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Englobal Corp (ENG) SEC Filing 10-Q Quarterly report for the period ending Saturday, June 27, 2020

Englobal Corp

CIK: 933738 Ticker: ENG
  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 
 $ 
 
 


The following information was filed by Englobal Corp (ENG) on Thursday, August 6, 2020 as an 8K 2.02 statement, which is an earnings press release pertaining to results of operations and financial condition. It may be helpful to assess the quality of management by comparing the information in the press release to the information in the accompanying 10-Q Quarterly Report statement of earnings and operation as management may choose to highlight particular information in the press release.

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Inside Englobal Corp's 10-Q Quarterly Report:
Ticker: ENG
CIK: 933738
Form Type: 10-Q Quarterly Report
Accession Number: 0001654954-20-008561
Submitted to the SEC: Thu Aug 06 2020 11:10:04 AM EST
Accepted by the SEC: Thu Aug 06 2020
Period: Saturday, June 27, 2020
Industry: Engineering Services

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