ICF International Reports Full Year and Fourth Quarter 2013 Results

  ICF International Reports Full Year and Fourth Quarter 2013 Results

Full Year 2013 Highlights

  *Total Revenue Increased 1 Percent
  *Commercial Revenues Up 7 Percent, Driven by 18 Percent Increase in Energy
    Efficiency Revenues
  *EPS Was $1.95; Adjusted EPS of $1.98 Exclusive of Acquisition Costs
  *Contract Awards Reached Record $1.2 Billion; Book-to-Bill of 1.23
  *Cash Flow from Operations Was $81 Million

Fourth Quarter Highlights

  *Total Revenue Declined 1 Percent, Due to U.S. Federal Government Shutdown
  *Commercial Revenues Up 2 Percent Despite Expected Decline in
    Infrastructure Project Revenue
  *EPS Was $0.38; Adjusted EPS of $0.40 Exclusive of Acquisition Costs
  *Contract Awards Were $224 Million, Up 36 Percent

Acquisitions

  *Announces Acquisition of CITYTECH, Inc.
  *Completed Mostra Acquisition on February 6, 2014

2014 Full Year Guidance

  *Revenues Estimated $1.025 Billion to $1.065 Billion
  *Diluted EPS Estimated $2.27 to $2.37

Business Wire

FAIRFAX, Va. -- February 26, 2014

ICF International, Inc. (NASDAQ:ICFI), a leading provider of consulting
services and technology solutions to government and commercial clients,
reported results for the full year and fourth quarter ended December 31, 2013.

Full Year 2013 Results

“Full year 2013 was representative of our differentiated business model. For
the third consecutive year, commercial revenue growth significantly outpaced
total revenue growth, driven by an 18 percent increase in revenues from energy
efficiency clients and solid performance across our other commercial
activities. International government revenues increased 44 percent
year-on-year, demonstrating our ability to successfully leverage existing
expertise and qualifications and integrate acquisitions to expand our pipeline
and improve win rates.”

“ICF’s increased spending on business development over the last two years has
yielded excellent returns on our investments. Contract awards reached a record
$1.2 billion in 2013, up 21 percent year-over-year, reflecting the importance
of our domain expertise in the broad areas of health and energy and the
increasing number of implementation projects that we have captured as natural
follow-ons to our advisory work,” said Sudhakar Kesavan, Chairman and Chief
Executive Officer.

For full year 2013, revenue was $949.3 million, up 1.3 percent over the $937.1
million reported for full year 2012. Service revenue, total revenue less
subcontractor and other direct costs, increased 0.6 percent to $709.8 million.
EBITDA was $85.4 million; and EBITDA margin was 9.0 percent. Operating income
was $64.7 million compared to the $66.2 million reported in 2012. Net income
increased 3.3 percent to $39.3 million, and earnings per diluted share were
$1.95, up from $1.91. Adjusted earnings per diluted share, which exclude
acquisition costs, were $1.98 in 2013, up from $1.93.

ICF experienced growth across two of its three key markets in 2013. Health,
Social Programs, and Consumer/Financial increased 4.0 percent, and Energy,
Environment, and Infrastructure was up 1.7 percent, together accounting for 88
percent of total revenues.

“ICF’s fourth quarter results were affected by the 16-day government shutdown
in October, but were in line with the guidance we provided in November,” said
Mr. Kesavan. “As anticipated, our growing commercial and international
government businesses, and a pick up in state and local projects, enabled us
to partially offset the revenue decline related to the government closure.”

For the fourth quarter, revenue was $229.8 million, a 1.0 percent decrease
from the $232.0 million reported in the 2012 fourth quarter. Service revenue
decreased 0.8 percent to $171.3 million. Fourth quarter profitability was
significantly impacted by the government shutdown. EBITDA was $17.7 million,
and EBITDA margin was 7.7 percent. Operating income was $12.6 million,
compared to the $14.5 million reported in the 2012 fourth quarter. Net income
was $7.8 million, or $0.38 per diluted share compared to $9.2 million, or
$0.47 per diluted share earned in the comparable 2012 period.

Backlog and New Business Awards

Backlog was $1.7 billion at the end of 2013, up 10 percent from $1.5 billion
at 2012 year-end. Funded backlog was $697 million, or 42 percent of total
backlog. The total value of contracts awarded in the fourth quarter of 2013
was $224 million, up 36 percent from the same period last year. The total
value of contracts awarded in 2013 was $1.2 billion, up 21 percent over 2012
levels.

Commercial Business 2013 Highlights

Revenues from commercial clients increased 7 percent in 2013 to $267.9 million
and represented 28 percent of total revenue, up from 27 percent in 2012.
Excluding a large infrastructure project that was in a slower phase of
construction in 2013, commercial revenues increased 9.7 percent. Revenues from
energy efficiency clients increased 18 percent and accounted for 39 percent of
commercial revenues.

Key Commercial Sales Highlights for the Fourth Quarter

Commercial sales awards were $83 million for the 2013 fourth quarter,
representing 37 percent of total sales for the period, and a book-to-bill
ratio of 1.2.

ICF was awarded more than 400 commercial projects globally in the fourth
quarter. Individual commercial sales in excess of $1 million included:

  *Eight energy efficiency contracts for U.S. Northeast, Midwest, and West
    Coast utilities encompassing new residential market contracts, scope
    expansion and extensions of existing contracts
  *Environmental infrastructure support projects on the U.S. West Coast
  *New interactive data applications for a utility and for a major financial
    institution

Primary areas of additional awards included residential as well as commercial
and industrial energy efficiency projects, aviation industry consulting,
management consulting for health insurers, health survey research, interactive
data applications for health care insurers and large financial institutions,
environmental program and compliance management, and market studies for
utilities and industry associations.

Government Business 2013 Highlights

  *U.S. Federal Government revenues declined 2.5 percent to $549.6 million in
    2013 and accounted for 58 percent of total revenue, compared to 60 percent
    in 2012. Growth areas included education, public health, and international
    health survey research.
  *U.S. state and local government revenues declined 4.7 percent and
    accounted for 9 percent of total revenue, compared to 10 percent in 2012.
  *International government revenues increased 43.6 percent and accounted for
    5 percent of total revenue, up from 3 percent in 2012, primarily
    reflecting recent contract wins with the European Commission and the U.K.
    government.

Key Government Contracts Won in the Fourth Quarter

ICF was awarded more than 100 U.S. Federal Government contracts and task
orders and hundreds of additional contracts from other U.S. state and local
and international governments. The largest awards included:

  *Human Health Risk Assessment: A contract valued at approximately $33
    million to continue to support the Environmental Protection Agency’s
    National Center for Environmental Assessment to conduct human health risk
    assessments on chemicals and other environmental stressors.
  *Cybersecurity: A contract valued at nearly $20 million to continue
    cybersecurity and identification management support for the Social
    Security Administration.
  *Health Informatics: A contract valued at more than $10 million with the
    National Science Foundation (NSF) to provide data collection, information
    technology, and analysis support of 11 NSF education and training grant
    programs.
  *Clean Energy: A $6 million contract with the Environmental Protection
    Agency to support clean energy and climate change strategies and programs.
  *European Immigration Policy: A $5 million contract with the European
    Commission to provide program support to the European Migration Network.

Additional individual government awards of greater than $1 million included
educational simulation support for medical training for the U.S. Navy,
strategic communications and software support to two offices of the National
Institutes of Health, web support for two offices of the Department of Health
and Human Services, information portal support for the Department of
Education, program support for two offices of the Department of
Transportation, and analytical support to the National Science Foundation.

Acquisitions of CITYTECH, Inc., and Mostra SA

ICF is announcing today that it has signed a definitive agreement to purchase
CITYTECH, Inc., a Chicago-based digital interactive consultancy specializing
in enterprise applications development, web experience management, mobile
application development, cloud enablement, and managed services. For 2013,
CITYTECH had annual revenues of approximately $16 million and 100 employees.

“A leading partner with Adobe, CITYTECH will add expertise to ICF’s content
management capabilities. It is a complementary fit with ICF Interactive, which
combines user experience, creative services, systems integration, marketing,
and e-commerce services into an integrated suite of capabilities designed to
meet commercial and government clients’ digital and interactive business
needs,” Mr. Kesavan said.

This transaction follows ICF’s recent acquisition of Brussels-based Mostra SA,
a fully-integrated communications firm with annual revenues of approximately
$40 million and 140 employees. Mostra offers end-to-end, multi-channel
communications solutions to assist government and commercial clients in
reaching out to their stakeholders and customers. The firm is a key provider
of strategic communications to European Union institutions, in particular the
European Commission, and significantly increases ICF’s ability to deliver
implementation services in Europe.

Summary and Outlook

“In 2013, we continued to execute effectively on our strategy to drive growth
by building our commercial and international government qualifications and
business wins. Since the end of the year, we have announced two acquisitions
that are strategically important and expected to be accretive in 2014. Both
position us to further expand our implementation activities, and Mostra will
also enable us to replicate the success of our program lifecycle strategy in
our international operations.”

“In 2014, we expect our commercial and international government activities to
further increase as a percentage of revenues. While we will continue to invest
in growth initiatives, we expect to see meaningful margin improvement coming
from scale benefits, a more favorable business mix, and increased
productivity.”

“In 2014, we expect to exceed the $1 billion milestone in revenues and
generate EBITDA around $100 million. Based on our current portfolio of
business, including the acquisitions of Mostra and CITYTECH, we expect full
year 2014 revenues of$1.025 billion to $1.065 billion and earnings per
diluted share of $2.27 to $2.37, based on approximately 20.2 million diluted
weighted average number of shares outstanding and an effective tax rate of
38.5 percent. Our operating cash flow for 2014 is expected to be $70 million
to $80 million,” Mr. Kesavan noted.

About ICF International

ICF International (NASDAQ:ICFI) provides professional services and technology
solutions that deliver beneficial impact in areas critical to the world’s
future. ICF is fluent in the language of change, whether driven by markets,
technology, or policy. Since 1969, we have combined a passion for our work
with deep industry expertise to tackle our clients’ most important challenges.
We partner with clients around the globe—advising, executing, innovating—to
help them define and achieve success. Our more than 4,500 employees serve
government and commercial clients from more than 60 offices worldwide. ICF's
website is www.icfi.com.

Caution Concerning Forward-looking Statements

Statements that are not historical facts and involve known and unknown risks
and uncertainties are "forward-looking statements" as defined in the Private
Securities Litigation Reform Act of 1995. Such statements may concern ICF’s
current expectations about its future results, plans, operations and prospects
and involve certain risks, including those related to the government
contracting industry generally; ICF’s particular business, including its
dependence on contracts with U.S. federal government agencies; and its ability
to acquire and successfully integrate businesses. These statements include
those that refer to ICF’s current expectations about the acquisitions of
Mostra and CITYTECH. These and other factors that could cause ICF’s actual
results to differ from those indicated in forward-looking statements are
included in the "Risk Factors" section of ICF’s securities filings with the
Securities and Exchange Commission. Although ICF’s expectations are based on
what management believes to be reasonable assumptions, it cannot assure the
expectations reflected in this document will be achieved as they are subject
to risks and uncertainties that are difficult to predict and may be outside of
ICF’s control. Such risks and uncertainties include the possibility that the
benefits anticipated from the Mostra and CITYTECH transactions will not be
fully realized, the possibility the CITYTECH transaction may not close, and
other risks in connection with both the proposed CITYTECH transaction and the
integration of Mostra. The forward-looking statements included herein are only
made as of the date hereof, and ICF specifically disclaims any obligation to
update these statements in the future.

                                                              
ICF International, Inc. and Subsidiaries
Consolidated Statements of Comprehensive Income
(in thousands, except per share amounts)
                                                                        
                        Three months ended              Twelve months ended
                        December 31,                    December 31,
                        2013            2012            2013            2012
                        (Unaudited)                                 
                                                                        
Gross Revenue         $ 229,759       $ 231,979       $ 949,303       $ 937,133
Direct Costs            143,146         146,879         591,516         583,195
Operating costs and
expenses:
Indirect and            68,874          64,265          272,387         263,878
selling expenses
Depreciation and        2,886           2,731           11,238          9,789
amortization
Amortization of         2,266          3,559          9,477          14,089  
intangible assets
Total operating         74,026         70,555         293,102        287,756 
costs and expenses
Operating Income        12,587          14,545          64,685          66,182
Interest expense        (577    )       (781    )       (2,447  )       (3,946  )
Other (expense)         (221    )       54             (12     )       (325    )
income
Income before           11,789          13,818          62,226          61,911
income taxes
Provision for           4,033          4,599          22,896         23,836  
income taxes
Net income            $ 7,756        $ 9,219        $ 39,330       $ 38,075  
                                                                        
Earnings per Share:
Basic                 $ 0.39         $ 0.47         $ 1.99         $ 1.94    
Diluted               $ 0.38         $ 0.47         $ 1.95         $ 1.91    
                                                                        
Weighted-average
Shares:
Basic                   19,826         19,501         19,755         19,663  
Diluted                 20,233         19,690         20,186         19,957  
                                                                        
Other comprehensive
income:
Foreign currency
translation             248            99             251            (436    )
adjustments
Comprehensive         $ 8,004        $ 9,318        $ 39,581       $ 37,639  
income
                                                                        
                                                                        
                                                                        
Reconciliation of
non-GAAP financial
measures:
                                                                        
Reconciliation of
Service Revenue
Revenue               $ 229,759       $ 231,979       $ 949,303       $ 937,133
Subcontractor and       58,423         59,249         239,529        231,838 
Other Direct Costs*
Service Revenue       $ 171,336      $ 172,730      $ 709,774      $ 705,295 
                                                                        
Reconciliation of
EBITDA
Operating Income      $ 12,587        $ 14,545        $ 64,685        $ 66,182
Depreciation and        5,152          6,290          20,715         23,878  
amortization
EBITDA                  17,739          20,835          85,400          90,060
Acquisition-related     536            -              903            676     
expenses**
Adjusted EBITDA       $ 18,275       $ 20,835       $ 86,303       $ 90,736  
                                                                        
Reconciliation of
Diluted EPS
Diluted EPS           $ 0.38          $ 0.47          $ 1.95          $ 1.91
EPS impact of
acquisition costs,      0.02           —              0.03           0.02    
net of tax
Adjusted EPS          $ 0.40         $ 0.47         $ 1.98         $ 1.93    
                                                                        
*Subcontractor and Other Direct Costs exclude Direct Labor and Fringe.
**Acquisition-related expenses include expenses related to closed and
anticipated-to-close acquisitions.
                      

                                                       
ICF International, Inc. and Subsidiaries
Consolidated Balance Sheets
(in thousands, except share amounts)
                                                             
                                     December 31, 2013       December 31, 2012
                                                             
Current Assets:
Cash                               $ 8,953                 $ 14,725
Contract receivables, net            205,062                 204,938
Prepaid expenses and other           7,847                   7,608
Income tax receivable                4,482                  11,231      
Total current assets                 226,344                238,502     
Total property and equipment,        30,214                  28,860
net
Other assets:
Goodwill                             418,839                 410,583
Other intangible assets, net         12,239                  21,016
Restricted cash                      1,864                   2,015
Other assets                         11,414                 8,745       
Total Assets                       $ 700,914              $ 709,721     
                                                             
Current Liabilities:
Accounts payable                   $ 45,544                $ 44,665
Accrued salaries and benefits        45,994                  42,264
Accrued expenses                     32,256                  31,779
Deferred revenue                     20,282                  22,333
Deferred income taxes                6,144                  5,790       
Total current liabilities            150,220                146,831     
Long-term liabilities:
Long-term debt                       40,000                  105,000
Deferred rent                        12,912                  10,599
Deferred income taxes                10,780                  9,081
Other                                12,911                 9,460       
Total Liabilities                    226,823                 280,971
Commitments and Contingencies
Stockholders’ Equity:
Preferred stock, par value $.001
per share; 5,000,000 shares          —                       —
authorized; none issued
Common stock, $.001 par value;
70,000,000 shares authorized;
20,617,270 and 20,171,613 shares
issued; and 19,764,634 and           21                      20
19,559,409 shares outstanding as
of December 31, 2013, and
December 31, 2012, respectively
Additional paid-in capital           250,698                 237,262
Retained earnings                    245,907                 206,577
Treasury stock                       (21,545     )           (13,868     )
Accumulated other comprehensive      (990        )           (1,241      )
loss
Total Stockholders’ Equity           474,091                428,750     
Total Liabilities and              $ 700,914              $ 709,721     
Stockholders’ Equity
                                                             

                                                              
ICF International, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(in thousands)
                                                                    
                                                   Twelve months ended
                                                   December 31,
                                                   2013             2012
Cash flows from operating activities
Net income                                       $ 39,330         $ 38,075
Adjustments to reconcile net income to net
cash provided by operating activities:
Bad debt expense                                   112              336
Deferred income taxes                              2,434            13,637
(Gain) loss on disposal of fixed assets            (15      )       122
Non-cash equity compensation                       8,891            8,770
Depreciation and amortization                      20,715           23,878
Amortization of debt issue costs                   476              562
Deferred rent                                      2,606            3,594
Changes in operating assets and liabilities,
net of the effect of acquisitions:
Contract receivables                               829              12,457
Prepaid expenses and other assets                  (3,619   )       (162     )
Accounts payable                                   730              2,604
Accrued salaries and benefits                      3,699            (4,154   )
Accrued expenses                                   42               1,619
Deferred revenue                                   (2,706   )       (2,638   )
Income tax receivable and payable                  6,749            (10,451  )
Restricted cash                                    150              (807     )
Other liabilities                                  609             (201     )
Net cash provided by operating activities          81,032          87,241   
Cash flows from investing activities
Capital expenditures for property and              (14,161  )       (13,561  )
equipment and capitalized software
Payments for business acquisitions, net of         (4,763   )       (9,974   )
cash received
Net cash used in investing activities              (18,924  )       (23,535  )
                                                                    
Cash flows from financing activities
Advances from working capital facilities           139,215          172,270
Payments on working capital facilities             (204,215 )       (212,270 )
Debt issue costs                                   —                (1,955   )
Proceeds from exercise of options                  3,103            78
Tax benefits of stock option exercises and         1,213            804
award vesting
Net payments for stockholder issuances and         (7,447   )       (11,569  )
buybacks
Net cash used in financing activities              (68,131  )       (52,642  )
Effect of exchange rate changes on cash            251             (436     )
(Decrease) increase in cash                        (5,772   )       10,628
Cash, beginning of period                          14,725          4,097    
Cash, end of period                              $ 8,953         $ 14,725   
                                                                    
Supplemental disclosure of cash flow
information
Cash paid during the period for:
Interest                                         $ 2,459         $ 3,243    
Income taxes                                     $ 13,670        $ 20,377   
                                                                    
Non-cash investing and financing transactions:
Fair value of contingent consideration payable   $ 2,842         $ —        
in connection with acquisition
                                                                             

                                                                
ICF International, Inc. and Subsidiaries
Supplemental Schedule
                                                                       
                                                                       
Revenue by market                   Three Months Ended     Twelve Months Ended
                                    December 31,           December 31,
                                    2013       2012        2013        2012
                                                                       
Energy, environment, and            41   %     40   %      39    %     39   %
infrastructure
Health, social programs, and        48   %     47   %      49    %     47   %
consumer/financial
Public safety and defense           11   %     13   %      12    %     14   %
                                                                    
Total                               100  %     100  %      100   %     100  %
                                                                       
                                                                       
                                                                       
Revenue by client                   Three Months Ended     Twelve Months Ended
                                    December 31,           December 31,
                                    2013       2012        2013        2012
                                                                       
U.S. federal government             55   %     58   %      58    %     60   %
U.S. state and local government     10   %     9    %      9     %     10   %
Non-U.S. government                 5    %     4    %      5     %     3    %
Government                          70   %     71   %      72    %     73   %
                                                                       
Commercial                          30   %     29   %      28    %     27   %
                                                                    
Total                               100  %     100  %      100   %     100  %
                                                                       
                                                                       
                                                                       
Revenue by contract                 Three Months Ended     Twelve Months Ended
                                    December 31,           December 31,
                                    2013       2012        2013        2012
                                                                       
Time-and-materials                  52   %     48   %      52    %     49   %
Fixed-price                         30   %     31   %      29    %     30   %
Cost-based                          18   %     21   %      19    %     21   %
                                                                    
Total                               100  %     100  %      100   %     100  %
                                                                            

Contact:

ICF International, Inc.
Douglas Beck, 1-703-934-3820
or
MBS Value Partners
Lynn Morgen/Betsy Brod, 1-212-750-5800
 
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