SEGMENT INFORMATION

6 Months Ended

Jun. 26, 2021

SEGMENT INFORMATION

NOTE 6 - SEGMENT INFORMATION

NOTE 6 – SEGMENT INFORMATION

Our segments are strategic business units that offer our services and products to customers in their respective industry segments. The operating performance of our segments is regularly reviewed with operational leaders in charge of these segments, the chief executive officer (“CEO”), the chief financial officer (“CFO”) and others. This group represents the chief operating decision maker (“CODM”) for ENGlobal.

We have identified four strategic markets where we have a long history of delivering project solutions and can provide complete project execution. These four targeted markets include: (i) Renewables, (ii) Automation, (iii) Oil, Gas, and Petrochemicals, and (iv) Government Services.

Within the Renewables group, our focus is to design and build production facilities for hydrogen and associated products, together with converting existing production facilities to produce products from renewable feedstock sources. These projects often utilize technologies that are more fuel efficient, and therefore reduce the associated carbon footprint of the facility. Our scope of work on these projects will typically include front-end development, engineering, procurement, mechanical fabrication, automation and commissioning services, and may be performed in conjunction with a construction partner.

Our Automation group designs, integrates and commissions modular systems that include electronic distributed control, on-line process analytical data, continuous emission monitoring, and electric power distribution. Often these packaged systems are housed in a fabricated metal enclosure, modular building or freestanding metal rack, which are commonly included in our scope of work. We provide automation engineering, procurement, fabrication, systems integration, programing and on-site commissioning services to our clients for both new and existing facilities.

Our Oil, Gas, and Petrochemicals group focuses on providing engineering, procurement and automation services as well as fabricated products to downstream refineries and petrochemical facilities as well as midstream pipeline, storage and other transportation related companies. These services are often applied to small capital improvement and maintenance projects within refineries and petrochemical facilities. For our transportation clients, we work on facilities that include pumping, compression, gas processing, metering, storage terminals, product loading and blending systems. In addition, this group designs, programs and maintains supervisory control and data acquisition (“SCADA”) systems for our transportation clients. This group also provides engineering, fabrication and automation services to clients who have operations in the U.S. oil and gas exploration and development markets. The operations are usually associated with the completion, purification, storage and transmission of the oil and gas from the well head to the terminal or pipeline destination.

Our Government Services group provides services related to the engineering, design, installation and maintenance of automated fuel handling and tank gauging systems for the U.S. military across the globe.

We have two reportable segments: Commercial and Government Services. Our Renewables, Automation, and Oil, Gas, and Petrochemical groups are aggregated into one reportable segment, Commercial.

Revenues, operating income, and identifiable assets for each segment are set forth in the following table. The amount identified as Corporate includes those activities that are not allocated to the operating segments and includes costs related to business development, executive functions, finance, accounting, safety, human resources and information technology that are not specifically identifiable with the segments. The segment information for the three months and six months ended June 27, 2020 and as of December 26, 2020 has been recast to align with our current reportable segments.

Segment information is as follows (dollars in thousands):

	Commercial			Government Services			Corporate			Consolidated
For the three months ended June 26, 2021:
Revenue	$	9,157		$	1,922		$	-		$	11,079
Gross profit (loss)		(201	)		283			-			82
Gross profit margin		(2.2	)%		14.7	%					0.7	%
SG&A		2,816			188			1,260			4,264
Operating income (loss)		(3,017	)		95			(1,260	)		(4,182	)
Other income, net											6
Interest expense, net											(57	)
Tax expense											(23	)
Net loss											(4,256	)
	Commercial			Government Services			Corporate			Consolidated
For the three months ended June 27, 2020:
Revenue	$	14,803		$	3,079		$	-		$	17,882
Gross profit		1,910			543			-			2,453
Gross profit margin		12.9	%		17.6	%					13.7	%
SG&A		831			150			1,333			2,314
Operating income (loss)		1,079			393			(1,333	)		139
Other income, net											1
Interest expense, net											(36	)
Tax expense											(36	)
Net income											68

	Commercial			Government Services			Corporate			Consolidated
For the six months ended June 26, 2021:
Revenue	$	19,206		$	4,322		$	-		$	23,528
Gross profit		714			372			-			1,086
Gross profit margin		3.7	%		8.6	%					4.6	%
SG&A		4,109			397			2,319			6,825
Operating loss		(3,395	)		(25	)		(2,319	)		(5,739	)
Other income, net											1,690
Interest expense, net											(115	)
Tax expense											(46	)
Net loss											(4,210	)
	Commercial			Government Services			Corporate			Consolidated
For the six months ended June 27, 2020:
Revenue	$	31,313		$	5,829		$	-		$	37,142
Gross profit		4,755			958			-			5,713
Gross profit margin		15.2	%		16.4	%					15.4	%
SG&A		1,661			320			2,466			4,447
Operating income (loss)		3,094			638			(2,466	)		1,266
Other income, net											2
Interest expense, net											(41	)
Tax expense											(58	)
Net income											1,169

Total assets by segment are as follows (dollars in thousands):

Total Assets by Segment	As of June 26, 2021		As of December 26, 2020
	(dollars in thousands)
Commercial	$	7,633	$	11,130
Government Services		2,606		3,151
Corporate		33,949		16,157
Consolidated	$	44,188	$	30,438