- --------------------------------------------------------------------------------
NEWS RELEASE
- --------------------------------------------------------------------------------
FOR IMMEDIATE RELEASE
ENGlobal Corporation
CONTACT: Natalie S. Hairston
(281) 878-1000
ir@ENGlobal.com
---------------
ENGLOBAL REPORTS RECORD SECOND QUARTER RESULTS
HOUSTON, TX, August 7, 2008 - ENGlobal (NASDAQ: ENG), a leading provider of
engineering and related project services, today reported record net income of
$6.7 million, or $0.24 per diluted share, for the quarter ended June 30, 2008.
The Company's 71% increase in net income, when compared to the prior year
quarter, was primarily achieved through a combination of 52% organic revenue
growth and improved operating profitability. ENGlobal increased its cumulative
net income to $0.39 per diluted share in the six months ended June 30, 2008,
compared to $0.26 per diluted share for the same period in 2007.
Second Quarter 2008 Highlights Compared to Second Quarter 2007:
- ---------------------------------------------------------------
o Revenue increased 52% to a record $136 million.
o Net income increased 71% to $6.7 million.
o Operating profit margin improved to 8.5% from 7.7%.
o 100% of quarter-over-quarter revenue increase is attributable to
organic or non-acquisition related growth.
o Bi-weekly billable hours averaged 235,000 hours, up 24%, compared to
189,000 hours.
o Employee count increased 17% to approximately 2,900.
The following table illustrates the Company's total revenue by segment for the
quarters ended June 30, 2008 and 2007, respectively:
Quarter Ended Quarter Ended
June 30, 2008 June 30, 2007
---------------------------------------- --------------------------------------
(Dollars in millions)
Gross Operating Gross Operating
Total % of Total Profit Profit Total % of Total Profit Profit
Segment Revenue Revenue Margin Margin(1) Revenue Revenue Margin Margin(1)
------- ------- ------- ------ --------- ------- ------- ------ ---------
Engineering $ 77.5 57.0% 16.5% 13.6% 57.0 63.6% 16.8% 13.8%
Construction 35.7 26.2% 11.2% 9.1% 16.0 17.9% 16.6% 12.4%
Automation 11.0 8.1% 12.3% 5.5% 9.5 10.6% 11.7% 3.6%
Land 11.8 8.7% 18.3% 10.9% 7.1 7.6% 12.4% 4.3%
------- --------- ------- --------
$ 136.0 100.0% $ 89.6 100.0%
======= ========= ======= ========
- ---------------
(1) Operating profit margin calculated prior to allocation of corporate
overhead.
~ more ~
- --------------------------------------------------------------------------------
654 N. Sam Houston Parkway E. o Suite 400 o Houston, Texas 77060
www.ENGlobal.com
ENGlobal Press Release
August 7, 2008
Page 2
Revenue increased $46.4 million, or 51.8%, to $136.0 million for the three
months ended June 30, 2008, from $89.6 million for the comparable prior-year
period, comprised entirely of internal growth initiatives. Gross profit margin
decreased one percentage point from 15.9% for the three months ended June 30,
2007, to 14.9% for the three months ended June 30, 2008. The decrease in gross
profit margin primarily relates to a quarter-over-quarter shift in revenue mix.
Substantially all of the Company's revenue growth can be attributed to
quarter-over-quarter increases in the following operations:
Segment Operation Increased %
------- --------- Revenue ($M) Increase
------------ --------
Construction Inspection $18.9 156%
Engineering Detailed Design $12.5 37%
Engineering Procurement Services $12.0 218%
Land Right-of-Way, Permitting $4.7 66%
Of these, inspection revenue in the Construction segment and procurement
services pass-through revenue in the Engineering segment have historically
produced lower gross profit margins than the Company's consolidated average.
ENGlobal's selling, general and administrative ("SG&A") expense for the second
quarter 2008 was $8.7 million, an increase of $1.4 million from the second
quarter 2007, and a $1.5 million increase from the first quarter 2008. The
Company's SG&A expense target is $7.5 million per quarter, but exceeded this
amount in the second quarter due to $1.3 million in bad debt expense and
reserves against project claims, the majority of which is expected to be a
non-recurring charge.
William A. Coskey, P.E., ENGlobal's Chairman and Chief Executive Officer, said,
"Today's excellent report is a direct result of ENGlobal meeting many of its
previously stated financial goals and objectives. I am especially pleased that
we achieved our 8% target for operating profitability and demonstrated an
impressive rate of organic growth that significantly exceeded our 25% compounded
annual target."
Mr. Coskey, continued, "We are encouraged by a robust level of project activity
from an increasingly broad client mix. Management's expectation for the second
half of 2008 is that our Engineering, Construction, Automation and Land
businesses will all continue on a similar strong track, with consolidated
profits from continuing operations expected to meet or exceed those produced
during the first half."
On average, the day's sales outstanding decreased to 61 days at June 30, 2008,
from 62 days at March 31, 2008 and from 70 days at June 30, 2007. During the
second quarter of 2008, the Company produced positive cash from operations of
$4.1 million, compared with $524,000 in the second quarter of 2007.
ENGlobal Press Release
August 7, 2008
Page 3
Long-term debt, net of current portion, decreased 9.6%, or $2.8 million, from
$29.3 million at December 31, 2007 to $26.5 million at June 30, 2008. The
decrease in long-term debt is primarily related to the $2.3 million decrease in
the Company's line of credit resulting from improved collections of associated
trade receivables. Cash on hand at June 30, 2008 was $2.3 million and $24.2
million was available under the Company's credit facility, resulting in total
liquidity of $26.5 million. ENGlobal's interest expense during the second
quarter was $413,000, a decrease of approximately $287,000, or 41%, from the
prior year period.
ENGlobal averaged 235,000 billable hours per two-week period during the second
quarter 2008, a 24% increase, when compared to 189,000 billable hours in the
same period in 2007. The Company's overall utilization percentage, inclusive of
overhead personnel, is approximately 93% for the second quarter 2008 compared to
91% for the comparable period of 2007. The Company has calculated its overall
utilization percentage, inclusive of overhead personnel, at approximately 90%
since 2004.
The Company will host a conference call to discuss its quarterly results at
11:00 a.m. EDT (10:00 a.m. CDT) today, August 7, 2008. To participate in the
conference call, please dial (877) 407-8033 (Domestic) or (201) 689-8033
(International) approximately 10 minutes before the scheduled start time and
request the "ENGlobal Second Quarter 2008 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 Thursday, August 21, 2008. The replay can
be accessed by dialing (877) 660-6853 (Domestic) or (201) 612-7415
(International), Account #286, Conference ID # 293030. 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 June 30, 2008
will be filed with the Securities and Exchange Commission on or about August 11,
2008.
About ENGlobal
- --------------
ENGlobal provides engineering, construction, automation, land and regulatory
services principally to the energy sector throughout the United States and
internationally. The Company employs approximately 2,900 employees in 20 offices
and occupies over 490,000 square feet of office and fabrication 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. Further information
about the Company and its businesses 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.
Click here to join ENGlobal's email list:
http://www.b2i.us/irpass.asp?BzID=702&to=ea&s=0.
~more~
ENGlobal Press Release
August 7, 2008
Page 4
FINANCIAL HIGHLIGHTS
--------------------
Consolidated Statements of Income (in thousands, except per share data):
Quarter Ended Six Months Ended
June 30 June 30
---------------------- ----------------------
2008 2007 2008 2007
--------- --------- --------- ---------
Operating Revenue $ 136,011 $ 89,576 $ 234,177 $ 171,235
Direct cost 115,710 75,357 199,530 143,739
--------- --------- --------- ---------
Gross Profit 20,301 14,219 34,647 27,496
Selling, general and administrative 8,701 7,290 15,927 15,033
--------- --------- --------- ---------
Operating Income 11,600 6,929 18,720 12,463
Other Income (Expense):
Other income 59 515 85 515
Interest income (expense), net (413) (700) (896) (1,260)
--------- --------- --------- ---------
Income before Provision for Income Taxes 11,246 6,744 17,909 11,718
Provision for Income Taxes 4,544 2,831 7,204 4,650
--------- --------- --------- ---------
Net Income $ 6,702 $ 3,913 $ 10,705 $ 7,068
========= ========= ========= =========
Net Income Per Common Share:
Basic $ 0.25 $ 0.15 $ 0.40 $ 0.26
Diluted $ 0.24 $ 0.14 $ 0.39 $ 0.26
Weighted Average Shares Used in
Computing Net Income Per Share:
Basic 27,096 26,864 27,078 26,839
Diluted 27,641 27,290 27,576 27,209
Selected Balance Sheet Information (in thousands):
As of
----------------------------
Jun. 30, 2008 Dec. 31, 2007
------------- -------------
Cash $ 2,344 $ 908
Working capital 53,307 42,915
Property and equipment, net 6,115 6,472
Total assets 146,175 119,590
Long-term debt, net of current portion 26,477 29,318
Stockholders' equity 68,349 55,797
###