HOUSTON, March 28, 2019 (GLOBE NEWSWIRE) -- ENGlobal, a leading provider of engineered modular solutions to the
energy industry, today announced a net loss of $5.7 million and a
diluted loss per share of $0.21 for the fiscal year ended December 29,
2018. The Company incurred non-cash expenses for goodwill impairment,
depreciation and amortization, and stock compensation of $2.7 million
during 2018 and income tax expense of $0.1 million primarily due to
state margin tax.
Management's Assessment
William
Coskey, P.E., Chairman and Chief Executive Officer of ENGlobal said:
"The Company is making strides to benefit from the multi-year strategic
initiative we began in the fall of 2017. We have identified modular
project execution offerings as the opportunity to which our capabilities
are best applied, and focused our business development team on
communicating these offerings to specific clients. Seven strategic
initiatives have been identified where we can provide complete project
execution that includes engineering, design, fabrication and integration
of automated control systems as a complete packaged solution for our
clients, preferably in a modular form. This "design it once - build it
many times" concept has many merits for our clients including a single
vendor interface, better control of costs, better control of schedule
and lower safety risk, among other things, which is being well received
by many of our clients."
Mr. Coskey continued:
"One result of our positioning and sales efforts is that the new
opportunities and proposal pipeline we track continues to increase. Many
of these proposals are larger, but have not yet been awarded and have
exceeded our expected award timing. Our backlog, which represents an
estimate of projects that have not been completed, increased to $29.2
million at December 29, 2018. This compares to backlog of $24.1 million
as of December 30, 2017. I expect our backlog will continue to increase
over the course of 2019, based on current levels of proposal activity."
Mark
Hess, ENGlobal's Chief Financial Officer, said: "We showed significant
progress towards profitability through the first three quarters of 2018,
reducing our quarterly loss to $197 thousand for the third quarter.
However, during the fourth quarter the Company experienced significant,
unforeseen employee benefit cost - that is anticipated to be short lived
but which negatively impacted both our gross profit and SG&A. This
trend reversal compounded by the Company's recent financial results also
triggered an impairment of our goodwill in the fourth quarter."
Mr.
Hess continued: "ENGlobal's cash on hand is trending positively,
increasing $0.8 million during the fourth quarter, 2018 to a total of
$6.1 million at December 29, 2018 and has continued to increase year to
date in 2019 as we close out some of the larger in-process projects
before investments in new projects are required. Although cash on hand
has increased in the first quarter of 2019, gross profit has been
negatively impacted by the delayed execution of current and expected
project awards. As a result, our financial results for the first quarter
are expected to be negatively impacted."
Mr. Hess
continued: "We continue to be very mindful of our overhead structure,
and total SG&A costs have continued to decrease. Although the
Company has made investments in key individuals, product developments,
new facilities and equipment, in addition to the increased employee
benefit cost mentioned above, these areas of additional overhead cost
have been more than offset by SG&A decreases in other areas of our
business."
2018 Fiscal Year results as compared to 2017 Fiscal Year results:
Revenue
decreased to $54.0 million for the fiscal year ended December 29, 2018,
or 3.2%, from $55.8 million for the fiscal year ended December 30,
2017. ENGlobal reported a net loss of $5.7 million, or $0.21 per diluted
share, for the fiscal year ended December 29, 2018, compared to net
loss of $16.3 million, or $0.59 per diluted share, for the prior year
period. The Company incurred income tax expense of $0.1 million during
2018 primarily due to state margin tax, compared to income tax expense
of $10.1 million during 2017. The Company incurred non-cash expenses for
goodwill impairment, depreciation and amortization, and stock
compensation of $2.7 million during 2018 and the Company incurred
non-cash expenses for depreciation and amortization and stock
compensation of $1.6 million during 2017. No goodwill impairment was
recorded in 2017.
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. The Company is not obligated to repurchase any dollar
amount or specific number of shares of common stock under the repurchase
program, which may be suspended, discontinued or reinstated at any
time. The stock repurchase program was suspended on May 16, 2017 and
reinstated on December 19, 2018. Through December 29, 2018, ENGlobal had
repurchased and retired 1,212,773 shares of common stock at a total
cost of $1.5 million, including 21,723 shares for $15 thousand in
between December 19, 2018 and December 29, 2018.
The
following table illustrates the composition of the Company's revenue
and profitability for its operations for the fiscal years ended December
29, 2018 and December 30, 2017:
| Year Ended | Year Ended | ||||||||||||||||
| (amounts in thousands) | December 29, 2018 | December 30, 2017 | |||||||||||||||
| 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 | $ | 24,152 | 44.7 | % | 12.5 | % | 4.7 | % | $ | 22,595 | 40.5 | % | 4.9 | % | (7.9 | )% | |
| Automation | 29,844 | 55.3 | % | 13.1 | % | (2.5 | )% | 33,170 | 59.5 | % | 16.1 | % | 6.5 | % | |||
| Consolidated | $ | 53,996 | 100.0 | % | 12.8 | % | (9.6 | )% | $ | 55,765 | 100.0 | % | 11.5 | % | (11.0 | )% | |
The
following table illustrates the composition of the Company's revenue
and profitability for its operations for the three months ended December
29, 2018 and December 30, 2017:
| Three Months Ended | Three Months Ended | ||||||||||||||||
| (amounts in thousands) | December 29, 2018 | December 30, 2017 | |||||||||||||||
| 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 | $ | 5,583 | 44.0 | % | 2.4 | % | (5.6 | )% | $ | 5,619 | 38.9 | % | (11.3 | )% | (28.5 | )% | |
| Automation | 7,098 | 56.0 | % | 11.9 | % | (25.6 | )% | 8,811 | 61.1 | % | 13.7 | % | 5.1 | % | |||
| Consolidated | 12,681 | 100.0 | % | 7.7 | % | (25.3 | )% | 14,430 | 100.0 | % | 4.0 | % | (17.4 | )% | |||
| (amounts in thousands) | 2018 | Fiscal Year | ||||||||||||||
| Q1 | Q2 | Q3 | Q4 | 2018 | ||||||||||||
| Revenue | $ | 13,188 | $ | 13,872 | $ | 14,255 | $ | 12,681 | $ | 53,996 | ||||||
| Gross Profit | 1,413 | 2,253 | 2,293 | 974 | 6,933 | |||||||||||
| Gross Profit Margin | 10.7 | % | 16.2 | % | 16.1 | % | 7.7 | % | 12.8 | % | ||||||
| General & Administrative Expenses | 2,582 | 2,869 | 2,483 | 2,096 | 10,030 | |||||||||||
| Goodwill impairment | - | - | - | 2,086 | 2,086 | |||||||||||
| Operating Loss | (1,169 | ) | (616 | ) | (190 | ) | (3,208 | ) | (5,183 | ) | ||||||
| Net Loss | (1,200 | ) | (992 | ) | (197 | ) | (3,282 | ) | (5,671 | ) | ||||||
(amounts in thousands) | As of December 29, 2018 | As of December 30, 2017 | ||
| Cash and restricted cash | $ | 6,060 | $ | 9,648 |
| Working capital | 13,725 | 16,846 | ||
