Exhibit 99.1
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NEWS RELEASE
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FOR IMMEDIATE RELEASE
(ENGlobal Logo Omitted) CONTACT: Natalie S. Hairston
(281) 878-1000
ir@ENGlobal.com
ENGLOBAL REPORTS THIRD QUARTER RESULTS
HOUSTON, TX, November 6, 2008 - ENGlobal (NASDAQ: ENG), a leading provider of
engineering and related project services, today reported net income of $3.5
million, or $0.13 per diluted share, for the quarter ended September 30, 2008.
For the nine months ended September 30, 2008, ENGlobal reported cumulative net
income of $0.51 per diluted share, compared to $0.40 per diluted share for the
same period in 2007.
Third Quarter 2008 Highlights Compared to Third Quarter 2007:
o Revenue increased 27.3% to $123.2 million from $96.8 million
o Gross profit margin decreased to 11.0% from 16.8%
o Operating profit margin decreased to 5.0% from 8.0%
o Net income decreased 12.5%, to $3.5 million compared to $4.0 million
o Bi-weekly billable hours averaged 241,000 hours, up 20%, compared to
201,000 hours
o 100% of quarter-over-quarter revenue increase attributable to organic
or non-acquisition growth
The following table illustrates the composition of the Company's revenue for the
three months ended September 30, 2008 and 2007, respectively:
Quarter Ended Quarter Ended
September 30, 2008 September 30, 2007
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(Dollars in millions)
Gross Operating Gross Operating
Total % of Total Profit Profit Total % of Total Profit Profit
Segment Revenue Revenue Margin Margin(1) Revenue Revenue Margin Margin(1)
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Engineering $ 63.1 51% 14.0% 11.7 % 61.7 64% 17.5% 13.1%
Construction 40.9 33% 6.7% 4.8 % 19.0 19% 19.4% 15.2%
Automation 7.9 7% 1.9% (7.2)% 8.5 9% 9.1% 1.0%
Land 11.3 9% 16.5% 10.6 % 7.6 8% 14.3% 6.9%
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$ 123.2 100% $ 96.8 100%
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654 N. Sam Houston Parkway E. o Suite 400 o Houston, Texas 77060
www.ENGlobal.com
ENGlobal Corporation Press Release
November 6, 2008
Page 2
Revenue for the quarter totaled $123.2 million, an increase of approximately
$26.4 million, or 27.3%, compared to the third quarter of 2007. The Company
estimates its current backlog is approximately 15% higher than the $298 million
reported for the fiscal year ended December 31, 2007.
The decline in net income during the three months ended September 30, 2008 was
due in part to Hurricanes Gustav and Ike, which impacted Gulf Coast operations
in September 2008. In addition, the Company was negatively affected by: (1)
higher labor burden resulting from improved employee benefits; (2) project
losses in the Automation segment; (3) higher overhead costs in the Construction
segment, in anticipation of future business, and higher mix of lower margin
inspection revenue; and (4) lower margin from procurement pass-through revenue.
ENGlobal benefited from a decrease in selling, general and administrative
("SG&A") expenses during the third quarter. As a percentage of revenue, SG&A
decreased to 6.0% for the three months ended September 30, 2008 from 8.9% for
the comparable period in 2007. Total SG&A expense decreased $1.2 million, or
14.0%, to $7.4 million for the three months ended September 30, 2008, from $8.6
million for the comparable prior-year period. SG&A is in line with the Company's
targeted baseline of $7.5 million per quarter and $30 million for the year ended
December 31, 2008.
On average, the Company's days sales outstanding remained 61 days at September
30, 2008, consistent with 61 days at December 31, 2007, but lower than 66 days
for the three-month period ended September 30, 2007.
Long-term debt, net of current portion, increased 9.6%, or $2.8 million, from
$29.3 million at December 31, 2007 to $32.1 million at September 30, 2008. As a
percentage of stockholders' equity, long-term debt decreased to 44.4% from 52.5%
at these dates. The increase in long-term debt primarily relates to $1.9 million
in notes payable issued as a part of the consideration paid for the acquisition
of Advanced Control Engineering and a $2.3 million increase in amounts drawn on
our line of credit, offset by note payments.
At September 30, 2008, the amount outstanding on the line of credit was $30.1
million compared to $25.5 million at June 30, 2008. This increase in debt is
primarily related to $2.5 million paid on September 29, 2008, for the
acquisition of Advanced Control Engineering.
The Company's estimated effective tax rate was 40.5% for the three months ended
September 30, 2008, compared to 42.0% for the comparable prior-year period. The
Company expects its full year 2008 tax rate to be approximately 40%.
Management's Assessment:
ENGlobal's Chairman and Chief Executive Officer, William A. Coskey, P.E., said,
"While the third quarter financial results were impacted due to the storms, they
were also impacted by an increase in employee benefit costs and operational
issues in our Automation and Construction segments. All of these issues resulted
in a reduction of approximately 10 to 12 cents in earnings per share during the
quarter. The Company has already begun implementing a plan to make improvements
in these areas."
ENGlobal Corporation Press Release
November 6, 2008
Page 3
ENGlobal's employee count remained steady at approximately 2,900 for the quarter
ended September 30, 2008. Of this amount, approximately 2,750 employees are
billable to clients. ENGlobal averaged 241,000 billable hours per two-week
period during the third quarter 2008, a 20% increase, when compared to 201,000
billable hours in the same period in 2007. The third quarter 2008 average
represents a 2% increase over 237,000 billable hours in the second quarter 2008.
The Company's overall utilization percentage, inclusive of overhead personnel,
is approximately 92% for the third quarter 2008 compared to 91% for the
comparable period of 2007. ENGlobal has calculated its overall utilization
percentage at approximately 90% since 2004.
The Company will host a conference call to discuss its quarterly results at
11:00 a.m. EST (10:00 a.m. CST). To participate in the conference call, please
dial (866) 524-3160 (Domestic) or (412) 317-6760 (International) approximately
10 minutes before the scheduled start time and request the "ENGlobal Third
Quarter 2008 Earnings Conference Call". If you are unable to join the call, a
replay will be available approximately three hours after the conclusion of the
call until Friday, November 21, 2008 at 8:00 a.m. Central Standard Time. The
replay can be accessed by dialing (877) 344-7529 (Domestic) or (412) 317-0088
(International), Account #425107. The call will be webcast live at
www.englobal.com in the Investor Relations section, and an audio archive will be
available on the Company's website shortly after the call concludes.
The Company's Quarterly Report on Form 10-Q for the quarter ended September 30,
2008 will be filed with the Securities and Exchange Commission on or before
November 10, 2008 reflecting these results.
About ENGlobal
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ENGlobal provides engineering, construction, automation, land and regulatory
services principally to the energy sector throughout the United States and
internationally. The Company has over 2,900 employees in 22 offices and occupies
over 500,000 square feet of office and fabrication space. ENGlobal has been
named one of the fastest growing engineering firms in the United States and
Canada by ZweigWhite in each of the last five years. Further information about
the Company and its businesses is available at www.ENGlobal.com.
Safe Harbor for Forward-Looking Statements
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The statements above regarding the Company's expectations regarding third
quarter financial results and certain other matters discussed in this press
release may constitute forward-looking statements within the meaning of the
federal securities laws and are subject to risks and uncertainties including,
but not limited to; (1) the Company's ability to achieve its business strategy
while effectively managing costs and expenses; (2) the Company's ability to
successfully and profitably integrate acquisitions; (3) the Company's ability to
retain its employees while reducing benefits; (4) the continued strong
performance of the energy sector; and (5) the impact from Hurricanes Ike and
Gustav and the timing of that impact. Actual results and the timing of certain
events could differ materially from those projected in or contemplated by the
forward-looking statements due to a number of factors detailed from time to time
in ENGlobal's filings with the Securities and Exchange Commission. In addition,
reference is hereby made to cautionary statements set forth in the Company's
most recent reports on Form 10-K and 10-Q, and other SEC filings. Also, the
information contained in this press release is subject to the risk factors
identified in the Company's most recent Form 10-K.
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ENGlobal Corporation Press Release
November 6, 2008
Page 4
FINANCIAL HIGHLIGHTS
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(in thousands, except per basic data)
Quarter Ended Nine Months Ended
September 30 September 30
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2008 2007 2008 2007
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Operating Revenue $ 123,167 $ 96,825 $ 357,344 $ 268,060
Direct cost 109,533 80,486 309,063 224,225
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Gross Profit 13,634 16,339 48,281 43,835
Selling, general and administrative 7,449 8,603 23,376 23,636
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Operating Income 6,185 7,736 24,905 20,199
Other Income (Expense):
Other income (expense) 49 (53) 134 462
Interest income (expense), net (360) (636) (1,256) (1,896)
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Income before Provision for Income Taxes 5,874 7,047 23,783 18,765
Provision for Income Taxes 2,379 3,072 9,583 7,722
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Net Income (Loss) 3,495 3,975 14,200 11,043
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Net Income Per Common Share:
Basic 0.13 0.15 0.52 0.41
Diluted 0.13 0.14 0.51 0.40
Weighted Average Shares Used in Computing Net
Income Per basic:
In thousands
Basic 27,272 26,953 27,143 26,877
Diluted 27,956 27,417 27,704 27,278
Selected Balance Sheet Information (in thousands):
As of
Sept. 30, 2008 Dec. 31, 2007
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Cash $ 1,370 908
Working capital 61,516 42,915
Property and equipment, net 6,106 6,472
Total assets 140,191 119,590
Long-term debt, net of current portion 32,115 29,318
Stockholders' Equity 72,312 55,797
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