Form 8-K

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

 

FORM 8-K

 

 

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): August 6, 2008

 

 

ICF International, Inc.

(Exact name of registrant as specified in its charter)

 

 

 

Delaware   001-33045   22-3661438

(State or other jurisdiction of

incorporation or organization)

  (Commission File Number)  

(I.R.S. Employer

Identification Number)

9300 Lee Highway, Fairfax, Virginia     22031
(Address of principal executive offices)     (Zip Code)
   

Registrant’s telephone number, including area code: (703) 934-3000

Not Applicable

(Former name or former address, if changed since last report.)

 

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

¨ Written communication pursuant to Rule 245 under the Securities Act (17 CFR 230.425)

 

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchanged Act (17 CFR 240.14d-2(b))

 

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 

 


Item 2.02 Results of Operations and Financial Condition

On August 6, 2008, ICF International, Inc. (the “Company”) announced its financial results for the second quarter ended June 30, 2008. The press release containing this announcement is filed as Exhibit 99.1 and incorporated herein by reference.

 

Item 9.01 Financial Statements and Exhibits

(d) Exhibits

 

99.1   Press Release dated August 6, 2008


SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

    ICF International, Inc.
Date: August 6, 2008     By:  

/s/ Judith Kassel

      Judith Kassel
      General Counsel and Secretary


Exhibit Index

 

Exhibit No.

  

Document

99.1    Press Release dated August 6, 2008
Press Release

EXHIBIT 99.1

 

LOGO    NEWS RELEASE

ICF International Reports Second Quarter 2008 Results

FOR IMMEDIATE RELEASE

Contacts:

Douglas Beck, ICF International, 1.703.934.3820

Lynn Morgen / Betsy Brod, MBS Value Partners, 1.212.750.5800

FAIRFAX, Va. (August 6, 2008) – ICF International, Inc. (NASDAQ:ICFI), a leading provider of consulting services and technology solutions to government and commercial clients, reported results for the second quarter ended June 30, 2008.

Second Quarter Results and Highlights

For the second quarter, revenue was $184.1 million, consisting of $113.7 million from ICF’s core business and $70.4 million from The Road Home contract. In last year’s second quarter, the Company reported total revenue of $190.2 million, of which $61.6 million represented core business and $128.6 million was from The Road Home contract.

“Second quarter core business revenue increased 84.5 percent on a year-over-year basis and 23.2 percent sequentially, reflecting robust demand for our advisory and implementation services across all of our markets and the positive impact of recent acquisitions. Organic growth was 23.9 percent in the second quarter, which is indicative of ICF’s strong competitive position in increasingly prominent markets including energy, climate change, environment, health and human services and homeland security,” said Sudhakar Kesavan, ICF Chairman and CEO.

For the 2008 second quarter, EBITDA1 was $17.9 million, or 9.7 percent of revenue. Earnings from operations were $14.3 million. Net income was $7.9 million, or $0.52 per diluted share, which included non-cash stock compensation expense of $1.7 million, as required by FAS 123(R). In last year’s second quarter, EBITDA was $19.8 million or 10.4 percent of revenue, earnings from operations were $18.6 million, and net income was $11.2 million, or $0.75 per share, which included non-cash stock compensation expense of $0.8 million. The fully diluted weighted average number of shares outstanding for the second quarter of 2008 was approximately 15.2 million compared to approximately 14.8 million for the second quarter of 2007.

“In the second quarter, we significantly increased the relative weighting of ICF’s core business to 62 percent of revenue, as Road Home revenues declined corresponding to the completion of the second year of the contract. Profitability remained firmly within our target range of 9 to 10 percent EBITDA margin, driven by a favorable business mix and greater efficiencies,” continued Mr. Kesavan.

 

1 EBITDA is a Non-GAAP measurement, which adds depreciation and amortization to operating income to derive EBITDA.


The Company’s 2008 second quarter results included a full quarter of operating results from Jones & Stokes Associates, Inc., an integrated planning and resource management firm specializing in the energy, transportation, and water sectors, which ICF acquired in February 2008.

“The integration of the Jones & Stokes and Simat, Helliesen & Eichner, Inc. acquisitions is proceeding very well, and the integration of Z-Tech Corporation is complete,” Mr. Kesavan said. “We have been able to take advantage of our combined expertise and geographical presence to win several important contracts together, and the expanded range of services and client relationships are giving ICF an important competitive advantage in addressing government and commercial opportunities.”

Backlog and New Business Awards

Backlog, excluding The Road Home contract, was $621.6 million at the end of June 2008, up 53 percent from second quarter 2007 backlog of $405.9 million and up 5 percent from the first quarter 2008 backlog of $591.3 million. The Company's total backlog was $780 million at the end of June 30, 2008, of which 54.6 percent was funded.

The total value of contracts awarded in the second quarter of 2008 was $146 million.

Key contracts won in the second quarter included:

 

   

Health Information Technology Support: Awarded a $60 million, five-year contract with the National Institutes of Health (NIH) Electronic Research Administration (eRA), which processes NIH’s research and non-research grants totaling $30 billion annually. ICF will provide systems engineering, architecture, requirements analysis, and other related IT support to the eRA program.

 

   

Food Labeling and Packaging: Awarded a multiple award blanket purchase agreement (BPA) with the U.S. Department of Agriculture with an expected value of approximately $5 million over five years. Services will fall into the general areas of risk assessment, program evaluation, economic and regulatory analysis, and training.

 

   

Brazil Environmental Impacts: Awarded two contracts totaling $1.5 million over three years from the Brazilian energy company Petrobas. Under one contract, ICF is conducting environmental studies to support the licensing of oil and gas exploration and production off the coast of São Paulo, where giant reservoirs were discovered earlier this year. Under the second contract, ICF is conducting similar studies in the Foz do Amazonas and Pará-Maranhão basins.

 

   

Siberia Environmental Impacts: Won a new eight-month contract valued at $2 million through its Moscow subsidiary, ICF/EKO, at a forest products complex. Under the contract, ICF/EKO is working to ensure the environmental impact assessment is in compliance with national and international standards.

 

   

Public-Private Partnerships: Received a $2.7 million supplemental grant from the U.S. Department of State’s Middle East Partnership Initiative. This grant increased the total value of the award to approximately $6 million. Under the contract, ICF is supporting public education and outreach to increase breast cancer awareness to help empower women in the Middle East.


   

Green Government: Awarded a new strategic and high profile contract as part of the U.S. House of Representatives’ Green the Capitol Initiative. Under the contract, ICF is developing a formal monitoring and reporting system to help prioritize and track progress toward environmental and sustainability goals, including reducing the overall carbon footprint.

In addition to these contract wins, ICF was singled out among 16 global consultancies as the leader in climate change consulting services by Verdantix, an independent business research firm. In its report, “Green Quadrant: Climate Change Business Consulting,” the research firm reported that “ICF International stands out from the pack…combin[ing] a long track record in climate change advisory, deep environmental expertise, business analysis skills and the capability to deliver engagements in energy intensive sectors and service sectors.”

Summary and Outlook

Looking ahead, Mr. Kesavan said, “ICF’s core business is growing at a faster pace than previously expected, reflecting the strong demand for our services from government and commercial clients and a high rate of business wins in the energy, climate change, environment, and human services markets. The Road Home contract revenues are lower, reflective of the fewer number of closings we are seeing as the program enters its third year.”

Consequently, the Company is increasing its guidance for full-year 2008 core business revenue to $430 million to $435 million, while reducing its expectation for The Road Home contract revenues to a range of $250 million to $260 million. This brings the revised full-year 2008 revenue guidance to $680 million to $695 million from $690 million to $720 million. EBITDA margin expectations remain unchanged at 9 to 10 percent, which will equate to earnings per diluted share of $1.85 to $1.92, based upon approximately 15.3 million weighted average shares outstanding.

Based on backlog levels and current trends, the Company expects 2008 third quarter revenue to range from $170 million to $175 million, of which core business will account for approximately two-thirds, up from 62 percent in the 2008 second quarter. EBITDA margin for the third quarter is projected to be approximately 9.5 percent, and earnings per diluted share are expected to be about $0.45, based on approximately 15.3 million weighted average shares outstanding, and a tax rate similar to the first six months of 2008.

About ICF International

ICF International (NASDAQ:ICFI) partners with government and commercial clients to deliver consulting services and technology solutions in the energy, climate change, environment, transportation, social programs, health, defense, and emergency management markets. The firm combines passion for its work with industry expertise and innovative analytics to produce compelling results throughout the entire program life cycle, from analysis and design through implementation and improvement. Since 1969, ICF has been serving government at all levels, major corporations, and multilateral institutions. More than 3,000 employees serve these clients worldwide. ICF’s Web site is www.icfi.com.

Caution Concerning Forward-looking Statements

This document may contain “forward-looking statements” as that term is defined in the Private Securities Litigation Reform Act of 1995—that is, statements related to future—not past—events, plans, and prospects. These statements involve known and unknown risks, uncertainties, and other factors that may cause our actual results, levels of activity, performance, or achievements to be materially different from any future results, levels of activity, performance, or achievements expressed or implied by such forward-looking statements. In some cases, you can identify these statements by forward-looking words such as “guidance,” “anticipate,” “believe,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “seek,”


“should,” “will,” “would,” or similar words. You should read statements that contain these words carefully because they discuss our future expectations, contain projections of our future results of operations or of our financial position, or state other forward-looking information, and are subject to factors that could cause actual results to differ materially from those anticipated. For ICF, particular uncertainties that could adversely or positively affect the Company’s future results include but are not limited to: risks related to the government contracting industry, including the timely approval of government budgets, changes in client spending priorities, and the results of government audits and investigations; risks related to our business, including our dependence on contracts with U.S. Federal Government agencies and departments and the State of Louisiana; continued good relations with these and other customers; success in competitive bidding on recompete and new contracts; performance by ICF and its subcontractors under our contract with the State of Louisiana, Office of Community Development, including but not limited to the risks of failure to achieve certain levels of program activities, termination, or material modification of the contract, and political uncertainties relating to The Road Home program; uncertainties as to whether revenues corresponding to the Company’s contract backlog will actually be received; the future of the energy sector of the global economy; our ability to attract and retain management and staff; strategic actions, including attempts to expand our service offerings and client base, the ability to make acquisitions, and the performance and future integration of acquired businesses; risks associated with operations outside the United States, including but not limited to international, regional, and national economic conditions, including the effects of terrorist activities, war, and currency fluctuations; and other risks and uncertainties disclosed in the Company’s filings with the Securities and Exchange Commission. These uncertainties may cause ICF’s actual future results to be materially different than those expressed in the Company’s forward-looking statements. ICF does not undertake to update its forward-looking statements.


ICF International, Inc. and Subsidiaries

Condensed Consolidated Statements of Earnings (Unaudited)

(in thousands, except per share amounts)

 

     Three months ended
June 30,
    Six months ended
June 30,
 
     2008     2007     2008     2007  

Gross Revenue

   $ 184,064     $ 190,171     $ 359,212     $ 341,884  

Direct Costs

     119,310       142,640       239,717       250,792  

Operating costs and expenses:

        

Indirect and selling expenses

     46,856       27,734       84,093       55,468  

Depreciation and amortization

     3,603       1,174       6,386       2,341  
                                

Total operating costs and expenses

     50,459       28,908       90,479       57,809  
                                

Operating Income

     14,295       18,623       29,016       33,283  

Interest expense

     (1,037 )     (414 )     (2,247 )     (738 )

Other income (expense)

     (2 )     158       (52 )     436  
                                

Income before taxes

     13,256       18,367       26,717       32,981  

Provision for income taxes

     5,358       7,207       11,004       13,139  
                                

Net income

   $ 7,898     $ 11,160     $ 15,713     $ 19,842  
                                

Earnings per Share:

        

Basic

   $ 0.54     $ 0.79     $ 1.08     $ 1.42  
                                

Diluted

   $ 0.52     $ 0.75     $ 1.04     $ 1.35  
                                

Weighted-average Shares:

        

Basic

     14,586       14,123       14,534       13,939  
                                

Diluted

     15,179       14,848       15,174       14,685  
                                


ICF International, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

(in thousands, except share amounts)

 

     June 30, 2008     December 31, 2007  
     (Unaudited)        

Assets

    

Current Assets:

    

Cash and cash equivalents

   $ 2,018     $ 2,733  

Contract receivables, net

     153,900       190,159  

Prepaid expenses and other

     4,057       3,955  

Income tax receivable

     —         1,933  

Deferred income taxes

     5,826       3,902  
                

Total current assets

     165,801       202,682  
                

Total property and equipment, net

     10,496       7,541  

Other assets:

    

Goodwill

     200,543       159,491  

Other intangible assets

     21,328       17,710  

Restricted cash

     2,906       3,668  

Other assets

     3,042       1,933  
                

Total assets

   $ 404,116     $ 393,025  
                

Liabilities and Stockholders’ Equity

    

Current Liabilities:

    

Accounts payable

   $ 28,584     $ 74,260  

Accrued expenses

     39,213       47,084  

Accrued salaries and benefits

     25,387       27,801  

Deferred revenue

     13,532       16,067  

Income taxes payable

     41       —    
                

Total current liabilities

     106,757       165,212  
                

Long-term liabilities:

    

Long-term debt

     92,896       47,079  

Deferred rent

     2,128       1,773  

Deferred income taxes

     12,092       9,109  

Other

     4,284       5,061  
                

Total Liabilities

     218,157       228,234  

Commitments and Contingencies

    

Stockholders’ Equity:

    

Preferred stock, par value $.001 per share; 5,000,000 shares authorized; none issued

     —         —    

Common stock, $.001 par value; 70,000,000 shares authorized; 14,791,692 and 14,593,723 issued; and 14,716,421 and 14,531,521 outstanding as of June 30, 2008 and December 31, 2007, respectively

     15       15  

Additional paid-in capital

     115,363       109,795  

Treasury stock, at cost

     (1,003 )     (746 )

Accumulated other comprehensive income

     496       361  

Stockholder notes receivable

     (12 )     (21 )

Retained earnings

     71,100       55,387  
                

Total stockholders’ equity

     185,959       164,791  
                

Total liabilities and stockholders’ equity

   $ 404,116     $ 393,025  
                


ICF International, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows (Unaudited)

(in thousands)

 

     Six months ended
June 30,
 
     2008     2007  

Cash flows from operating activities

    

Net income

   $ 15,713     $ 19,842  

Adjustments to reconcile net income to net cash provided by operating activities:

    

Depreciation and amortization

     6,386       2,341  

Non-cash compensation

     3,370       1,397  

Accrued interest on stockholder notes

     —         (18 )

Loss on disposal of fixed assets

     141       2  

Deferred income taxes

     (5,693 )     1,299  

Changes in operating assets and liabilities, net of the effect of acquisitions:

    

Contract receivables, net

     53,928       (23,979 )

Prepaid expenses and other

     1,249       (1,071 )

Accounts payable

     (49,755 )     14,256  

Accrued expenses

     (9,722 )     25,858  

Accrued salaries and benefits

     (6,185 )     3,804  

Deferred revenue

     (2,654 )     (7,096 )

Income tax payable

     1,217       (5,387 )

Deferred rent

     307       (28 )

Other liabilities

     (1,187 )     (1,066 )
                

Net cash provided by operating activities

     7,115       30,154  
                

Cash flows from investing activities

    

Capital expenditures

     (3,756 )     (1,405 )

Payments for trademark application

     —         (14 )

Capitalized software development costs

     (147 )     (359 )

Additional payments for acquisition of Caliber Associates, Inc.

     —         (523 )

Payments for business acquisitions, net of cash acquired

     (51,282 )     (40,021 )
                

Net cash used in investing activities

     (55,185 )     (42,322 )
                

Cash flows from financing activities

    

Advances from working capital facilities

     169,695       96,222  

Payments on working capital facilities

     (123,878 )     (91,222 )

Restricted cash

     762       136  

Debt issue costs

     (1,309 )     (11 )

Exercise of options

     932       2,956  

Tax benefits of stock option exercises

     1,038       2,251  

Net (payments) proceeds for stockholder issuances and buybacks

     (29 )     117  

Proceeds on stockholder notes

     9       314  
                

Net cash provided by financing activities

     47,220       10,763  

Effect of Exchange Rate on Cash

     135       85  
                

Net decrease in cash and cash equivalents

     (715 )     (1,320 )

Cash and cash equivalents, beginning of period

     2,733       2,997  
                

Cash and cash equivalents, end of period

   $ 2,018     $ 1,677  
                

Supplemental disclosure of cash flow information

    

Cash paid during the period for:

    

Interest

   $ 1,671     $ 693  
                

Income taxes

   $ 14,541     $ 14,995