NCI Provides Preliminary Business Outlook For 2012

NCI, Inc. (NASDAQ:NCIT), a leading provider of information technology (IT), engineering, logistics, and professional services and solutions to U.S. Federal Government agencies, today provided its preliminary business outlook for 2012 and announced that it has taken actions to remove more than $5 million from its annual cost structure, which will result in a one-time restructuring charge in the fourth quarter of 2011. The company also reaffirmed previously issued fourth quarter and full-year 2011 revenue and earnings per share guidance, excluding the restructuring charge.

NCI will report its full fiscal year 2011 results and issue guidance for 2012 on February 15, 2012.

Preliminary 2012 Business Outlook

NCI cited continuing difficulty and uncertainty in the Federal procurement environment as well as a high number of contract awards under protest in setting its current expected revenue range for 2012 at $340 million to $360 million. The company stated that the major components of the anticipated year-over-year revenue decline in 2012 were as follows:
  • Attrition of BRAC-related and other non-core program revenue, as previously disclosed;
  • Expiration of task orders and contracts within NCI’s core contract base; and
  • A net reduction of revenue associated with NCI’s core contract base as a result of reductions in scope of work and certain lost contract recompetes, among other factors.

The company added that bookings of new contract awards in 2011 would generate insufficient revenue in 2012 to meaningfully offset the revenue drop resulting from the aforementioned factors.

“A number of factors contributed to our bookings shortfall in 2011, including an unfavorable competitive environment, pricing pressures and delayed or cancelled procurements,” said NCI’s President, Brian J. Clark. “In addition, as we’ve previously disclosed, significant potential future revenue was held up in protests or cancellations of contracts awarded to NCI. It was clear that offsetting the year-over-year decline with new business revenue in 2012 was impracticable.”

NCI reported that it would provide a range for projected 2012 earnings per share on its February 15 earnings call; however, the company stated that the year-over-year decline in expected 2012 EPS would be disproportionately greater than the year-over-year revenue decrease would indicate. This is due to reduced absorption of indirect costs on the lower revenue base, as well as the mix of business and types of contracts under which NCI will derive revenues in 2012.

Primarily as a result of the lower expected revenue base forecasted for 2012, and in an effort to improve the company’s cost structure, NCI’s final 2011 numbers are expected to include a pre-tax restructuring charge in the range of $2.6 million - $3.1 million, or $0.11 - $0.14 per diluted share on a GAAP basis.

“In order to effect an immediate reduction of more than $5 million in annualized costs to address the revenue decline in 2012, we determined that two areas of operating expenses required immediate attention: facilities and indirect personnel costs, meaning headcount,” said Mr. Clark. “Approximately 85% of the charge is related to costs associated with the consolidation, termination or renegotiation of leases on five facilities, partially offset by anticipated recoveries from subleases of certain of those facilities. The remaining 15% or so is accounted for by severance costs associated with a reduction in force of approximately 60 net indirect NCI employees and consultants.”

“As we continue to face difficult market conditions, these actions are part of our ongoing focus on improving profitability and to position NCI to operate in the current federal procurement environment," said Charles Narang, NCI’s Chairman and CEO.

Conference Call Information

NCI will conduct a conference call today at 5 p.m. EST to discuss the items reported in today’s press release. Interested parties may access the call by dialing (877) 477-1422 (domestic) or (973) 582-2740 (international). The confirmation code for the live call is 45458949. The conference call will be broadcast simultaneously on the Investors page of the company’s website, www.nciinc.com. Investors are advised to log on to the website at least 15 minutes prior to the call to register, download and install any necessary audio software.

A replay of the call will be available beginning at 8 p.m. EST today and will remain available for a two-week period. To access the replay, call (855) 859-2056 (domestic) or (404) 537-3406 (international). The confirmation code for the replay is 45458949. A replay webcast will also be available on NCI, Inc.’s website shortly after the conclusion of the call.

About NCI, Inc.

NCI is a leading provider of information technology (IT), engineering, logistics, and professional services and solutions to U.S. Federal Government agencies. We have ISO 9001:2008 and other industry-leading and globally recognized certifications. NCI’s award-winning expertise encompasses areas critical to its customers’ mission objectives, including enterprise systems management; network engineering; cybersecurity and information assurance; software development and systems engineering; program management, acquisition, and lifecycle support; engineering and logistics; health IT/medical transformation; and training and simulation. The company is a member of the Russell 2000 and S&P Small Cap 600 indexes. Headquartered in Reston, Virginia, NCI has approximately 2,600 employees and more than 100 locations worldwide. For more information, visit our website at www.nciinc.com or e-mail mcrystal@nciinc.com.

Forward-Looking Statement:

Statements and assumptions made in this press release, which do not address historical facts, constitute “forward-looking” statements that NCI believes to be within the definition in the Private Securities Litigation Reform Act of 1995 and involve risks and uncertainties, many of which are outside of our control. Words such as “may,” “will,” “intends,” “should,” “expects,” “plans,” “projects,” “anticipates,” “believes,” “estimates,” “predicts,” “potential,” “continue,” or “opportunity,” or the negative of these terms or words of similar import are intended to identify forward-looking statements.

Such statements are subject to factors that could cause actual results to differ materially from anticipated results. The factors that could cause actual results to differ materially from those anticipated include, but are not limited to, the following: our dependence on our contracts with Federal Government agencies, particularly within the U.S. Department of Defense, for substantially all of our revenue; A reduction in the overall U.S. Defense budget, volatility in spending authorizations for Defense and Intelligence-related programs by the U.S. Federal Government or a shift in spending to programs in areas where we do not currently provide services; Federal Government shutdowns (such as that which occurred during the Federal Government’s 1996 fiscal year), other potential delays in the Government appropriations process, or budgetary cuts resulting from Congressional committee recommendations or automatic sequestration under the Budget Control Act of 2011), risk of contract performance or termination; failure to achieve contract awards in connection with recompetes for present business and/or competition for new business; adverse results of Federal Government audits of our government contracts; Government contract procurement (such as bid protest, small business set asides, etc.) and termination risks; competitive factors such as pricing pressures and competition to hire and retain employees (particularly those with security clearances); Federal Government agencies awarding contracts on a technically acceptable/lowest cost basis in order to reduce expenditures failure to successfully identify and integrate future acquired companies or businesses into our operations or to realize any accretive or synergistic effects from such acquisitions or to effectively integrate acquisitions appropriate to the achievement of our strategic plans; economic conditions in the United States, including conditions that result from terrorist activities or war; material changes in laws or regulations applicable to our businesses, particularly legislation affecting (i) government contracts for services, (ii) outsourcing of activities that have been performed by the government, (iii) government contracts containing organizational conflict of interest (OCI) clauses, (iv) delays related to agency specific funding freezes, (v) competition for task orders under Government Wide Acquisition Contracts (GWACs), agency-specific Indefinite Delivery/Indefinite Quantity (IDIQ) contracts and/or schedule contracts with the General Services Administration; and (vi) our own ability to achieve the objectives of near-term or long-range business plans, including internal systems failures. These and other risk factors are more fully discussed in the section titled “Risks Factors” in NCI's Form 10-K filed with the Securities and Exchange Commission (SEC), and from time to time, in other filings with the SEC, such as our Forms 8-K and Forms 10-Q.

Any projections of revenue, margins, expenses, earnings, tax provisions, cash flows, benefit obligations, share repurchases, any statements of the plans, strategies and objectives of management for future operations, the execution of cost reduction programs and restructuring and integration plans are also subject to factors that could cause actual results to differ materially from anticipated results.

The forward-looking statements included in this news release are only made as of the date of this news release and NCI undertakes no obligation to publicly update any of the forward-looking statements made herein, whether as a result of new information, subsequent events or circumstances, changes in expectations or otherwise.

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