Engility Reports First Quarter 2013 Results
Engility Reports First Quarter 2013 Results
First quarter revenue of $362 million and diluted EPS of $0.79
Cost savings initiatives positively impacting margins and customer wins
First quarter funded orders of $322 million and funded backlog of $816 million
Reiterates fiscal year 2013 guidance
CHANTILLY, Va.--(BUSINESS WIRE)-- Engility Holdings, Inc. (NYS: EGL) today announced financial results for the first quarter ended March 29, 2013.
First Quarter 2013 Results
Total revenue for the first quarter of 2013 was $362 million and operating income was $30 million. Net income attributable to Engility was $14 million, or $0.79 per diluted share.
"Our first quarter results were in-line with our plan," said Tony Smeraglinolo, President and CEO of Engility. "Additionally, our cost savings initiatives are beginning to positively impact our margins and our ability to win new and recompete business. During the quarter, we won several major recompete contracts, which contributed to another solid quarter of funded orders. We attribute this success to our differentiated low-cost business model, our strong track record of delivering superior services to our customers and our exceptional alignment with our customers' mission priorities."
"While our results were consistent with our expectations, significant Federal budget uncertainty continues and likely will remain for the foreseeable future. However, this is the market environment we anticipated when we formed Engility, and we believe we have created a company with the efficiencies needed to compete successfully in today's budget-constrained and competitive market. Recent wins, coupled with our healthy backlog and growing pipeline of business, keeps us confident about our future and our ability to achieve financial results within our 2013 guidance ranges."
Key Performance Indicators
Funded backlog at the end of the 2013 first quarter was $816 million.
Contract funded orders in the first quarter of 2013 were $322 million, representing a book-to-bill ratio of 0.9.
As expected, our days sales outstanding (DSO) increased in the first quarter of 2013. DSO, net of advanced payments, at the end of the 2013 first quarter was 89 days, compared to 78 days at the end of the December 2012 quarter.
Significant First Quarter 2013 Recompete Award
During the quarter, we won several major recompete contracts that validate both our business model and our focus on our customers' success. These wins also reduce our risk profile for 2013. Our largest recompete win that was scheduled for 2013 was a $116 million single-award contract, consisting of a one-year base period of performance with one six month option, from the Army Contracting Command - Aberdeen Proving Ground (ACC-APG) to train, mentor and advise U.S. and Coalition Forces in Afghanistan in law enforcement and investigation techniques. This recompete win reflects the strong relationship we have with this customer and underscores our superior past performance in supporting the warfighters' efforts of developing innovative solutions to counter emerging asymmetric threats for the U.S. Army.
2013 Outlook
We are reiterating the fiscal year 2013 financial guidance we issued on March 12, 2013 based on our first quarter 2013 financial results and our outlook for the remainder of 2013. Consistent with our March 12, 2013 outlook, our guidance does not include the impact of sequestration. The table below summarizes our fiscal year 2013 guidance.
2013 Fiscal Year Outlook | |||||||
Revenue | $1.45 billion to $1.55 billion | ||||||
GAAP Diluted EPS | $3.25 - $3.55 * | ||||||
Operating cash flow | $80 million to $100 million |
* 2013 GAAP diluted EPS guidance assumes a weighted-average share count of approximately 17.5 million shares and a full year effective tax rate of 40%.
Non-GAAP Measures
The tables under "Engility Holdings, Inc., Reconciliation of Non-GAAP Measures" present Adjusted Operating Income, Adjusted Operating Margin, Earnings before Interest, Taxes, Depreciation, and Amortization (EBITDA), Adjusted EBITDA, EBITDA Margin, Adjusted EBITDA Margin, Adjusted Net Income and Adjusted Diluted EPS, reconciled to their most directly comparable GAAP measure. These financial measures are calculated and presented on the basis of methodologies other than in accordance with U.S. generally accepted accounting principles ("Non-GAAP Measures"). Engility has provided these Non-GAAP Measures to adjust for the impact of (i) goodwill impairment, (ii) transaction-related-spin-off costs for the Company's July 2012 spin-off from L-3 Communications Holdings, Inc., (iii) severance and other costs related to the Company's strategic realignment announced in September 2012 and (iv) legal settlement costs. These items have been adjusted because they are not considered core to the Company's business or otherwise not considered operational or because these charges are non-cash or non-recurring. The Company presents these Non-GAAP Measures because management believes that they are meaningful to understanding Engility's performance during the periods presented and the Company's ongoing business. Non-GAAP Measures are not prepared in accordance with GAAP and therefore are not necessarily comparable to the financial results of other companies. These Non-GAAP Measures should be considered a supplement to, not a substitute for, or superior to, the corresponding financial measures calculated in accordance with GAAP.
CONFERENCE CALL INFORMATION
Engility will host a conference call at 5 P.M. ET on Monday, May 13, 2013, to discuss the financial results for the first quarter of 2013.
Listeners may access a webcast of the live conference call from the Investor Relations section of the company's website at http://www.EngilityCorp.com. Listeners may also access a slide presentation on the website that will be utilized during the call. Listeners should go to the website at least 15 minutes before the live event to download and install any necessary audio software.
Listeners may also participate in the conference call by dialing (877) 415-3180 (domestic) or (857) 244-7323 (international) and entering pass code 68184706.
A replay will be available on the company's website approximately two hours after the conference call and continuing for one year. A telephonic replay also will be available through May 20, 2013 at (888) 286-8010 (domestic) or (617) 801-6888 (international) and entering pass code 60472283.
ABOUT ENGILITY CORPORATION
Engility is a pure-play government services contractor providing highly skilled personnel wherever, whenever they are needed in a cost-effective manner. Headquartered in Chantilly, Virginia, Engility is a leading provider of specialized technical consulting, program and business support services, engineering and technology lifecycle support, information technology modernization and sustainment, supply chain services and logistics management, and training and education for the U.S. Government with approximately 7,800 employees worldwide and sales of $1.66 billion for 2012. To learn more about Engility, please visit www.engilitycorp.com.
FORWARD-LOOKING STATEMENTS
This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements regarding Engility's future prospects, projected financial results, business plans, and the expected benefits of our strategic realignment completed in the first quarter of 2013. Words such as "may," "will," "should," "likely," "anticipates," "expects," "intends," "plans," "projects," "believes," "estimates" and similar expressions are also used to identify these forward-looking statements. These statements are based on the current beliefs and expectations of Engility's management and are subject to significant risks and uncertainties. Actual results may differ from those set forth in the forward-looking statements. Factors that could cause Engility's actual results to differ materially from those described in the forward-looking statements can be found under the heading "Risk Factors" included in our annual report on Form 10-K for the year ended December 31, 2012, which has been filed with the Securities and Exchange Commission (SEC), and any updates thereto included in our more recent periodic reports, and is available on the investor relations section of Engility's website (http://www.engilitycorp.com) and on the SEC's website (www.sec.gov). Forward-looking statements are made only as of the date hereof, and we undertake no obligation to update or revise the forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law. In addition, historical information should not be considered as an indicator of future performance.
ENGILITY HOLDINGS, INC. | ||||||||||||
UNAUDITED CONSOLIDATED AND COMBINED STATEMENTS OF OPERATIONS | ||||||||||||
(in thousands, except per share data) | ||||||||||||
Three Months Ended | ||||||||||||
March 29, | March 30, | |||||||||||
2013 | 2012 | Change | ||||||||||
Revenue | $ | 361,675 | $ | 383,240 | $ | (21,565 | ) | |||||
Revenue from former affiliated entities | - | 48,734 | (48,734 | ) | ||||||||
Total revenue | 361,675 | 431,974 | (70,299 | ) | ||||||||
Costs and expenses | ||||||||||||
Cost of revenue | 315,491 | 324,168 | (8,677 | ) | ||||||||
Cost of revenue from former affiliated entities | - | 48,734 | (48,734 | ) | ||||||||
Total cost of revenue | 315,491 | 372,902 | (57,411 | ) | ||||||||
Selling, general and administrative expenses | 16,297 | 33,227 | (16,930 | ) | ||||||||
Total costs and expenses | 331,788 | 406,129 | (74,341 | ) | ||||||||
Operating income | 29,887 | 25,845 | 4,042 | |||||||||
Interest expense, net | (5,784 | ) | (97 | ) | (5,687 | ) | ||||||
Other income, net | 29 | 40 | (11 | ) | ||||||||
Income from continuing operations before income taxes | 24,132 | 25,788 | (1,656 | ) | ||||||||
Provision for income taxes | 9,353 | 10,801 | (1,448 | ) | ||||||||
Income from continuing operations | $ | 14,779 | $ | 14,987 | $ | (208 | ) | |||||
Loss from discontinued operations before income taxes | - | (125 | ) | 125 | ||||||||
Benefit for income taxes | - | (52 | ) | 52 | ||||||||
Loss from discontinued operations | - | (73 | ) | 73 | ||||||||
Net income | $ | 14,779 | $ | 14,914 | $ | (135 | ) | |||||
Less: Net income attributable to noncontrolling interest | 1,001 | 929 | 72 | |||||||||
Net income attributable to Engility | $ | 13,778 | $ | 13,985 | $ | (207 | ) | |||||
Earnings per share allocable to Engility Holdings, Inc. common shareholders - Basic | ||||||||||||
Net income per share from continuing operations less noncontrolling interest | $ | 0.82 | $ | 0.87 | $ | (0.05 | ) | |||||
Net income per share from discontinued operations | $ | - | $ | - | $ | - | ||||||
Net income per share attributable to Engility | $ | 0.82 | $ | 0.87 | $ | (0.05 | ) | |||||
Earnings per share allocable to Engility Holdings, Inc. common shareholders - Diluted | ||||||||||||
Net income per share from continuing operations less noncontrolling interest | $ | 0.79 | $ | 0.87 | $ | (0.08 | ) | |||||
Net income per share from discontinued operations | $ | - | $ | - | $ | - | ||||||
Net income per share attributable to Engility | $ | 0.79 | $ | 0.87 | $ | (0.08 | ) | |||||
Weighted average number of shares outstanding | ||||||||||||
Basic | 16,781 | 16,118 | ||||||||||
Diluted | 17,382 | 16,118 | ||||||||||
ENGILITY HOLDINGS, INC. | ||||||||
UNAUDITED CONSOLIDATED BALANCE SHEETS | ||||||||
(in thousands) | ||||||||
As of | As of | |||||||
March 29, | December 31, | |||||||
2013 | 2012 | |||||||
Assets: | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 38,728 | $ | 27,021 | ||||
Receivables, net | 379,047 | 366,236 | ||||||
Other current assets | 32,090 | 34,832 | ||||||
Total current assets | 449,865 | 428,089 | ||||||
Property, plant and equipment, net | 10,919 | 11,941 | ||||||
Goodwill | 477,604 | 477,604 | ||||||
Identifiable intangible assets, net | 98,748 | 100,929 | ||||||
Other assets | 11,630 | 8,887 | ||||||
Total assets | $ | 1,048,766 | $ | 1,027,450 | ||||
Liabilities and Equity: | ||||||||
Current liabilities: | ||||||||
Current portion of long-term debt | $ | 50,250 | $ | 50,250 | ||||
Accounts payable, trade | 27,485 | 20,725 | ||||||
Accrued employment costs | 64,546 | 63,278 | ||||||
Accrued expenses | 73,989 | 76,955 | ||||||
Advance payments and billings in excess of costs incurred | 21,292 | 24,855 | ||||||
Deferred income taxes, current and income taxes payable | 15,640 | 10,607 | ||||||
Other current liabilities | 16,518 | 19,311 | ||||||
Total current liabilities | 269,720 | 265,981 | ||||||
Long-term debt | 284,750 | 284,750 | ||||||
Income tax payable | 70,063 | 68,725 | ||||||
Other liabilities | 19,385 | 19,683 | ||||||
Total liabilities | 643,918 | 639,139 | ||||||
Equity: | ||||||||
Preferred stock, par value $0.01 per share, 25,000 shares authorized, none issued or outstanding as of March 29, 2013 or December 31, 2012 | - | - | ||||||
Common stock, par value $0.01 per share, 175,000 shares authorized, 17,144 shares issued and outstanding as of March 29, 2013 and 16,703 shares issued and outstanding as of December 31, 2012 | 171 | 168 | ||||||
Additional paid in capital | 757,384 | 755,638 | ||||||
Accumulated deficit | (366,661 | ) | (380,438 | ) | ||||
Noncontrolling interest | 13,954 | 12,943 | ||||||
Total equity | 404,848 | 388,311 | ||||||
Total liabilities and equity | $ | 1,048,766 | $ | 1,027,450 | ||||
ENGILITY HOLDINGS, INC. | ||||||||
UNAUDITED CONDENSED CONSOLIDATED AND COMBINED STATEMENTS OF CASH FLOWS | ||||||||
(in thousands) | ||||||||
Three Months Ended | ||||||||
March 29, | March 30, | |||||||
2013 | 2012 | |||||||
Operating activities: | ||||||||
Net income | $ | 14,779 | $ | 14,914 | ||||
Less: loss from discontinued operations, net of tax | - | (73 | ) | |||||
Income from continuing operations | 14,779 | 14,987 | ||||||
Share-based compensation | 2,622 | - | ||||||
Depreciation and amortization | 3,393 | 4,185 | ||||||
Amortization of bank debt fees | 891 | - | ||||||
Deferred income taxes | 3,783 | (5,541 | ) | |||||
Changes in operating assets and liabilities, excluding acquired amounts: | ||||||||
Receivables | (12,811 | ) | (7,921 | ) | ||||
Other assets | 358 | (1,779 | ) | |||||
Accounts payable, trade | 6,760 | (6,337 | ) | |||||
Accrued employment costs | 1,268 | 2,845 | ||||||
Accrued expenses | (2,966 | ) | (9,717 | ) | ||||
Advance payments and billings in excess of costs incurred | (3,563 | ) | 4,454 | |||||
Other liabilities | (1,753 | ) | 728 | |||||
Net cash provided by (used in) operating activities from continuing operations | 12,761 | (4,096 | ) | |||||
Investing activities: | ||||||||
Capital expenditures | (190 | ) | ||||||
