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Form 8-K ENGLOBAL CORP For: Mar 15

March 16, 2018 12:26 PM EDT

 

 

 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

 

FORM 8-K

 

 

 

CURRENT REPORT

 

Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934

 

Date of Report (Date of earliest event reported) March 15, 2018

 

 

 

ENGlobal Corporation

(Exact name of registrant as specified in its charter)

 

Nevada   001-14217   88-0322261
(State or other jurisdiction
of incorporation)
  (Commission
File Number)
  (IRS Employer
Identification No.)

 

654 N. Sam Houston Parkway E., Suite 400, Houston, Texas   77060-5914
(Address of principal executive offices)   (Zip Code)

 

Registrant’s telephone number, including area code: 281-878-1000

 

     
  (Former name or former address, if changed since last report)  

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

  [  ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
  [  ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
  [  ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
  [  ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 

 

   

 

 

Item 2.02. Results of Operations and Financial Condition.

 

On March 15, 2018, ENGlobal Corporation (the “Company”) issued a press release reporting fourth quarter and year ended December 30, 2017 results. A copy of the press release is filed as Exhibit 99.1 to this Current Report on Form 8-K and is incorporated herein by reference.

 

In accordance with General Instruction B.2 of Form 8-K, the foregoing information, including Exhibit 99.1, shall not be deemed “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934 or otherwise subject to the liabilities of that section, nor shall such information and Exhibit 99.1 be deemed incorporated by reference in any filing under the Securities Act of 1933 or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.

 

Item 9.01. Financial Statements and Exhibits.

 

(d) Exhibits

 

Exhibit 99.1. Press release dated March 15, 2018

 

   

 

 

SIGNATURE

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

    ENGlobal Corporation
    (Registrant)
     
March 16, 2018   /s/ Mark A. Hess
(Date)   Mark A. Hess
Chief Financial Officer

 

   

 

 

Exhibit 99.1

 

ENGlobal Reports Fourth Quarter and Fiscal Year 2017 Results

 

HOUSTON, March 15, 2018 (MARKETWIRE) — ENGlobal (Nasdaq: ENG), a leading provider of engineering and automation services, today announced a net loss of $16.3 million and a diluted loss per share of $0.59 for the fiscal year ended December 30, 2017. The Company incurred income tax expense of $10.1 million during 2017 primarily due to the effect of the income tax rate change and a valuation allowance recorded against the Company’s deferred tax assets. The Company incurred non-cash expenses for depreciation, amortization and stock compensation of $1.6 million during 2017.

 

Management’s Assessment

 

William Coskey, P.E., Chairman and Chief Executive Officer of ENGlobal said: “I am encouraged that ENGlobal’s sales pipeline of near term, higher probability opportunities have recently been growing at a rapid pace. Overall, our 2018 sales pipeline is now over three times larger than at this time two years ago, reinforcing the Company’s proactive efforts to increase the utilization of its capabilities and resources. It’s also important to note that our 2018 target list of opportunities currently exhibits over 90% of these potential projects being within the Automation segment.”

 

Mr. Coskey continued: “We have faced a certain sluggishness in the markets we serve with respect to our customers awarding work, and thus it has taken longer to turn our impressive list of opportunities into booked backlog. However, recent activity and customer communications indicates that our business is approaching an inflection point this year.”

 

Mr. Coskey continued: “I could not be prouder of the men and women of ENGlobal, who are working tirelessly to rebuild our Company in a better way. Building our backlog with higher expected margins, executing on a larger volume of business, and leveraging our lower fixed overhead structure together are expected to provide for profitable results.”

 

Mark Hess, ENGlobal’s Chief Financial Officer, said: “The Company has successfully reduced its run rate fixed overhead to under $12 million per year, significantly lower than in the recent past. However, our reduced volume of business does not currently produce sufficient project margin for profitable results. Working capital at December 30, 2017 was approximately $16.8 million, which, along with internally generated funds, is expected to be sufficient for our anticipated 2018 growth. We believe that increased value for our shareholders can be realized this year by executing our internal growth plan, together with potential external strategies being developed.”

 

2017 Fiscal Year results as compared to 2016 Fiscal Year results:

 

Revenue decreased to $55.8 million for the fiscal year ended December 30, 2017, or a 5.8% decrease, from $59.2 million for the fiscal year ended December 31, 2016. ENGlobal reported a net loss of $16.3 million, or $0.59 per diluted share, for the fiscal year ended December 30, 2017, compared to net loss of $2.3 million, or $0.08 per diluted share, for the prior year period. The Company incurred income tax expense of $10.1 million during 2017 primarily due to the effect of the income tax rate change and a valuation allowance recorded against the Company’s deferred tax assets. The Company recorded an income tax benefit of $1.0 million during 2016. The Company incurred non-cash expenses for depreciation, amortization and stock compensation of $1.6 million during both 2017 and 2016.

 

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. Through May 16, 2017, the date the program was suspended, ENGlobal had repurchased and retired 1,191,050 shares of common stock at a total cost of $1,498,409.

 

   

 

 

The following table illustrates the composition of the Company’s revenue and profitability for its operations for the fiscal years ended December 30, 2017 and December 31, 2016:

 

We have revised our segment reporting to reflect our current management approach and recast prior periods to conform to the current segment presentation. As a result of the change in reporting structure discussed above, effective January 1, 2017, the results of ENGlobal’s Government Services group, which were previously included as part of our Engineering, Procurement and Construction Management (“EPCM”), are now reported within the Automation segment.

 

(amounts in  Year Ended   Year Ended 
thousands)  December 30, 2017   December 31, 2016 
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  $22,595    40.5%   4.9%   (7.9)%  $24,006    40.5%   10.4%   0.2%
Automation   33,170    59.5%   16.1%   6.52%   35,218    59.5%   21.6%   11.3%
Consolidated  $55,765    100.0%   11.5%   (11.02)%  $59,224    100.0%   17.1%   (5.5)%

 

The following table illustrates the composition of the Company’s revenue and profitability for its operations for the three months ended December 30, 2017 and December 31, 2016:

 

(amounts in  Three Months Ended   Three Months Ended 
thousands)  December 30, 2017   December 31, 2016 
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  $5,619    38.9%   (11.3)%   (28.5)%  $5,890    40.3%   12.4%   1.6%
Automation   8,811    61.1%   13.7%   5.1%   8,712    59.7%   22.6%   13.1%
Consolidated   14,430    100.0%   4.0%   (17.4)%   14,602    100.0%   18.5%   (3.0)%

 

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)  2017   Fiscal Year 
   Q1   Q2   Q3   Q4   2017 
Revenue  $12,473   $15,966   $12,896   $14,430   $55,765 
Gross Profit   1,731    2,513    1,621    573    6,438 
Gross Profit Margin   13.9%   15.7%   12.6%   4.0%   11.5%
General & Administrative Expenses   3,406    3,057    3,041    3,077    12,581 
Operating Loss   (1,675)   (544)   (1,420)   (2,504)   (6,143)
Net Loss   (878)   (895)   (12,154)   (2,331)   (16,258)

 

The following table presents certain balance sheet items as of December 30, 2017 and December 31, 2016:

 

(amounts in thousands)  As of
December 30, 2017
   As of
December 31, 2016
 
Cash and restricted cash  $9,648   $15,687 
Working capital   16,847    22,200 

 

The Company’s Annual Report on Form 10-K for the year ended December 30, 2017 is expected to be filed with the Securities and Exchange Commission today reflecting these results.

 

   

 

 

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 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) 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) the risk of unexpected liability claims or poor safety performance; (14) our ability to identify, consummate and integrate potential acquisitions; (15) our reliance on third-party subcontractors and equipment manufacturers; (16) 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 (17) 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

[email protected]

 

   

 

 



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