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NCI, Inc. (NASDAQ:NCIT), a leading provider of information technology (IT), professional services, and solutions to U.S. Federal Government agencies, today announced its offer to purchase certain “out-of-the-money” stock options from NCI option holders for cash. The tender offer commenced August 22, 2012, and will expire—unless otherwise extended by the company—at 11:59 p.m. Eastern Daylight Time on September 19, 2012.
The tender offer applies to outstanding stock options held by current and former employees, officers, and directors of NCI that were granted prior to January 1, 2012, and have an exercise price equal to or greater than $10.00 per share provided that such stock options have not expired or will otherwise terminate prior to the expiration of the offering period. As of the tender offer commencement date, 788,956 eligible options are included in the offer, representing a total cash payment of approximately $1.2 million. All options tendered will be canceled and returned to the pool of available shares for future awards under NCI’s Performance Incentive Plan.
The total stock compensation and income tax expense from all options being tendered would reduce net income by approximately $4.2 million in the current quarter and full fiscal year. Of this amount, approximately $3.3 million relates to the acceleration of the remaining unamortized stock-based compensation expense associated with the unvested portions of the eligible options, as well as payroll and other related transaction costs. The write-off of associated deferred income tax assets would result in incremental income tax expense of approximately $0.9 million.
“Granting stock options and other equity incentives is an important component of NCI’s long-term compensation and retention philosophy for key managers and employees to help us create stockholder value and share in the value they create,” said Charles Narang, NCI’s Chairman and Chief Executive Officer. “Following an extensive review of our current compensation program and the impact of the decline in our common stock price on our incentive awards, we determined that providing the opportunity to obtain the more certain and immediate cash benefit as a result of this offer is in the best interests of NCI and the option holders. Future compensation expense from tendered unvested options will be reduced, as will the overhang associated with outstanding options that no longer serve as an effective incentive.”