Press Release

TULSA, Okla., Feb. 03, 2016 (GLOBE NEWSWIRE) -- Matrix Service Company (Nasdaq:MTRX), a leading contractor to the energy, power and industrial markets across North America, today reported its financial results for its second quarter and six months ended December 31, 2015.

Key highlights:

• Consolidated gross profit for the three and six months ended December 31, 2015 was $30.0 million and $64.6 million compared to $16.0 million and $44.3 million for the same periods in fiscal 2015, respectively
  
• Consolidated revenue for the three and six months ended December 31, 2015 was $323.5 million and $642.9 million compared to $342.9 million and $664.6 million for the same periods in fiscal 2015, respectively  
  
• Unexpected client bankruptcy results in $5.2 million bad debt charge, reducing second quarter earnings per share by $0.12 to $0.20 
  
• Company completes acquisition of internationally-based Baillie Tank Equipment
  
• Total liquidity increased to $215.6 million at December 31, 2015, a fiscal 2016 increase of $40.8 million or 23.3%
  
• Financial strength, strategic focus and market position creates opportunity for long-term expansion
  

"We had another solid operating quarter overall and results were in line with our expectations, excluding various close-out costs on the Garrison Energy Center project as well as a bad debt charge resulting from an unexpected client bankruptcy.  This performance was achieved despite slower ramp ups on certain projects in the quarter and the continued weakening of our industrial segment end markets," said John Hewitt, President and CEO. "As a result of slower project ramp ups, revenue and profit recognition gets shifted across future quarters without necessarily changing the ultimate outcome. This shift in timing, along with the weakening industrial segment and the bad debt charge, requires that we adjust our guidance."

"As discussed in prior periods, bidding opportunities in our Electrical Infrastructure, Storage Solutions and Oil Gas & Chemical segments continue to be robust. The combination of today's regulatory environment and current market conditions have some owners taking a more cautious approach to the timing of awards, especially on larger projects, but the projects themselves remain critical to our clients' infrastructure," he said.

Despite the challenges, Hewitt also sees significant opportunity for growth. "Our position in the market, our conservative approach to managing our balance sheet and our deliberate, measured approach to diversification has and will continue to serve us well," he said. "The company's financial position is strong and, as such, allows us to continue with our strategic growth plans as evidenced by the recently announced acquisition of Baillie Tank Equipment. Additionally, it enables us to take advantage of larger acquisition opportunities."

Second Quarter Fiscal 2016 Results

Consolidated revenue was $323.5 million for the three months ended December 31, 2015, compared to consolidated revenue of $342.9 million in the same period in the prior fiscal year. On a segment basis, consolidated revenue increased in the Electrical Infrastructure segment by $32.9 million.  This increase was offset by decreased revenue in the Industrial, Oil Gas & Chemical and Storage Solutions segments of $30.7 million, $14.0 million and $7.6 million, respectively.

Consolidated gross profit increased from $16.0 million in the three months ended December 31, 2014 to $30.0 million in the three months ended December 31, 2015. Gross margins were 9.3% in the three months ended December 31, 2015 compared to 4.7% for the three months ended December 31, 2014. Fiscal 2016 gross profit was negatively impacted by the $5.4 million Garrison Energy Center project charge discussed above.  Our share of the project charge reduced second quarter of fiscal 2016 net income by $2.0 million and fully diluted earnings per share by $0.07 to $0.20. In the prior fiscal year, we recorded a charge on this project which reduced gross profit by $22.9 million, net income by $7.9 million and fully diluted earnings per share by $0.29 to $0.12.

A non-routine bad debt charge of $5.2 million from an unexpected client bankruptcy increased consolidated SG&A expenses to $25.1 million in the three months ended December 31, 2015 compared to $19.6 million in the same period a year earlier.

Six Month Fiscal 2016 Results

Consolidated revenue for the six months ended December 31, 2015 was $642.9 million compared to $664.6 million in the same period a year earlier, a decrease of $21.7 million, or 3.3%. On a segment basis, consolidated revenue increased in the Electrical Infrastructure, Storage Solutions and Oil Gas & Chemical segments by $42.8 million, $3.3 million and $1.1 million, respectively. These increases were offset by a reduction in the Industrial segment of $68.9 million.

Consolidated gross profit increased from $44.3 million in the six months ended December 31, 2014 to $64.6 million in the six months ended December 31, 2015. Gross margins were 10.0% in the six months ended December 31, 2015 compared to 6.7% for the six months ended December 31, 2014.  Fiscal 2016 gross profit was reduced due to a $5.5 million project charge related to the Garrison Energy Center.  Our share of the project charge reduced fiscal 2016 net income by $2.0 million and fully diluted earnings per share by $0.07 to $0.56. In the prior fiscal year, we recorded charges on this project which reduced gross profit by $26.2 million, net income by $9.0 million and fully diluted earnings per share by $0.33 to $0.34.

A non-routine bad debt charge of $5.2 million from an unexpected client bankruptcy increased consolidated SG&A expenses to $44.6 million compared to $39.5 million in the same period a year earlier.

Backlog

Backlog at December 31, 2015 was $1.12 billion, compared to $1.28 billion at September 30, 2015 and $1.42 billion at June 30, 2015.  Project awards totaled $177.9 million and $372.9 million for the three and six months ended December 31, 2015.

Financial Position

Availability under the Company's credit facility of $133.2 million along with the Company's cash balance of $82.4 million provided liquidity of $215.6 million at December 31, 2015, an increase of $40.8 million, or 23.3%, in fiscal 2016.

Earnings Guidance

Primarily as a result of the unexpected bankruptcy discussed above and the timing of revenue ramp up, the Company is reducing fiscal 2016 revenue guidance from between $1.4 billion and $1.6 billion to between $1.3 billion and $1.4 billion and is reducing fiscal 2016 earnings guidance from between $1.45 and $1.75 per fully diluted share to between $1.30 and $1.50 per fully diluted share.

Conference Call Details

In conjunction with the earnings release, Matrix Service Company will host a conference call with John R. Hewitt, President and CEO, and Kevin S. Cavanah, Vice President and CFO. The call will take place at 10:30 a.m. (Eastern) / 9:30 a.m. (Central) on Thursday, February 4, 2016 and will be simultaneously broadcast live over the Internet which can be accessed at the Company's website at matrixservicecompany.com on the Investors' page under Conference Calls/Events. 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 conference call will be recorded and will be available for replay within one hour of completion of the live call and can be accessed following the same link as the live call.

About Matrix Service Company

Founded in 1984, Matrix Service Company is parent to a family of companies that include Matrix Service, Matrix NAC, Matrix PDM Engineering and Matrix Applied Technologies. Our subsidiaries design, build and maintain infrastructure critical to North America's energy, power and industrial markets. Matrix Service Company is headquartered in Tulsa, Oklahoma with subsidiary offices located throughout the United States and Canada, as well as Sydney, Australia and Seoul, South Korea. The Company reports its financial results based on four key operating segments: Electrical Infrastructure, Storage Solutions, Oil Gas & Chemical and Industrial. To learn more about Matrix Service Company, visit matrixservicecompany.com

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, except as required by law.

Backlog

We define backlog as the total dollar amount of revenue that we expect to recognize as a result of performing work that has been awarded to us through a signed contract, notice to proceed or other type of assurance that we consider firm. The following arrangements are considered firm:

• fixed-price awards;
  
  
• minimum customer commitments on cost plus arrangements; and
  
  
• certain time and material arrangements in which the estimated value is firm or can be estimated with a reasonable amount of certainty in both timing and amounts.
  

For long-term maintenance contracts and other established arrangements, we include only the amounts that we expect to recognize into revenue over the next 12 months. For all other arrangements, we calculate backlog as the estimated contract amount less revenue recognized as of the reporting date.

Three Months Ended December 31, 2015

The following table provides a summary of changes in our backlog for the three months ended December 31, 2015:

Six Months Ended December 31, 2015

The following table provides a summary of changes in our backlog for the six months ended December 31, 2015:

For more information, please contact:

Matrix Service Company
Kevin S. Cavanah
Vice President and CFO
T: 918-838-8822
Email:kcavanah@matrixservicecompany.com