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 FIRST QUARTER RESULTS
HOUSTON, TX, MAY 8, 2007 - ENGlobal Corporation (AMEX: ENG), a leading provider
of engineering and systems services, today reported net income of $3.2 million,
or $0.12 per diluted share, for the quarter ended March 31, 2007.
First Quarter 2007 Highlights Compared to First Quarter 2006:
o Revenue increased 23% to a record $81.7 million
o Gross profit increased 62%
o Gross profit margin increased 33% from 12.3% to 16.3%
o Operating profit margin increased from 3.2% to 6.8%
o Net income increased 156%, to a record $3.2 million
o Bi-weekly billable hours averaged 174,000 hours, up 41%
The following table illustrates the composition of the Company's revenue for the
quarters ended March 31, 2007 and 2006, respectively:
Three Months Ended Three Months Ended
(Dollars in millions)* March 31, 2007 March 31, 2006
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% of Total % of Total
Revenue Revenue Revenue Revenue
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1. Detail-design $ 35.8 44% 27.6 42%
2. Field services and inspection 35.2 43% 19.6 29%
3. Procurement and construction 1.4 2% 10.7 16%
4. Design-build fixed price 3.8 4% 4.7 7%
5. Systems 5.5 7% 4.0 6%
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$ 81.7 100% $ 66.6 100%
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*Some numbers may vary slightly from other reports due to rounding.
Gross profit increased $5.1 million, or 62.0%, to $13.3 million for the three
months ended March 31, 2007 from $8.2 million for the comparable prior year
period. As a percentage of revenue, gross profit increased 4.0% from 12.3% for
the three months ended March 31, 2006 to 16.3% for the quarter ended March 31,
2007. Of the overall $5.1 million increase in gross profit, approximately $1.9
million was primarily due to the $15.0 million increase in revenue plus
approximately $3.2 million in equivalent lower costs on increased revenue.
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654 N. Sam Houston Parkway E. o Suite 400 o Houston, Texas 77060
www.ENGlobal.com
ENGlobal Corporation Press Release
May 8, 2007
Page 2
ENGlobal averaged 174,400 billable hours per two-week period during the first
quarter 2007, a 41% increase, compared to 123,600 billable hours in the same
period in 2006. The Company has calculated its overall utilization percentage,
inclusive of overhead personnel, at approximately 90% for the first quarter 2007
compared to 88% for the comparable period of 2006.
Selling, general and administrative ("SG&A") expenses stayed approximately level
as a percent of revenue during the first quarter 2007 as compared to the same
period in 2006. As a percentage of revenue, SG&A expense increased 0.3% to 9.5%
for the three months ended March 31, 2007 from 9.2% for the comparable period in
2006.
"ENGlobal is extremely pleased to report these positive first quarter results -
a record in almost every category - driven by strong energy-related project
activity and better execution on the part of our entire management team," said
William A. Coskey, P.E., ENGlobal's Chairman and Chief Executive Officer. "One
important metric that indicates our improved performance is consolidated
operating margins, which more than doubled to 6.8% when compared to the first
quarter of 2006. Judging by our revenue mix, part of ENGlobal's success this
quarter can be attributed to replacing historically low margin revenue, with
higher margin revenue in the areas of field services and inspection."
"We are relying on a `back to basics' plan, which includes managing costs,
promoting higher value services, and limiting the acceptance of risk. Currently,
the strongest project activity where ENGlobal believes it is best positioned is
occurring in the refining, pipeline, automation and renewable energy areas. We
also believe there is potential upside to our business both in terms of new
project opportunities as well as the uplift that could be realized once our
underperforming operations begin to meet their financial goals."
Long-term debt, net of current portion, increased 19.6%, or $5.3 million, from
$27.2 million at December 31, 2006 to $32.5 million at March 31, 2007. The
primary reasons for the increase in long-term debt are the payout for
subcontractor charges to complete two fixed-price EPC projects, the timing
difference related to meeting short-term bi-weekly payroll obligations from the
Company's growth, and longer collection periods on receipts from its clients.
On average, ENGlobal's accounts receivable days outstanding has increased to 71
days for the three month period ended March 31, 2007, from 66 days for the
comparable period in 2006. One of the primary reasons for the increase in days
outstanding has been finalizing the conversion of WRC Corporation to the
Company's billing system. Excluding both the revenue and accounts receivable
balances attributable to this acquisition, ENGlobal's average days outstanding
would have been reduced to 69 days for the three month period ended March 31,
2007. The Company continues to work toward improving billing and collection
processes.
Effective March 30, 2007, the Company and Comerica Bank entered into an
amendment to the Company's existing Credit Facility (the "Comerica Credit
Facility") whereby the limit of the revolving credit note was increased from $30
million to $35 million, subject to loan covenant restrictions. The maturity date
of the Comerica Credit Facility will remain at July 26, 2009. The outstanding
balance on the line of credit as of March 31, 2007 was $29.6 million, with
remaining borrowings available of $5.4 million as loan covenant restrictions did
not limit the available borrowings. As of May 7, 2007, the outstanding balance
on the line of credit was $27.0, with remaining borrowings available of $8.0
million.
ENGlobal Corporation Press Release
May 8, 2007
Page 3
The Company will host a conference call to discuss its fiscal year end results
at 11:00 a.m. EDT (10:00 a.m. CDT). 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 First Quarter 2007 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 Tuesday, May 22, 2007. The replay can be accessed
by dialing (877) 660-6853 (Domestic) or (201) 612-7415 (International), Account
#286, Conference ID #240940. 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 year ended March 31,
2007 will be filed with the Securities and Exchange Commission on or before May
10, 2007 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 shift its contracting strategy in a manner that will prevent future charges;
(2) the Company's ability to mitigate its losses; (3) general economic
conditions that impact the cost of labor and materials; (4) the Company's
ability to achieve its business strategy while effectively managing costs and
expenses; (5) the Company's ability to estimate exact project completion dates;
(6) the Company's ability to successfully and profitably integrate acquisitions;
and (7) 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
May 8, 2007
Page 4
FINANCIAL HIGHLIGHTS
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Consolidated Statements of Income (in thousands, except per share data):
For the Three Months Ended
March 31,
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2007 2006
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Operating Revenue $ 81,659 $ 66,627
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Operating Expenses:
Direct cost 68,381 58,405
Selling, general and administrative 7,744 6,101
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Total operating expenses 76,125 64,506
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Operating income 5,534 2,121
Other Income (Expense):
Other income -- 22
Interest income (expense), net (560) (162)
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Income before Provision for Income Taxes 4,974 1,981
Provision for Income Taxes 1,820 747
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Net Income $ 3,154 $ 1,234
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Net Income Per Common Share:
Basic $ 0.12 $ 0.05
Diluted $ 0.12 $ 0.05
Weighted Average Shares Used in Computing Net
Income Per Share:
Basic 26,809,006 26,332,602
Diluted 27,259,948 27,246,347
Selected Balance Sheet Information (in thousands):
At
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Mar. 31, 2007 Dec. 31, 2006
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Cash 950 1,403
Working capital 44,215 35,187
Property and equipment, net 8,474 8,725
Total assets 111,201 106,227
Long-term debt, net of current portion 32,474 27,162
Stockholders' equity 44,321 40,862
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