Matrix Service Reports Fully Diluted Earnings Per Share of $0.12 in the First Quarter of Fiscal 2007 Ended, August 31, 2006

TULSA, Okla., Oct. 5 /PRNewswire-FirstCall/ -- Matrix Service Co. , a leading industrial services company, today reported its financial results for the first quarter of fiscal 2007 ended, August 31, 2006. Total revenues for the quarter were $126.9 million compared to $109.0 million recorded in the first quarter of fiscal 2006.

Net income for the first quarter of fiscal 2007 was $3.0 million, or $0.12 per fully diluted share, which included pre-tax charges of $0.2 million, or $0.01 per fully diluted share, for the adoption of fair value recognition provisions in SFAS 123(R) Accounting for Stock-Based Compensation. These results compare favorably to prior year first quarter net income of $0.4 million, or $0.02 per fully diluted share.

Michael J. Hall, president and chief executive officer of Matrix Service Company, said, "We are extremely pleased with our continued success in executing work with our core customer base and look forward to new opportunities in expanding markets. Our project mix continues to be heavily weighted to the Downstream Petroleum Industry which represented approximately 81% of our first quarter revenues and accounts for more than 72% of our record $307.2 million in backlog."

EBITDA (1) for the first quarter of fiscal 2007 was $7.2 million, compared to $4.8 million for the same period last year. Gross margins on a consolidated basis for the current quarter were 10.5% compared to 9.3% reported in the same quarter a year ago. The gross margins were driven by improvements in both the Construction Services and Repair & Maintenance Services segments.

Construction Services revenues for the first quarter of fiscal 2007 were $76.8 million compared to $62.2 million in the same period a year earlier. The increase was a result of higher construction work in the Downstream Petroleum Industry, where first quarter revenues increased 7.9% to $54.4 million, from $50.4 million in the first quarter of fiscal 2006, by Other Industries' revenues, which improved 113.4% to $17.5 million, from $8.2 million for the year earlier period and by Power Industry revenues, which increased 40.0% to $4.9 million, from $3.5 million a year earlier. Construction Services' gross margins were 11.0% versus 10.4% in the first quarter of fiscal 2006.

Repair & Maintenance Services revenues advanced by $3.3 million, or 7.1%, in the first quarter of fiscal 2007 to $50.1 million, from $46.8 million in the same quarter in fiscal 2006. The increase was primarily a result of higher Downstream Petroleum Industry revenues, where first quarter revenues rose 11.8% to $48.3 million, from $43.2 million a year earlier. This increase was offset slightly by a decrease from the Power Industry revenues, which were $1.2 million versus $2.9 million in the first quarter of fiscal 2006. Gross margins were 9.7% in the quarter versus 8.0% in the first quarter a year ago.

Mr. Hall added, "Due to the continued strength in the Downstream Petroleum Industry which continues to fuel our earnings growth and with additional planned expansions at terminal facilities like the Plains All American Pipeline, L.P. which we announced in an earlier press release, we see strong and growing backlog into the future. We are raising our revenue guidance for the full fiscal year to the range of $510 million to $540 million from the range of $480 million to $520 million as previously disclosed and will maintain our guidance of targeted consolidated gross profit margins between the range of 10.5% to 11.0%."

Conference Call Details

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 CFO. 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.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 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, 2006 2005 (unaudited) Revenues $126,859 $108,996 Cost of revenues 113,552 98,813 Gross profit 13,307 10,183 Selling, general and administrative expenses 7,684 7,207 Restructuring --- 322 Operating income 5,623 2,654 Other income (expense): Interest expense (746) (2,777) Interest income 29 7 Other 104 730 Income before income taxes 5,010 614 Provision for federal, state and foreign income taxes 2,002 239 Net income $3,008 $375 Basic earnings per common share $0.14 $0.02 Diluted earnings per common share $0.12 $0.02 Weighted average common shares outstanding: Basic 21,508,972 17,429,834 Diluted 26,547,276 17,654,336 Matrix Service Company Consolidated Balance Sheets (In thousands) August 31, May 31, 2006 2006 (unaudited) Assets Current assets: Cash and cash equivalents $4,395 $8,585 Accounts receivable, less allowances (August 31, 2006 - $223 and May 31, 2006 - $190) 56,050 64,061 Contract dispute receivables, net 11,684 11,668 Costs and estimated earnings in excess of billings on uncompleted contracts 34,564 24,538 Inventories 5,374 4,738 Income tax receivable --- 104 Deferred income taxes 2,850 2,831 Prepaid expenses 5,342 5,581 Assets held for sale 809 809 Total current assets 121,068 122,915 Property, plant and equipment at cost: Land and buildings 23,176 23,100 Construction equipment 33,153 31,081 Transportation equipment 11,738 10,921 Furniture and fixtures 8,707 8,658 Construction in progress 1,966 2,392 78,740 76,152 Accumulated depreciation (39,632) (38,712) 39,108 37,440 Goodwill 23,434 23,442 Other assets 5,729 4,479 Total assets $189,339 $188,276 Matrix Service Company Consolidated Balance Sheets (In thousands, except share data) August 31, May 31, 2006 2006 (unaudited) Liabilities and stockholders' equity Current liabilities: Accounts payable $40,929 $47,123 Billings on uncompleted contracts in excess of costs and estimated earnings 18,012 12,078 Income tax payable 1,885 --- Accrued insurance 6,423 6,408 Other accrued expenses 9,464 12,436 Current capital lease obligation 444 406 Current portion of acquisition payable 1,831 1,808 Total current liabilities 78,988 80,259 Long-term acquisition payable 2,611 2,578 Long-term capital lease obligation 512 538 Deferred income taxes 3,342 3,502 Convertible notes 15,000 25,000 Stockholders' equity: Common stock - $.01 par value; 30,000,000 shares authorized; 24,686,782 and 22,595,243 shares issued as of August 31, 2006 and May 31, 2006 247 226 Additional paid-in capital 85,259 75,855 Retained earnings 7,305 4,316 Accumulated other comprehensive income 789 814 93,600 81,211 Less: Treasury stock, at cost - 1,696,386 and 1,731,386 shares as of August 31, 2006 and May 31, 2006 (4,714) (4,812) Total stockholders' equity 88,886 76,399 Total liabilities and stockholders' equity $189,339 $188,276 Results of Operations Repair & Construction Maintenance Combined Services Services Other Total (In thousands) Three Months ended August 31, 2006 Gross revenues $78,991 $50,428 $--- $129,419 Less: Inter-segment revenues 2,182 378 --- 2,560 Consolidated revenues 76,809 50,050 --- 126,859 Gross profit 8,447 4,860 --- 13,307 Operating income 4,291 1,332 --- 5,623 Income before income tax expense 3,711 1,299 --- 5,010 Net income 2,227 781 --- 3,008 Segment assets 100,814 66,374 22,151 189,339 Capital expenditures 2,272 762 271 3,305 Depreciation and amortization expense 799 659 --- 1,458 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 Segment Revenue from External Customers by Industry Type Repair & Construction Maintenance Services Services Total (In thousands) Three Months Ended August 31, 2006 Downstream Petroleum Industry $54,435 $48,311 $102,746 Power Industry 4,884 1,223 6,107 Other Industries (A) 17,490 516 18,006 Total $76,809 $50,050 $126,859 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 (A) 8,236 689 8,925 Total $62,215 $46,781 $108,996 (A) 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 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 operations 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 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, 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 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 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 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, 2006 was $7.2 million, compared to EBITDA of $4.8 million for the three-month period ended August 31, 2005. A reconciliation of EBITDA to net income follows:

Three Months Ended August 31, 2006 August 31, 2005 (In thousands) Net income $3,008 $375 Interest expense, net 717 2,770 Provision for income taxes 2,002 239 Depreciation and amortization 1,458 1,447 EBITDA $7,185 $4,831

The $2.4 million increase in EBITDA for the three months ended August 31, 2006 as compared to the three-month period for the prior year was primarily due to improved operating results in both our Construction Services and Repair and Maintenance Services segments.

(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 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 Les Austin Vice President Finance and CFO T: 918-838-8822 E: laustin@matrixservice.com Investors and Financial Media: Truc Nguyen The Global Consulting Group T: 646-284-9418 E: tnguyen@hfgcg.com