- Revenue of $540.3 million
- Net loss attributable to Delta Tucker Holdings, Inc. of $71.5 million
- Adjusted EBITDA of $28.8 million
- Total backlog of $3.0 billion
- DSO of 75 days
- Term Loan principal prepayment of $30.0 million
MCLEAN, Va. – (November 10, 2014) – Delta Tucker Holdings, Inc. (“Holdings”), the parent of DynCorp International Inc. (“DI”), and together with Holdings, (the “Company”), a global services provider, today reported third quarter 2014 financial results.
Third quarter revenue was $540.3 million, compared to $766.8 million in the third quarter 2013, with the decrease primarily driven by the continued drawdown of U.S. forces in Afghanistan and delays in new business awards. Net loss attributable to Holdings for the third quarter 2014 was $71.5 million, compared with a net loss attributable to Holdings of $33.1 million in the third quarter 2013, largely due to the revenue declines discussed above, non-cash impairment charges of $51.0 million and a charge for additional contract losses associated with a contract dispute. The Company reported Adjusted EBITDA of $28.8 million for the third quarter, compared with $29.7 million for the same period in 2013.
“Though we continued to face U.S. government budget pressures and the impact of the continued drawdown of troops in Afghanistan, these challenges were anticipated and, in response, we realigned our organization and reduced costs during the quarter to increase operational efficiency and to create new opportunities for growth,” said Jim Geisler, interim chief executive officer.
“We successfully amended our credit facility which now provides an appropriate level of flexibility and allows us to execute our strategic and operational initiatives”, said Bill Kansky, chief financial officer. “In addition, the Company made a $30.0 million prepayment on our Term Loan, bringing our 2014 total to $90.0 million, which is in line with our full year guidance and highlights our continued commitment to deleveraging the enterprise.”
Third Quarter Highlights
- In August, the Company announced the award of a contract with the Commonwealth of Australia’s Department of Defence to provide project delivery services for Australian Defence bases. The contract has a six year base period with two, two-year options and a total potential contract value of $100.0 million.
- In September, DynLogistics was selected to bid for task orders under a U.S. Army Intelligence and Security Command (INSCOM) contract to provide global intelligence support services (GISS). The contract is a five-year, indefinite delivery-indefinite quantity (ID/IQ) vehicle with a maximum total value of $5.0 billion.
- In September 2014, the Company made a principal prepayment of $30.0 million on its Term Loan, bringing total prepayments for the year to $90.0 million.
- On November 5, 2014, the Company completed an amendment to the Senior Credit Facility that reset financial maintenance covenant levels, reduced the aggregate principal amount of Revolving Credit Commitments by 20%, and modified the definition of “Consolidated Net Income” to exclude up to $35.0 million with respect to a one-time charge related to a U.S. Air Force contract.
Reportable Segments Results
Revenue for DynAviation was $293.2 million, compared with $313.2 million for the same period in 2013. The change was primarily the result of a decrease in demand on the INL-Air Wing program in Iraq, in addition to a reduction in volume of certain task orders under the Contract Field Teams (“CFT”) and Counter Narco-Terrorism Program Office (“CNTPO”) programs, partially offset by revenue from the Army Field Maintenance (“AFM”) programs and the Multi Sensor Aerial Intelligence Surveillance Reconnaissance program.
Adjusted EBITDA was $26.4 million, compared to $12.7 million for the third quarter of 2013. Growth in profitability was driven by productivity gains on the INL-Air Wing program and the absence of a charge on a U.S. Air Force program that lowered earnings in the third quarter of 2013. These gains were partially offset by volume declines discussed above and a change in contract mix on the Theater Aviation Sustainment Manager (“TASM”) task order moving under the AFM contract vehicle. Adjusted EBITDA for the third quarter of 2014 excludes a one-time $35 million charge related to the U.S. Air Force contract referenced above.
Revenue for DynLogistics was $247.8 million, compared with $451.4 million for the third quarter 2013, based on reduced volume on the Logistics Civil Augmentation Program (“LOGCAP IV”) resulting from the continued drawdown of troops in Afghanistan. Additionally revenue was impacted by de-scoping on the Afghanistan Ministry of Defense Program (“AMDP”) and Combined Security Transition Command Afghanistan (“CSTC-A”) contracts, and lower volume on the Department of State Civilian Police program (“CivPol”) task orders. This decline was partially offset by increases in revenue from programs including the Africa Peacekeeping Program (“AFRICAP”), the War Reserve Materiel II program and the new task order for the Criminal Justice Program Support in Haiti.
Adjusted EBITDA was $3.3 million compared with $17.2 million for the third quarter 2013, with the change primarily a result of lower revenue as described above. Adjusted EBITDA as a percentage of revenue for the third quarter was 1.3% compared to 3.8% during the third quarter of 2013. The decrease primarily relates to lower profitability on our LOGCAP IV program as compared to the same period in 2013.
In August 2014, we amended our operating structure by realigning the DynGlobal Group to better reflect its true nature as a pure business development organization focused on achieving our global growth objectives. DynGlobal continues to bring the full range of DI’s diverse capabilities and decades of experience to international and commercial customers. Initial activities of DynGlobal have focused on the development and growth of this business.
Cash used by operating activities during the nine months ended September 26, 2014, was $17.7 million compared with $30.2 million for the same period in 2013. Cash used in operations for the nine months ended September 26, 2014, was primarily due to our net loss and changes in working capital partially offset by dividends received from equity method investees.
During the quarter the Company also made a $30.0 million principal prepayment on its Term Loan. The cash balance at quarter-end was $53.4 million with no borrowings outstanding under the Company’s revolving credit facility.
DSO at the end of the third quarter 2014 was 75 days, a 6 day increase from year end primarily due to the timing of payment cycles on certain programs.
The Company will host a conference call at 9:00 a.m. Eastern Time on November 10, 2014, to discuss results for the third quarter 2014. 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 https://www.dyn-intl.com, 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: 12665287. International callers should dial (706) 634-5249 and enter the same conference ID number above. A telephonic replay will be available from 12:00 p.m. Eastern Time on November 10, 2014, through 11:59 p.m. Eastern Time on December 10, 2014. To access the replay, please dial (855) 859-2056 or (404) 537-3406 and enter the conference ID number.
About DynCorp International
DynCorp International, a wholly owned subsidiary of Delta Tucker Holdings, Inc., is a leading global services provider offering unique, tailored solutions for an ever-changing world. Built on more than six decades of experience as a trusted partner to commercial, government and military customers, DI provides sophisticated aviation, logistics, training, intelligence and operational solutions wherever we are needed. DynCorp International is headquartered in McLean, 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, including EBITDA and Adjusted EBITDA. 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 Senior Unsecured Notes and/or 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. 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, 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.
For a reconciliation of non-GAAP financial measures to the comparable GAAP financial measures please see the financial schedules accompanying this release.
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, estimated total contract values, and 2014 outlook 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, government audit or other regulatory matters; policy and/or spending changes implemented by the Obama Administration, any subsequent administration or Congress, including extending the Continuing Resolution that the DoD is currently operating under; 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, AMDP, INL, CFT and LOGCAP IV contracts; changes in the demand for services provided by our joint venture partners; changes due to the 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, including cyber security threats; variations in performance of financial markets; the inherent difficulties of estimating future contract revenue and changes in anticipated revenue from indefinite delivery, IDIQ contracts and indefinite quantity contracts; the timing or magnitude of any award fee granted under our government contracts; 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; decline in the estimated fair value of a reporting unit resulting in a goodwill impairment and a related non-cash impairment charged against earnings; changes in underlying assumptions, circumstance or estimates may have a material adverse effect upon the profitability of one or more contracts and our performance; changes in our tax provisions or exposure to additional income tax liabilities could affect our profitability and cash flows; uncertainty created by management turnover; termination or modification of key subcontractor performance or delivery; and statements covering our business strategy, those described in “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2013, filed with the SEC on March 14, 2014, and other risks detailed from time to time in our reports filed with the SEC and other risks detailed from time to time in our reports posted to our website or made available publicly through other means. 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 statements 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.
To view corresponding financial tables, please visit the DynCorp International Investor Relations page.
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