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Original Source: FD (FAIR DISCLOSURE) WIRE
. Steve Waechter, CACI International, Inc., CFO . David Dragics, CACI International, Inc., VP Investor Relations . Jack London, CACI International, Inc., Chairman, President, CEO . Paul Cofoni, CACI International, Inc., President, U.S. Operations . Tom Meagher, Friedman, Billings, Ramsey Group, Analyst . Edward Caso, Wachovia Securities, Analyst . Sandra Notardonato, Robert W. Baird & Company, Analyst
. Brian Gesuale, Raymond James & Associates, Analyst . Mark Jordan, A.G. Edwards & Sons, Analyst . Bill Loomis, Stifel Nicolaus & Company, Analyst . Alex Hamilton, The Benchmark Company, Analyst . Jason Kupferberg, UBS Warburg, Analyst . Laura Lederman, William Blair & Company, Analyst . Bill Fairl, CACI International, Inc., COO U.S. Operations . Colin Gillis, Canaccord Adams, Analyst . Joseph Vafi, Jefferies & Company, Analyst . Julie Santoriello, Morgan Stanley, Analyst . Cindy Shaw, Moors & Cabot Capital Markets, Analyst . Cynthia Houlton, RBC Capital Markets, Analyst . Tim Quillin, Stephens, Inc., Analyst . Erik Olbeter, Stanford Financial Group, Analyst . Cai Von Rumohr, Cowen & Company, Analyst
Management today announced FY06 reported revenue of $1.76b and 4Q06 reported revenue of $477.3m and FY06 diluted EPS of $2.72 and 4Q06 diluted EPS of $0.71. FY07 revenue guidance is $2-2.1b. 1Q07 revenue guidance is $454-473m. FY07 diluted EPS guidance is $2.91-3.15. 1Q07 diluted EPS guidance is $0.57-0.61.
A. Key Data From Call 1. FY06 reported revenue = $1.76b. 2. 4Q06 reported revenue = $477.3m. 3. FY06 net income = $84.8m. 4. 4Q06 net income = $22.1m. 5. FY06 diluted EPS = $2.72. 6. 4Q06 diluted EPS = $0.71. 7. 4Q06 DSO = 74. 8. Cash at June 30 = $24.7m 9. FY07 revenue guidance = $2-2.1b. 10. 1Q07 revenue guidance = $454-473m.
11. FY07 diluted EPS guidance = $2.91-3.15. 12. 1Q07 diluted EPS guidance = $0.57-0.61.
S1. 4Q06 & Full Year Overview (J.L.) 1. Highlights: 1. 4Q06 reported revenue was $477.3m, up 11% over 4Q05. 2. 4Q06 net income was $22.1m.
3. 4Q06 diluted EPS was $0.71. 4. Full year reported revenue of $1.76b, up 8% over 2005. 5. Full year net income was $84.8m.
6. Full year diluted EPS was $2.72, up 6%. 7. 2H06 success rate defending business base very strong. 1. Retained incumbencies.
2. Won new and larger Tier 1 awards. 8. Strategic services sourcing (S3) award with the United States Army, $19.25b ceiling.
9. FY06 announced contract award were approx. $2b, up 63% over
prior year. 2. Acquisitions: 1. Completed three important domestic acquisitions in FY06. 2. Completed two acquisitions for UK operations. 3. All provide a solid foundation for future growth in FY07 and beyond. 3. Indicators: 1. Excellent indicaters for long-term growth. 2. Pipeline of qualified opportunities over next 24 months is nearly $13b. 1. $7b in Tier 1 deals, or more than $100m each. 3. Services and offerings sharply focused in federal market sectors that believe will receive priority funding and provide outstanding potential for long-term growth.
1. Intelligence community solutions, 2. Modernizing defense and security systems, 3. Supporting war fighter. 4. Information and intelligence are likely growth areas.
S2. Financial Results (S.W.) 1. Opening Comments: 1. Results reflect adoption of FAS-123R and resulting non-cash charges.
2. 4Q05 and full year 2005 results have been adjusted to reflect
retrospective application of FAS-123R. 3. Separately included stock option expense data in earnings release to enable computation without this expense. 2. Revenue: 1. 4Q06 revenue was up 11% over same period last year primarily due to acquisitions of ISS and Alpha Insight. 2. Federal business grew approx. 12% during quarter, representing over 94% of total revenue. 3. FY06 revenue increased 8% over FY05. 1. Acquired revenue, about 5%.
2. Organic, about 3%. 4. Full year federal business grew just over 8%. 3. Operating Income: 1. 4Q06 operating income was $40.7m, up 7.2% over last year's $38m. 2. Full year operating income increased almost 6% to $150.3m. 4. Net Income: 1. 4Q06 net income was $22.1m. 2. 4Q06 diluted EPS was $0.71. 3. Compares to prior year's net income of $22m, flat with $0.71 in '05.
4. 4Q06 net income reflects higher interest and intangible
amortization from recent acquisitions. 5. FY06 net income was $84.8m. 6. FY06 diluted EPS was $2.72. 7. Up 6% vs. net income of $79.7m or $2.61 per diluted share for FY05. 5. Orders:
1. 4Q06 funding orders were $495m, up 14% over prior year. 2. YTD total funding orders were $1.76b. 3. 4Q06 UK revenue was $17.2m, up 10% from $15.7m reported in prior year. 4. For year, UK revenue was $62.8m, up 13% over FY05. 5. Pretax profit margin was 8.6%, up from 6.9% for all of FY05. 6. Increase in revenue and pretax margins primarily due to acquisitions and accretive margins. 6. Operating Margin: 1. Operating margin for year was 8.5% vs. 8.8% in 4Q05. 2. Full year operating margin was 8.6% vs. 8.8% in prior year. 3. Decrease primarily due to higher mix of subcontractor costs, or ODCs vs. CAI's direct professional services costs. 1. ODCs generally deliver low margins. 7. Cash Flow:
1. FY06 operating cash flow, excluding non-cash charge for stock
option expenses, was $107.1m vs. $126m a year ago. 2. Cash position at June 30 was $24.7m 3. Outstanding debt was approx. $368m. 8. DSO: 1. DSO at quarter end was 74 vs. 70 last year.
1. Includes acquisitions. 2. Excluding acquisitions,DSO was 71. 9. Guidance: 1. During July divested assets supporting (indiscernible) services ship maintenance improvement program contract. 1. Services provided aboard Navy ships could have resulted in potential for conflict with services performed under one or more of co.'s other Navy contracts. 2. FY06 revenue from this source was approx. $20m. 2. Tax rate next year, assuming government passes new legislation relative to R&D, should be 36.5-37.5%.
3. Guidance does not include assumptions for additional acquisitions during course of year. 4. General practice is to issue most of stock options at beginning of each fiscal year.
1. For certain brands, full value of grant expensed immediately on grant date rather than amortized over period of time; typical treatment. 2. Effect of stock option expense of 1Q of any fiscal year tends to be higher than effect for entire fiscal year. 5. Believe coming fiscal year will bring continued budget pressures for agencies. 6. Other factors expected to continue: 1. Short-term aberrations and funding patterns, 2. Government budget process,
3. Overall political environment, 4. Hiring of cleared high-tech personnel and retention of employees. 7. Feel strongly about return to higher organic growth next year. 8. Entering 2007 with $4.6b backlog, up 35% over last year. 9. Funded backlog of $983m, up 11%. 10. 4Q06 fundings of $495m, up 14% over last year.
11. 1Q presents tough YoverY comps due to: 1. Sale of [SSMIP] contract, 2. Curtailment of tobacco litigation support work,
3. Loss of some recompete work. 12. Organic growth for back half of year expected to be double digit growth led by:
1. Intel business, which grew about 17% in FY07 (sic). 13. FY07, revenue guidance is $2-2.1b, up 19.6% at upper end of range.
14. FY07 diluted EPS guidance is $2.91-3.15, up 15.7% at upper
end of range. 15. 1Q07 revenue guidance is $454-473m, up 11.7% at upper end of range. 1. Vs. 4Q06, 1Q07 revenue projection assumes fewer billable hours, reflecting impact of employee summer vacation and loss revenue from the sale of SFMIP assets.
16. 1Q07 diluted EPS guidance is $0.57-0.61, down 1% at upper end
of range, primarily reflecting:. 1. Sale of surface ship maintenance contract, 2. Loss of recompete work at end of 1Q06,
3. Lower support services work related to tobacco litigation.
S3. Domestic Operations Update (P.C.) 1. Contract Awards: 1. FY06 US operations contract awards were $2b, up from FY05 by 63%. 2. 4Q06 contract awards were $329m. 3. Received one of four large contractor awards on $19.25b ceiling S3 contract.
1. Army awarded very first task orders to CAI. 2. To date, have received five S3 task orders for more than $82m in first 4.5 months of 10-year contract. 2. Revenue: 1. FY06 intelligence community revenue grew 17%. 1. Intel revenue was 28% of base, totaling $483m. 2. Defense revenue up 10% for quarter and 9% for year. 1. Compromises 73% of base revenue. 3. Federal civilian revenue up about 16% for quarter and about 7% for FY06.
1. Represents 21% of total for quarter and full year. 3. Win Rates:
1. Majority of 4Q awards were recompetes. 1. Won them all.
2. Throughout year stepped up to Tier 1 level on multiple large
bids. 3. S3 contract largest in co.'s history. 4. Won recompete to support Army's $450m [ETOS] program. 5. OPM Award:
1. Recompete, multiple award contract awarded in June. 2. Ceiling value of $2.4b. 3. Help office of personnel management (OPM) provide faster background investigations. 4. Work for OPM is increasing. 6. National Geospatial Intelligence Agency:
1. Multiaward contract in June. 2. Ceiling value of $200m.
3. First prime contract with National Geospatial Intelligence
Agency. 7. US Army Intelligence Center and School: 1. $156m new award in March to support the US Army Intelligence Center and School at Fort [Wachutka]. 2. New customer. 3. Contract result of acquisition of Information System Support. 4. Complements S3 and ETOS awards supporting everything from training to deployment.
8. Navy Mine Countermeasure Program: 1. …