Nevada (State or Other Jurisdiction of Incorporation) | 001-37494 (Commission File Number) | 47-4310550 (I.R.S. Employer Identification No.) |
3170 Fairview Park Drive Falls Church, Virginia (Address of Principal Executive Offices) | 22042 (Zip Code) | |
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Exhibit No. | Description |
99.1 | Press Release, dated August 10, 2016 |
By: | /s/ William J. Haynes II Name: William J. Haynes II Title: Executive Vice President, General Counsel and Secretary |
Exhibit No. | Description |
99.1 | Press Release, dated August 10, 2016 |
Summary Operating Results | ||||||||
(Dollars in millions, except per share data) | Three Months Ended | |||||||
July 1, 2016 | July 3, 2015 | |||||||
GAAP revenue | $ | 1,254 | $ | 959 | ||||
GAAP net income | $ | 68 | $ | 67 | ||||
GAAP diluted EPS | $ | 0.39 | $ | 0.45 | ||||
Pro forma revenue | $ | 1,254 | $ | 1,317 | ||||
Pro forma adjusted EBITDA | $ | 218 | $ | 210 | ||||
Pro forma adjusted diluted EPS | $ | 0.51 | $ | 0.51 | ||||
Note: All figures are unaudited; computation methods are shown at the end of the release. | ||||||||
• | Congressionally Directed Medical Research Program (CDMRP). The U.S. Army Medical Research Acquisition Activity awarded CSRA a single-award indefinite delivery, indefinite quantity (IDIQ) contract valued up to $180 million over five years to provide scientific, information technology and administrative solutions for the CDMRP. CSRA will support the receipt and scientific evaluation of more than $1 billion in grants. |
• | New York Health-Insurance Exchange (NYHIX). The New York State Department of Health awarded CSRA a one-year, $127 million extension of its contract to enhance, operate, and maintain the health-insurance exchange implemented under the Affordable Care Act. |
• | Maryland Coordinated Highways Action Response Team (CHART). Under a ten-year, $56 million contract, CSRA will provide IT engineering and software development support to improve the state's collection and dissemination of roadway and traffic information, enabling proactive management of Maryland's ground transportation system. |
• | Telecommunication and Information Systems Command (TISCOM) Technology Enterprise Support Services (TESS). The U.S. Coast Guard awarded CSRA the five-year, $55 million TESS contract to provide enterprise IT services and responsive technical support to TISCOM. On this new award, CSRA will lead the development and deployment of the U.S. Coast Guard's IT infrastructure both onshore and afloat and evaluate and implement emerging technologies to support current and future missions. |
• | Strategic Partners Acquisition Readiness Contract. The Centers for Medicare and Medicaid Services (CMS) awarded CSRA a prime position on its potential 10-year, $25 billion SPARC vehicle. CMS intends to use SPARC as its primary mechanism to acquire IT services and will make the vehicle available to all operational divisions of the Department of Health and Human Services (HHS). |
Metric | Fiscal Year 2017 |
Revenue (millions) | $5,000 - $5,200 |
Adjusted EBITDA (millions) | $870 - $905 |
Adjusted Diluted Earnings per Share | $1.91 - $2.04 |
Free Cash Flow (millions) | $300 - $350 |
CSRA INC. | ||||||||
CONSOLIDATED AND CONDENSED BALANCE SHEETS (unaudited) | ||||||||
As of | ||||||||
(Dollars in millions) | July 1, 2016 | April 1, 2016 | ||||||
Current assets | ||||||||
Cash and cash equivalents | $ | 133 | $ | 130 | ||||
Receivables, net of allowance for doubtful accounts of $25 and $21, respectively | 743 | 751 | ||||||
Prepaid expenses and other current assets | 110 | 123 | ||||||
Total current assets | 986 | 1,004 | ||||||
Intangible and other assets | ||||||||
Goodwill | 2,332 | 2,332 | ||||||
Customer-related and other intangible assets, net of accumulated amortization of $230 and $201, respectively | 839 | 870 | ||||||
Software, net of accumulated amortization of $98 and $95, respectively | 44 | 41 | ||||||
Other assets | 69 | 69 | ||||||
Total intangible and other assets | 3,284 | 3,312 | ||||||
Property and equipment, net of accumulated depreciation of $779 and $773, respectively | 514 | 530 | ||||||
Total assets | $ | 4,784 | $ | 4,846 | ||||
Current liabilities | ||||||||
Accounts payable | $ | 185 | $ | 170 | ||||
Accrued payroll and related costs | 187 | 200 | ||||||
Accrued expenses and other current liabilities | 490 | 528 | ||||||
Current capital lease liability | 48 | 42 | ||||||
Current maturities of long-term debt | 66 | 128 | ||||||
Dividends payable | 18 | 18 | ||||||
Total current liabilities | 994 | 1,086 | ||||||
Long-term debt, net of current maturities | 2,623 | 2,656 | ||||||
Noncurrent capital lease liability | 96 | 109 | ||||||
Deferred income tax liabilities | 156 | 163 | ||||||
Other long-term liabilities | 765 | 742 | ||||||
Commitments and contingent liabilities (Note 15) | ||||||||
Equity | ||||||||
CSRA Stockholders' Equity: | ||||||||
Common stock, $0.001 par value, 750,000,000 shares authorized, 163,603,851 and 162,925,821 shares issued, respectively and 163,489,212 and 162,925,821 shares outstanding, respectively | — | — | ||||||
Additional paid-in capital | 133 | 117 | ||||||
Accumulated earnings (deficit) | (25) | (74) | ||||||
Accumulated other comprehensive income | 13 | 21 |
Total CSRA stockholders' equity | 121 | 64 | ||||||
Noncontrolling interests | 29 | 26 | ||||||
Total equity | 150 | 90 | ||||||
Total liabilities and equity | $ | 4,784 | $ | 4,846 |
CSRA INC. | ||||||||
CONSOLIDATED AND CONDENSED STATEMENTS OF OPERATIONS (unaudited) | ||||||||
Three Months Ended | ||||||||
(Dollars in millions, except per share amounts) | July 1, 2016 | July 3, 2015 | ||||||
Revenue | $ | 1,254 | $ | 957 | ||||
Related-party revenue | — | 2 | ||||||
Total revenue | 1,254 | 959 | ||||||
Cost of services | 991 | 773 | ||||||
Related-party cost of services | — | 2 | ||||||
Total cost of services (excludes depreciation and amortization) | 991 | 775 | ||||||
Selling, general and administrative expenses | 56 | 41 | ||||||
Separation and merger costs | 5 | 15 | ||||||
Depreciation and amortization | 65 | 33 | ||||||
Interest expense, net | 30 | 5 | ||||||
Other expense (income), net | 1 | (19) | ||||||
Total costs and expenses | 1,148 | 850 | ||||||
Income before income taxes | 106 | 109 | ||||||
Income tax expense | 38 | 42 | ||||||
Net income | 68 | 67 | ||||||
Less: noncontrolling interests | 3 | 4 | ||||||
Net income attributable to CSRA common stockholders | $ | 65 | $ | 63 | ||||
Earnings per common share | ||||||||
Basic | $ | 0.40 | $ | 0.45 | ||||
Diluted | $ | 0.39 | $ | 0.45 | ||||
Common share information | ||||||||
Common shares outstanding for basic EPS | 163,275,412 | 139,128,158 | ||||||
Dilutive effect of stock options and equity awards | 1,663,182 | — | ||||||
Weighted average number of common shares outstanding - diluted | 164,938,594 | 139,128,158 | ||||||
Cash dividend per common share | $ | 0.10 | $ | — |
CSRA INC. | ||||||||
CONSOLIDATED AND CONDENSED STATEMENTS OF CASH FLOWS (unaudited) | ||||||||
(Dollars in millions) | Three Months Ended | |||||||
July 1, 2016 | July 3, 2015 | |||||||
Cash flows from operating activities | ||||||||
Net income | $ | 68 | $ | 67 | ||||
Adjustments to reconcile net income to cash provided by operating activities: | ||||||||
Depreciation and amortization | 67 | 35 | ||||||
Stock-based compensation | 3 | (1) | ||||||
Excess tax benefit from stock compensation | (1) | — | ||||||
Net (gain) loss on dispositions of businesses and assets | 2 | (17) | ||||||
Changes in assets and liabilities, net of acquisitions and dispositions: | ||||||||
Decrease in assets | 13 | 203 | ||||||
Decrease in liabilities | (2) | (40) | ||||||
Other operating activities, net | 6 | — | ||||||
Cash provided by operating activities | 156 | 247 | ||||||
Cash flows from investing activities | ||||||||
Purchases of property and equipment | (34) | (15) | ||||||
Proceeds from business dispositions | — | 34 | ||||||
Other investing activities | (9) | — | ||||||
Cash provided by (used in) investing activities | (43) | 19 | ||||||
Cash flows from financing activities | ||||||||
Payments of lines of credit | (48) | — | ||||||
Payments of long-term debt | (50) | — | ||||||
Proceeds from stock options and other common stock transactions | 8 | — | ||||||
Dividends paid | (18) | — | ||||||
Payments on lease liability | (7) | (5) | ||||||
Net transfers to CSC | — | (259) | ||||||
Other financing activities | 5 | — | ||||||
Cash used in financing activities | (110) | (264) | ||||||
Net increase in cash and cash equivalents | 3 | 2 | ||||||
Cash and cash equivalents at beginning of period | 130 | 5 | ||||||
Cash and cash equivalents at end of period | $ | 133 | $ | 7 | ||||
Supplemental cash flow information: | ||||||||
Cash paid for income taxes | $ | 2 | $ | 42 | ||||
Cash paid for interest | 28 | 5 | ||||||
Non-cash investing activities | 13 | 9 | ||||||
Non-cash operating activities | 4 | — |
Three Months Ended | ||||||||||||
(Dollars in millions; unaudited) | July 1, 2016 | July 3, 2015 | ||||||||||
Pro forma revenue | ||||||||||||
Defense and Intelligence | 568 | 615 | ||||||||||
Civil | 686 | 703 | ||||||||||
Total pro forma revenue | $ | 1,254 | $ | 1,318 | ||||||||
SRA revenue prior to November 30, 2015 | — | 359 | ||||||||||
Total revenue | $ | 1,254 | $ | 959 | ||||||||
Pro forma segment operating income | ||||||||||||
Defense and Intelligence | 54 | 67 | ||||||||||
Civil | 105 | 85 | ||||||||||
Total pro forma segment operating income | $ | 159 | $ | 152 | ||||||||
SRA segment operating income prior to November 30, 2015 | — | 26 | ||||||||||
Total segment operating income | $ | 159 | $ | 126 | ||||||||
Metric | Q1 2017 | Q1 2016 |
Pro Forma Revenue | None (GAAP) | Include: SRA revenue Exclude: Intercompany revenue |
Pro Forma Adjusted EBITDA | Exclude: Integration costs Spin/merger costs | Include: SRA EBITDA Pension income CSC IP expense Exclude: Intercompany EBITDA |
Pro Forma Adjusted Diluted EPS | Exclude: Integration costs Spin/merger costs SRA backlog amortization | Include: SRA income Pension income CSC IP expense Exclude: Intercompany income Apply: Normalized interest expense Long-term tax rate Share count at spin |
Pro Forma Adjusted Revenue | ||||||||
CSRA INC. | ||||||||
PRO FORMA REVENUE (unaudited) | ||||||||
Three Months Ended | ||||||||
(Dollars in millions) | July 1, 2016 | July 3, 2015 | ||||||
Revenue(a) | $ | 1,254 | $ | 959 | ||||
Historical SRA revenue(b) | — | 359 | ||||||
Separation and merger effect(c) | — | (1) | ||||||
Pro forma adjusted revenue | $ | 1,254 | $ | 1,317 | ||||
Notes: | ||||||||
(a) For the three months ended July 3, 2015, GAAP results reflect the operations of CSRA LLC. | ||||||||
(b) Revenue prior to the November 30, 2015 merger from the most closely corresponding reporting period, which is April 1, 2015 to June 30, 2015, in the case of the three months ended July 3, 2015. | ||||||||
(c) Adjustment for inter-company revenue prior to the November 30, 2015 merger. |
Pro Forma Adjusted Diluted Earnings Per Share | |||||||||
CSRA INC. | |||||||||
PRO FORMA ADJUSTED DILUTED EARNINGS PER SHARE (unaudited) | |||||||||
Three Months Ended | |||||||||
(Dollars in millions except per share amounts) | July 1, 2016 | July 3, 2015 | |||||||
Income before income taxes(a) | $ | 106 | $ | 109 | |||||
Historical SRA loss from continuing operations before taxes(b) | — | 0 | |||||||
Separation and merger costs(c) | 5 | 36 | |||||||
One-time integration costs | 7 | — | |||||||
Amortization of funded backlog associated with SRA acquisition(d) | 16 | — | |||||||
Pro forma adjusted income before income taxes | 135 | 145 | |||||||
Pro forma adjusted income tax expense(e) | 48 | 57 | |||||||
Pro forma adjusted net income | 87 | 88 | |||||||
Less: Noncontrolling interest | 3 | 4 | |||||||
Pro forma adjusted net income attributable to CSRA common stockholders | $ | 84 | $ | 84 | |||||
Pro forma adjusted diluted earnings per common share(f) | $ | 0.51 | $ | 0.51 | |||||
Notes: Pro forma adjusted net income attributable to CSRA common stockholders may not equal the sum of the component figures due to rounding. | |||||||||
(a) For the three months ended July 3, 2015, GAAP results reflect the operations of CSRA LLC, which includes a pre-tax gain of $17 million on the sale of Welkin. The gain increased pro forma adjusted net income to shareholders by $10 million and pro forma adjusted diluted EPS by $0.06. | |||||||||
(b) Income prior to the November 30, 2015 merger from the most closely corresponding reporting period, which is April 1, 2015 to June 30, 2015, in the case of the three months ended July 3, 2015. Income in this period was less than $500 thousand. | |||||||||
(c) Inter-company income prior to the November 30, 2015 merger plus costs directly associated with the separation and merger transactions, before tax effect. | |||||||||
(d) Total value of $65 million amortized over one year is included in GAAP Income before income taxes. | |||||||||
(e) For the three months ended July 1, 2016, the GAAP effective tax rate is applied; for the prior period, the long-term effective tax rate of 39% is applied. | |||||||||
(f) Diluted share count set at share count as of November 30, 2015 for the three months ended July 3, 2015. |
CSRA INC. | ||||||||
PRO FORMA ADJUSTED EBITDA (unaudited)(a) | ||||||||
Three Months Ended | ||||||||
(Dollars in millions) | July 1, 2016 | July 3, 2015 | ||||||
Net income (b) | $ | 68 | $ | 67 | ||||
Historical SRA loss from continuing operations before taxes(c) | — | 1 | ||||||
Separation, merger and integration costs(d) | 28 | 24 | ||||||
Interest expense, net | 30 | 30 | ||||||
Tax expense on income | 38 | 55 | ||||||
Depreciation and amortization | 49 | 48 | ||||||
Amortization of contract-related intangibles | 2 | 3 | ||||||
Stock-based compensation | 3 | (1) | ||||||
Restructuring costs | — | 3 | ||||||
Pension and post-retirement actuarial losses (gains), settlement losses, and amortization of other comprehensive income | — | (4) | ||||||
Gain on disposition of business(e) | — | (17) | ||||||
Impact of acquisitions(f) | — | 1 | ||||||
Pro Forma Adjusted EBITDA | $ | 218 | $ | 210 | ||||
Notes: | ||||||||
(a) The reconciliation to Pro Forma Adjusted EBITDA differs across periods. For example, Net income for the three months ended July 3, 2015, incorporate amounts furnished in the Form 8-K dated December 24, 2015, derived on the basis described therein; Net income for the three months ended July 1, 2016, is derived from the same basis of accounting used to prepare GAAP financial information for that period. | ||||||||
(b) For the three months ended July 3, 2015, GAAP results reflect the operations of CSRA LLC. | ||||||||
(c) SRA income prior to November 30, 2015 merger from the most closely corresponding reporting period, which is April 1, 2015 to June 30, 2015, in the case of the three months ended July 3, 2015. | ||||||||
(d) Inter-company income prior to the November 30, 2015 merger, costs directly associated with the separation and merger transactions incurred by CSGov and SRA before the merger and CSRA after the merger, intangibles amortization expense associated with SRA's funded contract backlog, and one-time integration costs. | ||||||||
(e) Pre-tax gain on the sale of Welkin in April 2015. | ||||||||
(f) Pre-tax income from the assets acquired by SRA in April 2015 earned before the acquisition. |
CSRA INC. | ||||||||
FREE CASH FLOW (unaudited) | ||||||||
Three Months ended | ||||||||
(Amounts in millions) | July 1, 2016 | July 3, 2015 | ||||||
Net cash provided by operating activities | $ | 156 | $ | 247 | ||||
Net cash (used in) provided by investing activities | (43) | 19 | ||||||
Sale of accounts receivable(a) | (46) | (180) | ||||||
Business dispositions | — | (34) | ||||||
Payments on capital leases and other long-term assets financing | (7) | (5) | ||||||
Separation-related payments | 7 | 5 | ||||||
Free cash flow | $ | 67 | $ | 52 | ||||
Notes: | ||||||||
(a) Impact of net proceeds arising from the initial sale of billed and/or unbilled receivables under the Master Accounts Receivable Purchase Agreement. |