- Revenue of $1,010.3 million, up 8.0% from third quarter2011
- Net income attributable to Delta Tucker Holdings, Inc. of $9.9million, up $2.4 million from third quarter 2011, adjusted forimpairment items in both quarters. Reported net loss attributableto Delta Tucker Holdings, Inc. of $15.8 million
- Adjusted EBITDA of $51.7 million, essentially flat to thirdquarter 2011
- Total Backlog of $6.1 billion, an increase of $325 million fromyear-end 2011
FALLS CHURCH, Va. – (November 13, 2012) – DeltaTucker Holdings, Inc. (“Holdings”), the parent of DynCorpInternational Inc. (“DI”, and together with Holdings, the”Company”), a global government services provider supporting U.S.national security and foreign policy objectives, today reportedthird quarter 2012 operational results. Revenue for the quarterincreased 8.0% over third quarter 2011, to $1,010.3 million, whilenet loss attributable to Holdings was $15.8 million for thequarter, representing a 62.1% improvement from the reported$41.6 million in net loss attributable to Holdings in third quarter2011. The Company recorded an impairment of goodwill related to oneof its reporting units of $30.9 million in the third quartercompared to a recorded impairment of equity method investees of$76.6 million in the third quarter of 2011. Excluding the taxadjusted impacts of both of these impairments, the Company had netincome attributable to Holdings of $9.9 million in third quarter2012 compared to net income attributable to Holdings of $7.5million for the same period in 2011, an increase of $2.4million.
“The team delivered another strong quarter with revenue growthof eight percent, supported by our Aviation, LOGCAP and SecurityServices Groups, including a much improved award fee determinationon LOGCAP” said Steve Gaffney, chairman and CEO. “We also wonimportant IDIQ positions in our Training and Intelligence Solutionsand Global Logistics and Development Groups, and continued toincrease backlog. This is a challenging environment but theextraordinary people we have working for us differentiate DI fromour competitors and I am proud of our accomplishments.”
Third Quarter Highlights
- On July 6, 2012, the Company acquired 100% of Heliworks, Inc.(“Heliworks”), an aviation service provider based in Pensacola,Florida. Heliworks operates from the Pensacola Regional Airport andprovides services that include charter flights, aircraftmaintenance and major repairs, avionics upgrades, componentoverhauls, and painting and refurbishment. Heliworks will beintegrated within the Aviation Group, allowing the Company tobetter serve its commercial and government customers while furtherexpanding its aircraft maintenance services. The Company funded thepurchase price with cash on hand.
- In July 2012, DI’s Global Logistics and Development SolutionsGroup (“GLDS”) was awarded multiple task orders with the U.S. AirForce under the Air Force Contract Augmentation Program (“AFCAP”)to provide services at multiple locations including the UnitedStates , the United Arab Emirates and Afghanistan. Collectively,these task orders have one base year and two, one-year options anda total potential value of $13.2 million.
- In August 2012, the GLDS Group was also awarded multiple taskorders with the U.S. AFCAP program to provide monitor support forthe Expeditionary Civil Engineer Squadrons (“ECES”) in multiplelocations in Afghanistan and to provide maintenance supportservices to vehicles and equipment at multiple locations inAfghanistan and Qatar. Collectively, these task orders have onebase year and two, one year options and a total potential value of$27.3 million.
- In September 2012, the U.S. Air Force Air Education andTraining Command awarded the Aviation Group a contract to providejet engine maintenance for J-85 aircraft at Laughlin Air ForceBase, Texas in support of the Engine Regional Repair Center. Thefirm-fixed price contract has an 11-month base period and five,one-year options and a total potential contract value of $36million.
Summary Operating Results
Revenue for the third quarter of $1,010.3 million was up 8.0%from the same quarter in 2011 primarily from: new contract wins theAviation Group; continued strong demand under the Departmentof State Bureau for International Narcotics and Law EnforcementAffairs (“INL”)-Air Wing contract primarily due to secure airtransportation services in Iraq and Afghanistan and constructionservices in Iraq; continued growth under the Logistics and CivilAugmentation Program (“LOGCAP”) IV contract and an improved awardfee determination on the Afghanistan task order that moved theCompany into the “very good” category; and performance of newcontracts under the Security Services Group. These revenuegains were partially offset by completion of certain task ordersunder the AFCAP and Worldwide Personal Protection Services (“WPPS”)programs and lower volume under the International Civilian PoliceProgram (“CivPol”) in Iraq.
Third quarter net loss attributable to Holdings was $15.8million compared to a net loss of $41.6 million reported in thecomparable period in 2011. The Company recorded a $30.9million impairment of goodwill in third quarter 2012, as comparedto the $76.6 million impairment of equity method investee, relatedto the investment in the GLS joint venture, recorded in the thirdquarter of 2011. Excluding the tax adjusted effect of these twospecial items, net income attributable to Holdings increased $2.4million in the third quarter of 2012 compared to the third quarterof 2011. This change in net income attributable to Holdings was duethe increased revenue discussed above, lower interest expense as aresult of the $158.7 million in debt the Company retired since thethird quarter 2011, and lower selling general and administrativecosts as a percentage of revenue, primarily from one-time costsincurred in third quarter 2011. These factors were partially offsetfrom higher cost of sales, primarily associated with growth on theLOGCAP IV contract which is a cost reimbursable program thatoperates at lower margins relative to the overall Company contractmix, lower earnings from equity method investees related to the GLSjoint venture, and additional legal reserves recorded during thequarter.
Adjusted EBITDA for third quarter 2012 was $51.7 million oressentially flat with the third quarter of 2011.
“I am extremely pleased that our LOGCAP team was recognized forthe outstanding work they do supporting the customer’s mission inthe Middle East with a much improved award fee determination”stated Bill Kansky, chief financial officer. “This score, coupledwith improved results in our Aviation and Security Group drove usto 5.1% margins for the quarter and enabled us to continue ourdeleveraging strategy by paying down an additional $30 million onour term loan.”
Reportable Segments Results:
Revenue of $438.3 million increased $55.0 million, or 14.3%,during the third quarter 2012 compared to the third quarter 2011primarily as a result of an increase in the volume of work underthe Afghanistan Area of Responsibility (“AOR”) coupled with animproved award fee determination, moving the Group into the “verygood” category. These increases were partially offset bymanning reductions under the Kuwait AOR. Adjusted EBITDA of $18.5million increased $8.1 million, or 78.4%, for the third quarter2012 compared to the third quarter 2011 primarily as a result ofthe improved award fee scores and additional volume. These samefactors drove an increase in Adjusted EBITDA as a percentage ofrevenue to 4.2% for the third quarter 2012 compared to 2.7% forthird quarter 2011.
Revenue of $348.6 million increased $65.3 million, or 23.0%,during the third quarter 2012 compared to the third quarter 2011.The change was primarily the result of an increase in demand forintra-theater transportation services in Iraq and Afghanistan,construction services in Iraq under the INL Air Wing program, andincreased demand for flight hours under the Counter NarcoterrorismTechnology Program Officer (“CNTPO”) contract. Additionally,operations under new CFT task orders, including the Robins AirForce Base, and 160th Special Operations Aviation Regiment -Airborne (“SOAR-A”) task orders, and new contracts, including theT6 Contractor Operated and Maintained Base Supply (“COMBS”), NASAAircraft Maintenance Operational Support (“AMOS”) and G222contracts, also drove the increase in revenue for the third quarter2012.
Adjusted EBITDA of $29.9 million increased $5.5 million, or22.3%, during the third quarter 2012 compared to the third quarter2011 as a result of the increased demand discussed above coupledwith margin expansion on the CNTPO and CFT contracts. AdjustedEBITDA as a percentage of revenue remained flat at 8.6% for thethird quarter 2012 and 2011.
Training and IntelligenceSolutions
Revenue of $125.0 million decreased $31.6 million, or 20.2%,during the third quarter 2012 compared to the third quarter 2011primarily as a result of the ramp-down of operations under theCivPol program in Iraq and the loss of revenue from theMulti-National Security Transition Command-Iraq (“MNSTC-I”)program, which concluded during calendar year 2011. These declineswere partially offset by increased volume under CivPol Afghanistanand Palestine as well as under the Afghanistan Ministry of DefenseProgram (“AMDP”) contract.
Adjusted EBITDA of $4.8 million for the third quarter was lowerby $0.9 million compared with the same period in 2011 primarilydriven by the conclusion of the MNSTC-I program. Adjusted EBITDA asa percentage of revenue increased 0.3 percentage points to 3.9% forthe third quarter 2012 compared to the third quarter of 2011.
Global Logistics & DevelopmentSolutions
Revenue of $66.2 million decreased $14.9 million, or 18.4%,during the third quarter 2012 compared to the third quarter 2011,primarily as a result of the completion of certain task ordersunder the AFCAP contract as well as the completion of the WeaponsRemoval and Abatement (“WRA”) and Sudan development contracts. Thedecrease in revenue was partially offset by operations under theEgyptian Personnel Support Services (“EPSS”) contract, which beganduring calendar year 2012, and revenue growth under the War ReserveMateriel (“WRM”) and Philippines Operational Support programs.
Adjusted EBITDA of $6.2 million increased $1.5 million, or31.6%, during the third quarter 2012 compared to the third quarter2011, primarily as a result of margin improvements on the OshkoshDefense contract driven by one-time start-up costs related todeploying personnel in the prior year that did not occur in thecurrent period and on the Philippines Operational Support programresulting from higher award fee scores during the current periodrelative to the comparable period in the prior year. Partiallyoffsetting these increases were the changes in volume discussedabove. These margin changes drove the increase in Adjusted EBITDAas a percentage of revenue to 9.3% for the third quarter 2012 from5.8% for the third quarter 2011.
Revenue of $30.1 million increased $11.9 million, or 65.6%,during the third quarter 2012 compared to the third quarter 2011primarily as a result of the replacement of the WPPS contract withthe higher volume Worldwide Protective Services (“WPS”) programduring the third quarter 2011 as well as the addition of theChemonics and Bondsteel contracts, which became operational duringthe first quarter of calendar year 2012.
As a result of performance challenges, such as fill rates,transition costs and other customer requirements on the WPS andBondsteel contracts, these contracts were identified as losscontracts during the first quarter of calendar year 2012. However,during the third quarter 2012 the Company reached a finalresolution with the customer minimizing any future losses on theWPS contract and completed the transition period; it does notanticipate any incremental losses on the Bondsteel contract.Additionally, during the third quarter 2012, the WPS contract wasawarded an additional option year which resulted in a positivechange in estimate. These changes resulted in the recognition ofAdjusted EBITDA of $1.7 million during the third quarter 2012.
Cash provided by operating activities during the nine monthsended September 28, 2012, was $65.2 million as compared to cashprovided by operating activities of $64.4 million during the ninemonths ended September 30, 2011. Cash provided by operations forthe nine months ended September 28, 2012, was primarily the resultof the improvement in working capital coupled with the release ofrestricted cash. Cash provided by operating activities during thenine months ended September 30, 2011 was primarily due to $48.0million in income tax refunds received in the first quarter ofcalendar year 2011, primarily related to the approved change inaccounting method with the IRS.
DSO for the quarter decreased seven days to 67 days from secondquarter ended June 29, 2012, as a result of the continued focus onworking capital management.
The cash balance at the end of the quarter was $87.4 millionafter the Company made a $30 million voluntary principal payment onits secured term loan. The Company did not have anyborrowings under its revolving credit facility at quarter end.
The Company will host a conference call at 10:00 a.m. EST onTuesday November 13, 2012, to discuss results for third quarter2012. The call may be accessed by webcast or through a dial-inconference line.
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: 46984111. 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. EST onNovember 13, 2012, through 11:59 PM EST December 13, 2012. Toaccess the replay, please dial (855) 859-2056 or (404) 537-3406 andenter the 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, visit www.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,the 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
bility 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; our dependence on customers within the defense industryand business risks related to that industry, including changingpriorities or reductions in the annual U.S. Department of Defense(“DoD”) budgets and the outcome of potential additionalreductions due to the sequestration process; the outcome of anymaterial litigation, government investigation, government audit orother regulatory matters; policy and/or spending changesimplemented by the Obama Administration, any subsequentadministration or Congress; termination or modification of key U.S.government or commercial contracts, including subcontracts; changesin the demand for services that we provide or work awarded underour contracts, including without limitation, the Civilian Police,International Narcotics and Law Enforcement, Worldwide PersonalProtection Services and LOGCAP IV contracts; changes in the demandfor services provided by our joint venture partners; pursuit of newcommercial business in the U.S. and abroad; activities ofcompetitors and the outcome of bid protests; changes in significantoperating expenses; impact of lower than expected win rates for newbusiness; general political, economic, regulatory and businessconditions in the U.S. or in other countries in which we operate;acts of war or terrorist activities; variations in performance offinancial markets; the inherent difficulties of estimating futurecontract revenue and changes in anticipated revenue from indefinitedelivery, indefinite quantity contracts; the timing or magnitude ofany award fee granted under our government contracts, including,but not limited to, LOGCAP IV; changes in expected percentages offuture revenue represented by fixed-price and time-and-materialscontracts, including increased competition with respect to taskorders subject to such contracts; termination or modification ofkey subcontractor performance or delivery; and statements coveringour business strategy, those described in “Risk Factors” in ourAnnual Report on Form 10-K for the year ended December 30, 2011filed with the SEC on April 9, 2012 and other risks detailed fromtime to time in our reports filed with the SEC and other risksdetailed from time to time in our reports posted to our website ormade available publicly through other means. Accordingly,such forward-looking statements do not purport to be predictions offuture events or circumstances and therefore, there can be noassurance that any forward-looking statement contained herein willprove to be accurate. We assume no obligation to update theforward-looking statements. Given these risk and uncertainties, youare cautioned not to place undue reliance on forward-lookingstatements. The Company’s actual results could differ materiallyfrom those contained in the forward-looking statements.
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