SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): February 28, 2018
ENGILITY HOLDINGS, INC.
(Exact name of registrant as specified in its charter)
Delaware |
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001-35487 |
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61-1748527 |
(State or other jurisdiction of incorporation) |
|
(Commission File Number) |
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(IRS Employer Identification No.) |
4803 Stonecroft Blvd. Chantilly, Virginia |
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20151 |
(Address of principal executive offices) |
|
(Zip Code) |
(703) 708-1400
(Registrant’s telephone number, including area code)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
☐ |
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
☐ |
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
☐ |
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
☐ |
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Item 1.01 Entry into a Material Definitive Agreement.
First Amendment to Stockholders Agreement
On February 28, 2018, Engility Holdings, Inc. (the “Company”) entered into the First Amendment (the “Amendment”) to the Stockholders Agreement, dated as of February 26, 2015, by and among the Company, Birch Partners, LP, certain investment funds affiliated with Kohlberg Kravis Roberts & Co. L.P. and certain investment funds affiliated with General Atlantic Services Company, LLC (the “Stockholders Agreement”). The Amendment provides that the size of the Board of Directors of the Company be increased from 11 directors to a maximum of 14 directors. Other than the Amendment, the material terms and conditions of the Stockholders Agreement remain unchanged.
The foregoing description of the Amendment is qualified entirely by the full text of the Amendment, which is attached hereto as Exhibit 4.1 and incorporated herein by reference.
Item 2.02. Results of Operations and Financial Condition.
On March 1, 2018, Engility Holdings, Inc. (the “Company”) issued a press release announcing the results of the Company’s operations for the three and twelve months ended December 31, 2017. The press release is furnished as Exhibit 99.1 to this Report and is hereby incorporated by reference in this Item 2.02.
As provided in General Instruction B.2 of Form 8-K, the information and exhibit contained in Item 2.02 of this Form 8-K and Exhibit 99.1 hereto shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, nor shall they be deemed to be incorporated by reference in any filing under the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such a filing.
Item 9.01. Financial Statements and Exhibits
(d) Exhibits
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.
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Engility Holdings, Inc. |
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March 1, 2018 |
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By: |
/s/ Jon Brooks |
Date |
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Name: |
Jon Brooks |
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Title: |
Vice President, Deputy General Counsel and Assistant Secretary |
Exhibit 4.1
FIRST AMENDMENT TO
STOCKHOLDERS’ AGREEMENT
THIS FIRST AMENDMENT TO STOCKHOLDERS’ AGREEMENT (this “Amendment”) is made effective as of February 28, 2018 (the “Effective Date”) by and among Engility Holdings, Inc., a Delaware corporation (the “Company”), Birch Partners, LP, a Delaware limited partnership (the “Stockholder”), KKR 2006 Fund L.P. (“KKR”) and General Atlantic Partners 85, L.P. (“General Atlantic”).
WHEREAS, the Company, the Stockholder, KKR, General Atlantic and the other parties thereto are parties to that certain Stockholders’ Agreement, dated as of February 26, 2015 (the “Agreement”); and
WHEREAS, the Company, the Stockholder, KKR and General Atlantic desire to amend the Agreement as set forth in this Amendment.
NOW THEREFORE, in consideration of the mutual representations, warranties, covenants and agreements contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and subject to the terms and conditions set forth herein, the parties to this Amendment hereby covenant and agree as follows:
1.Amendment to the Agreement. Subsection (a) of Section 3.4 of the Agreement is hereby deleted and replaced in its entirety by the following:
“(a) As of the date hereof and for so long as either the GA Investors or the KKR Investors Beneficially Own at least 25% of the shares of Common Stock as it Beneficially Owned on the date hereof, as adjusted for any stock split, reverse stock split or similar transaction, the Board shall be comprised of at least eleven (11) and no more than fourteen (14) directors. Subject to Section 3.4(c)-(h), the members of the Board shall include four (4) Stockholder nominees (the “Stockholder Nominees”). For purposes of this Section 3.4, prior to any Distribution, the GA Investors and the KKR Investors will each be deemed to Beneficially Own that amount of Common Stock that they would receive in a Distribution.”
2.All capitalized terms that are not defined in this Amendment shall have the meaning ascribed to them in the Agreement.
3.Except as set forth in this Amendment, the Agreement is unaffected and shall continue in full force and effect in accordance with its terms. If there is conflict between this Amendment and the Agreement, the terms of this Amendment will prevail.
4.This Amendment may be executed in any number of counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. Counterparts may be delivered via facsimile, electronic mail (including pdf or any electronic signature complying with the U.S. federal ESIGN Act of 2000, e.g., www.docusign.com) or other transmission method and any counterpart so delivered shall be deemed to have been duly and validly delivered and be valid and effective for all purposes.
5.This Amendment shall be governed by the laws of the State of Delaware, without regard to the principles of conflicts of laws thereof.
[Signature Page Follows]
IN WITNESS WHEREOF, the parties have executed this Amendment as of the date first written above.
[First Amendment to Stockholders’ Agreement – Engility Holdings, Inc.]
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ENGILITY HOLDINGS, INC.
By: /s/ Thomas O. Miiller Name: Thomas O. Miiller Title: Senior Vice President, General Counsel, and Corporate Secretary
By: Birch GP, LLC, its general partner
By: /s/ Brittany Bagley Name: Brittany Bagley Title: Manager KKR 2006 FUND, L.P.
By: KKR Associates 2006 L.P., its general partner
By: KKR 2006 GP LLC, the general partner of KKR Associates 2006 L.P.
By: /s/ William J. Janetschek Name: William J. Janetschek Title: Chief Financial Officer GENERAL ATLANTIC PARTNERS 85, L.P.
By: General Atlantic GenPar, L.P., its general partner
By: General Atlantic LLC, its general partner
By: /s/ Thomas J. Murphy Name: Thomas J. Murphy Title: Managing Director |
[First Amendment to Stockholders’ Agreement – Engility Holdings, Inc.]
Exhibit 99.1
______________________________________________________
Engility Reports Fourth Quarter and
Full Year 2017 Results; Establishes 2018 Guidance
• |
Revenue of $465 million for the fourth quarter of 2017 |
• |
Fourth quarter 2017 GAAP net loss attributable to Engility of $60 million, or $1.62 per diluted share, which includes $80 million, or $2.16 per adjusted diluted share, of non-cash expenses related to tax reform and goodwill impairment, and other non-core operating costs |
• |
EBITDA of $34 million, or 7.3% of revenue, and adjusted EBITDA of $44 million, or 9.4% of revenue, for the fourth quarter of 2017 |
• |
Trailing twelve-month book-to-bill ratio of 1.0x |
CHANTILLY, VA – March 1, 2018, Engility Holdings, Inc. (NYSE: EGL) today announced financial results for the fourth quarter and full year ended December 31, 2017.
CEO Commentary
“The financial results for 2017 are reflective of the significant progress that we have made against our key strategic initiatives of driving organic growth, attracting and retaining key talent and strengthening our balance sheet. We have streamlined our organizational structure, substantially augmented our leadership team, enhanced the focus of our business development and go-to-market strategies and effectively pursued new market opportunities while, simultaneously, generating strong cash flow and materially reducing our debt” said Lynn Dugle, Chairman, President and CEO of Engility.
She continued, “Our plan is to reduce the rate of revenue decline in 2018 and position the Company for positive organic growth in 2019. We have unique, innovative capabilities and the right team to execute our plan, which gives me great confidence in our ability to meet our goals.”
Fourth Quarter 2017 Results
Total revenue for the fourth quarter of 2017 was $465 million. GAAP operating income was $23 million and GAAP operating margin was 4.9%. GAAP net loss attributable to Engility was $60 million, or $1.62 per diluted share. Both GAAP operating income and net loss attributable to Engility include a non-cash goodwill impairment charge of $7 million and other non-core operating costs of $9 million. GAAP net loss attributable to Engility also includes $64 million of tax expenses, of which $60 million related to the re-measurement of the Company’s deferred tax assets resulting from the enactment of the Tax Cuts and Jobs Act (the “2017 Tax Act”). Cash taxes paid in the fourth quarter of 2017 were $0.1 million. These costs are outlined in the non-GAAP financial information provided in the tables included herein. EBITDA was $34 million and EBITDA margin was 7.3%. EBITDA also includes the goodwill impairment charge and $3 million of the other non-core operating costs mentioned above.
Adjusted operating income was $39 million and adjusted operating margin was 8.4%. Adjusted EBITDA was $44 million and adjusted EBITDA margin was 9.4%.
Fiscal Year 2017 Results
Total revenue for fiscal year 2017 was $1.93 billion. GAAP operating income was $127 million and GAAP operating margin was 6.6%. GAAP net loss attributable to Engility was $35 million, or $0.96 per diluted share. Both GAAP operating income and net loss attributable to Engility include a non-cash goodwill impairment charge of $7 million and other non-core operating costs of $34 million. GAAP net loss attributable to Engility also includes $80 million of tax expenses, of which $60 million related to the re-measurement of the Company’s deferred tax assets resulting from the 2017 Tax Act. Cash taxes paid in fiscal year 2017 were $0.6 million. EBITDA was $171 million and EBITDA margin was 8.9%. EBITDA also includes the goodwill impairment charge and $6 million of the other non-core operating costs mentioned above.
Adjusted operating income for fiscal year 2017 was $165 million and adjusted operating margin was 8.6%. Adjusted EBITDA was $184 million and adjusted EBITDA margin was 9.5%.
Information about the Company's use of non-GAAP financial information for the fourth quarter and for fiscal year 2017 is provided below under “Non-GAAP Measures.”
Key Performance Indicators
• |
Book-to-bill ratio for the fourth quarter of 2017 was 0.4x on net bookings of $179 million. Trailing twelve-month book-to-bill ratio was 1.0x on net bookings of $1.93 billion. |
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Total backlog at the end of the fourth quarter of 2017 was $3.4 billion, compared to $3.4 billion at the end of the fourth quarter of 2016, which excludes IRG’s total backlog from Q4 2016. IRG was divested on January 6, 2017. |
• |
Days sales outstanding, net of advanced payments, was 58 days at the end of the fourth quarter of 2017, compared to 56 days at the end of the fourth quarter of 2016. |
• |
Cash flow from operating activities for fiscal year 2017 was $98 million, compared to $94 million for fiscal year 2016. |
• |
During the fourth quarter of 2017, the company made total debt payments of $24 million. Total debt payments for fiscal year 2017 were $110 million. |
Recent Developments
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Engility’s Board of Directors unanimously elected Lynn Dugle as Chairman of the Board. Dugle will also continue to serve as Engility’s President and CEO. |
Key Fourth Quarter 2017 Contract Awards
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Awarded a position on the Alliant 2 government-wide acquisition contract with the General Services Administration to provide custom information technology services. Under this multi-award contract, which has a $50 billion ceiling value, Engility will support Federal IT systems and modernization efforts by providing key offerings such as systems engineering and integration, cyber, high performance computing and enterprise solutions. |
2
Fiscal Year 2018 Guidance
The table below summarizes the company’s fiscal year 2018 guidance.
|
Fiscal Year 2018 Guidance |
Revenue |
$1.83 billion - $1.91 billion |
GAAP Diluted EPS (1) |
$0.81 - $0.91 |
EBITDA |
$160 million - $170 million |
Operating Cash Flow |
$100 million - $110 million |
(1) 2018 GAAP diluted EPS guidance includes approximately $25 million of amortization expense related to intangible assets acquired by the company. It also assumes diluted weighted-average outstanding shares of approximately 38 million and a full-year effective tax rate of approximately 25 percent.
Non-GAAP Measures
The tables under "Engility Holdings, Inc. Reconciliation of Non-GAAP Measures" present Adjusted Operating Income, Adjusted Operating Margin, Earnings before Interest, Taxes, Depreciation, and Amortization (“EBITDA”), Adjusted EBITDA, EBITDA Margin, and Adjusted EBITDA Margin, reconciled to their most directly comparable GAAP measure. These financial measures are calculated and presented on the basis of methodologies other than in accordance with U.S. generally accepted accounting principles ("Non-GAAP Measures"). Engility has provided these Non-GAAP Measures to adjust for, among other things, the impact of amortization expenses related to our acquisitions of TASC, Inc. and Dynamics Research Corporation, costs associated with a loss or gain on the disposal or sale of property, plant and equipment, acquisition and restructuring-related expenses, legal and settlement costs, refinancing-related expenses, and the impact of certain tax related items. These items have been adjusted because they are not considered core to the company’s business or otherwise not considered operational or because these charges are non-cash or non-recurring. The company presents these Non-GAAP Measures because management believes that they are meaningful to understanding Engility’s performance during the periods presented and the company’s ongoing business. Non-GAAP Measures are not prepared in accordance with GAAP and therefore are not necessarily comparable to similarly titled metrics or the financial results of other companies. These Non-GAAP Measures should be considered a supplement to, not a substitute for, or superior to, the corresponding financial measures calculated in accordance with GAAP.
With respect to our “Fiscal Year 2018 Guidance” above, reconciliation of EBITDA guidance to the closest corresponding GAAP measure on a forward-looking basis is not available without unreasonable efforts. We are unable to reconcile EBITDA to net income due to our inability to predict certain non-
3
cash items included in net income, including taxes and timing of potential restructuring charges. The disclosure of such reconciliations may imply to our investors a degree of precision in our calculations that is not possible. For the same reasons, the company is unable to address the probable significance of the unavailable information.
Conference Call Information
Engility will host a conference call at 5:00 p.m. Eastern Time on March 1, 2018 (today), to discuss the financial results for its fourth quarter and full year 2017.
Listeners may access a webcast of the live conference call from the Investor Relations section of the company's website at http://www.engility.com. Listeners also may access a slide presentation on the website, which summarizes the company’s fourth quarter and full year 2017 results. Listeners should go to the website at least 15 minutes before the live event to download and install any necessary audio software.
Listeners also may participate in the conference call by dialing (888) 655-5029 (domestic) or (503) 343-6026 (international) and entering pass code 9488854.
A replay will be available on the company's website approximately two hours after the conference call and continuing for one year. A telephonic replay also will be available through March 8, 2018 at (855) 859-2056 (domestic) or (404) 537-3406 (international) and entering pass code 9488854.
About Engility
Engility (NYSE: EGL) is engineered to make a difference. Built on six decades of heritage, Engility is a leading provider of integrated solutions and services, supporting U.S. government customers in the defense, federal civilian, intelligence and space communities. Our innovative, highly technical solutions and engineering capabilities address diverse client missions. We draw upon our team’s intimate understanding of customer needs, deep domain expertise and technical skills to help solve our nation’s toughest challenges. Headquartered in Chantilly, Virginia, and with offices around the world, Engility’s array of specialized technical service offerings include high-performance computing, cybersecurity, enterprise modernization and systems engineering. To learn more about Engility, please visit www.engility.com and connect with us on Facebook, LinkedIn and Twitter.
Forward-Looking Statements
This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements regarding Engility’s future prospects, projected financial results, estimated integration costs and acquisition related amortization expenses and business plans. Words such as "may," "will," "should," "likely," "anticipates," "expects," "intends," "plans," "projects," "believes," "estimates" and similar expressions are also used to identify these forward-looking statements. These statements are based on the current beliefs and expectations of Engility’s management and are subject to significant risks and uncertainties. Actual results may differ from those set forth in the forward-looking statements. Factors that could cause Engility’s actual results to differ materially from those described in the forward-looking statements can be found under the heading "Risk Factors" included in our Annual Report on Form 10-K for the year ended December 31, 2017, and more recent documents that have been filed with the Securities and Exchange Commission (SEC)
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and are available on the investor relations section of Engility’s website (http://www.engility.com) and on the SEC’s website (www.sec.gov). Forward-looking statements are made only as of the date hereof, and we undertake no obligation to update or revise the forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law. In addition, historical information should not be considered as an indicator of future performance.
Media: Scott Fazekas Engility Holdings, Inc. (703) 984-5068 Scott.Fazekas@engility.com |
Investor Relations: Dave Spille Engility Holdings, Inc. (703) 984-6120 Dave.Spille@engility.com |
5
ENGILITY HOLDINGS, INC.
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
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Three Months Ended December 31, |
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Year Ended December 31, |
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2017 |
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2016 |
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2017 |
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2016 |
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Revenue |
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$ |
464,857 |
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$ |
506,412 |
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$ |
1,931,887 |
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$ |
2,076,423 |
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Costs and expenses |
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Cost of revenue |
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400,126 |
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|
|
436,018 |
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|
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1,655,729 |
|
|
|
1,777,844 |
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Selling, general and administrative expenses |
|
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35,088 |
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|
|
36,458 |
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|
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142,391 |
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|
|
166,238 |
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Goodwill impairment |
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7,083 |
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|
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9,875 |
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|
|
7,083 |
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|
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9,875 |
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Total costs and expenses |
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442,297 |
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|
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482,351 |
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|
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1,805,203 |
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|
|
1,953,957 |
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Operating income |
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22,560 |
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|
|
24,061 |
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|
|
126,684 |
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|
|
122,466 |
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Interest expense, net |
|
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17,527 |
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|
|
21,827 |
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|
|
76,716 |
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|
|
131,185 |
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Other expenses (income), net |
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|
15 |
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|
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(2 |
) |
|
|
227 |
|
|
|
80 |
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Income (loss) before provision for income taxes |
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|
5,018 |
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|
|
2,236 |
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|
|
49,741 |
|
|
|
(8,799 |
) |
Provision (benefit) for income taxes |
|
|
63,685 |
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|
|
(5,100 |
) |
|
|
80,356 |
|
|
|
(2,730 |
) |
Net income (loss) |
|
|
(58,667 |
) |
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|
7,336 |
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|
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(30,615 |
) |
|
|
(6,069 |
) |
Less: Net income attributable to non-controlling interest |
|
|
893 |
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|
650 |
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|
|
4,576 |
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|
|
4,738 |
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Net income (loss) attributable to Engility |
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$ |
(59,560 |
) |
|
$ |
6,686 |
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$ |
(35,191 |
) |
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$ |
(10,807 |
) |
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Earnings (loss) per share attributable to Engility |
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Basic |
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$ |
(1.62 |
) |
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$ |
0.18 |
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$ |
(0.96 |
) |
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$ |
(0.29 |
) |
Diluted |
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$ |
(1.62 |
) |
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$ |
0.18 |
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$ |
(0.96 |
) |
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$ |
(0.29 |
) |
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Weighted average number of shares outstanding |
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Basic |
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36,825 |
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36,738 |
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36,838 |
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36,730 |
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Diluted |
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36,825 |
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|
37,687 |
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|
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36,838 |
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|
36,730 |
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UNAUDITED CONSOLIDATED BALANCE SHEETS
(in thousands)
|
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December 31, |
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2017 |
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2016 |
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Assets: |
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Current assets: |
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Cash and cash equivalents |
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$ |
41,890 |
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$ |
48,236 |
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Receivables, net |
|
|
331,094 |
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|
334,248 |
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Assets held for sale, current |
|
|
— |
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|
|
20,242 |
|
Other current assets |
|
|
19,681 |
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|
|
30,404 |
|
Total current assets |
|
|
392,665 |
|
|
|
433,130 |
|
Property, plant and equipment, net |
|
|
44,006 |
|
|
|
46,547 |
|
Goodwill |
|
|
1,071,371 |
|
|
|
1,078,454 |
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Identifiable intangible assets, net |
|
|
361,410 |
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|
|
393,891 |
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Deferred tax assets |
|
|
150,535 |
|
|
|
232,283 |
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Assets held for sale |
|
|
— |
|
|
|
11,962 |
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Other assets |
|
|
6,021 |
|
|
|
2,292 |
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Total assets |
|
$ |
2,026,008 |
|
|
$ |
2,198,559 |
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Liabilities and Equity: |
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|
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Current liabilities: |
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|
|
|
|
|
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Current portion of long-term debt |
|
$ |
26,947 |
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|
$ |
26,947 |
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Accounts payable, trade |
|
|
52,954 |
|
|
|
43,943 |
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Accrued employment costs |
|
|
77,545 |
|
|
|
98,860 |
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Accrued expenses |
|
|
74,856 |
|
|
|
76,870 |
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Advance payments and billings in excess of costs incurred |
|
|
30,380 |
|
|
|
33,259 |
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Income tax liabilities |
|
|
548 |
|
|
|
209 |
|
Liabilities held for sale, current |
|
|
— |
|
|
|
4,341 |
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Other current liabilities |
|
|
26,688 |
|
|
|
36,410 |
|
Total current liabilities |
|
|
289,918 |
|
|
|
320,839 |
|
Long-term debt |
|
|
938,687 |
|
|
|
1,039,993 |
|
Income tax liabilities |
|
|
62,219 |
|
|
|
64,852 |
|
Liabilities held for sale |
|
|
— |
|
|
|
1,084 |
|
Other liabilities |
|
|
59,079 |
|
|
|
66,986 |
|
Total liabilities |
|
|
1,349,903 |
|
|
|
1,493,754 |
|
Equity: |
|
|
|
|
|
|
|
|
Preferred stock, par value $0.01 per share, 25,000 shares authorized, none issued or outstanding as of December 31, 2017 or 2016 |
|
|
— |
|
|
|
— |
|
Common stock, par value $0.01 per share, 175,000 shares authorized, 36,822 and 36,776 shares issued and outstanding as of December 31, 2017 and 2016, respectively |
|
|
368 |
|
|
|
368 |
|
Additional paid-in capital |
|
|
1,244,940 |
|
|
|
1,237,826 |
|
Accumulated deficit |
|
|
(576,019 |
) |
|
|
(541,702 |
) |
Accumulated other comprehensive loss |
|
|
(3,805 |
) |
|
|
(4,865 |
) |
Non-controlling interest |
|
|
10,621 |
|
|
|
13,178 |
|
Total equity |
|
|
676,105 |
|
|
|
704,805 |
|
Total liabilities and equity |
|
$ |
2,026,008 |
|
|
$ |
2,198,559 |
|
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
|
|
Year Ended December 31, |
|
|||||
|
|
|
2017 |
|
|
|
2016 |
|
Operating activities: |
|
|
|
|
|
|
|
|
Net loss |
|
$ |
(30,615 |
) |
|
$ |
(6,069 |
) |
Goodwill impairment charge |
|
|
7,083 |
|
|
|
9,875 |
|
Share-based compensation |
|
|
7,938 |
|
|
|
8,255 |
|
Depreciation and amortization |
|
|
44,572 |
|
|
|
46,797 |
|
Loss on sale of business |
|
|
1,062 |
|
|
|
— |
|
Loss (gain) on sale of property, plant and equipment |
|
|
(302 |
) |
|
|
1,078 |
|
Bad debt expense |
|
|
— |
|
|
|
744 |
|
Loss on extinguishment of debt |
|
|
432 |
|
|
|
4,642 |
|
Amortization of bank debt fees |
|
|
8,710 |
|
|
|
5,564 |
|
Deferred income taxes |
|
|
82,813 |
|
|
|
1,256 |
|
Excess tax deduction on share-based compensation |
|
|
(191 |
) |
|
|
— |
|
Changes in operating assets and liabilities: |
|
|
|
|
|
|
|
|
Receivables |
|
|
3,142 |
|
|
|
31,882 |
|
Other assets |
|
|
9,024 |
|
|
|
(986 |
) |
Accounts payable, trade |
|
|
8,817 |
|
|
|
(9,673 |
) |
Accrued employment costs |
|
|
(21,315 |
) |
|
|
17,149 |
|
Accrued expenses |
|
|
(1,903 |
) |
|
|
1,805 |
|
Advance payments and billings in excess of costs incurred |
|
|
(2,879 |
) |
|
|
(15,674 |
) |
Other liabilities |
|
|
(18,715 |
) |
|
|
(2,240 |
) |
Net cash provided by operating activities |
|
|
97,673 |
|
|
|
94,405 |
|
Investing activities: |
|
|
|
|
|
|
|
|
Proceeds from sale of business, net of amount placed in escrow |
|
|
22,349 |
|
|
|
— |
|
Proceeds from sale of property, plant and equipment |
|
|
2,902 |
|
|
|
— |
|
Capital expenditures |
|
|
(9,691 |
) |
|
|
(21,446 |
) |
Net cash provided by (used in) investing activities |
|
|
15,560 |
|
|
|
(21,446 |
) |
Financing activities: |
|
|
|
|
|
|
|
|
Gross borrowings from issuance of long-term debt |
|
|
— |
|
|
|
1,180,000 |
|
Repayment of long-term debt |
|
|
(110,447 |
) |
|
|
(1,215,754 |
) |
Gross borrowings from revolving credit facility |
|
|
318,500 |
|
|
|
137,000 |
|
Gross repayments of revolving credit facility |
|
|
(318,500 |
) |
|
|
(137,000 |
) |
Debt issuance costs |
|
|
— |
|
|
|
(9,988 |
) |
Proceeds from share-based payment arrangements |
|
|
— |
|
|
|
214 |
|
Payment of employee withholding taxes on share-based compensation |
|
|
(1,501 |
) |
|
|
(1,779 |
) |
Dividends paid |
|
|
(407 |
) |
|
|
(1,709 |
) |
Distributions to non-controlling interest member |
|
|
(7,133 |
) |
|
|
(3,865 |
) |
Net cash used in financing activities |
|
|
(119,488 |
) |
|
|
(52,881 |
) |
Change in cash from assets held for sale |
|
|
(91 |
) |
|
|
(1,864 |
) |
Net change in cash and cash equivalents |
|
|
(6,346 |
) |
|
|
18,214 |
|
Cash and cash equivalents, beginning of period |
|
|
48,236 |
|
|
|
30,022 |
|
Cash and cash equivalents, end of period |
|
$ |
41,890 |
|
|
$ |
48,236 |
|
RECONCILIATION OF NON-GAAP MEASURES
The following tables set forth a reconciliation of each of these Non-GAAP Measures to the most directly comparable GAAP measure for the periods presented.
Adjusted Operating Income and Adjusted Operating Margin
(dollars in thousands)
|
|
Three Months Ended December 31, |
|
|
Year Ended December 31, |
|
||||||||||
|
|
|
2017 |
|
|
|
2016 |
|
|
|
2017 |
|
|
|
2016 |
|
Net income (loss) |
|
$ |
(58,667 |
) |
|
$ |
7,336 |
|
|
$ |
(30,615 |
) |
|
$ |
(6,069 |
) |
Provision (benefit) for income taxes (1) |
|
|
63,685 |
|
|
|
(5,100 |
) |
|
|
80,356 |
|
|
|
(2,730 |
) |
Other expenses (income), net |
|
|
15 |
|
|
|
(2 |
) |
|
|
227 |
|
|
|
80 |
|
Interest expense, net (2) |
|
|
17,527 |
|
|
|
21,827 |
|
|
|
76,716 |
|
|
|
131,185 |
|
Operating income |
|
|
22,560 |
|
|
|
24,061 |
|
|
|
126,684 |
|
|
|
122,466 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill impairment charge |
|
|
7,083 |
|
|
|
9,875 |
|
|
|
7,083 |
|
|
|
9,875 |
|
Acquisition and restructuring-related expenses, excluding amortization |
|
|
1,798 |
|
|
|
1,485 |
|
|
|
5,404 |
|
|
|
9,112 |
|
Acquisition-related intangible amortization |
|
|
6,335 |
|
|
|
6,334 |
|
|
|
25,338 |
|
|
|
28,287 |
|
Loss on sale of business and property, plant and equipment, net |
|
|
1,066 |
|
|
|
— |
|
|
|
760 |
|
|
|
— |
|
Total adjustments |
|
|
16,282 |
|
|
|
17,694 |
|
|
|
38,585 |
|
|
|
47,274 |
|
Adjusted operating income |
|
$ |
38,842 |
|
|
$ |
41,755 |
|
|
$ |
165,269 |
|
|
$ |
169,740 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating margin |
|
|
4.9 |
% |
|
|
4.8 |
% |
|
|
6.6 |
% |
|
|
5.9 |
% |
Adjusted operating margin |
|
|
8.4 |
% |
|
|
8.2 |
% |
|
|
8.6 |
% |
|
|
8.2 |
% |
(1) |
Cash paid for income taxes for the three months ended December 31, 2017 and 2016 was $53 and $98, respectively, and for the year ended December 31, 2017 and 2016 was $592 and $1,071, respectively. |
|
|
(2) |
Interest expense, net, included refinancing-related expenses of $3,140 and $27,656 for the year ended December 31, 2017 and 2016, respectively. No amounts were recorded in the three month periods ended December 31, 2017 or 2016. |
|
Supplemental:
|
|
Adjusted diluted weighted average shares outstanding for the three months ended December 31, 2017 and 2016 was 37,412 and 37,687, respectively, and for the year ended December 31, 2017 and 2016 was 37,370 and 37,497, respectively. |
|
For the three months ended December 31, 2017 and 2016, the impact to GAAP net income attributable to Engility from the GAAP tax provision and the adjustments noted in the above table was $80 million and $13 million, respectively. For the years ended December 31, 2017 and 2016, the impact to GAAP net income attributable to Engility from the GAAP tax provision and the adjustments noted in the above table was $119 million and $45 million, respectively. These results have not been adjusted for cash taxes paid or refinancing-related expenses as noted in footnote 1 and footnote 2, respectively. |
9
Earnings before interest, taxes, depreciation, and amortization (EBITDA) and Adjusted EBITDA
(dollars in thousands)
|
|
Three Months Ended December 31, |
|
|
Year Ended December 31, |
|
||||||||||
|
|
|
2017 |
|
|
|
2016 |
|
|
|
2017 |
|
|
|
2016 |
|
Net income (loss) |
|
$ |
(58,667 |
) |
|
$ |
7,336 |
|
|
$ |
(30,615 |
) |
|
$ |
(6,069 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest, taxes, and depreciation and amortization |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense |
|
|
17,527 |
|
|
|
21,827 |
|
|
|
76,716 |
|
|
|
131,185 |
|
Provision (benefit) for income taxes |
|
|
63,685 |
|
|
|
(5,100 |
) |
|
|
80,356 |
|
|
|
(2,730 |
) |
Depreciation and amortization |
|
|
11,400 |
|
|
|
10,846 |
|
|
|
44,572 |
|
|
|
46,797 |
|
EBITDA |
|
|
33,945 |
|
|
|
34,909 |
|
|
|
171,029 |
|
|
|
169,183 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustments to EBITDA |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill impairment charge |
|
|
7,083 |
|
|
|
9,875 |
|
|
|
7,083 |
|
|
|
9,875 |
|
Acquisition and restructuring-related expenses, excluding amortization |
|
|
1,798 |
|
|
|
801 |
|
|
|
5,404 |
|
|
|
8,428 |
|
Loss on sale of business and property, plant and equipment, net |
|
|
1,066 |
|
|
|
1,026 |
|
|
|
760 |
|
|
|
1,078 |
|
Adjusted EBITDA |
|
$ |
43,892 |
|
|
$ |
46,611 |
|
|
$ |
184,276 |
|
|
$ |
188,564 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EBITDA Margin |
|
|
7.3 |
% |
|
|
6.9 |
% |
|
|
8.9 |
% |
|
|
8.1 |
% |
Adjusted EBITDA Margin |
|
|
9.4 |
% |
|
|
9.2 |
% |
|
|
9.5 |
% |
|
|
9.1 |
% |
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