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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 JUNE 30, 2016

 

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number 000-51579

 

 

 

LOGO

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)

Registrant’s 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   x
Non-accelerated filer   ¨  (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 July 22, 2016, there were 9,004,397 shares outstanding of the registrant’s Class A common stock and 4,500,000 shares outstanding of the registrant’s Class B common stock. Shares of the Class B common stock are convertible on a one-for-one basis into shares of Class A common stock.

 

 

 


Table of Contents

NCI, INC.

 

         PAGE  

PART I: UNAUDITED FINANCIAL INFORMATION

     1   

Item 1.

 

Condensed Consolidated Financial Statements

     1   

Item 2.

 

Management’s Discussion and Analysis of Financial Condition and Results of Operations

     9   

Item 3.

 

Quantitative and Qualitative Disclosures About Market Risk

     15   

Item 4.

 

Controls and Procedures

     15   

PART II: OTHER INFORMATION

     16   

Item 1.

 

Legal Proceedings

     16   

Item 1A.

 

Risk Factors

     16   

Item 2.

 

Unregistered Sales of Equity Securities and Use of Proceeds

     16   

Item 3.

 

Defaults Upon Senior Securities

     16   

Item 4.

 

Mine Safety Disclosures

     16   

Item 5.

 

Other Information

     16   

Item 6.

 

Exhibits

     17   
 

Signatures

     18   


Table of Contents

PART 1

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 June 30,      Six months ended June 30,  
     2016      2015      2016      2015  

Revenue

   $ 81,900       $ 85,799       $ 165,555       $ 166,767   

Operating expenses:

           

Cost of revenue

     67,921         71,553         137,908         139,155   

General and administrative expenses

     6,812         6,866         12,941         13,495   

Depreciation and amortization

     1,684         1,892         3,476         3,981   

Acquisition and integration related expenses

     —           192         —           422   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total operating expenses

     76,417         80,503         154,325         157,053   
  

 

 

    

 

 

    

 

 

    

 

 

 

Operating income

     5,483         5,296         11,230         9,714   

Interest expense, net

     153         221         343         459   
  

 

 

    

 

 

    

 

 

    

 

 

 

Income before income taxes

     5,330         5,075         10,887         9,255   

Provision for income taxes

     2,100         2,029         4,324         3,804   
  

 

 

    

 

 

    

 

 

    

 

 

 

Net income

   $ 3,230       $ 3,046       $ 6,563       $ 5,451   
  

 

 

    

 

 

    

 

 

    

 

 

 

Earnings per common and common equivalent share:

           

Basic:

           

Weighted average shares outstanding

     13,184         13,013         13,169         12,991   

Net income per share

   $ 0.25       $ 0.23       $ 0.50       $ 0.42   
  

 

 

    

 

 

    

 

 

    

 

 

 

Diluted:

           

Weighted average shares outstanding

     13,858         13,603         13,847         13,604   

Net income per share

   $ 0.23       $ 0.22       $ 0.47       $ 0.40   
  

 

 

    

 

 

    

 

 

    

 

 

 

Cash dividend declared and paid per share

     —           —         $ 0.15       $ 0.12   
  

 

 

    

 

 

    

 

 

    

 

 

 

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
June 30,
2016
    As of
December 31,
2015
 

Assets:

    

Current assets:

    

Cash and cash equivalents

   $ 138      $ 233   

Accounts receivable, net

     54,398        60,044   

Prepaid expenses and other current assets

     4,932        3,447   
  

 

 

   

 

 

 

Total current assets

     59,468        63,724   

Property and equipment, net

     5,870        6,698   

Other assets

     1,523        1,548   

Deferred tax assets, net

     38,722        38,789   

Intangible assets, net

     17,410        19,231   

Goodwill

     33,878        33,878   
  

 

 

   

 

 

 

Total assets

   $ 156,871      $ 163,868   
  

 

 

   

 

 

 

Liabilities and stockholders’ equity:

    

Current liabilities:

    

Current portion of long-term debt

   $ 7,107      $ —     

Accounts payable

     12,112        19,693   

Accrued salaries and benefits

     15,928        18,977   

Deferred revenue

     2,285        2,217   

Other accrued expenses

     4,985        3,843   
  

 

 

   

 

 

 

Total current liabilities

     42,417        44,730   
  

 

 

   

 

 

 

Long-term debt

     —          10,000   

Other long-term liabilities

     2,636        2,578   
  

 

 

   

 

 

 

Total liabilities

     45,053        57,308   
  

 

 

   

 

 

 

Stockholders’ equity:

    

Class A common stock, $0.019 par value—37,500 shares authorized; 9,921 shares issued and 9,004 shares outstanding as of June 30, 2016, and 9,843 shares issued and 8,961 shares outstanding as of December 31, 2015

     188        187   

Class B common stock, $0.019 par value—12,500 shares authorized; 4,500 shares issued and outstanding as of June 30, 2016 and December 31, 2015

     86        86   

Additional paid-in capital

     77,283        76,569   

Treasury stock at cost—917 shares of Class A common stock as of June 30, 2016 and December 31, 2015

     (8,331     (8,331

Retained earnings

     42,592        38,049   
  

 

 

   

 

 

 

Total stockholders’ equity

     111,818        106,560   
  

 

 

   

 

 

 

Total liabilities and stockholders’ equity

   $ 156,871      $ 163,868   
  

 

 

   

 

 

 

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)

 

     Six months ended June 30,  
     2016     2015  

Cash flows from operating activities:

    

Net income

   $ 6,563      $ 5,451   

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

    

Depreciation and amortization

     3,476        3,981   

Share-based compensation

     543        696   

Deferred income taxes

     67        73   

Changes in operating assets and liabilities:

    

Accounts receivable, net

     5,646        1,254   

Prepaid expenses and other assets

     (1,462     2,682   

Accounts payable

     (7,581     2,386   

Accrued expenses and other liabilities

     (1,779     (2,546
  

 

 

   

 

 

 

Net cash provided by operating activities

     5,473        13,977   
  

 

 

   

 

 

 

Cash flows from investing activities:

    

Purchases of property and equipment

     (827     (849

Cash paid for acquisition, net of cash acquired

     —          (56,657
  

 

 

   

 

 

 

Net cash used in investing activities

     (827     (57,506
  

 

 

   

 

 

 

Cash flows from financing activities:

    

Borrowings under credit facility

     91,636        106,975   

Repayments on credit facility

     (94,529     (87,475

Proceeds from exercise of stock options

     172        217   

Repurchase of stock awards

     —          (39

Dividends paid

     (2,020     (1,561
  

 

 

   

 

 

 

Net cash (used in) provided by financing activities

     (4,741     18,117   
  

 

 

   

 

 

 

Net change in cash and cash equivalents

     (95     (25,412

Cash and cash equivalents, beginning of period

     233        25,819   
  

 

 

   

 

 

 

Cash and cash equivalents, end of period

   $ 138      $ 407   
  

 

 

   

 

 

 

Supplemental disclosure of cash flow information:

    

Cash paid during the period for:

    

Interest

   $ 263      $ 414   
  

 

 

   

 

 

 

Income taxes

   $ 3,010      $ 2,333   
  

 

 

   

 

 

 

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 U. S. 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 Company’s financial position as of June 30, 2016 and its results of operations for the three and six months ended June 30, 2016 and 2015, and cash flows for the six months ended June 30, 2016 and 2015, which consists of normal and recurring adjustments. The information disclosed in the notes to the financial statements for these periods is unaudited. The current period’s 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 per share numbers. For further information, refer to the financial statements and footnotes included in NCI’s Annual Report on Form 10-K for the year ended December 31, 2015, as filed with the SEC.

Recently Issued Accounting Pronouncements

On November 20, 2015, the FASB issued ASU 2015-17, Balance Sheet Classification of Deferred Taxes. To simplify the presentation of deferred income taxes, the amendments in this ASU require that deferred tax assets and liabilities be classified as non-current in a classified balance sheet. As permitted, the Company elected to early adopt this ASU using the retrospective approach, effective with its Form 10-Q filing for March 31, 2016. As a result of adopting this ASU, current net deferred taxes of $4.0 million were reclassified to net non-current deferred taxes as of December 31, 2015. The adoption of ASU 2015-17 had no impact on the Company’s consolidated statements of income or cash flows for year ended December 31, 2015 or the condensed consolidated statements of income or cash flows three and six month periods ended June 30, 2016.

In February 2016, the FASB issued ASU 2016-02, which requires the recognition of right-to-use assets and lease liabilities arising from capital leases and operating leases in the statement of comprehensive income and the statement of financial position, respectively. The Company will adopt the standard effective January 1, 2019. The Company has not yet completed its evaluation of the impact that the standard may have on its consolidated balance sheet. The actual impact will depend on the Company’s lease portfolio at the time of adoption.

In March 2016, the FASB issued ASU 2016-08, which clarifies the implementation guidance with respect to principal versus agent considerations under the new revenue recognition standard, ASU 2014-09, Revenue from Contracts with Customers. In April 2016, the FASB issued ASU 2016-10, which clarifies the implementation guidance with respect to identifying promised goods or services from a principal and agent perspective under ASU 2014-09. The Company will adopt the standard effective January 1, 2018 and is continuing to evaluate the full effect that ASU 2014-09 and related subsequent updates will have on its consolidated financial statements and related disclosures.

In March 2016, the FASB issued ASU 2016-09, which simplifies several aspects of the accounting for share-based payments, including immediate recognition of all excess tax benefits and deficiencies in the income statement, changing the threshold to qualify for equity classification up to the employees’ maximum statutory tax rates, allowing an entity-wide accounting policy election to either estimate the number of awards that are expected to vest or account for forfeitures as they occur, and clarifying the classification on the statement of cash flows for the excess tax benefit and employee taxes paid when an employer withholds shares for tax-withholding purposes. The Company is evaluating the full effect that ASU 2016-09 will have on its consolidated financial statements and will adopt the standard effective January 1, 2017.

2. Business Overview

NCI is a leading provider of enterprise solutions and services to U.S. defense, intelligence, health care and civilian government agencies. The Company has the expertise and proven track record to solve its customers’ most important and complex mission challenges through technology and innovation. The Company’s 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,

 

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Virginia, the Company has approximately 2,000 employees operating at more than 100 locations worldwide. The majority of the Company’s 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 and six months ended June 30, 2016, the Company generated approximately 64% of revenue from the Department of Defense, including agencies within the intelligence community, and approximately 36% of revenue from federal civilian agencies. For the three and six months ended June 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.

NCI’s Program Executive Office Soldier (“PEO Soldier”) contract is the Company’s largest revenue-generating contract and accounted for approximately 17% and 10% of revenue for the three months ended June 30, 2016 and 2015, respectively. The Company’s PEO Soldier program is a cost-plus fee contract consisting of a base period and four option periods for a total term of five years, which commenced in October 2015. NCI’s Cyber Network Operations and Security Support (CNOSS) program, supporting the U.S. Army Network Enterprise Technology Command accounted for approximately 11% and 7% of revenue for the three months ended June 30, 2016 and 2015, respectively. This cost-plus-fixed-fee, single-award indefinite delivery indefinite quantity contract consists of a 12-month base period with two one-year option periods and one six-month option period, and commenced in October 2014.

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 June 30, 2016 and 2015, approximately 8,000 and 131,000 shares, respectively, were not included in the computation of diluted earnings per share, because to do so would have been anti-dilutive. For the six months ended June 30, 2016 and 2015, approximately 4,000 and 115,000 shares, respectively, were not included in the computation of diluted earnings per share, because to do so would have been anti-dilutive. The following table details the computation of basic and diluted earnings per common share (Class A and Class B) for the three and six months ended June 30, 2016 and 2015.

 

     Three months ended June 30,      Six months ended June 30,  
     2016      2015      2016      2015  

Net income

   $ 3,230       $ 3,046       $ 6,563       $ 5,451   
  

 

 

    

 

 

    

 

 

    

 

 

 

Weighted average number of basic shares outstanding during the period

     13,184         13,013         13,169         12,991   

Dilutive effect of stock options and restricted stock after application of treasury stock method

     674         591         678         614   
  

 

 

    

 

 

    

 

 

    

 

 

 

Weighted average number of diluted shares outstanding during the period

     13,858         13,603         13,847         13,604   
  

 

 

    

 

 

    

 

 

    

 

 

 

Basic earnings per share

   $ 0.25       $ 0.23       $ 0.50       $ 0.42   
  

 

 

    

 

 

    

 

 

    

 

 

 

Diluted earnings per share

   $ 0.23       $ 0.22       $ 0.47       $ 0.40   
  

 

 

    

 

 

    

 

 

    

 

 

 

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  
     June 30,
2016
     December 31,
2015
 

Billed receivables

   $ 21,499       $ 23,621   

Unbilled receivables:

     

Amounts billable at end of period

     26,480         27,185   

Other

     7,161         9,980   
  

 

 

    

 

 

 

Total unbilled receivables

     33,641         37,165   
  

 

 

    

 

 

 

Total accounts receivable

     55,140         60,787   

Less: Allowance for doubtful accounts

     742         742   
  

 

 

    

 

 

 

Total accounts receivable, net

   $ 54,398       $ 60,044   
  

 

 

    

 

 

 

 

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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  
     June 30,
2016
     December 31,
2015
 

Property and equipment

     

Furniture and equipment

   $ 24,502       $ 26,573   

Leasehold improvements

     9,388         9,323   

Real property

     549         549   
  

 

 

    

 

 

 
     34,519         36,444   

Less: Accumulated depreciation and amortization

     28,649         29,746   
  

 

 

    

 

 

 

Property and equipment, net

   $ 5,870       $ 6,698   
  

 

 

    

 

 

 

Depreciation and amortization expense for the three months ended June 30, 2016 and 2015 was $0.8 million. Depreciation expense for the six months ended June 30, 2016 and 2015 was $1.7 million and $1.8 million, respectively.

6. Intangible Assets

The following table details intangible assets at the end of each period:

 

     As of  
     June 30,
2016
     December 31,
2015
 

Contract and customer relationships

   $ 39,594       $ 39,594   

Developed software

     1,113         1,113   

Less: Accumulated amortization

     (23,297      (21,476
  

 

 

    

 

 

 

Intangible assets, net

   $ 17,410       $ 19,231   
  

 

 

    

 

 

 

Amortization expense of intangible assets for the three months ended June 30, 2016 and 2015 was $0.9 million and $1.1 million, respectively. Amortization expense of intangible assets for the six months ended June 30, 2016 and 2015 was $1.8 million and $2.2 million, respectively. Intangible assets are primarily amortized on a straight line basis over periods ranging from three to 11 years. Expected amortization expense for the remainder of the fiscal year ending December 31, 2016, and for each of the fiscal years thereafter, is as follows:

 

For the year ending December 31,

      

2016 (remaining six months)

   $ 1,823   

2017

     3,632   

2018

     3,149   

2019

     3,049   

2020

     3,027   

Thereafter

     2,730   
  

 

 

 
   $ 17,410   
  

 

 

 

 

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7. Share-Based Payments

During the three and six months ended June 30, 2016, the Company granted 25,000 stock options to purchase shares of Class A common stock with a weighted-average exercise price of $13.29, which represents the fair market value at the date of grant. During the three months ended June 30, 2016, no stock options were exercised. During the six months ended June 30, 2016, 38,332 stock options were exercised at a weighted-average exercise price of $4.48. As of June 30, 2016, there were 1,534,500 stock options outstanding.

During the three months ended June 30, 2016, 20,000 restricted shares were granted and 20,000 restricted shares were cancelled. During the six months ended June 30, 2016, 25,000 restricted shares were granted and 20,000 restricted shares were cancelled. As of June 30, 2016, there were 320,000 shares of restricted stock outstanding.

The following table summarizes stock compensation expense allocated to cost of revenue and general and administrative costs for the three and six months ended June 30, 2016 and 2015:

 

     Three months ended June 30,      Six months ended June 30,  
     2016      2015      2016      2015  

Cost of revenue

   $ 36       $ 59       $ 115       $ 122   

General and administrative

     178         267         428         574   
  

 

 

    

 

 

    

 

 

    

 

 

 
   $ 214       $ 326       $ 543       $ 696   
  

 

 

    

 

 

    

 

 

    

 

 

 

As of June 30, 2016, there was approximately $3.6 million of total unrecognized compensation cost related to unvested stock compensation arrangements. This cost is expected to be fully amortized over the next five years, with approximately $0.5 million, $0.9 million, $0.9 million, $0.7 million and $0.6 million amortized during the remainder of 2016, and the full years of 2017, 2018, 2019, and 2020, respectively. The cost of stock compensation is included in the Company’s Condensed Consolidated Statements of Income and expensed over the service period of the options.

8. Debt

NCI’s 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 the Company to increase its 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 Company’s 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 Company’s outstanding senior funded debt to Earnings before Interest, Taxes, Depreciation, and Amortization (EBITDA) as defined in the credit facility. The credit facility expires on January 31, 2017. Accordingly all borrowings are classified as current liabilities as they are due and payable within the next 12 months.

The credit facility contains various covenants that limit, among other things, the Company’s ability to incur or guarantee additional debt; make certain distributions, investments and other restricted payments, including limits on cash dividends on the Company’s 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 June 30, 2016, 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 six months ended June 30, 2016. At June 30, 2016, $16.7 million was remaining under the board of directors’ authorization for share repurchases.

 

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During the second quarter of 2016, NCI had a weighted average outstanding loan balance of $16.4 million which accrued interest at a weighted average borrowing rate of 2.5%. During the second quarter of 2015, NCI had a weighted average outstanding loan balance of $24.7 million which accrued interest at a weighted average borrowing rate of 2.3%.

As of June 30, 2016, the outstanding balance under the credit facility was $7.1 million and interest accrued at a rate of one-month LIBOR plus 210 basis points, or 2.5%.

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. 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.

Allocation of Purchase Price

NCI has completed the valuation of the assets acquired and liabilities assumed of Computech. The fair values assigned to the intangible assets acquired were based on estimates, assumptions, and other information compiled by management, including independent valuations that utilized established valuation techniques. Based on the Company’s 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 and other assets

     8,407   

Goodwill

     33,878   

Definite-life intangible assets

     19,720   

Accrued salary and benefits

     (4,112

Other accrued expenses

     (1,236
  

 

 

 
   $ 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.

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 10, 2015

   $ 0.12         February 25, 2015       $ 1,561         March 13, 2015   

February 8, 2016

   $ 0.15         February 26, 2016       $ 2,020         March 18, 2016   

11. Related Party Transactions

The Company purchases services under a subcontract from Renegade Technology Systems, Inc., 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 June 30, 2016 and 2015, the expense incurred under this agreement was approximately $201,000 and $182,000, respectively. For the six months ended June 30, 2016 and 2015, the expense incurred under this agreement was approximately $358,000 and $348,000, respectively. As of June 30, 2016 and 2015, outstanding amounts due to Renegade Technology Systems, Inc. under this agreement were $65,566 and $60,378, 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 Company’s 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 Company’s 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 Company’s financial position, results of operations, or liquidity.

 

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Forward-Looking Statements

This Quarterly Report on Form 10-Q, including the section titled “Management’s 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 of 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 shutdowns that occurred during the U.S. Federal Government’s 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 U.S., 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 Government’s “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, 2015, as filed with the U.S. 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.

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.

 

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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.

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 June 30,     Six months ended June 30,  
     2016     2015     2016     2015  

Revenue derived from prime contracts

     94     91     94     91

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 June 30,     Six months ended June 30,  
     2016     2015     2016     2015  

Department of Defense and intelligence agencies

     64     60     64     60

U.S. Federal civilian agencies

     36     40     36     40

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 June 30,     Six months ended June 30,  
     2016     2015     2016     2015  

Time-and-materials

     17     22     17     23

Cost-plus fee

     61     49     60     47

Firm fixed-price

     22     29     23     30

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  
     June 30, 2016      December 31, 2015  
     (in millions)  

Funded backlog

   $ 120       $ 147   

Total backlog

   $ 507       $ 552   

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, 2015, as filed with the SEC.

Results of Operations

Three Months Ended June 30, 2016 Compared to Three Months Ended June 30, 2015

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 June 30,  
     2016      2015      2016     2015  
     (in thousands)      (as a percentage of revenue)  

Revenue

   $ 81,900       $ 85,799         100.0     100.0

Operating expenses:

          

Cost of revenue

     67,921         71,553         83.0        83.4   

General and administrative expenses

     6,812         6,866         8.3        8.0   

Depreciation and amortization

     1,684         1,892         2.0        2.2   

Acquisition and integration related expenses

     —           192         —          0.2   
  

 

 

    

 

 

    

 

 

   

 

 

 

Total operating expenses

     76,417         80,503         93.3        93.8   
  

 

 

    

 

 

    

 

 

   

 

 

 

Operating income

     5,483         5,296         6.7        6.2   

Interest expense, net

     153         221         0.2        0.3   
  

 

 

    

 

 

    

 

 

   

 

 

 

Income before income taxes

     5,330         5,075         6.5        5.9   

Provision for income taxes

     2,100         2,029         2.6        2.4   
  

 

 

    

 

 

    

 

 

   

 

 

 

Net income

   $ 3,230       $ 3,046         3.9     3.5
  

 

 

    

 

 

    

 

 

   

 

 

 

 

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Revenue

For the three months ended June 30, 2016, revenue decreased by 4.5%, or $3.9 million, over the same period a year ago. The decrease was due mostly to completed contracts, work that was set aside for small businesses, and reductions in staffing and scope of work on certain contracts, partially offset by revenues derived under the expanded PEO Soldier program, CNOSS program, and other new awards.

NCI’s PEO Soldier program accounted for $13.6 million, or 16.6% of revenue, in the second quarter of 2016, up $5.4 million from $8.2 million, or 9.6% of revenue, in the second quarter of 2015. NCI’s CNOSS program accounted for $9.3 million, or 11.4% of revenue, in the second quarter of 2016, up $3.6 million from $5.6 million, or 6.6% of revenue, in the second quarter of 2015.

Cost of revenue

Cost of revenue for the three months ended June 30, 2016 was $68.0 million, or 83.0% of revenue, compared to $71.6 million, or 83.4% of revenue, for the three months ended June 30, 2015. The decrease in cost of revenue was primarily the result of the greater contribution of direct labor and more efficient absorption of indirect costs for the period.

General and administrative expenses

General and administrative expenses decreased 0.8%, or $0.1 million, for the three months ended June 30, 2016, as compared to the same period a year ago. The decrease was primarily due to lower indirect labor costs, more efficient allocation of business development expenses, lower executive compensation costs, and decreased stock compensation expense, partially offset by an increase in external strategic consulting costs.

Depreciation and amortization

Depreciation and amortization expense was approximately $1.7 million and $1.9 million for the three months ended June 30, 2016 and 2015, respectively. The decrease was primarily due to certain fixed assets becoming fully depreciated in the beginning of the second quarter of 2016.

Interest expense, net

Interest expense, net, was $0.2 million and $0.2 million for the quarters ended June 30, 2016 and 2015, respectively. During the second quarter of 2016, we had a weighted average outstanding loan balance of $16.4 million which accrued interest at a weighted average borrowing rate of 2.5%. During the second quarter of 2015, we had a weighted average outstanding loan balance of $24.7 million which accrued interest at a weighted average borrowing rate of 2.3%.

Provision for income taxes

Provision for income taxes increased by $0.1 million in the three months ended June 30, 2016, as compared to the three months ended June 30, 2015. This increase was due to slightly higher operating income for the period ended June 30, 2016, offset by a slightly lower effective income tax rate. The effective income tax rate for the quarters ended June 30, 2016 and 2015 was approximately 39.4% and 40.0%, respectively. The decrease in the effective income tax rate is due to changes in the blended state income tax rate and state apportionment factors.

 

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Six Months Ended June 30, 2016 Compared to Six Months Ended June 30, 2015

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:

 

     Six months ended June 30,  
     2016      2015      2016     2015  
     (in thousands)      (as a percentage of revenue)  

Revenue

   $ 165,555       $ 166,767         100.0     100.0

Operating expenses:

          

Cost of revenue

     137,908         139,155         83.3        83.4   

General and administrative expenses

     12,941         13,495         7.8        8.1   

Depreciation and amortization

     3,476         3,981         2.1        2.4   

Acquisition and integration related expenses

     —           422         0.0        0.3   
  

 

 

    

 

 

    

 

 

   

 

 

 

Total operating expenses

     154,325         157,053         93.2        94.2   
  

 

 

    

 

 

    

 

 

   

 

 

 

Operating income

     11,230         9,714         6.8        5.8   

Interest expense, net

     343         459         0.2        0.3   
  

 

 

    

 

 

    

 

 

   

 

 

 

Income before income taxes

     10,887         9,255         6.6        5.5   

Provision for income taxes

     4,324         3,804         2.6        2.3   
  

 

 

    

 

 

    

 

 

   

 

 

 

Net income

   $ 6,563       $ 5,451         4.0     3.2
  

 

 

    

 

 

    

 

 

   

 

 

 

Revenue

For the six months ended June 30, 2016, total revenue decreased 0.7%, or $1.2 million from $166.8 million to $165.6 million, over the same period a year ago. The decrease was primarily due to lower pass-through revenue, reductions in scope of work, and the expiration of task orders and contracts, offset by revenues derived under our PEO Soldier and CNOSS programs and, to a lesser extent, from new awards.

Cost of revenue

Cost of revenue decreased 0.9% or $1.3 million from $139.2 million to $137.9 million, for the six months ended June 30, 2016, as compared to the same period a year ago. This decrease was primarily the result of reduced hardware, software and subcontractor costs, offset by an increase in direct labor costs. Cost of revenue represented 83.3% of revenue for the six months ended June 30, 2016, as compared to 83.4% for the six months ended June 30, 2015. This decrease was primarily the result of the greater contribution of direct labor and more efficient absorbtion of indirect costs.

General and administrative expenses

General and administrative expenses decreased 4.1%, or $0.6 million, for the six months ended June 30, 2016, as compared to the same period a year ago. The decrease was primarily due to lower indirect labor costs, more efficient allocation of business development expenses, lower executive compensation costs, and decreased stock compensation expense, partially offset by an increase in external strategic consulting costs.

Depreciation and amortization

Depreciation and amortization expense was approximately $3.5 and $4.0 million for the six months ended June 30, 2016 and 2015, respectively. The decrease was primarily due to certain intangible assets becoming fully amortized in the second quarter of 2015 and due to certain fixed assets becoming fully depreciated in the beginning of the second quarter of 2016.

Interest expense, net

Interest expense, net, was approximately $0.3 million and $0.5 million for the six months ended June 30, 2016 and 2015, respectively. The decrease was primarily attributed to a lower weighted average loan balance.

Provision for income taxes

For the six months ended June 30, 2016, the provision for income taxes increased to $4.3 million from $3.8 million in the same period a year ago, due to increased pretax income on an lower effective tax rate. The effective income tax rate for the six months ended June 30, 2016 was

 

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approximately 39.4% as compared to an effective income tax rate of 41.1% for the six months ended June 30, 2015. The lower effective income tax rate for the six months ended June 30, 2016 was the result of a decrease in the blended state income tax rate from our current state revenue allocation for the six months ended June 30, 2016 and 2015.

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 six months ended June 30, 2016, the balance of accounts receivable decreased by $5.6 million to $54.4 million at the end of the quarter. Days sales outstanding of accounts receivable (DSO) decreased 6 days to 60 days at June 30, 2016 as compared to 66 days at December 31, 2015. The decrease in DSO was mostly attributable to the resolution and payment of invoices related to certain contracts. As of June 30, 2016, $7.1 million was due under the credit facility, as compared to $10.0 million outstanding as of December 31, 2015, reflecting $2.9 million of net pay downs during the first six months of 2016. Net cash provided by operating activities was $5.5 million at June 30, 2016 and was used to pay down debt and meet working capital requirements.

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 Company’s 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 2015 and the three and six months ended June 30, 2016, we did not repurchase any shares. At June 30, 2016, 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 of the Company’s 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.

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.

We intend to amend and extend our credit facility before the current facility expires in January 2017. As of June 30, 2016, we were in compliance with all our loan covenants.

Off-Balance Sheet Arrangements

We do not have any material off-balance sheet arrangements.

 

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Critical Accounting Policies

There have been no significant changes to our Critical Accounting Policies during the second quarter of 2016. Refer to the Critical Accounting Policies section in our Annual Report on Form 10-K for the year ended December 31, 2015, as filed with the SEC.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

The Company’s exposure to market risk relates to changes in interest rates for borrowings under its credit facility. For the quarter ended June 30, 2016, a change of one percentage point in interest rates would have changed NCI’s 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. NCI’s 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 June 30, 2016, under the supervision and with the participation of NCI’s 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, NCI’s Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective, as of June 30, 2016, such that the information that is required to be disclosed in NCI’s 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 NCI’s 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) as a result of the evaluation required by Rule 13a-15(d) under the Exchange Act during the three months ended June 30, 2016 that has materially affected, or is reasonably likely to materially affect, its internal control over financial reporting.

 

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PART II

OTHER INFORMATION

Item 1. Legal Proceedings

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 Company’s financial position, results of operations, or cash flows.

Item 1A. Risk Factors

There have been no significant changes in our risk factors from those discussed in Item 1A. “Risk Factors” included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2015, 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.

Item 5. Other Information

None.

 

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Item 6. Exhibits

 

Number

  

Description

    2.1    Stock Purchase Agreement among NCI Information Systems, Inc. (“NCIIS”), a wholly owned subsidiary of the Registrant, the Sellers named therein, the Phantom Stock Holders named therein and Computech, Inc. dated as of December 24, 2011 (incorporated herein by reference from Exhibit 2.1 to the Registrant’s Current Report on Form 8-K, as 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 registrant’s 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 the Registrant’s 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 the Registrant’s 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 registrant’s 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 registrant’s Current Report on Form 8-K, as filed with the Commission on June 12, 2009).
  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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SIGNATURES

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: July 29, 2016

   

By:

 

/s/ LUCAS J. NAREL

      Lucas J. Narel
      Executive Vice President, Chief Financial Officer and Treasurer
      (Principal Financial Officer)
      (Principal Accounting Officer)

 

18