UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K
CURRENT REPORT PURSUANT
TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
January 9, 2008
Date of report (Date of earliest event reported)
Matrix Service Company
(Exact Name of Registrant as Specified in Its Charter)
| DELAWARE | 001-15461 | 73-1352174 | ||
| (State or Other Jurisdiction of Incorporation) | (Commission File Number) | (IRS Employer Identification No.) |
| 10701 E. UTE. STREET, TULSA, OK | 74116 | |||
| (Address of Principal Executive Offices) | (Zip Code) | |||
918-838-8822
(Registrant’s Telephone Number, Including Area Code)
NOT APPLICABLE
(Former Name or Former Address, if Changed Since Last Report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
| ¨ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
| ¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| ¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| ¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
| Item 2.02 | Results of Operations and Financial Condition. |
On January 9, 2008 Matrix Service Company (the “Company”) issued a press release announcing its financial results for the second quarter of fiscal year 2008. The full text of the press release is attached as Exhibit 99 to this Current Report on Form 8-K.
The information in this Item 2.02 and Exhibit 99 attached hereto is being furnished pursuant to Item 2.02 and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.
| Item 9.01 | Financial Statements and Exhibits. |
The following exhibit is filed or furnished herewith:
| Exhibit No. | Description | |
| 99 | Press Release dated January 9, 2008, announcing financial results for the second quarter of fiscal year 2008. | |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| Matrix Service Company | ||||||
| Dated: January 9, 2008 | By: | /s/ George L. Austin | ||||
| George L. Austin | ||||||
| Chief Financial Officer and | ||||||
| Principal Accounting Officer | ||||||
EXHIBIT INDEX
| Exhibit No. | Description | |
| 99 | Press Release dated January 9, 2008 announcing financial results for the second quarter of fiscal year 2008. | |
Exhibit 99
FOR IMMEDIATE RELEASE
MATRIX SERVICE CHARGES OF $17.9 MILLION REDUCE FULLY DILUTED EARNINGS
PER SHARE TO $0.01 IN THE SECOND QUARTER OF FISCAL 2008, ENDED
NOVEMBER 30, 2007
Second Quarter 2008 Highlights:
| • | Revenues were $194.7 million compared to $166.4 million a year earlier; |
| • | Net income was $0.2 million compared with $8.1 million in the second quarter a year ago; |
| • | Gross margins were 5.8% versus 13.2% for the second quarter a year earlier; and |
| • | Fully diluted EPS was $0.01 per share versus $0.31 per share in the same quarter a year ago. |
Six Month 2008 Highlights:
| • | Revenues were $356.1 million compared to $293.2 million for the same period in fiscal 2007; and |
| • | Fully diluted EPS was $0.24 per share versus $0.43 per share a year earlier. |
TULSA, OK – January 9, 2008 – Matrix Service Co. (Nasdaq: MTRX), a leading industrial services company, today reported its financial results for the second quarter of fiscal 2008, ended November 30, 2007. Total revenues for the quarter were $194.7 million compared to $166.4 million recorded in the second quarter of fiscal 2007.
Net income for the second quarter of fiscal 2008 was $0.2 million, or $0.01 per fully diluted share compared to $8.1 million, or $0.31 per fully diluted share, in the prior year second quarter. Current second quarter results included pre-tax charges of $17.0 million, or $0.38 per fully diluted share, for cost overruns on a liquefied natural gas (LNG) construction project in the Gulf Coast Region ($16.0 million) and to fully reserve a receivable from a customer who filed bankruptcy in the second quarter ($1.0 million). These results also reflect an additional $0.9 million pre-tax charge for non-recurring employee benefit costs. In addition to these charges, Matrix Service recorded a $0.7 million tax benefit in the second quarter resulting from the continuing assessment of the realizability of state investment tax credits.
Michael J. Bradley, president and chief executive officer of Matrix Service Company, said, “We are extremely proud of the continued growth in our underlying businesses and the hard work and dedication of our skilled workforce. With that said, we are disappointed with the charges related to cost overruns on the Gulf Coast LNG project which overshadowed what otherwise was an outstanding quarter.”
EBITDA(1) for the second quarter of fiscal 2008 was $1.5 million, compared to $14.9 million for the same period last year. Gross margins on a consolidated basis for the current quarter were 5.8% compared to 13.2% reported in the same quarter a year ago. Absent the impact of the special items discussed above, gross margins would have been 15.0% in the current quarter(2).
| (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. |
| (2) | Gross margins before special items (and the related amounts per share), a non-GAAP financial measure, exclude a $16.0 million pre-tax charge for the second quarter of fiscal 2008 and exclude a $17.5 million pre-tax charge for the first six months of fiscal 2008 relating to a LNG project. Also excluded is a $0.5 million pre-tax charge in the second quarter and the six month period related to non-recurring employee benefit costs. Management believes these charges 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 revenues, gross profit, gross margin %, SG&A and operating income before special items is included at the end of this press release. |
Matrix Service Company
January 9, 2008
Page 2
Construction Services revenues for the second quarter 2008 were $116.3 million compared to $83.3 million in the same period a year earlier. The increase was a result of significantly higher construction work in Aboveground Storage Tanks, where second quarter revenues soared 53.0% to $58.3 million, from $38.1 million in the second quarter of fiscal 2007. The increase was also driven by Downstream Petroleum revenues, which gained 55.5% to $39.5 million, from $25.4 million for the year-earlier period, and by Specialty revenues, which increased 6.5% to $13.2 million, from $12.4 million for the year-earlier period. These improvements were partially offset by a decline of $2.1 million in Electrical and Instrumentation revenues. Construction Services’ gross margins were (1.6)% versus 11.3% in the second quarter of fiscal 2007. Absent the impact of the special items discussed previously, margins would have been 13.6% in the current quarter(2).
Repair and Maintenance Services revenues were $78.5 million in the second quarter of 2008 versus $83.1 million in the same quarter in 2007. The decrease was primarily a result of lower Downstream Petroleum revenues, where second quarter revenues were $29.8 million compared to $42.8 million a year earlier, and by lower Electrical and Instrumentation revenues, which fell to $4.1 million, from $6.6 million for the year-earlier period. These declines were partially offset by Aboveground Storage Tank revenues which rose 32.0% to $44.5 million from $33.7 million in the year-earlier period. Gross margins were 16.7% in the quarter versus 15.1% in the second quarter a year ago. Repair and Maintenance Services’ gross margins benefited from continued high levels of callout work, particularly in our Aboveground Storage Tank segment.
Six Month Results
For the six months ended November 30, 2007, Matrix Service reported consolidated revenues of $356.1 million versus $293.2 million recorded in the year-earlier period.
Net income for the six month period was $6.5 million, or $0.24 per fully diluted share, compared to $11.1 million, or $0.43 per fully diluted share, in the comparable period last year. Current year results included pre-tax charges of $18.5 million, or $0.41 per fully diluted share for cost overruns on a LNG construction project in the Gulf Coast Region ($17.5 million) and to fully reserve a receivable from a customer who filed bankruptcy in the second quarter ($1.0 million). These results also reflect an additional pre-tax $0.9 million charge for non-recurring employee benefit costs. In addition to these charges, Matrix Service recorded a $0.7 million tax benefit in the second quarter resulting from the continuing assessment of the realizability of state investment tax credits. EBITDA(1) for the six months ended November 30, 2007 was $14.1 million, compared with $22.1 million for the year-earlier period. Consolidated gross margins were 8.5% compared to 12.0% a year earlier. Absent the impact of the special items discussed above, year-to-date margins would have been 14.9%(2).
Revenues for the Construction Services segment were $215.1 million, compared with $160.1 million for the six months ending November 30, 2006. The increase was due to significantly higher construction work in Downstream Petroleum, where revenues for the six month period increased 82.3% to $73.1 million versus $40.1 million for the same six month period last year. The increase was also driven by higher Aboveground Storage Tank revenues, which jumped 28.0% to $97.8 million in the recent six month period, versus $76.4 million a year earlier, and by higher Specialty revenues, which gained 15.4% to $36.8 million in the recent six month period compared to $31.9 million a year earlier. These increases were partially offset by a decline of $4.4 million in Electrical and Instrumentation revenues. Gross margins in the Construction Services segment were 3.2% compared to 11.1% a year earlier. Absent the impact of the special items discussed previously, margins would have been 13.6% in the first half of fiscal year 2008(2).
Matrix Service Company
January 9, 2008
Page 3
Revenues for Repair and Maintenance Services rose $7.9 million, or 5.9%, to $141.0 million, for the six month period ending November 30, 2007, from $133.1 million for the six month period ending November 30, 2006. The increase was primarily due to significantly higher Aboveground Storage Tank revenues which rose 43.6% to $86.0 million, versus $59.9 million for the same six month period last year. These increases were partially offset by lower Downstream Petroleum revenues, which fell 24.3% to $47.3 million in the six month period from $62.5 million in the same six month period last year, and by Electrical and Instrumentation revenues, which fell 29.0% to $7.6 million in the six month period from $10.7 million in the same six month period last year. Gross margins were 16.5% versus 13.1% a year earlier.
Mr. Bradley added, “Based upon the results of our LNG project, we will not meet our earlier gross margin guidance. We believe gross margins in the remaining six months of the fiscal year should be in the range of 11.5% to 13.5%, which would include approximately $27 million of additional LNG revenues at zero gross profit. We are maintaining our original revenue guidance of $700 million to $750 million and SG&A expense should still range between 5.0% and 5.5%.”
Conference Call Details
In conjunction with the press release, Matrix Service will host a conference call with Michael J. Bradley, president and CEO, and Les Austin, vice president and CFO. The call will take place at 11:00 a.m. (EST)/10:00 a.m. (CST) today and will be simultaneously broadcast live over the Internet at www.matrixservice.com or 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 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 the possibility of further overruns or delays on the Company’s Gulf Coast LNG project and 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
Les Austin
Vice President Finance and CFO
T: 918-838-8822
E: laustin@matrixservice.com
Investors and Financial Media:
Trúc Nguyen
The Global Consulting Group
T: 646-284-9418
E: tnguyen@hfgcg.com
Matrix Service Company
January 9, 2008
Page 4
Matrix Service Company
Consolidated Statements of Operations
(In thousands, except share and per share data)
| Three Months Ended | Six Months Ended | |||||||||||||||
| November 30, 2007 |
November 30, 2006 |
November 30, 2007 |
November 30, 2006 |
|||||||||||||
| (unaudited) | (unaudited) | |||||||||||||||
| Revenues |
$ | 194,734 | $ | 166,366 | $ | 356,061 | $ | 293,225 | ||||||||
| Cost of revenues |
183,488 | 144,464 | 325,911 | 258,016 | ||||||||||||
| Gross profit |
11,246 | 21,902 | 30,150 | 35,209 | ||||||||||||
| Selling, general and administrative expenses |
11,841 | 8,749 | 19,887 | 16,433 | ||||||||||||
| Operating income (loss) |
(595 | ) | 13,153 | 10,263 | 18,776 | |||||||||||
| Other income (expense): |
||||||||||||||||
| Interest expense |
(273 | ) | (759 | ) | (577 | ) | (1,505 | ) | ||||||||
| Interest income |
15 | 29 | 31 | 58 | ||||||||||||
| Other |
47 | 198 | 37 | 302 | ||||||||||||
| Income (loss) before income taxes |
(806 | ) | 12,621 | 9,754 | 17,631 | |||||||||||
| Provision (benefit) for federal, state and foreign income taxes |
(1,016 | ) | 4,547 | 3,208 | 6,549 | |||||||||||
| Net income |
$ | 210 | $ | 8,074 | $ | 6,546 | $ | 11,082 | ||||||||
| Basic earnings per common share |
$ | 0.01 | $ | 0.35 | $ | 0.25 | $ | 0.50 | ||||||||
| Diluted earnings per common share |
$ | 0.01 | $ | 0.31 | $ | 0.24 | $ | 0.43 | ||||||||
| Weighted average common shares outstanding: |
||||||||||||||||
| Basic |
26,625 | 23,004 | 26,609 | 22,252 | ||||||||||||
| Diluted |
27,131 | 26,589 | 27,109 | 26,572 | ||||||||||||
Matrix Service Company
January 9, 2008
Page 5
Matrix Service Company
Consolidated Balance Sheets
(In thousands)
| November 30, 2007 |
May 31, 2007 |
|||||||
| (unaudited) | ||||||||
| Assets |
||||||||
| Current assets: |
||||||||
| Cash and cash equivalents |
$ | 6,229 | $ | 9,147 | ||||
| Accounts receivable, less allowances (November 30, 2007 - $192 and May 31, 2007 - $260) |
134,802 | 98,497 | ||||||
| Costs and estimated earnings in excess of billings on uncompleted contracts |
43,158 | 45,634 | ||||||
| Inventories |
4,866 | 4,891 | ||||||
| Income tax receivable |
3,104 | — | ||||||
| Deferred income taxes |
5,819 | 3,283 | ||||||
| Prepaid expenses |
2,149 | 2,910 | ||||||
| Other current assets |
1,759 | 929 | ||||||
| Total current assets |
201,886 | 165,291 | ||||||
| Property, plant and equipment at cost: |
||||||||
| Land and buildings |
23,719 | 23,405 | ||||||
| Construction equipment |
43,583 | 39,958 | ||||||
| Transportation equipment |
15,203 | 14,380 | ||||||
| Furniture and fixtures |
11,102 | 10,116 | ||||||
| Construction in progress |
5,472 | 1,788 | ||||||
| 99,079 | 89,647 | |||||||
| Accumulated depreciation |
(46,894 | ) | (43,654 | ) | ||||
| 52,185 | 45,993 | |||||||
| Goodwill |
23,530 | 23,357 | ||||||
| Other assets |
660 | 8,268 | ||||||
| Total assets |
$ | 278,261 | $ | 242,909 | ||||
Matrix Service Company
January 9, 2008
Page 6
Matrix Service Company
Consolidated Balance Sheets
(In thousands, except share data)
| November 30, 2007 |
May 31, 2007 |
|||||||
| (unaudited) | ||||||||
| Liabilities and stockholders’ equity |
||||||||
| Current liabilities: |
||||||||
| Accounts payable |
$ | 63,414 | $ | 52,144 | ||||
| Billings on uncompleted contracts in excess of costs and estimated earnings |
51,994 | 34,243 | ||||||
| Accrued insurance |
6,396 | 6,422 | ||||||
| Accrued wages and benefits |
9,980 | 15,442 | ||||||
| Income tax payable |
— | 956 | ||||||
| Current capital lease obligation |
854 | 753 | ||||||
| Current portion of acquisition payable |
2,781 | 2,712 | ||||||
| Other accrued expenses |
1,553 | 1,313 | ||||||
| Total current liabilities |
136,972 | 113,985 | ||||||
| Long-term capital lease obligation |
521 | 836 | ||||||
| Long-term debt |
3,250 | — | ||||||
| Deferred income taxes |
3,573 | 2,512 | ||||||
| Stockholders’ equity: |
||||||||
| Common stock – $.01 par value; 60,000,000 shares authorized 27,888,217 shares issued as of November 30, 2007 and May 31, 2007 |
279 | 279 | ||||||
| Additional paid-in capital |
106,157 | 104,408 | ||||||
| Retained earnings |
29,953 | 23,422 | ||||||
| Accumulated other comprehensive income |
1,439 | 967 | ||||||
| 137,828 | 129,076 | |||||||
| Less: Treasury stock, at cost – 1,218,518 and 1,297,466 shares as of November 30, 2007 and May 31, 2007 |
(3,883 | ) | (3,500 | ) | ||||
| Total stockholders’ equity |
133,945 | 125,576 | ||||||
| Total liabilities and stockholders’ equity |
$ | 278,261 | $ | 242,909 | ||||
Matrix Service Company
January 9, 2008
Page 7
Results of Operations
| Construction Services |
Repair & Maintenance Services |
Other | Combined Total |
||||||||||||
| (In thousands) | |||||||||||||||
| Three Months Ended November 30, 2007 |
|||||||||||||||
| Gross revenues |
$ | 119,443 | $ | 79,420 | $ | — | $ | 198,863 | |||||||
| Less: Inter-segment revenues |
3,170 | 959 | — | 4,129 | |||||||||||
| Consolidated revenues |
116,273 | 78,461 | — | 194,734 | |||||||||||
| Gross profit (loss) |
(1,839 | ) | 13,085 | — | 11,246 | ||||||||||
| Operating income (loss) |
(9,269 | ) | 8,508 | 166 | (595 | ) | |||||||||
| Income (loss) before income tax expense |
(9,432 | ) | 8,460 | 166 | (806 | ) | |||||||||
| Net income (loss) |
(5,240 | ) | 5,350 | 100 | 210 | ||||||||||
| Segment assets |
163,597 | 93,030 | 21,634 | 278,261 | |||||||||||
| Capital expenditures |
2,400 | 1,870 | 1,169 | 5,439 | |||||||||||
| Depreciation and amortization expense |
1,178 | 861 | — | 2,039 | |||||||||||
| Three Months Ended November 30, 2006 |
|||||||||||||||
| Gross revenues |
$ | 85,871 | $ | 83,383 | $ | — | $ | 169,254 | |||||||
| Less: Inter-segment revenues |
2,568 | 320 | — | 2,888 | |||||||||||
| Consolidated revenues |
83,303 | 83,063 | — | 166,366 | |||||||||||
| Gross profit |
9,372 | 12,530 | — | 21,902 | |||||||||||
| Operating income (loss) |
4,609 | 8,590 | (46 | ) | 13,153 | ||||||||||
| Income (loss) before income tax expense |
4,487 | 8,180 | (46 | ) | 12,621 | ||||||||||
| Net income (loss) |
2,945 | 5,157 | (28 | ) | 8,074 | ||||||||||
| Segment assets |
93,561 | 82,739 | 20,014 | 196,314 | |||||||||||
| Capital expenditures |
1,921 | 1,173 | 378 | 3,472 | |||||||||||
| Depreciation and amortization expense |
896 | 677 | — | 1,573 | |||||||||||
| Six Months Ended November 30, 2007 |
|||||||||||||||
| Gross revenues |
$ | 222,460 | $ | 143,405 | $ | — | $ | 365,865 | |||||||
| Less: Inter-segment revenues |
7,408 | 2,396 | — | 9,804 | |||||||||||
| Consolidated revenues |
215,052 | 141,009 | — | 356,061 | |||||||||||
| Gross profit |
6,834 | 23,316 | — | 30,150 | |||||||||||
| Operating income (loss) |
(5,345 | ) | 15,527 | 81 | 10,263 | ||||||||||
| Income (loss) before income tax expense |
(5,719 | ) | 15,392 | 81 | 9,754 | ||||||||||
| Net income (loss) |
(3,013 | ) | 9,510 | 49 | 6,546 | ||||||||||
| Segment assets |
163,597 | 93,030 | 21,634 | 278,261 | |||||||||||
| Capital expenditures |
3,906 | 2,542 | 1,879 | 8,327 | |||||||||||
| Depreciation and amortization expense |
2,231 | 1,582 | — | 3,813 | |||||||||||
| Six Months Ended November 30, 2006 |
|||||||||||||||
| Gross revenues |
$ | 164,862 | $ | 133,811 | $ | — | $ | 298,673 | |||||||
| Less: Inter-segment revenues |
4,750 | 698 | — | 5,448 | |||||||||||
| Consolidated revenues |
160,112 | 133,113 | — | 293,225 | |||||||||||
| Gross Profit |
17,819 | 17,390 | — | 35,209 | |||||||||||
| Operating income (loss) |
8,900 | 9,922 | (46 | ) | 18,776 | ||||||||||
| Income (loss) before income tax expense |
8,198 | 9,479 | (46 | ) | 17,631 | ||||||||||
| Net income (loss) |
5,172 | 5,938 | (28 | ) | 11,082 | ||||||||||
| Segment assets |
93,561 | 82,739 | 20,014 | 196,314 | |||||||||||
| Capital expenditures |
4,193 | 1,935 | 649 | 6,777 | |||||||||||
| Depreciation and amortization expense |
1,695 | 1,336 | — | 3,031 | |||||||||||
Matrix Service Company
January 9, 2008
Page 8
Segment Revenue from External Customers by Industry Type
| Construction Services |
Repair & Maintenance Services |
Total | |||||||
| (In thousands) | |||||||||
| Three Months Ended November 30, 2007 |
|||||||||
| Aboveground Storage Tanks |
$ | 58,326 | $ | 44,504 | $ | 102,830 | |||
| Downstream Petroleum |
39,499 | 29,810 | 69,309 | ||||||
| Electrical and Instrumentation |
5,239 | 4,147 | 9,386 | ||||||
| Specialty |
13,209 | — | 13,209 | ||||||
| Total |
$ | 116,273 | $ | 78,461 | $ | 194,734 | |||
| Three Months Ended November 30, 2006 |
|||||||||
| Aboveground Storage Tanks |
$ | 38,147 | $ | 33,685 | $ | 71,832 | |||
| Downstream Petroleum |
25,411 | 42,761 | 68,172 | ||||||
| Electrical and Instrumentation |
7,315 | 6,617 | 13,932 | ||||||
| Specialty |
12,430 | — | 12,430 | ||||||
| Total |
$ | 83,303 | $ | 83,063 | $ | 166,366 | |||
| Six Months Ended November 30, 2007 |
|||||||||
| Aboveground Storage Tanks |
$ | 97,801 | $ | 86,033 | $ | 183,834 | |||
| Downstream Petroleum |
73,050 | 47,347 | 120,397 | ||||||
| Electrical and Instrumentation |
7,410 | 7,629 | 15,039 | ||||||
| Specialty |
36,791 | — | 36,791 | ||||||
| Total |
$ | 215,052 | $ | 141,009 | $ | 356,061 | |||
| Six Months Ended November 30, 2006 |
|||||||||
| Aboveground Storage Tanks |
$ | 76,351 | $ | 59,893 | $ | 136,244 | |||
| Downstream Petroleum |
40,087 | 62,481 | 102,568 | ||||||
| Electrical and Instrumentation |
11,774 | 10,739 | 22,513 | ||||||
| Specialty |
31,900 | — | 31,900 | ||||||
| Total |
$ | 160,112 | $ | 133,113 | $ | 293,225 | |||
Matrix Service Company
January 9, 2008
Page 9
Non-GAAP Financial Measures
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 (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 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 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 | Six Months Ended | ||||||||||||
| November 30, 2007 |
November 30, 2006 |
November 30, 2007 |
November 30, 2006 | ||||||||||
| (In thousands) | (In thousands) | ||||||||||||
| Net income |
$ | 210 | $ | 8,074 | $ | 6,546 | $ | 11,082 | |||||
| Interest expense, net |
258 | 730 | 546 | 1,447 | |||||||||
| Provision (benefit) for income taxes |
(1,016 | ) | 4,547 | 3,208 | 6,549 | ||||||||
| Depreciation and amortization |
2,039 | 1,573 | 3,813 | 3,031 | |||||||||
| EBITDA |
$ | 1,491 | $ | 14,924 | $ | 14,113 | $ | 22,109 | |||||
Matrix Service Company
January 9, 2008
Page 10
Non-GAAP Financial Measures (Continued)
A reconciliation of these categories before special items follows:
| Actual | LNG Construction Project |
Bankrupt Customer Charge |
Non- Recurring Employee Costs |
Before Special Items |
||||||||||||||||
| Three Months Ended November 30, 2007 Consolidated |
||||||||||||||||||||
| Revenues |
$ | 194,734 | $ | (9,939 | ) | $ | $ | — | $ | 184,795 | ||||||||||
| Gross Profit |
11,246 | 16,000 | 500 | 27,746 | ||||||||||||||||
| Gross Margin % |
5.8 | % | 15.0 | % | ||||||||||||||||
| SG&A |
11,841 | (975 | ) | (358 | ) | 10,508 | ||||||||||||||
| Operating Income (loss) |
(595 | ) | 16,000 | 975 | 858 | 17,238 | ||||||||||||||
| Three Months Ended November 30, 2007 Construction Services |
||||||||||||||||||||
| Revenues |
$ | 116,273 | $ | (9,939 | ) | $ | $ | — | $ | 106,334 | ||||||||||
| Gross Profit |
(1,839 | ) | 16,000 | 290 | 14,451 | |||||||||||||||
| Gross Margin % |
(1.6 | %) | 13.6 | % | ||||||||||||||||
| SG&A |
7,430 | (975 | ) | (222 | ) | 6,233 | ||||||||||||||
| Operating Income (loss) |
(9,269 | ) | 16,000 | 975 | 512 | 8,218 | ||||||||||||||
| Six Months Ended November 30, 2007 Consolidated |
||||||||||||||||||||
| Revenues |
$ | 356,061 | $ | (33,711 | ) | $ | $ | — | $ | 322,350 | ||||||||||
| Gross Profit |
30,150 | 17,500 | 500 | 48,150 | ||||||||||||||||
| Gross Margin % |
8.5 | % | 14.9 | % | ||||||||||||||||
| SG&A |
19,887 | (975 | ) | (358 | ) | 18,554 | ||||||||||||||
| Operating Income |
10,263 | 17,500 | 975 | 858 | 29,596 | |||||||||||||||
| Six Months Ended November 30, 2007 Construction Services |
||||||||||||||||||||
| Revenues |
$ | 215,052 | $ | (33,711 | ) | $ | $ | — | $ | 181,341 | ||||||||||
| Gross Profit |
6,834 | 17,500 | 290 | 24,624 | ||||||||||||||||
| Gross Margin % |
3.2 | % | 13.6 | % | ||||||||||||||||
| SG&A |
12,179 | (975 | ) | (222 | ) | 10,982 | ||||||||||||||
| Operating Income (loss) |
(5,345 | ) | 17,500 | 975 | 512 | 13,642 | ||||||||||||||
Revenues, gross profit, gross margins, SG&A and operating income before special items (and the related amounts per share), which are non-GAAP financial measures, exclude certain pre-tax charges for the first and second quarters of fiscal 2008 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.