- Revenue of $1,047.1 million, up 18.4% from first quarter2011
- Net income attributable to Delta Tucker Holdings, Inc. of $5.6million, up $13.6% from first quarter 2011
- Adjusted EBITDA of $41.4 million, down $14.2 million from firstquarter 2011
- Total Backlog of $5.0 billion
FALLS CHURCH, Va. – (May 14, 2012) – Delta Tucker Holdings, Inc. (“Holdings”), the parent of DynCorpInternational Inc. (“DI”, and together with Holdings, the”Company”), a global government services provider supporting theUnited States’ national security and foreign policy objectives,today reported first quarter operational results with revenue of$1,047.1 million, an increase of 18.4% over first quarter2011. Net income attributable to Holdings was $5.6 millionfor the quarter, representing a 13.6% increase from the reported$4.9 million in net income attributable to Holdings in firstquarter 2011.
“This quarter the team successfully expanded into new, excitingadjacencies,” said Steve Gaffney, chairman and chief executiveofficer, DynCorp International. “We are honored to be supporting anew customer in NASA and working in new markets, such as Egypt.With seven straight quarters of revenue growth, we are confident inthe team’s ability to secure a strong, stable future.”
First Quarter and Other RecentHighlights
- In January 2012, DI was awarded a contract with the U.S. AirForce to provide support services for Department of Defense andcontractor personnel in Egypt. The firm fixed-price contracthas a one-year base contract with four one-year options and a totalcontract value of $95 million if all options are exercised.
- In January 2012, DI became a subcontractor to Alenia to supportthe Air Force Security Assistance Center (“AFSAC”) G222/C27 Aprogram. The time and materials contract has a two year base periodwith eight one-year options with a total contract value of $42.0million if all options are exercised.
- In January of 2012, DI amended its organizational structurere-aligning its Business Area Teams (“BATs”) into strategicbusiness “Groups.” The prior three operating segments, GlobalStabilization and Development Solutions (“GSDS”), Global PlatformSupport Solutions (“GPSS”) and Global Linguist Solutions(“GLS”) were re-aligned into six operating segments whichconsist of the LOGCAP IV (“LOGCAP”) Group, Aviation (“Aviation”)Group, Training and Intelligence Solutions (“TIS”) Group, GlobalLogistics & Development Solutions (“GLDS”) Group, SecurityServices (“Security”) Group and the GLS Group.
- In March 2012, DI was awarded a contract with the U.S. Navy toprovide facility support services for personnel from the NavalMobile Construction Battalion unit in Dili, Timor-Leste. The fixedprice, indefinite delivery/indefinite quantity (“IDIQ”) contracthas a one base year with four one-year options.
- In March 2012, DI received a contract with the US Army toprovide a Maintenance Augmentation Team for the Kuwait Air ForceAH-64D Apache helicopter maintenance program. The fixed-pricecontract has one base year with four, one-year options and a totalcontract value of $25.4 million if all options are exercised.
- In April 2012, DI was awarded a contract with NationalAeronautics and Space Administration (“NASA”) to provide aircraftmaintenance and operational support services at various locations.The contract will include work at Ellington Field at NASA’s JohnsonSpace Center in Houston; NASA’s Langley Research Center in Hampton,Virginia; NASA facilities in El Paso, Texas, and Edwards Air ForceBase, California; and other locations worldwide as required. Thefixed-price-award-fee/cost-plus-award-fee contract has a $46.6million base contract, beginning June 1 for one year and fourmonths, with two two-year option periods, with a total value of$176.9 million if all options are exercised.
Summary Operating Results
Revenue for the first quarter of $1,047.1 million was up 18.4%from the same quarter in 2011 based on: continued strong demandunder the Logistics and Civil Augmentation Program (“LOGCAP”) IVcontract; a significant increase under the Department of StateBureau for International Narcotics and Law Enforcement Affairs(“INL”) -Air Wing contract primarily due to construction servicesand secure air transportation services in Iraq and Afghanistan;performance of new contracts under the Security Services Group andthe Aviation Group, including task orders under the Contract FieldTeams (“CFT”) contract, the ramp-up of the Oshkosh Defensecontract under GLDS and increased volume under our AfghanistanMinistry of Defense Program (“AMDP”). Revenue growth in thequarter was partially offset by the loss of the Life-CycleContractor Support (“LCCS”) contracts.
First quarter net income attributable to Holdings was $5.6million compared to $4.9 million reported in the comparable periodin 2011. The change in net income attributable to Holdingswas due primarily to revenue growth noted above, and thecontribution of improved margins on the CFT contract, lowerselling, general and administrative expenses as a percent ofrevenue, and lower interest expense, including no loss on earlyextinguishment of debt which was recorded in the first quarter of2011. These benefits were partially offset by lowerprofitability driven by losses incurred on the ramp-up of the newSecurity Services contracts, and the mix of increased businessunder the Afghan National Police Ministry of Interior DevelopmentProgram (“AMDP”) contract and lower demand under the CivilianPolice (“CivPol”) contract as the AMDP contract carries lowermargins based on its cost responsive nature and lack of fee oncertain other direct costs. Additionally, the company recordedlower earnings from equity method investees related to the GLSjoint venture.
Adjusted EBITDA for first quarter 2012 was $41.4 million or$14.2 million lower than the comparable period in 2011 primarilydue to the net income items discussed above, the impact of lowerearnings from affiliates not received in cash and a higheradjustment for acquisition accounting and Merger-relateditems.
“I am pleased to see the effects of the new, higher-marginAviation contracts gain traction and I am excited about the marketadjacencies we entered into this quarter that continue to evolvethe business,” said Bill Kansky, chief financial officer. “But the beginning of the year also brought challenges. Theunexpected transition and staffing hurdles in our Security ServicesGroup coupled with the anticipated headwinds from the GLSwind-down in Iraq and mix changes in our training and mentoringcontracts negatively impacted the quarter. However, we havethe right management focus and we intend to improve the operationsof our Security business and get the programs back on track.”
Reportable Segments Results:
Revenue of $478.0 million increased $98.2 million, or 25.8%,during the three months ended March 30, 2012 compared to thethree months ended April 1, 2011, primarily as a result ofincreased demand for services under the Afghanistan task order.
Adjusted EBITDA of $17.5 million increased $ 5.6 million, or46.4%, for the three months ended March 30, 2012 compared withthe three months ended April 1, 2011 as a result of theincrease in volume discussed above. As a percentage of revenue,Adjusted EBITDA was 3.7%, for the three months ended March 30,2012, compared to 3.2%, for three months ended April 1, 2011, anincrease primarily due to higher award fee accruals.
Revenue of $306.4 million increased $45.8 million, or 17.6%,during the three months ended March 30, 2012, compared to thethree months ended April 1, 2011. The favorability wasprimarily the result of the increase in demand for the servicesunder the INL Air Wing for construction services and secure airtransportation services in Iraq and Afghanistan. The Company alsobenefited during the three months ended March 30, 2012 fromcontract wins during the third quarter of 2011 including the NavalTest Wing Patuxent River MD (“Pax River”) contract and new taskorders under the CFT program, specifically the Regional AviationSupport Management – West (“RASM-W”), Theater Aviation SupportManagement – Europe (“TASM-E”), and Fort Drum and Fort Campbellcontracts. The Company also continues to experience improvedperformance under the Counter Narcoterrorism Technology ProgramOfficer (“CNTPO”) contract. These increases were partially offsetby the impact of the loss of the LCCS programs during the threemonths ended April 1, 2011.
Adjusted EBITDA of $23.2 million increased $7.9 million, or51.9%, during the three months ended March 30, 2012 comparedto the three months ended April 1, 2011, primarily as a resultof increased revenue and profitability for the contracts discussedabove. As a percentage of revenue, Adjusted EBITDA was 7.6%for the three months ended March 30, 2012, compared to 5.9%from the three months ended April 1, 2011.
Training and IntelligenceSolutions
Revenue of $156.6 million increased $3.4 million, or 2.2%,during the three months ended March 30, 2012 compared to thethree months ended April 1, 2011. The increase was primarilydriven by increase in revenue on the AMDP and CSTC-A programs. TheAMDP program began operations during the three months ended April1, 2011 but was not fully operational until the third quarter of2011. This program substantially replaced the CivPol Afghanistanprogram from the prior year. The increase in revenue waspartially offset by declines in the CivPol program, which isramping down and the loss of revenue on the Multi-National SecurityTransition Command – IRAQ (“MNSTC-I”) program, which concludedduring calendar year 2011.
Adjusted EBITDA of $5.5 million decreased $7.9 million, or58.9%, during the three months ended March 30, 2012, comparedto the three months ended April 1, 2011, primarily as a resultof the contract mix within this Group containing more programsoperating at lower margins in comparison to prior year. Asmentioned above, the AMDP program substantially replaced the CivPolAfghanistan program, carrying lower margins with certain componentsnot eligible for fee as compared to the more favorable contractstructure under the CivPol Afghanistan program. This changealso drove the decrease in Adjusted EBITDA as a percentage ofrevenue to 3.5%, for the three months ended March 30, 2012,from 8.8%, in the prior year.
Global Logistics & DevelopmentSolutions
Revenue of $79.1 million increased $7.3 million, or 10.2%,during the three months ended March 30, 2012 compared to thethree months ended April 1, 2011, primarily as a result of theincrease in operations under the Oshkosh Defense contract, awardedduring second quarter of calendar year 2011. The increase inrevenue was also driven by the growth on the War Reserve Materiel(“WRM”) and the contract for the Democratic Republic of Congo andSomalia under the Africa Peacekeeping Program (“AFRICAP”). Theseincreases were partially offset by reduced volume under the AirForce Contract Augmentation Program (“AFCAP”) and the completion ofcertain contracts by Casals & Associates, Inc.
Adjusted EBITDA of $5.1 million increased $0.4 million, or 9.1%,during the three months ended March 30, 2012 compared to thethree months ended April 1, 2011 primarily as a result of thepositive margin contribution from the Oshkosh Defense program, inaddition to the increase in service demand under the AFRICAPprograms. As a percentage of revenue, Adjusted EBITDA was 6.5%, forthe three months ended March 30, 2012, compared to 6.5%, fromthe three months ended April 1, 2011, as a result of increaseddemand for higher margin business discussed above combined withlower demand for the AFCAP and Casals contracts which carried lowermargins.
Revenue of $23.9 million increased $9.4 million, or 65.2%,during the three months ended March 30, 2012 compared to thethree months ended April 1, 2011, primarily as a result of thereplacement of the Worldwide Personal Protection Program (“WPPS”)with the higher demand under the Worldwide Protective Services(“WPS”) program during calendar year 2011, and the addition of twonew programs, Chemonics and Camp Bondsteel, which became fullyoperational during the three months ended March 30, 2012.
Adjusted EBITDA loss of $6.6 million for the three months endedMarch 30, 2012 decreased from Adjusted EBITDA of $1.3 millionfor the three months ended April 1, 2011, primarily as aresult of the WPPS program ending in late 2011, and performancechallenges such as staffing issues, additional transition costs andcustomer process impediments on the WPS and Camp Bondsteelprograms.
DI had no Adjusted EBITDA from the GLS Group in the firstquarter of 2012 compared to $4.7 million reported during thethree months ended April 1, 2011, primarily as a result of thereduction in deployed linguists under the INSCOM contract insupport of U.S. troop levels in Iraq as the war came to an end inDecember 2011.
Cash used in Operating Activities of $10.0 million for thequarter-ended March 30, 2011 was driven by an increase in workingcapital needs as a result of revenue growth on our programs,primarily LOGCAP IV, coupled with a reduction in payables,partially offset by a reduction in DSO from 69 days at year-end2011 to 68 days at the end of first quarter. On March 30,2012 the Company was temporarily in default under its revolvingcredit facility (“Revolver”) for missing the March 29, 2012deadline to deliver annual financial statements and other relateddocuments to the Administrative Agent. The annual financialstatements were filed on April 9, 2012, curing the default andrestoring full access to the Revolver. The Cash balance atthe end of the quarter was $138.6 million which reflected the $90.0million draw the Company made under its revolving credit facilityat quarter-end to provide additional liquidity as the Companycompleted its financial statements. The Companyrepaid the outstanding Revolver balance in April.
The Company will host a conference call at 10:00 a.m. EDT onMonday May 14, 2012 to discuss results for first quarter 2012. Thecall may be accessed by webcast or through a dial-in conferenceline.
To access the webcast and view the accompanying presentation,please go to www.dyn-intl.com, click on”Investor Relations” and “Events & Presentations.” Please go tothe site approximately fifteen minutes prior to the start of thecall to register, download and install any necessary audiosoftware.
To participate by phone, dial (866) 871-0758 and enter theconference ID number: 78149237. International callers shoulddial (706) 634-5249 and enter the same conference ID numberabove. A telephonic replay will be available from 1:00 p.m.EDT on May 14, 2012 through 11:59 PM EDT June 14, 2012. To accessthe replay, please dial (855) 859-2056 or (404) 537-3406 and enterthe conference ID number.
About DynCorp International
DynCorp International Inc., a wholly owned subsidiary of DeltaTucker Holdings, Inc., is a global government services providerworking in support of U.S. national security and foreign policyobjectives, delivering support solutions for defense, diplomacy,and international development. DynCorp International operates majorprograms in logistics, platform support, contingency operations,and training and mentoring to reinforce security, communitystability, and the rule of law. DynCorp International isheadquartered in Falls Church, Va. For more information, visitwww.dyn-intl.com.
Reconciliation to GAAP
In addition to the Company’s financial results reported inaccordance with accounting principles generally accepted in theUnited States of America (“GAAP”) included in this press release,th
Company has provided certain financial measures that are notcalculated according to GAAP, including EBITDA and Adjusted EBITDA.We define EBITDA as GAAP net income attributable to the Companyadjusted for interest, taxes, depreciation and amortization.Adjusted EBITDA is calculated by adjusting EBITDA for certainnoncash items from operations and certain other items as defined inour 10.375% Senior Unsecured Notes and our Credit Facility.Management believes these non-GAAP financial measures are useful inevaluating operating performance and are regularly used by securityanalysts, institutional investors and other interested parties inreviewing the Company. We believe that Adjusted EBITDA is useful inassessing our ability to generate cash to cover our debtobligations including interest and principal payments. Non-GAAPfinancial measures, such as EBITDA and Adjusted EBITDA are notintended to be a substitute for any GAAP financial measure and, ascalculated, may not be comparable to other similarly titledmeasures of the performance of other companies.
For a reconciliation of non-GAAP financial measures to thecomparable GAAP financial measures please see the financialschedules accompanying this release.
This announcement may contain forward-looking statementsregarding future events and our future results that are subject tothe safe harbors created by the Private Securities LitigationReform 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 similarexpressions are intended to identify forward-looking statements.Forward-looking statements involve risks and uncertainties.Statements regarding the amount of our backlog, estimated totalcontract values, and 2012 outlook are other examples offorward-looking statements. We caution that these statements arefurther qualified by important economic, competitive, governmental,international and technological factors that could cause ourbusiness, strategy, projections or actual results or events todiffer materially, or otherwise, from those in the forward-lookingstatements. These factors, risks and uncertainties include, amongothers, the following: the future impact of mergers acquisitions,joint ventures or teaming agreements; our substantial level ofindebtedness and changes in availability of capital and cost ofcapital; the outcome of any material litigation, governmentinvestigation, audit or other regulatory matters; policy and/orspending changes implemented by the Obama Administration, anysubsequent administration or Congress; termination or modificationof key U.S. government or commercial contracts, includingsubcontracts; changes in the demand for services that we provide orwork awarded under our contracts, including without limitation, theCivilian Police, International Narcotics and Law Enforcement,Worldwide Personal Protection Services and LOGCAP IV contracts;change in demand for services provided by our joint venturepartners; pursuit of new commercial business in the U.S. andabroad; activities of competitors and the outcome of bid protests;changes in significant operating expenses; impact of lower thanexpected win rates for new business; general political, economic,regulatory and business conditions in the U.S. or in othercountries in which we operate; acts of war or terrorist activities;variations in performance of financial markets; the inherentdifficulties of estimating future contract revenue and changes inanticipated revenue from indefinite delivery, indefinite quantitycontracts; the timing or magnitude of any award fee granted underour government contracts, including, but not limited to, LOGCAP IV;changes in expected percentages of future revenue represented byfixed-price and time-and-materials contracts, including increasedcompetition with respect to task orders subject to such contracts;termination or modification of key subcontractor performance ordelivery; and statements covering our business strategy, thosedescribed in “Risk Factors” in our Annual Report on Form 10-K forthe year ended December 30, 2011 filed with the SEC on April 9,2012 and other risks detailed from time to time in our reportsfiled with the SEC. Accordingly, such forward-lookingstatements do not purport to be predictions of future events orcircumstances and therefore, there can be no assurance that anyforward-looking statement contained herein will prove to beaccurate. We assume no obligation to update theforward-looking statements. Given these risk anduncertainties, you are cautioned not to place undue reliance onforward-looking statements. The Company’s actual results coulddiffer materially from those contained in the forward-lookingstatements.
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