egl-ex991

CHANTILLY, VA - March 9, 2017, Engility Holdings, Inc. (NYSE: EGL) today announced financial results for the fourth quarter and full year ended December 31, 2016.

“2016 was a successful year for Engility as we significantly increased our book-to-bill ratio, hired key executives, reduced our cost of debt and implemented operational improvements,” said Lynn Dugle, Chief Executive Officer of Engility. “In addition, our strategic investments enabled us to win larger deals in higher-end markets. As we look to 2017, we have taken a prudent approach to guidance given continued protests and slow starts on large take-away contract wins.”

Total revenue for the fourth quarter of 2016 was $506 million. GAAP operating income was $24 million and GAAP operating margin was 4.8%. GAAP net income attributable to Engility was $7 million, or $0.18 per diluted share. Cash flow from operating activities was $10 million. Both GAAP operating income and net income reflect a $10 million non-cash goodwill impairment charge related to the sale of the Company’s international development services business, International Resources Group Ltd. (IRG).

Adjusted operating income was $42 million and adjusted operating margin was 8.2%. Adjusted net income attributable to Engility was $19 million, or $0.51 per diluted share. Adjusted EBITDA was $47 million and adjusted EBITDA margin was 9.2%.

Information about the Company's use of non-GAAP financial information is provided below under “Non-GAAP Measures.”

Total revenue for fiscal year 2016 was $2.076 billion. GAAP operating income was $122 million and GAAP operating margin was 5.9%. GAAP net loss attributable to Engility was $11 million, or $0.29 per diluted share. Cash flow from operating activities was $94 million. The sale of IRG resulted in a $10 million non-cash goodwill impairment charge that is reflected in both GAAP operating income and net loss attributable to Engility. GAAP net loss attributable to Engility also includes $28 million of bank refinancing transaction fees and the non-cash write-off of previously capitalized fees associated with the Company’s prior credit facilities, which are included in interest expense.

Adjusted operating income for fiscal year 2016 was $170 million and adjusted operating margin was 8.2%. Adjusted net income attributable to Engility was $60 million, or $1.61 per diluted share. Adjusted EBITDA was $189 million and adjusted EBITDA margin was 9.1%.

Information about the Company's use of non-GAAP financial information is provided below under “Non-GAAP Measures.”

The table below summarizes the Company’s fiscal year 2017 guidance. This guidance reflects the February 2017 repricing of the Company’s aggregate $803 million B1 and B2 term loans, and the IRG divestiture in January 2017. In fiscal year 2016, IRG generated $58 million in revenue and $1 million in EBITDA and operating income. IRG’s revenue and profitability results will continue to be included in the Company’s historical financial results, but not in its future results.

As the Company begins its fiscal year 2017, it will only be providing financial guidance on a GAAP basis, other than EBITDA. However, the Company intends to disclose certain additional forward-looking financial information in its quarterly earnings press releases that will enable investors to calculate adjustments to these GAAP financial projections (see footnote #2 below). Any such adjustments should not be considered a substitute for, or superior to, the corresponding financial measures calculated in accordance with GAAP.

⁽¹⁾ 2017 GAAP diluted EPS guidance includes approximately $3 million of restructuring and integration costs and $25 million of amortization expense related to intangible assets acquired by the Company. It also assumes weighted-average outstanding shares of approximately 38 million and a full-year effective tax rate of 37 percent.

⁽²⁾ 2017 EBITDA guidance includes approximately $3 million of restructuring and integration costs.

The tables under "Engility Holdings, Inc. Reconciliation of Non-GAAP Measures" present Adjusted Operating Income, Adjusted Operating Margin, Earnings before Interest, Taxes, Depreciation, and Amortization (EBITDA), Adjusted EBITDA, EBITDA Margin, Adjusted EBITDA Margin, Adjusted Net Income, and Adjusted Diluted EPS, reconciled to their most directly comparable GAAP measure. These financial measures are calculated and presented on the basis of methodologies other than in accordance with U.S. generally accepted accounting principles ("Non-GAAP Measures"). Engility has provided these Non-GAAP Measures to adjust for, among other things, the impact of transaction and integration costs and amortization expenses related to our acquisitions of TASC and DRC, costs associated with a loss on the disposal of property, plant and equipment, restructuring and legal and settlement costs, as well as the benefit for the early termination of a lease. These items have been adjusted because they are not considered core to the Company’s business or otherwise not considered operational or because these

charges are non-cash or non-recurring. The Company presents these Non-GAAP Measures because management believes that they are meaningful to understanding Engility’s performance during the periods presented and the Company’s ongoing business. Non-GAAP Measures are not prepared in accordance with GAAP and therefore are not necessarily comparable to similarly titled metrics or the financial results of other companies. These Non-GAAP Measures should be considered a supplement to, not a substitute for, or superior to, the corresponding financial measures calculated in accordance with GAAP.

With respect to our “Fiscal Year 2017 Guidance” above, reconciliation of EBITDA guidance to the closest corresponding GAAP measure on a forward-looking basis is not available without unreasonable efforts. We are unable to reconcile EBITDA to net income due to our inability to predict certain non-cash items included in net income, including taxes and timing of restructuring charges. The disclosure of such reconciliations may imply to our investors a degree of precision in our calculations that is not possible. For the same reasons, the Company is unable to address the probable significance of the unavailable information.

Engility will host a conference call at 8:30 a.m. Eastern Time on March 9, 2017 (today), to discuss the financial results for its fourth quarter and full year 2016.

Listeners may access a webcast of the live conference call from the Investor Relations section of the company's website at http://www.EngilityCorp.com. Listeners also may access a slide presentation on the website which summarizes the Company’s 2016 fourth quarter and fiscal year results. Listeners should go to the website at least 15 minutes before the live event to download and install any necessary audio software.

Listeners also may participate in the conference call by dialing (888) 655-5029 (U.S. dial-in) or (503) 343-6026 (international dial-in) and the pass code is 51865555.

A replay will be available on the company's website approximately two hours after the conference call and continuing for one year. A telephonic replay also will be available through March 16, 2017 at (855) 859-2056 (domestic) or (404) 537-3406 (international) and entering pass code 51865555.

Engility (NYSE: EGL) is engineered to make a difference. Built on six decades of heritage, Engility is a leading provider of integrated solutions and services, supporting U.S. government customers in the defense, federal civilian, intelligence and space communities. Our innovative, highly technical solutions and engineering capabilities address diverse client missions. We draw upon our team’s intimate understanding of customer needs, deep domain expertise and technical skills to help solve our nation’s toughest challenges. Headquartered in Chantilly, Virginia, and with offices around the world, Engility’s array of specialized technical service offerings include high-performance computing, cybersecurity, enterprise modernization and systems engineering. To learn more about Engility, please visit www.engilitycorp.com and connect with us on Facebook, LinkedIn and Twitter.

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements regarding Engility’s future prospects, projected financial results, estimated integration costs and acquisition related amortization expenses, business plans, as well as the TASC transaction and its expected benefits and the timing of such benefits. Words such as "may," "will," "should," "likely," "anticipates," "expects," "intends," "plans," "projects," "believes," "estimates" and similar expressions are also used to identify these forward-looking statements. These statements are based on the current beliefs and expectations of Engility’s management and are subject to significant risks and uncertainties. Actual results may differ from those set forth in the forward-looking statements. Factors that could cause Engility’s actual results to differ materially from those described in the forward-looking statements can be found under the heading "Risk Factors" included in our Annual Report on Form 10-K for the year ended December 31, 2015, and more recent documents that have been filed with the Securities and Exchange Commission (SEC) and are available on the investor relations section of Engility’s website (http://www.engilitycorp.com) and on the SEC’s website (www.sec.gov). Forward-looking statements are made only as of the date hereof, and we undertake no obligation to update or revise the forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law. In addition, historical information should not be considered as an indicator of future performance.

	Three Months Ended						Twelve Months Ended
	December 31, 2016			December 31, 2015			December 31, 2016			December 31, 2015
Revenue	$	506,412		$	537,022		$	2,076,423		$	2,085,623
Costs and expenses
Cost of revenue		436,018			463,227			1,777,844			1,779,709
Selling, general and administrative expenses		36,458			43,769			166,238			203,262
Goodwill impairment		9,875			292,100			9,875			292,100
Total costs and expenses		482,351			799,096			1,953,957			2,275,071
Operating income (loss)		24,061			(262,074	)		122,466			(189,448	)
Interest expense, net		21,827			29,554			131,185			110,143
Other income (expenses), net		2			1,241			(80	)		1,285
Income (loss) before income taxes		2,236			(290,387	)		(8,799	)		(298,306	)
Benefit for income taxes		(5,100	)		(52,405	)		(2,730	)		(68,067	)
Net income (loss)		7,336			(237,982	)		(6,069	)		(230,239	)
Less: Net income attributable to non-controlling interest		650			749			4,738			5,113
Net income (loss) attributable to Engility	$	6,686		$	(238,731	)	$	(10,807	)	$	(235,352	)

Earnings (loss) per share attributable to Engility
Basic	$	0.18		$	(6.53	)	$	(0.29	)	$	(7.02	)
Diluted	$	0.18		$	(6.53	)	$	(0.29	)	$	(7.02	)

Weighted average number of shares outstanding
Basic		36,738			36,565			36,730			33,536
Diluted		37,687			36,565			36,730			33,536

	December 31, 2016			December 31, 2015
Assets:
Current assets:
Cash and cash equivalents	$	48,236		$	30,022
Receivables, net		334,248			381,760
Prepaid income taxes		5,430			5,003
Assets held for sale, current		20,242			—
Other current assets		24,974			24,655
Total current assets		433,130			441,440
Property, plant and equipment, net		46,547			44,120
Goodwill		1,078,454			1,093,178
Identifiable intangible assets, net		393,891			436,627
Deferred tax assets		232,283			235,397
Assets held for sale		11,962			—
Other assets		2,292			3,211
Total assets	$	2,198,559		$	2,253,973
Liabilities and Equity:
Current liabilities:
Current portion of long-term debt	$	26,947		$	8,447
Accounts payable, trade		43,943			54,345
Accrued employment costs		98,860			81,711
Accrued expenses		76,870			82,765
Advance payments and billings in excess of costs incurred		33,259			49,205
Deferred income taxes, current and income tax liabilities		209			695
Liabilities held for sale, current		4,341			—
Other current liabilities		36,410			36,293
Total current liabilities		320,839			313,461
Long-term debt		1,039,993			1,094,029
Income tax liabilities		64,852			68,000
Liabilities held for sale		1,084			—
Other liabilities		66,986			72,350
Total liabilities		1,493,754			1,547,840
Equity:
Preferred stock, par value $0.01 per share, 25,000 shares authorized, none issued or outstanding as of September 30, 2016 or December 31, 2015		—			—
Common stock, par value $0.01 per share, 175,000 shares authorized, 36,776 and 36,735 shares issued and outstanding as of December 31, 2016 and 2015, respectively		368			368
Additional paid-in capital		1,237,826			1,231,584
Accumulated deficit		(541,702	)		(530,895	)
Accumulated other comprehensive loss		(4,865	)		(7,229	)
Non-controlling interest		13,178			12,305
Total equity		704,805			706,133
Total liabilities and equity	$	2,198,559		$	2,253,973

	Twelve Months Ended
	December 31, 2016			December 31, 2015
Operating activities:
Net loss	$	(6,069	)	$	(230,239	)
Goodwill impairment charge		9,875			292,100
Share-based compensation		8,255			9,297
Depreciation and amortization		46,797			58,435
Loss on disposal of property, plant and equipment		1,078			3,413
Bad debt expense		744			7,346
Loss on extinguishment of debt		4,642			—
Amortization of bank debt fees		5,564			13,339
Deferred income taxes		1,256			(37,487	)
Changes in operating assets and liabilities, excluding acquired amounts:
Receivables		31,882			46,338
Other assets		(986	)		26,553
Accounts payable, trade		(9,673	)		(33,570	)
Accrued employment costs		17,149			(58,467	)
Accrued expenses		1,805			(22,204	)
Advance payments and billings in excess of costs incurred		(15,674	)		8,901
Other liabilities		(2,240	)		(35,337	)
Net cash provided by operating activities		94,405			48,418
Investing activities:
Acquisitions, net of cash acquired		—			25,478
Capital expenditures		(21,446	)		(19,610	)
Net cash (used in) provided by investing activities		(21,446	)		5,868
Financing activities:
Gross borrowings from issuance of long-term debt		1,180,000			585,000
Repayment of long-term debt		(1,215,754	)		(403,674	)
Gross borrowings from revolving credit facility		137,000			157,000
Repayments of revolving credit facility		(137,000	)		(115,000	)
Debt issuance costs		(9,988	)		(42,425	)
Equity issuance costs		—			(2,590	)
Proceeds from share-based payment arrangements		214			279
Payment of employee withholding taxes on share-based compensation		(1,779	)		(8,021	)
Excess tax deduction on share-based compensation		—			5,530
Dividends paid		(1,709	)		(204,304	)
Distributions to non-controlling interest member		(3,865	)		(3,182	)
Net cash used in financing activities		(52,881	)		(31,387	)
Change in cash from assets held for sale		(1,864	)		—
Net change in cash and cash equivalents		18,214			22,899
Cash and cash equivalents, beginning of period		30,022			7,123
Cash and cash equivalents, end of period	$	48,236		$	30,022

The following tables set forth a reconciliation of each of these Non-GAAP Measures to the most directly comparable GAAP measure for the periods presented.

	Three Months Ended						Twelve Months Ended
	December 31, 2016			December 31, 2015			December 31, 2016			December 31, 2015
Operating income (loss)	$	24,061		$	(262,074	)	$	122,466		$	(189,448	)

Adjustments
Goodwill impairment charge		9,875			292,100			9,875			292,100
Acquisition and restructuring-related expenses, excluding amortization		3,914			11,983			11,541			44,753
Acquisition-related intangible amortization		6,334			10,238			28,287			36,206
Legal and settlement costs		—			1,605			—			3,345
Benefit for early termination of lease		(2,429	)		—			(2,429	)		—
Total adjustments		17,694			315,926			47,274			376,404
Adjusted operating income	$	41,755		$	53,852		$	169,740		$	186,956

Operating margin		4.8	%		(48.8	)%		5.9	%		(9.1	)%
Adjusted operating margin		8.2	%		10.0	%		8.2	%		9.0	%

	Three Months Ended						Twelve Months Ended
	December 31, 2016			December 31, 2015			December 31, 2016			December 31, 2015
GAAP net income (loss) attributable to Engility	$	6,686		$	(238,731	)	$	(10,807	)	$	(235,352	)
Net income attributable to non-controlling interest		650			749			4,738			5,113

GAAP net income (loss)		7,336			(237,982	)		(6,069	)		(230,239	)
Benefit for income taxes		(5,100	)		(52,405	)		(2,730	)		(68,067	)
Income tax rate		(228.1	)%		18.0	%		31.0	%		22.8	%

GAAP income (loss) before taxes		2,236			(290,387	)		(8,799	)		(298,306	)

Adjustments
Goodwill impairment charge		9,875			292,100			9,875			292,100
Acquisition and restructuring-related expenses, excluding amortization		3,914			11,983			11,541			44,753
Acquisition-related intangible amortization		6,334			10,238			28,287			36,206
Legal and settlement costs		-			1,605			-			3,345
Benefit for early termination of lease		(2,429	)		—			(2,429	)		-
Cash interest expensed in the refinancing		—			—			22,246			-
Bank fees previously capitalized and included in interest expense		—			—			5,410			4,602
Total adjustments		17,694			315,926			74,930			381,006

Adjusted income before income tax		19,930			25,539			66,131			82,700
Cash paid for income taxes		98			94			1,071			1,169
Adjusted income tax rate		0.5	%		0.4	%		1.6	%		1.4	%

Adjusted net income		19,832			25,445			65,060			81,531
Less: Net income attributable to non-controlling interest		650			749			4,738			5,113
Adjusted net income attributable to Engility	$	19,182		$	24,696		$	60,322		$	76,418

Diluted earnings (loss) per share attributable to Engility
GAAP	$	0.18		$	(6.53	)	$	(0.29	)	$	(7.02	)
Adjusted	$	0.51		$	0.66		$	1.61		$	2.24

Diluted weighted average number of shares outstanding
GAAP		37,687			36,565			36,730			33,536
Adjusted		37,687			37,230			37,497			34,106

Earnings before interest, taxes, depreciation, and amortization (EBITDA) and Adjusted EBITDA

	Three Months Ended						Twelve Months Ended
	December 31, 2016			December 31, 2015			December 31, 2016			December 31, 2015
Net income (loss)	$	7,336		$	(237,982	)	$	(6,069	)	$	(230,239	)

Interest, taxes, and depreciation and amortization
Interest expense		21,827			29,554			131,185			110,143
Benefit for income taxes		(5,100	)		(52,405	)		(2,730	)		(68,067	)
Depreciation and amortization		10,846			16,191			46,797			58,435
EBITDA		34,909			(244,642	)		169,183			(129,728	)

Adjustments to EBITDA
Goodwill impairment charge		9,875			292,100			9,875			292,100
Acquisition and restructuring-related expenses, excluding amortization and loss on disposal from restructuring		3,230			9,593			10,857			42,363
Legal and settlement costs		-			1,605			-			3,345
Benefit for early termination of lease		(2,429	)		-			(2,429	)		—
Loss on disposal of assets		1,026			2,739			1,078			3,413
Adjusted EBITDA	$	46,611		$	61,395		$	188,564		$	211,493

EBITDA Margin		6.9	%		(45.6	)%		8.1	%		(6.2	)%
Adjusted EBITDA Margin		9.2	%		11.4	%		9.1	%		10.1	%


	Fiscal Year 2017 Guidance
Revenue	$1.95 billion - $2.05 billion
GAAP Diluted EPS ⁽¹⁾	$0.75 - $0.85
EBITDA ⁽²⁾	$173 million - $183 million
Operating Cash Flow	$95 million - $105 million