Falls Church, Va. (November 14, 2011) Delta Tucker Holdings, Inc. ("Holdings"), the parent of DynCorp International Inc. ("DI", and together with Holdings, the "Company"), a global government services provider supporting the United States ("U.S.") national security and foreign policy objectives, today reported third quarter 2011 financial results, with revenue of $935.4 million, up $94.3 million or 11.2%, from the same quarter in 2010.
"I am very proud of our team for delivering another solid quarter" said Steven F. Gaffney, DI chairman and chief executive officer. "Our employees continue to deliver superior performance for our customers, have rallied around our new structure, and are producing results that will lead us into the future. The organizational changes made earlier this year continue to bear fruit, with a new business win rate that has jumped to over 40 percent. Our strong backlog, solid foundation and robust new business funnel give us confidence in our 2011 plan and set us up for a positive 2012." The increase in revenue was driven primarily from:
These increases were partially offset by the loss of the Life Cycle Contract Support ("LCCS") Army and Navy contracts and reduced deliveries on our CivPol contracts in Afghanistan and Iraq as those programs transition to their follow on contracts.
Net income attributable to Holdings was $7.5 million, up $0.6 million or 8.8% from the same quarter in 2010, adjusted for the impairment of the carrying value of DI's investment in the Global Linguist Solutions ("GLS") joint venture. Aside from the impairment charge, the change in net income attributable to Holdings was due primarily to higher selling, general and administrative expenses for consulting and other professional services costs during the quarter to improve core business and compliance capabilities, a request for equitable adjustment ("REA") settlement realized in 2010, and a decrease in earnings from equity method investees due primarily to the decrease in GLS' earnings. These decreases in net income were more than offset by an increase in profitability due to higher revenue levels, and lower legal expenses in 2011.
On October 5, 2011, the Defense Contract Audit Agency ("DCAA") issued GLS a Form 1 in the amount of $95.9 million which pertains to potential inconsistencies of certain contractual requirements. As a result of the Form 1, the customer informed GLS it would withhold 15% of outstanding and future invoices until the Form 1 is resolved. In view of these developments, combined with the wind-down of GLS' current task order in Iraq, the announced withdrawal of U.S. forces from that country by year-end and delays of new task orders under the DLITE contract, the Company performed an assessment and concluded that the carrying value of the GLS investment, which totaled $76.6 million as of September 30, 2011, had a loss in value that was other than temporary. We recorded an impairment of our investment in GLS as of September 30, 2011 in the amount of $76.6 million.
Adjusted EBITDA for third quarter 2011 was $51.8 million or $6.8 million lower than the comparable period in 2010. The decrease is primarily due to the loss of the LCCS programs, lower earnings from GLS, an REA settlement realized in 2010, lower profitability on the MRAP program as it transitioned to a sustainment mode and the lower margins on the AMDP program, compared to the program it replaced, CivPol-Afghanistan. These factors were partially offset by increased business and profitability under our LOGCAP IV and increased margins for the CFT and CNTPO programs and lower legal expenses.
Backlog of $6.4 billion was up $2.5 billion sequentially from second quarter 2011 due to new orders on LOGCAP IV, new and re-compete wins under the Aviation BAT as well as a new Worldwide Protective Services ("WPS") contract under the Security Services BAT.
Third Quarter 2011 Highlights
Global Stabilization and Development Solutions (GSDS) Third Quarter Highlights:
GSDS segment revenue of $589.6 million, which represents 63.0% of total revenue for the three months ended September 30, 2011, increased 15.4% compared to the comparable period in 2010. GSDS reported adjusted EBITDA of $20.0 million for third quarter 2011, a decrease of 30.1% compared to third quarter 2010. The performance was primarily driven by the following:
Contingency Operations ― $400.9 million in Revenue:
Training and Mentoring ― $151.7 million in Revenue:
Security Services ― $18.2 million in Revenue:
Global Platform Support Solutions (GPSS) Third Quarter Highlights:
GPSS segment revenue of $340.2 million, which represents 36.4% of total revenue for the three months ended September 30, 2011, increased 4.3% compared to the comparable period in 2010. GPSS also reported adjusted EBITDA of $31.7 million for third quarter 2011, a 0.1% increase from the comparable period in 2010. The results were primarily driven by the following:
Aviation ― $165.0 million in Revenue:
Air Operations ― $118.3 million in Revenue:
Operations and Maintenance ― $55.1 million in Revenue:
Global Linguist Solutions (GLS) Third Quarter Highlights:
Liquidity
Cash Used in Operating Activities of ($11.8) million for the three months ended September 30, 2011 was positively impacted by the Company's successful reduction in Accounts Receivable, primarily related to the CivPol contracts. This benefit was more than offset by the payment of the Company's annual insurance premiums. During the third quarter the Company also made a scheduled principal payment of $1.3 million on its credit facility. Subsequent to quarter end, the Company made an additional optional principal payment of $48.7 million on October 19, 2011.
Conference Call
The Company will host a conference call at 10:00 a.m. EDT on Monday November 14, 2011 to discuss results for third quarter 2011. The call may be accessed by webcast or through a dial-in conference line.
To access the webcast and view the accompanying presentation, please go to , click on "Investor Relations" and "Events & Presentations." Please go to the site approximately fifteen minutes prior to the start of the call to register, download and install any necessary audio software.
To participate by phone, dial (866) 871-0758 and enter the conference ID number: 18223152.
International callers should dial (706) 634-5249 and enter the same conference ID number above.
A telephonic replay will be available from 1:00 p.m. EDT on November 14, 2011 through 11:59 PM EDT December 14, 2011. To access the replay, please dial (855) 859-2056 or (404) 537-3406 and enter the conference ID number.
About DynCorp International
DynCorp International Inc., a wholly owned subsidiary of Delta Tucker Holdings, Inc., is a global government services provider in support of U.S. national security and foreign policy objectives, delivering support solutions for defense, diplomacy, and international development. DynCorp International operates major programs in logistics, platform support, contingency operations, and training and mentoring to reinforce security, community stability, and the rule of law. DynCorp International is headquartered in Falls Church, Va. For more information, visit www.dyn-intl.com.
Reconciliation to GAAP
In addition to the Company's financial results reported in accordance with accounting principles generally accepted in the United States of America ("GAAP") included in this press release, the Company has provided certain financial measures that are not calculated according to GAAP. We define EBITDA as GAAP net income attributable to the Company adjusted for interest, taxes, depreciation and amortization. Adjusted EBITDA is calculated by adjusting EBITDA for certain noncash items from operations and certain other items as defined in our 10.375% Senior Unsecured Notes and our Credit Facility. Management believes these non-GAAP financial measures are useful in evaluating operating performance and are regularly used by security analysts, institutional investors and other interested parties in reviewing the Company. Non-GAAP financial measures such as EBITDA and Adjusted EBITDA are not intended to be a substitute for any GAAP financial measure and, as calculated, may not be comparable to other similarly titled measures of the performance of other companies. We believe that Adjusted EBITDA is useful in assessing our ability to generate cash to cover our debt obligations including interest and principal payments. Non-GAAP financial measures are not intended to be a substitute for any GAAP financial measure and, as calculated, may not be comparable to other similarly titled measures of the performance of other companies.
For a reconciliation of non-GAAP financial measures to the comparable GAAP financial measures please see the financial schedules accompanying this release.
Forward-looking Statements
This announcement may contain forward-looking statements regarding future events and our future results that are subject to the safe harbors created by the Private Securities Litigation Reform Act of 1995 under the Securities Act of 1933 (the "Securities Act") and the Securities Exchange Act of 1934 (the "Exchange Act"). Without limiting the foregoing, the words "believes," "thinks," "anticipates," "plans," "expects" and similar expressions are intended to identify forward-looking statements. Forward-looking statements involve risks and uncertainties. Statements regarding the amount of our backlog and estimated total contract values are other examples of forward-looking statements. We caution that these statements are further qualified by important economic, competitive, governmental, international and technological factors that could cause our business, strategy, projections or actual results or events to differ materially, or otherwise, from those in the forward-looking statements. These factors, risks and uncertainties include, among others, the following: the future impact of mergers acquisitions, joint ventures or teaming agreements; our substantial level of indebtedness and changes in availability of capital and cost of capital; the outcome of any material litigation, government investigation, audit or other regulatory matters; policy and/or spending changes implemented by the Obama Administration, any subsequent administration or Congress; termination or modification of key U.S. government or commercial contracts, including subcontracts; changes in the demand for services that we provide or work awarded under our contracts, including without limitation, the Civilian Police, International Narcotics and Law Enforcement, Worldwide Personal Protection Services and LOGCAP IV contracts; pursuit of new commercial business in the U.S. and abroad; activities of competitors and the outcome of bid protests; changes in significant operating expenses; impact of lower than expected win rates for new business; general political, economic, regulatory and business conditions in the U.S. or in other countries in which we operate; acts of war or terrorist activities; variations in performance of financial markets; the inherent difficulties of estimating future contract revenue and changes in anticipated revenue from indefinite delivery, indefinite quantity contracts; the timing or magnitude of any award fee granted under our government contracts, including, but not limited to, LOGCAP IV; changes in expected percentages of future revenue represented by fixed-price and time-and-materials contracts, including increased competition with respect to task orders subject to such contracts; termination or modification of key subcontractor performance or delivery; statements covering our business strategy, those described in "Risk Factors" and other risks detailed from time to time in our reports filed with the SEC.
Accordingly, such forward-looking statements do not purport to be predictions of future events or circumstances and therefore, there can be no assurance that any forward-looking statement contained herein will prove to be accurate. We assume no obligation to update the forward-looking statements. Given these risk and uncertainties, you are cautioned not to place undue reliance on forward-looking statements. The Company's actual results could differ materially from those contained in the forward-looking statements.
Third Quarter Financial Results
For more information contact
Chris Porter
Vice President and Treasurer
(817) 224-7742
Christopher.Porter@dyn-intl.com
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