Nevada (State or Other Jurisdiction of Incorporation) | 001-37494 (Commission File Number) | 47-4310550 (I.R.S. Employer Identification No.) |
3170 Fairview Park Drive Falls Church, Virginia (Address of Principal Executive Offices) | 22042 (Zip Code) | |
[ ] 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. |
Exhibit No. | Description |
99.1 | Press Release, dated February 7, 2018 |
By: | /s/ William J. Haynes II Name: William J. Haynes II Title: Executive Vice President, General Counsel and Secretary |
Exhibit No. | Description |
99.1 |
• | Revenue of $1.31 billion up 7 percent compared to the third quarter of fiscal year 2017 (year-over-year) and up 3 percent compared to the second quarter of fiscal year 2018 (sequentially) |
• | Operating Income of 128 million up 23 percent and Adjusted EBITDA of $201 million up 7 percent year-over-year |
• | Diluted EPS of $1.14 (GAAP) and $0.56 (Adjusted) reflect strong profitability and benefits from recent tax reform |
• | Substantial Operating Cash Flow of $157 million and Free Cash Flow of $133 million |
• | Robust book-to-bill ratios of 1.3x for the quarter and 1.7x for the trailing twelve months build the foundation for future growth |
• | Increasing guidance for Fiscal Year 2018 Revenue, Adjusted EBITDA, and Adjusted Diluted EPS |
(Dollars in millions, except per share data) | Three Months Ended | Nine Months Ended | |||||||||||||||||
December 29, 2017 | December 30, 2016 | December 29, 2017 | December 30, 2016 | ||||||||||||||||
Revenue | $ | 1,309 | $ | 1,222 | $ | 3,810 | $ | 3,739 | |||||||||||
Operating income | $ | 128 | $ | 104 | $ | 398 | $ | 346 | |||||||||||
Net income attributable to CSRA common stockholders | $ | 188 | $ | 126 | $ | 341 | $ | 267 | |||||||||||
GAAP diluted EPS | $ | 1.14 | $ | 0.76 | $ | 2.07 | $ | 1.62 | |||||||||||
Non-GAAP Measures: | |||||||||||||||||||
Adjusted EBITDA | $ | 201 | $ | 188 | $ | 604 | $ | 586 | |||||||||||
Adjusted diluted EPS | $ | 0.56 | $ | 0.44 | $ | 1.50 | $ | 1.43 | |||||||||||
Note: All figures are unaudited; refer to Reconciliation of Non-GAAP Financial Measures at the end of this news release for a more detailed discussion of management's use of non-GAAP measures and for reconciliations to GAAP financial measures. | |||||||||||||||||||
• | Department of Veterans Affairs (VA) Enterprise Service Desk (ESD). The VA awarded CSRA a five-year, $238 million task order to transition 12 existing national IT service desks to an ESD for enterprise-class IT services and support. This project represents the VA’s first migration of critical services to a managed service environment, which will be operated at CSRA's Integrated Technology Center in Bossier City, La. |
• | Federal Aviation Administration (FAA) Traffic Flow Management System (TFMS). Under a $677 million contract extending up to 12 and a half years, CSRA will support the system operations, maintenance, and development of the TFMS, as it has done since 1981. Under the new contract, CSRA will incorporate the FAA’s NextGen future technologies program that provides air traffic managers the most up-to-date situational awareness to minimize delays and increase air safety. |
• | United States Citizenship and Immigration Services (USCIS) Call Center. CSRA received a two-year, $62 million task order to provide citizenship and immigration information to customers of the USCIS Customer Engagement Center (CEC). This award expands CSRA’s work with the CEC, and CSRA is now the sole provider of these services to the CEC. The CEC accepts between 12 million and 14 million phone calls and web chats annually. |
Metric | Fiscal Year 2018 |
Revenue (millions) | $5,150 - $5,200 |
Adjusted EBITDA (millions) | $805 - $825 |
Adjusted Diluted Earnings per Share | $2.00 - $2.05 |
Free Cash Flow (millions) | $330 - $380 |
As of | ||||||||||
(Dollars in millions, shares in thousands) | December 29, 2017 | March 31, 2017 | ||||||||
Current assets | ||||||||||
Cash and cash equivalents | $ | 80 | $ | 126 | ||||||
Receivables, net of allowance for doubtful accounts of $26 and $24, respectively | 945 | 748 | ||||||||
Prepaid expenses and other current assets | 119 | 126 | ||||||||
Total current assets | 1,144 | 1,000 | ||||||||
Intangible and other assets | ||||||||||
Goodwill | 2,522 | 2,335 | ||||||||
Customer-related and other intangible assets, net of accumulated amortization of $284 and $244, respectively | 854 | 775 | ||||||||
Software, net of accumulated amortization of $103 and $89, respectively | 72 | 81 | ||||||||
Other assets | 86 | 87 | ||||||||
Total intangible and other assets | 3,534 | 3,278 | ||||||||
Property and equipment, net of accumulated depreciation of $669 and $694, respectively | 622 | 610 | ||||||||
Total assets | $ | 5,300 | $ | 4,888 | ||||||
Current liabilities | ||||||||||
Accounts payable | $ | 120 | $ | 187 | ||||||
Accrued payroll and related costs | 212 | 181 | ||||||||
Accrued expenses and other current liabilities | 611 | 487 | ||||||||
Current capital lease liability | 50 | 44 | ||||||||
Current maturities of long-term debt | 86 | 72 | ||||||||
Dividends payable | 17 | 21 | ||||||||
Total current liabilities | 1,096 | 992 | ||||||||
Long-term debt, net of current maturities | 2,651 | 2,511 | ||||||||
Noncurrent capital lease liability | 210 | 172 | ||||||||
Deferred income tax liabilities | 170 | 272 | ||||||||
Other long-term liabilities | 522 | 582 | ||||||||
Equity | ||||||||||
Stockholders’ equity: | ||||||||||
Common stock, $0.001 par value, 750,000 shares authorized, 164,350 and 163,570 shares issued, and 163,827 and 163,216 shares outstanding, respectively | — | — | ||||||||
Additional paid-in capital | 141 | 134 | ||||||||
Accumulated earnings | 456 | 165 | ||||||||
Accumulated other comprehensive income | 28 | 31 | ||||||||
Total stockholders’ equity | 625 | 330 | ||||||||
Noncontrolling interests | 26 | 29 | ||||||||
Total equity | 651 | 359 | ||||||||
Total liabilities and equity | $ | 5,300 | $ | 4,888 |
Three Months Ended | Nine Months Ended | |||||||||||||||
(Dollars in millions, except per share amounts) | December 29, 2017 | December 30, 2016 | December 29, 2017 | December 30, 2016 | ||||||||||||
Total revenue | $ | 1,309 | $ | 1,222 | $ | 3,810 | $ | 3,739 | ||||||||
Cost of services | 1,063 | 1,000 | 3,064 | 3,023 | ||||||||||||
Selling, general and administrative expenses | 56 | 52 | 156 | 163 | ||||||||||||
Acquisition, integration, and other costs | 3 | 5 | 17 | 18 | ||||||||||||
Depreciation and amortization | 59 | 61 | 175 | 189 | ||||||||||||
Operating expense | 1,181 | 1,118 | 3,412 | 3,393 | ||||||||||||
Operating income | 128 | 104 | 398 | 346 | ||||||||||||
Net benefit of defined benefit plans | 20 | 137 | 61 | 186 | ||||||||||||
Interest expense, net | (29) | (36) | (88) | (95) | ||||||||||||
Other expense, net | (2) | (1) | (5) | (3) | ||||||||||||
Income from continuing operations before taxes | 117 | 204 | 366 | 434 | ||||||||||||
Income tax (benefit) expense | (75) | 76 | 16 | 158 | ||||||||||||
Net income | 192 | 128 | 350 | 276 | ||||||||||||
Less: noncontrolling interests | 4 | 2 | 9 | 9 | ||||||||||||
Net income attributable to CSRA common stockholders | $ | 188 | $ | 126 | $ | 341 | $ | 267 | ||||||||
Earnings per common share: | ||||||||||||||||
Basic | $ | 1.15 | $ | 0.77 | $ | 2.08 | $ | 1.63 | ||||||||
Diluted | $ | 1.14 | $ | 0.76 | $ | 2.07 | $ | 1.62 | ||||||||
Common share information (weighted averages, in thousands): | ||||||||||||||||
Common shares outstanding - basic | 163,780 | 163,325 | 163,570 | 163,413 | ||||||||||||
Dilutive effect of stock options and equity awards | 1,364 | 1,563 | 1,490 | 1,388 | ||||||||||||
Common shares outstanding - diluted | 165,144 | 164,888 | 165,060 | 164,801 | ||||||||||||
Cash dividend per common share | $ | 0.10 | $ | 0.10 | $ | 0.30 | $ | 0.30 |
(Dollars in millions) | Three Months Ended | Nine Months Ended | |||||||||||||||
December 29, 2017 | December 30, 2016 | December 29, 2017 | December 30, 2016 | ||||||||||||||
Cash flows from operating activities: | |||||||||||||||||
Net income | $ | 192 | $ | 128 | $ | 350 | $ | 276 | |||||||||
Adjustments to reconcile net income to cash provided by operating activities: | |||||||||||||||||
Depreciation and amortization | 59 | 60 | 175 | 191 | |||||||||||||
Pension settlement and actuarial gains | — | (114) | 0 | (114) | |||||||||||||
Stock based compensation | 3 | 18 | 11 | 25 | |||||||||||||
Excess tax benefit from stock based compensation | — | (1) | (2) | (3) | |||||||||||||
Deferred income taxes | (101) | 0 | (102) | 0 | |||||||||||||
Net loss on dispositions on business and assets | 10 | 2 | 10 | 2 | |||||||||||||
Other non-cash items, net | 8 | 0 | 14 | 1 | |||||||||||||
Changes in assets and liabilities, net of acquisitions and dispositions: | |||||||||||||||||
(Increase) decrease in assets | (52) | 82 | (91) | 26 | |||||||||||||
Decrease in defined benefit plan liability | (19) | (21) | (59) | (68) | |||||||||||||
Increase in other liabilities | 59 | 72 | 7 | 98 | |||||||||||||
Other operating activities, net | (2) | 1 | 3 | 4 | |||||||||||||
Cash provided by operating activities | 157 | 227 | 316 | 438 | |||||||||||||
Cash flows used in investing activities: | |||||||||||||||||
Purchases of property and equipment | (45) | (30) | (94) | (98) | |||||||||||||
Software purchased and developed | (2) | (8) | (11) | (16) | |||||||||||||
Payments for acquisitions, net of cash acquired | (234) | 0 | (335) | 0 | |||||||||||||
Proceeds from disposals of assets | 29 | (1) | 36 | 9 | |||||||||||||
Other investing activities, net | 30 | 12 | 23 | (13) | |||||||||||||
Cash used in investing activities | (222) | (27) | (381) | (118) | |||||||||||||
Cash flows (used in) provided by financing activities: | |||||||||||||||||
Borrowings on revolving credit facility | 165 | 0 | 220 | 0 | |||||||||||||
Repayment of revolving credit facility | (220) | 0 | (220) | (50) | |||||||||||||
Borrowings of long term debt | 200 | 234 | 384 | 234 | |||||||||||||
Payments of long-term debt | (21) | (281) | (233) | (379) | |||||||||||||
Debt issuance cost | (2) | (4) | (4) | (4) | |||||||||||||
Proceeds from stock options and other stock activity, net | 1 | (5) | 3 | 2 | |||||||||||||
Repurchase of common stock | 0 | (21) | (16) | (29) | |||||||||||||
Dividends paid | (17) | (17) | (50) | (51) | |||||||||||||
Payments on lease liability | (10) | (15) | (30) | (32) | |||||||||||||
Payments to noncontrolling interest | (12) | (4) | (12) | (8) | |||||||||||||
Other financing activities | (30) | 7 | (23) | 29 | |||||||||||||
Cash (used in) provided by financing activities | 54 | (106) | 19 | (288) | |||||||||||||
Net (decrease) increase in cash and cash equivalents | (11) | 94 | (46) | 32 | |||||||||||||
Cash and cash equivalents at beginning of period | 91 | 68 | 126 | 130 | |||||||||||||
Cash and cash equivalents at end of period | $ | 80 | $ | 162 | $ | 80 | $ | 162 |
(Dollars in millions) | Three Months Ended | Nine Months Ended | ||||||||||||||
December 29, 2017 | December 30, 2016 | December 29, 2017 | December 30, 2016 | |||||||||||||
Supplemental cash flow information: | ||||||||||||||||
Cash paid for income taxes | $ | 32 | $ | 14 | $ | 99 | $ | 61 | ||||||||
Cash paid for interest | 32 | 25 | 81 | 79 | ||||||||||||
Capital expenditures in accounts payable and other liabilities | 4 | 1 | 18 | 10 | ||||||||||||
Capital expenditures through capital lease obligations | 24 | 65 | 79 | 85 |
Three Months Ended | Nine Months Ended | |||||||||||||||||||
(Dollars in millions; unaudited) | December 29, 2017 | December 30, 2016 | December 29, 2017 | December 30, 2016 | ||||||||||||||||
Revenue | ||||||||||||||||||||
Defense and Intelligence | $ | 605 | $ | 556 | $ | 1,687 | $ | 1,699 | ||||||||||||
Civil | 704 | 666 | 2,123 | 2,040 | ||||||||||||||||
Segment operating income(a) | ||||||||||||||||||||
Defense and Intelligence | 70 | 37 | 203 | 149 | ||||||||||||||||
Civil | 88 | 91 | 283 | 270 | ||||||||||||||||
Notes: | ||||||||||||||||||||
(a) | Excludes segment operating income (loss) for the Corporate segment as well as acquisition, integration, and other costs. | |||||||||||||||||||
• | Plan Impacts. At the time of the Spin-off on November 27, 2015, CSRA assumed the assets and obligations of the pension and other post-retirement plans from CSC. The recurring net non-cash benefits associated with these plans are excluded from all quarters. The mark-to-market effect in the third quarter of fiscal year 2017 is excluded in the adjusted metrics; there were no other plan remeasurements in the current or year-ago quarterly or year-to-date periods. |
• | Acquisition, Integration, and Other Costs. Costs directly associated with acquisitions, including integration costs and costs associated with the separation and merger transactions, are excluded from adjusted diluted EPS, adjusted EBITDA, and free cash flow. |
• | Acquisition-related Intangible Amortization. All amortization associated with acquisition-related intangible assets is excluded from adjusted diluted EPS. |
• | Net Deferred Tax Liabilities. On December 22, 2017, the U.S. government enacted the “Tax Cuts and Jobs Act” of 2017. The Company is required to evaluate its deferred tax assets and liabilities as of December 29, 2017 using the new statutory rates. The benefit of approximately $101 million associated with the revaluation of the Company's net deferred tax liability is excluded from adjusted income tax expense, adjusted net income, and adjusted diluted EPS. |
• | Sale-Leaseback Transaction. On November 2, 2017, CSRA closed a sale-leaseback transaction with MCPII 3170 Fairview, LLC, pursuant to which the Company sold its corporate headquarters property in Falls Church, Va. and simultaneously leased back a significant portion of the building. The gross sale price was $33 million, and the Company recognized a loss of approximately $10 million. The proceeds from the sale are excluded from free cash flow, and the $8 million unbillable portion of the loss is excluded from adjusted EBITDA and adjusted diluted EPS. |
CSRA INC. | |||||||||||||||||||
ADJUSTED DILUTED EARNINGS PER SHARE (unaudited) | |||||||||||||||||||
Three Months Ended | Nine Months Ended | ||||||||||||||||||
(Dollars in millions except per share amounts) | December 29, 2017 | December 30, 2016 | December 29, 2017 | December 30, 2016 | |||||||||||||||
Income before income taxes | $ | 117 | $ | 204 | $ | 366 | $ | 434 | |||||||||||
Acquisition, integration, and other costs | 3 | 5 | 17 | 18 | |||||||||||||||
Other separation-related items (within SG&A and cost of services)(a) | 9 | 23 | 8 | 31 | |||||||||||||||
Actuarial and settlement (gains) losses of the defined benefit plans ("Plans") | — | (114) | — | (114) | |||||||||||||||
Net benefit of defined benefit plans | (20) | (23) | (61) | (72) | |||||||||||||||
Amortization of backlog associated with SRA acquisition(b) | — | 11 | — | 43 | |||||||||||||||
Other acquisition & spin-off-related intangible amortization(c) | 15 | 12 | 45 | 42 | |||||||||||||||
Adjusted income before income taxes | 124 | 118 | 375 | 382 | |||||||||||||||
Adjusted income tax expense(d) | 27 | 44 | 119 | 138 | |||||||||||||||
Adjusted net income | 97 | 74 | 256 | 244 | |||||||||||||||
Less: Noncontrolling interest | 4 | 2 | 9 | 9 | |||||||||||||||
Adjusted net income attributable to CSRA common stockholders | $ | 93 | $ | 72 | $ | 247 | $ | 235 | |||||||||||
Adjusted diluted earnings per common share | $ | 0.56 | $ | 0.44 | $ | 1.50 | $ | 1.43 | |||||||||||
Notes: Adjusted net income attributable to CSRA common stockholders may not equal the sum of the component figures due to rounding. | |||||||||||||||||||
(a) | The nine months ended December 29, 2017 includes approximately $2 million of interest expense for the write-off of deferred financing costs related to the restructuring of the Company's debt facility in the first quarter of fiscal year 2018. The three and nine months ended December 29, 2017 includes approximately $8 million of unbilled, non-cash loss on the sale of the Company's corporate headquarters building. | ||||||||||||||||||
(b) | Total value of $65 million amortized over the period November 30, 2015 to November 30, 2016 is included in Income before income taxes. | ||||||||||||||||||
(c) | The nine months ended December 29, 2017 includes $4.9 million in accelerated amortization expense related to software acquired in the spin-off of the North American Public Sector business from Computer Sciences Corporation, now known as DXC Technology, ("Spin-off") that was discontinued for further use in the period. | ||||||||||||||||||
(d) | For the nine months ended December 29, 2017, the adjusted income tax expense utilizes an effective rate of 31.85%, which reflects the projected rate for the fiscal year, absent the revaluation of deferred tax assets and liabilities resulting from enactment of the Tax Act. For the three and nine months ended December 30, 2016, the adjusted income tax utilizes the effective tax rate for GAAP purposes. |
CSRA INC. | |||||||||||||||||||||
ADJUSTED EBITDA (unaudited) | |||||||||||||||||||||
Three Months Ended | Nine Months Ended | ||||||||||||||||||||
(Dollars in millions) | December 29, 2017 | December 30, 2016 | December 29, 2017 | December 30, 2016 | |||||||||||||||||
Operating Income | $ | 128 | $ | 104 | $ | 398 | $ | 346 | |||||||||||||
Less: other expense, net | (2) | (1) | (5) | (3) | |||||||||||||||||
Other separation-related items (within SG&A and cost of services)(a) | 9 | 15 | 7 | 22 | |||||||||||||||||
Add: | |||||||||||||||||||||
Acquisition, integration and other costs(b) | 3 | 5 | 17 | 18 | |||||||||||||||||
Depreciation and amortization | 59 | 61 | 175 | 189 | |||||||||||||||||
Amortization of contract-related intangibles | — | — | — | 3 | |||||||||||||||||
Stock-based compensation | 4 | 4 | 11 | 11 | |||||||||||||||||
Foreign currency loss | 1 | — | 1 | — | |||||||||||||||||
Adjusted EBITDA | $ | 201 | $ | 188 | $ | 604 | $ | 586 | |||||||||||||
Adjusted EBITDA Margin | 15.4 | % | 15.4 | % | 15.9 | % | 15.7 | % | |||||||||||||
Notes: | |||||||||||||||||||||
(a) | The fiscal year 2017 periods include $14 million of stock-based compensation that was associated with the SRA merger. | ||||||||||||||||||||
(b) | Consists of costs directly associated with the Spin-off and the merger with SRA International Inc. ("SRA"), acquisition and one-time integration costs. The nine months ended December 29, 2017 includes $4.9 million in accelerated amortization expense related to software acquired in the Spin-off that was discontinued for further use in the period. The nine months ended December 30, 2016, includes intangibles amortization expense associated with SRA's funded contract backlog. |
CSRA INC. | |||||||||||||||||||||
FREE CASH FLOW (unaudited) | |||||||||||||||||||||
Three Months Ended | Nine Months Ended | ||||||||||||||||||||
(Amounts in millions) | December 29, 2017 | December 30, 2016 | December 29, 2017 | December 30, 2016 | |||||||||||||||||
Net cash provided by operating activities | $ | 157 | $ | 227 | $ | 316 | $ | 438 | |||||||||||||
Net cash used in investing activities | (222) | (27) | (381) | (118) | |||||||||||||||||
Acquisitions, net of cash acquired | 234 | — | 335 | — | |||||||||||||||||
Disposition of Corporate Headquarters(a) | (31) | — | (31) | — | |||||||||||||||||
Payments on capital lease liabilities | (10) | (15) | (30) | (32) | |||||||||||||||||
Separation and merger-related payments | 5 | 6 | 14 | 24 | |||||||||||||||||
Initial sales of qualifying accounts receivables(b) | — | — | — | (46) | |||||||||||||||||
Free cash flow | $ | 133 | $ | 191 | $ | 223 | $ | 266 | |||||||||||||
Notes: | |||||||||||||||||||||
(a) | The net proceeds from the sale of the corporate headquarters in the quarter ended December 29, 2017 is treated as a non-operating asset disposition and excluded from free cash flow. | ||||||||||||||||||||
(b) | Adjustments for the relative impact of the net proceeds arising from the initial sale of billed and/or unbilled receivables under the Purchase Agreement as well as the effect of any new types of sales arising from changes in the Purchase Agreement. For the nine months ended December 30, 2016, the amount relates to SRA unbilled receivables under the Purchase Agreement to which SRA was added to during the period. |