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Willdan Group Inc. Reports Operating Results (10-Q)

November 12, 2009 | About:
10qk

10qk

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Willdan Group Inc. (WLDN) filed Quarterly Report for the period ended 2009-10-02.

WILLDAN GROUP, INC. is a leading single resource provider of specialized outsourced services to small and mid-sized public agencies located primarily in California and other western states. Willdan Group, Inc. assists cities and other government agencies with a broad range of services, including civil engineering, building and safety services, geotechnical engineering, financial and economic consulting, and disaster preparedness and homeland security. Strategically located throughout California and other Western states, Willdan's market focus and competitive advantages support ample opportunities for geographic expansion into attractive, growing markets driven by unmet demand for privatized governmental services. Willdan's depth of executive expertise and specialized talent base has delivered a track record of consistent growth in contract revenues and strong performance metrics. Willdan Group Inc. has a market cap of $18.3 million; its shares were traded at around $2.55 with and P/S ratio of 0.2.

Highlight of Business Operations:

Declining revenue resulting from the economic conditions discussed above also contributed to us violating certain covenants that used to be in our revolving credit agreement with Wells Fargo Bank, National Association (Wells Fargo) during the fourth fiscal quarter of 2008 and the first fiscal quarter of 2009. Wells Fargo agreed to waive these defaults and eliminate or modify certain financial covenants in exchange for our agreement to reduce the aggregate revolving loan commitment from $10.0 million to $5.0 million, cash collateralize the commitment and increase pricing. We amended our revolving credit facility with Wells Fargo again in November 2009 to extend the maturity date of the credit facility to January 1, 2011 and to exclude from the calculation of tangible net worth, for purposes of the minimum net tangible net worth covenant, the impact of non-cash property lease termination expense of up to $1.0 million in the aggregate recorded during the period from October 1, 2009 through December 31, 2010. The terms of our amended credit agreement are discussed in more detail below under Liquidity and Capital ResourcesOutstanding Indebtedness. While we believe that our cash on hand, cash generated by operating activities and funds available under our amended credit facility with Wells Fargo will be sufficient to finance our operating activities for the next 12 months, if we do experience a cash flow shortage or violate the current terms of our credit agreement, we may have difficulty obtaining additional funds on favorable terms, if at all, in the current credit market.

Contract revenue. Our contract revenue was $14.6 million for the three months ended October 2, 2009, with $10.7 million attributable to the Engineering Services segment and $3.0 million attributable to the Public Finance Services segment. Our Homeland Security Services segment generated $0.9 million during this period. Consolidated contract revenue decreased $4.1 million, or 21.9%, to $14.6 million for the three months ended October 2, 2009, from $18.7 million for the three months ended September 26, 2008. This was due primarily to a decrease of $3.6 million, or 25.3%, in contract revenue for the Engineering Services segment primarily as a result of the continuing decline in our building and safety projects which is directly and indirectly affected by the residential housing market. Contract revenue in the Public Finance Services segment decreased $0.6 million, or 16.7%, from $3.6 million to $3.0 million for the three months ended October 2, 2009 as compared to the three months ended September 26, 2008. Contract revenue for our Homeland Security Services segment increased $0.2 million, or 28.6%, from $0.7 million to $0.9 million in the three months ended October 2, 2009 as compared to the three months ended September 26, 2008.

Direct costs of contract revenue. Direct costs of contract revenue were $6.5 million for the three months ended October 2, 2009, with $5.3 million attributable to the Engineering Services segment and $0.8 million attributable to the Public Finance Services segment. The additional $0.4 million is attributable to direct costs of contract revenue for our Homeland Security Services segment. Overall, direct costs decreased by $2.1 million, or 24.4%, to $6.5 million for the three months ended October 2, 2009, from $8.6 million for the three months ended September 26, 2008. This net decrease is attributable to decreases in direct costs within our Engineering and Public Finance Services segments of $2.0 million and $0.2 million, respectively, partially offset by an increase of $0.1 million within our Homeland Security Services segment.

Direct costs decreased as a result of decreases in salaries and wages, other direct costs and subconsultant services of $1.1 million, $0.7 million, and $0.3 million, respectively. Within direct costs of contract revenue, salaries and wages increased to 30.5% of contract revenue for the three months ended October 2, 2009 from 29.8% for the three months ended September 26, 2008. Comparing those same periods, subconsultant services increased to 12.2% of contract revenue from 10.9% of contract revenue.

General and administrative expenses. General and administrative expenses decreased by $1.4 million, or 13.0%, to $9.4 million for the three months ended October 2, 2009 from $10.8 million for the three months ended September 26, 2008. This was due primarily to a decrease of $1.3 million in general and administrative expenses of the Engineering Services segment. General and administrative expenses decreased by $0.1 million for our Public Finance Services segment and increased by $0.1 million for our Homeland Security Services segment. Our unallocated corporate expenses decreased by $0.1 million. General and administrative expenses as a percentage of contract revenue increased to 64.8% for the three months ended October 2, 2009 from 57.7% for the three months ended September 26, 2008.

Contract revenue. Our contract revenue was $47.2 million for the nine months ended October 2, 2009, with $35.7 million attributable to the Engineering Services segment and $9.1 million attributable to the Public Finance Services segment. Our Homeland Security Services segment generated $2.4 million during this period. Consolidated contract revenue decreased $7.0 million, or 12.9%, to $47.2 million for the nine months ended October 2, 2009, from $54.2 million for the nine months ended September 26, 2008. This was due primarily to a decrease of $6.7 million, or 15.8%, in contract revenue for the Engineering Services segment primarily as a result of the continuing decline in our building and safety projects which is directly and indirectly affected by the residential housing market. Contract revenue in the Public Finance Services segment decreased $1.1 million, or 10.8%, from $10.2 million to $9.1 million for the nine months ended October 2, 2009 as compared to the nine months ended September 26, 2008. Contract revenue for our Homeland Security Services segment increased $0.8 million, or 50.0%, from $1.6 million to $2.4 million for the nine months ended October 2, 2009 as compared to the nine months ended September 26, 2008.

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