit report, Matrix shares jumped $1.47 on the Nasdaq Exchange as Wall Street enjoyed a strong rally. The stock closed at $20.34, its 1.3 million shares traded representing more than five times its daily average. But in after- hours trading of 39,088 shares, the stock lost 99 cents of that gain.

M. Jake Dollarhide, chief executive of Longbow Asset Management Co., pinned the increase not just on the general market updraft, but the fact that investors had been forewarned. Analysts polled by Thomson Financial had forecast Matrix would record a 2-cent profit for the latest quarter.

"If the market wasn't healthy today, or would have continued its downward spiral, Matrix may have been down 5 percent," said Dollarhide.

For the six months ended Nov. 30, Matrix posted a 41-percent drop in net income to $6.5 million, or 24 cents per diluted share, from $11.1 million, or 43 cents, the prior year. …

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