CACI International Inc - 10-Q quarterly report FY

 

 

 

 

 

 

 

 

 

(Exact name of registrant as specified in its charter)

 

Delaware		54-1345888
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

 

(Address of principal executive offices)

 

(Registrant’s telephone number, including area code)

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class		Name of each exchange on which registered
None		None

 

Securities registered pursuant to Section 12(g) of the Act:

 

(Title of each class)

 

 

Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of April 30, 2002: CACI International Inc Common Stock, $0.10 par value, 28,410,364 shares.

 

 

 

PART I:    FINANCIAL INFORMATION				Page
Item 1.		Financial Statements
		Condensed Consolidated Statements of Operations (Unaudited) for the Three Months Ended March 31, 2002 and 2001		3
		Condensed Consolidated Statements of Operations (Unaudited) for the Nine Months Ended March 31, 2002 and 2001		4
		Condensed Consolidated Balance Sheets as of March 31, 2002 (Unaudited) and June 30, 2001		5
		Condensed Consolidated Statements of Cash Flows (Unaudited) for the Nine Months Ended March 31, 2002 and 2001		6
		Consolidated Financial Statements of Comprehensive Income (Unaudited) for the Three and Nine Months Ended March 31, 2002 and 2001		7
		Notes to Condensed Consolidated Financial Statements (Unaudited)		8
Item 2.		Management’s Discussion and Analysis of Financial Condition and Results of Operations		14
PART II:    OTHER INFORMATION
Item 3.		Legal Proceedings		21
Item 4.		Submission of Matters to a Vote of Security Holders		21
Item 5.		Other Information		21
Item 6.		Exhibits & Reports on Form 8-K		22
INDEX TO EXHIBITS				23
SIGNATURES				24

2

 

 

 

 

		Three Months Ended March 31,
		2002			2001
Revenues		$	182,818		$	146,655
Costs and expenses
Direct costs			114,112			91,321
Indirect costs and selling expenses			51,053			41,872
Depreciation and amortization			3,088			2,121
Goodwill amortization			—			1,451
Total operating expenses			168,253			136,765
Income from operations			14,565			9,890
Interest expense			718			983
Income before income taxes			13,847			8,907
Income taxes			5,259			3,474
Income from continuing operations		$	8,588		$	5,433
Discontinued operations
Income from operations from discontinued Marketing Systems Group (less applicable income tax benefit of $82)			—			128
Net income		$	8,588		$	5,561
Basic earnings per share
Income from continuing operations		$	0.34		$	0.24
Income from discontinued operations of Marketing Systems Group			—			0.01
Net Income		$	0.34		$	0.25
Average Shares Outstanding			25,141			22,602
Diluted earnings per share
Income from continuing operations		$	0.33		$	0.24
Income from discontinued operations of Marketing Systems Group			—			0.01
Net income		$	0.33		$	0.25
Average shares and equivalent shares outstanding			26,033			23,014

 

See notes to condensed consolidated financial statements (unaudited)

3

 

		Nine Months Ended March 31,
		2002				2001
Revenues		$	490,962			$	405,273
Costs and expenses
Direct costs			302,199				248,350
Indirect costs and selling expenses			141,716				120,802
Depreciation and amortization			8,635				6,112
Goodwill amortization			—				3,795
Total operating expenses			452,550				379,059
Income from operations			38,412				26,214
Interest expense			1,939				2,566
Income before income taxes			36,473				23,648
Income taxes			13,856				9,222
Income from continuing operations		$	22,617			$	14,426
Discontinued operations
Income (loss) from operations from discontinued Marketing Systems Group (less applicable income tax benefit of $128 and tax of $162)			(209	)			253
Loss on disposal of Marketing Systems Group including provision of $284 for operating losses during phase-out period (less applicable income tax benefit of $766)			(1,250	)			—
Net income		$	21,158			$	14,679
Basic earnings per share
Income from continuing operations		$	0.95			$	0.64
Income (loss) from discontinued operations of Marketing Systems Group			(0.01	)			0.01
Loss on disposal of Marketing Systems Group			(0.05	)			—
Net Income		$	0.89			$	0.65
Average shares outstanding			23,850				22,598
Diluted earnings per share
Income from continuing operations		$	0.92			$	0.63
Income (loss) from discontinued operations of Marketing Systems Group			(0.01	)			0.01
Loss on disposal of Marketing Systems Group			(0.05	)			—
Net income		$	0.86			$	0.64
Average shares and equivalent shares outstanding			24,663				22,950

 

See notes to condensed consolidated financial statements (unaudited)

4

 

		March 31, 2002				June 30, 2001
		(unaudited)
ASSETS
Current assets
Cash and equivalents		$	129,357			$	14,842
Accounts receivable:
Billed			149,695				114,953
Unbilled			7,565				11,038
Total accounts receivable			157,260				125,991
Deferred income taxes			412				407
Deferred contract costs			1,946				1,456
Prepaid expenses and other			7,921				8,562
Total current assets			296,896				151,258
Property and equipment, net			15,241				15,685
Accounts receivable, long term			8,786				13,686
Goodwill			112,874				88,895
Other assets			14,215				12,898
Intangible assets			10,590				—
Deferred contract costs, long term			202				—
Deferred income taxes			3,233				2,309
Total assets		$	462,037			$	284,731
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities
Notes payable		$	3,616			$	—
Accounts payable			9,880				7,532
Other accrued expenses			16,742				28,322
Accrued compensation and benefits			30,679				26,866
Income taxes payable			2,405				156
Deferred income taxes			5,008				6,421
Total current liabilities			68,330				69,297
Notes payable, long-term			28,500				48,888
Deferred rent expenses			1,555				1,286
Deferred income taxes			117				116
Other long-term obligations			7,423				4,940
Shareholders’ equity
Common stock—$.10 par value, 80,000,000 shares authorized, 36,180,000 and 30,572,000 shares issued			3,618				3,057
Capital in excess of par			197,468				23,269
Retained earnings			180,456				159,298
Accumulated other comprehensive loss			(4,413	)			(4,486	)
Treasury stock, at cost (7,772,000 and 7,768,000 shares)			(21,017	)			(20,934	)
Total shareholders’ equity			356,112				160,204
Total liabilities & shareholders’ equity		$	462,037			$	284,731

 

See notes to condensed consolidated financial statements (unaudited)

5

 

 

		Nine Months Ended March 31,
		2002				2001
CASH FLOWS FROM OPERATING ACTIVITIES
Net income		$	21,158			$	14,679
Reconciliation of net income to net cash provided by (used in) operating activities
Depreciation and amortization			8,759				10,255
Provision (benefit) for deferred income taxes			(2,341	)			(898	)
Loss on disposal of Marketing Systems Group business			966				—
Changes in operating assets and liabilities
Accounts receivable			(13,955	)			(7,335	)
Deferred contract costs			(692	)			(224	)
Prepaid expenses and other assets			1,088				14
Accounts payable and accrued expenses			(10,333	)			(3,925	)
Accrued compensation and benefits			978				8,951
Other long-term obligations			2,484				(1,504	)
Deferred rent expense			(10	)			160
Income taxes (receivable) payable			4,549				2,833
Net cash provided by (used in) operating activities			12,651				23,006
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisitions of property and equipment			(5,416	)			(6,518	)
Purchase of businesses			(40,280	)			(28,763	)
Capitalized software cost and other			(3,164	)			(1,924	)
Net cash provided by (used in) investing activities			(48,860	)			(37,205	)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds under line-of-credit			319,372				159,499
Payments under line-of-credit			(343,260	)			(136,762	)
Proceeds from exercise of stock options			12,870				2,379
Proceeds from secondary stock offering			161,890				—
Purchase of common stock for treasury			(83	)			(7,238	)
Net cash provided by (used in) financing activities			150,789				17,878
Effect of other comprehensive income (loss)			(65	)			(433	)
Net increase (decrease) in cash and equivalents			114,515				3,246
Cash and equivalents, beginning of period			14,842				4,931
Cash and equivalents, end of period		$	129,357			$	8,177
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the period for income taxes, net		$	6,362			$	4,900
Interest paid during the period		$	1,926			$	2,499

 

See notes to condensed consolidated financial statements (unaudited).

 

6

 

		Three Months Ended March 31,								Nine Months Ended March 31,
		2002				2001				2002				2001
Net income		$	8,588			$	5,561			$	21,158			$	14,679
Cumulative currency translation adjustment			(574	)			(1,281	)			402				(1,604	)
Fair value of interest rate swap			147				—				(329	)			—
Comprehensive income		$	8,161			$	4,280			$	21,231			$	13,075

 

See notes to condensed consolidated financial statements (unaudited).

7

 

A.    Basis of Presentation

 

 

 

8

 

B.    Goodwill

 

 

 

		Three Months Ended March 31,						Nine Months Ended March 31,
		2002			2001			2002			2001
Reported net income		$	8,588		$	5,561		$	21,158		$	14,679
Goodwill amortization (net of tax)			—			885			—			2,315
Adjusted net income		$	8,588		$	6,446		$	21,158		$	16,994
Basic Earnings Per Share:
Reported EPS—Basic		$	0.34		$	0.25		$	0.89		$	0.65
Goodwill amortization (net of tax)			—			0.04			—			0.10
Adjusted Basic EPS		$	0.34		$	0.29		$	0.89		$	0.75
Diluted Earnings Per Share:
Reported EPS—Diluted		$	0.33		$	0.25		$	0.86		$	0.64
Goodwill amortization (net of tax)			—			0.04			—			0.10
Adjusted Diluted EPS		$	0.33		$	0.29		$	0.86		$	0.74

9

 

C.    Accounts Receivable

 

 

		March 31, 2002			June 30, 2001
		(dollars in thousands)
Billed receivables
Billed receivables		$	130,771		$	100,095
Billable receivables at end of period			18,924			14,858
Total billed receivables			149,695			114,953
Unbilled receivables
Unbilled pending receipt of documents for billing			7,565			11,038
Unbilled retainages and fee withholds expected to be billed beyond the next 12 months			8,786			13,686
Total unbilled receivables			16,351			24,724
Total accounts receivable		$	166,046		$	139,677

 

D.    Commitments and Contingencies

 

10

E.    Business Segment Information

 

 

		Domestic Operations			International Operations			Other				Total
		(dollars in thousands)
Quarter Ended March 31, 2002
Revenue from external customers		$	172,611		$	10,106		$	101			$	182,818
Pre-tax income (loss) from continuing operations			14,527			1,447			(2,127	)			13,847
Quarter Ended March 31, 2001
Revenue from external customers		$	134,004		$	12,666		$	(15	)		$	146,655
Pre-tax income (loss) from continuing operations			9,212			1,277			(1,582	)			8,907
Nine Months Ended March 31, 2002
Revenue from external customers		$	460,781		$	30,031		$	150			$	490,962
Pre-tax income (loss) from continuing operations			37,861			3,877			(5,265	)			36,473
Nine Months Ended March 31, 2001
Revenue from external customers		$	370,868		$	34,226		$	179			$	405,273
Pre-tax income (loss) from continuing operations			23,369			3,664			(3,385	)			23,648

 

 

F.    Common Stock Dividend

 

11

G.    Discontinued Operations

 

 

H.    Secondary Offering

 

 

I.     Recent Accounting Pronouncements

 

 

12

 

J.     Subsequent Events

 

13

 

 

Revenues.    The table below sets forth revenues by customer with related percentages of total revenues for the three months ended on March 31, 2002 (FY2002) and March 31, 2001 (FY2001), respectively:

 

		Third Quarter												Third Quarter Change
		FY2002						FY2001						$’s				%
		(dollars in thousands)
Department of Defense		$	115,901		63.4	%		$	88,567		60.4	%		$	27,334			30.9	%
Federal Civilian Agencies			51,911		28.4	%			37,302		25.4	%			14.609			39.2	%
Commercial			11,808		6.5	%			15,492		10.6	%			(3,684	)		(23.8	%)
State & Local Governments			3,198		1.7	%			5,294		3.6	%			(2,096	)		(39.6	%)
Total		$	182,818		100.0	%		$	146,655		100.0	%		$	36,163			24.7	%

 

Revenue.    For the three months ended March 31, 2002, the Company’s total revenue increased by 24.7%, or $36.2 million, over the same period last year. Revenue growth in the third quarter came primarily from increased managed network services, systems integration, knowledge management and engineering services. The November 1, 2001 acquisition of Digital Systems International Corporation (“DSIC”) contributed $15.2 million of the revenue increase in the third quarter of FY2002.

 

Revenue from the Department of Defense (“DoD”) increased 30.9%, or $27.3 million, for the third quarter of FY2002 as compared to the same period in FY2001. DoD revenue growth was due primarily to higher levels of managed network and engineering services business. The acquisition of DSIC contributed $11.9 million in revenue and the remaining $15.4 million of revenue growth was attributable to internal growth for the quarter.

 

Revenue from Federal Civilian Agencies increased 39.2%, or $14.6 million, to $51.9 million for the three months ended March 31, 2002 as compared to the same period a year ago. Approximately 51.1% of Federal Civilian Agency revenue for the quarter was derived from the Department of Justice (“DoJ”), for whom the Company provides litigation support services and maintains an automated debt management system. Revenue for DoJ was $26.5 million for the third quarter of FY2002 as compared to $17.9 for the same period in FY2001. The overall increase in Federal Civilian Agency revenue was mainly generated from continued growth in the Company’s work with DoJ and the acquisition of DSIC.

 

Commercial revenue, which is primarily derived from the operations based in the United Kingdom, decreased by 23.8%, or $3.7 million, for the third quarter of FY2002. The decrease in Commercial revenue was largely the result of the Company’s exposure to the international telecom industry, which has been experiencing weakness, and lower other direct costs, which are billed directly to clients in FY2002, as compared to FY2001.

 

Revenue from State and Local Governments decreased 39.6%, or $2.1 million, to $3.2 million for the three months ended March 31, 2002 as compared to the same period a year ago. The Company’s continued and expanded focus on DoD and Federal Civilian Agency opportunities is resulting in a reduced emphasis in State and Local Governments.

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The following table sets forth the relative percentage that certain items of expense and earnings bore to revenues for the quarters ended March 31, 2002 and March 31, 2001, respectively.

 

		Third Quarter												Third Quarter Change
		FY02			FY01			FY02			FY01			$				%
		(dollars in thousands)
Revenue		$	182,818		$	146,655		100.0	%		100.0	%		$	36,163			24.7	%
Costs and expenses:
Direct costs			114,112			91,321		62.4			62.3				22,791			25.0
Indirect costs & selling expenses			51,053			41,872		27.9			28.6				9,181			21.9
Depreciation & amortization			3,088			2,121		1.7			1.4				967			45.6
Goodwill amortization			—			1,451		—			1.0				(1,451	)		(100.0	)
Total operating expenses			168,253			136,765		92.0			93.3				31,488			23.0
Income from operations			14,565			9,890		8.0			6.7				4,675			47.3
Interest expense			718			983		0.4			0.6				(265	)		(27.0	)
Earnings before income taxes			13,847			8,907		7.6			6.1				4,940			55.5
Income taxes			5,259			3,474		2.9			2.4				1,785			51.4
Income from continuing operations			8,588			5,433		4.7			3.7				3,155			58.1
Discontinued operations
Income (loss) from operations of discontinued Marketing Systems Group business			—			128		—			0.1				(128	)		(100.0	)
Net Income		$	8,588		$	5,561		4.7	%		3.8	%		$	3,027			54.4	%

 

Income from Operations.    Operating income increased 47.3% for the quarter ended March 31, 2002, as compared to the same period a year ago. The adoption of FAS 142, which discontinued the amortization of goodwill, accounted for over 31.0% of the increase. The balance of the increase in operating income was due to increased revenues and lower indirect costs and selling expenses, as a percentage of revenue.

 

Direct costs include direct labor and other direct costs, such as equipment purchases, subcontractor costs and travel expenses. Direct costs for the third quarter of FY2002 increased 25.0%, as compared to the same period a year ago. The largest component of direct costs, direct labor, was $56.6 million and $45.2 million for the third quarters of FY2002 and FY2001, respectively. The increase in direct labor was due to the acquisition of DSIC as well as growth in our Federal Government business. Other direct costs were $57.5 million and $46.1 million for the third quarters of FY2002 and FY2001, respectively. The increase in other direct costs was primarily due to large equipment purchases for DoD and DoJ contracts.

 

Indirect costs and selling expenses include fringe benefits, marketing and bid & proposal costs, indirect labor and other discretionary costs. Portions of these are highly variable. As a percentage of revenue, indirect costs have decreased due to the growth in our Federal Government business and the acquisition of DSIC.

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Depreciation and amortization rose 45.6%, or $1.0 million, for the third quarter of FY2002, as compared to a year ago. Of the increase, $.5 million was attributable to amortization associated with intangible assets purchased in recent acquisitions. The remainder of the increase was primarily due to the amortization of completed software development projects and purchases of computer equipment and software licenses.

 

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 of its goodwill during the three months ended March 31, 2002.

 

Interest Expense.    Interest expense decreased 27.0% for the third quarter of FY2002. The decrease was attributable to the March 2002 reduction in the Company’s credit facility balance using proceeds from the secondary stock offering.

 

Income Taxes.    The effective income tax rate for the three months ended March 31, 2002, was 38% versus 39% for the same period a year ago.

16

 

Revenues.    The table below sets forth revenues by customer with related percentages of total revenues for the nine months ended on March 31, 2002, (FY2002) and March 31, 2001 (FY2001), respectively:

 

		Year to Date												Year to Date Change
		FY2002						FY2001						$’s				%
		(dollars in thousands)
Department of Defense		$	311,760		63.5	%		$	232,317		57.3	%		$	79,443			34.2	%
Federal Civilian Agencies			131,612		26.8	%			108,648		26.8	%			22,964			21.1	%
Commercial			37,013		7.5	%			45,771		11.3	%			(8,758	)		(19.1	)%
State & Local Governments			10,577		2.2	%			18,537		4.6	%			(7,960	)		(42.9	)%
Total		$	490,962		100.0	%		$	405,273		100.0	%		$	85,689			21.1	%

 

Revenue.    For the nine months ended March 31, 2002, the Company’s total revenue increased 21.1%, or $85.7 million, over the same period last year. Revenue growth for the first nine months of FY2002 was driven primarily by higher levels of managed network and systems integration services from Federal Government customers. The Federal Services Business acquired from N.E.T. Federal, Inc. on December 2, 2000 contributed $41.5 million, and the November 1, 2001 acquisition of DSIC contributed $24.4 million, of the revenue increase for the first nine months of FY2002.

 

DoD revenue increased 34.2%, or $79.4 million, for the first nine months of FY2002 as compared to the same period in FY2001. The acquisitions of the Federal Services Business and DSIC accounted for the majority of the growth, contributing $44.0 million in revenue. Contracts with the U.S. Army, U.S. Navy, U.S. Air Force, and the Defense Information Service Agency (DISA), either acquired through acquisition or from internal growth, were the primary contributors to the increase in revenue for the first nine months of FY2002.

 

Revenue from Federal Civilian Agencies increased 21.1%, or $23.0 million, to $131.6 million for the first nine months of FY2002 as compared to the first nine months of FY2001. Approximately 48.0% of Federal Civilian Agency revenue for first nine months was derived from DoJ, for whom the Company provides litigation support services and maintains an automated debt management system. Revenue for DoJ was $63.2 million for the nine months ended March 31, 2002 as compared to $52.9 million for the same period in FY2001. The overall increase in Federal Civilian Agency revenue was mainly generated from continued growth in managed network services business, GSA schedule contracts and the Company’s work with DoJ.

 

Commercial revenue, which is primarily derived from the operations based in the United Kingdom, decreased by 19.1%, or $8.8 million, for the first nine months of FY2002. The decrease in Commercial revenue was largely the result of exposure to the international telecom industry, which has been experiencing weakness, and lower other direct costs, which are billed directly to clients, in FY2002 as compared to FY2001.

 

Revenue from State and Local Governments decreased 42.9%, or $8.0 million, to $10.6 million for the nine months ended March 31, 2002, as compared to the same period a year ago. The decline in revenue was primarily due to the phase out of work on two state contracts. The Company’s continued and expanded focus on DoD and Federal Civilian Agency opportunities is resulting in a reduced emphasis in State and Local Governments.

17

The following table sets forth the relative percentage that certain items of expense and earnings bore to revenues for the nine months ended March 31, 2002 and March 31, 2001, respectively.

 

		Year to Date													Year to Date Change
		FY02				FY01			FY02			FY01			$				%
		(Dollars in thousands)
Revenue		$	490,962			$	405,273		100.0	%		100.0	%		$	85,689			21.1	%
Costs and expenses:
Direct costs			302,199				248,350		61.5			61.3				53,849			21.7
Indirect costs & selling expenses			141,716				120,802		28.9			29.8				20,914			17.3
Depreciation & amortization			8,635				6,112		1.8			1.5				2,523			41.3
Goodwill amortization			—				3,795		—			0.9				(3,795	)		(100.0	)
Total operating expenses			452,550				379,059		92.2			93.5				73,491			19.4
Income from operations			38,412				26,214		7.8			6.5				12,198			46.5
Interest expense			1,939				2,566		0.4			0.6				(627	)		(24.4	)
Earnings before income taxes			36,473				23,648		7.4			5.9				12,825			54.2
Income taxes			13,856				9,222		2.8			2.3				4,634			50.2
Income from continuing operations			22,617				14,426		4.6			3.6				8,191			56.8
Discontinued operations
Income(loss) from operations of discontinued Marketing Systems Group business			(209	)			253		—			—				(462	)		—
Loss on disposal of Marketing Systems Group			(1,250	)			—		(0.3	)		—				(1,250	)		—
Net Income		$	21,158			$	14,679		4.3	%		3.6	%		$	6,479			44.1	%

 

Income from Operations.    Operating income increased 46.5% for the nine months ended March 31, 2002, as compared to the same period a year ago. The adoption of FAS 142, which discontinued the amortization of goodwill, accounted for approximately 31.1% of the increase. The balance of the increase in operating income was due to increased revenues and lower indirect costs and selling expenses, as a percentage of revenue.

 

Direct costs include direct labor and other direct costs, such as equipment purchases, subcontractor costs and travel expenses. Direct costs for the first nine months of FY2002 increased 21.7%, as compared to the same period a year ago. The largest component of direct costs, direct labor, was $153.4 million and $125.5 million, for the nine months ended March 31, 2002 and 2001, respectively. The increase in direct labor was due to the growth in our Federal Government business both in the Department of Defense and Federal Civilian Agencies, as well as from the acquisitions of Federal Services Business and DSIC. Other direct costs were $148.8 million and $122.9 million for the first nine months of FY2002 and FY2001, respectively. The increase in other direct costs was primarily from the same two acquisitions.

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Indirect costs and selling expenses include fringe benefits, marketing and bid & proposal costs, indirect labor and other discretionary costs. Portions of these are highly variable. As a percentage of revenue, indirect costs have decreased due to growth in our Federal Government business and the acquisitions of Federal Services Business and DSIC.

 

Depreciation and amortization rose 41.3%, or $2.5 million, to $8.6 million for the nine months ended March 31, 2002, as compared to a year ago. The increase was primarily due to the amortization associated with intangible assets purchased in recent acquisitions. The remainder of the increase was primarily due to the amortization of completed software development projects and purchases of computer equipment and software licenses.

 

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 of its goodwill during the nine months ended March 31, 2002.

 

Interest Expense.    Interest expense decreased 24.4%, to $1.9 million for the nine months March 31, 2002. The decrease was attributable to the March 2002 reduction of the Company’s credit facility balance using the proceeds from the secondary stock offering.

 

Income Taxes.    The effective income tax rate for the first nine months of FY2002 was 38%, versus 39% for the same period a year ago.

 

Liquidity and Capital Resources

 

Cash provided by operating activities for the nine months ended March 31, 2002 and 2001 was $12.7 million and $23.0 million, respectively. The primary reason for this decrease, year over year, was a $6.6 million increase in accounts receivable and a $6.4 million decrease in accounts payable and accrued expenses. In FY2002, cash provided by operating activities was generated primarily from net income of $21.2 million offset by an increase in accounts receivable from internal growth and the acquisition of DSIC and a decrease in accounts payable and accrued expenses. In FY2001, cash provided by operating activities was principally due to net income of $14.7 million, and increases in accrued compensation and benefits and income taxes payable.

 

Cash used in investing activities was $48.9 million for the nine months ended March 31, 2002, compared to $37.2 million for the same period a year ago. Investment activities included purchase of property and equipment, and purchases of businesses and related intangible assets.

 

Cash provided by financing activities was $150.8 million for the nine months ended March 31, 2002, compared to $17.9 million for the same period a year ago. The primary source of cash provided by financing activities was the proceeds realized from the secondary stock offering in March 2002.

 

At March 31, 2002, the Company had an unsecured revolving line of credit that permitted borrowings up to $185.0 with an annual sublimit of $75.0 million on amounts borrowed for acquisitions. The applicable interest rate was equal to LIBOR plus a margin rate of 0.750%. The Company also pays a fee on the unused portion of the facility. The margin rate and unused portion fee are determined quarterly based on leverage, net worth and fixed charge coverage ratios. The Company’s United Kingdom subsidiary also maintains a 500,000 British pound sterling unsecured line of credit, which expires in December 2002. At March 31, 2002, the Company had approximately $160.7 million available under its lines of credit.

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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.

 

The Company’s ability to generate cash from operations depends to a significant extent on winning new contracts and recompeted contracts from the Company’s government customers in competitive bidding processes. If a significant portion of the Company’s government contracts were terminated, or if its win rate on new contracts or recompeted contracts were to decline significantly, the Company’s operating cash flow would decrease, which would adversely affect its liquidity.

 

Historically, the Company has relied on borrowings under its credit facility and cash generated from operations to finance its acquisitions. Under the Company’s new credit facility, it will be able to borrow up to $75.0 million for acquisitions, but only if it complies with specified financial ratios and other covenants under that facility. For example, at the end of each fiscal quarter the Company’s consolidated leverage ratio, or the ratio of its consolidated debt to its consolidated earnings before interest, taxes, depreciation and amortization, or EBITDA, for the previous four quarters may not exceed 3.0x. As of March 31, 2002, its consolidated leverage ratio was below 1.0 .

 

The Company’s inability to finance acquisitions for any prolonged period of time would seriously affect its ability to execute its growth strategy and would harm its financial condition and results of operations.

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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-Q for the quarter ended December 31, 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.

 

Since the filing of Registrant’s last Quarterly Report on Form 10-Q, the Registrant has been working with DISA to develop damage issues for negotiation. In addition, the Registrant’s claim has been audited and ASBCA has established a schedule calling for a hearing on the matter in December 2002, in the event the parties are unable to reach a negotiated settlement.

 

 

 

On March 7, 2002, the SEC declared effective our registration statement on Form S-3 (File No. 333-82346) relating to an underwritten firm commitment public offering of 4,887,500 shares of our Class A common stock, including 637,500 shares issuable upon exercise of underwriters’ over-allotment option, at a pubic offering price of $35.00 per share. All of these shares were offered for our own account. The public offering commenced on March 8, 2002. We completed the sale of 4,250,000 shares on March 13, 2002, and we completed the sale of the remaining 637,500 shares on March 20, 2002. The managing underwriters for the offering were Banc of America Securities LLC, Raymond James & Associates, Inc., U.S. Bancorp Piper Jaffray Inc, Legg Mason Wood Walker, Incorporated and Adams, Harkness & Hill, Inc. The total price to the public was $171.1 million. The total underwriting discounts and commissions were approximately $8.6 million, and we estimate that through March 31, 2002 we incurred other expenses (including filing, legal, accounting and printing fees) of approximately $750,000, none of which was paid directly or indirectly to our directors or officers or their associates or to persons owning 10% or more of any class of our equity securities or to any affiliate. After deducting underwriting discounts and commissions and estimated offering expenses, our net proceeds from the offering were approximately $161.8 million. Through March 31, 2002, we used proceeds from the offering in the amount of $46.1 million to repay all but $25.0 million of principal under our credit facility, none of which was paid directly or indirectly to our directors or officers or their associates or to person owning 10% or more of any class of our equity securities or to any affiliate.

 

 

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; 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 the war on terrorism or homeland defense); government contract procurement (such as bid protests and small business set-asides) 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 including, but not limited to laws related to outsourcing and competitive award of tasks under GSA schedule contracts; 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.

 

 

The Registrant filed a Current Report on Form 8-K on March 7, 2002, in which the Registrant reported a correction to the “Aggregated Options Exercises in Fiscal Year 2001 and Fiscal Year Option Values” from the FY01 Proxy Statement.

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Exhibit Number		Title
11		Computation of Basic and Diluted Earnings Per Share

23

 

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.

 

				CACI International Inc
				Registrant
		By:		/s/    Dr. J. P. London
				Dr. J. P. London Chairman of the Board, Chief Executive Officer and Director (Principal Executive Officer)
Date:  May 13, 2002
		By:		/s/    Stephen L. Waechter
				Stephen L. Waechter Chief Financial Officer and Treasurer (Principal Financial Officer)
Date:  May 13, 2002