An Anaheim company that handles engineering, security and financial consulting jobs for cities and counties plans to go public in a $29 million offering.
Willdan Group Inc. said it’s looking to raise money from the offering to pay down $1.6 million in debt, create working capital and corporate moves, including possible acquisitions. It also will pay off shareholders. The company said it plans to expand its services, widen its geographic reach and bring on employees, according to a filing with the Securities and Exchange Commission.
Acquisitions could be on deck as well.
The 46-year-old company, which has about 650 workers, posted sales of more than $67 million in 2005. It was in the black for two of the past three years and in this year’s first quarter.
The company targets cities, counties and other governments with anywhere from 10,000 people to 300,000 people.
Willdan does civil engineering, building and safety services, geotechnical engineering, financial and economic consulting, and, its newest service, disaster preparedness and homeland security.
Engineering makes up 85% of revenue.
Los Angeles-based Wedbush Morgan Securities Inc. is the lone underwriter of the offering. The company expects to trade on the Nasdaq under the symbol “WLDN.”
Willdan hopes the offering can help it grow business with smaller cities, counties, schools districts and other agencies.
“We believe communities of this size are underserved by large private sector outsourcing companies that tend to focus on securing large federal and state projects, as well as projects for the private sector,” the company said in its SEC filing.
The market for business with these municipalities and agencies could expand, the company said.
“These entities increasingly are turning to privatization as a way to supplement their in-house ability to deliver services,” according to the filing.
Last year, Willdan’s sales grew by $9 million, or 15%, compared to 2004. The prior year, sales grew 7%.
In 2004, net income rose by nearly a third to $3.8 million compared to the prior year. In 2005, the company swung to a loss,albeit slight,of $646,000.
Much of the red ink stemmed from losses related to stock-based compensation costs of more than $2 million.
Also, Willdan saw litigation cost of $2.7 million. Late last year, a jury ruled against the company in Los Angeles County Superior Court in a case that involved a construction project in West Hollywood for the improvement of Santa Monica Boulevard.
The company faces pressures dealing with governments, including the “ability” of an agency to cancel a contract with just 30 days prior notice, and swings in government spending.
Still, Willdan has grown up with the government outsourcing trend that reaches back several decades.
“Beginning in the 1960s, cities and towns in California began to contract for governmental services, such as police and fire, from the counties in which they were located,” the company said. “Over time, this form of outsourcing extended to private companies.”
The company has contracts with municipalities across the country, but much of the business is concentrated in California and the West, where Willdan has more than 20 offices.
The company claims as customers 60% of California’s 478 cities and more than 60% of the state’s counties.
Now, the expectation is the rest of the U.S., especially in the Sunbelt, will follow.
“As the infrastructure in these communities deteriorates, we believe outsourcing to the private sector will become a logical alternative to developing in-house expertise and staffing to rehabilitate the existing public infrastructure,” the company said.
Other overall drivers for privatized outsourcing include population growth, demand for more services by locals, the creation of small communities and other factors, including finding ways to spend money on homeland security.
Willdan is looking to go public without its key leader, Dan Heil, who was cofounder and chief executive (except for a couple of years in the mid 1990s) until his death.
The death was unexpected and “recent,” the company said.
