Matrix Service Reports Fully Diluted Earnings Per Share of $0.34 in the Fourth Quarter...

Matrix Service Reports Fully Diluted Earnings Per Share of $0.34 in the Fourth
Quarter Ended May 31, 2008 and Record Operating Income for the Third
Consecutive Fiscal Year
Successful On-Time Delivery of the Third and Final Tank and More Than 99%
Complete on the Gulf Coast LNG Project

TULSA, Okla., Aug. 5 /PRNewswire-FirstCall/ -- Matrix Service Co.
(Nasdaq: MTRX), a leading industrial services company, today reported its
financial results for the fourth quarter and full fiscal year ended May 31,
2008.
Fourth Quarter of Fiscal 2008 Results
Total revenues for the fourth quarter rose 9.1% to $194.1 million from the
$177.9 million recorded in the fourth quarter of fiscal 2007.
Net income for the fourth quarter of fiscal 2008 was $8.9 million, or
$0.34 per fully diluted share, which included pre-tax charges of $0.8 million,
or $0.02 per fully diluted share, resulting from a change in cost estimates on
the liquefied natural gas (LNG) construction project in the Gulf Coast Region.
Matrix Service was able to deliver the third and final tank to the owner on
the required mechanical completion date without incurring significant costs in
excess of previous estimates.
Michael J. Bradley, president and chief executive officer of Matrix
Service Company, said, "We have good reason to be proud of our performance
this year. Fiscal 2008 was a record year for revenues (which increased 14.3%
over the prior year), gross profit, operating income, net income, fully
diluted earnings per share and backlog despite the challenges we encountered
with the LNG project. We are extremely pleased to have delivered all of the
tanks on time to our customer and to be in the cleanup stage on our LNG
project. We continue to see our ongoing business activity strengthen and our
liquidity position remains very strong with a net cash position of $22.0
million and no borrowings under the revolving credit facility."
Consolidated SG&A expenses increased $1.7 million to $9.8 million from
$8.1 million in the same quarter of fiscal 2007. The increase was primarily
due to employee-related expenses and facility costs as the Company added key
staff to meet the demands of current and expected future growth, including
growth anticipated in the Gulf Coast and Eastern regions of the United States
and in Western Canada. SG&A expense as a percentage of revenue increased to
5.0% in the fourth quarter of fiscal 2008 compared to 4.6% in the fourth
quarter of fiscal year 2007.
EBITDA(1) increased to $16.4 million, from $5.5 million in the same period
last year. Gross margins on a consolidated basis for the current quarter
increased to 12.3% from 6.6% reported in the same quarter a year ago. The
lower margin in the prior fiscal period included a $10.9 million pre-tax
charge for the LNG construction project.
Construction Services revenues advanced 18.1% to $121.3 million from
$102.7 million in the same period a year earlier. The $18.6 million increase
was primarily a result of higher Aboveground Storage Tank (AST) revenues,
which were $52.5 million up from $40.1 million a year-earlier, and higher
Specialty revenues, which improved to $17.3 million from $11.3 million for the
year-earlier period. Construction Services' gross margins improved to 12.3%
versus 0.9% due primarily to the $10.9 million charge taken on the LNG project
in the fourth quarter of fiscal 2007.
Repair and Maintenance Services revenues of $72.8 million were lower than
the $75.2 million reported in the same quarter of 2007. The decrease was
primarily due to lower Downstream Petroleum revenues, which decreased from
$31.3 million in the fourth quarter of fiscal 2007 to $22.4 million in the
same period in 2008 due to less demand from our core markets as forecasted,
including lower volume of customer call-out and turnaround work. This decline
was largely offset by AST revenues which increased 20.8% to $43.0 million from
$35.6 million in the year-earlier period. This change in the mix of work,
which we previously stated was likely to occur, was the primary contributing
factor to a decline in gross margins for Repair and Maintenance Services.
Gross margins in the fourth quarter of fiscal 2008 were 12.5% as compared to
14.4% earned in the fourth quarter of fiscal 2007.
Fiscal Year 2008 Results
For the fiscal year ended May 31, 2008, consolidated revenues increased
14.3% to $731.3 million from $639.8 million recorded in the year-earlier
period.
Net income for fiscal year 2008 was $21.4 million, or $0.80 per fully
diluted share, which included pre-tax charges of $20.8 million, or $0.46 per
fully diluted share resulting from the Gulf Coast LNG construction project
discussed earlier. The results reflect additional pre-tax charges of $1.5
million related to a contested receivable from a customer who filed bankruptcy
in November 2007 and non-recurring employee benefit costs.
EBITDA(1) for fiscal year 2008 improved to $42.9 million, from $39.9
million in the year earlier period. Consolidated gross margins were 10.3% for
both fiscal years. Absent the impact of the LNG construction project and the
other special items noted previously, the adjusted gross margin for fiscal
2008 and fiscal 2007 would have been 14.5%(2) and 13.0%(2), respectively.
(1) The Company uses EBITDA (earnings before net interest, income taxes,
depreciation and amortization) as part of its overall assessment of
financial performance by comparing EBITDA between accounting periods.
Matrix believes that EBITDA is used by the financial community as a
method of measuring the Company's performance and of evaluating the
market value of companies considered to be in similar businesses.
EBITDA should not be considered as an alternative to net income or
cash provided by operating activities, as defined by accounting
principles generally accepted in the United States ("GAAP"). A
reconciliation of EBITDA to net income is included at the end of this
release.

(2) Gross margins excluding special items, a non-GAAP financial measure,
excludes the impact of the LNG construction project and additional
other special items noted for the periods presented that management
believes affect the comparison of results. Management also believes
that results excluding these items are more comparable to estimates
provided by securities analysts and therefore are useful in
evaluating operational trends for Matrix Service and its performance
relative to its competitors. A reconciliation of gross margins
excluding special items to gross margins is included at the end of
this press release.

Consolidated SG&A expenses increased $7.8 million in fiscal 2008 to $40.6
million from $32.8 million for fiscal 2007. The increase was primarily due to
employee-related expenses and facility costs resulting from the cost of
additional hires and related benefits to meet the demands of current and
expected future growth domestically and in Western Canada. In addition, fiscal
2008 results also included a pre-tax charge of $1.0 million related to a
contested receivable from a customer who filed bankruptcy in November 2007.
SG&A expense as a percentage of revenue increased to 5.6% in fiscal 2008
compared to 5.1% in the prior fiscal year as the 14.3% growth in revenues
partially offset the increase in SG&A expenses.
Revenues for the Construction Services segment rose 24.5% to $455.9
million from $366.2 million for fiscal 2007. The increase was primarily due
to higher Aboveground Storage Tank revenues, which increased 26.4% to $201.4
million in fiscal 2008 from $159.3 million a year earlier. The increase was
also driven by higher revenues in Downstream Petroleum, which increased 29.5%
to $156.4 million in fiscal 2008 from $120.8 million a year earlier, and by
higher Specialty revenues, which increased 45.7% to $78.1 million in fiscal
2008 from $53.6 million a year earlier. These increases were partially offset
by lower Electrical and Instrumentation revenues, which fell $12.4 million.
Gross margins in the Construction Services segment were 7.3% compared to 8.1%
in the year earlier period due primarily to higher charges taken on the LNG
construction project in fiscal 2008 compared to fiscal 2007.
Revenues for Repair and Maintenance Services were $275.4 million for
fiscal 2008 and $273.7 million for the same period in 2007. The increase was
due to higher Aboveground Storage Tank revenues, which rose 34.2% to $168.0
million from $125.2 million last fiscal year, and was largely offset by lower
Downstream Petroleum revenues, which fell 26.2% to $89.0 million in fiscal
2008 from $120.6 million in the prior fiscal year due to less demand in our
core markets including a lower volume of turnaround work as expected. In
addition, Electrical and Instrumentation revenues fell $9.5 million to $18.4
million in fiscal 2008 from $27.9 million during fiscal 2007. Gross margins
widened to 15.3% versus 13.3% a year earlier as the first three quarters of
fiscal 2008 included high levels of customer call-out work.
Mr. Bradley added, "New business was robust in fiscal 2008, particularly
in Aboveground Storage Tank, in which consolidated year-over-year revenue
advanced 30%. Matrix backlog rose to $467.3 million at May 31, 2008, with new
awards of nearly $739 million in fiscal year 2008. The quality of our backlog
improved significantly in fiscal 2008. May 31, 2007 backlog included $75
million for the LNG project versus just $1 million for May 31, 2008 backlog.
We will continue to focus on controlling risks of new projects as we pursue
our growth strategy."
Mr. Bradley continued, "We are maintaining our fiscal 2009 guidance of
$800 million to $850 million in consolidated revenues, earnings of $1.35 per
fully diluted share to $1.60 per fully diluted share and SG&A of 5.5% to 6.0%
of revenues."
Conference Call Details
In conjunction with the press release, Matrix Service will host a
conference call with Michael J. Bradley, president and CEO, and Thomas E.
Long, vice president and CFO. The call will take place at 11:00 a.m.
(EDT)/10:00 a.m. (CDT) today and will be simultaneously broadcast live over
the Internet at http://www.matrixservice.com or http://www.vcall.com. Please
allow extra time prior to the call to visit the site and download the
streaming media software required to listen to the Internet broadcast. The
online archive of the broadcast will be available within one hour of
completion of the live call.
About Matrix Service Company
Matrix Service Company provides general industrial construction and repair
and maintenance services principally to the petroleum, petrochemical, power,
bulk storage terminal, pipeline and industrial gas industries.
The Company is headquartered in Tulsa, Oklahoma, with regional operating
facilities located in Oklahoma, Texas, California, Michigan, Pennsylvania,
Illinois, Washington, and Delaware in the U.S. and in Canada.
This release contains forward-looking statements that are made in reliance
upon the safe harbor provisions of the Private Securities Litigation Reform
Act of 1995. These statements are generally accompanied by words such as
"anticipate," "continues," "expect," "forecast," "outlook," "believe,"
"estimate," "should" and "will" and words of similar effect that convey future
meaning, concerning the Company's operations, economic performance and
management's best judgment as to what may occur in the future. Future events
involve risks and uncertainties that may cause actual results to differ
materially from those we currently anticipate. The actual results for the
current and future periods and other corporate developments will depend upon a
number of economic, competitive and other influences, including those factors
discussed in the "Risk Factors" and "Forward Looking Statements" sections and
elsewhere in the Company's reports and filings made from time to time with the
Securities and Exchange Commission. Many of these risks and uncertainties are
beyond the control of the Company, and any one of which, or a combination of
which, could materially and adversely affect the results of the Company's
operations and its financial condition. We undertake no obligation to update
information contained in this release.
For more information, please contact:

Matrix Service Company Investors and Financial Media:
Tom Long Truc Nguyen
Vice President and CFO Deputy Managing Director
T: 918-838-8822 Grayling Global
E: telong@matrixservice.com T: 646-284-9418
E: tnguyen@hfgcg.com

Matrix Service Company
Consolidated Statements of Operations
(In thousands, except share and per share data)

Three Months Ended Twelve Months Ended
May 31, May 31, May 31, May 31,
2008 2007 2008 2007
(unaudited) (unaudited)

Revenues $194,120 $177,921 $731,301 $639,846
Cost of revenues 170,154 166,168 656,184 573,960

Gross profit 23,966 11,753 75,117 65,886
Selling, general and
administrative expenses 9,774 8,150 40,566 32,836

Operating income 14,192 3,603 34,551 33,050

Other income (expense):
Interest expense (130) (423) (890) (2,403)
Interest income 25 2 82 139
Other (116) 50 (27) 328

Income before income taxes 13,971 3,232 33,716 31,114
Provision for federal,
state and foreign
income taxes 5,105 1,293 12,302 11,943

Net income $8,866 $1,939 $21,414 $19,171

Basic earnings per common
share $0.34 $0.08 $0.81 $0.83

Diluted earnings per common
share $0.34 $0.08 $0.80 $0.74

Weighted average common
shares outstanding:
Basic 26,028 24,609 26,427 23,056
Diluted 26,398 27,028 26,875 26,752

Matrix Service Company
Consolidated Balance Sheets
(In thousands)

May 31, May 31,
2008 2007
(unaudited)
Assets
Current assets:
Cash and cash equivalents $21,989 $9,147

Accounts receivable, less allowances
(2008 - $269; 2007 - $260) 105,858 98,497
Costs and estimated earnings in excess
of billings on uncompleted contracts 49,940 45,634
Inventories 4,255 4,891
Deferred income taxes 4,399 3,283
Prepaid expenses 3,357 2,910
Other current assets 809 929
Total current assets 190,607 165,291

Property, plant and equipment at cost:
Land and buildings 24,268 23,405
Construction equipment 47,370 39,958
Transportation equipment 16,927 14,380
Furniture and fixtures 11,781 10,116
Construction in progress 6,712 1,788
107,058 89,647
Accumulated depreciation (49,811) (43,654)
57,247 45,993

Goodwill 23,329 23,357

Other assets 3,410 8,268

Total assets $274,593 $242,909

Matrix Service Company
Consolidated Balance Sheets
(In thousands, except share data)

May 31, May 31,
2008 2007
(unaudited)
Liabilities and stockholders' equity

Current liabilities:
Accounts payable $53,449 $52,144
Billings on uncompleted contracts in excess
of costs and estimated earnings 48,709 34,243
Accrued insurance 8,451 6,422
Accrued wages and benefits 14,976 15,442
Income tax payable 2,028 956
Current capital lease obligation 1,042 753
Current portion of acquisition payable 111 2,712
Other accrued expenses 1,015 1,313

Total current liabilities 129,781 113,985

Long-term capital lease obligation 1,000 836
Deferred income taxes 5,112 2,512

Stockholders' equity:
Common stock - $.01 par value; 60,000,000
shares Authorized and 27,888,217 shares
issued as of May 31, 2008 and 2007 279 279
Additional paid-in capital 108,402 104,408
Retained earnings 44,809 23,422
Accumulated other comprehensive income 1,584 967

155,074 129,076
Less: Treasury stock, at cost - 1,825,600
and 1,297,466 shares as of May 31, 2008
and 2007 (16,374) (3,500)

Total stockholders' equity 138,700 125,576

Total liabilities and stockholders' equity $274,593 $242,909

Results of Operations
(In thousands)
Repair &
Construction Maintenance Combined
Services Services Other Total
(unaudited)
Three Months Ended May 31, 2008
Gross revenues $127,050 $73,248 $ - $200,298
Less: inter-segment revenues 5,757 421 - 6,178
Consolidated revenues 121,293 72,827 - 194,120
Gross profit 14,888 9,078 - 23,966
Operating income 8,783 5,409 - 14,192
Income before income tax
expense 8,654 5,317 - 13,971
Net income 5,488 3,378 - 8,866
Segment assets 150,174 93,052 31,367 274,593
Capital expenditures 2,537 1,279 1,376 5,192
Depreciation and amortization
expense 1,351 992 - 2,343

Three Months Ended May 31, 2007
Gross revenues $105,813 $78,015 $ - $183,828
Less: inter-segment revenues 3,086 2,821 - 5,907
Consolidated revenues 102,727 75,194 - 177,921
Gross profit 923 10,830 - 11,753
Operating income (loss) (3,554) 7,184 (27) 3,603
Income (loss) before income
tax expense (3,791) 7,050 (27) 3,232
Net income (loss) (2,269) 4,225 (17) 1,939
Segment assets 136,780 98,737 7,392 242,909
Capital expenditures 1,536 1,396 752 3,684
Depreciation and amortization
expense 910 895 - 1,805

Twelve Months Ended May 31, 2008
Gross revenues $472,696 $278,818 $ - $751,514
Less: inter-segment revenues 16,809 3,404 - 20,213
Consolidated revenues 455,887 275,414 - 731,301
Gross profit 33,081 42,036 - 75,117
Operating income (loss) 8,579 25,997 (25) 34,551
Income (loss) before income
tax expense 7,950 25,791 (25) 33,716
Net income (loss) 5,483 15,946 (15) 21,414
Segment assets 150,174 93,052 31,367 274,593
Capital expenditures 9,272 4,363 4,667 18,302
Depreciation and amortization
expense 4,966 3,407 - 8,373

Twelve Months Ended May 31, 2007
Gross revenues $376,849 $277,556 $ - $654,405
Less: inter-segment revenues 10,689 3,870 - 14,559
Consolidated revenues 366,160 273,686 - 639,846
Gross Profit 29,494 36,392 - 65,886
Operating income (loss) 11,567 21,556 (73) 33,050
Income (loss) before income
tax expense 10,394 20,793 (73) 31,114
Net income (loss) 6,498 12,718 (45) 19,171
Segment assets 136,780 98,737 7,392 242,909
Capital expenditures 6,850 4,319 1,951 13,120
Depreciation and amortization
expense 3,586 2,914 - 6,500

Segment Revenue from External Customers by Industry Type
(In thousands)
Repair &
Construction Maintenance
Services Services Total
(unaudited)
Three Months Ended May 31, 2008
Aboveground Storage Tanks $52,538 $43,037 $95,575
Downstream Petroleum 43,580 22,418 65,998
Electrical and Instrumentation 7,859 7,372 15,231
Specialty 17,316 - 17,316
Total $121,293 $72,827 $194,120

Three Months Ended May 31, 2007
Aboveground Storage Tanks $40,138 $35,550 $75,688
Downstream Petroleum 42,501 31,288 73,789
Electrical and Instrumentation 8,773 8,356 17,129
Specialty 11,315 - 11,315
Total $102,727 $75,194 $177,921

Twelve Months Ended May 31, 2008
Aboveground Storage Tanks $201,446 $167,970 $369,416
Downstream Petroleum 156,371 89,001 245,372
Electrical and Instrumentation 19,975 18,443 38,418
Specialty 78,095 - 78,095
Total $455,887 $275,414 $731,301

Twelve Months Ended May 31, 2007
Aboveground Storage Tanks $159,274 $125,236 $284,510
Downstream Petroleum 120,828 120,557 241,385
Electrical and Instrumentation 32,439 27,893 60,332
Specialty 53,619 - 53,619
Total $366,160 $273,686 $639,846

Non-GAAP Financial Measures
(1) EBITDA is a supplemental, non-generally accepted accounting principle
(GAAP) financial measure. EBITDA is defined as earnings before net
interest expense, taxes, depreciation and amortization. We have
presented EBITDA because it is used by the financial community as a
method of measuring our performance and of evaluating the market
value of companies considered to be in similar businesses. We
believe that the line item on our consolidated statements of
operations entitled "net income" is the most directly comparable GAAP
measure to EBITDA. Since EBITDA is not a measure of performance
calculated in accordance with GAAP, it should not be considered in
isolation of, or as a substitute for, net earnings as an indicator of
operating performance. EBITDA, as we calculate it, may not be
comparable to similarly titled measures employed by other companies.
In addition, this measure is not necessarily a measure of our ability
to fund our cash needs. As EBITDA excludes certain financial
information compared with net income, the most directly comparable
GAAP financial measure, users of this financial information should
consider the type of events and transactions, which are excluded.
Our non-GAAP performance measure, EBITDA, has certain material
limitations as follows:
-- It does not include net interest expense. Because we have
borrowed money to finance our operations, interest expense is a
necessary and ongoing part of our costs and has assisted us in
generating revenue. Therefore, any measure that excludes
interest expense has material limitations.
-- It does not include taxes. Because the payment of taxes is a
necessary and ongoing part of our operations, any measure that
excludes taxes has material limitations.
-- It does not include depreciation and amortization expense.
Because we use capital assets to generate revenue, depreciation
and amortization expense is a necessary element of our cost
structure. Therefore, any measure that excludes depreciation and
amortization expense has material limitations.

A reconciliation of EBITDA to net income follows:

Three Months Ended Twelve Months Ended
May 31, May 31, May 31, May 31,
2008 2007 2008 2007
(In thousands) (In thousands)
Net income $8,866 $1,939 $21,414 $19,171
Interest expense, net 105 421 808 2,264
Provision for income
taxes 5,105 1,293 12,302 11,943
Depreciation and
amortization 2,343 1,805 8,373 6,500
EBITDA $16,419 $5,458 $42,897 $39,878

Non-GAAP Financial Measures (Continued)
(2) Revenues, gross profit, gross margins, SG&A and operating income
excluding special items, which are non-GAAP financial measures,
exclude certain pre-tax charges that management believes affect the
comparison of results for the periods presented. Management also
believes that results excluding these items are useful in evaluating
operational trends for Matrix Service and its performance relative to
its competitors.

A reconciliation of these categories excluding special items follows:

Non-
LNG Contested Recurring
Constr- Recei- Employee Excluding
uction vable Benefit Special
Actual Project Write-off Costs Items
Three Months Ended
May 31, 2008
Consolidated
Revenues $194,120 $(12,508) $ - $ - $181,612
Gross Profit 23,966 754 - - 24,720
Gross Margin % 12.3 % (6.0%) - - 13.6 %
SG&A 9,774 - - - 9,774
Operating Income 14,192 754 - - 14,946

Construction Services
Revenues $121,293 $(12,508) $ - $ - $108,785
Gross Profit 14,888 754 - - 15,642
Gross Margin % 12.3 % (6.0%) - - 14.4 %
SG&A 6,105 - - - 6,105
Operating Income 8,783 754 - - 9,537

Three Months Ended
May 31, 2007
Consolidated
Revenues $177,921 $(8,851) $ - $ - $169,070
Gross Profit 11,753 10,874 - - 22,627
Gross Margin % 6.6 % (122.9%) - - 13.4 %
SG&A 8,150 - - - 8,150
Operating Income 3,603 10,874 - - 14,477

Construction Services
Revenues $102,727 $(8,851) $ - $ - $93,876
Gross Profit 923 10,874 - - 11,797
Gross Margin % 0.9 % (122.9%) - - 12.6 %
SG&A 4,477 - - - 4,477
Operating Income
(loss) (3,554) 10,874 - - 7,320

Non-
LNG Contested Recurring
Constr- Recei- Employee Excluding
uction vable Benefit Special
Actual Project Write-off Costs Items
Twelve Months Ended
May 31, 2008
Consolidated
Revenues $731,301 $(66,673) $ - $ - $664,628
Gross Profit 75,117 20,804 - 500 96,421
Gross Margin % 10.3 % (31.2%) - - 14.5 %
SG&A 40,566 - (975) - 39,591
Operating Income 34,551 20,804 975 500 56,830

Construction Services
Revenues $455,887 $(66,673) $ - $ - $389,214
Gross Profit 33,081 20,804 - 290 54,175
Gross Margin % 7.3 % (31.2%) - - 13.9 %
SG&A 24,502 - (975) - 23,527
Operating Income 8,579 20,804 975 290 30,648

Twelve Months Ended
May 31, 2007
Consolidated
Revenues $639,846 $(45,236) $ - $ - $594,610
Gross Profit 65,886 11,367 - - 77,253
Gross Margin % 10.3 % (25.1%) - - 13.0 %
SG&A 32,836 - - - 32,836
Operating Income 33,050 11,367 - - 44,417

Construction Services
Revenues $366,160 $(45,236) $ - $ - $320,924
Gross Profit 29,494 11,367 - - 40,861
Gross Margin % 8.1 % (25.1%) - - 12.7 %
SG&A 17,927 - - - 17,927
Operating Income 11,567 11,367 - - 22,934

SOURCE Matrix Service Co.

Tom Long, Vice President and CFO of Matrix Service Company, +1-918-838-8822,
telong@matrixservice.com; or Investors and Financial Media, Truc Nguyen,
Deputy Managing Director of Grayling Global, +1-646-284-9418,
tnguyen@hfgcg.com, for Matrix Service Co.