CACI International Inc - 10-Q quarterly report FY

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 March 30, 2001: CACI International Inc Common Stock, $0.10 par value, 11,305,574 shares.

Revenue. For the three months and nine months ended March 31, 2001, the Company's total revenue increased by 21%, or $26.0 million, and by 13% or $48.0 million, respectively, over the same periods last year. Revenue growth in the quarter and nine months came primarily from the Department of Defense ("DoD"), but was offset by a decrease of $1.7 million and $9.0 million in revenue from the State and Local Governments business, for the quarter and nine months ended, respectively. The acquisition of Century Technologies, Incorporated (CENTECH) ("CENTECH") on April 1, 2000, contributed $6.4 million and $19.5 million; XEN Corporation ("XEN"), acquired February 1, 2000, contributed $0.7 million and $5 million; the Federal Services Business acquired on December 2, 2000, contributed $12 million and $15.7 million, and the Special Projects Business, acquired on October 6, 2000, contributed $0.3 million and $0.7 million in revenues over the three and nine month periods ended March 31, 2001.

DoD revenue increased 45%, or $27.5 million for the quarter and 26%, or $48.6 million, for the first nine months of FY2001. This growth was due primarily to higher levels of network and engineering services business.

Revenue from Federal Civilian Agencies decreased by 1%, or $0.4 million for the quarter but increased 7%, or $7.1 million, for the first nine months of FY2001. 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 and implementing an automated debt collection system. Revenue from DoJ was $17.9 million and $54.6 million for the quarter and nine months ended March 31, 2001, as compared to $18.6 million and $55.4 million for the same periods in FY2000. The decrease in DoJ revenue stems primarily from the movement of major litigation from the discovery phase to trial and pre-trial phases. 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 nine 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 the State and Local Government business decreased 25%, or $1.7 million, and 33% or $9.0 million, for the three and nine months ended March 31, 2001, 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 nine months ended March 31, 2001 and March 31, 2000, respectively.

Income from Operations. Operating income increased 30% and 13% for the quarter and nine months ended March 31, 2001 as compared to the same periods a year ago. This is due to the 21% and 13% growth in revenue for the third quarter and first nine months of FY2001, respectively, along with the Company's ability to control its indirect costs and selling expenses.

Direct costs for the third quarter and first nine months of FY2001 increased 30% and 18%, 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 $45.5 million and $37.4 million for the third quarters of FY2001 and FY2000, respectively. For the nine months ended March 31, 2001 and 2000, direct labor was $126.1 million and $106.3 million, respectively. Other direct costs were $46.3 million and $33.3 million for the third quarters of FY2001 and FY2000, respectively, and $123.5 million versus $105.8 million for the first nine 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 third quarter and first nine months of FY2001, as well as the Company's ability to contain indirect costs.

Depreciation and amortization rose 7%, or $136 thousand, for the quarter and 9%, or $532 thousand, for the nine months ended March 31, 2001, 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 increased $553 thousand for the third quarter and $1.2 million and for the first nine months of FY2001 as compared to the same periods a year ago. This was 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 Business.

Interest Expense. Interest expense increased $444 thousand for the quarter, but decreased $129 thousand for the first nine months of FY2001 as compared to the same periods in FY2000. The increase for the quarter was primarily due to the purchase of Federal Services Business. For the third quarter of FY2001, average borrowings were $57.8 as compared to $28.5 million a year ago. In the first nine months of FY2001, average borrowings were $47.1 million as compared to $52.2 million in FY2000.

Income Taxes. The effective income tax rate for both the quarter and nine months ended FY2001 and FY2000 has remained constant at 39%.

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 $77.6 million and $69.8 million as of March 31, 2001 and June 30, 2000, respectively. The increase in working capital in the first nine months was due primarily to acquisition activities, which resulted in higher current asset balances. Operating activities provided cash of $23.0 million for the first nine months of FY2001 versus $0.5 million for the same period in FY2000. In FY2000, the Company made a disbursement in connection with payment of taxes on the proceed of the sale of the COMNET products business.

The company used $37.2 million in cash from investing activities for the nine months ended March 31, 2001 versus generating $23.6 million for the same period a year ago. The cash used in investing activities for FY2001 was primarily directed to the acquisitions of the Federal Services Business and Special Projects Business. The cash generated in FY2000 was due primarily to the sale of the COMNET products business.

During the nine months ended March 31, 2001, the Company's financing activities provided cash of approximately $17.9 million. This came primarily from an increase of $22.7 million in borrowings under the Company's revolving line of credit, net of the purchase of 357,000 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 March 31, 2001, the Company has $74.0 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.

Since the filing of Registrant's report indicated above, the Court has issued a final order dismissing the case.

Reference is made to Part II, Item 1, Legal Proceedings, in the Registrant's Report on Form 10-Q for the quarter ended December 31, 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 Court has issued a final order dismissing the case.

On September 27, 2000, the Registrant filed an appeal with the Armed Services Board of Contract Appeals ("ASBCA") challenging the Defense Information Systems Agency's ("DISA") denial of its claim for breach of contract damages. Registrant's appeal seeks damages arising from DISA's breach of license agreement pursuant to which the Defense Department agreed to conduct all electronic data interchanges (which can be broadly understood to mean e-commerce) exclusively through certified value-added networks, such as the network maintained by Registrant's wholly-owned subsidiary, CACI, INC.-FEDERAL, for the period from September 2, 1994 through April 22, 1998. By decision of March 22, 2001 in the companion case of GAP Instrument Corporation, ASBCA No. 51658 (2001), the ASBCA held that the Government's failure to conduct all electronic data interchanges exclusively through certified value-added networks constituted a breach of contract. As a result, unless the GAP Instrument decision is overturned on appeal, Registrant will pursue collection of its damages which are substantial and which could have a material impact on the Company's earnings.

No matters were submitted to shareholders during the fiscal quarter ended March 31, 2001.

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.