ICF International, Inc. - FORM 8-K/A - EX-99 - EXHIBIT 99.3

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file	filename
8-K/A - FORM 8-K/A - ICF International, Inc.	ifci20150119_8ka.htm
EX-23 - EXHIBIT 23.1 - ICF International, Inc.	ex23-1.htm
EX-99 - EXHIBIT 99.2 - ICF International, Inc.	ex99-2.htm
EX-99 - EXHIBIT 99.1 - ICF International, Inc.	ex99-1.htm

Exhibit 99.3

Pro Forma Financial Information

Unaudited Pro Forma Balance Sheet

As of September 30, 2014

(in thousands, except per share amounts)

	Historical			Historical							Consolidated
	ICF			Olson			Adjustments				Pro Forma

Current Assets:
Cash	$	7,509		$	10,753		$	—			$	18,262
Contract receivables, net		248,154			43,048			—				291,202
Prepaid expenses and other		13,892			1,546			—				15,438
Income tax receivable		3,528			—			—				3,528
Total current assets		273,083			55,347			—				328,430

Total property and equipment, net		28,920			16,340			—				45,260
Other assets:
Goodwill		461,659			77,804			130,949		(a)		670,412
Other intangible assets, net		15,852			15,704			49,159		(a)		80,715
Restricted cash		1,548			—			—				1,548
Other assets		12,419			3,010			(2,407	)	(b)		13,022
Total Assets	$	793,481		$	168,205		$	177,701			$	1,139,387

Current Liabilities:
Accounts payable	$	44,729		$	15,256		$	—			$	59,985
Accrued salaries and benefits		44,017			4,913			—				48,930
Accrued expenses		40,445			2,647			—				43,092
Deferred revenue		20,471			13,026			—				33,497
Deferred income taxes		4,155			787			—				4,942
Current maturities of long-term debt		—			9,000			(9,000	)	(c)		—
Other current liabilities		—			2,712			(2,221	)	(c)		491
Total current liabilities		153,817			48,341			(11,221	)			190,937
Long-term liabilities:
Long-term debt		115,216			74,250			222,140		(c)		411,606
Deferred rent		14,805			7,191			(1,781	)	(c)		20,215
Deferred income taxes		11,944			1,365			—				13,309
Other		9,027			—			—				9,027
Total Liabilities		304,809			131,147			209,138				645,094
Commitments and Contingencies
Stockholders’ Equity:
Additional paid-in capital		263,740			33,224			(33,224	)	(d)		263,740
Retained earnings		277,174			5,309			312		(d)		282,795
Other equity		(52,242	)		(1,475	)		1,475		(d)		(52,242	)
Total Stockholders’ Equity		488,672			37,058			(31,437	)			494,293
Total Liabilities and Stockholders’ Equity	$	793,481		$	168,205		$	177,701			$	1,139,387

Unaudited Pro Forma Statement of Operations

Nine Months Ended September 30, 2014

(in thousands, except per share amounts)

	Historical			Historical							Consolidated
	ICF			Olson			Adjustments				Pro Forma

Gross Revenue	$	773,708		$	106,148		$	—			$	879,856
Direct Costs		486,461			58,381			2,826		(e)		547,668
Operating costs and expenses:
Indirect and selling expenses		218,573			24,606			1,687		(e)(f)		244,866
Depreciation and amortization		9,493			3,191			—				12,684
Amortization of intangible assets		6,429			4,569			4,999		(g)		15,997
Total operating costs and expenses		234,495			32,366			6,686				273,547
Operating Income		52,752			15,401			(9,512	)			58,641
Interest expense		(2,288	)		(5,624	)		722		(h)		(7,190	)
Other (expense) income		(991	)		(226	)		—				(1,217	)
Income before income taxes		49,473			9,551			(8,790	)			50,234
Provision for income taxes		18,206			3,612			(3,332	)	(i)		18,486
Net income	$	31,267		$	5,939		$	(5,458	)		$	31,748

Earnings per Share:
Basic	$	1.59									$	1.61
Diluted	$	1.56									$	1.58

Weighted-average Shares:
Basic		19,682										19,682
Diluted		20,069										20,069

Unaudited Pro Forma Statement of Operations

Twelve Months Ended December 31, 2013

(in thousands, except per share amounts)

	Historical			Historical							Consolidated
	ICF			Olson			Adjustments				Pro Forma

Gross Revenue	$	949,303		$	118,208		$	—			$	1,067,511
Direct Costs		591,516			62,059			3,888		(e)		657,463
Operating costs and expenses:
Indirect and selling expenses		272,387			34,829			16		(e)(f)		307,232
Depreciation and amortization		11,238			3,927			—				15,165
Amortization of intangible assets		9,477			4,979			6,144		(g)		20,600
Total operating costs and expenses		293,102			43,735			6,160				342,997
Operating Income		64,685			12,414			(10,048	)			67,051
Interest expense		(2,447	)		(6,224	)		(1,089	)	(h)		(9,760	)
Other (expense) income		(12	)		(335	)		—				(347	)
Income before income taxes		62,226			5,855			(11,137	)			56,944
Provision for income taxes		22,896			2,100			(4,044	)	(i)		20,952
Net income	$	39,330		$	3,755		$	(7,093	)		$	35,992

Earnings per Share:
Basic	$	1.99									$	1.82
Diluted	$	1.95									$	1.78

Weighted-average Shares:
Basic		19,755										19,755
Diluted		20,186										20,186

NOTES TO UNAUDITED PRO FORMA FINANCIAL INFORMATION

On November 5, 2014, ICF International, Inc. (“ICF” or the "Company"), completed the acquisition of OCO Holdings, Inc. (“Olson”), a Delaware corporation. As contemplated by the Agreement and Plan of Merger (the “Merger Agreement”), Olson became a wholly-owned indirect subsidiary of the Company. The unaudited pro forma consolidated financial statements have been prepared to give effect to the completed acquisition as if the acquisition had taken place at the beginning of the fiscal period January 1, 2013, the beginning of the earliest fiscal period presented, and as of September 30, 2014 for the balance sheet.

The pro forma amounts have been developed from the unaudited consolidated financial statements for the nine months ended September 30, 2014, for ICF and Olson, as well as the audited consolidated financial statements of ICF contained in its Annual Report on Form 10-K for the year ended December 31, 2013, and audited financial statements for Olson for the year ended December 31, 2013. The historical Olson financial information is reflected in the financial statements according to ICF’s presentation. The assumptions, estimates and adjustments here have been made solely for the purposes of developing these consolidated financial statements.

In accordance with the purchase method of accounting, the assets and liabilities of Olson were recorded at their respective estimated fair values as of the date of acquisition. Management's estimates of the fair value of assets acquired and liabilities assumed are based, in part, on third-party evaluations. The preliminary allocation of the purchase price was based upon a preliminary valuation, and our estimates and assumptions are subject to change.

The unaudited pro forma consolidated financial statements are provided for illustrative purposes only and are not intended to represent the actual consolidated results of operations or the consolidated financial position of ICF had the acquisition occurred on the dates assumed, nor are they necessarily indicative of future consolidated results of operations or consolidated financial position. The unaudited pro forma consolidated financial statements should be read in conjunction with the separate historical consolidated financial statements of ICF and Olson.

Note A. Basis of Presentation

On November 5, 2014, the Company completed the acquisition of Olson, a leading provider of marketing technology and digital services based in Minneapolis, Minnesota. The acquisition expands the Company’s existing digital technology and strategic communications work and strengthens its ability to bring more integrated solutions to an expanded client base including multi-channel marketing initiatives across web, mobile, email, social, print, broadcast and off-premise platforms.

The aggregate purchase price of approximately $296.4 million in cash, which includes the estimated working capital adjustment required by the Merger Agreement, was funded by the Company’s Fourth Amended and Restated Business Loan and Security Agreement, as modified on November 5, 2014. The Company engaged an independent valuation firm to assist management in the allocation of the purchase price to goodwill and to other acquired intangible assets. The excess of the purchase price over the estimated fair value of the net tangible assets acquired was approximately $273.6 million. The Company has allocated approximately $208.8 million to goodwill and $64.8 million to other intangible assets. The intangible assets consist of approximately $60.3 million of customer-related intangibles that are being amortized over 10.2 years from the acquisition date, $3.9 million of marketing-related intangibles that are being amortized over 1.2 years from the acquisition date, and $0.6 million of technology intangibles that are being amortized over 6.2 years from the acquisition date. Olson was a stock purchase for tax purposes; therefore, goodwill and amortization of other intangibles created via this acquisition are not deductible for income tax purposes. These items will not affect the Company’s deferred tax assets or liabilities. The Company is still evaluating the fair value of acquired assets and liabilities and pre-acquisition contingencies; therefore, the final allocation of the purchase price has not been completed.

Note B. Pro Forma Adjustments

The pro forma adjustments include the estimated purchase price, including goodwill and intangibles, taxes, amortization expense, interest expense, and other expenses. The pro forma adjustments included in the unaudited consolidated financial statements are as follows:

	(a)	Eliminate Olson goodwill and other intangibles, and adjust goodwill, and other intangible assets to reflect preliminary purchase price allocation.
	(b)	Eliminate Olson deferred financing fees.
	(c)	Eliminate Olson current and long-term deferred rent, debt and settled contingent liabilities, and reflect long-term debt borrowed as a result of the acquisition.
	(d)	Eliminate Olson equity, and adjust stockholders’ equity for the impact of pro forma adjustments.
	(e)	Adjust for increased stock-based compensation as a result of the acquisition.
	(f)	Eliminate Olson management fees for the year ended December 31, 2013 and the nine months ended September 30, 2014, and eliminate costs related to ICF's acquisition of Olson and income related to the reduction of an Olson contingent liability that was settled as a result of the acquisition for the nine months ended September 30, 2014.
	(g)	Eliminate Olson amortization and record additional amortization on assets acquired from the acquisition.
	(h)	Eliminate Olson interest expense and record interest expense as a result of debt incurred from the acquisition.
	(i)	Adjust provision for income taxes to reflect ICF’s effective rate for the period.

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