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May 25, 2016
  • Robust book-to-bill ratios of 1.0x for the quarter and 1.3x for the year build the foundation for future growth
  • Quarterly loss from continuing operations before taxes of $107 million reflects pension remeasurement; adjusted EBITDA margin of 17.4 percent leads the industry
  • Quarterly Operating Cash Flow of $179 million and Free Cash Flow of $167 million enabled significant debt reduction

FALLS CHURCH, Va. -- CSRA Inc. (NYSE: CSRA), a leading provider of next-generation IT solutions and professional services to government organizations, today announced financial results for the fourth quarter of fiscal year 2016, which ended April 1, 2016.

"We capped off our first fiscal year with another strong quarter of profitability, cash flow, and business development performance," said Larry Prior, CSRA President and CEO. "We dramatically exceeded our cost synergy targets, which is driving margins and cash generation and enabling more rapid debt reduction. Our robust bookings demonstrate that we can compete fiercely in the federal marketplace and validate our leading position in offering and successfully delivering next generation information technology solutions to the federal government."

Summary Operating Results

 

(unaudited $ in millions, except

Three Months Ended

Twelve Months Ended

 
 

for per share data)

Apr 1, 2016

Apr 3, 2015

Apr 1, 2016

Apr 3, 2015

 
 

GAAP revenue

$

1,290

$

1,001

$

4,250

$

4,070

 
 

GAAP earnings before taxes

$

(107)

$

100

$

149

$

429

 
 

GAAP diluted EPS

$

(0.44)

$

0.43

$

0.53

$

1.82

 
 

Pro forma revenue

$

1,290

$

1,350

$

5,198

$

5,444

 
 

Pro forma adjusted EBITDA

$

225

$

209

$

895

$

865

 
 

Pro forma adjusted diluted EPS

$

0.50

$

0.38

$

1.96

$

1.72

 
 

Note: All figures and their computation methods are shown at the end of the release.

 

GAAP revenue for the fourth quarter of fiscal year 2016 was $1.29 billion, up 29 percent compared to the fourth quarter of fiscal year 2015 as a result of the merger with SRA International, Inc. Revenue for the quarter was up 1 percent compared to pro forma revenue in the third quarter of fiscal year 2016.

The GAAP loss from continuing operations before taxes of $107 million, or $0.44 per share, includes a $203 million non-cash charge associated with the remeasurement of various pension programs, and merger and integration costs of $27 million. Pro forma adjusted EBITDA for the quarter was $225 million, up 8 percent from pro forma adjusted EBITDA in the fourth quarter of fiscal year 2015, as margin increased from 15.5 percent to 17.4 percent. The year-over-year improvement in adjusted EBITDA was driven primarily by cost synergies realized from the SRA merger, which have significantly exceeded the company's initial projections. Adjusted diluted earnings per share for the quarter were $0.50, up 32 percent from pro forma adjusted EPS of $0.38 in the fourth quarter of fiscal year 2015.

Cash Management and Capital Deployment

Operating Cash Flow for the quarter was $179 million, which drove free cash flow of $167 million or 2.1 times adjusted net income attributable to CSRA common stockholders. As a result of the strong cash flow, the company aggressively executed on its balanced capital deployment program and deployed $170 million to pay down debt, $13 million to repurchase shares, and $16 million to pay dividends.

"Our superb fourth quarter free cash flow highlighted one of our fundamental value propositions for investors," remarked Dave Keffer, CSRA CFO. "The ability to generate free cash flow is the fundamental driver of value, and our exceptional results were a true team effort. We used our cash to pay down debt more quickly, deliver a dividend, and repurchase shares at good value. Our steady cash flows and $650 million of undrawn revolver capacity provide substantial liquidity and flexibility to manage the business, pay down debt, return cash to shareholders, and make accretive acquisitions."

The Board of Directors declared that the company will pay a cash dividend of $0.10 per share on July 11, 2016, to all common stockholders of record as of June 14, 2016, as part of its regular quarterly cash dividend program.

Contract Awards

Bookings totaled $1.3 billion in the fourth quarter, representing a book-to-bill ratio of 1.0x. The fourth quarter marked the fifth consecutive quarter with a pro forma book-to-bill ratio of 1.0x or higher. Pro forma bookings for the trailing twelve-month period totaled $6.9 billion, representing a pro forma book-to-bill ratio of 1.3x. New business bookings constituted 48 percent of the total bookings in the fourth quarter and 35 percent of the total bookings in the trailing twelve months.

Included in the quarterly bookings were several particularly important single-award prime contracts:

  • Securities and Exchange Commission (SEC) IT Solutions. Under a potential $252 million, 10-year award, CSRA will deliver a broad range of services supporting the overall day-to-day IT operations, while migrating agency IT services contracts from staff augmentation to fixed price, information technology as-a-service and managed services. 
  • Alabama Supercomputer Authority (ASA) Network Services. Under a $96 million, five-year contract, CSRA will continue its 22-year relationship with ASA to provide industry-leading supercomputing and network services to the academic community in Alabama. 
  • Scientific Models, Applications, Visualization, Computational Science and Statistical Support. The Environmental Protection Agency (EPA) Office of Research and Development (ORD) awarded CSRA a $54 million contract to create, apply and distribute complex environmental simulations in support of research initiatives.

In addition, the company won several large multiple-award, Indefinite Delivery, Indefinite Quantity contracts that are not included in bookings, but support future growth, including:

  • Transformation Twenty-One Total Technology Next Generation (T4NG). The Department of Veteran's Affairs (VA) awarded CSRA operating subsidiary, SRA International, Inc., a prime position on the T4NG contract, which has a potential ceiling value of $22 billion over 10 years. The contract will support the VA's efforts in information technology infrastructure improvements, cybersecurity and operations, and network management.

The company's backlog of signed business orders at the end of fourth quarter of fiscal year 2016 was $15.1 billion, of which $2.9 billion was funded. Total backlog increased 5 percent compared to the pro forma backlog at the end of the fourth quarter of fiscal year 2015.

Forward Guidance

The company is initiating guidance ranges for revenue, adjusted EBITDA, adjusted diluted earnings per share, and free cash flow for the fiscal year 2017 as specified in the table below.

Metric

Fiscal Year 2017

Revenue (millions)

$5,000 - $5,200

Adjusted EBITDA (millions)

$870 - $905

Adjusted Diluted Earnings per Share

$1.91 - $2.04

Free Cash Flow (millions)

$300 - $350

The fiscal year 2017 adjusted EBITDA and diluted EPS guidance assumes pension income of $96 million, or $16 million lower than the run rate for the third and fourth quarters of fiscal year 2016. Without that change, the adjusted EBITDA guidance would have been $886 to $921 million and adjusted EPS guidance would have been $1.97 to $2.10. The company affirms its long-term model of average compound annual growth in revenue of 2 percent to 3 percent and average compound annual growth in adjusted EPS of 8 percent to 10 percent.

Dave Keffer commented, "The entire CSRA team delivered outstanding earnings growth and industry-leading profitability in the fourth quarter. We have now identified more than double the $80 million of cost synergies that we originally targeted from the merger. Moreover, we have already taken most of the actions to execute at this new level of efficiency. Fiscal year 2017 should follow the pattern of investing in growth, managing costs well, and deploying our excellent cash flow in a balanced manner."

Conference Call

CSRA executive management will hold a conference call on May 25, 2016, at 5 p.m. Eastern to discuss the financial results and outlook and answer questions. Analysts and institutional investors may participate on the conference call by dialing 877-883-0383 (domestic) or 412-902-6506 (international) and entering pass code 2697791. The conference call will be webcast simultaneously to the public through a link on the Investor Relations section of the CSRA website (http://investorrelations.csra.com). A replay of the conference call will be available on the CSRA website approximately two hours after the conclusion of the call.

About CSRA Inc.

Every day CSRA (NYSE: CSRA) makes a difference in how the government serves our country and our citizens. We deliver a broad range of innovative, next-generation IT solutions and professional services to help our customers modernize their legacy systems, protect their networks and assets, and improve the effectiveness and efficiency of mission-critical functions for our warfighters and our citizens. Our 18,000 employees understand that success is a matter of perseverance, courage, adaptability and experience. CSRA is headquartered in Falls Church, Virginia. To learn more about CSRA, visit www.csra.com.

Forward-looking Statements

All statements in this press release and in all future press releases that do not directly and exclusively relate to historical facts constitute "forward-looking statements" within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements represent CSRA's intentions, plans, expectations and beliefs, including statements about network and asset protection and improving mission-critical functions. The forward-looking statements are subject to risks, uncertainties and other factors, many of which are outside the control of CSRA. These factors could cause actual results to differ materially from forward-looking statements. For a written description of these factors, see the sections titled "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" in CSRA's Quarterly Report for the Fiscal Quarter Ended January 1, 2016 and any updating information in subsequent SEC filings. CSRA disclaims any intention or obligation to update these forward-looking statements whether as a result of subsequent event or otherwise, except as required by law.

CSRA INC.

CONSOLIDATED AND COMBINED BALANCE SHEETS (unaudited)

   

As of

(Dollars in thousands)

 

April 1, 2016

 

April 3, 2015

Current assets

       

  Cash and cash equivalents

$

130,016

$

4,979

  Receivables, net of allowance for doubtful accounts of $21,295 
  (fiscal 2016) and $14,733 (fiscal 2015)

 

751,228

 

696,727

  Prepaid expenses and other current assets

 

123,278

 

92,665

Total current assets

 

1,004,522

 

794,371

Intangible and other assets

       

  Goodwill

 

2,332,158

 

802,582

  Customer-related and other intangible assets, net of accumulated  
  amortization of $200,611 (fiscal 2016) and $150,295 (fiscal 2015)

 

869,409

 

33,405

  Software, net of accumulated amortization of $95,034 (fiscal 2016) 
  and $75,544 (fiscal 2015)

 

41,427

 

35,261

  Other assets

 

68,697

 

58,931

Total intangible and other assets

 

3,311,691

 

930,179

Property and equipment, net of accumulated depreciation of $773,027 
(fiscal 2016) and $696,796 (fiscal 2015)

 

530,087

 

436,732

Total assets

$

4,846,300

$

2,161,282

Current liabilities

       

  Accounts payable

$

170,359

$

130,551

  Accrued payroll and related costs

 

199,512

 

109,539

  Accrued expenses and other current liabilities

 

527,734

 

440,606

  Current capital lease liability

 

42,191

 

21,351

  Current maturities of long-term debt

 

128,000

 

  Dividends payable

 

17,943

 

Total current liabilities

 

1,085,739

 

702,047

Long-term debt, net of current maturities

 

2,656,324

 

Noncurrent capital lease liability

 

108,530

 

129,933

Noncurrent deferred income tax liabilities

 

162,844

 

153,297

Other long-term liabilities

 

742,625

 

80,957

Commitments and contingent liabilities (Note 22)

       

Equity

       

  Net parent investment, prior to Spin-Off

 

 

1,067,492

  CSRA Stockholders' Equity:

       

  Common stock, $0.001 par value, 750,000,000 shares authorized, 
  162,925,821 shares issued and outstanding

 

163

 

  Additional paid-in capital

 

117,376

 

  Accumulated deficit

 

(73,901)

 

  Accumulated other comprehensive income (loss)

 

20,908

 

(405)

Total CSRA stockholders' equity

 

64,546

 

1,067,087

Noncontrolling interests

 

25,692

 

27,961

Total equity

 

90,238

 

1,095,048

Total liabilities and equity

$

4,846,300

$

2,161,282

 

CSRA INC.

CONSOLIDATED AND COMBINED STATEMENTS OF OPERATIONS (unaudited)

   

Three Months Ended

 

 Twelve Months Ended

(Dollars in thousands)

 

April 1, 2016

 

April 3, 2015

 

April 1, 2016

 

April 3, 2015

Revenue

$

1,290,151

 

1,000,051

$

4,245,673

 

4,061,914

Related party revenue

 

(1)

 

1,067

 

4,774

 

7,832

Total revenue

 

1,290,150

 

1,001,118

 

4,250,447

 

4,069,746

Cost of services

 

1,227,065

 

810,782

 

3,570,857

 

3,274,469

Related party cost of services

 

(1)

 

1,067

 

4,774

 

7,832

Total cost of services (excludes depreciation and 
amortization)

 

1,227,064

 

811,849

 

3,575,631

 

3,282,301

Selling, general and administrative expenses

 

52,398

 

49,429

 

187,244

 

194,207

Separation and merger costs

 

18,008

 

 

117,987

 

Depreciation and amortization

 

69,266

 

32,786

 

182,242

 

137,058

Interest expense, net

 

28,876

 

5,301

 

53,475

 

21,864

Other (income) expense, net

 

1,467

 

1,967

 

(15,221)

 

5,608

Total costs and expenses

 

1,397,079

 

901,332

 

4,101,358

 

3,641,038

(Loss) income from continuing operations before 
taxes

 

(106,929)

 

99,786

 

149,089

 

428,708

        Taxes on income

 

(38,724)

 

38,300

 

46,167

 

160,996

(Loss) income from continuing operations

 

(68,205)

 

61,486

 

102,922

 

267,712

(Loss) income from discontinued operations, net of 
taxes

 

 

(166)

 

 

(1,877)

Net income

 

(68,205)

 

61,320

 

102,922

 

265,835

       Less: noncontrolling  interest

 

3,658

 

3,601

 

15,777

 

14,078

Net income attributable to CSRA common 
stockholders

$

(71,863)

 

57,719

$

87,145

 

251,757

Earnings (loss) per common share

               

Basic:

               

Continuing operations

$

(0.44)

 

0.43

$

0.54

 

1.82

Discontinued operations

 

 

 

 

(0.01)

 

$

(0.44)

 

0.43

$

0.54

 

1.81

Diluted:

               

Continuing operations

$

(0.44)

 

0.43

$

0.53

 

1.82

Discontinued operations

 

 

 

 

(0.01)

 

$

(0.44)

 

0.43

$

0.53

 

1.81

 

CSRA INC.

CONSOLIDATED AND COMBINED STATEMENTS OF CASH FLOWS (unaudited)

   

Twelve Months Ended

(Dollars in thousands)

 

April 1, 2016

 

April 3, 2015

Cash flows from operating activities:

       

Net income

$

102,922

$

265,835

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

       

Depreciation and amortization

 

191,404

 

146,764

Pension and OPEB actuarial & settlement losses (gains)

 

202,800

 

8,359

Stock-based compensation

 

10,215

 

17,618

Excess tax benefit from stock-based compensation

 

(605)

 

Deferred income taxes

 

(44,187)

 

(2,615)

Net (gain) loss on dispositions on business and assets

 

(6,620)

 

3,521

Provision for loss (gain) on accounts receivable

 

337

 

(265)

Net loss on sale of receivables

 

2,458

 

Amortization of debt issuance costs

 

3,785

 

Other non-cash items, net

 

(4,811)

 

Changes in assets and liabilities, net of acquisitions and dispositions:

       

Decrease in receivables

 

185,939

 

7,996

(Increase) decrease in prepaid and other assets

 

(29,836)

 

42,674

(Increase) decrease in payables and accrued expenses

 

(17,537)

 

30,165

(Increase) decrease in defined benefits liability

 

(56,714)

 

(5,000)

Increase (decrease) in other long-term liabilities

 

13,985

 

(22,099)

Other operating activities, net

 

(19)

 

(6,015)

Cash provided by operating activities

 

553,516

 

486,938

Cash flows from investing activities

       

Purchases of property and equipment

 

(139,420)

 

(70,183)

Software purchased and developed

 

(21,913)

 

(7,720)

Payments for acquisitions, net of cash acquired

       

Payments for acquisitions, net of cash acquired

 

(341,606)

 

(49,370)

Extinguishment of SRA long-term debt and costs

 

(1,100,698)

 

Reimbursement of SRA-related expenses

 

(29,885)

 

Proceeds from business dispositions

 

34,001

 

3,000

Proceeds from disposals of assets

 

3,714

 

7,624

Other investing

 

(9,512)

 

Cash (used in) provided by investing activities

 

(1,605,319)

 

(116,649)

Cash flows from financing activities

       

Borrowings under lines of credit

 

200,000

 

Repayments of borrowings under lines of credit

 

(150,000)

 

Borrowings of long-term debt

 

2,800,000

 

Payments of long-term debt

 

(20,000)

 

Debt issuance costs

 

(56,415)

 

Excess tax benefit from stock-based compensation

 

605

 

Proceeds from stock options and other common stock transactions

 

3,692

 

Repurchase of common stock

 

(50,000)

 

Special Dividend payment

 

(1,147,807)

 

Dividends paid

 

(16,252)

 

Repayment of Transitory Note

 

(350,038)

 

Payments on lease liability

 

(16,497)

 

(28,902)

Payments to noncontrolling interest

 

(18,000)

 

Net transfers to CSC

 

(10,425)

 

(340,387)

Other financing

 

7,977

 

Cash provided by (used in) financing activities

 

1,176,840

 

(369,289)

Net increase (decrease) in cash and cash equivalents

 

125,037

 

1,000

Cash and cash equivalents at beginning of period

 

4,979

 

3,979

Cash and cash equivalents at end of period

$

130,016

$

4,979

 

Segment Operating Results

 

CSRA delivers IT, mission, and operations-related services across the U.S. federal government through two reportable segments–Defense and Intelligence, which supports customers in the Department of Defense (DoD) and Intelligence Community, and Civil, which supports customers in homeland security, law enforcement, healthcare, and other civil agencies as well as certain state and local government agencies. The following table summarizes revenue by reportable segment:

 
   

Three Months Ended

 

(unaudited $ in thousands)

Apr 1, 2016

 

Apr 3, 2015

Pro forma revenue

     
 

Defense and Intelligence

577,559

 

630,468

 

Civil

712,591

 

720,358

   

Total pro forma revenue

$

1,290,150

 

$

1,350,826

 

SRA revenue prior to November 30, 2015

 

349,708

   

Total revenue

$

1,290,150

 

$

1,001,118

Pro forma segment operating income

     
 

Defense and Intelligence

76,392

 

67,946

 

Civil

83,271

 

89,815

   

Total pro forma segment operating income

$

159,663

 

$

157,761

 

SRA segment operating income prior to November 30, 2015

 

20,036

   

Total segment operating income

$

159,663

 

$

137,725

Note: Values in bold have been derived by subtracting nine-month GAAP figures from the unaudited Third Quarter Fiscal Year 2016 Form 10-Q from twelve-month GAAP figures from the audited Fiscal Year 2016 Form 10-K.

For the three months ended April 1, 2016, pro forma Defense and Intelligence segment revenues decreased by $53 million, or 8.4 percent compared to the same period of the prior year. Fourth quarter pro forma Civil segment revenues decreased by $8 million, or 1.1 percent in 2016 as compared to the same period of the prior year.

Pro forma segment operating income increased across the company, driven by profitability enhancements with the Defense and Intelligence segment. For the three months ended April 1, 2016, total pro forma segment operating margin was 12.4 percent, up 70 basis points compared to the fourth quarter of fiscal year 2015.

Non-GAAP Financial Measures

The following tables illustrate the items and means to reconcile non-GAAP financial measures to the most directly comparable financial measures calculated and presented in accordance with GAAP. CSRA management believes that these non-GAAP financial measures provide useful additional information to investors regarding the company's financial condition and results of operations as they provide another measure of the company's profitability and ability to service its debt and are considered important measures by financial analysts covering CSRA. When analyzing CSRA's performance, investors and securities analysts should evaluate each adjustment in our reconciliation and use pro forma adjusted measures in addition to, and not as an alternative to, GAAP measures.

Pro forma adjusted results include a full period of SRA results; assess the impact of interest, non-backlog-related intangibles amortization, recurring elements of pension income, and other costs as if the separation and merger had occurred at the beginning of the period; and exclude costs directly associated with the separation and merger transactions and the ongoing integration process. The table below summarizes the major adjustments to GAAP to derive pro forma adjusted metrics for each reporting period.

Metric

Q4 2016

FY2016

Q4 2015 / FY2015

Pro Forma 
Revenue

None (GAAP)

+ SRA revenue

-  Intercompany revenue

+ SRA revenue

-  Intercompany revenue

Pro Forma
Adjusted 
EBITDA

-  Pension mark-to-market expense

-  Integration costs

-  Spin/merger costs

+ SRA EBITDA

-  Intercompany EBITDA

-  Pension mark-to-market expense

+ Pension income

-  Integration costs

-  Spin/merger costs

+ CSC IP expense

 

+ SRA EBITDA

-  Intercompany EBITDA

+ Pension income

+ CSC IP expense

Pro Forma 
Adjusted 
Diluted EPS

-  Pension mark-to-market expense

-  Integration costs

-  Spin/merger costs

-  SRA backlog amortization

+ Normalized tax rate

+ SRA income

-  Intercompany income

-  Pension mark-to-market expense

+ Pension income

-  Integration costs

-  Spin/merger costs

-  SRA backlog amortization

+ CSC IP expense

+ Normalized interest expense

+ Normalized tax rate

+ Weighted share count since spin

+ SRA income

-  Intercompany income

+ Pension income

+ CSC IP expense

+ Normalized interest expense

+ Normalized tax rate

+ Share count at spin

 

 

Pro Forma Adjusted Revenue

CSRA INC.

PRO FORMA REVENUE (unaudited)

     

Three Months Ended

 

 Twelve Months Ended

(Amounts in thousands)

 

April 1,
2016

 

April 3,
2015

 

April 1,
2016

 

April 3,
2015

Revenue(a)

$

1,290,150

$

1,001,118

$

4,250,447

$

4,069,746

Historical SRA revenue(b)

 

 

349,708

 

949,661

 

1,377,239

Separation and merger effect(c)

 

 

(804)

 

(1,844)

 

(3,015)

Pro forma adjusted revenue

$

1,290,150

$

1,350,022

$

5,198,264

$

5,443,970

Note: Values in bold have been derived by subtracting nine-month GAAP figures from the unaudited Third Quarter Fiscal Year 2016 Form 10-Q from twelve-month GAAP figures from the audited Fiscal Year 2016 Form 10-K.

(a)

For the quarter and year ended April 3, 2015, GAAP results reflect the operations of CSRA LLC.

(b)

Revenue prior to the November 30, 2015 merger from the most closely corresponding reporting period, which is January 1, 2015 to March 31, 2015, in the case of the three months ended April 3, 2015.

(c)

Adjustment for inter-company revenue prior to the November 30, 2015 merger.

 

Pro Forma Adjusted Diluted Earnings Per Share

CSRA INC.

PRO FORMA ADJUSTED DILUTED EARNINGS PER SHARE

(unaudited)

     

Three Months Ended

 

 Twelve Months Ended

(Amounts in thousands except per share amounts)

 

April 1,
2016

 

April 3,
2015

 

April 1,
2016

 

April 3,
2015

(Loss) income from continuing operations 
before taxes(a)

$

(106,929)

$

99,786

$

149,089

$

428,708

Historical SRA loss from continuing operations 
before taxes(b)

 

 

(6,175)

 

(61,724)

 

(23,920)

Separation and merger costs(c)

 

15,512

 

14,500

 

236,472

 

82,847

One-time integration costs

 

11,833

 

 

7,688

 

Mark-to-market pension and OPEB expense

 

202,800

 

 

202,800

 

Amortization of funded backlog associated with 
SRA acquisition(d)

 

16,300

 

 

17,906

 

Pro forma adjusted income from continuing 
operations before taxes

 

139,516

 

108,111

 

552,231

 

487,635

Pro forma adjusted income tax expense(e)

 

54,411

 

42,163

 

215,370

 

190,178

Pro forma adjusted net income

 

85,105

 

65,948

 

336,861

 

297,457

Less: Noncontrolling interest

 

3,658

 

3,601

 

15,777

 

14,078

Pro forma adjusted net income attributable to 
CSRA common stockholders

$

81,447

$

62,347

$

321,084

$

283,379

Pro forma adjusted diluted earnings per common 
share(f)

$

0.50

$

0.38

$

1.96

$

1.72

Note: Values in bold have been derived by subtracting nine-month GAAP figures from the unaudited Third Quarter Fiscal Year 2016 Form 10-Q from twelve-month GAAP figures from the audited Fiscal Year 2016 Form 10-K.

(a)

For the quarter and year ended April 3, 2015, GAAP results reflect the operations of CSRA LLC.

(b)

Income prior to the November 30, 2015 merger from the most closely corresponding reporting period, which is January 1, 2015 to March 31, 2015, in the case of the three months ended April 3, 2015 and April 1, 2014 to March 31, 2015, in the case of the twelve months ended April 3, 2015.

(c)

Inter-company income prior to the November 30, 2015 merger plus costs directly associated with the separation and merger transactions, before tax effect.

(d)

Total value of $65 million amortized over one year is included in GAAP net income from continuing operations before tax.

(e)

Effective tax rate applied at 39% in all periods.

(f)

Diluted share count set at share count as of November 30, 2015 for the three and twelve months ended April 3, 2015.

 

Pro Forma Adjusted EBITDA

CSRA defines pro forma adjusted EBITDA as revenue less cost of services and selling, general, and administrative (SG&A) costs. In addition, pro forma adjusted EBITDA excludes periodic mark-to-market adjustments to the pension plan as well as certain non-cash items such as stock-based compensation expense.

CSRA INC.

PRO FORMA ADJUSTED EBITDA (unaudited)

     

Three Months Ended

 

 Twelve Months Ended

(Amounts in millions)

 

April 1,
2016

 

April 3,
2015(a)

 

April 1,
2016

 

April 3,
2015(a)

(Loss) income from continuing operations(b)

$

(68)

$

62

$

103

$

268

Historical SRA loss from continuing operations 
before taxes(c)

 

 

(3)

 

(40)

 

(16)

Separation and merger costs(d)

 

35

 

(43)

 

184

 

(292)

Interest expense, net

 

29

 

29

 

117

 

116

Tax expense on income

 

(27)

 

5

 

109

 

(36)

Depreciation and amortization

 

49

 

69

 

198

 

270

Amortization of contract-related intangibles

 

2

 

2

 

10

 

10

Provision for losses on accounts receivables

 

 

 

 

Loss on sale of receivables

 

 

1

 

 

1

Stock-based compensation

 

2

 

6

 

12

 

23

Restructuring costs

 

 

10

 

4

 

14

Foreign currency loss

 

 

 

 

1

Pension and post-retirement actuarial losses 
(gains), settlement losses, and amortization of other 
comprehensive income

 

203

 

68

 

212

 

493

Gain on disposition

 

 

 

(17)

 

Separation and CSRA merger costs

 

 

 

2

 

Impact of acquisitions(e)

 

 

3

 

1

 

13

Pro forma Adjusted EBITDA

$

225

$

209

$

895

$

865

Note: Values in bold have been derived by subtracting nine-month GAAP figures from the unaudited Third Quarter Fiscal Year 2016 Form 10-Q from twelve-month GAAP figures from the audited Fiscal Year 2016 Form 10-K. Adjusted EBITDA may not equal the sum of the component figures due to rounding.

(a)

The reconciliation to Pro Forma Adjusted EBITDA for the periods ended April 3, 2015 differs from that used to calculate the periods ended April 1, 2016. For example, Losses from continuing operations for the periods ended April 3, 2015, incorporate amounts furnished in the Form 8-K dated December 24, 2015, derived on the basis described therein. The same profitability measures for the periods ended April 1, 2016, are derived from the same basis of accounting used to prepare GAAP financial information for those periods.

(b)

For the quarter and year ended April 3, 2015, GAAP results reflect the operations of CSRA LLC.

(c)

SRA income prior to November 30, 2015 merger from the most closely corresponding reporting period, which is January 1, 2015 to March 31, 2015, in the case of the three months ended April 3, 2015 and April 1, 2014 to March 31, 2015, in the case of the twelve months ended April 3, 2015.

(d)

Inter-company income prior to the November 30, 2015 merger plus costs directly associated with the separation and merger transactions, net of tax; and one time integration costs.

(e)

Pro-forma EBITDA contribution of SRA acquisition made prior to merger (revised from amounts furnished in the Form 8-K dated December 24, 2015).

 

Free Cash Flow

CSRA defines free cash flow as equal to the sum of (1) operating cash flows, (2) investing cash flows, excluding business acquisitions, dispositions and investments and (3) payments on capital leases and other long-term asset financings. Free cash flow is further adjusted for certain non-recurring cash flow items, such as (i) separation-related payments and (ii) the sale of accounts receivables. Quarterly free cash flow and its components are calculated by subtracting the nine-month values from the 10-Q filed on February 16, 2016, from the annual values presented on the year-end statement of cash flows.

CSRA INC.

FREE CASH FLOW (unaudited)

             
   

Twelve Months
Ended

 

Nine Months
Ended

 

Three Months
Ended

(Amounts in millions)

 

April 1, 2016

 

January 1, 2016

 

April 1, 2016

Net cash provided by operating activities

$

554

$

375

$

179

Net cash (used in) provided by investing 
activities

 

(1,605)

 

(1,551)

 

(54)

Acquisitions, net of cash acquired

 

1,472

 

1,473

 

(1)

Business dispositions

 

(34)

 

(34)

 

Payments on capital leases and other long-
term assets financing

 

(16)

 

(13)

 

(3)

Separation-related payments

 

80

 

70

 

10

Sale of receivables

 

(172)

 

(208)

 

36

Free cash flow

$

278

$

112

$

167

Note: Free cash flow may not equal the sum of the component figures due to rounding.

###

About CSRA Inc.

CSRA (NYSE: CSRA) solves our nation’s hardest mission problems as a bridge from mission and enterprise IT to Next Gen, from government to technology partners, and from agency to agency.  CSRA is tomorrow’s thinking, today. For our customers, our partners, and ultimately, all the people our mission touches, CSRA is realizing the promise of technology to change the world through next-generation thinking and meaningful results. CSRA is driving towards achieving sustainable, industry-leading organic growth across federal and state/local markets through customer intimacy, rapid innovation and outcome-based experience. CSRA has over 18,000 employees and is headquartered in Falls Church, Virginia. To learn more about CSRA, visit www.csra.com. Think Next. Now.

Forward-looking Statements

All statements in this press release and in all future press releases that do not directly and exclusively relate to historical facts constitute "forward-looking statements" within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements represent CSRA's intentions, plans, expectations and beliefs, including statements about the effects of the program on our business and our ability to enhance mission capabilities of our customers. The forward-looking statements are subject to risks, uncertainties and other factors, many of which are outside the control of CSRA. These factors could cause actual results to differ materially from forward-looking statements. For a written description of these factors, see the sections titled "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" in CSRA's most recent Annual Report on Form 10-K and any updating information in subsequent SEC filings. CSRA disclaims any intention or obligation to update these forward-looking statements whether as a result of subsequent event or otherwise.

Contact

Tom Doheny
Communications
thomas.doheny@csra.com
571.353.4454