SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended September 30, 2001
Commission File Number 0-8401
     CACI International Inc   (Exact name of registrant asspecified in its charter)
             Delaware             (State or other jurisdiction ofincorporation or organization)
                54-1345888                (I.R.S. Employer Identification No.)
1100 North Glebe Road, Arlington, VA 22201(Address of principal executive offices)
            (703) 841-7800          (Registrant's telephone number,including area code)
Securities registered pursuant to Section 12(b) of the Act:
Securities registered pursuant to Section 12(g) of the Act:
CACI International Inc Common Stock, $0.10 par value(Title of each class)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No .
Indicate the number of shares outstanding of each of the registrant's classes of common stock, as of September 30, 2001: CACI International Inc Common Stock, $0.10 par value, 11,570,666 shares.
CACI INTERNATIONAL INC AND SUBSIDIARIES
PART 1
FINANCIAL INFORMATION
Item 1. Financial Statements
CACI INTERNATIONAL INC AND SUBSIDIARIESCONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)(dollars in thousands, except per share data)
See notes to condensed consolidated financial statements (unaudited)
CACI INTERNATIONAL INC AND SUBSIDIARIESCONDENSED CONSOLIDATED BALANCE SHEETS (dollars in thousands)
CACI INTERNATIONAL INC AND SUBSIDIARIESCONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)(dollars in thousands)
See notes to condensed consolidated financial statements (unaudited).
CACI INTERNATIONAL INC AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)(dollars in thousands)
CACI INTERNATIONAL INC AND SUBSIDIARIESNOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Results of Operations For the Three Months Ended September 30, 2001 and 2000.
Revenues. The table below sets forth revenues by customer segment with related percentages of total revenues for the three ended September 30, 2001, (FY2002) and September 30, 2000 (FY2001), respectively:
Revenue. For the three months ended September 30, 2001, the Company's total revenue increased by 16.1%, or $20.3 million, over the same period last year. Revenue growth in the first quarter came primarily from agencies within the Department of Defense. The Federal Services Business acquired December 2, 2000 from N.E.T. Federal, Inc., contributed $13.0 million and the Special Projects Business acquired October 6, 2000 from Radian International, contributed $0.3 million in revenue in the first three months of FY2002.
Department of Defense ("DoD") revenue increased 33.8%, or $22.7 million, for the first three months of FY2002 as compared to the same period a year ago. This growth was primarily due to higher levels of managed network and engineering services and systems integration business.
Revenue from Federal Civilian Agencies increased slightly by 1.7%, or $0.6 million, for the first three months of FY2002 as compared to FY2001. Approximately 46.9% of Federal Civilian Agency revenue was derived from the Department of Justice ("DoJ"), for whom the Company provides litigation support services and is developing and implementing an automated debt collection system. Revenue for DoJ was $17.7 million for the first quarter of FY2002, as compared to $18.6 million for the same period a year ago, as a result of a reduced volume of case work. The overall increase in Federal Civilian Agency revenue was mainly generated from continued growth in managed network services and GSA schedule contracts.
Commercial revenue, which is primarily derived from the international operations in the United Kingdom, decreased by 19.3%, or $3.2 million. The decrease was due primarily to a reduction in e-business and Globalstar activities in the U.S.
Revenue from State and Local Governments for the first quarter of FY2002 was up 3.2%, or $5.6 million, as compared to $5.4 million a year ago.
The following table sets forth the relative percentage that certain items of expense and earnings bore to revenues for the quarter ended September 30, 2001 and September 30, 2000, respectively.
Income from Operations. Income from Operations increased by 44.8%, to $11.3 million, for the first quarter of FY2002 as compared to FY2001. The improvement in operating income was driven primarily by an improved contract mix and lower relative indirect operating costs.
As a percentage of revenue, direct costs were 60.6% and 60.1% for the quarters ended September 30, 2001 and 2000, respectively. Direct Costs include direct labor and other direct costs such as equipment purchases, subcontractor costs and travel expenses. The largest component of direct costs, direct labor, was $46.0 million and $39.6 million for the first quarters of FY2002 and FY2001, respectively. The increase in direct labor was attributable to the acquisitions of the Federal Services Business and the Special Projects Business in addition to increased contracts with the DoD. Other direct costs increased 17.8%, to $42.9 million, in FY2002 as compared to $36.4 million in the prior year.
Indirect costs and selling expenses include fringe benefits, marketing and bid & proposal costs, indirect labor and other discretionary costs. Most of these are highly variable and have grown in proportion with the growth in revenue. As a percentage of revenue, indirect costs have decreased slightly due to the impact of both higher direct labor and other direct costs on revenue for the first quarter of FY2002 as well as the Company's ability to contain indirect costs. Depreciation and amortization expense increased by $532 thousand as compared to the same period a year ago. This was primarily due to the completion of software development projects for which all costs are now being amortized based on current and future revenue with annual minimum amortization equal to straight-line amortimation over the remaining estimated economic life of the product.
As previously stated, effective July 1, 2001, the Company adopted Statements of Financial Accounting Standard Nos. 141 and 142, which relate to business combinations and the amortization of goodwill. In compliance with these recently issued accounting pronouncements, the Company recorded no amortization expense on its goodwill during the quarter ended September 30, 2001.
Interest Expense. Interest Expense for the first quarter of FY2002 increased by 3.1% as compared to the same period a year ago.
Income Taxes. The effective income tax rates for the first three months of FY2002 and FY2001 were 38% and 39%, respectively. The Company has adequate accruals in place to support a 38% tax rate for FY02. These accruals represent deferred tax benefits which will impact the FY02 tax liability.
Liquidity and Capital Resources
Historically, the Company's positive cash flow from operations and available credit facilities have provided adequate liquidity and working capital to fully fund the Company's operational needs and support its acquisition activities. Working capital was $82.6 million and $81.0 million as of September 30, 2001 and June 30, 2001, respectively. The slight increase in working capital was due to the Company using it's cash generated from operations to reduce accrued liabilities. Cash generated by operations for the first three months of FY2002 was $9.0 million as compared to cash used of $1.4 million for the same period a year ago. This increase in cash provided by operations since the prior year is primarily related to the growth in earnings as well as the timing of certain cash disbursements.
The Company used $4.6 million of cash in investing activities in FY2002 as compared to $4.3 million in FY2001. The Company paid $2.5 million in the current quarter to net.com for the Federal Services Business in accordance with the asset acquisition agreement dated December 2, 2000. The cash used in FY2001 was primarily for additional capital asset purchases, which consisted primarily of computer software to support the Company's e-Business.
During the three months ended September 30, 2001, the Company's financing activities used cash of $4.5 million. This was due primarily to increased cash collections from operations and proceeds from the exercise of stock options, which allowed the Company to pay down the loan balance on it's revolving line of credit. Over the same period last year, the Company increased it's borrowings to purchase 238,000 shares of treasury stock for $4.6 million.
The Company maintains an unsecured revolving line of credit which expires on June 19, 2003. The agreement permits borrowings of up to $125 million with annual sublimits on amounts borrowed for acquisitions. The Company also maintains a 500,000 British pound sterling unsecured line of credit in London, England, which expires in November 2001. At September 30, 2001, the Company had approximately $86.7 million available for borrowing under its lines of credit.
The Company believes that the combination of internally generated funds, available bank borrowings and cash on hand will provide the required liquidity and capital resources for the foreseeable future.
PART II
OTHER INFORMATION
Item 3. Legal Proceedings
Appeal of CACI International Inc, ASBCA No.53058
Reference is made to Part II, Item 1, Legal Proceedings, in the Registrant's Quarterly Report on Form 10-K for the quarter ended June 30, 2001, for the most recently filed information concerning the appeal filed on September 27, 2000, with the Armed Services Board of Contract Appeals ("ASBCA") challenging the Defense Information Systems Agency's ("DISA") denial of its claim for breach of contract damages. The Registrant's appeal seeks damages arising from DISA's breach of license agreement pursuant to which the Department of Defense agreed to conduct all electronic data interchanges (which can be broadly understood to mean e-commerce) exclusively through certified value-added networks, such as the network maintained by Registrant's wholly-owned subsidiary, CACI, INC.-FEDERAL, for the period from September 2, 1994 through April 22, 1998. By decision of March 22, 2001, in the companion case of GAP Instrument Corporation, ASBCA No.51658 (2001), the ASBCA held that the Government's failure to conduct all electronic data interchanges exclusively through certified value-added networks constituted a breach of contract. As a result, unless the GAP Instrument decision is overturned on appeal, Registrant will pursue collection of its damages, which are substantial and which could have a material impact on the Company's earnings.
Since the filing of Registrant's reports indicated above, Registrant has submitted supporting data to the Government and sought to schedule settlement discussions.
Item 5. Other Information
Forward Looking Statements
There are statements made herein which may not address historical facts and, therefore, could be interpreted to be forward looking statements as that term is defined in the Private Securities Litigation Reform Act of 1995. Such statements are subject to factors that could cause actual results to differ materially from anticipated results. The factors that could cause actual results to differ materially from those anticipated include, but are not limited to, the following: regional and national economic conditions in the United States and United Kingdom, including changes that result from terrorist activities; changes in interest rates; currency fluctuations; failure to achieve contract awards in connection with recompetes for present business and/or competition for new business; the risks and uncertainties associated with client interest in and purchases of new products and/or services; continued funding of U.S. Government or other public sector projects in the event of a priority need for funds, such as anti-terrorist activities; government contract procurement (such as bid protest) and termination risks; individual business decisions of our clients; paradigm shifts in technology; competitive factors such as pricing pressures and competition to hire and retain employees; our ability to complete acquisitions appropriate to achievement of our strategic plans; material changes in laws or regulations applicable to our businesses; our own ability to achieve the objectives of near term or long range business plans; and other risks described in the Company's Securities and Exchange Commission filings.
Item 6. Exhibits and Reports on Form 8-K
INDEX TO EXHIBITS
SIGNATURES
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.