CACI INTERNATIONAL INC /DE/ [CACI] Filings

10-Q 1 caci-10q_20210930.htm 10-Q caci-10q_20210930.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2021

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number 001-31400

CACI International Inc

(Exact name of registrant as specified in its charter)

Delaware

54-1345888

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

12021 Sunset Hills Road, Reston, VA 20190

(Address of principal executive offices)

(703) 841-7800

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock	CACI	New York Stock Exchange

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the Registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of October 11, 2021, there were 23,327,067 shares outstanding of CACI International Inc’s common stock, par value $0.10 per share.

CACI INTERNATIONAL INC

		PAGE
PART I:	FINANCIAL INFORMATION

Item 1.	Financial Statements (Unaudited)

	Condensed Consolidated Statements of Operations	3

	Condensed Consolidated Statements of Comprehensive Income	4

	Condensed Consolidated Balance Sheets	5

	Condensed Consolidated Statements of Cash Flows	6

	Condensed Consolidated Statements of Shareholder’s Equity	7

	Notes to Condensed Consolidated Financial Statements	8

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	16

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	22

Item 4.	Controls and Procedures	22


PART II:	OTHER INFORMATION

Item 1.	Legal Proceedings	23

Item 1A.	Risk Factors	25

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	25

Item 3.	Defaults Upon Senior Securities	25

Item 4.	Mine Safety Disclosures	25

Item 5.	Other Information	25

Item 6.	Exhibits	26

	Signatures	27

PART I

FINANCIAL INFORMATION

Item 1. Financial Statements

CACI INTERNATIONAL INC

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

(in thousands, except per share data)

	Three Months Ended
	September 30,
	2021		2020
Revenues	$	1,490,898	$	1,459,506
Costs of revenues:
Direct costs		974,171		939,934
Indirect costs and selling expenses		357,106		355,004
Depreciation and amortization		32,592		30,144
Total costs of revenues		1,363,869		1,325,082
Income from operations		127,029		134,424
Interest expense and other, net		10,398		9,980
Income before income taxes		116,631		124,444
Income taxes		28,522		30,800
Net income	$	88,109	$	93,644
Basic earnings per share	$	3.74	$	3.73
Diluted earnings per share	$	3.70	$	3.67
Weighted-average basic shares outstanding		23,560		25,099
Weighted-average diluted shares outstanding		23,844		25,486

See Notes to Unaudited Condensed Consolidated Financial Statements

CACI INTERNATIONAL INC

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)

(in thousands)

	Three Months Ended
	September 30,
	2021			2020
Net income	$	88,109		$	93,644
Other comprehensive income (loss):
Foreign currency translation adjustment		(6,762	)		7,793
Change in fair value of interest rate swap agreements, net of tax		2,214			2,252
Other comprehensive (loss) income, net of tax		(4,548	)		10,045
Comprehensive income	$	83,561		$	103,689

See Notes to Unaudited Condensed Consolidated Financial Statements

CACI INTERNATIONAL INC

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

(in thousands, except per share data)

	September 30,			June 30,
	2021			2021
ASSETS
Current assets:
Cash and cash equivalents	$	104,430		$	88,031
Accounts receivable, net		774,934			879,851
Prepaid expenses and other current assets		362,809			363,294
Total current assets		1,242,173			1,331,176
Goodwill		3,707,719			3,632,578
Intangible assets, net		501,574			476,106
Property, plant and equipment, net		183,864			190,444
Operating lease right-of-use assets		359,603			356,887
Supplemental retirement savings plan assets		103,048			102,984
Accounts receivable, long-term		11,540			12,159
Other long-term assets		69,789			70,038
Total assets	$	6,179,310		$	6,172,372
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Current portion of long-term debt	$	46,920		$	46,920
Accounts payable		119,176			148,636
Accrued compensation and benefits		370,905			409,275
Other accrued expenses and current liabilities		299,273			279,970
Total current liabilities		836,274			884,801
Long-term debt, net of current portion		1,647,765			1,688,919
Supplemental retirement savings plan obligations, net of current portion		106,574			104,490
Deferred income taxes		330,658			327,230
Operating lease liabilities, noncurrent		366,492			363,302
Other long-term liabilities		136,425			138,352
Total liabilities	$	3,424,188		$	3,507,094
COMMITMENTS AND CONTINGENCIES
Shareholders’ equity:
Preferred stock $0.10 par value, 10,000 shares authorized, no shares issued or outstanding		—			—
Common stock $0.10 par value, 80,000 shares authorized; 42,710 shares issued and 23,306 outstanding at September 30, 2021 and 42,676 shares issued and 23,554 outstanding at June 30, 2021		4,271			4,268
Additional paid-in capital		561,688			484,260
Retained earnings		3,277,196			3,189,087
Accumulated other comprehensive loss		(40,839	)		(36,291	)
Treasury stock, at cost (19,404 and 19,122 shares, respectively)		(1,047,329	)		(976,181	)
Total CACI shareholders’ equity		2,754,987			2,665,143
Noncontrolling interest		135			135
Total shareholders’ equity		2,755,122			2,665,278
Total liabilities and shareholders’ equity	$	6,179,310		$	6,172,372

See Notes to Unaudited Condensed Consolidated Financial Statements

CACI INTERNATIONAL INC

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(in thousands)

	Three Months Ended
	September 30,
	2021			2020
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	88,109		$	93,644
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		32,592			30,144
Amortization of deferred financing costs		576			583
Non-cash lease expense		16,960			19,056
Stock-based compensation expense		6,669			7,847
Deferred income taxes		(4,461	)		2,339
Changes in operating assets and liabilities, net of effect of business acquisitions:
Accounts receivable, net		108,236			20,987
Prepaid expenses and other assets		(24,085	)		(21,420	)
Accounts payable and other accrued expenses		(16,235	)		21,109
Accrued compensation and benefits		(40,521	)		(23,882	)
Income taxes payable and receivable		31,444			8,384
Operating lease liabilities		(16,076	)		(19,364	)
Long-term liabilities		2,745			37,473
Net cash provided by operating activities		185,953			176,900
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures		(10,203	)		(16,282	)
Acquisition of businesses, net of cash acquired		(116,273	)		(354,095	)
Net cash used in investing activities		(126,476	)		(370,377	)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from borrowings under bank credit facilities		548,000			839,500
Principal payments made under bank credit facilities		(589,730	)		(630,230	)
Proceeds from employee stock purchase plans		2,911			2,431
Repurchases of common stock		(2,472	)		(2,074	)
Payment of taxes for equity transactions		(426	)		(688	)
Net cash (used in) provided by financing activities		(41,717	)		208,939
Effect of exchange rate changes on cash and cash equivalents		(1,361	)		2,164
Net change in cash and cash equivalents		16,399			17,626
Cash and cash equivalents at beginning of period		88,031			107,236
Cash and cash equivalents at end of period	$	104,430		$	124,862
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the period for income taxes, net of refunds	$	518		$	19,725
Cash paid during the period for interest	$	9,383		$	8,768
Non-cash financing and investing activities:
Landlord sponsored tenant incentives	$	724		$	1,389
Accrued capital expenditures	$	227		$	938

See Notes to Unaudited Condensed Consolidated Financial Statements

CACI INTERNATIONAL INC

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (UNAUDITED)

(in thousands)

	Common Stock Shares Amount				Additional Paid-in Capital			Retained Earnings		Accumulated Other Comprehensive Income (Loss)			Treasury Stock Shares Amount						Total CACI Shareholders’ Equity			Noncontrolling Interest		Total Shareholders’ Equity
Balance at June 30, 2021		42,676	$	4,268	$	484,260		$	3,189,087	$	(36,291	)		19,122		$	(976,181	)	$	2,665,143		$	135	$	2,665,278
Net income		—		—		—			88,109		—			—			—			88,109			—		88,109
Stock-based compensation expense		—		—		6,669			—		—			—			—			6,669			—		6,669
Tax withholdings on restricted share vestings		34		3		(276	)		—		—			—			—			(273	)		—		(273	)
Other comprehensive loss, net of tax		—		—		—			—		(4,548	)		—			—			(4,548	)		—		(4,548	)
Repurchases of common stock		—		—		70,974			—		—			292			(73,446	)		(2,472	)		—		(2,472	)
Treasury stock issued under stock purchase plans		—		—		61			—		—			(10	)		2,298			2,359			—		2,359
Balance at September 30, 2021		42,710	$	4,271	$	561,688		$	3,277,196	$	(40,839	)		19,404		$	(1,047,329	)	$	2,754,987		$	135	$	2,755,122

Balance at June 30, 2020		42,525	$	4,253	$	573,744		$	2,731,644	$	(72,285	)		17,432		$	(576,181	)	$	2,661,175		$	135	$	2,661,310
Net income		—		—		—			93,644		—			—			—			93,644			—		93,644
Stock-based compensation expense		—		—		7,847			—		—			—			—			7,847			—		7,847
Tax withholdings on restricted share vestings		12		1		(1,177	)		—		—			—			—			(1,176	)		—		(1,176	)
Other comprehensive income, net of tax		—		—		—			—		10,045			—			—			10,045			—		10,045
Repurchases of common stock		—		—		80			—		—			10			(2,154	)		(2,074	)		—		(2,074	)
Treasury stock issued under stock purchase plans		—		—		19			—		—			(10	)		2,154			2,173			—		2,173
Balance at September 30, 2020		42,537	$	4,254	$	580,513		$	2,825,288	$	(62,240	)		17,432		$	(576,181	)	$	2,771,634		$	135	$	2,771,769

CACI INTERNATIONAL INC

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Note 1.

Basis of Presentation

The accompanying unaudited consolidated financial statements of CACI International Inc and subsidiaries (CACI or 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, comprehensive income and cash flows for the Company, including its subsidiaries and ventures that are majority-owned or otherwise controlled by the Company. Certain information and note disclosures normally included in the annual financial statements prepared in accordance with U.S. generally accepted accounting principles (GAAP) have been condensed or omitted pursuant to those rules and regulations, although the Company believes that the disclosures made are adequate to make the information presented not misleading. All intercompany balances and transactions have been eliminated in consolidation.

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 outstanding as of September 30, 2021 under its bank credit facility approximates its carrying value. The fair value of the Company’s debt under its bank credit facility was estimated using Level 2 inputs based on market data of companies with a corporate rating similar to CACI’s that have recently priced credit facilities. See Notes 10 and 15.

In the opinion of management, the accompanying unaudited consolidated financial statements reflect all adjustments and reclassifications (all of which are of a normal, recurring nature) that are necessary for the fair presentation of the periods presented. It is suggested that these unaudited consolidated financial statements be read in conjunction with the audited consolidated financial statements and the notes thereto included in the Company’s latest annual report to the SEC on Form 10-K for the year ended June 30, 2021. The results of operations for the three months ended September 30, 2021 are not necessarily indicative of the results to be expected for any subsequent interim period or for the full fiscal year.

Note 2.

Recent Accounting Pronouncements

In March 2020, the Financial Accounting Standards Board issued Accounting Standards Update (ASU) 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. This ASU provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships and other transactions that reference the London Interbank Offered Rate (LIBOR) or another reference rate expected to be discontinued because of reference rate reform. The guidance in this ASU is optional and expedients may be elected over time through December 31, 2022, as reference rate reform activities occur. During the three months ended June 30, 2020, CACI elected to apply the hedge accounting expedients related to probability and the assessments of effectiveness for future LIBOR-indexed cash flows to assume that the index upon which future hedged transactions will be based matches the index on the corresponding derivatives consistent with past presentation. Application of these expedients assisted in preserving the Company's presentation of derivatives as qualifying cash flow hedges. The Company continues to evaluate this guidance and may apply other elections, as applicable, as additional changes in the market occur.

Note 3.

Acquisitions

During the three months ended September 30, 2021 CACI completed two acquisitions that provide mission technology to sensitive government customers. Their capabilities include open source intelligence solutions, specialized cyber, and satellite communications. The aggregate purchase consideration was approximately $120.3 million. The Company preliminarily recognized fair values of the assets acquired and liabilities assumed and allocated $79.7 million to goodwill and $43.5 million to intangible assets. The fair value attributed to the intangible assets acquired was based on assumptions and other information compiled by management, including independent valuations that utilized established valuation techniques. Of the value attributed to goodwill and intangible assets, approximately $44.0 million is deductible for income tax purposes.

Note 4.

Intangible Assets

Intangible assets, net consisted of the following (in thousands):

	September 30,			June 30,
	2021 (1)			2021
Intangible assets:
Customer contracts and related customer relationships	$	598,074		$	601,516
Acquired technologies		217,711			198,273
Intangible assets		815,785			799,789
Less accumulated amortization:
Customer contracts and related customer relationships		(259,607	)		(276,498	)
Acquired technologies		(54,604	)		(47,185	)
Less accumulated amortization		(314,211	)		(323,683	)
Total intangible assets, net	$	501,574		$	476,106

(1)

During the three months ended September 30, 2021, the Company removed $26.8 million in fully amortized intangible assets.

Intangible assets are primarily amortized on an accelerated basis over periods ranging from one to twenty years. The weighted-average period of amortization for all customer contracts and related customer relationships as of September 30, 2021 is 17.9 years, and the weighted-average remaining period of amortization is 14.4 years. The weighted-average period of amortization for acquired technologies as of September 30, 2021 is 10.1 years, and the weighted-average remaining period of amortization is 8.4 years.

Amortization expense for the three months ended September 30, 2021 and 2020 was $17.6 million and $16.1 million, respectively. The estimated annual amortization expense as of September 30, 2021 was as follows (in thousands):

Fiscal year ending June 30,	Amount
2022 (remainder of year)	$	53,442
2023		69,062
2024		62,060
2025		54,886
2026		47,083
2027 and thereafter		215,041
	$	501,574

Note 5.

Goodwill

The changes in the carrying amount of goodwill for the three months ended September 30, 2021 are as follows (in thousands):

	Domestic			International			Total
Balance at June 30, 2021	$	3,491,747		$	140,831		$	3,632,578
Goodwill acquired (1)		79,690			—			79,690
Foreign currency translation		(739	)		(3,810	)		(4,549	)
Balance at September 30, 2021	$	3,570,698		$	137,021		$	3,707,719

(1)

Includes goodwill initially allocated to new business combinations as well as measurement period adjustments, when applicable.

Note 6.

Revenues from Contracts with Customers

Disaggregation of Revenues

The Company disaggregates revenues by contract type, customer type, prime vs. subcontractor, and whether the solution provided is primarily expertise or technology. These categories represent how the nature, amount, timing, and uncertainty of revenues and cash flows are affected.

Disaggregated revenues by contract type were as follows (in thousands):

Three Months Ended

September 30, 2021

September 30, 2020

Domestic

International

Total

Domestic

International

Total

Cost-plus-fee

893,713

—

893,713