Exhibit No. 99.1
MATRIX SERVICE REPORTS FULLY DILUTED EARNINGS PER SHARE CLIMBS 136.8% IN FIRST QUARTER OF FISCAL 2004, ENDED AUGUST 31
First Quarter 2004 Highlights:
• | Revenue was $158.8 million, up 195.6% from the same quarter a year ago |
• | Fully diluted EPS was $0.45 compared to $0.19 in the same quarter a year ago |
• | Net income rose 145.2% to $3.9 million, compared to the first quarter a year ago |
TULSA, OK – October 9, 2003 – Matrix Service Co. (Nasdaq: MTRX), a leading industrial services company today reported total revenue for the first quarter ended August 31, 2003, rose 195.6% to $158.8 million compared to the $53.7 million recorded in the first quarter a year ago.
Net income for the first quarter of fiscal 2004 climbed 145.2% to $3.9 million, or $0.45 per fully diluted share, from $1.6 million, or $0.19 per fully diluted share, in the first quarter a year ago. Gross margins on a consolidated basis were 8.8% versus 12.0% reported for the first quarter a year ago.
Revenues for the Construction Services segment rose to $123.4 million in the first quarter of fiscal 2004 from $29.9 million in the first quarter of fiscal 2003. The increase was due to significantly higher construction work on the east coast primarily from the Hake Group of Companies, which was acquired by Matrix in March, and to continued growth in construction revenues from Matrix’s west coast operations, offset somewhat by declines in new tank construction and product sales. Construction Services’ gross margins were 8.7% in the first quarter versus 13.4% in the first quarter of fiscal 2003 due to the inclusion of lower margin Hake work in the mix of business including two large power projects and a Chapter 11 filing on September 30, 2003 by one of Hake’s customers, lower margins on new tank construction and lower volumes of product sales.
Revenues from Repair and Maintenance Services advanced 48.7% to $35.4 million in the quarter from $23.8 million in the first quarter of fiscal 2003. The increase of $11.6 million was due primarily to the inclusion of Hake’s repair and maintenance service activity and moderate growth in tank repair and maintenance work. Routine plant maintenance and turnaround activity, although up from last year’s very low level, remained soft. Gross margins were 9.0% in the quarter versus 10.5% in the first quarter a year ago, as a result of lower margin Hake repair and maintenance work and lower than expected routine plant maintenance and turnaround activities, which were insufficient to cover the higher fixed cost structure resulting from Matrix’s geographical expansion last year.
Brad Vetal, president and CEO of Matrix Service said, “The Company is reaping the benefits of the Hake acquisition which was consummated on March 7, 2003. The environment for capital work is very positive both for work under contract and bidding activity. The Construction Services’ backlog at the end of the quarter was $207 million. Repair and Maintenance Services remain soft although we are anticipating a pick-up by the middle of our fiscal year, particularly in turnaround work, which should have a positive impact on our gross margins.”
Vetal added, “Revenues exceeded our expectations due to higher costs on a major power project that was contracted on a cost plus fixed fee basis and the dissolution of a joint venture during the first quarter as the work being performed was included in consolidated revenues versus the unconsolidated joint venture.”
In commenting on the prospects for the rest of the year, Vetal said, “Although Matrix is anticipating record results for fiscal 2004, we are still concerned with the slow activity in repair and maintenance and the final outcome of our customer’s Chapter 11 filing. As a result, we are holding our earnings guidance for fiscal 2004 at a range of $1.50 to $1.65 per fully diluted share despite very strong earnings in the first quarter of fiscal 2004. Revenues are anticipated to be in a range of $525 to $550 million.”
In conjunction with the earnings release, Matrix Service will host a conference call with Brad Vetal, President and CEO, and Michael Hall, Vice President and Chief Financial Officer. The call will take place today at 11:00 am (EST)/10:00 am (CST) and will be simultaneously broadcast live over the Internet atwww.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 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, Utah, South Carolina, Washington, and Delaware in the U.S. and Canada.
This release contains certain forward-looking statements including statements preceded or modified by the words “anticipate”, “continues”, “expect”, “forecast”, “outlook”, “believe”, “estimate”, “should” and “will” and words of similar effect, concerning the Company’s operations, economic performance and management’s best judgment as to what may occur in the future. 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 Company’s reports and documents filed from time to time with the Securities and Exchange Commission, many of which are beyond the control of the Company, and any one of which, or a combination of which, could materially affect the results of the Company’s operations.
For More Information: | Investors: | |
Michael J. Hall | Trúc N. Nguyen | |
Vice President Finance and CFO | VP, Investor Relations | |
Matrix Service Company | Stern & Co. | |
918/838-8822 | 212/888-0044 | |
mhall@matrixservice.com | tnguyen@sternco.com |
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Matrix Service Company
Segment Information
Matrix operates primarily in the United States and has operations in Canada. Prior to the acquisition of The Hake Group of Companies (“Hake”) in the 4th quarter of fiscal 2003, Matrix was organized into three reportable segments – Aboveground Storage Tank Services, Plant Services and Construction Services. As a result of the Hake acquisition, the structure of the Company’s internal organization changed in a manner that caused the Company’s reportable segments to change. Matrix now has two reportable segments – Construction Services and Repair & Maintenance Services. The corresponding items of segment information for earlier periods have been restated.
Construction Services | Repair & Maintenance Services | Other | Combined Total | |||||||||
Three Months ended August 31, 2003 | (in millions) | |||||||||||
Consolidated revenues | $ | 123.4 | $ | 35.4 | $ | — | $ | 158.8 | ||||
Gross profit | 10.7 | 3.2 | — | 13.9 | ||||||||
Operating income | 6.1 | 1.0 | — | 7.1 | ||||||||
Income before income tax expense | 5.7 | .8 | — | 6.5 | ||||||||
Net income | 3.4 | .5 | — | 3.9 | ||||||||
Segment assets | 83.7 | 36.0 | 82.3 | 202.0 | ||||||||
Capital expenditures | .6 | .7 | — | 1.3 | ||||||||
Depreciation and amortization expense | .9 | .7 | — | 1.6 | ||||||||
Three Months ended August 31, 2002 | ||||||||||||
Consolidated revenues | $ | 29.9 | $ | 23.8 | $ | — | $ | 53.7 | ||||
Gross profit | 4.0 | 2.5 | — | 6.5 | ||||||||
Operating income | 1.7 | .5 | .2 | 2.4 | ||||||||
Income before income tax expense | 1.7 | .7 | .2 | 2.6 | ||||||||
Net income | 1.1 | .4 | .1 | 1.6 | ||||||||
Segment assets | 39.2 | 39.8 | 23.5 | 102.5 | ||||||||
Capital expenditures | 1.9 | 1.8 | — | 3.7 | ||||||||
Depreciation and amortization expense | .7 | .6 | — | 1.3 |
Matrix Service Company
Consolidated Statements of Income
(in thousands, except share and per share data)
Three Months Ended August 31, (unaudited) | ||||||||
2003 | 2002 | |||||||
Revenues | $ | 158,762 | $ | 53,717 | ||||
Cost of revenues | 145,681 | 47,259 | ||||||
Net earnings of joint venture | 857 | — | ||||||
Gross profit | 13,938 | 6,458 | ||||||
Selling, general and administrative expenses | 6,841 | 4,271 | ||||||
Restructuring, impairment and abandonment cost | (2 | ) | (169 | ) | ||||
Operating income | 7,099 | 2,356 | ||||||
Other income (expense): | ||||||||
Interest expense | (672 | ) | (94 | ) | ||||
Interest income | 11 | 8 | ||||||
Other | 66 | 293 | ||||||
Income before income tax expense | 6,504 | 2,563 | ||||||
Provision for federal, state and foreign income tax expense | 2,639 | 987 | ||||||
Net income | $ | 3,865 | $ | 1,576 | ||||
Earnings per share of common stock: | ||||||||
Basic | $ | 0.48 | $ | 0.20 | ||||
Diluted | $ | 0.45 | $ | 0.19 | ||||
Weighted average number of common shares: | ||||||||
Basic | 8,091,799 | 7,858,532 | ||||||
Diluted | 8,664,920 | 8,251,207 |
Matrix Service Company
Consolidated Balance Sheets
(in thousands)
August 31, 2003 | May 31, 2003 | |||||
ASSETS: | (unaudited) | |||||
Current assets: | ||||||
Cash and cash equivalents | $ | 647 | $ | 775 | ||
Accounts receivable, less allowances (August 31-$1,093; May 31-$900) | 59,675 | 66,603 | ||||
Costs and estimated earnings in excess of billings on uncompleted contracts | 32,909 | 23,421 | ||||
Inventories | 3,050 | 2,850 | ||||
Income tax receivable | — | 2,309 | ||||
Deferred income taxes | 1,899 | 2,479 | ||||
Prepaid expenses | 2,614 | 2,997 | ||||
Total current assets | 100,794 | 101,434 | ||||
Property, plant and equipment at cost: | ||||||
Land and buildings | 24,514 | 24,517 | ||||
Construction equipment | 29,615 | 28,768 | ||||
Transportation equipment | 11,393 | 11,260 | ||||
Furniture and fixtures | 6,010 | 6,142 | ||||
Construction in progress | 4,319 | 4,419 | ||||
75,851 | 75,106 | |||||
Less accumulated depreciation | 28,805 | 27,743 | ||||
Net property, plant and equipment | 47,046 | 47,363 | ||||
Goodwill | 51,276 | 51,292 | ||||
Other assets | 2,845 | 2,850 | ||||
Total assets | $ | 201,961 | $ | 202,939 | ||
Matrix Service Company
Consolidated Balance Sheets
(in thousands)
August 31, 2003 | May 31, 2003 | |||||||
(unaudited) | ||||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY: | ||||||||
Current liabilities: | ||||||||
Accounts payable | $ | 38,930 | $ | 40,684 | ||||
Billings on uncompleted contracts in excess of costs and estimated earnings | 21,938 | 22,794 | ||||||
Joint venture | — | 1,013 | ||||||
Accrued insurance | 1,913 | 1,736 | ||||||
Income tax payable | 1,430 | 1,570 | ||||||
Other accrued expenses | 15,797 | 9,604 | ||||||
Current portion of long-term debt | 4,414 | 4,892 | ||||||
Current portion of acquisition payable | 974 | 854 | ||||||
Total current liabilities | 85,396 | 83,147 | ||||||
Long-term debt | 30,289 | 38,220 | ||||||
Acquisition Payable | 7,671 | 7,682 | ||||||
Deferred income taxes | 3,597 | 3,709 | ||||||
Stockholders’ equity: | ||||||||
Common stock | 96 | 96 | ||||||
Additional paid-in capital | 53,104 | 52,527 | ||||||
Retained earnings | 30,169 | 26,304 | ||||||
Accumulated other comprehensive income | (542 | ) | (567 | ) | ||||
82,827 | 78,360 | |||||||
Less: Treasury stock, at cost — | (7,819 | ) | (8,179 | ) | ||||
Total stockholders’ equity | 75,008 | 70,181 | ||||||
Total liabilities and stockholders’ equity | $ | 201,961 | $ | 202,939 | ||||