SOURCE: Vangent

March 13, 2008 08:00 ET

Vangent Announces Fourth Quarter and Year-End 2007 Financials

ARLINGTON, VA--(Marketwire - March 13, 2008) - Vangent, Inc., a leading global provider of information management and strategic business process outsourcing services, today announced its fourth quarter and year-end 2007 results.

"We made tremendous progress over the course of the year in building a foundation for growth by transforming our management team and streamlining our operations," said Mac Curtis, President and Chief Executive Officer of Vangent.

Mr. Curtis continued, "The business performed well in the fourth quarter, achieving sequential revenue and Adjusted EBITDA growth, building a strong cash position and maintaining a solid backlog. Importantly, these successes came as many of our largest contracts hit peak levels. With this groundwork in place, we look forward to further success in 2008 and beyond."

Financial Summary
(Dollars in Millions)

                                 Three Months Ended December 31, 2007
                                 ------------------------------------

Revenue                                         $147.6

Adjusted EBITDA (1)                              $24.3

Long Term Debt                                  $428.2

Cash and Cash Equivalents                        $26.1

Contract Backlog                              $1,769.9

Firm Contract Backlog                           $408.4


                                 Twelve Months Ended December 31, 2007
                                 -------------------------------------

Revenue                                         $510.1

Adjusted EBITDA (1)                              $71.2

LTM Credit Agreement Adjusted EBITDA (2)         $77.1

(1) "Adjusted EBITDA" is adjusted to (1) exclude legal expenses payable by Pearson in connection with an investigation into a contract awarded to NCS Pearson, Inc. by the Transportation Security Administration in 2002 and all potential reserves related to the potential settlement of such claim, and (2) eliminate certain costs resulting from our separation from Pearson plc net of certain overhead and infrastructure costs. These adjustments are the same categories presented during the marketing of the Senior Subordinated Notes. This does not include certain adjustments that are specific only to the credit agreement.

(2) "LTM Credit Agreement Adjusted EBITDA" as defined in the credit agreement is the sum of the actual EBITDA for Q1 through Q4 of 2007. As specified by the credit agreement, this total is adjusted to (1) include the items in footnote 1, (2) normalize the operating income of a certain HHS contract for Q1 and Q2, and (3) add back TSA related expenses per the sale and purchase agreement.

A reconciliation between certain non-GAAP financial measures and reported financial results is provided as an attachment to this press release.

Q4 and year-end 2007 Results Conference Call: Will take place on March 13, 2008 at 11:00 am EDT. Interested parties may call (888) 694-4702 and request the "Vangent Q4 and Fiscal 2007 Year-End Financial Results Conference Call," conference ID # 38111416.

Audio Replay: A replay of the earnings call can be heard after 2 p.m. on March 13, 2008 until March 20, 2008. To hear the replay, dial (800) 642-1687 and enter the same conference ID # 38111416. For interested parties outside the U.S. and Canada, dial (706) 645-9291 and enter the same conference ID #.

Vangent's fourth quarter and year 2007 financials and annual report on Form 10K, including the Management Discussion and Analysis, will be made available on the company's website at www.vangent.com following the completion of the Vangent Q4 and year-end 2007 Results Conference Call.

About Vangent, Inc.

With over 6,100 employees worldwide, Vangent, Inc. is a global provider of Consulting, Systems Integration, Human Capital Management and Business Process Outsourcing services to the U.S. federal and international governments, higher education institutions and corporations. Clients include the Centers for Medicare & Medicaid Services, the U.S. Departments of Defense, Education, Health and Human Services, Justice and Labor; and the U.S. Office of Personnel Management, as well as Fortune 500 companies.

Headquartered in Arlington, Virginia, the Company has offices throughout the U.S. and in the U.K., Canada, Mexico, Venezuela and Argentina.

Forward-Looking Statements

This press release contains forward-looking statements. Forward-looking statements are those that do not relate solely to historical fact. They include, but are not limited to, any statement that may predict, forecast, indicate or imply future results, performance, achievements or events. Words such as, but not limited to, "believe," "expect," "anticipate," "estimate," "intend," "plan," "targets," "projects," "likely," "will," "would," "could" and similar expressions or phrases identify forward-looking statements. All forward-looking statements involve risks and uncertainties. The occurrence of the events described, and the achievement of the expected results, depend on many events, some or all of which are not predictable or within our control. In light of these risks and uncertainties, expected results or other anticipated events or circumstances discussed in this press release might not occur. We undertake no obligation, and specifically decline any obligation, to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

Vangent, Inc. (formerly Pearson Government Solutions Business)
Condensed Consolidated Statements of Operations
(in thousands)


                Predecessor  Successor                           Successor
                   Entity     Entity      Predecessor Entity      Entity
                ----------- ----------  ----------------------  ----------
                                                      Period      Period
                  Three       Three                 January 1, February 15,
                  Months      Months      Year         2007        2007
                  Ended       Ended       Ended         to          to
                 December    December    December February 14, December 31,
                 31, 2006    31, 2007    31, 2006      2007        2007
                ----------- ----------  ----------- ----------  ----------

Revenue         $   124,453 $  147,564  $   520,932 $   58,833  $  451,220
Cost of revenue      93,861    122,278      409,797     48,187     376,374
                ----------- ----------  ----------- ----------  ----------
Gross profit         30,592     25,286      111,135     10,646      74,846
General and
 administrative
 expenses            16,517     12,945       45,677      9,383      42,927
Selling and
 marketing
 expenses             4,142      2,990       19,020      1,940      14,029
                ----------- ----------  ----------- ----------  ----------
Operating
 income (loss)        9,933      9,351       46,438       (677)     17,890
Interest
 expense
 (income), net          151      9,352          633        (10)     33,442
                ----------- ----------  ----------- ----------  ----------
Income (loss)
 before income
 taxes                9,782         (1)      45,805       (667)    (15,552)
Provision
 (benefit) for
 income taxes         3,490      1,995       17,190       (292)      6,497
                ----------- ----------  ----------- ----------  ----------
Net income
 (loss)         $     6,292 $   (1,996) $    28,615 $     (375) $  (22,049)
                =========== ==========  =========== ==========  ==========




Vangent, Inc. (formerly Pearson Government Solutions Business)
Condensed Consolidated Balance Sheets
(in thousands)


                                      Predecessor Entity  Successor Entity
                                      ------------------ ------------------
                                      December 31, 2006  December 31, 2007
                                      ------------------ ------------------
Assets
Current assets
   Cash and cash equivalents          $           11,713 $           26,093
   Accounts receivable, net                      102,457            112,292
   Deferred tax asset                              2,948                 --
   Prepaid and other assets                        5,051             15,470
                                      ------------------ ------------------
      Total current assets                       122,169            153,855

Property and equipment, net                       30,305             27,579
Intangible assets, net                               682            198,027
Goodwill                                         442,871            301,873
Deferred debt financing costs, net                    --             12,448
Other assets                                         749                286
                                      ------------------ ------------------
      Total assets                    $          596,776 $          694,068
                                      ================== ==================

Liabilities and Owner’s
 /Stockholder’s Equity
Current liabilities
   Current portion of long-term debt  $               -- $            7,325
   Accounts payable                               29,288             36,981
   Accrued expenses                               24,067             26,267
   Accrued interest                                   --              8,547
   Deferred tax liability                             --                852
   Advance payments on contracts                   8,790              4,444
                                      ------------------ ------------------
      Total current liabilities                   62,145             84,416

Long-term debt, net of current
 portion                                              --            420,875
Other long-term liabilities                        3,703              3,863
Deferred tax liability                             1,844              4,625
                                      ------------------ ------------------
      Total liabilities                           67,692            513,779

Total owner’s/stockholder’s equity               529,084            180,289
                                      ------------------ ------------------
      Total liabilities and
       owner’s/stockholder’s equity   $          596,776 $          694,068
                                      ================== ==================




Vangent, Inc. (formerly Pearson Government Solutions Business)
Condensed Consolidated Statements of Owner’s/Stockholder’s Equity and
Comprehensive Income (Loss)
(in thousands, except share amounts)



                                                              Accumulated
                           Common Stock          Additional      Other
                    ---------------------------   Paid-in    Comprehensive
                       Shares        Amount       Capital    (Loss) Income
                    ------------- ------------- ------------- ------------
(Predecessor
 Entity)
Balance, December
 31, 2005                      -- $          -- $          -- $     (4,930)
  Foreign currency
   translation
   adjustment                  --            --            --         (572)
  Net loss
  Total
   comprehensive
   loss
  Equity transfers
   and investment              --            --            --           --
                    ------------- ------------- ------------- ------------

Balance, December
 31, 2006                      --            --            --       (5,502)
  Foreign currency
   translation
   adjustment                  --            --            --         (166)
  Net loss                     --            --            --           --
  Total
   comprehensive
   loss
  Equity transfers
   and investment              --            --            --           --
                    ------------- ------------- ------------- ------------
Balance, February
 14, 2007                      -- $          -- $          -- $     (5,668)
                    ============= ============= ============= ============

                    ------------- ------------- ------------- ------------

(Successor Entity)
Balance, February
 15, 2007                      -- $          -- $          -- $         --
  Effect of hedging
   activities                  --            --            --       (3,362)
  Foreign currency
   translation
   adjustment                  --            --            --          425
  Net loss                     --            --            --           --
  Total
   comprehensive
   loss
  Issuance of
   common stock               100            --       203,466           --
  Equity-based
   compensation                                           909
  Investment from
   parent                                                 900
                    ------------- ------------- ------------- ------------
Balance, December
 31, 2007                     100 $          -- $     205,275 $     (2,937)
                    ============= ============= ============= ============



                    Intercompany                Total Owners'/
                    Investment in  Accumulated  Stockholders'
                     Subsidiary      Deficit       Equity
                    ------------- ------------- ------------
(Predecessor
 Entity)
Balance, December
 31, 2005           $     496,213 $          -- $    491,283
  Foreign currency
   translation
   adjustment                  --            --         (572)
  Net loss                 28,615                     28,615
                                                ------------
  Total
   comprehensive
   loss                                               28,043
  Equity transfers
   and investment           9,758            --        9,758
                    ------------- ------------- ------------

Balance, December
 31, 2006                 534,586            --      529,084
  Foreign currency
   translation
   adjustment                  --            --         (166)
  Net loss                  (375)            --         (375)
                                                ------------
  Total
   comprehensive
   loss                                                 (541)
  Equity transfers
   and investment          13,310            --       13,310
                    ------------- ------------- ------------
Balance, February
 14, 2007           $     547,521 $          -- $    541,853
                    ============= ============= ============

                    ------------- ------------- ------------

(Successor Entity)
Balance, February
 15, 2007           $          -- $          -- $         --
  Effect of hedging
   activities                  --            --       (3,362)
  Foreign currency
   translation
   adjustment                  --            --          425
  Net loss                     --      (22,049)      (22,049)
                                                ------------
  Total
   comprehensive
   loss                                              (24,986)
  Issuance of
   common stock                --            --      203,466
  Equity-based
   compensation                                          909
  Investment from
   parent                                                900
                    ------------- ------------- ------------
Balance, December
 31, 2007           $          -- $    (22,049) $    180,289
                    ============= ============= ============



Vangent, Inc. (formerly Pearson Government Solutions Business)
Condensed Consolidated Statements of Cash Flows
(in thousands)
                                                             Successor
                                       Predecessor Entity      Entity
                                     ----------------------- -----------
                                         Year      Period      Period
                                        Ended    Jan 1, 2007 Feb 15, 2007
                                        Dec 31,      to          to
                                         2006   Feb 14, 2007 Dec 31, 2007
                                     ----------- ----------- -----------
Cash flows from operating activities
  Net income (loss)                  $    28,615 $      (375)$   (22,049)
  Adjustments to reconcile net
   income (loss) to net cash
   provided by (used in) operating
   activities
    Depreciation and amortization         14,557       2,369      29,525
    Equity-based compensation              1,075       1,477         909
    Loss on disposal of property and
    equipment                             1,587           7          --
    Deferred income taxes                    632         (19)      4,952
  Changes in operating assets and
   liabilities, net of effect of
   acquisition:
    Accounts receivable                   18,970     (16,445)      1,589
    Prepaid and other assets                 508         343      (7,779)
    Accounts payable                     (37,062)     (4,508)     12,462
    Accrued expenses and accrued
     interest                                799        (664)     10,989
    Advance payments on contracts        (15,632)     (1,206)     (3,140)
    Other assets                            (496)         --       1,960
    Other long-term liabilities              825         125       1,429
                                     ----------- ----------- -----------

  Net cash provided by (used in)
   operating activities                   14,378     (18,896)     30,847
                                     ----------- ----------- -----------

Cash flows from investing activities
  Acquisition, net of cash acquired       (8,092)         --    (615,206)
  Capital expenditures                    (7,793)     (3,727)     (7,406)
                                     ----------- ----------- -----------

Net cash used in investing
 activities                              (15,885)     (3,727)   (622,612)
                                     ----------- ----------- -----------

Cash flows from financing activities
  Proceeds from issuance of common
   stock                                      --          --     203,466
  Borrowings under revolving credit
   facility                                   --          --      15,000
  Repayment of borrowings under
   revolving credit facility                  --          --     (15,000)
  Proceeds from issuance of senior
   secured term loan                          --          --     240,000
  Repayment of senior secured term
   loan                                       --          --      (1,800)
  Proceeds from issuance of senior
   subordinated notes                         --          --     190,000
  Debt financing costs                        --          --     (14,998)
  Excess tax benefit from
   equity-based compensation                 322          --          --
  Investment from parent                  10,019      13,310         900
  Capital lease payments                  (1,231)        (39)       (265)
                                     ----------- ----------- -----------
  Net cash provided by financing
   activities                              9,110      13,271     617,803
                                     ----------- ----------- -----------
  Effect of exchange rate changes on
   cash and cash equivalents              (2,228)       (166)         55
                                     ----------- ----------- -----------
Net increase (decrease) in cash and
 cash equivalents                          5,375      (9,518)     26,093
Cash and cash equivalents, beginning
 of period                                 6,338      11,713          --
                                     ----------- ----------- -----------
Cash and cash equivalents, end of
 period                              $    11,713 $     2,195 $    26,093
                                     =========== =========== ===========


Vangent, Inc. (formerly Pearson Government Solutions Business)
Reconciliation of GAAP to Non-GAAP Measures
(in thousands)
                                              Three months   Twelve months
                                                  ended          ended
                                              December 31,   December 31,
                                                  2007           2007
                                              -------------  -------------
Net loss                                      $      (1,996) $     (22,424)
Income tax expense                                    1,995          6,205
Interest, net                                         9,352         33,432
Depreciation and amortization                         8,771         31,894
                                              -------------  -------------
EBITDA                                        $      18,122  $      49,107
                                              =============  =============

Stock based compensation expense                          -          1,477
Loss on disposal of property and equipment                -              7
TSA adjustment                                           84          1,328
Net Transition Costs                                  6,038         18,402
Management fee                                          101            914
                                              -------------  -------------
Adjusted EBITDA                               $      24,345  $      71,235
                                              =============  =============

CMS contract normalization adjustment                     -          5,817
TSA adjustment                                          109             94
                                              -------------  -------------
Credit adjusted EBITDA                        $      24,454  $      77,146
                                              =============  =============

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