Attached files
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EX-31.1 - EX-31.1 - NCI, Inc. | d34666dex311.htm |
EX-31.2 - EX-31.2 - NCI, Inc. | d34666dex312.htm |
EX-32.1 - EX-32.1 - NCI, Inc. | d34666dex321.htm |
Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
x | QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
FOR THE QUARTER ENDED SEPTEMBER 30, 2015
¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Commission File Number 000-51579
NCI, Inc.
(Exact name of registrant as specified in its charter)
Delaware | 20-3211574 | |
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) | |
11730 Plaza America Drive Reston, Virginia |
20190-4764 | |
(Address of principal executive offices) | (Zip Code) |
Registrants telephone number, including area code: (703) 707-6900
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. x Yes ¨ No
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). x Yes ¨ No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definition of large accelerated filer, accelerated filer, and smaller reporting company in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer | ¨ | Accelerated filer | ¨ | |||
Non-accelerated filer | x (Do not check if a smaller reporting company) | Smaller Reporting Company | ¨ |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ¨ Yes x No
As of October 26, 2015, there were 8,656,065 shares outstanding of the registrants Class A common stock. In addition, there are 4,700,000 shares outstanding of the registrants Class B common stock, which are convertible on a one-for-one basis into shares of Class A common stock.
Table of Contents
PAGE | ||||||
PART I: | 1 | |||||
Item 1. | 1 | |||||
Item 2. | Managements Discussion and Analysis of Financial Condition and Results of Operations |
10 | ||||
Item 3. | 16 | |||||
Item 4. | 16 | |||||
PART II: | 17 | |||||
Item 1. | 17 | |||||
Item 1A. | 17 | |||||
Item 2. | 17 | |||||
Item 3. | 17 | |||||
Item 4. | 17 | |||||
Item 5. | 17 | |||||
Item 6. | 18 | |||||
20 |
Table of Contents
FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements
NCI, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
(in thousands, except per share data)
Three months ended September 30, | Nine months ended September 30, | |||||||||||||||
2015 | 2014 | 2015 | 2014 | |||||||||||||
Revenue |
$ | 82,310 | $ | 75,660 | $ | 249,077 | $ | 242,588 | ||||||||
Operating expenses: |
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Cost of revenue |
68,677 | 64,102 | 207,832 | 208,033 | ||||||||||||
General and administrative expenses |
6,445 | 6,205 | 19,941 | 19,967 | ||||||||||||
Depreciation and amortization |
1,794 | 1,401 | 5,774 | 4,302 | ||||||||||||
Acquisition and integration related expenses |
6 | | 428 | | ||||||||||||
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Total operating expenses |
76,922 | 71,708 | 233,975 | 232,302 | ||||||||||||
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Operating income |
5,388 | 3,952 | 15,102 | 10,286 | ||||||||||||
Interest expense, net |
204 | 95 | 662 | 302 | ||||||||||||
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Income before income taxes |
5,184 | 3,857 | 14,440 | 9,984 | ||||||||||||
Provision for income taxes |
2,013 | 1,495 | 5,818 | 3,956 | ||||||||||||
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Net income |
$ | 3,171 | $ | 2,362 | $ | 8,622 | $ | 6,028 | ||||||||
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Earnings per common and common equivalent share: |
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Basic: |
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Weighted average shares outstanding |
13,029 | 12,903 | 13,004 | 12,879 | ||||||||||||
Net income per share |
$ | 0.24 | $ | 0.18 | $ | 0.66 | $ | 0.47 | ||||||||
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Diluted: |
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Weighted average shares outstanding |
13,697 | 13,486 | 13,659 | 13,475 | ||||||||||||
Net income per share |
$ | 0.23 | $ | 0.18 | $ | 0.63 | $ | 0.45 | ||||||||
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Cash dividend declared and paid per share |
$ | | $ | | $ | 0.12 | $ | | ||||||||
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The accompanying notes are an integral
part of these condensed consolidated financial statements
1
Table of Contents
NCI, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(in thousands, except par value)
As of September 30, 2015 |
As of December 31, 2014 |
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Assets: |
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Current assets: |
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Cash and cash equivalents |
$ | 24 | $ | 25,819 | ||||
Accounts receivable, net |
52,820 | 52,856 | ||||||
Deferred tax assets, net |
3,942 | 3,950 | ||||||
Prepaid expenses and other current assets |
2,589 | 3,382 | ||||||
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Total current assets |
59,375 | 86,007 | ||||||
Property and equipment, net |
6,440 | 7,371 | ||||||
Other assets |
1,562 | 1,748 | ||||||
Deferred tax assets, net |
37,619 | 37,839 | ||||||
Intangible assets, net |
20,239 | 3,719 | ||||||
Goodwill |
33,878 | | ||||||
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Total assets |
$ | 159,113 | $ | 136,684 | ||||
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Liabilities and stockholders equity: |
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Current liabilities: |
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Accounts payable |
$ | 15,167 | $ | 15,646 | ||||
Accrued salaries and benefits |
17,999 | 16,481 | ||||||
Deferred revenue |
2,868 | 3,226 | ||||||
Other accrued expenses |
7,090 | 4,653 | ||||||
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Total current liabilities |
43,124 | 40,006 | ||||||
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Long-term debt |
11,297 | | ||||||
Other long-term liabilities |
2,636 | 2,901 | ||||||
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Total liabilities |
57,057 | 42,907 | ||||||
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Stockholders equity: |
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Class A common stock, $0.019 par value37,500 shares authorized; 9,258 shares issued and 8,341 shares outstanding as of September 30, 2015, and 9,223 shares issued and 8,306 shares outstanding as of December 31, 2014 |
176 | 175 | ||||||
Class B common stock, $0.019 par value12,500 shares authorized; 4,700 shares issued and outstanding as of September 30, 2015 and December 31, 2014 |
89 | 89 | ||||||
Additional paid-in capital |
75,623 | 74,406 | ||||||
Treasury stock at cost917 shares of Class A common stock as of September 30, 2015 and December 31, 2014 |
(8,331 | ) | (8,331 | ) | ||||
Retained earnings |
34,499 | 27,438 | ||||||
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Total stockholders equity |
102,056 | 93,777 | ||||||
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Total liabilities and stockholders equity |
$ | 159,113 | $ | 136,684 | ||||
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The accompanying notes are an integral
part of these condensed consolidated financial statements
2
Table of Contents
NCI, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(in thousands)
Nine months ended September 30, | ||||||||
2015 | 2014 | |||||||
Cash flows from operating activities: |
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Net income |
$ | 8,622 | $ | 6,028 | ||||
Adjustments to reconcile net income to net cash provided by operating activities: |
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Depreciation and amortization |
5,774 | 4,302 | ||||||
Share-based compensation |
1,036 | 2,774 | ||||||
Deferred income taxes |
228 | (72 | ) | |||||
Changes in operating assets and liabilities: (net of businesses acquired) |
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Accounts receivable, net |
5,421 | 9,209 | ||||||
Prepaid expenses and other assets |
3,893 | 474 | ||||||
Accounts payable |
(1,387 | ) | (3,344 | ) | ||||
Accrued expenses and other liabilities |
(1,105 | ) | 1,670 | |||||
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Net cash provided by operating activities |
22,482 | 21,041 | ||||||
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Cash flows from investing activities: |
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Purchases of property and equipment |
(1,537 | ) | (586 | ) | ||||
Cash paid for acquisition, net of cash acquired |
(56,657 | ) | | |||||
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Net cash used in investing activities |
(58,194 | ) | (586 | ) | ||||
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Cash flows from financing activities: |
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Borrowings under credit facility |
146,395 | 42,496 | ||||||
Repayments on credit facility |
(135,099 | ) | (43,496 | ) | ||||
Proceeds from exercise of stock options |
235 | 253 | ||||||
Repurchase of stock awards |
(53 | ) | (86 | ) | ||||
Dividends paid |
(1,561 | ) | | |||||
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Net cash provided by (used in) financing activities |
9,917 | (833 | ) | |||||
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Net change in cash and cash equivalents |
(25,795 | ) | 19,622 | |||||
Cash and cash equivalents, beginning of period |
25,819 | 50 | ||||||
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Cash and cash equivalents, end of period |
$ | 24 | $ | 19,672 | ||||
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Supplemental disclosure of cash flow information: |
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Cash paid during the period for: |
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Interest |
$ | 588 | $ | 247 | ||||
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Income taxes |
$ | 2,871 | $ | 3,460 | ||||
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Non-cash investing and finance activities during the period for: |
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Leasehold improvements acquired under tenant improvement funds |
$ | | $ | 706 | ||||
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The accompanying notes are an integral
part of these condensed consolidated financial statements
3
Table of Contents
NCI, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. Basis of Presentation
The accompanying unaudited condensed consolidated financial statements of NCI, Inc. and its subsidiaries (NCI or the Company) have been prepared in accordance with generally accepted accounting principles in the U.S. (GAAP) for interim financial information and pursuant to the rules and regulations of the Securities and Exchange Commission (SEC). As a result, certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted. In the opinion of management, the accompanying unaudited interim consolidated financial statements reflect all adjustments necessary to fairly present the Companys financial position as of September 30, 2015 and its results of operations and cash flows for the three and nine months ended September 30, 2015 and 2014, which consists of normal and recurring adjustments. The information disclosed in the notes to the financial statements for these periods is unaudited. The current periods results of operations are not necessarily indicative of results that may be achieved for any future period. All numbers in tables are presented in thousands except share and per share numbers. For further information, refer to the financial statements and footnotes included in NCIs Annual Report on Form 10-K for the year ended December 31, 2014, as filed with the SEC.
2. Business Overview
NCI is a leading provider of enterprise solutions and services to U.S. defense, intelligence, health care and civilian government agencies. We have the expertise and proven track record to solve our customers most important and complex mission challenges through technology and innovation. Our team of highly skilled professionals focuses on delivering cost-effective solutions and services in the areas of agile software application and systems development/integration; cybersecurity and information assurance; engineering and logistics support; enterprise information management and advanced analytics; cloud computing and IT infrastructure optimization; health IT and medical support; IT service management; and modeling, simulation and training. Headquartered in Reston, Virginia, we have more than 1,800 employees operating at more than 100 locations worldwide. The majority of the Companys revenue was derived from contracts with the U.S. Federal Government, directly as a prime contractor or as a subcontractor. NCI primarily conducts business throughout the U.S. The Company reports operating results and financial data as one reportable segment.
For the three months ended September 30, 2015, the Company generated approximately 59% of revenue from the Department of Defense, including agencies within the intelligence community, and approximately 41% of revenue from federal civilian agencies. For the nine months ended September 30, 2015, the Company generated approximately 60% of revenue from the Department of Defense, including agencies within the intelligence community, and approximately 40% of revenue from federal civilian agencies. For the three months ended September 30, 2014, the Company generated approximately 73% of revenue from the Department of Defense, including agencies within the intelligence community, and approximately 27% of revenue from federal civilian agencies. For the nine months ended September 30, 2014, the Company generated approximately 75% of revenue from the Department of Defense, including agencies within the intelligence community, and approximately 25% of revenue from federal civilian agencies.
NCIs Program Executive Office Soldier (PEO Soldier) contract is the Companys largest revenue-generating contract and accounted for approximately 9% and 11% of revenue for the three months ended September 30, 2015 and 2014, respectively. PEO Soldier accounted for approximately 10% and 12% of revenue for the nine months ended September 30, 2015 and 2014, respectively. The Companys PEO Soldier contract is a cost-plus fee contract consisting of a base period and two option periods for a total term of three years which commenced in September 2012. During the third quarter of 2015, NCI was awarded the follow-on contract for PEO Soldier and prevailed after a competitors protest was dismissed. The new contract is valued at $211.0 million and is a cost-plus fee vehicle consisting of a transition period, a base period and four option periods for a total term of five years commencing on October 1, 2015.
3. Earnings Per Share
Basic earnings per share exclude dilution and are computed by dividing net income by the weighted average number of common shares outstanding for the period. Diluted earnings per share reflect potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock. Diluted earnings per share include the incremental effect of stock options calculated using the treasury stock method. Shares that are anti-dilutive are not included in the computation of diluted earnings per share. For the three months ended September 30, 2015 and 2014, approximately 30,000 and 22,000 shares, respectively, were not included in the computation of diluted earnings per share, because to do so would have been anti-dilutive. For the nine months ended September 30, 2015 and 2014, approximately 63,000 and 16,000 shares, respectively, were not included in the computation of diluted earnings per share, because to do so would have been anti-dilutive. The following details the computation of basic and diluted earnings per common share (Class A and Class B) for the three and nine months ended September 30, 2015 and 2014.
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Three months ended September 30, | Nine months ended September 30, | |||||||||||||||
2015 | 2014 | 2015 | 2014 | |||||||||||||
Net Income |
$ | 3,171 | $ | 2,362 | $ | 8,622 | $ | 6,028 | ||||||||
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Weighted average number of basic shares outstanding during the period |
13,029 | 12,903 | 13,004 | 12,879 | ||||||||||||
Effect of dilutive potential common shares |
668 | 583 | 655 | 596 | ||||||||||||
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Weighted average number of diluted shares outstanding during the period |
13,697 | 13,486 | 13,659 | 13,475 | ||||||||||||
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Basic earnings per share |
$ | 0.24 | $ | 0.18 | $ | 0.66 | $ | 0.47 | ||||||||
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Diluted earnings per share |
$ | 0.23 | $ | 0.18 | $ | 0.63 | $ | 0.45 | ||||||||
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4. Accounts Receivable
Accounts receivable consists of billed and unbilled amounts. The following table details accounts receivable at the end of each period:
As of | ||||||||
September 30, 2015 |
December 31, 2014 |
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Billed receivables |
$ | 20,919 | $ | 25,231 | ||||
Unbilled receivables: |
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Amounts billable at end of period |
24,186 | 21,677 | ||||||
Other |
8,457 | 6,690 | ||||||
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Total unbilled receivables |
32,643 | 28,367 | ||||||
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Total accounts receivable |
53,562 | 53,598 | ||||||
Less: Allowance for doubtful accounts |
742 | 742 | ||||||
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Total accounts receivable, net |
$ | 52,820 | $ | 52,856 | ||||
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Other unbilled receivables primarily consist of amounts that will be billed upon milestone completions and other accrued amounts that cannot be billed as of the end of the period. Substantially all unbilled receivables are expected to be billed and collected within the next 12 months.
5. Property and Equipment
The following table details property and equipment at the end of each period:
As of | ||||||||
September 30, 2015 |
December 31, 2014 |
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Property and equipment |
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Furniture and equipment |
$ | 25,492 | $ | 23,896 | ||||
Leasehold improvements |
9,270 | 9,221 | ||||||
Real property |
549 | 549 | ||||||
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35,311 | 33,666 | |||||||
Less: Accumulated depreciation and amortization |
28,871 | 26,295 | ||||||
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Property and equipment, net |
$ | 6,440 | $ | 7,371 | ||||
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5
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Depreciation and amortization expense for the three months ended September 30, 2015 and 2014 was $0.8 million and $1.0 million, respectively. Depreciation and amortization expense for the nine months ended September 30, 2015 and 2014 was $2.6 million and $3.1 million, respectively.
6. Intangible Assets
The following table details intangible assets at the end of each period:
As of | ||||||||
September 30, 2015 |
December 31, 2014 |
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Contract and customer relationships |
$ | 28,979 | $ | 20,987 | ||||
Developed software |
1,113 | | ||||||
Less: Accumulated amortization |
(9,853 | ) | (17,268 | ) | ||||
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Intangible assets, net |
$ | 20,239 | $ | 3,719 | ||||
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Amortization expense of intangible assets for the three months ended September 30, 2015 and 2014 was $1.0 million and $0.4 million, respectively. Amortization expense of intangible assets for the nine months ended September 30, 2015 and 2014 was $3.2 million and $1.2 million, respectively. Intangible assets are primarily amortized on a straight line basis over periods ranging from three to eleven years. Expected amortization expense for the remainder of the fiscal year ending December 31, 2015, and for each of the fiscal years thereafter, is as follows:
For the year ending December 31, |
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2015 (remaining three months) |
$ | 1,008 | ||
2016 |
3,645 | |||
2017 |
3,632 | |||
2018 |
3,150 | |||
2019 |
3,049 | |||
Thereafter |
5,755 | |||
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$ | 20,239 | |||
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7. Share-Based Payments
During the three months ended September 30, 2015, the Company did not grant any stock options to purchase shares of Class A common stock. During the nine months ended September 30, 2015, the Company granted 85,000 stock options to purchase shares of Class A common stock with a weighted-average exercise price of $10.41, which represents the fair market value at the date of grant. During the three and nine months ended September 30, 2015, 2,500 stock options and 40,000 stock options were exercised at a weighted-average price of $7.28 and $5.90, respectively. As of September 30, 2015, there were approximately 1,678,359 stock options outstanding.
During the three months ended September 30, 2015, 11,250 restricted shares vested, with 1,231 shares cancelled to cover individual tax liabilities. During the nine months ended September 30, 2015, 37,500 restricted shares vested, with 4,791 shares cancelled to cover individual tax liabilities. As of September 30, 2015, there were 6,250 shares of restricted stock outstanding
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During the nine months ended September 30, 2014, approximately 737,000 of the options granted in June of 2013 vested on an accelerated vesting schedule after the Companys stock price reached two discrete acceleration milestones of a continuous 30-day average stock price of $8.00 and $10.00 per share, respectively. This accelerated vesting added approximately $1.1 million and $0.4 million in additional stock compensation costs to general and administrative expenses and cost of revenue, respectively, for the nine months ended September 30, 2014. During the nine months ended September 30, 2015, approximately 335,000 of the options granted in June of 2013 vested on an accelerated vesting schedule after the Companys stock price reached the final acceleration milestone of a continuous 30-day average stock price of $12.00 per share. This accelerated vesting added a nominal amount in additional stock compensation costs to general and administrative expenses and cost of revenue, respectively, for the nine months ended September 30, 2015. The following table summarizes stock compensation expense allocated to cost of revenue and general and administrative costs for the three and nine months ended September 30, 2015 and 2014:
Three months ended September 30, | Nine months ended September 30, | |||||||||||||||
2015 | 2014 | 2015 | 2014 | |||||||||||||
Cost of revenue |
$ | 76 | $ | 79 | $ | 199 | $ | 633 | ||||||||
General and administrative |
264 | 282 | 837 | 2,141 | ||||||||||||
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$ | 340 | $ | 361 | $ | 1,036 | $ | 2,774 | |||||||||
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As of September 30, 2015, there was approximately $0.6 million of total unrecognized compensation cost related to unvested stock compensation arrangements. This cost is expected to be fully amortized over the next four years, with approximately $0.1 million, $0.2 million, $0.2 million, and $0.1 million amortized during the remainder of 2015, and the full years of 2016, 2017 and 2018, respectively. The cost of stock compensation is included in the Companys Consolidated Statements of Income and expensed over the service period of the options.
8. Debt
The Companys senior credit facility, amended in December 2014, referred to herein as the credit facility, consists of a revolving line of credit with a borrowing capacity of up to an $80.0 million principal amount and a $45.0 million accordion feature allowing us to increase our borrowing capacity to up to a $125.0 million principal amount, subject to obtaining commitments for the incremental capacity from existing or new lenders. The outstanding borrowings are collateralized by a security interest in substantially all of the Companys assets. The lenders also require a direct assignment of all contracts at the lenders discretion. The outstanding balance under the credit facility accrues interest based on one-month LIBOR plus an applicable margin, ranging from 210 to 310 basis points, based on the ratio of the Companys outstanding senior funded debt to Earnings before Interest, Taxes, Depreciation, and Amortization (EBITDA) as defined in the credit facility agreement. The credit facility expires on January 31, 2017.
The credit facility contains various covenants that limit, among other things, the Companys ability to incur or guarantee additional debt; make certain distributions, investments and other restricted payments, including limits on cash dividends on the Companys outstanding common stock or equivalent equity interests; enter into transactions with certain affiliates; create or permit certain liens; and consolidate, merge, or sell assets. In addition, the credit facility contains certain financial covenants that require the Company to maintain a minimum fixed charge coverage ratio, maintain a minimum funded debt to earnings ratio; and limit capital expenditures below certain thresholds. As of September 30, 2015, the Company was in compliance with all of its loan covenants.
The credit facility allows the Company to use borrowings thereunder of up to $17.5 million to repurchase outstanding shares of Class A common stock. No stock repurchases took place in the three or nine months ended September 30, 2015. At September 30, 2015, $16.7 million was remaining under the board of directors authorization for share repurchases.
During the third quarter of 2015, NCI had a weighted average outstanding loan balance of $18.8 million which accrued interest at a weighted average borrowing rate of 2.3%. During the third quarter of 2014, NCI had a weighted average outstanding loan balance of zero which would have accrued interest at a weighted average borrowing rate of 2.3% had there been a balance.
As of September 30, 2015, the outstanding balance under the credit facility was $11.3 million and interest accrued at a rate of one-month LIBOR plus 210 basis points, or 2.3%.
9. Computech Acquisition
On January 1, 2015, the Company completed its purchase of 100% of the outstanding stock of Computech, Inc. (Computech), a leader in agile and lean application software development and IT operations and maintenance, for approximately $56.7 million, net of cash acquired.
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The acquisition has been accounted for under the acquisition method of accounting which requires the total purchase consideration to be allocated to the assets acquired and liabilities assumed based on estimates of fair value. The excess of the purchase consideration over the amounts assigned to tangible or intangible assets acquired and liabilities assumed is recognized as goodwill. Total acquisition and integration related costs through September 30, 2015 were approximately $0.4 million.
The following pro forma results are prepared for comparative purposes only and do not necessarily reflect the results that would have occurred had the acquisition occurred at the beginning of the year presented or the results which may occur in the future. The following unaudited pro forma results of operations assume the Computech acquisition had occurred on January 1, 2014. Amortization of purchased intangibles and acquisition and integration related costs for the acquisition of Computech are included in all periods presented.
Pro Forma Financial Information | ||||||||||||||||
Three months ended September 30, | Nine months ended September 30, | |||||||||||||||
2015 | 2014 | 2015 | 2014 | |||||||||||||
Revenue |
$ | 82,310 | $ | 88,031 | $ | 249,077 | $ | 274,776 | ||||||||
Net income |
$ | 3,171 | $ | 3,828 | $ | 8,622 | $ | 8,755 | ||||||||
Basic earnings per share |
$ | 0.24 | $ | 0.30 | $ | 0.66 | $ | 0.68 | ||||||||
Diluted earnings per share |
$ | 0.23 | $ | 0.28 | $ | 0.63 | $ | 0.65 |
Preliminary Allocation of Purchase Price
NCI is evaluating the valuation of the assets acquired and liabilities assumed of Computech and will complete the purchase accounting entries relating to the acquisition prior to the end of NCIs quarter ending March 31, 2016. The fair values assigned to the intangible assets acquired were based on preliminary estimates, assumptions, and other information compiled by management, including independent valuations that utilized established valuation techniques. Based on the Companys preliminary valuation, the total consideration of approximately $56.7 million, net of $3.3 million of cash acquired, has been allocated to assets acquired (including identifiable intangible assets and goodwill) and liabilities assumed, as follows:
Accounts receivable |
5,385 | |||
Property and equipment |
108 | |||
Other assets |
2,914 | |||
Goodwill |
33,878 | |||
Definite-life intangible assets |
19,720 | |||
Accounts Payable |
(909 | ) | ||
Accrued salary and benefits |
(4,112 | ) | ||
Other accrued expenses |
(68 | ) | ||
Deferred revenue |
(227 | ) | ||
Deferred rent |
(32 | ) | ||
|
|
|||
$ | 56,657 | |||
|
|
The definite life intangibles recognized in the allocation of the Computech purchase price consists of $18.6 million in contracts and customer relationships and $1.1 million in developed software. The fair value of the definite-lived intangible asset for contracts and customer relationships is based on existing customer contracts and anticipated follow-on contracts with existing customers and will be amortized on a straight-line basis over its expected life of seven years. The fair value of the definite-lived intangible asset for developed software will be amortized on a straight-line basis over its expected useful life of three years.
All goodwill and intangible asset amortization related to the acquisition of Computech is expected to be deductible for income tax purposes.
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10. Dividends
Our board of directors declared and the Company paid the following dividends during the periods presented:
Declaration Date |
Dividend Per Share |
Record Date | Total Amount | Payment Date | ||||||||
February 11, 2015 |
$ | 0.12 | February 20, 2015 | $ | 1,561 | March 13, 2015 |
11. Related Party Transactions
The Company purchased services under a subcontract from Renegade Technology Systems, Inc. (formerly Net Commerce Corporation), which is a government contractor wholly-owned by Rajiv Narang, the son of Charles K. Narang, Chairman of the Board. For the three months ended September 30, 2015 and 2014, the expense incurred under this agreement was approximately $177,000 and $270,000, respectively. For the nine months ended September 30, 2015 and 2014, the expense incurred under this agreement was approximately $525,000 and $687,000, respectively. As of September 30, 2015 and 2014, outstanding amounts due to Renegade Technology Systems, Inc. under this agreement were $51,137 and zero, respectively.
12. Contingencies
Government Audits
Payments to the Company on U.S. Federal Government contracts are subject to adjustment upon audit by various agencies of the U.S. Federal Government. Audits of costs and the related payments have been performed through 2007 for NCI Information Systems, Inc., the Companys primary corporate vehicle for government contracting. In the opinion of management, the final determination of costs and related payments for unaudited years will not have a material effect on the Companys financial position, results of operations, or liquidity.
Litigation
The Company is party to various legal actions, claims, government inquiries, and audits resulting from the normal course of business. The Company believes that the probability is remote that any resulting liability will have a material effect on the Companys financial position, results of operations, or liquidity.
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Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
Forward-Looking Statements
This Quarterly Report on Form 10-Q, including the section titled Managements Discussion and Analysis of Financial Condition and Results of Operations, contains forward-looking statements regarding our business, financial condition, results of operations, and prospects. There are statements made herein, which may 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:
| our dependence on our contracts with U.S. Federal Government agencies, particularly within the U.S. Department of Defense, for the majority our revenue; delays performing work under our contracts due to bid protests; changes in U.S. Federal Government spending priorities; changes in contract type, particularly changes from cost-plus fee or time-and-material type contracts to firm fixed-price type contracts |
| a reduction in the overall U.S. defense budget, volatility in spending authorizations for defense and intelligence-related programs by the U.S. Federal Government or a shift in spending to programs in areas where we do not currently provide services |
| delays in the U.S. Federal Government appropriations process, or budgetary cuts resulting from Congressional committee recommendations or automatic sequestration under the Budget Control Act of 2011; U.S. Federal Governmental shutdowns (such as the shutdown that occurred during the U.S. Federal Governments 1996 and 2013 fiscal years); and other potential delays in the U.S. Federal Government appropriations process |
| changes in U.S. Federal Government programs or requirements, including the increased use of small business providers |
| failure to achieve contract awards in connection with recompetes for present business and/or competition for new business |
| U.S. Federal Government agencies more frequently awarding contracts on a technically acceptable/lowest cost basis in order to reduce expenditures |
| adverse results of U.S. Federal Government audits of our government contracts |
| competitive factors, such as pricing pressures and competition to hire and retain employees (particularly those with security clearances) |
| failure to identify and successfully integrate acquired companies or businesses into our operations or to realize any accretive or synergistic effects from such acquisitions, or effectively integrate acquisitions appropriate to the achievement of our strategic plans |
| economic conditions in the United States, including conditions that result from terrorist activities or war |
| material changes in policies, laws, or regulations applicable to our businesses, particularly legislation affecting (i) U.S. Federal Government contracts for services, (ii) outsourcing of activities that have been performed by the U.S. Federal Government, (iii) U.S. Federal Government contracts containing organizational conflict of interest clauses, (iv) delays related to agency specific funding freezes, and (v) competition for task orders under Government Wide Acquisition Contracts (GWAC), agency-specific Indefinite Delivery/Indefinite Quantity (IDIQ) contracts and/or schedule contracts with the General Services Administration |
| the U.S. Federal Governments insourcing of previously contracted support services and the realignment of funds to non-defense related programs |
| our ability to achieve the objectives of near-term or long-range business plans, particularly revenue growth, and the ability to realize benefits from future deferred tax assets; and |
| risk of contract non-performance or termination |
Some of these important factors are outlined under Item 1A. Risk Factors and elsewhere in our Annual Report on Form 10-K for the year ended December 31, 2014, as filed with the Securities and Exchange Commission (SEC), and from time to time in other filings with the SEC, such as our Current Reports on Forms 8-K and Quarterly Reports on Form 10-Q. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee our future results, level of activity, or performance. We undertake no obligation to update publicly or revise any forward-looking statements. You should not place undue reliance on any forward-looking statements.
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In this document, unless the context indicates otherwise, the terms Company, NCI, we, us, and our refer to NCI, Inc., a Delaware corporation, and, where appropriate, its subsidiaries.
OVERVIEW
We are a provider of information technology (IT) and professional services and solutions primarily to U.S. Federal Government agencies. Our technology and industry expertise enables us to provide a wide spectrum of services and solutions that assist our customers in achieving their program goals. We deliver these complex services and solutions by leveraging our skills across eight core capabilities:
| Cloud Computing and IT Infrastructure Optimization |
| Cybersecurity and Information Assurance |
| Engineering and Logistics Support |
| Enterprise Information Management and Advanced Analytics |
| Health IT and Medical Support |
| IT Service Management |
| Modeling, Training and Simulation |
| Agile Development and Integration |
Our team of highly skilled professionals is committed to service excellence and delivers innovative, cost-effective enterprise services and solutions on time and within budget. We are focused on reshaping the way services and solutions are delivered to our customers in order to proactively understand and meet their mission needs and enable them to rapidly adapt to dynamic environments. Headquartered in Reston, Virginia, the Company currently operates in more than 100 locations around the globe. We report operating results and financial data as one reportable segment.
Key Financial Metrics
Prime Contractor Revenue
The following table shows our revenue derived from contracts on which we serve as a prime contractor.
Three months ended September 30, | Nine months ended September 30, | |||||||||||||||
2015 | 2014 | 2015 | 2014 | |||||||||||||
Revenue derived from prime contracts |
92 | % | 92 | % | 92 | % | 92 | % |
Customer Group Revenue
The following table shows our revenue from the customer groups listed as a percentage of total revenue for the periods shown.
Three months ended September 30, | Nine months ended September 30, | |||||||||||||||
2015 | 2014 | 2015 | 2014 | |||||||||||||
Department of Defense and intelligence agencies |
59 | % | 73 | % | 60 | % | 75 | % | ||||||||
U.S. Federal civilian agencies |
41 | % | 27 | % | 40 | % | 25 | % |
The increase in revenue from U.S. federal civilian agencies for the period ending September 30, 2015 is mainly due to the acquisition of Computech in January 2015.
Contract Type Revenue
Our services and solutions are provided under three types of contracts: time-and-materials; cost-plus fee; and firm fixed-price. Our contract mix varies from year to year due to numerous factors including our business strategies and U.S. Federal Government procurement objectives.
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The following table shows our revenue from each of these types of contracts as a percentage of our total revenue for the periods shown.
Three months ended September 30, | Nine months ended September 30, | |||||||||||||||
2015 | 2014 | 2015 | 2014 | |||||||||||||
Time-and-materials |
23 | % | 16 | % | 23 | % | 16 | % | ||||||||
Cost-plus fee |
49 | % | 51 | % | 48 | % | 52 | % | ||||||||
Firm fixed-price |
28 | % | 33 | % | 29 | % | 32 | % |
The increase in revenue from time-and-materials contracts for the period ending September 30, 2015 is mainly due to the acquisition of Computech in January 2015.
The amount of risk and potential reward varies under each type of contract. Under time-and-materials contracts, we are paid a fixed hourly rate by labor category. To the extent that our actual labor costs vary significantly from the negotiated hourly rates, we may generate more or less than the targeted amount of profit. We are typically reimbursed for other contract direct costs and expenses at our cost, and typically receive no fee on those costs. For cost-plus fee contracts, there is limited financial risk, because we are reimbursed all our allowable costs, therefore the profit margins tend to be lower on cost-plus fee contracts. Under firm fixed-price contracts, we perform specific tasks or provide specified goods for a predetermined price. Compared to time-and-materials and cost-plus fee contracts, firm fixed-price service contracts generally offer higher profit margin opportunities but involve greater financial risk because we would bear the impact of potential cost overruns in return for the full benefit of any cost savings.
Contract Backlog
As of |
Funded Backlog | Total Backlog | ||||||
(in millions) | ||||||||
September 30, 2015 |
$ | 136 | $ | 506 | ||||
December 31, 2014 |
184 | 410 |
We define backlog as our estimate of the remaining future revenue from existing signed contracts over the remaining base contract performance period and from the option periods of those contracts that we believe are more likely than not to be exercised. Our backlog does not include any estimate of future potential delivery orders that might be awarded under our GWAC, agency-specific IDIQ, or other multiple-award contract vehicles. We define funded backlog as the portion of backlog for which funding currently is appropriated and obligated to us under a contract or other authorization for payment signed by an authorized purchasing agency, less the amount of revenue we have previously recognized. Our funded backlog does not represent the full potential value of our contracts, as Congress often appropriates funds for a particular program or agency on a quarterly or yearly basis, even though the contract may provide for the provision of services over a number of years. We define unfunded backlog, not included above, as the total backlog less the funded backlog. Unfunded backlog includes values for contract options that have been priced but not yet funded. Additional information on how we determine backlog is included in our Annual Report on Form 10-K for the year ended December 31, 2014, as filed with the SEC.
Computech Acquisition
On January 1, 2015, we completed our purchase of 100% of the outstanding stock of Computech, a leader in agile and lean application software development and IT operations and maintenance, for approximately $56.7 million, net of cash acquired. The acquisition was financed through a combination of cash on hand and borrowings of $34.0 million under our senior credit facility (described below).
The acquisition of Computech is in line with our growth strategy, which calls for the development of new customers and service offerings both organically and through mergers and acquisitions. We expect to allocate the purchase price among goodwill, customer relationships, and property and equipment. All goodwill and intangible asset amortization related to the acquisition of Computech is expected to be deductible for income tax purposes. We have included the results of Computech in our financial statements from the closing date forward.
In accordance with Accounting Standards Codification 805, Business Combinations, management is completing its valuation of acquired assets and assumed liabilities, and expects that a majority of the purchase price will be allocated to intangible assets, including goodwill, backlog and customer relationships, and developed software. In estimating the fair value of the acquired assets and assumed liabilities, the fair value estimates are based on, but not limited to, expected future revenue and cash flows, expected future growth rates, and estimated discount rates. The initial purchase price allocation is based upon all information available to us at the present time and is subject to change, and such changes could be material.
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Results of Operations
Three Months Ended September 30, 2015 Compared to Three Months Ended September 30, 2014
The following table sets forth certain items from our consolidated statements of income and expresses each item in dollars and as a percentage of revenue for the periods indicated:
Three months ended September 30, | ||||||||||||||||
2015 | 2014 | 2015 | 2014 | |||||||||||||
(in thousands) | (as a percentage of revenue) | |||||||||||||||
Revenue |
$ | 82,310 | $ | 75,660 | 100.0 | % | 100.0 | % | ||||||||
Operating expenses: |
||||||||||||||||
Cost of revenue |
68,677 | 64,102 | 83.4 | 84.7 | ||||||||||||
General and administrative expenses |
6,445 | 6,205 | 7.8 | 8.2 | ||||||||||||
Depreciation and amortization |
1,794 | 1,401 | 2.2 | 1.9 | ||||||||||||
Acquisition and integration related expenses |
6 | | 0.0 | | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total operating expenses |
76,922 | 71,708 | 93.5 | 94.8 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Operating income |
5,388 | 3,952 | 6.5 | 5.2 | ||||||||||||
Interest expense, net |
204 | 95 | 0.2 | 0.1 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Income before income taxes |
5,184 | 3,857 | 6.3 | 5.1 | ||||||||||||
Provision for income taxes |
2,013 | 1,495 | 2.4 | 2.0 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Net income |
$ | 3,171 | $ | 2,362 | 3.9 | % | 3.1 | % | ||||||||
|
|
|
|
|
|
|
|
Revenue
For the three months ended September 30, 2015, revenue increased by 8.8%, or $6.7 million, over the same period a year ago. This increase is principally due to revenues derived under contracts from NCIs Computech acquisition as well as new awards during the last year. The increase was partially offset by completed contracts and reductions in staffing and scope of work on certain contracts.
NCIs Program Executive Office Soldier (PEO Soldier) contract accounted for $7.3 million, or 8.8% of revenue, in the third quarter of 2015, down $1.2 million from $8.5 million, or 11.3% of revenue, in the third quarter of 2014.
Cost of revenue
Cost of revenue for the three months ended September 30, 2015 was $68.7 million, or 83.4% of revenue, compared to $64.1 million, or 84.7% of revenue, for the three months ended September 30, 2014. The increase in cost of revenue was primarily the result of the acquisition of Computech in January 2015. Cost of revenue as a percentage of revenue decreased primarily as a result of higher-margin revenue from Computech contracts.
General and administrative expenses
General and administrative expense increased 3.9%, or $0.2 million, for the three months ended September 30, 2015, as compared to the same period a year ago. The increase was primarily the result of additional costs to support our increased bid and proposal activity.
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Depreciation and amortization
Depreciation and amortization expense was approximately $1.8 million and $1.4 million for the quarters ended September 30, 2015 and 2014, respectively. The increase was primarily due to the amortization of intangible assets associated with the acquisition of Computech.
Interest expense, net
Interest expense, net, was $0.2 million and $0.1 million for the quarters ended September 30, 2015 and 2014, respectively. This increase was primarily due to a higher average loan balance in the quarter ended September 30, 2015 due to the acquisition of Computech in January 2015. During the third quarter of 2015, we had a weighted average outstanding loan balance of $18.8 million which accrued interest at a weighted average borrowing rate of 2.3%. During the third quarter of 2014, we had a weighted average outstanding loan balance of $0.0 million which would have accrued interest at a weighted average borrowing rate of 2.3% had there been a balance.
Provision for income taxes
Provision for income taxes increased by $0.5 million in the three months ended September 30, 2015, as compared to the three months ended September 30, 2014. This increase was due to higher operating income for the period ended September 30, 2015. The effective income tax rate for the quarter ended September 30, 2015 and 2014 was approximately 38.8%.
Nine Months Ended September 30, 2015 Compared to Nine Months Ended September 30, 2014
The following table sets forth certain items from our consolidated statements of income and expresses each item in dollars and as a percentage of revenue for the periods indicated:
Nine months ended September 30, | ||||||||||||||||
2015 | 2014 | 2015 | 2014 | |||||||||||||
(in thousands) | (as a percentage of revenue) | |||||||||||||||
Revenue |
$ | 249,077 | $ | 242,588 | 100.0 | % | 100.0 | % | ||||||||
Operating expenses: |
||||||||||||||||
Cost of revenue |
207,832 | 208,033 | 83.4 | 85.8 | ||||||||||||
General and administrative expenses |
19,941 | 19,967 | 8.0 | 8.2 | ||||||||||||
Depreciation and amortization |
5,774 | 4,302 | 2.3 | 1.8 | ||||||||||||
Acquisition and integration related expenses |
428 | | 0.2 | | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total operating expenses |
233,975 | 232,302 | 93.9 | 95.8 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Operating income |
15,102 | 10,286 | 6.1 | 4.2 | ||||||||||||
Interest expense, net |
662 | 302 | 0.3 | 0.1 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Income before income taxes |
14,440 | 9,984 | 5.8 | 4.1 | ||||||||||||
Provision for income taxes |
5,818 | 3,956 | 2.3 | 1.6 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Net income |
$ | 8,622 | $ | 6,028 | 3.5 | % | 2.5 | % | ||||||||
|
|
|
|
|
|
|
|
Revenue
For the nine months ended September 30, 2015, total revenue increased 2.7%, or $6.5 million from $242.6 million to $249.1 million, over the same period a year ago. The increase was primarily due to revenues derived under contracts from our Computech acquisition and new awards, offset by lower revenue attributable to services provided on our PEO Soldier contract, lower pass-through revenue, reductions in scope of work, and the expiration of task orders and contracts. Our PEO Soldier contract accounted for $23.9 million, or 9.6% of revenue, for the nine months ended September 30, 2015, down $4.9 million from $28.8 million, or 11.9% of revenue, for the nine months ended September 30, 2014.
Cost of revenue
Cost of revenue decreased 0.1% or $0.2 million from $208.0 million to $207.8 million, for the nine months ended September 30, 2015, as compared to the same period a year ago. This decrease was primarily the result of reduced hardware, software and subcontractor costs, offset slightly by an increase in direct labor. Cost of revenue represented 83.4% of revenue for the nine months ended September 30, 2015, as compared to 85.8% for the nine months ended September 30, 2014. This decrease was primarily the result of the factors affecting revenue and the associated indirect costs, and improved margins on certain contracts.
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General and administrative expenses
General and administrative expenses decreased 0.1%, for the nine months ended September 30, 2015, as compared to the same period a year ago. The decrease was primarily due to lower stock compensation expense.
Depreciation and amortization
Depreciation and amortization expense was approximately $5.8 and $4.3 million for the nine months ended September 30, 2015 and 2014, respectively. The increase was primarily due to the amortization of intangible assets associated with the acquisition of Computech.
Interest expense, net
Interest expense, net was approximately $0.7 million and $0.3 million for the nine months ended September 30, 2015 and 2014, respectively. During the nine months ended September 30, 2015, we had a weighted average outstanding loan balance of $23.2 million which accrued interest at a weighted average borrowing rate of 2.3%. During the nine months ended September 30, 2014, we had a weighted average outstanding loan balance of $1.7 million which accrued interest at a weighted average borrowing rate of 2.3%.
The increase was primarily attributable to a higher weighted average loan balance due to the acquisition of Computech in January 2015.
Provision for income taxes
For the nine months ended September 30, 2015, provision for income taxes increased to $5.8 million from $4.0 million in the same period a year ago, due to increased pretax income and a higher effective tax rate. The effective income tax rate for the nine months ended September 30, 2015 and 2014 was approximately 40.3%, and 39.6%, respectively. The increase in the effective rate was due to changes in the state blended rate.
Liquidity and Capital Resources
Our primary liquidity needs are for financing working capital, capital expenditures, stock repurchases, and making selective strategic acquisitions. Historically, we have relied primarily on our cash flow from operations and borrowings under our credit facility to provide the capital for our liquidity needs. As part of our growth strategy, we may pursue acquisitions that could require us to incur additional debt or issue new equity. We expect the combination of our current cash, cash flow from operations, and the available borrowing capacity under our credit facility to continue to meet our normal working capital, capital expenditures and other cash requirements.
During the nine months ended September 30, 2015, the balance of accounts receivable decreased by $0.1 million to $52.8 million at the end of the quarter. Days sales outstanding of accounts receivable (DSO) decreased 6 days to 59 days at September 30, 2015 as compared to 65 days at December 31, 2014. As of September 30, 2015, $11.3 million was due under the credit facility, as compared to $0.0 million outstanding as of December 31, 2014, reflecting $11.3 million of net borrowing during the first nine months of 2015 due to the acquisition of Computech on January 1, 2015. Net cash provided by operating activities was $22.5 million at September 30, 2015 and was used to pay down borrowings under the credit facility and pay a special one-time dividend of $0.12 per share. On January 1, 2015, the Company completed its acquisition of Computech for approximately $56.7 million, net of cash acquired.
Our board of directors authorized management to repurchase up to $25.0 million of our Class A common stock pursuant to a stock repurchase program. If shares are repurchased, the shares will be repurchased pursuant to open market purchases, privately negotiated transactions, or block transactions. We have no obligation to repurchase shares under the authorization, and the timing, actual number and value of the shares which are repurchased (and the manner of any such repurchase) will be at the discretion of management and will depend on a number of factors, including the price of our common stock, our Companys cash needs, borrowing capacity under our credit facility, interest rates, and our financial performance and position. We may suspend or discontinue repurchases at any time.
During 2014 and the nine months ended September 30, 2015, we did not repurchase any shares. At September 30, 2015, we had $16.7 million remaining under the board of directors authorization for share repurchases.
Credit Facility: Our senior credit facility, amended in December 2014 and referred to herein as the credit facility, consists of a revolving line of credit with a borrowing capacity of up to an $80.0 million principal amount, and a $45.0 million accordion feature allowing us to increase our borrowing capacity to up to a $125.0 million principal amount, subject to obtaining commitments for the incremental capacity from existing or new lenders. The outstanding borrowings are collateralized by a security interest in substantially all the Companys assets. The lenders also require a direct assignment of all contracts at the lenders discretion. The outstanding balance under the credit facility accrues interest based on one-month LIBOR plus an applicable margin, ranging from 210 to 310 basis points, based on the ratio of our outstanding senior funded debt to Earnings before Interest, Taxes, Depreciation, and Amortization (EBITDA) as defined in the credit facility agreement.
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The credit facility allows us to use borrowings thereunder of up to $17.5 million to repurchase shares of our common stock. Funds borrowed under the credit facility may be used to finance possible future acquisitions, for working capital requirements, for stock repurchases, for cash dividends or for general corporate uses.
The loan interest accrual rate is set monthly at one-month LIBOR plus a set amount per the credit facility.
The credit facility contains various restrictive covenants that restrict, among other things, our ability to incur or guarantee additional debt; make certain distributions, investments and other restricted payments such as dividends; enter into transactions with certain affiliates; create or permit certain liens; and consolidate, merge, or sell assets. In addition, the credit facility contains certain financial covenants that require us to maintain a minimum tangible net worth; maintain a minimum fixed charge coverage ratio; maintain a minimum funded debt to earnings ratio; and limit capital expenditures below certain thresholds. There are no restrictions on our retained earnings in the credit facility.
As of September 30, 2015, we were in compliance with all our loan covenants.
Off-Balance Sheet Arrangements
We do not have any material off-balance sheet arrangements.
Critical Accounting Policies
There have been no significant changes to our Critical Accounting Policies during the third quarter of 2015. Refer to the Critical Accounting Policies section in our Annual Report on Form 10-K for the year ended December 31, 2014, as filed with the SEC.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
The Companys exposure to market risk relates to changes in interest rates for borrowings under its credit facility. For the quarter ended September 30, 2015, a change of one percentage point in interest rates would have changed NCIs interest expense or cash flows by less than $0.1 million. This estimate is based on our average balances for the period.
Additionally, the Company is subject to credit risks associated with our cash, cash equivalents, and accounts receivable. NCI believes that the concentration of credit risk with respect to cash equivalents is limited due to the high credit quality of these investments. NCIs investment policy requires that the Company invest excess cash in high-quality investments, which preserve principal, provide liquidity, and minimize investment risk. NCI also believes that its credit risk associated with accounts receivable is limited as they are primarily with the U.S. Federal Government or prime contractors working for the U.S. Federal Government.
Item 4. Controls and Procedures
Evaluation of the Effectiveness of Disclosure Controls and Procedures
As of September 30, 2015, under the supervision and with the participation of NCIs management, including our Chief Executive Officer and our Chief Financial Officer, the Company had evaluated the effectiveness of its disclosure controls and procedures, as defined in Rule 13a-15(e) of the Securities Exchange Act of 1934, as amended (the Exchange Act). Based on this evaluation, NCIs Chief Executive Officer and Chief Financial Officer concluded that the Companys disclosure controls and procedures were effective, as of September 30, 2015, such that the information that is required to be disclosed in NCIs reports filed with the SEC (i) is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms and (ii) is accumulated and communicated to management, including NCIs Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.
Changes in Internal Control over Financial Reporting
The Company made no change to its internal control over financial reporting (as defined in Rule 13a-15(f) of the Exchange Act) identified in connection with the evaluation required by Rule 13a-15(d) under the Exchange Act during the three months ended September 30, 2015 that has materially affected, or is reasonably likely to materially affect, its internal control over financial reporting.
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OTHER INFORMATION
The Company is party to various legal actions, claims, government inquiries, and audits resulting from the normal course of business. The Company currently believes that the probability is remote that any resulting liability will have a material effect on the Companys financial position, results of operations, or cash flows.
There have been no significant changes in our risk factors from those discussed in Item 1A. Risk Factors included in the Companys Annual Report on Form 10-K for the year ended December 31, 2014, as filed with the SEC.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
None
Item 3. Defaults Upon Senior Securities
None
Item 4. Mine Safety Disclosures
Not applicable
None
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Number |
Description | |
2.1 | Stock Purchase Agreement among NCI Information Systems, Inc. a wholly owned subsidiary of NCI, and stockholders of Computech, Inc. dated as of December 24, 2014 (incorporated herein by reference from Exhibit 2.1 to registrants Current Report on Form 8-K dated December 22, 2014, and filed with the Commission on December 29, 2014) | |
3.1 | Amended and Restated Certificate of Incorporation of the Registrant (incorporated herein by reference from Exhibit 3.1 to registrants Registration Statement on Form S-1 (File No. 333-127006), as filed with the Commission on October 4, 2005, as amended). | |
3.2 | Bylaws of the Registrant (incorporated herein by reference from Exhibit 3.2 to registrants Registration Statement on Form S-1 (File No. 333-127006), as filed with the Commission on July 29, 2005). | |
4.1 | Specimen Class A Common Stock Certificate (incorporated herein by reference from Exhibit 4.1 to registrants Registration Statement on Form S-1 (File No. 333-127006), as filed with the Commission on October 20, 2005, as amended). | |
4.2* | NCI, Inc. Amended and Restated 2005 Performance Incentive Plan (incorporated herein by reference from Appendix A to registrants Definitive Proxy Statement on Schedule 14A, as filed with the Commission on April 30, 2009). | |
4.3* | Form of Amended and Restated 2005 Performance Incentive Plan Notice of Stock Option Grant and Stock Option Agreement (incorporated herein by reference from Exhibit 4.2 to registrants Current Report on Form 8-K dated June 10, 2009 and filed with the Commission on June 12, 2009). |
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Number |
Description | |
31.1 | Certification of the Chief Executive Officer pursuant to rule 13a-14(a) of the Securities Exchange Act of 1934, as amended. | |
31.2 | Certification of the Chief Financial Officer pursuant to rule 13a-14(a) of the Securities Exchange Act of 1934, as amended. | |
32.1 | Certification of the Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | |
101.INS | XBRL Instance Document | |
101.SCH | XBRL Extension Schema | |
101.CAL | XBRL Extension Calculation Linkbase | |
101.DEF | XBRL Extension Definition Linkbase | |
101.LAB | XBRL Extension Label Linkbase | |
101.PRE | XBRL Extension Presentation Linkbase |
| Included with this filing. |
* | Management Contract or Compensatory Plan or Arrangement. |
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Table of Contents
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
NCI, Inc. | ||||||
Registrant | ||||||
Date: October 30, 2015 | By: | /s/ LUCAS J. NAREL | ||||
Lucas J. Narel | ||||||
Executive Vice President, Chief Financial Officer and Treasurer | ||||||
(Principal Financial Officer) | ||||||
(Principal Accounting Officer) |
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