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8-K - FORM 8-K - NCI, Inc. | c20934e8vk.htm |
EX-99.2 - EXHIBIT 99.2 - NCI, Inc. | c20934exv99w2.htm |
Exhibit 99.1
11730 Plaza America, Suite 700
Reston, VA 20190
Reston, VA 20190
News Release
Contacts:
Brian J. Clark, Executive Vice President & CFO
(703) 707-6751
(703) 707-6751
Maureen Crystal, Vice President of Investor Relations
(703) 707-6777
mcrystal@nciinc.com
(703) 707-6777
mcrystal@nciinc.com
NCI Reports Second Quarter 2011 Financial and Operating Results
Highlights:
| Revenue of $161 million, up 27% overall, 17% organic1; | |
| Diluted EPS of $0.28; and | |
| Company updates Fiscal Year 2011 revenue and earnings guidance. |
RESTON, VA, August 3, 2011 NCI, Inc. (NASDAQ:NCIT), a leading provider of information technology
(IT), engineering, logistics, and professional services and solutions to U.S. Federal Government
agencies, today announced financial and operating results for the second quarter ended June 30,
2011.
Second quarter revenue was within managements guidance range issued last quarter and diluted
earnings per share, including acquisition-related costs, was below the guidance range.
Second Quarter Fiscal Year 2011 Results:
For the second quarter of 2011, NCI reported revenue of $161.2 million, an increase of 27.4% over
second quarter 2010 revenues of $126.6 million. Organic revenue growth was 16.6%. The
year-over-year increase in revenue was attributable primarily to the acquisition of AdvanceMed
Corporation (AdvanceMed), as well as growth in the U.S. Army Program Executive Office (PEO)
Soldier, Base Realignment and Closure (BRAC), and U.S. Air Forces Network Centric Solutions
(NETCENTS) contracts.
1 | Organic revenue growth, as presented, measures revenue growth adjusted for the impact of acquisitions. NCI believes that this non-GAAP financial measure provides useful information because it allows management and investors to better assess the underlying growth rate of the companys existing business. This non-GAAP financial measure should not be considered in isolation or as a substitute for measures of performance prepared in accordance with GAAP. |
Operating income for the second quarter of 2011 decreased by 24.1% from the second quarter of 2010.
Operating income for the second quarter of 2011 was $6.9 million, or 4.3% of revenue, compared
with $9.1 million, or 7.2% of revenue, for the second quarter ended June 30, 2010. The
year-over-year decrease in operating margin was attributed to acquisition-related expenses; losses
on two separate and unrelated fixed-price contracts; lower profitability on the PEO-Soldier
cost-plus-fee bridge contract; and increases in materials and subcontractor labor costs, which
typically carry lower margins than the companys direct labor costs.
As expected and previously disclosed, materials-related revenue associated with the BRAC NETCENTS
contracts, contributed little to no operating margin. Excluding this BRAC and NETCENTS revenue and
related costs, operating margin was 4.6% and 7.7% for the second quarters of 2011 and 2010,
respectively. Excluding the aforementioned AdvanceMed acquisition costs, operating margin was 5.2%
for the second quarter of 2011.
The effective tax rate for the second quarter of 2011 was 39.7% compared with 39.5% for the second
quarter of 2010.
Net income for the second quarter of 2011 was $3.9 million, compared with $5.4 million for the same
period in 2010. Diluted earnings per share were $0.28 per share for the second quarter of 2011
compared with $0.39 per share for the second quarter of 2010.
NCI reported total backlog at June 30, 2011 of $1.3 billion, of which $254 million was funded.
This compares with total backlog of $1.2 billion at March 31, 2011, of which $227 million was
funded.
Second quarter net bookings totaled $26 million, equating to a book-to-bill ratio of 0.2:1;
year-to-date book-to-bill ratio was 0.3:1.
The acquisition of AdvanceMed was completed on April 1, 2011, expanding the companys Federal
Civilian business and establishing a platform in the program integrity services marketplace.
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Six-Month Fiscal Year 2011 Results:
For the six months ended June 30, 2011, revenue increased 29.0% to $311.4 million from $241.6
million for the same period in the prior fiscal year. Organic revenue growth for the first six
months of fiscal 2011 was 23.0%. Operating income for the six month period ended June 30, 2011
decreased 7.3% to $16.6 million compared with $17.9 million for the first six months of fiscal year
2010. Operating margin for the first six months of fiscal year 2011 was 5.3% compared with 7.4%
for the first six months of fiscal year 2010. Operating margin decreased due to
acquisition-related expenses, lower profitability on the PEO-Soldier cost-plus-fee bridge contract,
increases in lower-margin materials and subcontractor labor costs and losses on two separate,
unrelated fixed-price contracts, offset partially by efficiencies realized in the companys general
and administrative infrastructure on a higher revenue base.
Net income for the first six months of fiscal year 2011 was $9.6 million compared with net income
for the same period last year of $10.9 million. The primary reasons for the decrease in six-month
net income are the factors affecting operating income, higher interest expense due to the
acquisition of AdvanceMed, and a higher effective income tax rate during the period. Diluted
earnings per share for the first six months of fiscal year 2011 were $0.69 compared with $0.78 for
the first six months of fiscal year 2010.
Cash flow provided by operating activities for the first six months of 2011 was $13.2 million.
Capital expenditures for the first six months of 2011 were $1.3 million. At June 30, 2011, days
sales outstanding, or DSO, was 73 days, which was unchanged from last quarter.
NCI indeed, the entire Government IT Services Sector continues to face unprecedented
challenges: from deficit reduction plans; the likelihood of delayed Fiscal 2012 appropriations and
a continuing resolution similar to last year; inefficiencies in contracting and the acquisition
process; and unfavorable changes in the competitive nature of procurements. All of these factors
affected our second quarter results as well as our new expectations for the full year, said NCIs
President, Terry Glasgow. Nevertheless, our pipeline of new business opportunities now has a total
value of nearly $17 billion. Included in this total are 115 programs with values of $25 million or
more, 35 of which are valued at $100 million or more. We are encouraged by the size and scope of
our pipeline as well as our capacity to win new work, even in a difficult procurement environment.
We have a lot to do, but we are confident that we will achieve our long-term goals.
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Managements Outlook:
Based on the companys current contract backlog and managements estimate as to future tasking and
contract awards, NCI is issuing guidance for its fiscal year 2011 third-quarter and updating
guidance for its full 2011 fiscal year. The table below represents managements current
expectations about future financial performance, based on information available at this time:
Third Quarter | Fiscal Year | |||
Fiscal Year 2011 Ending | Ending | |||
September 30, 2011 | December 31, 2011 | |||
Revenue |
$132 million $140 million | $560 million $580 million | ||
Diluted EPS |
$0.22 $0.24 | $1.10 $1.16 | ||
Diluted projected
share count |
13.9 million | 13.9 million |
Charles K. Narang, NCIs Chairman and CEO, said, Our second quarter results are less than we
initially expected due to greater costs-to-complete on two fixed-priced contracts. These contract
issues are occurring during a time where we are seeing a slowdown of awards across the Federal
services industry. This has caused us to take a more conservative approach to our projections for
the remainder of the year and we have reduced our 2011 guidance accordingly. Despite the reduction
in our guidance, I want to make it clear that we remain extremely confident of our business
strategy as well as our positioning within the market.
Conference Call Information
As previously announced, NCI will conduct a conference call today at 5 p.m. EDT to discuss fiscal
second-quarter 2011 results. Interested parties may access the call by dialing (877) 477-1422
(domestic) or (973) 582-2740 (international). The confirmation code for the live call is 53255485.
The conference call will be broadcast simultaneously on the Investors page of the companys
website, www.nciinc.com. Investors are advised to log on to the website at least 15 minutes prior
to the call to register, download and install any necessary audio software.
A replay of the call will be available beginning at 8 p.m. EDT today and will remain available for
a two-week period. To access the replay, call (800) 642-1687 (domestic) or (706) 645-9291
(international). The confirmation code for the replay is 53249934. A replay webcast will also be
available on NCI, Inc.s website shortly after the conclusion of the call.
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About NCI, Inc.:
NCI is a leading provider of information technology (IT), engineering, logistics, and professional
services and solutions to U.S. Federal Government agencies. We have ISO 9001:2008 and other
industry-leading and globally recognized certifications. NCIs award-winning expertise encompasses
areas critical to its customers mission objectives, including enterprise systems management;
network engineering; cybersecurity and information assurance; software development and systems
engineering; program management, acquisition, and lifecycle support; engineering and logistics;
health IT and informatics; and training and simulation. A member of the Russell 2000 and S&P Small
Cap 600 indexes, the company was recently named to the Forbes list of Americas 25 Fastest-Growing
Tech Companies for 2010, as well as FORTUNE Magazines 2010 100 Fastest-Growing Companies list.
Headquartered in Reston, Virginia, NCI has approximately 2,900 employees at more than 100 locations
worldwide. For more information, visit our website at www.nciinc.com, or email
mcrystal@nciinc.com.
Forward-Looking Statement: Statements and assumptions made in this press release, which do not
address historical facts, constitute forward-looking statements that NCI believes to be within
the definition in the Private Securities Litigation Reform Act of 1995 and involve risks and
uncertainties, many of which are outside of our control. Words such as may, will, intends,
should, expects, plans, projects, anticipates, believes, estimates, predicts,
potential, continue, or opportunity, or the negative of these terms or words of similar
import are intended to identify forward-looking statements.
Such statements are subject to factors that could cause actual results to differ materially from
anticipated results. The factors that could cause actual results to differ materially from those
anticipated include, but are not limited to, the following: our dependence on our contracts with
Federal Government agencies, particularly within the U.S. Department of Defense, for substantially
all of our revenue; continued funding of U.S. Government, based on a change in spending priorities,
or in the event of a priority need for funds, such as homeland security, the war on terrorism or
rebuilding Iraq; the overall U.S. Defense budget declined from time to time during the late 1980s
and the early 1990s. While spending authorizations for Defense- and Intelligence-related programs
by the Federal Government have increased in recent years, future levels of expenditures and
authorizations for those programs may decrease, remain constant, or shift to programs in areas
where we do not currently provide services; Federal Government shutdowns (such as that which
occurred during the Federal Governments 1996 fiscal year), other potential delays in the
Government appropriations process, or failure to increase the Federal Government debt ceiling; risk
of contract performance or termination; failure to achieve contract awards in connection with
recompetes for present business and/or competition for new business; adverse results of Federal
Government audits of our government contracts; Government contract procurement (such as bid
protest, small business set asides, etc.) and termination risks; competitive factors such as
pricing pressures and competition to hire and retain employees (particularly those with security
clearances); Federal Government agencies are more frequently awarding contracts on a technically
acceptable/lowest cost basis in order to reduce expenditures failure to successfully identify and
integrate future acquired companies or businesses into our operations or to realize any accretive
or synergistic effects from such acquisitions or to effectively integrate acquisitions appropriate
to the achievement of our strategic plans, such as our AdvanceMed acquisition or others; economic
conditions in the United States, including conditions that result from terrorist activities or war;
material changes in laws or regulations applicable to our businesses, particularly legislation
affecting (i) government contracts for services, (ii) outsourcing of activities that have been
performed by the government, (iii) government contracts containing organizational conflict of
interest (OCI) clauses, (iv) delays related to agency specific funding freezes, (v) competition for
task orders under Government Wide Acquisition Contracts (GWACs), agency-specific Indefinite
Delivery/Indefinite Quantity (IDIQ) contracts and/or schedule contracts with the General Services
Administration; and (vi) our own ability to achieve the objectives of near-term or long-range
business plans, including internal systems failures. These and other risk factors are more fully
discussed in the section titled
Risks Factors in NCIs Form 10-K filed with the Securities and Exchange Commission (SEC), and
from time to time, in other filings with the SEC, such as our Forms 8-K and Forms 10-Q.
The forward-looking statements included in this news release are only made as of the date of this
news release and NCI undertakes no obligation to publicly update any of the forward-looking
statements made herein, whether as a result of new information, subsequent events or circumstances,
changes in expectations or otherwise.
5
NCI, INC.
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
(amounts in thousands, except per share data)
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
(amounts in thousands, except per share data)
Three months ended June 30, | Six months ended June 30, | |||||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
Revenue |
$ | 161,203 | $ | 126,558 | $ | 311,428 | $ | 241,550 | ||||||||
Operating costs and expenses: |
||||||||||||||||
Cost of revenue |
145,670 | 110,927 | 278,926 | 210,318 | ||||||||||||
General and administrative expense |
6,085 | 5,369 | 11,844 | 10,985 | ||||||||||||
Depreciation and amortization |
1,817 | 1,193 | 3,125 | 2,366 | ||||||||||||
Acquisition and integration related expenses |
748 | | 949 | | ||||||||||||
Total operating costs and expenses |
154,320 | 117,489 | 294,844 | 223,669 | ||||||||||||
Operating income |
6,883 | 9,069 | 16,584 | 17,881 | ||||||||||||
Interest expense, net |
483 | 149 | 680 | 292 | ||||||||||||
Income before income taxes |
6,400 | 8,920 | 15,904 | 17,589 | ||||||||||||
Provision for income taxes |
2,542 | 3,524 | 6,353 | 6,727 | ||||||||||||
Net income |
$ | 3,858 | $ | 5,396 | $ | 9,551 | $ | 10,862 | ||||||||
Earnings per common and common equivalent share: |
||||||||||||||||
Basic: |
||||||||||||||||
Weighted average shares outstanding |
13,681 | 13,628 | 13,675 | 13,598 | ||||||||||||
Net income per share |
$ | 0.28 | $ | 0.40 | $ | 0.70 | $ | 0.80 | ||||||||
Diluted: |
||||||||||||||||
Weighted average shares and equivalent
shares outstanding |
13,931 | 13,886 | 13,919 | 13,882 | ||||||||||||
Net income per share |
$ | 0.28 | $ | 0.39 | $ | 0.69 | $ | 0.78 | ||||||||
The accompanying notes are an integral
part of these consolidated financial statements
part of these consolidated financial statements
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NCI, INC.
CONSOLIDATED BALANCE SHEETS
(amounts in thousands, except share data)
CONSOLIDATED BALANCE SHEETS
(amounts in thousands, except share data)
As of | As of | |||||||
June 30, | December 31, | |||||||
2011 | 2010 | |||||||
(unaudited) | ||||||||
Assets: |
||||||||
Current assets: |
||||||||
Cash and cash equivalents |
$ | 561 | $ | 2,791 | ||||
Accounts receivable, net |
129,520 | 132,693 | ||||||
Deferred tax assets, net |
4,538 | 4,547 | ||||||
Prepaid expenses and other current assets |
5,393 | 3,347 | ||||||
Total current assets |
140,012 | 143,378 | ||||||
Property and equipment, net |
16,843 | 11,751 | ||||||
Other assets |
1,289 | 1,590 | ||||||
Intangible assets, net |
9,864 | 6,179 | ||||||
Goodwill |
147,932 | 106,580 | ||||||
Total assets |
$ | 315,940 | $ | 269,478 | ||||
Liabilities and stockholders equity: |
||||||||
Current liabilities: |
||||||||
Accounts payable |
$ | 47,150 | $ | 61,046 | ||||
Accrued salaries and benefits |
19,726 | 20,229 | ||||||
Deferred revenue |
964 | 2,951 | ||||||
Other accrued expenses |
6,091 | 3,468 | ||||||
Total current liabilities |
73,931 | 87,694 | ||||||
Long-term debt |
70,000 | 20,000 | ||||||
Deferred tax liabilities, net |
7,589 | 7,450 | ||||||
Deferred rent and other long-term liabilities |
1,018 | 1,287 | ||||||
Total liabilities |
152,538 | 116,431 | ||||||
Stockholders equity: |
||||||||
Class A common stock, $0.019 par
value37,500,000 shares authorized;
8,567,330 shares issued and outstanding as
of June 30, 2011 and 8,469,242 shares
issued and outstanding as of December 31,
2010 |
163 | 161 | ||||||
Class B common stock, $0.019 par
value12,500,000 shares authorized;
5,200,000 shares issued and outstanding as
of June 30, 2011 and December 31, 2010 |
99 | 99 | ||||||
Additional paid-in capital |
68,691 | 67,889 | ||||||
Retained earnings |
94,449 | 84,898 | ||||||
Total stockholders equity |
163,402 | 153,047 | ||||||
Total liabilities and stockholders equity |
$ | 315,940 | $ | 269,478 | ||||
The accompanying notes are an integral
part of these consolidated financial statements
part of these consolidated financial statements
7
NCI, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(amounts in thousands)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(amounts in thousands)
Six months ended June 30, | ||||||||
2011 | 2010 | |||||||
Cash flows from operating activities: |
||||||||
Net income |
$ | 9,551 | $ | 10,862 | ||||
Adjustments to reconcile net income to net cash provided by operating activities: |
||||||||
Depreciation and amortization |
3,125 | 2,366 | ||||||
Stock compensation expense |
619 | 919 | ||||||
Deferred income taxes |
147 | 490 | ||||||
Changes in operating assets and liabilities: |
||||||||
Accounts receivable, net |
19,363 | 20,986 | ||||||
Prepaid expenses and other assets |
(342 | ) | (1,991 | ) | ||||
Accounts payable |
(15,182 | ) | (11,921 | ) | ||||
Accrued expenses |
(3,847 | ) | (2,459 | ) | ||||
Deferred rent |
(237 | ) | (261 | ) | ||||
Net cash provided by operating activities |
13,197 | 18,991 | ||||||
Cash flows from investing activities: |
||||||||
Purchase of property and equipment |
(1,281 | ) | (4,027 | ) | ||||
Cash paid for acquisition, net of cash acquired |
(64,308 | ) | | |||||
Net cash used in investing activities |
(65,589 | ) | (4,027 | ) | ||||
Cash flows from financing activities: |
||||||||
Borrowings under credit facility |
123,986 | 59,163 | ||||||
Repayments of credit facility |
(73,986 | ) | (77,163 | ) | ||||
Principal payments under capital lease obligations |
(23 | ) | (37 | ) | ||||
Proceeds from exercise of stock options |
185 | 2,441 | ||||||
Excess tax deduction from exercise of stock options |
| 166 | ||||||
Net cash provided by (used in) financing activities |
50,162 | (15,430 | ) | |||||
Net change in cash and cash equivalents |
(2,230 | ) | (466 | ) | ||||
Cash and cash equivalents, beginning of period |
2,791 | 1,193 | ||||||
Cash and cash equivalents, end of period |
$ | 561 | $ | 727 | ||||
Supplemental disclosure of cash flow information: |
||||||||
Cash paid during the period for: |
||||||||
Interest |
$ | 752 | $ | 325 | ||||
Income taxes |
$ | 6,666 | $ | 8,226 | ||||
The accompanying notes are an integral
part of these consolidated financial statements
part of these consolidated financial statements
8
Organic Growth Reconciliation
(unaudited)
(in thousands)
(unaudited)
(in thousands)
Three months ended June 30, | Six months ended June 30, | |||||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
Revenue, as reported |
$ | 161,203 | $ | 126,558 | $ | 311,428 | $ | 241,550 | ||||||||
Plus: revenue from
acquired company
for the comparable
prior year periods |
| 11,696 | | 11,696 | ||||||||||||
Organic revenue |
$ | 161,203 | $ | 138,254 | $ | 311,428 | $ | 253,246 | ||||||||
Percent growth |
16.6 | % | 23.0 | % | ||||||||||||
###
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