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) August 9, 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)) |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR §230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR §240.12b-2).
Emerging growth company [ ]
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [ ]
Item 2.02. Results of Operations and Financial Condition
On August 9, 2018, ENGlobal Corporation issued a press release, a copy of which is attached hereto as Exhibit 99.1 and is incorporated herein by reference.
In accordance with General Instruction B.2 of Form 8-K, the information set forth in the attached Exhibit 99.1 is deemed to be “furnished” and shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended.
Item 9.01. Financial Statements and Exhibits.
Exhibit 99.1. Press release dated August 9, 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) | ||
| August 9, 2018 | /s/ MARK A. HESS | |
| (Date) | Mark A. Hess, Chief Financial Officer, Treasurer and Corporate Secretary |
| Exhibit Index |
| 99.1 | Press release dated August 9, 2018 |
Exhibit 99.1
ENGlobal Reports Second Quarter 2018 Results
HOUSTON, TX, August 9, 2018 (GLOBE NEWSWIRE) — ENGlobal (NASDAQ: ENG), a leading provider of engineering and automation services, today announced results for the second quarter ended June 30, 2018.
ENGlobal reported a net loss of $1.0 million for the second quarter of 2018 as compared to a $0.9 million net loss reported for the prior year period. Net loss per diluted share was $0.04 and $0.03 for the second quarter just ended and for the second quarter of 2017, respectively.
Adjusted for non-recurring costs, the Company posted a net loss of $0.3 million for the second quarter of 2018, as compared to a net loss of $0.9 million for the second quarter of 2017. During the second quarter of 2018, the Company settled two litigation matters, representing all outstanding litigation, and retained an investment banking firm. The non-recurring costs incurred during the quarter associated with these actions of approximately $0.7 million were recorded as $0.3 million in SG&A and $0.4 million in Other Expense.
Revenue decreased by $2.1 million to $13.9 million for the three months ended June 30, 2018 from $16.0 million for the three months ended July 1, 2017 while gross profit margins increased to 16.2% for the quarter ended June 30, 2018 as compared to 15.7% for the quarter ended July 1, 2017.
Management’s Assessment
Mark Hess, ENGlobal’s Chief Financial Officer stated: “Our revenue decline on a quarter over quarter basis is primarily due to a couple of large projects that were completed last year, including the Caspian Pipeline Consortium project, and a reduction in procurement activities in our Automation segment. The decline was partially offset by revenue resulting from our focus on engineered modular solutions, which produced slightly higher margins. Our SG&A for the quarter, adjusted for a one-time cost, was $2.6 million, or a $10.4 million annual run rate, which is the lowest SG&A level we have had in many years.”
Mr. Hess continued: “As expected, with the shift from a pure staffing business model to that of providing more turnkey systems, we have seen a shift in our working capital from cash to other components. We expect this shift to continue in the near term as the volume of turnkey execution increases. However, our overall working capital at the end of the quarter was $15.0 million, which we feel is sufficient to provide for our near-term growth.”
William A. Coskey, P.E., Chairman and CEO of ENGlobal added: “I am encouraged by the increase in volume of engineered modular systems that we have produced thus far this year and I expect that ENGlobal’s strategy of delivering these systems with turnkey execution will continue to become a larger part of our business going forward. We expect that long-term financial improvement can be realized as a result of increasing project scope which serves to better leverage our resources. Our management is focused on eight well-defined areas of modular project execution, which we are excited about and believe have excellent potential for growing our Business.”
Mr. Coskey continued: “We have positioned ourselves as a vertically integrated supplier and are proud to offer our heritage of engineering and design capabilities combined with modular fabrication and automation expertise. This combination of skills, together with our complete project support services, is a unique enhancement to our historical operation and a strategy that is appealing to our clientele. Based on recent trends, I continue to believe that we will see an inflection point and improved financial metrics in future quarters.”
The following is a summary of the income statement for the three months ended June 30, 2018 and July 1, 2017:
| (amounts in thousands) | Three months ended June 30, 2018 | Three months ended July 1, 2017 | ||||||
| Revenue | $ | 13,872 | $ | 15,966 | ||||
| Gross Profit | 2,253 | 2,513 | ||||||
| General & Administrative Expenses | 2,869 | 3,057 | ||||||
| Operating Loss | (616 | ) | (544 | ) | ||||
| Net loss | (992 | ) | (895 | ) | ||||
The following table presents certain balance sheet items as of June 30, 2018 and December 30, 2017:
| (amounts in thousands) | As of June 30, 2018 | As of December 30, 2017 | ||||||
| Cash | $ | 5,444 | $ | 9,648 | ||||
| Working capital | 15,019 | 16,846 | ||||||
The following table illustrates the composition of the Company’s revenue and profitability for its operations for the three and six months ended June 30, 2018 and July 1, 2017:
| (amounts in thousands) | Three months ended June 30, 2018 | Three Months ended July 1, 2017 | ||||||||||||||||||||||||||||||
| % of | Gross | Operating | % of | Gross | Operating | |||||||||||||||||||||||||||
| Total | Total | Profit | Profit | Total | Total | Profit | Profit | |||||||||||||||||||||||||
| Segment | Revenue | Revenue | Margin | (Loss) | Revenue | Revenue | Margin | (Loss) | ||||||||||||||||||||||||
| Engineering & Construction | $ | 6,652 | 48.0 | % | 20.0 | % | $ | 799 | $ | 10,018 | 62.7 | % | 14.1 | % | $ | 309 | ||||||||||||||||
| Automation | 7,220 | 52.0 | % | 12.8 | % | 260 | 5,948 | 37.3 | % | 16.7 | % | 1,008 | ||||||||||||||||||||
| Consolidated | $ | 13,872 | 100.0 | % | 16.2 | % | $ | (616 | ) | $ | 15,966 | 100.0 | % | 15.7 | % | $ | (544 | ) | ||||||||||||||
| (amounts in thousands) | Six months ended June 30, 2018 | Six Months ended July 1, 2017 | ||||||||||||||||||||||||||||||
| % of | Gross | Operating | % of | Gross | Operating | |||||||||||||||||||||||||||
| Total | Total | Profit | Profit | Total | Total | Profit | Profit | |||||||||||||||||||||||||
| Segment | Revenue | Revenue | Margin | (Loss) | Revenue | Revenue | Margin | (Loss) | ||||||||||||||||||||||||
| Engineering & Construction | $ | 11,747 | 43.4 | % | 14.9 | % | $ | 789 | $ | 11,577 | 40.7 | % | 11.5 | % | $ | 234 | ||||||||||||||||
| Automation | 15,312 | 56.6 | % | 12.5 | % | 552 | 16,863 | 59.3 | % | 17.3 | % | 1,505 | ||||||||||||||||||||
| Consolidated | $ | 27,059 | 100.0 | % | 13.5 | % | $ | (1,786 | ) | $ | 28,440 | 100.0 | % | 14.9 | % | $ | (2,218 | ) | ||||||||||||||
The Company’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2018 is expected to be filed with the Securities and Exchange Commission reflecting these results by the end of the day on Thursday, August 9, 2018.
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) our ability to identify, evaluate, and complete any strategic alternative; (2) the impact of the announcement of the 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 plan to enter 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, 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 continue 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. Actual results and the timing of certain events could differ materially from those projected in or contemplated by the forward-looking statements due to a number of factors detailed from time to time in ENGlobal’s filings with the Securities and Exchange Commission. In addition, reference is hereby made to cautionary statements set forth in the Company’s most recent reports on Form 10-K and 10-Q, and other SEC filings.
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Contact:
Mark Hess
Phone: 281-878-1040
E-mail: IR@ENGlobal.com