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 REPORTS THIRD QUARTER RESULTS
HOUSTON, TX, November 13, 2006 - ENGlobal Corporation (AMEX: ENG), a leading
provider of engineering services, today reported revenues of $82.5 million for
the third quarter ended September 30, 2006, an increase of 39.2%, when compared
to the prior year period. The net loss for the third quarter was $1.6 million,
or $(0.06) per diluted share, which included a charge of approximately $6.6
million, $3.5 million after taxes, or approximately $0.13 per diluted share, for
previously announced cost overruns on two domestic fixed price EPC projects.
Excluding the charge on these two projects, net income would have been
approximately $2.0 million, or $0.07 per diluted share.
The following table illustrates the composition of the Company's revenue for the
three and nine months ended September 30, 2006:
Quarter Ended Nine Months Ended
(Dollars in millions) September 30, 2006 September 30, 2006
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Revenue % of Total Revenue % of Total
Revenue Revenue
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1. Detail-design $ 33.9 41% $ 89.9 40%
2. Field services 29.0 35% 73.7 33%
3. Procurement and construction 1.3 2% 18.2 8%
4. Design-build fixed price 12.4 15% 27.2 12%
5. Systems 5.9 7% 15.2 7%
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$ 82.5 100% $ 224.2 100%
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Revenue increased $23.2 million, or 39.2%, for the three months ended September
30, 2006 from the comparable prior year period, with approximately $20.7 million
of the increase coming from ENGlobal's engineering segment and $2.5 million
attributable to the systems segment. Operating income decreased approximately
$5.0 million, or 181.6%, to $(2.3) million for the three months ended September
30, 2006 from $2.8 million compared to the same period in 2005. Excluding
approximately $6.6 million of reversals related to the two fixed price EPC
projects and on a pro forma basis, the Company's operating income for the three
months ended September 30, 2006 would have been approximately $4.3 million,
resulting in an operating margin of approximately 5.2%.
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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 13, 2006
Page 2
Total expense for SG&A increased $1.7 million, or 34.1%, to $6.8 million for the
three months ended September 30, 2006 from $5.1 million for the comparable prior
year period. As a percentage of revenue, SG&A was 8.2% for the latest quarter,
when compared to 8.6% for the prior year period. The adoption of SFAS 123(R)
related to stock-based compensation, which was recorded in SG&A expense, for the
three and nine months ended September 30, 2006, respectively, included $404,000
and $895,000 of expense related to stock options.
The Company's cash flow from operations has been affected primarily by: 1)
delays in receipts for fees on the start-up of a major alliance agreement; 2) an
increase in retention on cost plus fees; and 3) an increase in cost and
estimated earnings-in-excess of billing. Although the average accounts
receivable days outstanding increased to 60 days for the nine month period ended
September 30, 2006 from 51 days for the comparable period in 2005 the current
year trend has improved from 64 days at the end of the three month period ended
March 31, 2006 and from 63 days at the end of the six month period ended June
30, 2006. Our average for accounts receivable days outstanding was 59 days for
the year ended December 31, 2005. The Company has been able to lower the average
accounts receivable days outstanding primarily through an expanded focus on
collections of past due accounts.
Long-term debt, net of current portion, increased 337%, or $17.6 million, from
$5.2 million at December 31, 2005 to $22.8 million at September 30, 2006, and as
a percentage of stockholders' equity, long-term debt increased from 13.1% to
50.9% at these same dates. The increase in long-term debt is primarily
attributable to approximately $10.4 million used in transactions to acquire two
companies, additional investments in capital equipment totaling approximately
$2.8 million, plus delays in collections of fees primarily on a new alliance
contract totaling approximately $3.7 million.
Management's Assessment:
Commenting on the overall results, ENGlobal's President and Chief Executive
Officer, Michael L. Burrow, P.E., noted, "I have analyzed most of our operations
and developed a plan document that focuses on both short term remediation as
well as longer term measures to improve our business. We expect to emphasize
cost plus activities going forward, an area that continues to be strong. As one
example, for the third quarter just ended, billable hours increased
approximately 42% when compared to the third quarter of last year.
Mr. Burrow, continued, "The Company has made many types of internal investments
in its recent past, involving new operations and also overhead that has been put
in place to facilitate our growth. Each of these areas will also be reviewed,
with the expectation of producing improved financial results for our
stockholders."
The Company will host a conference call to discuss its third quarter results at
11:00 a.m. EST (10:00 a.m. CST) on November 13, 2006. To participate in the
conference call, please dial (877) 407-0782 (Domestic) or (201) 689-8567
(International) approximately 10 minutes before the scheduled start time and
request the "ENGlobal Third Quarter 2006 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 Monday, November 27, 2006. The replay can
ENGlobal Corporation Press Release
November 13, 2006
Page 3
be accessed by dialing (877) 660-6853 (Domestic) or (201) 612-7415
(International), Account #286, Conference ID #220256. 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,
2006 will be filed with the Securities and Exchange Commission on November 14,
2006 reflecting these results.
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. The Company, with its subsidiaries, now
employs over 2,200 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.
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ENGlobal Corporation Press Release
November 13, 2006
Page 4
FINANCIAL HIGHLIGHTS
(in thousands, except per share data)
Quarter Ended Nine Months Ended
September 30 September 30
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2006 2005 2006 2005
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Operating Revenue $ 82,504 $ 59,266 $ 224,196 $ 163,314
Operating Expenses:
Direct cost 77,954 51,427 200,697 142,499
Selling, general and administrative 6,411 4,815 18,921 12,991
Depreciation and amortization 393 258 1,150 814
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Total operating expenses 84,759 56,500 220,768 156,304
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Operating income (loss) (2,255) 2,765 3,428 7,010
Other Income (Expense):
Other income (expense) (20) 6 389 79
Interest income (expense), net (371) (199) (786) (643)
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Income before Provision for Income Taxes (2,647) 2,572 3,031 6,446
Provision for Income Taxes (1,076) 952 1,036 2,385
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Net Income (Loss) (1,570) 1,620 1,995 4,061
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Net Income Per Common Share:
Basic (0.06) 0.07 0.08 0.17
Diluted (0.06) 0.07 0.07 0.17
Weighted Average Shares Used in
Computing Net Income Per Share:
Basic 26,645,830 23,890,842 26,475,353 23,637,345
Diluted 26,645,830 24,898,045 27,027,931 24,460,313
Selected Balance Sheet Information (in thousands):
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As of
Sept. 30, 2006 Dec. 31, 2005
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Cash 1,071 159
Working capital 35,503 21,825
Property and equipment, net 7,960 6,861
Total assets 99,384 75,936
Long-term debt, net of current portion 22,831 5,228
Stockholders' Equity 44,882 39,865
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