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CACI Reports Fiscal 2007 Second Quarter Results Print

Revenue increased 13.7 percent to $476.9 million

CACI Reports Fiscal 2007 Second Quarter Results

ARLINGTON, Va., Jan. 31 /PRNewswire-FirstCall/ -- CACI International Inc (NYSE: CAI) , a leading information technology and network solutions provider to the federal government, announced results today for its second fiscal quarter and first six months ended December 31, 2006. CACI provides innovative solutions to meet America's national needs in defense, intelligence, homeland security, and the transformation of government, and is a leading strategic consolidator in its market space.

Second Quarter Results

For the second quarter of Fiscal Year 2007 (FY07) the Company reported record revenue of $476.9 million, up 13.7 percent over second quarter of Fiscal Year 2006 (FY06) revenue of $419.5 million, primarily due to acquisitions made in FY06. Operating income for the quarter was $37.0 million versus operating income of $39.2 million in the year earlier quarter, a decrease of 5.8 percent. The Company's operating margin in the quarter was 7.8 percent compared with 9.3 percent in the year earlier quarter. This decrease was driven primarily by three factors: reduced CACI labor content on work performed during the period; higher indirect costs due to unusually low healthcare-related expenses last year; and lower margin on an acquisition completed in FY06. The effective tax rate for the quarter was 35.2 percent versus 37.2 percent in the second quarter of FY06. The lower tax rate was driven by the positive impact of R&D tax credit legislation enacted in December 2006. Net income for the second quarter was $20.5 million, or $0.65 per diluted share, down 8.1 percent from $22.3 million, or $0.72 per diluted share, for the second quarter of FY06. Operating cash flow for the quarter was $27.9 million.

Second Quarter Highlights

Major highlights and accomplishments during the second quarter of FY07 include:

  * Contract awards totaling approximately $495 million, of which
    approximately $170 million are from unannounced awards from the
    Intelligence Community.  Contract awards for the first six months of
    FY07 total approximately $1.4 billion.

  * Award of a prime position as a large contractor on the 20-year, multiple
    award, indefinite delivery/indefinite quantity $36 billion U.S. Army
    Field and Installation Readiness Support Team (FIRST) contract.

  * Contract funding orders totaling $485 million, an increase of 65 percent
    over $294 million in the second quarter of FY06.  Contract funding
    orders for the first six months of FY07 total approximately $1.1
    billion, 41 percent higher than the approximately $772 million received
    in the first half of FY06.

  CEO Commentary

Commenting on the results for the second quarter, Dr. J.P. (Jack) London, CACI's Chairman, President and CEO said, "Our progress has been temporarily slowed by a combination of industry-wide and CACI-specific factors. Despite these issues, we remain confident in the value we provide to our customers and shareholders. We are encouraged by our sizeable recent contract awards and funding orders. They bode well for future results.

"We are convinced we are in the right market space, providing vital IT and network services to our Department of Defense, Homeland Security and intelligence agency customers. We are aggressively responding to short and longer-term changes in the marketplace. Recent large prime contract awards, both for new work and that previously performed by others, have provided clear indications from our government customers that they consider us a significant, tier 1 service provider. We continue with our aggressive acquisition strategy as a leading strategic consolidator. We have clearly defined goals for long- term profitable growth and we are confident that we will succeed."

Six Months FY07 Results

For the first six months of FY07, revenue increased 12.1 percent to $944.5 million versus revenue of $842.6 million for the same period of FY06. Operating income for the first six months was $73.5 million, 1.1 percent higher than the $72.7 million reported a year earlier. The Company's operating margin was 7.8 percent for the first six months of FY07 compared with 8.6 percent for the first six months of FY06. The effective tax rate for the first half of FY07 was 36.6 percent, equal to the tax rate for the first half of FY06. Net income for the first six months was $39.3 million, or $1.25 per diluted share, 5.1 percent lower than net income of $41.4 million, or $1.34 per diluted share, for the first half of FY06. Operating cash flow for the first six months of FY07 was $70.4 million compared with $47.1 million in the first six months of FY06.

CACI Guidance

The Company issued revised guidance for its FY07 on January 17, 2007. The contributing factors for the change in guidance are:

  * A larger-than-expected reduction in demand for our services on contracts
    supporting operations and maintenance activities in the Department of
    Defense (DoD) as a result of the continuing high priority of funding for
    the warfighter in Iraq and Afghanistan, and a continuing resolution for
    all federal civilian agencies, except for the Department of Homeland
    Security, that will last through September 2007.

  * An increase in the number and duration of protests of major contract
    awards received by the Company, resulting in the delay of the initiation
    of work.

  * The competitive hiring environment for individuals with high-level
    security clearances.

  * The recent loss of two recompeted contracts.


The Company is issuing its guidance for its third fiscal quarter and initial guidance for its fourth fiscal quarter of FY07. This guidance excludes the revenue or earnings from future acquisitions that may be completed prior to the end of FY07.

  (In millions except for           3rd            4th           Total
  earnings per share)             Quarter        Quarter          Year

  Revenue                       $460 - $495    $465 - $511   $1,875 - $1,950
  Diluted earnings per share   $0.55 - $0.65  $0.60 - $0.75   $2.45 - $2.65
  Diluted weighted
   average shares                  31.4           31.5            31.4



This guidance represents our views as of January 31, 2007. Investors are reminded that actual results may differ from these estimates for the reasons described below and in our filings with the Securities and Exchange Commission. As announced on November 1, 2006, beginning with its Fiscal Year 2008 (FY08), the Company will issue only annual guidance with quarterly updates.

Conference Call Information

The Company has scheduled a conference call for 8:30 AM Eastern Time Thursday, February 1st, during which management will be making a brief presentation focusing on second quarter results, operating trends and its expectations. A question-and-answer session will follow to allow further discussion of the results and the Company's future expectations. Interested parties can listen to the conference call and view the accompanying exhibits over the Internet by logging on to CACI's homepage, http://www.caci.com/, at the scheduled time. A replay of the call will also be available over the Internet beginning at 1:00 PM Eastern Time Thursday, February 1st, and can be accessed through CACI's homepage (http://www.caci.com/) by clicking on the CACI Investor Info button.

About CACI

CACI International Inc provides the IT and network solutions needed to prevail in today's new era of defense, intelligence, and e-government. From systems integration and managed network solutions to knowledge management, engineering, simulation, and information assurance, we deliver the IT applications and infrastructures our federal customers use to improve communications and collaboration, secure the integrity of information systems and networks, enhance data collection and analysis, and increase efficiency and mission effectiveness. Our solutions lead the transformation of defense and intelligence, assure homeland security, enhance decision-making, and help government to work smarter, faster, and more responsively. CACI has been named to the Fortune 1000 Largest Companies of 2006. A member of the Russell 1000 index, CACI provides dynamic careers for approximately 10,000 employees working in over 130 offices in the U.S. and Europe. CACI is the IT provider for a networked world. Visit CACI on the web at http://www.caci.com/.

There are statements made herein which do 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: regional and national economic conditions in the United States and the United Kingdom, including conditions that result from terrorist activities or war; changes in interest rates; currency fluctuations; failure to achieve contract awards in connection with recompetes for present business and/or competition for new business; the risks and uncertainties associated with client interest in and purchases of new products and/or services; continued funding of U.S. government or other public sector projects in the event of a priority need for funds, such as homeland security, the war on terrorism or rebuilding Iraq; government contract procurement (such as bid protest, small business set asides, loss of work due to organizational conflicts of interest, etc.) and termination risks; the results of government investigations into allegations of improper actions related to the provision of services in support of U.S. military operations in Iraq; individual business decisions of our clients; paradigm shifts in technology; competitive factors such as pricing pressures and/or competition to hire and retain employees (particularly those with security clearances); market speculation regarding the continued independence of the Company; material changes in laws or regulations applicable to our businesses, particularly in connection with (i) government contracts for services, (ii) outsourcing of activities that have been performed by the government, and (iii) competition for task orders under Government Wide Acquisition Contracts ("GWACs") and/or schedule contracts with the General Services Administration; our own ability to achieve the objectives of near term or long range business plans; and other risks described in the Company's Securities and Exchange Commission filings.

  For investor information contact:    For other information contact:
  David Dragics, Senior Vice           Jody Brown, Executive Vice
   President, Investor Relations        President, Public Relations
  (703) 841-7835, ddragics@caci.com    (703) 841-7801, jbrown@caci.com


                        (Financial tables follow)



                         Selected Financial Data

  CACI International Inc
  Condensed Consolidated Statements of Operations (Unaudited)
  (Amounts in thousands, except per share amounts)

                                              Quarter Ended
                                         12/31/2006   12/31/2005    % Change

  Revenue                                  $476,909     $419,530      13.7%
  Costs of revenue
      Direct costs                          311,464      270,740      15.0%
      Indirect costs and selling
       expenses                             119,426      101,621      17.5%
      Depreciation and amortization           9,054        7,942      14.0%
  Total costs of revenue                    439,944      380,303      15.7%
  Operating income                           36,965       39,227      -5.8%
  Interest expense, net                       5,362        3,777      42.0%
  Income before income taxes                 31,603       35,450     -10.9%
  Income taxes                               11,140       13,180     -15.5%
  Net income                                $20,463      $22,270      -8.1%

  Basic earnings per share                    $0.67        $0.74      -9.8%
  Diluted earnings per share                  $0.65        $0.72      -9.4%

  Weighted average shares used in per
   share computations:
      Basic                                  30,696       30,130
      Diluted                                31,440       30,985


                                             Six Months Ended
                                         12/31/2006   12/31/2005   % Change

  Revenue                                  $944,532     $842,636     12.1%
  Costs of revenue
      Direct costs                          612,191      541,617     13.0%
      Indirect costs and selling
       expenses                             239,281      212,827     12.4%
      Depreciation and amortization          19,560       15,477     26.4%
  Total costs of revenue                    871,032      769,921     13.1%
  Operating income                           73,500       72,715      1.1%
  Interest expense, net                      11,571        7,390     56.6%
  Income before income taxes                 61,929       65,325     -5.2%
  Income taxes                               22,663       23,932     -5.3%
  Net income                                $39,266      $41,393     -5.1%

  Basic earnings per share                    $1.28        $1.38     -6.9%
  Diluted earnings per share                  $1.25        $1.34     -6.3%

  Weighted average shares used in per
   share computations:
      Basic                                  30,662       30,102
      Diluted                                31,378       30,999


       Statement of Operations Data (Unaudited)

                                  Quarter Ended          Six Months Ended
                              12/31/2006  12/31/2005  12/31/2006  12/31/2005

  Operating profit margin        7.8%        9.3%        7.8%        8.6%
  Tax rate                      35.2%       37.2%       36.6%       36.6%
  Net profit margin              4.3%        5.3%        4.2%        4.9%



                   Selected Financial Data (Continued)

  CACI International Inc
  Condensed Consolidated Balance Sheets (Unaudited)
  (Amounts in thousands)

                                               12/31/2006        06/30/2006
  ASSETS:
  Current assets
      Cash and cash equivalents                   $69,335           $24,650
      Accounts receivable, net                    378,303           392,013
      Other current assets                         35,955            33,166
  Total current assets                            483,593           449,829

  Goodwill and intangible assets, net             821,796           832,184
  Property and equipment, net                      23,575            25,082
  Other long-term assets                           66,121            60,995
  Total assets                                 $1,395,085        $1,368,090

  LIABILITIES AND SHAREHOLDERS' EQUITY:
  Current liabilities
      Notes payable                                $3,544            $3,543
      Accounts payable                             52,503            44,921
      Accrued compensation and benefits            84,562            93,398
      Other current liabilities                    68,599            69,503
  Total current liabilities                       209,208           211,365

  Notes payable, long-term                        337,545           364,317
  Other long-term liabilities                      49,140            47,049
  Total liabilities                               595,893           622,731

  Shareholders' equity                            799,192           745,359
  Total liabilities and shareholders'
   equity                                      $1,395,085        $1,368,090



                   Selected Financial Data (Continued)

  CACI International Inc
  Condensed Consolidated Statements of Cash Flows (Unaudited)
  (Amounts in thousands)

                                                     Six Months Ended
                                               12/31/2006        12/31/2005

  CASH FLOWS FROM OPERATING ACTIVITIES:
  Net income                                      $39,266           $41,393
  Reconciliation of net income to net
   cash provided by operating activities
      Depreciation and amortization                19,560            15,477
      Amortization of deferred financing
       costs                                          710               710
      Stock-based compensation expense              7,269             9,683
      Deferred income tax expense                     290               379
  Changes in operating assets and
   liabilities, net of effect of
   business acquisitions:
      Accounts receivable, net                     15,308             5,231
      Other assets                                 (3,170)           (1,153)
      Accounts payable and accrued
       expenses                                     2,934            (9,204)
      Accrued compensation and benefits            (9,690)          (10,131)
      Income taxes payable and receivable          (6,358)           (9,564)
      Other liabilities                             4,273             4,278
  Net cash provided by operating
   activities                                      70,392            47,099

  CASH FLOWS FROM INVESTING ACTIVITIES:
  Capital expenditures                             (4,036)           (6,569)
  Purchases of businesses, net of cash
   acquired                                          (261)          (36,879)
  Other                                              (952)           (2,119)
  Net cash used in investing activities            (5,249)          (45,567)

  CASH FLOWS FROM FINANCING ACTIVITIES:
  Net repayments under line of credit             (26,771)           (1,872)
  Proceeds from employee stock
   transactions                                     3,392             4,506
  Proceeds from exercise of stock options           3,993             3,860
  Repurchase of common stock                       (2,684)           (4,651)
  Other                                               975             1,245
  Net cash (used in) provided by
   financing activities                           (21,095)            3,088
  Effect of changes in currency rates on
   cash                                               637              (427)
  Net increase in cash and equivalents             44,685             4,193
  Cash and cash equivalents, beginning of
   period                                          24,650           132,965
  Cash and cash equivalents, end of
   period                                         $69,335          $137,158



                   Selected Financial Data (Continued)

                   Revenue by Customer Type (Unaudited)

  (dollars in                    Quarter Ended
   thousands)             12/31/2006        12/31/2005     $ Change % Change
  Department of
   Defense             $343,000   71.9%  $307,328   73.2%   $35,672   11.6%
  Federal Civilian
   Agencies             106,553   22.4%    88,010   21.0%    18,543   21.1%
  Commercial             22,094    4.6%    18,380    4.4%     3,714   20.2%
  State and Local
   Governments            5,262    1.1%     5,812    1.4%      (550)  -9.5%
  Total                $476,909  100.0%  $419,530  100.0%   $57,379   13.7%


  (dollars in                   Six Months Ended
   thousands)             12/31/2006        12/31/2005     $ Change % Change
  Department of
   Defense             $677,101   71.7%  $614,536   72.9%   $62,565   10.2%
  Federal Civilian
   Agencies             214,398   22.7%   181,070   21.5%    33,328   18.4%
  Commercial             43,099    4.5%    34,889    4.2%     8,210   23.5%
  State and Local
   Governments            9,934    1.1%    12,141    1.4%    (2,207) -18.2%
  Total                $944,532  100.0%  $842,636  100.0%  $101,896   12.1%


                   Revenue by Contract Type (Unaudited)

  (dollars in                     Quarter Ended
   thousands)              12/31/2006        12/31/2005    $ Change % Change
  Time and materials    $239,544   50.2%  $215,119   51.3%   $24,425  11.4%
  Cost reimbursable      133,389   28.0%   119,347   28.4%    14,042  11.8%
  Fixed price            103,976   21.8%    85,064   20.3%    18,912  22.2%
  Total                 $476,909  100.0%  $419,530  100.0%   $57,379  13.7%


  (dollars in                    Six Months Ended
   thousands)              12/31/2006        12/31/2005    $ Change % Change
  Time and materials    $482,733   51.1%  $446,477   53.0%   $36,256   8.1%
  Cost reimbursable      263,086   27.9%   229,598   27.2%    33,488  14.6%
  Fixed price            198,713   21.0%   166,561   19.8%    32,152  19.3%
  Total                 $944,532  100.0%  $842,636  100.0%  $101,896  12.1%


       Revenue Received as a Prime versus Subcontractor (Unaudited)

  (dollars in                     Quarter Ended
   thousands)              12/31/2006        12/31/2005    $ Change % Change
  Prime                 $389,692   81.7%  $347,230   82.8%   $42,462  12.2%
  Subcontractor           87,217   18.3%    72,300   17.2%    14,917  20.6%
  Total                 $476,909  100.0%  $419,530  100.0%   $57,379  13.7%


  (dollars in                    Six Months Ended
   thousands)              12/31/2006        12/31/2005    $ Change % Change
  Prime                 $770,919   81.6%  $699,648   83.0%   $71,271  10.2%
  Subcontractor          173,613   18.4%   142,988   17.0%    30,625  21.4%
  Total                 $944,532  100.0%  $842,636  100.0%  $101,896  12.1%



                   Selected Financial Data (Continued)

               Contract Funding Orders Received (Unaudited)

  (dollars in                 Quarter Ended
   thousands)             12/31/2006  12/31/2005    $ Change  % Change
  Contract Funding
   Orders                   $485,258    $294,073    $191,185    65.0%


  (dollars in                Six Months Ended
   thousands)             12/31/2006  12/31/2005    $ Change  % Change
  Contract Funding
   Orders                 $1,090,447    $771,508    $318,939    41.3%



    Reconciliation of Total Revenue Growth and Organic Revenue Growth
                               (Unaudited)


The Company has presented organic revenue growth to reflect the effect of acquisitions on total revenue growth. Revenue generated from the date a business is acquired through the first anniversary of that date is considered acquired revenue growth. All remaining revenue growth is considered organic. The Company believes that this non-GAAP financial measure provides investors with useful information to evaluate the growth rate of the Company's core business. This non-GAAP measure should not be considered in isolation or as a substitute for performance measures prepared in accordance with GAAP.

                                                Quarter Ended
  (dollars in thousands)              12/31/2006   12/31/2005   % Change
  Revenue, as reported                  $476,909     $419,530     13.7%
  Less:
         Acquired revenue                 53,004            -
  Organic revenue                       $423,905     $419,530      1.0%


                                             Twelve Months Ended
  (dollars in thousands)              12/31/2006   12/31/2005   % Change
  Revenue, as reported                $1,857,220   $1,687,350     10.1%
  Less:
        Acquired revenue                 184,912            -
  Organic revenue                     $1,672,308   $1,687,350     -0.9%

Website: http://www.caci.com 

 
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