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NEWS RELEASE
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FOR IMMEDIATE RELEASE
ENGlobal Corporation
CONTACT: Natalie S. Hairston
(281) 878-1000
ir@ENGlobal.com
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ENGLOBAL REPORTS THIRD QUARTER NET EARNINGS OF $0.07 PER SHARE
HOUSTON, TX, NOVEMBER 3, 2005 - ENGlobal Corporation (AMEX: ENG):
THIRD QUARTER HIGHLIGHTS:
- -- Revenues increase 59% from the third quarter of 2004 to $59 million.
- -- Net income increases 115% to $1.6 million.
- -- $0.07 EPS, basic and diluted.
ENGlobal Corporation, a leading provider of engineering services, today reported
revenues of $59 million for the third quarter ended September 30, 2005, up 59%
compared to $37 million in the prior year period. Net income for the quarter was
a record $1.6 million, or $0.07 per diluted share, compared to approximately
$755,000, or $0.03 per diluted share, in the prior year quarter. These results
mark the third consecutive increase in earnings per share, having reported
$0.04, $0.06, and $0.07 in the first three quarters of 2005, respectively.
The Company's third quarter 2005 results were negatively impacted by an
estimated loss amounting to approximately $217,000 on an after-tax basis, or
$0.01 per diluted share. The loss was related to decreased billing man-hours and
earnings in the Beaumont, Texas and Lake Charles, Louisiana area as a result of
Hurricane Rita. ENGlobal expects the loss attributable to Hurricane Rita in the
fourth quarter 2005 to be less than that estimated in the third quarter 2005.
REVENUE
Revenues for the quarter compared to the prior-year period increased by
approximately $22 million, due primarily to increased engineering segment
revenues and contributions from acquisitions. The increase in total engineering
revenue is attributable to approximately $10.1 million in additional labor
revenue and approximately $8.8 million in non-labor revenue, with non-labor
revenue representing lower margin activity on engineering, procurement, and
construction management (EPC) projects.
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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 3, 2005
Page 2
MARGIN ACTIVITY
ENGlobal's gross profit margin increased to 13.2% for the three months ended
September 30, 2005 from 12.6% for the quarter ended September 30, 2004. The
Company's third quarter 2005 operating margin increased to 4.7% from 3.3%
recorded in the third quarter of 2004, with non-labor revenue primarily
contributing a lower margin.
DEBT
The Company used the proceeds from the September 2005 $14 million private
placement of Common Stock to repay its revolving line of credit. ENGlobal's net
debt position at the end of the quarter was $1.8 million down from $15.6 million
at December 31, 2004. As a result, the Company expects a decrease in interest
expense for the fourth quarter 2005.
Commenting on the overall results, ENGlobal's President and Chief Executive
Officer, Michael L. Burrow, P.E., noted, "I am proud to report our third
consecutive quarter of record earnings, which reflect a continuing upward trend
for both our industry and our Company. The record results produced in this
latest quarter are especially significant given Hurricane Rita, which impacted
ENGlobal's operations as well as many of our people late in the quarter."
Mr. Burrow continued, "ENGlobal has the ability to achieve further financial
progress, given what we expect will be a continued healthy industry environment.
First, we hope to continue on our mission of balanced growth, with a mix of both
organic growth stimulated by new internal start-up initiatives, as well as
selected external acquisitions. Second, we will diligently work toward improving
performance at our operations that are not currently up to par. Finally, we
believe we have the ability to raise our operating margins over a period of
time."
The Company's Quarterly Report on Form 10-Q for the quarter ended September 30,
2005 will be filed with the Securities and Exchange Commission on or about
November 8, 2005 reflecting these results.
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ENGlobal Corporation Press Release
November 3, 2005
Page 3
FINANCIAL HIGHLIGHTS
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Consolidated Statements of Income (in thousands, except per share data):
For the Three Months For the Nine Months
Ended September 30, Ended September 30,
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2005 2004 2005 2004
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Operating Revenue $ 59,266 $ 37,272 $ 163,314 $ 102,547
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Operating Expenses:
Direct cost 51,428 32,563 142,499 89,567
Selling, general and administrative 4,815 3,257 12,991 9,536
Depreciation and amortization 258 210 814 582
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Total operating expenses 56,501 36,030 156,304 99,685
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Operating income 2,765 1,242 7,010 2,862
Other Income (Expense):
Other income 6 24 79 52
Interest income (expense), net (199) (122) (643) (418)
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Total other income (expense) (193) (98) (564) (366)
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Income before Provision for Income Taxes 2,572 1,144 6,446 2,496
Provision for Income Taxes 952 389 2,385 849
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Net Income $ 1,620 $ 755 $ 4,061 $ 1,647
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Net Income Per Common Share:
Basic 0.07 0.03 0.17 0.07
Diluted 0.07 0.03 0.17 0.07
Weighted Average Shares Used in Computing Net
Income Per Share:
Basic 23,890,842 24,060,689 23,637,345 24,043,734
Diluted 24,898,045 24,216,826 24,460,313 24,199,871
Selected Balance Sheet Information (in thousands):
At Sept. 30, 2005 At Dec. 31, 2004
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Balance Sheet Data:
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Cash $ 2,959 $ 8
Working capital 18,334 14,503
Property and equipment, net 6,257 5,262
Total assets 63,286 57,261
Long-term debt, net of current portion 1,826 15,585
Stockholders' equity $ 39,023 $ 20,051
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ENGlobal Corporation Press Release
November 3, 2005
Page 4
About ENGlobal Corporation
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ENGlobal Corporation provides engineering services and systems principally to
the petroleum refining, petrochemical, pipeline, production, and process
industries throughout the United States and internationally. ENGlobal's
multi-disciplinary engineering services group develops projects from the initial
planning stage through detailed design, procurement, and construction
management. The systems group develops, manufactures, installs, and services
control and instrumentation systems utilized in various energy and
process-related industries, and provides services and products that support the
advanced automation and environmental technology fields. The Company, with its
subsidiaries, now employs over 1,600 employees in 14 offices and occupies over
300,000 square feet of office and manufacturing space. In 2005 and 2004, the
Company was named the #1 fastest growing engineering firm in the United States
by ZweigWhite and was ranked #2 in 2003. Further information about the Company
and its subsidiaries is available at www.ENGlobal.com.
Safe Harbor for Forward-Looking Statements
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Certain 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 inability to accurately assess the future financial impact of
Hurricane Rita on the Company's earnings, and (3) the continued strong
performance of the energy sector. 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. Among other
matters, the Company may not be able to sustain the growth or the profitability
that it has experienced in 2005. 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. In addition, 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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