UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC  20549

 

 

FORM 8-K

 

 

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934

 

Date of Report (Date of earliest event reported): March 10, 2016

 

 

WILLDAN GROUP, INC.

(Exact name of registrant as specified in its charter)

 

 

 

2401 East Katella Avenue, Suite 300, Anaheim, California 92806

(Address of Principal Executive Offices)

 

Registrant’s telephone number, including area code: (800) 424-9144

 

Not Applicable

(Former name or former address, if changed since last report)

 

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

☐             Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425).

 

☐             Soliciting material pursuant to Rule 14A-12 under the Exchange Act (17 CFR 240.14a-12)

 

☐             Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR.14d-2(b))

 

☐             Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 

 

Item 2.02.                                         Results of Operation and Financial Condition

 

Willdan Group, Inc. (“Willdan”) issued a press release on March 10, 2016.  The press release announced Willdan’s financial results for the fourth quarter and fiscal year ended January 1, 2016.  A copy of the press release is filed as Exhibit 99.1 hereto and is hereby incorporated by reference in its entirety.  The information in this item 2.02 and the attached Exhibit 99.1 to this Current Report on Form 8-K is being furnished (not filed) pursuant to Item 2.02 of Form 8-K.

 

This Current Report on Form 8-K contains forward-looking statements, which involve risk and uncertainties. The words “believe,” “expect,” “estimate,” “may,” “will,” “could,” “plan,” or “continue” and similar expressions are intended to identify forward-looking statements. Willdan’s actual results could differ significantly from the results discussed in such forward-looking statements. Factors that could cause or contribute to such differences in results and outcomes include, without limitation, those discussed under the heading “Risk Factors” in Willdan’s Annual Report on Form 10-K for the year ended January 2, 2015. Readers are urged not to place undue reliance on these forward-looking statements, which speak only as of the date of this Current Report on Form 8-K. Willdan undertakes no obligation to (and expressly disclaims any obligation to) revise or update any forward-looking statement, whether as a result of new information, subsequent events, or otherwise (except as may be required by law), in order to reflect any event or circumstance which may arise after the date of this Current Report on Form 8-K.

 

Item 9.01                                            Financial Statements and Exhibits

 

(d)                                  Exhibits.

 

99.1                         Press Release of Willdan Group, Inc. dated March 10, 2016.

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

 

 

 

EXHIBIT INDEX

 

 

 

Exhibit 99.1

 

 

Willdan Group Reports Fourth Quarter and

Full Year 2015 Financial Results

 

 

Investment Community Conference Call Today at 5:00 p.m. Eastern Time

 

ANAHEIM, Calif. – March 10, 2016 – Willdan Group, Inc. (“Willdan”) (NASDAQ: WLDN), a provider of professional technical and consulting services, today reported financial results for its fourth quarter and fiscal year ended January 1, 2016, and provided a business update.

 

For the fourth quarter of 2015, Willdan reported total contract revenue of $31.5 million and net income of $0.4 million, or $0.05 per basic and diluted share.  

 

For the fiscal year ended January 1, 2016,  Willdan reported total contract revenue of  $135.1 million and net income of  $4.3 million, or $0.54 and $0.52 per basic and diluted share, respectively.

 

“As we forecasted, our overall results in the fourth quarter were negatively impacted by the performance of our Energy Efficiency Services segment,” said Tom Brisbin, Willdan’s Chief Executive Officer.  “Similar to what we experienced in the third quarter of 2015, we had a decline in the scope of activity for our largest utility customer and a long ramp-up phase in one of our new utilities programs.  We enter 2016 with a robust pipeline of new opportunities in the Energy Efficiency Services segment, which we believe will help us improve the performance of this business going forward. Our Engineering Services segment continued to perform well, generating 13% year-over-year revenue growth in 2015, largely driven by increased demand for city engineering services in Northern California.”

 

Fourth Quarter 2015 Financial Highlights

 

Total contract revenue for the fourth quarter of 2015 increased 4.3% to $31.5 million, as compared to $30.2 million for the fourth quarter of 2014.  The increase in total contract revenue was primarily due to growth in the Engineering Services segment and the contribution of contract revenue from Willdan’s January 2015 acquisitions of 360 Energy Engineers, LLC (“360 Energy”) and Abacus Resource Management Company(“Abacus”).  In aggregate, contract revenue resulting from Willdan’s acquisitions of 360 Energy and Abacus was $4.5 million in the fourth quarter of 2015.  Contract revenue for the Energy Efficiency Services, Engineering Services, Public Finance Services, and Homeland Security Services segments was $15.9 million, $12.1 million, $2.9 million and $0.7 million, respectively, in the fourth quarter of 2015.

 

Direct costs of contract revenue were $18.4 million for the fourth quarter of 2015, an increase of 2.8% as compared to $17.9 million for the fourth quarter of 2014. Included in direct costs of contract revenue for the fourth quarter of 2015 was incremental direct costs of revenue of $2.5 million attributable to Willdan’s acquisitions of 360 Energy and Abacus. Excluding the direct costs of contract revenue attributable to the acquisitions, direct costs of contract revenue decreased by approximately $2.0 million, as an increase in direct costs associated with Engineering Services was offset by a decrease in direct costs associated with Energy Efficiency Services.

 

Revenue, net of subcontractor costs, (as defined below) for the fourth quarter of 2015 decreased by 3.9% to  $24.4 million,  as compared to  $25.4 million for the fourth quarter of 2014.

 

Total general and administrative expenses for the fourth quarter of 2015 increased by 26.6% to $12.6 million from $10.0 million for the prior year period, due primarily to increased audit fees associated with becoming an accelerated filer in the current year.

 

Adjusted EBITDA (as defined below) was $1.8 million for the fourth quarter of 2015.

 

Income tax expense was $0.2 million for the fourth quarter of 2015, as compared to income tax expense of  $0.4 million for the fourth quarter of 2014.  The effective tax rate in the fourth quarter of 2015 was 35.69%, as compared to 15.2% in the same period last year.  The difference in the effective tax rate is primarily due to recognition of an income tax benefit for net operating loss carryforwards that were fully utilized in 2014 and no longer available to offset taxable income in 2015. 

 

Net income for the fourth quarter of 2015 was  $0.4 million, or $0.05 per diluted share, as compared to net income of $2.0 million, or $0.26 per diluted share, for the fourth quarter of 2014.    

 

Full Year 2015 Financial Highlights

 

Total contract revenue for the full year 2015 increased 25.0% to $135.1 million, as compared to $108.1 million for the full year 2014.  Revenue growth was due primarily to a 40.0% increase in contract revenue from the Energy Efficiency Services segment and a 12.8% increase in contract revenue from the Engineering Services segment. The increase in the Energy Efficiency Services segment was primarily attributable to incremental contract revenue of $23.1 million generated by 360 Energy and Abacus.  Total contract revenue for Energy Efficiency Services, Engineering Services, Public Finance Services, and Homeland Security Services was $74.1 million, $46.0 million, $11.9 million and $3.1 million, respectively.

 

Direct costs of contract revenue were $82.1 million for the full year 2015, compared to $63.8 million for the full year 2014.   Included in direct costs of contract revenue for full year 2015 were incremental direct costs of contract revenue of $16.3 million attributable to 360 Energy and Abacus.  Excluding the increase in direct costs of contract revenue attributable to the acquisitions, direct costs of contract revenue increased by $2.0 million, primarily due to increases in direct costs for Willdan’s Engineering, Energy Efficiency and Public Finance Services, partially offset by a decrease in direct costs for its Homeland Security Services segment.  

 

Revenue, net of subcontractor costs, for the full year 2015 was $100.5 million, as compared to $87.2 million for the full year 2014.

 

Total general and administrative expenses for the full year 2015 increased by 26.5% to $45.5 million from $36.0 million for the prior year period, due primarily to higher expenses in the Energy Efficiency Services segment to support the year-over-year growth in contract revenues.    

 

Adjusted EBITDA (as defined below) was $10.2 million for the full year 2015, as compared to $8.9 million for the full year 2014.

 

Income tax expense was $3.1 million for the full year 2015, as compared to an income tax benefit of $1.0 million for the full year 2014. The difference between the income tax benefit for the full year 2014 versus the income tax expense for the full year 2015 is primarily due to the recognition of an income tax benefit for net operating loss carryforwards that were fully utilized in 2014 and no longer available to offset taxable income in 2015, as well as a reduction in the valuation allowances in 2014.

 

Net income for the full year 2015 was $4.3 million, or $0.52 per diluted share, as compared to net income of $9.4 million, or $1.22 per diluted share, for the full year 2014.

 

Liquidity and Capital Resources

 

Willdan reported $16.5 million in cash and cash equivalents at January 1, 2016, as compared to  $18.2 million at January 2, 2015. The reduction primarily resulted from the three acquisitions completed during 2015.  Willdan's primary sources of liquidity are cash generated from operations and a revolving line of credit with BMO Harris Bank, N.A., which matures on March 24, 2017. Cash flows provided by operating activities were $8.1 million for the full year 2015, as compared to $11.9 million for the full year 2014.

 

Outlook

 

Willdan’s financial and operational targets for full year 2016 are as follows:

 

 

Commenting on the outlook, Mr. Brisbin said, “We expect 2016 to be a strong year of profitable growth, particularly the second half of the year.  All of our major contracts with utilities have been extended through 2016, which gives us good revenue visibility.  We continue to deliver on key milestones in our utilities programs, which is leading to additional program expansion opportunities that we believe will provide incremental revenue in 2016.  We are also excited about the addition of Genesys Engineering, our latest acquisition that closed on March 4, 2016.  Genesys has exceptional experience in microgrid design, and the addition of their capabilities will improve our ability to capitalize on the growing demand for small-scale independent power grids across the United States.”

 

Use of Non-GAAP Financial Measures

 

"Revenue, net of subcontractor costs," a non-GAAP financial measure, is a supplemental measure that Willdan believes enhances investors' ability to analyze our business trend and performance because it substantially measures the work performed by our employees. In the course of providing services, Willdan routinely subcontracts various services. Generally, these subcontractor costs are passed through to our clients and, in accordance with Generally Accepted Accounting Principles (GAAP) and industry practice, are included in our revenue when it is our contractual responsibility to procure or manage these activities. Because subcontractor services can vary significantly from project to project and period to period, changes in revenue may not necessarily be indicative of our business trends. Accordingly, Willdan segregates costs from revenue to promote a better understanding of our business by evaluating revenue exclusive of costs associated with external service providers. A reconciliation of contract revenue as reported in accordance with GAAP to revenues, net of subcontractor costs is provided at the end of this news release.

 

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 interest expense (income), income tax expense (benefit), goodwill impairment, interest accretion and depreciation and amortization. Adjusted EBITDA is not a measure of net income (loss) determined in accordance with U.S. generally accepted accounting principles, or GAAP. Willdan believes Adjusted EBITDA is useful because it allows Willdan’s management to evaluate its operating performance and compare the results of its operations from period to period and against its peers without regard to its financing methods, capital structure and non-operating expenses. Willdan uses Adjusted EBITDA to evaluate its performance for, among other things, budgeting, forecasting and incentive compensation purposes. Adjusted EBITDA has limitations as an analytical tool and should not be considered as an alternative to, or more meaningful than, net income (loss) as determined in accordance with GAAP. Certain items excluded from Adjusted EBITDA are significant components in understanding and assessing a company’s financial performance, such as a company’s costs of capital, as well as the historical costs of depreciable assets. Willdan’s definition of Adjusted EBITDA may also differ from those of many companies reporting similarly named measures. Willdan believes Adjusted EBITDA is useful to investors, research analysts, investment bankers and lenders because it removes the impact of certain non-operational items from its operational results, which may facilitate comparison of its results from period to period.  A reconciliation of net income as reported in accordance with GAAP to Adjusted EBITDA is provided at the end of this news release.

 

Willdan's definition of Revenue, net of subcontractor costs, and Adjusted EBITDA may differ from other companies reporting similarly named measures. These measures should be considered in addition to, and not as a substitute for, or superior to, other measures of financial performance prepared in accordance with GAAP, such as contract revenues and net income.

 

Conference Call Details

 

Chief Executive Officer Thomas Brisbin and Chief Financial Officer Stacy McLaughlin will host a conference call today, March 10, 2016, at 5:00 p.m. Eastern/2:00 p.m. Pacific to discuss Willdan’s financial results and provide a business update.

 

Interested parties may participate in the conference call by dialing 888-438-5453 (719-457-2627 for international callers) and asking to be joined to the “Willdan Group Conference Call.”  The conference call will be webcast simultaneously on Willdan’s website at www.willdan.com under and the replay will be archived for at least 12 months.

 

The telephonic replay of the conference call may be accessed approximately two hours after the call by dialing 888-203-1112 and entering the passcode 2815641.  The replay will be available through March 24, 2016.

 

About Willdan Group, Inc.

 

Willdan provides professional consulting and technical services to utilities, public agencies and private industry throughout the United States. Willdan’s service offerings span a broad set of complementary disciplines that include energy efficiency and sustainability, engineering and planning, financial and economic consulting, and national preparedness. Willdan provides integrated technical solutions to extend the reach and resources of its clients, and provides all services through its subsidiaries specialized in each segment. For additional information, visit Willdan's website at www.willdan.com.

 

Forward Looking Statements

 

Statements in this press release that 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 filed for the year ended January 2, 2015. 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

(Unaudited)

 

 

 WILLDAN GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 WILLDAN GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

 

 

 

 

WILLDAN GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 

 

Willdan Group, Inc. and Subsidiaries

Reconciliation of GAAP Revenue and "Revenue, Net of Subcontractor Costs"

 

 

Willdan Group, Inc. and Subsidiaries

Reconciliation of GAAP Net Income to Adjusted EBITDA