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UNITED STATES 

SECURITIES AND EXCHANGE COMMISSION 

Washington, D.C. 20549 

FORM 10-K 

(Mark One) 

For the fiscal year ended May 31, 2008 

or 

 

For the transition period from to 

Commission File No. 1-15461 

 

MATRIX SERVICE COMPANY 

(Exact name of registrant as specified in its charter) 

 

 

Registrant’s telephone number, including area code: (918) 838-8822 

 

Securities Registered Pursuant to Section 12(b) of the Act: 

(Title of class) 

Common Stock, par value $0.01 per share 

Preferred Share Purchase Rights 

Securities Registered Pursuant to Section 12(g) of the Act: None 

Name of Each Exchange On Which Registered: NASDAQ Global Market (Common Stock) 

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities 

Act. Yes  No ⌧

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the 

Act. Yes  No ⌧

⌧ Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 

Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 

Delaware 73-1352174

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

5100 E. Skelly Drive, Suite 700

Tulsa, Oklahoma 74135

(Address of Principal Executive Offices) (Zip Code)
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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities 

Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), 

and (2) has been subject to such filing requirements for the past 90 days. Yes ⌧ No 

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not 

be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III 

of this Form 10-K or any amendment to this Form 10-K. 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller 

reporting company. See definition of “accelerated filer” , “large accelerated filer” and “smaller reporting company” in Rule 12 b-2 of 

the Exchange Act. 

Large accelerated filer  Accelerated filer ⌧ Non-accelerated filer  Smaller reporting company 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes  No ⌧

The aggregate market value of the registrant’s common stock held by non-affiliates computed by reference to the price at which the 

common stock was last sold as of the last business day of the registrant’s most recently completed second quarter was approximately 

$691 million. 

The number of shares of the registrant’s common stock outstanding as of August 4, 2008 was 26,062,617 shares. 

Documents Incorporated by Reference 

Certain sections of the registrant’s definitive proxy statement relating to the registrant’s 2008 annual meeting of stockholders, which 

definitive proxy statement will be filed within 120 days of the end of the registrant’s fiscal year, are incorporated by reference into 

Part III of this Form 10-K. 

 

 
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TABLE OF CONTENTS 

 

 Page

Part I 

Item 1. Business 2

Item 1A. Risk Factors 10

Item 1B. Unresolved Staff Comments 18

Item 2. Properties 19

Item 3. Legal Proceedings 20

Item 4. Submission of Matters to a Vote of Security Holders 20

Part II 

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 21

Item 6. Selected Financial Data 22

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 23

Item 7A. Quantitative and Qualitative Disclosures About Market Risk 37

Item 8. Financial Statements and Supplementary Data 39

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 73

Item 9A. Controls and Procedures 73

Item 9B. Other Information 73

Part III 

Item 10. Directors, Executive Officers and Corporate Governance 73

Item 11. Executive Compensation 74

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 74

Item 13. Certain Relationships and Related Transactions, and Director Independence 74

Item 14. Principal Accountant Fees and Services 74

Part IV 

Item 15. Exhibits and Financial Statement Schedules 75
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PART 1 

 

FORWARD-LOOKING STATEMENTS 

This Annual Report on Form 10-K includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 

1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements, other than statements of 

historical facts, included in this Annual Report which address activities, events or developments which we expect, believe or 

anticipate will or may occur in the future are forward-looking statements. The word “believes,” “intends,” “expects,” “anticipates,” 

“projects,” “estimates,” “predicts” and similar expressions are also intended to identify forward-looking statements. 

These forward-looking statements include, among others, such things as: 

 

 

 

 

 

These statements are based on certain assumptions and analyses we made in light of our experience and our perception of historical 

trends, current conditions and expected future developments as well as other factors we believe are appropriate in the circumstances. 

However, whether actual results and developments will conform with our expectations and predictions is subject to a number of risks 

and uncertainties which could cause actual results to differ materially from our expectations, including: 

 

 

 

 

Consequently, all of the forward-looking statements made in this Annual Report are qualified by these cautionary statements and

there can be no assurance that the actual results or developments anticipated by us will be realized or, even if substantially realized, 

that they will have the expected consequences to or effects on us or our business or operations. We assume no obligation to update 

publicly any such forward-looking statements, whether as a result of new information, future events or otherwise. 

- 2 -

Item 1. Business 

• amounts and nature of future revenues and margins from our Construction Services and Repair and Maintenance Services 

segments; 

• our ability to generate sufficient cash from operations or to raise cash in order to meet our short and long-term capital 

requirements; 

• our ability to comply with the covenants in our credit agreement; 

• the likely impact of new or existing regulations or market forces on the demand for our services; and 

• expansion and other development trends of the industries we serve. 

• the risk factors discussed in Item 1A of this Annual Report and listed from time to time in our filings with the Securities and

Exchange Commission; 

• economic, market or business conditions in general and in the oil and gas, power, and petrochemical industries in particular; 

• changes in laws or regulations; and 

• other factors, many of which are beyond our control. 
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BACKGROUND 

Matrix Service Company was incorporated in the State of Delaware in 1989. We provide construction services and repair and 

maintenance services primarily to the energy and energy related industries. As a full service industrial contractor, we strive to provide 

our clients a high degree of safety, quality and service utilizing our qualified professionals, technical expertise, skilled craftsmen, and 

overall project management expertise. To serve clients efficiently and effectively, Matrix Service operates regional offices throughout 

the United States and Canada. We have separate union and merit subsidiaries, which allows us to serve customers on both a union and 

a merit basis. 

We are licensed to operate in all fifty states and in certain Canadian provinces. Our headquarters are in Tulsa, Oklahoma, and we have 

regional operating facilities in California, Delaware, Illinois, Michigan, Oklahoma, Pennsylvania, Texas and Washington in the 

United States and Ontario, Alberta, and New Brunswick in Canada. Our principal executive offices are located at 5100 E. Skelly 

Drive, Suite 700, Tulsa, Oklahoma 74135. Our telephone number is (918) 838-8822. Unless the context otherwise requires, all 

references herein to “Matrix Service”, “Matrix Service Company”, the “Company” or to “we”, “our”, and “us” are to Matrix Service 

Company and its subsidiaries. 

WEBSITE ACCESS TO REPORTS 

Our public internet site is www.matrixservice.com. We make available free of charge through our internet site, via a link to Edgar 

Online, our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those 

reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, as soon as 

reasonably practicable after we electronically file such material with, or furnish it to, the Securities and Exchange Commission. 

In addition, we currently make available on www.matrixservice.com our annual reports to stockholders. Adobe Acrobat Reader 

software is required to view these documents, which are in PDF format. A link to Adobe Systems Incorporated’s Internet site, from 

which the software can be downloaded, is provided. 

OPERATING SEGMENTS 

We have two reportable segments, the Construction Services segment and the Repair and Maintenance Services segment. See Note 

14. Segment Information in the Notes to Consolidated Financial Statements for segment, geographic and market information. We also 

offer services to our customers where our two business segments work together to provide a combination of services. Customers 

utilize our services to construct or expand operating facilities, improve operating efficiencies, maintain existing facilities and to 

comply with stringent environmental and safety regulations. Our services range in duration from short—term to multiple year 

contracts and are provided on a project by project basis or as part of long—term preferred provider relationships and alliances. We are 

able to provide services and respond to our customer’s requirements for both union and merit shop operations. 

Construction Services 

Our Construction Services segment provides turnkey and specialty construction to many industries. Our scope of services includes 

civil/structural, mechanical, piping, electrical, instrumentation, millwrighting, and fabrication. These services are provided for 

projects of varying complexities, schedule durations, and budgets. Our project experience includes retrofits, modifications and

expansions to existing facilities and construction of new facilities. 

Repair and Maintenance Services 

Our Repair and Maintenance Services segment encompasses a wide range of routine, preventative, and emergency repair and 

maintenances services. Our ability to provide multiple services allows us to serve as a single source provider to our clients for their 

repair and maintenance needs. 

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MARKETS WITHIN OPERATING SEGMENTS

Within these two operating segments we serve four primary markets: 

 

 

 

 

Aboveground Storage Tanks 

One of the cornerstones of our business has been, and continues to be, aboveground storage tanks (“AST”). We offer complete 

engineering, procurement, fabrication, and construction (“EPFC”) services for the bulk storage / terminal industry as well as the 

refining, petrochemical, pipeline and power industries. We are one of the largest AST constructors in North America. Our expertise 

includes cone roof tanks, dome roof tanks, open top floating roof tanks, geodesic domes, and specialty tanks. 

Every AST project is designed in accordance with applicable industry standards, codes and regulations. With the teams that we have 

assembled, we have the knowledge and experience to comply with all applicable specifications to ensure that all quality requirements 

are met. In response to environmental requirements for control of vapor emissions and leak containment, we have developed many 

unique designs and devices such as floating roof seal systems, dike liners, and other products. 

One of our most significant areas of expertise is our turnkey tank and terminal construction service. Our tank design and EPFC 

services, coupled with our overall construction capabilities allow our clients to be confident that the project will meet safety and 

quality objectives and be completed within time and budget constraints. As a general contractor, we offer a single point of contact, 

with the capability to perform the civil and site preparation, foundations, liners, mechanical, piping, structural, tank design, 

engineering, fabrication and construction. 

Our tank repair and maintenance services are a key component of our core business. We are one of the largest tank repair and 

maintenance contractors in the United States with a reputation for quality, safety and reliability. Our personnel are well versed in 

American Petroleum Institute (“API”) standards and American Society of Mechanical Engineers (“ASME”) code work in both 

atmospheric and pressure storage vessels. 

AST repair and maintenance services include replacements/repairs to tank bottoms, shells, nozzles, roof structures, steel floating 

roofs, seals and manways for tanks of all sizes. We provide tank cleaning, foundation repair/replacement and complete tank relocation 

utilizing air lifting technology. 

We also provide environmentally friendly solutions for secondary containment and leak detection. Our product offerings include 

dikes and liners, steel internal floating roofs, tank double bottoms, and primary and secondary seals. Every product we offer is 

engineered to meet our customers’ quality specifications. 

Downstream Petroleum 

Our construction experience in the downstream petroleum market includes refineries, pipelines, petrochemical plants and gas 

facilities. This includes turnkey construction work, renovations, upgrades and expansion projects. We have developed many longterm relationships with our customers and, as a result, much of our work is repeat business. 

Repair and maintenance services for the downstream petroleum industry are typically classified as either refinery maintenance or 

turnarounds. 

Plant maintenance contracts are typically multi-year contracts that provide outsourcing of maintenance management and the multiple 

crafts necessary to provide routine and preventive maintenance services for a facility. A typical maintenance contract includes

planning and scheduling and active participation in or development of reliability programs, including the development of performance 

metrics. These services generally include both safety implementation and quality assurance /quality control management. 

- 4 -

• Aboveground Storage Tanks 

• Downstream Petroleum 

• Electrical and Instrumentation 

• Specialty 
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Contracts for planned major maintenance activities are generally of short duration, but require detailed scheduling and advanced 

planning to assure the availability of qualified personnel and specialty equipment that are needed to complete the work in the shortest 

possible timeframe. We are committed to delivering all services on time, within budget and schedule constraints, and most 

importantly, in a safe manner. 

Electrical and Instrumentation 

We are an experienced leader in electrical construction, instrumentation, and control systems. Our experience spans a wide range of 

industries including combined cycle power, refining, petrochemical and heavy industrial. In addition to ground-up construction, our 

management and technical teams perform expansion projects, critical path turnarounds, emergency response and staff augmentation

services. We also have expertise in the design and construction of industrial fiber optic and copper cabling for voice, data, control and 

video systems. 

As part of our electrical capabilities, we have the experience and expertise to install complex instrumentation and control systems. 

This service includes instrument calibration and installation, loop checks, commissioning, and start-up. 

Electrical and instrumentation repair and maintenance services include routine and preventative maintenance, emergency response, 

and outage support for various industries including power, petroleum and petrochemical. 

Specialty 

Our specialty construction services include liquefied natural gas (“LNG”) and industrial gas projects, power projects, specialty tanks 

and vessels and related fabrication. 

LNG/Industrial Gas Projects/Liquefied Petroleum Gas 

Matrix Service engineers, fabricates and constructs refrigerated and cryogenic liquefied gas storage tanks for the storage of ammonia, 

butane, carbon dioxide, ethane, methane, argon, nitrogen, oxygen, propane and other products. These tanks are utilized by the 

chemical, petrochemical and gas industries. 

Power Projects 

Our construction service offerings for the power industry includes stacks, stack liners, ducting, scrubbers, absorbers, and waste to 

energy facilities. Repair and maintenance services include providing repair, maintenance, and outage services for the power industry. 

Our onsite maintenance services include routine maintenance that includes cleaning fans, changing out lube oil coolers and 

maintaining gas turbines, heat recovery steam generators and other plant equipment. We also provide turbine disassembly, inspection 

and repair assistance. 

Specialty Tanks and Vessels 

Our specialty tank and vessel expertise includes aerobic/anaerobic digesters, clarifiers, egg shaped digesters, spheres, petroleum 

scrubbers/absorbers, flare tips, thermal vacuum chambers and other pressure vessels. The tanks and vessels are engineered, fabricated 

and constructed in adherence with API standards and specifications and ASME codes. These tanks and vessels are used throughout 

the petroleum, chemical, power, aerospace and waste water industries. 

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Fabrication 

We have facilities which provide large scale fabrication services for our operating units and directly for our customers throughout the 

United States and Canada. These facilities are staffed with qualified personnel and utilize sophisticated tooling and equipment. Our 

fabrication facilities specialize in steel plate, structural steel and vessel fabrication utilizing carbon steels, stainless steels and specialty 

alloy materials. Our largest fabrication facility is centrally located in the United States. This 160,000 sq. ft. facility in Oklahoma is 

located on the most inland port in the United States with barge, rail and truck access. This facility has the capacity to fabricate new 

tanks, new tank components and all maintenance, retrofit and repair parts, including fixed roofs, floating roofs, seal assemblies, shell 

plate and tank appurtenances. This facility is qualified to fabricate equipment in adherence to ASME codes and regulations including 

pressure vessels, stacks/stackliners, scrubbers, ducting, flare stacks and igniter tips. 

OTHER BUSINESS MATTERS 

Customers and Marketing 

Matrix Service derives a significant portion of its revenues from performing services for major integrated oil companies, independent 

petroleum refiners, and pipeline, terminal and marketing companies. In fiscal 2008, these customer types accounted for 84.1% of

consolidated revenues. The loss of significant work from any of these classes of customers or an overall decline in the petroleum 

industry would have a material adverse effect on the Company. Matrix Service also performs services for power companies, 

engineering firms, general contractors, and petrochemical and industrial gas companies. The Company provided services to 

approximately 350 customers in fiscal 2008. The following table provides a list of any customer that accounted for greater than 10% 

of either our Construction Services or Repair and Maintenance Services revenue for the twelve months ended May 31, 2008: 

 

The loss of any of these major customers could have a material adverse effect on the Company. 

Matrix Service markets its services and products primarily through its marketing and business development personnel, senior 

professional staff and its operating management. The marketing personnel concentrate on developing new customers and assisting 

management with existing customers. We enjoy many preferred provider relationships with customers who award our work through 

long-term agreements. In addition, we competitively bid many projects. Our projects have durations of one week to several years. 

Segment Financial Information 

Financial information for our operating segments is provided in “Item 7. Management’s Discussion and Analysis of Financial 

Condition and Results of Operations” and in Note 14. Segment Information of the Notes to Consolidated Financial Statements 

included in “Item 8. Financial Statements and Supplementary Data”. 

- 6 - 

 Construction Services 

Repair and Maintenance 

Services Total

 (In thousands, except percentages)

Plains All American Pipeline LP $ 95,941 21.0% $ 22,483 8.2% $118,424 16.2%

Bechtel Group, Inc 61,153 13.4% 24 0.0% 61,177 8.4%

BP PLC 2,024 0.5% 50,836 18.4% 52,860 7.2%

Total $ 159,118 34.9% $ 73,343 26.6% $232,461 31.8%
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Competition 

Matrix Service competes with regional and national construction companies in both the Construction Services and Repair and 

Maintenance Services segments. Competitors generally vary with the markets we serve with few competitors competing in all of the 

markets we serve or for all of the services we provide. Contracts are generally awarded based on reputation for quality, customer 

satisfaction, safety record and programs, price and schedule compliance. We believe that our turnkey capability, expertise, experience 

and reputation for providing safe and timely quality services allow us to compete effectively. 

Backlog 

We define backlog as the total dollar amount of revenues that we expect to recognize as a result of performing work that has been 

awarded to us through a signed contract that we consider firm. The following contract types are considered firm: 

 

 

 

For long-term maintenance contracts we include only the amounts that we expect to recognize into revenue over the next 12 months. 

For all other arrangements we generally calculate backlog as the estimated contract amount less revenues recognized. 

The following table provides a rollforward of our backlog from May 31, 2007 to May 31, 2008: 

 

At May 31, 2008, the Construction Services segment had a backlog of $325.3 million, as compared to a backlog of $349.3 million as 

of May 31, 2007. The decrease of $24.0 million is due to declines in Specialty of $41.0 million and Downstream Petroleum of $19.3 

million, partially offset by increases in Aboveground Storage Tank and Electrical and Instrumentation of $23.3 million and $13.0 

million, respectively. The backlog at May 31, 2008 and May 31, 2007 for the Repair and Maintenance Services segment was $142.0 

million and $110.8 million, respectively. The increase of $31.2 million was due to increases in Downstream Petroleum of $16.2 

million, Aboveground Storage Tank of $10.0 million and Electrical and Instrumentation of $5.0 million. Approximately 93% of our

backlog at May 31, 2008 is expected to be completed in fiscal year 2009. 

- 7 - 

• fixed-price arrangements; 

• minimum customer commitments on cost plus arrangements; and 

• certain time and material contracts in which the estimated contract value is firm or can be estimated with a reasonable 

amount of certainty in both timing and amounts. 

 

Construction

Services 

Repair and 

Maintenance

Services Total

 (In thousands)

Backlog as of May 31, 2007 $ 349,254 $ 110,776 $ 460,030

New backlog awarded 431,974 306,605 738,579

Revenue recognized on contracts in backlog (455,887) (275,414) (731,301)

Backlog as of May 31, 2008 $ 325,341 $ 141,967 $ 467,308
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Seasonality 

The operating results of the Repair and Maintenance Services segment is subject to significant quarterly fluctuations. Planned 

maintenance projects at customer facilities are typically scheduled in the spring and the fall when the demand for energy is seasonably 

lower. As a result, quarterly operating results can fluctuate materially. The Construction Services segment typically has a lower level 

of operating activity during the winter months and early in the new calendar year because many of our customers’ capital budgets, are 

spent or have not been finalized. Also, the demand for storage fluctuates, which can have a material impact on AST demand and 

revenues for the Construction Services segment. 

Raw Material Sources and Availability 

Steel and steel pipe are the primary raw materials used by the Company. Supplies of these materials are available throughout the 

United States from numerous sources. We do not anticipate being unable to obtain adequate amounts of these materials in the 

foreseeable future. However, the price, quantity available and timing of availability of these materials could change significantly due 

to various factors, including producer capacity, the level of foreign imports, demand for the materials, tariffs on imported steel and 

other market conditions. 

Insurance 

The Company maintains insurance coverage for various aspects of our operations. However, exposure to potential losses is retained 

through the use of deductibles, coverage limits and self-insured retentions. 

Typically our contracts require us to indemnify our customers for injury, damage or loss arising from the performance of our services 

and provide for warranties for materials and workmanship. The Company may also be required to name the customer as an additional 

insured under certain insurance policies up to the limits of insurance available, or we may have to purchase special insurance policies 

or surety bonds for specific customers or provide letters of credit issued under our credit facility in lieu of bonds to satisfy 

performance and financial guarantees on some projects. Matrix Service currently maintains a performance and payment bonding line 

of $ 140.0 million. The Company generally requires its subcontractors to indemnify the Company and the Company’s customer and 

name the Company as an additional insured for activities arising out of the subcontractors’ presence at the customer’s location. We 

also require certain subcontractors to provide additional insurance policies, including surety bonds in favor of the Company, to secure 

the subcontractors’ work or as required by the subcontract. 

There can be no assurance that our insurance and the additional insurance coverage provided by our subcontractors will fully protect 

us against a valid claim or loss under the contracts with our customers. 

Employees 

As of May 31, 2008, we had 3,202 employees of which 430 were employed in non-field positions and 2,772 were employed in field 

or shop positions. The number of employees varies significantly throughout the year because of the number, type and size of projects 

we have in progress at any particular time. 

We maintain separate merit shop and union operations. In our union business, we operate under collective bargaining agreements with 

various unions representing different groups of our employees. Union agreements provide the union employees with benefits 

including health and welfare, pension, training programs and compensation plans. We have not experienced any significant strikes or 

work stoppages in recent years. We maintain health and welfare, retirement and training programs for our merit shop and most 

administrative employees. 

Attracting and retaining high quality employees is important to our continued success. We have continued to expand our Professional 

Development Programs for project managers, engineers and safety professionals. Recruiting and retaining a skilled workforce 

continues to be a top initiative of the Company. 

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Patents and Proprietary Technology 

Matrix Service has been issued several patents, has patents pending, and continues to pursue new ideas and innovations to better serve 

our customers in all areas of our business. The Matrix Service patents under the Flex-A-Span® and Flex-A-Seal® trademarks are 

utilized to cover seals for floating roof tanks. Our patent of our ThermoStor® diffuser system is for a process that receives, stores and 

dispenses both chilled and warm water in and from the same storage tank. The patented RS 1000 Tank Mixer® controls sludge buildup in crude oil tanks through resuspension. We also have a patent on our Flex-A-Swivel®, a swivel joint for floating roof drain 

systems. Finally, Matrix Service holds a patent which covers a flexible fluid containment system marketed as the Valve Shield®. The 

Valve Shield® captures and contains fluid leaking from pipe and valve connections. 

While we believe that continued product development and the protection of our patents are important to our business, we do not 

believe that these patents are essential to our success. 

Regulation 

Health and Safety Regulations 

The operations of the Company are subject to the requirements of the United States Occupational Safety and Health Act (OSHA), 

comparable state laws and the Canadian Workers’ Compensation Board and its Workplace Health, Safety and Compensation 

Commission. Regulations promulgated by these agencies require employers and independent contractors who perform construction 

services, including electrical and repair and maintenance, to implement work practices, medical surveillance systems and personnel 

protection programs in order to protect employees from workplace hazards and exposure to hazardous chemicals and materials. In 

recognition of the potential for accidents within various scopes of work, these agencies have enacted very strict and comprehensive 

safety regulations. The Company has established comprehensive programs for complying with health and safety regulations and 

protecting the safety of its workers, subcontractors and customers. While the Company believes that it operates safely and prudently, 

there can be no assurance that accidents will not occur or that the Company will not incur substantial liability in connection with the 

operation of its business. 

Environmental 

The Company’s operations are subject to extensive and changing environmental laws and regulations in the United States and 

Canada. These laws and regulations relate primarily to air and water pollutants and the management and disposal of hazardous 

materials. The Company is exposed to potential liability for personal injury or property damage caused by any release, spill, exposure 

or other accident involving such pollutants, substances or hazardous materials. 

In order to limit environmental exposure in the performance of services at customer sites, the Company has purchased contractor’s 

pollution liability insurance with coverage limits of $10.0 million per occurrence. The Company has purchased pollution liability 

insurance relating to its operating locations, including fabrication facilities in Oklahoma and California, with coverage limits of $2.0 

million per occurrence. 

The Company believes that it is currently in compliance, in all material aspects, with all applicable environmental laws and 

regulations. The Company does not expect any material charges in subsequent periods relating to environmental conditions that 

currently exist and does not foresee any significant future capital spending relating to environmental matters. 

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The nature of our business activities and operations subjects us to a number of risks and uncertainties. If any of the events described 

below were to occur, they could have a material adverse effect on our business, financial condition and operating results. 

An inability to attract and retain qualified personnel, and in particular, project managers and skilled craft workers, could impact 

our ability to perform on our contracts, which could harm our business and impair our future revenues and profitability. 

Our ability to attract and retain qualified project managers, engineers, skilled craftsmen and other experienced professionals in 

accordance with our needs is an important factor in our ability to maintain and increase profitability. The market for these 

professionals is competitive, and the supply is limited. We cannot provide any assurance that we will be successful in our efforts to 

retain or attract qualified personnel when needed. Therefore, when we anticipate or experience growing demand for our services, we 

may incur additional cost to maintain a professional staff in excess of our current contract needs in an effort to have sufficient 

qualified personnel available to address this anticipated demand. If we do incur additional compensation and benefit costs, our

customer contracts may not allow us to pass through these costs. 

Competent and experienced project managers and craft workers are especially critical to the profitable performance of our contracts, 

particularly on our fixed-price contracts where superior execution of the contract can result in profits greater than originally estimated 

or where inferior contract execution can reduce or eliminate estimated profits or even result in a loss. 

Our project managers are involved in most aspects of contracting and contract execution including: 

 

 

 

 

 

 

Unsatisfactory safety performance can affect customer relationships, result in higher operating costs, negatively impact employee 

morale and result in high employee turnover. 

Our workers are subject to the normal hazards associated with providing services on construction sites and industrial facilities. Even 

with proper safety precautions, these hazards can lead to personal injury, loss of life, damage to, or destruction of, property, plant and 

equipment, lower employee morale and environmental damage. We are intensely focused on maintaining a strong safety environment 

and reducing the risk of accidents to the lowest possible level. Poor safety performance may limit or eliminate potential revenue 

streams from many of our largest customers and may materially increase our future insurance and other operating costs. 

Our growth strategy requires that we increase the size of our workforce. While we normally target experienced personnel for 

employment, we also hire inexperienced employees. Even with thorough training, inexperienced employees have a higher likelihood

of injury which could lead to higher operating costs and insurance rates. 

- 10 -

Item 1A. Risk Factors 

• supervising the bidding process, including providing estimates of significant cost components, such as material and equipment 

needs, and the size and composition of the workforce; 

• negotiating contracts; 

• supervising contract performance, including performance by our employees, subcontractors and other third party suppliers and 

vendors; 

• estimating costs for completion of contracts that is used by us to estimate amounts that can be reported as revenues and earnings on 

the contract under the percentage-of-completion method of accounting; 

• negotiating requests for change orders and the final terms of approved change orders; and 

• determining and documenting claims by us for increased costs incurred due to the failure of customers, subcontractors and other

third-party suppliers of equipment and materials to perform on a timely basis and in accordance with contract terms. 
ˆ1KLMD1QC6YZ5766"Š 1KLMD1QC6YZ5766

MATRIX SERVICE COMPA 64864 TX 11

FORM 10-K

05-Aug-2008 02:45 EST

DAL HTM

RR Donnelley ProFile MWRpalae0dc 1*

IFV 0C

ACWIN-CTXP79

10.0

Page 1 of 1

We may encounter difficulties during the course of performing our contracts that may result in additional costs to us and a 

reduction in our revenues and earnings that could have an adverse effect upon our financial condition and results of operations. 

Many of our construction and repair and maintenance projects are performed over extended periods of time and involve complex 

design and engineering specifications. In these cases, it is common for us to perform work from time-to-time over the life of the 

project that is outside the scope of the original contract with the expectation of receiving a signed change order from the customer. 

Our contracts for these projects often require us to provide extensive project management and to obtain machinery, equipment, 

materials and services from third parties or the customer. We may encounter difficulties in obtaining these products and services on a 

timely basis. In some cases, these third-party provided products may not perform as expected or the services delivered may not meet 

contract specifications. These performance failures and other factors, some of which are beyond our control, may result in delays and 

additional costs to us including, in some cases, the cost of procuring alternate product or service providers, which may adversely 

impact our ability to complete a project on budget and in accordance with the original delivery schedule. To the extent these and the 

other matters referred to in the next paragraph occur, we may seek to recover any increased costs incurred by us from the responsible 

party; however, we cannot assure you that we will be successful in recovering all or a part of these costs in any or all circumstances. 

In certain circumstances, we guarantee project completion or the achievement of certain acceptance and performance testing levels by 

a scheduled date. Failure to meet schedule or performance requirements could result in additional costs to us, including lost incentive 

payments and the payment of contractually agreed liquidated damages. The amount of such additional costs could exceed our profit 

margins on the project. While we may seek to recover these amounts as claims from the supplier, vendor, subcontractor or other third 

party responsible for the delay or for providing non-conforming products or services, we cannot assure you that we will recover all or 

any part of these costs in all circumstances. Performance problems for existing and future projects could cause our actual results of 

operations to differ materially from those anticipated by us and could damage our reputation within our industry and our customer 

base. 

The terms of our contracts could expose us to unforeseen costs and costs not within our control, which may not be recoverable 

and could adversely affect our results of operations and financial condition. 

Under fixed-price contracts, we agree to perform the contract for a fixed-price and, as a result, can improve our expected profit by 

superior contract performance, productivity, worker safety and other factors resulting in cost savings. However, we could incur cost 

overruns above the approved contract price, which may not be recoverable. Under certain incentive fixed-price contracts, we may

agree to share with a customer a portion of any savings we are able to generate while the customer agrees to bear a portion of any 

increased costs we may incur up to a negotiated ceiling. To the extent costs exceed the negotiated ceiling price, we may be required to 

absorb some or all of the cost overruns. 

Fixed-price contract prices are established based largely upon estimates and assumptions relating to project scope and specifications, 

personnel and material needs. These estimates and assumptions may prove inaccurate or conditions may change due to factors out of 

our control, resulting in cost overruns, which we may be required to absorb and that could have a material adverse effect on our 

business, financial condition and results of our operations. In addition, our profits from these contracts could decrease and we could 

experience losses if we incur difficulties in performing the contracts or are unable to secure fixed-pricing commitments from our 

manufacturers, suppliers and subcontractors at the time we enter into fixed-price contracts with our customers. 

Under cost-plus contracts, we perform our services in return for payment of our agreed upon reimbursable costs plus a profit. The 

profit component is typically expressed in the contract either as a percentage of the reimbursable costs we actually incur or is factored 

into the rates we charge for labor or for the cost of equipment and materials, if any, we are required to provide. Some cost-plus 

contracts provide for the customer’s review of the accounting and cost control systems used by us to calculate these labor rates and to 

verify the accuracy of the reimbursable costs invoiced. These reviews could result in reductions in amounts previously billed to the 

customer and in an adjustment to amounts previously reported by us as our profit on the contract. 

- 11 -
ˆ1KLMD1QC6YZCBJ6nŠ 1KLMD1QC6YZCBJ6

MATRIX SERVICE COMPA 64864 TX 12

FORM 10-K

05-Aug-2008 02:45 EST

DAL HTM

RR Donnelley ProFile MWRpalae0dc 1*

IFV 0C

ACWIN-CTXP79

10.0

Page 1 of 1

Many of our fixed-price or cost-plus contracts require us to satisfy specified progress milestones or performance standards in order to 

receive a payment. Under these types of arrangements, we may incur significant costs for labor, equipment and supplies prior to

receipt of payment. If the customer fails or refuses to pay us for any reason, there is no assurance we will be able to collect amounts 

due to us for costs previously incurred. In some cases, we may find it necessary to terminate subcontracts with suppliers engaged by 

us to assist in performing a contract and we may incur costs or penalties for canceling our commitments to them. 

If we are unable to collect amounts owed to us under our contracts, we may be required to record a charge against previously 

recognized earnings related to the project, and our liquidity, financial condition and results of operations could be adversely affected. 

We may incur significant costs in providing services in excess of original project scope without having an approved change order. 

After commencement of a contract, we may perform, without the benefit of an approved change order from the customer, additional

services requested by the customer that were not contemplated in our contract price due to customer changes or to incomplete or

inaccurate engineering, project specifications and other similar information provided to us by the customer. Our construction 

contracts generally require the customer to compensate us for additional work or expenses incurred under these circumstances. 

A failure to obtain adequate compensation for these matters could require us to record in the current period an adjustment to revenue 

and profit recognized in prior periods under the percentage-of-completion accounting method. Any such adjustments, if substantial, 

could have a material adverse effect on our results of operations and financial condition, particularly for the period in which such 

adjustments are made. We cannot assure you that we will be successful in obtaining, through negotiation, arbitration, litigation or 

otherwise, approved change orders in an amount adequate to compensate us for our additional work or expenses. 

There are integration and consolidation risks associated with our growth strategy. Future acquisitions may also result in 

significant transaction expenses, unexpected liabilities and risks associated with entering new markets, and we may be unable to 

profitably operate our business. 

An aspect of our business strategy is to make strategic acquisitions in markets where we currently operate as well as in markets in 

which we have not previously operated. We may have difficulties identifying attractive acquisition candidates or we may be unable to 

acquire desired businesses on economically acceptable terms during periods of elevated mergers and acquisition activity or for other 

reasons. Additionally, existing or future competitors may desire to compete with us for acquisition candidates that may have the effect 

of increasing acquisition costs or reducing the number of suitable acquisition candidates. We may not have the financial resources 

necessary to consummate any acquisitions or the ability to obtain the necessary funds on satisfactory terms. We may not have 

sufficient management, financial and other resources to integrate future acquisitions. Any future acquisitions may result in significant 

transaction expenses, unexpected liabilities and risks associated with entering new markets in addition to the integration and 

consolidation risks. In the event we are unable to complete future strategic acquisitions, we may not grow in accordance with our 

expectations. 

If we make any future acquisitions, we likely will have exposure to third parties for liabilities of the acquired business that may or 

may not be adequately covered by insurance or by indemnification, if any, from the former owners of the acquired business. Any of 

these unexpected liabilities could have a material adverse effect on us. 

Future events, including those associated with our growth strategy, could negatively affect our liquidity position. 

We can provide no assurance that we will have sufficient cash from operations or the credit capacity to meet all of our future cash 

needs should we encounter significant working capital requirements or incur significant acquisition costs. Insufficient cash from 

operations and significant working capital requirements have in the past and could in the future reduce availability under our credit 

facility and impact our ability to comply with the terms of our credit agreements. 

- 12 -
ˆ1KLMD1QC6YZKFV6uŠ 1KLMD1QC6YZKFV6

MATRIX SERVICE COMPA 64864 TX 13

FORM 10-K

05-Aug-2008 02:45 EST

DAL HTM

RR Donnelley ProFile MWRpalae0dc 1*

IFV 0C

ACWIN-CTXP79

10.0

Page 1 of 1

Work stoppages and other labor problems could adversely affect us. 

Some of our employees are represented by labor unions. A lengthy strike or other work stoppage on any of our projects could have a 

material adverse effect on our business and results of operations due to an inability to complete contracted projects in a timely 

manner. From time to time, we have also experienced attempts to unionize certain of our merit employees. While these efforts have 

achieved only limited success to date, we cannot provide any assurance that we will not experience additional and more successful 

union activity in the future. 

Demand for our products and services is cyclical and is vulnerable to downturns in the industries and markets which we serve as 

well as conditions in the general economy. 

The demand for our products and services depends significantly upon the existence of construction and repair and maintenance 

projects in the downstream petroleum and power and other industries in the United States and Canada. The capital budgets of many of 

our energy industry customers are largely dependent on the continuation of high commodity prices. Our markets historically have

been, and will likely continue to be, cyclical in nature and vulnerable to general downturns in the United States and Canadian 

economies and declines in commodity prices, which could adversely affect the demand for our products and services. Occasionally, 

the timing of the demand for our products and services in certain of these markets can also be adversely affected during periods of 

strong economic growth as customers may postpone closing their facilities for maintenance, repair, turnaround or expansion projects 

while demand for their products remains high. 

As a consequence of these and other factors, our results of operations have varied and are likely to continue to vary significantly 

depending on the demand for future projects from these industries. 

We face substantial competition in each of our business segments, which may have a material adverse effect on our business by 

reducing our ability to increase or maintain profitability. 

We face competition in all areas of our business from regional, national and international competitors, many of which may have 

greater financial and other resources. Our competitors include well-established, well-financed entities, both privately and publicly 

held, including many major power equipment manufacturers, engineering and construction companies and internal engineering 

departments. The markets that we serve require substantial resources and, in particular, highly skilled and experienced technical 

personnel. We compete primarily on the basis of price, customer satisfaction, safety performance and programs, the quality of our 

products and services, and our ability to timely comply with project schedules. We may encounter increased competition from 

existing competitors or new market entrants in the future, which could have a material adverse effect on our business, financial 

condition or results of operations. 

Our results of operations depend upon the award of new contracts and the timing of those awards. 

Our revenues are derived primarily from contracts awarded on a project-by-project basis. Generally, it is very difficult to predict 

whether and when we will be awarded a new contract since many potential contracts involve a lengthy and complex bidding and 

selection process that may be affected by a number of factors, including changes in existing or assumed market conditions, financing 

arrangements, governmental approvals and environmental matters. Because our revenues are derived primarily from these contracts, 

our results of operations and cash flows can fluctuate materially from period to period depending on the timing of contract awards. 

The uncertainty associated with the timing of contract awards may increase our cost of doing business over a short period or a 

comparatively longer term. For example, we may decide to maintain and bear the cost of a workforce in excess of our current contract 

needs in anticipation of future contract awards. If an expected contract award is delayed or not received, we could incur costs to 

maintain an idle workforce that may have a material adverse effect on our results of operations. Alternatively, we may decide that our 

long term interests are best served by reducing our workforce and incurring increased costs associated with severance and termination 

benefits which also could have a material adverse effect on our results of operations for the period when incurred. Reducing our 

workforce could also impact our results of operations if we are unable to adequately staff projects that are awarded subsequent to a 

workforce reduction. 

- 13 -
ˆ1KLMD1QC6YZNHH6VŠ 1KLMD1QC6YZNHH6

MATRIX SERVICE COMPA 64864 TX 14

FORM 10-K

05-Aug-2008 02:45 EST

DAL HTM

RR Donnelley ProFile MWRpalae0dc 1*

IFV 0C

ACWIN-CTXP79

10.0

Page 1 of 1

Our backlog is subject to unexpected fluctuations, adjustments and cancellations and is, therefore, an uncertain indicator of our 

future earnings. 

Backlog may not be a reliable indicator of our future performance due to the timing of contract awards by our customers. We cannot 

guarantee that the revenue projected in our backlog will be realized or profitable. Projects may remain in our backlog for an extended 

period of time. In addition, project cancellations or scope adjustments may occur from time to time with respect to contracts reflected 

in our backlog and could reduce the dollar amount of our backlog and the revenue and profits that we actually earn. Many of our

contracts have termination for convenience provisions in them. Therefore, project terminations, suspensions or scope adjustments 

may occur from time to time with respect to contracts in our backlog. Finally, poor project or contract performance could also impact 

our backlog and profits. 

The loss of one or more of our significant customers could adversely affect us. 

From time to time due to the size of one or more of our contracts, one or more customers have in the past and may in the future

contribute a material portion of our consolidated revenues in any one year. Because these significant customers generally contract 

with us for specific projects, we may lose these customers from year to year as their projects with us are completed. If we do not 

replace them with other customers or other projects, our financial condition and results of operations could be materially adversely 

affected. Additionally, we have long-standing alliance relationships with many significant customers. However, our contracts with 

these customers are on a project-by-project basis, and these customers may unilaterally reduce or discontinue their use of our services 

at any time. The loss of business from any one of these customers could have a material adverse effect on our business or results of 

operations. 

Our use of percentage-of-completion accounting for fixed-price contracts and our reporting of profits for cost-plus contracts prior 

to contract completion could result in a reduction or elimination of previously reported profits. 

A material portion of our revenues are recognized using the percentage-of-completion method of accounting. The percentage-ofcompletion accounting practices that we use result in our recognizing fixed-price contract revenues and earnings ratably over the 

contract term based on the proportion of actual costs incurred to our estimated contract costs. The earnings or losses recognized on 

individual fixed-price contracts are based on estimates of contract revenues, costs and profitability. We review our estimates of 

contract revenues, costs and profitability on a monthly basis. Prior to contract completion, we may adjust our estimates on one or 

more occasions as a result of changes in cost estimates, change orders to the original contract, collection disputes with the customer 

on amounts invoiced or claims against the customer for increased costs incurred by us due to customer-induced delays and other 

factors. 

Contract losses are recognized in the fiscal period when the loss is determined. Contract profit estimates are also adjusted in the fiscal 

period in which it is determined that an adjustment is required. No restatements are made to prior periods. Further, a number of our 

contracts contain various cost and performance incentives and penalties that impact the earnings we realize from our contracts, and 

adjustments related to these incentives and penalties are recorded in the period when estimable. 

As a result of the requirements of the percentage-of-completion method of accounting, the possibility exists, for example, that we 

could have estimated and reported a profit on a contract over several prior periods and later determine, usually near contract 

completion, that all or a portion of such previously estimated and reported profits were overstated. If this occurs, the full aggregate 

amount of the overstatement will be reported for the period in which such determination is made, thereby eliminating all or a portion 

of any profits from other contracts that would have otherwise been reported in such period or even resulting in a loss being reported 

for such period. 

Our financial loss exposure on cost-plus contracts is generally limited to a portion of our profit on the contract. However, it is possible 

that the customer could successfully dispute the costs we believe we incurred on the contract or assert that our costs were excessive 

for reasons such as poor project management or labor productivity. In addition, some cost-plus contracts contain penalty provisions 

for failure to achieve certain milestones or performance standards. To the extent we are not able to recover the full amount of our 

costs under a cost-plus contract, including adjustments under contract penalty provisions, there would be a reduction, or possibly an 

elimination, of previously recognized and reported earnings. In certain circumstances, it is possible that such adjustments could be 

material to our operating results. 

- 14 -
ˆ1KLMD1QC6YZVLT6]Š 1KLMD1QC6YZVLT6

MATRIX SERVICE COMPA 64864 TX 15

FORM 10-K

05-Aug-2008 02:45 EST

DAL HTM

RR Donnelley ProFile MWRpalae0dc 1*

IFV 0C

ACWIN-CTXP79

10.0

Page 1 of 1

We are involved and are likely to continue to be involved in legal proceedings, which will increase our costs and, if adversely

determined, could have a material effect on our financial condition and results of operations. 

We are currently a defendant in legal proceedings arising from the operation of our business and it is reasonable to expect that we 

would be named in future actions. Most of the actions against us arise out of the normal course of performing services on project 

sites, and include claims for workers’ compensation, personal injury and property damage. From time to time, we are also named as a 

defendant in contract disputes with customers relating to the timeliness and quality of the performance of our services and equipment, 

materials, design or other services provided by subcontractors and third-party suppliers. We also are, and are likely to continue to be, 

a plaintiff in legal proceedings against customers seeking to recover payment of contractual amounts due to us as well as claims for 

increased costs incurred by us resulting from, among other things, services performed by us at the request of a customer that are in 

excess of original project scope that are later disputed by the customer and customer-caused delays in our contract performance. 

We maintain insurance against operating hazards in amounts that we believe are customary in our industry. However, our insurance 

has deductibles and exclusions of coverage so we cannot provide assurance that we are adequately insured against all the types of 

risks that are associated with the conduct of our business. A successful claim brought against us in excess of, or outside of, our 

insurance coverage could have a material adverse effect on our financial condition and results of operations. 

Litigation, regardless of its outcome, is expensive, typically diverts the efforts of our management away from operations for varying 

periods of time, and can disrupt or otherwise adversely impact our relationships with current or potential customers and suppliers. 

Payment and claim disputes with customers also cause us to incur increased interest costs resulting from drawing higher levels of debt 

under our revolving line of credit or receive less interest income resulting from less funds invested due to the failure to receive 

payment for disputed claims and accounts. 

Actual results could differ from the estimates and assumptions that we use to prepare our financial statements. 

To prepare financial statements in conformity with generally accepted accounting principles, management is required to make 

estimates and assumptions, as of the date of the financial statements, which affect the reported values of assets, liabilities, revenues 

and expenses and disclosures of contingent assets and liabilities. Areas requiring significant estimation by our management include: 

 

 

 

 

 

 

Our actual results could differ from these estimates. 

- 15 -

• contract expenses and profits and application of percentage-of-completion accounting; 

• provisions for uncollectible receivables from customers for invoiced amounts; 

• the amount and collectability of claims against customers, third-party suppliers, subcontractors and others for increased costs

incurred by us that were caused by the actions or inactions of these parties, such as increased costs due to delays in their 

performance or to the failure of machinery, equipment and supplies provided by them to perform to agreed specifications; 

• provisions for income taxes and related valuation allowances; 

• recoverability of goodwill; 

• valuation of assets acquired and liabilities assumed in connection with business combinations; and 

• accruals for estimated liabilities, including litigation and insurance reserves. 
ˆ1KLMD1QC6Y=0Q366Š 1KLMD1QC6Y=0Q36

MATRIX SERVICE COMPA 64864 TX 16

FORM 10-K

05-Aug-2008 02:45 EST

DAL HTM

RR Donnelley ProFile MWRpalae0dc 1*

IFV 0C

ACWIN-CTXP79

10.0

Page 1 of 1

We are susceptible to adverse weather conditions, which may harm our business and financial results. 

Our business may be adversely affected by severe weather in areas where we have significant operations. Repercussions of severe

weather conditions may include: 

 

 

 

 

 

 

Our projects expose us to potential professional liability, product liability, warranty and other claims, which could be expensive, 

damage our reputation and harm our business. We may not be able to obtain or maintain adequate insurance to cover these 

claims. 

We perform construction and maintenance services at large industrial facilities where accidents or system failures can be disastrous. 

Any catastrophic occurrence in excess of our insurance limits at locations engineered or constructed by us or where our products are 

installed or services performed could result in significant professional liability, product liability, warranty and other claims against us 

by our customers, including claims for cost overruns and the failure of the project to meet contractually specified milestones or 

performance standards. Further, the rendering of our services on these projects could expose us to risks, and claims by, third parties 

and governmental agencies for personal injuries, property damage and environmental matters, among others. Any claim, regardless of 

its merit or eventual outcome, could result in substantial costs, divert management’s attention and create negative publicity, 

particularly for claims relating to environmental matters where the amount of the claim could be extremely large. Insurance coverage 

is increasingly expensive and we may not be able to or may choose not to obtain or maintain adequate protection against the types of 

claims described above. If we are unable to obtain insurance at an acceptable cost or otherwise protect against the claims described 

above, we will be exposed to significant liabilities, which may materially and adversely affect our financial condition and results of 

operations. 

Environmental factors and changes in laws and regulations could increase our costs and liabilities. 

Our operations are subject to environmental laws and regulations, including those concerning: 

 

 

 

 

Our projects often involve highly regulated materials, including hazardous wastes. Environmental laws and regulations generally

impose limitations and standards for regulated materials and require us to obtain permits and comply with various other requirements. 

The improper characterization, handling, or disposal of regulated materials or any other failure by us to comply with federal, state and 

local environmental laws and regulations or associated environmental permits could subject us to the assessment of administrative, 

civil and criminal penalties, the imposition of investigatory or remedial obligations, or the issuance of injunctions that could restrict or 

prevent our ability to operate our business and complete contracted projects. 

- 16 -

• curtailment of services; 

• suspension of operations; 

• inability to meet performance schedules in accordance with contracts; 

• weather related damage to our facilities; 

• inability to receive machinery, equipment and materials at jobsites; and 

• loss of productivity. 

• emissions into the air; 

• discharges into waterways; 

• generation, storage, handling, treatment and disposal of hazardous material and wastes; and 

• health and safety. 
ˆ1KLMD1QC6Y=6TF6zŠ 1KLMD1QC6Y=6TF6

MATRIX SERVICE COMPA 64864 TX 17

FORM 10-K

05-Aug-2008 02:46 EST

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ACWIN-CTXP79

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Page 1 of 1

In addition, under the Comprehensive Environmental Response, Compensation and Liability Act of 1980 (“CERCLA”), and 

comparable state laws, we may be required to investigate and remediate regulated materials. CERCLA and the comparable state laws 

typically impose liability without regard to whether a company knew of or caused the release, and liability for the entire cost of cleanup can be imposed upon any responsible party. 

The environmental, workplace, employment and health and safety laws and regulations, among others, to which we are subject are 

complex, change frequently and could become more stringent in the future. It is impossible to predict the effect of any future changes 

to these laws and regulations on us. We cannot assure you that our operations will continue to comply with future laws and 

regulations or that these laws and regulations and/or a failure to comply with these laws will not significantly adversely affect our 

business, financial condition and results of operations. 

Earnings for future periods may be affected by impairment charges. 

Because we have grown in part through acquisitions, goodwill and other acquired intangible assets represent a substantial portion of 

our assets. We perform an annual goodwill impairment review in the fourth quarter of every fiscal year. In addition, we perform a 

goodwill impairment review whenever events or changes in circumstances indicate the carrying value may not be recoverable. At 

some future date, we may determine that an additional significant impairment has occurred in the value of our unamortized intangible 

assets, goodwill or fixed assets, which could require us to write off an additional portion of our assets and could adversely affect our 

financial condition or results of operations. 

Our credit facility imposes restrictions that may limit business alternatives. 

Our senior revolving credit facility contains covenants that restrict or limit our ability to incur additional debt, create liens, acquire or 

dispose of assets, repurchase equity, or make distributions. In addition, our credit facility requires that we comply with a number of 

financial covenants. These covenants and restrictions may impact our ability to effectively execute operating and strategic plans. Our 

ability to comply with these covenants may be affected by factors or events beyond our control; therefore, our future operating

performance may not be sufficient to comply with the required covenants. 

Our failure to comply with one or more of the covenants in our credit facility could result in an event of default. We can provide no 

assurance that a default could be remedied, or that our creditors would grant a waiver or amend the terms of the credit facility. If an 

event of default occurs, our lenders could elect to declare all amounts outstanding under the facility to be immediately due and 

payable, terminate all commitments, refuse to extend further credit, and require us to provide cash to collateralize any outstanding 

letters of credit. If an event of default occurs and the lenders under the credit facility accelerate the maturity of any loans or other debt 

outstanding, we may not have sufficient liquidity to repay amounts outstanding under the existing agreement. 

Our common stock, which is listed on the NASDAQ Global Market, has from time-to-time experienced significant price and 

volume fluctuations. These fluctuations are likely to continue in the future, and our stockholders may not be able to resell their 

shares of common stock at or above the purchase price paid. 

The market price of our common stock may change significantly in response to various factors and events beyond our control, 

including the following: 

 

 

 

 

 

 

- 17 -

• the risk factors described in this Item 1A; 

• the significant concentration of ownership of our common stock in the hands of a small number of institutional investors; 

• a shortfall in operating revenue or net income from that expected by securities analysts and investors; 

• changes in securities analysts’ estimates of our financial performance or the financial performance of our competitors or companies 

in our industry; 

• general conditions in our customers’ industries; and 

• general conditions in the security markets. 
ˆ1KLMD1QC6Y=HZD6OŠ 1KLMD1QC6Y=HZD6

MATRIX SERVICE COMPA 64864 TX 18

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IFV 0C

ACWIN-CTXP79

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Page 1 of 1

Some companies that have volatile market prices for their securities have been subject to security class action suits filed against them. 

If a suit were to be filed against us, regardless of the outcome, it could result in substantial costs and a diversion of our management’s 

attention and resources. This could have a material adverse effect on our business, results of operations and financial condition. 

Future sales of our common stock may depress our stock price. 

Sales of a substantial number of shares of our common stock in the public market or otherwise, either by us, a member of 

management or a major stockholder, or the perception that these sales could occur, could depress the market price of our common

stock and impair our ability to raise capital through the sale of additional equity securities. 

We may issue additional equity securities, which would lead to dilution of our issued and outstanding stock. 

The issuance of additional common stock or securities convertible into our common stock would result in dilution of the ownership 

interest in us held by existing stockholders. We are authorized to issue, without stockholder approval 5,000,000 shares of preferred 

stock, par value $0.01 per share, in one or more series, which may give other stockholders dividend conversion, voting, and 

liquidation rights, among other rights, which may be superior to the rights of holders of our common stock. Our Board of Directors 

has no present intention of issuing any such preferred stock series, but reserves the right to do so in the future. In addition, we are 

authorized to issue, without stockholder approval, a significant number of additional shares of our common stock and securities

convertible into either common stock or preferred stock. 

We are exposed to credit risk from customers. If we experience delays and/or defaults in customer payments, we could suffer 

liquidity problems or we could be unable to recover all expenditures. 

Because of the nature of our contracts, at times we commit resources to customer projects prior to receiving payments form customers 

in amounts sufficient to cover expenditures on the customer projects as they are incurred. Delays in customer payments may require 

us to make a working capital investment. If customers default in making payments on projects to which we have devoted significant 

resources, it could have an adverse effect on our financial position, results of operations and cash flows. 

We may need to raise additional capital in the future for working capital, capital expenditures and/or acquisitions, and we may not 

be able to do so on favorable terms or at all, which would impair our ability to operate our business or achieve our growth 

objectives. 

To the extent that cash flow from operations, together with available borrowings under our credit facility, are insufficient to make 

future investments, make acquisitions or provide needed additional working capital, we may require additional financing from other 

sources. Our ability to obtain such additional financing in the future will depend in part upon prevailing capital market conditions, as 

well as conditions in our business and our operating results; and those factors may affect our efforts to arrange additional financing on 

terms that are satisfactory to us. If adequate funds are not available, or are not available on acceptable terms, we may not be able to 

make future investments, take advantage of acquisitions or other opportunities, or respond to competitive challenges. 

 

None 

- 18 -

Item 1B. Unresolved Staff Comments 
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The principal properties of Matrix Service at May 31, 2008 were as follows: 

 

In addition to the locations listed above, Matrix Service has temporary office facilities at numerous customer locations throughout the 

United States and Canada. 

- 19 -

Item 2. Properties 

Location Description of Facility Segment Interest

Tulsa, Oklahoma Corporate Headquarters Corporate Leased

Alton, Illinois

 

Regional office and 

warehouse

Repair & Maintenance

 

Leased

Bellingham, Washington

 

Regional office and 

warehouse 

Construction and Repair & 

Maintenance 

Owned

Catoosa, Oklahoma

 

Fabrication facility, regional 

office and warehouse 

Construction and Repair & 

Maintenance 

Owned (1)

Eddystone, Pennsylvania

 

Regional office and 

warehouse 

Construction and Repair & 

Maintenance 

Leased

Houston, Texas

 

Regional office and 

warehouse 

Construction and Repair & 

Maintenance 

Owned (2)

Houston, Texas

 

Regional office

 

Construction and Repair & 

Maintenance 

Leased (2)

Port Arthur, Texas

 

Warehouse

 

Construction and Repair & 

Maintenance 

Leased (2)

Newark, Delaware

 

Regional office and 

warehouse

Construction and Repair & 

Maintenance 

Leased

Orange, California

 

Fabrication facility, regional 

office and warehouse 

Construction and Repair & 

Maintenance 

Owned

Sarnia, Ontario, Canada

 

Regional office and 

warehouse 

Repair & Maintenance

 

Owned

Suisun City, California

 

Regional office and 

warehouse 

Repair & Maintenance

 

Leased

Temperance, Michigan

 

Regional office and 

warehouse 

Construction and Repair & 

Maintenance 

Owned

Leduc, Alberta, Canada

 

Regional office and 

warehouse 

Construction and Repair & 

Maintenance 

Leased

(1) Facilities were constructed by the Company in 2002 and 2003 on land acquired through the execution of a 15 year ground lease

with renewal provisions for five additional terms of five years each. 

(2) The Company is in the process of relocating its Houston regional office to a leased facility in Houston and relocating its 

Houston warehouse to the Port Arthur location. 
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The information called for by this item is provided in Note 8. Contingencies, of the Notes to Consolidated Financial Statements

included in Part II, Item 8., which information is incorporated by reference into this item. 

 

None 

- 20 -

Item 3. Legal Proceedings 

Item 4. Submission of Matters to a Vote of Security Holders 
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Part II 

 

Price Range of Common Stock 

Our common stock trades on the Global Market System of the National Association of Securities Dealers, Inc. Automated Quotation

System (“NASDAQ”). The trading symbol for our Common Stock is “MTRX”. The following table sets forth the high and low sale 

prices for our Common Stock as reported by NASDAQ for the periods indicated: 

 

As of August 1, 2008, there were 38 holders of record of our common stock. We believe that the number of beneficial owners of our 

common stock is substantially greater than the number of holders of record. 

Dividend Policy 

We have never paid cash dividends on our Common Stock, and our credit agreement limits the amount of cash dividends we can pay.

We currently intend to retain earnings to finance the growth of our business. Any payment of cash dividends in the future will depend 

upon our financial condition, capital requirements and earnings as well as other factors the Board of Directors may deem relevant. 

Issuer Purchases of Equity Securities 

In October 2000, the Board of Directors authorized a stock buyback program, which permitted the purchase of up to 20% (i.e., 

3,447,506 shares) of our common stock outstanding at that time. To date, Matrix Service has purchased 2,846,782 shares under the 

program and has authorization to purchase an additional 600,724 shares. In fiscal 2008, the Company purchased 729,982 shares at an 

average price of $17.59. In addition to the stock buyback program, Matrix Service may withhold shares of common stock to satisfy 

the tax withholding obligation upon vesting of an employee’s deferred shares. The Company withheld 23,192 shares of common 

stock during fiscal 2008 for this obligation. In addition to shares that may be repurchased in conjunction with the future issuance of 

deferred shares, Matrix Service has and may continue to repurchase shares under the stock buyback program if the Company 

determines the purchase is accretive to earnings per share. The Company has 1,825,600 treasury shares remaining as of May 31, 2008 

and intends to utilize these treasury shares solely for the satisfaction of stock issuances under the Company’s stock plans. 

 

- 21 -

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 

 Fiscal Year 2008 Fiscal Year 2007

 High Low High Low

First quarter $29.11 $16.99 $13.35 $10.63

Second quarter 30.32 17.74 16.00 11.89

Third quarter 28.15 17.16 19.60 15.10

Fourth quarter 24.83 16.64 27.19 16.50

 

Total Number

of Shares 

Purchased 

Average Price

Paid

Per Share 

Total Number

of Shares 

Purchased as 

Part of 

Publicly 

Announced 

Plans or 

Programs 

Maximum

Number of

Shares That

May Yet Be

Purchased

Under the

Plans

or Programs

March 1 to March 31, 2008 — $ — 2,846,782 600,724

April 1 to April 30, 2008 — — 2,846,782 600,724

May 1 to May 31, 2008 — — 2,846,782 600,724

Total — $ — 
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The summary financial data provided for the five years ended May 31, 2004 to May 31, 2008 was derived from the audited 

Consolidated Financial Statements. This information should be read together with Item 7 - Management’s Discussion and Analysis of 

Financial Condition and Results of Operations and the consolidated financial statements, including the related notes, appearing in 

Item 8 - Financial Statements and Supplementary Data. 

 

- 22 -

Item 6. Selected Financial Data 

Fiscal Year Ended May 31,

2008 2007 2006 2005 (1) 2004

 (In thousands, except percentages and per share data)

Revenues $731,301 $639,846 $493,927 $439,138 $607,904

Gross profit 75,117 65,886 47,079 31,019 46,313 

Gross profit % 10.3% 10.3% 9.5% 7.1% 7.6%

Operating income (loss) 34,551 33,050 17,698 (39,138) 17,519

Operating income (loss) % 4.7% 5.2% 3.6% (8.9)% 2.9%

Income (loss) before income taxes 33,716 31,114 11,594 (44,458) 15,213

Net income (loss) 21,414 19,171 7,653 (38,830) 9,542

Net income (loss ) % 2.9% 3.0% 1.5% (8.8)% 1.6%

Earnings (loss) per share-diluted 0.80 0.74 0.35 (2.24) 0.54

Equity per share-outstanding 5.32 4.72 3.67 2.76 4.98

Weighted average shares outstanding diluted 26,875 26,752 25,742 17,327 17,615

Working capital 60,826 51,306 42,656 21,726 63,914

Total assets 274,593 242,909 188,276 202,380 216,274

Long-term debt (including long-term portion of acquisition 

payable and capital lease obligations) 1,000 836 28,116 34,400 69,823

Total debt (including acquisition payable and capital lease 

obligations) 2,153 4,301 30,330 79,086 76,551

Capital expenditures 18,302 13,120 5,614 1,430 4,675

Stockholders’ equity 138,700 125,576 76,399 47,985 85,715

Total long-term debt to equity % 0.7% 0.7% 36.8% 71.7% 81.5%

Cash flow provided (used) by operations 45,596 11,358 35,880 4,516 (28,099)

(1) Fiscal 2005 results include impairment charges of $26.2 million, restructuring charges of $3.7 million, and a receivable 

writedown of $10.3 million. 
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Management’s discussion and analysis of our financial condition and results of operations is based on our consolidated financial 

statements, which have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”).

GAAP represents a comprehensive set of accounting and disclosure rules and requirements, the application of which requires 

management judgments and estimates including, in certain circumstances, choices between acceptable GAAP alternatives. The 

preparation of these consolidated financial statements requires management to make estimates and assumptions that affect the 

reported amounts of assets and liabilities and disclosure of contingent assets and liabilities, if any, at the date of the financial 

statements, and the reported amounts of revenues and expenses during the reporting period. We base our estimates on historical 

experience and various other assumptions that are believed to be reasonable under the circumstances. Actual results could differ from 

these estimates under different assumptions or conditions. Note 1 of the Notes to Consolidated Financial Statements included 

elsewhere in this Annual Report on Form 10-K, contains a comprehensive summary of our significant accounting policies. The 

following is a discussion of our most critical accounting policies, estimates, judgments and uncertainties that are inherent in our 

application of GAAP. 

CRITICAL ACCOUNTING ESTIMATES 

Revenue Recognition 

Matrix Service records profits on fixed-price contracts on a percentage-of-completion basis, primarily based on costs incurred to date 

compared to the total estimated contract cost. Matrix Service records revenue on reimbursable and time and material contracts on a 

proportional performance basis as costs are incurred. Contracts in process are valued at cost plus accrued profits less billings on 

uncompleted contracts. Contracts are generally considered substantially complete when field construction is completed. The elapsed 

time from award of a contract to completion of performance may be in excess of one year. Matrix Service includes pass-through 

revenue and costs on cost-plus contracts, which are customer-reimbursable materials, equipment and subcontractor costs, when 

Matrix Service determines that it is responsible for the procurement and management of such cost components on behalf of the 

customer. 

Matrix Service has numerous contracts that are in various stages of completion which require estimates to determine the appropriate 

cost and revenue recognition. Matrix Service has a history of making reasonably dependable estimates of the extent of progress 

towards completion, contract revenues and contract costs, and accordingly, does not believe significant fluctuations are likely to 

materialize. However, current estimates may be revised as additional information becomes available. If estimates of costs to complete 

fixed-price contracts indicate a loss, a provision is made through a contract write-down for the total loss anticipated. A number of our 

contracts contain various cost and performance incentives and penalties that impact the earnings we realize from our contracts.

Adjustments related to these incentives and penalties are recorded in the period on a percentage of completion basis when estimable 

and probable. 

Indirect costs (such as salaries and benefits, supplies and tools, equipment costs and insurance costs) are charged to projects based 

upon direct labor hours and overhead allocation rates per direct labor hour. Warranty costs are normally incurred prior to project 

completion and are charged to project costs as they are incurred. Warranty costs incurred subsequent to project completion were not 

material for the periods presented. Overhead allocation rates are established annually during the budgeting process and evaluated for 

accuracy throughout the year based upon actual direct labor hours and actual costs incurred. 

- 23 -

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 
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Claims Recognition 

Claims are amounts in excess of the agreed contract price (or amounts not included in the original contract price) that we seek to 

collect from customers or others for delays, errors in specifications and designs, contract terminations, change orders in dispute or 

unapproved as to both scope and price or other causes of anticipated additional costs incurred by us. Recognition of amounts as

additional contract revenue related to claims is appropriate only if it is probable that the claims will result in additional contract 

revenue and if the amount can be reliably estimated. We must determine if: 

 

 

 

 

If all of these requirements are met, revenue from a claim is recorded only to the extent that we have incurred costs relating to the 

claim. 

As of May 31, 2008 and May 31, 2007, costs and estimated earnings in excess of billings on uncompleted contracts included 

revenues, for unapproved change orders of $0.8 million and $5.1 million, respectively. At May 31, 2007 costs and estimated earnings 

in excess of billings on uncompleted contracts included revenues for other claims of $1.5 million. There were no claims included in 

costs and estimated earnings in excess of billings on uncompleted contracts as of May 31, 2008. Historically, our collections for 

unapproved change orders and other claims have approximated the amount of revenue recognized. 

The following table provides a rollforward of revenue recognized on claims and unapproved change orders. Amounts disclosed for 

unapproved change orders exclude amounts associated with contract disputes disclosed in Note 8. Contingencies. 

 

Loss Contingencies 

Various legal actions, claims, and other contingencies arise in the normal course of our business. Contingencies are recorded in the 

consolidated financial statements, or are otherwise disclosed, in accordance with SFAS No. 5 “Accounting for Contingencies”. 

Specific reserves are provided for loss contingencies to the extent we conclude their occurrence is both probable and estimable. We 

use a case by case evaluation of the underlying data and update our evaluation as further information becomes known. We believe

that any amounts exceeding our recorded accruals should not materially affect our financial position, results of operations or liquidity. 

However, the results of litigation are inherently unpredictable and the possibility exists that the ultimate resolution of one or more of 

these matters could result in a material adverse effect on our financial position, results of operations or liquidity. 

Legal costs are expensed as incurred. 

- 24 -

• there is a legal basis for the claim; 

• the additional costs were caused by circumstances that were unforeseen by the Company and are not the result of deficiencies in

our performance; 

• the costs are identifiable or determinable and are reasonable in view of the work performed; and 

• the evidence supporting the claim is objective and verifiable. 

 

Claims for 

Unapproved Change

Orders Other Claims Total

 (In thousands)

Balance at May 31, 2006 $ 3,845 $ 523 $ 4,368

Additions 5,639 1,493 7,132

Collections (3,921) (492) (4,413)

Loss (434) (31) (465)

Balance at May 31, 2007 5,129 1,493 6,622

Additions 3,016 897 3,913

Collections (6,957) (1,865) (8,822)

Loss (384) (525) (909)

Balance at May 31, 2008 $ 804 $ — $ 804
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Insurance Reserves 

We maintain insurance coverage for various aspects of our operations. However, we retain exposure to potential losses through the 

use of deductibles, coverage limits and self-insured retentions. As of May 31, 2008 and May 31, 2007, insurance reserves totaling 

$8.5 million and $6.4 million, respectively, are included on our balance sheet. These amounts represent our best estimate of our 

ultimate obligations for asserted claims, insurance premium obligations, and claims incurred but not yet reported at the balance sheet 

dates. We establish specific reserves for claims using a case by case evaluation of the underlying claim data and update our 

evaluations as further information becomes known. Judgments and assumptions are inherent in our reserve accruals; as a result, 

changes in assumptions or claims experience could result in changes to these estimates in the future. Additionally, the actual results of 

claim settlements could differ from the amounts estimated. 

Goodwill 

Goodwill and intangible assets with indefinite useful lives are not amortized and are tested at least annually for impairment. We 

perform our annual analysis during the fourth quarter of each fiscal year and in any other period in which indicators of impairment 

warrant an additional analysis. Goodwill represents the excess of the purchase price of acquisitions over the fair value of the net assets 

acquired. Goodwill is evaluated for impairment by first comparing management’s estimate of the fair value of a reporting unit with its 

carrying value, including goodwill. Reporting units for purposes of goodwill impairment calculations are our reportable segments. 

Management utilizes a discounted cash flow analysis to determine the estimated fair value of our reporting units. Significant 

judgments and assumptions including the discount rate, anticipated revenue growth and gross margins, estimated operating and 

interest expense, and capital expenditures are inherent in these fair value estimates which are based on our internal operating budgets. 

As a result, actual results may differ from the estimates utilized in our discounted cash flow analysis. The use of alternate judgments 

and/or assumptions could result in a fair value that differs from our estimate and could result in the recognition of an impairment 

charge in the financial statements. 

As a result of these uncertainties, we utilize multiple scenarios and assign probabilities to each of the scenarios in the discounted cash 

flow analysis. The results of the discounted cash flow analysis are then compared to the carrying value of the reporting unit. If the 

carrying value of a reporting unit exceeds its fair value, a computation of the implied fair value of goodwill is compared with its 

related carrying value. If the carrying value of the reporting unit goodwill exceeds the implied fair value of that goodwill, an 

impairment loss is recognized in the amount of the excess. If an impairment charge is incurred, it would negatively impact our results 

of operations and financial position. 

- 25 -
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We did not record a goodwill impairment for either our Construction Services or Repair and Maintenance Services segments in the

three year period ended May 31, 2008. However, we did record an impairment charge of $25.0 million in fiscal 2005 due to declines 

in operating results at that time and significant contract disputes. Although we do not anticipate a future impairment charge, certain 

events could occur that might adversely affect the reported value of goodwill. Such events could include, but are not limited to, 

strategic decisions made in response to economic or competitive conditions, a significant change in the project plans of our 

customers, the economic condition of the customers and industries we serve, and a material negative change in the relationships with 

one or more of our significant customers. If our judgments and assumptions change as a result of the occurrence of any of these

events or other events that we do not currently anticipate, our expectations as to future results and our estimate of the implied value of 

one or more of our reporting units also may change. 

We define headroom as the percentage difference between each segments’ carrying value and fair value. At May 31, 2008, headroom

for the Construction Services segment was 220% and headroom for the Repair and Maintenance Services segment was 74%. 

Our significant assumptions, including revenue growth, gross margins, operating and interest expense and other factors, have been 

reasonably accurate in recent years, but are likely to change in light of the dynamic competitive environment in which we operate. 

Assuming that all other components of our fair value estimate remain unchanged, a change in the following assumptions would have 

the following effect on headroom: 

 

 

 

Recently Issued Accounting Standards 

Accounting standards that have recently been issued that may have an effect on our Consolidated Financial Statements include the 

following. 

FIN 48 – Accounting for Uncertainty in Income Taxes 

Effective June 1, 2007, the Company adopted the provisions of FASB Interpretation No. 48, “Accounting for Uncertainty in Income

Taxes – an Interpretation of FASB Statement No. 109”, as amended (“FIN No. 48”). Upon adoption of FIN No. 48 on June 1, 2007 

and as of May 31, 2008, the Company had no material uncertain tax positions and no adjustments to the Company’s financial 

statements were required. 

- 26 - 

• if the growth rate of estimated revenue decreases one percent from current estimates, headroom for the Construction Services 

segment would be reduced from 220% to 201% and headroom for the Repair and Maintenance Services segment would be 

reduced from 74% to 62%; 

• if assumed gross margins decrease one percent, headroom for the Construction Services segment would be reduced from 

220% to 174% and headroom for the Repair and Maintenance Services segment would be reduced from 74% to 42%; and 

• if the applicable discount rate increases one percent, headroom for the Construction Services segment would be decreased 

from 220% to 200% and headroom for the Repair and Maintenance Services segment would be reduced from 74% to 62%. 
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The Company files federal and various state income tax returns and tax returns in certain foreign jurisdictions. In the Company’s 

significant tax jurisdictions, the tax years 2005 through 2008 are subject to examination by federal tax authorities and the tax years 

2004 through 2008 are subject to examination by state and foreign taxing authorities. 

The Company accrues interest and penalties on underpayment of income taxes related to uncertain tax positions as a component of

income tax expense in the consolidated statement of income. No amounts were recognized for interest and penalties upon adoption of 

FIN No. 48 or during the twelve months ended May 31, 2008. 

SFAS No. 157 – Fair Value Measurements 

In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements” (“SFAS No. 157”). This Statement established a 

framework for fair value measurements in the financial statements by providing a definition of fair value, guidance on the methods 

used to estimate fair value and expanded disclosures about fair value measurements. SFAS No. 157 is effective for fiscal years 

beginning after November 15, 2007 and is generally applied prospectively. We do not expect the Company’s adoption of SFAS 

No. 157 to have a material effect on our financial statements. 

SFAS No. 159 – The Fair Value Option for Financial Assets and Financial Liabilities – Including an Amendment of FASB Statement 

No. 115 

In February 2007, the FASB issued Statement of Financial Accounting Standards No. 159 (“SFAS No. 159”), “The Fair Value Option 

for Financial Assets and Financial Liabilities – Including an Amendment of FASB Statement No. 115”. SFAS No. 159 permits 

entities to choose to measure many financial instruments and certain other items at fair value. Unrealized gains and losses on items for 

which the fair value option has been elected will be recognized in earnings at each subsequent reporting date. SFAS No. 159 is 

effective for fiscal years beginning after November 15, 2007. We do not expect the Company’s adoption of SFAS No. 159 to have a

material effect on our financial statements. 

SFAS No. 141(R) – Business Combinations 

In December 2007, the FASB issued SFAS No. 141(R), “Business Combinations” (“SFAS No. 141(R)”). SFAS No. 141(R) applies to 

all business combinations and establishes guidance for recognizing and measuring identifiable assets acquired, liabilities assumed, 

noncontrolling interests in the acquiree and goodwill. Most of these items are recognized at their full fair value on the acquisition 

date, including acquisitions where the acquirer obtains control but less than 100 percent ownership in the acquiree. SFAS No. 141(R) 

also requires transaction costs to be recognized as expense as incurred and establishes disclosure requirements to enable the 

evaluation of the nature and financial effects of the business combination. SFAS No. 141(R) is effective for business combinations 

with an acquisition date in fiscal years beginning after December 15, 2008. 

- 27 -
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Matrix Service Company 

Annual Results of Operations 

(Amounts in thousands, except per share data) 

 

- 28 -

 

Construction

Services 

Repair & 

Maintenance

Services 

(1) 

Other Total

Fiscal Year 2008 

Consolidated revenues $ 455,887 $ 275,414 $ — $731,301

Gross profit 33,081 42,036 — 75,117

Operating income (loss) 8,579 25,997 (25) 34,551

Income (loss) before income tax expense 7,950 25,791 (25) 33,716

Net income (loss) 5,483 15,946 (15) 21,414

Earnings per share - diluted 0.80

Weighted average shares outstanding- diluted 26,875

Fiscal Year 2007 

Consolidated revenues $ 366,160 $ 273,686 $ — $639,846

Gross profit 29,494 36,392 — 65,886

Operating income (loss) 11,567 21,556 (73) 33,050

Income (loss) before income tax expense 10,394 20,793 (73) 31,114

Net income (loss) 6,498 12,718 (45) 19,171

Earnings per share - diluted 0.74

Weighted average shares outstanding - diluted 26,752

Fiscal Year 2006 

Consolidated revenues $ 243,725 $ 250,202 $ — $493,927

Gross profit 20,392 26,687 — 47,079

Operating income (loss) 6,561 11,237 (100) 17,698

Income (loss) before income tax expense 2,536 9,158 (100) 11,594

Net income (loss) 2,168 5,547 (62) 7,653

Earnings per share - diluted 0.35

Weighted average shares outstanding - diluted 25,742

Variances 2008 to 2007 

Consolidated revenues $ 89,727 $ 1,728 $ — $ 91,455

Gross profit 3,587 5,644 — 9,231

Operating income (loss) (2,988) 4,441 48 1,501

Income (loss) before income tax expense (2,444) 4,998 48 2,602

Net income (loss) (1,015) 3,228 30 2,243

Variances 2007 to 2006 

Consolidated revenues $ 122,435 $ 23,484 $ — $145,919

Gross profit 9,102 9,705 — 18,807

Operating income (loss) 5,006 10,319 27 15,352

Income (loss) before income tax expense 7,858 11,635 27 19,520

Net income (loss) 4,330 7,171 17 11,518

(1) Includes items associated with exited operations. 
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Results of Operations 

Overview 

The Company has two reportable segments, Construction Services and Repair and Maintenance Services. The majority of the work 

for both segments is performed in the United States with less than 2.0% of revenues generated in Canada during fiscal 2008. 

However, the Company does continue to seek opportunities for growth in both the domestic and international markets. 

The primary services of our Construction Services segment are aboveground storage tanks for the bulk storage/terminal industry,

capital construction for the downstream petroleum industry, specialty construction, and electrical/instrumentation services for various 

industries. These services, including civil/structural, mechanical, piping, electrical and instrumentation, millwrighting, and 

fabrication, are provided for projects of varying complexities, schedule durations, and budgets. Our project experience includes 

renovations, retrofits, modifications and expansions to existing facilities as well as construction of new facilities. 

The primary services of our Repair and Maintenance Services segment are aboveground storage tank repair and maintenance services 

including tank inspection, cleaning and ASME code repairs, planned major and routine maintenance for the downstream petroleum 

industry, specialty repair and maintenance services and electrical and instrumentation repair and maintenance. 

Significant fluctuations in revenues, gross profits and operating results are discussed below on a consolidated basis and for each 

segment. Revenues fluctuate due to many factors, including the changing product mix and project schedules, which are dependent on 

the level and timing of customer releases of new business. 

Fiscal Year 2008 versus 2007 

Consolidated 

Consolidated revenues were $731.3 million in fiscal 2008, an increase of $91.5 million, or 14.3%, from consolidated revenues of

$639.8 million for fiscal 2007. The improvement in consolidated revenues resulted from increases of $89.7 million in Construction 

Services revenues and $1.8 million in Repair and Maintenance Services revenues. 

Consolidated gross profit increased from $65.9 million in fiscal 2007 to $75.1 million in fiscal 2008. The improvement of $9.2 

million, or 14.0% was primarily due to revenue growth of $91.5 million. Consolidated gross margins were unchanged at 10.3% for 

both fiscal years despite an improvement in the Repair and Maintenance Services segment, where the gross margin grew to 15.3% in 

the current fiscal year versus 13.3% in the prior fiscal year. Offsetting this improvement was a decline in the Construction Services 

segment’s gross margin, which was 8.1% in fiscal 2007 versus 7.3% in fiscal 2008. 

Consolidated SG&A expenses increased $7.8 million, or 23.8%, in fiscal 2008 to $40.6 million from $32.8 million for fiscal 2007. 

The increase was primarily caused by higher employee-related expenses and facility costs resulting from the cost of additional hires 

and related benefits to meet the demands of current and anticipated growth and a bad debt charge caused by the bankruptcy of a 

customer that is involved in a contract dispute with the Company. SG&A expense as a percentage of revenue increased to 5.6% in 

fiscal 2008 compared to 5.1% in the prior fiscal year as the benefit from the 14.3% growth in revenues was more than offset by the 

increase in SG&A expenses. 

Interest expense decreased to $0.9 million in fiscal 2008 compared to $2.4 million in fiscal 2007. The decline of $1.5 million was 

primarily due to the fiscal 2007 conversion to common stock of $25.0 million of convertible notes and lower amortization of debt 

issuance costs. Current year interest expense was primarily related to the amortization of deal fees on the senior revolving credit 

facility and interest on short-term borrowings under this facility. 

Income before income tax expense increased to $33.7 million in fiscal 2008 from $31.1 million in fiscal 2007. This $2.6 million

increase occurred due to higher gross profits and lower interest expense, partially offset by higher SG&A expenses. 

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The effective tax rates for fiscal 2008 and fiscal 2007 were 36.5% and 38.4%, respectively. The fiscal 2008 tax rate was reduced due 

to a tax benefit of $0.7 million resulting from the continuing assessment of the realizability of state investment tax credits and other 

miscellaneous deductions. The fiscal 2007 rate was favorably impacted by the utilization of losses on disputed contracts, the tax 

benefits of which had been reserved as a valuation allowance in previous years. 

Net income for fiscal 2008 grew to $21.4 million, or $0.80 per fully diluted share, versus net income in fiscal 2007 of $19.2 million, 

or $0.74 per fully diluted share. 

Construction Services 

Revenues for the Construction Services segment were $455.9 million, compared with $366.2 million in the same period a year earlier. 

The increase of $89.7 million, or 24.5%, was primarily due to higher Aboveground Storage Tank revenues, which increased 26.4% to 

$201.4 million in fiscal 2008, versus $159.3 million a year earlier. The increase was also driven by higher revenues in Downstream 

Petroleum, which increased 29.5% to $156.4 million in fiscal 2008, versus $120.8 million a year earlier, and by higher Specialty 

revenues, which increased 45.7% to $78.1 million in fiscal 2008 compared to $53.6 million a year earlier. These increases were 

partially offset by lower Electrical and Instrumentation revenues, which fell $12.4 million. 

At May 31, 2008, the Construction Services segment had a backlog of $325.3 million, as compared to a backlog of $349.3 million as 

of May 31, 2007. The decrease of $24.0 million is due to declines in Specialty of $41.0 million and Downstream Petroleum of $19.3 

million, partially offset by increases in Aboveground Storage Tank and Electrical and Instrumentation of $23.3 and $13.0 million, 

respectively. The decline in Specialty backlog was attributable to the completion of a major LNG construction project in the Gulf 

Coast region. 

Gross profit increased from $29.5 million in fiscal 2007 to $33.1 million in fiscal 2008 due largely to the 24.5% growth in revenues 

offset partially by reduced gross margins, which fell from 8.1% in fiscal 2007 to 7.3% in fiscal 2008. The gross profit improvement of 

$3.6 million occurred despite fiscal 2008 results including $20.8 million in pre-tax charges for cost overruns related to an LNG 

construction project in the Gulf Coast region. In comparison, fiscal 2007 results included pre-tax charges of $11.3 million for this 

same LNG construction project. The remaining Construction Services projects experienced higher margins in fiscal 2008 than those 

recognized in the prior fiscal year. 

Operating income and income before income tax expense were $8.6 million and $8.0 million in fiscal 2008 compared to $11.6 million 

and $10.4 million in fiscal 2007. 

Repair and Maintenance Services 

Revenues for Repair and Maintenance Services were $275.4 million in fiscal 2008 versus $273.7 million in fiscal 2007. The change 

was due to higher Aboveground Storage Tank revenues, which improved 34.2% to $168.0 million, versus $125.2 million last fiscal 

year. This increase was largely offset by lower Downstream Petroleum revenues, which fell 26.2% to $89.0 million in fiscal 2008, 

from $120.6 million in the prior fiscal year, and lower Electrical and Instrumentation revenues, which dropped $9.5 million to $18.4 

million in fiscal 2008 from $27.9 million during fiscal 2007. 

Backlog at May 31, 2008 and May 31, 2007 for the Repair and Maintenance Services segment was $142.0 million and $110.8 

million, respectively. The increase of $31.2 million was due to increases in Downstream Petroleum of $16.2 million, Aboveground

Storage Tank of $10.0 million and Electrical and Instrumentation of $5.0 million. 

Despite relatively flat year-over-year revenues, gross profit increased from $36.4 million in fiscal 2007 to $42.0 million in fiscal 2008 

and gross margins improved from 13.3% during fiscal 2007 to 15.3% in fiscal 2008. Repair and Maintenance Services’ gross margins 

for fiscal 2008 benefited from high levels of customer call-out work and strong markets, particularly in Aboveground Storage Tank. 

Operating income and income before income tax expense increased to $26.0 million and $25.8 million, respectively, in fiscal 2008 

compared to $21.6 million and $20.8 million in fiscal 2007. 

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Fiscal Year 2007 versus 2006 

Consolidated 

Consolidated revenues were $639.8 in fiscal 2007, an increase of $145.9 million, or 29.5%, from consolidated revenues of $493.9

million in fiscal 2006. This large improvement in consolidated revenues resulted from an increase of $122.4 million in Construction 

Services revenues combined with growth of $23.5 million in Repair and Maintenance Services revenues. 

Consolidated gross profit increased from $47.1 million in fiscal 2006 to $65.9 million in fiscal 2007. This improvement of $18.8 

million, or 39.9%, was due to the 29.5% growth in revenues combined with greater margins contributed by the Repair and 

Maintenance Services segment. Consolidated gross margins grew from 9.5% in fiscal 2006 to 10.3% in fiscal 2007 due to an 

improvement in the Repair and Maintenance Services segment, which grew to 13.3% in the current fiscal year versus 10.7% in the 

prior fiscal year. This improvement stemmed from effective project execution, more efficient absorption of fixed costs due to the 

larger revenue base and a continued focus by the Company on managing its contractual risks. In addition, margins were further 

enhanced by a favorable market and an expanding backlog which allowed Matrix Service to be more selective in its process of 

procuring projects. Partially offsetting these improvements was a pre-tax charge in fiscal 2007 of $11.3 million, or $0.25 per fully 

diluted share, resulting from continued cost escalations on a LNG construction project in the Gulf Coast region. 

Consolidated SG&A expenses were $32.8 million in fiscal 2007 compared to $29.4 million for fiscal 2006. The increase of $3.4 

million was primarily due to employee-related expenses resulting from additional staff hired throughout fiscal 2007 to support our 

growth combined with additional expense of $1.5 million related to the fair value recognition provisions in SFAS-123(R), “ShareBased Payment”. Partially offsetting this increase was a decline in legal costs of approximately $1.5 million as the Company settled 

all but one of its significant contract disputes and lower restructuring costs. SG&A expense as a percentage of revenue fell to 5.1% in 

fiscal 2007 compared to 5.9% in the prior fiscal year as the 29.5% growth in revenues more than offset the increase in SG&A 

expenses. 

Interest expense declined to $2.4 million in fiscal 2007 compared to $7.8 million in fiscal 2006. This sharp decline of $5.4 million 

was primarily due to reduced debt outstanding during the year. Current year interest expense was primarily related to the amortization 

of prepaid interest and fees on the convertible notes, amortization of deal fees on the senior credit facility, and interest on short-term 

borrowings under the revolving facility. 

Other income in fiscal 2006 of $1.6 million resulted from gains on the sale of assets identified during the restructuring effort. Other 

income in fiscal 2007 of $0.3 million consisted of miscellaneous non-operating items. 

Income before income tax expense increased to $31.1 million in fiscal 2007 from $11.6 million in fiscal 2006. This $19.5 million 

improvement was due to higher gross profit combined with decreased interest expense. Partially offsetting this improvement was 

higher SG&A expense in fiscal 2007 along with gains on the sale of assets included in fiscal 2006 results. 

The effective tax rates for fiscal 2007 and fiscal 2006 were 38.4% and 34.0%, respectively. Both fiscal 2007 and fiscal 2006 benefited 

from the tax recognition of losses on disputed contracts. In fiscal 2007, certain operating loss carryforwards previously reserved were 

utilized or deemed to be fully utilizable resulting in a benefit of $0.8 million. In fiscal 2006, approximately $1.4 million of previously 

established valuation allowances were reversed upon the utilization of the related operating loss carryforwards. 

Net income for fiscal 2007 rose to $19.2 million, or $0.74 per fully diluted share, versus net income in fiscal 2006 of $7.7 million, or 

$0.35 per fully diluted share. 

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Construction Services 

Revenues for the Construction Services segment rose significantly from $243.7 million in fiscal 2006 to $366.2 million in fiscal 2007, 

which represents an increase of $122.5 million, or 50.3%. This improvement was primarily due to Aboveground Storage Tank 

revenues increasing $70.9 million, but improvements were also seen throughout the segment as Downstream Petroleum revenues rose

$25.1 million, Specialty revenues grew $16.6 million and Electrical and Instrumentation revenues climbed $9.9 million. The 

substantial growth in the Aboveground Storage Tank revenues was driven by the strength of the market and capital spending from our 

core customer base. The growth in Downstream Petroleum revenues was primarily due to the performance of work for two additional

refinery customers, while the growth in Specialty revenues was primarily related to the LNG construction project. 

Backlog increased from $230.1 million at May 31, 2006 to $349.3 million at May 31, 2007. A change in the method used to calculate 

backlog that led to the inclusion of time and material contracts that had been previously excluded accounted for $35.4 million of the 

increase, the remaining increase was due to significant awards for the construction of Aboveground Storage Tank capacity at new

terminals and terminal expansions. 

Gross profit rose from $20.4 million in fiscal 2006 to $29.5 million in fiscal 2007, an improvement of 44.6%. Construction Services 

gross margins declined from 8.4% in fiscal 2006 to 8.1% in fiscal 2007. This decrease occurred due to a pre-tax charge in fiscal 2007 

of $11.3 million on an LNG construction project in the Gulf Coast region. The charge was a result of a difficult post-Katrina labor 

environment, unforeseen productivity challenges and complexity of design leading to material and equipment cost increases. In 

addition, weather continued to affect this lump sum project resulting in a more compressed schedule. The loss recognized in fiscal 

2007 reflected our best forecast of costs required to achieve our customer’s schedule on the 42.5% of the work remaining to be 

completed at May 31, 2007. 

Operating income and income before income tax expense increased to $11.6 million and $10.4 million, respectively, in fiscal 2007 

from operating income and income before income tax expense of $6.6 million and $2.5 million in fiscal 2006, respectively. This 

significant improvement was the result of additional revenues, combined with lower interest expense. 

Repair and Maintenance Services 

Revenues from the Repair and Maintenance Services segment grew $23.5 million, or 9.4%, from $250.2 million in fiscal 2006 to 

$273.7 million in fiscal 2007. This improvement resulted primarily from increases in Aboveground Storage Tank revenues of $28.1

million and Electrical and Instrumentation revenues of $14.2 million. Partially offsetting this growth was a reduction in Downstream 

Petroleum revenues of $18.8 million as turnaround work that occurred in fiscal 2006 was not fully replaced in fiscal 2007. 

Repair and Maintenance Services backlog increased from $18.3 million at May 31, 2006 to $110.8 million at May 31, 2007, an 

increase of $92.5 million or 505.5%. An increase of $24.3 million was driven by leveraging our AST construction customers, 

resulting in new and additional AST repair and maintenance projects. The remaining increase was due to a change in the method used 

to calculate backlog that led to the inclusion of time and material contracts that had previously been excluded. 

Gross margins improved to 13.3% in fiscal 2007 as compared to gross margins of 10.7% in fiscal 2006 primarily as the result of more 

effective project execution and higher revenue volumes relative to the segment’s overall fixed cost structure. Gross profit also 

improved from $26.7 million in fiscal 2006 to $36.4 million in fiscal 2007. 

Operating income and income before income tax expense climbed to $21.6 million and $20.8 million, respectively, in fiscal 2007 

compared to $11.2 million and $9.2 million produced in fiscal 2006. This improvement was primarily due to higher revenues and 

margins combined with reduced interest expense. 

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Non-GAAP Financial Measure 

EBITDA is a supplemental, non-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 Income 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 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, which are excluded. Our non-GAAP 

performance measure, EBITDA, has certain material limitations as follows: 

 

 

 

A reconciliation of EBITDA to net income follows: 

 

Outlook 

We expect the strong demand for our core services in the energy market to continue into fiscal 2009. We are focused on diversifying 

our service offerings and expanding our geographic footprint within the energy and industrial markets. By focusing on project 

execution, customer service and diversification, we believe that we are well positioned to build upon our recent growth and expect 

record revenues and net income in fiscal 2009. 

- 33 -

• It does not include interest income or 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 expense. Because we use capital assets to generate revenue, depreciation expense is a necessary 

element of our cost structure. Therefore, any measure that excludes depreciation expense has material limitations. 

 Fiscal Year Ended May 31,

 2008 2007 2006

 (In thousands)

Net income $21,414 $19,171 $ 7,653

Interest expense, net 808 2,264 7,677

Provision for income taxes 12,302 11,943 3,941

Depreciation and amortization 8,373 6,500 5,698

EBITDA $42,897 $39,878 $24,969
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FINANCIAL CONDITION AND LIQUIDITY 

Overview 

We define liquidity as the ongoing ability to pay our liabilities as they become due, fund business operations and meet all monetary 

contractual obligations. Our primary sources of liquidity in fiscal 2008 were cash flows from operations and borrowings under our 

senior revolving credit facility. Cash on hand at May 31, 2008 totaled $22.0 million and availability under the senior revolving credit 

facility totaled $70.4 million, resulting in total liquidity of $92.4 million. Factors that routinely impact our short-term liquidity and 

may impact our long-term liquidity include, but are not limited to: 

 

 

 

 

 

 

 

 

 

 

In the future, we may elect to increase the revolving credit facility or raise additional capital by issuing common stock, convertible 

notes or term debt as necessary to fund our operations. In fiscal 2009, we expect cash flows from operations to be a significant source 

of liquidity, which we expect will provide funding for additional investments in capital assets. We will continue to evaluate our 

working capital requirements and other factors to maintain sufficient liquidity. 

Cash Flows from Operating Activities 

Operations generated $45.6 million of cash in fiscal 2008 compared to $11.4 million in fiscal 2007. The $34.2 million increase in 

cash generated from operations was due primarily to a favorable change in operating assets and liabilities of $10.0 million in fiscal 

2008, compared to an unfavorable change of $16.0 million in fiscal 2007. Also contributing to the increase was a $2.2 million 

increase in net income and an increase in non-cash charges of $6.0 million. 

Cash Flows from Investing Activities 

Investing activities used $17.9 million of cash in fiscal 2008 due to capital expenditures of $18.3 million partially offset by proceeds 

from asset sales of $0.4 million. Fiscal 2008 capital expenditures were related to the replacement of existing assets, the support of 

growth in our business and facility expansions. Expenditures totaled $9.4 million for the purchase of construction equipment, $2.6 

million for transportation equipment, $2.1 million for furniture and fixtures, and $4.2 million for land and buildings. Assets acquired 

through capital leases totaled $1.2 million in fiscal 2008 and are reported as non-cash additions to Property, Plant and Equipment in 

the Consolidated Statement of Cash Flows. 

- 34 -

• Changes in working capital 

• Contract terms that determine the timing of billings to customers and the collection of those billings 

• Some cost plus and fixed price customer contracts are billed based on milestones which may require us to incur 

significant expenditures prior to collections from our customers. 

• Time and material contracts are normally billed in arrears. Therefore, we are required to carry these costs until they 

can be billed and collected. 

• Some of our large construction projects require retentions. 

• Capital expenditures 

• Strategic investments in new operations 

• Acquisitions of new businesses 

• Purchases of shares under our existing or any future stock buyback program 

• Contract disputes or collection issues resulting from the failure of a significant customer 
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Our Board of Directors has approved a capital budget of $26.4 million for fiscal 2009. Capital required to complete projects in

progress at May 31, 2008 totaled $4.7 million, or 18% of the capital budget. Capital to replace, repair or maintain equipment is $7.4 

million, or 28% of the capital budget. We expect to invest $12.0 million, or 45% of the capital budget in new assets to increase 

fabrication capacity and to equip additional construction and maintenance crews in targeted growth markets. The remaining $2.3 

million, or 9% of the capital budget is to purchase, expand or improve facilities to address the Company’s need for additional office 

and shop space. 

Cash Flows from Financing Activities 

Financing activities used $15.3 million of cash in fiscal 2008. This was primarily due to open market purchases of treasury shares of 

$12.8 million, payments on the acquisition note of $2.7 million, and capital lease payments of $0.8 million, partially offset by the net 

proceeds received from stock option and deferred share activity of $1.1 million. 

Senior Revolving Credit Facility 

The senior revolving credit facility is primarily used to fund short-term changes in working capital and issuance of letters of credit. 

The total capacity of the facility at May 31, 2008 was $75.0 million with $4.6 million outstanding for letters of credit that have been 

issued to support certain workers’ compensation insurance programs. The facility contains provisions that allow us to increase the 

capacity to $100.0 million, with the approval of the administrative agent. The Company currently believes that sufficient liquidity 

exists but may seek approval to increase the facility to $100.0 million in the future if considered necessary. We believe the senior 

credit facility provides adequate liquidity and financial flexibility to support our expected growth in fiscal 2009 and beyond.

The facility contains customary negative covenants including limits on other indebtedness, operating and capital lease obligations, 

asset sales, dividends and certain other distributions. The facility also contains financial covenants that require us to maintain certain 

financial ratios, including a senior leverage ratio, an asset coverage ratio, a fixed charge coverage ratio and a tangible net worth 

requirement. Non-compliance with any of these ratios or a violation of other covenants could result in an event of default and reduce 

availability under the facility. We are currently in compliance with all covenants and have full availability under the facility. 

Convertible Notes 

Convertible notes with a principal balance of $30.0 million, were issued through a private placement transaction on April 25, 2005. 

The notes were convertible into shares of our Common Stock at a conversion price of $4.69 per share. In fiscal 2006, $5.0 million of 

the convertible notes were converted into 1,002,275 shares of our Common Stock. The remaining $25.0 million of notes were 

converted into 5,292,974 shares of our Common Stock in fiscal 2007. 

Acquisition Payable 

As part of an acquisition in fiscal 2003, we deferred a portion of the purchase price to be paid in annual installments over five years. 

The final payment of $2.8 million was due in fiscal 2008. On March 7, 2008, we paid $2.3 million to the seller. An additional $0.4 

was paid on behalf of the seller to certain taxing authorities, the remaining $0.1 million will be paid either to or on behalf of the seller 

to the taxing authorities after final resolution of certain disputed sales and use tax obligations. 

Dividend Policy 

We have never paid cash dividends on our Common Stock, and the terms of our credit agreement limits the amount of cash dividends 

we can pay. We currently intend to retain earnings to finance the growth of our business. Any payment of cash dividends in the future 

will depend upon our financial condition, capital requirements and earnings as well as other factors the Board of Directors may deem 

relevant. 

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Treasury Shares 

In October 2000, the Board of Directors authorized a stock buyback program, which permitted the purchase of up to 20% (i.e., 

3,447,506 shares) of our common stock outstanding at that time. To date, Matrix Service has purchased 2,846,782 shares under the 

program and has authorization to purchase an additional 600,724 shares. In fiscal 2008, the Company purchased 729,982 shares at an 

average price of $17.59. In addition to the stock buyback program, Matrix Service may withhold shares of common stock to satisfy 

the tax withholding obligation upon vesting of an employee’s deferred shares. The Company withheld 23,192 shares of common 

stock during fiscal 2008 for the obligation. In addition to shares that may be repurchased in conjunction with the future issuance of 

deferred shares, Matrix Service has and may continue to repurchase shares under the stock buyback program if the Company 

determines the purchase is accretive to earnings per share. The Company has 1,825,600 treasury shares remaining as of May 31, 2008 

and intends to utilize these treasury shares solely for the satisfaction of stock issuances under the Company’s stock plans. 

Commitments 

As of May 31, 2008, the following commitments were in place to support our ordinary course obligations: 

 

Contractual obligations at May 31, 2008 are summarized below: 

 

- 36 -

Commitments by Expiration Period

 

Less than 1

Year 1 –3 Years 3 –5 Years 

More than 5

Years Total

 (In thousands)

Letters of credit (1) $ — $ — $ 4,648 $ — $ 4,648

Surety bonds 41,893 5,577 — — 47,470

Total commitments $ 41,893 $ 5,577 $ 4,648 $ — $52,118

(1) All letters of credit are in support of our workers’ compensation insurance programs. The letters of credit are secured by our 

senior credit facility and are expected to renew annually through the term of the credit facility; therefore, they are reported in the 

same period that the credit facility expires. 

 Contractual Obligations by Expiration Period

 

Less than 1

Year 1 –3 Years 3–5 Years 

More than 5

Years Total

 (In thousands)

Operating leases $ 1,856 $ 3,736 $ 3,128 $ 2,200 $10,920

Capital lease obligations 1,050 1,082 46 — 2,178

Acquisition payable 111 — — — 111

Total contractual obligations $ 3,017 $ 4,818 $ 3,174 $ 2,200 $13,209
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Interest Rate Risk 

Our interest rate risk results primarily from our variable rate indebtedness under our senior credit facility, which is influenced by 

movements in short-term rates. Borrowings under our $75.0 million revolving credit facility are based on an alternate base rate or 

one, two, three or six month LIBOR as elected by the Company plus an additional margin based on our Senior Leverage Ratio. 

Although there were no amounts outstanding under the facility at May 31, 2008, we do routinely borrow against our revolving credit 

line to fund short-term working capital needs. We do not currently utilize interest rate swaps to hedge our interest rate risk; therefore, 

short-term interest rates could have an impact on future interest expense. 

Financial instruments with interest rate risk at May 31, 2008 were as follows: 

 

Financial instruments with interest rate risk at May 31, 2007 are as follows: 

 

Effective July 6, 2007, the Company amended the senior credit facility. The amendment reduced the additional margin on 

alternate base rate borrowings to a range of 0% to 0.25% and reduced the additional margins on the LIBOR based borrowings to 

a range of 1.00% to 1.75%. 

- 37 -

Item 7A. Quantitative and Qualitative Disclosures About Market Risk 

 Maturity by Fiscal Year 

 2009 2010 2011 2012 2013 Total 

Fair Value as

of May 31,

2008

 (In thousands) 

Long-term debt: 

Variable rate debt (1) $— $— $— $— $— $— $ —

Acquisition payable (2) 111 — — — — 111 111

(1) There were no outstanding borrowings under our senior credit facility at May 31, 2008. In fiscal 2008, the weighted average 

interest rate on our borrowings under our senior credit facility was 7.7%. At the Company’s option, amounts borrowed under the 

revolving credit facility will bear interest at LIBOR or an alternate base rate, plus in each case, an additional margin based on 

the Senior Leverage Ratio. The alternate base rate is the greater of the prime rate or the fed funds effective rate plus 0.5%. The 

additional margin ranges from 0.00% to 0.25% on alternate base rate borrowings and from 1.00% to 1.75% on LIBOR-based 

borrowings. The Senior Leverage Ratio for the quarter ended May 31, 2008 places the Company in the lowest interest rate tier, 

resulting in LIBOR and alternative base rate margins of 1.00% and 0.00%, respectively. 

(2) The payment included in the table represents the amount the Company is obligated to pay in the period indicated. The 

Acquisition payable is recorded at its present value of $0.1 million in the financial statements, and will be paid either to or on 

behalf of the seller to certain taxing authorities after final resolution of disputed sales and use tax obligations. 

 Maturity by Fiscal Year 

 2008 2009 2010 2011 2012 Total 

Fair Value as

of May 31,

2007

 (In thousands) 

Long-term debt: 

Variable rate debt (1) $ — $— $— $— $— $ — $ —

Acquisition payable (2) 2,820 — — — — 2,820 2,653

(1) There were no outstanding borrowings under our senior credit facility at May 31, 2007. In fiscal 2007, the weighted average 

interest rate on our borrowings under our senior credit facility was 8.9%. At the Company’s option, amounts borrowed under the 

revolving credit facility will bear interest at LIBOR or an alternate base rate, plus in each case, an additional margin based on 

the Senior Leverage Ratio. The alternate base rate is the greater of the prime rate or the fed funds effective rate plus 0.5%. The 

additional margin ranged from 0% to 0.75% on alternate base rate borrowings and from 1.50% to 2.25% on LIBOR-based 

borrowings. The Senior Leverage Ratio for the quarter ended May 31, 2007 placed the Company in the lowest interest rate tier, 

resulting in LIBOR and alternative base rate margins of 1.50% and 0%, respectively. 

(2) The payments included in the table represents the amount the Company was obligated to pay in the period indicated. The 

Acquisition Payable is recorded at its present value of $2.7 million in the financial statements. Accretion is recorded based on an 

interest rate of approximately 5.1%. 
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Foreign Currency Risk 

Matrix Service has subsidiaries with operations in Canada with the Canadian dollar as their functional currency. Historically, 

movements in the foreign currency exchange rate have not significantly impacted results. However, growth in our Canadian 

operations and fluctuations in the Canadian dollar could impact the Company’s financial results in the future. Management has not 

entered into derivative instruments to hedge foreign currency risk, but periodically evaluates the materiality of our foreign currency 

exposure. A 10% change in the Canadian dollar against the U. S. dollar would not have had a material impact on the financial results 

of the Company for the fiscal year ended May 31, 2008. 

Commodity Risk 

Steel and steel pipe are the primary raw materials used by the Company. Supplies of these materials are available throughout the 

United States. We do not anticipate being unable to obtain adequate amounts of these materials in the foreseeable future. However, 

the price, quantity available and timing of availability of these materials could change significantly due to various factors, including 

producer capacity, the level of foreign imports, demand for the materials, the imposition or removal of tariffs on imported steel and 

other market conditions. We mitigate these risks by including standard language in our contracts, which passes the risk of increases in 

steel prices or unavailability of steel to our customers. 

- 38 -
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Financial Statement Schedules 

The financial statement schedule is filed as a part of this report under Schedule II – Valuation and Qualifying Accounts for the three 

fiscal years ended May 31, 2008, 2007, and 2006 immediately following Quarterly Financial Data (Unaudited). All other schedules

are omitted because they are not applicable or the required information is shown in the financial statements, or notes thereto, included 

herein. 

- 39 -

Item 8. Financial Statements and Supplementary Data 

Financial Statements of the Company 

Management’s Report on Internal Control Over Financial Reporting 40

Reports of Independent Registered Public Accounting Firm 41

Consolidated Balance Sheets as of May 31, 2008 and 2007 43

Consolidated Statements of Income for the Years Ended May 31, 2008, 2007 and 2006 45

Consolidated Statements of Changes in Stockholders’ Equity for the Years Ended May 31, 2008, 2007 and 2006 46

Consolidated Statements of Cash Flows for the Years Ended May 31, 2008, 2007 and 2006 47

Notes to Consolidated Financial Statements 49

Quarterly Financial Data (Unaudited) 71

Schedule II – Valuation and Qualifying Accounts 72
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MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING 

The management of Matrix Service Company (the “Company”) and its wholly-owned subsidiaries are responsible for establishing 

and maintaining adequate internal control over financial reporting. The Company’s internal control over financial reporting is a 

process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial 

statements for external purposes in accordance with U.S. generally accepted accounting principles. Internal control over financial 

reporting includes policies and procedures that: (i) pertain to the maintenance of records that, in reasonable detail, accurately and 

fairly reflect the transactions and dispositions of the assets of the Company; (ii) provide reasonable assurance that transactions are 

recorded as necessary to permit preparation of financial statements in accordance with U.S. generally accepted accounting principles, 

and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and 

directors of the Company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, 

use or disposition of the Company’s assets that could have a material effect on the financial statements. 

All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be 

effective may not prevent or detect misstatements. 

The Company’s management assessed the effectiveness of the Company’s internal control over financial reporting as of May 31, 

2008. In making this assessment, the Company’s management used the criteria set forth by the Committee of Sponsoring 

Organizations of the Treadway Commission (“COSO”) in Internal Control-Integrated Framework. 

Management’s assessment included an evaluation of such elements as the design and operating effectiveness of key financial 

reporting controls, process documentation, accounting policies, overall control environment and information systems control 

environment. Based on this assessment, the Company’s management has concluded that the Company’s internal control over financial 

reporting as of May 31, 2008 was effective. 

- 40 -
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM 

To the Board of Directors and Stockholders of 

Matrix Service Company: 

We have audited the internal control over financial reporting of Matrix Service Company and subsidiaries (“the Company”) as of 

May 31, 2008 based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring 

Organizations of the Treadway Commission. The Company’s management is responsible for maintaining effective internal control 

over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the 

accompanying Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the 

Company’s internal control over financial reporting based on our audit. 

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those

standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over 

financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over 

financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of 

internal control based on the assessed risk, and performing such other procedures as we considered necessary in the 

circumstances. We believe that our audit provides a reasonable basis for our opinion. 

A company’s internal control over financial reporting is a process designed by, or under the supervision of, the company’s principal 

executive and principal financial officers, or persons performing similar functions, and effected by the company’s board of directors, 

management, and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation 

of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal

control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in

reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable 

assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally 

accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with 

authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely 

detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial 

statements. 

Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper 

management override of controls, material misstatements due to error or fraud may not be prevented or detected on a timely 

basis. Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to future periods are 

subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with 

the policies or procedures may deteriorate. 

In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of May 31, 

2008, based on the criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring 

Organizations of the Treadway Commission. 

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the 

consolidated financial statements and financial statement schedule as of and for the year ended May 31, 2008 of the Company and our 

report dated August 5, 2008 expressed an unqualified opinion on those financial statements and financial statement schedule. 

/s/ DELOITTE & TOUCHE LLP 

Tulsa, Oklahoma 

August 5, 2008 

- 41 -
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM 

To the Board of Directors and Stockholders of 

Matrix Service Company: 

We have audited the accompanying consolidated balance sheets of Matrix Service Company and subsidiaries (the “Company”) as of 

May 31, 2008 and 2007, and the related consolidated statements of income, changes in stockholders’ equity, and cash flows for each 

of the three years in the period ended May 31, 2008. Our audits also included the financial statement schedule listed in the Index at 

Item 15. These financial statements and financial statement schedule are the responsibility of the Company’s management. Our 

responsibility is to express an opinion on the financial statements and the financial statement schedule based on our audits. 

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United 

States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial 

statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and

disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made 

by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable 

basis for our opinion. 

In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of Matrix Service 

Company and subsidiaries as of May 31, 2008 and 2007, and the results of their operations and their cash flows for each of the three 

years in the period ended May 31, 2008, in conformity with accounting principles generally accepted in the United States of 

America. Also, in our opinion, such financial statement schedule, when considered in relation to the basic consolidated financial 

statements taken as a whole, presents fairly, in all material respects, the information set forth therein. 

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the 

Company’s internal control over financial reporting as of May 31, 2008, based on the criteria established in Internal Control—

Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated 

August 5, 2008 expressed an unqualified opinion on the Company’s internal control over financial reporting. 

/s/ DELOITTE & TOUCHE LLP 

Tulsa, Oklahoma 

August 5, 2008 

- 42 -
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Matrix Service Company 

Consolidated Balance Sheets 

(In thousands) 

 

See accompanying notes. 

- 43 -

 As of May 31,

 2008 2007

Assets 

Current assets: 

Cash and cash equivalents $ 21,989 $ 9,147

Accounts receivable, less allowances (2008 - $269; 2007 - $260) 105,858 98,497

Costs and estimated earnings in excess of billings on uncompleted contracts 49,940 45,634

Inventories 4,255 4,891

Deferred income taxes 4,399 3,283

Prepaid expenses 3,357 2,910 

Other current assets 809 929

Total current assets 190,607 165,291

Property, plant and equipment, at cost: 

Land and buildings 24,268 23,405 

Construction equipment 47,370 39,958

Transportation equipment 16,927 14,380

Furniture and fixtures 11,781 10,116

Construction in progress 6,712 1,788

 107,058 89,647

Accumulated depreciation (49,811) (43,654)

 57,247 45,993

Goodwill 23,329 23,357

Other assets 3,410 8,268

Total assets $274,593 $242,909
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Matrix Service Company 

Consolidated Balance Sheets (continued) 

(In thousands, except share data) 

See accompanying notes. 

- 44 -

 As of May 31,

 2008 2007

Liabilities and stockholders’ equity 

Current liabilities: 

Accounts payable $ 53,449 $ 52,144

Billings on uncompleted contracts in excess of costs and estimated earnings 48,709 34,243

Accrued insurance 8,451 6,422

Accrued wages and benefits 14,976 15,442 

Income tax payable 2,028 956

Current capital lease obligation 1,042 753

Current portion of acquisition payable 111 2,712

Other accrued expenses 1,015 1,313

Total current liabilities 129,781 113,985

Long-term capital lease obligation 1,000 836

Deferred income taxes 5,112 2,512

Stockholders’ equity: 

Common stock - $.01 par value; 60,000,000 shares authorized; 27,888,217 shares issued as of 

May 31, 2008 and 2007 279 279

Additional paid-in capital 108,402 104,408 

Retained earnings 44,809 23,422

Accumulated other comprehensive income 1,584 967

 155,074 129,076

Less treasury stock, at cost – 1,825,600 and 1,297,466 shares as of May 31, 2008 and 2007 (16,374) (3,500)

Total stockholders’ equity 138,700 125,576

Total liabilities and stockholders’ equity $274,593 $242,909 
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Matrix Service Company 

Consolidated Statements of Income 

(In thousands, except per share data) 

 

See accompanying notes. 

- 45 -

Fiscal Year Ended May 31,

2008 2007 2006

Revenues $731,301 $639,846 $493,927

Cost of revenues 656,184 573,960 446,848

Gross profit 75,117 65,886 47,079

Selling, general and administrative expenses 40,566 32,836 29,381

Operating income 34,551 33,050 17,698

Other income (expense): 

Interest expense (890) (2,403) (7,765)

Interest income 82 139 88

Other (27) 328 1,573

Income before income taxes 33,716 31,114 11,594

Provision for federal, state and foreign income taxes 12,302 11,943 3,941

Net income $ 21,414 $ 19,171 $ 7,653

Basic earnings per common share $ 0.81 $ 0.83 $ 0.39

Diluted earnings per common share $ 0.80 $ 0.74 $ 0.35

Weighted average common shares outstanding: 

Basic 26,427 23,056 19,652

Diluted 26,875 26,752 25,742
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Matrix Service Company 

Consolidated Statements of Changes in Stockholders’ Equity 

(In thousands, except share data) 

 

See accompanying notes. 

- 46 -

 Common

Stock

 

Additional

Paid-In 

Capital

Retained

Earnings

(Deficit)

Treasury

Stock

Accumulated Other 

Comprehensive Income 

(Loss) 

 Translation Derivative Total

Balances, May 31, 2005 $ 193 $ 56,322 $ (3,307) $ (5,201) $ 44 $ (66) $ 47,985

Net income — — 7,653 — — — 7,653

Other comprehensive income 

Translation adjustment — — — — 770 — 770

Derivative activity — — — — — 66 66

Comprehensive income 8,489

Conversion of convertible notes (1,002,275 

shares) 10 4,291 — — — — 4,301

Issuance of additional common stock 

(2,307,692 shares) 23 14,859 — — — — 14,882

Exercise of stock options (142,364 shares) — 74 (30) 389 — — 433

Tax effect of exercised stock options — 309 — — — — 309

Balances, May 31, 2006 226 75,855 4,316 (4,812) 814 — 76,399

Net income — — 19,171 — — — 19,171

Other comprehensive income 

Translation adjustment — — — — 153 — 153

Comprehensive income 19,324

Conversion of convertible notes (5,292,974 

shares) 53 23,623 — — — — 23,676

Exercise of stock options (433,920 shares) — 1,324 (65) 1,312 — — 2,571

Tax effect of exercised stock options — 2,132 — — — — 2,132

Stock-based compensation expense — 1,474 — — — — 1,474

Balances, May 31, 2007 279 104,408 23,422 (3,500) 967 — 125,576

Net income — — 21,414 — — — 21,414

Other comprehensive income 

Translation adjustment — — — — 617 — 617

Comprehensive income 22,031

Exercise of stock options (165,450 shares) — 574 (27) 494 — — 1,041

Tax effect of exercised stock options — 721 — — — — 721

Stock-based compensation expense — 2,874 — — — — 2,874

Issuance of deferred shares (59,590 shares) — (175) — 175 — — —

Other treasury share purchases (23,192 shares) — — — (700) — — (700)

Open market purchase of treasury shares 

(729,982 shares) — — — (12,843) — — (12,843)

Balances, May 31, 2008 $ 279 $108,402 $44,809 $(16,374) $ 1,584 $ — $138,700
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Matrix Service Company 

Consolidated Statements of Cash Flows 

(In thousands) 

 

See accompanying notes. 

- 47 - 

Fiscal Year Ended May 31,

2008 2007 2006

Operating activities: 

Net income $ 21,414 $ 19,171 $ 7,653

Adjustments to reconcile net income to net cash provided by operating activities: 

Depreciation and amortization 8,373 6,500 5,698

Deferred income tax 1,484 (1,442) 1,316

Gain on sale of property, plant and equipment (6) (186) (1,554)

Allowance for uncollectible accounts 1,161 189 587

Stock-based compensation expense 2,874 1,474 — 

Accretion on acquisition payable 108 206 271

Amortization of debt issuance costs 152 372 2,660

Amortization of prepaid interest — 1,069 1,921

Changes in operating assets and liabilities increasing (decreasing) cash: 

Receivables (2,748) (22,957) 10,946

Costs and estimated earnings in excess of billings on uncompleted contracts (4,306) (21,096) (1,945)

Inventories 636 (1,369) (990)

Prepaid expenses and other assets (1,530) (3,879) (848)

Accounts payable 963 5,590 9,093

Billings on uncompleted contracts in excess of costs and estimated earnings 14,466 22,166 (348)

Accrued expenses 1,265 4,333 (2,075)

Income tax receivable/payable 1,290 1,217 3,412

Other — — 83

Net cash provided by operating activities 45,596 11,358 35,880

Investing activities: 

Acquisition of property, plant and equipment (18,302) (13,120) (5,614)

Proceeds from asset sales 452 288 7,046

Net cash provided (used) by investing activities $(17,850) $(12,832) $ 1,432
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Matrix Service Company 

Consolidated Statements of Cash Flows (continued) 

(In thousands) 

See accompanying notes. 

- 48 -

 Fiscal Year Ended May 31,

 2008 2007 2006

Financing activities: 

Issuance of common stock $ 1,041 $ 2,571 $ 15,315

Advances under bank credit facility 183,810 126,740 142,601

Repayments of bank credit facility (183,810) (126,740) (185,280)

Payment of debt issuance costs — (145) (929)

Capital lease payments (775) (671) (416)

Repayment of other notes (2,709) (1,880) (1,862)

Tax benefit of exercised stock options and vesting of deferred shares 721 2,132 —

Open market purchase of treasury shares (12,843) — —

Other treasury share purchases (700) — —

Net cash provided (used) by financing activities (15,265) 2,007 (30,571)

Effect of exchange rate changes on cash 361 29 348

Net increase in cash and cash equivalents 12,842 562 7,089

Cash and cash equivalents, beginning of year 9,147 8,585 1,496 

Cash and cash equivalents, end of year $ 21,989 $ 9,147 $ 8,585

Supplemental disclosure of cash flow information 

Cash paid (received) during the period for: 

Income taxes $ 8,750 $ 10,034 $ (810)

Interest $ 529 $ 723 $ 3,024

Non-cash investing and financing activities: 

Equipment acquired through capital leases $ 1,220 $ 1,316 $ 1,016

Purchases of property, plant and equipment on account $ 484 $ 142 $ 711

Conversion of convertible notes $ — $ 25,000 $ 5,000
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Matrix Service Company 

Notes to Consolidated Financial Statements (continued) 

Note 1. Summary of Significant Accounting Policies 

Organization and Basis of Presentation 

The consolidated financial statements include the accounts of Matrix Service Company (“Matrix Service” or the “Company”) and its 

subsidiaries, all of which are wholly owned. Intercompany transactions and balances have been eliminated in consolidation. 

The Company operates primarily in the United States and has operations in Canada. The Company’s reportable segments are 

Construction Services and Repair and Maintenance Services. 

Use of Estimates 

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires 

management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. 

Actual results could differ from those estimates. 

Revenue Recognition 

Matrix Service records profits on fixed-price contracts on a percentage-of-completion basis, primarily based on costs incurred to date 

compared to the total estimated contract cost. Matrix Service records revenue on reimbursable and time and material contracts on a 

proportional performance basis as costs are incurred. Contracts in process are valued at cost plus accrued profits less billings on 

uncompleted contracts. Contracts are generally considered substantially complete when field construction is completed. The elapsed 

time from award of a contract to completion of performance may be in excess of one year. Matrix Service includes pass-through 

revenue and costs on cost-plus contracts, which are customer-reimbursable materials, equipment and subcontractor costs, when 

Matrix Service determines that it is responsible for the procurement and management of such cost components on behalf of the 

customer. 

Matrix Service has numerous contracts that are in various stages of completion which require estimates to determine the appropriate 

cost and revenue recognition. Matrix Service has a history of making reasonably dependable estimates of the extent of progress 

towards completion, contract revenues and contracts costs, and accordingly, does not believe significant fluctuations are likely to 

materialize. However, current estimates may be revised as additional information becomes available. If estimates of costs to complete 

fixed-price contracts indicate a loss, provision is made through a contract write-down for the total loss anticipated. A number of our 

contracts contain various cost and performance incentives and penalties that impact the earnings we realize from our contracts, and 

adjustments related to these incentives and penalties are recorded in the period, on a percentage-of-completion basis, when estimable 

and probable. 

Indirect costs (such as salaries and benefits, supplies and tools, equipment costs and insurance costs) are charged to projects based 

upon direct labor hours and overhead allocation rates per direct labor hour. Warranty costs are normally incurred prior to project 

completion and are charged to project costs as they are incurred. Warranty costs incurred subsequent to project completion were not 

material for the periods presented. Overhead allocation rates are established annually during the budgeting process and evaluated for 

accuracy throughout the year based upon actual direct labor hours and actual costs incurred. 

- 49 -
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Matrix Service Company 

Notes to Consolidated Financial Statements (continued) 

Claims Recognition 

Claims are amounts in excess of the agreed contract price (or amounts not included in the original contract price) that we seek to 

collect from customers or others for delays, errors in specifications and designs, contract terminations, change orders in dispute or 

unapproved as to both scope and price or other causes of anticipated additional costs incurred by us. Recognition of amounts as

additional contract revenue related to claims is appropriate only if it is probable that the claims will result in additional contract 

revenue and if the amount can be reliably estimated. We must determine if: 

 

 

 

 

If all of these requirements are met, revenue from a claim is recorded only to the extent that we have incurred costs relating to the 

claim. 

Cash Equivalents 

The Company includes as cash equivalents all investments with original maturities of three months or less which are readily 

convertible into cash. The carrying value of cash equivalents approximates fair value. Approximately $0.3 million of cash as of

May 31, 2008 and 2007 is classified as Other Assets as it is restricted for use under an alliance agreement with a customer. 

Accounts Receivable 

Accounts receivable are carried on a gross basis, less the allowance for uncollectible accounts. The Company grants credit without 

requiring collateral from its customers that consist primarily of major integrated oil companies, independent refiners and marketers, 

power companies, petrochemical companies, pipelines, contractors and engineering firms. Although this potentially exposes the 

Company to the risks of individual customer defaults or depressed cycles in these industries, our contracts require payment as projects 

progress or advance payment in some circumstances. In addition, in most cases the Company can place liens against the property,

plant or equipment constructed or terminate the contract if a material contract default occurs. Management estimates the allowance 

for uncollectible accounts based on existing economic conditions, the financial condition of its customers and the amount and age of 

past due accounts. Accounts are written off against the allowance for uncollectible accounts only after all collection attempts have 

been exhausted. 

- 50 -

• there is a legal basis for the claim; 

• the additional costs were caused by circumstances that were unforeseen by the Company and are not the result of deficiencies in

our performance; 

• the costs are identifiable or determinable and are reasonable in view of the work performed; and 

• the evidence supporting the claim is objective and verifiable. 
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Matrix Service Company 

Notes to Consolidated Financial Statements (continued) 

Loss Contingencies 

Various legal actions, claims and other contingencies arise in the normal course of our business. Contingencies are recorded in the 

consolidated financial statements, or are otherwise disclosed, in accordance with SFAS No. 5, “Accounting for Contingencies”. 

Specific reserves are provided for loss contingencies to the extent we conclude their occurrence is both probable and estimable. We 

use a case-by-case evaluation of the underlying data and update our evaluation as further information becomes known. We believe

that any amounts exceeding our recorded accruals should not materially affect our financial position, results of operations or liquidity. 

However, the results of litigation are inherently unpredictable and the possibility exists that the ultimate resolution of one or more of 

these matters could result in a material adverse effect on our financial position, results of operations or liquidity. 

Legal costs are expensed as incurred. 

Inventories 

Inventories consist primarily of raw materials and are stated at the lower of cost or net realizable value. Cost is determined primarily 

using the average cost method. 

Depreciation 

Depreciation is computed using the straight-line method over the estimated useful lives of the depreciable assets. Depreciable lives 

are as follows: buildings – 40 years, construction equipment – 3 to 15 years, transportation equipment – 3 to 5 years, and furniture and 

fixtures – 3 to 10 years. 

Impairment of Long-Lived Assets 

The Company evaluates long-lived assets, including intangibles, for impairment when events or changes in circumstances indicate, in 

management’s judgment, that the carrying value of such assets used in operations may not be recoverable. The determination of 

whether an impairment has occurred is based on management’s estimate of undiscounted future cash flows attributable to the assets as 

compared to the carrying value of the assets. If an impairment has occurred, the amount of the impairment recognized is determined 

by estimating the fair value for the assets and recording a loss provision if the carrying value is greater than fair value. 

For assets identified to be disposed of in the future, the carrying value of the assets are compared to the estimated fair value less the 

cost of disposal to determine if an impairment is required. Until the assets are disposed of, an estimate of the fair value is 

redetermined when related events or circumstances change. 

Goodwill 

Goodwill and intangible assets with indefinite useful lives are not amortized and are tested at least annually for impairment. Goodwill 

represents the excess of the purchase price of acquisitions over the fair value of the net assets acquired. Goodwill is evaluated for 

impairment by first comparing management’s estimate of the fair value of a reporting unit with its carrying value, including goodwill. 

Reporting units for purposes of goodwill impairment calculations are our reportable segments. 

- 51 -
ˆ1KLMD1QC6Z774K6)Š 1KLMD1QC6Z774K6

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Matrix Service Company 

Notes to Consolidated Financial Statements (continued) 

Management utilizes a discounted cash flow analysis to determine the estimated fair value of our reporting units. Judgments and

assumptions related to revenue, gross margins, operating expenses, interest, capital expenditures, cash flow and market assumptions 

are inherent in these estimates. As a result, use of alternate judgments and/or assumptions could result in a fair value that differs from 

our estimate and ultimately result in the recognition of impairment charges in the financial statements. We utilize various scenarios 

and assign probabilities to each of these scenarios in our discounted cash flow analysis. The results of the discounted cash flow 

analysis are then compared to the carrying value of the reporting unit. 

If the carrying value of a reporting unit exceeds its fair value, a computation of the implied fair value of goodwill is compared with its 

related carrying value. If the carrying value of the reporting unit goodwill exceeds the implied fair value of that goodwill, an 

impairment loss is recognized in the amount of the excess. If an impairment charge is incurred, it would negatively impact our results 

of operations and financial position. We perform our annual analysis during the fourth quarter of each fiscal year and in any other 

period in which indicators of impairment warrant an additional analysis. 

Insurance Reserves 

We maintain insurance coverage for various aspects of our operations. However, we retain exposure to potential losses through the 

use of deductibles, coverage limits and self-insured retentions. As of May 31, 2008 and May 31, 2007, insurance reserves totaling 

$8.5 million and $6.4 million, respectively, are included in our consolidated balance sheet. These amounts represent our best estimate 

of our ultimate obligations for asserted claims, insurance premium obligations and claims incurred but not yet reported at the balance 

sheet dates. We establish specific reserves for claims using case-by-case evaluations of the underlying claim data and update our 

evaluations as further information becomes known. Judgments and assumptions are inherent in our reserve accruals; as a result, 

changes in assumptions or claims experience could result in changes to these estimates in the future. Additionally, the actual results of 

claim settlements could differ from the amounts estimated. 

Income Taxes 

Deferred income taxes are computed using the liability method whereby deferred tax assets and liabilities are recognized based on 

temporary differences between the financial statement and tax basis of assets and liabilities using presently enacted tax rates. 

Stock - Based Compensation 

Prior to June 1, 2006, the Company accounted for stock options granted under its stock-based compensation plans (“Plans”) pursuant 

to the recognition and measurement provisions of Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to 

Employees,” and related interpretations, as permitted by FASB Statement No. 123, “Accounting for Stock-Based 

Compensation” (“SFAS No. 123”). Therefore, compensation cost for stock options was not recognized in the Consolidated Statement

of Income for the fiscal year ended May 31, 2006 because all options granted under the Plans had an exercise price equal to the

market value of the underlying common stock on the date of the grant. Effective June 1, 2006 the Company adopted the fair value

recognition provisions of SFAS No. 123(R), “Share-Based Payment (“SFAS No. 123(R)”), using the modified-prospective method. 

Under this method, compensation cost for all share-based awards is recognized over the requisite service period. As required under 

the modified-prospective method, results for prior periods have not been restated. 

- 52 -
ˆ1KLMD1QC6Z7B666oŠ 1KLMD1QC6Z7B666

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Matrix Service Company 

Notes to Consolidated Financial Statements (continued) 

Recent Accounting Standards 

FIN 48 – Accounting for Uncertainty in Income Taxes 

Effective June 1, 2007, the Company adopted the provisions of FASB Interpretation No. 48, “Accounting for Uncertainty in Income

Taxes – an Interpretation of FASB Statement No. 109”, as amended (“FIN No. 48”). Upon adoption of FIN No. 48 on June 1, 2007 

and as of May 31, 2008, the Company had no material uncertain tax positions and no adjustments to the Company’s financial 

statements were required. 

The Company files federal and various state income tax returns and tax returns in certain foreign jurisdictions. In the Company’s 

significant tax jurisdictions, the tax years 2005 through 2008 are subject to examination by federal tax authorities and the tax years 

2004 through 2008 are subject to examination by state and foreign taxing authorities. 

The Company accrues interest and penalties on underpayment of income taxes related to uncertain tax positions as a component of

income tax expense in the consolidated statement of income. No amounts were recognized for interest and penalties upon adoption of 

FIN No. 48 or during the twelve months ended May 31, 2008. 

SFAS No. 157 – Fair Value Measurements 

In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements” (“SFAS No. 157”). This Statement established a 

framework for fair value measurements in the financial statements by providing a definition of fair value, guidance on the methods 

used to estimate fair value and expanded disclosures about fair value measurements. SFAS No. 157 is effective for fiscal years 

beginning after November 15, 2007 and is generally applied prospectively. We do not expect the Company’s adoption of SFAS 

No. 157 to have a material effect on our financial statements. 

SFAS No. 159 – The Fair Value Option for Financial Assets and Financial Liabilities – Including an Amendment of FASB Statement 

No. 115 

In February 2007, the FASB issued Statement of Financial Accounting Standards No. 159 (“SFAS No. 159”), “The Fair Value Option 

for Financial Assets and Financial Liabilities – Including an Amendment of FASB Statement No. 115”. SFAS No. 159 permits 

entities to choose to measure many financial instruments and certain other items at fair value. Unrealized gains and losses on items for 

which the fair value option has been elected will be recognized in earnings at each subsequent reporting date. SFAS No. 159 is 

effective for fiscal years beginning after November 15, 2007. We do not expect the Company’s adoption of SFAS No. 159 to have a

material effect on our financial statements. 

SFAS No. 141(R) – Business Combinations 

In December 2007, the FASB issued SFAS No. 141(R), “Business Combinations (“SFAS No. 141(R)”). SFAS No. 141(R) applies to 

all business combinations and establishes guidance for recognizing and measuring identifiable assets acquired, liabilities assumed, 

noncontrolling interests in the acquiree and goodwill. Most of these items are recognized at their full fair value on the acquisition 

date, including acquisitions where the acquirer obtains control but less than 100 percent ownership in the acquiree. SFAS No. 141(R) 

also requires transaction costs to be recognized as expense as incurred and establishes disclosure requirements to enable the 

evaluation of the nature and financial effects of the business combination. SFAS No. 141(R) is effective for business combinations 

with an acquisition date in fiscal years beginning after December 15, 2008. 

- 53 -
ˆ1KLMD1QC6Z7J9J6rŠ 1KLMD1QC6Z7J9J6

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Matrix Service Company 

Notes to Consolidated Financial Statements (continued) 

Note 2. Uncompleted Contracts 

Contract terms of the Company’s construction contracts generally provide for progress billings based on project milestones. The

excess of costs incurred and estimated earnings over amounts billed on uncompleted contracts is reported as a current asset. The 

excess of amounts billed over costs incurred and estimated earnings on uncompleted contracts is reported as a current liability. Gross 

and net amounts on uncompleted contracts are as follows: 

 

Accounts receivable at May 31, 2008 and 2007 included retentions to be collected within one year of $16.3 million and $8.6 million, 

respectively. Contract retentions collectible beyond one year are included in Other Assets on the Consolidated Balance Sheets and 

totaled $1.7 million at May 31, 2008 and $7.5 million at May 31, 2007. Billings on uncompleted contracts in excess of costs and

estimated earnings at May 31, 2008 and May 31, 2007 included an estimated accrued loss of $0.3 million and $3.8 million on a 

construction project that was partially complete at those dates. 

Gulf Coast LNG Project 

The Company has recorded a cumulative net loss of $29.8 million on a Gulf Coast construction project for three LNG tanks of which 

$20.8 was recorded during fiscal 2008. This charge reflects management’s best estimate of the total revenues to be realized, including 

incentives, and total costs at completion. The current forecast includes actual cost and productivity data as of May 31, 2008 when the 

project was 99% complete and detailed cost projections for all remaining activity. 

The Company successfully achieved the contracted completion date for tank one in February 2008, tank two in March 2008, and the

third tank in April of 2008. Retentions have been billed and collected on tanks one and two. Tank three retention is $3.6 million and is 

scheduled to be billed and collected in the normal course of business. 

- 54 -

 As of May 31,

 2008 2007

 (In thousands)

Costs incurred and estimated earnings recognized on uncompleted contracts $982,369 $697,045

Billings on uncompleted contracts 981,138 685,654

 $ 1,231 $ 11,391

Shown on balance sheet as: 

Costs and estimated earnings in excess of billings on uncompleted contracts $ 49,940 $ 45,634

Billings on uncompleted contracts in excess of costs and estimated earnings 48,709 34,243

 $ 1,231 $ 11,391
ˆ1KLMD1QC6Z7MC56YŠ 1KLMD1QC6Z7MC56

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Matrix Service Company 

Notes to Consolidated Financial Statements (continued) 

Note 3. Property Sales and Assets Held for Sale 

Asset Sales 

In fiscal 2006, the Company completed several sales of excess assets including: 

 

 

 

 

 

Assets Held for Sale 

The Company holds excess land located in Orange, California, for which a sale is pending. The carrying value of the excess land at 

May 31, 2008 was $0.8 million, which approximates the expected proceeds from the pending sale. The land is included in Other 

current assets on the Consolidated Balance Sheets and is reflected in the Company’s “Other” segment in Note 14. 

- 55 -

• A fabrication facility in Tulsa, Oklahoma was sold for $0.7 million. The sale proceeds approximated the book value of the 

asset. 

• Excess construction equipment was sold for net proceeds of $1.7 million, including $0.2 million for services to be provided in 

the future. The sale resulted in a gain of approximately $0.6 million and these services have been provided. 

• A fabrication facility and land in Holmes, Pennsylvania was sold for $0.7 million. The asset sale resulted in a gain of 

approximately $0.4 million. 

• A Bethlehem, Pennsylvania fabrication facility was sold for $3.5 million, $0.5 million of which was in the form of a 

promissory note bearing interest at 12% per annum. The sale resulted in a gain of $0.4 million. In November 2006, the buyer 

paid the promissory note in full. 

• The corporate facility at the time was sold and subsequently leased back from the buyer. The net proceeds from the sale were 

approximately $0.7 million. No gain or loss was recognized on the sale, as the carrying value of the facility approximated the 

sale proceeds. 
ˆ1KLMD1QC6Z7=KT6~Š 1KLMD1QC6Z7=KT6

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Matrix Service Company 

Notes to Consolidated Financial Statements (continued) 

Note 4. Goodwill 

The changes in the carrying amount of goodwill by segment for the fiscal years ended May 31, 2008 and 2007 follow: 

 

The translation adjustment relates to goodwill recorded as a part of a Canadian acquisition. A deferred tax asset valuation allowance 

relating to an acquisition was reversed that resulted in the goodwill adjustments in both fiscal 2007 and fiscal 2008. 

Note 5. Debt 

Effective November 30, 2006, the Company entered into a Second Amended and Restated Credit Agreement (“Credit Agreement”), 

for a five-year, $75.0 million senior revolving credit facility (“Credit Facility”). On July 6, 2007, the Company entered into the First 

Amendment to the Second Amended and Restated Credit Agreement (“Amendment”) which changed certain terms in the Credit 

Agreement, including extension of the Revolving Credit termination date from November 30, 2011 to November 30, 2012. The Credit

Agreement is guaranteed by substantially all of the Company’s subsidiaries and is secured by a lien on substantially all of the

Company’s assets The Company may elect to increase the total capacity under the Credit Agreement up to $100.0 million, with the

approval of the administrative agent. 

Availability under the senior credit facility is as follows: 

 

- 56 -

Construction

Services 

Repair and 

Maintenance

Services Total

 (In thousands)

Balance at May 31, 2006 $ 4,315 $ 19,127 $23,442

Purchase price adjustment (110) (47) (157)

Translation adjustment — 72 72

Balance at May 31, 2007 4,205 19,152 23,357

Purchase price adjustment (153) (65) (218)

Translation adjustment — 190 190

Balance at May 31, 2008 $ 4,052 $ 19,277 $23,329

 

May 31,

2008 

May 31,

2007

 (In thousands)

Senior credit facility - revolver $75,000 $75,000

Letters of credit 4,648 8,575

Availability under senior credit facility $70,352 $66,425
ˆ1KLMD1QC6Z82MG67Š 1KLMD1QC6Z82MG6

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Matrix Service Company 

Notes to Consolidated Financial Statements (continued) 

The Credit Facility may be used for working capital, issuance of letters of credit or other lawful corporate purposes. The Credit 

Agreement contains customary affirmative and negative covenants that place certain restrictions on the Company, including limits on 

new debt, operating and capital lease obligations, restrictions on capital expenditures, asset sales and certain distributions, including 

dividends. Significant financial covenants include the following: 

 

 

 

 

At the Company’s option, amounts borrowed under the Credit Facility bear interest at LIBOR or an Alternate Base Rate, plus in each 

case, an additional margin based on the Senior Leverage Ratio. The Alternate Base Rate is the greater of the Prime Rate or the Fed 

Funds Effective Rate plus 0.5%. The additional margin ranges on the Alternate Base Rate loans are between 0.00% and 0.25% and 

from between 1.00% and 1.75% on LIBOR-based loans. The Company also pays an Unused Revolving Credit Facility Fee of 

between 0.175% and 0.375% based on the Senior Leverage Ratio. Since the closing date, the Company has been at the lowest 

additional margin tier for both LIBOR and Alternate Base Rate loans and the lowest fee tier for the Unused Revolving Credit Facility 

Fee. 

Convertible Notes 

Convertible notes with a principal balance of $30.0 million, were issued through a private placement transaction on April 25, 2005. 

The notes were convertible into shares of our Common Stock at a conversion price of $4.69 per share. In fiscal 2006, $5.0 million of 

the convertible notes were converted into 1,002,275 shares of our Common Stock. The remaining $25.0 million of notes were 

converted into 5,292,974 shares of our Common Stock in fiscal 2007. 

Note 6. Acquisition Payable 

As part of an acquisition in fiscal 2003, the former shareholders of the acquired entity agreed, jointly and severally, to indemnify 

Matrix Service for damages it may suffer due to breaches of representations and warranties made by the shareholders with respect to, 

among other things, its employee benefit plans, the ownership, use and condition of its assets and the performance by the acquired 

company of its contractual obligations, and its obligations under applicable laws, including employment and environmental laws. In 

order to better assure the payment to Matrix Service of any claims by it for indemnity, $10.0 million of the purchase price was

withheld in the form of a deferred purchase price payable to the former shareholders or their designee. As to these matters, Matrix 

Service may recover its damages only if its claims for damages are made by the due date of the last payment of March 7, 2008, the 

amount of damages claimed as to any single event exceeds a de minimus amount of $10,000, and only after the aggregate amount of

all such claims, excluding de minimus claims, exceeds $250,000. 

Matrix Service did not file an indemnification claim under this provision and on March 7, 2008, $2.3 million was paid directly to the 

seller. An additional $0.4 million was paid on behalf of the seller to certain taxing authorities. The May 31, 2008 balance of $0.1 

million will be paid either to or on behalf of the seller to certain taxing authorities after final resolution of disputed sales and use tax 

obligations. 

- 57 -

• Senior Leverage Ratio not to exceed 2.50 to 1.00; 

• Asset Coverage Ratio to be greater than 1.45 to 1.00; 

• Fixed Charge Coverage Ratio to be greater than 1.25 to 1.00; and 

• Tangible Net Worth must be greater than the sum of $55.6 million plus 75% of positive net income after August 31, 2006 and 

net proceeds from the sale of any equity securities. 
ˆ1KLMD1QC6Z8KWR6|Š 1KLMD1QC6Z8KWR6

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Matrix Service Company 

Notes to Consolidated Financial Statements (continued) 

Note 7. Income Taxes 

The components of the provision for income taxes are as follows: 

 

The difference between the expected income tax provision applying the domestic federal statutory tax rate and the reported income 

tax provision is as follows: 

 

- 58 -

 Fiscal Year Ended May 31,

 2008 2007 2006

 (In thousands)

Current: 

Federal $ 9,213 $11,321 $1,433

State 1,280 1,786 783

Foreign 325 278 376

 10,818 13,385 2,592

Deferred: 

Federal 1,550 (1,007) 958

State (58) (434) 411

Foreign (8) (1) (20)

 1,484 (1,442) 1,349

 $12,302 $11,943 $3,941

 Fiscal Year Ended May 31,

 2008 2007 2006

 (In thousands)

Expected provision for Federal income taxes at the statutory rate $11,801 $10,890 $ 3,942

State income taxes, net of Federal benefit 1,206 1,120 793

Charges without tax benefit (26) 529 562

Change in valuation allowance 2 (764) (1,401)

State investment credits (538) — —

Other (143) 168 45

Provision for income taxes $12,302 $11,943 $ 3,941
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Matrix Service Company 

Notes to Consolidated Financial Statements (continued) 

Significant components of the Company’s deferred tax liabilities and assets as of May 31, 2008 and 2007 were as follows: 

 

As reported in the consolidated balance sheets: 

 

The Company has state operating loss carryforwards, state investment tax credit carryforwards and federal foreign tax credit 

carryforwards of which a portion relates to an acquisition. The valuation allowance at May 31, 2008 and May 31, 2007 reduces the 

recognized tax benefit of these carryforwards to an amount that will more likely than not be realized. The carryforwards generally 

expire between 2017 and 2027. 

- 59 -

 As of May 31,

 2008 2007

 (In thousands)

Deferred tax liabilities: 

Tax over book depreciation $ 5,072 $ 2,700

Change in tax accounting methods 761 —

Other - net 480 459

Total deferred tax liabilities 6,313 3,159

Deferred tax assets: 

Bad debt reserve 105 102

Foreign insurance dividend 132 132

Vacation accrual 354 118

Insurance reserve 2,750 1,101

Noncompete amortization 62 100

Net operating loss benefit and credit carryforwards 3,002 2,564

Valuation allowance (2,377) (2,149)

Accrued compensation and pension 550 —

Stock compensation expense on nonvested deferred shares 806 288

Accrued losses 166 1,618

Other - net 50 56

Total deferred tax assets 5,600 3,930

Net deferred tax asset (liability) $ (713) $ 771

 As of May 31,

 2008 2007

 (In thousands)

Current deferred tax assets $ 4,399 $ 3,283

Non-current deferred tax liabilities (5,112) (2,512)

Net deferred tax asset (liability) $ (713) $ 771
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Notes to Consolidated Financial Statements (continued) 

Note 8. Contingencies 

Insurance Reserves 

The Company maintains insurance coverage for various aspects of our operations. However, exposure to potential losses is retained 

through the use of deductibles, coverage limits and self-insured retentions. 

Typically our contracts require us to indemnify our customers for injury, damage or loss arising from the performance of our services 

and provide for warranties for materials and workmanship. The Company may also be required to name the customer as an additional 

insured under certain insurance policies up to the limits of insurance available, or we may have to purchase special insurance policies 

or surety bonds for specific customers or provide letters of credit issued under our credit facility in lieu of bonds to satisfy 

performance and financial guarantees on some projects. Matrix Service currently maintains a performance and payment bonding line 

of $ 140.0 million. The Company generally requires its subcontractors to indemnify the Company and the Company’s customer and 

name the Company as an additional insured for activities arising out of the subcontractors’ presence at the customer’s location. We 

also require certain subcontractors to provide additional insurance policies, including surety bonds in favor of the Company, to secure 

the subcontractors’ work or as required by the subcontract. 

There can be no assurance that our insurance and the additional insurance coverage provided by our subcontractors will fully protect 

us against a valid claim or loss under the contracts with our customers. 

Refinery Accident 

On November 6, 2005, two employees of the Company were fatally injured in an accident that occurred at a customer jobsite in 

Delaware City, Delaware. The estates of both employees have filed liability claims against the property owner. These claims have 

been tendered by the property owner to the Company for defense. The Company believes that it is adequately reserved or insured for 

this incident and any losses incurred are not expected to be significant. 

Unapproved Change Orders and Claims 

As of May 31, 2008 and May 31, 2007, costs and estimated earnings in excess of billings on uncompleted contracts included revenues 

for unapproved change orders of $0.8 million and $5.1 million, respectively. At May 31, 2007 costs and estimated earnings in excess 

of billings on uncompleted contracts included revenues for other claims of $1.5 million. There were no claims included in costs and 

estimated earnings in excess of billings on uncompleted contracts at May 31, 2008. Amounts disclosed for unapproved change orders 

and claims exclude amounts associated with the contract dispute disclosed elsewhere in this Note 8. Generally, collection of amounts 

related to unapproved change orders and claims is expected within twelve months. However, customers generally will not pay these 

amounts until final resolution of related claims, and accordingly, collection of these amounts may extend beyond one year. 

- 60 -
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Matrix Service Company 

Notes to Consolidated Financial Statements (continued) 

Contract Disputes 

At May 31, 2006, the Company had recorded net receivables of approximately $11.7 million under four contracts which were in 

dispute. In fiscal 2007, the Company settled three of the four disputes, comprising $10.7 million of the recorded net receivables, and 

collected $11.3 million under the settlements resulting in a $0.6 million pre-tax net gain. 

At May 31, 2007, the Company had one remaining contract dispute, with a recorded value of $1.0 million. In March 2000, the 

Company entered into a joint venture partnership (JV) agreement for the construction of a pulp and paper project for an owner, which 

was completed late in 2000. The services provided by the JV consisted primarily of a labor contract with the owner supplying the 

engineering and the majority of the materials to be installed. The claim arises out of a contractual dispute in which the Company 

believes the JV incurred substantial work because the owner’s planning and engineering on the project was not adequate. The owner 

did not pay amounts owed. The Company had planned on continuing its collection efforts through arbitration. However, on 

November 18, 2007, the owner filed for Chapter 11 bankruptcy protection. The Company’s arbitration has been stayed and will not

move forward until an order is received from the bankruptcy court to proceed. Based on those events, the Company now believes that 

collection is unlikely and charged off the receivable in fiscal 2008. The Company will continue to evaluate all available collection 

alternatives. 

Other 

The Company and its subsidiaries are named as defendants in various other legal actions and are vigorously defending each of them. 

It is the opinion of management that none of the known legal actions will have a material adverse impact on the Company’s financial 

position, results of operations or liquidity. 

Note 9. Leases 

Operating Leases 

The Company is the lessee under operating leases covering real estate, office equipment and vehicles under non-cancelable operating 

lease agreements that expire at various times. Future minimum lease payments under non-cancelable operating leases that were in

effect at May 31, 2008 total $10.9 million and are payable as follows: fiscal 2009 - $1.9 million; fiscal 2010 - $2.0 million; fiscal 

2011 - $1.7 million; fiscal 2012 - $1.6 million; fiscal 2013 - $1.5 million and thereafter - $2.2 million. Operating lease expense was 

$1.9 million, $ 1.2 million and $1.4 million for the years ended May 31, 2008, 2007 and 2006, respectively. Operating lease expense 

associated with related party leases was $0.3 million for the year ended May 31, 2008, $0.3 million for the year ended May 31, 2007 

and $0.4 million for the year ended May 31, 2006. 

- 61 -
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Matrix Service Company 

Notes to Consolidated Financial Statements (continued) 

Capital Leases 

The Company leases most of its copiers, printers, and passenger vehicles under various non-cancelable lease agreements. Minimum

lease payments have been capitalized and the related assets and obligations recorded using various interest rates. The assets are 

depreciated on a straight line method over their estimated useful lives. Interest expense is recognized using the effective interest 

method. 

The following table is a summary of future obligations under capital leases: 

 

Assets with a cost of $3.9 million have been capitalized under capital lease arrangements. The net book value of these assets at 

May 31, 2008 is $2.1 million. 

Note 10. Stockholders’ Equity 

Preferred Stock 

The Company has 5.0 million shares of preferred stock authorized, none of which was issued or outstanding at May 31, 2008 or 2007. 

Preferred Share Purchase Rights 

The Company’s Board of Directors authorized and directed a dividend of one preferred share purchase right for each common share

outstanding on November 12, 1999 and authorized and directed the issuance of one right per common share for any shares issued 

after that date. These rights, which expire November 12, 2009, will be exercisable only if a person or group acquires 15 percent or 

more of the Company’s common stock or announces a tender offer that would result in ownership of 15 percent or more of the 

common stock. Each right will entitle stockholders to buy one one-hundredth of a share of preferred stock at an exercise price of $40. 

In addition, the rights enable holders to either acquire additional shares of the Company’s common stock or purchase the stock of an 

acquiring company at a discount, depending on specific circumstances. The rights may be redeemed by the Company in whole, but 

not in part, for one cent per right. 

In connection with the issuance of the convertible notes described under Note 5. Debt and the private placement of common stock on 

October 3, 2005, the Company amended the Rights Agreement for the preferred share purchase rights. The amendments render the 

provisions of the Rights Agreement inapplicable to the investors in the two private placements by exempting them from the definition 

of “acquiring person” as a result of the purchase of the convertible notes and common stock. 

- 62 -

 

Minimum Lease

Payments

(In thousands)

For the year ending May 31: 

2009 $ 1,050

2010 710

2011 372

2012 46

2013 and thereafter — 

Total Payments 2,178

Amount representing interest (136)

Total obligation 2,042

Current portion (1,042)

Long-term capital lease obligation $ 1,000
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Matrix Service Company 

Notes to Consolidated Financial Statements (continued) 

Private Placement of Common Stock 

On October 3, 2005, the Company completed a private placement of approximately 2.3 million shares of common stock. The 

common stock was sold at $6.50 per share. The net proceeds from the issuance were approximately $14.9 million. The Company used

the proceeds to repay a portion of the then outstanding balance on the Company’s revolving line of credit. 

In connection with the private placement of common stock, on October 3, 2005, the Company entered into a registration rights 

agreement with the purchasers of the common stock. The registration rights agreement required us to file a registration statement with 

respect to the resale of the shares of the common stock issued in the private placement. The registration statement was filed with the 

SEC on October 20, 2005 and was declared effective by the SEC on October 28, 2005. The registration rights agreement also requires 

the use of our best efforts to keep the registration statement continuously effective until the earlier of (a) the date on which all of the 

common stock covered by such registration statement has been sold or may be sold without volume restrictions pursuant to Rule 144

(k) under the Securities Act of 1933, as amended, or (b) the fifth anniversary of the date the registration statement is declared 

effective by the SEC. If we fail to satisfy our obligations under the registration rights agreement, we will owe the holders of the 

common stock as partial liquidated damages an amount in cash equal to 1% of the aggregate amount paid for the common stock for 

each such event, and an additional 1% thereafter on each monthly anniversary of each such event (if the applicable failure shall not 

have been cured by such date) until the applicable failure is cured. 

Treasury Shares 

In October 2000, the Board of Directors authorized a stock buyback program, which permitted the purchase of up to 20% (i.e., 

3,447,506 shares) of our common stock outstanding at that time. To date, Matrix Service has purchased 2,846,782 shares under the 

program and has authorization to purchase an additional 600,724 shares. In fiscal 2008, the Company purchased 729,982 shares at an 

average price of $17.59. In addition to the stock buyback program, Matrix Service may withhold shares of common stock to satisfy 

the tax withholding obligation upon vesting of an employee’s deferred shares. The Company withheld 23,192 shares of common 

stock during fiscal 2008 for the obligation. In addition to shares that may be repurchased in conjunction with the future issuance of 

deferred shares, Matrix Service has and may continue to repurchase shares under the stock buyback program if the Company 

determines the purchase is accretive to earnings per share. The Company has 1,825,600 treasury shares remaining as of May 31, 2008 

and intends to utilize these treasury shares solely for the satisfaction of stock issuances under the Company’s stock plans. 

Note 11. Stock-Based Compensation 

Total stock-based compensation expense for the years ended May 31, 2008 and 2007 was $2.9 million and $1.5 million, respectively. 

Measured but unrecognized stock-based compensation expense at May 31, 2008 was $9.8 million, of which $0.8 million related to 

stock options and $9.0 million related to nonvested deferred shares. These amounts are expected to be recognized as expense over a 

weighted average period of 2.2 years. 

- 63 - 
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Matrix Service Company 

Notes to Consolidated Financial Statements (continued) 

The following table illustrates the pro forma effect on net income and earnings per share for the year ended May 31, 2006 as if the 

Company had applied the fair value provisions of SFAS No. 123: 

 

Plan Information 

The Company’s 1990 Incentive Stock Option Plan (the “1990 Plan”), 1991 Incentive Stock Option Plan (the “1991 Plan”), and 2004 

Stock Incentive Plan (the “2004 Plan”) provide incentives for officers and other key employees of the Company and the 1995 

Nonemployee Directors’ Stock Option Plan (the “1995 Plan”) provided incentives for nonemployee directors. Shareholders have 

authorized an aggregate of 1,800,000 options, 2,640,000 options, and 500,000 options to be granted under the 1990, 1991 and 1995 

Plans, respectively. Grants of 1,200,000 awards have been authorized by shareholders under the 2004 Plan. The awards under the 

2004 Plan may include options, restricted stock units, stock appreciation rights and performance shares. 

The Company terminated the 1995 Plan in fiscal 2007. The termination of the 1995 Plan did not affect options outstanding at the time 

of termination. At May 31, 2008, there were approximately 527,000 shares available for grant under the 2004 Plan. There were no

shares available for grant under either the 1990 or 1991 Plans. 

- 64 - 

 

Fiscal Year Ended

May 31, 2006

 

(In thousands,

except per share

amounts)

Net Income as reported $ 7,653

Pro forma compensation expense from stock options, net of tax effects (853)

Pro forma net income $ 6,800

Earnings per common share as reported 

Basic $ 0.39

Diluted $ 0.35

Pro forma earnings per common share: 

Basic $ 0.35

Diluted $ 0.32
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Matrix Service Company 

Notes to Consolidated Financial Statements (continued) 

Stock Options 

Stock options are valued at the date of award and compensation cost is recognized on a straight-line basis, net of estimated forfeitures, 

over the requisite service period. Employee stock options generally vest annually, in equal increments, over a five-year period

beginning one year after the grant date. Options granted to non-employee directors generally vest annually, in equal installments, over 

a two-year period beginning one year after the grant date. Under all stock option plans, the option term cannot exceed ten years. The 

option price per share may not be less than the fair market value of the common stock at the time the option is granted. The 

Company’s policy is to issue shares upon the exercise of stock options from its treasury shares, if available. 

Stock option activity and related information for the year ended May 31, 2008 is as follows: 

 

The Company uses the Black-Scholes option pricing model to estimate grant date fair value for each stock option granted. Expected 

volatility is based on the historic volatility of the Company’s stock. The risk-free rate is based on the applicable United States 

Treasury Note rate. The expected life of the option is based on historical and expected future exercise behavior. 

There were no options granted in fiscal 2008 or 2007. Assumptions used to calculate the fiscal 2006 grant date fair value and the fair 

value calculated was as follows: 

 

The total intrinsic value of stock options exercised during fiscal 2008, 2007, and 2006 were $2.5 million, $6.2 million and $1.0 

million, respectively. 

- 65 -

Number of

Options

WeightedAverage 

Remaining 

Contractual

Life 

WeightedAverage 

Exercise 

Price 

Aggregate 

Intrinsic Value

 (Years) (In thousands)

Outstanding at May 31, 2007 669,880 $ 7.09 

Granted — — 

Exercised (165,450) $ 6.17 $ 2,536

Cancelled (46,600) $ 7.41 

Outstanding at May 31, 2008 457,830 5.9 $ 7.39 $ 7,665

Vested or expected to vest at May 31, 2008 453,856 5.9 $ 7.39 $ 7,588

Exercisable at May 31, 2008 268,410 5.2 $ 7.01 $ 4,590

 2006

Grant date fair value $ 5.62

Risk-free interest rate 3.76%

Expected life in years 4.56

Expected volatility 68.14%

Expected dividend yield — 
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Matrix Service Company 

Notes to Consolidated Financial Statements (continued) 

The following table summarizes information about stock options at May 31, 2008: 

 

Nonvested Deferred Shares 

The Company issued nonvested deferred shares in fiscal 2008 and fiscal 2007. A portion of the shares awarded to employees vest 

after three years if certain performance conditions are satisfied and the remaining shares vest in one to five equal annual installments 

beginning one year after the grant. All shares awarded to non-employee directors vest after three years if certain performance 

conditions are satisfied. Based on the actual performance as measured against the performance criteria, the performance-based portion 

of the award can range from zero to one hundred percent of the original award grant for both the fiscal 2007 and fiscal 2008 grants. 

The Company’s policy is to issue shares upon vesting from its treasury shares, if available. The fiscal 2008 grant also provides for an 

additional award of up to 50% of the original performance-based award in the form of phantom shares. This phantom share award is 

based on the achievement of certain stretch financial targets and will be settled in cash. 

Deferred shares are valued at market value on the grant date. Deferred share expense, net of estimated forfeitures, is generally 

recognized over the vesting period on a straight-line basis. The expense for the phantom shares will be recognized over the service 

period based on management’s assessment of the likelihood of achieving the stretch performance targets. Since the phantom share

award will be paid in cash, the estimated liability will be marked to market based on changes in the value of Matrix Service Company 

Common Stock. 

The following table reflects nonvested deferred share activity and related information for the year ended May 31, 2008: 

 

There were 263,130 deferred shares issued in fiscal 2007 with an average grant date fair value of $14.79. There were no deferred 

shares issued in fiscal 2006. There were no deferred shares released in fiscal 2007 or fiscal 2006. 

- 66 -

 Stock Options Outstanding Stock Options Exercisable

Range of Exercise Price 

Options

Outstanding 

WeightedAverage 

Exercise Price 

WeightedAverage

Remaining 

Contractual Life 

Options

Exercisable 

WeightedAverage 

Exercise Price 

WeightedAverage 

Remaining 

Contractual Life

 (Years) (Years)

$ 2.13 - $ 2.41 34,300 $ 2.22 1.8 34,300 $ 2.22 1.8

 3.03 - 3.70 58,200 3.41 4.0 58,200 3.41 4.0

 4.60 - 5.49 134,750 4.81 6.6 51,950 4.72 6.5

 8.93 - 12.20 230,580 10.68 6.5 123,960 10.97 6.2

$ 2.13 - $ 12.20 457,830 $ 7.39 5.9 268,410 $ 7.01 5.2

Deferred Shares Shares 

Weighted Average Grant

Date Fair Value

Nonvested shares at May 31, 2007 263,130 $ 14.79

Shares granted 319,370 25.77

Shares released (59,590) 14.82

Shares cancelled (25,830) 23.33

Nonvested shares at May 31, 2008 497,080 $ 21.41
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Matrix Service Company 

Notes to Consolidated Financial Statements (continued) 

Note 12. Earnings per Common Share 

Basic earnings per share (EPS) is calculated based on the weighted average shares outstanding during the period. Diluted earnings per 

share includes the dilutive effect of employee and director stock options, as well as the dilutive effect of convertible securities. Stock 

options are considered antidilutive whenever the exercise prices of the options exceed the average market price of the common stock 

during the period. Convertible debt is considered antidilutive whenever its interest (net of tax) per common share obtainable on 

conversion exceeds basic earnings per share. Stock options are considered dilutive whenever the exercise price is less than the

average market price of the stock during the period. Dilutive convertible securities are calculated using the “if converted” method, in 

which all unconverted securities are assumed to be converted as of the beginning of the period. The “if converted” method also 

requires that any interest charges, net of tax, applicable to the securities be added back to net income for purposes of computing 

diluted earnings per share. Both stock options and convertible debt are considered antidilutive in the event of a net loss. 

There were no antidilutive options for the years ended May 31, 2008 and May 31, 2007. Antidilutive options for the year ended 

May 31, 2006 totaled 358,267. These options were not included in the calculation of diluted earnings per share. 

The computation of basic and diluted EPS is as follows: 

 

- 67 - 

 Fiscal Year Ended May 31,

 2008 2007 2006

 (In thousands, except per share data)

Basic EPS: 

Net income $ 21,414 $ 19,171 $ 7,653

Weighted average shares outstanding 26,427 23,056 19,652

Basic EPS $ 0.81 $ 0.83 $ 0.39

Diluted EPS: 

Net income $ 21,414 $ 19,171 $ 7,653

Convertible notes interest expense (net of tax) — 731 1,314

Adjusted net income $ 21,414 $ 19,902 $ 8,967

Weighted average shares outstanding—basic 26,427 23,056 19,652

Dilutive stock options 352 430 393

Dilutive nonvested deferred shares 96 24 — 

Dilutive convertible note shares — 3,242 5,697

Dilutive weighted average shares 26,875 26,752 25,742

Diluted EPS $ 0.80 $ 0.74 $ 0.35
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Matrix Service Company 

Notes to Consolidated Financial Statements (continued) 

Note 13. Employee Benefit Plan 

The Company sponsors a defined contribution 401(k) savings plan (the “Plan”) for all eligible employees meeting length of service 

requirements. Participants may contribute an amount up to 25% of pretax annual compensation as defined in the Plan, subject to 

certain limitations in accordance with Section 401(k) of the Internal Revenue Code. For calendar years 2005 and 2006, the 

Company’s matching contribution was discretionary and the Company elected to match 50% of the first 6% of employee 

contributions. The Company match vested ratably beginning after 2 years of service with full vesting occurring after 6 years of

service. Effective January 1, 2007, the Plan was amended to include; 1) immediate vesting on all employer matching contributions, 2) 

make the employer matching contribution mandatory, and 3) modify the matching contribution to 100% of the first 3% of employee 

contributions and 50% of the next 2% of employee contributions. 

The Company recognized cost relating to the Plan of $2.8 million, $1.5 million and $1.0 million for the fiscal years ended May 31, 

2008, 2007 and 2006, respectively. 

Note 14. Segment Information 

The Company has two reportable segments, the Construction Services segment and the Repair and Maintenance Services segment. 

The primary services of our Construction Services segment are aboveground storage tanks for the bulk storage/terminal industry,

capital construction for the downstream petroleum industry, specialty construction, and electrical/instrumentation services for various 

industries. These services, including civil/structural, mechanical, piping, electrical and instrumentation, millwrighting, and 

fabrication, are provided for projects of varying complexities, schedule durations, and budgets. Our project experience includes 

renovations, retrofits, modifications and expansions to existing facilities as well as construction of new facilities. 

The primary services of our Repair and Maintenance Services segment are aboveground storage tank repair and maintenance services 

including tank inspection, cleaning and ASME code repairs, planned major and routine maintenance for the downstream petroleum 

industry, specialty repair and maintenance services and electrical and instrumentation repair and maintenance. 

Other consists of operating activity related to previously disposed of businesses and certain corporate assets. 

The Company evaluates performance and allocates resources based on profit or loss from operations before income taxes. The 

accounting policies of the reportable segments are the same as those described in the summary of significant accounting policies. 

Intersegment sales and transfers are recorded at cost; therefore, no intercompany profit or loss recognized. 

Segment assets consist of accounts receivable, costs and estimated earnings in excess of billings on uncompleted contracts, property, 

plant and equipment and goodwill. 

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Matrix Service Company 

Notes to Consolidated Financial Statements (continued) 

Annual Results of Operations 

(In thousands) 

 

- 69 -

 

Construction

Services 

Repair &

Maintenance

Services Other Total

Fiscal Year 2008 

Gross revenues $ 472,696 $ 278,818 $ — $751,514

Less: inter-segment revenues 16,809 3,404 — 20,213

Consolidated revenues 455,887 275,414 — 731,301

Gross profit 33,081 42,036 — 75,117

Operating income (loss) 8,579 25,997 (25) 34,551

Income (loss) before income tax expense 7,950 25,791 (25) 33,716

Net income (loss) 5,483 15,946 (15) 21,414

Segment assets 150,174 93,052 31,367 274,593

Capital expenditures 9,272 4,363 4,667 18,302

Depreciation and amortization expense 4,966 3,407 — 8,373

Fiscal Year 2007 

Gross revenues $ 376,849 $ 277,556 $ — $654,405

Less: inter-segment revenues 10,689 3,870 — 14,559

Consolidated revenues 366,160 273,686 — 639,846

Gross profit 29,494 36,392 — 65,886

Operating income (loss) 11,567 21,556 (73) 33,050

Income (loss) before income tax expense 10,394 20,793 (73) 31,114

Net income (loss) 6,498 12,718 (45) 19,171

Segment assets 136,780 98,737 7,392 242,909

Capital expenditures 6,850 4,319 1,951 13,120

Depreciation and amortization expense 3,586 2,914 — 6,500

Fiscal Year 2006 

Gross revenues $ 254,382 $ 250,832 $ — $505,214

Less: inter-segment revenues 10,657 630 — 11,287

Consolidated revenues 243,725 250,202 — 493,927

Gross profit 20,392 26,687 — 47,079

Operating income (loss) 6,561 11,237 (100) 17,698

Income (loss) before income tax expense 2,536 9,158 (100) 11,594

Net income (loss) 2,168 5,547 (62) 7,653

Segment assets 91,079 69,981 27,216 188,276

Capital expenditures 3,945 383 1,286 5,614

Depreciation and amortization expense 2,796 2,902 — 5,698
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Matrix Service Company 

Notes to Consolidated Financial Statements (continued) 

Geographical information is as follows: 

 

Segment revenue from external customers by market is as follows: 

 

- 70 - 

 Revenues

 

Fiscal Year 

2008 

Fiscal Year 

2007 

Fiscal Year

2006

(In thousands)

Domestic $ 718,276 $ 624,002 $ 478,154

International 13,025 15,844 15,773

 $ 731,301 $ 639,846 $ 493,927

 Long-Lived Assets

 May 31, 2008 May 31, 2007 May 31, 2006

 (In thousands)

Domestic $ 77,897 $ 66,473 $ 59,134

International 4,352 3,379 3,341

 $ 82,249 $ 69,852 $ 62,475

 

Construction

Services 

Repair &

Maintenance

Services Total

 (In thousands)

Fiscal Year 2008 

Aboveground Storage Tanks $ 201,446 $ 167,970 $369,416

Downstream Petroleum 156,371 89,001 245,372

Electrical and Instrumentation 19,975 18,443 38,418

Specialty 78,095 — 78,095

Total $ 455,887 $ 275,414 $731,301

Fiscal Year 2007 

Aboveground Storage Tanks $ 159,274 $ 125,236 $284,510

Downstream Petroleum 120,828 120,557 241,385

Electrical and Instrumentation 32,439 27,893 60,332

Specialty 53,619 — 53,619

Total $ 366,160 $ 273,686 $639,846

Fiscal Year 2006 

Aboveground Storage Tanks $ 88,368 $ 97,157 $185,525

Downstream Petroleum 95,789 139,371 235,160

Electrical and Instrumentation 22,517 13,674 36,191

Specialty 37,051 — 37,051

Total $ 243,725 $ 250,202 $493,927
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Matrix Service Company 

Notes to Consolidated Financial Statements (continued) 

Information about Significant Customers 

In fiscal 2008, one customer accounted for 16% of our consolidated revenue and 21% of our Construction Services revenue. Another 

customer accounted for 13% of our Construction Services revenue. An additional customer accounted for 18% of our Repair and 

Maintenance Services revenue. 

In fiscal 2007, one customer accounted for 14% of our consolidated revenues and 23% of our Construction Services revenues. Two 

additional customers accounted for 12% and 13% of our Construction Services revenues. Three other customers represented 20%, 

13% and 11% of our Repair and Maintenance Services revenues, respectively. 

One customer accounted for approximately 14% of the Company’s consolidated revenues and approximately 27% of Repair and 

Maintenance Services revenues for the year ended May 31, 2006. One customer represented 13% of Construction Services revenues 

and another customer represented 13% of Repair and Maintenance Services revenues. 

Matrix Service Company 

Quarterly Financial Data (Unaudited) 

Fiscal Years Ended May 31, 2008 and 2007 

 

The Company recorded a pretax charge of $10.9 million in the fourth quarter of fiscal 2007 and $16.0 million in the second quarter of 

fiscal 2008 relating to a Gulf Coast LNG construction project. 

The sum of earnings per share for the four quarters may not equal the total earnings per share for the year due to changes in the 

average number of common shares outstanding and rounding. 

- 71 -

 

First 

Quarter 

Second 

Quarter 

Third 

Quarter 

Fourth 

Quarter

 (In thousands, except per share amounts)

Fiscal Year 2008 

Revenues $161,327 $194,734 $181,120 $194,120

Gross profit 18,904 11,246 21,001 23,966

Net income 6,336 210 6,002 8,866

Earnings per common share: 

Basic 0.24 0.01 0.23 0.34

Diluted 0.23 0.01 0.22 0.34

Fiscal Year 2007 

Revenues $126,859 $166,366 $168,700 $177,921

Gross profit 13,307 21,902 18,924 11,753

Net income 3,008 8,074 6,150 1,939

Earnings per common share: 

Basic 0.14 0.35 0.27 0.08

Diluted 0.12 0.31 0.24 0.08
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Matrix Service Company 

Schedule II – Valuation and Qualifying Accounts 

May 31, 2008, 2007 and 2006 

(In thousands) 

 

- 72 -

COL. A COL. B

COL. C

ADDITIONS COL. D COL. E

 

Balance at

Beginning of

Period 

Charged to

Costs and

Expenses 

Charged to

Other 

Accounts – 

Describe 

Deductions

– Describe 

Balance at

End of

Period

Fiscal Year 2008 

Deducted from asset accounts: 

Allowance for doubtful accounts $ 260 $ 1,161 $ — $ (1,152)(A) $ 269

Valuation reserve for deferred tax assets 2,149 467 (B) — (239)(C) 2,377

Total $ 2,409 $ 1,628 $ — $ (1,391) $ 2,646

Fiscal Year 2007 

Deducted from asset accounts: 

Allowance for doubtful accounts $ 190 $ 189 $ — $ (119)(A) $ 260

Contract disputes reserve 5,390 — — (5,390)(A) —

Valuation reserve for deferred tax assets 3,431 — — (1,282)(D) 2,149

Total $ 9,011 $ 189 $ — $ (6,791) $ 2,409

Fiscal Year 2006 

Deducted from asset accounts: 

Allowance for doubtful accounts $ 461 $ 587 $ — $ (858)(A) $ 190

Contract disputes reserve 10,333 — — (4,943)(A) 5,390

Valuation reserve for deferred tax assets 5,139 — — (1,708)(E) 3,431

Total $ 15,933 $ 587 $ — $ (7,509) $ 9,011

(A) Receivables written off against allowance for doubtful accounts and contract dispute reserve. The write off in fiscal 2008 relates 

to a receivable previously classified as a contract dispute receivable. 

(B) An excess foreign tax credit was generated in fiscal 2008 for which the current and future utilization is doubtful. Therefore, a 

valuation allowance for the full amount of the credit was recorded. 

(C) Operating loss carryforwards previously reserved were utilized resulting in an adjustment to goodwill and a reduction to the

valuation reserve of $218. The remaining reduction was due to certain miscellaneous adjustments. 

(D) Operating loss carryforwards previously reserved were utilized or deemed utilizable resulting in a reduction in the valuation 

reserve of $921. The recognition of the operating loss carryforward resulted in a $157 charge to goodwill and $764 reduction of

the fiscal 2007 tax provision. The remaining reduction was due to miscellaneous adjustments. 

(E) Represents recognition of operating loss carryforwards and tax credits previously reserved. Of the reversal, $202 was charged to 

goodwill, $1,401 reduced the current year tax provision and $105 related to rate adjustments. 
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None 

 

Evaluation of Disclosure Controls and Procedures 

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our Securities 

Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and 

forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and 

Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure based on the definition of “disclosure 

controls and procedures” in Rule 13a-15(e). In designing and evaluating the disclosure controls and procedures, management 

recognized that disclosure controls and procedures, no matter how well designed and operated, can provide only reasonable assurance 

of achieving the desired control objectives, and management necessarily was required to apply its judgment in evaluating the costbenefit relationship of possible disclosure controls and procedures. We carried out an evaluation, under the supervision and with the 

participation of our management, including our Chief Executive Officer and our Chief Financial Officer, of the effectiveness of the 

design and operation of our disclosure controls and procedures as of May 31, 2008. Based on the foregoing, our Chief Executive 

Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective at the reasonable assurance 

level at May 31, 2008. 

Management’s Report on Internal Control over Financial Reporting 

See “Management’s Report on Internal Control over Financial Reporting” set forth in Item 8, Financial Statements and 

Supplementary Data of this Annual Report on Form 10-K. 

Changes in Internal Control Over Financial Reporting 

There have been no changes during the fourth quarter that materially affected, or are reasonably likely to materially affect, our 

internal control over financial reporting. 

 

None 

PART III 

 

The information required by this item with respect to the Company’s directors and corporate governance is incorporated herein by 

reference to the sections entitled “Proposal Number 1: Election of Directors” and “Corporate Governance and Board Matters” in the 

Company’s definitive Proxy Statement for 2008 Annual Meeting of Stockholders (“Proxy Statement”). The information required by 

this item with respect to the Company’s executive officers is incorporated herein by reference to the section entitled “Executive 

Officer Information” in the Proxy Statement. The information required by this item with respect to the Section 16 ownership reports 

is incorporated herein by reference to the section entitled “Section 16(a) Beneficial Ownership Reporting Compliance” in the Proxy 

Statement. 

- 73 -

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 

Item 9A. Controls and Procedures 

Item 9B. Other Information 

Item 10. Directors, Executive Officers and Corporate Governance 
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The Company has adopted a Code of Business Conduct and Ethics applicable to all directors, officers and employees, including the 

principal executive officer, principal financial officer and principal accounting officer of the Company. In addition, we have adopted 

Corporate Governance Guidelines for the Board of Directors and Charters for the Audit, Compensation and Nominating and 

Corporate Governance Committees of the Board of Directors. The current version of these corporate governance documents is 

publicly available in the “Investors” section of the Company’s website at www.matrixservice.com under “Corporate Governance.” If 

we make any substantive amendments to the Code of Business Conduct and Ethics, or grant any waivers, including implicit waivers, 

from the Code of Business Conduct and Ethics applicable to the principal executive officer, principal financial officer or principal 

accounting officer, or any person performing similar functions, we will disclose such amendment or waiver on our website or in a 

report on Form 8-K. 

 

The information required by this item is incorporated herein by reference to the sections entitled “Proposal Number 1: Election of 

Directors” and “Executive Officer Compensation” in the Proxy Statement. 

 

The information required by this item is incorporated herein by reference to the sections entitled “Securities Authorized for Issuance 

Under Executive Compensation Plans” and “Security Ownership of Certain Beneficial Owners and Management” in the Proxy 

Statement. 

 

The information required by this item is incorporated herein by reference to the section entitled “Proposal Number 1: Election of 

Directors” in the Proxy Statement. 

 

The information required by this item is incorporated herein by reference to the sections entitled “Fees of Independent Registered 

Public Accounting Firm” and “Audit Committee Pre-Approval Policy” in the Proxy Statement. 

- 74 - 

Item 11. Executive Compensation 

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 

Item 13. Certain Relationships and Related Transactions, and Director Independence 

Item 14. Principal Accountant Fees and Services 
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PART IV 

 

 

 

 

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Item 15. Exhibits and Financial Statement Schedules 

(a) (1) Financial Statements of the Company

 

The following financial statements and supplementary data are filed as a part of this report under “Item 8 – Financial 

Statements and Supplementary Data” in this Annual Report on Form 10-K:

Financial Statements of the Company 

Management’s Report on Internal Control Over Financial Reporting 40

Reports of Independent Registered Public Accounting Firm (Deloitte & Touche LLP) 41

Consolidated Balance Sheets as of May 31, 2008 and 2007 43

Consolidated Statements of Income for the Years Ended May 31, 2008, 2007 and 2006 45

Consolidated Statements of Changes in Stockholders’ Equity for the Years Ended May 31, 2008, 2007 

and 2006 46

Consolidated Statements of Cash Flows for the Years Ended May 31, 2008, 2007 and 2006 47

Notes to Consolidated Financial Statements 49

Quarterly Financial Data (Unaudited) 71

Schedule II – Valuation and Qualifying Accounts 72

(2) Financial Statement Schedules

 

The financial statement schedule is filed as a part of this report under Schedule II – Valuation and Qualifying Accounts for the 

three fiscal years ended May 31, 2008, 2007, and 2006 immediately following Quarterly Financial Data (Unaudited). All other 

schedules are omitted because they are not applicable or the required information is shown in the financial statements, or notes 

thereto, included herein.
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(3) The following documents are included as exhibits to this Annual Report on Form 10-K:

 

3.1 

 

Restated Certificate of Incorporation (Exhibit 3.1 to the Company’s Registration Statement on Form S-3 (File 

No. 333-117077) filed July 1, 2004 (the “S-3 Registration Statement”) is hereby incorporated by reference).

 

3.2 

 

Certificate of Amendment of Restated Certificate of Incorporation dated October 31, 2000 (Exhibit 3.3 to the S-3 

Registration Statement is hereby incorporated by reference).

 

3.3 

 

Form of Certificate of Amendment of Restated Certificate of Incorporation (Appendix A to the Company’s Proxy 

Statement filed on September 15, 2006 (File No. 1-15461) is hereby incorporated by reference).

 

3.4 

 

Certification of Designations, Preferences and Rights of Series B Junior Preferred Stock dated November 12, 

1999 (Exhibit 3.2 to the S-3 Registration Statement is hereby incorporated by reference).

 

3.5 

 

Bylaws, as amended (Exhibit 3 to the Company’s current report on Form 8-K, filed December 4, 2007, is hereby 

incorporated by reference).

 

3.6 

 

Certificate of Increase of Authorized Number of Shares of Series B Junior Participating Preferred Stock pursuant 

to Section 151 of the General Corporation Law of the State of Delaware dated May 1, 2005 (Exhibit 3.5 to the 

Company’s Annual Report on Form 10-K (File No. 1-15461), filed August 17, 2005, is hereby incorporated by 

reference).

 

3.7 

 

Certificate of Increase of Authorized Number of Shares of Series B Junior Participating Preferred Stock pursuant 

to Section 151 of the General Corporation Law of the State of Delaware dated October 23, 2006 (Exhibit 3.7 to 

the Company’s annual report on Form 10-K (File No. 1-15461) filed August 14, 2007, is hereby incorporated by 

reference).

 

4.1 

 

Specimen Common Stock Certificate (Exhibit 4.1 to the Company’s Registration Statement on Form S-1 (File 

No. 33-36081), filed July 26, 1990, is hereby incorporated by reference).

 

4.2 

 

Securities Purchase Agreement dated April 22, 2005, including form of Note (Exhibit 10.1 to the Company’s 

current report on Form 8-K (File No. 1-15461), filed April 25, 2005, is hereby incorporated by reference).

 

+10.1 

 

Matrix Service 1990 Incentive Stock Option Plan (Exhibit 10.14 to the Company’s Registration Statement on 

Form S-1 (File No. 333-56945), as amended, filed June 12, 1990, is hereby incorporated by reference).

 

+10.2 

 

Matrix Service 1991 Incentive Stock Option Plan (Exhibit 10.1 to the Company’s Registration Statement on 

Form S-8 (File No. 33-36081), filed July 26, 1990, is hereby incorporated by reference).

 

+10.3 

 

Matrix Service 1995 Nonemployee Directors’ Stock Option Plan (Exhibit 4.3 to the Company’s Registration 

Statement on Form S-8 (File No. 333-2771), filed April 24,1996, is hereby incorporated by reference).

 

+10.4 

 

Matrix Service 2004 Stock Incentive Plan (Exhibit A to the Company’s Proxy Statement filed on September 15, 

2006 (File No. 1-15461), is hereby incorporated by reference).

 

+10.5 

 

Amendment No. 1 to Matrix Service Company 2004 Stock Incentive Plan (Exhibit 10 to Amended Schedule 14A 

filed on October 4, 2006 (File No. 1-15461) is hereby incorporated by reference).

 *+10.6 Amendment No.2 to Matrix Service Company 2004 Stock Incentive Plan.

 *+10.7 Form of Restricted Stock Award Agreement for non-employee directors (2004 Stock Incentive Plan).

 *+10.8 Form of Restricted Stock Award Agreement for employees (2004 Stock Incentive Plan).

 

+10.9 

 

Matrix Service Company Deferred Compensation Plan for members of the Board of Directors effective 

December 31, 2006 (Exhibit 10.5 to the Company’s current report on Form 8-K (File No. 1-15461), filed October 

27, 2006 is hereby incorporated by reference).
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+10.10

 

Form of Severance Agreement (Exhibit 10.6 to the Company’s current report on Form 8-K (File No. 1- 15461), 

filed on October 27, 2006 is hereby incorporated by reference).

 

+10.11

 

Form of Management Retention Agreement (Exhibit 10.7 to the Company’s current report on Form 8-K (File No. 

1-15461), filed October 27, 2006 is hereby incorporated by reference).

 

+10.12

 

Form of Stock Option Award Agreement (2004 Stock Incentive Plan) (Exhibit 10.5 to the Company’s annual 

report on Form 10-K (File No, 1-15461) filed August 4, 2006 is hereby incorporated by reference).

 

+10.13

 

Form of Stock Option Award Agreement (1995 Directors Plan) (Exhibit 10.6 to the Company’s annual report on 

Form 10-K (File No, 1-15461) filed August 4, 2006 is hereby incorporated by reference).

 

+10.14

 

Amendment No. 1 to the Matrix Service 1995 Nonemployee Directors’ Stock Option Plan (Exhibit B to the 

Company’s 2005 Proxy Statement filed on September 16, 2005, is hereby incorporated by reference herein).

 

10.15

 

Rights Agreement (including a form of Certificate of Designation of Series B Junior Participating Preferred Stock 

as Exhibit A thereto, a form of Rights Certificate as Exhibit B thereto and a summary of Rights to Purchase 

Preferred Stock as Exhibit C thereto) dated November 2, 1999, (Exhibit 1 to the Company’s current report on 

Form 8-K (File No. 0-18716), filed November 9, 1999, is hereby incorporated by reference).

 

10.16

 

Amendment No. 1 to Rights Agreement effective April 21, 2005 (Exhibit 10.4 to the Company’s current report on 

Form 8-K (File No. 1-15461), filed April 25, 2005, is hereby incorporated by reference).

 

10.17

 

Equity Interests Purchase Agreement dated as of March 7, 2003 by and among Hake Acquisition Corp., Matrix 

Service Company, and the Holders of the Equity Interests of The Hake Group of Companies (Exhibit 99.1 to the 

Company’s current report on Form 8-K (File No. 1-15461), filed March 24, 2003, is hereby incorporated by 

reference).

 

10.18

 

Second Amended and Restated Credit Agreement dated as of November 30, 2006, among the Company, as 

Borrower, the Lenders party thereto, J.P. Morgan Chase Bank, N.A., as Administrative Agent and J.P. Morgan 

Securities Inc. as Sole Bookrunner and Sole Lead Arranger (filed as Exhibit 10 to the Company’s current report on 

Form 8-K (File No. 1-15461), filed on December 6, 2006, is hereby incorporated by reference).

 

10.19

 

First Amendment to Second Amended and Restated Credit Agreement dated as of July 6, 2007 (Exhibit 10 to the 

Company’s current report on Form 8-K (File No. 1-15461), filed July 11, 2007 is hereby incorporated by 

reference).

 

10.20

 

Securities Purchase Agreement dated October 3, 2005 (Exhibit 10.1 to the Company’s Current Report on Form 8-

K filed (File No. 1-15461), filed on October 4, 2005, is hereby incorporated by reference).

 

10.21

 

Registration Rights Agreement dated October 3, 2005 (Exhibit 10.2 to the Company’s Current Report on Form 8-

K (File No. 1-15461), filed on October 4, 2005, is hereby incorporated by reference).

 

10.22

 

Amendment No. 2 to Rights Agreement effective as of October 3, 2005 (Exhibit 10.3 to the Company’s Current 

Report on Form 8-K (File No. 1-15461), filed on October 4, 2005, is hereby incorporated by reference).

 

10.23

 

Lump Sum Turnkey Agreement dated May 6, 2005 among the Company, Diamond LNG LLC and Bechtel 

Corporation (Exhibit 10.34 to the Company’s Annual Report on Form 10-K (File No. 1-15461) filed August 17, 

2005 is hereby incorporated by reference).
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 *21 Subsidiaries.

 *23 Consent of Independent Registered Public Accounting Firm – Deloitte & Touche LLP.

 *31.1 Certification Pursuant to Section 302 of Sarbanes-Oxley Act of 2002 – CEO.

 *31.2 Certification Pursuant to Section 302 of Sarbanes-Oxley Act of 2002 – CFO.

 *32.1 Certification Pursuant to 18 U.S.C. 1350 (section 906 of Sarbanes-Oxley Act of 2002) – CEO.

 *32.2 Certification Pursuant to 18 U.S.C. 1350 (section 906 of Sarbanes-Oxley Act of 2002) – CFO.

* Filed herewith. 

+ Management Contract or Compensatory Plan. 
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SIGNATURES 

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, Matrix Service Company has duly caused 

this report to be signed on its behalf by the undersigned, thereunto duly authorized. 

 

- 79 -

Matrix Service Company

Date: August 5, 2008

By: /s/ Michael J. Bradley

 Michael J. Bradley, President and Chief Executive Officer
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Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on 

behalf of the registrant and in the capacities and on the dates indicated. 

 

- 80 -

Signatures Title Date

/s/ Mike Bradley

Mike Bradley

 

President, Chief Executive

Officer and Director

(Principal Executive Officer) 

August 5, 2008

/s/ Thomas E. Long

Thomas E. Long

 

Vice President and Chief

Financial Officer

(Principal Financial Officer) 

August 5, 2008

/s/ Kevin S. Cavanah

Kevin S. Cavanah

 

Vice President – Accounting

and Financial Reporting

(Principal Accounting Officer) 

August 5, 2008

/s/ Michael J. Hall

Michael J. Hall 

Chairman of the Board of Directors

 

August 5, 2008

/s/ I. Edgar Hendrix

I. Edgar Hendrix 

Director

 

August 5, 2008

/s/ Paul K. Lackey

Paul K. Lackey 

Director

 

August 5, 2008

/s/ Tom E. Maxwell

Tom E. Maxwell 

Director

 

August 5, 2008

/s/ David E. Tippeconnic

David E. Tippeconnic 

Director

 

August 5, 2008
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Index to Exhibits 

 

- 81 -

 3.1 Restated Certificate of Incorporation (Exhibit 3.1 to the Company’s Registration Statement on Form S-3 (File No. 333-

117077) filed July 1, 2004 (the “S-3 Registration Statement”) is hereby incorporated by reference).

 3.2 Certificate of Amendment of Restated Certificate of Incorporation dated October 31, 2000 (Exhibit 3.3 to the S-3 

Registration Statement is hereby incorporated by reference).

 3.3 Form of Certificate of Amendment of Restated Certificate of Incorporation (Appendix A to the Company’s Proxy Statement 

filed on September 15, 2006 (File No. 1-15461) is hereby incorporated by reference).

 3.4 Certification of Designations, Preferences and Rights of Series B Junior Preferred Stock dated November 12, 1999 (Exhibit 

3.2 to the S-3 Registration Statement is hereby incorporated by reference).

 3.5 Bylaws, as amended (Exhibit 3 to the Company’s current report on Form 8-K, filed December 4, 2007, is hereby 

incorporated by reference).

 3.6 Certificate of Increase of Authorized Number of Shares of Series B Junior Participating Preferred Stock pursuant to Section 

151 of the General Corporation Law of the State of Delaware dated May 1, 2005 (Exhibit 3.5 to the Company’s Annual 

Report on Form 10-K (File No. 1-15461), filed August 17, 2005, is hereby incorporated by reference).

 3.7 Certificate of Increase of Authorized Number of Shares of Series B Junior Participating Preferred Stock pursuant to Section 

151 of the General Corporation Law of the State of Delaware dated October 23, 2006 (Exhibit 3.7 to the Company's annual 

report on Form 10-K (File No. 1-15461) filed August 14, 2007, is hereby incorporated by reference).

 4.1 Specimen Common Stock Certificate (Exhibit 4.1 to the Company’s Registration Statement on Form S-1 (File No. 33-

36081), filed July 26, 1990, is hereby incorporated by reference).

 4.2 Securities Purchase Agreement dated April 22, 2005, including form of Note (Exhibit 10.1 to the Company’s current report 

on Form 8-K (File No. 1-15461), filed April 25, 2005, is hereby incorporated by reference).

 +10.1 Matrix Service 1990 Incentive Stock Option Plan (Exhibit 10.14 to the Company’s Registration Statement on Form S-1 (File 

No. 333-56945), as amended, filed June 12, 1990, is hereby incorporated by reference).

 +10.2 Matrix Service 1991 Incentive Stock Option Plan (Exhibit 10.1 to the Company’s Registration Statement on Form S-8 (File 

No. 33-36081), filed July 26, 1990, is hereby incorporated by reference).

 +10.3 Matrix Service 1995 Nonemployee Directors’ Stock Option Plan (Exhibit 4.3 to the Company’s Registration Statement on 

Form S-8 (File No. 333-2771), filed April 24,1996, is hereby incorporated by reference).

 +10.4 Matrix Service 2004 Stock Incentive Plan (Exhibit A to the Company’s Proxy Statement filed on September 15, 2006 (File 

No. 1-15461), is hereby incorporated by reference).

 +10.5 Amendment No. 1 to Matrix Service Company 2004 Stock Incentive Plan (Exhibit 10 to Amended Schedule 14A filed on 

October 4, 2006 (File No. 1-15461) is hereby incorporated by reference).

*+10.6 Amendment No.2 to Matrix Service Company 2004 Stock Incentive Plan.

*+10.7 Form of Restricted Stock Award Agreement for non-employee directors (2004 Stock Incentive Plan).

*+10.8 Form of Restricted Stock Award Agreement for employees (2004 Stock Incentive Plan).

 +10.9 Matrix Service Company Deferred Compensation Plan for members of the Board of Directors effective December 31, 2006 

(Exhibit 10.5 to the Company’s current report on Form 8-K (File No. 1-15461), filed October 27, 2006 is hereby 

incorporated by reference).
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 +10.10 Form of Severance Agreement (Exhibit 10.6 to the Company’s current report on Form 8-K (File No. 1- 15461), filed on 

October 27, 2006 is hereby incorporated by reference).

 +10.11 Form of Management Retention Agreement (Exhibit 10.7 to the Company’s current report on Form 8-K (File No. 1-15461), 

filed October 27, 2006 is hereby incorporated by reference).

 +10.12 Form of Stock Option Award Agreement (2004 Stock Incentive Plan) (Exhibit 10.5 to the Company’s annual report on 

Form 10-K (File No, 1-15461) filed August 4, 2006 is hereby incorporated by reference).

 +10.13 Form of Stock Option Award Agreement (1995 Directors Plan) (Exhibit 10.6 to the Company’s annual report on Form 10-K 

(File No, 1-15461) filed August 4, 2006 is hereby incorporated by reference).

 +10.14 Amendment No. 1 to the Matrix Service 1995 Nonemployee Directors’ Stock Option Plan (Exhibit B to the Company’s 

2005 Proxy Statement filed on September 16, 2005, is hereby incorporated by reference herein).

 10.15 Rights Agreement (including a form of Certificate of Designation of Series B Junior Participating Preferred Stock as Exhibit 

A thereto, a form of Rights Certificate as Exhibit B thereto and a summary of Rights to Purchase Preferred Stock as Exhibit 

C thereto) dated November 2, 1999, (Exhibit 1 to the Company’s current report on Form 8-K (File No. 0-18716), filed 

November 9, 1999, is hereby incorporated by reference).

 10.16 Amendment No. 1 to Rights Agreement effective April 21, 2005 (Exhibit 10.4 to the Company’s current report on Form 8-K 

(File No. 1-15461), filed April 25, 2005, is hereby incorporated by reference).

 10.17 Equity Interests Purchase Agreement dated as of March 7, 2003 by and among Hake Acquisition Corp., Matrix Service 

Company, and the Holders of the Equity Interests of The Hake Group of Companies (Exhibit 99.1 to the Company’s current 

report on Form 8-K (File No. 1-15461), filed March 24, 2003, is hereby incorporated by reference).

 10.18 Second Amended and Restated Credit Agreement dated as of November 30, 2006, among the Company, as Borrower, the 

Lenders party thereto, J.P. Morgan Chase Bank, N.A., as Administrative Agent and J.P. Morgan Securities Inc. as Sole 

Bookrunner and Sole Lead Arranger (filed as Exhibit 10 to the Company’s current report on Form 8-K (File No. 1-15461), 

filed on December 6, 2006, is hereby incorporated by reference).

 10.19 First Amendment to Second Amended and Restated Credit Agreement dated as of July 6, 2007 (Exhibit 10 to the 

Company’s current report on Form 8-K (File No. 1-15461), filed July 11, 2007 is hereby incorporated by reference).

 10.20 Securities Purchase Agreement dated October 3, 2005 (Exhibit 10.1 to the Company’s Current Report on Form 8-K filed 

(File No. 1-15461), filed on October 4, 2005, is hereby incorporated by reference).

 10.21 Registration Rights Agreement dated October 3, 2005 (Exhibit 10.2 to the Company’s Current Report on Form 8-K (File 

No. 1-15461), filed on October 4, 2005, is hereby incorporated by reference).

 10.22 Amendment No. 2 to Rights Agreement effective as of October 3, 2005 (Exhibit 10.3 to the Company’s Current Report on 

Form 8-K (File No. 1-15461), filed on October 4, 2005, is hereby incorporated by reference).

 10.23 Lump Sum Turnkey Agreement dated May 6, 2005 among the Company, Diamond LNG LLC and Bechtel Corporation 

(Exhibit 10.34 to the Company’s Annual Report on Form 10-K (File No. 1-15461) filed August 17, 2005 is hereby 

incorporated by reference).
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 *21 Subsidiaries.

 *23 Consent of Independent Registered Public Accounting Firm – Deloitte & Touche LLP.

 *31.1 Certification Pursuant to Section 302 of Sarbanes-Oxley Act of 2002 – CEO.

 *31.2 Certification Pursuant to Section 302 of Sarbanes-Oxley Act of 2002 – CFO.

 *32.1 Certification Pursuant to 18 U.S.C. 1350 (section 906 of Sarbanes-Oxley Act of 2002) – CEO.

 *32.2 Certification Pursuant to 18 U.S.C. 1350 (section 906 of Sarbanes-Oxley Act of 2002) – CFO.

* Filed herewith. 

+ Management Contract or Compensatory Plan. 
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EXHIBIT 10.6 

AMENDMENT 2 

TO 

MATRIX SERVICE COMPANY 

2004 STOCK INCENTIVE PLAN 

1. Introduction. The Matrix Service Company 2004 Stock Option Plan was initially adopted by the Board of Directors of Matrix 

Service Company (the “Company”) on January 20, 2004, and approved by our stockholders on March 23, 2004 (the “Option Plan”). 

On October 23, 2006, our stockholders approved, based on the recommendation of the Compensation Committee and approval of the 

Company’s Board of Directors, the amendment and restatement of the Option Plan (the “Amended and Restated Plan”). The 

Amended and Restated Plan was renamed the “Matrix Service Company 2004 Stock Incentive Plan” (the “Incentive Plan”) and 

permits the grant of restricted stock, restricted stock units, stock appreciation rights and performance shares, in addition to options. 

Awards may be granted under the Incentive Plan until October 23, 2016, the tenth anniversary of the date of stockholder approval. 

The Incentive Plan was amended by Amendment 1 to Matrix Service Company 2004 Stock Incentive Plan on October 23, 2006, in 

order to clarify certain authority of the Compensation Committee. References to “Incentive Plan” in this Amendment 2 shall mean the 

Incentive Plan, as so amended. 

2. Purpose. The purpose of this Amendment 2 is to add provisions for the award of Phantom Share Rights (as defined herein) 

and to amend the Incentive Plan to be compliant with Section 409A of the Code. 

3. Amendments. The Incentive Plan is hereby amended as follows: 

(a) The definition of “Affiliate” in Section 2(a) is hereby amended and restated to read as follows: “(a) “Affiliate” means, 

other than the Company, (i) any corporation or limited liability company in an unbroken chain of corporations or limited liability 

companies ending with the Company if each corporation or limited liability company owns stock or membership interests (as 

applicable) possessing more than fifty percent (50%) of the total combined voting power of all classes of stock in one of the 

other corporations or limited liability companies in such chain; or (ii) any corporation, trade or business (including, without

limitation, a partnership or limited liability company) which is more than fifty percent (50%) controlled (whether by ownership

of stock, assets or an equivalent ownership interest or voting interest) by the Company or one of its Affiliates; provided that no 

person or entity shall be an Affiliate of the Company unless such person or entity and the Company would be considered a 

single employer under Section 414(b) or 414(c) of the Code.” 

(b) The definition of “Award” in Section 2(b) is hereby amended and restated to read as follows: ““Award” shall mean 

any Option, SAR, Restricted Stock, Restricted Stock Unit, Performance Unit or Phantom Share Right granted under the Plan.”
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(c) In Section 2(g) of the Incentive Plan, the preamble to subsections (i), (ii) and (iii) of such Section 2(g) is hereby 

amended and restated to read as follows: “Unless otherwise set forth in the applicable Agreement, “Change in Control” means 

the occurrence of any of the following events, provided that such event is also either a “change in the ownership or effective 

control” of the Company or a “change in the ownership of a substantial portion of the assets” of the Company, each within the 

meaning of Treas. Reg. § 1.409A-3(i)(5) and applicable Treasury guidance:”. 

(d) The definition of “Disability” in Section 2(k) is hereby amended and restated to read as follows: ““Disability” shall 

mean that a Participant is unable to engage in any substantial gainful activity by reason of any medically determinable physical 

or mental impairment which can be expected to result in the Participant’s death or can be expected to last for a continuous 

period of not less than twelve (12) months, or that such Participant is, by reason of any medically determinable physical or 

mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than 

twelve (12) months, receiving income replacement benefits for a period of not less than three (3) months under an accident and 

health plan covering employees of the Company or an Affiliate, as the case may be. In addition, a Participant has a Disability if 

he or she is determined to be totally disabled by the Social Security Administration or the Railroad Retirement Board. The 

Committee may require such proof of Disability as the Committee in its sole discretion deems appropriate and the Committee’s 

determination as to whether the Participant is disabled shall be conclusive, final, and binding on all parties concerned.” 

(e) New definitions shall be added to Section 2 in the appropriate alphabetical order as follows, and all definitions set forth 

in Section 2 shall be renumbered as appropriate: 

““Key Employee” means an employee designated on an annual basis by the Committee as a Key Employee in accordance 

with Section 3(j) below.” 

“Phantom Share Right” shall mean the right to receive cash equal to the Fair Market Value of a certain number of shares 

of Stock at a future date, which is granted pursuant to the terms of Section 8A and the relevant Award Agreement.” 

“Phantom Share Rights Award” shall mean a grant of one or more Phantom Share Rights pursuant to the terms of 

Section 8A and the relevant Award Agreement.” 

2 
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“Retirement” shall mean that a Participant experiences a voluntary Separation from Service with the Company or an 

Affiliate on or after the date on which such Participant attains age 65.” 

“Specified Employee” means a Key Employee, but only during any period during which stock of the Company is publicly 

traded.” 

“Separation from Service” means a Participant’s termination or deemed termination from employment with the Company 

and its Affiliates. For purposes of determining whether a Separation from Service has occurred, the employment relationship is 

treated as continuing intact while the Participant is on military leave, sick leave or other bona fide leave of absence if the period 

of such leave does not exceed six (6) months, or if longer, so long as the Participant retains a right to reemployment with his or 

her employer under an applicable statute or by contract. For this purpose, a leave of absence constitutes a bona fide leave of 

absence only if there is a reasonable expectation that the Participant will return to perform services for his or her employer. If the

period of leave exceeds six (6) months and the Participant does not retain a right to reemployment under an applicable statute or 

by contract, the employment relationship will be deemed to terminate on the first date immediately following such six (6) month

period. Notwithstanding the foregoing, if a leave of absence is due to any medically determinable physical or mental impairment

that can be expected to result in death or can be expected to last for a continuous period of not less than six (6) months, and such 

impairment causes the Participant to be unable to perform the duties of the Participant’s position of employment or any 

substantially similar position of employment, a twenty-nine (29) month period of absence shall be substituted for such six 

(6) month period. For purposes of the Plan, a Separation from Service occurs at the date as of which the facts and circumstances 

indicate either that, after such date: (i) the Participant and the Company reasonably anticipate the Participant will perform no 

further services for the Company and its Affiliates (whether as an employee or an independent contractor) or (ii) that the level of 

bona fide services the Participant will perform for the Company and its Affiliates (whether as an employee or independent 

contractor) will permanently decrease to no more than twenty (20%) of the average level of bona fide services performed over 

the immediately preceding thirty-six (36) month period or, if the Participant has been providing services to the Company and its 

Affiliates for less than thirty-six (36) months, the full period over which the Participant has rendered services, whether as an 

employee or independent contractor. The determination of whether a Separation from Service has occurred shall be governed by 

the provisions of Treasury Regulation § 1.409A-1, as amended, taking into account the objective facts and circumstances with 

respect to the level of bona fide services performed by the Participant after a certain date, or any successor rule, regulation or 

guidance.” 

(f) The second sentence of the definition of “Performance Goals” in Section 2(v) is hereby amended by adding the word 

“objective” between the words “following” and “criteria” in such second sentence so that it reads as follows: “A Performance 

Goal shall be based on one or more of the following objective criteria: 

3 
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(i) total shareholder return, (ii) return on invested capital, equity, or assets, (iii) operating profit, (iv) earnings per share, (v) sales 

or revenues, (vi) operating expenses, (vii) Stock price appreciation; (viii) cash flow; (ix) increase in economic value of a 

Subsidiary, division, business unit, or asset or group of assets of the Company or any Subsidiary, division, or business unit; 

(x) pre-tax income or after-tax income; (xi) reductions in expenses, which reductions may be expressed in terms of absolute 

numbers and/or as a percentage decrease; or (xii) backlog.” 

(g) In the last sentence of Section 3(c) of the Incentive Plan, the clause reading “determine whether an Award shall take the 

form of Performance Shares, Restricted Stock, Restricted Stock Units, an SAR, an ISO or an Option other than an ISO;” shall be 

amended and restated to read as follows: “determine whether an Award shall take the form of Performance Shares, Restricted 

Stock, Restricted Stock Units, Phantom Share Rights, an SAR, an ISO or an Option other than an ISO;” 

(h) A new Section 3(j) is hereby added to the Plan to provide for designation of Key Employees to read as follows: 

“(j) Annually, as of December 31 (the “Key Employee Designation Date”), for purposes of Section 409A of the Code, 

the Committee shall designate the Company’s Key Employees who shall be those employees who qualify as “key employees” 

under Section 416(i)(1)(A)(i), (ii), or (iii) of the Code (applied in accordance with the regulations thereunder and disregarding 

section 416(i)(5)) at any time during the 12-month period ending on the Key Employee Designation Date utilizing the definition 

of compensation under Reg. § 1.415(c)-2(d)(2). An employee designated as a Key Employee shall be a Key Employee for the 

entire twelve (12) month period beginning on the first day of April following the Key Employee Designation Date.” 

(i) Section 7(d) of the Plan, which provides for terms related to the vesting of shares of Restricted Stock and Restricted 

Stock Units, is hereby amended and restated to read as follows: 

“Shares of Restricted Stock and Restricted Stock Units covered by an Award Agreement granted to a Participant shall 

vest and be paid in accordance with the terms and conditions specified in the applicable Award Agreement which may be based 

on the achievement of Performance Goals. In addition, the Committee may, in its sole discretion, accelerate the vesting of any or 

all grants of Restricted Stock and Restricted Stock Units under the Plan other than grants which will be forfeited if Performance 

Goals are not met. Restricted Stock Units shall be paid in shares of Stock.” 

(j) Section 8(b) of the Plan is hereby amended to add the words “in writing” after the word “certify” is such section. 

4 
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(k) Section 8(e) of the Plan is hereby amended by deleting the words “and during which the recipient was a key employee” 

from the second sentence of such section. 

(l) A new Section 8A. is hereby added to the Plan to provide for awards of Phantom Share Rights to read as follows: 

“8A. Phantom Share Rights. The Committee may make grants of Phantom Share Rights to eligible persons, which grants 

may be made either alone or in addition to other Awards granted under the Plan. Each grant of Phantom Share Rights under the 

Plan shall be evidenced by an Award Agreement, which shall comply with and be subject to the following terms and conditions: 

(a) Each Phantom Share Right Award shall constitute an agreement by the Company to pay an amount of cash equal 

to the Fair Market Value of a specified number of shares of Stock to the Participant in the future, subject to the fulfillment of 

such conditions, including vesting periods and Performance Goals, if any, as the Committee may specify at the date of grant. 

(b) Phantom Share Rights shall not be sold, transferred, pledged, assigned, encumbered or otherwise alienated or 

hypothecated. Any attempt by a Participant to violate the terms of this Section 8A(b) shall be null and void and without effect, 

and all of the Company’s obligations with respect to any Phantom Share Rights shall terminate. 

(c) No holder of any Phantom Share Rights shall become the beneficial owner of any shares of Stock of the 

Company, nor have any rights to dividends or other rights of a stockholder with respect to any Phantom Share Rights. 

(d) Except as otherwise determined by the Committee or the terms of the Award Agreement that granted the Phantom 

Share Rights, upon a Participant’s termination for any reason during the applicable restricted period, all Phantom Share Rights

shall be forfeited by the Participant. The Committee may, when it finds that a waiver would be in the best interests of the 

Company, waive in whole or in part any or all remaining restrictions with respect to such Participant’s Phantom Share Rights, 

provided however, that if the Award is intended to qualify as performance based compensation under Section 162(m) of the 

Code, then such waiver may be made only upon a termination due to death or disability or a change in control of the Company 

or other event permitted by Section 162(m) of the Code or the regulations thereunder.” 

(m) Section 9 of the Plan shall be deleted in its entirety and replaced with the words “Intentionally left blank.” 

5 
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(n) Section 13(f) of the Plan is hereby amended and restated to read as follows: 

“(f) In the discretion of the Committee, a Participant may elect irrevocably (at a time and in a manner determined by 

the Committee so long as the timing and nature of the election complies with section 409A of the Code and applicable Treasury 

guidance) so as to avoid the imposition of tax under Code Section 409A prior to settlement of an Award or exercising an Option,

that delivery of shares of Stock upon such settlement or exercise shall be deferred until a future date and/or the occurrence of a 

future event or events, specified in such election. Upon the settlement of any such Award or the exercise of any such Option and 

until the delivery of any deferred shares under this paragraph (f) of Section 13, the number of shares otherwise issuable to the 

Participant shall be credited to a memorandum account in the records of the Company or its designee and any dividends or other 

distributions payable on such shares shall be deemed reinvested in additional shares of Stock, in a manner determined by the 

Committee, until all shares of Stock credited to such Participant’s memorandum account shall become issuable pursuant to the 

Participant’s election.” 

(o) The last paragraph of Section 16 of the Plan is hereby amended and restated to read as follows: 

“The Committee may amend the terms of any Award theretofore granted, including any Award Agreement, retroactively or 

prospectively, but no such amendment shall impair the previously accrued rights of any Participant without his or her written 

consent. The Company intends that the Plan and Awards either (1) comply with Code section 409A and applicable guidance 

thereunder or (b) be excepted from the provisions of Code section 409A and applicable guidance thereunder. Accordingly, 

notwithstanding the foregoing, the Company reserves the right, without the consent of affected Participants, to amend or revise

the Plan and to amend, revise, or revoke an Award (including the related Award Agreement) to cause the Plan or the Award 

(including the related Award Agreement), as the case may be, to be so compliant or so excepted and to take such other actions 

under the Plan and an Award (including the related Award Agreement) to achieve such compliance or exception.” 

4. No Other Changes. No other terms and provisions of the Incentive Plan are amended hereby. 

5. Effective Date. This Amendment 2 was adopted on April 1, 2008, and effective as of October 27, 2007. 

[Signature Page to Follow] 

6 
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Executed as of the 4th day of August, 2008. 

 

7 

ATTEST: MATRIX SERVICE COMPANY

/s/ Nancy E. Austin By: /s/ Michael J. Bradley

Nancy E. Austin

Assistant Secretary

 

Michael J. Bradley

President and

Chief Executive Officer
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EXHIBIT 10.7 

MATRIX SERVICE COMPANY 

AWARD AGREEMENT 

 , 20 

«Grantee» 

«Address1» 

«Address2» 

«City», «State» «PostalCode» 

Dear «FirstName»: 

1. Award. The awards set forth in this Award Agreement (the “Award Agreement”) are subject to your acceptance of and 

agreement to all of the applicable terms, conditions, and restrictions described in the 2004 Stock Incentive Plan of Matrix Service 

Company, a Delaware corporation (the “Company”), as amended and restated effective October 23, 2006, and as further amended by 

Amendment 1 thereto (the “Plan”), a copy of which is on file with, and may be obtained from, the Secretary of the Company, and to 

your acceptance of and agreement to the further terms, conditions, and restrictions described in this Award Agreement. To the extent 

that any provision of this Award Agreement conflicts with the expressly applicable terms of the Plan, it is hereby acknowledged and 

agreed that those terms of the Plan shall control and, if necessary, the applicable provisions of this Award Agreement shall be hereby 

deemed amended so as to carry out the purpose and intent of the Plan. 

2. Restricted Stock Units.

(a) Restricted Stock Units Award. The Company hereby grants to you an aggregate of up to «Shares» restricted stock 

units (individually, an “RSU,” and collectively, “RSUs”) as more specifically set forth in Section 2(e). Each RSU entitles you to 

receive one share of common stock, par value $.01 per share, of the Company (the “Restricted Shares”) at such time as the 

restrictions described in Section 2(d)(ii) lapse as described in Section 2(e). 

(b) Form of Restricted Stock; Possession of Certificates. The Company shall issue the Restricted Shares you become 

entitled to receive hereunder by book-entry registration or by issuance of a certificate or certificates for the Restricted Shares in 

your name as soon as practicable after the restrictions in Section 2(d)(ii) lapse as described in Section 2(e). In the event the 

Company issues a certificate or certificates for the Restricted Shares, such certificates shall be subject to such stop transfer 

orders and other restrictions as the committee of the Board of Directors that administers the Plan may deem necessary or 

advisable under the Plan and rules, regulations and other requirements of the Securities and Exchange Commission, any stock 

exchange upon which such Restricted Shares are then listed, and any applicable foreign, federal or state securities laws. 

(c) Shareholder Rights Prior to Issuance of Restricted Shares. Neither you nor any of your beneficiaries shall be 

deemed to have any voting rights, rights to 
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receive dividends or other rights as a stockholder of the Company with respect to any Restricted Shares covered by the RSUs 

until the date of book-entry registration or issuance by the Company of a certificate to you for such Restricted Shares. 

(d) Restrictions.

(i) Your ownership of the RSUs shall be subject to the restrictions set forth in subsection (ii) of this Section 2(d) until 

such restrictions lapse pursuant to the terms of Section 2(e). 

(ii) The restrictions referred to in subsection (i) of this Section 2(d) are as follows: 

(A) At the time you cease to be a director of the Company, other than as a result of an event described in 

Section 2(e)(ii), you shall forfeit the RSUs to the Company and all of your rights thereto shall terminate without any 

payment of consideration by the Company. 

(B) You may not sell, assign, transfer or otherwise dispose of any RSUs or any rights under the RSUs. No 

RSU and no rights under any such RSU may be pledged, alienated, attached or otherwise encumbered, other than by 

will or the laws of descent and distribution, and any purported pledge, alienation, attachment or encumbrance 

thereof, other than by will or the laws of descent and distribution, shall be void and unenforceable against the 

Company. 

(e) Lapse of Restrictions.

(i) The restrictions described in Section 2(d)(ii) shall lapse with respect to the RSUs on the third anniversary of the 

date of this Award Agreement (the “Measurement Date”), but only if and to the extent the Performance Goals set forth in 

this subsection (i) are met. The Performance Goals are as follows: aggregate Fully-Diluted Earnings Per Share of the 

Company for fiscal years 2008, 2009 and 2010: 

 

2 

Performance Level 

Fully-Diluted

Earnings Per Share 

Number of

RSUs for which

Conditions are Satisfied

Minimum Performance Goal $ 3.15 _______

Threshold Performance Goal $ 3.22 _______

Target Performance Goal $ 3.30 _______
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Achievement of the Performance Goals will be measured when the Company’s Fully-Diluted Earnings Per Share for 

fiscal year 2010 is released to the public. In the event the Minimum Performance Goal is not met, then all of the RSUs will 

be forfeited to the Company. In the event the Company achieves Fully-Diluted Earnings Per Share that are between any of 

the Performance Levels set forth above, then the conditions with respect to the RSUs shall be deemed to have been met for 

the number of RSUs determined by linear interpolation between the applicable Performance Levels and the restrictions on 

such RSUs shall be removed on the Measurement Date and the remainder of the RSUs will be forfeited to the Company. In 

the event the Company achieves the Target Performance Goal, the conditions shall be deemed to have been satisfied and 

the restrictions on all of the RSUs associated with such Target Performance Goal as set forth above shall be removed on 

the Measurement Date. The Committee has the final authority to determine whether the Performance Goals have been met 

and to what extent. 

For purposes of measuring the Performance Goal, “Fully-Diluted Earnings Per Share” shall mean, for any fiscal year, 

the Company’s fully-diluted earnings per share as set forth in the Company’s Consolidated Financial Statements included 

within its Annual Report on Form 10-K for such fiscal year, as filed with the Securities and Exchange Commission. 

(ii) Notwithstanding the provisions of subsection (i) of this Section 2(e), the restrictions described in Section 2(d)(ii) 

shall lapse with respect to the RSUs (as if the Target Performance Goal had been met) upon the occurrence of any of the 

following events: 

(1) Your death, “Disability” (as defined in the Plan) or your “Retirement” (as defined in Section 6); or 

(2) A “Change of Control” (as defined in the Plan) of the Company. 

(iii) Following the lapse of the restrictions described in Section 2(d)(ii), the Company will make a book-entry 

registration or will issue you a certificate as provided in Section 2(b) of this Award Agreement for the Restricted Shares 

covered by such RSUs in redemption of such RSUs. 

3. Bonus Award.

(a) Phantom Share Bonus Award. In addition to the RSUs awarded pursuant to this Agreement and subject to the terms 

and conditions set forth herein, the Company hereby grants to you a cash “Bonus Award” calculated by reference to an 

aggregate of up to «Shares» phantom share rights (the “Rights”). Subject to the limitations set forth in this Section 3, each Right, 

when fully vested hereunder, will represent the economic equivalent of ownership of one share of the Company’s common 

stock, par value $0.01 per share (the “Stock”); provided that the Rights will not entitle you to, and you will not have any rights 

in, or own any, shares of Stock. 

3 
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(b) Vesting. Subject to the limitations herein, the Rights granted shall vest and be payable on the third anniversary of the 

date of this Award Agreement (the “Vesting Date”) if and only to the extent the Bonus Award Performance Goals set forth in 

this subsection (b) are met. The Bonus Award Performance Goals are as follows: aggregate Fully-Diluted Earnings Per Share of 

the Company for fiscal years 2008, 2009 and 2010: 

 

Achievement of the Bonus Award Performance Goals will be measured when the Company’s Fully-Diluted Earnings Per 

Share for fiscal year 2010 is released to the public. In the event the Bonus Award Minimum Performance Goal is not met, then 

the Rights will be forfeited to the Company and no Bonus Award will be payable. In the event the Company achieves FullyDiluted Earnings Per Share that are between the Bonus Award Minimum Performance Goal and the Bonus Award Maximum 

Performance Goal, then the number of Rights which shall vest shall be determined by linear interpolation and the remainder of 

the Rights will be forfeited to the Company and no Bonus Award associated with such forfeited Rights shall be payable. In the 

event the Company achieves the Bonus Award Maximum Performance Goal, then all of the Rights shall vest and the entire 

Bonus Award shall be payable. The Committee has the final authority to determine whether the Bonus Award Performance 

Goals have been met and to what extent. 

Notwithstanding the foregoing, the Rights shall not vest and you shall immediately forfeit all rights, title and interests in 

and to any and all Rights that have not vested on the date on which you cease to serve as a director of the Company for any 

reason. 

(c) Payment. Within 10 days after the Vesting Date, the Company will pay in cash to you for each vested Right an amount 

equal to the closing price per share of the Company’s Stock as reported by the New York Stock Exchange on the Vesting Date. 

(d) Transferability. The Rights (including the right to receive the Bonus Award) may not be sold, transferred, pledged, 

assigned, encumbered or otherwise alienated or hypothecated. If you or anyone claiming under or through you attempts to 

violate this Section 3(d), such attempted violation shall be null and void and without effect, and all of the Company’s obligations 

hereunder shall terminate. 

4 

Performance Level

Fully-Diluted

Earnings Per Share

Bonus Award Minimum Performance Goal > than $ 3.30

Bonus Award Maximum Performance Goal $ 3.62
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(e) No Stockholder Rights. You will not be deemed to be a holder of or possess any stockholder rights with respect to any 

shares of Stock based on the Rights granted hereunder. 

4. Adjustment of Shares. The number of Restricted Shares subject to the RSUs, Granted Shares and/or Rights awarded to you 

under this Award Agreement may be adjusted as provided in the Plan. 

5. Agreement With Respect to Securities Matters. You agree that you will not sell or otherwise transfer any Restricted Shares 

received pursuant to this Award Agreement except pursuant to an effective registration statement under the U.S. Securities Act of 

1933, as amended, or pursuant to an applicable exemption from such registration. Unless a registration statement relating to the 

Restricted Shares issuable upon the lapse of the restrictions on the RSUs pursuant to this Award Agreement is in effect at the time of 

issuance of such Restricted Shares, the certificate(s) for the Restricted Shares shall contain the following legend: 

The securities evidenced by this certificate have not been registered under the Securities Act of 1933 or any other securities 

laws. These securities have been acquired for investment and may not be sold or transferred for value in the absence of an 

effective registration of them under the U.S. Securities Act of 1933 and any other applicable securities laws, or receipt by the 

Company of an opinion of counsel or other evidence acceptable to the Company that such registration is not required under such 

acts. 

6. Certain Definitions. As used in this Award Agreement, “Retirement” shall mean the voluntary termination of your full-time 

employment with the Company or Subsidiary on the date on which you become, or after attaining, 65 years of age. Capitalized terms 

used in this Award Agreement and not otherwise defined herein shall have the respective meanings provided in the Plan. 

7. Compliance with 409A. The Company intends that this Award Agreement and the Plan either (1) comply with Section 409A 

of the Internal Revenue Code of 1986, as amended, and guidance thereunder (“Section 409A”) or (b) be excepted from the provisions 

of Section 409A. Accordingly, the Company reserves the right and you agree that the Company shall have the right, without your 

consent and without prior notice to you, to amend either or both this Award Agreement and the Plan to cause this Award Agreement 

and the Plan to be so compliant or so excepted and to take such other actions under the Plan and this Award Agreement to achieve 

such compliance or exception. 

5 
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If you accept this Award Agreement and agree to the foregoing terms and conditions, please so confirm by signing and returning 

the duplicate copy of this Award Agreement enclosed for that purpose. 

 

The foregoing Award Agreement is accepted by me as of , and I hereby agree to the terms, conditions, and 

restrictions set forth above and in the Plan. 

 

6 

MATRIX SERVICE COMPANY

By:

Name:

Title:

«Grantee»
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EXHIBIT 10.8 

MATRIX SERVICE COMPANY 

AWARD AGREEMENT 

 , 20 

«Grantee» 

«Address1» 

«Address2» 

«City», «State» «PostalCode» 

Dear «FirstName»: 

1. Award. The awards set forth in this Award Agreement (the “Award Agreement”) are subject to your acceptance of and 

agreement to all of the applicable terms, conditions, and restrictions described in the 2004 Stock Incentive Plan of Matrix Service 

Company, a Delaware corporation (the “Company”), as amended and restated effective October 23, 2006, and as further amended by 

Amendment 1 thereto (the “Plan”), a copy of which is on file with, and may be obtained from, the Secretary of the Company, and to 

your acceptance of and agreement to the further terms, conditions, and restrictions described in this Award Agreement. To the extent 

that any provision of this Award Agreement conflicts with the expressly applicable terms of the Plan, it is hereby acknowledged and 

agreed that those terms of the Plan shall control and, if necessary, the applicable provisions of this Award Agreement shall be hereby 

deemed amended so as to carry out the purpose and intent of the Plan. 

2. Restricted Stock Units.

(a) Restricted Stock Units Award. The Company hereby grants to you an aggregate of up to «Shares» restricted stock 

units (individually, an “RSU,” and collectively, “RSUs”) as more specifically set forth in Section 2(e). Each RSU entitles you to 

receive one share of common stock, par value $.01 per share, of the Company (the “Restricted Shares”) at such time as the 

restrictions described in Section 2(d)(ii) lapse as described in Section 2(e). 

(b) Form of Restricted Stock; Possession of Certificates. The Company shall issue the Restricted Shares you become 

entitled to receive hereunder by book-entry registration or by issuance of a certificate or certificates for the Restricted Shares in 

your name as soon as practicable after the restrictions in Section 2(d)(ii) lapse as described in Section 2(e). In the event the 

Company issues a certificate or certificates for the Restricted Shares, such certificates shall be subject to such stop transfer 

orders and other restrictions as the committee of the Board of Directors that administers the Plan may deem necessary or 

advisable under the Plan and rules, regulations and other requirements of the Securities and Exchange Commission, any stock 

exchange upon which such Restricted Shares are then listed, and any applicable foreign, federal or state securities laws. 

(c) Shareholder Rights Prior to Issuance of Restricted Shares. Neither you nor any of your beneficiaries shall be 

deemed to have any voting rights, rights to 
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receive dividends or other rights as a stockholder of the Company with respect to any Restricted Shares covered by the RSUs 

until the date of book-entry registration or issuance by the Company of a certificate to you for such Restricted Shares. 

(d) Restrictions.

(i) Your ownership of the RSUs shall be subject to the restrictions set forth in subsection (ii) of this Section 2(d) until 

such restrictions lapse pursuant to the terms of Section 2(e). 

(ii) The restrictions referred to in subsection (i) of this Section 2(d) are as follows: 

(A) At the time of your termination of employment with the Company or a Subsidiary, other than a termination 

of employment that occurs as a result of an event described in Section 2(e)(iii), you shall forfeit the RSUs to the 

Company and all of your rights thereto shall terminate without any payment of consideration by the Company. 

(B) You may not sell, assign, transfer or otherwise dispose of any RSUs or any rights under the RSUs. No 

RSU and no rights under any such RSU may be pledged, alienated, attached or otherwise encumbered, other than by 

will or the laws of descent and distribution, and any purported pledge, alienation, attachment or encumbrance 

thereof, other than by will or the laws of descent and distribution, shall be void and unenforceable against the 

Company. 

(e) Lapse of Restrictions.

(i) 50 percent of the RSUs shall be designated as “Service RSUs”. The restrictions described in Section 2(d)(ii) shall 

lapse with respect to the Service RSUs in five equal installments of 20 percent each on each of the first, second, third, 

fourth and fifth anniversaries of the date of this Award Agreement, such that the restrictions set forth in Section 2(d)(ii) 

shall have lapsed with respect to 100 percent of the Service RSUs on the fifth anniversary of the date of this Award 

Agreement. 

(ii) 50 percent of the RSUs shall be designated as “Performance RSUs”. The restrictions described in Section 2(d)(ii) 

shall lapse with respect to the Performance RSUs on the third anniversary of the date of this Award Agreement (the 

“Measurement Date”), but only if and to the extent the Performance Goals set forth in this subsection (ii) are met. The 

Performance Goals are as follows: aggregate Fully-Diluted Earnings Per Share of the Company for fiscal years 2008, 2009 

and 2010: 

 

2 

Performance Level 

Fully-Diluted

Earnings Per Share 

Number of

RSUs for which

Conditions are Satisfied

Minimum Performance Goal $ 3.15 _______

Threshold Performance Goal $ 3.22 _______

Target Performance Goal $ 3.30 _______
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Achievement of the Performance Goals will be measured when the Company’s Fully-Diluted Earnings Per Share for 

fiscal year 2010 is released to the public. In the event the Minimum Performance Goal is not met, then all of the 

Performance RSUs will be forfeited to the Company. In the event the Company achieves Fully-Diluted Earnings Per Share 

that are between any of the Performance Levels set forth above, then the conditions with respect to the Performance RSUs 

shall be deemed to have been met for the number of Performance RSUs determined by linear interpolation between the 

applicable Performance Levels and the restrictions on such Performance RSUs shall be removed on the Measurement Date 

and the remainder of the Performance RSUs will be forfeited to the Company. In the event the Company achieves the 

Target Performance Goal, the conditions shall be deemed to have been satisfied and the restrictions on all of the 

Performance RSUs associated with such Target Performance Goal as set forth above shall be removed on the Measurement 

Date. The Committee has the final authority to determine whether the Performance Goals have been met and to what 

extent. 

For purposes of measuring the Performance Goal, “Fully-Diluted Earnings Per Share” shall mean, for any fiscal year, 

the Company’s fully-diluted earnings per share as set forth in the Company’s Consolidated Financial Statements included 

within its Annual Report on Form 10-K for such fiscal year, as filed with the Securities and Exchange Commission. 

(iii) Notwithstanding the provisions of subsections (i) and (ii) of this Section 2(e), the restrictions described in 

Section 2(d)(ii) shall lapse with respect to all RSUs (with respect to Performance RSUs as if the Target Performance Goal 

had been met) upon the occurrence of any of the following events: 

(1) Your death, “Disability” (as defined in the Plan) or your “Retirement” (as defined in Section 7); or 

(2) A “Change of Control” (as defined in the Plan) of the Company. 

3 
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(iv) Following the lapse of the restrictions described in Section 2(d)(ii), the Company will make a book-entry 

registration or will issue you a certificate as provided in Section 2(b) of this Award Agreement for the Restricted Shares 

covered by such RSUs in redemption of such RSUs. 

3. Bonus Award.

(a) Phantom Share Bonus Award. In addition to the RSUs awarded pursuant to this Agreement and subject to the terms and 

conditions set forth herein, the Company hereby grants to you a cash “Bonus Award” calculated by reference to an aggregate of up to 

«Shares» phantom share rights (the “Rights”). Subject to the limitations set forth in this Section 3, each Right, when fully vested 

hereunder, will represent the economic equivalent of ownership of one share of the Company’s common stock, par value $0.01 per 

share (the “Stock”); provided that the Rights will not entitle you to, and you will not have any rights in, or own any, shares of Stock. 

(b) Vesting. Subject to the limitations herein, the Rights granted shall vest and be payable on the third anniversary of the date of 

this Award Agreement (the “Vesting Date”) if and only to the extent the Bonus Award Performance Goals set forth in this subsection 

(b) are met. The Bonus Award Performance Goals are as follows: aggregate Fully-Diluted Earnings Per Share of the Company for 

fiscal years 2008, 2009 and 2010: 

 

Achievement of the Bonus Award Performance Goals will be measured when the Company’s Fully-Diluted Earnings Per Share 

for fiscal year 2010 is released to the public. In the event the Bonus Award Minimum Performance Goal is not met, then the Rights 

will be forfeited to the Company and no Bonus Award will be payable. In the event the Company achieves Fully-Diluted Earnings Per 

Share that are between the Bonus Award Minimum Performance Goal and the Bonus Award Maximum Performance Goal, then the 

number of Rights which shall vest shall be determined by linear interpolation and the remainder of the Rights will be forfeited to the 

Company and no Bonus Award associated with such forfeited Rights shall be payable. In the event the Company achieves the Bonus 

Award Maximum Performance Goal, then all of the Rights shall vest and the entire Bonus Award shall be payable. The Committee 

has the final authority to determine whether the Bonus Award Performance Goals have been met and to what extent. 

4 

Performance Level

Fully-Diluted

Earnings Per Share

Bonus Award Minimum Performance Goal > than $ 3.30

Bonus Award Maximum Performance Goal $ 3.62
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Notwithstanding the foregoing, the Rights shall not vest and you shall immediately forfeit all rights, title and interests in 

and to any and all Rights that have not vested on the date your employment with the Company or its Subsidiaries is terminated 

for any reason. 

(c) Payment. Within 10 days after the Vesting Date, the Company will pay in cash to you for each vested Right an amount 

equal to the closing price per share of the Company’s Stock as reported by the New York Stock Exchange on the Vesting Date. 

(d) Transferability. The Rights (including the right to receive the Bonus Award) may not be sold, transferred, pledged, 

assigned, encumbered or otherwise alienated or hypothecated. If you or anyone claiming under or through you attempts to 

violate this Section 3(d), such attempted violation shall be null and void and without effect, and all of the Company’s obligations 

hereunder shall terminate. 

(e) No Stockholder Rights. You will not be deemed to be a holder of or possess any stockholder rights with respect to any 

shares of Stock based on the Rights granted hereunder. 

4. Agreement with Respect to Taxes; Share Withholding.

(a) You agree that (1) you will pay to the Company or an Affiliate, as the case may be, in cash, or make arrangements 

satisfactory to the Company or such Affiliate regarding the payment of any taxes of any kind required by law to be withheld by the 

Company or any of its Affiliates with respect to the RSUs and/or the Restricted Shares and (2) the Company or any of its Affiliates 

shall, to the extent permitted by law, have the right to deduct from any payments of any kind otherwise due to you any taxes of any 

kind required by law to be withheld with respect to the RSUs, the Restricted Shares, the Rights and/or the Bonus Award. 

(b) You agree that, if required by applicable law, you shall pay any taxes no later than the date as of which the value of the 

RSUs and/or Restricted Shares first become includible in your gross income for income tax purposes; provided, however, that the

Committee may, in accordance with Section 11(b) of the Plan, permit you to: (i) elect withholding by the Company of Restricted 

Shares otherwise deliverable to you pursuant to this Award Agreement (provided, however, that the amount of any Restricted Shares 

so withheld shall not exceed the amount necessary to satisfy the Company’s or any Affiliate’s required tax withholding of obligations 

using the minimum statutory withholding rates for Federal, state and/or local tax purposes, including payroll taxes, that are applicable 

to supplemental taxable income) and/or (ii) tender to the Company shares of Stock owned by you (or by you and your spouse jointly) 

and acquired more than six (6) months prior to such tender in full or partial satisfaction of such tax obligations, based, in each case, 

on the Fair Market Value of the Stock on the payment date as determined by the Committee. 

5 
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5. Adjustment of Shares. The number of Restricted Shares subject to the RSUs, Granted Shares and/or Rights awarded to you 

under this Award Agreement may be adjusted as provided in the Plan. 

6. Agreement With Respect to Securities Matters. You agree that you will not sell or otherwise transfer any Restricted Shares 

received pursuant to this Award Agreement except pursuant to an effective registration statement under the U.S. Securities Act of 

1933, as amended, or pursuant to an applicable exemption from such registration. Unless a registration statement relating to the 

Restricted Shares issuable upon the lapse of the restrictions on the RSUs pursuant to this Award Agreement is in effect at the time of 

issuance of such Restricted Shares, the certificate(s) for the Restricted Shares shall contain the following legend: 

The securities evidenced by this certificate have not been registered under the Securities Act of 1933 or any other securities 

laws. These securities have been acquired for investment and may not be sold or transferred for value in the absence of an 

effective registration of them under the U.S. Securities Act of 1933 and any other applicable securities laws, or receipt by the 

Company of an opinion of counsel or other evidence acceptable to the Company that such registration is not required under such 

acts. 

7. Certain Definitions. As used in this Award Agreement, “Retirement” shall mean the voluntary termination of your full-time 

employment with the Company or Subsidiary on the date on which you become, or after attaining, 65 years of age. Capitalized terms 

used in this Award Agreement and not otherwise defined herein shall have the respective meanings provided in the Plan. 

8. Compliance with 409A. The Company intends that this Award Agreement and the Plan either (1) comply with Section 409A 

of the Internal Revenue Code of 1986, as amended, and guidance thereunder (“Section 409A”) or (b) be excepted from the provisions 

of Section 409A. Accordingly, the Company reserves the right and you agree that the Company shall have the right, without your 

consent and without prior notice to you, to amend either or both this Award Agreement and the Plan to cause this Award Agreement 

and the Plan to be so compliant or so excepted and to take such other actions under the Plan and this Award Agreement to achieve 

such compliance or exception. 

6 
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If you accept this Award Agreement and agree to the foregoing terms and conditions, please so confirm by signing and returning 

the duplicate copy of this Award Agreement enclosed for that purpose. 

 

The foregoing Award Agreement is accepted by me as of , and I hereby agree to the terms, conditions, and 

restrictions set forth above and in the Plan. 

 

7 

MATRIX SERVICE COMPANY

By:

Name:

Title:

«Grantee»
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EXHIBIT 21 

Matrix Service Company 

Subsidiaries 

Matrix Service Inc., an Oklahoma corporation 

Matrix Service Industrial Contractors, Inc., an Oklahoma corporation 

Matrix Service Inc. Canada, an Ontario, Canada corporation 

Matrix Service Industrial Contractors Canada, Inc., a Delaware corporation 

Matrix Service Industrial Contractors ULC, a Nova Scotia, Canada corporation 

Matrix Service Specialized Transport, Inc., a Pennsylvania corporation 

I & S, Inc., a Pennsylvania corporation 

Matrix Service ULC, an Alberta, Canada corporation 
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EXHIBIT 23 

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM 

We consent to the incorporation by reference in the following Registration Statements of Matrix Service Company of our reports 

dated August 5, 2008, appearing in this Annual Report on Form 10-K of Matrix Service Company for the year ended May 31, 2008: 

Registration Statement on Form S-3 (Registration No. 333-117077) related to the registration of $125,000,000 of Common 

Stock, Preferred Stock, Debt Securities and Warrants 

Registration Statement on Form S-3 (File No. 333-129155) related to the registration of 2,307,692 shares of Common Stock 

Registration Statement on Form S-8 (File No. 33-36081) related to the Matrix Service Company 1990 Incentive Stock Option 

Plan 

Registration Statement on Form S-8 (File No. 333-56945) related to the Matrix Service Company 1991 Incentive Stock Option 

Plan, as amended 

Registration Statement of Form S-8 (File No. 333-02771) related to the Matrix Service Company 1995 Nonemployee Directors’ 

Stock Option Plan 

Registration Statement on Form S-8 (File No. 333-119840) related to the Matrix Service Company 2004 Stock Option Plan 

/s/ DELOITTE & TOUCHE LLP 

Tulsa, Oklahoma 

August 5, 2008 
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EXHIBIT 31.1 

CERTIFICATIONS 

I, Michael J. Bradley, certify that: 

 

 

 

 

 

 

 

 

 

 

 

Date: August 5, 2008 

 

1. I have reviewed this annual report on Form 10-K of Matrix Service Company; 

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact 

necessary to make the statements made, in light of the circumstances under which such statements were made, not 

misleading with respect to the period covered by this report; 

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in 

all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods 

presented in this report; 

4. The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and 

procedures (as defined in Exchange Act Rules 13a-15(e) and 15d – 15(e)) and internal control over financial reporting (as 

defined in Exchange Act Rules 13a – 15(f) and 15d – 15f)) for the registrant and have: 

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be 

designed under our supervision, to ensure that material information relating to the registrant, including its 

consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in 

which this report is being prepared; 

b. Designed such internal control over financial reporting, or caused such internal control over financial reporting 

to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial 

reporting and the preparation of financial statements for external purposes in accordance with generally 

accepted accounting principles; 

c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report 

our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period 

covered by this report based on such evaluation; and 

d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred 

during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual 

report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control 

over financial reporting; and 

5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over

financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons 

performing the equivalent functions): 

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial 

reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize 

and report financial information; and 

b. Any fraud, whether or not material, that involves management or other employees who have a significant role 

in the registrant’s internal control over financial reporting. 

/s/ Michael J. Bradley

Michael J. Bradley

President and Chief Executive Officer
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EXHIBIT 31.2 

CERTIFICATIONS 

I, Thomas E. Long, certify that: 

 

 

 

 

 

 

 

 

 

 

 

Date: August 5, 2008 

 

1. I have reviewed this annual report on Form 10-K of Matrix Service Company; 

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact 

necessary to make the statements made, in light of the circumstances under which such statements were made, not 

misleading with respect to the period covered by this report; 

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in 

all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods 

presented in this report; 

4. The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and 

procedures (as defined in Exchange Act Rules 13a-15(e) and 15d – 15(e)) and internal control over financial reporting (as 

defined in Exchange Act Rules 13a – 15(f) and 15d – 15f)) for the registrant and have: 

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be 

designed under our supervision, to ensure that material information relating to the registrant, including its 

consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in 

which this report is being prepared; 

b. Designed such internal control over financial reporting, or caused such internal control over financial reporting 

to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial 

reporting and the preparation of financial statements for external purposes in accordance with generally 

accepted accounting principles; 

c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report 

our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period 

covered by this report based on such evaluation; and 

d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred 

during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual 

report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control 

over financial reporting; and 

5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over

financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons 

performing the equivalent functions): 

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial 

reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize 

and report financial information; and 

b. Any fraud, whether or not material, that involves management or other employees who have a significant role 

in the registrant’s internal control over financial reporting. 

/s/ Thomas E. Long

Thomas E. Long

Vice President and Chief Financial Officer
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EXHIBIT 32.1 

Certification Pursuant to 18 U. S. C. Section 1350, 

As Adopted Pursuant 

Section 906 of Sarbanes-Oxley Act of 2002 

In connection with the Annual Report of Matrix Service Company (the “Company”) on Form 10-K for the period ending May 31, 

2008 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Michael J. Bradley, President and 

Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. ss 1350, as adopted pursuant to ss. 906 of the Sarbanes Oxley 

Act of 2002, that based on my knowledge: 

 

 

Date: August 5, 2008 

 

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934 as 

amended; and 

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of 

operations of the Company. 

/s/ Michael J. Bradley

Michael J. Bradley

President and Chief Executive Officer
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EXHIBIT 32.2 

Certification Pursuant to 18 U. S. C. Section 1350, 

As Adopted Pursuant 

Section 906 of Sarbanes-Oxley Act of 2002 

In connection with the Annual Report of Matrix Service Company (the “Company”) on Form 10-K for the period ending May 31, 

2008 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Thomas E. Long, Vice President and 

Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. ss 1350, as adopted pursuant to ss. 906 of the Sarbanes Oxley 

Act of 2002, that based on my knowledge: 

 

 

Date: August 5, 2008 

 

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934 as 

amended; and 

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of 

operations of the Company. 

/s/ Thomas E. Long

Thomas E. Long

Vice President and Chief Financial Officer