SOURCE: Vangent

March 23, 2011 10:54 ET

Vangent, Inc. Announces Fourth Quarter and Full Year 2010 Financial Results

ARLINGTON, VA--(Marketwire - March 23, 2011) -


Full Year 2010 Highlights
-- Revenue Increased 30% Over 2009 to $761.8 Million
-- Operating Income Grew to $51.9 Million and Adjusted EBITDA Grew 36% to
   $95.1 Million

Fourth Quarter 2010 Highlights
--  Revenue Increased 2% to $176.4 Million
--  Operating Income Grew to $4.6 Million and Adjusted EBITDA Increased 9%
    to $21.3 Million

Vangent, Inc., a leading global provider of information management and strategic business process services, today announced results for the fourth quarter and year ended December 31, 2010.

Full Year 2010 Results and Highlights

Total revenue from continuing operations for the year ended December 31, 2010 was $761.8 million, an increase of $177.9 million or 30% over the prior year.

Revenue growth for the full year 2010 was primarily attributable to Vangent's work on the U.S. Census contract, the acquisition of Buccaneer Computer Systems and Services, Inc. and contracts with the U.S. Department of Education, which are reflected in the Government Group results, plus the ramp-up of a contract in the International Group.

Operating income for the year ended December 31, 2010 increased 117% to $51.9 million compared to $23.9 million in the prior year. The strong growth in operating income was primarily due to increased revenue from Vangent's contracts with the U.S. Census and the U.S. Department of Education as well as the acquisition of Buccaneer.

Vangent reported net income of $40.0 million for the year ended December 31, 2010 compared to a net loss of $34.0 million in the prior year. The change is primarily due to the strong year-over-year operating income results and the reversal in the fourth quarter of 2010 of a tax valuation allowance related to deferred tax assets.

Adjusted EBITDA increased 36% to $95.1 million for the full year ended December 31, 2010 compared to $70.1 million for 2009. The increase in Adjusted EBITDA was primarily attributable to the increase in operating income.

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 $1.9 billion at December 31, 2010. Vangent's funded backlog, the portion for which funding has been authorized, totaled $416.3 million.

Total debt as of December 31, 2010 was $406.8 million. During the fourth quarter of 2010, Vangent repaid the $16 million in borrowings drawn on the credit facility for the acquisition of Buccaneer. Cash and cash equivalents were $27.2 million at December 31, 2010. Net cash provided by operating activities for continuing operations was $72.8 million for the year ended December 31, 2010, an increase of $23.4 million compared to the prior year due to cash flows from the 2010 U.S. Census contract. Vangent's total liquidity, which includes $49.8 million available under its credit facility, was $77.0 million.

Fourth Quarter 2010 Results and Highlights

Total revenue from continuing operations for the three months ended December 31, 2010 was $176.4 million, an increase of $3.9 million or 2% compared to $172.5 million in the fourth quarter of 2009. The increase in total revenue was primarily attributable to Vangent's acquisition of Buccaneer in the third quarter of 2010 which offset lower revenue on the U.S. Census contract.

Operating income for the three months ended December 31, 2010 was $4.6 million compared to a net loss of $0.3 million for the same period in 2009. Impairment charges for goodwill and intangible assets were lower for 2010 compared to 2009.

Net income for the three months ended December 31, 2010 was $38.5 million compared to a net loss of $23.6 million in the same period in 2009. The increase in net income for the fourth quarter of 2010 primarily resulted from a tax benefit from continuing operations of $37.1 million which reflects the reversal of a previously established valuation allowance for deferred tax assets as well as the improved operating results.

Adjusted EBITDA increased $1.8 million to $21.3 million for the fourth quarter of 2010, compared to $19.4 million for the fourth quarter of 2009. The increase in Adjusted EBITDA was primarily attributable to the Buccaneer acquisition.

"This was a pivotal year for Vangent. The acquisition of Buccaneer has gone extremely well. Our successful execution of the U.S. Census contract, combined with stellar operations and superior delivery across the organization, contributed to the best year on record for customer satisfaction and results," stated Mac Curtis, President and CEO of Vangent. "We ended 2010 with strong top and bottom line performance and a solid working capital and cash management position, paving the way for another successful year when our government customers need Vangent more than ever. With our long track record of helping the government reduce costs and improve efficiencies, we are excited about opportunities that are top of mind with the U.S. Congress such as fraud detection and prevention, data center consolidation and other cost-saving initiatives that drive pay-for-performance in health care."

Discontinued Operations

As previously reported, 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 have been revised for all periods presented to report Vangent's Latin American business as discontinued operations.

In 2010, Vangent completed the sales of its operations in Mexico and Argentina. Vangent completed the sale of its operations in Venezuela in February 2011.

Fourth Quarter and Full Year 2010 Financial Results Conference Call

The conference call will take place on March 23, 2011 at 4:30 pm ET. Interested parties may call (888) 329-8889 and request the "Vangent Fourth Quarter and Full Year 2010 Financial Results Conference Call," conference ID # 1638322.

Audio Replay

A replay of the earnings call can be heard after 7:30 p.m. on March 23, 2011 until April 6, 2011. To hear the replay, dial (888) 203-1112 and enter the same conference ID # 1638322.

Vangent's fourth quarter and full year 2010 financial statements including its annual report on Form 10K will be made available on the company's website at www.vangent.com in connection with Vangent Fourth Quarter and Full Year 2010 Financial Results Conference Call.

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, State, Labor 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
(in thousands)


                                  (Unaudited)
                              Three Months Ended         Years  Ended
                                 December 31,            December 31,
                            ----------------------  ----------------------
                               2010        2009        2010        2009
                            ----------  ---------   ----------  ---------
Revenue                     $  176,392  $ 172,544   $  761,841  $ 583,986
Cost of revenue                152,014    146,085      639,377    490,500
                            ----------  ---------   ----------  ---------
Gross profit                    24,378     26,459      122,464     93,486
General and administrative
 expenses                       10,462     10,874       45,354     40,387
Selling and marketing
 expenses                        4,021      4,684       19,905     18,003
Impairment of goodwill and
 indefinite-life intangible
 asset                           5,320     11,227        5,320     11,227
                            ----------  ---------   ----------  ---------
Operating income (loss)          4,575       (326)      51,885     23,869
Interest expense, net            7,839      8,903       31,140     34,289
                            ----------  ---------   ----------  ---------
Income (loss) from
 continuing operations
 before income taxes            (3,264)    (9,229)      20,745    (10,420)
Provision (benefit) for
 income taxes                  (37,084)     1,727      (31,486)     6,794
                            ----------  ---------   ----------  ---------
Income (loss) from
 continuing operations          33,820    (10,956)      52,231    (17,214)
Income (loss) from
 discontinued operations,
 net of tax                      4,728    (12,636)     (12,228)   (16,794)
                            ----------  ---------   ----------  ---------
Net income (loss)               38,548    (23,592)      40,003    (34,008)
Net loss attributed to
 noncontrolling interest           (35)         -          (26)         -
                            ----------  ---------   ----------  ---------
Net income (loss)
 attributable to Vangent    $   38,583  $ (23,592)  $   40,029  $ (34,008)
                            ==========  =========   ==========  =========

Statements of Operations
 Data as a Percent of Revenue

Revenue                          100.0%     100.0%       100.0%     100.0%
Cost of revenue                   86.2       84.7         83.9       84.0
                            ----------  ---------   ----------  ---------
Gross profit margin               13.8       15.3         16.1       16.0
General and administrative
 expenses                          5.9        6.3          6.0        6.9
Selling and marketing
 expenses                          2.3        2.7          2.6        3.1
Impairment of goodwill and
 indefinite-life intangible
 asset                             3.0        6.5          0.7        1.9
                            ----------  ---------   ----------  ---------
Operating income margin            2.6       (0.2)         6.8        4.1
Interest expense and other,
 net                               4.5        5.1          4.1        5.9
                            ----------  ---------   ----------  ---------
Income (loss) before income
 taxes                            (1.9)      (5.3)         2.7       (1.8)
Provision (benefit) for
 income taxes                    (21.1)       1.0         (4.2)       1.1
                            ----------  ---------   ----------  ---------
Income (loss) from
 continuing operations            19.2       (6.3)         6.9       (2.9)
Income (loss) from
 discontinued operations,
 net of tax                        2.7       (7.4)        (1.6)      (2.9)
                            ----------  ---------   ----------  ---------
Net income (loss)                 21.9      (13.7)         5.3       (5.8)
Net loss attributed to
 noncontrolling interest             -          -            -          -
                            ----------  ---------   ----------  ---------
Net income (loss)
 attributable to Vangent          21.9%     (13.7)%        5.3%      (5.8)%
                            ==========  =========   ==========  =========




Vangent, Inc.
Condensed Consolidated Balance Sheets
(in thousands)
                                                       December 31,
                                                ---------------------------
                                                    2010          2009
                                                ------------- -------------
Assets
Current assets:
  Cash and cash equivalents                     $      27,194 $      44,638
  Trade receivables, net                              122,940       109,846
  Prepaid expenses and other assets                    12,572        10,353
  Assets of discontinued operations                       329        15,036
                                                ------------- -------------
    Total current assets                              163,035       179,873

Property and equipment, net                            28,031        25,124
Intangible assets, net                                150,847       151,860
Goodwill                                              297,076       268,212
Deferred tax asset                                     21,923             -
Deferred debt financing costs and other                 8,823         8,433
Assets of discontinued operations                           -         6,727
                                                ------------- -------------
    Total assets                                $     669,735 $     640,229
                                                ============= =============

Liabilities and Equity
Current liabilities:
  Current portion of long-term debt             $       1,401 $      13,534
  Accounts payable and accrued liabilities             80,672        64,849
  Accrued interest payable                              7,781         8,186
  Deferred tax liability                                    -         5,628
  Deferred revenue                                      7,964         3,976
  Liabilities of discontinued operations                1,880         7,521
                                                ------------- -------------
    Total current liabilities                          99,698       103,694

Long-term debt, net of current portion                405,353       406,832
Other long-term liabilities                             5,453         7,194
Deferred tax liability                                  1,860        12,144
Liabilities of discontinued operations                      -           502
                                                ------------- -------------
    Total liabilities                                 512,364       530,366
                                                ------------- -------------

Total equity                                          157,371       109,863
                                                ------------- -------------
    Total liabilities and equity                $     669,735 $     640,229
                                                ============= =============




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

                                                        Years Ended
                                                       December 31,
                                                --------------------------
                                                    2010          2009
                                                ------------  ------------
Cash flows from operating activities
Net income (loss)                               $     40,003  $    (34,008)
Loss from discontinued operations, net of tax        (12,228)      (16,794)
                                                ------------  ------------
Income (loss) from continuing operations              52,231       (17,214)
Depreciation and amortization                         34,798        31,883
Deferred income taxes                                (32,591)        5,822
Impairment of goodwill and indefinite-life
 intangible asset                                      5,320        11,227
Other non-cash charges                                 3,398         3,208
Net changes in operating assets and
 liabilities, excluding effect of acquisition:
    Trade receivables                                  5,177        14,401
    Prepaid expenses and other assets                   (338)        2,852
    Accounts payable and other liabilities             4,788        (2,751)
                                                ------------  ------------
Continuing operations, net                            72,783        49,428
Discontinued operations, net                          (1,892)       (9,041)
                                                ------------  ------------
Net cash provided by operating activities             70,891        40,387
                                                ------------  ------------

Cash flows from investing activities
Acquisition, net of cash acquired                    (60,153)            -
Capital expenditures                                 (12,449)      (10,682)
                                                ------------  ------------
Continuing operations, net                           (72,602)      (10,682)
Discontinued operations, net                            (516)       (5,101)
                                                ------------  ------------
Net cash used in investing activities                (73,118)      (15,783)
                                                ------------  ------------

Cash flows from financing activities
Repayment of senior secured term loan                (13,612)            -
Deferred debt financing costs and other               (2,192)         (188)
                                                ------------  ------------
Net cash used in financing activities,
 continuing operations                               (15,804)         (188)
Effect of exchange rate changes on cash and
 cash equivalents                                        (38)           34
                                                ------------  ------------
Net increase (decrease) in cash and cash
 equivalents                                         (18,069)       24,450
Total cash and cash equivalents, beginning of
 year                                                 45,584        21,134
                                                ------------  ------------
Total cash and cash equivalents, end of year          27,515        45,584
Less: Cash and cash equivalents, discontinued
 operations                                              321           946
                                                ------------  ------------
Cash and cash equivalents, continuing
 operations                                     $     27,194  $     44,638
                                                ============  ============





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

                                 Three Months Ended       Years Ended
                                    December 31,          December 31,
                                --------------------  --------------------
                                  2010       2009       2010       2009
                                ---------  ---------  ---------  ---------

Net income (loss)               $  38,548  $ (23,593) $  40,003  $ (34,008)
Provision (benefit) for income
 taxes                            (37,084)     1,727    (31,486)     6,794
Interest expense, net of
 interest income                    7,885      8,895     31,246     34,281
Depreciation and amortization      10,095      8,051     34,798     31,883
                                ---------  ---------  ---------  ---------
   EBITDA                          19,444     (4,920)    74,561     38,950
(Income) loss from discontinued
 operations, net of tax            (4,728)    12,637     12,228     16,794
Impairment of goodwill and
 indefinite-life intangible asset   5,320     11,227      5,320     11,227
Equity-based compensation
 expense                              145        273        896      1,048
Management fee and expenses           298        315      1,278      1,289
Other                                 785        (84)       789        810
                                ---------  ---------  ---------  ---------
Adjusted EBITDA, excluding pro
 forma results of
 acquisition                    $  21,264  $  19,448  $  95,072  $  70,118
                                =========  =========  =========  =========

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 $6,574 for the year ended December 31, 2010, resulting in Adjusted EBITDA, including the pro forma results of Buccaneer, of $101,646 for the year ended December 31, 2010.

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