First Quarter 2006 Highlights:
- Revenues were $109.0 million, up 28.3% from the same quarter
a year ago
- Fully diluted EPS was $0.02 compared to a loss of $(0.05) per fully
diluted share in the same quarter a year ago
- Net income rose to $0.4 million compared to a net loss of
$(0.9) million in the same quarter last year
TULSA, Okla., Oct. 6 - Matrix Service Co. (Nasdaq: MTRX), a leading industrial services company, today reported its financial results for the first quarter 2006, ended August 31, 2005. Total revenues for the quarter were $109.0 million compared to $84.9 million recorded in the first quarter a year ago.
Net income for the first quarter of fiscal 2006 was $0.4 million, or $0.02 per fully diluted share, versus a net loss of $(0.9) million, or $(0.05) per fully diluted share, in the first quarter a year ago. These first quarter 2006 results include pre-tax charges and expenses of $0.5 million, or $0.02 per fully diluted share, for legal fees related to the three major contract disputes and $0.3 million, or $0.01 per fully diluted share, for consulting fees for the current restructuring efforts. These results also include pre-tax charges of $0.6 million, or $0.02 per fully diluted share, for the write-off of certain previously paid bank fees since the Company anticipates refinancing its senior facility by the end of the second fiscal quarter. These charges were partially offset by $0.7 million, or $0.02 per fully diluted share, for gains associated with disposed property and equipment in the Eastern business unit. EBITDA (1) for the first quarter of fiscal 2006 was $4.8 million, compared to $1.1 million for the same period last year. Gross margins on a consolidated basis for the current quarter were 9.3% compared to 7.9% reported in the same quarter a year ago. The gross margins were driven entirely by the improvement in the Construction Services segment.
President and Chief Executive Officer of Matrix Service, Michael J. Hall, said, "I am extremely proud of the excellent work done by the employees and management of Matrix Service. The speed with which turnaround measures were executed exceeded our expectations. To date, we have completed $7.7 million of liquidity events through surplus asset sales, the sale of our aluminum floating roof division and tax refunds."
On October 3, 2005, Matrix executed a $15 million private placement of the Company's common stock. This transaction, in combination with the previously discussed liquidity events, has enabled the Company to reduce its total funded senior debt to less than $17 million at October 4, 2005. The Company will now be able to close an extended senior credit facility at much more favorable rates that meets the long-term needs of the Company. We should also be able to re-establish a surety line with the new capital structure.
Construction Services revenues for first quarter 2006 were $62.2 million compared to $44.3 million in the same period a year earlier. The increase was a result of significantly higher construction work in the Downstream Petroleum Industry, where first quarter revenues climbed 79.7% to $50.4 million, from $28.1 million in the first quarter of fiscal 2005 and by Other Industries' revenues, which rose 64.5% to $8.2 million, from $5.0 million for the year- earlier period. These increases were partially offset by Power Industry revenues, which fell 68.5% to $3.6 million, from $11.2 million a year earlier. Construction Services' gross margins were 10.4% versus 6.3% in the first quarter of 2005.
Repair and Maintenance Services revenues advanced by $6.2 million, or 15.2%, in the first quarter of 2006 to $46.8 million, from $40.6 million in the same quarter in 2005. The increase was primarily a result of higher Downstream Petroleum Industry revenues, where first quarter revenues rose 18.0% to $43.2 million, from $36.6 million a year earlier, as well as higher Power Industry revenues, which climbed 110.6% to $2.9 million, from $1.4 million for the year-earlier period. Gross margins were 8.0% in the quarter versus 9.7% in the first quarter a year ago, as a result of lower turnaround activity in the plant services units and the inclusion of lower margin maintenance contracts in the Eastern operations, which the Company recently exited.
Mr. Hall added, "While we are still not in a position to provide earnings guidance, we believe the strength demonstrated in our Construction Services segment, particularly in the Downstream Petroleum Industry, should continue. Repair and Maintenance revenues and margins should continue to improve through the balance of the year. Based upon these factors, we are raising our revenue guidance to $400 million to $450 million versus our previous guidance of $375 million to $425 million."
In conjunction with the press release, Matrix Service will host a conference call with Michael J. Hall, president and CEO, and Les Austin, vice president and chief financial officer. 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.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.
(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 (loss)
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 (loss) is included at the end
of this release.
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 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 identified 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.
Matrix Service Company
Consolidated Statements of Operations
(In Thousands, Except Share and Per Share Data)
Three Months Ended
August 31, August 31,
2005 2004
(unaudited)
Revenues $108,996 $84,939
Cost of revenues 98,813 78,225
Gross profit 10,183 6,714
Selling, general and administrative expenses 7,207 7,133
Restructuring 322 175
Operating income (loss) 2,654 (594)
Other income (expense):
Interest expense (2,777) (901)
Interest income 7 -
Other 730 (8)
Income (loss) before income taxes 614 (1,503)
Income tax provision (benefit) 239 (611)
Net income (loss) $375 $(892)
Basic earnings (loss) per common share $0.02 $(0.05)
Diluted earnings (loss) per common share $0.02 $(0.05)
Weighted average common shares outstanding:
Basic 17,429,834 17,269,958
Diluted 17,654,336 17,269,958
Matrix Service Company
Consolidated Balance Sheets
(In Thousands)
August 31, May 31,
2005 2005
Assets (unaudited)
Current assets:
Cash and cash equivalents $1,117 $1,496
Accounts receivable, less allowances
(August 31, 2005 -$400, May 31, 2005- $461) 55,899 70,088
Contract dispute receivables, net 20,975 20,975
Costs and estimated earnings in excess
of billings on uncompleted contracts 22,582 22,733
Inventories 3,532 4,739
Income tax receivable 1,852 3,004
Deferred income taxes 4,478 4,820
Prepaid expenses 6,982 8,245
Assets held for sale 5,780 1,479
Total current assets 123,197 137,579
Property, plant and equipment at cost:
Land and buildings 22,750 23,087
Construction equipment 28,564 29,711
Transportation equipment 10,461 10,862
Furniture and fixtures 8,626 8,889
Construction in progress 911 318
71,312 72,867
Accumulated depreciation 35,944 35,791
35,368 37,076
Goodwill 23,471 24,834
Other assets 2,351 2,891
Total assets $184,387 $202,380
Matrix Service Company
Consolidated Balance Sheets
(In Thousands, Except Share Data)
August 31, May 31,
2005 2005
(unaudited)
Liability and stockholders' equity
Current liabilities:
Accounts payable $33,456 $ 38,059
Billings on uncompleted contracts
in excess of costs and estimated earnings 11,572 12,311
Accrued insurance 4,672 5,038
Other accrued expenses 10,333 15,759
Liabilities held for sale 1,456 -
Current capital lease obligation 166 113
Current portion of long-term debt 34,019 42,765
Current portion of acquisition payable 1,831 1,808
Total current liabilities 97,505 115,853
Convertible notes 29,500 30,000
Acquisition payable 4,222 4,169
Long-term capital lease obligation 338 231
Deferred income taxes 3,703 4,142
Stockholders' equity:
Common stock - $.01 par value;
30,000,000 shares authorized, and
19,381,130 and 19,285,276 shares issued
as of August 31, 2005 and May 31, 2005,
respectively 194 193
Additional paid-in capital 56,746 56,322
Retained deficit (2,934) (3,307)
Accumulated other comprehensive income
(loss) 301 (22)
54,307 53,186
Less: treasury stock, at cost - 1,868,850
and 1,873,750 shares as of August 31, 2005
and May 31, 2005, respectively (5,188) (5,201)
Total stockholders' equity 49,119 47,985
Total liabilities and stockholders' equity $184,387 $202,380
Matrix Service Company
1st Quarter Results of Operations
(In Thousands)
Repair &
Construction Maintenance Combined
Services Services Other Total
Three Months ended
August 31, 2005
Gross revenues $64,245 $46,936 $- $111,181
Less: Inter-segment
revenues (2,030) (155) - (2,185)
Consolidated revenues 62,215 46,781 - 108,996
Gross profit 6,441 3,742 - 10,183
Operating income (loss) 2,585 244 (175) 2,654
Income (loss) before
income tax expense 1,130 (341) (175) 614
Net income (loss) 696 (213) (108) 375
Segment assets 98,338 64,356 21,693 184,387
Capital expenditures 347 426 166 939
Depreciation and
amortization expense 700 747 - 1,447
Three Months ended
August 31, 2004
Gross revenues $46,779 $40,757 $- $87,536
Less: Inter-segment
revenues (2,453) (144) - (2,597)
Consolidated revenues 44,326 40,613 - 84,939
Gross profit 2,792 3,922 - 6,714
Operating income (loss) (968) 549 (175) (594)
Income (loss) before
income tax expense (1,535) 207 (175) (1,503)
Net income (loss) (917) 129 (104) (892)
Segment assets 121,767 57,660 28,263 207,690
Capital expenditures 88 88 216 392
Depreciation and
amortization expense 881 851 - 1,732
Segment revenue from external customers by industry type are as follows:
Repair &
Construction Maintenance
Services Services Total
Three Months Ended
August 31, 2005
Downstream Petroleum Industry $50,435 $43,222 $93,657
Power Industry 3,544 2,870 6,414
Other Industries 8,236 689 8,925
Total $62,215 $46,781 $108,996
Three Months Ended
August 31, 2004
Downstream Petroleum Industry $28,066 $36,629 $64,695
Power Industry 11,254 1,363 12,617
Other Industries 5,006 2,621 7,627
Total $44,326 $40,613 $84,939
Other Industries consists primarily of liquefied natural gas, wastewater,
food and beverage, manufacturing and paper industries.
Non-GAAP Financial Measure
EBITDA is a supplemental, non-GAAP financial measure. EBITDA is defined as earnings before taxes, interest expense, 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 (loss)" 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 does not necessarily represent funds available for discretionary use, and is not necessarily a measure of our ability to fund our cash needs. As EBITDA excludes certain financial information compared with net income (loss), 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 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, depreciation and amortization expense is a
necessary element of our costs and ability to generate revenue.
Therefore, any measure that excludes depreciation and amortization
expense has material limitations.
EBITDA for the three-month period ended August 31, 2005 was $4.8 million, compared to $1.1 million for the three-month period ended August 31, 2004. A reconciliation of EBITDA to net income (loss) follows:
Three Months Ended
August 31, August 31,
2005 2004
(In Thousands)
Net Income (loss) $375 $(892)
Interest Expense, net 2,770 901
Provision (benefit) for income taxes 239 (611)
Depreciation and amortization 1,447 1,732
EBITDA $4,831 $1,130
The $3.7 million increase in EBITDA for the three months ended August 31, 2005 as compared to three-month period for the prior year was primarily due to higher revenues in fiscal 2006 combined with the benefit of restructuring efforts, which led to a smaller fixed cost structure. In addition, EBITDA for fiscal 2006 was further enhanced by the gain on the sale of assets that were identified as part of the Company's restructuring efforts.
For More Information: Investor Relations:
Les Austin Truc N. Nguyen
Vice President Finance and CFO The Global Consulting Group, Inc.
Matrix Service Company 646/284-9418
918/838-8822 tnguyen@hfgcg.com
laustin@matrixservice.com
Media Relations:
Ivette Almeida
The Global Consulting Group
646/284-9455
ialmeida@hfgcg.com
