Document and Entity Information
Document and Entity Information - shares | 3 Months Ended | |
Mar. 31, 2018 | May 09, 2018 | |
Document And Entity Information | ||
Entity Registrant Name | ENGLOBAL CORP | |
Entity Central Index Key | 933,738 | |
Document Type | 10-Q | |
Document Period End Date | Mar. 31, 2018 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --12-31 | |
Entity Filer Category | Smaller Reporting Company | |
Entity Common Stock, Shares Outstanding | 27,514,380 | |
Trading Symbol | ENG | |
Document Fiscal Period Focus | Q1 | |
Document Fiscal Year Focus | 2,018 |
Condensed Consolidated Statemen
Condensed Consolidated Statements of Operations (Unaudited) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2018 | Apr. 01, 2017 | |
Income Statement [Abstract] | ||
Operating revenues | $ 13,188 | $ 12,473 |
Operating costs | 11,775 | 10,742 |
Gross profit | 1,413 | 1,731 |
Selling, general and administrative expenses | 2,582 | 3,406 |
Operating loss | (1,169) | (1,675) |
Other income (expense): | ||
Other income (expense), net | (5) | 3 |
Interest expense, net | (9) | (65) |
Loss from operations before income taxes | (1,183) | (1,737) |
Provision (benefit) for federal and state income taxes | 17 | (859) |
Net loss | $ (1,200) | $ (878) |
Basic and diluted loss per common share: | $ (0.04) | $ (0.03) |
Basic and diluted weighted average shares used in computing loss per share: | 27,514 | 27,188 |
Condensed Consolidated Balance
Condensed Consolidated Balance Sheets (Unaudited) - USD ($) $ in Thousands | Mar. 31, 2018 | Dec. 30, 2017 |
Current Assets: | ||
Cash, cash equivalents and restricted cash | $ 6,767 | $ 9,648 |
Trade receivables, net of allowances of $695 and $695 | 9,588 | 9,114 |
Prepaid expenses and other current assets | 630 | 994 |
Contract assets | 4,677 | 5,273 |
Total Current Assets | 21,662 | 25,029 |
Property and equipment, net | 880 | 1,027 |
Goodwill | 2,806 | 2,806 |
Other assets | 371 | 390 |
Total Assets | 25,719 | 29,252 |
Current Liabilities: | ||
Accounts payable | 3,372 | 3,742 |
Accrued compensation and benefits | 1,564 | 2,039 |
Contract liabilities | 293 | 1,334 |
Other current liabilities | 545 | 1,068 |
Total Liabilities | 5,774 | 8,183 |
Commitments and Contingencies (Note 8) | ||
Stockholders' Equity: | ||
Common stock - $0.001 par value; 75,000,000 shares authorized; 27,514,380 shares issued and outstanding at March 31, 2018 and December 30, 2017, respectively | 27 | 27 |
Additional paid-in capital | 36,919 | 36,843 |
Accumulated deficit | (17,001) | (15,801) |
Total Stockholders' Equity | 19,945 | 21,069 |
Total Liabilities and Stockholders' Equity | $ 25,719 | $ 29,252 |
Condensed Consolidated Balance4
Condensed Consolidated Balance Sheets (Unaudited) (Parenthetical) - USD ($) $ in Thousands | Mar. 31, 2018 | Dec. 30, 2017 |
Statement of Financial Position [Abstract] | ||
Trade receivables, allowances | $ 695 | $ 695 |
Common stock, par value | $ 0.001 | $ 0.001 |
Common stock, shares authorized | 75,000,000 | 75,000,000 |
Common stock, shares issued | 27,514,380 | 27,514,380 |
Common stock, shares outstanding | 27,514,380 | 27,514,380 |
Condensed Consolidated Stateme5
Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2018 | Apr. 01, 2017 | |
Cash Flows from Operating Activities: | ||
Net loss | $ (1,200) | $ (878) |
Adjustments to reconcile net loss to net cash used in operating activities: | ||
Depreciation and amortization | 156 | 269 |
Share-based compensation expense | 76 | 75 |
Deferred tax | (848) | |
Changes in current assets and liabilities: | ||
Trade accounts receivable | (474) | 2,474 |
Contract assets | 596 | (995) |
Other current assets | 378 | 176 |
Accounts payable | (370) | (976) |
Accrued compensation and benefits | (475) | (259) |
Contract liabilities | (1,041) | 102 |
Income taxes payable | 14 | 96 |
Other current liabilities, net | (491) | (109) |
Net cash used in operating activities | (2,831) | (873) |
Cash Flows from Investing Activities: | ||
Proceeds from notes receivable | 4 | 10 |
Property and equipment acquired | (8) | (408) |
Net cash used in investing activities | (4) | (398) |
Cash Flows from Financing Activities: | ||
Payments on capitalized leases | (46) | (43) |
Net cash used in financing activities | (46) | (43) |
Net change in cash, cash equivalents and restricted cash | (2,881) | (1,314) |
Cash, cash equivalents and restricted cash, at beginning of period | 9,648 | 15,687 |
Cash, cash equivalents and restricted cash, at end of period | 6,767 | 14,373 |
Supplemental disclosure of cash flow information: | ||
Cash paid during the period for interest | 9 | 65 |
Cash paid (received) during the period for income taxes (net of refunds) | $ 2 | $ (107) |
Basis of Presentation
Basis of Presentation | 3 Months Ended |
Mar. 31, 2018 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Basis of Presentation | NOTE 1 – BASIS OF PRESENTATION The accompanying unaudited condensed consolidated financial statements of ENGlobal Corporation (which may be referred to as “ENGlobal,” the “Company,” “we,” “us,” or “our”) were prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and the rules and regulations of the Securities and Exchange Commission. Accordingly, these condensed financial statements do not include all of the information or note disclosures normally included in annual financial statements prepared in accordance with U.S. GAAP. These condensed financial statements should be read in conjunction with the audited financial statements for the year ended December 30, 2017, included in the Company’s 2017 Annual Report on Form 10-K filed with the Securities and Exchange Commission. The condensed financial statements included herein are unaudited for the three month periods ended March 31, 2018 and April 1, 2017, and in the case of the condensed balance sheet as of December 30, 2017 have been derived from the audited financial statements of the Company. These financial statements reflect all adjustments (consisting of normal recurring adjustments), which are, in the opinion of management, necessary to fairly present the results for the periods presented. The Company has assessed subsequent events through the date of filing of these condensed financial statements with the Securities and Exchange Commission and believes that the disclosures made herein are adequate to make the information presented herein not misleading. We had no items of other comprehensive income in any period presented; therefore, no other components of comprehensive income are presented. Each of our quarters is comprised of 13 weeks. |
Accounting Standards
Accounting Standards | 3 Months Ended |
Mar. 31, 2018 | |
New Accounting Pronouncements and Changes in Accounting Principles [Abstract] | |
Accounting Standards | NOTE 2 – ACCOUNTING STANDARDS In May 2014, the Financial Statements Accounting Board (“FASB”) issued ASU No. 2014-09 , Revenue From Contracts with Customers (Topic 606), In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments. New Accounting Pronouncements Not Yet Adopted In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) In January 2017, the FASB issued ASU No. 2017-04, Intangibles—Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment |
Critical Accounting Policies Up
Critical Accounting Policies Update | 3 Months Ended |
Mar. 31, 2018 | |
Accounting Policies [Abstract] | |
Critical Accounting Policies Update | NOTE 3 – CRITICAL ACCOUNTING POLICIES UPDATE Our critical accounting policies are detailed in “Note 2 – Accounting Policies and New Accounting Pronouncements” within Item 8 of our Annual Report on Form 10-K for the year ended December 30, 2017. Significant changes to our accounting policies as a result of adopting Topic 606 are discussed below: Revenue Recognition A majority of sales of fabrication and assembled systems are under fixed-price contracts. We account for a contract when it has approval and commitment from both parties, the rights of the parties are identified, payment terms are identified, the contract has commercial substance and collectability of consideration is probable. We generally recognize revenue over time as we perform because of continuous transfer of control to the customer. Our customer typically controls the work in process as evidenced either by contractual termination clauses or by our rights to payment for work performed to date plus a reasonable profit to deliver products or services that do not have an alternative use to the Company. The selection of the method to measure progress towards completion requires judgment and is based on the nature of the products or service to be provided, which measures the ratio of costs incurred to date to the total estimated costs at completion of the performance obligation. We generally use the cost-to-cost method of revenue recognition to measure progress for our contracts because it best depicts the transfer of control to the customer which occurs as we consume the costs on the contracts. Therefore, revenues and estimated profits are recorded proportionally as costs are incurred. Under the typical payment terms of our fixed-price contracts, the customer pays us progress payments. These progress payments are based on quantifiable measures of performance or on the achievement of specified events or milestones. The customer may retain a small portion of the contract price until completion of the contract. Revenue recognized in excess of billings is recorded as a contract asset on the balance sheet. Amounts billed and due from our customers are classified as receivables on the balance sheet. The portion of the payments retained by the customer until final contract settlement is not considered a significant financing component because the intent is to protect the customer should we fail to adequately complete some or all of our obligations under the contract. For some contracts we may receive advance payments from the customer. We record a liability for these advance payments in contract liabilities on the balance sheet. The advance payment typically is not considered a significant financing component because it is used to meet working capital demand that can be higher in the early stages of a contract and to protect us from the other party failing to adequately complete some or all of its obligations under the contract. To determine proper revenue recognition for contracts, we evaluate whether two or more contracts should be combined and accounted for as one single performance obligation or whether a single contract should be accounted for as more than one performance obligation. This evaluation requires significant judgment and the decision to combine a group of contracts or separate a single contract into multiple performance obligations could change the amount of revenue and profit recorded in a given period. For most of our contracts, we provide a significant service of integrating a complex set of tasks and components into a single project. Hence, the entire contract is accounted for as one performance obligation. Less commonly, we may provide distinct goods or services within a contract in which case we separate the contract into more than one performance obligation. If a contract is separated into more than one performance obligation, we allocate the total transaction price to each performance obligation in an amount based on the estimated relative standalone selling price of the promised goods or services underlying each performance obligation and use the expected cost plus margin approach to estimate the standalone selling price of each performance obligation. Due to the nature of the work require to be performed on many of our performance obligations, the estimation of total revenue and cost at completion is complex, subject to variables and requires significant judgment. We estimate variable consideration at the most likely amount to which we expect to be entitled. We include estimated amounts in the transaction price to the extent it is probable that a significant reversal of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is resolved. Our estimates of variable consideration and determination of whether to include estimated amounts in the transaction price are based largely on an assessment of our anticipated performance and all information (historical, current and forecasted) that is reasonably available to us. Contracts are often modified to account for changes in contract specifications and requirements. We consider contract modifications to exist when the modification either creates new or changes the existing enforceable rights and obligations. Most of our contract modifications are for goods or services that are not distinct from the existing contract due to the significant integration service provided in the context of the contract and are accounted for as if they were part of that existing contract. The effect of a contract modification on the transaction price and our measure of progress for the performance obligation to which it relates, is recognized as an adjustment to revenue (either as an increase or a reduction of revenue) on a cumulative catch-up basis. We have a standard, monthly process in which management reviews the progress and execution of our performance obligations. As part of this process, management reviews information including, but not limited to, any outstanding key contract matters, progress towards completion and the related program schedule, identified risks and opportunities and the related changes in estimates of revenues and costs. The risks and opportunities include management’s judgment about the ability and cost to achieve the schedule, technical requirements, and other contractual requirements. Management must make assumptions and estimates regarding labor productivity and availability, the complexity of the work to be performed, the availability of materials, the length of time to complete the performance obligation, execution by our subcontractors, the availability and timing of funding from our customer and overhead cost rates, among other variables. Based on this analysis, any adjustments to revenue, operating costs and the related impact to operating income are recognized as necessary in the period they become known. These adjustments may result from positive performance and may result in an increase in operating income during the performance of individual performance obligations if we determine we will be successful in mitigating risks surrounding the technical, schedule and cost aspects of those performance obligations or realizing related opportunities. When estimates of total costs to be incurred exceed total estimates to be earned, a provision for the entire loss on the performance obligation is recognized in the period the loss is recorded. Likewise, these adjustments may result in a decrease in operating income if we determine we will not be successful in mitigating these risks or realizing related opportunities. Changes in estimates of net revenue, operating costs and the related impact to operating income are recognized monthly on a cumulative catch-up basis, which recognizes in the current period the cumulative effect of the changes on current and prior periods based on a performance obligation’s percentage of completion. A significant change in one or more of these estimates could affect the profitability of one or more of our performance obligations. Incremental Costs |
Cash, Cash Equivalents and Rest
Cash, Cash Equivalents and Restricted Cash | 3 Months Ended |
Mar. 31, 2018 | |
Cash and Cash Equivalents [Abstract] | |
Cash, Cash Equivalents and Restricted Cash | NOTE 4 – CASH, CASH EQUIVALENTS AND RESTRICTED CASH The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the consolidated financial statements: March 31, 2018 December 30, 2017 (dollars in thousands) Cash and cash equivalents $ 6,767 $ 8,988 Restricted cash — 660 Total cash, cash equivalents and restricted cash $ 6,767 $ 9,648 Amounts included in restricted cash represent those required to be set aside to collateralize a letter of credit required by a customer. This letter of credit expired on December 31, 2017. |
Contract Assets and Contract Li
Contract Assets and Contract Liabilities | 3 Months Ended |
Mar. 31, 2018 | |
Contractors [Abstract] | |
Contract Assets and Contract Liabilities | NOTE 5 – CONTRACT ASSETS AND CONTRACT LIABILITIES Our contract assets consist of unbilled amounts typically resulting from sales under long-term contracts when the cost-to-cost method of revenue recognition is utilized and revenue recognized exceeds the amount billed to the customer. Our contract liabilities consist of advance payments and billings in excess of costs incurred and deferred revenue. The noncurrent portion of deferred revenue is included in other long-term liabilities in our consolidated balance sheets. Costs, estimated earnings and billings on uncompleted contracts consisted of the following at March 31, 2018 and December 30, 2017: March 31, 2018 December 30, 2017 (dollars in thousands) Costs incurred on uncompleted contracts $ 32,928 $ 57,916 Estimated earnings on uncompleted contracts 5,565 15,423 Earned revenues 38,493 73,339 Less: billings to date 34,109 69,400 Net costs and estimated earnings in excess of billings on uncompleted contracts $ 4,384 $ 3,939 Contract assets $ 4,677 $ 5,273 Contract liabilities (293 ) (1,334 ) Net contract assets $ 4,384 $ 3,939 |
Segment Information
Segment Information | 3 Months Ended |
Mar. 31, 2018 | |
Segment Reporting [Abstract] | |
Segment Information | NOTE 6 – SEGMENT INFORMATION Our segments are strategic business units that offer different services and products and therefore require different marketing and management strategies. During 2017, ENGlobal changed the reporting structure within the Company by placing an operational leader in charge of its engineering offices and a separate operational leader in charge of its automation offices, including the office that contracts with government agencies. The operating performance is regularly reviewed with these two operational leaders, the chief executive officer (“CEO”), the chief financial officer (“CFO”) and others. This group represents the chief operating decision maker (“CODM”) for ENGlobal. The Engineering, Procurement and Construction Management (“EPCM”) segment provides services relating to the development, management and execution of projects requiring professional engineering and related project services primarily to the energy industry throughout the United States. The Automation segment provides services related to the design, integration and implementation of advanced automation, information technology, process distributed control systems, analyzer systems, and electrical projects primarily to the upstream and downstream sectors throughout the United States. The Automation segment includes the government services group, which provides engineering, design, installation and operation and maintenance of various government, public sector and international facilities and the fabrication operation. We have revised our segment reporting to reflect our current management approach and recast prior periods to conform to the current segment presentation. Effective December 31, 2017, we adopted the requirements of Topic 606 using the modified retrospective method as discussed in “Note 2 – Accounting Standards.” The presentation of our business segments, including corporate, set forth in these consolidated financial statements reflect these changes. Revenues, operating income, and identifiable assets for each segment are set forth in the following table. The amount identified as Corporate includes those activities that are not allocated to the operating segments and includes costs related to business development, executive functions, finance, accounting, safety, human resources and information technology that are not specifically identifiable with the segments. Segment information for the three months ended March 31, 2018 and April 1, 2017 is as follows (dollars in thousands): For the three months ended March 31, 2018: EPCM Automation Corporate Consolidated Revenue $ 5,095 $ 8,093 $ — $ 13,188 Gross profit 416 997 — 1,413 Gross Profit Margin 8.2 % 12.3 % 10.7 % SG&A 426 705 1,451 2,582 Operating income (loss) (10 ) 292 (1,451 ) (1,169 ) Other expense (5 ) Interest expense, net (9 ) Tax expense (17 ) Net loss $ (1,200 ) For the three months ended April 1, 2017: EPCM Automation Corporate Consolidated Revenue $ 5,629 6,844 $ — $ 12,473 Gross profit 494 1,237 — 1,731 Gross Profit Margin 8.8 % 18.1 % 13.9 % SG&A 569 739 2,098 3,406 Operating income (loss) (75 ) 498 (2,098 ) (1,675 ) Other income 3 Interest expense, net (65 ) Tax benefit 859 Net loss $ (878 ) Total Assets by Segment As of March 31, 2018 As of December 30, 2017 (dollars in thousands) EPCM $ 7,032 $ 5,976 Automation 11,618 12,485 Corporate 7,069 10,791 Consolidated $ 25,719 $ 29,252 |
Federal and State Income Taxes
Federal and State Income Taxes | 3 Months Ended |
Mar. 31, 2018 | |
Income Tax Disclosure [Abstract] | |
Federal and State Income Taxes | NOTE 7 – FEDERAL AND STATE INCOME TAXES The Company accounts for income taxes in accordance with FASB Accounting Standards Codification 740, “Income Taxes” (“ASC 740”). Under ASC 740-270 we estimate an annual effective tax rate based on year-to-date operating results and our projection of operating results for the remainder of the year. We apply this annual effective tax rate to the year-to-date operating results. If our actual results differ from the estimated annual projection, our estimated annual effective tax rate can change affecting the tax expense for successive interim results as well as the estimated annual tax expense results. Certain states are not included in the calculation of the estimated annual effective tax rate because the underlying basis for the tax is related to revenues and not taxable income. Amounts for Texas margin taxes are reported as income tax expense. The Company applies a more likely than not recognition threshold for all tax uncertainties. The FASB guidance for uncertain tax positions only allows the recognition of those tax benefits, based on their technical merits that are greater than 50 percent likelihood of being sustained upon examination by the taxing authorities. Management has reviewed the Company’s tax positions and determined there are no uncertain tax positions requiring recognition in the financial statements. U.S. federal tax returns prior to 2014 and Texas margins tax returns prior to 2014 are closed. Generally, the applicable statues of limitations are three to four years from their filings. The Company recorded $17 thousand of state income tax expense for the three months ended March 31, 2018 as compared to an $859 thousand income tax benefit for the three months ended April 1, 2017. The Company recorded a valuation allowance of approximately $0.3 million against the federal portion of its income tax benefit in 2018 effectively netting it to zero. |
Commitments and Contingencies
Commitments and Contingencies | 3 Months Ended |
Mar. 31, 2018 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | NOTE 8 – COMMITMENTS AND CONTINGENCIES From time to time, ENGlobal or one or more of its subsidiaries is involved in various legal proceedings or is subject to claims that arise in the ordinary course of business alleging, among other things, claims of breach of contract or negligence in connection with the performance or delivery of goods and/or services. The outcome of any such claims or proceedings cannot be predicted with certainty. Management is not aware of any pending or threatened lawsuits or proceedings that are expected to have a material effect on our financial position, results of operations or liquidity. We carry a broad range of insurance coverage, including general and business automobile liability, commercial property, professional errors and omissions, workers’ compensation insurance, directors’ and officers’ liability insurance and a general umbrella policy, all with standard self-insured retentions/deductibles. We also provide health insurance to our employees (including vision and dental), and are partially self-funded for these claims. Provisions for expected future payments are accrued based on our experience, and specific stop loss levels provide protection for the Company. We believe we have adequate reserves for the self-funded portion of our insurance policies. We are not aware of any material litigation or claims that are not covered by these policies or which are likely to materially exceed the Company’s insurance limits. |
Critical Accounting Policies 14
Critical Accounting Policies Update (Policies) | 3 Months Ended |
Mar. 31, 2018 | |
Accounting Policies [Abstract] | |
New Accounting Pronouncements Not Yet Adopted | New Accounting Pronouncements Not Yet Adopted In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) In January 2017, the FASB issued ASU No. 2017-04, Intangibles—Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment |
Revenue Recognition | Revenue Recognition A majority of sales of fabrication and assembled systems are under fixed-price contracts. We account for a contract when it has approval and commitment from both parties, the rights of the parties are identified, payment terms are identified, the contract has commercial substance and collectability of consideration is probable. We generally recognize revenue over time as we perform because of continuous transfer of control to the customer. Our customer typically controls the work in process as evidenced either by contractual termination clauses or by our rights to payment for work performed to date plus a reasonable profit to deliver products or services that do not have an alternative use to the Company. The selection of the method to measure progress towards completion requires judgment and is based on the nature of the products or service to be provided, which measures the ratio of costs incurred to date to the total estimated costs at completion of the performance obligation. We generally use the cost-to-cost method of revenue recognition to measure progress for our contracts because it best depicts the transfer of control to the customer which occurs as we consume the costs on the contracts. Therefore, revenues and estimated profits are recorded proportionally as costs are incurred. Under the typical payment terms of our fixed-price contracts, the customer pays us progress payments. These progress payments are based on quantifiable measures of performance or on the achievement of specified events or milestones. The customer may retain a small portion of the contract price until completion of the contract. Revenue recognized in excess of billings is recorded as a contract asset on the balance sheet. Amounts billed and due from our customers are classified as receivables on the balance sheet. The portion of the payments retained by the customer until final contract settlement is not considered a significant financing component because the intent is to protect the customer should we fail to adequately complete some or all of our obligations under the contract. For some contracts we may receive advance payments from the customer. We record a liability for these advance payments in contract liabilities on the balance sheet. The advance payment typically is not considered a significant financing component because it is used to meet working capital demand that can be higher in the early stages of a contract and to protect us from the other party failing to adequately complete some or all of its obligations under the contract. To determine proper revenue recognition for contracts, we evaluate whether two or more contracts should be combined and accounted for as one single performance obligation or whether a single contract should be accounted for as more than one performance obligation. This evaluation requires significant judgment and the decision to combine a group of contracts or separate a single contract into multiple performance obligations could change the amount of revenue and profit recorded in a given period. For most of our contracts, we provide a significant service of integrating a complex set of tasks and components into a single project. Hence, the entire contract is accounted for as one performance obligation. Less commonly, we may provide distinct goods or services within a contract in which case we separate the contract into more than one performance obligation. If a contract is separated into more than one performance obligation, we allocate the total transaction price to each performance obligation in an amount based on the estimated relative standalone selling price of the promised goods or services underlying each performance obligation and use the expected cost plus margin approach to estimate the standalone selling price of each performance obligation. Due to the nature of the work require to be performed on many of our performance obligations, the estimation of total revenue and cost at completion is complex, subject to variables and requires significant judgment. We estimate variable consideration at the most likely amount to which we expect to be entitled. We include estimated amounts in the transaction price to the extent it is probable that a significant reversal of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is resolved. Our estimates of variable consideration and determination of whether to include estimated amounts in the transaction price are based largely on an assessment of our anticipated performance and all information (historical, current and forecasted) that is reasonably available to us. Contracts are often modified to account for changes in contract specifications and requirements. We consider contract modifications to exist when the modification either creates new or changes the existing enforceable rights and obligations. Most of our contract modifications are for goods or services that are not distinct from the existing contract due to the significant integration service provided in the context of the contract and are accounted for as if they were part of that existing contract. The effect of a contract modification on the transaction price and our measure of progress for the performance obligation to which it relates, is recognized as an adjustment to revenue (either as an increase or a reduction of revenue) on a cumulative catch-up basis. We have a standard, monthly process in which management reviews the progress and execution of our performance obligations. As part of this process, management reviews information including, but not limited to, any outstanding key contract matters, progress towards completion and the related program schedule, identified risks and opportunities and the related changes in estimates of revenues and costs. The risks and opportunities include management’s judgment about the ability and cost to achieve the schedule, technical requirements, and other contractual requirements. Management must make assumptions and estimates regarding labor productivity and availability, the complexity of the work to be performed, the availability of materials, the length of time to complete the performance obligation, execution by our subcontractors, the availability and timing of funding from our customer and overhead cost rates, among other variables. Based on this analysis, any adjustments to revenue, operating costs and the related impact to operating income are recognized as necessary in the period they become known. These adjustments may result from positive performance and may result in an increase in operating income during the performance of individual performance obligations if we determine we will be successful in mitigating risks surrounding the technical, schedule and cost aspects of those performance obligations or realizing related opportunities. When estimates of total costs to be incurred exceed total estimates to be earned, a provision for the entire loss on the performance obligation is recognized in the period the loss is recorded. Likewise, these adjustments may result in a decrease in operating income if we determine we will not be successful in mitigating these risks or realizing related opportunities. Changes in estimates of net revenue, operating costs and the related impact to operating income are recognized monthly on a cumulative catch-up basis, which recognizes in the current period the cumulative effect of the changes on current and prior periods based on a performance obligation’s percentage of completion. A significant change in one or more of these estimates could affect the profitability of one or more of our performance obligations. |
Incremental Costs | Incremental Costs |
Cash, Cash Equivalents and Re15
Cash, Cash Equivalents and Restricted Cash (Tables) | 3 Months Ended |
Mar. 31, 2018 | |
Cash and Cash Equivalents [Abstract] | |
Schedule of Cash, Cash Equivalents and Restricted Cash | The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the consolidated financial statements: March 31, 2018 December 30, 2017 (dollars in thousands) Cash and cash equivalents $ 6,767 $ 8,988 Restricted cash — 660 Total cash, cash equivalents and restricted cash $ 6,767 $ 9,648 |
Contract Assets and Contract 16
Contract Assets and Contract Liabilities (Tables) | 3 Months Ended |
Mar. 31, 2018 | |
Contractors [Abstract] | |
Schedule of Costs Estimated Earnings and Billings on Uncompleted Contracts | Costs, estimated earnings and billings on uncompleted contracts consisted of the following at March 31, 2018 and December 30, 2017: March 31, 2018 December 30, 2017 (dollars in thousands) Costs incurred on uncompleted contracts $ 32,928 $ 57,916 Estimated earnings on uncompleted contracts 5,565 15,423 Earned revenues 38,493 73,339 Less: billings to date 34,109 69,400 Net costs and estimated earnings in excess of billings on uncompleted contracts $ 4,384 $ 3,939 Contract assets $ 4,677 $ 5,273 Contract liabilities (293 ) (1,334 ) Net contract assets $ 4,384 $ 3,939 |
Segment Information (Tables)
Segment Information (Tables) | 3 Months Ended |
Mar. 31, 2018 | |
Segment Reporting [Abstract] | |
Schedule of Segment Information for Operation Statement | Segment information for the three months ended March 31, 2018 and April 1, 2017 is as follows (dollars in thousands): For the three months ended March 31, 2018: EPCM Automation Corporate Consolidated Revenue $ 5,095 $ 8,093 $ — $ 13,188 Gross profit 416 997 — 1,413 Gross Profit Margin 8.2 % 12.3 % 10.7 % SG&A 426 705 1,451 2,582 Operating income (loss) (10 ) 292 (1,451 ) (1,169 ) Other expense (5 ) Interest expense, net (9 ) Tax expense (17 ) Net loss $ (1,200 ) For the three months ended April 1, 2017: EPCM Automation Corporate Consolidated Revenue $ 5,629 6,844 $ — $ 12,473 Gross profit 494 1,237 — 1,731 Gross Profit Margin 8.8 % 18.1 % 13.9 % SG&A 569 739 2,098 3,406 Operating income (loss) (75 ) 498 (2,098 ) (1,675 ) Other income 3 Interest expense, net (65 ) Tax benefit 859 Net loss $ (878 ) Total Assets by Segment As of March 31, 2018 As of December 30, 2017 (dollars in thousands) EPCM $ 7,032 $ 5,976 Automation 11,618 12,485 Corporate 7,069 10,791 Consolidated $ 25,719 $ 29,252 |
Cash, Cash Equivalents and Re18
Cash, Cash Equivalents and Restricted Cash (Details Narrative) | 3 Months Ended |
Mar. 31, 2018 | |
Cash and Cash Equivalents [Abstract] | |
Letter of credit expiration, description | This letter of credit expired December 31, 2017 |
Cash, Cash Equivalents and Re19
Cash, Cash Equivalents and Restricted Cash - Schedule of Cash, Cash Equivalents and Restricted Cash (Details) - USD ($) $ in Thousands | Mar. 31, 2018 | Dec. 31, 2017 | Dec. 30, 2017 | Apr. 01, 2017 | Dec. 31, 2016 |
Cash and Cash Equivalents [Abstract] | |||||
Cash and cash equivalents | $ 6,767 | $ 8,988 | |||
Restricted cash | 660 | ||||
Total cash, cash equivalents and restricted cash | $ 6,767 | $ 9,648 | $ 9,648 | $ 14,373 | $ 15,687 |
Contract Assets and Contract 20
Contract Assets and Contract Liabilities - Schedule of Costs Estimated Earnings and Billings on Uncompleted Contracts (Details) - USD ($) $ in Thousands | Mar. 31, 2018 | Dec. 30, 2017 |
Contractors [Abstract] | ||
Costs incurred on uncompleted contracts | $ 32,928 | $ 57,916 |
Estimated earnings on uncompleted contracts | 5,565 | 15,423 |
Earned revenues | 38,493 | 73,339 |
Less: billings to date | 34,109 | 69,400 |
Net costs and estimated earnings in excess of billings on uncompleted contracts | 4,384 | 3,939 |
Contract assets | 4,677 | 5,273 |
Contract liabilities | (293) | (1,334) |
Net contract assets | $ 4,384 | $ 3,939 |
Segment Information - Schedule
Segment Information - Schedule of Segment Information for Operation Statement (Details) - USD ($) $ in Thousands | 3 Months Ended | ||
Mar. 31, 2018 | Apr. 01, 2017 | Dec. 30, 2017 | |
Revenue | $ 13,188 | $ 12,473 | |
Gross profit | $ 1,413 | $ 1,731 | |
Gross Profit Margin | 10.70% | 13.90% | |
SG&A | $ 2,582 | $ 3,406 | |
Operating income (loss) | (1,169) | (1,675) | |
Other expense | (5) | 3 | |
Interest expense, net | (9) | (65) | |
Tax expense | (17) | 859 | |
Net loss | (1,200) | (878) | |
Total Assets | 25,719 | $ 29,252 | |
EPCM [Member] | |||
Revenue | 5,095 | 5,629 | |
Gross profit | $ 416 | $ 494 | |
Gross Profit Margin | 8.20% | 8.80% | |
SG&A | $ 426 | $ 569 | |
Operating income (loss) | (10) | (75) | |
Total Assets | 7,032 | 5,976 | |
Automation [Member] | |||
Revenue | 8,093 | 6,844 | |
Gross profit | $ 997 | $ 1,237 | |
Gross Profit Margin | 12.30% | 18.10% | |
SG&A | $ 705 | $ 739 | |
Operating income (loss) | 292 | 498 | |
Total Assets | 11,618 | 12,485 | |
Corporate [Member] | |||
Revenue | |||
Gross profit | |||
SG&A | 1,451 | 2,098 | |
Operating income (loss) | (1,451) | $ (2,098) | |
Total Assets | $ 7,069 | $ 10,791 |
Federal and State Income Taxes
Federal and State Income Taxes (Details Narrative) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2018 | Apr. 01, 2017 | |
Income Tax Disclosure [Abstract] | ||
Income tax benefits likelihood percentage of description | greater than 50 percent likelihood | |
Total income tax benefit | $ 17 | $ (859) |
Valuation allowance | 300 | |
Federal income tax benefit | $ 0 |