SOURCE: Vangent

Vangent

May 17, 2011 13:06 ET

Vangent, Inc. Announces First Quarter 2011 Financial Results

ARLINGTON, VA--(Marketwire - May 17, 2011) -


-- Non-Census Revenue Grew 22% Over First Quarter of 2010

-- Cash Increased $18.9 Million since December 31, 2010 Due to Increased
   Cash Flow from Operations

-- New Business Bookings Totaled $108.9 Million in First Quarter of 2011

Vangent, Inc., a leading global provider of information management and strategic business process services, today announced its first fiscal quarter 2011 financial results.

First Quarter 2011 Results

Vangent reported revenue from continuing operations of $175.8 million for the quarter ended April 2, 2011, a decrease of $18.3 million or 9% compared to $194.2 million in the year ago period. The decrease is primarily attributable to the completion of the U.S. 2010 Census contract which contributed $50.0 million in revenue for the first quarter of 2010. Adjusting for the U.S. 2010 Census contract, revenue increased 22% in the quarter ended April 2, 2011 compared to the prior year period, driven by an increase of $32.1 million in revenue from the acquisition of Buccaneer.

Operating income was $13.4 million for the three months ended April 2, 2011 compared to $18.1 million in the year ago period. The decrease in operating income was primarily due to the completion of the U.S. 2010 Census contract.

Vangent reported net income of $2.1 million for the three months ended April 2, 2011, a decrease of $3.5 million compared to the prior year period. The decrease in net income is attributable to the completion of the U.S. 2010 Census contract plus a $1.6 million tax charge in the first quarter of 2011 increasing the Company's tax provision related to the expiration of the Company's interest rate hedge.

Adjusted EBITDA was $23.9 million for the first quarter of 2011, compared with $27.0 million for the prior year period. The decrease in Adjusted EBITDA was primarily attributable to the completion of the U.S. 2010 Census contract.

First Quarter 2011 Contract Awards and Backlog

Vangent booked $108.9 million in new backlog in the first quarter of 2011. Key wins in the first quarter of 2011 include a $95 million, two-year contract in the Human Capital Group to modernize the learning and training infrastructure for the U.S. Army. In addition, Vangent won a $3.6 million contract with the Military Health System to enhance www.afterdeployment.org, a government website that provides behavioral health and wellness resources to the military community. Vangent also won a prime position on the ITSS-4 IDIQ vehicle with Department of Justice, a new customer, which gives Vangent an opportunity to bid on over $1 billion in IT systems and services business over the next seven years.

Vangent's total contract backlog, which is the amount of revenue the Company expects to realize over the remaining term of the contracts, including the base period and all option years, totaled $1.8 billion at April 2, 2011. Vangent's funded backlog, the portion for which funding has been authorized, totaled $428.6 million at April 2, 2011.

"We got off to a strong start in 2011 winning a $95 million contract with the U.S. Army as well as continued growth in our Military Health System portfolio," stated Mac Curtis, President and Chief Executive Officer of Vangent. "Adjusting for the U.S. 2010 Census contract, quarter-over-quarter revenue grew 22% and Adjusted EBITDA increased 11%. The acquisition of Buccaneer -- which continues to exceed our expectations -- combined with our strong performance on a major government contract in the U.K. and our recent win with the U.S. Army, positions the company well for another solid year."

Liquidity, Cash Flow and Balance Sheet Information

Total long-term debt at April 2, 2011 was $405.4 million which reflects a principal reduction of $1.4 million made during the first quarter of 2011. Cash and cash equivalents were $46.4 million at the end of the first quarter of 2011, an increase of $18.9 million compared to December 31, 2010. Net cash provided by operating activities was $21.9 million for the three months ended April 2, 2011, an increase of $40.9 million compared to the prior year period. The increase in net cash was primarily due to the completion of the U.S. Census contract which had significant working capital requirements. Vangent's total liquidity, which includes $49.8 million available under its revolving credit facility, was $96.2 million.

Discontinued Operations

In the fourth quarter of 2009, Vangent completed an evaluation of its international business and committed to a plan to sell its business operations in Latin America. The consolidated financial statements report our Latin American business as discontinued operations. In 2010, Vangent completed the sales of its operations in Mexico and Argentina. In February 2011, Vangent completed the sale of its operations in Venezuela.

Q1 2011 Financial Results Conference Call

The conference call will take place on Thursday, May 19, 2011 at 5:00 pm ET. Interested parties may call (877) 627-6580 and request the "Vangent First Quarter 2011 Financial Results Conference Call," conference ID #1920963.

Audio Replay

A replay of the earnings call can be heard after 9:00 a.m. on May 20, 2011 until June 2, 2011. To hear the replay, dial (888) 203-1112 and enter the same conference ID # 1920963.

Vangent's first quarter 2011 financial statements including its Quarterly Report on Form 10-Q will be made available on the company's website at www.vangent.com prior to the Vangent Q1 2011 Financial Results Conference Call on May 19, 2011 at 5 pm.

About Vangent, Inc.

With more than 7,000 employees worldwide, Vangent, Inc. is a global provider of consulting, systems integration, human capital management and strategic business process 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, Labor, State and Veterans Affairs; U.S. Census Bureau and the U.S. Office of Personnel Management, as well as Fortune 500 companies.

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.
Condensed Consolidated Statements of Operations (Unaudited)
(in thousands)

                                                       Three Months Ended
                                                      --------------------
                                                       April 2,   April 3,
                                                         2011       2010
                                                      ---------  ---------
Revenue                                               $ 175,849  $ 194,197
Cost of revenue                                         145,192    158,226
                                                      ---------  ---------
Gross profit                                             30,657     35,971
General and adminstrative expenses                       12,149     12,190
Selling and marketing expenses                            5,138      5,675
                                                      ---------  ---------
Operating income                                         13,370     18,106
Interest expense, net                                     7,491      8,236
                                                      ---------  ---------
Income from continuing operations, before income
 taxes                                                    5,879      9,870
Provision for income taxes                                3,730      1,834
                                                      ---------  ---------
Income from continuing operations                         2,149      8,036
Loss from discontinued operations, net of tax               (12)    (2,437)
                                                      ---------  ---------
Net income                                                2,137      5,599
Net loss attributed to noncontrolling interest               (8)         -
                                                      ---------  ---------
Net income attributable to Vangent                    $   2,145  $   5,599
                                                      =========  =========

Statements of Operations Data as a Percent of Revenue
Revenue                                                   100.0%     100.0%
Cost of revenue                                            82.6       81.5
                                                      ---------  ---------
Gross profit margin                                        17.4       18.5
General and administrative expenses                         6.9        6.3
Selling and marketing expenses                              2.9        2.9
                                                      ---------  ---------
Operating income margin                                     7.6        9.3
Interest expense, net                                       4.3        4.2
                                                      ---------  ---------

Income from continuing operations, before income taxes      3.3        5.1
Provision for income taxes                                  2.1        0.9
                                                      ---------  ---------
Income from continuing operations                           1.2        4.2
Loss from discontinued operations, net of tax                 -       (1.3)
                                                      ---------  ---------
Net income                                                  1.2        2.9
Net loss attributed to noncontrolling interest                -          -
                                                      ---------  ---------
Net income attributable to Vangent                          1.2%       2.9%
                                                      =========  =========




Vangent, Inc.
Condensed Consolidated Balance Sheets (Unaudited)
(in thousands)

                                                         April 2,  December
                                                           2011    31, 2010
                                                        --------- ---------
Assets
Current assets:
  Cash and cash equivalents                             $  46,438 $  27,194
  Trade receivables, net                                  110,010   122,940
  Prepaid expenses and other assets                        13,467    12,572
  Assets of discontinued operations                             -       329
                                                        --------- ---------
    Total current assets                                  169,915   163,035

Property and equipment, net                                26,581    28,031
Goodwill and intangible assets, net                       441,741   447,923
Deferred tax asset                                         19,977    21,923
Deferred debt financing costs and other                     8,113     8,823
                                                        --------- ---------
    Total assets                                        $ 666,327 $ 669,735
                                                        ========= =========

Liabilities and Equity
Current liabilities:
  Current portion of long-term debt                     $       - $   1,401
  Accounts payable and accrued liabilities                 76,761    80,672
  Accrued interest payable                                  2,803     7,781
  Deferred revenue                                         10,389     7,964
  Liabilities of discontinued operations                        -     1,880
                                                        --------- ---------
    Total current liabilities                              89,953    99,698

Long-term debt, net of current portion                    405,353   405,353
Other long-term liabilities                                 4,961     5,453
Deferred tax liability                                      1,901     1,860
                                                        --------- ---------
    Total liabilities                                     502,168   512,364
                                                        --------- ---------
Total equity                                              164,159   157,371
                                                        --------- ---------
    Total liabilities and equity                        $ 666,327 $ 669,735
                                                        ========= =========



Vangent, Inc.
Condensed Consolidated Statements of Cash Flows (Unaudited)
(in thousands)

                                                        Three Months Ended
                                                        ------------------
                                                        April 2,  April 3,
                                                          2011      2010
                                                        --------  --------
Cash flows from operating activities
Net income                                              $  2,137  $  5,599
Loss from discontinued operations, net of tax                (12)   (2,437)
                                                        --------  --------
Income from continuing operations                          2,149     8,036
Depreciation and amortization                              9,842     8,357
Deferred income taxes                                      3,344     1,656
Other non-cash charges                                       915       825
Net changes in operating assets and liabilities:
    Trade receivables                                     13,317   (32,066)
    Prepaid expenses and other assets                        (62)   (3,538)
    Accounts payable and other liabilities                (9,993)   (1,635)
    Deferred revenue                                       2,425     1,352
                                                        --------  --------
Continuing operations, net                                21,937   (17,013)
Discontinued operations, net                                 (87)   (1,994)
                                                        --------  --------
Net cash provided by (used in) operating activities       21,850   (19,007)
                                                        --------  --------

Cash flows from investing activities
Capital expenditures of continuing operations             (1,896)   (1,304)
Discontinued operations, net                                 118      (123)
                                                        --------  --------
Net cash used in investing activities                     (1,778)   (1,427)
                                                        --------  --------

Cash flows from financing activities
Repayment of senior secured term loan                     (1,401)  (13,612)
Other                                                          -       (29)
                                                        --------  --------
Net cash used in financing activities, continuing
 operations                                               (1,401)  (13,641)
Effect of exchange rate changes on cash and cash
 equivalents                                                 252      (146)
                                                        --------  --------
Net increase (decrease) in cash and cash equivalents      18,923   (34,221)
Total cash and cash equivalents, beginning of period      27,515    45,584
                                                        --------  --------
Total cash and cash equivalents, end of period            46,438    11,363
Less: Cash and cash equivalents, discontinued
 operations                                                    -       645
                                                        --------  --------
Cash and cash equivalents, continuing operations        $ 46,438  $ 10,718
                                                        ========  ========




Vangent, Inc.
Reconciliation of GAAP to Non-GAAP Measures (Unaudited)
(in thousands)

                                    Three Months Ended Twelve Months Ended
                                    ------------------  ------------------
                                     April 2, April 3,  April 2,  April 3,
                                       2011     2010      2011      2010
                                    --------- --------  --------  --------

Net income (loss)                   $   2,137 $  5,599  $ 36,567  $(29,373)
Provision (benefit) for income
 taxes                                  3,730    1,834   (29,590)    6,884
Interest expense, net of interest
 income                                 7,370    8,270    30,345    34,254
Depreciation and amortization           9,842    8,357    36,283    32,127
                                    --------- --------  --------  --------
  EBITDA                               23,079   24,060    73,605    43,892
Loss from discontinued operations,
 net of tax                                12    2,437     9,803    18,616
Impairment of goodwill and
 indefinite-life intangible asset           -        -     5,320    11,227
Equity-based compensation expense         201      262       836     1,064
Management fee and expenses               292      265     1,305     1,186
Other                                     275      (12)    1,075       455
                                    --------- --------  --------  --------
Adjusted EBITDA, excluding pro
 forma results of acquisition       $  23,859 $ 27,012  $ 91,944  $ 76,440
                                    ========= ========  ========  ========

EBITDA is defined as net income (loss) before interest, income taxes, and depreciation and amortization. Management uses this measure as an indicator of operating performance. EBITDA is not an indicator of financial performance under U.S. generally accepted accounting principles ("GAAP") or a measure of liquidity and may not be comparable to similarly captioned information reported by other companies. In addition, it should not be considered as an alternative to, or more meaningful than, income (loss) before income taxes, cash flows from operating activities, or other traditional indicators of operating performance.

Adjusted EBITDA is a financial measure used to calculate the consolidated leverage ratio, one of the more restrictive financial covenants under the senior secured credit facility. Adjusted EBITDA, as defined in the senior secured credit facility, excludes (i) discontinued operations, (ii) impairment charges, (iii) equity-based compensation expense, (iv) management fee and expenses paid to Veritas Capital, and (v) other items as defined in the senior secured credit facility, including an adjustment to include the pre-acquisition EBITDA results of the acquired company for the calculation of the consolidated leverage ratio. The adjustment to EBITDA for the pre-acquisition results of Buccaneer was $3,293 for the twelve months ended April 2, 2011, resulting in Adjusted EBITDA, including the pro forma results of Buccaneer, of $95,237 for the twelve months ended April 2, 2011.

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