ENGlobal Corporation: 1Q 2013 Report

ENGlobal Reports First Quarter 2013 Results

HOUSTON, May 14, 2013 (GLOBE NEWSWIRE) -- ENGlobal (Nasdaq:ENG), a leading provider of energy-related engineering and automation services, announced today its financial results for the first quarter ended March 30, 2013.

First Quarter 2013 Highlights Compared to First Quarter 2012:

$0.07 earnings per share, an increase from a loss per share of $0.01
Revenue of $49.8 million, a decrease of 15.9%
Gross profit margin as a percentage of revenue of 11.7%, an increase from 11.1%
Corporate SG&A decreased from $4.0 million to $3.4 million
ENGlobal reported net income of approximately $1.9 million, or $0.07 per share, and a net loss from continuing operations of approximately $1.0 million, or $0.04 per share for the quarter ended March 30, 2013.  This compares to a net loss of approximately $0.1 million, or $0.01 per share, and a net loss from continuing operations of approximately $0.9 million, or $0.03 per share, for the quarter ended March 31, 2012. First quarter 2013 revenues decreased to $49.8 million, 15.9% lower than the $59.2 million for the first quarter of fiscal year 2012, primarily due to lower engineering, procurement and construction (EPC) project revenues in the Engineering and Construction segment and the conclusion of several projects in the fabrication division of the Automation segment in 2012.

Although the Company's borrowings under our credit facility have been reduced, interest expense, fees, and consulting services associated with the credit facility were approximately $520,000 higher during the first quarter of 2013 when compared to the first quarter of 2012.

Management's Assessment

"We are pleased to see the anticipated financial impact of the strategic divesture of the land and inspection divisions in late 2012," said William A. Coskey, P.E., ENGlobal's Chairman and Chief Executive Officer. "We continue to evaluate alternatives for improving our financial condition and further paying down debt. Operationally, we are making good progress on increasing profit margins under both new and existing master service agreements.  It is important to note that we have been successful in landing several significant contracts from new clients in various geographical regions as well negotiating contract extensions from a number of long-term clients, which indicates the viability of our business development efforts."

Mark A. Hess, ENGlobal's Chief Financial Officer, added, "We have been focused on our core engineering and automation businesses since the first of the year, greatly reducing exposure to EPC projects. As of March 30, 2013, project backlog was approximately $205 million, which was roughly unchanged from December 29, 2012. During the first quarter, we produced cash from operations that was used to pay down our credit facility."

The Company's gross profit margin as a percentage of revenue increased to 11.7% in the three months ended March 30, 2013 as compared to 11.1% for the three months ended March 31, 2012. The primary reason for this increase is reduced variable costs and improved efficiencies in the

Automation segment.

Overall, selling, general and administrative ("SG&A") expenses decreased $0.9 million, or 12.8%, from $7.1 million in the three months ended March 31, 2012 to $6.2 million for the three months ended March 30, 2013. As a percentage of revenue, SG&A increased to 12.6% for the three months ended March 30, 2013, from 12.0% for the comparable period in 2012.

The amount outstanding on the credit facility was $20.2 million at March 30, 2013, $26.8 million at December 29, 2012, and $19.4 million at May 13, 2013.  As previously announced, the Company entered into the Second Amendment to Revolving Credit and Security Agreement, Waiver and Forbearance Extension on December 18, 2012. Under the terms of the Amendment, the maximum revolving amount was reduced from $35.0 million beginning on February 1, 2013 as follows: $31.5 million for the period from February 1, 2013 through and including April 29, 2013, and $26.5 million for the period from April 30, 2013 through and including the last day of the term, which is presently May 29, 2015.

The Company is currently in default under the terms of the credit facility with its senior lender and the Second Amendment to the Forbearance Agreement expired on April 30, 2013. However, the lender has not taken any action with respect to the Company's defaults and the Company continues to actively discuss with the lender the terms under which such defaults may be cured or waived.

By following the link you can get the table illustrates the composition of the Company's revenue and profitability for the three months ended March 30, 2013 and March 31, 2012, respectively:

http://www.englobal.com/profiles/investor/ResLibraryView.asp?ResLibraryID=62684&BzID=702&Nav=0&LangID=1&s=0&Category=64