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.
|
Year Ended |
|
Year Ended |
(amounts in
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:
|
Three Months Ended |
|
Three Months Ended |
(amounts in
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 ofDecember 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) 878-1000ir@ENGlobal.com
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