HOUSTON, Nov. 03, 2017 (GLOBE NEWSWIRE) -- ENGlobal (NASDAQ:ENG), a leading provider of engineering and
automation services, today announced results for the third quarter ended September 30, 2017.
ENGlobal reported a net loss of $12.1 million for the third quarter of 2017 which was a $12.6 million decrease
over net income of $0.5 million reported for the prior year period. The third quarter 2017 results included the effects of a
$11.3 million non-cash charge relating to a valuation allowance that was taken against the Company’s deferred tax
assets. Net loss per diluted share was ($0.44) versus net income per diluted share of $0.02 for the third quarter just
ended and for the third quarter of 2016, respectively.
During the second quarter of 2017, management worked closely with a strategy consultant to perform an assessment
of the Company and both short term and long term market trends, which in turn assisted management in updating its long term
business growth strategy. This assessment was completed in the quarter just ended and concluded that ENGlobal’s market segments
that are expected to experience the highest future growth rates are those relating to Industrial Controls and Automation and the
Industrial Internet of Things (IIOT).
These are both areas in which the Company has extensive experience providing higher value products and services
to its clients but have not been the Company’s primary focus in recent years. As a result of this strategic assessment,
management has developed a multi-year plan to invest and position the Company as a leading provider of higher value industrial
automation and IIOT services to its extensive customer base – an area that has historically produced higher project margins for
ENGlobal.
Additionally, through previous organic initiatives, ENGlobal is now a vertically integrated service provider
with expertise in project related engineering, mechanical fabrication, systems integration and automation. This positioning has
allowed the Company to differentiate itself from most of its competitors as a full service provider - delivering benefits by
reducing its clients’ need to coordinate multiple vendors. In addition, ENGlobal is now able to pursue larger scopes of work
focused on a wide range of modularized engineered systems. Management believes that because of the vertical integration
strategy, an increasing amount of engineering, mechanical fabrication and systems integration services necessary to support the
Company’s strategic growth plan will be awarded to the Company.
Management's Assessment
William A. Coskey, P.E., Chairman and CEO of ENGlobal stated: “Our management has been very busy - taking
actions during the quarter to begin the implementation of ENGlobal’s strategy. These first steps included the reorganization and
refocusing of our business development personnel, the development of relevant marketing materials and the successful adoption of a
new customer relationship management system. In addition, during the quarter we completed the reorganization of our
operations staff resulting in a senior VP responsible for the staffing, training, development and project execution of our
automation business and a senior VP with the same responsibilities for our multidiscipline engineering and EPC projects
business.”
Mark A. Hess, ENGlobal's Chief Financial Officer stated: “During the quarter, we continued to work through
many projects that were awarded at the end of last year and early this year at relatively lower margins. Combined with our low
productivity levels following hurricane Harvey, this produced lower than expected revenue and gross margin for the quarter.
While our selling, general and administrative costs continue to be rationalized and reduced, the reduction was not enough to offset
the reduced gross margin. In addition, during the quarter, pursuant to standard accounting rules, we established a valuation
allowance against our deferred tax assets of $11.3 million.”
Mr. Hess continued: “While work as a result of our strategy assessment is in its beginning phases, we have seen
encouraging early indicators that this approach is aligned with our customers’ strategic focus and will be well received by our
clients. As one example, we have been developing our automation pipeline over the last few quarters resulting in a 20%
increase of our automation backlog during the quarter just ended. Proposal activity has been healthy and we are currently
awaiting client decisions on a number of significant opportunities.”
The following is a summary of the income statement for the three months ended September 30, 2017 and September 24, 2016:
|
(amounts in thousands) |
|
Three months ended
September 30, 2017 |
|
|
Three Months ended
September 24, 2016 |
Revenue |
$ |
12,896 |
|
$ |
15,968 |
Gross Profit |
|
1,621 |
|
|
3,881 |
General & Administrative Expenses |
|
3,041 |
|
|
3,511 |
Operating Income (Loss) |
|
(1,420) |
|
|
370 |
Net Income (Loss) |
|
(12,154) |
|
|
489 |
|
|
|
|
|
|
The following table presents certain balance sheet items as of September 30, 2017 and December 31, 2016:
|
(amounts in thousands) |
|
As of September 30,
2017 |
|
As of December 31,
2016 |
Cash |
$ |
10,898 |
$ |
15,687 |
Working capital |
|
19,163 |
|
22,200 |
|
|
|
|
|
The following table illustrates the composition of the Company's revenue and profitability for its operations for the three and
nine months ended September 30, 2017 and September 24, 2016:
|
(amounts in thousands) |
Three months ended
September 30, 2017 |
Three Months ended September 24, 2016 |
|
|
% of |
Gross |
Operating |
|
|
% of |
Gross |
Operating |
|
Total |
Total |
Profit |
Profit |
|
Total |
Total |
Profit |
Profit |
Segment |
Revenue |
Revenue |
Margin |
Margin |
|
Revenue |
Revenue |
Margin |
Margin |
|
|
|
|
|
|
|
|
|
|
Engineering & Construction |
$ |
8,573 |
66.5% |
10.5% |
0.3% |
|
$ |
8,216 |
51.5% |
17.7% |
6.6% |
Automation |
|
4,323 |
33.5% |
16.7% |
4.4% |
|
|
7,752 |
48.5% |
31.3% |
22.5% |
Consolidated |
$ |
12,896 |
100.0% |
12.6% |
(11.0)% |
|
$ |
15,968 |
100.0% |
24.3% |
2.3% |
|
(amounts in thousands) |
Nine months ended
September 30, 2017 |
Nine Months ended September 24, 2016 |
|
|
% of |
Gross |
Operating |
|
|
% of |
Gross |
Operating |
|
Total |
Total |
Profit |
Profit |
|
Total |
Total |
Profit |
Profit |
Segment |
Revenue |
Revenue |
Margin |
Margin |
|
Revenue |
Revenue |
Margin |
Margin |
|
|
|
|
|
|
|
|
|
|
Engineering & Construction |
$ |
26,833 |
64.9% |
13.5% |
3.5% |
|
$ |
25,000 |
56.0% |
11.5% |
1.8% |
Automation |
|
14,503 |
35.1% |
15.5% |
4.0% |
|
|
19,622 |
44.0% |
23.1% |
11.9% |
Consolidated |
$ |
41,336 |
100.0% |
14.2% |
(8.8)% |
|
$ |
44,622 |
100.0% |
16.6% |
(6.3)% |
|
The Company's Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2017 is expected to be filed with the
Securities and Exchange Commission reflecting these results by the end of the day on Friday, November 3, 2017.
About ENGlobal
ENGlobal (Nasdaq:ENG) is a provider of engineering and automation services primarily to the energy sector throughout the United
States and internationally. ENGlobal operates through two business segments: Automation and Engineering. ENGlobal's
Automation segment provides services related to the design, integration and implementation of advanced automation, information
technology process distributed control, instrumentation and process analytical systems. The Engineering segment provides
consulting services for the development, management and execution of projects requiring professional engineering, construction
management, and related support services and the fabrication operation. Within the Engineering segment, ENGlobal's Government
Services group provides engineering, design, installation and operation and maintenance of various government, public sector and
international facilities, and specializes in the turnkey installation and maintenance of automation and instrumentation systems for
the U.S. Defense industry worldwide. Further information about the Company and its businesses is available at www.ENGlobal.com.
Safe Harbor for Forward-Looking Statements
The statements above regarding the Company's expectations regarding its operations and certain other 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 effect of economic downturns and the volatility and level of oil
and natural gas prices; (2) our ability to retain existing customers and attract new customers; (3) our ability to accurately
estimate the overall risks, revenue or costs on a contract; (4) the risk of providing services in excess of original project scope
without having an approved change order; (5) our ability to execute our expansion into the modular solutions market and to execute
our updated business growth strategy to position the Company as a leading provider of higher value industrial automation and
Industrial Internet of Things services to its customer base; (6) our ability to attract and retain key professional personnel; (7)
our ability to fund our operations and grow our business utilizing cash on hand, internally generated funds and other working
capital; (8) our ability to obtain additional financing, including pursuant to a new credit facility, when needed: (9) our
dependence on one or a few customers; (10) the risks of internal system failures of our information technology systems, whether
caused by us, third-party service providers, intruders or hackers, computer viruses, natural disasters, power shortages or
terrorist attacks; (11) our ability to realize revenue projected in our backlog and our ability to collect accounts receivable and
process accounts payable in a timely manner; (12) the uncertainties related to the U.S. Government’s budgetary process and their
effects on our long-term U.S. Government contracts; (13) operational and political risks in Russia and Kazakhstan along the Caspian
Sea; (14) the risk of unexpected liability claims or poor safety performance; (15) our ability to identify, consummate and
integrate potential acquisitions; (16) our reliance on third-party subcontractors and equipment manufacturers; and (17) our ability
to purchase shares under our stock purchase program due to changes in stock price and other considerations. 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. 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.
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Contact:
Mark Hess
Phone: 281-878-4584
E-mail: IR@ENGlobal.com