Engility Reports First Quarter 2013 Results

  Engility Reports First Quarter 2013 Results

  *First quarter revenue of $362 million and diluted EPS of $0.79
  *Cost savings initiatives positively impacting margins and customer wins
  *First quarter funded orders of $322 million and funded backlog of $816
    million
  *Reiterates fiscal year 2013 guidance

Business Wire

CHANTILLY, Va. -- May 13, 2013

Engility Holdings, Inc. (NYSE: EGL) today announced financial results for the
first quarter ended March 29, 2013.

First Quarter 2013 Results

Total revenue for the first quarter of 2013 was $362 million and operating
income was $30 million. Net income attributable to Engility was $14 million,
or $0.79 per diluted share.

“Our first quarter results were in-line with our plan,” said Tony
Smeraglinolo, President and CEO of Engility. “Additionally, our cost savings
initiatives are beginning to positively impact our margins and our ability to
win new and recompete business. During the quarter, we won several major
recompete contracts, which contributed to another solid quarter of funded
orders. We attribute this success to our differentiated low-cost business
model, our strong track record of delivering superior services to our
customers and our exceptional alignment with our customers’ mission
priorities.”

“While our results were consistent with our expectations, significant Federal
budget uncertainty continues and likely will remain for the foreseeable
future. However, this is the market environment we anticipated when we formed
Engility, and we believe we have created a company with the efficiencies
needed to compete successfully in today’s budget-constrained and competitive
market. Recent wins, coupled with our healthy backlog and growing pipeline of
business, keeps us confident about our future and our ability to achieve
financial results within our 2013 guidance ranges.”

Key Performance Indicators

  *Funded backlog at the end of the 2013 first quarter was $816 million.
  *Contract funded orders in the first quarter of 2013 were $322 million,
    representing a book-to-bill ratio of 0.9.
  *As expected, our days sales outstanding (DSO) increased in the first
    quarter of 2013. DSO, net of advanced payments, at the end of the 2013
    first quarter was 89 days, compared to 78 days at the end of the December
    2012 quarter.

Significant First Quarter 2013 Recompete Award

During the quarter, we won several major recompete contracts that validate
both our business model and our focus on our customers’ success. These wins
also reduce our risk profile for 2013. Our largest recompete win that was
scheduled for 2013 was a $116 million single-award contract, consisting of a
one-year base period of performance with one six month option, from the Army
Contracting Command – Aberdeen Proving Ground (ACC-APG) to train, mentor and
advise U.S. and Coalition Forces in Afghanistan in law enforcement and
investigation techniques. This recompete win reflects the strong relationship
we have with this customer and underscores our superior past performance in
supporting the warfighters’ efforts of developing innovative solutions to
counter emerging asymmetric threats for the U.S. Army.

2013 Outlook

We are reiterating the fiscal year 2013 financial guidance we issued on March
12, 2013 based on our first quarter 2013 financial results and our outlook for
the remainder of 2013. Consistent with our March 12, 2013 outlook, our
guidance does not include the impact of sequestration. 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%.

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 Monday, May 13, 2013, to
discuss the financial results for the first quarter of 2013.

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 (877)
415-3180 (domestic) or (857) 244-7323 (international) and entering pass code
68184706.

A replay will be available on the company's website approximately two hours
after the conference call and continuing for one year. A telephonic replay
also will be available through May 20, 2013 at (888) 286-8010 (domestic) or
(617) 801-6888 (international) and entering pass code 60472283.

ABOUT ENGILITY CORPORATION

Engility is a pure-play government services contractor providing highly
skilled personnel wherever, whenever they are needed in a cost-effective
manner. Headquartered in Chantilly, Virginia, 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 for 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 the expected benefits of 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” included in our annual report on
Form 10-K for the year ended December 31, 2012, which has been filed with the
Securities and Exchange Commission (SEC), and any updates thereto included in
our more recent periodic reports, and is available on the investor relations
section of Engility’s website (http://www.engilitycorp.com) 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
                                       March 29,    March 30,
                                       2013          2012          Change
                                                                   
Revenue                                $ 361,675     $ 383,240     $ (21,565 )
Revenue from former affiliated          -           48,734      (48,734 )
entities
Total revenue                            361,675       431,974       (70,299 )
Costs and expenses
Cost of revenue                          315,491       324,168       (8,677  )
Cost of revenue from former             -           48,734      (48,734 )
affiliated entities
Total cost of revenue                    315,491       372,902       (57,411 )
Selling, general and administrative     16,297      33,227      (16,930 )
expenses
Total costs and expenses                331,788     406,129     (74,341 )
Operating income                         29,887        25,845        4,042
Interest expense, net                    (5,784  )     (97     )     (5,687  )
Other income, net                       29          40          (11     )
Income from continuing operations        24,132        25,788        (1,656  )
before income taxes
Provision for income taxes              9,353       10,801      (1,448  )
Income from continuing operations      $ 14,779      $ 14,987      $ (208    )
                                                                   
Loss from discontinued operations        -             (125    )     125
before income taxes
Benefit for income taxes                -           (52     )    52      
Loss from discontinued operations       -           (73     )    73      
                                                                   
Net income                             $ 14,779      $ 14,914      $ (135    )
Less: Net income attributable to        1,001       929         72      
noncontrolling interest
Net income attributable to Engility    $ 13,778     $ 13,985     $ (207    )
                                                                   
Earnings per share allocable to
Engility Holdings, Inc. common
shareholders – Basic
Net income per share from continuing
operations less noncontrolling         $ 0.82        $ 0.87        $ (0.05   )
interest
Net income per share from              $ -           $ -           $ -
discontinued operations
Net income per share attributable to   $ 0.82        $ 0.87        $ (0.05   )
Engility
                                                                   
Earnings per share allocable to
Engility Holdings, Inc. common
shareholders – Diluted
Net income per share from continuing
operations less noncontrolling         $ 0.79        $ 0.87        $ (0.08   )
interest
Net income per share from              $ -           $ -           $ -
discontinued operations
Net income per share attributable to   $ 0.79        $ 0.87        $ (0.08   )
Engility
                                                                   
Weighted average number of shares
outstanding
Basic                                    16,781        16,118
Diluted                                  17,382        16,118      

                                                              
ENGILITY HOLDINGS, INC.
UNAUDITED CONSOLIDATED BALANCE SHEETS
(in thousands)
                                                                 
                                                 As of           As of
                                                 March 29,       December 31,
                                                 2013            2012
Assets:
Current assets:
Cash and cash equivalents                        $ 38,728        $ 27,021
Receivables, net                                   379,047         366,236
Other current assets                              32,090        34,832    
Total current assets                               449,865         428,089
Property, plant and equipment, net                 10,919          11,941
Goodwill                                           477,604         477,604
Identifiable intangible assets, net                98,748          100,929
Other assets                                      11,630        8,887     
Total assets                                     $ 1,048,766    $ 1,027,450 
Liabilities and Equity:
Current liabilities:
Current portion of long-term debt                $ 50,250        $ 50,250
Accounts payable, trade                            27,485          20,725
Accrued employment costs                           64,546          63,278
Accrued expenses                                   73,989          76,955
Advance payments and billings in excess of         21,292          24,855
costs incurred
Deferred income taxes, current and income          15,640          10,607
taxes payable
Other current liabilities                         16,518        19,311    
Total current liabilities                          269,720         265,981
Long-term debt                                     284,750         284,750
Income tax payable                                 70,063          68,725
Other liabilities                                 19,385        19,683    
Total liabilities                                  643,918         639,139
Equity:
Preferred stock, par value $0.01 per share,
25,000 shares authorized, none issued or           -               -
outstanding as of March 29, 2013 or December
31, 2012
Common stock, par value $0.01 per share,
175,000 shares authorized, 17,144 shares
issued and outstanding as of March 29, 2013        171             168
and 16,703 shares issued and outstanding as of
December 31, 2012
Additional paid in capital                         757,384         755,638
Accumulated deficit                                (366,661  )     (380,438  )
Noncontrolling interest                           13,954        12,943    
Total equity                                      404,848       388,311   
Total liabilities and equity                     $ 1,048,766    $ 1,027,450 

                                                    
ENGILITY HOLDINGS, INC.
UNAUDITED CONDENSED CONSOLIDATED AND COMBINED STATEMENTS OF CASH FLOWS
(in thousands)
                                                      
                                                      Three Months Ended
                                                      March 29,    March 30,
                                                      2013          2012
Operating activities:
Net income                                            $ 14,779      $ 14,914
Less: loss from discontinued operations, net of tax    -           (73    )
Income from continuing operations                       14,779        14,987
Share-based compensation                                2,622         -
Depreciation and amortization                           3,393         4,185
Amortization of bank debt fees                          891           -
Deferred income taxes                                   3,783         (5,541 )
Changes in operating assets and liabilities,
excluding acquired amounts:
Receivables                                             (12,811 )     (7,921 )
Other assets                                            358           (1,779 )
Accounts payable, trade                                 6,760         (6,337 )
Accrued employment costs                                1,268         2,845
Accrued expenses                                        (2,966  )     (9,717 )
Advance payments and billings in excess of costs        (3,563  )     4,454
incurred
Other liabilities                                      (1,753  )    728    
Net cash provided by (used in) operating activities     12,761        (4,096 )
from continuing operations
Investing activities:
Capital expenditures                                   (190    )    (66    )
Net cash used in investing activities from             (190    )    (66    )
continuing operations
Financing activities:
Proceeds from share-based payment arrangements          164           -
Payment of employee withholding taxes on restricted     (1,028  )     -
stock units vesting
Net transfers from prior parent                        -           1,829  
Net cash (used in) provided by financing activities     (864    )     1,829
from continuing operations
Discontinued Operations:
Net cash used in operating activities                   -             (190   )
Net cash used in investing activities                   -             -
Net cash provided by financing activities              -           190    
Net cash provided by discontinued operations           -           -      
Net change in cash and cash equivalents                 11,707        (2,333 )
Cash and cash equivalents, beginning of period         27,021      13,710 
Cash and cash equivalents, end of period              $ 38,728     $ 11,377 


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).

                                   
Adjusted Operating Income and Adjusted Operating Margin
                                     
                                     Quarter Ended
                                     March 29, 2013  March 30, 2012
Operating income
                                     $   29,887       $   25,845
Adjustments
Transaction-related spin-off costs      -              6,000   
                                        -              6,000   
                                                     
Adjusted operating income            $   29,887      $   31,845  
                                                      
Operating margin                         8.3     %        6.0     %
Adjusted operating margin                8.3     %        7.4     %

                                             
ENGILITY HOLDINGS, INC.
Adjusted Earnings Per Share
(in thousands except per share data)
                                               
                                               Quarter Months Ended
                                               March 29, 2013  March 30, 2012
                                                                
Adjusted operating income                      $   29,887       $   31,845
                                                                
Other items
Interest expense, net                              (5,784  )        (97     )
Other income, net                                  29               40
Loss from discontinued operations                  -                (73     )
Net income attributable to non-controlling        (1,001  )       (929    )
interest
                                                                
Adjusted income before provision for income    $   23,131       $   30,786
taxes
                                                                
Provision for income taxes (1)                     9,353            12,314
                                                               
Adjusted net income attributable to Engility   $   13,778      $   18,472  
Holdings, Inc.
                                                                
GAAP Earnings per share
Net income attributable to Engility            $   13,778       $   13,985
Holdings, Inc.
                                                                
Earnings per share attributable to Engility
Holdings, Inc. common shareholders
Basic                                          $   0.82         $   0.87
Diluted                                        $   0.79         $   0.87
                                                                
Engility Holdings, Inc. weighted average
common shares outstanding
Basic                                              16,781           16,118
Diluted                                            17,382           16,118
                                                                
Adjusted earnings per share attributable to
Engility Holdings, Inc. common shareholders
Basic                                          $   0.82         $   1.15
Diluted                                        $   0.79         $   1.15
                                                                
Weighted average number of shares
outstanding
Basic                                              16,781           16,118
Diluted                                            17,382           16,118
                                                                            
(1) The March 30, 2012 period assumes a 40% income tax rate as a result of the
adjustments.

                                       
ENGILITY HOLDINGS, INC.
Earnings before interest, taxes, depreciation, and amortization (EBITDA) and
Adjusted EBITDA
(dollars in thousands)
                                           
                                           Quarter Ended
                                           March 29, 2013     March 30, 2012
                                                               
Income from continuing operations          $    14,779         $   14,987
                                                               
Interest, taxes, depreciation, and
amortization
Interest expense                                5,784              97
Provision for income taxes                      9,353              10,801
Depreciation and amortization                  3,393            4,185    
EBITDA                                     $    33,309        $   30,070   
                                                               
Adjustments to EBITDA
Transaction-related spin-off costs             -                6,000    
                                               -                6,000    
                                                              
Adjusted EBITDA                            $    33,309        $   36,070   
                                                               
EBITDA Margin                                   9.2      %         7.0      %
Adjusted EBITDA Margin                          9.2      %         8.4      %

                                          
ENGILITY HOLDINGS, INC.
Revision to Costs and Expenses
(in thousands)
                                            
                                            For the Three Month Period Ending
                                            March 30, 2012
                                            Reported   Adjustment  Revised
                                                                     
Costs and expenses
Cost of revenue                             $ 326,666   $  (2,498)   $ 324,168
Cost of revenue from affiliated entities     48,734      -          48,734
Total cost of revenue                        375,400     (2,498)    372,902
                                                                     
Selling, general and administrative          30,729      2,498      33,227
expenses
Total costs and expenses                     406,129     -          406,129
Impact of the revision on cost and          $ -         $  -         $ -
expenses
                                                                     

Note – As noted in our Form 10-K for the year ended December 31, 2012,
management determined that 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 period was not materially misstated. This change did not
impact the balance sheet or statement of cash flows. The three month period
ended March 30, 2012 has been revised to reflect this correction.

Contact:

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