SRA International, Inc. (NYSE: SRX), a leading provider of
technology and strategic consulting services and solutions to
government organizations and commercial clients, today announced
operating results for the first quarter of fiscal year (FY) 2011,
which ended September 30, 2010.
Revenue for the quarter was $423.9 million, up 1.7% from $416.7
million in the September 2009 quarter, driven by the recent
acquisitions of PQA and Sentech. Operating income for the quarter
was $30.0 million, for an operating margin of 7.1%. Income from
continuing operations was $18.5 million, for a net margin of 4.4%.
Diluted earnings per share (DEPS) from continuing operations for
the quarter were $0.32. Operating cash flow was $34.8 million and
free cash flow was $31.2 million.
During the quarter the company entered into an agreement to sell
the Airport Operations Solutions (AOS) business. The transaction is
expected to close in the quarter ending December 31, 2010. The
results of the AOS business have been included in discontinued
operations in the financial statements.
SRA President and CEO Stan Sloane said, “We are pleased to have
achieved quarterly contract awards of over $1 billion for the first
time in company history. Our book-to-bill ratio over the past
twelve months is now 1.5, and our pipeline of opportunities remains
strong, with $2.0 billion pending adjudication.”
Executive Vice President and CFO Rick Nadeau added, “We had
strong cash flows from operations in the quarter, driven by further
improvement in days sales outstanding to 71 days.”
Contract Awards
SRA won new business in the first quarter with potential value
of $1.1 billion, if all option years are exercised, for a
book-to-bill ratio of 2.6. As of September 30, 2010, the company’s
backlog of signed business orders was $5.0 billion, up 10%
year-over-year, and the funded portion of backlog was $1.1 billion,
up 29% year-over-year.
Major highlights of competitive contract awards in the quarter
include:
- Department of Defense. SRA was
awarded a re-compete contract to support the receipt and scientific
review of research grant applications for DoD's Congressionally
Directed Medical Research Programs. The contract has a potential
total value of $100 million over five years, if all options are
exercised.
- Classified Contracts. SRA was
awarded over $400 million in contract awards in support of
classified customers.
SRA was also awarded several multiple-award, IDIQ contracts in
the first quarter, which are not included in the company’s
quarterly bookings figure, but are expected to drive growth over
time. The largest was a prime position on the Management Consulting
and Information Management Services domains for the Centers for
Disease Control and Prevention’s Information Management Services,
or CIMS, contract. This multiple-award IDIQ contract has a total
value to all awardees of these two domains of $4 billion over 10
years, if all options are exercised.
Forward Guidance
The company is updating revenue and earnings guidance for Fiscal
Year 2011 originally provided on August 11, 2010 to reflect the
plan to divest the AOS business. The table below represents
management’s current expectations about the company’s future
financial performance, based on information available at this time.
SRA entered an agreement to acquire Platinum Solutions, Inc. in
October. The forward guidance does not include any effect for the
Platinum acquisition, or any additional acquisitions or
divestitures that SRA might make in the future. The guidance
assumes that the FY 2011 diluted weighted-average shares
outstanding are 58.0 million, excluding unvested restricted stock
awards, and that the allocation of earnings to unvested restricted
shares used in the calculation of diluted earnings per share is
approximately 1.3% of net income.
Measure Fiscal Year Ending
June 30, 2011
Revenue $1.77 billion to $1.82 billion Diluted earnings per
share from continuing operations $1.37 to $1.45
Conference Call
SRA senior management will hold a conference call to discuss
these operating results and forward guidance today at 5:00 PM
Eastern. Interested parties may listen to the conference call by
dialing 888-790-3103 (U.S./Canada) or 630-395-0282 (Other) with
passcode 1256593. The conference call will be Webcast
simultaneously through a link on the SRA Web site
(www.sra.com/investors/). A replay of the conference call will be
available approximately two hours after the conclusion of the call
on Nov. 2 through Nov. 16 by dialing 800-262-5125 (U.S./Canada) or
402-220-9716 (Other) and entering passcode 1978.
About SRA International, Inc.
SRA and its subsidiaries are dedicated to solving complex
problems of global significance for government organizations and
commercial clients serving the national security, civil government
and global health markets. Founded in 1978, the company and its
subsidiaries have expertise in such areas as air surveillance and
air traffic management; contract research organization (CRO)
services; cyber security; disaster response planning; enterprise
resource planning; environmental strategies; IT systems,
infrastructure and managed services; learning technologies;
logistics; public health preparedness; public safety; strategic
management consulting; systems engineering; and wireless
integration.
SRA and its subsidiaries employ more than 7,200 employees
serving clients from its headquarters in Fairfax, Va., and offices
around the world. For additional information on SRA, please visit
www.sra.com.
Any statements in this press release about future expectations,
plans, and prospects for SRA, including statements about the
estimated value of the contract and work to be performed, and other
statements containing the words “estimates,” “believes,”
“anticipates,” “plans,” “expects,” “will,” and similar expressions,
constitute forward-looking statements within the meaning of The
Private Securities Litigation Reform Act of 1995. Actual results
may differ materially from those indicated by such forward-looking
statements. In addition, the forward-looking statements included in
this press release represent our views as of Nov. 2, 2010. We
anticipate that subsequent events and developments will cause our
views to change. However, while we may elect to update these
forward-looking statements at some point in the future, we
specifically disclaim any obligation to do so. These
forward-looking statements should not be relied upon as
representing our views as of any date subsequent to Nov. 2,
2010.
Consolidated Statements of Operations
(Unaudited) (in thousands, except share amounts)
Three Months Ended 30-Sep-10 30-Sep-09
Revenue $ 423,933 $ 416,739 Operating costs and expenses: Cost of
services 317,156 316,550 Selling, general and administrative 70,317
62,077 Depreciation and amortization 6,453
7,010 Total operating costs and expenses
393,926 385,637 Operating income 30,007
31,102 Interest expense (163 ) (483 ) Interest income 363
408 Income before income taxes 30,207
31,027 Provision for income taxes 11,738 12,296 Income from
continuing operations 18,469 18,731
Loss from discontinued operations, net of tax (281 )
(681 ) Net Income $ 18,188 $ 18,050
Basic earnings (loss) per share: Continuing
operations 0.32 $ 0.33 Discontinued operations (0.01 )
(0.01 ) Basic earnings per share $ 0.31
$ 0.32 Diluted earnings (loss) per share: Continuing
operations 0.32 $ 0.32 Discontinued operations (0.01 )
(0.01 ) Diluted earnings per share $ 0.31
$ 0.31
Reconciliation Between Reported Net
Income and Net Income used in the Calculation of Earnings Per Share
(Unaudited)
(in thousands)
In accordance with Accounting Standards Codification (ASC)
section 260 Earnings Per Share, we are required to allocate a
portion of our earnings to any outstanding unvested restricted
share awards that qualify as participating securities as defined in
that standard. The Company's unvested restricted stock awards are
excluded from both the basic and diluted weighted average shares
outstanding.
Three Months Ended
30-Sep-10 30-Sep-09 Income from continuing
operations $ 18,469 $ 18,731 Less: allocation of earnings to
unvested restricted shares 239 213 Income from
continuing operations for the computation of earnings per share $
18,230 $ 18,518 Basic weighted-average shares
outstanding 56,982 56,567 Diluted
weighted-average shares outstanding 57,586
57,102 Basic earnings per share from continuing operations $
0.32 $ 0.33 Diluted earnings per share from continuing
operations $ 0.32 $ 0.32
Condensed
Consolidated Balance Sheets (Unaudited) (in thousands)
As of 30-Sep-10 30-Jun-10
Current assets: Cash and cash equivalents $ 100,565 $ 98,113
Accounts receivable, net 352,324 354,140 Inventories, net 7,370
6,829 Prepaid expenses and other 18,588 25,712 Deferred income
taxes 17,073 15,057 Current assets of discontinued operations
1,041 762 Total current assets 496,961 500,613
Property, plant and equipment, net 33,821 33,501 Goodwill 448,801
436,683 Identified intangibles, net 41,189 33,005 Deferred
compensation trust 8,065 7,182 Other long-term assets 14,238 18,236
Long-term assets of discontinued operations 4,432
4,495 Total assets $ 1,047,507 $ 1,033,715
Current liabilities: Accounts payable and accrued expenses $
101,450 $ 101,323 Accrued payroll and employee benefits 113,814
123,334 Billings in excess of revenue recognized 15,855 16,487
Liabilities of discontinued operations 813
1,069 Total current liabilities 231,932 242,213 Deferred
compensation liability 8,065 7,182 Deferred income taxes 10,221
7,280 Other long-term liabilities 5,159 5,477
Total liabilities 255,377 262,152
Stockholders' equity 792,130 771,563
Total liabilities and stockholders' equity $
1,047,507 $ 1,033,715
Condensed
Consolidated Statements of Cash Flows (Unaudited) (in
thousands) Three Months Ended 30-Sep-10
30-Sep-09 Cash flows from operating activities: Net
income $ 18,188 $ 18,050 Loss from discontinued operations 281 681
Adjustments to reconcile net income to net cash provided by
operating activities: Depreciation of property, plant and equipment
4,305 4,353 Amortization of intangible assets 2,556 2,657
Stock-based compensation 2,528 2,466 Deferred income taxes 694
1,788 Loss (gain) realized from forward exchange contracts 3,065
(398 ) Changes in assets and liabilities, net of the effect of
acquisitions 3,168 (25,462 ) Net cash
provided by operating activities of continuing operations 34,785
4,135 Net cash (used in) provided by operating activities of
discontinued operations (752 ) 197 Net
cash provided by operating activities 34,033
4,332 Cash flows from investing activities:
Capital expenditures (3,576 ) (5,190 ) Acquisitions, net of cash
acquired (25,195 ) - Collections on note receivable - 2,000
(Payments for) proceeds from forward exchange contracts
(3,065 ) 398 Net cash used in investing
activities (31,836 ) (2,792 ) Cash
flows from financing activities: Proceeds from the exercise of
stock options 656 946 Proceeds from employee stock purchase plan
357 341 Excess tax benefits of stock option exercises 88 25
Borrowings under credit facility - 35,000 Repayments under credit
facility - (45,000 ) Net borrowings under other short-term credit
facilities - 4,715 Purchase of treasury stock (1,114 )
(857 ) Net cash used in financing activities
(13 ) (4,830 ) Effect of
exchange rate changes on cash and cash equivalents 268
(915 ) Net increase (decrease) in cash
and cash equivalents 2,452 (4,205 ) Cash and cash equivalents,
beginning of period 98,113 74,683
Cash and cash equivalents, end of period $ 100,565
$ 70,478
Non-GAAP Financial
Measures The financial measures shown below, organic
revenue and free cash flow from continuing operations, are non-GAAP
financial measures. These measures are not calculated through the
application of GAAP and are not the required form of disclosure by
the Securities and Exchange Commission. As such, they should not be
considered as substitutes for the most directly comparable GAAP
measures and should not be used in isolation, but in conjunction
with these GAAP measures. The use of any non-GAAP measure may
produce results that vary from the GAAP measure and may not be
comparable to a similarly defined non-GAAP measure used by other
companies. Reconciliations to the most directly comparable GAAP
financial measures are included below.
Reconciliation Between Total Revenue and Organic Revenue
(Unaudited) (in thousands) Organic revenue, as
presented, is computed by comparing our actual reported revenue in
the current period, including revenue attributable to acquired
companies, with adjusted revenue from the prior year period. In
arriving at prior year revenue, we include the revenue of acquired
companies for the prior year periods comparable to the current-year
periods for which the companies are included in our actual reported
revenue. Revenue from discontinued operations is not included in
reported revenue, and therefore, is not considered in our
calculation of organic revenue. The resulting rate is intended to
represent our organic, or non-acquisitive, growth or decline
year-over-year. We believe that this non-GAAP financial measure
provides useful information because it allows investors to better
assess the underlying growth rate of our business, including the
post-acquisition activity of acquired companies.
Three Months Ended 30-Sep-10
30-Sep-09 % Change Revenue from continuing
operations, as reported $ 423,933 $ 416,739 1.7 % Plus:
Revenue of acquired companies for the comparable prior year period
- 7,927 Organic revenue $
423,933 $ 424,666 -0.2 %
Reconciliation Between Net Cash Provided by Operating Activities
and Free Cash Flow (Unaudited) (in thousands) We
define free cash flow, as presented, as net cash provided by
operating activities less capital expenditures. Cash flows from
discontinued operations are excluded from the calculation of free
cash flow as these cash flows will not continue in future periods.
We believe that this non-GAAP financial measure is useful for
investors in analyzing our ability to generate cash flow for
purposes such as repaying debt, funding business acquisitions, and
repurchasing our common stock.
Three Months
Ended 30-Sep-10 30-Sep-09 Net cash
provided by operating activities of continuing operations $ 34,785
$ 4,135 Less: Capital expenditures (3,576 )
(5,190 ) Free cash flow from continuing operations $ 31,209
$ (1,055 )
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