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8-K - FORM 8-K - Engility Holdings, Inc.d533298d8k.htm

Exhibit 99.1

LOGO

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 – May 13, 2013, Engility Holdings, Inc. (NYSE: 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.

 

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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.

 

Corporate Communications and Media:    Investor Relations:
Eric Ruff    Dave Spille
Engility Holdings, Inc.    Engility Holdings, Inc.
(703) 375-6463    (703) 375-4221
eric.ruff@engilitycorp.com    dave.spille@engilitycorp.com

 

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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     

 

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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   
  

 

 

   

 

 

 

 

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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     (66
  

 

 

   

 

 

 

Net cash used in investing activities from continuing operations

     (190     (66
  

 

 

   

 

 

 

Financing activities:

    

Proceeds from share-based payment arrangements

     164        —     

Payment of employee withholding taxes on restricted stock units vesting

     (1,028     —     

Net transfers from prior parent

     —          1,829   
  

 

 

   

 

 

 

Net cash (used in) provided by financing activities from continuing operations

     (864     1,829   

Discontinued Operations:

    

Net cash used in operating activities

     —          (190

Net cash used in investing activities

     —          —     

Net cash provided by financing activities

     —          190   
  

 

 

   

 

 

 

Net cash provided by discontinued operations

     —          —     
  

 

 

   

 

 

 

Net change in cash and cash equivalents

     11,707        (2,333

Cash and cash equivalents, beginning of period

     27,021        13,710   
  

 

 

   

 

 

 

Cash and cash equivalents, end of period

   $ 38,728      $ 11,377   
  

 

 

   

 

 

 

 

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ENGILITY HOLDINGS, INC.

RECONCILIATION OF NON-GAAP MEASURES

The following tables set forth a reconciliation of each of these Non-GAAP Measures to the most directly comparable GAAP measure for the periods presented (in thousands, except for ratio and per share amounts).

Adjusted Operating Income and Adjusted Operating Margin

 

     Quarter Ended  
     March 29, 2013     March 30, 2012  

Operating income

   $ 29,887      $ 25,845   

Adjustments

    

Transaction-related spin-off costs

     —          6,000   
  

 

 

   

 

 

 
     —          6,000   
  

 

 

   

 

 

 

Adjusted operating income

   $ 29,887      $ 31,845   
  

 

 

   

 

 

 

Operating margin

     8.3     6.0

Adjusted operating margin

     8.3     7.4

 

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ENGILITY HOLDINGS, INC.

Adjusted Earnings Per Share

(in thousands except per share data)

 

     Quarter Months
Ended
 
     March
29, 2013
    March
30, 2012
 

Adjusted operating income

   $ 29,887      $ 31,845   

Other items

    

Interest expense, net

     (5,784     (97

Other income, net

     29        40   

Loss from discontinued operations

     —          (73

Net income attributable to non-controlling interest

     (1,001     (929
  

 

 

   

 

 

 

Adjusted income before provision for income taxes

   $ 23,131      $ 30,786   

Provision for income taxes (1)

     9,353        12,314   
  

 

 

   

 

 

 

Adjusted net income attributable to Engility Holdings, Inc.

   $ 13,778      $ 18,472   
  

 

 

   

 

 

 

GAAP Earnings per share

    

Net income attributable to Engility Holdings, Inc.

   $ 13,778      $ 13,985   

Earnings per share attributable to Engility Holdings, Inc. common shareholders

    

Basic

   $ 0.82      $ 0.87   

Diluted

   $ 0.79      $ 0.87   

Engility Holdings, Inc. weighted average common shares outstanding

    

Basic

     16,781        16,118   

Diluted

     17,382        16,118   

Adjusted earnings per share attributable to Engility Holdings, Inc. common shareholders

    

Basic

   $ 0.82      $ 1.15   

Diluted

   $ 0.79      $ 1.15   

Weighted average number of shares outstanding

    

Basic

     16,781        16,118   

Diluted

     17,382        16,118   

 

(1) The March 30, 2012 period assumes a 40% income tax rate as a result of the adjustments.

 

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ENGILITY HOLDINGS, INC.

Earnings before interest, taxes, depreciation, and amortization (EBITDA) and Adjusted EBITDA

(dollars in thousands)

 

     Quarter Ended  
     March 29, 2013     March 30, 2012  

Income from continuing operations

   $ 14,779      $ 14,987   

Interest, taxes, depreciation, and amortization

    

Interest expense

     5,784        97   

Provision for income taxes

     9,353        10,801   

Depreciation and amortization

     3,393        4,185   
  

 

 

   

 

 

 

EBITDA

   $ 33,309      $ 30,070   
  

 

 

   

 

 

 

Adjustments to EBITDA

    

Transaction-related spin-off costs

     —          6,000   
  

 

 

   

 

 

 
     —          6,000   
  

 

 

   

 

 

 

Adjusted EBITDA

   $ 33,309      $ 36,070   
  

 

 

   

 

 

 

EBITDA Margin

     9.2     7.0

Adjusted EBITDA Margin

     9.2     8.4

ENGILITY HOLDINGS, INC.

Revision to Costs and Expenses

(in thousands)

 

     For the Three Month Period Ending  
     March 30, 2012  
     Reported      Adjustment     Revised  

Costs and expenses

       

Cost of revenue

   $ 326,666       $ (2,498   $ 324,168   

Cost of revenue from affiliated entities

     48,734         —          48,734   
  

 

 

    

 

 

   

 

 

 

Total cost of revenue

     375,400         (2,498     372,902   
  

 

 

    

 

 

   

 

 

 

Selling, general and administrative expenses

     30,729         2,498        33,227   
  

 

 

    

 

 

   

 

 

 

Total costs and expenses

     406,129         —          406,129   
  

 

 

    

 

 

   

 

 

 

Impact of the revision on cost and expenses

   $ —         $ —        $ —     
  

 

 

    

 

 

   

 

 

 

Note – As noted in our Form 10-K for the year ended December 31, 2012, management determined that we improperly classified certain amounts in cost of revenue that were selling, general and administrative in nature. We have assessed the impact of the adjustments on the statements of operations and determined that the period was not materially misstated. This change did not impact the balance sheet or statements of cash flows. The three month period ended March 30, 2012 has been revised to reflect this correction.

 

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