Matrix Service Reports Record Operating Income and Fully Diluted Earnings Per Share in the First Quarter Fiscal 2009

TULSA, Okla., Oct. 2 /PRNewswire-FirstCall/ -- Matrix Service Co. (NASDAQ: MTRX) , a leading industrial services company, today reported its financial results for the first quarter ended August 31, 2008.

Total revenues for the first quarter increased 15.7% to $186.7 million from the $161.3 million recorded in the first quarter of fiscal 2008.

Net income for the first quarter of fiscal 2009 was $9.5 million, or $0.36 per fully diluted share, which compares favorably to prior year first quarter net income of $6.3 million, or $0.23 per fully diluted share.

Michael J. Bradley, president and chief executive officer of Matrix Service, said, "We are very proud of our overall performance in the first quarter of fiscal 2009. Our financial results continue to demonstrate our focus on execution and the Company's strong growth potential."

Consolidated SG&A expenses increased to $12.1 million from $8.0 million in the same quarter of fiscal 2008 with the addition of key resources necessary to execute the Company's growth strategy.

EBITDA(1) increased to $17.7 million, from $12.6 million in the same period last year. Gross margins on a consolidated basis for the current quarter increased to 14.3% from 11.7% reported in the same quarter a year ago. The lower margin in the prior fiscal period resulted from a $1.5 million pre-tax charge for a liquefied natural gas (LNG) construction project in the Gulf Coast Region.

Construction Services revenues improved by 16.2% to $114.8 million from $98.8 million in the same period a year earlier. The $16.0 million increase was a result of higher Aboveground Storage Tank (AST) revenues, which increased 41.5% to $55.9 million in fiscal 2009, up from $39.5 million a year earlier, higher revenues in Electrical and Instrumentation (E&I), which increased $9.3 million to $11.5 million in fiscal 2009, up from $2.2 million a year earlier, and higher Downstream Petroleum revenues, which increased 14.6% to $38.5 million in fiscal 2009 from $33.6 million a year earlier. These increases were partially offset by lower Specialty revenues, which decreased $14.7 million due to the completion of our Gulf Coast LNG project in fiscal 2008.

Construction Services' gross margins improved to 13.1% from 8.8%, primarily as a result of the $1.5 million charge taken on the LNG project in the first quarter of fiscal 2008. Moreover, the gross margins in the first quarter of fiscal 2009 benefited from the 16.2% increase in revenues, which led to further absorption of fixed costs.

Revenues for the Repair and Maintenance Services segment increased 15.0% to $71.9 million, up from $62.5 million a year earlier. The $9.4 million improvement resulted from higher AST revenues in this segment, which increased 15.4% to $47.9 million in fiscal 2009 from $41.5 million in the prior fiscal year and higher Downstream Petroleum revenues in this segment, which increased 21.1% to $21.2 million in fiscal 2009 from $17.5 million a year earlier. Gross margins in the first quarter of fiscal 2009 were 16.2% as compared to 16.4% earned in the first quarter of fiscal 2008.

Mr. Bradley added, "We continue to lay the groundwork to expand our geographic reach and diversify our service and product offerings to achieve sustainable and profitable long-term growth. We will also continue to look for acquisition opportunities that fit our strategy, strengths and culture."

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. (Eastern) / 10:00 a.m. (Central) 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.

    (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 Service 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.

     For more information, please contact:

     Matrix Service Company                   Investors and Financial Media:
     Tom Long                                 Truc Nguyen
     Vice President and CFO                   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 Income

                    (In thousands, except per share data)

                                                          Three Months Ended
                                                        August 31,  August 31,
                                                           2008        2007
                                                             (unaudited)

    Revenues                                             $186,650    $161,327
    Cost of revenues                                      159,979     142,423

    Gross profit                                           26,671      18,904
    Selling, general and administrative expenses           12,062       8,046

    Operating income                                       14,609      10,858

    Other income (expense):
      Interest expense                                       (114)       (304)
      Interest income                                         109          16
      Other                                                   736         (10)

    Income before income taxes                             15,340      10,560
    Provision for federal, state and foreign income taxes   5,836       4,224

    Net income                                             $9,504      $6,336

    Basic earnings per common share                         $0.36       $0.24
    Diluted earnings per common share                       $0.36       $0.23

    Weighted average common shares outstanding:
      Basic                                                26,073      26,592
      Diluted                                              26,473      27,083



                            Matrix Service Company

                         Consolidated Balance Sheets

                                (In thousands)

                                                        August 31,     May 31,
                                                           2008         2008
                                                              (unaudited)
    Assets

    Current assets:
      Cash and cash equivalents                           $18,819     $21,989
      Accounts receivable, less allowances
       (August 31, 2008 - $315 and May 31, 2008 - $269)   111,028     105,858
      Costs and estimated earnings in excess of billings
       on uncompleted contracts                            47,126      49,940
      Inventories                                           5,870       4,255
      Deferred income taxes                                 4,993       4,399
      Prepaid expenses                                      4,426       3,357
      Other current assets                                    809         809
    Total current assets                                  193,071     190,607

    Property, plant and equipment at cost:
      Land and buildings                                   24,147      24,268
      Construction equipment                               47,861      47,370
      Transportation equipment                             17,081      16,927
      Furniture and fixtures                               11,840      11,781
      Construction in progress                              8,610       6,712
                                                          109,539     107,058
      Accumulated depreciation                            (51,174)    (49,811)
                                                           58,365      57,247

    Goodwill                                               23,103      23,329

    Other assets                                            2,781       3,410


    Total assets                                         $277,320    $274,593



                            Matrix Service Company

                         Consolidated Balance Sheets

                      (In thousands, except share data)

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

    Current liabilities:
      Accounts payable                                    $51,236     $53,560
      Billings on uncompleted contracts in excess of
       costs and estimated earnings                        43,110      48,709
      Accrued insurance                                     8,771       8,451
      Accrued wages and benefits                           10,361      14,976
      Income tax payable                                    6,047       2,028
      Current capital lease obligation                      1,107       1,042
      Other accrued expenses                                2,046       1,015
    Total current liabilities                             122,678     129,781

    Long-term capital lease obligation                        947       1,000
    Deferred income taxes                                   4,950       5,112

    Stockholders' equity:
      Common stock - $.01 par value; 60,000,000 shares
       authorized; 27,888,217 shares issued as of
       August 31, 2008 and May 31, 2008                       279         279
      Additional paid-in capital                          109,528     108,402
      Retained earnings                                    54,312      44,809
      Accumulated other comprehensive income                  947       1,584
                                                          165,066     155,074
      Less:  Treasury stock, at cost - 1,806,150 and
       1,825,600 shares as of August 31, 2008 and
       May 31, 2008                                       (16,321)    (16,374)

    Total stockholders' equity                            148,745     138,700

    Total liabilities and stockholders' equity           $277,320    $274,593



                            Results of Operations
                                (In thousands)

                                                 Repair &
                                  Construction  Maintenance
                                    Services     Services    Other     Total
    Three Months Ended
     August 31, 2008
    Gross revenues                  $122,361     $72,167      $ -    $194,528
    Less: Inter-segment revenues       7,603         275        -       7,878
    Consolidated revenues            114,758      71,892        -     186,650
    Gross profit                      15,045      11,626        -      26,671
    Operating income                   7,492       7,117        -      14,609
    Income before income tax expense   7,703       7,637        -      15,340
    Net income                         4,379       5,125        -       9,504
    Segment assets                   150,322      91,116   35,882     277,320
    Capital expenditures               1,039         930    1,136       3,105
    Depreciation expense               1,412         969        -       2,381

    Three Months Ended
     August 31, 2007
    Gross revenues                  $103,017     $63,985      $ -    $167,002
    Less: Inter-segment revenues       4,238       1,437        -       5,675
    Consolidated revenues             98,779      62,548        -     161,327
    Gross profit                       8,673      10,231        -      18,904
    Operating income (loss)            3,924       7,019      (85)     10,858
    Income (loss) before income
     tax expense                       3,713       6,932      (85)    10,560
    Net income (loss)                  2,227       4,160      (51)      6,336
    Segment assets                   135,094      86,732   19,301     241,127
    Capital expenditures               1,506         672      710       2,888
    Depreciation and amortization
     expense                           1,053         721        -       1,774



    Segment revenue from external customers by market is as follows:

                                                          Repair &
                                          Construction   Maintenance
                                            Services      Services      Total
                                                       (In thousands)
    Three Months Ended August 31, 2008
    Aboveground Storage Tanks                $55,869      $47,897     $103,766
    Downstream Petroleum                      38,547       21,245       59,792
    Electrical and Instrumentation            11,474        2,750       14,224
    Specialty                                  8,868            -        8,868
    Total                                   $114,758      $71,892     $186,650

    Three Months Ended August 31, 2007
    Aboveground Storage Tanks                $39,474      $41,529      $81,003
    Downstream Petroleum                      33,551       17,537       51,088
    Electrical and Instrumentation             2,172        3,482        5,654
    Specialty                                 23,582            -       23,582
    Total                                    $98,779      $62,548     $161,327

Non-GAAP Financial Measure

EBITDA is a supplemental, non-GAAP financial measure. EBITDA is defined as earnings before net interest expense, income 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 Income 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 that are excluded. Our non-GAAP performance measure, EBITDA, has certain material limitations as follows:

    -- It does not include interest income or expense.  Because we borrow
       money from time to time 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 income taxes.  Because the payment of income taxes
       is a necessary and ongoing part of our operations, any measure that
       excludes income taxes has material limitations.

    -- It does not include depreciation expense.  Because we use capital
       assets to generate revenue, depreciation expense is a necessary element
       of our cost structure.  Therefore, any measure that excludes
       depreciation expense has material limitations.



     A reconciliation of EBITDA to net income follows:

                                                 Three Months Ended
                                         August 31, 2008    August 31, 2007
                                                   (In thousands)
    Net income                                $9,504             $6,336
    Interest expense, net                          5                288
    Provision for income taxes                 5,836              4,224
    Depreciation and amortization              2,381              1,774
    EBITDA                                   $17,726            $12,622