SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended September 30, 1994
Commission File Number 0-8401
-----------------------------
CACI International Inc
----------------------
(Exact name of registrant as specified in its charter)
Delaware
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(State or other jurisdiction of incorporation or organization)
54-1345888
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(I.R.S. Employer Identification No.)
1100 North Glebe Road, Arlington, VA 22201
------------------------------------------
(Address of principal executive offices)
(703) 841-7800
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
- - - - ------------------- -----------------------------------------
None None
Securities registered pursuant to Section 12(g) of the Act:
CACI International Inc Common Stock, $0.10 par value
(Title of each class)
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. Yes X No
----- -----
Indicate the number of shares outstanding of each of the registrant's classes
of common stock, as of September 30, 1994: CACI International Inc Common
Stock, $0.10 par value, 9,989,000 shares.
Page 2
CACI INTERNATIONAL INC AND SUBSIDIARIES
PART I: FINANCIAL INFORMATION Page
Item 1. Financial Statements
Unaudited Consolidated Balance Sheet as of
September 30, 1994 and June 30, 1994 3
Unaudited Consolidated Statement of Operations for the
Three Months Ended September 30, 1994 and 1993 5
Unaudited Consolidated Statement of Cash Flows for the
Three Months Ended September 30, 1994 and 1993 6
Notes to Unaudited Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 9
PART II: OTHER INFORMATION
Item 1. Legal Proceedings 13
INDEX TO EXHIBITS 14
SIGNATURES 15
Page 3
Item 1. FINANCIAL STATEMENTS
CACI INTERNATIONAL INC AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET (UNAUDITED)
ASSETS
------
September 30, 1994 June 30, 1994
------------------ --------------
CURRENT ASSETS
Cash and equivalents $ 20,000 $ 941,000
Accounts receivable:
Billed 38,754,000 35,668,000
Unbilled 15,827,000 14,420,000
----------- ----------
Total accounts receivable 54,581,000 50,088,000
----------- ----------
Prepaid expenses and other 5,081,000 5,067,000
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TOTAL CURRENT ASSETS 59,682,000 56,096,000
----------- ----------
PROPERTY AND EQUIPMENT, NET
Equipment and furniture 18,967,000 18,476,000
Leasehold improvements 1,695,000 1,648,000
----------- ----------
Property and equipment, at cost 20,662,000 20,124,000
Accumulated depreciation
and amortization (12,745,000) (12,369,000)
----------- ----------
TOTAL PROPERTY AND EQUIPMENT, NET 7,917,000 7,755,000
----------- ----------
GOODWILL, NET 5,795,000 5,921,000
OTHER ASSETS 942,000 1,001,000
DEFERRED INCOME TAXES 348,000 226,000
----------- ----------
TOTAL ASSETS $74,684,000 $70,999,000
=========== ==========
Page 4
CACI INTERNATIONAL INC AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET (UNAUDITED)
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
September 30, 1994 June 30, 1994
------------------ --------------
CURRENT LIABILITIES
Note payable $6,950,000 $2,745,000
Accounts payable and accrued expenses 14,380,000 14,848,000
Accrued compensation and benefits 10,088,000 10,712,000
Deferred rent expense 535,000 454,000
Income taxes payable 1,693,000 1,829,000
Deferred income taxes 637,000 181,000
----------- -----------
TOTAL CURRENT LIABILITIES 34,283,000 30,769,000
----------- -----------
DEFERRED RENT EXPENSES 2,392,000 2,353,000
DEFERRED INCOME TAXES 143,000 139,000
SHAREHOLDERS' EQUITY
Common stock - $.10 par value,
40,000,000 shares authorized,
13,515,000 and 13,490,000 shares issued 1,352,000 1,349,000
Capital in excess of par 4,732,000 4,591,000
Retained earnings 46,534,000 44,621,000
Cumulative currency translation adjustments (1,090,000) (1,315,000)
Treasury stock, at cost
(3,526,000 shares and 3,251,000 shares) (13,662,000) (11,508,000)
---------- ----------
TOTAL SHAREHOLDERS' EQUITY 37,866,000 37,738,000
---------- ----------
TOTAL LIABILITIES & SHAREHOLDERS' EQUITY $74,684,000 $70,999,000
========== ==========
See notes to consolidated financial statements (unaudited).
Page 5
CACI INTERNATIONAL INC AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED)
Three Months Ended September 30,
1994 1993
--------------------------------
REVENUE $54,881,000 $38,200,000
----------- ----------
COSTS AND EXPENSES:
Direct costs 29,657,000 19,685,000
Indirect costs and selling expenses 20,783,000 15,311,000
Depreciation and amortization 1,163,000 888,000
----------- ----------
Total Operating Expenses 51,603,000 35,884,000
----------- ----------
3,278,000 2,316,000
Interest expense 142,000 91,000
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INCOME BEFORE INCOME TAXES
AND EXTRAORDINARY ITEM 3,136,000 2,225,000
INCOME TAXES 1,223,000 867,000
----------- ----------
INCOME BEFORE EXTRAORDINARY ITEM 1,913,000 1,358,000
----------- ----------
EXTRAORDINARY ITEM - COST OF SHAREHOLDER
LAWSUIT SETTLEMENT,
(NET OF $194,000 TAX BENEFIT) 0 (300,000)
----------- ----------
NET INCOME $ 1,913,000 $1,058,000
=========== ==========
EARNINGS (LOSS) PER COMMON AND
COMMON EQUIVALENT SHARE:
Income before extraordinary item $0.18 $0.13
Extraordinary item 0.00 (0.03)
Net income 0.18 0.10
AVERAGE NUMBER OF SHARES AND
EQUIVALENT SHARES OUTSTANDING 10,595,000 10,384,000
Dividends paid per share NONE NONE
=========== ==========
See notes to consolidated financial statements (unaudited).
Page 6
CACI INTERNATIONAL INC AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
Three Months Ended September 30,
1994 1993
--------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 1,913,000 $ 1,058,000
Reconciliation of net income to net cash
provided by (used in) operating activities:
Depreciation and amortization 1,163,000 888,000
Provision for deferred income taxes 332,000 (606,000)
Changes in operating assets and liabilities:
Accounts receivable (4,270,000) (162,000)
Prepaid expenses and other assets (42,000) (717,000)
Accounts payable and accrued expenses (649,000) 655,000
Accrued compensation and benefits (585,000) 47,000
Deferred rent expense 119,000 (19,000)
Income taxes payable (149,000) 128,000
---------- ----------
Net cash provided by (used in)
operating activities (2,168,000) 1,272,000
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CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisitions of property and equipment (939,000) (460,000)
Other, net (60,000) (200,000)
---------- ----------
Net cash used in investing activities (999,000) (660,000)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds under line-of-credit 25,228,000 18,513,000
Reductions under line-of-credit (21,023,000) (21,291,000)
Issuance of common stock 143,000 20,000
Purchase of common stock for treasury (2,154,000) 0
---------- ----------
Net cash provided by (used in)
financing activities 2,194,000 (2,758,000)
---------- ----------
EFFECT OF EXCHANGE RATES ON CASH AND
EQUIVALENTS: 52,000 11,000
---------- ----------
Net decrease in cash and equivalents (921,000) (2,135,000)
Cash and equivalents, beginning of period 941,000 2,725,000
---------- ----------
Cash and equivalents, end of period $ 20,000 $ 590,000
========== ==========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
Cash paid during the year for:
Income taxes, net of refunds 1,025,000 (116,000)
=========== ==========
Interest 120,000 100,000
=========== ==========
See notes to consolidated financial statements (unaudited).
Page 7
CACI INTERNATIONAL INC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
A. Basis of Presentation
The accompanying unaudited consolidated financial statements have been
prepared pursuant to the rules and regulations of the Securities and Exchange
Commission. Certain information and note disclosures normally included in the
annual financial statements, prepared in accordance with generally accepted
accounting principles, have been condensed or omitted pursuant to those rules
and regulations, although the Company believes that the disclosures made are
adequate to make the information presented not misleading.
In the opinion of management, the unaudited accompanying consolidated
financial statements reflect all necessary adjustments and reclassifications
(all of which are of a normal, recurring nature) that are necessary for fair
presentation for the periods presented. It is suggested that these
consolidated financial statements be read in conjunction with the consolidated
financial statements and the notes thereto included in the Company's latest
annual report to the Securities and Exchange Commission on Form 10-K for the
year ended June 30, 1994.
B. Accounts Receivable
Total accounts receivable are net of allowance for doubtful accounts of
$1,016,000 and $1,664,000 at September 30, 1994 and June 30, 1994,
respectively.
C. Settlement of Shareholder Lawsuits
On September 2, 1993, the Company announced an agreement, subject to approval
by the courts, to settle its outstanding shareholder lawsuits. Under the
terms of the agreement, the Company will reimburse the plaintiffs for certain
legal fees and expenses. The Company would also establish a "Fund" which
would be available on a claims-made basis to cover certain defined losses
incurred by shareholders who sold their stock during the covered period. The
Company also agreed to make a self-tender offer for a limited number of shares
of its Common Stock at a price determined in the agreement. Hearings by the
Courts on the settlement are scheduled to commence during the next fiscal
quarter.
The Company and the plaintiffs subsequently agreed to amend the terms of the
self-tender because of the increase in the price of the Company's Common Stock
since the original agreement was announced. Under the amended terms, the
Company will offer a contingent self-tender for 1.3 million shares of Common
Stock at $6.00 per share in the event that the average closing price for the
Company's shares for twenty consecutive trading days during an approximate
seven month period is below $6.00 per share. If the average closing price of
the Company's shares does not fall below $6.00 per share for twenty
consecutive trading days prior to February 28, 1995, the offer to self-tender
will expire.
Since January 1994, the Company's Common Stock has traded above the $6.00 per
share tender price. Under the terms of the agreement, the Company is under no
obligation to increase the tender price and has no current plans to do so.
Accordingly, the Company cannot now predict how many shares, if any, it will
obtain through the tender.
Page 8
The Company accrued $300,000 (net of $194,000 tax benefit) as of September 30,
1993 to cover the estimated future costs of the settlement after reimbursement
of certain costs by the Company's liability insurance carrier. This amount
was reported as an extraordinary item in the first quarter of FY 1994.
In reaching the settlement, the Board of Directors did not acknowledge any
wrongdoing. In its deliberations on these suits, the Board did not believe it
was productive to continue to incur legal expenses and divert senior
managements' attention at a time when the Company's plan to enhance
shareholder value was proving out and revenue and operating income were
growing.
Page 9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The following table sets forth the relative percentages that the items of
expense and earnings bear to revenue for the quarters ended September 30, 1994
and 1993.
Percentage of Revenue
Three Months
---------------------
FY 1995 FY 1994
Revenue 100.0% 100.0%
Costs and Expenses
Direct Costs 54.0% 51.5%
Indirect Costs and Selling Expenses 37.9% 40.1%
Depreciation and Amortization 2.1% 2.4%
------ ------
Operating Expenses 94.0% 94.0%
Operating Income 6.0% 6.0%
Interest Expense 0.3% 0.2%
------ ------
Income Before Income Taxes and
Extraordinary Items 5.7% 5.8%
Income Taxes 2.2% 2.2%
------ ------
Income Before Extraordinary Item 3.5% 3.6%
Extraordinary Item (Net of Tax Benefit) 0.0% (0.8%)
------ ------
Net Income 3.5% 2.8%
====== ======
THREE MONTHS ENDED 9/30/94 COMPARED WITH THREE MONTHS ENDED 9/30/93
Revenue for the current quarter was up $16.7 million or 44% to $54.9 million
from $38.2 million in last year's first fiscal quarter. The increase was the
result of a $9.9 million (52%) increase in revenue from the U.S. Department of
Defense ("DoD"), a $3.5 million increase (54%) in revenue from contracts with
the U.S. Department of Justice ("DoJ"), a $1.9 million increase (18%) in
revenue from commercial customers, $0.9 million increase (168%) in revenue
from Federal agencies other than DoD or DoJ, and $0.5 million increase (26%)
in revenue from state governments.
Of the $9.9 million (52%) increase in revenue from DoD contracts,
approximately $6.4 million (65%) was the result of the acquisition of the
government services business of SofTech, Inc. on December 1, 1993, with the
remainder derived from new contracts and add-ons to existing contracts. DoD-
derived revenue accounted for 53% of total revenue during the current quarter,
compared to 50% of total revenue during the last year's first quarter.
Page 10
The DoJ growth was a result of new contract awards for automated litigation
support services which the Company won competitively in the spring and summer
of 1993. For the quarter, DoJ revenue accounted for 18% of total company
revenue versus last year's 17% for the same period. Although revenue from DoJ
is dependent upon the level of DoJ litigation case load the Company is
supporting at any period in time, the Company believes DoJ-derived revenue
will continue to increase for the balance of this fiscal year.
The $1.9 million (18%) increase in commercial revenue is the result of a 49%
increase in revenue from the U.K. operation. The substantial growth in U.K.
revenue is the result of (i) added expansion into the information systems
market area; (ii) increase in the size of the sales force; (iii)
augmentation of the data base marketing business; (iv) continued improvement
of the U.K. economy; and (v) the early FY 1994 acquisitions of Pinpoint and
Miracle (discussed in the "Liquidity and Capital Resources" below).
Direct contract costs grew by $10 million (51%) from $19.7 million to $29.7
million. Direct labor, the principal driving component of contract revenue,
was up $6.1 million or 49%, while non-labor direct costs increased $3.9
million or 54%. Direct costs, as a percentage of revenue, increased to 54.0%
from 51.5%. This increase was attributable to a decline in the mark-up on
direct labor, which is the result of the increasing competition for Federal
Government contracts, and a relative increase in less profitable non-labor
direct costs, which increased from 18.7% to 20.0% of revenue.
Indirect costs grew by $5.5 million or 36% to $20.8 million from $15.3 million
but, as a percentage of revenue, declined to 38% from 40%. The decrease
reflects the Company's continuing emphasis on reducing administrative indirect
costs while increasing funds for marketing and bid and proposal (B&P) efforts.
As a result of this management emphasis and despite the 44% increase in
revenue, indirect labor increased by only $0.9 million or 27% and, as a
percentage of revenue, decreased from 8.3% to 7.3%.
Indirect costs also increased in B&P labor, incentive compensation and fringe
benefits. B&P labor increased in response to increases in the volume of
actual and planned proposals for the year. Incentive compensation (profit
bonuses, sales commission and other pay for performance) grew because of the
increased revenue and profit. Fringe benefits, the largest category of
indirect expenses (33% of total), increased in proportion to the increase in
total payroll (direct labor, B&P labor, indirect labor and incentive
compensation).
Depreciation and amortization increased by $0.3 million to $1.2 million from
$0.9 million. An increased level of fixed assets (primarily computing and
network equipment), necessitated by internal growth and obtained through
acquisitions, accounted for 71% of the growth. The other 29% of the growth
was the result of the Goodwill amortization.
Income before interest, income taxes and extraordinary item grew $962,000 or
42% from $2.3 million to $3.3 million. The increase resulted primarily from
the increase in revenue.
Page 11
Interest costs totalled $142,000 (0.3% of revenue) and were up $51,000 (56%)
from last year's $91,000. The increase is a result of (i) a $2.6 million or
40% increase in average borrowings from $6.5 million to $9.1 million; and
(ii) a 24.5% increase in the effective interest rate from 5% to 6.2%. The
increase in borrowings was caused by the Company's current high growth rate,
the acquisitions made since last year's first quarter, and the stock buy back
program discussed under "Liquidity and Capital Resources" (see below).
Income before income taxes and extraordinary item rose to $3.1 million from
last year's earnings of $2.2 million. The $911,000 (41%) increase was
primarily attributable to the growth in operating income with a slight offset
by the increase in interest expense.
Income tax expense of $1,223,000 is consistent with the growth in income
before income tax as the effective tax rate has remained constant from year to
year.
The FY 1994 extraordinary item reflects a provision at September 30, 1993 to
cover the cost of settling the outstanding shareholder lawsuits. The
provision equates to a $494,000 pre-tax expense, and $300,000 net of tax
expense. See Note C to the Unaudited Consolidated Financial Statements.
Also, see comments under "Liquidity and Capital Resources" below.
LIQUIDITY AND CAPITAL RESOURCES
The Company's principal source of cash is from operating activities and bank
borrowings. The Company's primary requirement for working capital is to carry
billed and unbilled receivables, a majority of which are due under prime
contracts with the U.S. Federal Government, or subcontracts thereunder.
During the first quarter of FY 1995, the Company purchased for Treasury Stock
275,000 shares of Common Stock at an aggregate price of $2.154 million. In
addition, the Company is pursuing a strategy of small, synergistic, niche
acquisitions designed to broaden its client and product base in its
Information Technology business portfolio. Although no acquisitions were made
in the current quarter, the Company continues to seek and review potential
candidates.
As noted earlier, under the terms of the shareholder litigation settlement
agreement, the Company agreed to initiate a contingent self-tender for 1.3
million of its Common Shares at a price of $6.00 per share in the event that
the average closing price for the Company's shares for twenty consecutive
trading days, between July 22, 1994 and February 28, 1995, is below $6.00 per
share. If the Company's shares do not trade below $6.00 per share in twenty
consecutive days prior to February 28, 1995, the offer for the self-tender
will expire. If the tender is accomplished as announced and fully subscribed,
the Company's debt will increase by approximately $7.8 million, and its
shareholder equity will decrease by a like amount. Hence, the Company's
capital structure will be significantly changed if the self-tender is fully
subscribed. As of October 31, 1994, the Company's stock price was
substantially above the $6.00 per share tender price. Under the terms of the
agreement, the Company is under no obligation to increase the tender price and
has no current plans to do so. Moreover, in view of (i) the substantial
difference between the present price of the Company's stock and the $6.00 per
share contingent tender price, and (ii) the fact that the reviewing Court
must approve a settlement including a proposed contingent self-tender on the
Page 12
terms set forth above, the Company cannot at this time predict with assurance
that a self-tender will be part of the final, court-approved settlement.
Accordingly, the Company cannot now predict how many shares, if any, it will
obtain through the tender, or whether a tender will occur.
The Company's principal source of cash, other than from operations, is its $20
million unsecured line of credit with Signet Bank in the U.S., and a 500,000
pounds sterling unsecured line with the National Westminster Bank in London,
England. These credit lines expire on January 31, 1995 and in November, 1995
respectively. The Company believes they can be renewed and increased as
necessary to cover the transactions described above. Accordingly, the Company
believes that the combination of internally generated funds, available bank
credit and cash on hand will provide the required liquidity and capital
resources for the foreseeable future.
Page 13
PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Pfirman and Chrysogelos Litigation
Reference is made to Part II, Item 1, Legal Proceedings, in the Registrant's
quarterly report on Form 10-Q for the quarter ended March 31, 1991 for a
description of the two pending shareholder suits against the Registrant, and
against the directors of the Registrant entitled "Pfirman v. London, et al.",
and "Chrysogelos v. London, et al". Reference is also made to Part I, Item 3
in the Registrant's Annual Report on Form 10-K for the year ending June 30,
1994. Since the aforementioned filing of the Registrant's reports, on which
Part I, Item 3, Legal Proceedings, was current, the information reported
therein on pending legal proceedings instituted against the Registrant has not
changed.
In view of Director Pfirman's continuing adverse interest in this case as a
name plaintiff, during the period before final settlement, Director Pfirman
excused and will continue to excuse himself from all Board discussions
concerning these cases and the Settlement Agreement.
Pentagen Technologies International, Ltd. v. CACI International Inc, et al.
Reference is made to Part I, Item 3, Legal Proceedings, in the Registrant's
Annual Report on Form 10-K for the year ending June 30, 1994 for the most
recently filed information concerning the lawsuit filed on July 1, 1993,
against the Registrant by Pentagen Technologies International, Ltd. (Pentagen)
in the Supreme Court for the State of New York alleging conversion of
intellectual property and violation of statutory duties as to appropriation of
computer software, and the lawsuit filed December 10, 1993 against the
Registrant in the United States District Court for the Southern District of
New York alleging copyright and trademark infringement and violation of the
Major Fraud Against the United States Act. Since the filing of the
Registrant's report indicated above, the information reported therein on
pending legal proceedings has not changed.
The Registrant believes that the allegations of these cases are without merit
and intends to vigorously defend itself.
CACI International Inc, et al. v. Pentagen Technologies, Ltd., et al.
Reference is made to Part I, Item 3, Legal Proceedings, in the Registrant's
Annual Report on Form 10-K for the year ending June 30, 1994 for the most
recently filed information concerning the lawsuit filed on December 22, 1993,
in the United States District Court for the Eastern District of Virginia
against Pentagen Technologies International, Ltd., Baird Technologies, Inc.,
John C. Baird and Mitchell R. Leiser (principals of Pentagen and Baird).
The lawsuit was brought by the Registrant in order to provide an expeditious
redress of Pentagen's unfounded allegations including the allegations in the
lawsuits brought by Pentagen in New York as described above, and to compensate
the Registrant for any damage it may have suffered because of the defendants'
unfounded accusations.
Page 14
The suit seeks declaratory judgements that the Registrant and its subsidiary
have not infringed on Pentagen's copyright and trademark rights, damages for
the defendants' defamation of the Registrant and for their tortuous
interference with the Registrant's contracts, and damages for Baird
Technologies' breach of its contractual obligation to indemnify the Registrant
against any infringement claims.
Since the filing of the Registrant's report indicated above, the information
reported therein on pending legal proceedings has changed as set forth below:
On September 2, 1994, defendants filed an Amended Notice of Appeal.
The Registrant filed a Cross Appeal on September 12, 1994 from (i) the
judgement in favor of the defendants on the issue of the Registrant's breach
of contract claim (Count III); (ii) the Order vacating the Court's judgement
in favor of the Registrant and finding for the defendants on the tortuous
interference claim (Count IV); and (iii) the award of damages to the
Registrant on the defamation claim (Count V). The Registrant is engaged in
discovery to identify defendant's assets for satisfying the monetary award.
CACI INTERNATIONAL INC AND SUBSIDIARIES
INDEX TO EXHIBITS
Exhibit
Number Title
11 Computation of Earnings per Common and
Common Equivalent Share
27 Financial Data Schedule
Page 15
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 thereunto duly authorized.
CACI International Inc
----------------------
(Registrant)
Date: November 11, 1994 By: /s/
----------------------------------
Dr. J.P. London
Chairman of the Board,
President, and Director
(Principal Executive Officer)
Date: November 11, 1994 By: /s/
---------------------------------
Samuel R. Strickland
Executive Vice President,
Chief Financial Officer, and Treasurer
(Principal Financial and Accounting
Officer)