 | 654 N. Sam Houston Pkwy. E., Suite 400 Houston, Texas 77060-5914 Phone: 281.878.1000 Fax: 281.878.1010 |
VIA EDGAR
Mr. John Cash
Accounting Branch Chief
Mail Stop 7010
Securities and Exchange Commission
Division of Corporation Finance
100 F St., N. E.
Washington, DC 20549-7010
October 16, 2013
| Re: | ENGlobal Corporation Form 10-K for the Fiscal Year Ended December 29, 2012 Filed April 15, 2013 Form 10-K/A for the Fiscal Year Ended December 29, 2012 Filed April 29, 2013 Form 10-Q for the Period Ended June 29, 2013 Filed August 9, 2013 Form 8-K Filed April 15, 2013 File No. 1-14217 |
Dear Mr. Cash:
With respect to the above-captioned filings, we enclose ENGlobal’s additional responses to the comments posed by the Staff of the Securities and Exchange Commission (the “Commission”) set forth in your comment letter dated October 3, 2013. As requested, our responses are keyed numerically to the additional comments received from the Commission.
Referencing:
Form 10-K/A for the Fiscal Year Ended December 29, 2012
Summary Compensation Table, page 7
| 1. | We note your supplemental disclosure in response to comment nine in our letter dated September 4, 2013. Please provide us with the following information to better understand how the 2012 compensation for Messrs. Pagano and Rennie is being disclosed: |
| · | Reasons for the decrease in salary for both Messrs. Pagano and Rennie by $104,644 and $47,433, respectively; and |
Mr. John Cash
Securities and Exchange Commission
Page 2
The Salary column for Messrs. Pagano and Rennie in our initial filing erroneously included all federal income taxable wages, which included cash paid in lieu of vacation as reported in the salary column as well as executive and other benefits that were already included in the All Other Compensation column. The supplementary response to the Staff included the corrected Executive Compensation Table.
| · | Whether the $13,156 amount paid to Mr. Pagano for amounts owed to him for paid time off and holidays during 2012 is included in the $123,451 severance payment he received in 2012, or otherwise, tell us how this amount is being reflected in the Summary Compensation Table. |
The $13,156 paid to Mr. Pagano was cash in lieu of paid time off and holidays that was included in the Salary column and the $123,451 severance payment was included in the All Other Compensation column. Below are the components of the All Other Compensation column.
| Executive Benefits Plan | Severance | All Other Compensation | ||
| Pagano | 6,911 | 123,451 | = | $130,362 |
| Rennie | 4,960 | 41,539 | = | $46,499 |
Referencing:
Form 8-K/A Filed September 6, 2013
| 2. | With reference to Item 2.01 and Item 9.01(b)(4) of Form 8-K, please tell us how you considered the provisions of Rule 8-05(b) of Regulation S-X with regard to the form and content of the pro forma financial information you presented related to the disposition of your Gulf Coast Operations. |
As requested, we have revised the following presentation to conform to the requirements of 17 CFR 210.8-05 regarding pro forma financial information.
Mr. John Cash
Securities and Exchange Commission
Page 3
Pro forma Condensed Consolidated Statement of Operations
Unaudited
(amounts in thousands)
Actual for the Six Months Ended June 29, 2013 | Pro Forma Adjustments (1) | Pro Forma for the Six Months Ended June 29, 2013 | ||||||||||
| Operating revenues | $ | 100,411 | $ | (59,560 | ) | $ | 40,851 | |||||
| Operating costs | 89,100 | (54,214 | ) | 34,886 | ||||||||
| Gross profit | 11,311 | (5,346 | ) | 5,965 | ||||||||
| Selling, general and administrative expenses | 12,579 | (2,104 | ) | 10,475 | ||||||||
| Operating loss | (1,268 | ) | (3,242 | ) | (4,510 | ) | ||||||
| Other income (expense): | ||||||||||||
| Gain on sale of assets | - | 1,061 | 1,061 | |||||||||
| Other income (expense), net | (89 | ) | 300 | 211 | ||||||||
| Interest expense, net | (1,036 | ) | - | (1,036 | ) | |||||||
| Loss from continuing operations before income taxes | (2,393 | ) | (1,881 | ) | (4,274 | ) | ||||||
| Provision (benefit) for federal and state income taxes | 192 | - | 192 | |||||||||
| Loss from continuing operations | (2,585 | ) | (4,466 | ) | ||||||||
| Income (loss) from discontinued operations, net of taxes | 2,935 | 2,943 | 5,878 | |||||||||
| Net income (loss) | $ | 350 | $ | 1,062 | $ | 1,412 | ||||||
Mr. John Cash
Securities and Exchange Commission
Page 4
Pro forma Condensed Consolidated Balance Sheet
Unaudited
(amounts in thousands)
| ASSETS | Actual as of June 29, 2013 | Pro Forma Adjustments (1) | Pro Forma as of June 29, 2013 | |||||||||
| Current Assets: | ||||||||||||
| Cash, restricted cash and cash equivalents | $ | 814 | $ | 1,102 | $ | 1,916 | ||||||
| Trade receivables, net | 41,914 | (21,931 | ) | 19,983 | ||||||||
| Notes receivable | 1,420 | 1,420 | ||||||||||
| Prepaid expenses and other current assets | 1,000 | (344 | ) | 656 | ||||||||
| Costs and earnings in excess of billings on uncompleted contracts | 1,876 | (15 | ) | 1,861 | ||||||||
| Total Current Assets | 47,024 | (21,188 | ) | 25,836 | ||||||||
| Property and equipment, net | 2,333 | (939 | ) | 1,394 | ||||||||
| Goodwill and other intangible assets | 4,165 | 4,165 | ||||||||||
| Long-term trade, notes receivable and other, net | 5,067 | 2,000 | 7,067 | |||||||||
| Other assets, net | 785 | (117 | ) | 668 | ||||||||
| Total Assets | $ | 59,374 | $ | (20,244 | ) | $ | 39,130 | |||||
| LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||||||
| Current Liabilities: | ||||||||||||
| Accounts payable, accrued and other current liabilities | $ | 5,785 | $ | (97 | ) | $ | 5,688 | |||||
| Accrued compensation and benefits | 8,176 | (6,494 | ) | 1,682 | ||||||||
| Credit facility | 14,688 | (14,688 | ) | - | ||||||||
| Billings in excess of costs and earnings on uncompleted contracts | 3,321 | (3 | ) | 3,318 | ||||||||
| Other current liabilities | 1,667 | (23 | ) | 1,644 | ||||||||
| Total Current Liabilities | 33,637 | (21,305 | ) | 12,332 | ||||||||
| Stockholders' Equity: | ||||||||||||
| Common stock - | 28 | - | 28 | |||||||||
| Additional paid-in capital | 38,570 | - | 38,570 | |||||||||
| Accumulated deficit | (10,429 | ) | 1,061 | (9,368 | ||||||||
| Treasury stock at cost | (2,362 | ) | - | (2,362 | ||||||||
| Accumulated other comprehensive loss | (70 | ) | - | (70 | ||||||||
| Total Stockholders' Equity | 25,737 | 1,061 | 26,798 | |||||||||
| Total Liabilities and Stockholders' Equity | $ | 59,374 | (20,244 | ) | $ | 39,130 | ||||||
(1) | Record the sale of the Gulf Coast engineering and in-plant operations and retirement of the old credit facility from the proceeds. |
Mr. John Cash
Securities and Exchange Commission
Page 5
If you have any additional questions regarding these comments, please direct them to Mark A. Hess at 281-878-4584 or mark.hess@englobal.com.
ENGlobal Corporation
/s/ Mark A. Hess
Mark A. Hess
Chief Financial Officer
| cc: | Lisa Etheredge, Staff Accountant, Division of Corporation Finance Jeanne Baker, Assistant Chief Accountant, Division of Corporation Finance Asia Timmons-Pierce, Staff Attorney, Division of Corporation Finance Era Anagnosti, Staff Attorney, Division of Corporation Finance Mr. William Coskey, Chairman and Chief Executive Officer, ENGlobal Mr. Randy Hale, Audit Committee Chairman, ENGlobal Board of Directors |