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8-K - CURRENT REPORT - ENGLOBAL CORP | eng_8k.htm |
Exhibit 99.1
ENGlobal Corporation Announces Profitable Q2 2020;
Revenues Up 31 Percent vs. Q2 2019
-- Conference Call To
Discuss
Results at 9:00 am EDT Today --
HOUSTON, August 6, 2020 -- ENGlobal Corporation
(NASDAQ:ENG), a leading provider of engineered modular
solutions, today announced that, for
the second quarter ended June 27, 2020, it achieved net income of
$68,000, or $.00 per share, compared to a net loss of $517,000, or
$(.02) per share, in the second quarter ended June 29,
2019.
In the second quarter of 2020, ENGlobal achieved revenue of
$17,882,000, a 31 percent improvement on revenue of $13,621,000
recorded in Q2 2019. This gain was due to a $3.3 million, or 41
percent, increase in revenue from the company’s Automation
segment, and a $1.0 million, or 17 percent, increase in revenue
from its Engineering, Procurement and Construction
Management (EPCM)
segment.
ENGlobal’s improved bottom line performance compared with Q2
2019 was largely due to the company’s increased quarterly
revenue, a 2.1 percentage point gain in gross profit margin
by the Automation segment - to 16.1 percent from 14.0 percent - and
a $136,000 decrease in SG&A expenses compared with the year-ago
quarter.
For the
six months ended June 27, 2020, ENGlobal achieved net income of $1,169,000, or $.04 per
share, compared with a net loss of $1,491,000, or $(.05) per share,
in the first six months ended June 29, 2019.
Six-month 2020 revenue was $37,142,000, a 44 percent improvement on revenue
of $25,784,000 recorded in the first half of 2019. This gain was
due to a $10.9 million, or 75 percent, increase in revenue from the
company’s Automation segment and a $0.5 million, or 4
percent, increase in revenue from its EPCM segment compared with
the first half of 2019. ENGlobal’s improved six-month bottom
line performance was the result of the company’s increased
revenue, a 6.6 percentage point gain in gross profit margin
by the Automation segment - to 18.9 percent from 12.3 percent - and
a $308,000 decrease in SG&A expenses compared with the same
period a year ago.
"We’re proud to again report profitable results, given the
many challenges of operating during the pandemic and extremely
difficult energy industry conditions,” said ENGlobal CEO
William A. Coskey, P.E. "Not only did our company achieve its third
consecutive quarterly profit, but also we grew revenue strongly in
the second quarter and first half of 2020.”
The CEO continued, “ENGlobal is fortunate to operate in
several fairly resilient areas, in particular our work on modular
engineered process plants, which are now mainly directed toward
renewable fuels and the hydrogen economy. Both of these areas are
driven by attractive low carbon fuel initiatives, and are not
totally dependent on oil and gas economics. We estimate the total
value of our potential opportunities in this sector, including
projects we are actively bidding on, now exceeds $500 million. We
won’t of course win all of these jobs, but as the green
energy market continues to expand, we’re optimistic that
we’ll win our fair share of them.
“Another resilient area for us is our modular automation
business, where we supply highly technical electronic control and
process analytical systems on a full service basis. This area of
our business is typically driven by environmental compliance
requirements as well as our customers’ need to replace
obsolete, computer-based equipment.
“Finally, we are very proud of our Government group’s
long-term support of the U.S. military, as we install, upgrade and
maintain fueling systems at installations around the world. This
business has historically been another consistent area for
ENGlobal.
“Even in the midst of the COVID-19 pandemic and difficult
conditions in the energy industry, we believe that ENGlobal still
has significant growth opportunities with drivers outside of our
historical oil & gas work, and these could potentially exceed
the level of business we have performed in recent
years.
“While our backlog has not been materially impacted by COVID
in terms of project cancellations, many of our projects have been
impacted by quarantine orders, travel restrictions and work site
closures. COVID has affected our ability to make business
development contacts with customers and it has also delayed their
project award decisions. As a result, our backlog has declined by
29 percent from $59.2 million as of December 28, 2019 to $42.0
million as of June 27, 2020.”
ENGlobal
CFO Mark Hess stated, “Our mission is to capitalize on these
potential areas of growth in order to grow backlog. While we
believe our backlog is sufficient to keep a significant portion of
our workforce productive for the balance of 2020, replacing our backlog will be one key factor in
our future profitability and the extent to which this will occur may be affected
by future delays and pandemic-related developments, most of which
cannot be predicted at this time.”
Mr. Hess continued, “As a result of these uncertainties
and as a precaution to provide additional future liquidity,
ENGlobal
entered into a Revolving Credit Facility with California-based
Pacific Western Bank on May 21, 2020 for an aggregate amount of up
to $6.0 million. We believe that unused availability under this
credit facility, which was $2.1 million at the end of June,
together with our cash and other components of working capital,
which includes the funds provided by our previously disclosed $4.9
million PPP loan, will provide us with enough liquidity to fund our
current operations.”
The following is a summary of the income statements for the three-
and six-months periods ended June 27, 2020 and June 29,
2019:
|
For the Three
Months Ended
|
For the Six Months
Ended
|
||
|
June 27,
2020
|
June 29,
2019
|
June 27,
2020
|
June 29,
2019
|
Revenue
|
$17,882
|
$13,621
|
$37,142
|
$25,784
|
Gross
profit
|
2,453
|
1,942
|
5,713
|
3,280
|
Selling, general
and administrative expenses
|
2,314
|
2,450
|
4,447
|
4,755
|
Operating profit
(loss)
|
139
|
(508)
|
1,266
|
(1,475)
|
Net income
(loss)
|
68
|
(517)
|
1,169
|
(1,491)
|
The following table illustrates the composition of the company's
revenue and profitability for its operations for the three- and
six-months periods ended June 27, 2020 and June 29,
2019:
|
Three Months
Ended
|
Three Months
Ended
|
||||||
(amounts in
thousands)
|
June 27,
2020
|
June 29,
2019
|
||||||
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
|
$6,632
|
37.1%
|
9.7%
|
0.5%
|
$5,659
|
41.5%
|
14.6%
|
4.2%
|
Automation
|
11,250
|
62.9%
|
16.1%
|
12.8%
|
7,962
|
58.5%
|
14.0%
|
9.1%
|
Consolidated
|
17,882
|
100.0%
|
13.7%
|
0.8%
|
13,621
|
100.0%
|
14.3%
|
(3.7)%
|
|
Six Months
Ended
|
Six Months
Ended
|
||||||
(amounts in
thousands)
|
June 27,
2020
|
June 29,
2019
|
||||||
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
|
$11,755
|
31.6%
|
7.9%
|
(3.0)%
|
$11,292
|
43.8%
|
13.3%
|
2.9%
|
Automation
|
25,387
|
68.4%
|
18.9%
|
16.1%
|
14,492
|
56.2%
|
12.3%
|
6.6%
|
Consolidated
|
37,142
|
100.0%
|
15.4%
|
3.4%
|
25,784
|
100.0%
|
12.7%
|
(5.7)%
|
The following table presents certain balance sheet items as of June
27, 2020 and December 28, 2019:
(amounts in
thousands)
|
As
of
June 27,
2020
|
As
of
December 28,
2019
|
Cash and cash
equivalents
|
$14,401
|
$8,307
|
Working
capital
|
16,066
|
11,289
|
For further information on ENGlobal's second quarter 2020 financial
results, please refer to its Form 10-Q 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 Q2 2020 financial results, provide updates on
contract awards, and provide outlook for 2020.
To participate in the conference call, please dial (Toll Free) 844-602-0380 domestically
or 862-298-0970 internationally, approximately ten 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/2272/36020
You may also access the teleconference replay by dialing (Toll
Free) 877-481-4010 domestically or 919-882-2331 internationally,
referencing conference ID 36020. This replay will be available
shortly after the completion of the live event through 9:00am EDT
on August 13, 2020. You may also access the replay by visiting the
company's web site at https://www.englobal.com/investors/events-and-presentations/
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 Automation 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 impact of the COVID-19 pandemic and of the
actions taken by governmental authorities, individuals and
companies in response to the pandemic on the company's business,
financial condition, and results of operations, including on the
company's revenues and profitability; (2) the effect of economic
downturns and the volatility and level of oil and natural gas
prices, including the severe disruptions in the worldwide economy,
including the global demand for oil and natural gas, resulting from
the COVID-19 pandemic; (3) 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; (4) the company's ability to increase the company's
backlog, revenue and profitability; (5) 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; (6) the company's ability to retain existing
customers and attract new customers; (7) the company's ability to
attract and retain key professional personnel (8) the company's
ability to obtain additional financing when needed; (9) the
company's dependence on one or a few customers; (10) 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; (11) the
uncertainties related to the U.S. Government's budgetary process
and their effects on the company's long-term U.S. Government
contracts; (12) the risk of unexpected liability claims or poor
safety performance; (13) the company's reliance on third-party
subcontractors and equipment manufacturers; (14) 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 (15) 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 our 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
Condensed Consolidated Statements of Operations
(Unaudited)
(amounts in thousands, except per share data)
|
For the Three
Months Ended
|
For the Six Months
Ended
|
||
|
June 27,
2020
|
June 29,
2019
|
June 27,
2020
|
June 29,
2019
|
Operating
revenues
|
$17,882
|
$13,621
|
$37,142
|
$25,784
|
Operating
costs
|
15,429
|
11,679
|
31,429
|
22,504
|
Gross
profit
|
2,453
|
1,942
|
5,713
|
3,280
|
|
|
|
|
|
Selling, general
and administrative expenses
|
2,314
|
2,450
|
4,447
|
4,755
|
Operating
profit (loss)
|
139
|
(508)
|
1,266
|
(1,475)
|
|
|
|
|
|
Other
income (expense):
|
|
|
|
|
Other income,
net
|
1
|
26
|
2
|
41
|
Interest expense,
net
|
(36)
|
(4)
|
(41)
|
(6)
|
Income
(loss) from operations before income taxes
|
104
|
(486)
|
1,227
|
(1,440)
|
|
|
|
|
|
Provision
for federal and state income taxes
|
36
|
31
|
58
|
51
|
|
|
|
|
|
Net
income (loss)
|
68
|
(517)
|
1,169
|
(1,491)
|
|
|
|
|
|
Basic
and diluted income (loss) per common share:
|
$0.00
|
$(0.02)
|
$0.04
|
$(0.05)
|
|
|
|
|
|
Basic
and diluted weighted average shares used in computing income (loss)
per share:
|
27,413
|
27,408
|
27,413
|
27,420
|
ENGlobal Corporation
Condensed Consolidated Balance Sheets
(Unaudited)
(amounts in thousands, except share amounts)
|
June 27,
2020
|
December 28,
2019
|
ASSETS
|
|
|
Current
Assets:
|
|
|
Cash
|
$14,401
|
$8,307
|
Trade receivables,
net of allowances of $270 and $236
|
9,866
|
11,435
|
Prepaid expenses
and other current assets
|
391
|
889
|
Contract
assets
|
5,118
|
3,862
|
Total Current
Assets
|
29,776
|
24,493
|
Property
and equipment, net
|
1,192
|
1,033
|
Goodwill
|
720
|
720
|
Other
assets
|
|
|
Right of use
asset
|
2,367
|
2,133
|
Deposits and other
assets
|
461
|
307
|
Total Other
Assets
|
2,828
|
2,440
|
Total
Assets
|
$34,516
|
$28,686
|
|
|
|
LIABILITIES
AND STOCKHOLDERS’ EQUITY
|
|
|
|
|
|
Current
Liabilities:
|
|
|
Accounts
payable
|
$3,095
|
$3,261
|
Accrued
compensation and benefits
|
3,760
|
2,783
|
Current portion of
leases
|
1,605
|
1,041
|
Contract
liabilities
|
2,329
|
5,438
|
Current portion of
note
|
2,212
|
—
|
Other current
liabilities
|
709
|
681
|
Total Current
Liabilities
|
13,710
|
13,204
|
Long-term
debt
|
4,158
|
—
|
Long-term
leases
|
1,323
|
1,458
|
Total
Liabilities
|
19,191
|
14,662
|
Commitments
and Contingencies (Note 8)
|
|
|
Stockholders’
Equity:
|
|
|
Common stock -
$0.001 par value; 75,000,000
shares authorized; 27,413,626 shares issued and outstanding at June
27, 2020 and December 28, 2019
|
27
|
27
|
Additional paid-in
capital
|
37,066
|
36,934
|
Accumulated
deficit
|
(21,768)
|
(22,937)
|
Total
Stockholders’ Equity
|
15,325
|
14,024
|
Total Liabilities
and Stockholders’ Equity
|
$34,516
|
$28,686
|
ENGlobal Corporation
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(amounts in thousands)
|
For the Six Months
Ended
|
|
|
June 27,
2020
|
June 29,
2019
|
Cash
Flows from Operating Activities:
|
|
|
Net income
(loss)
|
$1,169
|
$(1,491)
|
Adjustments to
reconcile net income (loss) to net cash provided by (used in)
operating activities:
|
|
|
Depreciation and
amortization
|
205
|
177
|
Share-based
compensation expense
|
132
|
32
|
Changes in current
assets and liabilities:
|
|
|
Trade accounts
receivable
|
1,569
|
2,022
|
Contract
assets
|
(1,256)
|
985
|
Prepaids and other
current assets
|
344
|
492
|
Accounts
payable
|
(166)
|
(16)
|
Accrued
compensation and benefits
|
977
|
192
|
Contract
liabilities
|
(3,109)
|
2,046
|
Income taxes
payable
|
219
|
(430)
|
Other current
liabilities, net
|
(192)
|
(44)
|
Net cash provided
by (used in) operating activities
|
$(108)
|
$3,965
|
|
|
|
Cash
Flows from Investing Activities:
|
|
|
Proceeds from notes
receivable
|
—
|
5
|
Property and
equipment acquired
|
(126)
|
(72)
|
Net cash used in
investing activities
|
$(126)
|
$(67)
|
|
|
|
Cash
Flows from Financing Activities:
|
|
|
Purchase of common
stock
|
—
|
(61)
|
Proceeds from PPP
loan
|
4,925
|
—
|
Proceeds from
revolving credit facility
|
1,445
|
—
|
Payments on finance
leases
|
(42)
|
(1)
|
Net cash provided
by (used in) financing activities
|
$6,328
|
$(62)
|
Net change in
cash
|
6,094
|
3,836
|
Cash
at beginning of period
|
8,307
|
6,060
|
Cash
at end of period
|
$14,401
|
$9,896
|
|
|
|
Supplemental
disclosure of cash flow information:
|
|
|
Cash paid during
the period for interest
|
$12
|
$9
|
Right of use assets
obtained in exchange for new operating lease liability
|
$1,182
|
$2,619
|
Cash paid during
the period for income taxes (net of refunds)
|
$86
|
$—
|
Debt issuance
costs
|
$131
|
$—
|