Engility Reports Fourth Quarter and Full Year 2012 Results; Establishes 2013 Guidance

  Engility Reports Fourth Quarter and Full Year 2012 Results; Establishes 2013
  Guidance

  *Fourth quarter 2012 revenue of $396 million and adjusted diluted EPS of
    $0.77 exceeds guidance
  *Fiscal year 2012 revenue of $1.66 billion and adjusted diluted EPS of
    $4.06 exceeds guidance
  *Fourth quarter funded orders of $461 million and funded backlog of $856
    million increase from prior quarter
  *Fourth quarter book-to-bill ratio of 1.2
  *Cost reduction initiatives completed ahead of schedule

Business Wire

CHANTILLY, Va. -- March 12, 2013

Engility Holdings, Inc. (NYSE: EGL), a global provider of technical and
professional services for the U.S. Government, today announced financial
results for the fourth quarter and full year ended December 31, 2012.

Fourth Quarter 2012 Results

Total revenue for the fourth quarter was $396 million and operating income for
the quarter was $27 million. Adjusted operating income for the fourth quarter
was $28 million. Net income attributable to Engility was $41 million, or $2.38
per diluted share. Adjusted net income was $13 million, or $0.77 per diluted
share. Information about Engility’s use of non-GAAP financial information is
provided below under “Non-GAAP Measures.”

“Our fourth quarter was very solid, as we exceeded our internal top and bottom
line targets and won key IDIQ awards that will provide opportunities for 2013
and beyond,” said Tony Smeraglinolo, President and CEO of Engility. “These
achievements reflect the strength of our business model and validate that
Engility is well positioned to meet the challenges of today’s budget
constrained environment. During the fourth quarter, we also completed our
significant cost reduction initiatives ahead of schedule. This, along with the
organizational realignment we implemented on January 1^st, enhances our
competitive position in the market.”

“The federal government market remains challenging given current budget
uncertainties. Nevertheless, our long-standing success in supporting our
customers’ missions, combined with our enhanced operating efficiencies and
disruptive pricing model is differentiating us from our competition. These
characteristics also are enabling us to provide the mission critical services
our customers require at prices that can ease their budget constraints. As we
enter fiscal year 2013, we will remain focused on our pure-play services
strategy and leveraging our strong current pipeline of opportunities to
further increase shareholder value.”

Key Performance Indicators

  *Funded backlog as of December 31, 2012 was $856 million, compared to $788
    million as of the end of the September 2012 quarter.
  *Contract funded orders in the fourth quarter of 2012 were $461 million,
    representing a book-to-bill ratio of 1.2.
  *Contract funded orders for the full year 2012 were $1.7 billion,
    representing a book-to-bill ratio of 1.0.
  *Days sales outstanding at the end of the 2012 fourth quarter were 84 days,
    compared to 82 days at the end of the September 2012 quarter.

Significant Fourth Quarter 2012 Awards

Key indefinite delivery/indefinite quantity (IDIQ) awards won during the
fourth quarter of 2012, which highlight the breadth of our value-added service
offerings, include:

  *A prime position on a $900 million multiple-award IDIQ contract for new
    work to provide Production, Installation, and In-Service Support (PII)
    services to the Space and Naval Warfare Systems Center (SPAWARSYSCEN)
    Atlantic, Charleston, SC. Under this five year contract, we will provide a
    wide array of services, including design, acquisition, production,
    integration, testing, installation, lifecycle support, and configuration
    management of certified Command, Control, Communications, Computers,
    Combat Systems, Intelligence, Surveillance, and Reconnaissance (C5ISR)
    capabilities.
  *A prime position on a $750 million multiple-award IDIQ contract for new
    work to support the Space and Naval Warfare Systems Center (SPAWARSYSCEN)
    Atlantic, Charleston, S.C. Under this five year contract, we will provide
    Command, Control, Communications, Computers, Intelligence, Surveillance
    and Reconnaissance (C4ISR) and Information Technical (IT) expertise in
    support of customers in Charleston, central Europe and other locations
    outside the continental United States.
  *A prime position on a $350 million multiple-award IDIQ contract for the
    U.S. Agency for International Development’s (USAID) Clean Energy contract
    for Non-Critical Priority Countries. Under this five year contract, we
    will provide a range of critical activities, from energy sector reform to
    increasing human resource capacity related to energy services and
    fostering private sector participation and investment. This new work
    represents an expansion of energy support services that our highly skilled
    team of professionals has been providing on USAID’s behalf for the past 34
    years; and
  *A prime position on four domain areas of a multi-million dollar contract
    to support the Joint Program Executive Office for Chemical and Biological
    Defense (JPEO-CBD). The potential value of this six-domain IDIQ five year
    contract is $495 million. For this new work award, we were selected to
    provide services in the fields of engineering and technical support,
    business and analytical assistance, information technology and logistics.

Fiscal Year 2012 Results

For fiscal year 2012, the Company reported total revenue of $1.66 billion and
a GAAP operating loss of $329 million. Fiscal year 2012 adjusted operating
income was $129 million, which excludes a total of $458 million before tax in
spin-off related transaction costs, realignment costs, legal and settlement
costs, and a non-cash goodwill impairment charge. GAAP net loss attributable
to Engility was $350 million, or $21.52 per diluted share. Excluding the above
charges, adjusted net income attributable to Engility was $67 million, or
$4.06 per diluted share. We exceeded the revenue and adjusted diluted earnings
per share guidance we issued on November 13, 2012, primarily as a result of
stronger than expected revenue, lower overall costs, and a lower than
anticipated share count. Information about Engility’s use of non-GAAP
financial information is provided below under “Non-GAAP Measures.”

2013 Outlook

Our guidance for fiscal year 2013 does not reflect the potential impact of
sequestration since it remains uncertain how the current mandated budget cuts
may be implemented. However, our guidance does reflect the challenging
environment we have experienced over the last several months leading up to the
March 1, 2013 sequester deadline. The table below summarizes our fiscal year
2013 guidance.

                          
                          2013 Fiscal Year Outlook
Revenue                    $1.45 billion to $1.55 billion
GAAP Diluted EPS                  $3.25 - $3.55 *
Operating cash flow        $80 million to $100 million
                                  

* 2013 GAAP diluted EPS guidance assumes a weighted-average share count of
approximately 17.5 million shares and a full year effective tax rate of 40%.
Interest expense in 2013 is expected to be approximately $22 million,
negatively impacting diluted EPS by approximately $0.38 compared to 2012.

Discontinued Operations

The Global Security Solutions business unit, which historically had been
managed by Engility under the Professional Support Services segment, was
retained by L-3 Communications Holdings, Inc. in connection with the spin-off
and is shown as discontinued operations in Engility’s financial statements.

Non-GAAP Measures

The tables under “Engility Holdings, Inc., Reconciliation of Non-GAAP
Measures” present Adjusted Operating Income, Adjusted Operating Margin,
Earnings before Interest, Taxes, Depreciation, and Amortization (EBITDA),
Adjusted EBITDA, EBITDA Margin, Adjusted EBITDA Margin, Adjusted Net Income
and Adjusted Diluted EPS, reconciled to their most directly comparable GAAP
measure. These financial measures are calculated and presented on the basis of
methodologies other than in accordance with U.S. generally accepted accounting
principles (“Non-GAAP Measures”). Engility has provided these Non-GAAP
Measures to adjust for the impact of (i) goodwill impairment, (ii)
transaction-related-spin-off costs for the Company’s July 2012 spin-off from
L-3 Communications Holdings, Inc., (iii) severance and other costs related to
the Company’s strategic realignment announced in September 2012 and (iv) legal
settlement costs. These items have been adjusted because they are not
considered core to the Company’s business or otherwise not considered
operational or because these charges are non-cash or non-recurring. The
Company presents these Non-GAAP Measures because management believes that they
are meaningful to understanding Engility’s performance during the periods
presented and the Company’s ongoing business. Non-GAAP Measures are not
prepared in accordance with GAAP and therefore are not necessarily comparable
to the financial results of other companies. These Non-GAAP Measures should be
considered a supplement to, not a substitute for, or superior to, the
corresponding financial measures calculated in accordance with GAAP.

CONFERENCE CALL INFORMATION

Engility will host a conference call at 5 P.M. ET on Tuesday, March 12, 2013,
to discuss the financial results for the fourth quarter and full year 2012.

Listeners may access a webcast of the live conference call from the Investor
Relations section of the company's website at http://www.EngilityCorp.com.
Listeners may also access a slide presentation on the website that will be
utilized during the call. Listeners should go to the website at least 15
minutes before the live event to download and install any necessary audio
software.

Listeners may also participate in the conference call by dialing (800)
901-5231 (domestic) or (617) 786-2961 (international) and entering pass code
51672805.

Approximately two hours after the conference call, a replay will be available
on the company's website. A telephonic replay will also be available for one
year at (888) 286-8010 (domestic) or 617-801-6888 (international) and entering
pass code 11907854.

ABOUT ENGILITY CORPORATION

Engility is a “pure-play” government services contractor providing
highly-skilled personnel wherever and whenever they are needed, in a cost
effective manner. Headquartered in Chantilly, Va., Engility is a leading
provider of specialized technical consulting, program and business support
services, engineering and technology lifecycle support, information technology
modernization and sustainment, supply chain services and logistics management,
and training and education for the U.S. government with approximately 7,800
employees worldwide and sales of $1.66 billion in fiscal year 2012. To learn
more about Engility, please visit www.engilitycorp.com.

FORWARD-LOOKING STATEMENTS

This press release contains forward-looking statements within the meaning of
the Private Securities Litigation Reform Act of 1995, including statements
regarding Engility’s future prospects, projected financial results, business
plans, and our strategic realignment completed in the first quarter of 2013.
Words such as “may,” “will,” “should,” “likely,” “anticipates,” “expects,”
“intends,” “plans,” “projects,” “believes,” “estimates” and similar
expressions are also used to identify these forward-looking statements. These
statements are based on the current beliefs and expectations of Engility’s
management and are subject to significant risks and uncertainties. Actual
results may differ from those set forth in the forward-looking statements.
Factors that could cause Engility’s actual results to differ materially from
those described in the forward-looking statements can be found under the
heading “Risk Factors” in the Information Statement included in our
Registration Statement on Form 10, as amended, and Quarterly Report on Form
10-Q for the quarter ended September 28, 2012, which have been filed with the
Securities and Exchange Commission (SEC) and are available on Engility’s
website (http://www.engilitycorp.com/investor-relations.html) and on the SEC’s
website (www.sec.gov). Forward-looking statements are made only as of the date
hereof, and we undertake no obligation to update or revise the forward-looking
statements, whether as a result of new information, future events or
otherwise, except as required by law. In addition, historical information
should not be considered as an indicator of future performance.


ENGILITY HOLDINGS, INC.
UNAUDITED CONSOLIDATED AND COMBINED STATEMENTS OF OPERATIONS
(in thousands, except per share data)


                  Three Months Ended                             Twelve Months Ended
                    December        December                         December 31,      December
                    31,           31,           Change                           31,           Change
                                                                     2012
                    2012            2011                                               2011
Revenue             $ 395,684       $ 427,127       $ (31,443  )     $ 1,555,310       $ 1,903,370     $ (348,060 )
Revenue from
former               -             47,909        (47,909  )      100,034         167,411        (67,377  )
affiliated
entities
Total revenue         395,684         475,036         (79,352  )       1,655,344         2,070,781       (415,437 )
                                                                                                                  
Costs and
expenses
Cost of revenue       333,641         369,685         (36,044  )       1,315,352         1,618,421       (303,069 )
Cost of revenue
from former          -             47,909        (47,909  )      100,034         167,411        (67,377  )
affiliated
entities
Total cost of         333,641         417,594         (83,953  )       1,415,386         1,785,832       (370,446 )
revenue
                                                                                                                  
Selling,
general and           34,851          23,316          11,535           142,440           115,908         26,532
administrative
expenses
Goodwill
impairment           -             76,600        (76,600  )      426,436         76,600         349,836  
charge
Total costs and      368,492       517,510       (149,018 )      1,984,262       1,978,340      5,922    
expenses
Operating             27,192          (42,474 )       69,666           (328,918  )       92,441          (421,359 )
income (loss)
                                                                                                                  
Interest              (5,830  )       -               (5,830   )       (10,857   )       -               (10,857  )
expense
Other income         188           (36     )      224            136             148            (12      )
(expense), net
Income (loss)
from continuing
operations            21,550          (42,510 )       64,060           (339,639  )       92,589          (432,228 )
before income
taxes
                                                                                                                  
Provision
(benefit) for        (19,841 )      13,978        (33,819  )      5,156           66,562         (61,406  )
income taxes
Income (loss)
from continuing       41,391          (56,488 )       97,879           (344,795  )       26,027          (370,822 )
operations
                                                                                                                  
Income (loss)
from
discontinued          -               (759    )       759              (1,017    )       5,735           (6,752   )
operations
before income
taxes
Provision
(benefit) for        -             249           (249     )      (391      )      2,777          (3,168   )
income taxes
Income (loss)
from
discontinued         -             (1,008  )      1,008          (626      )      2,958          (3,584   )
operations, net
of tax
Net income          $ 41,391        $ (57,496 )     $ 98,887         $ (345,421  )     $ 28,985        $ (374,406 )
(loss)
                                                                                                                  
Less: Net
income
attributable to      442           96            346            4,952           3,126          1,826    
non-controlling
interest
                                                                                                                  
Net income
(loss)              $ 40,949       $ (57,592 )     $ 98,541        $ (350,373  )     $ 25,859        $ (376,232 )
attributable to
Engility
                                                                                                                  
Earnings (loss)
per share
allocable to
Engility
Holdings, Inc.
common
shareholders
Basic               $ 2.47          $ (3.57   )     $ 6.04           $ (21.52    )     $ 1.60          $ (23.12   )
Diluted             $ 2.38          $ (3.57   )     $ 5.95           $ (21.52    )     $ 1.60          $ (23.12   )
                                                                                                                  
Engility
Holdings, Inc.
weighted
average common
shares
outstanding
Basic                 16,596          16,118                           16,281            16,118
Diluted               17,228          16,118                           16,281            16,118
                                                                                                                  


ENGILITY HOLDINGS, INC.
UNAUDITED CONSOLIDATED AND COMBINED BALANCE SHEETS
(in thousands, except per share data)


                                     December 31, 2012   December 31, 2011
Assets:
Current assets:
Cash and cash equivalents                  27,021                 13,688
Receivables, net                           366,236                394,842
Other current assets                       30,658                 23,114
Income taxes                              4,174                -
Total current assets                       428,089                431,644
                                                                  
Property, plant and equipment, net         11,941                 12,629
Goodwill                                   477,604                904,040
Identifiable intangible assets,            100,929                114,035
net
Other assets                               8,887                  5,473
Assets related to discontinued            -                    35,426
operations
Total assets                           $   1,027,450        $    1,503,247
                                                                  
Liabilities and Equity:
Current liabilities:
Current portion of long-term debt      $   50,250            $    -
Accounts payable, trade                    20,725                 53,299
Accrued employment costs                   63,278                 72,541
Accrued expenses                           76,955                 73,604
Advance payments and billings in           24,855                 26,273
excess of costs incurred
Deferred income taxes, current and         10,607                 26,750
income taxes payable
Other current liabilities                 19,311               19,170
Total current liabilities                  265,981                271,637
                                                                  
Long-term debt                             284,750                -
Deferred income taxes                      -                      41,636
Income tax payable                         68,725                 58,288
Other liabilities                          19,683                 29,710
Liabilities related to                    -                    8,373
discontinued operations
Total liabilities                          639,139                409,644
                                                                  
Commitments and contingencies
                                                                  
Equity:
Preferred stock, par value $0.01
per share, 25,000 shares
authorized, none issued or                 -                      -
outstanding as of December 31,
2012 and 2011.
Common stock, par value $0.01 per
share, 175,000 shares authorized,
16,703 shares issued and
outstanding as of December 31,             168                    -
2012 and 0 shares issued and
outstanding as of December 31,
2011
Additional paid in capital                 755,638                -
Accumulated deficit                        (380,438   )           -
Prior parent company investment            -                      1,083,237
Non-controlling interest                  12,943               10,366
Total equity                               388,311                1,093,603
                                                              
Total liabilities and equity           $   1,027,450        $    1,503,247
                                                                  


ENGILITY HOLDINGS, INC.
UNAUDITED CONSOLIDATED AND COMBINED STATEMENTS OF CASH FLOWS
(in thousands)


                                     Twelve Months Ended
                                       December 31, 2012   December 31, 2011
                                                                            
Operating activities:
Net income (loss)                      $   (345,421   )      $   28,985
Less: net income (loss) from              (626       )         2,958      
discontinued operations
Income (loss) from continuing          $   (344,795   )      $   26,027
operations
                                                                            
Goodwill impairment charge                 426,436               76,600
Share-based compensation                   7,487                 -
Depreciation and amortization              18,001                22,594
Deferred income tax benefit                (63,375    )          (20,814    )
Losses on asset retirements                71                    -
Changes in operating assets and
liabilities
Receivables                                28,606                45,159
Other assets                               (193       )          7,400
Accounts payable, trade                    (32,574    )          (4,070     )
Accrued employment costs                   (9,263     )          (16,609    )
Accrued expenses                           3,351                 2,109
Advance payments and billings in           (1,418     )          9,335
excess of costs incurred
Other liabilities                         (128       )         12,700     
Net cash provided by operating         $   32,206            $   160,431
activities
                                                                            
Investing activities:
Capital expenditures                       (2,164     )          (4,795     )
Proceeds from sale of property,            680                   -
plant, and equipment
Other investing activities                -                   1,000      
Net cash used in investing             $   (1,484     )      $   (3,795     )
activities
                                                                            
Financing activities:
Borrowings from issuance of                335,000               -
long-term debt
Dividend paid to prior parent              (335,000   )          -
Borrowings from revolving credit           30,690                -
facility
Repayments of revolving credit             (30,690    )          -
facility
Debt issuance costs                        (11,005    )          -
Proceeds from share-based payment          1,225                 -
arrangements
Net transfers to prior parent              (5,235     )          (161,800   )
Distributions to non-controlling           (2,374     )          (1,546     )
interest member
Other financing activities                -                   300        
Net cash used in financing             $   (17,389    )      $   (163,046   )
activities
                                                                            
Discontinued Operations:
Net cash provided by operating             25,952                4,023
activities
Net cash provided by (used in)             (25,974    )          535
financing activities
Cash balance of discontinued              22                  (22        )
operations
Net cash provided by discontinued      $   -                 $   4,536
operations
                                                                            
Net increase (decrease) in cash        $   13,333            $   (1,874     )
and cash equivalents
                                                                            
Cash and cash equivalents,             $   13,688            $   15,562
beginning of period
                                                                       
Cash and cash equivalents, end of      $   27,021           $   13,688     
period
                                                                            
Supplemental information
Taxes paid                             $   15,973            $   -
Interest paid                          $   9,167             $   -
                                                                            


ENGILITY HOLDINGS, INC.
RECONCILIATION OF NON-GAAP MEASURES

The following tables set forth a reconciliation of each of these Non-GAAP
Measures to the most directly comparable GAAP measure for the periods
presented (in thousands, except for ratio and per share amounts).



ENGILITY HOLDINGS, INC.
Adjusted Operating Income and Adjusted Operating Margin
(dollars in thousands)

                                                          
                 Three Months Ended               Twelve Months Ended
                 December 31,     December        December 31,     December
                 2012             31, 2011        2012             31, 2011
                                                                             
Operating
income           $  27,192        $ (42,474 )     $ (328,918 )     $ 92,441
(loss)
                                                                             
Adjustments
Goodwill
impairment          -               76,600          426,436          76,600
charge
Transaction
related             -               5,400           17,300           9,100
spin-off
costs
Realignment         662             -               8,222            -
costs
Legal and
settlement         272           -             5,552          -       
cost
                   934           82,000        457,510        85,700  
                                                                  
Adjusted
operating        $  28,126       $ 39,526       $ 128,592       $ 178,141 
income
                                                                             
Operating           6.9     %       -8.9    %       -19.9    %       4.5     %
margin
Adjusted
operating           7.1     %       8.3     %       7.8      %       8.6     %
margin
                                                                             


ENGILITY HOLDINGS, INC.
Adjusted Earnings Per Share
(in thousands except per share data)


                  Three Months Ended           Twelve Months Ended
                    December     December        December 31,   December
                    31, 2012       31, 2011        2012             31, 2011
                                                                              
Adjusted
operating           $ 28,126       $ 39,526        $ 128,592        $ 178,141
income
                                                                              
Other items
Interest              (5,830 )       -               (10,857  )       -
expense
Other income          188            (36     )       136              148
Income (loss)
from                  -              (1,008  )       (626     )       2,958
discontinued
operations
Net income
attributable to      (442   )      (96     )      (4,952   )      (3,126  )
non-controlling
interest
                                                                              
Adjusted net
income before       $ 22,042       $ 38,386        $ 112,293        $ 178,121
provision for
income taxes
                                                                              
Estimated
provision for         8,817          15,354          44,917           71,248
taxes (1)
                                                                   
Adjusted net        $ 13,225      $ 23,032       $ 67,376        $ 106,873 
income
                                                                              
                                                                              
GAAP Earnings
per share
Net income
(loss)              $ 40,949       $ (57,592 )     $ (350,373 )     $ 25,859
attributable to
Engility
                                                                              
Earnings (loss)
per share
allocable to
Engility
Holdings, Inc.
common
shareholders
Basic               $ 2.47         $ (3.57   )     $ (21.52   )     $ 1.60
Diluted             $ 2.38         $ (3.57   )     $ (21.52   )     $ 1.60
                                                                              
Engility
Holdings, Inc.
weighted
average common
shares
outstanding
Basic                 16,596         16,118          16,281           16,118
Diluted               17,228         16,118          16,281           16,118
                                                                              
                                                                              
                                                                              
Adjusted
earnings per
share
Basic               $ 0.80         $ 1.43          $ 4.14           $ 6.63
Diluted             $ 0.77         $ 1.43          $ 4.06           $ 6.63
                                                                              
Weighted
averages shares
outstanding
Basic                 16,596         16,118          16,281           16,118
Diluted               17,228         16,118          16,577           16,118
                                                                              
                                                                              
(1) The estimated provision for taxes assumes a 40% tax rate.



ENGILITY HOLDINGS, INC.
Earnings before interest, taxes, depreciation, and amortization (EBITDA) and
Adjusted EBITDA
(dollars in thousands)


                Three Months Ended            Twelve Months Ended
                  December      December        December 31,   December
                  31, 2012        31, 2011        2012             31, 2011
                                                                             
Income from
continuing        $ 41,391        $ (56,488 )     $ (344,795 )     $ 26,027
operations
                                                                             
Interest,
taxes,
depreciation,
and
amortization
Interest            5,830           -               10,857           -
expense
Provision
(benefit) for       (19,841 )       13,978          5,156            66,562
income taxes
Depreciation
and                5,158         5,103         18,001         22,594  
amortization
EBITDA            $ 32,538       $ (37,407 )     $ (310,781 )     $ 115,183 
                                                                             
Adjustments
to EBITDA
Goodwill
Impairment          -               76,600          426,436          76,600
charge
Transaction
related             -               5,400           17,300           9,100
spin-off
costs
Realignment         662             -               8,222            -
costs
Legal and
settlement         272           -             5,552          -       
costs
                   934           82,000        457,510        85,700  
                                                                  
Adjusted          $ 33,472       $ 44,593       $ 146,729       $ 200,883 
EBITDA
                                                                             
EBITDA Margin       8.2     %       -7.9    %       -18.8    %       5.6     %
Adjusted            8.5     %       9.4     %       8.9      %       9.7     %
EBITDA Margin
                                                                             


ENGILITY HOLDINGS, INC.
Segment Information
(in thousands)


                   Three Months Ended December   Year Ended December 31,
                     31,
                     2012          2011            2012            2011
Revenue
Professional         $ 212,438       $ 264,943       $ 905,320         $ 1,102,430
Support Services
Mission Support        193,000         212,408         772,928           978,106
Services
Elimination of
intercompany          (9,754  )      (2,315  )      (22,904   )      (9,755    )
revenue
Total                $ 395,684      $ 475,036      $ 1,655,344      $ 2,070,781 
                                                                                   
                                                                                   
Operating income
Professional         $ 8,438         $ 23,768        $ (331,550  )     $ 90,461
Support Services
Mission Support        12,870          (60,842 )       26,837            11,081
Services
Elimination of
intercompany
income and            5,884         (5,400  )      (24,205   )      (9,101    )
corporate
allocations
Segment total        $ 27,192        $ (42,474 )     $ (328,918  )     $ 92,441
Spin-off-related
transaction,
costs, goodwill,      934           82,000        457,510         85,700    
realignment, and
legal and
settlement costs
Total                $ 28,126       $ 39,526       $ 128,592        $ 178,141   
                                                                                   




ENGILITY HOLDINGS, INC.
Revision to Costs and Expenses
(in thousands)

                                                                                                                      
                                                                                                                       For the    For the
                                                                                                                       Three      Twelve

                                                                                                                       Month      Month
                                                                                                                       Period     Period
                 For the Three Month Period        For the Three Month Period        For the Three Month Period
                 Ending March 30, 2012             Ending June 29, 2012              Ending September 28, 2012         Ending     Ending

                                                                                                                       December   December
                                                                                                                       31,        31,

                                                                                                                       2012       2012
                 Reported   Adjustment   Revised   Reported   Adjustment   Revised   Reported   Adjustment   Revised   Actual     Actual
                                                                                                                                  
Costs and
expenses
Cost of          326,666    (2,498  )    324,168   307,674    (2,195  )    305,479   354,147    (2,084  )    352,063   333,642    1,315,352
revenue
Cost of
revenue from     48,733     -           48,733    46,413     -           46,413    4,888      -           4,888     -          100,034
affiliated
entities
Total cost of    375,399    (2,498  )    372,901   354,087    (2,195  )    351,892   359,035    (2,084  )    356,951   333,642    1,415,386
revenue
                                                                                                                                  
Selling,
general and      30,729     2,498        33,227    33,471     2,195        35,666    36,612     2,084        38,696    34,851     142,440
administrative
expenses
Goodwill
impairment       -          -           -         -          -           -         426,436    -           426,436   -          426,436
charge
Total costs      406,128    2,498        406,128   387,558    2,195        387,558   822,083    2,084        822,083   368,493    1,984,262
and expenses
                                                                                                                     
Impact of the
revision on      -          -            -         -          -            -         -          -            -         -          -
cost and
expenses
                                                                                                                                  


Note - During the process of finalizing the year end financial statements, the
Company determined during the first three quarters of 2012 we improperly
classified certain amounts in cost of revenue that were selling, general and
administrative in nature. We have assessed the impact of the adjustments on
the statements of operations and determined that the periods were not
materially misstated. These changes did not impact the balance sheet or
statements of cash flows. All periods presented in this release have been
revised to reflect this correction.


Contact:

Engility Holdings, Inc.
Corporate Communications and Media:
Eric Ruff, 703-375-6463
eric.ruff@engilitycorp.com
or
Investor Relations:
Dave Spille, 703-375-4221
dave.spille@engilitycorp.com
 
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