exv99w1
Exhibit 99.1
11730 Plaza America, Suite 700
Reston, VA 20190
News Release
Contacts:
Brian J. Clark, Executive Vice President & CFO
(703) 707-6751
Maureen Crystal, Vice President of Investor Relations
(703) 707-6777
mcrystal@nciinc.com
NCI Reports First Quarter 2011 Financial and Operating Results
Highlights:
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Revenue of $150 million, up 31%, all organic1; |
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Company updates Fiscal Year 2011 revenue and earnings guidance. |
RESTON, Va., May 4, 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 first quarter ended March 31,
2011.
First quarter revenue was at the midpoint of managements guidance, and diluted earnings per share,
excluding acquisition-related costs, were at the low end of guidance.
First Quarter Fiscal Year 2011 Results:
For the first quarter of 2011, NCI reported revenue of $150.2 million, all organic, an increase of
31% over first quarter 2010 revenues of $115.0 million. The year-over-year increase in revenue was
attributable primarily to growth in the Army Program Executive Office (PEO) Soldier and Base
Realignment and Closure (BRAC) contracts, as well as network management and analysis services under
new and existing contracts.
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1 |
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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 first quarter of 2011 increased by 10.1% over first quarter of 2010.
Operating income for the first quarter of 2011 was $9.7 million, or 6.5% of revenue, compared with
$8.8 million, or 7.7% of revenue, for the three months ended March 31, 2010. The year-over-year
decrease in operating margin was attributed to increases in materials and subcontractor labor
costs, which typically carry lower margins than the companys direct labor costs. Operating margin
was also impacted by $0.2 million of costs incurred related to the acquisition of AdvanceMed
Corporation, which was completed on April 1, 2011.
Materials-related revenue associated with the BRAC and U.S. Air Forces Network Centric Solutions
(NETCENTS) contracts, contributed little to no operating margin. Excluding this BRAC and NETCENTS
revenue and related costs, operating margin was 7.2% and 7.9% for the first quarters of 2011 and
2010, respectively. Excluding the aforementioned acquisition costs as well, operating margin was
7.4% for the first quarter of 2011.
The effective tax rate for the first quarter of 2011 was 40.1% compared with 36.9% for the first
quarter of 2010. The prior year effective tax rate was lower due to a one-time credit related to a
corporate tax reorganization completed in 2010.
Net income for the first quarter of 2011 was $5.7 million, compared with $5.5 million for the same
period in 2010. Diluted earnings per share were $0.41 per share for the first quarter of 2011
compared with $0.39 per share for the first quarter of 2010.
NCI reported total backlog at March 31, 2011 of $1.2 billion, of which $227 million was funded.
This compares with total backlog of $1.3 billion at December 31, 2010, of which $302 million was
funded.
Cash flow used in operating activities for the first quarter of 2011 was $7.3 million. Capital
expenditures for the first quarter of 2011 were $0.6 million. Days sales outstanding, or DSO, for
the quarter was 73 days, up from 71 days for the quarter ended December 31, 2010.
First Quarter Fiscal Year 2011 and Recent Operational Highlights:
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First quarter net bookings totaled $77 million, equating to a book-to-bill ratio of
0.5:1 |
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Among new business awards and additional tasking in the first quarter: |
2
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Won a prime position on the Department of Justices Information Technology Support
Services-4 (ITSS-4) contract. The contract has a $1.1 billion ceiling and a seven-year
period of performance to provide IT support services, including cyber security; |
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A prime position on the U.S. Army Total Engineering and Integration Services, TEIS
III, contract. The contract has a $892 million ceiling with a five year period of
performance to provide systems engineering and IT support; |
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A $26.5 million, four-and-a-half-year task order to continue and expand IT and
program management support for the Air National Guard; and |
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An $11 million, five-year task order under the GSA Alliant contract to continue
NCIs support of the 81st Medical Groups Air Education and Training
Command. |
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Completed the acquisition of AdvanceMed on April 1st, solidly placing NCI in
the program integrity services marketplace. |
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Named Philip O. Nolan to NCIs Board of Directors. |
NCIs President, Terry Glasgow, stated, With one quarter behind us, 2011 is shaping-up to be a
year of both promise and challenge. We enter the second quarter with more than $500 million of bids
submitted and awaiting award. In addition, we have submitted four prime GWAC and ID/IQ bids
awaiting award with a combined ceiling value of more than $50 billion. Additionally, our
acquisition of AdvanceMed provides us substantial momentum to deliver strong operational results in
2011. We believe our future holds tremendous promise as our team executes in a challenging federal
procurement environment.
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 second-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:
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Second Quarter |
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Fiscal Year |
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Fiscal Year 2011 Ending |
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Ending |
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June 30, 2011 |
|
December 31, 2011 |
Revenue |
|
$160 million $168 million |
|
$653 million $677 million |
Diluted EPS |
|
$0.35 $0.37 |
|
$1.70 $1.80 |
Diluted projected
share count |
|
14.0 14.1 million |
|
14.0 14.1 million |
3
Charles K. Narang, NCIs Chairman and CEO, said, We firmly believe that NCI is positioned in a
number of exciting platforms that will drive growth and profitability for the rest of 2011 and
beyond. NCI has the leadership and employee motivation to realize our billion-dollar vision and
deliver long-term value for our customers, employees and shareholders.
Conference Call Information
As previously announced, NCI will conduct a conference call today at 5 p.m. ET to discuss fiscal
first-quarter 2011 results. Interested parties may access the call by dialing (877) 822-9780
(domestic) or (973) 582-2740 (international). The confirmation code for the live call is 53249934.
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. ET 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.
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 3,100 employees at more than 100 locations
worldwide. For more information, visit our website at www.nciinc.com, or email
mcrystal@nciinc.com.
4
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 Governmental
shutdowns (such as that which occurred during the Federal Governments 1996 fiscal year) and other
potential delays in the Government appropriations process; 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)
|
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|
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|
|
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|
Three months ended March 31, |
|
|
|
2011 |
|
|
2010 |
|
Revenue |
|
$ |
150,225 |
|
|
$ |
114,993 |
|
|
|
|
|
|
|
|
|
|
Operating costs and expenses: |
|
|
|
|
|
|
|
|
Cost of revenue |
|
|
133,256 |
|
|
|
99,392 |
|
General and administrative expense |
|
|
5,759 |
|
|
|
5,617 |
|
Depreciation and amortization |
|
|
1,308 |
|
|
|
1,172 |
|
Acquisition and integration related costs |
|
|
201 |
|
|
|
|
|
|
|
|
|
|
|
|
Total operating costs and expenses |
|
|
140,524 |
|
|
|
106,181 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income |
|
|
9,701 |
|
|
|
8,812 |
|
Interest expense, net |
|
|
197 |
|
|
|
143 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes |
|
|
9,504 |
|
|
|
8,669 |
|
Provision for income taxes |
|
|
3,811 |
|
|
|
3,203 |
|
|
|
|
|
|
|
|
Net income |
|
$ |
5,693 |
|
|
$ |
5,466 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per common and common equivalent share: |
|
|
|
|
|
|
|
|
Basic: |
|
|
|
|
|
|
|
|
Weighted average shares outstanding |
|
|
13,670 |
|
|
|
13,568 |
|
|
|
|
|
|
|
|
|
|
Net income per share |
|
$ |
0.42 |
|
|
$ |
0.40 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted: |
|
|
|
|
|
|
|
|
Weighted average shares and equivalent shares outstanding |
|
|
13,909 |
|
|
|
13,877 |
|
|
|
|
|
|
|
|
|
|
Net income per share |
|
$ |
0.41 |
|
|
$ |
0.39 |
|
|
|
|
|
|
|
|
6
NCI, INC.
CONSOLIDATED BALANCE SHEETS
(amounts in thousands, except share data)
|
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|
|
|
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As of |
|
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As of |
|
|
|
March 31, |
|
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December 31, |
|
|
|
2011 |
|
|
2010 |
|
|
|
(unaudited) |
|
|
|
|
Assets: |
|
|
|
|
|
|
|
|
Current assets: |
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
802 |
|
|
$ |
2,791 |
|
Accounts receivable, net |
|
|
121,460 |
|
|
|
132,693 |
|
Deferred tax assets |
|
|
4,512 |
|
|
|
4,547 |
|
Prepaid expenses and other current assets |
|
|
5,798 |
|
|
|
3,347 |
|
|
|
|
|
|
|
|
Total current assets |
|
|
132,572 |
|
|
|
143,378 |
|
|
|
|
|
|
|
|
|
|
Property and equipment, net |
|
|
11,596 |
|
|
|
11,751 |
|
Other assets |
|
|
1,324 |
|
|
|
1,590 |
|
Intangible assets, net |
|
|
5,664 |
|
|
|
6,179 |
|
Goodwill |
|
|
106,580 |
|
|
|
106,580 |
|
|
|
|
|
|
|
|
Total assets |
|
$ |
257,736 |
|
|
$ |
269,478 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities and stockholders equity: |
|
|
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
|
|
Accounts payable |
|
$ |
37,271 |
|
|
$ |
61,046 |
|
Accrued salaries and benefits |
|
|
17,868 |
|
|
|
20,229 |
|
Deferred revenue |
|
|
1,827 |
|
|
|
2,951 |
|
Other accrued expenses |
|
|
6,920 |
|
|
|
3,468 |
|
|
|
|
|
|
|
|
Total current liabilities |
|
|
63,886 |
|
|
|
87,694 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt |
|
|
25,900 |
|
|
|
20,000 |
|
Deferred tax liabilities, net |
|
|
7,523 |
|
|
|
7,450 |
|
Deferred rent and other long-term liabilities |
|
|
1,179 |
|
|
|
1,287 |
|
|
|
|
|
|
|
|
Total liabilities |
|
|
98,488 |
|
|
|
116,431 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders equity: |
|
|
|
|
|
|
|
|
Class A common stock, $0.019 par
value37,500,000 shares authorized;
8,471,492 shares issued and outstanding as
of March 31, 2011, and 8,469,242 shares
issued and outstanding as of December 31,
2010 |
|
|
161 |
|
|
|
161 |
|
Class B common stock, $0.019 par
value12,500,000 shares authorized;
5,200,000 shares issued and outstanding as
of March 31, 2011 and December 31, 2010 |
|
|
99 |
|
|
|
99 |
|
Additional paid-in capital |
|
|
68,397 |
|
|
|
67,889 |
|
Retained earnings |
|
|
90,591 |
|
|
|
84,898 |
|
|
|
|
|
|
|
|
Total stockholders equity |
|
|
159,248 |
|
|
|
153,047 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders equity |
|
$ |
257,736 |
|
|
|
269,478 |
|
|
|
|
|
|
|
|
7
NCI, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(amounts in thousands)
|
|
|
|
|
|
|
|
|
|
|
Three months ended March 31, |
|
|
|
2011 |
|
|
2010 |
|
Cash flows from operating activities: |
|
|
|
|
|
|
|
|
Net income |
|
$ |
5,693 |
|
|
$ |
5,466 |
|
Adjustments to reconcile net income to net cash (used in) provided by operating activities: |
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
1,308 |
|
|
|
1,172 |
|
Gain on sale and disposal of property and equipment |
|
|
(16 |
) |
|
|
|
|
Non-cash stock compensation expense |
|
|
505 |
|
|
|
397 |
|
Deferred income taxes |
|
|
107 |
|
|
|
178 |
|
Changes in operating assets and liabilities: |
|
|
|
|
|
|
|
|
Accounts receivable, net |
|
|
11,234 |
|
|
|
15,145 |
|
Prepaid expenses and other assets |
|
|
(2,184 |
) |
|
|
(1,675 |
) |
Accounts payable |
|
|
(23,775 |
) |
|
|
(8,584 |
) |
Accrued expenses |
|
|
(32 |
) |
|
|
(1,131 |
) |
Deferred rent |
|
|
(92 |
) |
|
|
(141 |
) |
|
|
|
|
|
|
|
Net cash (used in) provided by operating activities |
|
|
(7,252 |
) |
|
|
10,827 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities: |
|
|
|
|
|
|
|
|
Purchase of property and equipment |
|
|
(641 |
) |
|
|
(2,103 |
) |
Proceeds from sale of property and equipment |
|
|
18 |
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in investing activities |
|
|
(623 |
) |
|
|
(2,103 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities: |
|
|
|
|
|
|
|
|
Proceeds from credit facility |
|
|
37,911 |
|
|
|
31,199 |
|
Payments on credit facility |
|
|
(32,011 |
) |
|
|
(42,199 |
) |
Principal payments under capital lease obligations |
|
|
(17 |
) |
|
|
(20 |
) |
Proceeds from exercise of stock options |
|
|
30 |
|
|
|
2,179 |
|
Excess tax deduction from exercise of stock options |
|
|
(27 |
) |
|
|
34 |
|
|
|
|
|
|
|
|
Net cash provided by (used in) financing activities |
|
|
5,886 |
|
|
|
(8,807 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net change in cash and cash equivalents |
|
|
(1,989 |
) |
|
|
(83 |
) |
Cash and cash equivalents, beginning of period |
|
|
2,791 |
|
|
|
1,193 |
|
|
|
|
|
|
|
|
Cash and cash equivalents, end of period |
|
$ |
802 |
|
|
$ |
1,110 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosure of cash flow information: |
|
|
|
|
|
|
|
|
Cash paid during the period for: |
|
|
|
|
|
|
|
|
Interest |
|
$ |
193 |
|
|
$ |
161 |
|
|
|
|
|
|
|
|
Income taxes |
|
$ |
381 |
|
|
$ |
1,416 |
|
|
|
|
|
|
|
|
###
8