X | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
ENGlobal Corporation |
(Exact name of registrant as specified in its charter) |
Nevada |
(State or other jurisdiction of |
incorporation or organization) |
88-0322261 |
(I.R.S Employer Identification No.) |
654 N. Sam Houston Parkway E., Suite 400, Houston, TX | 77060-5914 | |||
(Address of principal executive offices) | (Zip code) |
Yes | X | No |
Yes | No |
Large Accelerated Filer | Accelerated Filer | |||||||||
Non-Accelerated Filer | (Do not check if a smaller reporting company) | Smaller Reporting Company | X |
Yes | No | X |
$0.001 Par Value Common Stock | 26,602,156 shares |
Page Number | ||
Part I. | ||
Item 1. | ||
Item 2. | ||
Item 3. | ||
Item 4. | ||
Part II. | ||
Item 1. | ||
Item 1A. | ||
Item 2. | ||
Item 3. | ||
Item 5. | ||
Item 6. | ||
ITEM 1. | FINANCIAL STATEMENTS |
For the Three Months Ended June 30, | For the Six Months Ended June 30, | ||||||||||||||
2011 | 2010 | 2011 | 2010 | ||||||||||||
Operating revenues | $ | 79,612 | $ | 73,705 | $ | 156,862 | $ | 141,689 | |||||||
Operating costs | 72,145 | 69,674 | 143,674 | 132,786 | |||||||||||
Gross profit | 7,467 | 4,031 | 13,188 | 8,903 | |||||||||||
Selling, general and administrative expenses | 6,890 | 10,273 | 15,210 | 17,656 | |||||||||||
Operating income (loss) | 577 | (6,242 | ) | (2,022 | ) | (8,753 | ) | ||||||||
Other income (expense): | |||||||||||||||
Other income (expense), net | (16 | ) | 159 | (59 | ) | 148 | |||||||||
Interest expense, net | (191 | ) | (78 | ) | (408 | ) | (154 | ) | |||||||
Income (loss) before income taxes | 370 | (6,161 | ) | (2,489 | ) | (8,759 | ) | ||||||||
Provision (benefit) for federal and state income taxes | 228 | (1,644 | ) | (658 | ) | (2,704 | ) | ||||||||
Net income (loss) | $ | 142 | $ | (4,517 | ) | $ | (1,831 | ) | $ | (6,055 | ) | ||||
Earnings (loss) per common share: | |||||||||||||||
Basic | $ | 0.01 | $ | (0.16 | ) | $ | (0.07 | ) | $ | (0.22 | ) | ||||
Diluted | $ | 0.01 | $ | (0.16 | ) | $ | (0.07 | ) | $ | (0.22 | ) | ||||
Weighted average shares used in computing earnings (loss) per share (in thousands): | |||||||||||||||
Basic | 26,578 | 27,419 | 26,566 | 27,427 | |||||||||||
Diluted | 26,958 | 27,419 | 26,566 | 27,427 |
ASSETS | |||||||
June 30, 2011 | December 31, 2010 | ||||||
Current Assets: | |||||||
Cash and cash equivalents | $ | 34 | $ | 49 | |||
Trade receivables, net of allowances of $1,239 and $2,130 | 57,734 | 56,064 | |||||
Prepaid expenses and other current assets | 1,233 | 1,801 | |||||
Notes receivable | — | 2,579 | |||||
Costs and estimated earnings in excess of billings on uncompleted contracts | 5,663 | 5,129 | |||||
Federal and state income taxes receivable | 6,869 | 6,841 | |||||
Deferred tax asset | 3,515 | 2,619 | |||||
Total Current Assets | $ | 75,048 | $ | 75,082 | |||
Property and equipment, net | 3,837 | 4,503 | |||||
Goodwill | 22,614 | 22,614 | |||||
Other intangible assets, net | 3,913 | 4,975 | |||||
Long-term trade and notes receivable, net of current portion and allowances | 1,361 | 1,361 | |||||
Deferred tax asset, non-current | 1,575 | 1,424 | |||||
Other assets | 432 | 365 | |||||
Total Assets | $ | 108,780 | $ | 110,324 | |||
LIABILITIES AND STOCKHOLDERS' EQUITY | |||||||
Current Liabilities: | |||||||
Accounts payable | $ | 9,959 | $ | 9,430 | |||
Accrued compensation and benefits | 16,584 | 11,221 | |||||
Notes payable | 83 | 2,070 | |||||
Current portion of long-term debt and leases | 12,457 | 19,093 | |||||
Deferred rent | 638 | 629 | |||||
Billings in excess of costs and estimated earnings on uncompleted contracts | 2,115 | 1,233 | |||||
Other current liabilities | 3,469 | 1,294 | |||||
Total Current Liabilities | $ | 45,305 | $ | 44,970 | |||
Long-Term Debt and Leases, net of current portion | 5 | 252 | |||||
Total Liabilities | $ | 45,310 | $ | 45,222 | |||
Commitments and Contingencies (Note 10) | |||||||
Stockholders' Equity: | |||||||
Common stock - $0.001 par value; 75,000,000 shares authorized; 26,602,156 and 26,676,279 shares outstanding and 27,583,255 and 27,657,378 shares issued at June 30, 2011 and December 31, 2010, respectively | $ | 28 | $ | 28 | |||
Additional paid-in capital | 37,807 | 37,608 | |||||
Retained earnings | 28,067 | 29,920 | |||||
Treasury stock at cost - 981,099 shares at June 30, 2011 and December 31, 2010 | (2,362 | ) | (2,362 | ) | |||
Accumulated other comprehensive loss | (70 | ) | (92 | ) | |||
Total Stockholders' Equity | $ | 63,470 | $ | 65,102 | |||
Total Liabilities and Stockholders' Equity | $ | 108,780 | $ | 110,324 |
For the Six Months Ended June 30, | |||||||
2011 | 2010 | ||||||
Cash Flows from Operating Activities: | |||||||
Net loss | $ | (1,831 | ) | $ | (6,055 | ) | |
Adjustments to reconcile net loss to net cash provided by operating activities: | |||||||
Depreciation and amortization | 1,880 | 2,197 | |||||
Share-based compensation expense | 198 | 200 | |||||
Deferred income tax benefit | (1,047 | ) | — | ||||
Gain on disposal of property, plant and equipment | (21 | ) | (7 | ) | |||
Changes in current assets and liabilities, net of acquisitions: | |||||||
Trade accounts and other receivables | 909 | 4,959 | |||||
Costs and estimated earnings in excess of billings on uncompleted contracts | (534 | ) | 2,543 | ||||
Prepaid expenses and other assets | 530 | 923 | |||||
Accounts payable | (944 | ) | 1,326 | ||||
Accrued compensation and benefits | 5,340 | 3,866 | |||||
Billings in excess of costs and estimated earnings on uncompleted contracts | 882 | (1,782 | ) | ||||
Other liabilities | 2,184 | 1,914 | |||||
Income taxes receivable | (28 | ) | (1,225 | ) | |||
Net cash provided by operating activities | $ | 7,518 | $ | 8,859 | |||
Cash Flows from Investing Activities: | |||||||
Property and equipment acquired | (203 | ) | (695 | ) | |||
Proceeds from note receivable | — | 15 | |||||
Business acquisitions, net of cash acquired | — | (1,896 | ) | ||||
Proceeds from sale of other assets | 65 | 9 | |||||
Net cash used in investing activities | $ | (138 | ) | $ | (2,567 | ) | |
Cash Flows from Financing Activities: | |||||||
Borrowings on line of credit | 73,456 | 41,068 | |||||
Payments on line of credit | (80,042 | ) | (46,245 | ) | |||
Purchase of treasury stock | — | (804 | ) | ||||
Proceeds from issuance of common stock | — | 14 | |||||
Repayments under capital lease | (50 | ) | (94 | ) | |||
Other long-term debt borrowings (repayments) | (759 | ) | (148 | ) | |||
Net cash used in financing activities | $ | (7,395 | ) | $ | (6,209 | ) | |
Effect of Exchange Rate Changes on Cash | — | 1 | |||||
Net change in cash | (15 | ) | 84 | ||||
Cash and cash equivalents, at beginning of period | 49 | 143 | |||||
Cash and cash equivalents, at end of period | $ | 34 | $ | 227 |
Number of Options | Weighted Average Exercise Price | Weighted Average Remaining Contractual Term (Years) | Aggregate Intrinsic Value (000's)* | ||||||||||
Balance at December 31, 2010 | 915,000 | $ | 7.14 | 5.2 | $ | 145 | |||||||
Granted | — | — | — | — | |||||||||
Exercised | — | — | — | — | |||||||||
Canceled or expired | (140,000 | ) | 8.77 | — | — | ||||||||
Balance at June 30, 2011 | 775,000 | $ | 6.84 | 4.7 | $ | 426 | |||||||
Exercisable at June 30, 2011 | 755,000 | $ | 6.77 | 4.6 | $ | 426 |
Date Issued | Issued to | Number of Individuals | Number of Shares | Market Price | Fair Value | Grants Forfeited | |||||||||||||
January 27, 2010 | Employee | 2 | 37,500 | $ | 3.09 | $ | 115,875 | 18,750 | |||||||||||
June 17, 2010 | Employee | 1 | 40,323 | $ | 2.48 | $ | 100,000 | — | |||||||||||
June 17, 2010 | Director | 3 | 96,774 | $ | 2.48 | $ | 240,000 | — | |||||||||||
September 10, 2010 | Employee | 2 | 21,008 | $ | 2.38 | $ | 50,000 | — | |||||||||||
June 16, 2011 | Employee | 1 | 22,866 | $ | 3.28 | $ | 75,000 | — | |||||||||||
June 16, 2011 | Director | 3 | 73,170 | $ | 3.28 | $ | 240,000 | — |
June 30, 2011 | December 31, 2010 | ||||||
(dollars in thousands) | |||||||
Costs incurred on uncompleted contracts | $ | 46,750 | $ | 60,812 | |||
Estimated earnings on uncompleted contracts | 5,842 | 8,731 | |||||
Earned revenues | 52,592 | 69,543 | |||||
Less: billings to date | 49,044 | 65,647 | |||||
Net costs and estimated earnings in excess of billings on uncompleted contracts | $ | 3,548 | $ | 3,896 | |||
Costs and estimated earnings in excess of billings on uncompleted contracts | $ | 5,663 | $ | 5,129 | |||
Billings in excess of costs and estimated earnings on uncompleted contracts | (2,115 | ) | (1,233 | ) | |||
Net costs and estimated earnings in excess of billings on uncompleted contracts | $ | 3,548 | $ | 3,896 |
June 30, 2011 | December 31, 2010 | ||||||
(dollars in thousands) | |||||||
Schedule of Long-Term Debt and Leases: | |||||||
Wells Fargo Credit Facility | $ | 12,112 | $ | 18,698 | |||
The following notes are subordinate to the credit facility and are unsecured: | |||||||
ICP Transco, Inc. | 99 | 96 | |||||
Control Dynamics International, L.P. | 251 | 500 | |||||
Total long-term debt | 12,462 | 19,294 | |||||
Less: current maturities of long-term debt | (12,457 | ) | (19,042 | ) | |||
Long-term debt, net of current portion | 5 | 252 | |||||
Borrowings under capital lease | — | 51 | |||||
Less: current maturities of capital lease | — | (51 | ) | ||||
Total long-term debt and leases, net of current portion | $ | 5 | $ | 252 |
• | EBITDA not less than $1.25 million: |
• | fixed charge coverage ratio (commencing September 30, 2011) not less than 1.75 to 1.00. |
For the three months ended June 30, 2011 | Engineering and Construction | Automation | Field Solutions | All Other | Consolidated | ||||||||||||||
(dollars in thousands) | |||||||||||||||||||
Revenue before eliminations | $ | 43,699 | $ | 17,930 | $ | 18,020 | $ | — | $ | 79,649 | |||||||||
Inter-segment eliminations | — | (37 | ) | — | — | (37 | ) | ||||||||||||
Revenue | 43,699 | 17,893 | 18,020 | — | 79,612 | ||||||||||||||
Gross profit | 4,399 | 1,860 | 1,208 | — | 7,467 | ||||||||||||||
SG&A | 1,447 | 1,128 | 964 | 3,351 | 6,890 | ||||||||||||||
Operating income (loss) | 2,952 | 732 | 244 | (3,351 | ) | 577 | |||||||||||||
Other expense | (16 | ) | |||||||||||||||||
Interest expense | (191 | ) | |||||||||||||||||
Tax expense | (228 | ) | |||||||||||||||||
Net income | $ | 142 | |||||||||||||||||
For the three months ended June 30, 2010 | |||||||||||||||||||
(dollars in thousands) | |||||||||||||||||||
Revenue before eliminations | $ | 35,935 | $ | 15,804 | $ | 21,997 | $ | — | $ | 73,736 | |||||||||
Inter-segment eliminations | (17 | ) | (14 | ) | — | — | (31 | ) | |||||||||||
Revenue | 35,918 | 15,790 | 21,997 | — | 73,705 | ||||||||||||||
Gross profit | 1,605 | 744 | 1,682 | — | 4,031 | ||||||||||||||
SG&A | 4,752 | 1,368 | 872 | 3,281 | 10,273 | ||||||||||||||
Operating income (loss) | (3,147 | ) | (624 | ) | 810 | (3,281 | ) | (6,242 | ) | ||||||||||
Other income | 159 | ||||||||||||||||||
Interest expense | (78 | ) | |||||||||||||||||
Tax benefit | 1,644 | ||||||||||||||||||
Net loss | $ | (4,517 | ) |
For the six months ended June 30, 2011 | Engineering and Construction | Automation | Field Solutions | All Other | Consolidated | ||||||||||||||
(dollars in thousands) | |||||||||||||||||||
Revenue before eliminations | $ | 81,545 | $ | 35,833 | $ | 39,712 | $ | — | $ | 157,090 | |||||||||
Inter-segment eliminations | (1 | ) | (227 | ) | — | — | (228 | ) | |||||||||||
Revenue | 81,544 | 35,606 | 39,712 | — | 156,862 | ||||||||||||||
Gross profit | 7,581 | 2,740 | 2,867 | — | 13,188 | ||||||||||||||
SG&A | 3,693 | 2,066 | 3,045 | 6,406 | 15,210 | ||||||||||||||
Operating income (loss) | 3,888 | 674 | (178 | ) | (6,406 | ) | (2,022 | ) | |||||||||||
Other expense | (59 | ) | |||||||||||||||||
Interest expense | (408 | ) | |||||||||||||||||
Tax benefit | 658 | ||||||||||||||||||
Net loss | $ | (1,831 | ) | ||||||||||||||||
For the six months ended June 30, 2010 | |||||||||||||||||||
(dollars in thousands) | |||||||||||||||||||
Revenue before eliminations | $ | 69,133 | $ | 31,021 | $ | 41,588 | $ | — | $ | 141,742 | |||||||||
Inter-segment eliminations | (39 | ) | (14 | ) | — | — | (53 | ) | |||||||||||
Revenue | 69,094 | 31,007 | 41,588 | — | 141,689 | ||||||||||||||
Gross profit | 3,598 | 2,126 | 3,179 | — | 8,903 | ||||||||||||||
SG&A | 7,341 | 2,325 | 1,607 | 6,383 | 17,656 | ||||||||||||||
Operating income (loss) | (3,743 | ) | (199 | ) | 1,572 | (6,383 | ) | (8,753 | ) | ||||||||||
Other income | 148 | ||||||||||||||||||
Interest expense | (154 | ) | |||||||||||||||||
Tax benefit | 2,704 | ||||||||||||||||||
Net loss | $ | (6,055 | ) |
Total Assets by Segment | As of June 30, 2011 | As of December 31, 2010 | ||||||
(dollars in thousands) | ||||||||
Engineering and Construction | $ | 51,588 | $ | 53,333 | ||||
Automation | 26,512 | 24,883 | ||||||
Field Solutions | 17,042 | 19,702 | ||||||
All Other | 13,638 | 12,406 | ||||||
Consolidated | $ | 108,780 | $ | 110,324 |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2011 | 2010 | 2011 | 2010 | ||||||||||||
(dollars in thousands) | |||||||||||||||
Current | $ | 228 | $ | 80 | $ | 389 | $ | 260 | |||||||
Deferred | — | (1,724 | ) | (1,047 | ) | (2,964 | ) | ||||||||
Total tax benefit | $ | 228 | $ | (1,644 | ) | $ | (658 | ) | $ | (2,704 | ) | ||||
Effective tax rate | 61.6 | % | 26.7 | % | 26.4 | % | 30.9 | % |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||
2011 | 2010 | 2011 | 2010 | ||||||||
(shares in thousands) | |||||||||||
Weighted average shares outstanding used to compute basic EPS | 26,578 | 27,419 | 26,566 | 27,427 | |||||||
Effect of share-based compensation plans | 380 | — | — | — | |||||||
Shares used to compute diluted EPS | 26,958 | 27,419 | 26,566 | 27,427 |
ITEM 2. | MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
During the three months ended June 30, 2011 | During the six months ended June 30, 2011 | |
Revenues | Increased 8.0% | Increased 10.7% |
Gross profit | Increased 85.2% | Increased 48.1% |
Operating income | Increased 109.2% | Increased 76.9% |
SG&A expense | Decreased 32.9% | Decreased 13.9% |
Net income | Increased 103.1% | Increased 69.8% |
Selected Balance Sheet Comparisons | As of | As of | As of | ||||||||
June 30, | December 31, | June 30, | |||||||||
2011 | 2010 | 2010 | |||||||||
(dollars in thousands) | |||||||||||
Working capital | $ | 29,743 | $ | 30,112 | $ | 26,409 | |||||
Total assets | $ | 108,780 | $ | 110,324 | $ | 105,562 | |||||
Long-term debt and capital leases, net of current portion | $ | 5 | $ | 252 | $ | 1,585 | |||||
Stockholders' equity | $ | 63,470 | $ | 65,102 | $ | 72,068 | |||||
Days sales outstanding | 65 | 56 | 56 |
For the three months ended June 30, 2011 | Engineering and Construction | Automation | Field Solutions | All Other | Consolidated | |||||||||||||||||
(dollars in thousands) | ||||||||||||||||||||||
Revenue before eliminations | $ | 43,699 | $ | 17,930 | $ | 18,020 | $ | — | $ | 79,649 | ||||||||||||
Inter-segment eliminations | — | (37 | ) | — | — | (37 | ) | |||||||||||||||
Revenue | 43,699 | 17,893 | 18,020 | — | 79,612 | 100.0 | % | |||||||||||||||
Gross profit | 4,399 | 1,860 | 1,208 | — | 7,467 | 9.4 | % | |||||||||||||||
SG&A | 1,447 | 1,128 | 964 | 3,351 | 6,890 | 8.7 | % | |||||||||||||||
Operating income (loss) | 2,952 | 732 | 244 | (3,351 | ) | 577 | 0.7 | % | ||||||||||||||
Other expense | (16 | ) | 0.0 | % | ||||||||||||||||||
Interest expense | (191 | ) | (0.2 | )% | ||||||||||||||||||
Tax expense | (228 | ) | (0.3 | )% | ||||||||||||||||||
Net income | $ | 142 | 0.2 | % | ||||||||||||||||||
Diluted earnings per share | $ | 0.01 | ||||||||||||||||||||
For the three months ended June 30, 2010 | ||||||||||||||||||||||
(dollars in thousands) | ||||||||||||||||||||||
Revenue before eliminations | $ | 35,935 | $ | 15,804 | $ | 21,997 | $ | — | $ | 73,736 | ||||||||||||
Inter-segment eliminations | (17 | ) | (14 | ) | — | — | (31 | ) | ||||||||||||||
Revenue | 35,918 | 15,790 | 21,997 | — | 73,705 | 100.0 | % | |||||||||||||||
Gross profit | 1,605 | 744 | 1,682 | — | 4,031 | 5.5 | % | |||||||||||||||
SG&A | 4,752 | 1,368 | 872 | 3,281 | 10,273 | 13.9 | % | |||||||||||||||
Operating income (loss) | (3,147 | ) | (624 | ) | 810 | (3,281 | ) | (6,242 | ) | (8.4 | )% | |||||||||||
Other income | 159 | 0.2 | % | |||||||||||||||||||
Interest expense | (78 | ) | (0.1 | )% | ||||||||||||||||||
Tax benefit | 1,644 | 2.2 | % | |||||||||||||||||||
Net loss | $ | (4,517 | ) | (6.1 | )% | |||||||||||||||||
Diluted loss per share | $ | (0.16 | ) | |||||||||||||||||||
Increase/(Decrease) in Operating Results | ||||||||||||||||||||||
(dollars in thousands) | ||||||||||||||||||||||
Revenue before eliminations | $ | 7,764 | $ | 2,126 | $ | (3,977 | ) | $ | — | $ | 5,913 | |||||||||||
Inter-segment eliminations | 17 | (23 | ) | — | — | (6 | ) | |||||||||||||||
Revenue | 7,781 | 2,103 | (3,977 | ) | — | 5,907 | 8.0 | % | ||||||||||||||
Gross profit | 2,794 | 1,116 | (474 | ) | — | 3,436 | 85.2 | % | ||||||||||||||
SG&A | (3,305 | ) | (240 | ) | 92 | 70 | (3,383 | ) | (32.9 | )% | ||||||||||||
Operating income (loss) | 6,099 | 1,356 | (566 | ) | (70 | ) | 6,819 | 109.2 | % | |||||||||||||
Other expense | (175 | ) | (110.1 | )% | ||||||||||||||||||
Interest expense | (113 | ) | (144.9 | )% | ||||||||||||||||||
Tax benefit | (1,872 | ) | (113.9 | )% | ||||||||||||||||||
Net income | $ | 4,659 | 103.1 | % | ||||||||||||||||||
Increase per diluted share | $ | 0.17 |
For the six months ended June 30, 2011 | Engineering and Construction | Automation | Field Solutions | All Other | Consolidated | |||||||||||||||||
(dollars in thousands) | ||||||||||||||||||||||
Revenue before eliminations | $ | 81,545 | $ | 35,833 | $ | 39,712 | $ | — | $ | 157,090 | ||||||||||||
Inter-segment eliminations | (1 | ) | (227 | ) | — | — | (228 | ) | ||||||||||||||
Revenue | 81,544 | 35,606 | 39,712 | — | 156,862 | 100.0 | % | |||||||||||||||
Gross profit | 7,581 | 2,740 | 2,867 | — | 13,188 | 8.4 | % | |||||||||||||||
SG&A | 3,693 | 2,066 | 3,045 | 6,406 | 15,210 | 9.7 | % | |||||||||||||||
Operating income (loss) | 3,888 | 674 | (178 | ) | (6,406 | ) | (2,022 | ) | (1.3 | )% | ||||||||||||
Other expense | (59 | ) | 0.0 | % | ||||||||||||||||||
Interest expense | (408 | ) | (0.3 | )% | ||||||||||||||||||
Tax benefit | 658 | 0.4 | % | |||||||||||||||||||
Net loss | $ | (1,831 | ) | (1.2 | )% | |||||||||||||||||
Diluted loss per share | $ | (0.07 | ) | |||||||||||||||||||
For the six months ended June 30, 2010 | ||||||||||||||||||||||
(dollars in thousands) | ||||||||||||||||||||||
Revenue before eliminations | $ | 69,133 | $ | 31,021 | $ | 41,588 | $ | — | $ | 141,742 | ||||||||||||
Inter-segment eliminations | (39 | ) | (14 | ) | — | — | (53 | ) | ||||||||||||||
Revenue | 69,094 | 31,007 | 41,588 | — | 141,689 | 100.0 | % | |||||||||||||||
Gross profit | 3,598 | 2,126 | 3,179 | — | 8,903 | 6.3 | % | |||||||||||||||
SG&A | 7,341 | 2,325 | 1,607 | 6,383 | 17,656 | 12.5 | % | |||||||||||||||
Operating income (loss) | (3,743 | ) | (199 | ) | 1,572 | (6,383 | ) | (8,753 | ) | (6.2 | )% | |||||||||||
Other income | 148 | 0.1 | % | |||||||||||||||||||
Interest expense | (154 | ) | (0.1 | )% | ||||||||||||||||||
Tax benefit | 2,704 | 1.9 | % | |||||||||||||||||||
Net loss | $ | (6,055 | ) | (4.3 | )% | |||||||||||||||||
Diluted loss per share | $ | (0.22 | ) | |||||||||||||||||||
Increase/(Decrease) in Operating Results | ||||||||||||||||||||||
(dollars in thousands) | ||||||||||||||||||||||
Revenue before eliminations | $ | 12,412 | $ | 4,812 | $ | (1,876 | ) | $ | — | $ | 15,348 | |||||||||||
Inter-segment eliminations | 38 | (213 | ) | — | — | (175 | ) | |||||||||||||||
Revenue | 12,450 | 4,599 | (1,876 | ) | — | 15,173 | 10.7 | % | ||||||||||||||
Gross profit | 3,983 | 614 | (312 | ) | — | 4,285 | 48.1 | % | ||||||||||||||
SG&A | (3,648 | ) | (259 | ) | 1,438 | 23 | (2,446 | ) | (13.9 | )% | ||||||||||||
Operating income (loss) | 7,631 | 873 | (1,750 | ) | (23 | ) | 6,731 | 76.9 | % | |||||||||||||
Other expense | (207 | ) | (139.9 | )% | ||||||||||||||||||
Interest expense | (254 | ) | (164.9 | )% | ||||||||||||||||||
Tax benefit | (2,046 | ) | (75.7 | )% | ||||||||||||||||||
Net loss | $ | 4,224 | 69.8 | % | ||||||||||||||||||
Increase per diluted share | $ | 0.15 |
• | ENGlobal has served many of our valued clients over a long period of time and these strong relationships are the foundation of our business. We are also continuously undertaking business development activities to form new long-term client relationships. While some clients are basing their purchasing decisions on overall costs rather than existing relationships, we continue to see project awards from our long-term clients and we have entered into several Master Service Agreements since the first of the year. |
• | Our business relies primarily on small to mid-sized projects, many of which fall into the “run and maintain” category. We believe that future petrochemical work undertaken in the United States will consist primarily of these types of projects. |
• | We continue to see increased interest in our Field Solutions segment from our client base. This further supports our belief that the recovery is continuing. Our clients are able to take advantage of our capabilities from the beginning (right-of-way) to the end (inspection) of any midstream project. We believe that new pipelines and storage facilities will be required in the United States as a result of the need to transport crude oil and natural gas from developing basins and shale plays, such as the Bakken, Haynesville, Marcellus, Eagle Ford, Utica, and in the Niobrara Rocky Mountain area. We also see continued need for pipelines to transport imported sources of energy, such as Canadian crude, liquefied natural gas and refined products. |
• | A significant part of our Automation segment's work is driven by our clients' need to replace aging and obsolete distributed control system (“DCS”) and analytical equipment, both domestically and internationally. While some of these expenditures can be deferred, Automation revenues and backlog have increased since the comparable period in 2010. Historically, the need to replace DCS and other equipment has provided reliable and recurring projects for us. We continue to benefit as certain DCS manufacturers are currently phasing out their support for heritage control platforms and launching new platforms. We have recently seen an increase in proposal activity for larger projects and have identified several large, sole-sourced Automation opportunities. Also, we believe that with such a large installed base, our large engineering and construction firm clients may be required to migrate to newer DCS platforms, thus gaining access to major international projects. |
• | We are entering into more international contracts and actively working to increase our ability to take advantage of opportunities outside the United States. During the second quarter of 2011, we were awarded an engineering, procurement and commissioning services agreement from the Caspian Pipeline Consortium (CPC). Granted under two contracts, one to the Russian Federation and one to the Republic of Kazakhstan, the award is expected to have a total value of approximately $86 million over four years. Our Automation segment also benefits from its ability to sell work to large engineering and construction firms, thus gaining access to major international projects through tier-one firms. |
• | losses return, |
• | amounts billed are not collected or are not collected in a timely manner, |
• | circumstances prevent the timely internal processing of invoices, |
• | we are unable to win new projects that we can perform on a profitable basis, |
• | project mix continues to shift from cost-reimbursable to fixed-price contracts and we are unable to accurately estimate the project costs and fees, resulting in cost overruns, |
• | there are changes in our competitive position within our market in view of, among other things, the resulting changes in demand for our services and competitive pricing pressures, |
• | the Company loses one or more of its major customers or its major customers continue to significantly reduce the amount of work requested from the Company, |
• | we are unable to achieve our business strategy while effectively managing costs and expenses, |
• | the associated costs of compliance with laws and regulations, either currently or in the future, significantly impacts the Company, |
• | there are substantial costs or fees to increase or replace our line of credit, or |
• | we are unable to maintain compliance with the covenants of the Wells Fargo Credit Facility or to obtain waivers when necessary. |
• | fixed charge coverage ratio (commencing September 30, 2011) not less than 1.75 to 1.00; |
• | EBITDA not less than $1.25 million. |
• | Increased Trade Receivables – The increase of $1.7 million from December 31, 2010, was primarily due to larger billings to a few major clients and increased work in the Automation and Engineering and Construction segments. Our days sales outstanding has fluctuated from 56 days for the three month period ended June 30, 2010 and for the twelve month period ended December 31, 2010, to 65 days for the three month period ended June 30, 2011. The Company manages its billing and client collection processes toward reducing days sales outstanding to the extent practicable. We believe that our allowance for bad debt is adequate to cover any potential non-payment by our customers. |
• | Decreased Notes Receivable - The decrease of $2.6 million from December 31, 2010 was due to payments received in relation to the Alon settlement. |
• | Increased Accrued Compensation and Benefits – The increase of $5.4 million from December 31, 2010 was due to timing differences of our bi-weekly payrolls as well as the Company increasing the personal leave benefits for our regular full-time employees at the beginning of 2011. |
• | Decreased Notes Payable - The decrease of $2.0 million from December 31, 2010 was due primarily to the payoff of a current note payable. |
• | Decreased Current Portion of Long-Term Debt and Leases – The decrease of $6.6 million from December 31, 2010 was due to the Wells Fargo Credit Facility loan balance being lower at the end of the current quarter compared to year end. |
• | Increased Other Liabilities - The increase of $2.2 million from December 31, 2010 was due to increased legal reserves and the funding from a client on pass-through project. |
Three Months Ended June 30, | ||||||||||||||||||||
2011 | 2010 | Increase/(Decrease) | ||||||||||||||||||
(dollars in thousands) | ||||||||||||||||||||
Revenue before eliminations | $ | 43,699 | $ | 35,935 | $ | 7,764 | ||||||||||||||
Inter-segment eliminations | — | (17 | ) | 17 | ||||||||||||||||
Total revenue | $ | 43,699 | $ | 35,918 | $ | 7,781 | ||||||||||||||
Detailed revenue | ||||||||||||||||||||
Detail-design | $ | 24,893 | 57.0 | % | $ | 17,316 | 48.2 | % | $ | 7,577 | 43.8 | % | ||||||||
Field services | 16,391 | 37.5 | % | 13,526 | 37.7 | % | 2,865 | 21.2 | % | |||||||||||
Procurement services | 967 | 2.2 | % | 1,257 | 3.5 | % | (290 | ) | (23.1 | )% | ||||||||||
Fixed-price | 1,448 | 3.3 | % | 3,819 | 10.6 | % | (2,371 | ) | (62.1 | )% | ||||||||||
Total revenue | $ | 43,699 | 100.0 | % | $ | 35,918 | 100.0 | % | $ | 7,781 | 21.7 | % | ||||||||
Gross profit | 4,399 | 10.1 | % | 1,605 | 4.5 | % | 2,794 | 174.1 | % | |||||||||||
Operating SG&A expense | 1,447 | 3.3 | % | 4,752 | 13.2 | % | (3,305 | ) | (69.5 | )% | ||||||||||
Operating income (loss) | $ | 2,952 | 6.8 | % | $ | (3,147 | ) | (8.7 | )% | $ | 6,099 | 193.8 | % |
For the Six Months Ended June 30, | ||||||||||||||||||||
2011 | 2010 | Increase/(Decrease) | ||||||||||||||||||
(dollars in thousands) | ||||||||||||||||||||
Revenue before eliminations | $ | 81,545 | $ | 69,133 | $ | 12,412 | ||||||||||||||
Inter-segment eliminations | (1 | ) | (39 | ) | 38 | |||||||||||||||
Total revenue | $ | 81,544 | $ | 69,094 | $ | 12,450 | ||||||||||||||
Detailed revenue | ||||||||||||||||||||
Detail-design | $ | 44,892 | 55.1 | % | $ | 34,220 | 49.5 | % | $ | 10,672 | 31.2 | % | ||||||||
Field services | 30,018 | 36.8 | % | 27,142 | 39.3 | % | 2,876 | 10.6 | % | |||||||||||
Procurement services | 2,701 | 3.3 | % | 1,258 | 1.8 | % | 1,443 | 114.7 | % | |||||||||||
Fixed-price | 3,933 | 4.8 | % | 6,474 | 9.4 | % | (2,541 | ) | (39.2 | )% | ||||||||||
Total revenue | $ | 81,544 | $ | 69,094 | 100.0 | % | $ | 12,450 | 18.0 | % | ||||||||||
Gross profit | 7,581 | 9.3 | % | 3,598 | 5.2 | % | 3,983 | 110.7 | % | |||||||||||
Operating SG&A expense | 3,693 | 4.5 | % | 7,341 | 10.6 | % | (3,648 | ) | (49.7 | )% | ||||||||||
Operating income (loss) | $ | 3,888 | 4.8 | % | $ | (3,743 | ) | (5.4 | )% | $ | 7,631 | (203.9 | )% |
Three Months Ended June 30, | ||||||||||||||||||||
2011 | 2010 | Increase/(Decrease) | ||||||||||||||||||
(dollars in thousands) | ||||||||||||||||||||
Revenue before eliminations | $ | 17,930 | $ | 15,804 | $ | 2,126 | ||||||||||||||
Inter-segment eliminations | (37 | ) | (14 | ) | (23 | ) | ||||||||||||||
Total revenue | $ | 17,893 | $ | 15,790 | $ | 2,103 | ||||||||||||||
Detailed revenue | ||||||||||||||||||||
Electrical | $ | 6,511 | 36.4 | % | $ | 2,362 | 14.9 | % | $ | 4,149 | 175.7 | % | ||||||||
Fabrication | 5,687 | 31.8 | % | 7,449 | 47.2 | % | (1,762 | ) | (23.7 | )% | ||||||||||
Non-fabrication | 5,695 | 31.8 | % | 5,979 | 37.9 | % | (284 | ) | (4.7 | )% | ||||||||||
Total revenue | $ | 17,893 | 100.0 | % | $ | 15,790 | 100.0 | % | $ | 2,103 | 13.3 | % | ||||||||
Gross profit | 1,860 | 10.4 | % | 744 | 4.7 | % | 1,116 | 150.0 | % | |||||||||||
Operating SG&A expense | 1,128 | 6.3 | % | 1,368 | 8.7 | % | (240 | ) | (17.5 | )% | ||||||||||
Operating income (loss) | $ | 732 | 4.1 | % | $ | (624 | ) | (4.0 | )% | $ | 1,356 | 217.3 | % |
Six Months Ended June 30, | ||||||||||||||||||||
2011 | 2010 | Increase/(Decrease) | ||||||||||||||||||
(dollars in thousands) | ||||||||||||||||||||
Revenue before eliminations | $ | 35,833 | $ | 31,021 | $ | 4,812 | ||||||||||||||
Inter-segment eliminations | (227 | ) | (14 | ) | (213 | ) | ||||||||||||||
Total revenue | $ | 35,606 | $ | 31,007 | $ | 4,599 | ||||||||||||||
Detailed revenue | ||||||||||||||||||||
Electrical | $ | 14,671 | 41.2 | % | $ | 2,362 | 7.6 | % | $ | 12,309 | 521.1 | % | ||||||||
Fabrication | 10,153 | 28.5 | % | 16,720 | 53.9 | % | (6,567 | ) | (39.3 | )% | ||||||||||
Non-fabrication | 10,782 | 30.3 | % | 11,925 | 38.5 | % | (1,143 | ) | (9.6 | )% | ||||||||||
Total revenue | $ | 35,606 | 100.0 | % | $ | 31,007 | 100.0 | % | $ | 4,599 | 14.8 | % | ||||||||
Gross profit | 2,740 | 7.7 | % | 2,126 | 6.9 | % | 614 | 28.9 | % | |||||||||||
Operating SG&A expense | 2,066 | 5.8 | % | 2,325 | 7.5 | % | (259 | ) | (11.1 | )% | ||||||||||
Operating income (loss) | $ | 674 | 1.9 | % | $ | (199 | ) | (0.6 | )% | $ | 873 | (438.7 | )% |
Three Months Ended June 30, | ||||||||||||||||||||
2011 | 2010 | Increase/(Decrease) | ||||||||||||||||||
(dollars in thousands) | ||||||||||||||||||||
Revenue before eliminations | $ | 18,020 | $ | 21,997 | $ | (3,977 | ) | |||||||||||||
Inter-segment eliminations | — | — | — | |||||||||||||||||
Total revenue | $ | 18,020 | $ | 21,997 | $ | (3,977 | ) | |||||||||||||
Detailed revenue | ||||||||||||||||||||
Inspection services | $ | 11,669 | 64.8 | % | $ | 16,172 | 73.5 | % | $ | (4,503 | ) | (27.8 | )% | |||||||
Land services | 6,351 | 35.2 | % | 5,825 | 26.5 | % | 526 | 9.0 | % | |||||||||||
Total revenue | $ | 18,020 | 100.0 | % | $ | 21,997 | 100.0 | % | $ | (3,977 | ) | (18.1 | )% | |||||||
Gross profit | 1,208 | 6.7 | % | 1,682 | 7.6 | % | (474 | ) | (28.2 | )% | ||||||||||
Operating SG&A expense | 964 | 5.3 | % | 872 | 3.9 | % | 92 | 10.6 | % | |||||||||||
Operating income | $ | 244 | 1.4 | % | $ | 810 | 3.7 | % | $ | (566 | ) | (69.9 | )% |
Six Months Ended June 30, | ||||||||||||||||||||
2011 | 2010 | Increase/(Decrease) | ||||||||||||||||||
(dollars in thousands) | ||||||||||||||||||||
Revenue before eliminations | $ | 39,712 | $ | 41,588 | $ | (1,876 | ) | |||||||||||||
Inter-segment eliminations | — | — | — | |||||||||||||||||
Total revenue | $ | 39,712 | $ | 41,588 | $ | (1,876 | ) | |||||||||||||
Detailed revenue | ||||||||||||||||||||
Inspection services | $ | 27,837 | 70.1 | % | $ | 29,493 | 70.9 | % | $ | (1,656 | ) | (5.6 | )% | |||||||
Land services | 11,875 | 29.9 | % | 12,095 | 29.1 | % | (220 | ) | (1.8 | )% | ||||||||||
Total revenue | $ | 39,712 | 100.0 | % | $ | 41,588 | 100.0 | % | $ | (1,876 | ) | (4.5 | )% | |||||||
Gross profit | 2,867 | 7.2 | % | 3,179 | 7.6 | % | (312 | ) | (9.8 | )% | ||||||||||
Operating SG&A expense | 3,045 | 7.7 | % | 1,607 | 3.8 | % | 1,438 | 89.5 | % | |||||||||||
Operating income (loss) | $ | (178 | ) | (0.4 | )% | $ | 1,572 | 3.8 | % | $ | (1,750 | ) | (111.3 | )% |
ITEM 3. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK |
ITEM 4. | CONTROLS AND PROCEDURES |
ITEM 1. | LEGAL PROCEEDINGS |
ITEM 1A. | RISK FACTORS |
ITEM 2. | UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS |
ITEM 3. | DEFAULTS UPON SENIOR SECURITIES |
ITEM 5. | OTHER INFORMATION |
ITEM 6. | EXHIBITS |
Incorporated by Reference to: | |||||||
Exhibit No. | Description | Form or Schedule | Exhibit No. | Filing Date with SEC | SEC File Number | ||
3.1 | Restated Articles of Incorporation of Registrant dated August 8, 2002 | 10-Q | 3.1 | 11/14/2002 | 001-14217 | ||
3.2 | Amendment to the Restated Articles of Incorporation of the Registrant, filed with the Nevada Secretary of State on June 2, 2006 | 8-A12B | 3.1 | 12/17/2007 | 001-14217 | ||
3.3 | Amended and Restated Bylaws of Registrant dated November 6, 2007 | 10-K | 3.3 | 3/28/2008 | 001-14217 | ||
3.4 | Amendments to Amended and Restated Bylaws of Registrant dated April 29, 2008. | 10-Q | 3.2 | 5/7/2008 | 001-14217 | ||
*31.1 | Certifications Pursuant to Rule 13a – 14(a) of the Securities Exchange Act of 1934 for the Second Quarter 2011 | ||||||
*31.2 | Certifications Pursuant to Rule 13a – 14(a) of the Securities Exchange Act of 1934 for the Second Quarter 2011 | ||||||
*32.0 | Certification Pursuant to Rule 13a – 14(b) of the Securities Exchange Act of 1934 and 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 for the Second Quarter 2011 | ||||||
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ENGlobal Corporation | ||||
Dated: | August 4, 2011 | |||
By: | /s/ Edward L. Pagano | |||
Edward L. Pagano | ||||
Chief Executive Officer and Principal Accounting Officer |
1. | I have reviewed this quarterly report on Form 10-Q for the quarter ended June 30, 2011 of ENGlobal Corporation; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c) | Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d) | Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and |
5. | The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): |
a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
Date: | August 4, 2011 | By: | /s/ Edward L. Pagano | ||
Edward L. Pagano | |||||
Chief Executive Officer |
1. | I have reviewed this quarterly report on Form 10-Q for the quarter ended June 30, 2011 of ENGlobal Corporation; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c) | Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d) | Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and |
5. | The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): |
a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
Date: | August 4, 2011 | By: | /s/ Edward L. Pagano | ||
Edward L. Pagano | |||||
Principal Accounting Officer |
Date: | August 4, 2011 | By: | /s/ Edward L. Pagano | ||
Edward L. Pagano | |||||
Chief Executive Officer |
Date: | August 4, 2011 | By: | /s/ Edward L. Pagano | ||
Edward L. Pagano | |||||
Principal Accounting Officer |
Condensed Consolidated Balance Sheets Parenthetical (USD $)
In Thousands, except Share data |
Jun. 30, 2011
|
Dec. 31, 2010
|
---|---|---|
Current Assets: | Â | Â |
Allowance for doubtful accounts | $ 1,239 | $ 2,130 |
Stockholders' Equity: | Â | Â |
Common stock, par value | $ 0.001 | $ 0.001 |
Common stock, shares authorized | 75,000,000 | 75,000,000 |
Common stock, shares issued | 27,583,255 | 27,657,378 |
Common stock, shares outstanding | 26,602,156 | 26,676,279 |
Treasury stock | 981,099 | 981,099 |
Document and Entity Information
|
6 Months Ended | |
---|---|---|
Jun. 30, 2011
|
Aug. 01, 2011
|
|
Entity Information [Line Items] | Â | Â |
Entity Registrant Name | ENGlobal Corporation | Â |
Entity Central Index Key | 0000933738 | Â |
Current Fiscal Year End Date | --12-31 | Â |
Entity Filer Category | Smaller Reporting Company | Â |
Document Type | 10-Q | Â |
Document Period End Date | Jun. 30, 2011 | |
Document Fiscal Year Focus | 2011 | Â |
Document Fiscal Period Focus | Q2 | Â |
Amendment Flag | false | Â |
Entity Common Stock, Shares Outstanding | Â | 26,602,156 |
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NOTE Federal and State Income Taxes
|
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2011
|
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NOTE Federal and State Income Taxes [Abstract] | Â | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Income Tax Disclosure [Text Block] | The components of income tax expense (benefit) for the three months and six months ended June 30, 2011 and 2010 were as follows:
The Company makes its interim tax allocation by applying estimated fiscal year effective tax rates to estimated fiscal year ordinary income together with unusual or infrequently occurring activity for the year-to-date period. The computed effective tax rate for the three month period ended June 30, 2011, was higher than the customary relationship between income tax expense and pretax accounting income because we revised our estimate of fiscal year effective tax rates downward to reflect estimated proportionate changes in components of fiscal year pretax income. |
NOTE Subsequent Events
|
3 Months Ended |
---|---|
Jun. 30, 2011
|
|
NOTE Subsequent Events [Abstract] | Â |
Schedule of Subsequent Events [Text Block] | In July 2011, with the support of Wells Fargo's Global Banking Group, ENGlobal and the Export-Import Bank of the United States (“Ex-Im Bank”) entered into a $9.5 million letter of credit facility (the “Ex-Im Bank Facility”) to support the Company's Caspian Pipeline Consortium (CPC) project. Under the terms of this agreement, the Company may issue letters of credit to CPC for its performance under the CPC project. The Company is required to collateralize letters of credit outstanding under the Ex-Im Bank Facility with cash or eligible receivables resulting from the CPC project. As of the date of this filing, there were $9.1 million in letters of credit outstanding under this facility. These letters of credit were collateralized by $2.3 million in cash. |
NOTE Share Based Compensation
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NOTE Share Based Compensation [Abstract] | Â | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Disclosure of Share-based Compensation Arrangements by Share-based Payment Award [Text Block] | The Company's 1998 Incentive Plan (“Option Plan”) that provided for the issuance of options to acquire up to 3,250,000 shares of common stock expired in June 2008. The Option Plan provided for grants of non-statutory options, incentive stock options, restricted stock awards and stock appreciation rights. All stock option grants were for a ten-year term. Stock options issued to executives and management generally vested over a four-year period, one-fifth at grant date and one-fifth at December 31 of each year until they are fully vested. Stock options issued to directors under the Option Plan vested quarterly over a one-year period. As of August 1, 2011, 775,000 shares of common stock remained subject to outstanding awards previously granted under the Option Plan. In June 2009, the Company's stockholders approved a new 2009 Equity Incentive Plan (“Equity Plan”) that provides for the issuance of up to 480,000 shares of common stock. The Equity Plan provides for grants of non-statutory options, incentive stock options, restricted stock awards, performance shares, performance units, restricted stock units and other stock-based awards. Grants to employees generally vest over a four-year period, one-fourth at December 31 of each year until they are fully vested. Grants to non-employee directors vest quarterly over a one-year period coinciding with their service term. As of August 1, 2011, 319,766 shares of restricted stock have been granted under the Equity Plan, of which 151,409 remain subject to outstanding awards. Unvested restricted stock awards and restricted stock units are included in diluted earnings per share until the shares have been vested. The vested shares are then included in basic earnings per share. Total share-based compensation expense in the amount of $98,000 and $100,000 was recognized during the three months ended June 30, 2011 and 2010, respectively. Total share-based compensation expense in the amount of $198,000 and $200,000 was recognized during the six months ended June 30, 2011 and 2010, respectively. Share-based compensation expense is reported in selling, general and administrative expense. Stock Options Compensation expense related to outstanding non-vested stock option awards under the Option Plan of $55,000 had not been recognized at June 30, 2011. This compensation expense is expected to be recognized over a weighted-average period of approximately 6 months. The following table summarizes stock option activity through the second quarter of 2011:
*Based on average stock price through the second quarter of 2011 of $4.18 per share. The average stock price for the same period in 2010 was $2.92 per share. The total fair value of vested options outstanding as of June 30, 2011 and 2010 was $0.4 million and $0.3 million, respectively. There were no options exercised during the six months ended June 30, 2011. The total intrinsic value of options exercised was $27,000 for the six months ended June 30, 2010. Restricted Stock Awards Restricted stock awards granted to directors are intended to compensate and retain the director over the one-year service period commencing July 1 of the year of service. These awards vest in quarterly installments beginning September 30 of the year of service, so long as the grantee continues to serve as a director of the Company. Restricted stock awards granted to employees vest in four equal annual installments beginning December 31 in the year granted, so long as the grantee remains employed full-time with the Company as of each vesting date. During 2010 and 2011, the Company granted restricted stock awards per the following table.
The amount of compensation expense related to all restricted stock awards that had not been recognized at June 30, 2011, totaled $433,000. This compensation expense is expected to be recognized over a weighted-average period of approximately 22 months. |
NOTE Stock Repurchase Program
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Jun. 30, 2011
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NOTE Stock Repurchase Program [Abstract] | Â |
Schedule of Treasury Stock by Class [Text Block] | Effective May 14, 2010, our Board of Directors authorized a total expenditure of $2.5 million to repurchase shares of the Company's common stock. Through open market purchases under this authorization, we purchased 981,099 shares at an average cost of 2.41 per share during the twelve months ended December 31, 2010. At June 30, 2011, approximately $0.1 million remains authorized in the stock repurchase program. The program does not have an expiration date. Restrictions, contained in our loan agreements governing our credit facility with Wells Fargo Bank, limit the amount of our common stock that we can repurchase. In accordance with amendments to the loan agreement with Wells Fargo, the Company does not currently intend to purchase additional shares under this program. |
NOTE Commitments and Contingencies
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Jun. 30, 2011
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NOTE Commitments and Contingencies [Abstract] | Â |
Commitments and Contingencies Disclosure [Text Block] | Employment Agreements The Company has employment agreements with certain of its executive officers and certain other officers, the terms of which expire on or before May 2013, with the severance terms ranging from six to twelve months. Such agreements provide for minimum salary levels. If employment is terminated for any reason other than (1) termination for cause, (2) voluntary resignation or (3) the employee's death, the Company is obligated to provide a severance benefit equal to between six and twelve months of the employee's salary, and, at its option, an additional six months at 50% to 100% of the employee's salary in exchange for an extension of a non-competition agreement. Some of these agreements are renewable for an additional one-year term at the Company's option. No liability is recorded for the Company's obligations under employment agreements as the amounts that will ultimately be paid cannot be reasonably estimated, if any. Long-term Trade and Note Receivable In the first quarter of 2007, ENGlobal and South Louisiana Ethanol, LLC (“SLE”) executed an agreement for engineering, procurement and construction (“EPC”) services relating to the retro-fit of an ethanol plant in southern Louisiana (the “SLE project”). In October 2007, SLE executed a promissory note, or “Hand Note,” payable to the Company and having a principal balance of approximately $12.3 million, constituting all amounts then due to the Company for its work performed in connection with the project. The history of the SLE Project is described in Note 12 to the Company's condensed consolidated financial statements included in its Quarterly Report on Form 10-Q for the quarter ended September 30, 2007, is discussed further in the Company's Annual Reports on Form 10-K for the years ended December 31, 2007, 2008, 2009 and 2010 and under Litigation, below, of this Quarterly Report on Form 10-Q. During 2010, the Company elected to write down the SLE note receivable to $1.4 million. More information relating to the SLE matter is discussed further in Litigation below. Litigation In June 2008, ENGlobal filed an action in the United States District Court for the Eastern District of Louisiana; Case Number 08-3601, against South Louisiana Ethanol LLC (“SLE”) entitled ENGlobal Engineering, Inc. and ENGlobal Construction Resources, Inc. vs. South Louisiana Ethanol, LLC. The lawsuit seeks to enforce collection of $15.8 million owed to ENGlobal and its affiliates for services performed on an ethanol plant in Louisiana. In August 2009, SLE filed for Chapter 11 protection in the United States Bankruptcy Court for the Eastern District of Louisiana, Case number 09-12676. On October 26, 2010, the Bankruptcy Court issued an order setting forth the manner in which proceeds of a sale of the SLE property will be allocated among the debtors in the Bankruptcy proceeding. Given the time this matter has been pending, together with other factors, such as the time it would take to prosecute an appeal, ENGlobal elected to write down the note receivable to $1.4 million in 2010. Although an auction of the SLE property was scheduled for June 30, 2011, SLE accepted a closed bid pursuant to the “Bid Procedures” approved by the court in April. The purchase price was $6.8 million allocated as follows: $2.6 million for “Immoveable Property”, $4.0 million for “Moveables”, and $0.2 million for an Option to Purchase SLE's membership interest in CHS-SLE, LLC. A hearing was held and the judge approved the sale, subject to ENGlobal's reservation of the value allocation and categorization for immovable and movable assets. ENGlobal estimates net recovery to be approximately $1.5 million of which an undetermined amount may have to be paid to a subcontractor. As of the date of these interim financial statements, we are party to several legal proceedings arising in the ordinary course of business that we believe have been adequately allowed for, are covered by insurance or if determined adversely to us, whether individually or in the aggregate, would not have a material adverse effect on our results of operations or financial position. However, we cannot predict the ultimate outcomes of these matters with certainty. In addition, the Company has filed suit against a number of its clients for payment of accounts receivable. Although the Company believes it will receive favorable judgments in these collection matters, due to impact of the downturn of the business and credit climate on its clients' businesses, it may not be able to fully collect on judgments it receives. Insurance The Company carries a broad range of insurance coverage, including general and business automobile liability, commercial property, professional errors and omissions, workers' compensation insurance, director's and officer's liability insurance and a general umbrella policy. The Company is not aware of any claims in excess of insurance recoveries. ENGlobal is partially self-funded for health insurance claims. Provisions for expected future payments are accrued based on the Company's experience. Specific stop loss levels provide protection for the Company with $200,000 per occurrence. The self-insurance liability, which is included in the Accrued Compensation and Benefits line of the balance sheet, was $1.3 million as of June 30, 2011 and $1.2 million as of December 31, 2010. |
NOTE Earnings Per Share
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Jun. 30, 2011
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NOTE Earnings Per Share [Abstract] | Â | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings Per Share [Text Block] | The following table reconciles the number of shares used to compute basic earnings per share to the number of shares used to compute diluted earnings per share (“EPS”).
The Company excluded potentially issuable shares of 443,000 and 738,000 from the computation of diluted EPS, as the effect of including the shares would have been anti-dilutive for the three and six month periods ended June 30, 2011 and 2010, respectively. |
NOTE Basis of Presentation
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3 Months Ended |
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Jun. 30, 2011
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NOTE Basis of Presentation [Abstract] | Â |
Organization, Consolidation and Presentation of Financial Statements Disclosure [Text Block] | Our condensed consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America. The Company consolidates all of its subsidiaries' financial results, and significant inter-company accounts and transactions have been eliminated in the consolidation. The condensed consolidated financial statements of ENGlobal Corporation (which may be referred to as “ENGlobal,” the “Company,” “we,” “us,” or “our”) included herein are unaudited for the three month and six month periods ended June 30, 2011 and 2010, have been prepared from the books and records of the Company pursuant to the rules and regulations of the Securities and Exchange Commission, and in the case of the condensed balance sheet as of December 31, 2010, have been derived from the audited financial statements. These financial statements reflect all adjustments (consisting of normal recurring adjustments), which are, in the opinion of management, necessary to fairly present the results for the periods presented. Certain information and note disclosures, normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America, have been condensed or omitted pursuant to rules and regulations of the Securities and Exchange Commission. It is suggested that these condensed financial statements be read in conjunction with the Company's audited financial statements for the year ended December 31, 2010, included in the Company's Annual Report on Form 10-K filed with the Securities and Exchange Commission. The Company has assessed subsequent events through the date of filing these condensed consolidated financial statements with the Securities and Exchange Commission and believes that the disclosures made herein are adequate to make the information presented not misleading. |
NOTE Contracts
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Jun. 30, 2011
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NOTE Contracts [Abstract] | Â | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Costs and estimated earnings and billings on uncompleted contracts [Text Block] | Costs, estimated earnings and billings on uncompleted contracts consisted of the following at June 30, 2011 and December 31, 2010:
Revenue on fixed-price contracts is recorded primarily using the percentage-of-completion (cost-to-cost) method. Under this method, revenue on long-term contracts is recognized in the ratio that contract costs incurred bear to total estimated contract costs. Revenue and gross margin on fixed-price contracts are subject to revision throughout the lives of the contracts and any required adjustments are made in the period in which the revisions become known. To manage unknown risks, management may use contingency amounts to increase the estimated costs, therefore, lowering the earned revenues until the risks are better identified and quantified or have been mitigated. We currently have $6.0 million in contingency as of June 30, 2011, of which $4.7 million is related to the new Caspian Pipeline Consortium (CPC) project awarded in 2011, compared to $0.8 million as of December 31, 2010. Losses on contracts are recorded in full as they are identified. $1.1 million of the contingency amount relates to projects that will be complete by fiscal year end and will be released to either cost or profit which is determined on a project by project basis. The Company recognizes service revenue as soon as the services are performed. For clients that we consider higher risk, due to past payment history or history of not providing written work authorizations, we have deferred revenue recognition until we receive either a written authorization or a payment. The current amount of revenue deferred for these reasons is $0.3 million as of June 30, 2011, compared to $0.5 million as of December 31, 2010. We expect a majority of the deferred revenue amount to be realized by year end. |
NOTE Line of Credit and Debt
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Jun. 30, 2011
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NOTE Line of Credit and Debt [Abstract] | Â | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt Disclosure [Text Block] |
The maturity date of the Wells Fargo Credit Facility is April 2012; therefore, the $12.1 million line of credit balance outstanding was classified as current portion of long-term debt on the balance sheet as of June 30, 2011. The rate applicable to the Wells Fargo Credit Facility line of credit outstanding at June 30, 2011 and December 31, 2010 was 4.0% and 4.125%, respectively. Interest and discount rates on the remainder of the Company's notes payable vary from 5.00% to 6.25%, with the weighted average being 5.625% at June 30, 2011 and December 31, 2010. On June 30, 2011, the Company entered into a third agreement to amend the Wells Fargo Credit Facility, reset financial covenants and increase the underlying line of credit from $25 million to $35 million. The financial covenants were reset to require:
The Company was in compliance with all covenants under the Wells Fargo Credit Facility as of June 30, 2011. For the quarter ended June 30, 2011, our EBITDA was $1.6 million. During the six month period ended June 30, 2011, we expended or committed approximately 9%, or $0.3 million, of the $3.5 million fiscal year covenant limitation on capital expenditures. The balance of our capital expenditures for the six month period has been for normal operating requirements including office furniture, computers, software and vehicles. The Company does not expect to exceed the covenant limitation for capital expenditures during the balance of the current fiscal year. Additionally, in July 2011, with the support of Wells Fargo's Global Banking Group, ENGlobal and the Export-Import Bank of the United States (“Ex-Im Bank”) entered into a $9.5 million letter of credit facility (the “Ex-Im Bank Facility”) to support the Company's Caspian Pipeline Consortium (CPC) project. This agreement is discussed further in Note 12 - Subsequent Events |
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