EXHIBIT 99.1
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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 RECORD QUARTERLY RESULTS
HOUSTON, TX, AUGUST 8, 2006 - ENGlobal Corporation (AMEX: ENG), a leading
provider of engineering services, today reported net income of $0.09 per share
for the three months ended June 30, 2006, compared to $0.06 for the same period
in 2005. Revenue for the quarter totaled $75.1 million, an increase of
approximately $15.7 million, or 26% compared to the prior year period. The
results for both revenue and net income represent new quarterly records for the
Company.
Second Quarter 2006 Highlights Compared to Second Quarter 2005:
- - Revenue increased 26%
- - Gross profit margin increased from 12.3% to 14.3%
- - Net income increased 53%
- - Operating profit margin increased from 4.4% to 4.7%
The Company's reported net income of $0.09 per share for the current quarter was
achieved after taking into effect a 12.6% increase in the basic weighted average
shares outstanding, when compared to the prior year period. This increase was
due primarily to the Company's private placement of two million shares of its
common stock in September 2005.
The following table illustrates the composition of the Company's revenue for the
three and six months ended June 30, 2006:
Quarter Ended Six Months Ended
(Dollars in millions) June 30, 2006 June 30, 2006
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% of Total % of Total
Revenue Revenue Revenue Revenue
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1. Detail-design engineering $ 28.4 38% $ 56.0 39%
2. Field services and inspection 25.0 33% 44.7 32%
3. Procurement and construction 6.3 8% 16.9 12%
4. Design-build fixed price 10.1 14% 14.8 10%
5. Systems 5.3 7% 9.3 7%
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$ 75.1 100% $ 141.7 100%
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~ more ~
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654 N. Sam Houston Parkway E. o Suite 400 o Houston, Texas 77060
www.ENGlobal.com
ENGlobal Corporation Press Release
August 8, 2006
Page 2
ENGlobal attributes the following positive factors as contributing to its record
quarter:
1. An overall increase in the level of project activity and billable
man-hours during the period;
2. The Company's performance under newly established cost reimbursable
contracts that provide higher margins;
3. Positive contributions within our systems segment resulting from the
January 2006 asset acquisition of Analyzer Technology International,
Inc.; and
4. Receipt of a joint venture distribution for a portion of an insurance
settlement related to the Beaumont building that was destroyed by
Hurricane Rita.
The total charge related to stock-based compensation, which was recorded in SG&A
expense, was $406,000 in the second quarter 2006, as compared to $85,000 in the
first quarter. The second quarter stock-based compensation expense was offset by
$460,000 in income related to the joint venture distribution and additional
proceeds received as a result of insurance claims related to Hurricane Rita,
which was recorded as Other Income.
The Company continues to make concerted efforts to improve profitability, with a
specific focus on operating margins and cash flows from operating activities.
The Company's cash flow from operations has been affected primarily by the
timing of its collection of trade accounts receivable. Accounts receivable days
outstanding averaged 63 days for the six-month period ended June 30, 2006,
compared to 55 days for the comparable period in 2005. The Company continues to
work toward reducing both the invoicing cycles and collection periods related to
services provided to clients.
Long-term debt on June 30, 2006, as compared to December 31, 2005, increased
approximately $11.7 million, of which approximately (i) $5.9 million was
utilized for two acquisitions, (ii) $1.6 million was invested in capital
equipment, and (iii) $4.2 million was required to finance working capital needs.
As of August 1, 2006, ENGlobal had approximately $11.8 million outstanding under
its $22 million line of credit, compared with $13.5 million at June 30, 2006.
Total selling, general and administrative ("SG&A") expenses as a percent of
revenue, including depreciation and amortization, increased to 9.5% of revenue
in the second quarter of 2006 as compared to 7.8% in the same period in 2005.
This increase in SG&A expense can be attributed to a diverse range of costs
required to support the Company's growth.
Management's Assessment:
Commenting on the Company's performance, Michael L. Burrow, P.E., President and
Chief Executive Officer of ENGlobal, said, "We are extremely pleased to report
record quarterly results for both revenue and net income. Our operations
continue to benefit from strong performance of the energy industry and the
continuing increases in capital spending in all sectors. Our business is
currently relying on more time and material contracts to produce revenue, as
opposed to fixed price work, mainly based on our desire to increase revenue
predictability."
ENGlobal Corporation Press Release
August 8, 2006
Page 3
"During the second quarter, our management team began implementing a number of
initiatives designed to improve profitability. As our record results indicate,
the initial effects of these initiatives have been promising and we look forward
to further improvement going forward, given that many of the actions were not in
effect for the full quarter."
The Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2006
will be filed with the Securities and Exchange Commission on or about August 14,
2006 reflecting these results.
The Company also announced that its President and Chief Executive Officer and
one of its independent directors have advised the Company that they have entered
into trading plans to sell a portion of their holdings in the Company. The
trading plans will be implemented pursuant to the requirements of Rule 10b5-1 of
the Securities and Exchange Act as part of a long-term asset diversification
strategy. The transactions under these plans will commence in August 2006 and
will be disclosed publicly through Form 144 and Form 4 filings with the
Securities and Exchange Commission.
About ENGlobal Corporation
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ENGlobal Corporation provides engineering, automation systems, field inspection,
and land management and regulatory 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 land management group provides land
management, environmental compliance, governmental regulatory and related
services to the power, energy, transportation, telecommunications and
governmental sectors. The Company, with its subsidiaries, now employs over 2,100
employees in 18 offices and occupies over 400,000 square feet of office and
manufacturing space. In 2004 and 2005, the Company was named the #1 fastest
growing engineering firm in the United States and Canada by ZweigWhite and was
ranked #2 in 2006 and 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 successfully and profitably integrate acquisitions;
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. 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.
~~ more ~~
ENGlobal Corporation Press Release
August 8, 2006
Page 4
FINANCIAL HIGHLIGHTS
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(in thousands, except per share data)
Quarter Ended Six Months Ended
June 30 June 30
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2006 2005 2006 2005
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Operating Revenue $ 75,065 $ 59,419 $ 141,693 $ 104,049
Operating Expenses:
Direct cost 64,337 52,140 122,742 91,071
Selling, general and administrative 6,812 4,388 12,510 8,176
Depreciation and amortization 354 276 757 557
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Total operating expenses 71,503 56,804 136,009 99,804
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Operating income 3,562 2,615 5,684 4,245
Other Income (Expense):
Other income 387 44 409 73
Interest income (expense), net (253) (247) (415) (444)
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Income before Provision for Income Taxes 3,696 2,412 5,678 3,874
Provision for Income Taxes 1,365 892 2,112 1,433
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Net Income 2,331 1,520 3,566 2,441
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Net Income Per Common Share:
Basic $ 0.09 0.06 $ 0.14 0.10
Diluted $ 0.09 0.06 $ 0.13 0.10
Weighted Average Shares Used in
Computing Net Income Per Share:
Basic 26,444,185 23,492,842 26,388,702 23,508,496
Diluted 27,191,617 24,156,525 27,218,982 24,155,176
Selected Balance Sheet Information (in thousands):
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As of
June 30, 2006 Dec. 31, 2005
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Cash $ 884 $ 159
Working capital 31,051 21,825
Property and equipment, net 7,477 6,861
Total assets 93,053 75,936
Long-term debt, net of current portion 16,943 5,228
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