ENGlobal Reports Fourth Quarter and Fiscal Year 2017 Results
HOUSTON, March 15, 2018 (GLOBE NEWSWIRE) -- ENGlobal (Nasdaq:ENG), a leading provider of engineering and automation services, today announced a net loss of $16.3 million and a diluted loss per share of $0.59 for the fiscal year ended December 30, 2017. The Company incurred income tax expense of $10.1 million during 2017 primarily due to the effect of the income tax rate change and a valuation allowance recorded against the Company's deferred tax assets. The Company incurred non-cash expenses for depreciation, amortization and stock compensation of $1.6 million during 2017.
Management's Assessment
William Coskey, P.E., Chairman and Chief Executive Officer of ENGlobal said: "I am encouraged that ENGlobal's sales pipeline of near term, higher probability opportunities have recently been growing at a rapid pace. Overall, our 2018 sales pipeline is now over three times larger than at this time two years ago, reinforcing the Company's proactive efforts to increase the utilization of its capabilities and resources. It's also important to note that our 2018 target list of opportunities currently exhibits over 90% of these potential projects being within the Automation segment."
Mr. Coskey continued: "We have faced a certain sluggishness in the markets we serve with respect to our customers awarding work, and thus it has taken longer to turn our impressive list of opportunities into booked backlog. However, recent activity and customer communications indicates that our business is approaching an inflection point this year."
Mr. Coskey continued: "I could not be prouder of the men and women of ENGlobal, who are working tirelessly to rebuild our Company in a better way. Building our backlog with higher expected margins, executing on a larger volume of business, and leveraging our lower fixed overhead structure together are expected to provide for profitable results."
Mark Hess, ENGlobal's Chief Financial Officer, said: "The Company has successfully reduced its run rate fixed overhead to under $12 million per year, significantly lower than in the recent past. However, our reduced volume of business does not currently produce sufficient project margin for profitable results. Working capital at December 30, 2017 was approximately $16.8 million, which, along with internally generated funds, is expected to be sufficient for our anticipated 2018 growth. We believe that increased value for our shareholders can be realized this year by executing our internal growth plan, together with potential external strategies being developed."
2017 Fiscal Year results as compared to 2016 Fiscal Year results:
Revenue decreased to $55.8 million for the fiscal year ended December 30, 2017, or a 5.8% decrease, from $59.2 million for the fiscal year ended December 31, 2016. ENGlobal reported a net loss of $16.3 million, or $0.59 per diluted share, for the fiscal year ended December 30, 2017, compared to net loss of $2.3 million, or $0.08 per diluted share, for the prior year period. The Company incurred income tax expense of $10.1 million during 2017 primarily due to the effect of the income tax rate change and a valuation allowance recorded against the Company's deferred tax assets. The Company recorded an income tax benefit of $1.0 million during 2016. The Company incurred non-cash expenses for depreciation, amortization and stock compensation of $1.6 million during both 2017 and 2016.
In April 2015, the Company's Board of Directors authorized the repurchase of up to $2.0 million of the Company's common stock from time to time, based on prevailing market conditions. Through May 16, 2017, the date the program was suspended, ENGlobal had repurchased and retired 1,191,050 shares of common stock at a total cost of $1,498,409.
The following table illustrates the composition of the Company's revenue and profitability for its operations for the fiscal years ended December 30, 2017 and December 31, 2016:
We have revised our segment reporting to reflect our current management approach and recast prior periods to conform to the current segment presentation. As a result of the change in reporting structure discussed above, effective January 1, 2017, the results of ENGlobal's Government Services group, which were previously included as part of our Engineering, Procurement and Construction Management ("EPCM"), are now reported within the Automation segment.
| Year Ended | Year Ended | ||||||||||||||||
| (amounts in thousands) | December 30, 2017 | December 31, 2016 | |||||||||||||||
| Segment | Total Revenue | % of Total Revenue | Gross Profit Margin | Operating Profit Margin | Total Revenue | % of Total Revenue | Gross Profit Margin | Operating Profit Margin | |||||||||
| Engineering & Construction | $ 22,595 | 40.5% | 4.9% | (7.9 )% | $ 24,006 | 40.5% | 10.4% | 0.2% | |||||||||
| Automation | 33,170 | 59.5% | 16.1% | 6.52 % | 35,218 | 59.5% | 21.6% | 11.3% | |||||||||
| Consolidated | $ 55,765 | 100.0% | 11.5% | (11.02)% | $ 59,224 | 100.0% | 17.1% | (5.5)% | |||||||||
The
following table illustrates the composition of the Company's revenue
and profitability for its operations for the three months ended December
30,
2017 and December 31,
2016:
| Three Months Ended | Three Months Ended | ||||||||||||||||
| (amounts in thousands) | December 30, 2017 | December 31, 2016 | |||||||||||||||
| Segment | Total Revenue | % of Total Revenue | Gross Profit Margin | Operating Profit Margin | Total Revenue | % of Total Revenue | Gross Profit Margin | Operating Profit Margin | |||||||||
| Engineering & Construction | $ 5,619 | 38.9% | (11.3)% | (28.5 )% | $ 5,890 | 40.3% | 12.4% | 1.6% | |||||||||
| Automation | 8,811 | 61.1% | 13.7% | 5.1 % | 8,712 | 59.7% | 22.6% | 13.1% | |||||||||
| Consolidated | 14,430 | 100.0% | 4.0% | (17.4)% | 14,602 | 100.0% | 18.5% | (3.0)% | |||||||||
The
following is a summary of the Company's statement of operations for the
last four quarters which may be helpful in analyzing our ongoing
business:
| (amounts in thousands) | 2017 | Fiscal Year | ||||||||||||||||||
| Q1 | Q2 | Q3 | Q4 | 2017 | ||||||||||||||||
| Revenue | $ 12,473 | $ 15,966 | $ 12,896 | $ 14,430 | $ 55,765 | |||||||||||||||
| Gross Profit | 1,731 | 2,513 | 1,621 | 573 | 6,438 | |||||||||||||||
| Gross Profit Margin | 13.9% | 15.7% | 12.6% | 4.0% | 11.5% | |||||||||||||||
| General & Administrative Expenses | 3,406 | 3,057 | 3,041 | 3,077 | 12,581 | |||||||||||||||
| Operating Loss | (1,675 | ) | (544 | ) | (1,420 | ) | (2,504 | ) | (6,143 | ) | ||||||||||
| Net Loss | (878 | ) | (895 | ) | (12,154 | ) | (2,331 | ) | (16,258 | ) | ||||||||||
The following table presents certain balance sheet items as of December 30,
2017 and December 31,
2016:
| (amounts in thousands) | As of December 30, 2017 | As of December 31, 2016 | ||
| Cash and restricted cash | $ 9,648 | $ 15,687 | ||
| Working capital | 16,847 | 22,200 | ||
