CSRA Announces Fourth Quarter and Fiscal Year 2016 Financial Results
- Robust book-to-bill ratios of 1.0x for the quarter and 1.3x for the year build the foundation for future growth
- Quarterly loss from continuing operations before taxes of $107 million reflects pension remeasurement; adjusted EBITDA margin of 17.4 percent leads the industry
- Quarterly Operating Cash Flow of $179 million and Free Cash Flow of $167 million enabled significant debt reduction
FALLS CHURCH, Va., May 25, 2016 /PRNewswire/ -- CSRA Inc. (NYSE: CSRA), a leading provider of next-generation IT solutions and professional services to government organizations, today announced financial results for the fourth quarter of fiscal year 2016, which ended April 1, 2016.
"We capped off our first fiscal year with another strong quarter of profitability, cash flow, and business development performance," said Larry Prior, CSRA President and CEO. "We dramatically exceeded our cost synergy targets, which is driving margins and cash generation and enabling more rapid debt reduction. Our robust bookings demonstrate that we can compete fiercely in the federal marketplace and validate our leading position in offering and successfully delivering next generation information technology solutions to the federal government."
| Summary Operating Results |
||||||||||
| (unaudited $ in millions, except |
Three Months Ended |
Twelve Months Ended |
||||||||
| for per share data) |
Apr 1, 2016 |
Apr 3, 2015 |
Apr 1, 2016 |
Apr 3, 2015 |
||||||
| GAAP revenue |
$ |
1,290 |
$ |
1,001 |
$ |
4,250 |
$ |
4,070 |
||
| GAAP earnings before taxes |
$ |
(107) |
$ |
100 |
$ |
149 |
$ |
429 |
||
| GAAP diluted EPS |
$ |
(0.44) |
$ |
0.43 |
$ |
0.53 |
$ |
1.82 |
||
| Pro forma revenue |
$ |
1,290 |
$ |
1,350 |
$ |
5,198 |
$ |
5,444 |
||
| Pro forma adjusted EBITDA |
$ |
225 |
$ |
209 |
$ |
895 |
$ |
865 |
||
| Pro forma adjusted diluted EPS |
$ |
0.50 |
$ |
0.38 |
$ |
1.96 |
$ |
1.72 |
||
| Note: All figures and their computation methods are shown at the end of the release. |
||||||||||
GAAP revenue for the fourth quarter of fiscal year 2016 was $1.29 billion, up 29 percent compared to the fourth quarter of fiscal year 2015 as a result of the merger with SRA International, Inc. Revenue for the quarter was up 1 percent compared to pro forma revenue in the third quarter of fiscal year 2016.
The GAAP loss from continuing operations before taxes of $107 million, or $0.44 per share, includes a $203 million non-cash charge associated with the remeasurement of various pension programs, and merger and integration costs of $27 million. Pro forma adjusted EBITDA for the quarter was $225 million, up 8 percent from pro forma adjusted EBITDA in the fourth quarter of fiscal year 2015, as margin increased from 15.5 percent to 17.4 percent. The year-over-year improvement in adjusted EBITDA was driven primarily by cost synergies realized from the SRA merger, which have significantly exceeded the company's initial projections. Adjusted diluted earnings per share for the quarter were $0.50, up 32 percent from pro forma adjusted EPS of $0.38 in the fourth quarter of fiscal year 2015.
Cash Management and Capital Deployment
Operating Cash Flow for the quarter was $179 million, which drove free cash flow of $167 million or 2.1 times adjusted net income attributable to CSRA common stockholders. As a result of the strong cash flow, the company aggressively executed on its balanced capital deployment program and deployed $170 million to pay down debt, $13 million to repurchase shares, and $16 million to pay dividends.
"Our superb fourth quarter free cash flow highlighted one of our fundamental value propositions for investors," remarked Dave Keffer, CSRA CFO. "The ability to generate free cash flow is the fundamental driver of value, and our exceptional results were a true team effort. We used our cash to pay down debt more quickly, deliver a dividend, and repurchase shares at good value. Our steady cash flows and $650 million of undrawn revolver capacity provide substantial liquidity and flexibility to manage the business, pay down debt, return cash to shareholders, and make accretive acquisitions."
The Board of Directors declared that the company will pay a cash dividend of $0.10 per share on July 11, 2016, to all common stockholders of record as of June 14, 2016, as part of its regular quarterly cash dividend program.
Contract Awards
Bookings totaled $1.3 billion in the fourth quarter, representing a book-to-bill ratio of 1.0x. The fourth quarter marked the fifth consecutive quarter with a pro forma book-to-bill ratio of 1.0x or higher. Pro forma bookings for the trailing twelve-month period totaled $6.9 billion, representing a pro forma book-to-bill ratio of 1.3x. New business bookings constituted 48 percent of the total bookings in the fourth quarter and 35 percent of the total bookings in the trailing twelve months.
Included in the quarterly bookings were several particularly important single-award prime contracts:
- Securities and Exchange Commission (SEC) IT Solutions. Under a potential $252 million, 10-year award, CSRA will deliver a broad range of services supporting the overall day-to-day IT operations, while migrating agency IT services contracts from staff augmentation to fixed price, information technology as-a-service and managed services.
- Alabama Supercomputer Authority (ASA) Network Services. Under a $96 million, five-year contract, CSRA will continue its 22-year relationship with ASA to provide industry-leading supercomputing and network services to the academic community in Alabama.
- Scientific Models, Applications, Visualization, Computational Science and Statistical Support. The Environmental Protection Agency (EPA) Office of Research and Development (ORD) awarded CSRA a $54 million contract to create, apply and distribute complex environmental simulations in support of research initiatives.
In addition, the company won several large multiple-award, Indefinite Delivery, Indefinite Quantity contracts that are not included in bookings, but support future growth, including:
- Transformation Twenty-One Total Technology Next Generation (T4NG). The Department of Veteran's Affairs (VA) awarded CSRA operating subsidiary, SRA International, Inc., a prime position on the T4NG contract, which has a potential ceiling value of $22 billion over 10 years. The contract will support the VA's efforts in information technology infrastructure improvements, cybersecurity and operations, and network management.
The company's backlog of signed business orders at the end of fourth quarter of fiscal year 2016 was $15.1 billion, of which $2.9 billion was funded. Total backlog increased 5 percent compared to the pro forma backlog at the end of the fourth quarter of fiscal year 2015.
Forward Guidance
The company is initiating guidance ranges for revenue, adjusted EBITDA, adjusted diluted earnings per share, and free cash flow for the fiscal year 2017 as specified in the table below.
| Metric |
Fiscal Year 2017 |
||||||||
| Revenue (millions) |
$5,000 - $5,200 |
||||||||
| Adjusted EBITDA (millions) |
$870 - $905 |
||||||||
| Adjusted Diluted Earnings per Share |
$1.91 - $2.04 |
||||||||
| Free Cash Flow (millions) |
$300 - $350 |
The fiscal year 2017 adjusted EBITDA and diluted EPS guidance assumes pension income of $96 million, or $16 million lower than the run rate for the third and fourth quarters of fiscal year 2016. Without that change, the adjusted EBITDA guidance would have been $886 to $921 million and adjusted EPS guidance would have been $1.97 to $2.10. The company affirms its long-term model of average compound annual growth in revenue of 2 percent to 3 percent and average compound annual growth in adjusted EPS of 8 percent to 10 percent.
Dave Keffer commented, "The entire CSRA team delivered outstanding earnings growth and industry-leading profitability in the fourth quarter. We have now identified more than double the $80 million of cost synergies that we originally targeted from the merger. Moreover, we have already taken most of the actions to execute at this new level of efficiency. Fiscal year 2017 should follow the pattern of investing in growth, managing costs well, and deploying our excellent cash flow in a balanced manner."
Conference Call
CSRA executive management will hold a conference call on May 25, 2016, at 5 p.m. Eastern to discuss the financial results and outlook and answer questions. Analysts and institutional investors may participate on the conference call by dialing 877-883-0383 (domestic) or 412-902-6506 (international) and entering pass code 2697791. The conference call will be webcast simultaneously to the public through a link on the Investor Relations section of the CSRA website (http://investorrelations.csra.com). A replay of the conference call will be available on the CSRA website approximately two hours after the conclusion of the call.
About CSRA Inc.
Every day CSRA (NYSE: CSRA) makes a difference in how the government serves our country and our citizens. We deliver a broad range of innovative, next-generation IT solutions and professional services to help our customers modernize their legacy systems, protect their networks and assets, and improve the effectiveness and efficiency of mission-critical functions for our warfighters and our citizens. Our 18,000 employees understand that success is a matter of perseverance, courage, adaptability and experience. CSRA is headquartered in Falls Church, Virginia. To learn more about CSRA, visit www.csra.com.
Forward-looking Statements
All statements in this press release and in all future press releases that do not directly and exclusively relate to historical facts constitute "forward-looking statements" within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements represent CSRA's intentions, plans, expectations and beliefs, including statements about network and asset protection and improving mission-critical functions. The forward-looking statements are subject to risks, uncertainties and other factors, many of which are outside the control of CSRA. These factors could cause actual results to differ materially from forward-looking statements. For a written description of these factors, see the sections titled "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" in CSRA's Quarterly Report for the Fiscal Quarter Ended January 1, 2016 and any updating information in subsequent SEC filings. CSRA disclaims any intention or obligation to update these forward-looking statements whether as a result of subsequent event or otherwise, except as required by law.
| CSRA INC. CONSOLIDATED AND COMBINED BALANCE SHEETS (unaudited) |
||||
| As of |
||||
| (Dollars in thousands) |
April 1, 2016 |
April 3, 2015 |
||
| Current assets |
||||
| Cash and cash equivalents |
$ |
130,016 |
$ |
4,979 |
| Receivables, net of allowance for doubtful accounts of $21,295 |
751,228 |
696,727 |
||
| Prepaid expenses and other current assets |
123,278 |
92,665 |
||
| Total current assets |
1,004,522 |
794,371 |
||
| Intangible and other assets |
||||
| Goodwill |
2,332,158 |
802,582 |
||
| Customer-related and other intangible assets, net of accumulated |
869,409 |
33,405 |
||
| Software, net of accumulated amortization of $95,034 (fiscal 2016) |
41,427 |
35,261 |
||
| Other assets |
68,697 |
58,931 |
||
| Total intangible and other assets |
3,311,691 |
930,179 |
||
| Property and equipment, net of accumulated depreciation of $773,027 |
530,087 |
436,732 |
||
| Total assets |
$ |
4,846,300 |
$ |
2,161,282 |
| Current liabilities |
||||
| Accounts payable |
$ |
170,359 |
$ |
130,551 |
| Accrued payroll and related costs |
199,512 |
109,539 |
||
| Accrued expenses and other current liabilities |
527,734 |
440,606 |
||
| Current capital lease liability |
42,191 |
21,351 |
||
| Current maturities of long-term debt |
128,000 |
— |
||
| Dividends payable |
17,943 |
— |
||
| Total current liabilities |
1,085,739 |
702,047 |
||
| Long-term debt, net of current maturities |
2,656,324 |
— |
||
| Noncurrent capital lease liability |
108,530 |
129,933 |
||
| Noncurrent deferred income tax liabilities |
162,844 |
153,297 |
||
| Other long-term liabilities |
742,625 |
80,957 |
||
| Commitments and contingent liabilities (Note 22) |
||||
| Equity |
||||
| Net parent investment, prior to Spin-Off |
— |
1,067,492 |
||
| CSRA Stockholders' Equity: |
||||
| Common stock, $0.001 par value, 750,000,000 shares authorized, |
163 |
— |
||
| Additional paid-in capital |
117,376 |
— |
||
| Accumulated deficit |
(73,901) |
— |
||
| Accumulated other comprehensive income (loss) |
20,908 |
(405) |
||
| Total CSRA stockholders' equity |
64,546 |
1,067,087 |
||
| Noncontrolling interests |
25,692 |
27,961 |
||
| Total equity |
90,238 |
1,095,048 |
||
| Total liabilities and equity |
$ |
4,846,300 |
$ |
2,161,282 |
| CSRA INC. CONSOLIDATED AND COMBINED STATEMENTS OF OPERATIONS (unaudited) |
||||||||
| Three Months Ended |
Twelve Months Ended |
|||||||
| (Dollars in thousands) |
April 1, 2016 |
April 3, 2015 |
April 1, 2016 |
April 3, 2015 |
||||
| Revenue |
$ |
1,290,151 |
1,000,051 |
$ |
4,245,673 |
4,061,914 |
||
| Related party revenue |
(1) |
1,067 |
4,774 |
7,832 |
||||
| Total revenue |
1,290,150 |
1,001,118 |
4,250,447 |
4,069,746 |
||||
| Cost of services |
1,227,065 |
810,782 |
3,570,857 |
3,274,469 |
||||
| Related party cost of services |
(1) |
1,067 |
4,774 |
7,832 |
||||
| Total cost of services (excludes depreciation and |
1,227,064 |
811,849 |
3,575,631 |
3,282,301 |
||||
| Selling, general and administrative expenses |
52,398 |
49,429 |
187,244 |
194,207 |
||||
| Separation and merger costs |
18,008 |
— |
117,987 |
— |
||||
| Depreciation and amortization |
69,266 |
32,786 |
182,242 |
137,058 |
||||
| Interest expense, net |
28,876 |
5,301 |
53,475 |
21,864 |
||||
| Other (income) expense, net |
1,467 |
1,967 |
(15,221) |
5,608 |
||||
| Total costs and expenses |
1,397,079 |
901,332 |
4,101,358 |
3,641,038 |
||||
| (Loss) income from continuing operations before |
(106,929) |
99,786 |
149,089 |
428,708 |
||||
| Taxes on income |
(38,724) |
38,300 |
46,167 |
160,996 |
||||
| (Loss) income from continuing operations |
(68,205) |
61,486 |
102,922 |
267,712 |
||||
| (Loss) income from discontinued operations, net of |
— |
(166) |
— |
(1,877) |
||||
| Net income |
(68,205) |
61,320 |
102,922 |
265,835 |
||||
| Less: noncontrolling interest |
3,658 |
3,601 |
15,777 |
14,078 |
||||
| Net income attributable to CSRA common |
$ |
(71,863) |
57,719 |
$ |
87,145 |
251,757 |
||
| Earnings (loss) per common share |
||||||||
| Basic: |
||||||||
| Continuing operations |
$ |
(0.44) |
0.43 |
$ |
0.54 |
1.82 |
||
| Discontinued operations |
— |
— |
— |
(0.01) |
||||
| $ |
(0.44) |
0.43 |
$ |
0.54 |
1.81 |
|||
| Diluted: |
||||||||
| Continuing operations |
$ |
(0.44) |
0.43 |
$ |
0.53 |
1.82 |
||
| Discontinued operations |
— |
— |
— |
(0.01) |
||||
| $ |
(0.44) |
0.43 |
$ |
0.53 |
1.81 |
|||
| CSRA INC. CONSOLIDATED AND COMBINED STATEMENTS OF CASH FLOWS (unaudited) |
||||
| Twelve Months Ended |
||||
| (Dollars in thousands) |
April 1, 2016 |
April 3, 2015 |
||
| Cash flows from operating activities: |
||||
| Net income |
$ |
102,922 |
$ |
265,835 |
| Adjustments to reconcile net income to cash provided by operating activities: |
||||
| Depreciation and amortization |
191,404 |
146,764 |
||
| Pension and OPEB actuarial & settlement losses (gains) |
202,800 |
8,359 |
||
| Stock-based compensation |
10,215 |
17,618 |
||
| Excess tax benefit from stock-based compensation |
(605) |
— |
||
| Deferred income taxes |
(44,187) |
(2,615) |
||
| Net (gain) loss on dispositions on business and assets |
(6,620) |
3,521 |
||
| Provision for loss (gain) on accounts receivable |
337 |
(265) |
||
| Net loss on sale of receivables |
2,458 |
— |
||
| Amortization of debt issuance costs |
3,785 |
— |
||
| Other non-cash items, net |
(4,811) |
— |
||
| Changes in assets and liabilities, net of acquisitions and dispositions: |
||||
| Decrease in receivables |
185,939 |
7,996 |
||
| (Increase) decrease in prepaid and other assets |
(29,836) |
42,674 |
||
| (Increase) decrease in payables and accrued expenses |
(17,537) |
30,165 |
||
| (Increase) decrease in defined benefits liability |
(56,714) |
(5,000) |
||
| Increase (decrease) in other long-term liabilities |
13,985 |
(22,099) |
||
| Other operating activities, net |
(19) |
(6,015) |
||
| Cash provided by operating activities |
553,516 |
486,938 |
||
| Cash flows from investing activities |
||||
| Purchases of property and equipment |
(139,420) |
(70,183) |
||
| Software purchased and developed |
(21,913) |
(7,720) |
||
| Payments for acquisitions, net of cash acquired |
||||
| Payments for acquisitions, net of cash acquired |
(341,606) |
(49,370) |
||
| Extinguishment of SRA long-term debt and costs |
(1,100,698) |
— |
||
| Reimbursement of SRA-related expenses |
(29,885) |
— |
||
| Proceeds from business dispositions |
34,001 |
3,000 |
||
| Proceeds from disposals of assets |
3,714 |
7,624 |
||
| Other investing |
(9,512) |
— |
||
| Cash (used in) provided by investing activities |
(1,605,319) |
(116,649) |
||
| Cash flows from financing activities |
||||
| Borrowings under lines of credit |
200,000 |
— |
||
| Repayments of borrowings under lines of credit |
(150,000) |
— |
||
| Borrowings of long-term debt |
2,800,000 |
— |
||
| Payments of long-term debt |
(20,000) |
— |
||
| Debt issuance costs |
(56,415) |
— |
||
| Excess tax benefit from stock-based compensation |
605 |
— |
||
| Proceeds from stock options and other common stock transactions |
3,692 |
— |
||
| Repurchase of common stock |
(50,000) |
— |
||
| Special Dividend payment |
(1,147,807) |
— |
||
| Dividends paid |
(16,252) |
— |
||
| Repayment of Transitory Note |
(350,038) |
— |
||
| Payments on lease liability |
(16,497) |
(28,902) |
||
| Payments to noncontrolling interest |
(18,000) |
— |
||
| Net transfers to CSC |
(10,425) |
(340,387) |
||
| Other financing |
7,977 |
— |
||
| Cash provided by (used in) financing activities |
1,176,840 |
(369,289) |
||
| Net increase (decrease) in cash and cash equivalents |
125,037 |
1,000 |
||
| Cash and cash equivalents at beginning of period |
4,979 |
3,979 |
||
| Cash and cash equivalents at end of period |
$ |
130,016 |
$ |
4,979 |
| Segment Operating Results |
|||||||||
| CSRA delivers IT, mission, and operations-related services across the U.S. federal government through two reportable segments–Defense and Intelligence, which supports customers in the Department of Defense (DoD) and Intelligence Community, and Civil, which supports customers in homeland security, law enforcement, healthcare, and other civil agencies as well as certain state and local government agencies. The following table summarizes revenue by reportable segment: |
|||||||||
| Three Months Ended |
|||||||||
| (unaudited $ in thousands) |
Apr 1, 2016 |
Apr 3, 2015 |
|||||||
| Pro forma revenue |
|||||||||
| Defense and Intelligence |
577,559 |
630,468 |
|||||||
| Civil |
712,591 |
720,358 |
|||||||
| Total pro forma revenue |
$ |
1,290,150 |
$ |
1,350,826 |
|||||
| SRA revenue prior to November 30, 2015 |
— |
349,708 |
|||||||
| Total revenue |
$ |
1,290,150 |
$ |
1,001,118 |
|||||
| Pro forma segment operating income |
|||||||||
| Defense and Intelligence |
76,392 |
67,946 |
|||||||
| Civil |
83,271 |
89,815 |
|||||||
| Total pro forma segment operating income |
$ |
159,663 |
$ |
157,761 |
|||||
| SRA segment operating income prior to November 30, 2015 |
— |
20,036 |
|||||||
| Total segment operating income |
$ |
159,663 |
$ |
137,725 |
|||||
| Note: Values in bold have been derived by subtracting nine-month GAAP figures from the unaudited Third Quarter Fiscal Year 2016 Form 10-Q from twelve-month GAAP figures from the audited Fiscal Year 2016 Form 10-K. |
|||||||||
For the three months ended April 1, 2016, pro forma Defense and Intelligence segment revenues decreased by $53 million, or 8.4 percent compared to the same period of the prior year. Fourth quarter pro forma Civil segment revenues decreased by $8 million, or 1.1 percent in 2016 as compared to the same period of the prior year.
Pro forma segment operating income increased across the company, driven by profitability enhancements with the Defense and Intelligence segment. For the three months ended April 1, 2016, total pro forma segment operating margin was 12.4 percent, up 70 basis points compared to the fourth quarter of fiscal year 2015.
Non-GAAP Financial Measures
The following tables illustrate the items and means to reconcile non-GAAP financial measures to the most directly comparable financial measures calculated and presented in accordance with GAAP. CSRA management believes that these non-GAAP financial measures provide useful additional information to investors regarding the company's financial condition and results of operations as they provide another measure of the company's profitability and ability to service its debt and are considered important measures by financial analysts covering CSRA. When analyzing CSRA's performance, investors and securities analysts should evaluate each adjustment in our reconciliation and use pro forma adjusted measures in addition to, and not as an alternative to, GAAP measures.
Pro forma adjusted results include a full period of SRA results; assess the impact of interest, non-backlog-related intangibles amortization, recurring elements of pension income, and other costs as if the separation and merger had occurred at the beginning of the period; and exclude costs directly associated with the separation and merger transactions and the ongoing integration process. The table below summarizes the major adjustments to GAAP to derive pro forma adjusted metrics for each reporting period.
| Metric |
Q4 2016 |
FY2016 |
Q4 2015 / FY2015 |
| Pro Forma |
None (GAAP) |
+ SRA revenue - Intercompany revenue |
+ SRA revenue - Intercompany revenue |
| Pro Forma |
- Pension mark-to-market expense - Integration costs - Spin/merger costs |
+ SRA EBITDA - Intercompany EBITDA - Pension mark-to-market expense + Pension income - Integration costs - Spin/merger costs + CSC IP expense
|
+ SRA EBITDA - Intercompany EBITDA + Pension income + CSC IP expense |
| Pro Forma |
- Pension mark-to-market expense - Integration costs - Spin/merger costs - SRA backlog amortization + Normalized tax rate |
+ SRA income - Intercompany income - Pension mark-to-market expense + Pension income - Integration costs - Spin/merger costs - SRA backlog amortization + CSC IP expense + Normalized interest expense + Normalized tax rate + Weighted share count since spin |
+ SRA income - Intercompany income + Pension income + CSC IP expense + Normalized interest expense + Normalized tax rate + Share count at spin
|
| Pro Forma Adjusted Revenue |
|||||||||
| CSRA INC. |
|||||||||
| PRO FORMA REVENUE (unaudited) |
|||||||||
| Three Months Ended |
Twelve Months Ended |
||||||||
| (Amounts in thousands) |
April 1, |
April 3, |
April 1, |
April 3, |
|||||
| Revenue(a) |
$ |
1,290,150 |
$ |
1,001,118 |
$ |
4,250,447 |
$ |
4,069,746 |
|
| Historical SRA revenue(b) |
— |
349,708 |
949,661 |
1,377,239 |
|||||
| Separation and merger effect(c) |
— |
(804) |
(1,844) |
(3,015) |
|||||
| Pro forma adjusted revenue |
$ |
1,290,150 |
$ |
1,350,022 |
$ |
5,198,264 |
$ |
5,443,970 |
|
| Note: Values in bold have been derived by subtracting nine-month GAAP figures from the unaudited Third Quarter Fiscal Year 2016 Form 10-Q from twelve-month GAAP figures from the audited Fiscal Year 2016 Form 10-K. |
|||||||||
| (a) |
For the quarter and year ended April 3, 2015, GAAP results reflect the operations of CSRA LLC. |
| (b) |
Revenue prior to the November 30, 2015 merger from the most closely corresponding reporting period, which is January 1, 2015 to March 31, 2015, in the case of the three months ended April 3, 2015. |
| (c) |
Adjustment for inter-company revenue prior to the November 30, 2015 merger. |
| Pro Forma Adjusted Diluted Earnings Per Share |
|||||||||
| CSRA INC. |
|||||||||
| PRO FORMA ADJUSTED DILUTED EARNINGS PER SHARE |
|||||||||
| Three Months Ended |
Twelve Months Ended |
||||||||
| (Amounts in thousands except per share amounts) |
April 1, |
April 3, |
April 1, |
April 3, |
|||||
| (Loss) income from continuing operations |
$ |
(106,929) |
$ |
99,786 |
$ |
149,089 |
$ |
428,708 |
|
| Historical SRA loss from continuing operations |
— |
(6,175) |
(61,724) |
(23,920) |
|||||
| Separation and merger costs(c) |
15,512 |
14,500 |
236,472 |
82,847 |
|||||
| One-time integration costs |
11,833 |
— |
7,688 |
— |
|||||
| Mark-to-market pension and OPEB expense |
202,800 |
— |
202,800 |
— |
|||||
| Amortization of funded backlog associated with |
16,300 |
— |
17,906 |
— |
|||||
| Pro forma adjusted income from continuing |
139,516 |
108,111 |
552,231 |
487,635 |
|||||
| Pro forma adjusted income tax expense(e) |
54,411 |
42,163 |
215,370 |
190,178 |
|||||
| Pro forma adjusted net income |
85,105 |
65,948 |
336,861 |
297,457 |
|||||
| Less: Noncontrolling interest |
3,658 |
3,601 |
15,777 |
14,078 |
|||||
| Pro forma adjusted net income attributable to |
$ |
81,447 |
$ |
62,347 |
$ |
321,084 |
$ |
283,379 |
|
| Pro forma adjusted diluted earnings per common |
$ |
0.50 |
$ |
0.38 |
$ |
1.96 |
$ |
1.72 |
|
| Note: Values in bold have been derived by subtracting nine-month GAAP figures from the unaudited Third Quarter Fiscal Year 2016 Form 10-Q from twelve-month GAAP figures from the audited Fiscal Year 2016 Form 10-K. |
|||||||||
| (a) |
For the quarter and year ended April 3, 2015, GAAP results reflect the operations of CSRA LLC. |
|||||||||||||
| (b) |
Income prior to the November 30, 2015 merger from the most closely corresponding reporting period, which is January 1, 2015 to March 31, 2015, in the case of the three months ended April 3, 2015 and April 1, 2014 to March 31, 2015, in the case of the twelve months ended April 3, 2015. |
|||||||||||||
| (c) |
Inter-company income prior to the November 30, 2015 merger plus costs directly associated with the separation and merger transactions, before tax effect. |
|||||||||||||
| (d) |
Total value of $65 million amortized over one year is included in GAAP net income from continuing operations before tax. |
|||||||||||||
| (e) |
Effective tax rate applied at 39% in all periods. |
|||||||||||||
| (f) |
Diluted share count set at share count as of November 30, 2015 for the three and twelve months ended April 3, 2015. |
|||||||||||||
| Pro Forma Adjusted EBITDA |
|||||||||
| CSRA defines pro forma adjusted EBITDA as revenue less cost of services and selling, general, and administrative (SG&A) costs. In addition, pro forma adjusted EBITDA excludes periodic mark-to-market adjustments to the pension plan as well as certain non-cash items such as stock-based compensation expense. |
|||||||||
| CSRA INC. |
|||||||||
| PRO FORMA ADJUSTED EBITDA (unaudited) |
|||||||||
| Three Months Ended |
Twelve Months Ended |
||||||||
| (Amounts in millions) |
April 1, |
April 3, |
April 1, |
April 3, |
|||||
| (Loss) income from continuing operations(b) |
$ |
(68) |
$ |
62 |
$ |
103 |
$ |
268 |
|
| Historical SRA loss from continuing operations |
— |
(3) |
(40) |
(16) |
|||||
| Separation and merger costs(d) |
35 |
(43) |
184 |
(292) |
|||||
| Interest expense, net |
29 |
29 |
117 |
116 |
|||||
| Tax expense on income |
(27) |
5 |
109 |
(36) |
|||||
| Depreciation and amortization |
49 |
69 |
198 |
270 |
|||||
| Amortization of contract-related intangibles |
2 |
2 |
10 |
10 |
|||||
| Provision for losses on accounts receivables |
— |
— |
— |
— |
|||||
| Loss on sale of receivables |
— |
1 |
— |
1 |
|||||
| Stock-based compensation |
2 |
6 |
12 |
23 |
|||||
| Restructuring costs |
— |
10 |
4 |
14 |
|||||
| Foreign currency loss |
— |
— |
— |
1 |
|||||
| Pension and post-retirement actuarial losses |
203 |
68 |
212 |
493 |
|||||
| Gain on disposition |
— |
— |
(17) |
— |
|||||
| Separation and CSRA merger costs |
— |
— |
2 |
— |
|||||
| Impact of acquisitions(e) |
— |
3 |
1 |
13 |
|||||
| Pro forma Adjusted EBITDA |
$ |
225 |
$ |
209 |
$ |
895 |
$ |
865 |
|
| Note: Values in bold have been derived by subtracting nine-month GAAP figures from the unaudited Third Quarter Fiscal Year 2016 Form 10-Q from twelve-month GAAP figures from the audited Fiscal Year 2016 Form 10-K. Adjusted EBITDA may not equal the sum of the component figures due to rounding. |
|||||||||
| (a) |
The reconciliation to Pro Forma Adjusted EBITDA for the periods ended April 3, 2015 differs from that used to calculate the periods ended April 1, 2016. For example, Losses from continuing operations for the periods ended April 3, 2015, incorporate amounts furnished in the Form 8-K dated December 24, 2015, derived on the basis described therein. The same profitability measures for the periods ended April 1, 2016, are derived from the same basis of accounting used to prepare GAAP financial information for those periods. |
|||||||||||||
| (b) |
For the quarter and year ended April 3, 2015, GAAP results reflect the operations of CSRA LLC. |
|||||||||||||
| (c) |
SRA income prior to November 30, 2015 merger from the most closely corresponding reporting period, which is January 1, 2015 to March 31, 2015, in the case of the three months ended April 3, 2015 and April 1, 2014 to March 31, 2015, in the case of the twelve months ended April 3, 2015. |
|||||||||||||
| (d) |
Inter-company income prior to the November 30, 2015 merger plus costs directly associated with the separation and merger transactions, net of tax; and one time integration costs. |
|||||||||||||
| (e) |
Pro-forma EBITDA contribution of SRA acquisition made prior to merger (revised from amounts furnished in the Form 8-K dated December 24, 2015). |
|||||||||||||
| Free Cash Flow |
|||||||||
| CSRA defines free cash flow as equal to the sum of (1) operating cash flows, (2) investing cash flows, excluding business acquisitions, dispositions and investments and (3) payments on capital leases and other long-term asset financings. Free cash flow is further adjusted for certain non-recurring cash flow items, such as (i) separation-related payments and (ii) the sale of accounts receivables. Quarterly free cash flow and its components are calculated by subtracting the nine-month values from the 10-Q filed on February 16, 2016, from the annual values presented on the year-end statement of cash flows. |
|||||||||
| CSRA INC. |
|||||||||
| FREE CASH FLOW (unaudited) |
|||||||||
| Twelve Months |
Nine Months |
Three Months |
|||||||
| (Amounts in millions) |
April 1, 2016 |
January 1, 2016 |
April 1, 2016 |
||||||
| Net cash provided by operating activities |
$ |
554 |
$ |
375 |
$ |
179 |
|||
| Net cash (used in) provided by investing |
(1,605) |
(1,551) |
(54) |
||||||
| Acquisitions, net of cash acquired |
1,472 |
1,473 |
(1) |
||||||
| Business dispositions |
(34) |
(34) |
— |
||||||
| Payments on capital leases and other long- |
(16) |
(13) |
(3) |
||||||
| Separation-related payments |
80 |
70 |
10 |
||||||
| Sale of receivables |
(172) |
(208) |
36 |
||||||
| Free cash flow |
$ |
278 |
$ |
112 |
$ |
167 |
|||
| Note: Free cash flow may not equal the sum of the component figures due to rounding. |
|||||||||
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SOURCE CSRA Inc.
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