- Revenue of $935.4 million up $94.3 million, or 11.2%, from third quarter 2010.
- Net income attributable to Delta Tucker Holdings, Inc. of $7.5 million, up 8.8% compared to third quarter 2010, adjusted for one impairment item. Reported net loss attributable to Delta Tucker Holdings, Inc. of $41.6 million.
- Adjusted EBITDA of $51.8 million, down $6.8 million from thirdquarter 2010.
- Total Backlog of $6.4 billion, up $2.5 billion from secondquarter 2011.
- $48.7 million debt reduction in October 2011.
Falls Church, Va. (November 14, 2011) Delta Tucker Holdings, Inc. (“Holdings”), the parent of DynCorpInternational 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 newbusiness funnel give us confidence in our 2011 plan and set us upfor a positive 2012.” The increase in revenue was drivenprimarily from:
- Continued increased demand under the Logistics Civil Augmentation Program (“LOGCAP IV”) contract as well as new task orders under the Air Force Contract Augmentation Program (“AFCAP III”) under the Contingency Operations Business Area Team (“BAT”);
- Sustained volume increases in the Bureau of International Narcotics and Law Enforcement Affairs (“INL”) Air Wing contract with the U.S. Department of State (“DoS”) under the Air Operations BAT;
- The Combined Security Transition Command-Afghanistan (“CSTC-A”)contract to support the development of the Afghanistan Ministry of Defense that began during third quarter 2010, and the Afghanistan Ministry of Defense Program (“AMDP”), which replaced the Civilian Police Training Program (“CivPol”) Afghanistan program this year under the Training and Mentoring BAT; and
- New orders and successful re-competes under the Counter-Narcoterrorism Technology Program Office (“CNTPO”),Patuxent River and International contracts under the Aviation BAT.
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 wouldwithhold 15% of outstanding and future invoices until the Form 1 isresolved. 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 $6.8million 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
- In July 2011, the Company was awarded two new task orders under the CFT contract vehicle for aviation maintenance work. The task orders have a combined potential value of $244.8 million.
- In August 2011, the Company was awarded a contract with the U.S. Naval Air Systems to provide aviation maintenance andlogistic support. The total value of the cost-plus fixed fee contract is $490.0 million, with four option years and a base year valued at $92.8 million.
- In August 2011, the Company was also awarded a contract withthe U.S. Air Force to provide aircraft maintenance and other services. The total value of the firm-fixed price contract is $400.9 million with six option years and a base year valued at$54.4 million.
- In September 2011, the Company was awarded a contract with theU.S. Navy to provide operations and maintenance service. The total value of the fixed price contract is $20.9 million with four option years and one base year.
- In September 2011, Global Response Services LLC, one of DI’s unconsolidated joint ventures, was one of four contractors receiving a Department of the Navy IDIQ multiple award contract.The total potential value of the contract is $900.0 million overfive years.
- In September 2011, the Company was awarded two new WPS task orders within its Security BAT.
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. GSDSreported adjusted EBITDA of $20.0 million for third quarter 2011, adecrease of 30.1% compared to third quarter 2010. The performancewas primarily driven by the following:
Contingency Operations ― $400.9 million in Revenue:
- Strong continued growth from the LOGCAP IV program with a $52.5million, or 15.9%, revenue increase from third quarter 2010 andimproved margins based on the increased award fee scores announcedin first quarter 2011.
- The four new tasks orders awarded during second quarter 2011 bythe U.S. Air Force under the AFCAP III base operations contractcontributed to revenue growth offset by the completion of the APKSomalia task order.
Training and Mentoring ― $151.7 million in Revenue:
- The revenue increase from the new AMDP contract was partiallyoffset by lower volume under the CivPol-Afghanistan task order. TheAMDP contract offers lower margins than CivPol-Afghanistan andcontributed to lower adjusted EBITDA. Continued operations underCSTC-A positively impacted revenue compared to third quarter 2010,but were partially offset by lower volume on the CivPol-Iraq taskorder.
Security Services ― $18.2 million in Revenue:
- Revenue was up $3.5 million due to new business awarded in the2nd quarter 2011 partially offset by the completion of the Qatarsecurity guard contract in late 2010 and reduced demand under theWPPS business.
Global Platform Support Solutions (GPSS) Third QuarterHighlights:
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 alsoreported adjusted EBITDA of $31.7 million for third quarter 2011, a0.1% increase from the comparable period in 2010. The results wereprimarily driven by the following:
Aviation ― $165.0 million in Revenue:
- Revenue was negatively impacted by the loss of the LCCS-Armycontract in late 2010 and the LCCS-Navy contract in first quarter2011, partially offset by performance under the CFT-Fort Campbelland Patuxent River contracts, the Saudi Arabia MSS and AWACScontract as well as volume under the CNTPO contract. Increasedmargins on the CFT contracts helped provide lift to Adjusted EBITDAfor the quarter.
Air Operations ― $118.3 million in Revenue:
- Both Revenue and adjusted EBITDA were positively impacted bycontributions from the INL Air Wing program due to demand forsecure aviation transport and construction services in Iraq andAfghanistan through the DoS.
Operations and Maintenance ― $55.1 million inRevenue:
- Revenue for the third quarter of 2011 increased approximately$1.1 million, or 2%, compared to the same period in 2010 drivenprimarily by the revenue earned on the War Reserve Material programand the Philippines Operations Support program partially offset bylower services under the MRAP contracts. Margins on the MRAPprogram were lower in the third quarter 2011 compared to the thirdquarter 2010 reflecting the program’s move to sustainment andmaintenance mode.
Global Linguist Solutions (GLS) Third QuarterHighlights:
- The Company’s share of Adjusted EBITDA of $3.9 million forthird quarter of 2011 was down approximately $1.0 million from thecomparable quarter in 2010 driven by a reduction in deployedlinguists in support of U.S. troop levels in Iraq, which hastrended lower during the past year and is expected to be fullycomplete with the announced withdrawal of troops by the end of2011.
Cash Used in Operating Activities of ($11.8) million for thethree months ended September 30, 2011 was positively impacted bythe Company’s successful reduction in Accounts Receivable,primarily related to the CivPol contracts. This benefit was morethan offset by the payment of the Company’s annual insurancepremiums. During the third quarter the Company also made ascheduled principal payment of $1.3 million on its credit facility.Subsequent to quarter end, the Company made an additional optionalprincipal payment of $48.7 million on October 19, 2011.
The Company will host a conference call at 10:00 a.m. EDT onMonday November 14, 2011 to discuss results for third quarter 2011.The call may be accessed by webcast or through a dial-in conferenceline.
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 minutesprior to the start of the call to register, download and installany necessary audio software.
To participate by phone, dial (866) 871-0758 and enter theconference ID number: 18223152.
International callers should dial (706) 634-5249 and enter thesame conference ID number above.
A telephonic replay will be available from 1:00 p.m. EDT onNovember 14, 2011 through 11:59 PM EDT December 14, 2011. 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 provider insupport of U.S. national security and foreign policy objectives,delivering support solutions for defense, diplomacy, andinternational 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. We define EBITDA as GAAP net incomeattributable to the Company adjusted for interest, taxes,depreciation and amortization. Adjusted EBITDA is calculated byadjusting EBITDA for certain noncash items from operations andcertain other items as defined in our 10.375% Senior UnsecuredNotes and our Credit Facility. Management believes these non-GAAPfinancial measures are useful in evaluating operating performanceand are regularly used by security analysts, institutionalinvestors and other interested parties in reviewing the Company.Non-GAAP financial measures such as EBITDA and Adjusted EBITDA arenot intended to be a substitute for any GAAP financial measure and,as calculated, may not be comparable to other similarly titledmeasures of the performance of other companies. We believe thatAdjusted EBITDA is useful in assessing our ability to generate cashto cover our debt obligations including interest and principalpayments. Non-GAAP financial measures are not intended to be asubstitute for any GAAP financial measure and, as calculated, maynot be comparable to other similarly titled measures of theperformance 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 and estimated totalcontract values are other examples of forward-looking statements.We caution that these statements are further qualified by importanteconomic, competitive, governmental, international andtechnological factors that could cause our business, strategy,projections or actual results or events to differ materially, orotherwise, from those in the forward-looking statements. Thesefactors, risks and uncertainties include, among others, thefollowing: the future impact of mergers acquisitions, jointventures 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 limita
ion, theCivilian 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; changesin significant operating expenses; impact of lower than expectedwin rates for new business; general political, economic, regulatoryand business conditions in the U.S. or in other countries in whichwe operate; acts of war or terrorist activities; variations inperformance of financial markets; the inherent difficulties ofestimating future contract revenue and changes in anticipatedrevenue from indefinite delivery, indefinite quantity contracts;the timing or magnitude of any award fee granted under ourgovernment 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; statements covering our business strategy, thosedescribed in “Risk Factors” and other risks detailed from time totime in our reports filed with the SEC.
Accordingly, such forward-looking statements do not purport tobe predictions of future events or circumstances and therefore,there can be no assurance that any forward-looking statementcontained herein will prove to be accurate. We assume no obligationto update the forward-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.
For more information contact
Vice President and Treasurer