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8-K - FORM 8-K - ICF International, Inc.ifci20140225_8k.htm

 

Exhibit 99.1

 

 

NEWS RELEASE

 

 

 

ICF International Reports Full Year and Fourth Quarter 2013 Results

 

Full Year 2013 Highlights

 

 

Total Revenue Increased 1 Percent

 

Commercial Revenues Up 7 Percent, Driven by 18 Percent Increase in Energy Efficiency Revenues

 

EPS Was $1.95; Adjusted EPS of $1.98 Exclusive of Acquisition Costs

 

Contract Awards Reached Record $1.2 Billion; Book-to-Bill of 1.23

 

Cash Flow from Operations Was $81 Million

 

Fourth Quarter Highlights

 

 

Total Revenue Declined 1 Percent, Due to U.S. Federal Government Shutdown

 

Commercial Revenues Up 2 Percent Despite Expected Decline in Infrastructure Project Revenue

 

EPS Was $0.38; Adjusted EPS of $0.40 Exclusive of Acquisition Costs

 

Contract Awards Were $224 Million, Up 36 Percent

 

Acquisitions

 

 

Announces Acquisition of CITYTECH, Inc.
 

Completed Mostra Acquisition on February 6, 2014

 

2014 Full Year Guidance

 

 

Revenues Estimated $1.025 Billion to $1.065 Billion

 

Diluted EPS Estimated $2.27 to $2.37

 

FOR IMMEDIATE RELEASE

Contacts: Douglas Beck, ICF International, 1.703.934.3820
Lynn Morgen/Betsy Brod, MBS Value Partners, 1.212.750.5800

 

 

FAIRFAX, Va. (February 26, 2014) — ICF International, Inc. (NASDAQ:ICFI), a leading provider of consulting services and technology solutions to government and commercial clients, reported results for the full year and fourth quarter ended December 31, 2013.

  

Full Year 2013 Results

 

“Full year 2013 was representative of our differentiated business model. For the third consecutive year, commercial revenue growth significantly outpaced total revenue growth, driven by an 18 percent increase in revenues from energy efficiency clients and solid performance across our other commercial activities. International government revenues increased 44 percent year-on-year, demonstrating our ability to successfully leverage existing expertise and qualifications and integrate acquisitions to expand our pipeline and improve win rates.”

 

 
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“ICF’s increased spending on business development over the last two years has yielded excellent returns on our investments. Contract awards reached a record $1.2 billion in 2013, up 21 percent year-over-year, reflecting the importance of our domain expertise in the broad areas of health and energy and the increasing number of implementation projects that we have captured as natural follow-ons to our advisory work,” said Sudhakar Kesavan, Chairman and Chief Executive Officer.

 

For full year 2013, revenue was $949.3 million, up 1.3 percent over the $937.1 million reported for full year 2012. Service revenue, total revenue less subcontractor and other direct costs, increased 0.6 percent to $709.8 million. EBITDA was $85.4 million; and EBITDA margin was 9.0 percent. Operating income was $64.7 million compared to the $66.2 million reported in 2012. Net income increased 3.3 percent to $39.3 million, and earnings per diluted share were $1.95, up from $1.91. Adjusted earnings per diluted share, which exclude acquisition costs, were $1.98 in 2013, up from $1.93.

 

ICF experienced growth across two of its three key markets in 2013. Health, Social Programs, and Consumer/Financial increased 4.0 percent, and Energy, Environment, and Infrastructure was up 1.7 percent, together accounting for 88 percent of total revenues.

 

“ICF’s fourth quarter results were affected by the 16-day government shutdown in October, but were in line with the guidance we provided in November,” said Mr. Kesavan. “As anticipated, our growing commercial and international government businesses, and a pick up in state and local projects, enabled us to partially offset the revenue decline related to the government closure.”

 

For the fourth quarter, revenue was $229.8 million, a 1.0 percent decrease from the $232.0 million reported in the 2012 fourth quarter. Service revenue decreased 0.8 percent to $171.3 million. Fourth quarter profitability was significantly impacted by the government shutdown. EBITDA was $17.7 million, and EBITDA margin was 7.7 percent. Operating income was $12.6 million, compared to the $14.5 million reported in the 2012 fourth quarter. Net income was $7.8 million, or $0.38 per diluted share compared to $9.2 million, or $0.47 per diluted share earned in the comparable 2012 period.

 

Backlog and New Business Awards 

 

Backlog was $1.7 billion at the end of 2013, up 10 percent from $1.5 billion at 2012 year-end. Funded backlog was $697 million, or 42 percent of total backlog. The total value of contracts awarded in the fourth quarter of 2013 was $224 million, up 36 percent from the same period last year. The total value of contracts awarded in 2013 was $1.2 billion, up 21 percent over 2012 levels.

 

Commercial Business 2013 Highlights 

 

Revenues from commercial clients increased 7 percent in 2013 to $267.9 million and represented 28 percent of total revenue, up from 27 percent in 2012. Excluding a large infrastructure project that was in a slower phase of construction in 2013, commercial revenues increased 9.7 percent. Revenues from energy efficiency clients increased 18 percent and accounted for 39 percent of commercial revenues.

 

Key Commercial Sales Highlights for the Fourth Quarter 

 

Commercial sales awards were $83 million for the 2013 fourth quarter, representing 37 percent of total sales for the period, and a book-to-bill ratio of 1.2.

 

ICF was awarded more than 400 commercial projects globally in the fourth quarter. Individual commercial sales in excess of $1 million included:

 

 

Eight energy efficiency contracts for U.S. Northeast, Midwest, and West Coast utilities encompassing new residential market contracts, scope expansion and extensions of existing contracts

 

Environmental infrastructure support projects on the U.S. West Coast

 

New interactive data applications for a utility and for a major financial institution

 

 
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Primary areas of additional awards included residential as well as commercial and industrial energy efficiency projects, aviation industry consulting, management consulting for health insurers, health survey research, interactive data applications for health care insurers and large financial institutions, environmental program and compliance management, and market studies for utilities and industry associations.

 

Government Business 2013 Highlights

 

 

U.S. Federal Government revenues declined 2.5 percent to $549.6 million in 2013 and accounted for 58 percent of total revenue, compared to 60 percent in 2012. Growth areas included education, public health, and international health survey research.

 

U.S. state and local government revenues declined 4.7 percent and accounted for 9 percent of total revenue, compared to 10 percent in 2012.

 

International government revenues increased 43.6 percent and accounted for 5 percent of total revenue, up from 3 percent in 2012, primarily reflecting recent contract wins with the European Commission and the U.K. government.

 

Key Government Contracts Won in the Fourth Quarter 

 

ICF was awarded more than 100 U.S. Federal Government contracts and task orders and hundreds of additional contracts from other U.S. state and local and international governments. The largest awards included:

 

 

Human Health Risk Assessment: A contract valued at approximately $33 million to continue to support the Environmental Protection Agency’s National Center for Environmental Assessment to conduct human health risk assessments on chemicals and other environmental stressors.

 

 

Cybersecurity: A contract valued at nearly $20 million to continue cybersecurity and identification management support for the Social Security Administration.

 

 

Health Informatics: A contract valued at more than $10 million with the National Science Foundation (NSF) to provide data collection, information technology, and analysis support of 11 NSF education and training grant programs.

 

 

Clean Energy: A $6 million contract with the Environmental Protection Agency to support clean energy and climate change strategies and programs.

 

 

European Immigration Policy: A $5 million contract with the European Commission to provide program support to the European Migration Network.

 

Additional individual government awards of greater than $1 million included educational simulation support for medical training for the U.S. Navy, strategic communications and software support to two offices of the National Institutes of Health, web support for two offices of the Department of Health and Human Services, information portal support for the Department of Education, program support for two offices of the Department of Transportation, and analytical support to the National Science Foundation.

 

Acquisitions of CITYTECH, Inc., and Mostra SA

 

ICF is announcing today that it has signed a definitive agreement to purchase CITYTECH, Inc., a Chicago-based digital interactive consultancy specializing in enterprise applications development, web experience management, mobile application development, cloud enablement, and managed services. For 2013, CITYTECH had annual revenues of approximately $16 million and 100 employees.

 

“A leading partner with Adobe, CITYTECH will add expertise to ICF’s content management capabilities. It is a complementary fit with ICF Interactive, which combines user experience, creative services, systems integration, marketing, and e-commerce services into an integrated suite of capabilities designed to meet commercial and government clients’ digital and interactive business needs,” Mr. Kesavan said.

 

 
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This transaction follows ICF’s recent acquisition of Brussels-based Mostra SA, a fully-integrated communications firm with annual revenues of approximately $40 million and 140 employees. Mostra offers end-to-end, multi-channel communications solutions to assist government and commercial clients in reaching out to their stakeholders and customers. The firm is a key provider of strategic communications to European Union institutions, in particular the European Commission, and significantly increases ICF’s ability to deliver implementation services in Europe.

 

Summary and Outlook 

 

“In 2013, we continued to execute effectively on our strategy to drive growth by building our commercial and international government qualifications and business wins. Since the end of the year, we have announced two acquisitions that are strategically important and expected to be accretive in 2014. Both position us to further expand our implementation activities, and Mostra will also enable us to replicate the success of our program lifecycle strategy in our international operations.”

 

“In 2014, we expect our commercial and international government activities to further increase as a percentage of revenues. While we will continue to invest in growth initiatives, we expect to see meaningful margin improvement coming from scale benefits, a more favorable business mix, and increased productivity.”

 

“In 2014, we expect to exceed the $1 billion milestone in revenues and generate EBITDA around $100 million. Based on our current portfolio of business, including the acquisitions of Mostra and CITYTECH, we expect full year 2014 revenues of $1.025 billion to $1.065 billion and earnings per diluted share of $2.27 to $2.37, based on approximately 20.2 million diluted weighted average number of shares outstanding and an effective tax rate of 38.5 percent. Our operating cash flow for 2014 is expected to be $70 million to $80 million,” Mr. Kesavan noted.

 

About ICF International

 

ICF International (NASDAQ:ICFI) provides professional services and technology solutions that deliver beneficial impact in areas critical to the world’s future. ICF is fluent in the language of change, whether driven by markets, technology, or policy. Since 1969, we have combined a passion for our work with deep industry expertise to tackle our clients’ most important challenges. We partner with clients around the globe—advising, executing, innovating—to help them define and achieve success. Our more than 4,500 employees serve government and commercial clients from more than 60 offices worldwide. ICF's website is www.icfi.com.

 

Caution Concerning Forward-looking Statements

 

Statements that are not historical facts and involve known and unknown risks and uncertainties are "forward-looking statements" as defined in the Private Securities Litigation Reform Act of 1995. Such statements may concern ICF’s current expectations about its future results, plans, operations and prospects and involve certain risks, including those related to the government contracting industry generally; ICF’s particular business, including its dependence on contracts with U.S. federal government agencies; and its ability to acquire and successfully integrate businesses. These statements include those that refer to ICF’s current expectations about the acquisitions of Mostra and CITYTECH. These and other factors that could cause ICF’s actual results to differ from those indicated in forward-looking statements are included in the "Risk Factors" section of ICF’s securities filings with the Securities and Exchange Commission. Although ICF’s expectations are based on what management believes to be reasonable assumptions, it cannot assure the expectations reflected in this document will be achieved as they are subject to risks and uncertainties that are difficult to predict and may be outside of ICF’s control. Such risks and uncertainties include the possibility that the benefits anticipated from the Mostra and CITYTECH transactions will not be fully realized, the possibility the CITYTECH transaction may not close, and other risks in connection with both the proposed CITYTECH transaction and the integration of Mostra. The forward-looking statements included herein are only made as of the date hereof, and ICF specifically disclaims any obligation to update these statements in the future.

 

 
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ICF International, Inc. and Subsidiaries

Consolidated Statements of Comprehensive Income

(in thousands, except per share amounts)

 

   

Three months ended

   

Twelve months ended

 
   

December 31,

   

December 31,

 
   

2013

   

2012

   

2013

   

2012

 
   

(Unaudited)

         
                                 

Gross Revenue

  $ 229,759     $ 231,979     $ 949,303     $ 937,133  

Direct Costs

    143,146       146,879       591,516       583,195  

Operating costs and expenses:

                               

Indirect and selling expenses

    68,874       64,265       272,387       263,878  

Depreciation and amortization

    2,886       2,731       11,238       9,789  

Amortization of intangible assets

    2,266       3,559       9,477       14,089  

Total operating costs and expenses

    74,026       70,555       293,102       287,756  

Operating Income

    12,587       14,545       64,685       66,182  

Interest expense

    (577 )     (781 )     (2,447 )     (3,946 )

Other (expense) income

    (221 )     54       (12 )     (325 )

Income before income taxes

    11,789       13,818       62,226       61,911  

Provision for income taxes

    4,033       4,599       22,896       23,836  

Net income

  $ 7,756     $ 9,219     $ 39,330     $ 38,075  
                                 

Earnings per Share:

                               

Basic

  $ 0.39     $ 0.47     $ 1.99     $ 1.94  

Diluted

  $ 0.38     $ 0.47     $ 1.95     $ 1.91  
                                 

Weighted-average Shares:

                               

Basic

    19,826       19,501       19,755       19,663  

Diluted

    20,233       19,690       20,186       19,957  
                                 

Other comprehensive income:

                               

Foreign currency translation adjustments

    248       99       251       (436 )

Comprehensive income

  $ 8,004     $ 9,318     $ 39,581     $ 37,639  
                                 
                                 

Reconciliation of non-GAAP financial measures:

                               
                                 

Reconciliation of Service Revenue

                               

Revenue

  $ 229,759     $ 231,979     $ 949,303     $ 937,133  

Subcontractor and Other Direct Costs*

    58,423       59,249       239,529       231,838  

Service Revenue

  $ 171,336     $ 172,730     $ 709,774     $ 705,295  
                                 

Reconciliation of EBITDA

                               

Operating Income

  $ 12,587     $ 14,545     $ 64,685     $ 66,182  

Depreciation and amortization

    5,152       6,290       20,715       23,878  

EBITDA

    17,739       20,835       85,400       90,060  

Acquisition-related expenses**

    536             903       676  

Adjusted EBITDA

  $ 18,275     $ 20,835     $ 86,303     $ 90,736  
                                 

Reconciliation of Diluted EPS

                               

Diluted EPS

  $ 0.38     $ 0.47     $ 1.95     $ 1.91  

EPS impact of acquisition costs, net of tax

    0.02             0.03       0.02  

Adjusted EPS

  $ 0.40     $ 0.47     $ 1.98     $ 1.93  

 

*

Subcontractor and Other Direct Costs exclude Direct Labor and Fringe.

**

Acquisition-related expenses include expenses related to closed and anticipated-to-close acquisitions.

 

 
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ICF International, Inc. and Subsidiaries

Consolidated Balance Sheets

(in thousands, except share amounts)

 

   

December 31, 2013

   

December 31, 2012

 
                 

Current Assets:

               

Cash

  $ 8,953     $ 14,725  

Contract receivables, net

    205,062       204,938  

Prepaid expenses and other

    7,847       7,608  

Income tax receivable

    4,482       11,231  

Total current assets

    226,344       238,502  

Total property and equipment, net

    30,214       28,860  

Other assets:

               

Goodwill

    418,839       410,583  

Other intangible assets, net

    12,239       21,016  

Restricted cash

    1,864       2,015  

Other assets

    11,414       8,745  

Total Assets

  $ 700,914     $ 709,721  
                 

Current Liabilities:

               

Accounts payable

  $ 45,544     $ 44,665  

Accrued salaries and benefits

    45,994       42,264  

Accrued expenses

    32,256       31,779  

Deferred revenue

    20,282       22,333  

Deferred income taxes

    6,144       5,790  

Total current liabilities

    150,220       146,831  

Long-term liabilities:

               

Long-term debt

    40,000       105,000  

Deferred rent

    12,912       10,599  

Deferred income taxes

    10,780       9,081  

Other

    12,911       9,460  

Total Liabilities

    226,823       280,971  

Commitments and Contingencies

               

Stockholders’ Equity:

               

Preferred stock, par value $.001 per share; 5,000,000 shares authorized; none issued

           

Common stock, $.001 par value; 70,000,000 shares authorized; 20,617,270 and 20,171,613 shares issued; and 19,764,634 and 19,559,409 shares outstanding as of December 31, 2013, and December 31, 2012, respectively

    21       20  

Additional paid-in capital

    250,698       237,262  

Retained earnings

    245,907       206,577  

Treasury stock

    (21,545 )     (13,868 )

Accumulated other comprehensive loss

    (990 )     (1,241 )

Total Stockholders’ Equity

    474,091       428,750  

Total Liabilities and Stockholders’ Equity

  $ 700,914     $ 709,721  

 

 
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ICF International, Inc. and Subsidiaries

Consolidated Statements of Cash Flows

(in thousands)

 

   

Twelve months ended

 
   

December 31,

 
   

2013

   

2012

 

Cash flows from operating activities

               

Net income

  $ 39,330     $ 38,075  

Adjustments to reconcile net income to net cash provided by operating activities:

               

Bad debt expense

    112       336  

Deferred income taxes

    2,434       13,637  

(Gain) loss on disposal of fixed assets

    (15 )     122  

Non-cash equity compensation

    8,891       8,770  

Depreciation and amortization

    20,715       23,878  

Amortization of debt issue costs

    476       562  

Deferred rent

    2,606       3,594  

Changes in operating assets and liabilities, net of the effect of acquisitions:

               

Contract receivables

    829       12,457  

Prepaid expenses and other assets

    (3,619 )     (162 )

Accounts payable

    730       2,604  

Accrued salaries and benefits

    3,699       (4,154 )

Accrued expenses

    42       1,619  

Deferred revenue

    (2,706 )     (2,638 )

Income tax receivable and payable

    6,749       (10,451 )

Restricted cash

    150       (807 )

Other liabilities

    609       (201 )

Net cash provided by operating activities

    81,032       87,241  

Cash flows from investing activities

               

Capital expenditures for property and equipment and capitalized software

    (14,161 )     (13,561 )

Payments for business acquisitions, net of cash received

    (4,763 )     (9,974 )

Net cash used in investing activities

    (18,924 )     (23,535 )
                 

Cash flows from financing activities

               

Advances from working capital facilities

    139,215       172,270  

Payments on working capital facilities

    (204,215 )     (212,270 )

Debt issue costs

          (1,955 )

Proceeds from exercise of options

    3,103       78  

Tax benefits of stock option exercises and award vesting

    1,213       804  

Net payments for stockholder issuances and buybacks

    (7,447 )     (11,569 )

Net cash used in financing activities

    (68,131 )     (52,642 )

Effect of exchange rate changes on cash

    251       (436 )

(Decrease) increase in cash

    (5,772 )     10,628  

Cash, beginning of period

    14,725       4,097  

Cash, end of period

  $ 8,953     $ 14,725  
                 

Supplemental disclosure of cash flow information

               

Cash paid during the period for:

               

Interest

  $ 2,459     $ 3,243  

Income taxes

  $ 13,670     $ 20,377  
                 

Non-cash investing and financing transactions:

               

Fair value of contingent consideration payable in connection with acquisition

  $ 2,842     $  

 

 
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ICF International, Inc. and Subsidiaries

Supplemental Schedule

 

Revenue by market

 

Three Months Ended

   

Twelve Months Ended

 
   

December 31,

   

December 31,

 
   

2013

   

2012

   

2013

   

2012

 
                                 

Energy, environment, and infrastructure

    41 %     40 %     39 %     39 %

Health, social programs, and consumer/financial

    48 %     47 %     49 %     47 %

Public safety and defense

    11 %     13 %     12 %     14 %

Total

    100 %     100 %     100 %     100 %

 

Revenue by client

 

Three Months Ended

   

Twelve Months Ended

 
   

December 31,

   

December 31,

 
   

2013

   

2012

   

2013

   

2012

 
                                 

U.S. federal government

    55 %     58 %     58 %     60 %

U.S. state and local government

    10 %     9 %     9 %     10 %

Non-U.S. government

    5 %     4 %     5 %     3 %

Government

    70 %     71 %     72 %     73 %
                                 

Commercial

    30 %     29 %     28 %     27 %
                                 

Total

    100 %     100 %     100 %     100 %

 

Revenue by contract

 

Three Months Ended

   

Twelve Months Ended

 
   

December 31,

   

December 31,

 
   

2013

   

2012

   

2013

   

2012

 
                                 

Time-and-materials

    52 %     48 %     52 %     49 %

Fixed-price

    30 %     31 %     29 %     30 %

Cost-based

    18 %     21 %     19 %     21 %

Total

    100 %     100 %     100 %     100 %

 

 

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