EXHIBIT 99.1
- --------------------------------------------------------------------------------
NEWS RELEASE
- --------------------------------------------------------------------------------
FOR IMMEDIATE RELEASE
ENGlobal Corporation
CONTACT: Natalie S. Hairston
(281) 878-1000
ir@ENGlobal.com
---------------
ENGLOBAL CORPORATION REPORTS THIRD QUARTER RESULTS
HOUSTON, TX, November 9, 2007 - ENGlobal Corporation (AMEX: ENG), a leading
provider of engineering and professional services, today reported record net
income of $4.0 million, or $0.15 per basic share, for the quarter ended
September 30, 2007. Operating profit margin increased to 8.0% during the third
quarter 2007, compared to operating margins of 7.7% and 6.8% during the second
and first quarters 2007, respectively. For the nine months ended September 30,
2007, ENGlobal reported its cumulative net income at $0.41 per basic share,
compared to $0.08 per basic for the same period in 2006.
Third Quarter 2007 Highlights Compared to Third Quarter 2006:
- -------------------------------------------------------------
o Gross profit margin increased to 16.9% from 5.6%
o Revenue increased 17% to a record $96.8 million from $82.5 million
o Bi-weekly billable hours averaged 200,500 hours, up 36%, compared to
148,000 hours
o Net income increased 350%, to $4.0 million compared to a loss of $1.6
million
o 28.8% of quarter-over-quarter revenue increase attributable to organic
or non-acquisition growth
The following table illustrates the composition of the Company's revenue for the
three and nine months ended September 30, 2007:
Quarter Ended Nine Months Ended
(Dollars in millions) September 30, 2007 September 30, 2007
-------------------- ---------------------
Revenue % of Total Revenue % of Total
Revenue Revenue
-------- ---------- --------- ----------
1. Detail-design $ 35.5 36.7% 107.4 40.1%
2. Field services 41.4 42.8% 114.8 42.8%
3. Procurement and construction 9.4 9.7% 16.2 6.0%
4. Design-build fixed price 6.0 6.2% 14.0 5.2%
5. Systems 4.5 4.6% 15.7 5.9%
-------- ---------- --------- ----------
$ 96.8 100.0% $ 268.1 100.0%
======== ========== ========= ==========
~ more ~
- --------------------------------------------------------------------------------
654 N. Sam Houston Parkway E. o Suite 400 o Houston, Texas 77060
www.ENGlobal.com
ENGlobal Corporation Press Release
November 9, 2007
Page 2
Revenue for the quarter totaled a record $96.8 million, an increase of
approximately $14.3 million, or 17%, compared to the third quarter of 2006.
ENGlobal continues to benefit from an upward trend in cost-plus billable work in
its engineering segment, which is being seen by most of its operations. Revenue
in the quarter sequentially increased 8% when compared to $89.6 million in the
second quarter of 2007.
As a percentage of revenue, selling, general and administrative ("SG&A")
expenses increased to 8.9% for the three months ended September 30, 2007 from
8.2% for both the comparable period in 2006 and the second quarter 2007,
respectively. SG&A increased slightly above the Company's targeted baseline of
$7.5 million per quarter primarily due to an increased level of stock
compensation, bad debt, and SOX expenses incurred during the quarter.
The Company's cash flow from operations has been affected primarily by the
timing of its collection of accounts receivable. On average, accounts receivable
days outstanding is 66 days for the three months ended September 30, 2007, a
decrease from 70 days and 71 days in the second and first quarters of 2007,
respectively. A factor contributing to an increased overall level in days
outstanding has been the conversion of outstanding receivables from an ethanol
client to a long-term promissory note. The Company is making rapid improvements
in getting unbilled receivables current and improving billing and collection
processes.
Long-term debt, net of current portion, increased 39.0%, or $10.6 million, from
$27.2 million at December 31, 2006 to $37.8 million at September 30, 2007. As
percentage of stockholders' equity, long-term debt increased to 70.7% from 66.5%
at these same dates. The primary reason for the increase in long-term debt is
the re-classification of $10.4 million accounts and unbilled receivables to a
long-term note receivable plus 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.
The outstanding balance on the line of credit as of September 30, 2007 was $35.7
million, with remaining borrowings available of $14.3 million. As of November
06, 2007, the outstanding balance on the line of credit was $26.3 million, with
remaining borrowings available of $23.7 million.
The estimated effective tax rate was 43.6% for the three months ended September
30, 2007 compared to 40.7% for the comparable prior year period. The change in
the effective tax rate is the result of increasing state income taxes, and a
higher tax bracket for Federal taxes. The Company continues to work with its tax
consultants to assist with taxation planning to, if possible: (i) mitigate taxes
and/or (ii) take advantage of all available tax benefits.
Management's Assessment:
Commenting on the overall results, ENGlobal's Chairman and Chief Executive
Officer, William A. Coskey, P.E., noted, "We are pleased with our favorable
results and the positive sequential trends we are seeing in the majority of our
business units. These factors enabled us to deliver good results and demonstrate
the continued successful implementation of our growth strategies. We are
particularly proud to have increased operating margins to 8.0%, which has
steadily increased over the course of this year."
ENGlobal averaged 200,500 billable hours per two-week period during the third
quarter 2007, a 36% increase, when compared to 148,000 billable hours in the
same period in 2006. The third quarter 2007 average represents a 5% increase
over 190,000 billable hours in the second quarter 2007. The Company's overall
utilization percentage, inclusive of overhead personnel, is approximately 91%
for the third quarter 2007 compared to 90% for the comparable period of 2006.
ENGlobal Corporation Press Release
November 9, 2007
Page 3
The Company also announced that, subsequent to the end of third quarter, it has
terminated a contract on a previously announced ethanol project. ENGlobal has
converted the receivable into a long-term promissory note, which, net of
reserves, is in the amount of $9.1 million. Management believes that the Company
will be successful in recovering the full balance owed on the project. In
addition, it has filed a mechanics lien on the partially completed plant. The
Company expects to establish a structured transition plan to recover amounts
owed, while assisting the client in its efforts to raise financing for the
project. The client has affirmed its intention to restart the project once
permanent funding is received.
The Company will host a conference call to discuss its quarterly 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 Third
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 Wednesday, November 21, 2007. The replay can be accessed by dialing
(877) 660-6853 (Domestic) or (201) 612-7415 (International), Account #286,
Conference ID # 259177. 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,
2007 will be filed with the Securities and Exchange Commission on November 9,
2007 reflecting these results.
About ENGlobal Corporation
- --------------------------
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 2,500 employees in 18 offices and occupies over 450,000 square feet
of office and manufacturing space. ENGlobal has been named one of the fastest
growing engineering firms in the United States and Canada by ZweigWhite in each
of the last five years, placing first in 2004 and 2005, second in 2006 and 2003,
and 10th in 2007. Further information about the Company and its subsidiaries is
available at www.ENGlobal.com.
Safe Harbor for Forward-Looking Statements
- ------------------------------------------
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.
ENGlobal Corporation Press Release
November 9, 2007
Page 4
FINANCIAL HIGHLIGHTS
--------------------
(in thousands, except per basic data)
Quarter Ended Nine Months Ended
September 30 September 30
---------------------- ----------------------
2007 2006 2007 2006
--------- --------- --------- ---------
Operating Revenue $ 96,826 $ 82,503 $ 268,061 $ 224,196
Operating Expenses:
Direct cost 80,487 77,954 224,225 200,697
Selling, general and administrative 7,722 6,411 21,338 18,921
Depreciation and amortization 881 393 2,299 1,150
--------- --------- --------- ---------
Total operating expenses 89,090 84,758 247,862 220,768
--------- --------- --------- ---------
Operating income (loss) 7,736 (2,255) 20,199 3,428
Other Income (Expense):
Other income (expense) (53) (20) 462 389
Interest income (expense), net (636) (371) (1,896) (786)
--------- --------- --------- ---------
Income before Provision for Income Taxes 7,047 (2,646) 18,765 3,031
Provision for Income Taxes 3,072 (1,076) 7,722 1,036
--------- --------- --------- ---------
Net Income (Loss) 3,975 (1,570) 11,043 1,995
========= ========= ========= =========
Net Income Per Common Share:
Basic 0.15 (0.06) 0.41 0.08
Diluted 0.14 (0.06) 0.40 0.07
Weighted Average Shares Used in
Computing Net Income Per basic:
Basic 26,953 26,646 26,877 26,475
Diluted 27,417 26,646 27,278 27,028
Selected Balance Sheet Information (in thousands):
- --------------------------------------------------
As of
Sept. 30, 2007 Dec. 31, 2006
-------------- -------------
Cash $ 1,103 1,403
Working capital 48,924 35,187
Property and equipment, net 7,001 8,725
Total assets 126,790 106,227
Long-term debt, net of current portion 37,795 27,162
Stockholders' Equity 53,531 40,861
###