SINT SiNtx Technologies Inc

SI International Reports Record Financial Results for Second Quarter FY05 and Raises Full Year 2005 Guidance Revenue up 50% to $96 million; Operating Income up 61% to $8.3 million; Net Income up 50% to $4.0 million; Diluted EPS of 35 Cents RESTON, Va., July 25 /PRNewswire-FirstCall/ -- SI International, Inc. (NASDAQ:SINT), an information technology and network solutions (IT) company, today announced record results for its second quarter ended June 25, 2005. Revenue for the second quarter of fiscal year 2005 (FY05) increased 50 percent and operating income increased by 61 percent as compared to the second quarter in the previous year. The Company's results were driven by strong organic growth in the Federal government IT business and the acquisition of Bridge Technology Corporation in December 2004 and of Shenandoah Electronic Intelligence, Inc. in February 2005. Second Quarter FY05 Financial Results Revenue for the second quarter of FY05 was $96.0 million, an increase of 50 percent over second quarter FY04 revenue of $63.8 million. Federal government contract revenue, which represented 99 percent of second quarter FY05 total revenue, grew by 54 percent to $94.5 million, from $61.6 million for the second quarter FY04. The strong growth during the second quarter reflects SI International's continued excellence in performing mission- critical assignments in its four key focus areas: Federal IT modernization, defense transformation, homeland defense, and mission-critical outsourcing. Income from operations for the second quarter of FY05 was $8.3 million, an increase of 61 percent over operating income of $5.2 million reported in the second quarter FY04. Operating margin for the second quarter of FY05 was 8.7 percent, as compared to 8.1 percent in the second quarter of FY04. Net income for the second quarter FY05 was $4.0 million, an increase of 50 percent over second quarter FY04 net income of $2.7 million. Diluted earnings per share for the second quarter FY05 was $0.35. Backlog as of June 25, 2005 was $894 million, including $150 million in funded backlog and $744 million in unfunded backlog. Days Sales Outstanding (DSOs) were 71 days at the end of the second quarter FY05. "We are very pleased to report another record quarter of financial results, marked by exceptional top-line growth, improving profitability, and very strong cash flow performance. Organic growth was ahead of our targeted range of 10-15 percent, confirming that our capabilities are well aligned with the Federal government's IT priorities. And we have successfully completed the integration of our two most recent acquisitions, which have substantially strengthened our capabilities in areas that offer significant opportunities for future growth," said Ray Oleson, SI International's Chairman and CEO. "We continue our tradition of meeting or exceeding our financial goals for every quarter since becoming a public company." First Half FY05 Financial Results For the first half of FY05 ended June 25, 2005, revenue increased 50 percent to $179.7 million, compared to $119.8 million for the first half of FY04. Income from operations for the first half of FY05 was $14.8 million, an increase of 55 percent over operating income of $9.6 million reported a year earlier. Operating margin for the first half of FY05 was 8.3 percent, as compared to 8.0 percent in the first half of FY04. Net income for the first six months of FY05 was $7.3 million, an increase of 44 percent over the same period last year of $5.0 million. Business Outlook Based on the Company's current backlog and management estimates as to future tasking and contract awards, SI International issued the following guidance ranges for the third and fourth fiscal quarters FY05 and revised its guidance for full year 2005. The Company projects annual organic growth of 10 to 15 percent for fiscal year 2005: Q3 2005 Q4 2005 Full Year 2005 Revenue $100 - 104 $108 million or $390 million or million better better Net income $4.2 - 4.4 $4.4 million or $16.0 million or million better better Diluted earnings per share $0.36 - 0.38 $0.38 or better $1.37 or better "Our strong performance in the first half of 2005, combined with robust opportunities for future work, provide us confidence that SI International is on track for an outstanding fiscal year. We believe that the trends that are driving government spending on IT are squarely aligned with SI International's strengths," said Oleson. Conference Call SI International has scheduled a conference call to discuss its results and business outlook for 9:00 AM EDT, tomorrow. Participating in the conference call will be SI International's Chairman and CEO, Ray Oleson, President and COO, Brad Antle, and Executive Vice President and CFO, Ted Dunn. A question and answer session will be included to further discuss the results and the Company's future performance expectations. Interested parties should contact Alan Hill at 703-234-6854 for dial-in information. The conference call will be webcast simultaneously to the public through a link on the Investor Relations section of SI International's web site, http://www.si-intl.com/. A replay of the webcast will be available on the SI International web site beginning two hours after the conclusion of the conference call. In addition, a replay of the conference will be available by telephone beginning on Tuesday, July 26, 2005 at 11:00 AM ET through Tuesday, August 2, 2005 at 5:00 PM ET by calling 1-888-286-8010 and entering the conference passcode number 29143837. About SI International: SI International, a member of the Russell 2000 index, is a provider of information technology and network solutions (IT) primarily to the Federal government. The Company combines technology and industry expertise to provide a full spectrum of state-of-the-practice solutions and services, from design and development to documentation and operations, to assist clients in achieving their missions. SI International is ranked as the 49th largest Federal Prime IT Contractor by Washington Technology and has over 3,800 employees. More information about SI International can be found at http://www.si-intl.com/. The above-referenced statements may contain forward-looking statements that are made pursuant to the safe-harbor provisions of the Private Securities Litigation Reform Act of 1995. Expressions of future goals and similar expressions reflecting something other than historical fact are intended to identify forward-looking statements, but are not the exclusive means of identifying such statements. These forward-looking statements involve a number of risks and uncertainties, which are described in the Company's filings with the Securities and Exchange Commission. These risks and uncertainties include: differences between authorized amounts and amounts received by the Company under government contracts; government customers' failure to exercise options under contracts; changes in federal government (or other applicable) procurement laws, regulations, policies and budgets; the Company's ability to attract and retain qualified personnel; and the important factors discussed in the Risk Factors section of the annual report on Form 10-K filed by the Company with the Securities and Exchange Commission and available directly from the Commission at http://www.sec.gov/. The actual results may differ materially from any forward-looking statements due to such risks and uncertainties. The Company undertakes no obligations to revise or update any forward-looking statements in order to reflect events or circumstances that may arise after the date of this release. SI International, Inc. Consolidated Income Statement (unaudited) (In thousands, except per share data) Three Months Ended Six Months Ended ---------------------------------------------------- June 25, June 26, June 25, June 26, 2005 2004 2005 2004 --------- --------- --------- --------- Revenue $95,983 $63,814 $179,700 $119,784 Direct costs 58,598 38,801 111,201 72,330 Indirect costs 27,929 19,049 51,509 36,358 Depreciation and amortization 531 598 1,082 1,187 Amortization of intangible assets 611 192 1,068 306 --------- --------- --------- --------- Income from Operations 8,314 5,174 14,840 9,603 Other Income (expense) 14 (85) Interest expense (1,659) (738) (2,756) (1,272) --------- --------- --------- --------- Income before provision for income taxes 6,669 4,436 11,999 8,331 Provision for income taxes 2,633 1,752 4,739 3,291 --------- --------- --------- --------- Net income $4,036 $2,684 $7,260 $5,040 ========= ========= ========= ========= Basic weighted average shares outstanding 11,131 8,473 11,097 8,465 Diluted weighted average shares outstanding 11,650 9,008 11,638 8,926 Earnings per common share: Basic $0.36 $0.32 $0.65 $0.60 Diluted $0.35 $0.30 $0.62 $0.56 EBITDA (1) $9,456 $5,964 $16,990 $11,096 Notes (1) EBITDA is defined as GAAP net income (loss) plus interest expense, income taxes, and depreciation and amortization. EBITDA as calculated by us may be calculated differently than EBITDA for other companies. We have provided EBITDA because we believe it is a commonly used measure of financial performance in comparable companies and is provided to help investors evaluate companies on a consistent basis, as well as to enhance an understanding of our operating results. EBITDA should not be construed as either an alternative to net income as an indicator of our operating performance or as an alternative to cash flows as a measure of liquidity. Reconciliation of Net Income to EBITDA is as follows: Three Months Ended Six Months Ended ----------------------------------------------- June 25, June 26, June 25, June 26, 2005 2004 2005 2004 -------- --------- -------- -------- Net income $4,036 $2,684 $7,260 $5,040 Other expense (income) (14) -- 85 -- Interest expense 1,659 738 2,756 1,272 Provision for income taxes 2,633 1,752 4,739 3,291 Depreciation 531 598 1,082 1,187 Amortization 611 192 1,068 306 -------- --------- -------- -------- EBITDA $9,456 $5,964 $16,990 $11,096 SI International, Inc. Revenue Segmentation Data (unaudited) (In thousands) Three Months Ended --------------------------------------------------- June 25, 2005 June 26, 2004 Growth -------------- -------------- --------------- $ % $ % $ % Core government revenue 94,515 98.5% 61,587 96.5% 32,928 53.5% Commercial revenue 1,468 1.5% 2,227 3.5% (759) (34.1)% --------------------------------------------------- Total revenue 95,983 100.0% 63,814 100.0% 32,169 50.4% Prime revenue 70,647 73.6% 51,300 80.4% 19,347 37.7% Subcontract revenue 25,336 26.4% 12,514 19.6% 12,822 102.5% --------------------------------------------------- Total revenue 95,983 100.0% 63,814 100.0% 32,169 50.4% Cost plus 25,890 27.0% 17,085 26.8% 8,805 51.5% Time & materials 43,352 45.2% 30,654 48.0% 12,698 41.4% Fixed price 26,741 27.8% 16,075 25.2% 10,666 66.4% --------------------------------------------------- Total revenue 95,983 100.0% 63,814 100.0% 32,169 50.4% Department of Defense 42,376 44.2% 33,341 52.2% 9,035 27.1% Civilian agencies 52,139 54.3% 28,246 44.3% 23,893 84.6% Commercial 1,468 1.5% 2,227 3.5% (759) (34.1)% --------------------------------------------------- Total revenue 95,983 100.0% 63,814 100.0% 32,169 50.4 % Major contracts: C4I2TSR/C4I2SR 15,866 16.5% 8,613 13.5% 7,253 84.2% SCOT 9,937 10.4% 0 0.0% 9,937 100.0% NVC/KCC 9,474 9.9% 6,215 9.7% 3,259 52.4% All other 60,706 63.2% 48,986 76.8% 11,720 23.9% --------------------------------------------------- Total revenue 95,983 100.0% 63,814 100.0% 32,169 50.4% SI International, Inc. Consolidated Balance Sheets (in thousands, except share and per share data) June 25, December 25, 2005 2004 --------------------------- (Unaudited) Assets Current assets: Cash and cash equivalents $ 14,932 $ 5,754 Accounts receivable, net 74,463 65,710 Deferred tax asset 2,740 2,740 Other current assets 4,962 3,503 Total current assets 97,097 77,707 Property and equipment, net 4,536 4,971 Intangible assets, net 17,708 6,575 Other assets 5,681 2,142 Goodwill 173,876 120,712 Total assets $ 298,898 $ 212,107 Liabilities and stockholders' equity Current liabilities: Note Payable-Line of Credit $ - $ 28,954 Current portion of long-term debt 1,000 - Accounts payable 13,433 11,225 Accrued expenses and other current liabilities 20,089 15,314 Deferred revenue - 289 Note payable - former owner of acquired business 2,280 - Total current liabilities 36,802 55,782 Long-term debt, net of current portion 99,000 - Note payable-former owner of acquired business - 2,280 Deferred income tax 5,046 5,046 Other long-term liabilities 4,268 3,929 Stockholders' equity: Common stock-$0.01 par value per share; 50,000,000 shares authorized; 11,167,894 and 11,047,533 shares issued and outstanding as of June 25, 2005 and December 25, 2004, respectively 112 111 Additional paid-in capital 129,568 128,192 Deferred compensation (133) (208) Retained earnings 24,235 16,975 Total stockholders' equity 153,782 145,070 Total liabilities and stockholders' equity $ 298,898 $ 212,107 SI International, Inc. Consolidated Statements of Cash Flows (unaudited (in thousands) Six Months Ended June 25, June 26, 2005 2004 -------- -------- Cash flows from operating activities: Net income $7,260 $5,040 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation and amortization 1,082 1,187 Amortization of intangible assets 1,068 306 Loss on disposal of fixed assets 9 - Deferred income tax provision - 1,371 Stock-based compensation 62 66 Amortization of deferred financing costs 288 226 Changes in operating assets and liabilities, net of effect of acquisitions: Accounts receivable, net 3,724 (11,164) Other current assets (1,360) (1,047) Other assets (658) (502) Accounts payable and accrued expenses 2,152 (671) Deferred revenue (289) (49) Other long term liabilities 934 1,223 ------------------ Net cash provided by (used in) operating activities 14,272 (4,014) Cash flows from investing activities: Purchase of property and equipment, net (333) (803) Cash paid for acquisition of MATCOM (82) (66,065) Cash paid for acquisition of Bridge Tech (133) - Cash paid for acquisition of SEI, net of cash assumed (73,758) - ------------------ Net cash used in investing activities (74,306) (66,868) Cash flows from financing activities: Proceeds from exercise of stock options 1,389 285 Proceeds from bank overdrafts - 2,872 Net (repayments) borrowings under line of credit (28,954) 16,000 Proceeds from long-term debt 100,000 30,000 Payments of debt issuance costs (3,170) (1,201) Repayments of capital lease obligations (53) (70) ------------------ Net cash provided by financing activities 69,212 47,886 ------------------ Net change in cash and cash equivalents 9,178 (22,996) Cash and cash equivalents, beginning of period 5,754 23,252 ------------------ Cash and cash equivalents, end of period $14,932 $256 ================== Supplemental disclosures of cash flow information: Cash payments for interest $1,916 $793 Cash payments for income taxes $2,458 $2,788 CONTACT: Alan Hill of SI International, Inc., +1-703-234-6854, or . DATASOURCE: SI International, Inc. CONTACT: Alan Hill of SI International, Inc., +1-703-234-6854, or Web site: http://www.si-intl.com/

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