MISCOR Group Reports Increased Sales, Net Income in Second Quarter

SOUTH BEND, Ind., Aug. 14, 2007 -- Industrial services provider MISCOR Group, Ltd. (BULLETIN BOARD: MCGL) reported a return to profitability on a 16 percent increase in revenues for the second quarter ended July 1, 2007. MISCOR posted gains in each of its segments and in both product sales and services revenue.

MISCOR, a provider of mechanical and electrical industrial services and products, reported net sales of $16.8 million for the second quarter of 2007, compared with net sales of $14.5 million in the same quarter last year. The addition of strong service-based revenue from the Company's May 2006 acquisition of Smith Services of Alabama, coupled with growth in both of MISCOR's two operating segments - Repair, Remanufacturing and Manufacturing (RRM) and Construction and Engineering Services (CES) - drove the sales gain.

MISCOR reported net income of $213,000, or $0.00 per diluted share, for the 2007 second quarter, compared with a net loss of $1.1 million, or $0.01 per diluted share, in the same period last year. The quarter-over-quarter improvement reflects the higher sales and lower interest expense as a result of the company's improved capital structure. The 2006 second quarter results also included a $0.8 million loss on warrants liability.

"Since the beginning of 2007, we have made significant strides to reduce our debt and control expenses, while staying firmly focused on growing the business. The result was a solid second quarter and first half of the year, marked by double-digit sales increases as we grew our existing operations and reaped the benefits of an accretive acquisition," said John Martell, president and CEO of MISCOR.

MISCOR reported that operating income was essentially unchanged year-over- year as lower Selling, General and Administrative Expenses as a percentage of sales were offset by lower gross margins. The Company reported working capital increased approximately $7.3 million to $11.4 million at the end of the second quarter compared with year-end 2006. The increase reflects the sale of 62.5 million shares of common stock in Jan. 2007 for $12.5 million, which also decreased MISCOR's total debt-to-equity ratio from 7.4:1 to 1:1 as of July 1, 2007.

For the first six months of 2007, MISCOR reported net sales of $32.9 million, an increase of 19 percent over net sales of $27.7 million in the same period last year, with the increase attributable to both product-oriented and service-related gains. The Company reported a net loss of $2.4 million in the current six-month period, inclusive of a loss on debt extinguishments of $2.3 million in the first quarter, compared to a net loss of $1.9 million in the first six months of 2006.

Martell added: "We have a strong core business that can clearly generate positive net income. At the same time, we remain long-term in our view and are staying focused on building the team and infrastructure to become a national industrial services provider."

Segment Results

In the first quarter of 2007, MISCOR completed an internal realignment process as it relates to the Company's former three operating segments in order to better serve customers across its markets. In an effort to bring further clarity to the business, MISCOR realigned its segment reporting and now operates two segments: Repair, Remanufacturing and Manufacturing (RRM), which provides maintenance and repair services for industrial motors, generators and lifting magnets, as well as diesel engine component manufacturing, remanufacturing and repair services; and the Construction and Engineering Services (CES) segment, which provides a wide range of electrical contracting, engineering and repair services for electrical power distribution systems to industrial, commercial and institutional customers.

For the 2007 second quarter, RRM reported $12.1 million in revenue, a 12 percent increase over the same period last year, driven by increased sales of motors, magnets and other industrial products and services. RRM was also the beneficiary of increasing market share gains in the diesel engine components market, which contributed $1.2 million to RRM's gains in the quarter. CES reported $4.6 million in revenue, up 26 percent over the 2006 second quarter, due to increases in electrical contracting, a strong local construction market and growing name brand recognition.

Conclusion

"In addition to the financial strides we've made as it relates to our recent recapitalization and strong rate of top line growth, we recently entered into a revolving credit facility agreement that will enable us to further boost our working capital," said Rich Mullin, chief financial officer of MISCOR. "Combined, these initiatives are critical as we survey the acquisition landscape for appropriate candidates that will facilitate our geographic expansion while adding experienced people at all levels of our operations."

During the second quarter, MISCOR entered into a $5 million revolving credit facility with MFB Financial with the proceeds to be used for capital expenditures and working capital purposes.

MISCOR's success as a rapidly growing company has been recognized by its listing on the Inc. 500 twice, and a #8 ranking in 2006 on the Inner City 100's list of fastest-growing inner city companies in America with a five-year revenue growth of 1,299 percent.

"The industrial services sector has substantial potential as we continue to operate in a marketplace with no true national leader," concluded Martell. "With the aid of our recent recapitalization and debt reduction, streamlining of our operating segments, and revenue growth rate, we have a strong platform to build for the future."