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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 CORPORATION ANNOUNCES YEAR END RESULTS
HOUSTON, TX, MARCH 22, 2006 - ENGlobal Corporation (AMEX: ENG), a leading
provider of engineering and systems services, today reported earnings for the
year ended December 31, 2005, including record revenue and net income.
2005 Highlights:
- - Revenue increased 56.9% in fiscal year 2005 over the prior year period
- - Net income of $0.20 per share in fiscal year 2005 represents a 100%
increase over 2004
- - Backlog reached a record $170 million at December 31, 2005
- - 86.8% of year-over-year revenue increase attributable to organic growth
- - Reduced long-term indebtedness by $9.8 million
Financial Results:
Net income for the year ended December 31, 2005 increased 100% to $4.8 million,
or $0.20 per basic share, compared to net income of $2.4 million, or $0.10 per
basic share, for the year ended December 31, 2004. During 2005, the Company
increased its total revenue 56.9% to $233.6 million from $148.9 million in 2004.
Of this amount, 86.8% of the Company's revenue growth was attributable to
organic, or non-acquisition, growth.
Overall gross profit increased 55.5% to $28.3 million in 2005 from $18.2 million
in 2004. Revenue from procurement activities, including material, equipment and
subcontractor activities, increased 55.5% to $59.7 million in 2005 from $38.4
million in 2004. Labor-based revenue, excluding revenue from acquisitions,
totaled $135.8 million, and $85.9 million in 2005 and 2004, respectively.
Backlog at December 31, 2005 was $170 million, a record high for the Company,
and an increase from $135 million at December 31, 2004.
Total SG&A expenses, as a percent of revenue, decreased to 8.4% in 2005 from
9.2% in 2004. Working capital increased 50.3% to $21.8 million on December 31,
2005, as compared to $14.5 million on December 31, 2004. Long-term debt on
December 31, 2005, as compared to December 31, 2004, decreased by $9.8 million.
This was due primarily to the repayment of existing debt from a portion of the
proceeds of the Company's September 30, 2005 private placement, in which it
raised $14.0 million from the sale of its Common Stock.
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654 N. Sam Houston Parkway E. o Suite 400 o Houston, Texas 77060-5914
www.ENGlobal.com
ENGlobal Corporation Press Release
March 22, 2006
Page 2
Hurricane Rita damages and delays, occurring primarily in the fourth quarter,
resulted in an estimated reduction of after tax earnings of $159,000. This
reduction was due, in large part, to losses in revenue, as well as unanticipated
expenses required to temporarily relocate and permanently restore business
operations. The Company has filed claims to recover approximately 88% of these
losses, but any resolution has been delayed due the overwhelming number of
claims being processed from the hurricane-affected areas. The Company has not
recorded any benefit it may receive from these claims and does not expect to
incur any additional expense as a result of the hurricane.
Commenting on the Company's performance, Michael L. Burrow, P.E., President and
Chief Executive Officer of ENGlobal, said, "While we are pleased to report
another successful year for ENGlobal, several factors impacted our fourth
quarter performance, including: (1) costs we incurred to establish new ventures,
(2) a relative increase in in-plant and procurement services, which have lower
margins than engineering services, (3) the impact of Hurricane Rita, including
slower payments of accounts receivable, and (4) typical fourth quarter
seasonality."
Mr. Burrow continued, "Overall, we are proud of our record 2005 financial
results, especially given that almost 90% of our 2005 growth was achieved
organically. ENGlobal's performance on turnkey, or design-build, engineering
projects has played a significant role in this accomplishment, together with an
outstanding year reported by our In-Plant services division. I believe our
entire management team deserves recognition for its accomplishments, having
produced 80.4% revenue growth and 48.6% net income growth, compounded annually
over the last four years."
However, Management cannot rest on its past successes and we have thus pursued
what we believe are prudent investments for our future," Mr. Burrow, added.
"During 2005, the Company continued efforts - and incurred expenses - to ramp-up
two internal growth initiatives: ENGlobal Automation Group, Inc., which opened
its Calgary office in September 2005, and ENGlobal Sulfur Group. Since
approximately $18.2 million in backlog has been established for these two
entrepreneurial ventures, we believe that the majority of the start-up expenses
are behind us."
Mr. Burrow stated, "Although Management continues to consider strategic
acquisitions, we did not choose to complete any acquisitions during 2005,
instead focusing on organic growth. In fact, excluding acquisitions, it is
management's goal, based on the Company's past growth, and subject to favorable
economic conditions, to increase revenues at a compounded annual rate of
approximately 25% over the next several years. Our internal growth initiatives
will play a large part, since these specialty services tend to produce higher
margins. Management believes the long-term results of these initiatives will be
positive for our stockholders."
In addition, the Company has made an investment, at various office locations, in
facility expansion, which it believes will be needed for further growth. These
expenses, together with the financial impact from Hurricane Rita and other less
significant non-recurring events, had a negative impact on the Company's 2005
after tax earnings of approximately $914,000, with this impact occurring
primarily in the fourth quarter of the year.
Business Outlook:
Commenting on the future, Mr. Burrow, said, "As this year progresses, and as
ENGlobal's investments for the future pay-off, we expect our operating
performance will improve in 2006. We continue to observe increased capital
ENGlobal Corporation Press Release
March 22, 2006
Page 3
spending by our clients and anticipate that ENGlobal may be considered for even
larger projects in the future. There is a high degree of activity and
cross-selling among our business development team, which is uncovering many new
business opportunities. As an example, ENGlobal is currently performing projects
in the area of alternative energy, including ethanol and biomass energy. We
expect to see a substantial amount of proposal activity and projects that take
advantage of the mandate by the Energy Bill to dramatically increase the use of
renewable fuels by 2012."
The Company's Annual Report on Form 10-K for the fiscal year ended December 31,
2005 will be filed with the Securities and Exchange Commission on or before
March 31, 2006 reflecting these results.
About ENGlobal Corporation
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ENGlobal Corporation provides engineering and systems services principally to
the petroleum refining, petrochemical, pipeline, production, and process
industries throughout the United States and internationally. ENGlobal's
multi-disciplinary engineering group develops projects from the initial planning
stage through detailed design, procurement, and construction management. The
systems group designs, fabricates, and supports control, instrumentation and
analyzer systems utilized in various energy and process-related industries. The
Company, with its subsidiaries, now employs over 1,800 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 ability to secure future contract awards and/or perform work
under the contracts efficiently; 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, there
can be no assurance that the Company will be able to sustain the growth or the
profitability that it 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. Also, the information contained in this
press release is subject to the risk factors identified in the Company's most
recent Form 10-K.
ENGlobal Corporation Press Release
March 22, 2006
Page 4
FINANCIAL HIGHLIGHTS
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Consolidated Statements of Income (in thousands, except per share data):
For the Year
Ended December 31,
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2005 2004
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Operating Revenue $ 233,585 $ 148,888
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Operating Expenses:
Direct cost 205,312 130,696
Selling, general and administrative 19,689 13,700
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Total operating expenses 225,001 144,396
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Operating income 8,584 4,492
Other Income (Expense):
Other income 114 118
Interest income (expense), net (800) (590)
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Income before Provision for Income Taxes 7,898 4,020
Provision for Income Taxes 3,116 1,656
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Net Income $ 4,782 $ 2,364
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Net Income Per Common Share:
Basic $ 0.20 $ 0.10
Diluted $ 0.19 $ 0.10
Weighted Average Shares Used in Computing Net
Income Per Share:
Basic 24,300 23,455
Diluted 25,250 23,786
Selected Balance Sheet Information (in thousands):
For the Year
Ended December 31,
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At Dec. 30, 2005 At Dec. 31, 2004
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Balance Sheet Data:
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Cash $ 159 $ 8
Working capital 21,825 14,503
Property and equipment, net 6,861 5,262
Total assets 75,936 57,261
Long-term debt, net of current portion 5,228 15,585
Stockholders' equity 39,865 20,051
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