Wi-Fi firm falls short in 4th quarter
Wireless Facilities also to restate past earnings
By Rachel Laing
UNION-TRIBUNE STAFF WRITER
March 15, 2006
Falling short of Wall Street analysts' expectations, Wireless Facilities Inc. posted a $3.4 million fourth-quarter loss and said yesterday it will restate earnings from two quarters last year to reflect a contract cancellation.
The San Diego-based wireless network engineering firm reported losses of $3.4 million, or 5 cents per share, for the fourth quarter. This compares with profits of $12.3 million, or 18 cents per share, for the same period in the prior year.
Wall Street analysts had, on average, expected fourth-quarter net income of 5 cents per share.
In a conference call with analysts, Wireless Facilities' chief financial officer, Deanna Lund, attributed the loss primarily to the write-off of unrecoverable costs for networks in Mexico and Latin America that were canceled while being built.
Fourth-quarter revenue was $94.8 million, a 7.2 percent jump over the year-ago period but below average analyst estimates of $109.1 million.
For the year, Wireless Facilities earned $8.9 million, or 12 cents per share, compared with profits of $5 million, or 7 cents per share, for 2004. Analysts had expected per-share earnings of 23 cents.
Revenue for 2005 was $334.2 million, a 12.3 percent increase over 2004. Analysts had expected annual sales of $429.96 million.
The company said it would revise results downward for the second and third quarters last year because of a canceled contract in its Mexico operation, which was sold last month. The adjustment will reduce revenue by $4.8 million and net income by $1.3 million over both quarters.
Wireless Facilities spokesman Michael Baehr said the company had booked the anticipated revenue for the job not knowing it had been canceled. The cancellation was discovered during the fourth quarter when the company replaced the Mexico operation's management team.
Wireless Facilities also has delayed filing its annual earnings report with the Securities and Exchange Commission until it is certain the discrepancy is worked out, Baehr said.
He pointed to the situation as an example of why the company has pulled out of Latin America and is diversifying its business to include more relatively stable and predictable U.S. government and municipal contracts.
Baehr said 91 percent of the company's business is now domestic, with a quarter of its sales in federal government contracts.
“We're making a solid decision moving forward and eliminating a huge risk to our business that has been demonstrated,” he said.
The company is involved in the design and deployment of several municipal Wi-Fi networks, including a joint bid with Google to provide Wi-Fi to the city of San Francisco. Baehr said the company has no timeline for the city's award of the contract.
Citing the generally unpredictable nature of its business, Wireless Facilities will no longer issue earnings guidance.
“There's been so much unpredictability, and our customers' actions aren't always consistent, so it's better for us not to set those expectations,” Baehr said.
Wireless Facilities made its earnings announcement after the markets closed. Its shares closed up 5 cents to $4.73 on the Nasdaq, then fell 42 cents, or 8.7 percent, in after-hours trading.
Research analyst John Bright with Avondale Partners in Nashville, Tenn., said yesterday's earnings report showed that the company is struggling somewhat in its efforts to regroup.
“Right now, they're in a position to reshape their business to focus more on consulting and government side, and they're obviously experiencing some bumps in the road as they try to accomplish that,” he said.
In a separate announcement yesterday, Wireless Facilities said a class-action shareholder lawsuit against the company and some of its officers and directors was dismissed by a federal judge in San Diego. The lawsuit alleged the company materially underreported its liabilities and inflated its profits. The plaintiffs can amend their complaint and re-file the suit within 45 days.
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