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8-K/A - FORM 8-K/A - NCI, Inc.c18570e8vkza.htm
EX-99.2 - EXHIBIT 99.2 - NCI, Inc.c18570exv99w2.htm
EX-23.1 - EXHIBIT 23.1 - NCI, Inc.c18570exv23w1.htm
Exhibit 99.3
Unaudited Pro Forma Condensed Consolidated Financial Statements
On April 1, 2011, NCI, Inc. (“NCI” or “the Company”) purchased AdvanceMed Corporation (“AdvanceMed”) for $64.3 million in cash which includes a $2.3 million working capital adjustment. The Company also incurred or will incur approximately $1.0 million in acquisition costs which will be expensed in NCI’s financial statements for the year ended December 31, 2011.
The pro forma condensed consolidated financial statements, which have been prepared in accordance with rules prescribed by Article 11 of Regulation S-X, are provided for informational purposes only and are not necessarily indicative of the past or future results of operations or financial position of the Company.
The Unaudited Pro Forma Consolidated Statement of Income and Unaudited Pro Forma Consolidated Balance Sheet are prepared to give the effect of the Company’s purchase of AdvanceMed. The AdvanceMed audited financial statements were prepared as of and for the year ended April 1, 2011 (the fiscal year end of AdvanceMed’s former parent). NCI’s fiscal year ended December 31, 2010. Article 11 of Regulation S-X allows pro forma financial statement information to be prepared as if the compared companies have similar fiscal years when the fiscal years in question ended within 93 days of each other. The Pro Forma Consolidated Statement of Income has been prepared as of the beginning of the respective companies’ 2010 fiscal years. The Unaudited Pro Forma Consolidated Balance Sheet presents the financial position of the Company as if the acquisition of AdvanceMed occurred as of the end of the respective companies’ 2010 fiscal years. The acquisition has been accounted for using the purchase method in accordance with Accounting Standards Codification 805, Business Combinations.
This information should be read in conjunction with the previously filed Current Report on Form 8-K, dated April 1, 2011 and filed with the Securities and Exchange Commission, the previously filed historical consolidated financial statements and accompanying notes contained in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2010 and other subsequent filings, and in conjunction with the historical financial statements and accompanying notes of AdvanceMed included in this report on Form 8-K/A.

 

 


 

NCI, INC.
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME

(amounts in thousands, except per share data)
                                 
    NCI For the     AdvanceMed For              
    fiscal year ended     the fiscal year              
    December 31,     ended April 1,              
    2010     2011     Adjustments     Pro Forma  
Revenue
    581,341       54,135             635,476  
 
                               
Operating expenses:
                               
Cost of revenue
    512,779       51,349       (1,539 )A     562,589  
General and administrative expenses
    23,730       446             24,176  
Depreciation and amortization
    5,054             777 B     7,370  
 
                    1,539 A        
Acquisition costs
                1,000 C     1,000  
 
                       
Total operating expenses
    541,563       51,795       1,777       595,135  
 
                       
 
                               
Operating income (loss)
    39,778       2,340       (1,777 )     40,341  
 
                       
 
                               
Interest expense, net
    598             1,426 D     2,024  
 
                       
 
                               
Income before tax expense
    39,180       2,340       (3,203 )     38,317  
Income tax expense (benefit)
    15,309       929       (1,253 )E     14,985  
 
                       
Net income (loss)
    23,871       1,411       (1,950 )     23,332  
 
                       
 
                               
EPS
                               
Basic:
                               
Weighted average shares outstanding
    13,621                       13,621  
Net income per share
    1.75                       1.71  
 
                           
 
                               
Diluted:
                               
Weighted average shares and equivalent shares outstanding
    13,878                       13,878  
Net income per share
    1.72                       1.68  
 
                           

 

 


 

NCI, INC.
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET

(amounts in thousands)
                                 
    NCI As of     AdvanceMed              
    December 31,     As of April 1,              
    2011     2011     Adjustments     Pro Forma  
Assets:
                               
Cash and cash equivalents
  $ 2,791     $     $ (2,308 )J   $ 483  
Accounts receivable, net
    132,693       17,128               149,821  
Deferred tax assets
    4,547                     4,547  
Prepaid expenses and other current assets
    3,347       180               3,527  
 
                       
Total current assets
    143,378       17,308       (2,308 )     158,378  
 
                               
Property and equipment, net
    11,751       6,046               17,797  
Other assets
    1,590                     1,590  
Intangible assets, net
    6,179       132       (132 )F     9,525  
 
                    3,346 J        
Goodwill
    106,580       12,760       (12,760 )F     152,338  
 
                    45,218 J        
 
                       
Total assets
  $ 269,478     $ 36,246     $ 33,364     $ 339,628  
 
                       
 
                               
Liabilities and stockholders’ equity
                               
Accounts payable
  $ 61,046     $ 1,288             $ 62,334  
Accrued salaries and benefits
    20,229       2,599       (115 )G     22,713  
Deferred revenue
    2,951                     2,951  
Other accrued expenses/liabilities
    3,468       3,944       (540 )H     6,872  
 
                       
Total current liabilities
    87,694       7,831       (655 )     94,870  
 
                               
Long-term debt
    20,000             62,000 J     82,000  
Deferred tax liabilities
    7,450       706       (706 )H     7,450  
Deferred rent and other long-term liabilities
    1,287       1,065       (631 )G     1,721  
 
                       
Total liabilities
    116,431       9,602       60,008       186,041  
 
                       
 
                               
Stockholders’ equity:
                               
Common stock
    260                     260  
Additional paid-in capital
    67,889       25,234       (9,490 )I     67,889  
 
                  (15,744 )I        
Retained earnings
    84,898       1,410       (1,410 )I     84,898  
 
                       
Total stockholders’ equity
    153,047       26,644       (26,644 )     153,047  
 
                       
Total liabilities and stockholders’ equity
  $ 269,478     $ 36,246     $ 33,364     $ 339,088  
 
                       

 

 


 

NCI, INC.
Notes to the Unaudited Pro Forma Consolidated Financial Statements

(amounts in thousands)
Statement of Income
A.   AdvanceMed incurred $1,539 of depreciation which is included within their Cost of revenue expenses.
B.   This adjustment reflects the estimated annual amortization of the acquired contract backlog and customer relationships in the amount of $777 based on the preliminary purchase price allocation (See Note G below).
C.   This adjustment reflected the estimated acquisition costs associated with the AdvanceMed purchase in the amount of $1,000 of which $200 has been incurred through March 31, 2011.
D.   This adjustment reflects the application of interest expense for the funds borrowed for the acquisition of AdvanceMed in the amount of $1,426. NCI borrowed approximately $62,000 on its credit facility. As of April 1, 2011, the interest rate on our credit facility was approximately 2.3%.
E.   This adjustment reflects the application of the Company’s estimated 39.1% effective tax rate for 2011 for the items described above.
Balance Sheet
These adjustments reflect the elimination of AdvanceMed’s accounts in consolidation and adjusts historical cost to estimated fair value as of April 1, 2011 for the assets and liabilities acquired.
F.   NCI did not allocate any value to the AdvanceMed Customer Intangible asset or the historical Goodwill; as such adjustments were made for $132 and $12,760 to reduce intangible assets.
G.   NCI did not assume the pension as described in the historical financial statements of AdvanceMed; as such adjustments in the amounts of $115 from current liabilities and $631 from long term liabilities were made to reduce the liabilities associated with the AdvanceMed pension. The pension was retained by AdvanceMed’s prior parent, Computer Sciences Corporation.
H.   Deferred tax liabilities are based on historical cost and not considered part of the acquired basis of AdvanceMed. Adjustments of $540 from current liabilities and $706 from long term liabilities were made to eliminate these items.
I.   The historical balances of Additional Paid in Capital and Retained Earnings were eliminated as they are not considered part of the acquired basis of AdvanceMed. Adjustments of $25,234 and $1,410 were made to eliminate these items.
J.   This adjustment reflects the purchase of AdvanceMed including the preliminary valuation of acquired intangible assets and goodwill as a result of the acquisition. The goodwill adjustment is calculated as the excess of purchase price over the estimated fair value of the net assets acquired.
         
Purchase Price
  $ 62,000  
Working capital adjustment
    2,308  
 
     
Total purchase price
    64,308  
 
       
Less:
       
Net assets acquired
    15,744  
Identified intangible assets (preliminary)
    3,346  
 
     
 
    19,090  
 
     
Goodwill
  $ 45,218  
 
     
Identified acquired intangible assets consist of the acquired contract backlog and customer relationships. The preliminary value of the acquired contract backlog is $3,348 which we estimate to have a useful life of seven years.
The adjustment also reflects the cash expenditures and loan borrowings in conjunction with the AdvanceMed acquisition. The cash expenditure of $2,308 was made from cash on hand as of the date fo the transaction, April 1, 2011.