MCLEAN, Va. - (May 12, 2014) - Delta Tucker Holdings, Inc. ("Holdings"), the parent of DynCorp International Inc. ("DI", and together with Holdings, the "Company"), a global services provider, today reported first quarter 2014 financial results.
First quarter revenue was $612.8 million, compared to $932.1 million in the first quarter 2013, with the decrease primarily driven by the accelerated pace of the drawdown in Afghanistan, reduced service needs in Iraq for the Department of State (DoS) and delays in new business awards caused by United States budget uncertainty. Net loss attributable to Holdings for the first quarter 2014 was $0.8 million, compared with net income attributable to Holdings of $15.0 million in the first quarter 2013. The Company reported Adjusted EBITDA of $34.6 million for the first quarter, compared with $53.3 million for the same period in 2013.
"Despite the slowdown in contract awards that has been recognized across our industry, we saw the team continue to capture new business at an impressive win rate and I am cautiously optimistic about the almost $6 billion in proposals that are currently submitted and awaiting award across the three businesses," said Steve Gaffney, chairman and CEO. "With the drawdown in the Middle East, our focus remains on growth from our core into new areas through our commercial and internationally-focused business, DynGlobal, and through innovative partnerships created in our DynAviation and DynLogistics Groups."
Bill Kansky, chief financial officer, added, "As the slowing operational tempo of the war pressures our revenues we need to realize lower working capital levels, which will allow us to continue to retire our outstanding debt. As previously communicated, the Company expects to pay down at least $50 million of debt in 2014, and we are on-plan through the first quarter as we made a $15 million prepayment on our term loan. "
First Quarter and Other Recent Highlights
Reportable Segments Results:
Revenue was $295.7 million, compared with $367.7 million for the same period in 2013. The change was primarily the result of: decreased demand resulting from the de-scoping of the DoS Bureau of International Narcotics and Law Enforcement Air Wing program (INL-A) in Iraq, a reduction in volume of certain task orders under the Contract Field Teams (CFT) program, and the completion of the G222 and Columbus Support Division contracts. The decrease was partially offset by the Army Field Maintenance (AFM) and the Multi Sensor Aerial Intelligence Surveillance Reconnaissance (MAISR) contracts.
Adjusted EBITDA was $12.2 million, compared to $33.1 million for the first quarter 2013, with the change primarily driven by the revenue decline discussed above, charges on two loss contracts and a change in contract mix from CFT to AFM. These changes also impacted adjusted EBITDA as a percentage of revenue, which declined to 4.1%, compared with 9.0% in the first quarter 2013.
Revenue was $317.2 million, compared with $567.1 million for the first quarter 2013, consistent with the expectation of reduced volume on the LOGCAP IV and Afghanistan Ministry of Defense Program (AMDP) contracts resulting from the continued drawdown of troops in Afghanistan, and was impacted by lower volume on the U.S. DoS Civilian Police (CivPol) program task orders, and the completion of the Worldwide Protective Services (WPS) program in Iraq. This decline was partially offset by increases in revenue from programs including the Enhanced Army Global Logistics Enterprise (EAGLE) Fort Campbell program, the Medium Tactical Vehicles (MTV) program, and the new task order for the Criminal Justice Program Support (CJPS) in Haiti.
Adjusted EBITDA was $14.1 million compared with $19.5 million for the first quarter 2013, the decline was primarily a result of lower revenue as described above. Adjusted EBITDA as a percentage of revenue for the first quarter was 4.4% compared to 3.4% during the first quarter of 2013. The increase primarily relates to a favorable change in contract mix.
DynGlobal brings the full range of DI's diverse capabilities and decades of experience to international and commercial customers. Initial activities of this segment are focused on the development and growth of this business.
Cash used by operating activities during the first quarter of 2014 was $29.1 million compared with $73.5 million during the first quarter of 2013. Cash used by operations in the first quarter of 2014 benefited primarily by improved working capital as compared to the same period of 2013. During the quarter the Company also made a $15.0 million principal prepayment on its term loan and still ended the quarter with $122.1 million in unrestricted cash. The Company did not have any borrowings under its revolving credit facility at quarter-end.
DSO at the end of the first quarter 2014 was 73 days, a four day increase from year-end, primarily attributable to the timing of payment cycles by certain customers.
The Company will host a conference call at 9:00 a.m. Eastern Time on May 12, 2014, to discuss results for the first quarter 2014. The call may be accessed by webcast or through a dial-in conference line.
To access the webcast and view the accompanying presentation, please go to http://www.dyn-intl.com, click on "Investor Relations" and "Events & Presentations." Please go to the site approximately fifteen minutes prior to the start of the call to register, download and install any necessary audio software.
To participate by phone, dial (866) 871-0758 and enter the conference ID number: 40912501. International callers should dial (706) 634-5249 and enter the same conference ID number above. A telephonic replay will be available from 12:00 p.m. Eastern Time on May 12, 2014, through 11:59 p.m. Eastern Time on June 12, 2014. To access the replay, please dial (855) 859-2056 or (404) 537-3406 and enter the conference ID number.
About DynCorp International
DynCorp International, a wholly owned subsidiary of Delta Tucker Holdings, Inc., is a leading global services provider offering unique, tailored solutions for an ever-changing world. Built on more than six decades of experience as a trusted partner to commercial, government and military customers, DI provides sophisticated aviation, logistics, training, intelligence and operational solutions wherever we are needed. DynCorp International is headquartered in McLean, Va. For more information, visit www.dyn-intl.com.
Reconciliation to GAAP
In addition to the Company's financial results reported in accordance with accounting principles generally accepted in the United States of America ("GAAP") included in this press release, the Company has provided certain financial measures that are not calculated according to GAAP, including EBITDA and Adjusted EBITDA. We define EBITDA as GAAP net income attributable to the Company adjusted for interest, taxes, depreciation and amortization. Adjusted EBITDA is calculated by adjusting EBITDA for certain noncash items from operations and certain other items as defined in our 10.375% Senior Unsecured Notes and our Credit Facility. Management believes these non-GAAP financial measures are useful in evaluating operating performance and are regularly used by security analysts, institutional investors and other interested parties in reviewing the Company. We believe that Adjusted EBITDA is useful in assessing our ability to generate cash to cover our debt obligations including interest and principal payments. Non-GAAP financial measures, such as EBITDA and Adjusted EBITDA are not intended to be a substitute for any GAAP financial measure and, as calculated, may not be comparable to other similarly titled measures of the performance of other companies.
For a reconciliation of non-GAAP financial measures to the comparable GAAP financial measures please see the financial schedules accompanying this release.
This announcement may contain forward-looking statements regarding future events and our future results that are subject to the safe harbors created by the Private Securities Litigation Reform Act of 1995 under the Securities Act of 1933 (the "Securities Act") and the Securities Exchange Act of 1934 (the "Exchange Act"). Without limiting the foregoing, the words "believes," "thinks," "anticipates," "plans," "expects" and similar expressions are intended to identify forward-looking statements. Forward-looking statements involve risks and uncertainties. Statements regarding the amount of our backlog, estimated total contract values, and 2013 outlook are other examples of forward-looking statements. We caution that these statements are further qualified by important economic, competitive, governmental, international and technological factors that could cause our business, strategy, projections or actual results or events to differ materially, or otherwise, from those in the forward-looking statements. These factors, risks and uncertainties include, among others, the following: the future impact of mergers acquisitions, joint ventures or teaming agreements; our substantial level of indebtedness and changes in availability of capital and cost of capital; our dependence on customers within the defense industry and business risks related to that industry, including changing priorities or reductions in the annual U.S. Department of Defense (DoD) budgets and the outcome of potential additional reductions due to the sequestration process; the outcome of any material litigation, government investigation, government audit or other regulatory matters; policy and/or spending changes implemented by the Obama Administration, any subsequent administration or Congress, including extending the Continuing Resolution that the DoD is currently working under; termination or modification of key U.S. government or commercial contracts, including subcontracts; changes in the demand for services that we provide or work awarded under our contracts, including without limitation, AMDP, INL, WPS, CFT and LOGCAP IV contracts; changes in the demand for services provided by our joint venture partners; pursuit of new commercial business in the U.S. and abroad; activities of competitors and the outcome of bid protests; changes in significant operating expenses; impact of lower than expected win rates for new business; general political, economic, regulatory and business conditions in the U.S. or in other countries in which we operate; acts of war or terrorist activities; variations in performance of financial markets; the inherent difficulties of estimating future contract revenue and changes in anticipated revenue from indefinite delivery, IDIQ contracts; the timing or magnitude of any award fee granted under our government contracts,; changes in expected percentages of future revenue represented by fixed-price and time-and-materials contracts, including increased competition with respect to task orders subject to such contracts; termination or modification of key subcontractor performance or delivery; and statements covering our business strategy, those described in "Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, 2013, filed with the SEC on March 14, 2014, and other risks detailed from time to time in our reports filed with the SEC and other risks detailed from time to time in our reports posted to our website or made available publicly through other means. Accordingly, such forward-looking statements do not purport to be predictions of future events or circumstances and therefore, there can be no assurance that any forward-looking statements contained herein will prove to be accurate. We assume no obligation to update the forward-looking statements. Given these risk and uncertainties, you are cautioned not to place undue reliance on forward-looking statements. The Company's actual results could differ materially from those contained in the forward-looking statements.
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