HOUSTON, March 28, 2019 (GLOBE NEWSWIRE) -- ENGlobal (Nasdaq:ENG), a leading provider of
engineered modular solutions to the energy industry, today announced a net loss of $5.7 million and a diluted loss per share of
$0.21 for the fiscal year ended December 29, 2018. The Company incurred non-cash expenses for goodwill impairment, depreciation and
amortization, and stock compensation of $2.7 million during 2018 and income tax expense of $0.1 million primarily due to state
margin tax.
Management's Assessment
William Coskey, P.E., Chairman and Chief Executive Officer of ENGlobal said: “The Company is making strides to
benefit from the multi-year strategic initiative we began in the fall of 2017. We have identified modular project execution
offerings as the opportunity to which our capabilities are best applied, and focused our business development team on communicating
these offerings to specific clients. Seven strategic initiatives have been identified where we can provide complete project
execution that includes engineering, design, fabrication and integration of automated control systems as a complete packaged
solution for our clients, preferably in a modular form. This “design it once – build it many times” concept has many merits for our
clients including a single vendor interface, better control of costs, better control of schedule and lower safety risk, among other
things, which is being well received by many of our clients.”
Mr. Coskey continued: “One result of our positioning and sales efforts is that the new opportunities and
proposal pipeline we track continues to increase. Many of these proposals are larger, but have not yet been awarded and have
exceeded our expected award timing. Our backlog, which represents an estimate of projects that have not been completed, increased
to $29.2 million at December 29, 2018. This compares to backlog of $24.1 million as of December 30, 2017. I expect our backlog will
continue to increase over the course of 2019, based on current levels of proposal activity.”
Mark Hess, ENGlobal's Chief Financial Officer, said: “We showed significant progress towards profitability
through the first three quarters of 2018, reducing our quarterly loss to $197 thousand for the third quarter. However, during the
fourth quarter the Company experienced significant, unforeseen employee benefit cost - that is anticipated to be short lived but
which negatively impacted both our gross profit and SG&A. This trend reversal compounded by the Company’s recent financial
results also triggered an impairment of our goodwill in the fourth quarter.”
Mr. Hess continued: “ENGlobal’s cash on hand is trending positively, increasing $0.8 million during the fourth
quarter, 2018 to a total of $6.1 million at December 29, 2018 and has continued to increase year to date in 2019 as we close out
some of the larger in-process projects before investments in new projects are required. Although cash on hand has increased in the
first quarter of 2019, gross profit has been negatively impacted by the delayed execution of current and expected project awards.
As a result, our financial results for the first quarter are expected to be negatively impacted.”
Mr. Hess continued: “We continue to be very mindful of our overhead structure, and total SG&A costs have
continued to decrease. Although the Company has made investments in key individuals, product developments, new facilities and
equipment, in addition to the increased employee benefit cost mentioned above, these areas of additional overhead cost have been
more than offset by SG&A decreases in other areas of our business.”
2018 Fiscal Year results as compared to 2017 Fiscal Year results:
Revenue decreased to $54.0 million for the fiscal year ended December 29, 2018, or 3.2%, from $55.8 million for
the fiscal year ended December 30, 2017. ENGlobal reported a net loss of $5.7 million, or $0.21 per diluted share, for the fiscal
year ended December 29, 2018, compared to net loss of $16.3 million, or $0.59 per diluted share, for the prior year period. The
Company incurred income tax expense of $0.1 million during 2018 primarily due to state margin tax, compared to income tax expense
of $10.1 million during 2017. The Company incurred non-cash expenses for goodwill impairment, depreciation and amortization, and
stock compensation of $2.7 million during 2018 and the Company incurred non-cash expenses for depreciation and amortization and
stock compensation of $1.6 million during 2017. No goodwill impairment was recorded in 2017.
In April 2015, the Company’s Board of Directors authorized the repurchase of up to $2.0 million of the Company’s
common stock from time to time, based on prevailing market conditions. The Company is not obligated to repurchase any dollar amount
or specific number of shares of common stock under the repurchase program, which may be suspended, discontinued or reinstated at
any time. The stock repurchase program was suspended on May 16, 2017 and reinstated on December 19, 2018. Through December 29,
2018, ENGlobal had repurchased and retired 1,212,773 shares of common stock at a total cost of $1.5 million, including 21,723
shares for $15 thousand in between December 19, 2018 and December 29, 2018.
The following table illustrates the composition of the Company's revenue and profitability for its operations
for the fiscal years ended December 29, 2018 and December 30, 2017:
| |
Year Ended |
|
Year Ended |
| (amounts in thousands) |
December 29, 2018 |
|
December 30, 2017 |
| Segment |
Total Revenue |
% of Total Revenue |
Gross Profit Margin |
Operating Profit (Loss) Margin |
|
Total Revenue |
% of Total Revenue |
Gross Profit Margin |
Operating Profit (Loss)
Margin |
| |
|
|
|
|
|
|
|
|
|
| Engineering & Construction |
$ |
24,152 |
44.7 |
% |
12.5 |
% |
4.7 |
% |
|
$ |
22,595 |
40.5 |
% |
4.9 |
% |
(7.9 |
)% |
| Automation |
|
29,844 |
55.3 |
% |
13.1 |
% |
(2.5 |
)% |
|
|
33,170 |
59.5 |
% |
16.1 |
% |
6.5 |
% |
| Consolidated |
$ |
53,996 |
100.0 |
% |
12.8 |
% |
(9.6 |
)% |
|
$ |
55,765 |
100.0 |
% |
11.5 |
% |
(11.0 |
)% |
| |
|
|
|
|
|
|
|
|
|
The following table illustrates the composition of the Company's revenue and profitability for its operations
for the three months ended December 29, 2018 and December 30, 2017:
| |
Three Months Ended |
|
Three Months Ended |
| (amounts in thousands) |
December 29, 2018 |
|
December 30, 2017 |
| Segment |
Total Revenue |
% of Total Revenue |
Gross Profit Margin |
Operating Profit Margin |
|
Total Revenue |
% of Total Revenue |
Gross Profit Margin |
Operating Profit Margin |
| |
|
|
|
|
|
|
|
|
|
| Engineering & Construction |
$ |
5,583 |
44.0 |
% |
2.4 |
% |
(5.6 |
)% |
|
$ |
5,619 |
38.9 |
% |
(11.3 |
)% |
(28.5 |
)% |
| Automation |
|
7,098 |
56.0 |
% |
11.9 |
% |
(25.6 |
)% |
|
|
8,811 |
61.1 |
% |
13.7 |
% |
5.1 |
% |
| Consolidated |
|
12,681 |
100.0 |
% |
7.7 |
% |
(25.3 |
)% |
|
|
14,430 |
100.0 |
% |
4.0 |
% |
(17.4 |
)% |
| |
|
|
|
|
|
|
|
|
|
The following is a summary of the Company’s statement of operations for the last four quarters which may be helpful in analyzing
our ongoing business:
| (amounts in thousands) |
|
2018 |
|
|
Fiscal Year |
| |
Q1 |
Q2 |
Q3 |
Q4 |
|
|
2018 |
|
| Revenue |
$ |
13,188 |
|
$ |
13,872 |
|
$ |
14,255 |
|
$ |
12,681 |
|
|
$ |
53,996 |
|
| Gross Profit |
|
1,413 |
|
|
2,253 |
|
|
2,293 |
|
|
974 |
|
|
|
6,933 |
|
| Gross Profit Margin |
|
10.7 |
% |
|
16.2 |
% |
|
16.1 |
% |
|
7.7 |
% |
|
|
12.8 |
% |
| General & Administrative Expenses |
|
2,582 |
|
|
2,869 |
|
|
2,483 |
|
|
2,096 |
|
|
|
10,030 |
|
| Goodwill impairment |
|
— |
|
|
— |
|
|
— |
|
|
2,086 |
|
|
|
2,086 |
|
| Operating Loss |
|
(1,169 |
) |
|
(616 |
) |
|
(190 |
) |
|
(3,208 |
) |
|
|
(5,183 |
) |
| Net Loss |
|
(1,200 |
) |
|
(992 |
) |
|
(197 |
) |
|
(3,282 |
) |
|
|
(5,671 |
) |
The following table presents certain balance sheet items as of December 29, 2018 and December 30, 2017:
(amounts in thousands) |
As of
December 29, 2018 |
As of
December 30, 2017 |
| Cash and restricted cash |
$ |
6,060 |
$ |
9,648 |
| Working capital |
|
13,725 |
|
16,846 |
| |
|
|
The Company's Annual Report on Form 10-K for the year ended December 29, 2018 is expected to be filed with the Securities and
Exchange Commission today reflecting these results.
About ENGlobal
ENGlobal (Nasdaq:ENG) is a leading provider of engineered modular solutions 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 process
distributed control and analyzer systems, advanced automated data gathering systems and information technology. Within the
Automation 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. The Engineering segment provides multi-disciplined
engineering services relating to the development, management and execution of projects requiring professional engineering and
related project management services. 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) our ability to identify, evaluate, and complete any strategic
alternative in connection with our review of strategic alternatives; (2) the impact of the announcement of our review of strategic
alternatives on our business, including our financial and operating results, or our employees, suppliers and customers; (3) the
effect of economic downturns and the volatility and level of oil and natural gas prices; (4) our ability to retain existing
customers and attract new customers; (5) our ability to accurately estimate the overall risks, revenue or costs on a contract; (6)
the risk of providing services in excess of original project scope without having an approved change order; (7) 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; (8)
our ability to attract and retain key professional personnel; (9) our ability to fund our operations and grow our business
utilizing cash on hand, internally generated funds and other working capital; (10) our ability to obtain additional financing,
including pursuant to a new credit facility, when needed: (11) our dependence on one or a few customers; (12) the risks of internal
system failures of our information technology systems, whether caused by us, third-party service providers, intruders or hackers,
computer viruses, malicious code, cyber-attacks, phishing and other cyber security problems, natural disasters, power shortages or
terrorist attacks; (13) our ability to realize revenue projected in our backlog and our ability to collect accounts receivable and
process accounts payable in a timely manner; (14) the uncertainties related to the U.S. Government’s budgetary process and their
effects on our long-term U.S. Government contracts; (15) the risk of unexpected liability claims or poor safety performance; (16)
our ability to identify, consummate and integrate potential acquisitions; (17) our reliance on third-party subcontractors and
equipment manufacturers; (18) our ability to satisfy the continued listing standards of NASDAQ with respect to our common stock or
to cure any continued listing standard deficiency with respect thereto; and (19) the effect of changes in laws and regulations,
including U.S. tax laws, with which the Company must comply and the associated cost of compliance with such laws and regulations .
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 A. Hess
(281) 878-1000
ir@ENGlobal.com
