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Table of Contents

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 10-Q

 

 

(Mark One)

x QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTER ENDED SEPTEMBER 30, 2014

 

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number 000-51579

 

 

 

LOGO

NCI, Inc.

(Exact name of registrant as specified in its charter)

 

 

 

Delaware   20-3211574

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

11730 Plaza America Drive

Reston, Virginia

  20190-4764
(Address of principal executive offices)   (Zip Code)

Registrant’s telephone number, including area code: (703) 707-6900

 

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    x  Yes    ¨  No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    x  Yes    ¨  No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definition of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

 

Large accelerated filer   ¨    Accelerated filer   ¨
Non-accelerated filer   ¨  (Do not check if a smaller reporting company)    Smaller Reporting Company   x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    ¨  Yes    x  No

As of October 24, 2014, there were 8,258,773 shares outstanding of the registrant’s Class A common stock. In addition, there are 4,700,000 shares outstanding of the registrant’s Class B common stock, which are convertible on a one-for-one basis into shares of Class A common stock.

 

 

 


Table of Contents

NCI, INC.

 

         PAGE  

PART I:

  FINANCIAL INFORMATION      1   

Item 1.

  Condensed Consolidated Financial Statements      1   

Item 2.

  Management’s Discussion and Analysis of Financial Condition and Results of Operations      9   

Item 3.

  Quantitative and Qualitative Disclosures About Market Risk      14   

Item 4.

  Controls and Procedures      15   

PART II:

  OTHER INFORMATION      16   

Item 1.

  Legal Proceedings      16   

Item 1A.

  Risk Factors      16   

Item 2.

  Unregistered Sales of Equity Securities and Use of Proceeds      16   

Item 3.

  Defaults Upon Senior Securities      16   

Item 4.

  Mine Safety Disclosures      16   

Item 5.

  Other Information      16   

Item 6.

  Exhibits      17   
  Signatures      19   

 


Table of Contents

PART 1

FINANCIAL INFORMATION

Item 1. Financial Statements

NCI, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(UNAUDITED)

(in thousands, except per share data)

 

     Three months ended September 30,     Nine months ended September 30,  
     2014      2013     2014      2013  

Revenue

   $ 75,660       $ 77,918      $ 242,588       $ 252,430   

Operating expenses:

          

Cost of revenue

     64,102         67,832        208,033         220,300   

General and administrative expenses

     6,205         5,819        19,967         17,809   

Depreciation and amortization

     1,401         1,679        4,302         4,824   

Purchase contingency gain

     —           (864     —           (864
  

 

 

    

 

 

   

 

 

    

 

 

 

Total operating expenses

     71,708         74,466        232,302         242,069   
  

 

 

    

 

 

   

 

 

    

 

 

 

Operating income

     3,952         3,452        10,286         10,361   

Interest expense, net

     95         157        302         656   
  

 

 

    

 

 

   

 

 

    

 

 

 

Income before income taxes

     3,857         3,295        9,984         9,705   

Provision for income taxes

     1,495         1,344        3,956         3,967   
  

 

 

    

 

 

   

 

 

    

 

 

 

Net income

   $ 2,362       $ 1,951      $ 6,028       $ 5,738   
  

 

 

    

 

 

   

 

 

    

 

 

 

Earnings per common and common equivalent share:

          

Basic:

          

Weighted average shares outstanding

     13,639         12,837        13,457         12,825   

Net income per share

   $ 0.17       $ 0.15      $ 0.45       $ 0.45   
  

 

 

    

 

 

   

 

 

    

 

 

 

Diluted:

          

Weighted average shares outstanding

     13,816         12,837        13,805         12,832   

Net income per share

   $ 0.17       $ 0.15      $ 0.44       $ 0.45   
  

 

 

    

 

 

   

 

 

    

 

 

 

The accompanying notes are an integral

part of these condensed consolidated financial statements

 

1


Table of Contents

NCI, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

(in thousands, except par value)

 

     As of
September 30,
2014
    As of
December 31,
2013
 

Assets:

    

Current assets:

    

Cash and cash equivalents

   $ 19,672      $ 50   

Accounts receivable, net

     54,782        63,991   

Deferred tax assets, net

     3,362        3,217   

Prepaid expenses and other current assets

     2,859        2,941   
  

 

 

   

 

 

 

Total current assets

     80,675        70,199   

Property and equipment, net

     7,959        9,752   

Other assets

     1,720        2,113   

Deferred tax assets, net

     39,917        39,990   

Intangible assets, net

     4,124        5,340   
  

 

 

   

 

 

 

Total assets

   $ 134,395      $ 127,394   
  

 

 

   

 

 

 

Liabilities and stockholders’ equity:

    

Current liabilities:

    

Accounts payable

   $ 14,027      $ 17,371   

Accrued salaries and benefits

     17,431        16,645   

Deferred revenue

     2,868        2,594   

Other accrued expenses

     6,164        4,578   
  

 

 

   

 

 

 

Total current liabilities

     40,490        41,188   
  

 

 

   

 

 

 

Long-term debt

     —         1,000   

Other long-term liabilities

     3,129        3,399   
  

 

 

   

 

 

 

Total liabilities

     43,619        45,587   
  

 

 

   

 

 

 

Stockholders’ equity:

    

Class A common stock, $0.019 par value—37,500 shares authorized; 9,175 shares issued and 8,259 shares outstanding as of September 30, 2014, and 9,142 shares issued and 8,226 shares outstanding as of December 31, 2013

     174        174   

Class B common stock, $0.019 par value—12,500 shares authorized; 4,700 shares issued and outstanding as of September 30, 2014 and December 31, 2013

     89        89   

Additional paid-in capital

     73,846        70,905   

Treasury stock at cost—917 shares of Class A common stock as of September 30, 2014 and December 31, 2013

     (8,331     (8,331

Retained earnings

     24,998        18,970   
  

 

 

   

 

 

 

Total stockholders’ equity

     90,776        81,807   
  

 

 

   

 

 

 

Total liabilities and stockholders’ equity

   $ 134,395      $ 127,394   
  

 

 

   

 

 

 

The accompanying notes are an integral

part of these condensed consolidated financial statements

 

2


Table of Contents

NCI, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

(in thousands)

 

     Nine months ended September 30,  
     2014     2013  

Cash flows from operating activities:

    

Net income

   $ 6,028      $ 5,738   

Adjustments to reconcile net income to net cash provided by operating activities:

    

Depreciation and amortization

     4,302        4,824   

Share-based compensation

     2,774        1,067   

Deferred income taxes

     (72     299   

Changes in operating assets and liabilities:

    

Accounts receivable, net

     9,209        6,404   

Prepaid expenses and other assets

     474        7,436   

Accounts payable

     (3,344     (9,730

Accrued expenses and other liabilities

     1,670        8   
  

 

 

   

 

 

 

Net cash provided by operating activities

     21,041        16,046   
  

 

 

   

 

 

 

Cash flows from investing activities:

    

Purchases of property and equipment

     (586     (734
  

 

 

   

 

 

 

Net cash used in investing activities

     (586     (734
  

 

 

   

 

 

 

Cash flows from financing activities:

    

Borrowings under credit facility

     42,496        62,300   

Repayments on credit facility

     (43,496     (78,300

Proceeds from exercise of stock options

     253        —    

Shares repurchased for tax withholdings on vesting of restricted shares

     (86     (33
  

 

 

   

 

 

 

Net cash used in financing activities

     (833     (16,033
  

 

 

   

 

 

 

Net change in cash and cash equivalents

     19,622        (721

Cash and cash equivalents, beginning of period

     50        763   
  

 

 

   

 

 

 

Cash and cash equivalents, end of period

   $ 19,672      $ 42   
  

 

 

   

 

 

 

Supplemental disclosure of cash flow information:

    

Cash paid during the period for:

    

Interest

   $ 247      $ 512   
  

 

 

   

 

 

 

Income taxes

   $ 3,460      $ 251   
  

 

 

   

 

 

 

Non-cash investing and finance activities during the period for:

    

Leasehold improvements acquired under tenant improvement funds

     706        —    
  

 

 

   

 

 

 

The accompanying notes are an integral

part of these condensed consolidated financial statements

 

3


Table of Contents

NCI, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

1. Basis of Presentation

The accompanying unaudited condensed consolidated financial statements of NCI, Inc. and its subsidiaries (“NCI” or “the Company”) have been prepared in accordance with generally accepted accounting principles in the United States (“GAAP”) for interim financial information and pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). As a result, certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted. In the opinion of management, the accompanying unaudited interim consolidated financial statements reflect all adjustments necessary to fairly present the Company’s financial position as of September 30, 2014 and its results of operations and cash flows for the three months and nine months ended September 30, 2014 and 2013, which consists of normal and recurring adjustments. The information disclosed in the notes to the financial statements for these periods is unaudited. The current period’s results of operations are not necessarily indicative of results that may be achieved for any future period. All numbers in tables are presented in thousands except per share numbers. For further information, refer to the financial statements and footnotes included in NCI’s Annual Report on Form 10-K for the year ended December 31, 2013, as filed with the SEC.

2. Business Overview

NCI provides IT and professional services and solutions by leveraging its eight core service offerings: cloud computing and IT infrastructure optimization; enterprise information management and advanced analytics; cybersecurity and information assurance; IT service management; engineering and logistics support; software and systems development/integration; health IT and medical support; and modeling, simulation, and training. The Company provides these services to U.S. Defense, Intelligence, and Federal Civilian agencies. The majority of the Company’s revenue was derived from contracts with the U.S. Federal Government, directly as a prime contractor or as a subcontractor. NCI primarily conducts business throughout the United States. The Company reports operating results and financial data as one reportable segment.

For the three months ended September 30, 2014, the Company generated approximately 73% of revenue from the Department of Defense, including agencies within the intelligence community, and approximately 27% of revenue from federal civilian agencies. For the three months ended September 30, 2013, the Company generated approximately 74% of revenue from the Department of Defense, including agencies within the intelligence community, and approximately 26% of revenue from federal civilian agencies. For the nine months ended September 30, 2014 and 2013, the Company generated approximately 75% of revenue from the Department of Defense, including agencies within the intelligence community, and approximately 25% of revenue from federal civilian agencies.

On an annualized basis, NCI’s PEO Soldier contract is the Company’s largest revenue-generating contract and accounted for approximately 11% and 14% of revenue for the three months ended September 30, 2014 and 2013, respectively. PEO Soldier accounted for approximately 12% and 14% of revenue for the nine months ended September 30, 2014 and 2013, respectively. The Company’s PEO Soldier contract is a cost-plus fee contract consisting of a base period and two option periods for a total term of three years commencing in September 2012. NCI provides cyber network operations and security support (CNOSS) services to the U.S. Army Network Enterprise Technology Command (NETCOM), which accounted for approximately 12% and 6% of revenue for the three months ended September 30, 2014 and 2013, respectively, and approximately 11% and 8% of revenue for the nine months ended September 30, 2014 and 2013, respectively. This cost-plus-fixed-fee, single-award contract consisted of a base period and two option periods for a total term of three years. It was successfully recompeted and awarded in October 2014, the follow-on contract consists of a 12-month base period with two one-year option periods and one six-month option period.

3. Recently Issued Accounting Pronouncements

 

In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers (ASU 2014-09), which will replace most of the current revenue recognition guidance under U.S. GAAP when it becomes effective for annual periods beginning after December 15, 2016, and interim periods therein. While this new accounting standard will not affect the Company until the Company’s 2017 fiscal year, it does require either a full retrospective approach reflecting the application of the standard in each prior reporting period, or a retrospective approach with the cumulative effect of initially adopting the ASU 2014-09 recognized at the date of adoption (which includes additional footnote disclosures).

The main principle of ASU 2014-09 is that revenue should be recognized when contracted goods or services are transferred to customers in an amount that reflects the consideration that the entity expects to be entitled in exchange for those goods or services. ASU 2014-09 defines a five step process to achieve this new principle which will require entities to apply significantly more management judgment and may require the use of more estimates than are required under existing U.S. GAAP. NCI is currently evaluating the impact of the pending adoption of ASU 2014-09 on the Company’s consolidated financial statements and has not yet determined the method by which NCI will adopt the standard in 2017.

 

4


Table of Contents

In August 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update No. 2014-15, Presentation of Financial Statements —Going Concern (Subtopic 205-40), which provides U.S. GAAP guidance on management’s responsibility in evaluating whether there is substantial doubt about a company’s ability to continue as a going concern and about the related footnote disclosures. It becomes effective for annual periods beginning after December 15, 2016, and interim periods thereafter. While this new accounting standard will not affect the Company until the Company’s 2017 fiscal year, early application is permitted.

Currently there is no guidance in U.S. GAAP surrounding management’s responsibility to evaluate whether substantial doubt exists about an entity’s ability to continue as a going concern or to provide related footnote disclosures. The amendments in this update require management to evaluate an entity’s ability to continue as a going concern by incorporating and building upon principles that already exist in U.S. GAAP. Specifically, the amendments provide a definition of the term substantial doubt, require management to make an evaluation every reporting period including interim periods, provide principles for evaluating the mitigation effect of management’s plans and require certain disclosures when substantial doubt is mitigated as a result of management’s plans. It also requires a short statement and additional disclosures when substantial doubt is not mitigated, and requires as assessment for a period of one year after the date that the financial statements are issued. NCI is currently evaluating the impact of the pending adoption of ASU 2014-15 on the Company’s financial statements and disclosures when NCI adopts the standard in 2017.

4. Earnings Per Share

Basic earnings per share exclude dilution and are computed by dividing net income by the weighted average number of common shares outstanding for the period, including contingently issuable shares that could share in NCI’s income if options containing a market condition that was met during the quarter were exercised. Diluted earnings per share reflect potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock. Diluted earnings per share include the incremental effect of stock options calculated using the treasury stock method and contingently issuable shares that could share in our income if options containing a market condition that was met during the nine months were exercised. Shares that are anti-dilutive are not included in the computation of diluted earnings per share. For the three months ended September 30, 2014 and 2013, approximately 22,000 and 1,800,000 shares, respectively, were not included in the computation of diluted earnings per share, because to do so would have been anti-dilutive. For the nine months ended September 30, 2014 and 2013, approximately 16,000 and 1,200,000 shares, respectively, were not included in the computation of diluted earnings per share, because to do so would have been anti-dilutive. The following details the computation of basic and diluted earnings per common share (Class A and Class B) for the three months and nine months ended September 30, 2014 and 2013.

 

     Three months ended September 30,      Nine months ended September 30,  
     2014      2013      2014      2013  
     (in thousands, except per share data)  

Net income

   $ 2,362       $ 1,951       $ 6,028       $ 5,738   
  

 

 

    

 

 

    

 

 

    

 

 

 

Weighted average number of basic shares outstanding during the period

     13,639         12,837         13,457         12,825   

Effect of dilutive potential common shares

     177         —          348         7   
  

 

 

    

 

 

    

 

 

    

 

 

 

Weighted average number of diluted shares outstanding during the period

     13,816         12,837         13,805         12,832   
  

 

 

    

 

 

    

 

 

    

 

 

 

Basic earnings per share

   $ 0.17       $ 0.15       $ 0.45       $ 0.45   
  

 

 

    

 

 

    

 

 

    

 

 

 

Diluted earnings per share

   $ 0.17       $ 0.15       $ 0.44       $ 0.45   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

5


Table of Contents

5. Accounts Receivable

Accounts receivable consist of billed and unbilled amounts at the end of each period:

 

     As of  
     September 30,
2014
     December 31,
2013
 

Billed receivables

   $ 21,837       $ 31,398   

Unbilled receivables:

     

Amounts billable at end of period

     28,618         19,215   

Other

     5,115         14,166   
  

 

 

    

 

 

 

Total unbilled receivables

     33,733         33,381   
  

 

 

    

 

 

 

Total accounts receivable

     55,570         64,779   

Less: Allowance for doubtful accounts

     788         788   
  

 

 

    

 

 

 

Total accounts receivable, net

   $ 54,782       $ 63,991   
  

 

 

    

 

 

 

Other unbilled receivables primarily consist of amounts that will be billed upon milestone completions and other accrued amounts that cannot be billed as of the end of the period. Substantially all unbilled receivables are expected to be billed and collected within the next 12 months.

6. Property and Equipment

The following table details property and equipment at the end of each period:

 

     As of  
     September 30,
2014
     December 31,
2013
 

Property and equipment

     

Furniture and equipment

   $ 23,549       $ 23,054   

Leasehold improvements

     9,210         8,488   

Real property

     549         549   
  

 

 

    

 

 

 
     33,308         32,091   

Less: Accumulated depreciation and amortization

     25,349         22,339   
  

 

 

    

 

 

 

Property and equipment, net

   $ 7,959       $ 9,752   
  

 

 

    

 

 

 

Depreciation expense for the three months ended September 30, 2014 and 2013 was $1.0 million and $1.3 million, respectively. Depreciation expense for the nine months ended September 30, 2014 and 2013 was $3.1 million and $3.5 million, respectively.

7. Intangible Assets

The following table details intangible assets at the end of each period:

 

     As of  
     September 30,
2014
     December 31,
2013
 

Contract and customer relationships

   $ 20,987       $ 20,987   

Less: Accumulated amortization

     16,863         15,647   
  

 

 

    

 

 

 

Intangible assets, net

   $ 4,124       $ 5,340   
  

 

 

    

 

 

 

Amortization expense of intangible assets for the three months ended September 30, 2014 and 2013 was $0.4 million. Amortization expense of intangible assets for the nine months ended September 30, 2014 and 2013 was $1.2 million and $1.3 million, respectively.

8. Share-Based Payments

During the three months ended September 30, 2014, the Company granted 30,000 stock options. During the nine months ended September 30, 2014, the Company granted 60,000 stock options. During the three and nine months ended September 30, 2014, 8,500 stock options and 42,500 stock options were exercised, respectively. As of September 30, 2014, there were approximately 1,770,000 stock options outstanding.

 

6


Table of Contents

During the three months ended September 30, 2014, 12,500 restricted shares vested, 2,059 of which were cancelled to cover individual tax liabilities. During the nine months ended September 30, 2014, 38,750 restricted shares vested, with 9,328 shares cancelled to cover individual tax liabilities. As of September 30, 2014, there were approximately 43,750 shares of restricted stock outstanding.

During the nine months ended September 30, 2014, approximately 737,000 of the options granted in September of 2013 vested on an accelerated vesting schedule after the Company’s stock price reached two discrete acceleration milestones of a continuous 30-day average stock price of $8.00 and $10.00 per share, respectively. This accelerated vesting added approximately $1.1 million and $0.4 million in additional stock compensation costs to general and administrative expenses and cost of revenue, respectively. During the quarter ended September 30, 2014, there was no further accelerated vesting of outstanding options.

The following table summarizes stock compensation expense allocated to cost of revenue and general and administrative costs for the three and nine months ended September 30, 2014 and 2013:

 

     Three months ended September 30,      Nine months ended September 30,  
     2014      2013      2014      2013  

Cost of revenue

   $ 79       $ 94       $ 633       $ 212   

General and administrative

     282         315         2,141         855   
  

 

 

    

 

 

    

 

 

    

 

 

 
   $ 361       $ 409       $ 2,774       $ 1,067   
  

 

 

    

 

 

    

 

 

    

 

 

 

As of September 30, 2014, there was approximately $1.5 million of total unrecognized compensation cost related to unvested stock compensation arrangements. This cost is expected to be fully amortized over the next three years, with approximately $0.3 million, $0.9 million, $0.2 million, and $0.1 million amortized during the remainder of 2014, and the full year of 2015, 2016 and 2017, respectively. The cost of stock compensation is included in the Company’s Consolidated Statements of Income and expensed over the service period of the options.

9. Debt

The Company’s amended and restated senior credit facility, herein referred to as the “credit facility”, consists of a revolving line of credit with a borrowing capacity of up to an $80.0 million principal amount and a $45.0 million accordion feature allowing us to increase our borrowing capacity to up to a $125.0 million principal amount, subject to obtaining commitments for the incremental capacity from existing or new lenders. The outstanding borrowings are collateralized by a security interest in substantially all of the Company’s assets. The lenders also require a direct assignment of all contracts at the lenders’ discretion. The outstanding balance under the credit facility accrues interest based on one-month LIBOR plus an applicable margin, ranging from 210 to 310 basis points, based on the ratio of the Company’s outstanding senior funded debt to Earnings before Interest, Taxes, Depreciation, and Amortization (EBITDA) as defined in the credit facility agreement. The credit facility expires on January 31, 2017.

The credit facility contains various restrictive covenants that, among other provisions, restrict the Company’s ability to: incur or guarantee additional debt; make certain distributions, investments and other restricted payments, including limits on cash dividends on the Company’s outstanding common stock or equivalent equity interests; enter into transactions with certain affiliates; create or permit certain liens; and consolidate, merge, or sell assets. In addition, the credit facility contains certain financial covenants that require the Company to: maintain a minimum tangible net worth; maintain a minimum fixed charge coverage ratio and a minimum funded debt to earnings ratio; and limit capital expenditures below certain thresholds. As of September 30, 2014, the Company was in compliance with all of its loan covenants.

The credit facility allows the Company to use borrowings thereunder of up to $17.5 million to repurchase shares of Class A common stock. No stock repurchases took place in the nine months ended September 30, 2014. At September 30, 2014, $16.7 million was remaining under the Board of Directors’ authorization for shares repurchases.

During the third quarter of 2014, NCI had a weighted average outstanding loan balance of zero. During the third quarter of 2013, NCI had a weighted average outstanding loan balance of $7.2 million which accrued interest at a weighted average borrowing rate of 2.5%. During the nine months ended September 30, 2014, NCI had a weighted average outstanding loan balance of $1.7 million which accrued interest at a weighted average borrowing rate of 2.3%. During the nine months ended September 30, 2013, NCI had a weighted average outstanding loan balance of $17.3 million which accrued interest at a weighted average borrowing rate of 2.5%.

As of September 30, 2014, the outstanding balance under the credit facility was zero. Had a balance existed as of September 30, 2014, interest would have accrued at a rate of one-month LIBOR plus 210 basis points, or 2.3%. As of December 31, 2013, the outstanding balance under the credit facility was $1.0 million and interest accrued at a rate of one-month LIBOR plus 210 basis points, or 2.3%.

 

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10. Restructuring Charge

During December 2011, management completed a restructuring plan. The restructuring was undertaken to reduce costs by downsizing NCI’s physical locations.

The activity and balance of the restructuring liability accounts for the quarter ended September 30, 2014 are as follows:

 

     Lease and
Facilities Exit
Costs
 

Balance as of January 1, 2014

   $ 928   

Cash payments and adjustments

     (415
  

 

 

 

Balance as of September 30, 2014

     513   
  

 

 

 

Amounts contained in balance sheet as of September 30, 2014

  

Other accrued expenses

     319   

Other long-term liabilities

     194   
  

 

 

 

Total

   $ 513   
  

 

 

 

The accrued amounts related to the lease and facilities exit costs will be reduced over the respective lease terms, the longest of which extends through 2017.

11. Related Party Transactions

The Company purchased services under a subcontract from Renegade Technology Systems, Inc. (formerly Net Commerce Corporation), which is a Government contractor wholly-owned by Rajiv Narang, the son of Charles K. Narang, the Chairman and Chief Executive Officer of the Company. For the three months ended September 30, 2014 and 2013, the expense incurred under this agreement was approximately $270,000 and $219,900 respectively. For the nine months ended September 30, 2014 and 2013, the expense incurred under this agreement was approximately $687,000 and $628,500 respectively. As of September 30, 2014 and September 30, 2013, approximate outstanding amounts due to Renegade Technology Systems, Inc. were zero and $149,700, respectively.

 

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Forward-Looking Statements

This Quarterly Report on Form 10-Q, including the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” contains forward-looking statements regarding our business, financial condition, results of operations, and prospects. There are statements made herein, which may not address historical facts and, therefore, could be interpreted to be forward-looking statements as that term is defined in the Private Securities Litigation Reform Act of 1995. 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 U.S. Federal Government agencies, particularly within the U.S. Department of Defense, for the majority our revenue; a change in funding of our contracts due to bid protests; changes in U.S. Federal Government spending priorities; changes in contract type, particularly changes from cost-plus fee or time-and-material type contracts to firm fixed-price type contracts

 

    A reduction in the overall U.S. Defense budget, volatility in spending authorizations for Defense and Intelligence-related programs by the U.S. Federal Government or a shift in spending to programs in areas where we do not currently provide services

 

    Delays in the U.S. Federal Government appropriations process, or budgetary cuts resulting from Congressional committee recommendations or automatic sequestration under the Budget Control Act of 2011; U.S. Federal Governmental shutdowns (such as the shutdown that occurred during the U.S. Federal Government’s 1996 and 2013 fiscal years); and other potential delays in the U.S. Federal Government appropriations process

 

    Changes in U.S. Federal Government programs or requirements, including the increased use of small business providers

 

    Failure to achieve contract awards in connection with recompetes for present business and/or competition for new business

 

    U.S. Federal Government agencies more frequently awarding contracts on a technically acceptable/lowest cost basis in order to reduce expenditures

 

    Adverse results of U.S. Federal Government audits of our government contracts

 

    Competitive factors, such as pricing pressures and competition to hire and retain employees (particularly those with security clearances)

 

    Failure to identify and successfully integrate future acquired companies or businesses into our operations or to realize any accretive or synergistic effects from such acquisitions, or effectively integrate acquisitions appropriate to the achievement of our strategic plans

 

    Economic conditions in the United States, including conditions that result from terrorist activities or war

 

    Material changes in policies, laws, or regulations applicable to our businesses, particularly legislation affecting (i) U.S. Federal Government contracts for services, (ii) outsourcing of activities that have been performed by the U.S. Federal Government, (iii) U.S. Federal Government contracts containing organizational conflict of interest clauses, (iv) delays related to agency specific funding freezes, and (v) competition for task orders under Government Wide Acquisition Contracts, agency-specific Indefinite Delivery/Indefinite Quantity contracts and/or schedule contracts with the General Services Administration

 

    U.S. Federal Government’s “insourcing” of previously contracted support services and the realignment of funds to non-defense related programs

 

    Our ability to achieve the objectives of near-term or long-range business plans, particularly revenue growth, and the ability to realize future deferred tax assets benefits

 

    Risk of contract non-performance or termination

Some of these important factors are outlined under Item 1A. Risk Factors and elsewhere in our Annual Report on Form 10-K for the year ended December 31, 2013 filed with the SEC, and from time to time in other filings with the SEC, such as our Forms 8-K and 10-Q. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee our future results, level of activity, or performance. We undertake no obligation to update publicly or revise any forward-looking statements. You should not place undue reliance on any forward-looking statements.

In this document, unless the context indicates otherwise, the terms “Company,” “NCI,” “we,” “us,” and “our” refer to NCI, Inc., a Delaware corporation, and, where appropriate, its subsidiaries.

 

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OVERVIEW

We are a provider of information technology (IT) and professional engineering services and solutions to U.S. Federal Government Agencies. Our technology and industry expertise enables us to provide a wide spectrum of services and solutions that assist our customers in achieving their program goals. We deliver these complex services and solutions by leveraging our skills across eight core competencies:

 

    Cloud Computing and IT infrastructure optimization

 

    Enterprise information management and advanced analytics

 

    Cybersecurity and information assurance

 

    IT service management

 

    Engineering and logistics support

 

    Software and systems development/integration

 

    Health IT and medical support

 

    Modeling, simulation, and training

Our team of highly skilled professionals is committed to service excellence and delivers innovative, cost-effective enterprise services and solutions on time and within budget. We are focused on reshaping the way services and solutions are delivered to our customers in order to proactively understand and meet their mission needs and enable them to rapidly adapt to dynamic environments. Headquartered in Reston, Virginia, NCI currently operates in more than 100 locations around the globe. We report operating results and financial data as one reportable segment.

Key Financial Metrics

Prime Contractor Revenue

The following table shows our revenue derived from contracts on which we serve as a prime contractor.

 

     Three months ended September 30,     Nine months ended September 30,  
     2014     2013     2014     2013  

Revenue derived from prime contracts

     92     90     92     90

Customer Group Revenue

The following table shows our revenue from the customer groups listed as a percentage of total revenue for the period shown.

 

     Three months ended September 30,     Nine months ended September 30,  
     2014     2013     2014     2013  

Department of Defense and intelligence agencies

     73     74     75     75

U.S. Federal civilian agencies

     27     26     25     25

Contract Type Revenue

Our services and solutions are provided under three types of contracts: time-and-materials; cost-plus fee; and firm fixed-price. Our contract mix varies from year to year due to numerous factors including our business strategies and U.S. Federal Government procurement objectives.

The following table shows our revenue from each of these types of contracts as a percentage of our total revenue for the periods shown.

 

     Three months ended September 30,     Nine months ended September 30,  
     2014     2013     2014     2013  

Time-and-materials

     16     16     16     20

Cost-plus fee

     51     54     52     51

Firm fixed-price

     33     30     32     29

 

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The amount of risk and potential reward varies under each type of contract. Under time-and-materials contracts, we are paid a fixed hourly rate by labor category. To the extent that our actual labor costs vary significantly from the negotiated hourly rates, we may generate more or less than the targeted amount of profit. We are typically reimbursed for other contract direct costs and expenses at our cost, and typically receive no fee on those costs. For cost-plus fee contracts, there is limited financial risk, because we are reimbursed all our allowable costs, therefore the profit margins tend to be lower on cost-plus fee contracts. Under firm fixed-price contracts, we perform specific tasks or provide specified goods for a predetermined price. Compared to time-and-materials and cost-plus fee contracts, firm fixed-price service contracts generally offer higher profit margin opportunities but involve greater financial risk because we would bear the impact of potential cost overruns in return for the full benefit of any cost savings.

Contract Backlog

 

As of

   Funded Backlog      Total Backlog  
     (in millions)  

September 30, 2014

   $ 165       $ 435   

December 31, 2013

     195         488   

We define backlog as our estimate of the remaining future revenue from existing signed contracts over the remaining base contract performance period and from the option periods of those contracts that we believe have a more likely than not probability of being exercised. Our backlog does not include any estimate of future potential delivery orders that might be awarded under our GWAC, agency-specific IDIQ, or other multiple-award contract vehicles. We define funded backlog as the portion of backlog for which funding currently is appropriated and obligated to us under a contract or other authorization for payment signed by an authorized purchasing agency, less the amount of revenue we have previously recognized. Our funded backlog does not represent the full potential value of our contracts, as Congress often appropriates funds for a particular program or agency on a quarterly or yearly basis, even though the contract may provide for the provision of services over a number of years. We define unfunded backlog, not included above, as the total backlog less the funded backlog. Unfunded backlog includes values for contract options that have been priced but not yet funded. Additional information on how we determine backlog is included in our Annual Report on Form 10-K for the year ended December 31, 2013, filed with the SEC.

Results of Operations

Three Months Ended September 30, 2014 Compared to Three Months Ended September 30, 2013

The following table sets forth certain items from our consolidated statements of income and expresses each item in dollars and as a percentage of revenue for the periods indicated:

 

     Three months ended September 30,  
     2014      2013     2014     2013  
     (in thousands)     (as a percentage of revenue)  

Revenue

   $ 75,660       $ 77,918        100.0     100.0

Operating expenses:

         

Cost of revenue

     64,102         67,832        84.7        87.1   

General and administrative expenses

     6,205         5,819        8.2        7.5   

Depreciation and amortization

     1,401         1,679        1.9        2.1   

Purchase contingency gain

     —           (864     —          (1.1
  

 

 

    

 

 

   

 

 

   

 

 

 

Total operating expenses

     71,708         74,466        94.8        95.6   
  

 

 

    

 

 

   

 

 

   

 

 

 

Operating income

     3,952         3,452        5.2        4.4   

Interest expense, net

     95         157        0.1        0.2   
  

 

 

    

 

 

   

 

 

   

 

 

 

Income before income taxes

     3,857         3,295        5.1        4.2   

Provision for income taxes

     1,495         1,344        2.0        1.7   
  

 

 

    

 

 

   

 

 

   

 

 

 

Net income

   $ 2,362       $ 1,951        3.1     2.5
  

 

 

    

 

 

   

 

 

   

 

 

 

 

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Revenue

For the three months ended September 30, 2014, revenue decreased by 2.9%, or $2.3 million, over the same period a year ago. The decrease was primarily due to approximately $2.7 million of lower revenue attributable to services provided on our PEO Soldier contract.

Cost of revenue

Cost of revenue decreased 5.5%, or $3.7 million, for the three months ended September 30, 2014, as compared to the same period a year ago. This decrease was primarily the result of lower non-labor costs offset partially by an increase in direct labor and subcontractor costs. Cost of revenue represented 84.7% of revenue for the quarter ended September 30, 2014, as compared to 87.1% for the quarter ended September 30, 2013.

General and administrative expenses

General and administrative expense increased 6.6%, or $0.4 million, for the three months ended September 30, 2014, as compared to the same period a year ago. The increase was primarily due to increased costs supporting business development and our bid and proposal efforts.

Depreciation and amortization

Depreciation and amortization expense was approximately $1.4 million and $1.7 million for the quarters ended September 30, 2014 and 2013, respectively.

Interest expense, net

Net interest expense was $0.1 million and $0.2 million for the quarters ended September 30, 2014 and 2013, respectively. This decrease was primarily due to a lower average loan balance in the quarter ended September 30, 2014. During the third quarter of 2014, we had a weighted average outstanding loan balance of zero. During the third quarter of 2013, we had a weighted average outstanding loan balance of $7.2 million which accrued interest at a weighted average borrowing rate of 2.5%.

Income taxes

Income tax expense increased by $0.2 million in the three months ended September 30, 2014, as compared to the three months ended September 30, 2013. This increase was due to higher operating income for the period ended September 30, 2014, offset by a decrease in our effective tax rate. The effective income tax rate for the quarter ended September 30, 2014 was approximately 38.8% compared with 40.8% for the quarter ended September 30, 2013. The decrease in effective tax rate resulted from changes in the blended state tax rate.

Nine Months Ended September 30, 2014 Compared to Nine Months Ended September 30, 2013

The following table sets forth certain items from our consolidated statements of income and expresses each item in dollars and as a percentage of revenue for the periods indicated:

 

     Nine months ended September 30,  
     2014      2013     2014     2013  
     (in thousands)     (as a percentage of revenue)  

Revenue

   $ 242,588       $ 252,430        100.0     100.0

Operating expenses:

         

Cost of revenue

     208,033         220,300        85.8        87.3   

General and administrative expenses

     19,967         17,809        8.2        7.1   

Depreciation and amortization

     4,302         4,824        1.8        1.9   

Purchase contingency gain

     —           (864     —          (0.3
  

 

 

    

 

 

   

 

 

   

 

 

 

Total operating expenses

     232,302         242,069        95.8        95.9   
  

 

 

    

 

 

   

 

 

   

 

 

 

Operating income

     10,286         10,361        4.2        4.1   

Interest expense, net

     302         656        0.1        0.2   
  

 

 

    

 

 

   

 

 

   

 

 

 

Income before income taxes

     9,984         9,705        4.1        3.8   

Provision for income taxes

     3,956         3,967        1.6        1.6   
  

 

 

    

 

 

   

 

 

   

 

 

 

Net income

   $ 6,028       $ 5,738        2.5     2.3
  

 

 

    

 

 

   

 

 

   

 

 

 

 

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Revenue

For the nine months ended September 30, 2014, total revenue decreased 3.9%, or $9.8 million, compared with the same period a year ago. The decrease was primarily due to approximately $6.5 million of lower revenue attributable to services provided on our PEO Soldier contract, and $3.3 million as a result of reductions of scope of work, and the expiration of task orders and contracts.

Cost of revenue

Cost of revenue decreased 5.6%, or $12.3 million, for the nine months ended September 30, 2014, as compared to the same period a year ago. This decrease was primarily the result of lower non-labor costs. Cost of revenue represented 85.8% of revenue for the quarter ended September 30, 2014, as compared to 87.3% for the quarter ended September 30, 2013. This decrease was primarily the result of the factors affecting revenue and the associated indirect costs.

General and administrative expenses

General and administrative expenses increased 12.1%, or $2.2 million, for the nine months ended September 30, 2014, as compared to the same period a year ago. The increase was primarily due to $1.1 million in accelerated stock compensation expense, and increased business development and bid and proposal costs.

Depreciation and amortization

Depreciation and amortization expense was approximately $4.3 and $4.8 million for the nine months ended September 30, 2014 and 2013, respectively. The decrease was primarily due to the reduction in the amortization expense of intangible assets.

Interest expense, net

Net interest expense was approximately $0.3 million for the nine months ended September 30, 2014 and approximately $0.7 million for the nine months ended September 30, 2013. The decrease was primarily attributed to a lower weighted average loan balance and a slightly lower weighted average borrowing rate.

Income taxes

For the nine months ended September 30, 2014 and 2013, income taxes were approximately $4.0 million on slightly increased pretax income and a slightly lower effective tax rate. The effective income tax rate for the nine months ended September 30, 2014 was approximately 39.6% as compared to an effective income tax rate of 40.9% for the nine months ended September 30, 2013. The lower effective income tax rate for the nine months ended September 30, 2014 was the result of a decrease in the blended state rate from our current state revenue allocation.

Liquidity and Capital Resources

Our primary liquidity needs are for financing working capital, capital expenditures, stock repurchases, and making selective strategic acquisitions. Historically, we have relied primarily on our cash flow from operations and borrowings under our credit facility to provide the capital for our liquidity needs. As part of our growth strategy, we may pursue acquisitions that could require us to incur additional debt or issue new equity. We expect the combination of our current cash, cash flow from operations, and the available borrowing capacity under our credit facility to continue to meet our normal working capital, capital expenditures and other cash requirements.

During the third quarter of 2014, the balance of accounts receivable decreased by $9.2 million to $54.8 million at the end of the quarter. Days sales outstanding of accounts receivable (DSO) decreased 7 days to 67 days at September 30, 2014 as compared to 74 days at December 31, 2013. As of September 30, 2014, no amounts were due under the credit facility, as compared to $1.0 million outstanding as of December 31, 2013, reflecting $1.0 million of net repayments during the first nine months of 2014. Net cash provided by operating activities was $21.0 million at September 30, 2014.

Our Board of Directors authorized management to repurchase up to $25.0 million of our Class A common stock pursuant to a stock repurchase program. If shares are repurchased, the shares will be repurchased pursuant to open market purchases, privately negotiated transactions, or block transactions. We have no obligation to repurchase shares under the authorization, and the timing, actual number and value of the shares which are repurchased (and the manner of any such repurchase) will be at the discretion of management and will depend on a number of factors, including the price of our common stock, our Company’s cash needs, borrowing capacity under our credit facility, interest rates, and our financial performance and position. We may suspend or discontinue repurchases at any time.

 

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During 2013 and the three and nine months ended September 30, 2014, we did not purchase any shares. At September 30, 2014, we had $16.7 million remaining under the Board of Directors’ authorization for share repurchases.

Credit Facility: Our amended and restated senior credit facility consists of a revolving line of credit with a borrowing capacity of up to an $80.0 million principal amount, and a $45.0 million accordion feature allowing us to increase our borrowing capacity to up to a $125.0 million principal amount, subject to obtaining commitments for the incremental capacity from existing or new lenders. The outstanding borrowings are collateralized by a security interest in substantially all the Company’s assets. The lenders also require a direct assignment of all contracts at the lenders’ discretion. The outstanding balance under the credit facility accrues interest based on one-month LIBOR plus an applicable margin, ranging from 210 to 310 basis points, based on the ratio of our outstanding senior funded debt to Earnings before Interest, Taxes, Depreciation, and Amortization (EBITDA) as defined in the credit facility agreement.

The credit facility allows us to use borrowings thereunder of up to $17.5 million to repurchase shares of our common stock. Funds borrowed under the credit facility may be used to finance possible future acquisitions, for working capital requirements, for stock repurchases, for cash dividends or for general corporate uses.

The loan interest accrual rate is set monthly at one-month LIBOR plus a set amount per the credit facility, amended in December 2013.

The credit facility contains various restrictive covenants that, among other provisions, restrict our ability to incur or guarantee additional debt; make certain distributions, investments and other restricted payments such as dividends; enter into transactions with certain affiliates; create or permit certain liens; and consolidate, merge, or sell assets. In addition, the credit facility contains certain financial covenants that require us to maintain a minimum tangible net worth; maintain a minimum fixed-charge coverage ratio and a minimum funded debt-to-earnings ratio; and limit capital expenditures below certain thresholds. There are no restrictions on our retained earnings in the credit facility.

As of September 30, 2014, we were in compliance with all our loan covenants.

Off-Balance Sheet Arrangements

We do not have any material off-balance sheet arrangements.

Critical Accounting Policies

There have been no significant changes to our Critical Accounting Policies during the third quarter of 2014. Refer to our Critical Accounting Policies section in our Annual Report on Form 10-K for the year ended December 31, 2013 filed with the SEC.

In May of 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers (ASU 2014-09), which will replace most of the current revenue recognition guidance under U.S. GAAP when it becomes effective for annual periods beginning after December 15, 2016, and interim periods therein. While this new accounting standard will not affect the Company until the Company’s 2017 fiscal year, it does require either a full retrospective approach reflecting the application of the standard in each prior reporting period, or a retrospective approach with the cumulative effect of initially adopting the ASU 2014-09 recognized at the date of adoption (which includes additional footnote disclosures).

The main principle of ASU 2014-09 is that revenue should be recognized when contracted goods or services are transferred to customers in an amount that reflects the consideration that the entity expects to be entitled in exchange for those goods or services. ASU 2014-09 defines a five step process to achieve this new principle which will require entities to apply significantly more management judgment and may require the use of more estimates than are required under existing U.S. GAAP. We are currently evaluating the impact of our pending adoption of ASU 2014-09 on our consolidated financial statements and have not yet determined the method by which we will adopt the standard in 2017.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

The Company’s exposure to market risk relates to changes in interest rates for borrowings under its credit facility. For the quarter ended September 30, 2014, a change of one percentage point in interest rates would have changed NCI’s interest expense or cash flows by less than $0.1 million. This estimate is based on our average balances for the period.

Additionally, the Company is subject to credit risks associated with our cash, cash equivalents, and accounts receivable. NCI believes that the concentration of credit risk with respect to cash equivalents is limited due to the high credit quality of these investments. NCI’s investment policy requires that the Company invest excess cash in high-quality investments, which preserve principal, provide liquidity, and minimize investment risk. NCI also believes that its credit risk associated with accounts receivable is limited as they are primarily with the U.S. Federal Government or prime contractors working for the U.S. Federal Government.

 

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Item 4. Controls and Procedures

Evaluation of the Effectiveness of Disclosure Controls and Procedures

As of September 30, 2014, under the supervision and with the participation of NCI’s management, including our chief executive officer and our chief financial officer, the Company had evaluated the effectiveness of its disclosure controls and procedures, as defined in Rule 13a-15(e) of the Securities Exchange Act of 1934, as amended. Based on this evaluation, NCI’s chief executive officer and chief financial officer concluded that the Company’s disclosure controls and procedures were effective, as of September 30, 2014, such that the information that is required to be disclosed in NCI’s reports filed with the SEC (i) is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms and (ii) is accumulated and communicated to management, including NCI’s chief executive officer and chief financial officer, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Control over Financial Reporting

The Company made no change to its internal control over financial reporting (as defined in Rule 13a-15(f) of the Exchange Act) identified in connection with the evaluation required by Rule 13a-15(d) under the Exchange Act during the three months ended September 30, 2014 that has materially affected, or is reasonably likely to materially affect, its internal control over financial reporting.

 

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PART II

OTHER INFORMATION

Item 1. Legal Proceedings

The Company is party to various legal actions, claims, government inquiries, and audits resulting from the normal course of business. The Company believes that the probability is remote that any resulting liability will have a material effect on the Company’s financial position, results of operations, or cash flows.

Item 1A. Risk Factors

There have been no significant changes from those discussed in Item 1A. “Risk Factors” included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2013 filed with the SEC.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

None

Item  3. Defaults Upon Senior Securities

None

Item 4. Mine Safety Disclosures

Not applicable

Item 5. Other Information

None

 

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Item 6. Exhibits

 

Number

  

Description

    2.1    Stock Purchase Agreement among NCI Information Systems, Inc. (“NCIIS”), a wholly owned subsidiary of NCI, Inc., and stockholders of AdvanceMed Corporation dated as of February 24, 2011 (incorporated herein by reference from Exhibit 2.1 to registrant’s Current Report on Form 8-K, as filed with the Commission on April 4, 2011)
    3.1    Amended and Restated Certificate of Incorporation of the Registrant (incorporated herein by reference from Exhibit 3.1 to registrant’s Registration Statement on Form S-1 (File No. 333-127006), as filed with the Commission on October 4, 2005, as amended).
    3.2    Bylaws of the Registrant (incorporated herein by reference from Exhibit 3.2 to registrant’s Registration Statement on Form S-1 (File No. 333-127006), as filed with the Commission on July 29, 2005).
    4.1    Specimen Class A Common Stock Certificate (incorporated herein by reference from Exhibit 4.1 to registrant’s Registration Statement on Form S-1 (File No. 333-127006), as filed with the Commission on October 20, 2005, as amended).
    4.2*    NCI, Inc. Amended and Restated 2005 Performance Incentive Plan (incorporated herein by reference from Appendix A to registrant’s Definitive Proxy Statement on Schedule 14A, as filed with the Commission on April 30, 2009).
    4.3*    Form of Amended and Restated 2005 Performance Incentive Plan Notice of Stock Option Grant and Stock Option Agreement (incorporated herein by reference from Exhibit 4.2 to registrant’s Current Report on Form 8-K, as filed with the Commission on September 12, 2009).
    4.4*    NCI, Inc. Amended and Restated 2005 Performance Incentive Plan (incorporated herein by reference from Appendix A to registrant’s Proxy Statement on Form DEF 14A, as filed with the Commission on April 30, 2009).
    4.5*    Form of Amended and Restated 2005 Performance Incentive Plan Notice of Stock Option Grant and Stock Option Agreement (incorporated herein by reference from Exhibit 4.2 to registrant’s Current Report on Form 8-K, as filed with the Commission on September 12, 2009).
  10.1    Amended and Restated Loan and Security Agreement, dated as of December 13, 2010, by and among NCI, Inc., NCI Information Systems Incorporated, Operational Technologies Services, Inc., as Borrowers, the several banks and financial institutions from time to time parties thereto, as Lenders, SunTrust Bank as the Administrative Agent to the Lenders and SunTrust Robinson Humphrey, Inc., as Lead Arranger and Book Manager (incorporated by reference from Exhibit 10.1 to registrant’s Current Report on Form 8-K dated December 13, 2010, and filed with the Commission on December 15, 2010).
  10.2*    Executive Change in Control and Severance Agreement, dated September 9, 2012, by and among, NCI, Inc. and Brian J. Clark. (incorporated herein by reference from Exhibit 10.2 to registrant’s Annual Report on Form 10-K (File No. 000-51579), as filed with the Commission on September 12, 2012).
  10.3*    Executive Change in Control and Severance Agreement, dated September 9, 2012, by and among, NCI, Inc. and Marco de Vito (incorporated herein by reference from Exhibit 10.3 to registrant’s Annual Report on Form 10-K (File No. 000-51579), as filed with the Commission on September 12, 2012).
  10.4*    Executive Change in Control and Severance Agreement, dated September 9, 2012, by and among, NCI, Inc. and Michele R. Cappello (incorporated herein by reference from Exhibit 10.4 to registrant’s Annual Report on Form 10-K (File No. 000-51579), as filed with the Commission on September 12, 2012).
  10.5*    Executive Change in Control and Severance Agreement, dated September 9, 2012, by and among, NCI, Inc. and Lucas J. Narel (incorporated herein by reference from Exhibit 10.5 to registrant’s Annual Report on Form 10-K (File No. 000-51579), as filed with the Commission on September 12, 2012).
  10.6    Waiver and Amendment to Amended and Restated Loan and Security Agreement, dated as of December 31, 2012, by and among NCI, Inc., and NCI Information Systems Incorporated, as Borrowers, the several banks and financial institutions from time to time parties thereto, as Lenders, SunTrust Bank as the Administrative Agent to the Lenders and SunTrust Robinson Humphrey, Inc., as Lead Arranger and Book Manager (incorporated by reference from Exhibit 10.1 to registrant’s Current Report on Form 8-K dated January 7, 2013, and filed with the Commission on January 8, 2013).
  10.7    Second Amendment to Amended and Restated Loan and Security Agreement, dated as of December 19, 2013, by and among NCI, Inc., and NCI Information Systems Incorporated, as Borrowers, the several banks and financial institutions from time to time parties thereto, as Lenders, SunTrust Bank as the Administrative Agent to the Lenders and SunTrust Robinson Humphrey, Inc., as Lead Arranger and Book Manager (incorporated by reference from Exhibit 10.1 to registrant’s Current Report on Form 8-K dated December 23, 2013, and filed with the Commission on December 23, 2013).

 

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Number

  

Description

  31.1‡    Certification of the Chief Executive Officer pursuant to rule 13a-14(a) of the Securities Exchange Act of 1934, as amended.
  31.2‡    Certification of the Chief Financial Officer pursuant to rule 13a-14(a) of the Securities Exchange Act of 1934, as amended.
  32.1‡    Certification of the Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS    XBRL Instance Document
101.SCH    XBRL Extension Schema
101.CAL    XBRL Extension Calculation Linkbase
101.DEF    XBRL Extension Definition Linkbase
101.LAB    XBRL Extension Label Linkbase
101.PRE    XBRL Extension Presentation Linkbase

 

Included with this filing.
* Management Contract or Compensatory Plan or Arrangement.

 

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Table of Contents

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.

 

   

NCI, Inc.

    Registrant
Date: October 30, 2014     By:   /s/ LUCAS J. NAREL
      Lucas J. Narel
      Executive Vice President, Chief Financial Officer and Treasurer
      (Principal Financial Officer)
      (Principal Accounting Officer)

 

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