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 26, 2020
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)) |
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
| Common Stock, $0.001 par value | ENG | The Nasdaq Stock Market LLC |
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 March 26, 2020, ENGlobal Corporation issued a press release reporting fourth quarter and fiscal year 2019 results, 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 this Item 2.02 (including the press release attached as Exhibit 99.1 and incorporated by reference in this Item 2.02) 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 (the “Exchange Act”), or otherwise subject to the liabilities of that section, nor shall such information be been incorporated by reference under the Securities Act of 1933 or the Exchange Act, except as shall be expressly set forth in such a filing.
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits.
The following exhibit is included with this Current Report on Form 8-K:
| Exhibit No. | Description | |
| Exhibit 99.1. | Press release dated March 26, 2020 |
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 26, 2020 | /s/ MARK A. HESS | |
| (Date) | Mark A. Hess, Chief Financial Officer, Treasurer and Corporate Secretary |
Exhibit Index
| Exhibit No. | Description | |
| 99.1 | Press release dated March 26, 2020 |
Exhibit 99.1
ENGLOBAL POSTS Q4 2019 PROFIT
AND PROJECTS PROFITABLE RESULTS FOR Q1 2020
Conference Call To Discuss 2019 Results Scheduled Today at 9:00 am Eastern
Houston, March 26, 2020 — ENGlobal Corporation (Nasdaq: ENG), a leading provider of engineered modular solutions, today announced that it achieved a profit of $741,000, or $.03 per share, in the fourth quarter of 2019 – the company’s first quarterly profit in five years. The company also announced it is currently on track for continued profitability in the first quarter of 2020.
For the year ended December 28, 2019, the company had a net loss of $1,466,000, or $(.05) per share, on revenue of $56,446,000, compared with a net loss of $5,671,000, or $(.21) per share, on revenue of $53,996,000 for the year ended December 29, 2018. ENGlobal’s reduced annual loss – an improvement of 74 percent over 2018 – was primarily the result of the increased revenue and reduced operating cost and expenses in 2019 and a $2.1 million goodwill write off in 2018.
At December 28, 2019, ENGlobal had cash on hand of $8.3 million compared to $6.1 million at December 29, 2018. The company has no significant debt.
“The company’s turnaround,” said CFO Mark Hess, “is the direct result of our strategic shift away from performing on smaller project assignments toward higher-value modular process and automation systems supply contracts.”
“These contracts – one of which is expected to contribute over $22 million in revenue and involves the production of clean hydrogen fuel as part of a renewable diesel production unit – are expected to permit ENGlobal to achieve higher revenues while leveraging overall operating costs,” Mr. Hess added.
“We are extremely happy with our 2019 results,” commented CEO William A. Coskey, “in particular our crossover to profitability in the fourth quarter. Importantly, we are making good headway in adding to our list of established technology partners which adds to our differentiated capabilities.”
“ENGlobal’s success in building these new relationships is expected to help us sign and perform the higher-value modular contracts that we are targeting, including the most attractive green and renewable energy projects. As a direct result of these strategic efforts and the roughly $10 to $250 million size installations we are targeting, we believe ENGlobal is well positioned for significant growth throughout this and future years,” he added.
Going forward, ENGlobal is expected to benefit from several external trends, especially the nation’s accelerating dependence on the production of alternative and renewable energy. The company also sees continuing demand resulting from large process control and analytical equipment installations, as well as the U.S. Military’s increasing need to upgrade or replace its fueling systems.
The Company does recognize we are in an unprecedented situation in regards to the COVID-19 virus. We are seeing city, county, and state governments issue stay at home mandates across the country, some of which are in cities where we have offices and employees. While most of our employees can telecommute, some cannot. Our challenge as a company is to stay productive and responsive to our clients while not being located at our normal workplace, in some cases. We are working through the logistics surrounding our employees in light of the recently issued Families First Coronavirus Response Act in order to minimize the impact to both the employee and the company.
The following table illustrates the composition of the Company’s revenue and profitability for its operations for the fiscal years ended December 28, 2019 and December 29, 2018:
| Year Ended | Year Ended | |||||||||||||||||||||||||||||||
| (amounts in thousands) | December 28, 2019 | December 29, 2018 | ||||||||||||||||||||||||||||||
| Segment | Total Revenue | % of Total Revenue | Gross Profit Margin | Operating Profit (Loss) Margin | Total Revenue | % of Total Revenue | Gross Profit Margin | Operating Profit (Loss) Margin | ||||||||||||||||||||||||
| Engineering & Construction | $ | 19,436 | 34.4 | % | 8.4 | % | (4.3 | )% | $ | 24,152 | 44.7 | % | 12.5 | % | 4.7 | % | ||||||||||||||||
| Automation | 37,010 | 65.6 | % | 17.0 | % | 12.4 | % | 29,844 | 55.3 | % | 13.1 | % | (2.5 | )% | ||||||||||||||||||
| Consolidated | $ | 56,446 | 100.0 | % | 14.0 | % | (2.5 | )% | $ | 53,996 | 100.0 | % | 12.8 | % | (9.6 | )% | ||||||||||||||||
The following table illustrates the composition of the Company’s revenue and profitability for its operations for the three months ended December 28, 2019 and December 29, 2018:
| Three Months Ended | Three Months Ended | |||||||||||||||||||||||||||||||
| (amounts in thousands) | December 28, 2019 | December 29, 2018 | ||||||||||||||||||||||||||||||
| 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 | $ | 3,888 | 23.3 | % | 1.5 | % | (14.9 | )% | $ | 5,583 | 44.0 | % | 2.4 | % | (5.6 | )% | ||||||||||||||||
| Automation | 12,800 | 76.7 | % | 22.7 | % | 19.2 | % | 7,098 | 56.0 | % | 11.9 | % | (25.6 | )% | ||||||||||||||||||
| Consolidated | 16,688 | 100.0 | % | 17.7 | % | 4.6 | % | 12,681 | 100.0 | % | 7.7 | % | (25.3 | )% | ||||||||||||||||||
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) | 2019 | Fiscal Year | ||||||||||||||||||
| Q1 | Q2 | Q3 | Q4 | 2019 | ||||||||||||||||
| Revenue | $ | 12,163 | $ | 13,621 | $ | 13,974 | $ | 16,688 | $ | 56,446 | ||||||||||
| Gross Profit | 1,338 | 1,942 | 1,675 | 2,961 | 7,916 | |||||||||||||||
| Gross Profit Margin | 11.0 | % | 14.3 | % | 12.0 | % | 17.7 | % | 14.0 | % | ||||||||||
| General & Administrative Expenses | 2,304 | 2,450 | 2,371 | 2,192 | 9,317 | |||||||||||||||
| Operating Income (Loss) | (966 | ) | (508 | ) | (696 | ) | 769 | (1,401 | ) | |||||||||||
| Net Income (Loss) | (974 | ) | (517 | ) | (716 | ) | 741 | (1,466 | ) | |||||||||||
The following table presents certain balance sheet items as of December 28, 2019 and December 29, 2018:
| (amounts in thousands) | As of December 28, 2019 | As of December 29, 2018 | ||||||
| Cash and restricted cash | $ | 8,307 | $ | 6,060 | ||||
| Working capital | 11,289 | 13,725 | ||||||
For further information on ENGlobal’s 2019 financial results, please refer to its Form 10-K filing on the company’s website at www.englobal.com, or on the SEC’s website at www.sec.gov.
Conference Call
Management will host a conference call today at 9:00am EDT to discuss the company’s 2019 financial results and outlook for 2020.
To participate in the conference call, please dial (Toll Free) 844-369-8770 domestically or 862-298-0840 internationally, approximately 5-to-10 minutes before the beginning of the call. The conference call will also be broadcast live over the Internet and can be accessed at:
https://www.webcaster4.com/Webcast/Page/2272/33183
You may access the teleconference replay by dialing (Toll Free) 877-481-4010 domestically or 919-882-2331 internationally, referencing conference ID 33183 or by visiting the company’s web site. The replay will be available shortly after the completion of the live event through 9:00am EDT on June 26, 2020.
About ENGlobal
ENGlobal (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, fabrication and implementation of distributed control, instrumentation and process analytical systems. The Engineering segment provides consulting services for the development, management and execution of projects requiring professional engineering, construction management, and related support services. Within ENGlobal’s Engineering segment, ENGlobal Government Services, Inc. provides engineering, design, installation, operations, and maintenance of various government, public sector, and international facilities, specializing in turnkey automation and instrumentation systems for the U.S. Defense industry worldwide. 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, its operations and certain other matters discussed in this press release may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, which are statements related to future, not past, events and are based on the company’s current expectations and assumptions regarding the company’s business, the economy and other future conditions, and are subject to risks and uncertainties. Generally, the words “anticipate,” “believe,” “estimate,” “expect,” “may” and similar expressions, identify forward-looking statements, which generally are not historical in nature. Although the company believes that the expectations reflected in such forward-looking statements are reasonable, it can give no assurance that such expectations will prove to have been correct. Actual results could differ materially from the results described in the forward-looking statements due to the risks and uncertainties, including, among other things, (1) the company’s ability to identify, evaluate, and complete any strategic alternative in connection with the company’s review of strategic alternatives; (2) the impact of the announcement of the company’s review of strategic alternatives on the company’s business, including the company’s financial and operating results, or the company’s employees, suppliers and customers; (3) the company’s ability to increase the company’s revenue and profitability; (4) the company’s ability to realize project awards or contracts on the company’s pending proposals, and the timing, scope and amount of any related awards or contracts; (5) the effect of economic downturns and the volatility and level of oil and natural gas prices; (6) the impact of the outbreak of the COVID-19 coronavirus on the company’s business, financial condition, and results of operations; (7) the company’s ability to retain existing customers and attract new customers; (8) the company’s ability to accurately estimate the overall risks, revenue or costs on a contract; (9) the risk of providing services in excess of original project scope without having an approved change order; (10) the company’s ability to execute the company’s expansion into the modular solutions market and to execute the company’s updated business growth strategy to position the company as a leading provider of engineered modular solutions to its customer base; (11) the company’s ability to attract and retain key professional personnel; (12) the company’s ability to fund the company’s operations and grow the company’s business utilizing cash on hand, internally generated funds and other working capital; (13) the company’s ability to obtain additional financing, including pursuant to a new credit facility, when needed: (14) the company’s dependence on one or a few customers; (15) the risks of internal system failures of the company’s information technology systems, whether caused by the company, third-party service providers, intruders or hackers, computer viruses, malicious code, cyber-attacks, phishing and other cyber security problems, natural disasters, power shortages or terrorist attacks; (16) the company’s ability to realize revenue projected in the company’s backlog and the company’s ability to collect accounts receivable and process accounts payable in a timely manner; (17) the uncertainties related to the U.S. Government’s budgetary process and their effects on the company’s long-term U.S. Government contracts; (18) the risk of unexpected liability claims or poor safety performance; (19) the company’s ability to identify, consummate and integrate potential acquisitions; (20) the company’s reliance on third-party subcontractors and equipment manufacturers; (21) the company’s ability to satisfy the continued listing standards of NASDAQ with respect to the company’s common stock or to cure any continued listing standard deficiency with respect thereto; and (22) 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. For additional information regarding known material factors that could cause the company’s actual results to differ from the company’s projected results, please see ENGlobal’s filings with the Securities and Exchange Commission, including the company’s most recent reports on Form 10-K and 10-Q, and other SEC filings. Readers are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date hereof. The company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
Click here to join the company’s email list: http://www.b2i.us/irpass.asp?BzID=702&to=ea&s=0.
CONTACT:
Mark A. Hess
Phone: (281) 878-1000
E-mail: ir@ENGlobal.com
Market Makers - Investor Relations
Jimmy Caplan
512-329-9505
Email: jimmycaplan@me.com
Market Makers - Media Relations
Rick Eisenberg
212-496-6828
Email: eiscom@msn.com
ENGLOBAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(amounts in thousands, except per share amounts)
| Year Ended | Year Ended | |||||||
| December 28, 2019 | December 29, 2018 | |||||||
| Operating revenues | $ | 56,446 | $ | 53,996 | ||||
| Operating costs | 48,530 | 47,063 | ||||||
| Gross profit | 7,916 | 6,933 | ||||||
| Operating costs and expenses: | ||||||||
| Selling, general, and administrative expenses | 9,317 | 10,030 | ||||||
| Goodwill impairment | — | 2,086 | ||||||
| Operating loss | (1,401 | ) | (5,183 | ) | ||||
| Other income (expense) | ||||||||
| Interest expense, net | (31 | ) | (22 | ) | ||||
| Other income (expense), net | 49 | (356 | ) | |||||
| Loss before income taxes | (1,383 | ) | (5,561 | ) | ||||
| Provision for federal and state income taxes | (83 | ) | (110 | ) | ||||
| Net loss | $ | (1,466 | ) | $ | (5,671 | ) | ||
| Basic and diluted loss per common share | $ | (0.05 | ) | $ | (0.21 | ) | ||
| Basic and diluted weighted average shares used in computing loss per share: | 27,414 | 27,510 | ||||||
ENGLOBAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(amounts in thousands, except share amounts)
| December 28, 2019 | December 29, 2018 | |||||||
| ASSETS | ||||||||
| Current Assets: | ||||||||
| Cash and cash equivalents | $ | 8,307 | $ | 6,060 | ||||
| Trade receivables, net of allowances of $236 and $202 | 11,435 | 10,211 | ||||||
| Prepaid expenses and other current assets | 889 | 1,096 | ||||||
| Contract assets | 3,862 | 3,175 | ||||||
| Total Current Assets | 24,493 | 20,542 | ||||||
| Property and equipment, net | 1,033 | 677 | ||||||
| Goodwill | 720 | 720 | ||||||
| Other assets | ||||||||
| Right of use asset | 2,133 | — | ||||||
| Deposits and other assets | 307 | 367 | ||||||
| Total Other Assets | 2,440 | 367 | ||||||
| Total Assets | $ | 28,686 | $ | 22,306 | ||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| Current Liabilities: | ||||||||
| Accounts payable | $ | 3,261 | $ | 3,172 | ||||
| Accrued compensation and benefits | 2,783 | 2,301 | ||||||
| Current portion of leases | 1,041 | — | ||||||
| Contract liabilities | 5,438 | 604 | ||||||
| Other current liabilities | 681 | 740 | ||||||
| Total Current Liabilities | 13,204 | 6,817 | ||||||
| Long Term Leases | 1,458 | — | ||||||
| Total Liabilities | 14,662 | 6,817 | ||||||
| Commitment and Contingencies (Note 14) | ||||||||
| Stockholders’ Equity: | ||||||||
| Common stock - $0.001 par value; 75,000,000 shares authorized; 27,413,626 and 27,487,594 shares issued and outstanding at December 28, 2019 and December 29, 2018, respectively | 27 | 27 | ||||||
| Additional paid-in capital | 36,934 | 36,934 | ||||||
| Accumulated deficit | (22,937 | ) | (21,472 | ) | ||||
| Total Stockholders’ Equity | 14,024 | 15,489 | ||||||
| Total Liabilities and Stockholders’ Equity | $ | 28,686 | $ | 22,306 | ||||
ENGLOBAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(amounts in thousands)
| For the Year Ended | ||||||||
| December 28, 2019 | December 29, 2018 | |||||||
| Cash Flows from Operating Activities: | ||||||||
| Net loss | $ | (1,466 | ) | $ | (5,671 | ) | ||
| Adjustments to reconcile net loss to net cash provided by (used in) operating activities: | ||||||||
| Depreciation and amortization | 389 | 460 | ||||||
| Share-based compensation expense | 61 | 106 | ||||||
| Goodwill impairment | — | 2,086 | ||||||
| Gain on sale of asset | — | (2 | ) | |||||
| Changes in current assets and liabilities: | ||||||||
| Trade accounts receivable | (1,224 | ) | (1,097 | ) | ||||
| Contract assets | (689 | ) | 2,099 | |||||
| Other current assets | 245 | (104 | ) | |||||
| Accounts payable | 89 | (570 | ) | |||||
| Accrued compensation and benefits | 482 | 262 | ||||||
| Contract liabilities | 4,834 | (731 | ) | |||||
| Income taxes payable | 84 | 25 | ||||||
| Other current liabilities, net | (140 | ) | (291 | ) | ||||
| Net cash provided by (used in) operating activities | $ | 2,665 | $ | (3,428 | ) | |||
| Cash Flows from Investing Activities: | ||||||||
| Proceeds from notes receivable | 24 | 24 | ||||||
| Property and equipment acquired | (345 | ) | (107 | ) | ||||
| Net cash used in investing activities | $ | (321 | ) | $ | (83 | ) | ||
| Cash Flows from Financing Activities: | ||||||||
| Purchase of stock | (61 | ) | (15 | ) | ||||
| Payments on finance leases | (36 | ) | (62 | ) | ||||
| Net cash used in financing activities | $ | (97 | ) | $ | (77 | ) | ||
| Net change in cash, cash equivalents and restricted cash | 2,247 | (3,588 | ) | |||||
| Cash, cash equivalents and restricted cash, at beginning of period | 6,060 | 9,648 | ||||||
| Cash, cash equivalents and restricted cash, at end of period | $ | 8,307 | $ | 6,060 | ||||
| Supplemental disclosure of cash flow information: | ||||||||
| Cash paid during the period for interest | $ | 33 | $ | 22 | ||||
| Right of use assets obtained in exchange for new operating lease liability | $ | 2,854 | $ | — | ||||
| Leased assets obtained in exchange for new finance lease liabilities | $ | 351 | $ | — | ||||
| Cash paid during the period for income taxes (net of refunds) | $ | 26 | $ | 85 | ||||