GTEC Reports Second Quarter 2010 Financial Results

MCLEAN, Va., Aug. 5 /PRNewswire-FirstCall/ -- Global Defense Technology & Systems, Inc. (Nasdaq: GTEC), a provider of mission-critical, technology-based systems, solutions and services for national security agencies and programs of the U.S. government, today announced its second quarter 2010 fin

GTEC Reports Second Quarter 2010 Financial Results

MCLEAN, Va., Aug. 5 /PRNewswire-FirstCall/ -- Global Defense Technology & Systems, Inc. (Nasdaq: GTEC), a provider of mission-critical, technology-based systems, solutions and services for national security agencies and programs of the U.S. government, today announced its second quarter 2010 financial results.

Second Quarter 2010 Results – Profit Above Expectations

Revenue for the second quarter 2010 was $49.2 million. The Company's revenue from the Technology and Intelligence Services (TIS) and Force Mobility and Modernization Systems (FMMS) segments was $24.0 million and $25.2 million, respectively. Total segment operating income was $6.0 million, or 12.2% of segment revenues. Unallocated corporate expenses totaled $2.4 million. This resulted in operating income for the second quarter 2010 of $3.5 million, or 7.2% of revenue, and diluted earnings per share (EPS) of $0.23.

"Our second quarter results reflect GTEC's focus on delivering bottom line results despite a number of challenges to our top line. Continued delays in contract awards for our FMMS business pushed a portion of our revenue into 2011 while delays in customer decisions in our fast growing TIS business have slowed the extraordinary growth we anticipated in 2010," said John Hillen, President & CEO of GTEC. "Our business development pipeline continues to expand and the contract awards anticipated during the remainder of the year provide strong growth prospects for 2011 above our long term targets of 10 to 15 percent."

Business Highlights – Contract Awards Momentum

Contract awards totaled $42 million for the second quarter 2010, with a $9 million five-year task order coming from a classified contract supporting the Intelligence Community. Additionally, during the quarter GTEC was awarded an approximately $27 million contract from the U.S. Army for field feeding systems.

GTEC's contract award momentum continued into the third quarter of 2010 in the TIS segment with the receipt of a $6 million five-year task order under our Department of Justice counterterrorism contract and a $47 million five-year extension of a classified intelligence analysis subcontract. The Company's qualified business development pipeline is currently over $3.2 billion and there is over $300 million in pending awards across our business which we anticipate being decided by the end of calendar year 2010.

As of June 30, 2010, GTEC had total backlog of $590 million and funded backlog of $120 million.

Balance Sheet Metrics – Solid Cash Flow

As of June 30, 2010, GTEC had $1.7 million of cash and no debt based on $2.0 million in operating cash flow during the quarter.  

Jim Allen, Executive Vice President & CFO of GTEC, noted, "We anticipate strong cash flow in the third quarter as we bill and collect receivables from our FMMS customers for fixed price work that was recently completed and performed in the first and second quarter."

Forward Guidance – Revised Full Year Outlook

GTEC's third quarter 2010 and full year 2010 guidance is summarized in the table below. GTEC's guidance does not include the assumption of any future acquisitions.

"Given the contracting delays we have experienced in 2010 across our business development pipeline and particularly within our FMMS expeditionary camp solutions business, we have assumed that only $25 million of the $60 million in orders anticipated earlier in the year is converted to revenue in 2010," said John Hillen.



3rd Quarter 2010

Full Year 2010

Revenue

$53 - $57 million

$220 - $228 million

Diluted EPS

$0.22 - $0.25

$0.87 - $0.93

Weighted Average Shares Outstanding – Diluted

9.16 million

9.16 million




Key Guidance Assumptions

  • $25 million in revenue from expeditionary camp solution order(s) expected to be awarded in August 2010
  • Net interest expense of $40,000 in the third quarter and $130,000 for full year 2010
  • Tax rate of 39.7% for the third and fourth quarters before a one-time tax benefit of $0.05 in the third quarter related to a legal reorganization to utilize an existing net operating loss

Conference Call

GTEC executive management will hold a conference call today at 5:00 p.m. ET, to discuss second quarter 2010 results and answer questions. Interested parties may access the call by dialing 800-299-9630 (domestic) or +1 617-786-2904 (international) and entering passcode 93652179. The conference call will be Webcast (audio only) simultaneously via the Investor Relations page of GTEC's website at www.gtec-inc.com.  Interested parties should dial in or log on approximately 10 minutes prior to the start of the call.

A replay of the call will be available beginning at 8:00 p.m. ET today and will remain available through midnight ET, August 19, 2010. To access the replay, call (888) 286-8010 (domestic) or +1 (617) 801-6888 (international).  The confirmation code for the replay is 27364401.  A replay will also be available via the Investor Relations page of GTEC's website approximately 3 hours after the conclusion of the call.

About Global Defense Technology & Systems, Inc.

Global Defense Technology & Systems, Inc. (GTEC) provides mission-critical, technology-based systems, solutions and services for national security agencies and programs of the U.S. government. Our services and solutions are integral parts of mission-critical programs run by the Department of Defense, Intelligence Community, Department of Homeland Security, federal law enforcement agencies, and other parts of the federal government charged with national security responsibilities. Learn more about Global Defense Technology & Systems at www.gtec-inc.com.  

"Safe Harbor" Statement under the Private Securities Litigation Reform Act of 1995: Statements in this announcement other than historical data and information constitute forward-looking statements that involve risks and uncertainties. A number of factors could cause our actual results, performance, achievements or industry results to differ materially from the results, performance or achievements expressed or implied by such forward-looking statements. Some of these factors include, but are not limited to, the risk factors set forth in Global Defense Technology & Systems, Inc.'s (GTEC) Annual Report on Form 10-K, and such other filings that GTEC makes with the Securities and Exchange Commission from time to time. Due to such uncertainties and risks, readers are cautioned not to place undue reliance on such forward-looking statements.  All forward-looking statements speak only as of the date hereof and GTEC undertakes no obligation to update such forward-looking statements in the future except as required by law.

Investor Relations:

Joseph Cormier


t: +1.703.883.2771


e: investors@gtec-inc.com



Media Contact:

Lauren Peduzzi


t:  +1.703.738.2861


e: media@gtec-inc.com



GLOBAL DEFENSE TECHNOLOGY & SYSTEMS, INC.

CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

(in thousands, except share and per share amounts)






As of


As of


June 30,


December 31,


2010


2009





Assets




Current assets




Cash and cash equivalents

$     1,738


$                   7

Accounts receivable, net

49,254


50,691

Due from affiliates

364


1,109

Prepaid expenses and other current assets

1,240


1,238

Deferred tax assets

589


324

Income taxes receivable

308


3,543

Total current assets

53,493


56,912

Property and equipment, net

3,509


3,441

Intangible assets, net

19,140


21,268

Goodwill  

24,373


24,373

Deferred tax assets

6,140


6,295

Other assets

442


222

Total assets

$ 107,097


$        112,511

Liabilities and Stockholders' Equity




Current liabilities




Accounts payable

$   10,286


$          13,040

Accrued expenses

6,966


9,521

Advance payments on contracts

526


517

Interest rate swap liability

-


106

Total current liabilities

17,778


23,184

Deferred rent

303


289

Bank loans, net of current

-


3,686

Total liabilities

18,081


27,159





Stockholders' Equity




Common stock, par value $0.01 per share, 90,000,000
  shares authorized and 9,071,812 and 9,051,812
  shares issued and outstanding, respectively

91


91









Additional paid-in capital

88,685


88,178

Retained earnings (accumulated deficit)

240


(2,917)

Total stockholders' equity

89,016


85,352

Total liabilities and stockholders' equity

$ 107,097


$        112,511



GLOBAL DEFENSE TECHNOLOGY & SYSTEMS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

(in thousands, except share and per share amounts)










Three Months Ended June 30,


Six Months Ended June 30,


2010


2009


2010


2009

Revenue








Products

$   25,232


$   31,332


$   46,486


$   59,010

Services

23,990


22,095


48,629


44,030

Total revenue

49,222


53,427


95,115


103,040









Operating costs and expenses








Cost of revenue - products

18,917


26,777


36,546


49,229

Cost of revenue - services

20,235


18,065


41,047


36,435

Selling, general and administrative  expenses

5,813


4,807


10,425


9,253

Amortization of intangible assets

722


2,089


2,128


4,178

Total operating costs and expenses

45,687


51,738


90,146


99,095

Operating income

3,535


1,689


4,969


3,945

Other income (expense)








Interest income

3


1


6


3

Interest expense

(47)


(491)


(55)


(1,000)

Income before income taxes

3,491


1,199


4,920


2,948

Provision for income taxes

(1,428)


(558)


(1,763)


(1,388)

Net income

$     2,063


$        641


$     3,157


$     1,560

















Earnings per share








Basic

$       0.23


$       0.11


$       0.35


$       0.26

Diluted

$       0.23


$       0.11


$       0.34


$       0.26

Weighted average common shares outstanding








Basic

9,036,432


6,000,000


9,036,432


6,000,000

Diluted

9,150,197


6,055,152


9,156,163


6,027,898



GLOBAL DEFENSE TECHNOLOGY & SYSTEMS, INC.

SELECTED SEGMENT INFORMATION

(UNAUDITED)

(in thousands)










Three Months Ended June 30,


Six Months Ended June 30,


2010


2009


2010


2009









Revenue








TIS Segment

$  23,990


$  22,095


$  48,629


$    44,030

FMMS Segment

25,232


31,332


46,486


59,010

Total revenue

$ 49,222


$ 53,427


$ 95,115


$ 103,040









Operating income








TIS Segment

$   1,976


$   1,831


$   3,917


$     3,897

FMMS Segment

4,005


3,272


6,182


7,104

Unallocated Corporate expenses

(2,446)


(3,414)


(5,130)


(7,056)

Total operating income

$   3,535


$   1,689


$   4,969


$     3,945









Operating margin








TIS Segment

8.2%


8.3%


8.1%


8.9%

FMMS Segment

15.9%


10.4%


13.3%


12.0%

Total segment

12.2%


9.6%


10.6%


10.7%



GLOBAL DEFENSE TECHNOLOGY & SYSTEMS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

(in thousands)


Six Months Ended June 30,


2010


2009





Cash flows from operating activities




Net income

$ 3,157


$ 1,560

Adjustments to reconcile net income to net cash provided by
   (used in) operating activities




Depreciation and amortization

500


497

Amortization of intangible assets

2,128


4,178

Equity-based compensation

507


153

Gain from change in fair value of interest rate swap

(106)


(50)

Deferred income taxes

(110)


(818)

Change in operating assets and liabilities




Accounts receivable

1,437


(12,986)

Due to/from affiliates

745


(399)

Prepaid expenses and other assets

5


(184)

Income taxes receivable

3,235


9,218

Accounts payable

(2,754)


(4,624)

Accrued expenses

(2,555)


597

Accrued interest on loans from affiliates

-


1,404

Advance payments on contracts

9


(4,001)

Deferred rent

14


37

Net cash provided by (used in) operating activities

6,212


(5,418)

Cash flows from investing activities




Purchases of property and equipment

(481)


(681)

Net cash used in investing activities

(481)


(681)

Cash flows from financing activities




Proceeds from overline note

-


3,000

Payments under term loan

-


(1,800)

Net (payments) borrowings under revolving line of credit

(3,686)


5,013

Payments of financing costs

(314)


-

Advances to affiliates

-


(1,319)

Net cash (used in) provided by financing activities

(4,000)


4,894

Increase (decrease) in cash and cash equivalents

1,731


(1,205)

Cash and cash equivalents, beginning of period

7


1,422

Cash and cash equivalents, end of period

$  1,738


$     217



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