CACI Reports Results for Its Fiscal 2013 Third Quarter

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CACI Reports Results for Its Fiscal 2013 Third Quarter

Diluted EPS increased 17.9 percent over FY12 adjusted diluted EPS

Revenue decreased 2.3 percent from FY12 revenue


Generated operating cash flow of $50.9 million

Revises Fiscal Year 2013 guidance

ARLINGTON, Va.--(BUSINESS WIRE)-- CACI International Inc (NYS: CACI) , a leading information solutions and services provider to the federal government, announced results today for its third fiscal quarter ended March 31, 2013:

  • Revenue of $906.2 million
  • Operating income of $68.6 million
  • Net income attributable to CACI of $38.4 million
  • Diluted earnings per share of $1.62

CEO Commentary and Outlook

Ken Asbury, CACI's President and CEO, said, "We remain confident in our market-focused strategy and see continued demand in our high-growth and high-volume markets. We continued our solid operating performance, grew direct labor, maintained our margins, and generated excellent cash flow. During the quarter, however, our customers began to take actions to manage their budgets as a result of sequestration, and based on those actions, we are revising our guidance for our fiscal year.

"Our strategy remains focused on the government's high-priority missions. We believe that this strategy will serve us well in this challenging environment. To grow in our large addressable market, my vision is to increase our emphasis on new business development, continue to drive operational excellence, leverage mergers and acquisitions to further increase our market share, and to create long-term shareholder value."

Third Quarter Comparisons

When analyzing our performance, we believe better insight and a more meaningful comparison of our Fiscal Year 2013 (FY13) third quarter results with those of Fiscal Year 2012 (FY12) third quarter can be made by adjusting for a significant one-time item that positively impacted our results last year. In our third quarter FY12, a one-time item impacted our quarterly results which we discussed when we released both our third quarter FY12 results and our FY13 annual guidance. This item was greater-than-expected profitability on a large fixed-price contract that generated $2.3 million in additional net income in the third quarter of FY12.

Results for the third quarter of FY13 compared with results for the third quarter of FY12, excluding the item described above, are shown below:

       
  Q3, FY12 
As Adjusted
(in millions except per share data) Q3, FY13 (see page 13) % Change
Revenue $906.2 $928.0 -2.3%
Operating income $68.6 $69.0 -0.5%
Net income attributable to CACI $38.4 $38.5 -0.5%
Diluted earnings per share $1.62 $1.37 17.9%
 

Revenue decreased 2.3 percent from revenue for the third quarter of FY12. Our 5.2 percent increase in direct labor was offset by the anticipated reduction of contract purchases of materials tied to the draw down in Afghanistan as well as sequestration-related reductions in other such material purchases. Operating income in the third quarter of FY13 was negatively impacted by lower other direct costs (ODCs) and severance-related costs incurred in the quarter. Net income attributable to CACI in the third quarter of FY13 was $38.4 million, or $1.62 diluted earnings per share, a decrease of 0.5 percent over adjusted net income attributable to CACI of $38.5 million, or $1.37 adjusted diluted earnings per share, for the same period in FY12. The increase in diluted earnings per share was due to share repurchase activity in FY12. Net cash provided by operations in the quarter was $50.9 million. (See Reconciliation of Revenue, Operating Income, Net Income, and Diluted Earnings Per Share to Adjusted Amounts on page 13.)

For a comparison of our FY13 results to FY12 results reported in accordance with generally accepted accounting principles (GAAP), see the income statement on page 7 of this release.

Additional Financial Metrics

       
  Q3, FY12 
  Q3, FY13 As Adjusted % Change
Earnings before interest, taxes, depreciation and amortization (EBITDA), a non-GAAP measure (in millions) $83.1 $82.9 0.2%
Diluted adjusted earnings per share, a non-GAAP measure $2.08 $1.83 13.7%
Days sales outstanding 61 63  
 

Third Quarter Awards and Contract Funding Orders

During the third quarter, we received awards in all ten of our markets with approximately one-third of those in our high-growth markets of Business Systems, Cyberspace, Healthcare and Integrated Security Solutions. Our contract awards of $555 million were 1.5 percent higher than the year earlier quarter. Approximately three-quarters of our awards were either contract modifications or recompete wins, which assures us that we continue to serve the critical missions of our customers. FY13 year-to-date awards totaled $2.9 billion, led by Business Systems, C4ISR, and Intelligence.

Contract funding orders in the third quarter were $655 million, and $2.69 billion year-to-date. Our total backlog at March 31, 2013 was $7.2 billion. Funded backlog at March 31, 2013 was $1.9 billion.

We continued to expand our inventory of indefinite delivery, indefinite quantity (IDIQ) contract vehicles during the quarter by being awarded prime positions on new multiple and single award contracts, resulting in a combined total of over 160 of these vehicles. IDIQ contract vehicles support our growth plans across our ten market areas and provide us the flexibility to deliver on our customers' mission-critical requirements.

Awards during the quarter included:

  • An $11 billion, five-year multiple-award to provide acquisition support to the Department of Homeland Security on the Technical, Acquisition and Business Support Services contract. This new work for us expands our presence in our Business Systems, C4ISR, and Logistics and Material Readiness markets.
  • A $21 million, three-year award to provide academic and technical support to the National Defense University on the Professional and Technical Support Services contract. This new work for us, which includes strategy, planning, and thought leadership support, expands our presence in our Integrated Security Solutions market.

Other Third Quarter Highlights

  • Kenneth Asbury was appointed President and Chief Executive Officer of CACI International Inc. Mr. Asbury has proven industry leadership in strategy and business development, including more than 27 years leading highly successful systems and services expansion and program delivery at Lockheed Martin.
  • CACI received a number of differentiating credentials that support our market-based strategies for growth in high-value markets. Two industry-unique awards were:
    • Becoming the first U.S. company to achieve ISO® 28000 certification in supply chain security management. Protecting supply chains is vital to national security, and CACI solutions provide security, minimize disruption, and enable rapid restoration after a catastrophe. This accomplishment enhances the capabilities we offer customers in our Logistics and Material Readiness and Cyberspace markets.
    • We became the first U.S. company to have a division appraised at Maturity Level 5 of the CMMI Institute's Capability Maturity Model Integration for Services. Level 5 is the highest CMMI® rating and indicates that CACI customers can expect high-quality software implementation and support that consistently generates productivity gains and savings in time and cost. This achievement positions us to grow in our Enterprise IT Solutions market.
  • An additional credential includes the revalidation of our CMMI Level 3 for Development for U.S. Operations. This appraisal crosses all of our markets and assures CACI customers of state-of-the-art software and systems engineering solutions that advance their capabilities and help meet critical missions.
  • We formed two business groups from our former Mission Systems Group: C4ISR (command, control, communications, computers, intelligence, surveillance, and reconnaissance) Solutions, and Missions Systems and Services. This action was taken to provide a higher level of focus on our markets, and further integrates resources and skillsets to add value for our customers and drive cost efficiencies in our organization.

Third Quarter Recognition

  • CACI's Executive Chairman and Chairman of the Board, Dr. J.P. (Jack) London, was awarded the Nathan Hale Award from the Reserve Officers Association in recognition of his dedicated individual service to national security. The award honors Dr. London's 40 years of CACI leadership in supporting the nation's most critical missions safeguarding our troops and securing the homeland.
  • CACI was named a winner in the highly competitive 2013 WhatWorks Awards presented by the human resources research firm Bersin by Deloitte. CACI's award recognizes the performance of our Recruiting and Assimilation team in merging marketing and technology to improve job candidates' experience with CACI, lower recruiting and hiring costs, and enhance the entire hiring process.
  • CACI was ranked among Military Times Edge's Best for Vets employers, reflecting the dedication to military hiring shown in our recruiting resources and corporate culture. Veteran-related programs at CACI include support for veterans with disabilities, a mentoring program for service members re-entering the workforce, and tailored training and development programs that ensure veterans enjoy meaningful CACI careers.

Nine Months Results

The following are our results for the first nine months of our FY13:

  • Revenue of $2.77 billion
  • Operating income of $202.9 million
  • Net income attributable to CACI of $113.8 million
  • Diluted earnings per share of $4.79

Nine Months Comparison

We believe better insight and a more meaningful comparison of our FY13 year-to-date results with those of FY12 can be made by adjusting for three significant one-time items that positively impacted our results last year. These items, which we discussed when we released both our nine months FY12 results and our FY13 annual guidance, are:

  • A large commercial product sale that generated $12.0 million of revenue and $6.1 million of net income in the first quarter of FY12
  • During each of the first three quarters of FY12, greater-than-expected profitability on a large fixed-price contract that generated a total of $7.0 million in additional net income in the first three quarters of FY12
  • A $0.4 million increase in net income in the first quarter of FY12 associated with a reduction in the fair value of contingent consideration related to a prior year acquisition

Results for the first nine months of FY13 compared with results for the first nine months of FY12, excluding the items described above, are shown below:

       
  Nine Months, 
NineFY12
Months,

As Adjusted

(in millions except per share data) FY13 

(see page 13)

 % Change
Revenue $2,769.1 $2,813.6 -1.6%
Operating income $202.9 $201.0 1.0%
Net income attributable to CACI $113.8 $110.6 2.9%
Diluted earnings per share $4.79 $3.89 23.1%
 

Revenue decreased 1.6 percent from adjusted revenue for the first nine months of FY12 primarily due to increases in direct labor being offset by the anticipated reduction of contract purchases of materials (ODCs) tied to the draw down in Afghanistan as well as sequestration-related reductions in other such material purchases. Operating income increased primarily as a result of a 5.6 percent growth in direct labor and lower stock-based compensation expense. Net income attributable to CACI in the first nine months of FY13 was $113.8 million, or $4.79 diluted earnings per share, an increase of 2.9 percent over adjusted net income attributable to CACI of $110.6 million, or $3.89 adjusted diluted earnings per share, for the same period in FY12. The larger increase in diluted earnings per share was due to two share repurchase programs largely executed in FY12. Net cash provided by operations in the first nine months of FY13 was $142.4 million. (See Reconciliation of Revenue, Operating Income, Net Income, and Diluted Earnings Per Share to Adjusted Amounts on page 13.)

For a comparison of our FY13 results to FY12 results reported in accordance with GAAP, see the income statement on page 7 of this release.

Additional Financial Metrics

       
  Nine 
NineMonths,
Months,FY12 As
  FY13 Adjusted % Change
Earnings before interest, taxes, depreciation and amortization (EBITDA), a non-GAAP measure (in millions) $244.7 $243.5 0.5%
Diluted adjusted earnings per share, a non-GAAP measure $6.27 $5.26 19.3%
 

CACI Revises Its FY13 Guidance

We are revising the FY13 guidance we issued on January 30, 2013 to reflect the impact of actions being taken by our customers to manage their budgets, including lower contract run rates and delays in awards. We are also anticipating additional severance related expenses. The table below summarizes our FY13 guidance ranges:

   
 

FY 2013

(in millions except for per share data) 

Guidance

Revenue $3,650 - $3,750
Net income attributable to CACI $151 - $157
Diluted earnings per share $6.29 - $6.55
 

We are now assuming a lower effective tax rate of 37.7 percent as a result of non-taxable gains in our deferred compensation plan and certain tax credits. Diluted weighted average shares for FY13 remain at 24.0 million. This information represents our views as of May 1, 2013.

Conference Call Information

We have scheduled a conference call for 8:30 AM Eastern Time Thursday, May 2, 2013 during which members of our senior management team will be making a brief presentation focusing on third quarter results and operating trends followed by a question-and-answer session. You can listen to the conference call and view the accompanying exhibits over the Internet by logging on to our homepage, www.caci.com, at the scheduled time, or you may dial 877-303-9143 and enter the confirmation code 15743121. A replay of the call will also be available over the Internet beginning at 1:00 PM Eastern Time Thursday, May 2, 2013 and can be accessed through our homepage (www.caci.com) by clicking on the CACI Investor Info button.

CACI provides information solutions and services in support of national security missions and government transformation for Intelligence, Defense, and Federal Civilian clients. A member of the Fortune 1000 Largest Companies and the Russell 2000 Index, CACI provides dynamic careers for approximately 15,300 employees working in over 120 offices worldwide. Visit www.caci.com.

There are statements made herein which do 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: regional and national economic conditions in the United States and globally (including the impact of uncertainty regarding U.S. debt limits and actions taken related thereto); terrorist activities or war; changes in interest rates; currency fluctuations; significant fluctuations in the equity markets; changes in our effective tax rate; failure to achieve contract awards in connection with re-competes for present business and/or competition for new business; the risks and uncertainties associated with client interest in and purchases of new products and/or services; continued funding of U.S. government or other public sector projects, based on a change in spending patterns, implementation of spending cuts (sequestration) under the Budget Control Act of 2011, changes in budgetary priorities or in the event of a priority need for funds, such as homeland security or the war on terrorism; government contract procurement (such as bid protest, small business set asides, loss of work due to organizational conflicts of interest, etc.) and termination risks; the results of government investigations into allegations of improper actions related to the provision of services in support of U.S. military operations in Iraq; the results of government audits and reviews conducted by the Defense Contract Audit Agency, the Defense Contract Management Agency, or other governmental entities with cognizant oversight; individual business decisions of our clients; paradigm shifts in technology; competitive factors such as pricing pressures and/or competition to hire and retain employees (particularly those with security clearances); market speculation regarding our continued independence; material changes in laws or regulations applicable to our businesses, particularly in connection with (i) government contracts for services, (ii) outsourcing of activities that have been performed by the government, and (iii) competition for task orders under Government Wide Acquisition Contracts (GWACs) and/or schedule contracts with the General Services Administration; the ability to successfully integrate the operations of our recent and any future acquisitions; our own ability to achieve the objectives of near term or long range business plans; and other risks described in our Securities and Exchange Commission filings.

CACI-Financial

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Selected Financial Data
      
CACI International Inc
Condensed Consolidated Statements of Operations (Unaudited)
(Amounts in thousands, except per share amounts)
 
Quarter EndedNine Months Ended
 3/31/2013  3/31/2012 % Change 3/31/2013  3/31/2012 % Change
Revenue$906,196 $927,962 -2.3%$2,769,059 $2,825,600 -2.0%
Costs of revenue
Direct costs623,125632,570-1.5%1,908,4111,946,899-2.0%
Indirect costs and selling expenses200,684208,843-3.9%617,375613,6660.6%
Depreciation and amortization 13,767  13,768 0.0% 40,334  41,894 -3.7%
Total costs of revenue 837,576  855,181 -2.1% 2,566,120  2,602,459 -1.4%
Operating income68,62072,781-5.7%202,939223,141-9.1%
Interest expense and other, net 6,295  6,175 1.9% 19,308  18,313 5.4%
Income before income taxes62,32566,606-6.4%183,631204,828-10.3%
Income taxes 23,838  25,475 -6.4% 69,174  80,304 -13.9%

Net income including portion attributable to noncontrolling interest in earnings of joint ventures

38,48741,131-6.4%114,457124,524-8.1%

Noncontrolling interest in earnings of joint ventures

 

(120

)

 (275) (706) (467)
 
Net income attributable to CACI$38,367 $40,856 -6.1%$113,751 $124,057 -8.3%
 
Basic earnings per share$1.67$1.548.3%$4.95$4.549.0%
Diluted earnings per share$1.62$1.4511.3%$4.79$4.379.7%
 
Weighted average shares used in per share computations:
Basic23,02126,53722,96827,303
Diluted23,70628,08623,74028,402
 
Statement of Operations Data (Unaudited)
Quarter EndedNine Months Ended
 3/31/2013  3/31/2012 % Change 3/31/2013  3/31/2012