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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 March 31, 2021

OR

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: 001-33045

 

ICF International, Inc.

(Exact name of Registrant as Specified in its Charter)

 

 

Delaware 

 

22-3661438  

(State or Other Jurisdiction of

Incorporation or Organization) 

 

(I.R.S. Employer

Identification No.) 

 

 

 

9300 Lee Highway, Fairfax, VA 

 

22031 

(Address of Principal Executive Offices) 

 

(Zip Code) 

 

Registrant’s telephone number, including area code: (703934-3000

Not Applicable

(Former name, former address and former fiscal year, if changed since last report)

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

 

Title of each class

Trading Symbols(s)

Name of each exchange on which registered

Common Stock

ICFI

NASDAQ

 

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, 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 April 30, 2021, there were 18,837,808 shares outstanding of the registrant’s common stock.

 

 

 


 

ICF INTERNATIONAL, INC. AND SUBSIDIARIES

QUARTERLY REPORT ON FORM 10-Q FOR THE

PERIOD ENDED MARCH 31, 2021

TABLE OF CONTENTS

 

PART I. FINANCIAL INFORMATION

3

 

 

 

Item 1.

Financial Statements

3

 

 

 

 

Consolidated Balance Sheets at March 31, 2021 (Unaudited) and December 31, 2020

3

 

 

 

 

Consolidated Statements of Comprehensive Income (Unaudited) for the Three Months Ended March 31, 2021 and 2020

4

 

 

 

 

Consolidated Statements of Cash Flows (Unaudited) for the Three Months Ended March 31, 2021 and 2020

5

 

 

 

 

Notes to Consolidated Financial Statements

6

 

 

 

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

17

 

 

 

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

26

 

 

 

Item 4.

Controls and Procedures

27

 

 

PART II. OTHER INFORMATION

28

 

 

 

Item 1.

Legal Proceedings

28

 

 

 

Item 1A.

Risk Factors

28

 

 

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

28

 

 

 

Item 3.

Defaults Upon Senior Securities

28

 

 

 

Item 4.

Mine Safety Disclosures

28

 

 

 

Item 5.

Other Information

28

 

 

 

Item 6.

Exhibits

29

 

 

 


 

PART I. FINANCIAL INFORMATION

Item  1.

Financial Statements 

ICF International, Inc. and Subsidiaries

CONSOLIDATED BALANCE SHEETS
(UNAUDITED)

  

(in thousands, except share and per share amounts)

 

March 31, 2021

 

 

December 31, 2020

 

ASSETS

 

 

 

 

 

 

 

 

Current Assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

8,592

 

 

$

13,841

 

Restricted cash

 

 

42,231

 

 

 

68,146

 

Contract receivables, net

 

 

214,291

 

 

 

222,850

 

Contract assets

 

 

164,155

 

 

 

143,369

 

Prepaid expenses and other assets

 

 

22,115

 

 

 

25,492

 

Income tax receivable

 

 

 

 

 

1,977

 

Total Current Assets

 

 

451,384

 

 

 

475,675

 

Property and Equipment, net

 

 

60,294

 

 

 

62,434

 

Other Assets:

 

 

 

 

 

 

 

 

Goodwill

 

 

910,359

 

 

 

909,913

 

Other intangible assets, net

 

 

56,900

 

 

 

59,887

 

Operating lease - right-of-use assets

 

 

119,250

 

 

 

127,132

 

Other assets

 

 

32,572

 

 

 

32,249

 

Total Assets

 

$

1,630,759

 

 

$

1,667,290

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

 

 

 

 

 

 

Current Liabilities:

 

 

 

 

 

 

 

 

Current portion of long-term debt

 

$

10,000

 

 

$

10,000

 

Accounts payable

 

 

90,894

 

 

 

91,365

 

Contract liabilities

 

 

43,589

 

 

 

42,050

 

Operating lease liabilities - current

 

 

28,881

 

 

 

23,350

 

Accrued salaries and benefits

 

 

85,134

 

 

 

80,512

 

Accrued subcontractors and other direct costs

 

 

45,110

 

 

 

78,842

 

Accrued expenses and other current liabilities

 

 

77,318

 

 

 

100,908

 

Income taxes payable

 

 

2,402

 

 

 

 

Total Current Liabilities

 

 

383,328

 

 

 

427,027

 

Long-term Liabilities:

 

 

 

 

 

 

 

 

Long-term debt

 

 

314,451

 

 

 

303,214

 

Operating lease liabilities - non-current

 

 

106,551

 

 

 

115,614

 

Deferred income taxes

 

 

36,966

 

 

 

34,330

 

Other long-term liabilities

 

 

38,230

 

 

 

40,144

 

Total Liabilities

 

 

879,526

 

 

 

920,329

 

 

 

 

 

 

 

 

 

 

Commitments and Contingencies (Note 18)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stockholders’ Equity:

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

Common stock, par value $.001; 70,000,000 shares authorized; 23,461,587 and 23,305,255 shares issued at March 31, 2021 and December 31, 2020, respectively; 18,859,608 and 18,909,983 shares outstanding at March 31, 2021 and December 31, 2020, respectively

 

 

23

 

 

 

23

 

Additional paid-in capital

 

 

372,420

 

 

 

369,058

 

Retained earnings

 

 

604,441

 

 

 

588,731

 

Treasury stock, 4,601,979 and 4,395,272 shares at March 31, 2021 and December 31, 2020, respectively

 

 

(214,325

)

 

 

(196,745

)

Accumulated other comprehensive loss

 

 

(11,326

)

 

 

(14,106

)

Total Stockholders’ Equity

 

 

751,233

 

 

 

746,961

 

Total Liabilities and Stockholders’ Equity

 

$

1,630,759

 

 

$

1,667,290

 

The accompanying notes are an integral part of these consolidated financial statements.

3


ICF International, Inc. and Subsidiaries

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(UNAUDITED)

 

 

 

Three Months Ended

 

 

 

March 31,

 

(in thousands, except per share amounts)

 

2021

 

 

2020

 

Revenue

 

$

378,478

 

 

$

358,238

 

Direct costs

 

 

232,082

 

 

 

230,616

 

Operating costs and expenses:

 

 

 

 

 

 

 

 

Indirect and selling expenses

 

 

109,982

 

 

 

103,271

 

Depreciation and amortization

 

 

5,270

 

 

 

5,179

 

Amortization of intangible assets

 

 

3,015

 

 

 

2,853

 

Total operating costs and expenses

 

 

118,267

 

 

 

111,303

 

 

 

 

 

 

 

 

 

 

Operating income

 

 

28,129

 

 

 

16,319

 

Interest expense

 

 

(2,683

)

 

 

(3,525

)

Other (expense) income

 

 

(417

)

 

 

190

 

Income before income taxes

 

 

25,029

 

 

 

12,984

 

Provision for income taxes

 

 

6,678

 

 

 

2,372

 

Net income

 

$

18,351

 

 

$

10,612

 

 

 

 

 

 

 

 

 

 

Earnings per Share:

 

 

 

 

 

 

 

 

Basic

 

$

0.97

 

 

$

0.56

 

Diluted

 

$

0.96

 

 

$

0.55

 

 

 

 

 

 

 

 

 

 

Weighted-average Shares:

 

 

 

 

 

 

 

 

Basic

 

 

18,885

 

 

 

18,840

 

Diluted

 

 

19,118

 

 

 

19,197

 

 

 

 

 

 

 

 

 

 

Cash dividends declared per common share

 

$

0.14

 

 

$

0.14

 

 

 

 

 

 

 

 

 

 

Other comprehensive income (loss), net of tax

 

 

2,780

 

 

 

(11,123

)

Comprehensive income (loss), net of tax

 

$

21,131

 

 

$

(511

)

 

The accompanying notes are an integral part of these consolidated financial statements.

4


ICF International, Inc. and Subsidiaries

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

 

 

 

Three Months Ended

 

 

 

March 31,

 

(in thousands)

 

2021

 

 

2020

 

Cash Flows from Operating Activities

 

 

 

 

 

 

 

 

Net income

 

$

18,351

 

 

$

10,612

 

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

 

 

 

 

 

 

 

 

Provision for credit losses

 

 

5,334

 

 

 

444

 

Deferred income taxes

 

 

1,838

 

 

 

4,756

 

Non-cash equity compensation

 

 

3,275

 

 

 

3,826

 

Depreciation and amortization

 

 

8,285

 

 

 

8,032

 

Non-cash lease expense

 

 

(1,143

)

 

 

(418

)

Facilities consolidation reserve

 

 

(75

)

 

 

(71

)

Amortization of debt issuance costs

 

 

155

 

 

 

246

 

Impairment of long-lived assets

 

 

303

 

 

 

 

Other adjustments, net

 

 

457

 

 

 

(348

)

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

 

 

 

 

 

 

 

 

Net contract assets and liabilities

 

 

(19,750

)

 

 

(17,349

)

Contract receivables

 

 

2,531

 

 

 

40,488

 

Prepaid expenses and other assets

 

 

2,016

 

 

 

(1,070

)

Accounts payable

 

 

(354

)

 

 

(49,200

)

Accrued salaries and benefits

 

 

4,715

 

 

 

4,453

 

Accrued subcontractors and other direct costs

 

 

(33,466

)

 

 

(10,326

)

Accrued expenses and other current liabilities

 

 

8,303

 

 

 

(5,835

)

Income tax receivable and payable

 

 

3,924

 

 

 

(2,996

)

Other liabilities

 

 

262

 

 

 

(476

)

Net Cash Provided by (Used in) Operating Activities

 

 

4,961

 

 

 

(15,232

)

 

 

 

 

 

 

 

 

 

Cash Flows from Investing Activities

 

 

 

 

 

 

 

 

Capital expenditures for property and equipment and capitalized software

 

 

(3,595

)

 

 

(4,704

)

Payments for business acquisitions, net of cash acquired

 

 

 

 

 

(253,021

)

Net Cash Used in Investing Activities

 

 

(3,595

)

 

 

(257,725

)

 

 

 

 

 

 

 

 

 

Cash Flows from Financing Activities

 

 

 

 

 

 

 

 

Advances from working capital facilities

 

 

185,755

 

 

 

744,331

 

Payments on working capital facilities

 

 

(174,674

)

 

 

(389,776

)

Receipt of restricted contract funds

 

 

451

 

 

 

 

Payment of restricted contract funds

 

 

(27,081

)

 

 

 

Debt issue costs

 

 

 

 

 

(2,081

)

Proceeds from exercise of options

 

 

2,702

 

 

 

37

 

Dividends paid

 

 

(2,642

)

 

 

(2,639

)

Net payments for stock issuances and buybacks

 

 

(17,104

)

 

 

(23,998

)

Payments on business acquisition liabilities

 

 

(682

)

 

 

 

Net Cash (Used in) Provided by Financing Activities

 

 

(33,275

)

 

 

325,874

 

Effect of Exchange Rate Changes on Cash, Cash Equivalents, and Restricted Cash

 

 

745

 

 

 

(738

)

 

 

 

 

 

 

 

 

 

(Decrease) Increase in Cash, Cash Equivalents, and Restricted Cash

 

 

(31,164

)

 

 

52,179

 

Cash, Cash Equivalents, and Restricted Cash, Beginning of Period

 

 

81,987

 

 

 

6,482

 

Cash, Cash Equivalents, and Restricted Cash, End of Period

 

$

50,823

 

 

$

58,661

 

 

 

 

 

 

 

 

 

 

Supplemental Disclosure of Cash Flow Information

 

 

 

 

 

 

 

 

Cash paid during the period for:

 

 

 

 

 

 

 

 

Interest

 

$

2,637

 

 

$

3,892

 

Income taxes

 

$

961

 

 

$

895

 

The accompanying notes are an integral part of these consolidated financial statements.

5


Notes to Consolidated Financial Statements

(in thousands, except per share amounts)

NOTE 1 - BASIS OF PRESENTATION AND NATURE OF OPERATIONS

Basis of Presentation

The accompanying consolidated financial statements include the accounts of ICF International, Inc. and its subsidiaries (collectively, the “Company”), and have been prepared in accordance with United States (“U.S.”) generally accepted accounting principles (“U.S. GAAP”). All significant intercompany transactions and balances have been eliminated.

Nature of Operations

The Company provides professional services and technology-based solutions to government and commercial clients, including management, marketing, technology, and policy consulting and implementation services, in the areas of energy, environment, and infrastructure; health, education, and social programs; safety and security; and consumer and financial services. The Company offers a full range of services to these clients throughout the entire life cycle of a policy, program, project, or initiative, from research and analysis and assessment and advice to design and implementation of programs and technology-based solutions, and the provision of engagement services and programs.

The Company’s major clients are U.S. federal government departments and agencies, most significantly the Department of Health and Human Services, Department of State, and Department of Defense. The Company also serves U.S. state (including territories) and local government departments and agencies, international governments, and commercial clients worldwide. Commercial clients include airlines, airports, electric and gas utilities, health care companies, banks and other financial services companies, banks and other financial services companies, transportation, travel and hospitality firms, non-profits/associations, law firms, manufacturing firms, retail chains, and distribution companies. The term “federal” or “federal government” refers to the U.S. federal government, and “state and local” or “state and local government” refers to U.S. state (including territories) and local governments, unless otherwise indicated.

The Company, incorporated in Delaware, is headquartered in Fairfax, Virginia. The Company maintains additional offices throughout the world, including more than 56 offices in the U.S. and U.S. territories and 22 offices in key markets outside the U.S., including offices in the United Kingdom, Belgium, China, India, and Canada.

Use of Estimates

The preparation of consolidated 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 reporting periods. Areas of the consolidated financial statements where estimates may have the most significant effect include contractual and regulatory reserves, valuation and lives of tangible and intangible assets, contingent consideration related to business acquisitions, impairment of goodwill and long-lived assets, accrued liabilities, revenue recognition and costs to complete fixed-price contracts, bonus and other incentive compensation, stock-based compensation, reserves for tax benefits and valuation allowances on deferred tax assets, provisions for income taxes, collectability of receivables, and loss accruals for litigation. Actual results experienced by the Company may differ from management's estimates.

Interim Results

The unaudited consolidated financial statements included in this Quarterly Report on Form 10-Q have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). These rules and regulations permit some of the information and footnote disclosures normally included in financial statements, prepared in accordance with U.S. GAAP, to be condensed or omitted. In management’s opinion, the unaudited consolidated financial statements contain all adjustments that are of a normal recurring nature, necessary for a fair presentation of the results of operations and financial position of the Company for the interim periods presented. The Company reports operating results and financial data in one operating segment and reporting unit. Operating results for the three months periods ended March 31, 2021 and 2020 are not necessarily indicative of the results that may be expected for the full year. These unaudited consolidated financial statements should be read in conjunction with the audited consolidated financial statements for the fiscal year ended December 31, 2020 and the notes thereto included in the Company’s Annual Report on Form 10-K, filed with the SEC on February 26, 2021 (the “Annual Report”).

Reclassifications

The Company has reclassified non-cash lease expense, previously part of “Other adjustments, net,” on the consolidated statements of cash flows for the three months ended March 31, 2020 for consistency of presentation.

 

6


 

Recent Accounting Pronouncements

Recent Accounting Pronouncements Not Yet Adopted

 

Reference Rate Reform

In March 2020, the Financial Accounting Standards Board issued Accounting Standards Update 2020-04, Facilitation of the Effects of Reference Rate Reform on Financial Reporting. The standard is intended to provide temporary optional expedients and exceptions to the U.S. GAAP guidance on contract modifications and hedge accounting to ease the financial reporting burdens related to the expected market transition from the London Interbank Offered Rate (“LIBOR”) and other interbank offered rates to alternative reference rates. The provisions of this ASU are elective and apply to all entities, subject to meeting certain criteria, that have debt or hedging contracts, among other contracts, that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform. The Company can elect to not apply certain modification accounting requirements to contracts affected by reference rate reform, if certain criteria are met. Also, the Company can elect various optional expedients that would allow for the Company to continue to apply hedge accounting for hedging relationships affected by reference rate reform, if certain criteria are met. This guidance was effective beginning on March 12, 2020, and the Company may elect to apply the amendments prospectively through December 31, 2022. The Company is currently evaluating the impact this guidance may have on its consolidated financial statements.

 

NOTE 2 – RESTRICTED CASH

The following table provides a reconciliation of cash and cash equivalents and restricted cash reported within the consolidated balance sheets for the periods presented to the total of cash, cash equivalents, and restricted cash shown in the consolidated statements of cash flows for the three months ended March 31, 2021 and 2020:

 

 

2021

 

 

2020

 

 

 

Beginning

 

 

Ending

 

 

Beginning

 

 

Ending

 

Cash and cash equivalents

 

$

13,841

 

 

$

8,592

 

 

$

6,482

 

 

$

58,661

 

Restricted cash (1)

 

 

68,146

 

 

 

42,231

 

 

 

 

 

 

 

Total of cash, cash equivalents, and restricted cash shown in the consolidated statements of cash flows

 

$

81,987

 

 

$

50,823

 

 

$

6,482

 

 

$

58,661

 

 

(1)

Under a contract with a customer commencing in the fourth quarter of fiscal year 2020, the Company received advance payments to be used to pay providers of service to the customer, a separate third-party. The advanced payments are treated as restricted cash as the Company is required under the contract to distribute the advanced funds to the third-party providers or return the advanced funds to the customer. Because the Company receives the advance payments from the customer, which must be refunded to the customer or remitted to a third party, the cash receipts are treated as borrowings and recorded in restricted cash and accrued expenses and other current liabilities rather than receipts for the provision of goods or services. Therefore, these cash receipts are presented in the consolidated statements of cash flows as financing cash inflows, “receipt of restricted contract funds”, with the subsequent payments classified as financing cash outflows, “payment of restricted contract funds.”

 

NOTE 3 – CONTRACT RECEIVABLES, NET

Contract receivables, net consisted of the following: 

 

 

 

March 31, 2021

 

 

December 31, 2020

 

Billed and billable

 

$

226,955

 

 

$

230,466

 

Allowance for expected credit losses

 

 

(12,664

)

 

 

(7,616

)

Contract receivables, net

 

$

214,291

 

 

$

222,850

 

 

NOTE 4 – GOODWILL

The changes in the carrying amount of goodwill during the three-months period ended March 31, 2021 were as follows:

 

Balance as of December 31, 2020

 

$

909,913

 

Effect of foreign currency translation

 

 

446

 

Balance as of March 31, 2021

 

$

910,359

 

 

  

7


 

NOTE 5 – LEASES

The Company has operating leases for facilities and equipment which have remaining terms ranging from 1 to 13 years. The leases may include options to extend the lease periods for up to 5 years at rates approximating market rates and/or options to terminate the leases within 1 year. The leases may include a residual value guarantee or a responsibility to return the property to its original state of use. A limited number of leases contain provisions that provide for rental increases based on consumer price indices. The change in rent expense resulting from changes in these indices are included within variable rent.

Operating leases consisted of the following at March 31, 2021:

 

 

March 31, 2021

 

 

December 31, 2020

 

Real estate facilities

 

$

156,641

 

 

$

157,010

 

Office equipment

 

 

1,866

 

 

 

1,864

 

Other

 

 

604

 

 

 

580

 

 

 

 

159,111

 

 

 

159,454

 

Amortization of right-of-use assets

 

 

(39,861

)

 

 

(32,322

)

Total operating lease right-of-use assets

 

$

119,250

 

 

$

127,132

 

Rent expense is recognized on a straight-line basis over the lease term.  Rent expense consists of the following:

 

 

Three Months Ended

 

 

 

March 31, 2021

 

 

March 31, 2020

 

Operating lease costs

 

$

8,793

 

 

$

9,326

 

Short-term lease costs

 

 

131

 

 

 

431

 

Variable lease costs

 

 

10

 

 

 

1

 

Total rent expense

 

$

8,934

 

 

$

9,758

 

Future minimum lease payments under non-cancellable leases as of March 31, 2021 were as follows:

March 31, 2022

 

$

32,630

 

March 31, 2023

 

 

33,971

 

March 30, 2024

 

 

20,613

 

March 30, 2025

 

 

15,753

 

March 30, 2026

 

 

13,255

 

Thereafter

 

 

34,066

 

Total future minimum lease payments

 

 

150,288

 

Less:  Interest

 

 

(14,856

)

Total operating lease liabilities

 

$

135,432

 

 

 

 

 

 

Operating lease liabilities - current

 

$

28,881

 

Operating lease liabilities - non-current

 

 

106,551

 

Total operating lease liabilities

 

$

135,432

 

Other information related to operating leases is as follows:

 

 

March 31, 2021

 

 

March 31, 2020

 

Cash paid for amounts included in the measurement of lease liabilities:

 

 

 

 

 

 

 

 

Operating cash flows from operating leases

 

$

3,957

 

 

$

9,526

 

Right-of-use assets obtained in exchange for operating lease liabilities

 

$

142

 

 

$

21,098

 

Weighted-average remaining lease term - operating leases

 

 

5.8

 

 

 

6.0

 

Weighted-average discount rate - operating leases

 

 

3.4

%

 

 

3.6

%

At March 31, 2021, the Company had an additional operating lease that had not yet commenced with a potential lease liability of $115.3 million.  The operating lease has a term of 18 years and is anticipated to commence on March 1, 2022, when the Company takes possession of the property upon completion of buildouts.

 

8


 

NOTE 6 – LONG-TERM DEBT

At March 31, 2021 and December 31, 2020, debt consisted of:

 

 

 

March 31, 2021

 

 

December 31, 2020

 

 

 

Average

Interest Rate

 

 

Outstanding

Balance

 

 

Average

Interest Rate

 

 

Outstanding

Balance

 

Term Loan

 

 

 

 

 

$

190,000

 

 

 

 

 

 

$

192,500

 

Revolving Credit

 

 

 

 

 

 

136,863

 

 

 

 

 

 

 

123,281

 

Total before debt issuance costs

 

1.88%

 

 

 

326,863

 

 

2.35%

 

 

 

315,781

 

Unamortized debt issuance costs

 

 

 

 

 

 

(2,412

)

 

 

 

 

 

 

(2,567

)

 

 

 

 

 

 

$

324,451

 

 

 

 

 

 

$

313,214

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current portion of long-term debt

 

 

 

 

 

$

10,000

 

 

 

 

 

 

$

10,000

 

Long-term debt - non-current

 

 

 

 

 

 

314,451

 

 

 

 

 

 

 

303,214

 

 

 

 

 

 

 

$

324,451

 

 

 

 

 

 

$

313,214

 

 

On March 3, 2020, the Company entered into the First Amendment (the “First Amendment”) to the Fifth Amended and Restated Business Loan and Security Agreement with a group of ten commercial banks (the “Credit Facility”). The First Amendment amended the Fifth Amended and Restated Business Loan and Security Agreement to, among other things, (i) add a new term loan facility in the original principal amount of $200.0 million; (ii) increase the swing line commitment amount by $25.0 million to $75.0 million; (iii) extend the maturity date; and (iv) modify certain definitions and certain covenants. As a result, the Credit Facility now consists of (i) a term loan facility of $200.0 million; (ii) a revolving line of credit of up to $600.0 million with additional revolving credit commitments of up to $300.0 million, subject to lenders’ approval (the “Accordion”); and (iii) a sub-limit of $75.0 million for swing line loans.  The Credit Facility matures on March 3, 2025.

The Company has the option to borrow funds under the Credit Facility at interest rates based on both LIBOR (1, 3, or 6-month rates) and the Base Rate (as defined herein), at its discretion, plus their applicable margins. Base Rates are fluctuating per annum rates of interest equal to the highest of (i) the Overnight Bank Funding Rate, plus 0.5%, (ii) the Prime Rate (as defined under the Credit Facility) and (iii) the daily LIBOR rate, plus a LIBOR margin between 1.00% and 2.00% based on its Leverage Ratio (as defined under the Credit Facility). The interest accrued based on LIBOR rates is to be paid on the last business day of the interest period (1, 3, or 6 months), while interest accrued based on the Base Rate is to be paid in quarterly installments. The Credit Facility also provides for letters of credit aggregating up to $60.0 million which reduce the funds available under the Credit Facility when issued.  The unused portion of the Credit Facility is subject to a commitment fee between 0.13% and 0.25% per annum based on the Leverage Ratio.

The Credit Facility is collateralized by substantially all the assets of the Company and requires that the Company remain in compliance with certain financial and non-financial covenants. The financial covenants require, among other things, that the Company maintain at all times an Interest Coverage Ratio (as defined under the Credit Facility) of not less than 3.00 to 1.00 and a Leverage Ratio of not more than 4.00 to 1.00 (subject to a step-up to 4.25 to 1.0 for a four quarter period following permitted acquisitions as defined under the Credit Facility) for each fiscal quarter. As of March 31, 2021, the Company was in compliance with its covenants under the Credit Facility. The Credit Facility also has a conforming dividend covenant that allows the Company to pay dividends as long as it remains in compliance with the financial covenants set forth in the Credit Facility.

As of March 31, 2021, the Company had $326.9 million long-term debt outstanding from the Credit Facility (including the term loan, exclusive of unamortized debt issuance costs), outstanding letters of credit totaling $3.3 million, net derivative obligations of $6.7 million and unused borrowing capacity of $459.9 million under the Credit Facility (excluding the Accordion). Taking into account the financial, performance-based limitations, available borrowing capacity (excluding the Accordion and the term loan) was $265.5 million as of March 31, 2021. 

Future scheduled repayments of debt principal are as follows:

Payments due by

 

Term Loan

 

 

Revolving Credit

 

 

Total

 

March 31, 2022

 

$

10,000

 

 

$

 

 

$

10,000

 

March 31, 2023

 

 

10,000

 

 

 

 

 

 

10,000

 

March 31, 2024

 

 

15,000

 

 

 

 

 

 

15,000

 

March 3, 2025 (Maturity)

 

 

155,000

 

 

 

136,863

 

 

 

291,863

 

Total

 

$

190,000

 

 

$

136,863

 

 

$

326,863

 

 

9


 

NOTE 7 – REVENUE RECOGNITION

Disaggregation of Revenue

The Company disaggregates revenue from clients, most of which is earned over time, into categories that depict how the nature, amount and uncertainty of revenue and cash flows are affected by economic factors. Those categories are client market, client type and contract mix. Client markets provide insight into the breadth of the Company’s expertise. In classifying revenue by client market, the Company attributes revenue from a client to the market that the Company believes is the client’s primary market. The Company also classifies revenue by the type of entity for which it does business, which is an indicator of the diversity of its client base. The Company attributes revenue generated from being a subcontractor to a commercial company as government revenue when the ultimate client is a government agency or department. Disaggregation by contract mix provides insight in terms of the degree of performance risk that the Company has assumed. Fixed-price contracts are considered to provide the highest amount of performance risk as the Company is required to deliver a scope of work or level of effort for a negotiated fixed price. Time-and-materials contracts require the Company to provide skilled employees on contracts for negotiated fixed hourly rates. Since the Company is not required to deliver a scope of work, but merely skilled employees, it considers these contracts to be less risky than a fixed-price agreement. Cost-based contracts are considered to provide the lowest amount of performance risk since the Company is generally reimbursed for all contract costs incurred in performance of contract deliverables with only the amount of incentive or award fees (if applicable) dependent on the achievement of negotiated performance requirements.  

Changes in the three months ended March 31, 2021 compared to the prior year period were primarily from an increase of revenue in the energy, environment, and infrastructure client market and the health, education, and social programs client market as a result of  U.S. government clients and international government clients, partially offset by decreases in revenue from the consumer and financial markets primarily as a result of commercial clients.

 

 

Three Months Ended March 31,

 

 

 

2021

 

 

2020

 

 

 

Dollars

 

 

Percent

 

 

Dollars

 

 

Percent

 

Client Markets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Energy, environment, and infrastructure

 

$

164,492