Willdan Reports Third Quarter 2012 Financial Results

Willdan Reports Third Quarter 2012 Financial Results

ANAHEIM, Calif.--(BUSINESS WIRE)-- Willdan Group, Inc. ("Willdan") (Nasdaq: WLDN) , today announced financial results for its third quarter ended September 28, 2012.

For the third quarter of 2012, Willdan reported total contract revenue of $21.5 million and net income of $0.8 million, or $0.11 per share.


Tom Brisbin, Willdan's Chief Executive Officer, stated: "While our third quarter revenue declined, we had a profitable quarter and generated solid cash flow from operations. We managed our expenses carefully during the quarter and three of our four segments were profitable."

Third Quarter 2012 Results

For the third quarter of fiscal 2012, revenue was $21.5 million, down $7.1 million, or 24.7%, from revenue of $28.6 million for the comparable period last year. On a sequential basis, revenue was down $1.9 million, or 8.2%, from the second quarter of 2012. Income from operations was $1.4 million for the third quarter of fiscal 2012, as compared to income from operations of $2.4 million for the comparable period last year. On a sequential basis, income from operations was $1.4 million as compared to loss from operations of $19.6 million, including a $15.2 million goodwill impairment charge, for the second quarter of 2012.

Net income was $0.8 million for the third quarter of fiscal 2012, as compared to net income of $2.2 million for the comparable period last year and a net loss of $17.0 million for the second quarter of 2012.

Earnings per share for the third quarter of fiscal 2012 were $0.11 as compared to earnings per share of $0.30 for the comparable period last year.

Willdan generated $3.7 million in cash flow from operations in the third quarter of fiscal 2012.

Nine Months 2012 Results

For the nine months ended September 28, 2012, revenue was $70.5 million, as compared to $77.2 million in the comparable period last year. Loss from operations was $20.5 million for the nine months ended September 28, 2012 as compared to income from operations of $3.1 million for the comparable period last year. Net loss was $17.6 million for the nine months ended September 28, 2012 as compared to net income of $2.6 million for the comparable period last year.

Loss per share for the nine months ended September 28, 2012 was $2.41 as compared to earnings per share of $0.36 for the comparable period last year.

Willdan generated $4.6 million in cash flow from operations in the nine months ended September 28, 2012.

Three Months Ended

Nine Months Ended

In thousands (except per share data)

September 28,

2012

September 30,

2011

September 28,

2012

September 30,

2011

Revenue

$

21,547

$

28,605

$

70,496

$

77,159

Income (loss) from operations

1,420

2,380

(20,480

)

3,054

Interest income

2

1

4

5

Interest expense

(28

)

(21

)

(80

)

(53

)

Other, net

(14

)

8

(35

)

5

Income tax expense (benefit)

593

203

(2,991

)

402

Net income (loss)

$

787

$

2,165

$

(17,600

)

$

2,609

Basic earnings (loss) per share

$

0.11

$

0.30

$

(2.41

)

$

0.36

Diluted earnings (loss) per share

$

0.11

$

0.29

$

(2.41

)

$

0.35

Weighted average shares outstanding:

Basic

7,315

7,267

7,303

7,258

Diluted

7,315

7,468

7,303

7,478

Use of Non-GAAP Financial Measures

Adjusted EBITDA is a supplemental measure used by Willdan's management to measure its operating performance. Willdan defines Adjusted EBITDA as net income (loss) plus net interest expense, income tax expense (benefit), depreciation and amortization, goodwill impairment and other non-recurring income and expense items occurring in such period. Willdan's definition of Adjusted EBITDA may differ from those of many companies reporting similarly named measures. This measure should be considered in addition to, and not as a substitute for or superior to, other measures of financial performance prepared in accordance with U.S. generally accepted accounting principles, or GAAP, such as net income. Willdan believes Adjusted EBITDA enables management to separate unusual or infrequent income and expense items from its results of operations to provide a more normalized and consistent view of operating performance on a period-to-period basis. Willdan uses Adjusted EBITDA to evaluate its performance for, among other things, budgeting, forecasting and incentive compensation purposes. Willdan also believes Adjusted EBITDA is useful to investors, research analysts, investment bankers and lenders because it removes from its operational results the impact of certain unusual or infrequent income and expense items, which may facilitate comparison of its results from period to period.

Adjusted EBITDA is not a recognized term under GAAP and does not purport to be an alternative to income from operations or net income as an indicator of operating performance or any other GAAP measure.

Adjusted EBITDA decreased $8.5 million to $(4.7) million for the nine months ended September 28, 2012 from $3.8 million for the comparable period last year.

The following is a reconciliation of net income (loss) to Adjusted EBITDA:

Nine Months Ended

In thousands

September 28,

2012

September 30,

2011

Net (loss) income

$

(17,600

)

$

2,609

Interest income

(4

)

(5

)

Interest expense

80

53

Income tax (benefit) expense

(2,991

)

402

Loss on sale of assets

17

1

Depreciation and amortization

569

733

Impairment of goodwill

15,208

Lease abandonment expense, net

27

9

Adjusted EBITDA

$

(4,694

)

$

3,802

Liquidity and Capital Resources

Willdan had $9.2 million in cash and cash equivalents at September 28, 2012, compared with $3.0 million at December 30, 2011. Willdan has a $5.0 million bank revolving line of credit with Wells Fargo Bank, National Association ("Wells Fargo"), with $3.0 million in outstanding borrowings at the quarter's end.

Willdan is currently in breach of the net income covenant in its revolving line of credit because it did not have net income of at least $250,000 measured on a rolling four quarter basis and it sustained net losses for two consecutive quarters in the past year. Additionally, Willdan's ratio of funded debt to EBITDA exceeds the limits permitted under the line of credit. Because of these covenant breaches, Willdan's ability to borrow additional funds under the line of credit is currently subject to Wells Fargo's discretion. Although Willdan is seeking a waiver from Wells Fargo for the current breach of the covenants and is seeking to amend certain covenants in the credit agreement, Wells Fargo is not obligated to provide any waiver or modify the terms of the agreement and could choose to increase the interest rate of the outstanding indebtedness, accelerate the loans outstanding under the line of credit and/or terminate its commitments under the line of credit.

Conference Call and Webcast

Chief Executive Officer Thomas Brisbin and Chief Financial Officer Kimberly Gant plan to host a conference call on November 8, 2012 at 5:00 p.m. Eastern/2:00 p.m. Pacific, to discuss Willdan's financial results.

Interested parties may participate in the conference call by dialing 888-549-7880 (480-629-9867 for international callers). When prompted, ask for the "Willdan Group, Inc., Third Quarter 2012 Conference Call." The conference call will be webcast simultaneously on Willdan's website at www.willdan.com under Investors: Events.

The telephonic replay of the conference call may be accessed approximately two hours after the call through November 22, 2012, by dialing 800-406-7325 (303-590-3030 for international callers). The replay access code is 4571509. The webcast replay will be archived for 12 months.

About Willdan Group, Inc.

Founded in 1964, Willdan is a provider of professional technical and consulting services to public agencies at all levels of government, public and private utilities and commercial and industrial firms. Willdan provides a broad range of services to clients, including engineering and planning, energy efficiency and sustainability, economic and financial consulting, and national preparedness and interoperability. For additional information, visit Willdan's website at www.willdan.com.

Forward-Looking Statements

Safe Harbor Statement: Statements in this press release which are not purely historical, including statements regarding Willdan's intentions, hopes, beliefs, expectations, representations, projections, estimates, plans or predictions of the future are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. The forward-looking statements involve risks and uncertainties including, but not limited to, the risk that Willdan will not be able to expand its services or meet the needs of customers in markets in which it operates. It is important to note that Willdan's actual results could differ materially from those in any such forward-looking statements. Factors that could cause actual results to differ materially include, but are not limited to, a slowdown in the local and regional economies of the states where Willdan conducts business and the loss of or inability to hire additional qualified professionals. Willdan's business could be affected by a number of other factors, including the risk factors listed from time to time in Willdan's SEC reports including, but not limited to, the Annual Report on Form 10-K for the year ended December 30, 2011 filed on March 29, 2012, the Quarterly Report on Form 10-Q for the quarter ended March 30, 2012 filed on May 14, 2012, the Quarterly Report on Form 10-Q for the quarter ended June 29, 2012 filed on August 13, 2012, and the Quarterly Report on Form 10-Q for the quarter ended September 28, 2012. Willdan cautions investors not to place undue reliance on the forward-looking statements contained in this press release. Willdan disclaims any obligation to, and does not undertake to, update or revise any forward-looking statements in this press release.

WILLDAN GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

September 28,
2012

December 30,
2011

(unaudited)

Assets

Current assets:

Cash and cash equivalents

$

9,230,000

$

3,001,000

Accounts receivable, net of allowance for doubtful accounts of $562,000 and $421,000 at September 28, 2012 and December 30, 2011, respectively

14,079,000

16,782,000

Costs and estimated earnings in excess of billings on uncompleted contracts

11,154,000

20,672,000

Other receivables

128,000

175,000

Prepaid expenses and other current assets

1,072,000

1,724,000

Total current assets

35,663,000

42,354,000

Equipment and leasehold improvements, net

1,014,000

1,217,000

Goodwill

15,208,000

Other intangible assets, net

20,000

49,000

Other assets

353,000

383,000

Deferred income taxes, net of current portion

5,336,000

5,100,000

Total assets

$

42,386,000

$

64,311,000

Liabilities and Stockholders' Equity

Current liabilities:

Excess of outstanding checks over bank balance

$

1,496,000

$

1,777,000

Borrowings under line of credit

3,000,000

256,000

Accounts payable

4,946,000

8,182,000

Accrued liabilities

7,536,000

10,192,000

Billings in excess of costs and estimated earnings on uncompleted contracts

3,607,000

752,000

Current portion of notes payable

71,000

600,000

Current portion of capital lease obligations

150,000

163,000

Current portion of deferred income taxes

4,001,000

7,349,000

Total current liabilities

24,807,000

29,271,000

Notes payable, less current portion

24,000

77,000

Capital lease obligations, less current portion

116,000

136,000

Deferred lease obligations

435,000

534,000

Total liabilities

25,382,000

30,018,000

Commitments and contingencies

Stockholders' equity:

Preferred stock, $0.01 par value, 10,000,000 shares authorized, no shares issued and outstanding

Common stock, $0.01 par value, 40,000,000 shares authorized: 7,335,000 and 7,274,000 shares issued and outstanding at September 28, 2012 and December 30, 2011, respectively

73,000

73,000

Additional paid-in capital

34,376,000

34,065,000

Accumulated (deficit) earnings

(17,445,000

)

155,000

Total stockholders' equity

17,004,000

34,293,000

Total liabilities and stockholders' equity

$

42,386,000

$

64,311,000

WILLDAN GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

Three Months Ended

Nine Months Ended

September 28,

September 30,

September 28,

September 30,

2012

2011

2012

2011

Contract revenue

$

21,547,000

$

28,605,000

$

70,496,000

$

77,159,000

Direct costs of contract revenue:

Salaries and wages

5,680,000

6,568,000

17,613,000

19,567,000

Subconsultant services

7,104,000

8,825,000

29,072,000

22,618,000

Other direct costs

(1,494,000

)

1,462,000

(1,085,000

)

3,749,000

Total direct costs of contract revenue

11,290,000

16,855,000

45,600,000

45,934,000

General and administrative expenses:

Salaries and wages, payroll taxes and employee benefits

5,075,000

5,381,000

17,342,000

16,245,000

Facilities and facilities related

1,224,000

1,266,000

3,659,000

3,663,000

Stock-based compensation

50,000

40,000

181,000

148,000

Depreciation and amortization

163,000

197,000

518,000

683,000

Lease abandonment, net

(3,000

)

27,000

9,000

Impairment of goodwill

15,208,000

Other

2,328,000

2,486,000