Exhibit 99.1
Engility Reports Fourth Quarter and Full Year 2012 Results; Establishes 2013 Guidance
| | • | | Fourth quarter 2012 revenue of $396 million and adjusted diluted EPS of $0.77 exceeds guidance |
| | • | | Fiscal year 2012 revenue of $1.66 billion and adjusted diluted EPS of $4.06 exceeds guidance |
| | • | | Fourth quarter funded orders of $461 million and funded backlog of $856 million increase from prior quarter |
| | • | | Fourth quarter book-to-bill ratio of 1.2 |
| | • | | Cost reduction initiatives completed ahead of schedule |
CHANTILLY, VA – March 12, 2013 – Engility Holdings, Inc. (NYSE: EGL), a global provider of technical and professional services for the U.S. Government, today announced financial results for the fourth quarter and full year ended December 31, 2012.
Fourth Quarter 2012 Results
Total revenue for the fourth quarter was $396 million and operating income for the quarter was $27 million. Adjusted operating income for the fourth quarter was $28 million. Net income attributable to Engility was $41 million, or $2.38 per diluted share. Adjusted net income was $13 million, or $0.77 per diluted share. Information about Engility’s use of non-GAAP financial information is provided below under “Non-GAAP Measures.”
“Our fourth quarter was very solid, as we exceeded our internal top and bottom line targets and won key IDIQ awards that will provide opportunities for 2013 and beyond,” said Tony Smeraglinolo, President and CEO of Engility. “These achievements reflect the strength of our business model and validate that Engility is well positioned to meet the challenges of today’s budget constrained environment. During the fourth quarter, we also completed our significant cost reduction initiatives ahead of schedule. This, along with the organizational realignment we implemented on January 1st, enhances our competitive position in the market.”
“The federal government market remains challenging given current budget uncertainties. Nevertheless, our long-standing success in supporting our customers’ missions, combined with our enhanced operating efficiencies and disruptive pricing model is differentiating us from our competition. These characteristics also are enabling us to provide the mission critical services our customers require at prices that can ease their budget constraints. As we enter fiscal year 2013, we will remain focused on our pure-play services strategy and leveraging our strong current pipeline of opportunities to further increase shareholder value.”
Key Performance Indicators
| • | | Funded backlog as of December 31, 2012 was $856 million, compared to $788 million as of the end of the September 2012 quarter. |
| • | | Contract funded orders in the fourth quarter of 2012 were $461 million, representing a book-to-bill ratio of 1.2. |
| • | | Contract funded orders for the full year 2012 were $1.7 billion, representing a book-to-bill ratio of 1.0. |
| • | | Days sales outstanding at the end of the 2012 fourth quarter were 84 days, compared to 82 days at the end of the September 2012 quarter. |
Significant Fourth Quarter 2012 Awards
Key indefinite delivery/indefinite quantity (IDIQ) awards won during the fourth quarter of 2012, which highlight the breadth of our value-added service offerings, include:
| • | | A prime position on a $900 million multiple-award IDIQ contract for new work to provide Production, Installation, and In-Service Support (PII) services to the Space and Naval Warfare Systems Center (SPAWARSYSCEN) Atlantic, Charleston, SC. Under this five year contract, we will provide a wide array of services, including design, acquisition, production, integration, testing, installation, lifecycle support, and configuration management of certified Command, Control, Communications, Computers, Combat Systems, Intelligence, Surveillance, and Reconnaissance (C5ISR) capabilities. |
| • | | A prime position on a $750 million multiple-award IDIQ contract for new work to support the Space and Naval Warfare Systems Center (SPAWARSYSCEN) Atlantic, Charleston, S.C. Under this five year contract, we will provide Command, Control, Communications, Computers, Intelligence, Surveillance and Reconnaissance (C4ISR) and Information Technical (IT) expertise in support of customers in Charleston, central Europe and other locations outside the continental United States. |
| • | | A prime position on a $350 million multiple-award IDIQ contract for the U.S. Agency for International Development’s (USAID) Clean Energy contract for Non-Critical Priority Countries. Under this five year contract, we will provide a range of critical activities, from energy sector reform to increasing human resource capacity related to energy services and fostering private sector participation and investment. This new work represents an expansion of energy support services that our highly skilled team of professionals has been providing on USAID’s behalf for the past 34 years; and |
| • | | A prime position on four domain areas of a multi-million dollar contract to support the Joint Program Executive Office for Chemical and Biological Defense (JPEO-CBD). The potential value of this six-domain IDIQ five year contract is $495 million. For this new work award, we were selected to provide services in the fields of engineering and technical support, business and analytical assistance, information technology and logistics. |
Fiscal Year 2012 Results
For fiscal year 2012, the Company reported total revenue of $1.66 billion and a GAAP operating loss of $329 million. Fiscal year 2012 adjusted operating income was $129 million, which excludes a total of $458 million before tax in spin-off related transaction costs, realignment costs, legal and settlement costs, and a non-cash goodwill impairment charge. GAAP net loss attributable to Engility was $350 million, or $21.52 per diluted share. Excluding the above charges, adjusted net income attributable to Engility was $67 million, or $4.06 per diluted share. We exceeded the revenue and adjusted diluted earnings per share guidance we issued on November 13, 2012, primarily as a result of stronger than expected revenue, lower overall costs, and a lower than anticipated share count. Information about Engility’s use of non-GAAP financial information is provided below under “Non-GAAP Measures.”
2013 Outlook
Our guidance for fiscal year 2013 does not reflect the potential impact of sequestration since it remains uncertain how the current mandated budget cuts may be implemented. However, our guidance does reflect the challenging environment we have experienced over the last several months leading up to the March 1, 2013 sequester deadline. The table below summarizes our fiscal year 2013 guidance.
| | |
| | | 2013 Fiscal Year Outlook |
Revenue | | $1.45 billion to $1.55 billion |
GAAP Diluted EPS | | $3.25 - $3.55 * |
Operating cash flow | | $80 million to $100 million |
| * | 2013 GAAP diluted EPS guidance assumes a weighted-average share count of approximately 17.5 million shares and a full year effective tax rate of 40%. Interest expense in 2013 is expected to be approximately $22 million, negatively impacting diluted EPS by approximately $0.38 compared to 2012. |
Discontinued Operations
The Global Security Solutions business unit, which historically had been managed by Engility under the Professional Support Services segment, was retained by L-3 Communications Holdings, Inc. in connection with the spin-off and is shown as discontinued operations in Engility’s financial statements.
Non-GAAP Measures
The tables under “Engility Holdings, Inc., Reconciliation of Non-GAAP Measures” present Adjusted Operating Income, Adjusted Operating Margin, Earnings before Interest, Taxes, Depreciation, and Amortization (EBITDA), Adjusted EBITDA, EBITDA Margin, Adjusted EBITDA Margin, Adjusted Net Income and Adjusted Diluted EPS, reconciled to their most directly comparable GAAP measure. These financial measures are calculated and presented on the basis of methodologies other than in accordance with U.S. generally accepted accounting principles (“Non-GAAP Measures”). Engility has provided these Non-GAAP Measures to adjust for the impact of (i) goodwill impairment, (ii) transaction-related-spin-off costs for the Company’s July 2012 spin-off from L-3 Communications Holdings, Inc., (iii) severance and other costs related to the Company’s strategic realignment announced in September 2012 and (iv) legal settlement costs. These items have been adjusted because they are not considered
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core to the Company’s business or otherwise not considered operational or because these charges are non-cash or non-recurring. The Company presents these Non-GAAP Measures because management believes that they are meaningful to understanding Engility’s performance during the periods presented and the Company’s ongoing business. Non-GAAP Measures are not prepared in accordance with GAAP and therefore are not necessarily comparable to the financial results of other companies. These Non-GAAP Measures should be considered a supplement to, not a substitute for, or superior to, the corresponding financial measures calculated in accordance with GAAP.
CONFERENCE CALL INFORMATION
Engility will host a conference call at 5 P.M. ET on Tuesday, March 12, 2013, to discuss the financial results for the fourth quarter and full year 2012.
Listeners may access a webcast of the live conference call from the Investor Relations section of the company’s website athttp://www.EngilityCorp.com. Listeners may also access a slide presentation on the website that will be utilized during the call. Listeners should go to the website at least 15 minutes before the live event to download and install any necessary audio software.
Listeners may also participate in the conference call by dialing (800) 901-5231 (domestic) or (617) 786-2961 (international) and entering pass code 51672805.
Approximately two hours after the conference call, a replay will be available on the company’s website. A telephonic replay will also be available for one year at (888) 286-8010 (domestic) or 617-801-6888 (international) and entering pass code 11907854.
ABOUT ENGILITY CORPORATION
Engility is a “pure-play” government services contractor providing highly-skilled personnel wherever and whenever they are needed, in a cost effective manner. Headquartered in Chantilly, Va., Engility is a leading provider of specialized technical consulting, program and business support services, engineering and technology lifecycle support, information technology modernization and sustainment, supply chain services and logistics management, and training and education for the U.S. government with approximately 7,800 employees worldwide and sales of $1.66 billion in fiscal year 2012. To learn more about Engility, please visit www.engilitycorp.com.
FORWARD-LOOKING STATEMENTS
This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements regarding Engility’s future prospects, projected financial results, business plans, and our strategic realignment completed in the first quarter of 2013. Words such as “may,” “will,” “should,” “likely,” “anticipates,” “expects,” “intends,” “plans,” “projects,” “believes,” “estimates” and similar expressions are also used to identify these forward-looking statements. These statements are based on the current beliefs and expectations of Engility’s management and are subject to significant risks and uncertainties. Actual results may differ from those set forth in the forward-looking statements. Factors that could cause Engility’s actual results to differ materially from those described in the forward-looking statements can be found under the heading “Risk Factors” in the Information Statement included in our Registration Statement on Form 10, as amended, and Quarterly Report on Form 10-Q for the quarter ended September 28, 2012, which have been filed with the Securities and Exchange Commission (SEC) and are available on Engility’s website (http://www.engilitycorp.com/investor-relations.html) and on the SEC’s website (www.sec.gov). Forward-looking statements are made only as of the date hereof, and we undertake no obligation to update or revise the forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law. In addition, historical information should not be considered as an indicator of future performance.
| | |
| Corporate Communications and Media: | | Investor Relations: |
| Eric Ruff | | Dave Spille |
| Engility Holdings, Inc. | | Engility Holdings, Inc. |
| (703) 375-6463 | | (703) 375-4221 |
| eric.ruff@engilitycorp.com | | dave.spille@engilitycorp.com |
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ENGILITY HOLDINGS, INC.
UNAUDITED CONSOLIDATED AND COMBINED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | Three Months Ended | | | Twelve Months Ended | |
| | | December 31,
2012 | | | December 31,
2011 | | | Change | | | December 31,
2012 | | | December 31,
2011 | | | Change | |
Revenue | | $ | 395,684 | | | $ | 427,127 | | | $ | (31,443 | ) | | $ | 1,555,310 | | | $ | 1,903,370 | | | $ | (348,060 | ) |
Revenue from former affiliated entities | | | — | | | | 47,909 | | | | (47,909 | ) | | | 100,034 | | | | 167,411 | | | | (67,377 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | |
Total revenue | | | 395,684 | | | | 475,036 | | | | (79,352 | ) | | | 1,655,344 | | | | 2,070,781 | | | | (415,437 | ) |
| | | | | | |
Costs and expenses | | | | | | | | | | | | | | | | | | | | | | | | |
Cost of revenue | | | 333,641 | | | | 369,685 | | | | (36,044 | ) | | | 1,315,352 | | | | 1,618,421 | | | | (303,069 | ) |
Cost of revenue from former affiliated entities | | | — | | | | 47,909 | | | | (47,909 | ) | | | 100,034 | | | | 167,411 | | | | (67,377 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | |
Total cost of revenue | | | 333,641 | | | | 417,594 | | | | (83,953 | ) | | | 1,415,386 | | | | 1,785,832 | | | | (370,446 | ) |
| | | | | | |
Selling, general and administrative expenses | | | 34,851 | | | | 23,316 | | | | 11,535 | | | | 142,440 | | | | 115,908 | | | | 26,532 | |
Goodwill impairment charge | | | — | | | | 76,600 | | | | (76,600 | ) | | | 426,436 | | | | 76,600 | | | | 349,836 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Total costs and expenses | | | 368,492 | | | | 517,510 | | | | (149,018 | ) | | | 1,984,262 | | | | 1,978,340 | | | | 5,922 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Operating income (loss) | | | 27,192 | | | | (42,474 | ) | | | 69,666 | | | | (328,918 | ) | | | 92,441 | | | | (421,359 | ) |
| | | | | | |
Interest expense | | | (5,830 | ) | | | — | | | | (5,830 | ) | | | (10,857 | ) | | | — | | | | (10,857 | ) |
Other income (expense), net | | | 188 | | | | (36 | ) | | | 224 | | | | 136 | | | | 148 | | | | (12 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | |
Income (loss) from continuing operations before income taxes | | | 21,550 | | | | (42,510 | ) | | | 64,060 | | | | (339,639 | ) | | | 92,589 | | | | (432,228 | ) |
| | | | | | |
Provision (benefit) for income taxes | | | (19,841 | ) | | | 13,978 | | | | (33,819 | ) | | | 5,156 | | | | 66,562 | | | | (61,406 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | |
Income (loss) from continuing operations | | | 41,391 | | | | (56,488 | ) | | | 97,879 | | | | (344,795 | ) | | | 26,027 | | | | (370,822 | ) |
| | | | | | |
Income (loss) from discontinued operations before income taxes | | | — | | | | (759 | ) | | | 759 | | | | (1,017 | ) | | | 5,735 | | | | (6,752 | ) |
Provision (benefit) for income taxes | | | — | | | | 249 | | | | (249 | ) | | | (391 | ) | | | 2,777 | | | | (3,168 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | |
Income (loss) from discontinued operations, net of tax | | | — | | | | (1,008 | ) | | | 1,008 | | | | (626 | ) | | | 2,958 | | | | (3,584 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | |
Net income (loss) | | $ | 41,391 | | | $ | (57,496 | ) | | $ | 98,887 | | | $ | (345,421 | ) | | $ | 28,985 | | | $ | (374,406 | ) |
| | | | | | |
Less: Net income attributable to non-controlling interest | | | 442 | | | | 96 | | | | 346 | | | | 4,952 | | | | 3,126 | | | | 1,826 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | |
Net income (loss) attributable to Engility | | $ | 40,949 | | | $ | (57,592 | ) | | $ | 98,541 | | | $ | (350,373 | ) | | $ | 25,859 | | | $ | (376,232 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | |
Earnings (loss) per share allocable to Engility Holdings, Inc. common shareholders | | | | | | | | | | | | | | | | | | | | | | | | |
Basic | | $ | 2.47 | | | $ | (3.57 | ) | | $ | 6.04 | | | $ | (21.52 | ) | | $ | 1.60 | | | $ | (23.12 | ) |
Diluted | | $ | 2.38 | | | $ | (3.57 | ) | | $ | 5.95 | | | $ | (21.52 | ) | | $ | 1.60 | | | $ | (23.12 | ) |
| | | | | | |
Engility Holdings, Inc. weighted average common shares outstanding | | | | | | | | | | | | | | | | | | | | | | | | |
Basic | | | 16,596 | | | | 16,118 | | | | | | | | 16,281 | | | | 16,118 | | | | | |
Diluted | | | 17,228 | | | | 16,118 | | | | | | | | 16,281 | | | | 16,118 | | | | | |
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ENGILITY HOLDINGS, INC.
UNAUDITED CONSOLIDATED AND COMBINED BALANCE SHEETS
(in thousands, except per share data)
| | | | | | | | |
| | | December 31,
2012 | | | December 31,
2011 | |
Assets: | | | | | | | | |
Current assets: | | | | | | | | |
Cash and cash equivalents | | | 27,021 | | | | 13,688 | |
Receivables, net | | | 366,236 | | | | 394,842 | |
Other current assets | | | 30,658 | | | | 23,114 | |
Income taxes | | | 4,174 | | | | — | |
| | | | | | | | |
Total current assets | | | 428,089 | | | | 431,644 | |
| | |
Property, plant and equipment, net | | | 11,941 | | | | 12,629 | |
Goodwill | | | 477,604 | | | | 904,040 | |
Identifiable intangible assets, net | | | 100,929 | | | | 114,035 | |
Other assets | | | 8,887 | | | | 5,473 | |
Assets related to discontinued operations | | | — | | | | 35,426 | |
| | | | | | | | |
Total assets | | $ | 1,027,450 | | | $ | 1,503,247 | |
| | | | | | | | |
| | |
Liabilities and Equity: | | | | | | | | |
Current liabilities: | | | | | | | | |
Current portion of long-term debt | | $ | 50,250 | | | $ | — | |
Accounts payable, trade | | | 20,725 | | | | 53,299 | |
Accrued employment costs | | | 63,278 | | | | 72,541 | |
Accrued expenses | | | 76,955 | | | | 73,604 | |
Advance payments and billings in excess of costs incurred | | | 24,855 | | | | 26,273 | |
Deferred income taxes, current and income taxes payable | | | 10,607 | | | | 26,750 | |
Other current liabilities | | | 19,311 | | | | 19,170 | |
| | | | | | | | |
Total current liabilities | | | 265,981 | | | | 271,637 | |
| | |
Long-term debt | | | 284,750 | | | | — | |
Deferred income taxes | | | — | | | | 41,636 | |
Income tax payable | | | 68,725 | | | | 58,288 | |
Other liabilities | | | 19,683 | | | | 29,710 | |
Liabilities related to discontinued operations | | | — | | | | 8,373 | |
| | | | | | | | |
Total liabilities | | | 639,139 | | | | 409,644 | |
| | |
Commitments and contingencies | | | | | | | | |
| | |
Equity: | | | | | | | | |
Preferred stock, par value $0.01 per share, 25,000 shares authorized, none issued or outstanding as of December 31, 2012 and 2011. | | | — | | | | — | |
Common stock, par value $0.01 per share, 175,000 shares authorized, 16,703 shares issued and outstanding as of December 31, 2012 and 0 shares issued and outstanding as of December 31, 2011 | | | 168 | | | | — | |
Additional paid in capital | | | 755,638 | | | | — | |
Accumulated deficit | | | (380,438 | ) | | | — | |
Prior parent company investment | | | — | | | | 1,083,237 | |
Non-controlling interest | | | 12,943 | | | | 10,366 | |
| | | | | | | | |
Total equity | | | 388,311 | | | | 1,093,603 | |
| | | | | | | | |
Total liabilities and equity | | $ | 1,027,450 | | | $ | 1,503,247 | |
| | | | | | | | |
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ENGILITY HOLDINGS, INC.
UNAUDITED CONSOLIDATED AND COMBINED STATEMENTS OF CASH FLOWS
(in thousands)
| | | | | | | | |
| | | Twelve Months Ended | |
| | | December 31,
2012 | | | December 31,
2011 | |
| | |
Operating activities: | | | | | | | | |
Net income (loss) | | $ | (345,421 | ) | | $ | 28,985 | |
Less: net income (loss) from discontinued operations | | | (626 | ) | | | 2,958 | |
| | | | | | | | |
Income (loss) from continuing operations | | $ | (344,795 | ) | | $ | 26,027 | |
| | |
Goodwill impairment charge | | | 426,436 | | | | 76,600 | |
Share-based compensation | | | 7,487 | | | | — | |
Depreciation and amortization | | | 18,001 | | | | 22,594 | |
Deferred income tax benefit | | | (63,375 | ) | | | (20,814 | ) |
Losses on asset retirements | | | 71 | | | | — | |
Changes in operating assets and liabilities | | | | | | | | |
Receivables | | | 28,606 | | | | 45,159 | |
Other assets | | | (193 | ) | | | 7,400 | |
Accounts payable, trade | | | (32,574 | ) | | | (4,070 | ) |
Accrued employment costs | | | (9,263 | ) | | | (16,609 | ) |
Accrued expenses | | | 3,351 | | | | 2,109 | |
Advance payments and billings in excess of costs incurred | | | (1,418 | ) | | | 9,335 | |
Other liabilities | | | (128 | ) | | | 12,700 | |
| | | | | | | | |
Net cash provided by operating activities | | $ | 32,206 | | | $ | 160,431 | |
| | |
Investing activities: | | | | | | | | |
Capital expenditures | | | (2,164 | ) | | | (4,795 | ) |
Proceeds from sale of property, plant, and equipment | | | 680 | | | | — | |
Other investing activities | | | — | | | | 1,000 | |
| | | | | | | | |
Net cash used in investing activities | | $ | (1,484 | ) | | $ | (3,795 | ) |
| | |
Financing activities: | | | | | | | | |
Borrowings from issuance of long-term debt | | | 335,000 | | | | — | |
Dividend paid to prior parent | | | (335,000 | ) | | | — | |
Borrowings from revolving credit facility | | | 30,690 | | | | — | |
Repayments of revolving credit facility | | | (30,690 | ) | | | — | |
Debt issuance costs | | | (11,005 | ) | | | — | |
Proceeds from share-based payment arrangements | | | 1,225 | | | | — | |
Net transfers to prior parent | | | (5,235 | ) | | | (161,800 | ) |
Distributions to non-controlling interest member | | | (2,374 | ) | | | (1,546 | ) |
Other financing activities | | | — | | | | 300 | |
| | | | | | | | |
Net cash used in financing activities | | $ | (17,389 | ) | | $ | (163,046 | ) |
| | |
Discontinued Operations: | | | | | | | | |
Net cash provided by operating activities | | | 25,952 | | | | 4,023 | |
Net cash provided by (used in) financing activities | | | (25,974 | ) | | | 535 | |
Cash balance of discontinued operations | | | 22 | | | | (22 | ) |
| | | | | | | | |
Net cash provided by discontinued operations | | $ | — | | | $ | 4,536 | |
| | |
Net increase (decrease) in cash and cash equivalents | | $ | 13,333 | | | $ | (1,874 | ) |
| | |
Cash and cash equivalents, beginning of period | | $ | 13,688 | | | $ | 15,562 | |
| | | | | | | | |
Cash and cash equivalents, end of period | | $ | 27,021 | | | $ | 13,688 | |
| | | | | | | | |
| | |
Supplemental information | | | | | | | | |
Taxes paid | | $ | 15,973 | | | $ | — | |
Interest paid | | $ | 9,167 | | | $ | — | |
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ENGILITY HOLDINGS, INC.
RECONCILIATION OF NON-GAAP MEASURES
The following tables set forth a reconciliation of each of these Non-GAAP Measures to the most directly comparable GAAP measure for the periods presented (in thousands, except for ratio and per share amounts).
Adjusted Operating Income and Adjusted Operating Margin
(dollars in thousands)
| | | | | | | | | | | | | | | | |
| | | Three Months Ended | | | Twelve Months Ended | |
| | | December 31, 2012 | | | December 31, 2011 | | | December 31, 2012 | | | December 31, 2011 | |
| | | | |
Operating income (loss) | | $ | 27,192 | | | $ | (42,474 | ) | | $ | (328,918 | ) | | $ | 92,441 | |
| | | | |
Adjustments | | | | | | | | | | | | | | | | |
Goodwill impairment charge | | | — | | | | 76,600 | | | | 426,436 | | | | 76,600 | |
Transaction related spin-off costs | | | — | | | | 5,400 | | | | 17,300 | | | | 9,100 | |
Realignment costs | | | 662 | | | | — | | | | 8,222 | | | | — | |
Legal and settlement costs | | | 272 | | | | — | | | | 5,552 | | | | — | |
| | | | | | | | | | | | | | | | |
| | | 934 | | | | 82,000 | | | | 457,510 | | | | 85,700 | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
Adjusted operating income | | $ | 28,126 | | | $ | 39,526 | | | $ | 128,592 | | | $ | 178,141 | |
| | | | | | | | | | | | | | | | |
| | | | |
Operating margin | | | 6.9 | % | | | –8.9 | % | | | –19.9 | % | | | 4.5 | % |
Adjusted operating margin | | | 7.1 | % | | | 8.3 | % | | | 7.8 | % | | | 8.6 | % |
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ENGILITY HOLDINGS, INC.
Adjusted Earnings Per Share
(in thousands except per share data)
| | | | | | | | | | | | | | | | |
| | | Three Months Ended | | | Twelve Months Ended | |
| | | December 31, 2012 | | | December 31, 2011 | | | December 31, 2012 | | | December 31, 2011 | |
| | | | |
Adjusted operating income | | $ | 28,126 | | | $ | 39,526 | | | $ | 128,592 | | | $ | 178,141 | |
| | | | |
Other items | | | | | | | | | | | | | | | | |
Interest expense | | | (5,830 | ) | | | — | | | | (10,857 | ) | | | — | |
Other income | | | 188 | | | | (36 | ) | | | 136 | | | | 148 | |
Income (loss) from discontinued operations | | | — | | | | (1,008 | ) | | | (626 | ) | | | 2,958 | |
Net income attributable to non-controlling interest | | | (442 | ) | | | (96 | ) | | | (4,952 | ) | | | (3,126 | ) |
| | | | | | | | | | | | | | | | |
| | | | |
Adjusted net income before provision for income taxes | | $ | 22,042 | | | $ | 38,386 | | | $ | 112,293 | | | $ | 178,121 | |
| | | | |
Estimated provision for taxes (1) | | | 8,817 | | | | 15,354 | | | | 44,917 | | | | 71,248 | |
| | | | | | | | | | | | | | | | |
Adjusted net income | | $ | 13,225 | | | $ | 23,032 | | | $ | 67,376 | | | $ | 106,873 | |
| | | | | | | | | | | | | | | | |
| | | | |
GAAP Earnings per share | | | | | | | | | | | | | | | | |
Net income (loss) attributable to Engility | | $ | 40,949 | | | $ | (57,592 | ) | | $ | (350,373 | ) | | $ | 25,859 | |
| | | | |
Earnings (loss) per share allocable to Engility Holdings, Inc. common shareholders | | | | | | | | | | | | | | | | |
Basic | | $ | 2.47 | | | $ | (3.57 | ) | | $ | (21.52 | ) | | $ | 1.60 | |
Diluted | | $ | 2.38 | | | $ | (3.57 | ) | | $ | (21.52 | ) | | $ | 1.60 | |
| | | | |
Engility Holdings, Inc. weighted average common shares outstanding | | | | | | | | | | | | | | | | |
Basic | | | 16,596 | | | | 16,118 | | | | 16,281 | | | | 16,118 | |
Diluted | | | 17,228 | | | | 16,118 | | | | 16,281 | | | | 16,118 | |
| | | | |
Adjusted earnings per share | | | | | | | | | | | | | | | | |
Basic | | $ | 0.80 | | | $ | 1.43 | | | $ | 4.14 | | | $ | 6.63 | |
Diluted | | $ | 0.77 | | | $ | 1.43 | | | $ | 4.06 | | | $ | 6.63 | |
| | | | |
Weighted averages shares outstanding | | | | | | | | | | | | | | | | |
Basic | | | 16,596 | | | | 16,118 | | | | 16,281 | | | | 16,118 | |
Diluted | | | 17,228 | | | | 16,118 | | | | 16,577 | | | | 16,118 | |
| (1) | The estimated provision for taxes assumes a 40% tax rate. |
ENGILITY HOLDINGS, INC.
Earnings before interest, taxes, depreciation, and amortization (EBITDA) and Adjusted EBITDA
(dollars in thousands)
| | | | | | | | | | | | | | | | |
| | | Three Months Ended | | | Twelve Months Ended | |
| | | December 31, 2012 | | | December 31, 2011 | | | December 31, 2012 | | | December 31, 2011 | |
| | | | |
Income from continuing operations | | $ | 41,391 | | | $ | (56,488 | ) | | $ | (344,795 | ) | | $ | 26,027 | |
| | | | |
Interest, taxes, depreciation, and amortization | | | | | | | | | | | | | | | | |
Interest expense | | | 5,830 | | | | — | | | | 10,857 | | | | — | |
Provision (benefit) for income taxes | | | (19,841 | ) | | | 13,978 | | | | 5,156 | | | | 66,562 | |
Depreciation and amortization | | | 5,158 | | | | 5,103 | | | | 18,001 | | | | 22,594 | |
| | | | | | | | | | | | | | | | |
EBITDA | | $ | 32,538 | | | $ | (37,407 | ) | | $ | (310,781 | ) | | $ | 115,183 | |
| | | | | | | | | | | | | | | | |
| | | | |
Adjustments to EBITDA | | | | | | | | | | | | | | | | |
Goodwill Impairment charge | | | — | | | | 76,600 | | | | 426,436 | | | | 76,600 | |
Transaction related spin-off costs | | | — | | | | 5,400 | | | | 17,300 | | | | 9,100 | |
Realignment costs | | | 662 | | | | — | | | | 8,222 | | | | — | |
Legal and settlement costs | | | 272 | | | | — | | | | 5,552 | | | | — | |
| | | | | | | | | | | | | | | | |
| | | 934 | | | | 82,000 | | | | 457,510 | | | | 85,700 | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
Adjusted EBITDA | | $ | 33,472 | | | $ | 44,593 | | | $ | 146,729 | | | $ | 200,883 | |
| | | | | | | | | | | | | | | | |
| | | | |
EBITDA Margin | | | 8.2 | % | | | –7.9 | % | | | –18.8 | % | | | 5.6 | % |
Adjusted EBITDA Margin | | | 8.5 | % | | | 9.4 | % | | | 8.9 | % | | | 9.7 | % |
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ENGILITY HOLDINGS, INC.
Segment Information
(in thousands)
| | | | | | | | | | | | | | | | |
| | | Three Months Ended | | | Twelve Months Ended | |
| | | December 31, | | | December 31, | |
| | | 2012 | | | 2011 | | | 2012 | | | 2011 | |
Revenue | | | | | | | | | | | | | | | | |
Professional Support Services | | $ | 212,438 | | | $ | 264,943 | | | $ | 905,320 | | | $ | 1,102,430 | |
Mission Support Services | | | 193,000 | | | | 212,408 | | | | 772,928 | | | | 978,106 | |
Elimination of intercompany revenue | | | (9,754 | ) | | | (2,315 | ) | | | (22,904 | ) | | | (9,755 | ) |
| | | | | | | | | | | | | | | | |
| | | | |
Total | | $ | 395,684 | | | $ | 475,036 | | | $ | 1,655,344 | | | $ | 2,070,781 | |
| | | | | | | | | | | | | | | | |
| | | | |
Operating income | | | | | | | | | | | | | | | | |
Professional Support Services | | $ | 8,438 | | | $ | 23,768 | | | $ | (331,550 | ) | | $ | 90,461 | |
Mission Support Services | | | 12,870 | | | | (60,842 | ) | | | 26,837 | | | | 11,081 | |
Elimination of intercompany income and corporate allocations | | | 5,884 | | | | (5,400 | ) | | | (24,205 | ) | | | (9,101 | ) |
| | | | | | | | | | | | | | | | |
Segment total | | $ | 27,192 | | | $ | (42,474 | ) | | $ | (328,918 | ) | | $ | 92,441 | |
Spin-off-related transaction, goodwill, realignment, and legal and settlement costs | | | 934 | | | | 82,000 | | | | 457,510 | | | | 85,700 | |
| | | | | | | | | | | | | | | | |
Total | | $ | 28,126 | | | $ | 39,525 | | | $ | 128,592 | | | $ | 178,141 | |
| | | | | | | | | | | | | | | | |
ENGILITY HOLDINGS, INC.
Revision to Costs and Expenses
(in thousands)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | For the Three Month Period Ending
March 30, 2012 | | | For the Three Month Period Ending
June 29, 2012 | | | For the Three Month Period Ending
September 28, 2012 | | | For the
Three Month
Period
Ending
December 31,
2012 | | | For the
Twelve
Month
Period
Ending
December 31,
2012 | |
| | | Reported | | | Adjustment | | | Revised | | | Reported | | | Adjustment | | | Revised | | | Reported | | | Adjustment | | | Revised | | | Actual | | | Actual | |
Costs and expenses | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Cost of revenue | | | 326,666 | | | | (2,498 | ) | | | 324,168 | | | | 307,674 | | | | (2,195 | ) | | | 305,479 | | | | 354,147 | | | | (2,084 | ) | | | 352,063 | | | | 333,642 | | | | 1,315,352 | |
Cost of revenue from affiliated entities | | | 48,733 | | | | — | | | | 48,733 | | | | 46,413 | | | | — | | | | 46,413 | | | | 4,888 | | | | — | | | | 4,888 | | | | — | | | | 100,034 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total cost of revenue | | | 375,399 | | | | (2,498 | ) | | | 372,901 | | | | 354,087 | | | | (2,195 | ) | | | 351,892 | | | | 359,035 | | | | (2,084 | ) | | | 356,951 | | | | 333,642 | | | | 1,415,386 | |
| | | | | | | | | | | |
Selling, general and administrative expenses | | | 30,729 | | | | 2,498 | | | | 33,227 | | | | 33,471 | | | | 2,195 | | | | 35,666 | | | | 36,612 | | | | 2,084 | | | | 38,696 | | | | 34,851 | | | | 142,440 | |
Goodwill impairment charge | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 426,436 | | | | — | | | | 426,436 | | | | — | | | | 426,436 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total costs and expenses | | | 406,129 | | | | 2,498 | | | | 406,129 | | | | 387,558 | | | | 2,195 | | | | 387,558 | | | | 822,083 | | | | 2,084 | | | | 822,083 | | | | 368,493 | | | | 1,984,263 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Impact of the revision on cost and expenses | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
Note - During the process of finalizing the year end financial statements, the Company determined during the first three quarters of 2012 we improperly classified certain amounts in cost of revenue that were selling, general and administrative in nature. We have assessed the impact of the adjustments on the statements of operations and determined that periods were not materially misstated. These changes did not impact the balance sheet or statements of cash flows. All periods presented in this release have been revised to reflect this correction.
9
