SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended December 31, 2000
Commission File Number 0-8401
CACI International Inc  (Exact name of registrant asspecified in its charter)
Delaware (State or other jurisdiction ofincorporation or organization)
54-1345888 (I.R.S. Employer Identification No.)
1100 North Glebe Road, Arlington, VA 22201(Address of principal executive offices)
(703) 841-7800 (Registrant's telephone number,including area code)
Securities registered pursuant to Section 12(b) of the Act:
Securities registered pursuant to Section 12(g) of the Act:
CACI International Inc Common Stock, $0.10 par value(Title of each class)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No .
Indicate the number of shares outstanding of each of the registrant's classes of common stock, as of December 29, 2000: CACI International Inc Common Stock, $0.10 par value, 11,290,572 shares.
CACI INTERNATIONAL INC AND SUBSIDIARIES
PART I: FINANCIAL INFORMATION
PART 1
FINANCIAL INFORMATION
Item 1. Financial Statements
CACI INTERNATIONAL INC AND SUBSIDIARIESCONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)(dollars in thousands, except per share data)
See notes to condensed consolidated financial statements (unaudited)
CACI INTERNATIONAL INC AND SUBSIDIARIESCONDENSED CONSOLIDATED BALANCE SHEETS (dollars in thousands)
CACI INTERNATIONAL INC AND SUBSIDIARIESCONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)(dollars in thousands)
See notes to condensed consolidated financial statements (unaudited).
CACI INTERNATIONAL INC AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)(dollars in thousands)
CACI INTERNATIONAL INC AND SUBSIDIARIESNOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Results of Operations For the Three and Six Months Ended December 31, 2000 and 1999.
Revenues. The table below sets forth revenues by customer segment with related percentages of total revenues for the three and six months ended on December 31, 2000, (FY2001) and December 31, 1999 (FY2000), respectively:
Revenue. For the three months and six months ended December 31, 2000, the Company's total revenue increased by 12%, or $14.4 million and by 9% or $22.0 million, respectively, over the same periods last year. Revenue growth in the quarter and six month periods came primarily from both Department of Defense ("DoD") and Federal Civilian Agencies, but was offset by the absence of almost $9.5 million of Y2K revenue from the State and Local Governments business. The April 1, 2000 acquisition of substantially all the assets of Century Technologies, Incorporated (CENTECH) ("CENTECH") contributed $6.4 million and $13.1 million, and XEN Corporation ("XEN"), acquired February 1, 2000, contributed $2.1 million and $4.3 million in revenues over the three and six month periods ended December 31, 2000. The acquisition of the Federal Services Buisness on December 2, 2000, contributed $3.7 million in revenue. The acquisition of the Special Projects division on October 6, 2000 contributed $0.4 million in revenue.
DoD revenue increased 23% or $14.1 million for the quarter and 17% or $21.2 million for the first six months of FY2001. This growth was due in part to higher levels of systems integration and managed network services business as well as increased use of the GSA schedule contracts.
Revenue from Federal Civilian Agencies increased 11% or $3.3 million for the quarter and 12% or $7.5 million for the first six months of FY2001 as compared to the same periods a year ago. Approximately 50% of Federal Civilian Agencies revenue is derived from the Department of Justice ("DoJ"), for whom the Company provides litigation support services and is developing an automated debt collection system.
Revenue for DoJ was $16.3 million and $34.9 million for the quarter and six months ended December 31, 2000, as compared to $17.9 million and $36.8 for the same periods in FY2000. The decrease stems primarily from the movement of major litigation from the discovery phase to trial and pre-trial phases. The level of effort is anticipated to return to the historical run rate during the second half of the year. The overall increase in Federal Civilian Agency revenue was mainly generated from continued growth in managed network services and GSA schedule contracts.
Commercial revenue, which is primarily derived from the Marketing Systems Group in the United Kingdom, increased slightly for both the quarter and six months over the same periods a year ago. The slower than anticipated growth rate was primarily due to the impact of foreign exchange rate fluctuations during the year.
Revenue from State and Local Governments decreased 30% or $3.4 million and 35% or $7.2 million for the three and six months ended December 31, 2000, respectively, over the same periods a year ago. This is primarily due to the reduced level of Y2K business.
The following table sets forth the relative percentage that certain items of expense and earnings bore to revenues for the quarter and six months ended December 31, 2000 and December 31, 1999, respectively.
Income from Operations. Operating income increased 7% and 4% for the quarter and six months ended December 31, 2000 as compared to the same periods a year ago. This is due to the 12% and 9% growth in revenue for the second quarter and first half of FY2001, respectively, along with the Company's ability to control its indirect costs and selling expenses.
Direct costs for the second quarter and first half of FY2001 increased 15% and 12%, respectively, as compared to the same periods a year ago. Direct costs include direct labor and other direct costs such as equipment purchases, subcontractor costs and travel expenses. The largest component of direct costs, direct labor, was $41.1 million and $34.4 million for the second quarter of FY2001 and FY2000, respectively. For the six months ended December 31, 2000 and 1999, direct labor was $80.7 million and $68.8 million, respectively. Other direct costs were $40.8 million and $37.1 million for the second quarters of FY2001 and FY2000, respectively, and $77.2 million versus $72.4 million for the first six months of FY2001 and FY2000, respectively.
Indirect costs and selling expenses include fringe benefits, marketing, bid and proposal costs, indirect labor, and other discretionary costs, most of which are highly variable. As a percentage of revenue, indirect costs have decreased due to the impact of higher other direct costs on revenue for the second quarter and first six months of FY2001, as well as the Company's ability to contain indirect costs.
Depreciation and amortization rose 15% or $285 thousand for the quarter and 11% or $396 thousand for the six months ended December 31, 2000, as compared to a year ago. This growth was primarily due to the purchases of computer equipment and software licenses. As a percentage of revenue, depreciation and amortization has remained constant as compared to a year ago.
Goodwill amortization expense has increased $360 thousand for the second quarter and $597 thousand for the first half of FY2001 as compared to the same periods a year ago, due primarily to the XEN and CENTECH acquisitions in the prior fiscal year and the acquisitions in the current year of the Federal Services Business and the Special Projects division.
Interest Expense. Interest expense decreased $114 thousand for the quarter and $573 thousand for the first six months of FY2001 as compared to the same periods in FY2000. This decrease was due primarily due to the reduction of the Company's line of credit using the proceeds from the sale of the COMNET products business in December 1999. For the six months of FY2001, average borrowings were $41.7 million as compared to $65.3 million in FY2000. In the second quarter of FY2001, average borrowings were $50.1 as compared to $65.2 million a year ago.
Income Taxes. The effective income tax rate for both the quarter and six months ended FY2001 and FY2000 has remained constant at 39%.
Liquidity and Capital Resources
Historically, the Company's positive cash flow from operations and available credit facilities provided adequate liquidity and working capital to fully fund the Company's operational needs and support its acquisition activities. Working capital was $85.1 million and $69.8 million as of December 31, 2000 and June 30, 2000, respectively. The increase in working capital in the first six months is due primarily to the Company borrowing under its line of credit for acquisition activities which resulted in higher current asset balances. Operating activities provided cash of $5.8 million for the first six months of FY2001 versus using cash of $2.4 million for the same period in FY2000. The increase in cash provided by operating activities since the prior year is primarily related to the timing of cash disbursements. Also, tax payments normally applied on a quarterly basis have been deferred to the later quarters.
The company used $34.1 million in cash from investing activities for the six months ended December 31, 2000 versus generating $31.2 million for the same period a year ago. The cash used in investing activities for FY2001 was primarily for the acquisition of the Federal Services Business and Special Projects. The cash generated in FY2000 was due primarily to the sale of the COMNET products business.
During the six months ended December 31, 2000, the Company's financing activities provided cash of approximately $30.2 million. This was primarily from an increase of $35.4 million in borrowings under the Company's revolving line of credit, net of the purchase of 345,000 shares of treasury stock for $7.2 million. Over the same period last year, the Company used the cash from the sale of the COMNET products business to pay down its line of credit.
The Company maintains an unsecured revolving line of credit which expires on June 19, 2003. The agreement permits borrowings of up to $125 million with annual sublimits on amounts borrowed for acquisitions. The Company also maintains a 500,000 British pound sterling unsecured line of credit in London, England, which expires in November 2001. At December 31, 2000, the Company has approximately $62.0 million available under its lines of credit.
The Company believes that the combination of internally generated funds, available bank borrowings and cash on hand will provide the required liquidity and capital resources for the foreseeable future.
PART II
OTHER INFORMATION
Item 1. Legal Proceedings
John Chrysogelos v. V.L. Salvatori, et al
Reference is made to Part II, Item 1, Legal Proceedings, in the Registrant's Report on Form 10-Q for the quarter ended September 30, 2000, for the most recent information concerning this lawsuit filed in the Chancery Court for the State of Delaware on September 3, 1999. The suit sets forth both class and derivative claims alleging that the Registrant's Directors breached their fiduciary and other duties to the Registrant and its stockholder actions by (i) adopting by-law amendments specifying procedures for stockholder actions by consent and calling of special meetings; and (ii) failing to evaluate and fairly respond to a premium cash offer to purchase the stock of the Registrant
Since the filing of Registrant's report indicated above, the parties have filed a joint motion to dismiss the case and are awaiting the Court's final order of dismissal.
Parsow Partnership, Ltd., de al v. J.P. London, et al
Reference is made to Part II, Item 1, Legal Proceedings, in the Registrant's Report on Form 10-Q for the quarter ended September 30, 2000, for the most recent information concerning the lawsuit filed in the Chancery Court for the State of Delaware on November 10, 1999. The suit alleges that the Board of Directors and senior management of the Registrant had solicited proxies in violation of Section 14 (a) and 20 (2) of the Securities Exchange Act of 1934 (the "Exchange Act") and Rule 14 (a-9) promulgated thereunder.
Since the filing of the Registrant's report indicated above, the parties have reached agreement on a settlement and are awaiting the Court's final dismissal of the action.
Item 4. Submission of Matters to a Vote of Security Holders
On November 14, 2000, the Company held its Annual Meeting of Stockholders. At the meeting, all management nominees were elected to serve as directors; the stockholders approved an amendment to the Company's 1996 Stock Incentive Plan adding 500,000 shares for possible award under the plan; and the appointment of Deloitte & Touche, LLP as independent auditors for the current fiscal year was ratified.
Item 5. Other Information
Forward Looking Statements
There are statements made herein which may not address historical facts and, therefore, could be interpreted to be forward looking statements as that term is defined in the Private Securities Litigation Reform Act of 1995. Such statements are subject to factors that could cause actual results to differ materially from anticipated results. The factors that could cause actual results to differ materially from those anticipated include, but are not limited to, the following: regional and national economic conditions in the United States and United Kingdom; changes in interest rates; currency fluctuations; failure to achieve contract awards in connection with recompetes for present business and/or competition for new business; the risks and uncertainties associated with client interest in and purchases of new products and/or services; continued funding of U.S. Government or other public sector projects in the event of a priority need for funds; government contract procurement (such as bid protest) and termination risks; individual business decisions of our clients; paradigm shifts in technology; competitive factors such as pricing pressures and competition to hire and retain employees; our ability to complete acquisitions appropriate to achievement of our strategic plans; material changes in laws or regulations applicable to our businesses including, but not limited to the application of new OSHA Ergonomic Standards; our own ability to achieve the objectives of near term or long range business plans; and other risks described in the Company's Securities and Exchange Commission filings.
Item 6. Exhibits and Reports on Form 8-K
The Registrant filed a Current Report on Form 8-K on December 15, 2000, in which the Registrant reported that it had completed its acquisition of the Federal Services Business and related assets of N.E.T. Federal, Inc.
CACI INTERNATIONAL INC AND SUBSIDIARIESINDEX TO EXHIBITS
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.