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NOTE 1. ORGANIZATION AND BASIS OF PRESENTATION
Business Activities
CACI International Inc, along with its wholly-owned subsidiaries and joint ventures that are more than 50 percent owned or otherwise controlled by it (collectively, the Company), is an international information systems, high technology services, and professional services corporation. It delivers professional services and information technology solutions to its clients, primarily the U.S. government. Other customers include state and local governments, commercial enterprises and agencies of foreign governments.
The Company's operations are subject to certain risks and uncertainties including, among others, the dependence on contracts with federal government agencies, dependence on revenue derived from contracts awarded through competitive bidding, existence of contracts with fixed pricing, dependence on subcontractors to fulfill contractual obligations, dependence on key management personnel, ability to attract and retain qualified employees, ability to successfully integrate acquired companies, and current and potential competitors with greater resources.
Basis of Presentation
The accompanying consolidated financial statements of the Company have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (SEC) and include the assets, liabilities, results of operations and cash flows for the Company, including its subsidiaries and joint ventures that are more than 50 percent owned or otherwise controlled by the Company. All intercompany balances and transactions have been eliminated in consolidation.
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NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Revenue Recognition
The Company generates almost all of its revenue from three different types of contractual arrangements: cost-plus-fee contracts, time and materials contracts, and fixed price contracts. Revenue on cost-plus-fee contracts is recognized to the extent of costs incurred plus an estimate of the applicable fees earned. The Company considers fixed fees under cost-plus-fee contracts to be earned in proportion to the allowable costs incurred in performance of the contract. For cost-plus-fee contracts that include performance based fee incentives, and that are subject to the provisions of Accounting Standards Codification (ASC) 605-35, Revenue Recognition—Construction-Type and Production-Type Contracts (ASC 605-35), the Company recognizes the relevant portion of the expected fee to be awarded by the customer at the time such fee can be reasonably estimated, based on factors such as the Company's prior award experience and communications with the customer regarding performance. For such cost-plus-fee contracts subject to the provisions of ASC 605-10-S99, Revenue Recognition—SEC Materials (ASC 605-10-S99), the Company recognizes the relevant portion of the fee upon customer approval. Revenue on time and material contracts is recognized to the extent of billable rates times hours delivered for services provided, to the extent of material cost for products delivered to customers, and to the extent of expenses incurred on behalf of the customers. Shipping and handling fees charged to the customers are recognized as revenue at the time products are delivered to the customers.
The Company has four basic categories of fixed price contracts: fixed unit price, fixed price-level of effort, fixed price-completion, and fixed price-license. Revenue on fixed unit price contracts, where specified units of output under service arrangements are delivered, is recognized as units are delivered based on the specified price per unit. Revenue on fixed unit price maintenance contracts is recognized ratably over the length of the service period. Revenue for fixed price-level of effort contracts is recognized based upon the number of units of labor actually delivered multiplied by the agreed rate for each unit of labor.
A significant portion of the Company's fixed price-completion contracts involve the design and development of complex client systems. For these contracts that are within the scope of ASC 605-35, revenue is recognized on the percentage-of-completion method using costs incurred in relation to total estimated costs. For fixed price-completion contracts that are not within the scope of ASC 605-35, revenue is generally recognized ratably over the service period. The Company's fixed price-license agreements and related services contracts are primarily executed in its international operations. As the agreements to deliver software require significant production, modification or customization of software, revenue is recognized using the contract accounting guidance of ASC 605-35. For agreements to deliver data under license and related services, revenue is recognized as the data is delivered and services are performed. Except for losses on contracts accounted for under ASC 605-10-S99, provisions for estimated losses on uncompleted contracts are recorded in the period such losses are determined. Losses on contracts accounted for under ASC 605-10-S99 are recognized as the services and materials are provided.
The Company's contracts may include the provision of more than one of its services. In these situations, and for applicable arrangements, revenue recognition includes the proper identification of separate units of accounting and the allocation of revenue across all elements based on relative fair values, with proper consideration given to the guidance provided by other authoritative literature.
Contract accounting requires judgment relative to assessing risks, estimating contract revenue and costs, and making assumptions for schedule and technical issues. Due to the size and nature of many of the Company's contracts, the estimation of total revenue and cost at completion is complicated and subject to many variables. Contract costs include material, labor, subcontracting costs, and other direct costs, as well as an allocation of allowable indirect costs. Assumptions have to be made regarding the length of time to complete the contract because costs also include expected increases in wages and prices for materials. For contract change orders, claims or similar items, the Company applies judgment in estimating the amounts and assessing the potential for realization. These amounts are only included in contract value when they can be reliably estimated and realization is considered probable. Incentives or penalties related to performance on contracts are considered in estimating sales and profit rates, and are recorded when there is sufficient information for the Company to assess anticipated performance. Estimates of award fees for certain contracts are also a factor in estimating revenue and profit rates based on actual and anticipated awards.
Long-term development and production contracts make up a large portion of the Company's business, and therefore the amounts recorded in the Company's financial statements using contract accounting methods are material. For federal government contracts, the Company follows U.S. government procurement and accounting standards in assessing the allowability and the allocability of costs to contracts. Due to the significance of the judgments and estimation processes, it is likely that materially different amounts could be recorded if the Company used different assumptions or if the underlying circumstances were to change. The Company closely monitors compliance with, and the consistent application of, its critical accounting policies related to contract accounting. Business operations personnel conduct thorough periodic contract status and performance reviews. When adjustments in estimated contract revenue or costs are required, any changes from prior estimates are generally included in earnings in the current period. Also, regular and recurring evaluations of contract cost, scheduling and technical matters are performed by management personnel who are independent from the business operations personnel performing work under the contract. Costs incurred and allocated to contracts with the U.S. government are scrutinized for compliance with regulatory standards by Company personnel, and are subject to audit by the Defense Contract Audit Agency (DCAA).
From time to time, the Company may proceed with work based on client direction prior to the completion and signing of formal contract documents. The Company has a formal review process for approving any such work. Revenue associated with such work is recognized only when it can be reliably estimated and realization is probable. The Company bases its estimates on previous experiences with the client, communications with the client regarding funding status, and its knowledge of available funding for the contract or program.
The Company's U.S. government contracts (94.9 percent of total revenue in the year ended June 30, 2011) are subject to subsequent government audit of direct and indirect costs. Incurred cost audits have been completed through June 30, 2005. Management does not anticipate any material adjustment to the consolidated financial statements in subsequent periods for audits not yet started or completed.
Costs of Revenue
Costs of revenue include all direct contract costs as well as indirect overhead costs and selling, general and administrative expenses that are allowable and allocable to contracts under federal procurement standards. Costs of revenue also include costs and expenses that are unallowable under applicable procurement standards, and are not allocable to contracts for billing purposes. Such costs and expenses do not directly generate revenue, but are necessary for business operations.
Cash and Cash Equivalents
The Company considers all investments with an original maturity of three months or fewer on their trade date to be cash equivalents. The Company classifies investments with an original maturity of more than three months but less than twelve months on their trade date as short-term marketable securities.
Investments in Marketable Securities
From time to time, the Company invests in marketable securities that are classified as available-for-sale and are reported at fair value. Unrealized gains and losses as a result of changes in the fair value of the available-for-sale investments are recorded as a separate component within accumulated other comprehensive income in the accompanying consolidated balance sheets. For securities classified as trading securities, unrealized gains and losses are reported in the consolidated statement of operations and impact net earnings.
The fair value of marketable securities is determined based on quoted market prices at the reporting date for those securities. The cost of securities sold is determined using the specific identification method. Premiums and discounts are amortized over the period from acquisition to maturity, and are included in investment income, along with interest and dividends.
Allowance For Doubtful Accounts
The Company establishes bad debt reserves against certain billed receivables based upon the latest information available to determine whether invoices are ultimately collectible. Whenever judgment is involved in determining the estimates, there is the potential for bad debt expense and the fair value of accounts receivable to be misstated. Given that the Company primarily serves the U.S. government and that, in management's opinion, the Company has sufficient controls in place to properly recognize revenue, the Company believes the risk to be relatively low that a misstatement of accounts receivable would have a material impact on its consolidated financial statements. Accounts receivable balances are written-off when the balance is deemed uncollectible after exhausting all reasonable means of collection.
Inventories
Inventories are stated at the lower of cost or market using the specific identification cost method, and are recorded within prepaid expenses and other current assets on the accompanying consolidated balance sheets.
Goodwill
Goodwill represents the excess of costs over the fair value of assets of businesses acquired. Goodwill and intangible assets acquired in a purchase business combination and determined to have an indefinite useful life are not amortized, but instead tested for impairment at least annually or if impairment indicators are present. The evaluation includes comparing the fair value of the relevant reporting unit to the carrying value, including goodwill, of such unit. If the fair value exceeds the carrying value, no impairment loss is recognized. However, if the carrying value of the reporting unit exceeds its fair value, the goodwill of the reporting unit may be impaired. Impairment is measured by comparing the derived fair value of the goodwill to its carrying value.
The Company has two reporting units—domestic operations and international operations. Its reporting units are the same as its operating segments. Approximately 95 percent of the Company's goodwill is attributable to its domestic operations. The Company estimates the fair value of its reporting units using both an income approach and a market approach. The valuation process considers management's estimates of the future operating performance of each reporting unit. Companies in similar industries are researched and analyzed and management considers the domestic and international economic and financial market conditions, both in general and specific to the industry in which the Company operates, prevailing as of the valuation date. The income approach utilizes discounted cash flows. The Company calculates a weighted average cost of capital for each reporting unit in order to estimate the discounted cash flows. The Company performs its annual testing for impairment of goodwill and other indefinite life intangible assets as of June 30 of each year. The fair value of each of the Company's reporting units as of June 30, 2011 significantly exceeded its carrying value.
Long-Lived Assets (Excluding Goodwill)
Long-lived assets such as property and equipment and intangible assets subject to amortization are reviewed for impairment whenever events or circumstances indicate that the carrying amount of an asset may not be fully recoverable. An impairment loss would be recognized if the sum of the long-term undiscounted cash flows is less than the carrying amount of the long-lived asset being evaluated. Any write-downs are treated as permanent reductions in the carrying amount of the assets. Property and equipment is recorded at cost. Depreciation of equipment and furniture has been provided over the estimated useful life of the respective assets (ranging from three to eight years) using the straight-line method. Leasehold improvements are generally amortized using the straight-line method over the remaining lease term or the useful life of the improvements, whichever is shorter. Repairs and maintenance costs are expensed as incurred. Separately identifiable intangible assets with estimable useful lives are amortized over their respective estimated useful lives to their estimated residual values. The Company believes that the carrying values of its long-lived assets as of June 30, 2011 and 2010 are fully realizable.
External Software Development Costs
Costs incurred in creating a software product to be sold or licensed for external use are charged to expense when incurred as indirect costs and selling expenses until technological feasibility has been established for the software. Technological feasibility is established upon completion of a detailed program design or, in its absence, completion of a working software version. Thereafter, all such software development costs are capitalized and subsequently reported at the lower of unamortized cost or estimated net realizable value. Capitalized costs are amortized on a straight-line basis over the remaining estimated economic life of the product.
Supplemental Retirement Savings Plan
The Company maintains the CACI International Inc Group Executive Retirement Plan (the Supplemental Savings Plan) and maintains the underlying assets in a Rabbi Trust. The Supplemental Savings Plan is a
non-qualified defined contribution supplemental retirement savings plan for certain key employees whereby participants may elect to defer and contribute a portion of their compensation, as permitted by the plan. Each participant directs his or her investments in the Supplemental Savings Plan (see Note 20).
A Rabbi Trust is a grantor trust established to fund compensation for a select group of management. The assets of this trust are available to satisfy the claims of general creditors in the event of bankruptcy of the Company. The assets held by the Rabbi Trust are invested in both corporate owned life insurance (COLI) products and in non-COLI products. The COLI products are recorded at cash surrender value in the consolidated financial statements as supplemental retirement savings plan assets and the non-COLI products are recorded at fair value in the consolidated financial statements as supplemental retirement savings plan assets. The amounts due to participants are based on contributions participant investment elections, and other participant activity and are recorded as supplemental retirement savings plan obligations.
Income Taxes
Income taxes are accounted for using the asset and liability method whereby deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the consolidated financial statement carrying amounts of assets and liabilities, and their respective tax bases, and operating loss and tax credit carry forwards. The Company accounts for tax contingencies in accordance with updates made to ASC 740-10-25, Income Taxes—Recognition. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities due to a change in tax rates is recognized in income in the period that includes the enactment date. Estimates of the realizability of deferred tax assets are based on the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies. Any interest or penalties incurred in connection with income taxes are recorded as part of income tax expense for financial reporting purposes.
Costs of Acquisitions
Through June 30, 2009, costs incurred by the Company related to legal, financial and other professional advisors that were directly related to successful acquisitions were capitalized as a cost of the acquisition. Such costs for unsuccessful or terminated acquisition opportunities were expensed when the Company determined that the opportunity would no longer be pursued. Effective July 1, 2009, all such costs associated with acquisitions, successful or unsuccessful, are expensed as incurred.
Foreign Currency Translation
The assets and liabilities of the Company's foreign subsidiaries whose functional currency is other than the U.S. dollar are translated at the exchange rate in effect on the reporting date, and income and expenses are translated at the weighted-average exchange rate during the period. The Company's primary practice is to negotiate contracts in the same currency in which the predominant expenses are incurred, thereby mitigating the exposure to foreign currency fluctuations. The net translation gains and losses are not included in determining net income, but are accumulated as a separate component of shareholders' equity. Foreign currency transaction gains and losses are included in determining net income, but are insignificant. These costs are included as indirect costs and selling expenses in the accompanying consolidated statements of operations.
Earnings Per Share
Basic earnings per share is computed using the sum of the weighted-average number of shares of common stock outstanding during the period and shares issued during the period are weighted for the portion of the period
that they were outstanding. Diluted earnings per share is computed in a manner similar to that used for basic earnings per share after giving effect to the dilutive effects of the exercise of stock settled stock appreciation rights and stock options and the vesting of restricted stock and restricted stock units. In addition, diluted earnings per share reflect the dilutive effects of restricted stock units with performance conditions in the reporting period in which the performance metric is achieved. When applicable, diluted earnings per share reflect the dilutive effects of shares issuable under the Company's $300.0 million of 2.125 percent convertible senior subordinated notes that were issued on May 16, 2007 and mature on May 1, 2014 (the Notes), and warrants to issue 5.5 million shares of CACI common stock at an exercise price of $68.31 per share that were issued in May 2007. Information about the weighted-average number of basic and diluted shares is presented in Note 23.
Fair Value of Financial Instruments
The carrying amounts of cash and cash equivalents, accounts receivable, accounts payable and amounts included in other current assets and current liabilities that meet the definition of a financial instrument approximate fair value because of the short-term nature of these amounts.
The fair value of the Company's debt under its bank credit facility approximates its carrying value at June 30, 2011. The fair value of the Company's debt under its bank credit facility was estimated using market data on companies with a corporate rating similar to CACI's that have recently priced credit facilities. The fair value of the Notes is based on quoted market prices (see Note 13).
Concentrations of Credit Risk
Financial instruments that potentially subject the Company to credit risk include accounts receivable and cash equivalents. Management believes that credit risk related to the Company's accounts receivable is limited due to a large number of customers in differing segments and agencies of the U.S. government. Accounts receivable credit risk is also limited due to the credit worthiness of the U.S. government. Management believes the credit risk associated with the Company's cash equivalents is limited due to the credit worthiness of the obligors of the investments underlying the cash equivalents. In addition, although the Company maintains cash balances at financial institutions that exceed federally insured limits, these balances are placed with high quality financial institutions.
Comprehensive Income
Comprehensive income is the change in equity of a business enterprise during a period from transactions and other events and circumstances from non-owner sources. Other comprehensive income refers to revenue, expenses, and gains and losses that under U.S. GAAP are included in comprehensive income, but excluded from the determination of net income. The elements within other comprehensive income consist of foreign currency translation adjustments; the changes in the fair value of interest rate swap agreements, net of tax; and differences between actual amounts and estimates based on actuarial assumptions and the effect of changes in actuarial assumptions made under the Company's post-retirement benefit plans, net of tax (see Note 15).
As of June 30, 2011 and 2010, accumulated other comprehensive loss included a loss of $2.4 million and $9.1 million, respectively, related to foreign currency translation adjustments and a loss of $0.7 million in both years, related to unrecognized post-retirement medical plan costs.
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reported periods. The significant management estimates include estimated costs to complete fixed-price contracts, estimated award fees for contracts accounted for under ASC 605-35, amortization periods for long-lived intangible assets, recoverability of long-lived assets, reserves for accounts receivable, reserves for contract related matters, reserves for unrecognized tax benefits, contingent consideration amounts to be paid in connection with certain acquisitions completed on or after July 1, 2009 and loss contingencies. Actual results could differ from these estimates.
Commitments and Contingencies
Liabilities for loss contingencies arising from claims, assessments, litigation, fines and penalties and other sources are recorded when it is probable that a liability has been incurred and the amount of the assessment and/or remediation can be reasonably estimated.
Reclassifications
Certain reclassifications have been made to the prior years' financial statements in order to conform to the current presentation.
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NOTE 3. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
The Company adopted the provisions of updates to ASC 470-20, Debt with Conversion and Other Options (ASC 470-20) and ASC 810, Consolidation (ASC 810) effective July 1, 2009.
ASC 470-20 governs the accounting for convertible debt with cash settlement options and accordingly applies to the Company's convertible debt. Under this standard, the Company separately accounts for the liability and equity (conversion option) components of the Notes, and recognizes interest expense on the Notes using an interest rate in effect for comparable debt instruments that do not contain conversion features. The effective interest rate used under the standard, 6.9 percent, is significantly higher than the coupon rate of 2.125 percent used prior to adoption to record interest expense.
Based on the effective rate of 6.9 percent, the fair value of the liability component of the Notes at May 16, 2007 was measured at $221.9 million, and has been reflected as the carrying amount of the Notes at issuance. The $78.1 million difference between the recast initial carrying amount and the $300.0 million of gross proceeds is accounted for as an unamortized debt discount that is recognized over the seven year term of the Notes as a non-cash component of interest expense. This difference also represents the fair value of the embedded conversion option. This amount, net of the income tax effect of $30.7 million as of the date of issue, was recorded within shareholders' equity as additional paid-in capital. The income tax effect of $30.7 million was retroactively recognized as a long-term deferred tax liability as of May 16, 2007. This deferred tax liability was netted against the deferred tax asset of $32.8 million associated with the original issue discount originally recorded as of May 16, 2007. Under the revised provisions of ASC 470-20, the Company also reclassified, as of the date of issue, $2.0 million of the Notes' issuance costs from other long-term assets to additional paid-in capital, and recognized a deferred tax asset of $0.8 million related to this reclassification.
The updates to ASC 470-20 had the effect of significantly increasing interest expense with the amortization of the debt discount. Income tax expense decreased by the incremental benefit related to the increased interest expense, and net income and basic and diluted earnings per share decreased due to the after-tax effect of the incremental interest expense. While there was no effect on operating or total cash flows, certain amounts within the cash flows from operating activities were retroactively adjusted to reflect the impact of changes to ASC 470-20 for the year ended June 30, 2009.
The retroactive effects of the ASC 470-20 updates on the Company's financial position as of June 30, 2009, and on the results of operations and cash flows for the year then ended, are shown in the tables below. Current period balances related to the convertible debt and interest expense thereon are described in Note 13.
The updates to ASC 810 established new accounting and reporting standards for 1) noncontrolling ownership interests in subsidiaries, 2) the amount of consolidated net income (loss) attributable to the Company and to the noncontrolling interests, 3) changes in the Company's ownership interest and 4) the valuation of retained noncontrolling equity investments when a subsidiary is deconsolidated. ASC 810 also established additional reporting requirements that identify and distinguish between the ownership interest of the Company and that of the noncontrolling owners.
In accordance with the provisions of ASC 810, the Company retrospectively reclassified the "Minority interest in joint venture" balance associated with its investment in eVenture Technology, LLC (eVentures) previously included in "Other long-term liabilities" in the consolidated balance sheet to a new component of shareholders' equity entitled "Noncontrolling interest in joint venture". In the Statement of Operations for the year ended June 30, 2009, the Company retrospectively included the minority interest in earnings of the joint venture within its consolidated net income before noncontrolling interest in earnings of joint venture, and deducted the same amount to derive net income attributable to CACI.
The impacts of the updates to ASC 470-20 and ASC 810 on the Company's results of operations for the year ended June 30, 2009 are as follows (in thousands, except per share data):
| Year Ended June 30, 2009 | ||||||||||||||||
| Effects of Retroactively Adopting Accounting Standard Updates to: |
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| As Previously Reported |
ASC 470-20 | ASC 810 | As Adjusted | |||||||||||||
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Interest expense and other |
$ | 23,062 | $ | 9,521 | $ | (719 | ) | $ | 31,864 | |||||||
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Income before income taxes |
$ | 161,791 | $ | (9,521 | ) | $ | 719 | $ | 152,989 | |||||||
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Income taxes |
66,311 | (3,739 | ) | — | 62,572 | |||||||||||
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Net income before noncontrolling interest in earnings of joint venture |
$ | 95,480 | $ | (5,782 | ) | $ | 719 | $ | 90,417 | |||||||
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Noncontrolling interest in earnings of joint venture |
— | (719 | ) | (719 | ) | |||||||||||
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Net income attributable to CACI |
$ | (5,782 | ) | $ | — | $ | 89,698 | |||||||||
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Basic earnings per share |
$ | 3.19 | $ | (0.20 | ) | $ | — | $ | 2.99 | |||||||
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Diluted earnings per share |
$ | 3.14 | $ | (0.19 | ) | $ | — | $ | 2.95 | |||||||
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Weighted-average basic shares outstanding |
29,976 | — | — | 29,976 | ||||||||||||
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Weighted-average diluted shares outstanding |
30,427 | — | — | 30,427 | ||||||||||||
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The impacts of the updates to ASC 470-20 and ASC 810 on the Company's statement of cash flows for the year ended June 30, 2009 are as follows (in thousands):
| Year Ended June 30, 2009 | ||||||||||||||||
| Effects of Retroactively Adopting Accounting Standard Updates to: |
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| As Previously Reported |
ASC 470-20 | ASC 810 | As Adjusted | |||||||||||||
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Cash Flows from Operating Activities: |
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Net income before non-controlling interests |
$ | 95,480 | $ | (5,782 | ) | $ | 719 | $ | 90,417 | |||||||
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Non-cash interest expense |
— | 9,809 | — | 9,809 | ||||||||||||
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Amortization of deferred financing costs |
2,841 | (288 | ) | — | 2,553 | |||||||||||
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Deferred income tax expense (benefit) |
13,363 | (3,739 | ) | — | 9,624 | |||||||||||
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Changes in other liabilities |
(359 | ) | — | (881 | ) | (1,240 | ) | |||||||||
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Net cash provided by operating activities |
151,080 | — | (162 | ) | 150,918 | |||||||||||
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Cash Flows from Financing Activities: |
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Other activities |
(1,318 | ) | — | 162 | (1,156 | ) | ||||||||||
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Net cash used in financing activities |
(21,263 | ) | — | 162 | (21,101 | ) | ||||||||||
In June 2009, the FASB issued updates to ASC 810, Consolidation (ASC 810). These ASC 810 updates amend the accounting standards pertaining to the consolidation of certain variable interest entities, and when and how to determine, or re-determine, whether an entity is a variable interest entity. In addition, ASC 810 replaces the quantitative approach for determining who has a controlling financial interest in a variable interest entity with a qualitative approach, and requires ongoing assessments of whether an entity is the primary beneficiary of a variable interest entity. The updates to ASC 810 were effective for the Company beginning July 1, 2010. The adoption of ASC 810 did not have a material effect on the Company's financial position or results of operations.
In October 2009, the FASB issued Accounting Standard Update (ASU) No. 2009-13, Multiple-Deliverable Revenue Arrangements (ASU 2009-13) which amends ASC Topic 605, Revenue Recognition. This accounting update establishes a hierarchy for determining the value of each element within a multiple deliverable arrangement. ASU 2009-13 was effective for the Company beginning July 1, 2010 and applies to arrangements entered into on or after this date. The adoption of ASU 2009-13 did not have a material effect on the Company's financial position or results of operations.
In October 2009, the FASB issued ASU No. 2009-14, Certain Revenue Arrangements That Include Software Elements (ASU 2009-14), which updates ASC Topic 985, Software. ASU 2009-14 clarifies which accounting guidance should be used for purposes of measuring and allocating revenue for arrangements that contain both tangible products and software, and where the software is more than incidental to the tangible product as a whole. ASU 2009-14 was effective for the Company beginning July 1, 2010 and applies to arrangements entered into on or after this date. The adoption of ASU 2009-14 did not have a material effect on the Company's financial position or results of operations.
In January 2010, the FASB issued ASU No. 2010-06, Fair Value Measurements and Disclosures (Topic 820)—Improving Disclosures about Fair Value Measurements (ASU 2010-06). This update requires new disclosures around transfers into and out of Levels 1 and 2 in the fair value hierarchy, and separate disclosures about purchases, sales, issuances, and settlements related to Level 3 measurements. ASU 2010-06 was effective for interim and annual reporting periods beginning after December 15, 2009 with early adoption permitted, except for the disclosures about purchases, sales, issuances, and settlements in the rollforward of Level 3 activity. Those disclosures are effective for fiscal years beginning after December 15, 2010 and for interim periods within those fiscal years with early adoption permitted. The Company has provided the required disclosures regarding the valuation techniques utilized in measuring its Level 3 assets and liabilities (see Note 22). The Company will adopt the provisions of ASU 2010-06 pertaining to transfers into and out of the Level 3 category effective July 1, 2011.
In December 2010, the FASB issued ASU No. 2010-29, Disclosure of Supplementary Pro Forma Information for Business Combinations (ASU 2010-29) which amends ASC Topic 805, Business Combinations. This accounting update specifies that if a public entity presents comparative financial statements, the entity should disclose revenue and earnings of the combined entity as though the business combination that occurred during the current year had occurred as of the beginning of the comparable prior annual reporting period only. ASU 2010-29 is effective for the Company beginning July 1, 2011 and applies to acquisitions entered into on or after this date. The adoption of ASU 2010-29 will not have a material impact on the Company's financial position or results of operations.
In June 2011, the FASB issued ASU No. 2011-05, Presentation of Comprehensive Income (ASU 2011-05) which amends ASC Topic 220, Comprehensive Income. This accounting update requires companies to present the total of comprehensive income, the components of net income, and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements. ASU 2011-05 is effective for the Company beginning July 1, 2012. The adoption of ASU 2011-05 will impact disclosures only and will not impact the Company's financial position or results of operations.
|
|||
NOTE 4. ACQUISITIONS
Year Ended June 30, 2011
During the year ended June 30, 2011, the Company completed acquisitions of three businesses that have added to the Company's portfolio of cyber security and information technology modernization solutions, two in the United States and one in the United Kingdom, as follows:
| • |
On November 1, 2010, the acquisition of 100 percent of TechniGraphics, Inc., a United States-based company that provides imaging and geospatial services to the U.S. government; |
| • |
On November 1, 2010, the acquisition of 100 percent of Applied Systems Research, Inc, a United States-based company that provides technical services and products to the U.S. government; and |
| • |
On February 10, 2011, the acquisition of 100 percent of Chronotech b.v., a Dutch company specializing in advanced on-line applications for government and commercial organizations. |
The combined initial purchase consideration to acquire these three businesses was approximately $132.5 million, of which $14.0 million was deposited into escrow accounts pending final determination of the net worth of the assets acquired and to secure the sellers' indemnification obligations for the United States-based acquisitions and approximately $1.5 million was retained by CACI Limited to secure the United Kingdom-based sellers' indemnification obligations (collectively, Indemnification Amounts). Remaining Indemnification Amounts, if any, at the end of the indemnification periods will be distributed to the Sellers. All remaining Indemnification Amounts, if any, are expected to be distributed to the sellers by February 2013.
Subsequent to the dates of the acquisitions, the Company and the Sellers of each company agreed on the net worth of the assets acquired in each acquisition and, as a result, the Company paid an additional $2.1 million of purchase consideration.
The Company has completed its detailed valuations of the assets acquired and liabilities assumed. Based on the Company's valuations, the total consideration of $134.6 million has been allocated to assets acquired, including identifiable intangible assets and goodwill, and liabilities assumed, as follows (in thousands):
|
Cash |
$ | 2,773 | ||
|
Accounts receivable |
12,070 | |||
|
Prepaid expenses and other current assets |
1,267 | |||
|
Property and equipment |
2,143 | |||
|
Customer contracts, customer relationships, non-compete agreements |
37,913 | |||
|
Goodwill |
98,800 | |||
|
Other assets |
51 | |||
|
Accounts payable |
(1,234 | ) | ||
|
Accrued expenses and other current liabilities |
(7,153 | ) | ||
|
Long-term deferred taxes |
(12,000 | ) | ||
|
|
|
|||
|
Total consideration paid |
$ | 134,630 | ||
|
|
|
The value attributed to customer contracts, customer relationships and non-compete agreements is being amortized on an accelerated basis over periods ranging from four to 10 years.
During the year ended June 30, 2011, these three businesses generated $40.0 million of revenue from the dates of acquisition through the Company's fiscal year end.
Year Ended June 30, 2010
During the year ended June 30, 2010, the Company completed acquisitions of three businesses, two in the United States and one in the United Kingdom. The total consideration recorded to acquire these three businesses, including the amounts paid at closing, additional payments made subsequent to closing based on the final agreed net worth of the assets acquired in each acquisition, transaction costs paid, and the fair value at the date of each acquisition attributable to contingent consideration which may be paid to the sellers of each acquisition based on events to occur in the first two years subsequent to each acquisition date, was approximately $129.1 million. The Company recognized fair values of the assets acquired and liabilities assumed and allocated $83.0 million to goodwill and $48.2 million to other intangible assets, primarily customer relationships and acquired technologies, with the balance allocated to net tangible assets and liabilities assumed. These fair values represent management's calculations of the fair values as of the acquisition dates and are based on analysis of supporting information.
The maximum contingent consideration that could have been paid in connection of all three acquisition was $49.0 million, and the combined acquisition date fair value was $35.8 million. During the year ended June 30, 2011, $3.3 million of contingent consideration was earned and paid in connection with one of the acquisitions, and the remaining fair value of the contingent consideration liability recorded as of June 30, 2011 related to all three acquisitions is $20.8 million. This amount is included in other accrued expenses and current liabilities on the accompanying consolidated balance sheet. See Notes 12 and 22 for additional information.
Year Ended June 30, 2009
During the year ended June 30, 2009, the Company completed acquisitions of three businesses in the United Kingdom. The total consideration paid for these three businesses, including transaction costs, was $27.4 million, using exchange rates in effect on the date of each acquisition. The Company recognized fair values of the assets acquired and liabilities assumed and allocated $21.0 million to goodwill; $4.1 million to other intangible assets, primarily computer software and customer relationships; and $2.3 million to net tangible assets. These fair values represent management's calculations of the fair values as of the acquisition dates and are based on analysis of supporting information.
Two of the acquisitions contained provisions requiring that the Company pay additional consideration of up to a total of approximately $5.0 million, based upon events to occur subsequent to the acquisition date. During the year ended June 30, 2010, in connection with one of the acquisitions, it was determined that no additional consideration would be due. In connection with the other acquisition, additional consideration due, if any, will be determined as of the three year anniversary of the acquisition in January 2012.
|
|||
NOTE 5. CASH AND CASH EQUIVALENTS
Cash and cash equivalents consisted of the following (cost approximates fair value) (in thousands):
| June 30, | ||||||||
| 2011 | 2010 | |||||||
|
Cash |
$ | 163,788 | $ | 192,844 | ||||
|
Money market funds |
1,029 | 61,699 | ||||||
|
|
|
|
|
|||||
|
Total cash and cash equivalents |
$ | 164,817 | $ | 254,543 | ||||
|
|
|
|
| |||||
|
|||
NOTE 6. ACCOUNTS RECEIVABLE
Total accounts receivable, net of allowance for doubtful accounts of approximately $3.7 million and $3.2 million at June 30, 2011 and 2010, respectively, consisted of the following (in thousands):
| June 30, | ||||||||
| 2011 | 2010 | |||||||
|
Billed receivables |
$ | 452,533 | $ | 393,094 | ||||
|
Billable receivables at end of period |
66,587 | 84,107 | ||||||
|
Unbilled receivables pending receipt of contractual documents authorizing billing |
53,922 | 53,832 | ||||||
|
|
|
|
|
|||||
|
Total accounts receivable, current |
573,042 | 531,033 | ||||||
|
Unbilled receivables, retainages and fee withholdings expected to be billed beyond the next 12 months |
8,657 | 9,291 | ||||||
|
|
|
|
|
|||||
|
Total accounts receivable |
$ | 581,699 | $ | 540,324 | ||||
|
|
|
|
|
|||||
|
|||
NOTE 7. GOODWILL
For the year ended June 30, 2011, goodwill increased as a result of the acquisitions made during the year (Note 4). Many of the acquisitions completed by the Company are structured in a manner whereby goodwill is deductible for income tax purposes. As of June 30, 2011, the Company had $487.6 million of goodwill which is deductible for income tax purposes.
|
|||
NOTE 8. INTANGIBLE ASSETS
Intangible assets consisted of the following (in thousands):
| June 30, | ||||||||
| 2011 | 2010 | |||||||
|
Customer contracts and related customer relationships |
$ | 291,174 | $ | 253,031 | ||||
|
Acquired technologies |
27,177 | 27,177 | ||||||
|
Covenants not to compete |
3,070 | 2,373 | ||||||
|
Other |
1,637 | 1,631 | ||||||
|
|
|
|
|
|||||
|
Intangible assets |
323,058 | 284,212 | ||||||
|
Less accumulated amortization |
(214,956 | ) | (175,914 | ) | ||||
|
|
|
|
|
|||||
|
Total intangible assets, net |
$ | 108,102 | $ | 108,298 | ||||
|
|
|
|
|
|||||
Intangible assets are primarily amortized on an accelerated basis over periods ranging from 12 to 120 months. The weighted-average period of amortization for customer contracts and related customer relationships as of June 30, 2011 is 8.5 years, and the weighted-average remaining period of amortization is 6.8 years. The weighted-average period of amortization for acquired technologies as of June 30, 2011 is 6.7 years, and the weighted-average remaining period of amortization is 6.0 years.
Amortization expense for the years ended June 30, 2011, 2010 and 2009 was $38.8 million, $37.2 million, and $32.1 million, respectively. Accumulated amortization as of June 30, 2011 for customer contracts and related customer relationships and for acquired technologies was $198.7 million and $13.0 million, respectively. Expected amortization expense for each of the fiscal years through June 30, 2016 and for periods thereafter is as follows (in thousands):
| Amount | ||||
|
Year ending June 30, 2012 |
$ | 29,261 | ||
|
Year ending June 30, 2013 |
21,677 | |||
|
Year ending June 30, 2014 |
17,859 | |||
|
Year ending June 30, 2015 |
13,296 | |||
|
Year ending June 30, 2016 |
8,606 | |||
|
Thereafter |
17,403 | |||
|
|
|
|||
|
Total intangible assets, net |
$ | 108,102 | ||
|
|
|
|||
|
|||
NOTE 9. PROPERTY AND EQUIPMENT
Property and equipment consisted of the following (in thousands):
| June 30, | ||||||||
| 2011 | 2010 | |||||||
|
Equipment and furniture |
$ | 76,233 | $ | 69,164 | ||||
|
Leasehold improvements |
57,889 | 53,745 | ||||||
|
|
|
|
|
|||||
|
Property and equipment, at cost |
134,122 | 122,909 | ||||||
|
Less accumulated depreciation and amortization |
(71,367 | ) | (64,243 | ) | ||||
|
|
|
|
|
|||||
|
Total property and equipment, net |
$ | 62,755 | $ | 58,666 | ||||
|
|
|
|
|
|||||
Depreciation expense, including amortization of leasehold improvements, was $16.6 million, $13.9 million and $11.1 million for the years ended June 30, 2011, 2010 and 2009, respectively.
|
|||
NOTE 10. CAPITALIZED EXTERNAL SOFTWARE DEVELOPMENT COSTS
A summary of changes in capitalized external software development costs, including costs capitalized and amortized during each of the years in the three-year period ended June 30, 2011, is as follows (in thousands):
| Year ended June 30, | ||||||||||||
| 2011 | 2010 | 2009 | ||||||||||
|
Capitalized software development costs, beginning of year |
$ | 1,315 | $ | 2,001 | $ | 5,165 | ||||||
|
Costs capitalized |
3,358 | 1,230 | 171 | |||||||||
|
Amortization |
(624 | ) | (1,916 | ) | (3,335 | ) | ||||||
|
|
|
|
|
|
|
|||||||
|
Capitalized software development costs, end of year |
$ | 4,049 | $ | 1,315 | $ | 2,001 | ||||||
|
|
|
|
|
|
|
|||||||
Capitalized software development costs are presented within other current assets and other long-term assets in the accompanying consolidated balance sheets.
|
|||
NOTE 11. ACCRUED COMPENSATION AND BENEFITS
Accrued compensation and benefits consisted of the following (in thousands):
| June 30, | ||||||||
| 2011 | 2010 | |||||||
|
Accrued salaries and withholdings |
$ | 102,116 | $ | 86,748 | ||||
|
Accrued leave |
60,437 | 54,460 | ||||||
|
Accrued fringe benefits |
11,033 | 11,582 | ||||||
|
|
|
|
|
|||||
|
Total accrued compensation and benefits |
$ | 173,586 | $ | 152,790 | ||||
|
|
|
|
|
|||||
|
|||
NOTE 12. OTHER ACCRUED EXPENSES AND CURRENT LIABILITIES
Other accrued expenses and current liabilities consisted of the following (in thousands):
| June 30, | ||||||||
| 2011 | 2010 | |||||||
|
Vendor obligations |
$ | 84,434 | $ | 82,345 | ||||
|
Deferred revenue |
34,127 | 24,249 | ||||||
|
Deferred acquisition consideration |
24,779 | 3,420 | ||||||
|
Other |
13,902 | 18,545 | ||||||
|
|
|
|
|
|||||
|
Total other accrued expenses and current liabilities |
$ | 157,242 | $ | 128,559 | ||||
|
|
|
|
|
|||||
The deferred acquisition consideration of $24.8 million as of June 30, 2011 includes $20.8 million of contingent consideration associated with acquisitions made by the Company during the year ended June 30, 2010 (see Note 22) and $3.5 million related to amounts retained by the Company to secure the Seller's indemnification obligations in connection with three past U.K. acquisitions.
|
|||
NOTE 13. LONG TERM DEBT
Long-term debt consisted of the following (in thousands):
| June 30, | ||||||||
| 2011 | 2010 | |||||||
|
Convertible notes payable |
$ | 300,000 | $ | 300,000 | ||||
|
Bank credit facility—term loans |
146,250 | 278,653 | ||||||
|
|
|
|
|
|||||
|
Principal amount of long-term debt |
446,250 | 578,653 | ||||||
|
Less unamortized discount |
(36,313 | ) | (47,549 | ) | ||||
|
|
|
|
|
|||||
|
Total long-term debt |
409,937 | 531,104 | ||||||
|
Less current portion |
(7,500 | ) | (278,653 | ) | ||||
|
|
|
|
|
|||||
|
Long-term debt, net of current portion |
$ | 402,437 | $ | 252,451 | ||||
|
|
|
|
|
|||||
Bank Credit Facility
The Company has a $750.0 million credit facility (the Credit Facility), which consists of a $600.0 million revolving credit facility (the Revolving Facility) and a $150.0 million term loan (the Term Loan). The Revolving Facility has subfacilities of $50.0 million for same-day swing line loan borrowings and $25.0 million for stand-by letters of credit. The Credit Facility was entered into on October 21, 2010 and replaced the Company's then outstanding term loan and revolving credit facility.
The Revolving Facility is a secured facility that permits continuously renewable borrowings of up to $600.0 million, with an expiration date of October 21, 2015. As of June 30, 2011, the Company had no borrowings outstanding under the Revolving Facility and no outstanding letters of credit. The Company pays a quarterly facility fee for the unused portion of the Revolving Facility.
The Term Loan is a five-year secured facility under which principal payments are due in quarterly installments of $1.9 million through December 31, 2013 and $3.8 million from January 1, 2014 through September 30, 2015, with the balance due in full on October 21, 2015.
At any time and so long as no default has occurred, the Company has the right to increase the Term Loan or Revolving Facility in an aggregate principal amount of up to $200.0 million with applicable lender approvals. The Credit Facility is available to refinance existing indebtedness and for general corporate purposes, including working capital expenses and capital expenditures.
The interest rates applicable to loans under the Credit Facility are floating interest rates that, at the Company's option, equal a base rate or a Eurodollar rate plus, in each case, an applicable margin based upon the Company's consolidated total leverage ratio. As of June 30, 2011, the effective interest rate, excluding the effect of amortization of debt financing costs, for the outstanding borrowings under the Credit Facility was 2.21 percent.
The Credit Facility requires the Company to comply with certain financial covenants, including a maximum senior secured leverage ratio, a maximum total leverage ratio and a minimum fixed charge coverage ratio. The Credit Facility also includes customary negative covenants restricting or limiting the Company's ability to guarantee or incur additional indebtedness, grant liens or other security interests to third parties, make loans or investments, transfer assets, declare dividends or redeem or repurchase capital stock or make other distributions, prepay subordinated indebtedness and engage in mergers, acquisitions or other business combinations, in each case except as expressly permitted under the Credit Facility. Since the inception of the Credit Facility, the Company has been in compliance with all of the financial covenants. A majority of the Company's assets serve as collateral under the Credit Facility.
The Company capitalized $6.0 million of debt issuance costs associated with the origination of the Credit Facility. All debt issuance costs are being amortized from the date incurred to the expiration date of the Credit Facility. The unamortized balance of $5.2 million at June 30, 2011 is included in other assets.
As of June 30, 2010 the Company had a $590.0 million credit facility (the 2004 Credit Facility), consisting of a $240.0 million revolving credit facility (the 2004 Revolving Facility) and a $350.0 million term loan (the 2004 Term Loan). The 2004 Revolving Facility was a seven-year, secured facility that permitted continuously renewable borrowings of up to $240.0 million, with an expiration date of May 3, 2011. The 2004 Term Loan was a seven-year secured facility under which principal payments were due in quarterly installments of $0.7 million at the end of each fiscal quarter through March 2011, and the balance would have been due in full on May 3, 2011. Borrowings under both the 2004 Revolving Facility and the 2004 Term Loan bore interest rates based on the London Inter-Bank Offered Rate (LIBOR) or the higher of the prime rate or the federal funds rate plus 0.5 percent, as elected by the Company, in each case plus applicable margins based on the Company's total leverage ratio as determined quarterly. On October 21, 2010 the 2004 Credit Facility was replaced by the Credit Facility described above.
Convertible Notes Payable
Effective May 16, 2007, the Company issued the Notes in a private placement. The Notes were issued at par value and are subordinate to the Company's senior secured debt. Interest on the Notes is payable on May 1 and November 1 of each year.
Holders may convert their notes at a conversion rate of 18.2989 shares of CACI common stock for each $1,000 of note principal (an initial conversion price of $54.65 per share) under the following circumstances: 1) if the last reported sale price of CACI stock is greater than or equal to 130 percent of the applicable conversion price for at least 20 trading days in the period of 30 consecutive trading days ending on the last trading day of the preceding fiscal quarter; 2) during the five consecutive business day period immediately after any ten consecutive trading day period (the note measurement period) in which the average of the trading price per $1,000 principal amount of convertible note was equal to or less than 97 percent of the average product of the closing price of a share of the Company's common stock and the conversion rate of each date during the note measurement period; 3) upon the occurrence of certain corporate events constituting a fundamental change, as defined in the indenture governing the Notes; or 4) during the last three-month period prior to maturity. CACI is required to satisfy 100 percent of the principal amount of these notes solely in cash, with any amounts above the principal amount to be satisfied in common stock. As of June 30, 2011, none of the conditions permitting conversion of the Notes had been satisfied.
In the event of a fundamental change, as defined in the indenture governing the Notes, holders may require the Company to repurchase the Notes at a price equal to the principal amount plus any accrued interest. Also, if certain fundamental changes occur prior to maturity, the Company will in certain circumstances increase the conversion rate by a number of additional shares of common stock or, in lieu thereof, the Company may in certain circumstances elect to adjust the conversion rate and related conversion obligation so that these notes are convertible into shares of the acquiring or surviving company. The Company is not permitted to redeem the Notes.
The Company separately accounts for the liability and the equity (conversion option) components of the Notes and recognizes interest expense on the Notes using an interest rate in effect for comparable debt instruments that do not contain conversion features. The effective interest rate for the Notes excluding the conversion option was determined to be 6.9 percent.
The fair value of the liability component of the Notes was calculated to be $221.9 million at May 16, 2007, the date of issuance. The excess of the $300.0 million of gross proceeds over the $221.9 million fair value of the liability component, or $78.1 million, represents the fair value of the equity component, which was recorded, net of income tax effect, as additional paid-in capital within shareholders' equity. This $78.1 million difference represents a debt discount that is amortized over the seven-year term of the Notes as a non-cash component of interest expense. The components of interest expense related to the Notes were as follows (in thousands):
| Year Ended June 30, | ||||||||||||
| 2011 | 2010 | 2009 | ||||||||||
|
Coupon interest |
$ | 6,375 | $ | 6,375 | $ | 6,375 | ||||||
|
Non-cash amortization of discount |
11,235 | 10,499 | 9,809 | |||||||||
|
Amortization of issuance costs |
820 | 820 | 820 | |||||||||
|
|
|
|
|
|
|
|||||||
|
Total |
$ | 18,430 | $ | 17,694 | $ | 17,004 | ||||||
|
|
|
|
|
|
|
|||||||
The balance of the unamortized discount as of June 30, 2011 and 2010, was $36.3 million and $47.5 million, respectively. The discount will continue to be amortized as additional, non-cash interest expense over the remaining term of the Notes (through May 1, 2014) using the effective interest method as follows (in thousands):
|
Fiscal year ending June 30, |
Amount Amortized During Period |
|||
|
2012 |
$ | 12,024 | ||
|
2013 |
12,868 | |||
|
2014 |
11,421 | |||
|
|
|
|||
| $ | 36,313 | |||
|
|
|
|||
The fair value of the Notes as of June 30, 2011 was $379.5 million based on quoted market values.
The contingently issuable shares that may result from the conversion of the Notes were included in CACI's diluted share count for the fiscal year ended June 30, 2011 because CACI's average stock price during the third and fourth quarters of the year ended June 30, 2011 was above the conversion price of $54.65 per share. The contingently issuable shares were not included in CACI's diluted share count for the years ended June 30, 2010 or 2009 because CACI's average stock price during each three month period in those years was below the conversion price. Of total debt issuance costs of $7.8 million, $5.8 million is being amortized to interest expense over seven years. The remaining $2.0 million of debt issuance costs attributable to the embedded conversion option was recorded in additional paid-in capital. Upon closing of the sale of the Notes, $45.5 million of the net proceeds was used to concurrently repurchase one million shares of CACI's common stock.
In connection with the issuance of the Notes, the Company purchased in a private transaction at a cost of $84.4 million call options (the Call Options) to purchase approximately 5.5 million shares of its common stock at a price equal to the conversion price of $54.65 per share. The cost of the Call Options was recorded as a reduction of additional paid-in capital. The Call Options allow CACI to receive shares of its common stock from the counterparties equal to the amount of common stock related to the excess conversion value that CACI would pay the holders of the Notes upon conversion.
For income tax reporting purposes, the Notes and the Call Options are integrated. This created an original issue discount for income tax reporting purposes, and therefore the cost of the Call Options is being accounted for as interest expense over the term of the Notes for income tax reporting purposes. The associated income tax benefit of $32.8 million to be realized for income tax reporting purposes over the term of the Notes was recorded as an increase in additional paid-in capital and a long-term deferred tax asset. The majority of this deferred tax asset is offset in the Company's balance sheet by the $30.7 million deferred tax liability associated with the non-cash interest expense to be recorded for financial reporting purposes.
In addition, the Company sold warrants (the Warrants) to issue approximately 5.5 million shares of CACI common stock at an exercise price of $68.31 per share. The proceeds from the sale of the Warrants totaled $56.5 million and were recorded as an increase to additional paid-in capital.
On a combined basis, the Call Options and the Warrants are intended to reduce the potential dilution of CACI's common stock in the event that the Notes are converted by effectively increasing the conversion price of these notes from $54.65 to $68.31. The Call Options are anti-dilutive and are therefore excluded from the calculation of diluted shares outstanding. The Warrants will result in additional diluted shares outstanding if CACI's average common stock price exceeds $68.31. The Call Options and the Warrants are separate and legally distinct instruments that bind CACI and the counterparties and have no binding effect on the holders of the Notes.
JV Bank Credit Facility
eVentures, a joint venture between the Company and ActioNet, Inc. (see Note 17), entered into a $1.5 million revolving credit facility (the JV Facility). The JV Facility is a four-year, guaranteed facility that permits continuously renewable borrowings of up to $1.5 million with an expiration date of the earliest of September 14, 2011; the date of any restatement, refinancing, or replacement of the Credit Facility without the lender acting as the sole and exclusive administrative agent; or termination of the Credit Facility. Borrowings under the JV Facility bear interest at the lender's prime rate plus 1.0 percent. eVentures pays a fee of 0.25 percent on the unused portion of the JV Facility. As of June 30, 2011, eVentures had no borrowings outstanding under the JV Facility.
Cash Flow Hedges
The Company periodically uses derivative financial instruments as part of a strategy to manage exposure to market risks associated with interest rate fluctuations. In 2007, the Company entered into two interest rate swap agreements and in 2008, the Company entered into an interest rate cap agreement. Both agreements qualified as effective hedges and both expired during the Company's fiscal year ended June 30, 2010. The Company does not hold or issue derivative financial instruments for trading purposes.
The effect of derivative instruments in the consolidated statements of operations and accumulated other comprehensive loss for the years ended June 30, 2011, 2010 and 2009 is as follows (in thousands):
| Interest Rate Swaps | ||||||||||||
| 2011 | 2010 | 2009 | ||||||||||
|
Gain (loss) recognized in other comprehensive income (loss) (effective portion) |
$ | — | $ | 1,045 | $ | (332 | ) | |||||
|
|
|
|
|
|
|
|||||||
|
Loss reclassified to earnings from accumulated other comprehensive loss (effective portion) |
$ | — | $ | (1,817 | ) | $ | (1,795 | ) | ||||
|
Gain recognized in earnings (ineffective portion) |
— | — | — | |||||||||
|
|
|
|
|
|
|
|||||||
| $ | — | $ | (1,817 | ) | $ | (1,795 | ) | |||||
|
|
|
|
|
|
|
|||||||
As of June 30, 2011, the Company had no outstanding derivative instruments.
The aggregate maturities of long-term debt at June 30, 2011 are as follows (in thousands):
|
Year ending June 30, |
||||
|
2012 |
$ | 7,500 | ||
|
2013 |
7,500 | |||
|
2014 |
311,250 | |||
|
2015 |
15,000 | |||
|
2016 |
105,000 | |||
|
|
|
|||
|
Principal amount of long-term debt |
446,250 | |||
|
Less unamortized discount |
(36,313 | ) | ||
|
|
|
|||
|
Total long-term debt |
$ | 409,937 | ||
|
|
|
|
|||
NOTE 14. LEASES
The Company conducts its operations from leased office facilities, all of which are classified as operating leases and expire over the next 11 years. Future minimum lease payments due under non-cancelable leases as of June 30, 2011, are as follows (in thousands):
|
Year ending June 30: |
||||
|
2012 |
$ | 35,289 | ||
|
2013 |
31,336 | |||
|
2014 |
29,563 | |||
|
2015 |
28,029 | |||
|
2016 |
22,263 | |||
|
Thereafter |
76,007 | |||
|
|
|
|||
|
Total minimum lease payments |
$ | 222,487 | ||
|
|
|
The minimum lease payments above are shown net of sublease rental income of $0.1 million scheduled to be received over the next eight months under non-cancelable sublease agreements.
Rent expense incurred under operating leases for the years ended June 30, 2011, 2010, and 2009 totaled $45.9 million, $43.0 million, and $40.2 million, respectively.
|
|||
NOTE 15. OTHER LONG-TERM LIABILITIES
Other long-term liabilities consisted of the following (in thousands):
| June 30, | ||||||||
| 2011 | 2010 | |||||||
|
Deferred rent, net of current portion |
$ | 25,983 | $ | 23,272 | ||||
|
Reserve for unrecognized tax benefits |
5,095 | 4,296 | ||||||
|
Accrued post-retirement obligations |
3,447 | 3,198 | ||||||
|
Deferred acquisition and contingent consideration |
526 | 34,196 | ||||||
|
Other |
2,815 | 2,401 | ||||||
|
|
|
|
|
|||||
|
Total other long-term liabilities |
$ | 37,866 | $ | 67,363 | ||||
|
|
|
|
|
|||||
Deferred rent liabilities result from recording rent expense and incentives for tenant improvements on a straight-line basis over the life of the respective lease.
Accrued post-retirement obligations include projected liabilities for benefits the Company is obligated to provide under a long-term care, a group health, and an executive life insurance plan, each of which is unfunded. Plan benefits are provided to certain current and former executives, their dependents and other eligible employees, as defined. The post-retirement obligations also include accrued benefits under a supplemental retirement benefit plan covering the Company's chief executive officer. This plan became effective in August 2005 and replaced the retirement benefits that were forfeited to a former employer. The costs under these plans were $0.3 million during the year ended June 30, 2011.
The deferred acquisition consideration of $0.5 million at June 30, 2011 is related to amounts retained by the Company to secure the seller's indemnification obligations in connection with a U.K. acquisition made during the Company's year ended June 30, 2011. The deferred acquisition consideration of $34.2 million at June 30, 2010 is related to acquisitions made by the Company during the year ended June 30, 2010 and consists of $33.8 million of contingent consideration and $0.4 million related to amounts retained by the Company to secure the seller's indemnification obligations in connection with a U.K. acquisition. The related contingent consideration recorded as of June 30, 2011 is recorded as a current liability (see Note 12).
|
|||
NOTE 16. BUSINESS SEGMENT, CUSTOMER AND GEOGRAPHIC INFORMATION
Segment Information
The Company reports operating results and financial data in two segments: domestic operations and international operations. Domestic operations provide professional services and information technology solutions to its customers. Its customers are primarily U.S. federal government agencies. The Company does not measure revenue or profit by its major service offerings, either for internal management or external financial reporting purposes, as it would be impractical to do so. In many cases more than one offering is provided under a single contract, to a single customer, or by a single employee or group of employees, and segregating the costs of the service offerings in situations for which it is not required would be difficult and costly. The Company also serves customers in the commercial and state and local governments sectors and, from time to time, serves a number of agencies of foreign governments. The Company places employees in locations around the world in support of its clients. International operations offer services to both commercial and non-U.S. government customers primarily through the Company's data information and knowledge management services, business systems solutions, and enterprise IT and network services lines of business. The Company evaluates the performance of its operating segments based on net income. Summarized financial information concerning the Company's reportable segments is shown in the following tables.
| Domestic Operations |
International Operations |
Total | ||||||||||
| (in thousands) | ||||||||||||
|
Year Ended June 30, 2011 |
||||||||||||
|
Revenue from external customers |
$ | 3,459,715 | $ | 118,065 | $ | 3,577,780 | ||||||
|
Net income attributable to CACI |
135,158 | 9,060 | 144,218 | |||||||||
|
Net assets |
1,211,517 | 98,099 | 1,309,616 | |||||||||
|
Goodwill |
1,200,091 | 66,194 | 1,266,285 | |||||||||
|
Total long-term assets |
1,457,505 | 80,548 | 1,538,053 | |||||||||
|
Total assets |
2,176,380 | 143,751 | 2,320,131 | |||||||||
|
Capital expenditures |
13,264 | 1,124 | 14,388 | |||||||||
|
Depreciation and amortization |
53,179 | 2,888 | 56,067 | |||||||||
|
Year Ended June 30, 2010 |
||||||||||||
|
Revenue from external customers |
$ | 3,032,341 | $ | 116,790 | $ | 3,149,131 | ||||||
|
Net income attributable to CACI |
98,649 | 7,866 | 106,515 | |||||||||
|
Net assets |
1,090,795 | 82,360 | 1,173,155 | |||||||||
|
Goodwill |
1,105,055 | 56,806 | 1,161,861 | |||||||||
|
Total long-term assets |
1,333,876 | 70,144 | 1,404,020 | |||||||||
|
Total assets |
2,122,510 | 122,256 | 2,244,766 | |||||||||
|
Capital expenditures |
20,954 | 1,549 | 22,503 | |||||||||
|
Depreciation and amortization |
50,095 | 2,944 | 53,039 | |||||||||
|
Year Ended June 30, 2009(1) |
||||||||||||
|
Revenue from external customers |
$ | 2,650,769 | $ | 79,393 | $ | 2,730,162 | ||||||
|
Net income attributable to CACI |
84,772 | 4,926 | 89,698 | |||||||||
|
Net assets |
971,685 | 57,923 | 1,029,608 | |||||||||
|
Goodwill |
1,031,980 | 51,770 | 1,083,750 | |||||||||
|
Total long-term assets |
1,214,944 | 66,303 | 1,281,247 | |||||||||
|
Total assets |
1,907,677 | 98,402 | 2,006,079 | |||||||||
|
Capital expenditures |
11,692 | 677 | 12,369 | |||||||||
|
Depreciation and amortization |
44,788 | 1,804 | 46,592 | |||||||||
| (1) |
Certain amounts as of and for the year ended June 30, 2009 have been adjusted to reflect the retroactive application of new accounting standards. See Note 3. |
Interest income and interest expense are not presented above as the amounts attributable to the Company's international operations are insignificant.
Customer Information
The Company earned 94.9 percent, 94.8 percent and 96.0 percent of its revenue from various agencies and departments of the U.S. government for the years ended June 30, 2011, 2010 and 2009, respectively. Revenue by customer sector was as follows (dollars in thousands):
| Year ended June 30, | ||||||||||||||||||||||||
| 2011 | % | 2010 | % | 2009 | % | |||||||||||||||||||
|
Department of Defense |
$ | 2,858,721 | 79.9 | % | $ | 2,450,463 | 77.8 | % | $ | 2,078,338 | 76.1 | % | ||||||||||||
|
Federal civilian agencies |
537,687 | 15.0 | 535,467 | 17.0 | 542,090 | 19.9 | ||||||||||||||||||
|
Commercial and other |
166,966 | 4.7 | 146,839 | 4.7 | 88,228 | 3.2 | ||||||||||||||||||
|
State and local governments |
14,406 | 0.4 | 16,362 | 0.5 | 21,506 | 0.8 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
|
Total revenue |
$ | 3,577,780 | 100.0 | % | $ | 3,149,131 | 100.0 | % | $ | 2,730,162 | 100.0 | % | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Geographic Information
Revenue and net assets are attributed to geographic areas based on the location of the reportable segment's management and are disclosed above.
|
|||
NOTE 17. INVESTMENTS IN JOINT VENTURES
AC FIRST LLC
In July 2009, the Company entered into a joint venture with AECOM Government Services, Inc. (AGS), a division of AECOM Technology Corporation, called AC FIRST LLC (AC FIRST). The companies partnered in the venture to jointly pursue work under a U.S. Army contract. The Company owns 49 percent of AC FIRST and AGS owns 51 percent. The Company accounts for its interest in AC FIRST using the equity method of accounting. The Company's investment in AC FIRST as of June 30, 2011 is $10.1 million and is included in other long-term assets on the Company's consolidated balance sheets. The Company's maximum exposure to loss cannot be determined as any losses incurred by AC FIRST would be allocated to each partner based on the joint venture agreement, however, AC FIRST has not experienced any losses to date. During the years ended June 30, 2011 and 2010, the Company's share of the net income of AC FIRST was $1.8 million and $70 thousand, respectively. These amounts are included in interest expense and other on the accompanying consolidated statements of operations. The Company has determined that the primary beneficiary of AC FIRST is AGS as AGS owns the majority of AC FIRST and controls its operations. The Company contributed $6.0 million in cash to AC FIRST for general business purposes during the year ended June 30, 2011.
eVenture Technologies LLC
eVentures is a joint venture between the Company and ActioNet, Inc. (ActioNet), and is the entity through which work is being performed on a contract awarded in January 2007 by the United States Navy. The Company owns 60 percent of eVentures and ActioNet owns the remaining 40 percent. eVentures was funded through capital contributions made by the Company and by ActioNet. As the Company owns and controls more than 50 percent of eVentures, the Company's results include those of eVentures. ActioNet's share of eVentures' assets, liabilities, results of operations, and cash flows have been accounted for as a noncontrolling interest.
Prior to July 1, 2009, the Company had accounted for ActioNet's interest in eVentures as a minority interest. Effective July 1, 2009, the Company adopted the updates to ASC 810, and has retroactively adjusted its financial statements to account for ActioNet's share of eVentures as a noncontrolling interest. See Note 3.
|
|||
NOTE 18. OTHER COMMITMENTS AND CONTINGENCIES
General Legal Matters
The Company is involved in various lawsuits, claims, and administrative proceedings arising in the normal course of business. Management is of the opinion that any liability or loss associated with such matters, either individually or in the aggregate, will not have a material adverse effect on the Company's operations and liquidity.
Iraq Investigations
On April 26, 2004, the Company received information indicating that one of its employees was identified in a report authored by U.S. Army Major General Antonio M. Taguba as being connected to allegations of abuse of Iraqi detainees at the Abu Ghraib prison facility. To date, despite the Taguba Report and the subsequently-issued Fay Report addressing alleged inappropriate conduct at Abu Ghraib, no present or former employee of the Company has been officially charged with any offense in connection with the Abu Ghraib allegations.
The Company does not believe the outcome of this matter will have a material adverse effect on its financial statements.
Government Contracting
Payments to the Company on cost-plus-fee and time-and-materials contracts are subject to adjustment upon audit by the DCAA. The DCAA is currently in the process of auditing the Company's incurred cost submissions for the year ended June 30, 2006. In the opinion of management, audit adjustments that may result from audits not yet completed or started are not expected to have a material effect on the Company's financial position, results of operations, or cash flows as the Company has accrued its best estimate of potential disallowances. Additionally, the DCAA continually reviews the cost accounting and other practices of government contractors, including the Company. In the course of those reviews, cost accounting and other issues are identified, discussed and settled.
In December 2010, the Defense Contract Management Agency (DCMA) issued a letter to the Company with its determination that the Company improperly allocated certain legal costs incurred in connection with the Iraq investigations described above. The Company does not agree with the DCMA's findings and, on March 9, 2011, filed a Notice of Appeal in the Armed Services Board of Contract Appeals. The Company's appeal is pending. The Company has accrued its current best estimate of the potential outcome within its estimated range of zero to $2.9 million.
|
|||
NOTE 19. INCOME TAXES
The domestic and foreign components of income before provision for income taxes are as follows (in thousands):
| Year ended June 30, | ||||||||||||
| 2011 | 2010 | 2009 (As Adjusted(1)) |
||||||||||
|
Domestic |
$ | 215,200 | $ | 156,024 | $ | 144,888 | ||||||
|
Foreign |
12,123 | 11,662 | 7,382 | |||||||||
|
|
|
|
|
|
|
|||||||
|
Income before income taxes |
$ | 227,323 | $ | 167,686 | $ | 152,270 | ||||||
|
|
|
|
|
|
|
|||||||
| (1) | Certain amounts for the year ended June 30, 2009 have been adjusted to reflect the retroactive application of new accounting standards. See Note 3. |
The components of income tax expense are as follows (in thousands):
| Year ended June 30, | ||||||||||||
| 2011 | 2010 | 2009 (As Adjusted(1)) |
||||||||||
|
Current: |
||||||||||||
|
Federal |
$ | 59,095 | $ | 51,572 | $ | 41,884 | ||||||
|
State and local |
13,578 | 11,155 | 8,404 | |||||||||
|
Foreign |
2,845 | 3,147 | 2,660 | |||||||||
|
|
|
|
|
|
|
|||||||
|
Total current |
75,518 | 65,874 | 52,948 | |||||||||
|
|
|
|
|
|
|
|||||||
|
Deferred: |
||||||||||||
|
Federal |
6,175 | (4,082 | ) | 8,268 | ||||||||
|
State and local |
1,194 | (820 | ) | 1,661 | ||||||||
|
Foreign |
218 | 199 | (305 | ) | ||||||||
|
|
|
|
|
|
|
|||||||
|
Total deferred |
7,587 | (4,703 | ) | 9,624 | ||||||||
|
|
|
|
|
|
|
|||||||
|
Total income tax expense |
$ | 83,105 | $ | 61,171 | $ | 62,572 | ||||||
|
|
|
|
|
|
|
|||||||
| (1) | Certain amounts for the year ended June 30, 2009 have been adjusted to reflect the retroactive application of new accounting standards. See Note 3. |
Income tax expense differs from the amounts computed by applying the statutory U.S. income tax rate of 35 percent as a result of the following (in thousands):
| Year ended June 30, | ||||||||||||
| 2011 | 2010 | 2009 (As Adjusted(1)) |
||||||||||
|
Expected tax expense computed at federal rate |
$ | 79,563 | $ | 58,690 | $ | 53,295 | ||||||
|
State and local taxes, net of federal benefit |
9,602 | 6,759 | 6,479 | |||||||||
|
(Nonincludible) nondeductible items |
(1,965 | ) | (861 | ) | 4,227 | |||||||
|
Incremental effect of foreign tax rates |
(914 | ) | (830 | ) | (513 | ) | ||||||
|
Other |
(3,181 | ) | (2,587 | ) | (916 | ) | ||||||
|
|
|
|
|
|
|
|||||||
|
Total income tax expense |
$ | 83,105 | $ | 61,171 | $ | 62,572 | ||||||
|
|
|
|
|
|
|
|||||||
| (1) |
Certain amounts for the year ended June 30, 2009 have been adjusted to reflect the retroactive application of new accounting standards. See Note 3.
|
The tax effects of temporary differences that give rise to deferred taxes are presented below (in thousands):
| June 30, | ||||||||
| 2011 | 2010 | |||||||
|
Deferred tax assets: |
||||||||
|
Reserves and accruals |
$ | 29,945 | $ | 25,347 | ||||
|
Stock-based compensation |
28,768 | 30,739 | ||||||
|
Deferred compensation and post-retirement obligations |
27,977 | 22,093 | ||||||
|
Deferred rent |
2,929 | 1,746 | ||||||
|
Original issue discount related to the Notes |
883 | 1,355 | ||||||
|
Other |
1,323 | 3,138 | ||||||
|
|
|
|
|
|||||
|
Total deferred tax assets |
91,825 | 84,418 | ||||||
|
|
|
|
|
|||||
|
Deferred tax liabilities: |
||||||||
|
Goodwill and other intangible assets |
(121,842 | ) | (98,988 | ) | ||||
|
Unbilled revenue |
(11,758 | ) | (10,360 | ) | ||||
|
Prepaid expenses |
(4,011 | ) | (3,630 | ) | ||||
|
Other |
(6,257 | ) | (1,789 | ) | ||||
|
|
|
|
|
|||||
|
Total deferred tax liabilities |
(143,868 | ) | (114,767 | ) | ||||
|
|
|
|
|
|||||
|
Net deferred tax liability |
$ | (52,043 | ) | $ | (30,349 | ) | ||
|
|
|
|
|
|||||
The Company is subject to income taxes in the U.S. and various state and foreign jurisdictions. Tax statutes and regulations within each jurisdiction are subject to interpretation and require the application of significant judgment. During the Company's year ended June 30, 2010, the Internal Revenue Service completed its field audit of the Company's consolidated federal income tax returns for the years ended June 30, 2005 through 2007 and earlier years in connection with amended returns and carryback claims filed by the Company. The Company received the refunds reflected on its amended returns and carryback claims, as adjusted for the results of the field audit, during the year ended June 30, 2011. During the year ended June 30, 2011, the Internal Revenue Service concluded its examination of the Company's federal income tax return for the year ended June 30, 2008 with no significant adjustments to a previously recorded refund receivable. The Company collected this receivable during the year ended June 30, 2011. The Company is currently under examination by three state jurisdictions and one foreign jurisdiction for years ended June 30, 2003 through June 30, 2009. The Company does not expect the resolution of these examinations to have a material impact on its results of operations, financial condition or cash flows.
During the years ended June 30, 2011 and June 30, 2010, the Company's income tax expense was favorably impacted by non-taxable gains on assets invested in corporate-owned life insurance (COLI) policies, tax benefits related to deductions claimed for income from domestic production activities and interest earned from refunds due on prior year tax returns.
In connection with the issuance of the Notes, original issue discount (OID) was created for income tax purposes. Over the term of the Notes, this OID will generate additional interest expense for income tax reporting purposes (see Note 13).
U.S. income taxes have not been provided for with respect to undistributed earnings of foreign subsidiaries that have been permanently reinvested outside the United States. As of June 30, 2011, the deferred liability associated with these undistributed earnings is $6.0 million.
The Company's total liability for unrecognized tax benefits as of June 30, 2011, 2010 and 2009 was $5.9 million, $5.2 million and $11.9 million, respectively. Of the $5.9 million unrecognized tax benefit at June 30, 2011, $2.0 million, if recognized, would impact the Company's effective tax rate. A reconciliation of the beginning and ending amount of unrecognized benefits is shown in the table below (in thousands):
| Year ended June 30, | ||||||||||||
| 2011 | 2010 | 2009 | ||||||||||
|
Beginning of year |
$ | 5,189 | $ | 11,945 | $ | 4,612 | ||||||
|
Additions based on current year tax positions |
2,711 | 1,323 | 651 | |||||||||
|
Reductions based on current year tax positions |
— | — | — | |||||||||
|
Additions based on prior year tax positions |
— | — | 6,682 | |||||||||
|
Reductions based on prior year tax positions |
(2,003 | ) | (7,332 | ) | — | |||||||
|
Lapse of statute of limitations |
— | (630 | ) | — | ||||||||
|
Settlements with taxing authorities |
— | (117 | ) | — | ||||||||
|
|
|
|
|
|
|
|||||||
|
End of year |
$ | 5,897 | $ | 5,189 | $ | 11,945 | ||||||
|
|
|
|
|
|
|
|||||||
The Company recognizes net interest and penalties as a component of income tax expense. During the years ended June 30, 2011 and 2010, the Company's income tax expense was reduced by $0.2 million and $0.7 million, respectively, related to interest earned in connection with amended returns and carryback claims filed by the Company, as described above. Over the next 12 months, the Company does not expect a significant increase or decrease in the unrecognized tax benefits recorded at June 30, 2011. As of June 30, 2011, $5.1 million of the unrecognized tax benefits are included in other long-term liabilities, with the remainder included in other balance sheets accounts.
|
|||
NOTE 20. RETIREMENT SAVINGS PLANS
401(k) Plan
The Company maintains a defined contribution plan under Section 401(k) of the Internal Revenue Code, the CACI $MART Plan (the 401(k) Plan). Employees can contribute up to 75 percent (subject to certain statutory limitations) of their total cash compensation. The Company provides matching contributions equal to 50 percent of the amount of salary deferral employees elect, up to 6 percent of each employee's total calendar year cash compensation, as defined. The Company may also make discretionary profit sharing contributions to the 401(k) Plan. Employee contributions vest immediately. Employer contributions vest in full after three years of employment. Total Company contributions to the 401(k) Plan for the years ended June 30, 2011, 2010, and 2009 were $21.6 million, $17.4 million, and $21.0 million, respectively. During the year ended June 30, 2010, the Company amended the 401(k) Plan to provide that non-vested balances are forfeited upon the earlier of a distribution being taken or on December 31 of the year the participant terminated employment at the Company. Previously, non-vested balances were forfeited upon the earlier of a distribution being taken or on December 31 following a five year break in service. This change increased the amount of forfeitures available to offset Company contributions during the year ended June 30, 2010.
U.K. Defined Contribution Plan
The Company maintains a defined contribution plan in the U.K. Under the plan, employees can elect the amount of pension contributions that they wish to make out of their flexible benefit entitlements subject to certain U.K. tax limits. The contributions are deemed to be company contributions and vest immediately. Employees may also elect to make personal contributions into the plan. Contributions to this plan and its predecessor plans for the years ended June 30, 2011, 2010, and 2009 were $1.5 million, $1.5 million, and $1.3 million, respectively.
Supplemental Savings Plan
The Company maintains the Supplemental Savings Plan through which, on a calendar year basis, officers at the director level and above can elect to defer for contribution to the Supplemental Savings Plan up to 50 percent of their base compensation and up to 100 percent of their bonuses and commissions. Prior to January 1, 2011, officers at the vice president level and above were eligible to participate. During the year ended June 30, 2011, the Supplemental Savings Plan was amended to allow employees at the director level to participate. The Company provides a contribution of 5 percent of compensation for each participant's compensation that exceeds the limit as set forth in IRC 401(a)(17) (currently $245,000 per year). The Company also has the option to make annual discretionary contributions. Company contributions vest over a 5-year period, and vesting is accelerated in the event of a change of control of the Company. Participant deferrals and Company contributions will be credited with the rate of return based on the investment options and asset allocations selected by the Participant. Participants may change their asset allocation as often as daily, if they so choose. A Rabbi Trust has been established to hold and provide a measure of security for the investments that finance benefit payments. Distributions from the Supplemental Savings Plan are made upon retirement, termination, death, or total disability. The Supplemental Savings Plan also allows for in-service distributions.
Supplemental Savings Plan obligations due to participants totaled $67.2 million at June 30, 2011, of which $2.3 million is included in accrued compensation and benefits in the accompanying consolidated balance sheet. Supplemental Savings Plan obligations increased by $14.3 million during the year ended June 30, 2011, consisting of $9.1 million of investment gains, $9.3 million of participant compensation deferrals, and $1.1 million of Company contributions, offset by $5.2 million of distributions.
The Company maintains investment assets in a Rabbi Trust to offset the obligations under the Supplemental Savings Plan. The value of the investments in the Rabbi Trust was $66.9 million at June 30, 2011. Investment gains were $8.9 million for the year ended June 30, 2011.
Contribution expense for the Supplemental Savings Plan during the years ended June 30, 2011, 2010, and 2009, was $1.2 million, $0.9 million, and $0.9 million, respectively.
|
|||
NOTE 21. STOCK PLANS AND STOCK-BASED COMPENSATION
For stock options, stock-settled stock appreciation rights (SSARs) and non-performance-based restricted stock units (RSUs), stock-based compensation expense is recognized on a straight-line basis ratably over the respective vesting periods. For RSUs subject to graded vesting schedules for which vesting is based on achievement of a performance metric in addition to grantee service (performance-based RSUs), stock-based compensation expense is recognized on an accelerated basis by treating each vesting tranche as if it was a separate grant. Stock-based compensation expense for performance-based grants dependent upon the net after tax profit (NATP) reported by the Company for the fiscal year ended June 30, 2010 was also adjusted in each reporting period such that expense is recorded for the number of shares then expected to vest based on management's then best estimate of the performance that would be achieved. A summary of the components of stock-based compensation expense recognized during the years ended June 30, 2011, 2010, and 2009, together with the income tax benefits realized, is as follows (in thousands):
| Year ended June 30, | ||||||||||||
| 2011 | 2010 | 2009 | ||||||||||
|
Stock-based compensation included in indirect costs and selling expense: |
||||||||||||
|
SSARs and non-qualified stock option expense |
$ | 3,714 | $ | 8,484 | $ | 9,926 | ||||||
|
Restricted stock and RSU expense |
14,201 | 22,266 | 6,895 | |||||||||
|
|
|
|
|
|
|
|||||||
|
Total stock-based compensation expense |
$ | 17,915 | $ | 30,750 | $ | 16,821 | ||||||
|
|
|
|
|
|
|
|||||||
|
Income tax benefit recognized for stock-based compensation expense |
$ | 6,549 | $ | 11,218 | $ | 6,895 | ||||||
|
|
|
|
|
|
|
|||||||
The Company recognizes the effect of expected forfeitures of equity grants by estimating an expected forfeiture rate for grants of equity instruments. Amounts recognized for expected forfeitures are subsequently adjusted periodically and at major vesting dates to reflect actual forfeitures.
The incremental income tax benefits realized upon the exercise or vesting of equity instruments are reported as financing cash flows. During the years ended June 30, 2011, 2010, and 2009, the Company recognized $2.2 million, $0.2 million, and $0.2 million of excess tax benefits, respectively, which have been reported as financing cash inflows in the accompanying consolidated statements of cash flows.
Equity Grants and Valuation
Under the terms of its 2006 Stock Incentive Plan (the 2006 Plan), the Company may issue, among others, non-qualified stock options, restricted stock, RSUs, SSARs, and performance awards, collectively referred to herein as equity instruments. During the periods presented, all equity instrument grants were made in the form of either SSARs or RSUs and the exercise price of all SSAR grants was set at the closing price of a share of the Company's common stock on the date of grant, as reported by the New York Stock Exchange. Annual grants under the 2006 Plan are generally made to the Company's key employees during the first quarter of the Company's fiscal year and to members of the Company's Board of Directors during the second quarter of the Company's fiscal year. With the approval of its Chief Executive Officer, the Company also issues equity instruments to strategic new hires and to employees who have demonstrated superior performance.
RSUs and shares of restricted stock granted through June 2008 vest based on the passage of time and continued service as an employee of the Company. Between August 2008 and January 2010, the Company issued performance-based RSUs for which vesting was initially dependent upon the NATP reported by the Company for the fiscal year ended June 30, 2010. In addition to achieving a certain level of NATP, vesting is contingent upon the grantee's service. Based on the Company's actual NATP for the year ended June 30, 2010, which is the same as the Company's net income attributable to CACI as reported on the consolidated statements of operations, the maximum numbers of performance-based RSUs were earned. Performance-based RSUs granted in August 2008 vest in increments of one-third of the shares underlying the RSUs on an annual basis beginning in August 2010, and performance-based RSUs granted in August 2009 vest in increments of one-fourth of the shares underlying the RSUs on an annual basis beginning in August 2011.
On September 1, 2010, the Company made its annual grant to key employees, in the form of performance-based RSUs. The initial number of RSUs granted was 727,880. The final number of such performance-based RSUs which will vest is based on the achievement of an increased NATP for the year ended June 30, 2011 as compared to NATP for the year ended June 30, 2010 and on the average share price of Company stock for the 90 day period ending September 1, 2011 as compared to the average share price for the 90 day period ended September 1, 2010. Once the final number of RSUs has been determined, one-half of the RSUs will vest three years from the grant date and one-half will vest four years from the grant date.
The Company also issues equity instruments in the form of RSUs under its Management Stock Purchase Plan (MSPP) and Director Stock Purchase Plan (DSPP). In addition, annual grants are made to members of the Company's Board of Directors in the form of a set dollar value of RSUs. Grants to members of the Board of Directors vest based on the passage of time and continued service as a Director of the Company.
Upon the exercise of stock options and SSARs and the vesting of restricted shares and RSUs, the Company fulfills its obligations under the equity instrument agreements by either issuing new shares of authorized common stock or by issuing shares from treasury. The total number of shares authorized by shareholders for grants under the 2006 Plan was 10,950,000 as of June 30, 2011. The aggregate number of grants that may be made under the 2006 Plan may exceed this approved amount as forfeited SSARs, stock options, restricted stock and RSUs, and vested but unexercised SSARs and stock options that expire, become available for future grants. As of June 30, 2011, cumulative grants of 11,488,491 equity instruments underlying the shares authorized for the 2006 Plan have been awarded, and 2,286,294 of these instruments have been forfeited.
Non-qualified stock options granted prior to January 1, 2004 lapse and are no longer exercisable if not exercised within ten years of the date of grant. Equity instruments granted on or after January 1, 2004 have a term of seven years. For SSAR and stock option awards, grantees whose employment has terminated have 60 days after their termination date to exercise vested SSARs and stock options, or they forfeit their right to the instruments. Grantees whose employment is terminated due to death or permanent disability will vest in 100 percent of their equity instrument grants. Also, effective for grants made on or after July 1, 2004, grantees who were age 62 on or before July 1, 2008 who retire on or after age 65 will vest in 100 percent of their equity instrument grants upon retirement, with the exception of performance-based RSUs, which must be held at least until the measurement period is complete. Grantees who were not age 62 on or before July 1, 2008, who retire on or after age 62, vest in a prorated portion of their equity instrument grants upon retirement, based upon their service during the vesting period, with the exception of performance-based RSUs, which must be held until the measurement period is complete.
Stock options vest ratably over a three, four, or five year period, depending on the year of grant. Restricted shares and non-performance-based RSUs vest in full three years from the date of grant. SSARs granted as part of the Company's customary annual award vest ratably over a five year period in a manner consistent with the vesting of stock options. On July 2, 2007, the Company made a one-time special grant of 25,000 SSARs to its then newly appointed President of U.S. Operations and effective June 20, 2007, the Company made a one-time special grant of 300,000 SSARs to its then newly appointed Chief Executive Officer. These special grants of SSARs contain market-based vesting features under which, beginning one year from the date of award, a grantee may exercise portions of his SSARs if the average of the closing prices of a share of the Company's common stock for 20 consecutive trading days equals or exceeds pre-defined amounts. Greater portions of the grants vest as the average of the closing prices increases. Any SSARs that do not vest under the market-based feature will vest in full five years from the date of grant.
Other than performance-based RSUs which contain a market-based element, the fair value of restricted shares and RSUs is determined based on the closing price of a share of the Company's common stock on the date of grant. Other than SSARs which contain a market-based element, the fair value of each SSAR or stock option award is estimated on the date of grant using the Black-Scholes valuation model. The fair value of RSUs and SSARs with market-based vesting features is also measured on the grant date, but is done so using a binomial lattice model. The fair values of SSARs granted during the year ended June 30, 2009 were based on the following assumptions (no stock options or SSARs were granted during the years ended June 30, 2011 or 2010):
| For SSARs Granted During the year ended June 30, | ||
| 2009 | ||
|
Historical volatility |
30.7% - 38.7% | |
|
Expected dividends |
0% | |
|
Expected life (in years) |
5.5 | |
|
Risk-free rate |
2.19% - 3.23% |
The expected lives of the SSAR grants represent the period of time SSARs are expected to be outstanding and were based on the contractual terms of the grant and vesting schedules. The risk-free rates for periods approximating the expected lives were based on the U.S. treasury yield curve in effect at the time of the respective grant.
The weighted-average fair value of SSARs granted during the year ended June 30, 2009, was $17.09 and the weighted-average fair value of RSUs granted during the years ended June 30, 2011, 2010, and 2009, was $43.79, $46.01, and $48.77, respectively.
Activity for all outstanding SSARs and stock options, and the corresponding exercise price and fair value information, for the years ended June 30, 2011, 2010, and 2009, is as follows:
| Number of Shares |
Exercise Price | Weighted Average Exercise Price |
Weighted Average Grant Date Fair Value |
|||||||||||||
|
Outstanding, June 30, 2008 |
3,307,849 | $ | 8.44 - 65.04 | $ | 47.37 | $ | 18.91 | |||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
Exercisable, June 30, 2008 |
1,267,681 | 8.44- 65.04 | 37.00 | 14.68 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
Issued |
346,300 | 37.67- 49.78 | 49.13 | 17.09 | ||||||||||||
|
Exercised |
(71,215 | ) | 9.41- 40.00 | 29.89 | 13.54 | |||||||||||
|
Forfeited |
(172,889 | ) | 9.94- 62.48 | 50.66 | 19.27 | |||||||||||
|
Expired |
(31,000 | ) | 8.44- 49.43 | 46.79 | 16.61 | |||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
Outstanding, June 30, 2009 |
3,379,045 | 9.25- 65.04 | 47.76 | 18.84 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
Exercisable, June 30, 2009 |
1,335,207 | 9.25- 65.04 | 40.22 | 16.03 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
Exercised |
(191,337 | ) | 9.25- 46.37 | 29.21 | 11.17 | |||||||||||
|
Forfeited |
(56,667 | ) | 45.77- 62.48 | 51.10 | 19.55 | |||||||||||
|
Expired |
(44,613 | ) | 11.19- 64.36 | 60.59 | 23.44 | |||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
Outstanding, June 30, 2010 |
3,086,428 | 9.94- 65.04 | 48.66 | 19.23 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
Exercisable, June 30, 2010 |
1,455,220 | 9.94- 65.04 | 44.99 | 18.08 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
Exercised |
(791,722 | ) | 9.94- 62.48 | 36.36 | 14.82 | |||||||||||
|
Forfeited |
(85,460 | ) | 45.77- 54.39 | 49.47 | 18.88 | |||||||||||
|
Expired |
(98,942 | ) | 48.83- 63.20 | 58.61 | 22.09 | |||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
Outstanding, June 30, 2011 |
2,110,304 | 34.10 - 65.04 | 52.78 | 20.77 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
Exercisable, June 30, 2011 |
1,177,209 | $ | 34.10 - 65.04 | $ | 55.19 | $ | 22.17 | |||||||||
|
|
|
|
|
|
|
|
|
|||||||||
Changes in the number of unvested SSARs and stock options and in unvested restricted stock and RSUs during each of the years in the three-year period ended June 30, 2011, together with the corresponding weighted-average fair values, are as follows:
| SSARs and Stock Options |
Restricted Stock and Restricted Stock Units |
|||||||||||||||
| Number of Shares |
Weighted Average Grant Date Fair Value |
Number of Shares |
Weighted Average Grant Date Fair Value |
|||||||||||||
|
Unvested at June 30, 2008 |
2,040,168 | $ | 21.53 | 346,160 | $ | 54.19 | ||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
Granted |
346,300 | 17.09 | 410,699 | 48.77 | ||||||||||||
|
Vested |
(178,575 | ) | 24.59 | (115,475 | ) | 50.40 | ||||||||||
|
Forfeited |
(164,055 | ) | 19.59 | (62,570 | ) | 49.71 | ||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
Unvested at June 30, 2009 |
2,043,838 | 20.67 | 578,814 | 49.37 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
Granted |
— | — | 499,466 | 46.01 | ||||||||||||
|
Vested |
(355,963 | ) | 22.73 | (101,715 | ) | 51.56 | ||||||||||
|
Forfeited |
(56,667 | ) | 19.55 | (26,935 | ) | 48.13 | ||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
Unvested at June 30, 2010 |
1,631,208 | 20.26 | 949,630 | 47.41 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
Granted |
— | — | 800,112 | 43.79 | ||||||||||||
|
Vested |
(612,653 | ) | 22.38 | (357,954 | ) | 47.87 | ||||||||||
|
Forfeited |
(85,460 | ) | 18.88 | (69,687 | ) | 45.01 | ||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
Unvested at June 30, 2011 |
933,095 | $ | 18.99 | 1,322,101 | $ | 45.23 | ||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
Information regarding the cash proceeds received, and the intrinsic value and total tax benefits realized resulting from stock option exercises is as follows (in thousands):
| Year ended June 30, | ||||||||||||
| 2011 | 2010 | 2009 | ||||||||||
|
Cash proceeds received |
$ | 22,077 | $ | 5,589 | $ | 2,129 | ||||||
|
Intrinsic value realized |
$ | 14,561 | $ | 1,557 | $ | 989 | ||||||
|
Income tax benefit realized |
$ | 5,731 | $ | 612 | $ | 388 | ||||||
The total intrinsic value of RSUs that vested during the years ended June 30, 2011, 2010, and 2009 was $15.4 million, $4.5 million and $5.3 million, respectively, and the tax benefit realized for these vestings was $6.1 million, $1.7 million and $2.1 million, respectively.
The grant date fair value of stock options that vested during each of the years in the three-year period ended June 30, 2011 was $13.7 million, $8.1 million, and $4.4 million, respectively.
Outstanding SSAR and Stock Option Information
Information regarding the SSARs and stock options outstanding and exercisable as of June 30, 2011, is as follows (intrinsic value in thousands):
| SSARs and Options Outstanding | SSARs and Options Exercisable | |||||||||||||||||||||||||||||||
|
Range of exercise |
Number of Instruments |
Weighted Average Exercise Price |
Weighted Average Remaining Contractual Life |
Intrinsic Value |
Number of Instruments |
Weighted Average Exercise Price |
Weighted Average Remaining Contractual Life |
Intrinsic Value |
||||||||||||||||||||||||
|
$30.00-$39.99 |
156,509 | $ | 34.59 | 1.94 | $ | 4,458 | 152,669 | $ | 34.52 | 1.89 | $ | 4,361 | ||||||||||||||||||||
|
$40.00-$49.99 |
786,761 | 48.71 | 3.66 | 11,309 | 215,826 | 48.73 | 3.66 | 3,097 | ||||||||||||||||||||||||
|
$50.00-$59.99 |
568,140 | 52.49 | 2.51 | 6,017 | 209,820 | 54.10 | 2.14 | 1,883 | ||||||||||||||||||||||||
|
$60.00-$69.99 |
598,894 | 63.17 | 1.13 | 255 | 598,894 | 63.17 | 1.13 | 255 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||
| 2,110,304 | $ | 52.78 | 2.51 | $ | 22,039 | 1,177,209 | $ | 55.19 | 1.87 | $ | 9,596 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||
As of June 30, 2011, there was $3.4 million of unrecognized compensation cost related to SSARs and stock options scheduled to be recognized over a weighted-average period of 1.5 years, and $18.8 million of unrecognized compensation cost related to restricted stock and RSUs scheduled to be recognized over a weighted-average period of 2.5 years.
Stock Purchase Plans
The Company adopted the 2002 Employee Stock Purchase Plan (ESPP), MSPP and DSPP in November 2002, and implemented these plans beginning July 1, 2003. There are 1,000,000, 500,000, and 75,000 shares authorized for grants under the ESPP, MSPP and DSPP, respectively.
The ESPP allows eligible full-time employees to purchase shares of common stock at 95 percent of the fair market value of a share of common stock on the last day of the quarter. The maximum number of shares that an eligible employee can purchase during any quarter is equal to two times an amount determined as follows: 20 percent of such employee's compensation over the quarter, divided by 95 percent of the fair market value of a share of common stock on the last day of the quarter. The ESPP is a qualified plan under Section 423 of the Internal Revenue Code and, for financial reporting purposes, was amended effective July 1, 2005 so as to be considered non-compensatory. Accordingly, there is no stock-based compensation expense associated with shares acquired under the ESPP. As of June 30, 2011, participants have purchased 792,180 shares under the ESPP, at a weighted-average price per share of $45.16. Of these shares, 75,321 were purchased by employees at a weighted-average price per share of $47.00 during the year ended June 30, 2011. To satisfy its obligations under the ESPP, the Company can purchase shares in the open market, issue shares previously acquired and held in treasury or issue authorized but unissued shares. During the year ended June 30, 2011, the Company purchased 75,321 shares in the open market to fulfill the employees' share purchases.
The MSPP provides those senior executives with stock holding requirements a mechanism to receive RSUs in lieu of up to 100 percent of their annual bonus. For the fiscal years ended June 30, 2011, 2010 and 2009, RSUs awarded in lieu of bonuses earned are granted at 85 percent of the closing price of a share of the Company's common stock on the date of the award, as reported by the New York Stock Exchange. RSUs granted under the MSPP vest at the earlier of 1) three years from the grant date, 2) upon a change of control of the Company, 3) upon a participant's retirement at or after age 65, or 4) upon a participant's death or permanent disability. Vested RSUs are settled in shares of common stock. The Company recognizes the value of the discount applied to RSUs granted under the MSPP as stock compensation expense ratably over the three-year vesting period.
The DSPP allows directors to elect to receive RSUs at the market price of the Company's common stock on the date of the award in lieu of up to 100 percent of their annual retainer fees. Vested RSUs are settled in shares of common stock.
Activity related to the MSPP and the DSPP during the year ended June 30, 2011 is as follows:
| MSPP | DSPP | |||||||
|
RSUs outstanding, June 30, 2010 |
72,844 | 427 | ||||||
|
Granted |
15,171 | 241 | ||||||
|
Issued |
(9,005 | ) | — | |||||
|
Forfeited |
(1,518 | ) | — | |||||
|
|
|
|
|
|||||
|
RSUs outstanding, June 30, 2011 |
77,492 | 668 | ||||||
|
|
|
|
|
|||||
|
Weighted average grant date fair value as adjusted for the applicable discount |
$ | 36.46 | ||||||
|
|
|
|||||||
|
Weighted average grant date fair value |
$ | 51.87 | ||||||
|
|
|
|||||||
|
|||
NOTE 22. FAIR VALUE OF FINANCIAL INSTRUMENTS
ASC 820 defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. Fair value is the price that would be received to sell an asset or paid to transfer a liability between market participants in an orderly transaction. The market in which the reporting entity would sell the asset or transfer the liability with the greatest volume and level of activity for the asset or liability is known as the principal market. When no principal market exists, the most advantageous market is used. This is the market in which the reporting entity would sell the asset or transfer the liability with the price that maximizes the amount that would be received or minimizes the amount that would be paid. Fair value is based on assumptions market participants would make in pricing the asset or liability. Generally, fair value is based on observable quoted market prices or derived from observable market data when such market prices or data are available. When such prices or inputs are not available, the reporting entity should use valuation models.
The Company's financial assets and liabilities recorded at fair value on a recurring basis are categorized based on the priority of the inputs used to measure fair value. The inputs used in measuring fair value are categorized into three levels, as follows:
|
|
• |
|
Level 1 Inputs—unadjusted quoted prices in active markets for identical assets or liabilities. |
|
|
• |
|
Level 2 Inputs—unadjusted quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, inputs other than quoted prices that are observable, and inputs derived from or corroborated by observable market data. |
|
|
• |
|
Level 3 Inputs—amounts derived from valuation models in which unobservable inputs reflect the reporting entity's own assumptions about the assumptions of market participants that would be used in pricing the asset or liability. |
As of June 30, 2011, the Company's financial instruments measured at fair value included non-COLI money market investments and mutual funds held in the Company's Supplemental Savings Plan and contingent consideration in connection with business combinations completed during the year ended June 30, 2010. The following table summarizes the financial assets and liabilities measured at fair value on a recurring basis as of June 30, 2011, and the level they fall within the fair value hierarchy (in thousands):
|
Description of Financial Instrument |
|
Financial |
|
Fair Value |
|
Fair Value |
| |
|
Non-COLI assets held in connection with Supplemental Savings Plan |
|
Long-term asset |
|
Level 1 |
|
$ |
6,514 |
|
|
Contingent Consideration |
|
Current liability |
|
Level 3 |
|
$ |
20,839 |
|
Changes in the fair value of the assets held in connection with the Supplemental Savings Plan are recorded in indirect costs and selling expenses.
All three acquisitions completed during the year ended June 30, 2010 (see Note 4) contained provisions requiring that the Company pay contingent consideration in the event the acquired businesses achieved certain specified earnings results during the two year periods subsequent to each acquisition. The Company determined the fair value of the contingent consideration as of each acquisition date using a valuation model which included the evaluation of all possible outcomes and the application of an appropriate discount rate. At the end of each reporting period, the fair value of the contingent consideration is remeasured and any changes are recorded in indirect costs and selling expenses. During the years ended June 30, 2011 and 2010, this remeasurement resulted in a $9.6 million and $2.0 million, respectively, reduction in the liability recorded.
|
|||
NOTE 23. EARNINGS PER SHARE
Earnings per share and the weighted-average number of diluted shares are computed as follows (in thousands, except per share data):
| Year ended June 30, | ||||||||||||
| 2011 | 2010 | 2009 (As Adjusted(1)) |
||||||||||
|
Net income attributable to CACI |
$ | 144,218 | $ | 106,515 | $ | 89,698 | ||||||
|
|
|
|
|
|
|
|||||||
|
Weighted-average number of basic shares outstanding during the period |
30,281 | 30,138 | 29,976 | |||||||||
|
Dilutive effect of SSARs/stock options and RSUs/restricted shares after application of treasury stock method |
816 | 538 | 451 | |||||||||
|
Dilutive effect of the Notes |
203 | — | — | |||||||||
|
|
|
|
|
|
|
|||||||
|
Weighted-average number of diluted shares outstanding during the period |
31,300 | 30,676 | 30,427 | |||||||||
|
|
|
|
|
|
|
|||||||
|
Basic earnings per share |
$ | 4.76 | $ | 3.53 | $ | 2.99 | ||||||
|
|
|
|
|
|
|
|||||||
|
Diluted earnings per share |
$ | 4.61 | $ | 3.47 | $ | 2.95 | ||||||
|
|
|
|
|
|
|
|||||||
| (1) | Certain amounts for the year ended June 30, 2009 have been adjusted to reflect the retroactive application of new accounting standards. See Note 3. |
The total number of weighted-average common stock equivalents excluded from the diluted per share computations due to their anti-dilutive effects for the years ended June 30, 2011, 2010 and 2009, were 1.9 million, 2.4 million, and 2.5 million, respectively. The performance-based RSUs granted in August 2008 were excluded from the calculation of diluted earnings per share for the fiscal year ended June 30, 2009 as the underlying shares were considered to be contingently issuable shares until June 30, 2010, the date on which the performance metric was measured. With the resolution of the performance metric, shares underlying the performance-based RSUs granted in August 2008 and August 2009 are included in the calculation of diluted earnings per share for the years ended June 30, 2010 and 2011. The shares underlying the performance-based RSUs granted in September 2010 are included in the calculation of diluted earnings per share for the year ended June 30, 2011 as the NATP performance metric associated with the shares was met and as if the performance metric based on the share price was computed as of June 30, 2011. The shares underlying the Notes were not included in the computation of diluted earnings per share for the years ended June 30, 2009 and 2010 because the conversion price of $54.65 exceeded the average share price during each three month period in those years. The shares underlying the Notes were included in the computation of diluted earnings per share for the year ended June 30, 2011 because the average share price during the quarters ended March 31, 2011 and June 30, 2011 exceeded the conversion price of $54.65. The Warrants were excluded from the computation of diluted earnings per share because the Warrants' exercise price of $68.31 was greater than the average market price of a share of Company common stock during the periods in which the Warrants were outstanding.
|
|||
NOTE 24. COMMON STOCK DATA (UNAUDITED)
The ranges of high and low sales prices of the Company's common stock as reported by the New York Stock Exchange for each quarter during the fiscal years ended June 30, 2011 and 2010 were as follows:
| 2011 | 2010 | |||||||||||||||
|
Quarter |
High | Low | High | Low | ||||||||||||
|
1st |
$ | 48.70 | $ | 40.00 | $ | 48.85 | $ | 42.00 | ||||||||
|
2nd |
$ | 54.11 | $ | 43.61 | $ | 49.92 | $ | 44.65 | ||||||||
|
3rd |
$ | 62.75 | $ | 50.91 | $ | 52.92 | $ | 45.36 | ||||||||
|
4th |
$ | 64.40 | $ | 58.15 | $ | 51.93 | $ | 41.44 | ||||||||
|
|||
NOTE 25. QUARTERLY FINANCIAL DATA (UNAUDITED)
This data is unaudited, but in the opinion of management, includes and reflects all adjustments that are normal and recurring in nature, and necessary, for a fair presentation of the selected data for these interim periods. Quarterly condensed financial operating results of the Company for the years ended June 30, 2011 and 2010, are presented below (in thousands except per share data).
| Year ended June 30, 2011 | ||||||||||||||||
| First | Second | Third | Fourth | |||||||||||||
|
Revenue |
$ | 833,971 | $ | 867,278 | $ | 913,369 | $ | 963,162 | ||||||||
|
Income from operations |
$ | 52,097 | $ | 59,435 | $ | 61,785 | $ | 78,084 | ||||||||
|
Net income attributable to CACI |
$ | 28,655 | $ | 33,235 | $ | 36,427 | $ | 45,901 | ||||||||
|
Basic earnings per share |
$ | 0.95 | $ | 1.10 | $ | 1.20 | $ | 1.52 | ||||||||
|
Diluted earnings per share |
$ | 0.92 | $ | 1.08 | $ | 1.16 | $ | 1.44 | ||||||||
|
Weighted-average shares outstanding: |
||||||||||||||||
|
Basic |
30,304 | 30,288 | 30,373 | 30,162 | ||||||||||||
|
Diluted |
31,102 | 30,906 | 31,300 | 31,895 | ||||||||||||
| Year ended June 30, 2010 | ||||||||||||||||
| First | Second | Third | Fourth | |||||||||||||
|
Revenue |
$ | 739,518 | $ | 776,727 | $ | 784,169 | $ | 848,717 | ||||||||
|
Income from operations |
$ | 46,028 | $ | 47,461 | $ | 47,322 | $ | 53,971 | ||||||||
|
Net income attributable to CACI |
$ | 23,855 | $ | 26,052 | $ | 26,708 | $ | 29,900 | ||||||||
|
Basic earnings per share |
$ | 0.79 | $ | 0.87 | $ | 0.89 | $ | 0.99 | ||||||||
|
Diluted earnings per share |
$ | 0.78 | $ | 0.85 | $ | 0.87 | $ | 0.96 | ||||||||
|
Weighted-average shares outstanding: |
||||||||||||||||
|
Basic |
30,034 | 30,109 | 30,171 | 30,241 | ||||||||||||
|
Diluted |
30,464 | 30,580 | 30,641 | 31,022 | ||||||||||||
|
|||
NOTE 26. SUBSEQUENT EVENTS
On July 1, 2011, the Company completed its transaction to acquire Pangia Technologies, LLC, for $41.0 million. Pangia is a software engineering company that provides technical solutions in the areas of computer network operations, information assurance, mission systems, software and systems engineering, and IT infrastructure support. This acquisition furthers CACI's growth in cybersecurity solutions and increases its presence in the Intelligence Community.
On July 25, 2011, the Company announced that it had signed a definitive agreement to acquire Paradigm Holdings, Inc., the parent of Paradigm Solutions Corporation. Paradigm provides cybersecurity and enterprise IT solutions to clients in federal civilian agencies, the Department of Defense, and the Intelligence Community. This acquisition expands CACI's cybersecurity capabilities and its presence in supporting national security missions. The Company anticipates that it will complete the acquisition during the first half of its fiscal year ending June 30, 2012.
In August 2011, the Company's Board of Directors rescinded its May 2011 authorization to repurchase up to $175.0 million in value of shares of the Company's common stock, and adopted a resolution authorizing the repurchase of up to 4.0 million shares of the Company's common stock. On August 29, 2011, the Company announced its agreement with Bank of America, N.A. to repurchase 4.0 million shares of its common stock under an accelerated share repurchase program.
|
|||
SCHEDULE II
CACI INTERNATIONAL INC
VALUATION AND QUALIFYING ACCOUNTS
FOR YEARS ENDED JUNE 30, 2011, 2010 AND 2009
(in thousands)
| Balance at Beginning of Period |
Additions at Cost |
Deductions | Other Changes |
Balance at End of Period |
||||||||||||||||
|
2011 |
||||||||||||||||||||
|
Reserves deducted from assets to which they apply: |
||||||||||||||||||||
|
Allowances for doubtful accounts |
$ | 3,212 | $ | 1,802 | $ | (1,383 | ) | $ | 107 | $ | 3,738 | |||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
2010 |
||||||||||||||||||||
|
Reserves deducted from assets to which they apply: |
||||||||||||||||||||
|
Allowances for doubtful accounts |
$ | 3,501 | $ | 1,285 | $ | (1,394 | ) | $ | (180 | ) | $ | 3,212 | ||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
2009 |
||||||||||||||||||||
|
Reserves deducted from assets to which they apply: |
||||||||||||||||||||
|
Allowances for doubtful accounts |
$ | 3,937 | $ | 1,208 | $ | (1,047 | ) | $ | (597 | ) | $ | 3,501 | ||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
Items included as "Other Changes" include acquisition date reserves of acquired businesses and foreign currency exchange differences.
|
|||
Revenue Recognition
The Company generates almost all of its revenue from three different types of contractual arrangements: cost-plus-fee contracts, time and materials contracts, and fixed price contracts. Revenue on cost-plus-fee contracts is recognized to the extent of costs incurred plus an estimate of the applicable fees earned. The Company considers fixed fees under cost-plus-fee contracts to be earned in proportion to the allowable costs incurred in performance of the contract. For cost-plus-fee contracts that include performance based fee incentives, and that are subject to the provisions of Accounting Standards Codification (ASC) 605-35, Revenue Recognition—Construction-Type and Production-Type Contracts (ASC 605-35), the Company recognizes the relevant portion of the expected fee to be awarded by the customer at the time such fee can be reasonably estimated, based on factors such as the Company's prior award experience and communications with the customer regarding performance. For such cost-plus-fee contracts subject to the provisions of ASC 605-10-S99, Revenue Recognition—SEC Materials (ASC 605-10-S99), the Company recognizes the relevant portion of the fee upon customer approval. Revenue on time and material contracts is recognized to the extent of billable rates times hours delivered for services provided, to the extent of material cost for products delivered to customers, and to the extent of expenses incurred on behalf of the customers. Shipping and handling fees charged to the customers are recognized as revenue at the time products are delivered to the customers.
The Company has four basic categories of fixed price contracts: fixed unit price, fixed price-level of effort, fixed price-completion, and fixed price-license. Revenue on fixed unit price contracts, where specified units of output under service arrangements are delivered, is recognized as units are delivered based on the specified price per unit. Revenue on fixed unit price maintenance contracts is recognized ratably over the length of the service period. Revenue for fixed price-level of effort contracts is recognized based upon the number of units of labor actually delivered multiplied by the agreed rate for each unit of labor.
A significant portion of the Company's fixed price-completion contracts involve the design and development of complex client systems. For these contracts that are within the scope of ASC 605-35, revenue is recognized on the percentage-of-completion method using costs incurred in relation to total estimated costs. For fixed price-completion contracts that are not within the scope of ASC 605-35, revenue is generally recognized ratably over the service period. The Company's fixed price-license agreements and related services contracts are primarily executed in its international operations. As the agreements to deliver software require significant production, modification or customization of software, revenue is recognized using the contract accounting guidance of ASC 605-35. For agreements to deliver data under license and related services, revenue is recognized as the data is delivered and services are performed. Except for losses on contracts accounted for under ASC 605-10-S99, provisions for estimated losses on uncompleted contracts are recorded in the period such losses are determined. Losses on contracts accounted for under ASC 605-10-S99 are recognized as the services and materials are provided.
The Company's contracts may include the provision of more than one of its services. In these situations, and for applicable arrangements, revenue recognition includes the proper identification of separate units of accounting and the allocation of revenue across all elements based on relative fair values, with proper consideration given to the guidance provided by other authoritative literature.
Contract accounting requires judgment relative to assessing risks, estimating contract revenue and costs, and making assumptions for schedule and technical issues. Due to the size and nature of many of the Company's contracts, the estimation of total revenue and cost at completion is complicated and subject to many variables. Contract costs include material, labor, subcontracting costs, and other direct costs, as well as an allocation of allowable indirect costs. Assumptions have to be made regarding the length of time to complete the contract because costs also include expected increases in wages and prices for materials. For contract change orders, claims or similar items, the Company applies judgment in estimating the amounts and assessing the potential for realization. These amounts are only included in contract value when they can be reliably estimated and realization is considered probable. Incentives or penalties related to performance on contracts are considered in estimating sales and profit rates, and are recorded when there is sufficient information for the Company to assess anticipated performance. Estimates of award fees for certain contracts are also a factor in estimating revenue and profit rates based on actual and anticipated awards.
Long-term development and production contracts make up a large portion of the Company's business, and therefore the amounts recorded in the Company's financial statements using contract accounting methods are material. For federal government contracts, the Company follows U.S. government procurement and accounting standards in assessing the allowability and the allocability of costs to contracts. Due to the significance of the judgments and estimation processes, it is likely that materially different amounts could be recorded if the Company used different assumptions or if the underlying circumstances were to change. The Company closely monitors compliance with, and the consistent application of, its critical accounting policies related to contract accounting. Business operations personnel conduct thorough periodic contract status and performance reviews. When adjustments in estimated contract revenue or costs are required, any changes from prior estimates are generally included in earnings in the current period. Also, regular and recurring evaluations of contract cost, scheduling and technical matters are performed by management personnel who are independent from the business operations personnel performing work under the contract. Costs incurred and allocated to contracts with the U.S. government are scrutinized for compliance with regulatory standards by Company personnel, and are subject to audit by the Defense Contract Audit Agency (DCAA).
From time to time, the Company may proceed with work based on client direction prior to the completion and signing of formal contract documents. The Company has a formal review process for approving any such work. Revenue associated with such work is recognized only when it can be reliably estimated and realization is probable. The Company bases its estimates on previous experiences with the client, communications with the client regarding funding status, and its knowledge of available funding for the contract or program.
The Company's U.S. government contracts (94.9 percent of total revenue in the year ended June 30, 2011) are subject to subsequent government audit of direct and indirect costs. Incurred cost audits have been completed through June 30, 2005. Management does not anticipate any material adjustment to the consolidated financial statements in subsequent periods for audits not yet started or completed.
Costs of Revenue
Costs of revenue include all direct contract costs as well as indirect overhead costs and selling, general and administrative expenses that are allowable and allocable to contracts under federal procurement standards. Costs of revenue also include costs and expenses that are unallowable under applicable procurement standards, and are not allocable to contracts for billing purposes. Such costs and expenses do not directly generate revenue, but are necessary for business operations.
Cash and Cash Equivalents
The Company considers all investments with an original maturity of three months or fewer on their trade date to be cash equivalents. The Company classifies investments with an original maturity of more than three months but less than twelve months on their trade date as short-term marketable securities.
Investments in Marketable Securities
From time to time, the Company invests in marketable securities that are classified as available-for-sale and are reported at fair value. Unrealized gains and losses as a result of changes in the fair value of the available-for-sale investments are recorded as a separate component within accumulated other comprehensive income in the accompanying consolidated balance sheets. For securities classified as trading securities, unrealized gains and losses are reported in the consolidated statement of operations and impact net earnings.
The fair value of marketable securities is determined based on quoted market prices at the reporting date for those securities. The cost of securities sold is determined using the specific identification method. Premiums and discounts are amortized over the period from acquisition to maturity, and are included in investment income, along with interest and dividends.
Allowance For Doubtful Accounts
The Company establishes bad debt reserves against certain billed receivables based upon the latest information available to determine whether invoices are ultimately collectible. Whenever judgment is involved in determining the estimates, there is the potential for bad debt expense and the fair value of accounts receivable to be misstated. Given that the Company primarily serves the U.S. government and that, in management's opinion, the Company has sufficient controls in place to properly recognize revenue, the Company believes the risk to be relatively low that a misstatement of accounts receivable would have a material impact on its consolidated financial statements. Accounts receivable balances are written-off when the balance is deemed uncollectible after exhausting all reasonable means of collection.
Inventories
Inventories are stated at the lower of cost or market using the specific identification cost method, and are recorded within prepaid expenses and other current assets on the accompanying consolidated balance sheets.
Goodwill
Goodwill represents the excess of costs over the fair value of assets of businesses acquired. Goodwill and intangible assets acquired in a purchase business combination and determined to have an indefinite useful life are not amortized, but instead tested for impairment at least annually or if impairment indicators are present. The evaluation includes comparing the fair value of the relevant reporting unit to the carrying value, including goodwill, of such unit. If the fair value exceeds the carrying value, no impairment loss is recognized. However, if the carrying value of the reporting unit exceeds its fair value, the goodwill of the reporting unit may be impaired. Impairment is measured by comparing the derived fair value of the goodwill to its carrying value.
The Company has two reporting units—domestic operations and international operations. Its reporting units are the same as its operating segments. Approximately 95 percent of the Company's goodwill is attributable to its domestic operations. The Company estimates the fair value of its reporting units using both an income approach and a market approach. The valuation process considers management's estimates of the future operating performance of each reporting unit. Companies in similar industries are researched and analyzed and management considers the domestic and international economic and financial market conditions, both in general and specific to the industry in which the Company operates, prevailing as of the valuation date. The income approach utilizes discounted cash flows. The Company calculates a weighted average cost of capital for each reporting unit in order to estimate the discounted cash flows. The Company performs its annual testing for impairment of goodwill and other indefinite life intangible assets as of June 30 of each year. The fair value of each of the Company's reporting units as of June 30, 2011 significantly exceeded its carrying value.
Long-Lived Assets (Excluding Goodwill)
Long-lived assets such as property and equipment and intangible assets subject to amortization are reviewed for impairment whenever events or circumstances indicate that the carrying amount of an asset may not be fully recoverable. An impairment loss would be recognized if the sum of the long-term undiscounted cash flows is less than the carrying amount of the long-lived asset being evaluated. Any write-downs are treated as permanent reductions in the carrying amount of the assets. Property and equipment is recorded at cost. Depreciation of equipment and furniture has been provided over the estimated useful life of the respective assets (ranging from three to eight years) using the straight-line method. Leasehold improvements are generally amortized using the straight-line method over the remaining lease term or the useful life of the improvements, whichever is shorter. Repairs and maintenance costs are expensed as incurred. Separately identifiable intangible assets with estimable useful lives are amortized over their respective estimated useful lives to their estimated residual values. The Company believes that the carrying values of its long-lived assets as of June 30, 2011 and 2010 are fully realizable.
External Software Development Costs
Costs incurred in creating a software product to be sold or licensed for external use are charged to expense when incurred as indirect costs and selling expenses until technological feasibility has been established for the software. Technological feasibility is established upon completion of a detailed program design or, in its absence, completion of a working software version. Thereafter, all such software development costs are capitalized and subsequently reported at the lower of unamortized cost or estimated net realizable value. Capitalized costs are amortized on a straight-line basis over the remaining estimated economic life of the product.
Supplemental Retirement Savings Plan
The Company maintains the CACI International Inc Group Executive Retirement Plan (the Supplemental Savings Plan) and maintains the underlying assets in a Rabbi Trust. The Supplemental Savings Plan is a
non-qualified defined contribution supplemental retirement savings plan for certain key employees whereby participants may elect to defer and contribute a portion of their compensation, as permitted by the plan. Each participant directs his or her investments in the Supplemental Savings Plan (see Note 20).
A Rabbi Trust is a grantor trust established to fund compensation for a select group of management. The assets of this trust are available to satisfy the claims of general creditors in the event of bankruptcy of the Company. The assets held by the Rabbi Trust are invested in both corporate owned life insurance (COLI) products and in non-COLI products. The COLI products are recorded at cash surrender value in the consolidated financial statements as supplemental retirement savings plan assets and the non-COLI products are recorded at fair value in the consolidated financial statements as supplemental retirement savings plan assets. The amounts due to participants are based on contributions participant investment elections, and other participant activity and are recorded as supplemental retirement savings plan obligations.
Income Taxes
Income taxes are accounted for using the asset and liability method whereby deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the consolidated financial statement carrying amounts of assets and liabilities, and their respective tax bases, and operating loss and tax credit carry forwards. The Company accounts for tax contingencies in accordance with updates made to ASC 740-10-25, Income Taxes—Recognition. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities due to a change in tax rates is recognized in income in the period that includes the enactment date. Estimates of the realizability of deferred tax assets are based on the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies. Any interest or penalties incurred in connection with income taxes are recorded as part of income tax expense for financial reporting purposes.
Costs of Acquisitions
Through June 30, 2009, costs incurred by the Company related to legal, financial and other professional advisors that were directly related to successful acquisitions were capitalized as a cost of the acquisition. Such costs for unsuccessful or terminated acquisition opportunities were expensed when the Company determined that the opportunity would no longer be pursued. Effective July 1, 2009, all such costs associated with acquisitions, successful or unsuccessful, are expensed as incurred.
Foreign Currency Translation
The assets and liabilities of the Company's foreign subsidiaries whose functional currency is other than the U.S. dollar are translated at the exchange rate in effect on the reporting date, and income and expenses are translated at the weighted-average exchange rate during the period. The Company's primary practice is to negotiate contracts in the same currency in which the predominant expenses are incurred, thereby mitigating the exposure to foreign currency fluctuations. The net translation gains and losses are not included in determining net income, but are accumulated as a separate component of shareholders' equity. Foreign currency transaction gains and losses are included in determining net income, but are insignificant. These costs are included as indirect costs and selling expenses in the accompanying consolidated statements of operations.
Earnings Per Share
Basic earnings per share is computed using the sum of the weighted-average number of shares of common stock outstanding during the period and shares issued during the period are weighted for the portion of the period
that they were outstanding. Diluted earnings per share is computed in a manner similar to that used for basic earnings per share after giving effect to the dilutive effects of the exercise of stock settled stock appreciation rights and stock options and the vesting of restricted stock and restricted stock units. In addition, diluted earnings per share reflect the dilutive effects of restricted stock units with performance conditions in the reporting period in which the performance metric is achieved. When applicable, diluted earnings per share reflect the dilutive effects of shares issuable under the Company's $300.0 million of 2.125 percent convertible senior subordinated notes that were issued on May 16, 2007 and mature on May 1, 2014 (the Notes), and warrants to issue 5.5 million shares of CACI common stock at an exercise price of $68.31 per share that were issued in May 2007. Information about the weighted-average number of basic and diluted shares is presented in Note 23.
Fair Value of Financial Instruments
The carrying amounts of cash and cash equivalents, accounts receivable, accounts payable and amounts included in other current assets and current liabilities that meet the definition of a financial instrument approximate fair value because of the short-term nature of these amounts.
The fair value of the Company's debt under its bank credit facility approximates its carrying value at June 30, 2011. The fair value of the Company's debt under its bank credit facility was estimated using market data on companies with a corporate rating similar to CACI's that have recently priced credit facilities. The fair value of the Notes is based on quoted market prices (see Note 13).
Concentrations of Credit Risk
Financial instruments that potentially subject the Company to credit risk include accounts receivable and cash equivalents. Management believes that credit risk related to the Company's accounts receivable is limited due to a large number of customers in differing segments and agencies of the U.S. government. Accounts receivable credit risk is also limited due to the credit worthiness of the U.S. government. Management believes the credit risk associated with the Company's cash equivalents is limited due to the credit worthiness of the obligors of the investments underlying the cash equivalents. In addition, although the Company maintains cash balances at financial institutions that exceed federally insured limits, these balances are placed with high quality financial institutions.
Comprehensive Income
Comprehensive income is the change in equity of a business enterprise during a period from transactions and other events and circumstances from non-owner sources. Other comprehensive income refers to revenue, expenses, and gains and losses that under U.S. GAAP are included in comprehensive income, but excluded from the determination of net income. The elements within other comprehensive income consist of foreign currency translation adjustments; the changes in the fair value of interest rate swap agreements, net of tax; and differences between actual amounts and estimates based on actuarial assumptions and the effect of changes in actuarial assumptions made under the Company's post-retirement benefit plans, net of tax (see Note 15).
As of June 30, 2011 and 2010, accumulated other comprehensive loss included a loss of $2.4 million and $9.1 million, respectively, related to foreign currency translation adjustments and a loss of $0.7 million in both years, related to unrecognized post-retirement medical plan costs.
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reported periods. The significant management estimates include estimated costs to complete fixed-price contracts, estimated award fees for contracts accounted for under ASC 605-35, amortization periods for long-lived intangible assets, recoverability of long-lived assets, reserves for accounts receivable, reserves for contract related matters, reserves for unrecognized tax benefits, contingent consideration amounts to be paid in connection with certain acquisitions completed on or after July 1, 2009 and loss contingencies. Actual results could differ from these estimates.
Commitments and Contingencies
Liabilities for loss contingencies arising from claims, assessments, litigation, fines and penalties and other sources are recorded when it is probable that a liability has been incurred and the amount of the assessment and/or remediation can be reasonably estimated.
|
|||
| Year Ended June 30, 2009 | ||||||||||||||||
| Effects of Retroactively Adopting Accounting Standard Updates to: |
||||||||||||||||
| As Previously Reported |
ASC 470-20 | ASC 810 | As Adjusted | |||||||||||||
|
Interest expense and other |
$ | 23,062 | $ | 9,521 | $ | (719 | ) | $ | 31,864 | |||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
Income before income taxes |
$ | 161,791 | $ | (9,521 | ) | $ | 719 | $ | 152,989 | |||||||
|
Income taxes |
66,311 | (3,739 | ) | — | 62,572 | |||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
Net income before noncontrolling interest in earnings of joint venture |
$ | 95,480 | $ | (5,782 | ) | $ | 719 | $ | 90,417 | |||||||
|
|
|
|||||||||||||||
|
Noncontrolling interest in earnings of joint venture |
— | (719 | ) | (719 | ) | |||||||||||
|
|
|
|
|
|
|
|||||||||||
|
Net income attributable to CACI |
$ | (5,782 | ) | $ | — | $ | 89,698 | |||||||||
|
|
|
|
|
|
|
|||||||||||
|
Basic earnings per share |
$ | 3.19 | $ | (0.20 | ) | $ | — | $ | 2.99 | |||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
Diluted earnings per share |
$ | 3.14 | $ | (0.19 | ) | $ | — | $ | 2.95 | |||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
Weighted-average basic shares outstanding |
29,976 | — | — | 29,976 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
Weighted-average diluted shares outstanding |
30,427 | — | — | 30,427 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Year Ended June 30, 2009 | ||||||||||||||||
| Effects of Retroactively Adopting Accounting Standard Updates to: |
||||||||||||||||
| As Previously Reported |
ASC 470-20 | ASC 810 | As Adjusted | |||||||||||||
|
Cash Flows from Operating Activities: |
||||||||||||||||
|
Net income before non-controlling interests |
$ | 95,480 | $ | (5,782 | ) | $ | 719 | $ | 90,417 | |||||||
|
Non-cash interest expense |
— | 9,809 | — | 9,809 | ||||||||||||
|
Amortization of deferred financing costs |
2,841 | (288 | ) | — | 2,553 | |||||||||||
|
Deferred income tax expense (benefit) |
13,363 | (3,739 | ) | — | 9,624 | |||||||||||
|
Changes in other liabilities |
(359 | ) | — | (881 | ) | (1,240 | ) | |||||||||
|
Net cash provided by operating activities |
151,080 | — | (162 | ) | 150,918 | |||||||||||
|
Cash Flows from Financing Activities: |
||||||||||||||||
|
Other activities |
(1,318 | ) | — | 162 | (1,156 | ) | ||||||||||
|
Net cash used in financing activities |
(21,263 | ) | — | 162 | (21,101 | ) | ||||||||||
|
|||
|
Cash |
$ | 2,773 | ||
|
Accounts receivable |
12,070 | |||
|
Prepaid expenses and other current assets |
1,267 | |||
|
Property and equipment |
2,143 | |||
|
Customer contracts, customer relationships, non-compete agreements |
37,913 | |||
|
Goodwill |
98,800 | |||
|
Other assets |
51 | |||
|
Accounts payable |
(1,234 | ) | ||
|
Accrued expenses and other current liabilities |
(7,153 | ) | ||
|
Long-term deferred taxes |
(12,000 | ) | ||
|
|
|
|||
|
Total consideration paid |
$ | 134,630 | ||
|
|
|
|
|||
| June 30, | ||||||||
| 2011 | 2010 | |||||||
|
Cash |
$ | 163,788 | $ | 192,844 | ||||
|
Money market funds |
1,029 | 61,699 | ||||||
|
|
|
|
|
|||||
|
Total cash and cash equivalents |
$ | 164,817 | $ | 254,543 | ||||
|
|
|
|
| |||||
|
|||
| June 30, | ||||||||
| 2011 | 2010 | |||||||
|
Billed receivables |
$ | 452,533 | $ | 393,094 | ||||
|
Billable receivables at end of period |
66,587 | 84,107 | ||||||
|
Unbilled receivables pending receipt of contractual documents authorizing billing |
53,922 | 53,832 | ||||||
|
|
|
|
|
|||||
|
Total accounts receivable, current |
573,042 | 531,033 | ||||||
|
Unbilled receivables, retainages and fee withholdings expected to be billed beyond the next 12 months |
8,657 | 9,291 | ||||||
|
|
|
|
|
|||||
|
Total accounts receivable |
$ | 581,699 | $ | 540,324 | ||||
|
|
|
|
|
|||||
|
|||
| June 30, | ||||||||
| 2011 | 2010 | |||||||
|
Customer contracts and related customer relationships |
$ | 291,174 | $ | 253,031 | ||||
|
Acquired technologies |
27,177 | 27,177 | ||||||
|
Covenants not to compete |
3,070 | 2,373 | ||||||
|
Other |
1,637 | 1,631 | ||||||
|
|
|
|
|
|||||
|
Intangible assets |
323,058 | 284,212 | ||||||
|
Less accumulated amortization |
(214,956 | ) | (175,914 | ) | ||||
|
|
|
|
|
|||||
|
Total intangible assets, net |
$ | 108,102 | $ | 108,298 | ||||
|
|
|
|
|
|||||
| Amount | ||||
|
Year ending June 30, 2012 |
$ | 29,261 | ||
|
Year ending June 30, 2013 |
21,677 | |||
|
Year ending June 30, 2014 |
17,859 | |||
|
Year ending June 30, 2015 |
13,296 | |||
|
Year ending June 30, 2016 |
8,606 | |||
|
Thereafter |
17,403 | |||
|
|
|
|||
|
Total intangible assets, net |
$ | 108,102 | ||
|
|
|
|||
|
|||
| June 30, | ||||||||
| 2011 | 2010 | |||||||
|
Equipment and furniture |
$ | 76,233 | $ | 69,164 | ||||
|
Leasehold improvements |
57,889 | 53,745 | ||||||
|
|
|
|
|
|||||
|
Property and equipment, at cost |
134,122 | 122,909 | ||||||
|
Less accumulated depreciation and amortization |
(71,367 | ) | (64,243 | ) | ||||
|
|
|
|
|
|||||
|
Total property and equipment, net |
$ | 62,755 | $ | 58,666 | ||||
|
|
|
|
|
|||||
|
|||
| Year ended June 30, | ||||||||||||
| 2011 | 2010 | 2009 | ||||||||||
|
Capitalized software development costs, beginning of year |
$ | 1,315 | $ | 2,001 | $ | 5,165 | ||||||
|
Costs capitalized |
3,358 | 1,230 | 171 | |||||||||
|
Amortization |
(624 | ) | (1,916 | ) | (3,335 | ) | ||||||
|
|
|
|
|
|
|
|||||||
|
Capitalized software development costs, end of year |
$ | 4,049 | $ | 1,315 | $ | 2,001 | ||||||
|
|
|
|
|
|
|
|||||||
|
|||
| June 30, | ||||||||
| 2011 | 2010 | |||||||
|
Accrued salaries and withholdings |
$ | 102,116 | $ | 86,748 | ||||
|
Accrued leave |
60,437 | 54,460 | ||||||
|
Accrued fringe benefits |
11,033 | 11,582 | ||||||
|
|
|
|
|
|||||
|
Total accrued compensation and benefits |
$ | 173,586 | $ | 152,790 | ||||
|
|
|
|
|
|||||
|
|||
| June 30, | ||||||||
| 2011 | 2010 | |||||||
|
Vendor obligations |
$ | 84,434 | $ | 82,345 | ||||
|
Deferred revenue |
34,127 | 24,249 | ||||||
|
Deferred acquisition consideration |
24,779 | 3,420 | ||||||
|
Other |
13,902 | 18,545 | ||||||
|
|
|
|
|
|||||
|
Total other accrued expenses and current liabilities |
$ | 157,242 | $ | 128,559 | ||||
|
|
|
|
|
|||||
|
|||
| June 30, | ||||||||
| 2011 | 2010 | |||||||
|
Convertible notes payable |
$ | 300,000 | $ | 300,000 | ||||
|
Bank credit facility—term loans |
146,250 | 278,653 | ||||||
|
|
|
|
|
|||||
|
Principal amount of long-term debt |
446,250 | 578,653 | ||||||
|
Less unamortized discount |
(36,313 | ) | (47,549 | ) | ||||
|
|
|
|
|
|||||
|
Total long-term debt |
409,937 | 531,104 | ||||||
|
Less current portion |
(7,500 | ) | (278,653 | ) | ||||
|
|
|
|
|
|||||
|
Long-term debt, net of current portion |
$ | 402,437 | $ | 252,451 | ||||
|
|
|
|
|
|||||
| Year Ended June 30, | ||||||||||||
| 2011 | 2010 | 2009 | ||||||||||
|
Coupon interest |
$ | 6,375 | $ | 6,375 | $ | 6,375 | ||||||
|
Non-cash amortization of discount |
11,235 | 10,499 | 9,809 | |||||||||
|
Amortization of issuance costs |
820 | 820 | 820 | |||||||||
|
|
|
|
|
|
|
|||||||
|
Total |
$ | 18,430 | $ | 17,694 | $ | 17,004 | ||||||
|
|
|
|
|
|
|
|||||||
|
Fiscal year ending June 30, |
Amount Amortized During Period |
|||
|
2012 |
$ | 12,024 | ||
|
2013 |
12,868 | |||
|
2014 |
11,421 | |||
|
|
|
|||
| $ | 36,313 | |||
|
|
|
|||
| Interest Rate Swaps | ||||||||||||
| 2011 | 2010 | 2009 | ||||||||||
|
Gain (loss) recognized in other comprehensive income (loss) (effective portion) |
$ | — | $ | 1,045 | $ | (332 | ) | |||||
|
|
|
|
|
|
|
|||||||
|
Loss reclassified to earnings from accumulated other comprehensive loss (effective portion) |
$ | — | $ | (1,817 | ) | $ | (1,795 | ) | ||||
|
Gain recognized in earnings (ineffective portion) |
— | — | — | |||||||||
|
|
|
|
|
|
|
|||||||
| $ | — | $ | (1,817 | ) | $ | (1,795 | ) | |||||
|
|
|
|
|
|
|
|||||||
|
Year ending June 30, |
||||
|
2012 |
$ | 7,500 | ||
|
2013 |
7,500 | |||
|
2014 |
311,250 | |||
|
2015 |
15,000 | |||
|
2016 |
105,000 | |||
|
|
|
|||
|
Principal amount of long-term debt |
446,250 | |||
|
Less unamortized discount |
(36,313 | ) | ||
|
|
|
|||
|
Total long-term debt |
$ | 409,937 | ||
|
|
|
|
|||
|
Year ending June 30: |
||||
|
2012 |
$ | 35,289 | ||
|
2013 |
31,336 | |||
|
2014 |
29,563 | |||
|
2015 |
28,029 | |||
|
2016 |
22,263 | |||
|
Thereafter |
76,007 | |||
|
|
|
|||
|
Total minimum lease payments |
$ | 222,487 | ||
|
|
|
|
|||
| June 30, | ||||||||
| 2011 | 2010 | |||||||
|
Deferred rent, net of current portion |
$ | 25,983 | $ | 23,272 | ||||
|
Reserve for unrecognized tax benefits |
5,095 | 4,296 | ||||||
|
Accrued post-retirement obligations |
3,447 | 3,198 | ||||||
|
Deferred acquisition and contingent consideration |
526 | 34,196 | ||||||
|
Other |
2,815 | 2,401 | ||||||
|
|
|
|
|
|||||
|
Total other long-term liabilities |
$ | 37,866 | $ | 67,363 | ||||
|
|
|
|
|
|||||
|
|||
| Domestic Operations |
International Operations |
Total | ||||||||||
| (in thousands) | ||||||||||||
|
Year Ended June 30, 2011 |
||||||||||||
|
Revenue from external customers |
$ | 3,459,715 | $ | 118,065 | $ | 3,577,780 | ||||||
|
Net income attributable to CACI |
135,158 | 9,060 | 144,218 | |||||||||
|
Net assets |
1,211,517 | 98,099 | 1,309,616 | |||||||||
|
Goodwill |
1,200,091 | 66,194 | 1,266,285 | |||||||||
|
Total long-term assets |
1,457,505 | 80,548 | 1,538,053 | |||||||||
|
Total assets |
2,176,380 | 143,751 | 2,320,131 | |||||||||
|
Capital expenditures |
13,264 | 1,124 | 14,388 | |||||||||
|
Depreciation and amortization |
53,179 | 2,888 | 56,067 | |||||||||
|
Year Ended June 30, 2010 |
||||||||||||
|
Revenue from external customers |
$ | 3,032,341 | $ | 116,790 | $ | 3,149,131 | ||||||
|
Net income attributable to CACI |
98,649 | 7,866 | 106,515 | |||||||||
|
Net assets |
1,090,795 | 82,360 | 1,173,155 | |||||||||
|
Goodwill |
1,105,055 | 56,806 | 1,161,861 | |||||||||
|
Total long-term assets |
1,333,876 | 70,144 | 1,404,020 | |||||||||
|
Total assets |
2,122,510 | 122,256 | 2,244,766 | |||||||||
|
Capital expenditures |
20,954 | 1,549 | 22,503 | |||||||||
|
Depreciation and amortization |
50,095 | 2,944 | 53,039 | |||||||||
|
Year Ended June 30, 2009(1) |
||||||||||||
|
Revenue from external customers |
$ | 2,650,769 | $ | 79,393 | $ | 2,730,162 | ||||||
|
Net income attributable to CACI |
84,772 | 4,926 | 89,698 | |||||||||
|
Net assets |
971,685 | 57,923 | 1,029,608 | |||||||||
|
Goodwill |
1,031,980 | 51,770 | 1,083,750 | |||||||||
|
Total long-term assets |
1,214,944 | 66,303 | 1,281,247 | |||||||||
|
Total assets |
1,907,677 | 98,402 | 2,006,079 | |||||||||
|
Capital expenditures |
11,692 | 677 | 12,369 | |||||||||
|
Depreciation and amortization |
44,788 | 1,804 | 46,592 | |||||||||
| (1) |
Certain amounts as of and for the year ended June 30, 2009 have been adjusted to reflect the retroactive application of new accounting standards. See Note 3. |
| Year ended June 30, | ||||||||||||||||||||||||
| 2011 | % | 2010 | % | 2009 | % | |||||||||||||||||||
|
Department of Defense |
$ | 2,858,721 | 79.9 | % | $ | 2,450,463 | 77.8 | % | $ | 2,078,338 | 76.1 | % | ||||||||||||
|
Federal civilian agencies |
537,687 | 15.0 | 535,467 | 17.0 | 542,090 | 19.9 | ||||||||||||||||||
|
Commercial and other |
166,966 | 4.7 | 146,839 | 4.7 | 88,228 | 3.2 | ||||||||||||||||||
|
State and local governments |
14,406 | 0.4 | 16,362 | 0.5 | 21,506 | 0.8 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
|
Total revenue |
$ | 3,577,780 | 100.0 | % | $ | 3,149,131 | 100.0 | % | $ | 2,730,162 | 100.0 | % | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
|
|||
| Year ended June 30, | ||||||||||||
| 2011 | 2010 | 2009 (As Adjusted(1)) |
||||||||||
|
Domestic |
$ | 215,200 | $ | 156,024 | $ | 144,888 | ||||||
|
Foreign |
12,123 | 11,662 | 7,382 | |||||||||
|
|
|
|
|
|
|
|||||||
|
Income before income taxes |
$ | 227,323 | $ | 167,686 | $ | 152,270 | ||||||
|
|
|
|
|
|
|
|||||||
| (1) | Certain amounts for the year ended June 30, 2009 have been adjusted to reflect the retroactive application of new accounting standards. See Note 3. |
| Year ended June 30, | ||||||||||||
| 2011 | 2010 | 2009 (As Adjusted(1)) |
||||||||||
|
Current: |
||||||||||||
|
Federal |
$ | 59,095 | $ | 51,572 | $ | 41,884 | ||||||
|
State and local |
13,578 | 11,155 | 8,404 | |||||||||
|
Foreign |
2,845 | 3,147 | 2,660 | |||||||||
|
|
|
|
|
|
|
|||||||
|
Total current |
75,518 | 65,874 | 52,948 | |||||||||
|
|
|
|
|
|
|
|||||||
|
Deferred: |
||||||||||||
|
Federal |
6,175 | (4,082 | ) | 8,268 | ||||||||
|
State and local |
1,194 | (820 | ) | 1,661 | ||||||||
|
Foreign |
218 | 199 | (305 | ) | ||||||||
|
|
|
|
|
|
|
|||||||
|
Total deferred |
7,587 | (4,703 | ) | 9,624 | ||||||||
|
|
|
|
|
|
|
|||||||
|
Total income tax expense |
$ | 83,105 | $ | 61,171 | $ | 62,572 | ||||||
|
|
|
|
|
|
|
|||||||
| (1) | Certain amounts for the year ended June 30, 2009 have been adjusted to reflect the retroactive application of new accounting standards. See Note 3. |
| Year ended June 30, | ||||||||||||
| 2011 | 2010 | 2009 (As Adjusted(1)) |
||||||||||
|
Expected tax expense computed at federal rate |
$ | 79,563 | $ | 58,690 | $ | 53,295 | ||||||
|
State and local taxes, net of federal benefit |
9,602 | 6,759 | 6,479 | |||||||||
|
(Nonincludible) nondeductible items |
(1,965 | ) | (861 | ) | 4,227 | |||||||
|
Incremental effect of foreign tax rates |
(914 | ) | (830 | ) | (513 | ) | ||||||
|
Other |
(3,181 | ) | (2,587 | ) | (916 | ) | ||||||
|
|
|
|
|
|
|
|||||||
|
Total income tax expense |
$ | 83,105 | $ | 61,171 | $ | 62,572 | ||||||
|
|
|
|
|
|
|
|||||||
| (1) |
Certain amounts for the year ended June 30, 2009 have been adjusted to reflect the retroactive application of new accounting standards. See Note 3.
|
| June 30, | ||||||||
| 2011 | 2010 | |||||||
|
Deferred tax assets: |
||||||||
|
Reserves and accruals |
$ | 29,945 | $ | 25,347 | ||||
|
Stock-based compensation |
28,768 | 30,739 | ||||||
|
Deferred compensation and post-retirement obligations |
27,977 | 22,093 | ||||||
|
Deferred rent |
2,929 | 1,746 | ||||||
|
Original issue discount related to the Notes |
883 | 1,355 | ||||||
|
Other |
1,323 | 3,138 | ||||||
|
|
|
|
|
|||||
|
Total deferred tax assets |
91,825 | 84,418 | ||||||
|
|
|
|
|
|||||
|
Deferred tax liabilities: |
||||||||
|
Goodwill and other intangible assets |
(121,842 | ) | (98,988 | ) | ||||
|
Unbilled revenue |
(11,758 | ) | (10,360 | ) | ||||
|
Prepaid expenses |
(4,011 | ) | (3,630 | ) | ||||
|
Other |
(6,257 | ) | (1,789 | ) | ||||
|
|
|
|
|
|||||
|
Total deferred tax liabilities |
(143,868 | ) | (114,767 | ) | ||||
|
|
|
|
|
|||||
|
Net deferred tax liability |
$ | (52,043 | ) | $ | (30,349 | ) | ||
|
|
|
|
|
|||||
| Year ended June 30, | ||||||||||||
| 2011 | 2010 | 2009 | ||||||||||
|
Beginning of year |
$ | 5,189 | $ | 11,945 | $ | 4,612 | ||||||
|
Additions based on current year tax positions |
2,711 | 1,323 | 651 | |||||||||
|
Reductions based on current year tax positions |
— | — | — | |||||||||
|
Additions based on prior year tax positions |
— | — | 6,682 | |||||||||
|
Reductions based on prior year tax positions |
(2,003 | ) | (7,332 | ) | — | |||||||
|
Lapse of statute of limitations |
— | (630 | ) | — | ||||||||
|
Settlements with taxing authorities |
— | (117 | ) | — | ||||||||
|
|
|
|
|
|
|
|||||||
|
End of year |
$ | 5,897 | $ | 5,189 | $ | 11,945 | ||||||
|
|
|
|
|
|
|
|||||||
|
|||
| Year ended June 30, | ||||||||||||
| 2011 | 2010 | 2009 | ||||||||||
|
Stock-based compensation included in indirect costs and selling expense: |
||||||||||||
|
SSARs and non-qualified stock option expense |
$ | 3,714 | $ | 8,484 | $ | 9,926 | ||||||
|
Restricted stock and RSU expense |
14,201 | 22,266 | 6,895 | |||||||||
|
|
|
|
|
|
|
|||||||
|
Total stock-based compensation expense |
$ | 17,915 | $ | 30,750 | $ | 16,821 | ||||||
|
|
|
|
|
|
|
|||||||
|
Income tax benefit recognized for stock-based compensation expense |
$ | 6,549 | $ | 11,218 | $ | 6,895 | ||||||
|
|
|
|
|
|
|
|||||||
| For SSARs Granted During the year ended June 30, | ||
| 2009 | ||
|
Historical volatility |
30.7% - 38.7% | |
|
Expected dividends |
0% | |
|
Expected life (in years) |
5.5 | |
|
Risk-free rate |
2.19% - 3.23% |
| Number of Shares |
Exercise Price | Weighted Average Exercise Price |
Weighted Average Grant Date Fair Value |
|||||||||||||
|
Outstanding, June 30, 2008 |
3,307,849 | $ | 8.44 - 65.04 | $ | 47.37 | $ | 18.91 | |||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
Exercisable, June 30, 2008 |
1,267,681 | 8.44- 65.04 | 37.00 | 14.68 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
Issued |
346,300 | 37.67- 49.78 | 49.13 | 17.09 | ||||||||||||
|
Exercised |
(71,215 | ) | 9.41- 40.00 | 29.89 | 13.54 | |||||||||||
|
Forfeited |
(172,889 | ) | 9.94- 62.48 | 50.66 | 19.27 | |||||||||||
|
Expired |
(31,000 | ) | 8.44- 49.43 | 46.79 | 16.61 | |||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
Outstanding, June 30, 2009 |
3,379,045 | 9.25- 65.04 | 47.76 | 18.84 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
Exercisable, June 30, 2009 |
1,335,207 | 9.25- 65.04 | 40.22 | 16.03 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
Exercised |
(191,337 | ) | 9.25- 46.37 | 29.21 | 11.17 | |||||||||||
|
Forfeited |
(56,667 | ) | 45.77- 62.48 | 51.10 | 19.55 | |||||||||||
|
Expired |
(44,613 | ) | 11.19- 64.36 | 60.59 | 23.44 | |||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
Outstanding, June 30, 2010 |
3,086,428 | 9.94- 65.04 | 48.66 | 19.23 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
Exercisable, June 30, 2010 |
1,455,220 | 9.94- 65.04 | 44.99 | 18.08 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
Exercised |
(791,722 | ) | 9.94- 62.48 | 36.36 | 14.82 | |||||||||||
|
Forfeited |
(85,460 | ) | 45.77- 54.39 | 49.47 | 18.88 | |||||||||||
|
Expired |
(98,942 | ) | 48.83- 63.20 | 58.61 | 22.09 | |||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
Outstanding, June 30, 2011 |
2,110,304 | 34.10 - 65.04 | 52.78 | 20.77 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
Exercisable, June 30, 2011 |
1,177,209 | $ | 34.10 - 65.04 | $ | 55.19 | $ | 22.17 | |||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| SSARs and Stock Options |
Restricted Stock and Restricted Stock Units |
|||||||||||||||
| Number of Shares |
Weighted Average Grant Date Fair Value |
Number of Shares |
Weighted Average Grant Date Fair Value |
|||||||||||||
|
Unvested at June 30, 2008 |
2,040,168 | $ | 21.53 | 346,160 | $ | 54.19 | ||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
Granted |
346,300 | 17.09 | 410,699 | 48.77 | ||||||||||||
|
Vested |
(178,575 | ) | 24.59 | (115,475 | ) | 50.40 | ||||||||||
|
Forfeited |
(164,055 | ) | 19.59 | (62,570 | ) | 49.71 | ||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
Unvested at June 30, 2009 |
2,043,838 | 20.67 | 578,814 | 49.37 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
Granted |
— | — | 499,466 | 46.01 | ||||||||||||
|
Vested |
(355,963 | ) | 22.73 | (101,715 | ) | 51.56 | ||||||||||
|
Forfeited |
(56,667 | ) | 19.55 | (26,935 | ) | 48.13 | ||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
Unvested at June 30, 2010 |
1,631,208 | 20.26 | 949,630 | 47.41 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
Granted |
— | — | 800,112 | 43.79 | ||||||||||||
|
Vested |
(612,653 | ) | 22.38 | (357,954 | ) | 47.87 | ||||||||||
|
Forfeited |
(85,460 | ) | 18.88 | (69,687 | ) | 45.01 | ||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
Unvested at June 30, 2011 |
933,095 | $ | 18.99 | 1,322,101 | $ | 45.23 | ||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Year ended June 30, | ||||||||||||
| 2011 | 2010 | 2009 | ||||||||||
|
Cash proceeds received |
$ | 22,077 | $ | 5,589 | $ | 2,129 | ||||||
|
Intrinsic value realized |
$ | 14,561 | $ | 1,557 | $ | 989 | ||||||
|
Income tax benefit realized |
$ | 5,731 | $ | 612 | $ | 388 | ||||||
| SSARs and Options Outstanding | SSARs and Options Exercisable | |||||||||||||||||||||||||||||||
|
Range of exercise |
Number of Instruments |
Weighted Average Exercise Price |
Weighted Average Remaining Contractual Life |
Intrinsic Value |
Number of Instruments |
Weighted Average Exercise Price |
Weighted Average Remaining Contractual Life |
Intrinsic Value |
||||||||||||||||||||||||
|
$30.00-$39.99 |
156,509 | $ | 34.59 | 1.94 | $ | 4,458 | 152,669 | $ | 34.52 | 1.89 | $ | 4,361 | ||||||||||||||||||||
|
$40.00-$49.99 |
786,761 | 48.71 | 3.66 | 11,309 | 215,826 | 48.73 | 3.66 | 3,097 | ||||||||||||||||||||||||
|
$50.00-$59.99 |
568,140 | 52.49 | 2.51 | 6,017 | 209,820 | 54.10 | 2.14 | 1,883 | ||||||||||||||||||||||||
|
$60.00-$69.99 |
598,894 | 63.17 | 1.13 | 255 | 598,894 | 63.17 | 1.13 | 255 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||
| 2,110,304 | $ | 52.78 | 2.51 | $ | 22,039 | 1,177,209 | $ | 55.19 | 1.87 | $ | 9,596 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||
| MSPP | DSPP | |||||||
|
RSUs outstanding, June 30, 2010 |
72,844 | 427 | ||||||
|
Granted |
15,171 | 241 | ||||||
|
Issued |
(9,005 | ) | — | |||||
|
Forfeited |
(1,518 | ) | — | |||||
|
|
|
|
|
|||||
|
RSUs outstanding, June 30, 2011 |
77,492 | 668 | ||||||
|
|
|
|
|
|||||
|
Weighted average grant date fair value as adjusted for the applicable discount |
$ | 36.46 | ||||||
|
|
|
|||||||
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Weighted average grant date fair value |
$ | 51.87 | ||||||
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Description of Financial Instrument |
|
Financial |
|
Fair Value |
|
Fair Value |
| |
|
Non-COLI assets held in connection with Supplemental Savings Plan |
|
Long-term asset |
|
Level 1 |
|
$ |
6,514 |
|
|
Contingent Consideration |
|
Current liability |
|
Level 3 |
|
$ |
20,839 |
|
|
|||
| Year ended June 30, | ||||||||||||
| 2011 | 2010 | 2009 (As Adjusted(1)) |
||||||||||
|
Net income attributable to CACI |
$ | 144,218 | $ | 106,515 | $ | 89,698 | ||||||
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|
|
|
|
|
|||||||
|
Weighted-average number of basic shares outstanding during the period |
30,281 | 30,138 | 29,976 | |||||||||
|
Dilutive effect of SSARs/stock options and RSUs/restricted shares after application of treasury stock method |
816 | 538 | 451 | |||||||||
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Dilutive effect of the Notes |
203 | — | — | |||||||||
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|
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|
Weighted-average number of diluted shares outstanding during the period |
31,300 | 30,676 | 30,427 | |||||||||
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Basic earnings per share |
$ | 4.76 | $ | 3.53 | $ | 2.99 | ||||||
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Diluted earnings per share |
$ | 4.61 | $ | 3.47 | $ | 2.95 | ||||||
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|||||||
| (1) | Certain amounts for the year ended June 30, 2009 have been adjusted to reflect the retroactive application of new accounting standards. See Note 3. |
|
|||
| 2011 | 2010 | |||||||||||||||
|
Quarter |
High | Low | High | Low | ||||||||||||
|
1st |
$ | 48.70 | $ | 40.00 | $ | 48.85 | $ | 42.00 | ||||||||
|
2nd |
$ | 54.11 | $ | 43.61 | $ | 49.92 | $ | 44.65 | ||||||||
|
3rd |
$ | 62.75 | $ | 50.91 | $ | 52.92 | $ | 45.36 | ||||||||
|
4th |
$ | 64.40 | $ | 58.15 | $ | 51.93 | $ | 41.44 | ||||||||
|
|||
| Year ended June 30, 2011 | ||||||||||||||||
| First | Second | Third | Fourth | |||||||||||||
|
Revenue |
$ | 833,971 | $ | 867,278 | $ | 913,369 | $ | 963,162 | ||||||||
|
Income from operations |
$ | 52,097 | $ | 59,435 | $ | 61,785 | $ | 78,084 | ||||||||
|
Net income attributable to CACI |
$ | 28,655 | $ | 33,235 | $ | 36,427 | $ | 45,901 | ||||||||
|
Basic earnings per share |
$ | 0.95 | $ | 1.10 | $ | 1.20 | $ | 1.52 | ||||||||
|
Diluted earnings per share |
$ | 0.92 | $ | 1.08 | $ | 1.16 | $ | 1.44 | ||||||||
|
Weighted-average shares outstanding: |
||||||||||||||||
|
Basic |
30,304 | 30,288 | 30,373 | 30,162 | ||||||||||||
|
Diluted |
31,102 | 30,906 | 31,300 | 31,895 | ||||||||||||
| Year ended June 30, 2010 | ||||||||||||||||
| First | Second | Third | Fourth | |||||||||||||
|
Revenue |
$ | 739,518 | $ | 776,727 | $ | 784,169 | $ | 848,717 | ||||||||
|
Income from operations |
$ | 46,028 | $ | 47,461 | $ | 47,322 | $ | 53,971 | ||||||||
|
Net income attributable to CACI |
$ | 23,855 | $ | 26,052 | $ | 26,708 | $ | 29,900 | ||||||||
|
Basic earnings per share |
$ | 0.79 | $ | 0.87 | $ | 0.89 | $ | 0.99 | ||||||||
|
Diluted earnings per share |
$ | 0.78 | $ | 0.85 | $ | 0.87 | $ | 0.96 | ||||||||
|
Weighted-average shares outstanding: |
||||||||||||||||
|
Basic |
30,034 | 30,109 | 30,171 | 30,241 | ||||||||||||
|
Diluted |
30,464 | 30,580 | 30,641 | 31,022 | ||||||||||||
|
|||
| Balance at Beginning of Period |
Additions at Cost |
Deductions | Other Changes |
Balance at End of Period |
||||||||||||||||
|
2011 |
||||||||||||||||||||
|
Reserves deducted from assets to which they apply: |
||||||||||||||||||||
|
Allowances for doubtful accounts |
$ | 3,212 | $ | 1,802 | $ | (1,383 | ) | $ | 107 | $ | 3,738 | |||||||||
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2010 |
||||||||||||||||||||
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Reserves deducted from assets to which they apply: |
||||||||||||||||||||
|
Allowances for doubtful accounts |
$ | 3,501 | $ | 1,285 | $ | (1,394 | ) | $ | (180 | ) | $ | 3,212 | ||||||||
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2009 |
||||||||||||||||||||
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Reserves deducted from assets to which they apply: |
||||||||||||||||||||
|
Allowances for doubtful accounts |
$ | 3,937 | $ | 1,208 | $ | (1,047 | ) | $ | (597 | ) | $ | 3,501 | ||||||||
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