defa14a
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934
Filed by the Registrant ý
Filed by a Party other than the Registrant ¨
Check the appropriate box:
¨ Preliminary Proxy Statement
¨ Definitive Proxy Statement
ý Definitive Additional Materials
¨ Soliciting Material Pursuant to §240.14a-11(c) or §240.14a-12
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¨
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Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) |
SM&A
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
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ý
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No fee required. |
¨
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Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11. |
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Title of each class of securities to which transaction applies:
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Aggregate number of securities to which transaction applies: |
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Per unit price or other underlying value of transaction computed pursuant to
Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and
state how it was determined): |
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Proposed maximum aggregate value of transaction:
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Total fee paid: |
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¨
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Fee paid previously with preliminary materials. |
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Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the
offsetting fee was paid previously. Identify the previous filing
by registration statement number, or the Form or Schedule and the
date of its filing. |
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Amount Previously Paid: |
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Form, Schedule or Registration Statement No.: |
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Filing Party: |
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Date Filed: |
On November 6, 2008, SM&A, a Delaware corporation, issued a press release announcing its results
for the third quarter ended September 30, 2008.
A copy of the press release follows.
SM&A Reports Third Quarter Financial Results
For Immediate Release
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Company Contact:
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Investor Contact: |
Jim Eckstaedt
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Joe Diaz, Robert Blum |
Exec. Vice President CFO
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Lytham Partners, LLC |
949-975-1550
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602-889-9700 |
NEWPORT BEACH, CA., November 6, 2008 - SM&A (Nasdaq: WINS) the worlds foremost management
consulting firm providing solutions to PURSUE, WIN and PERFORM on competitive procurements and
projects, today announced financial results for the third quarter ended September 30, 2008.
The Company reported quarterly revenues of $25.3 million for the third quarter of 2008, compared to
$25.1 million in the comparable quarter of the previous year. Net income for the quarter was $1.4
million or $0.07 per fully diluted share, versus net income of $1.8 million, or $0.10 per fully
diluted share in the third quarter of 2007.
Financial results for the quarter were impacted by charges of $0.3 million associated with the
recently announced transaction to be acquired by Odyssey Investment Partners, LLC and on-going
proxy related costs; and by an earn-out expense of $0.7 million relating to a company acquired in
2007. The Company recognized as an expense, under generally accepted accounting principals (GAAP)
the contingent payment to the principal of the acquired company earned under the acquisition
agreement. Excluding the aforementioned charges, on a non-GAAP tax-effected basis net income for
the third quarter would have been $2.0 million, or $0.11 per fully diluted share, compared with
non-GAAP fully diluted earnings per share of $0.10 in the immediately preceding quarter and
non-GAAP fully diluted earnings per share of $0.12 in the third quarter of 2007.
(See Exhibit A for Reconciliation of GAAP to Non-GAAP EPS.)
Cathy McCarthy, president and CEO of SM&A said, Results for the quarter were in-line with our
internal expectations. There remains a significant level of uncertainty in spending priorities at
all levels of government; that notwithstanding our performance during the third quarter was quite
strong. As we did in the previous quarter, we attracted 11 new customers and generated new
customer revenue that also ranks among the highest of any quarter in the history of the company.
Aerospace and defense (A&D) revenues continued to be strong as we were able to maintain an
increased level of SM&A Program Services personnel into client programs.
As it relates to SM&A being acquired by Odyssey Investment Partners, LLC, Ms. McCarthy continued,
we are excited to enter into a new phase in the development of SM&A. We now have a strong
financial partner that will help us to enhance our already strong market position and that will
permit us to operate our business focusing on expanding market share, customer development, and
operational efficiency with a long-term perspective. We believe that this transaction rewards our
loyal stockholders in a very difficult market environment and permits them to redeploy their
investment capital.
Program Services:
Program Services revenue for the quarter was $15.1 million, an increase of 31%, compared with $11.5
million for the same period of the prior year. Program Services accounted for 60% of total
quarterly revenues, compared to 46% of total quarterly revenue in the third quarter of 2007.
Performance Management Associates, Inc. (PMA), acquired in mid-September 2007, contributed $2.3
million to Program Services revenues in the third quarter of 2008, of which $1.8 million is
considered non-organic. Organic revenue growth for the quarter in the Program Services segment was
16%.
Competition Management:
Competition Management revenue for the quarter was $10.2 million, or 40% of total revenues,
compared to $13.6 million, or 54% of total revenues, in the third quarter of 2007. During the
quarter there were fewer large Federal procurement opportunities as compared to the third quarter
of 2007. The trend of Federal procurement opportunities continues to contribute to the variability
of Competition Management revenue.
Revenue by Market Vertical:
Revenue from A&D clients represented 79% of total revenues or $20.1 million for the third quarter
of 2008, compared to $18.1 million, or 72% of total revenues, in the comparable quarter last year.
Revenue from non-A&D clients was $5.2 million, compared to $7.0 million in the third quarter last
year. Non-A&D business represented 21% of total third quarter revenue, compared with 28% a year
ago.
SG&A Expense:
SG&A expenses were $8.0 million in the quarter. Stock-based compensation for the quarter totaled
$0.4 million. Included in SG&A expense was $0.7 million related to an earn-out expense by the
principal of an acquired business and $0.3 million associated with the recently announced
transaction to be acquired and the recent proxy contest. Excluding the aforementioned stock-based
compensation, earn-out, acquisition and proxy expenses, operating SG&A expenses were $6.5 million,
or 25.7% of third quarter 2008 revenue compared to $6.1 million, or 24.2% on an operating basis in
the third quarter of 2007.
(See Exhibit B for reconciliation of GAAP to non-GAAP information.)
Stock Buyback:
During the quarter, the Company did not buy back shares due to the recently announced transaction
for the Company to be acquired by Odyssey Investment Partners, LLC.
2008 Guidance:
The Company expects revenue growth for
full year 2008 of approximately 5% to 6%. The Company
anticipates GAAP earnings per share for full year 2008 to be between
$0.25 and $0.27 per diluted share.
Excluding proxy costs, transaction and earn-out expense, adjusted non-GAAP EPS is anticipated to be
between $0.37 and $0.39 per diluted share for the year. Gross margin is expected to be approximately 39% to 40% for
the full year. The full year impact of the earn-out expense related to the PPI acquisition is
estimated to be approximately $3.1 million or $0.10 per share
Disclosure of Certain Financial Information:
In an effort to be transparent
and to provide more meaningful comparative SG&A and diluted EPS,
including the recurring stock-based compensation expense disclosure to our shareholders, we have
provided a reconciliation of GAAP and non-GAAP information.
About SM&A
SM&A is the worlds foremost management consulting firm providing leadership and mentoring
solutions to PURSUE for business capture, WIN competitive procurements and PERFORM on the projects
and programs won. Our proven processes, people and tools have delivered significant top-line and
bottom-line growth across markets, products and services. From the largest aerospace and defense
contractors, through the major software providers, to healthcare and financial/audit service
providers, SM&A is the partner many companies turn to WHEN THEY MUST WIN.
Information Regarding Solicitation of Proxies:
In connection with the proposed transaction, the Company will file proxy materials with the SEC
relating to the solicitation of proxies to vote at a special meeting of stockholders to be called
to approve the proposed transaction. The definitive proxy statement will be mailed to the
stockholders of the Company in advance of the special meeting. Stockholders of the Company are
urged to read the proxy statement and other relevant materials when they become available because
they will contain important information about the proposed transaction. Stockholders may obtain a
free copy of the proxy statements and any other relevant documents (when available) at the SECs
web site at http://www.sec.gov. The definitive proxy statements and these other documents will also
be available on the Companys website (http://www.smawins.com) and may be obtained free from the
Company by directing a request to SM&A, Attn: Investor Relations, 4695 MacArthur Court, 8th Floor,
Newport Beach, CA 92660.
Participants in the Solicitation:
SM&A and its executive officers and directors may be deemed, under SEC rules, to be participants in
the solicitation of proxies from SM&A stockholders with respect to the proposed merger described
above. Information regarding the officers and directors of SM&A is included in its definitive proxy
statement for its 2008 annual meeting filed with the SEC on April 18, 2008. More detailed
information regarding the identity of potential participants, and their direct or indirect
interests, by securities, holdings or otherwise, will be set forth in the proxy statement and other
materials to be filed with the SEC in connection with the proposed merger.
Conference Call and Webcast:
The Company will host a conference call with investors at 1:30 p.m. Pacific Time (4:30 p.m.
Eastern) on November 6, 2008 to discuss the sale of the Company and financial results for the 3rd
fiscal quarter ended September 30, 2008. The dial-in number for the conference call is 888-413-9033
for domestic participants and 706-679-5064, for international participants. The call will also be
accessible via live webcast at the homepage of http://www.smawins.com by clicking on the Investor
Relations tab and webcast link. A replay of the conference call will be available at
http://www.smawins.com or by dialing 800-642-1687 or 706-645-9291, reference access code 69823725.
The call replay will be available for seven days.
Cautionary Statement:
Some statements made in this news release refer to future actions, strategies, or results that
involve a number of risks and uncertainties. Any number of factors could cause actual results to
differ materially from expectations, including a shift in demand for SM&As Competition Management
and Program Services; fluctuations in the size, timing, and duration of client engagements; delays,
cancellations, or shifts in emphasis for competitive procurement activities; declines in future
defense, information technology, homeland security, new systems, and research and development
expenditures aerospace and defense industries along with System Integration and Information
Technology industries, and other risk factors listed in SM&As SEC reports, including the report on
Form 10-K for the year ended December 31, 2007. Actual results may differ materially from those
expressed or implied. The company does not undertake any duty to update forward-looking statement.
Exhibit A
SM&A
Diluted EPS Non-GAAP Reconciliation
(in thousands, except per share information)
(unaudited)
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Three Months Ended |
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September 30, 2008 |
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September 30, 2007 |
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June 30, 2008 |
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$ |
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Per Share |
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$ |
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Per Share |
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$ |
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Per Share |
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EPS (as reported) |
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$ |
0.07 |
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$ |
0.10 |
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$ |
0.05 |
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Earn-out expense |
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$ |
733 |
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0.02 |
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$ |
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$ |
733 |
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0.02 |
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Proxy contest cost |
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40 |
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0.00 |
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820 |
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0.03 |
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Transaction cost |
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256 |
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0.01 |
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Severance expense |
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600 |
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0.02 |
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Subtotal |
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$ |
1,029 |
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0.03 |
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$ |
600 |
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0.02 |
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$ |
1,553 |
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0.05 |
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Non-GAAP EPS (as
adjusted) |
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$ |
0.11 |
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$ |
0.12 |
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$ |
0.10 |
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Tax rate |
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39.4 |
% |
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40.9 |
% |
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42.2 |
% |
Diluted shares |
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18,480 |
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19,021 |
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18,698 |
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Note: Sum of columns may not equal totals due to rounding. Per share data is shown net of tax.
Exhibit B
SM&A
SG&A Non-GAAP Reconciliation
(in thousands)
(unaudited)
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Three Months Ended |
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September 30, 2008 |
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September 30, 2007 |
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June 30, 2008 |
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Revenue |
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$ |
25,332 |
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100.0 |
% |
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$ |
25,059 |
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100.0 |
% |
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$ |
26,009 |
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100.0 |
% |
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SG&A (as reported) |
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7,968 |
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31.5 |
% |
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7,095 |
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28.3 |
% |
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8,553 |
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32.9 |
% |
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Less: |
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Stock-based compensation |
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421 |
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1.7 |
% |
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436 |
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1.7 |
% |
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434 |
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1.7 |
% |
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Less: |
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Earn-out expense |
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733 |
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2.9 |
% |
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0.0 |
% |
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733 |
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2.8 |
% |
Proxy contest cost |
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40 |
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0.2 |
% |
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0.0 |
% |
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820 |
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3.2 |
% |
Transaction cost |
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256 |
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1.0 |
% |
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0.0 |
% |
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0.0 |
% |
Severance expense |
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0.0 |
% |
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600 |
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2.4 |
% |
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0.0 |
% |
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Subtotal |
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1,029 |
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4.1 |
% |
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600 |
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2.4 |
% |
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1,553 |
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6.0 |
% |
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Non-GAAP SG&A (as
adjusted) |
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$ |
6,518 |
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25.7 |
% |
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$ |
6,059 |
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24.2 |
% |
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$ |
6,566 |
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25.2 |
% |
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Note: Sum of columns may not equal totals due to rounding.
SM&A
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
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September 30, |
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December 31, |
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2008 |
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2007 |
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(unaudited) |
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Assets: |
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Current assets: |
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Cash and cash equivalents |
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$ |
4,844 |
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$ |
5,422 |
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Investments |
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6,692 |
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10,610 |
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Accounts receivable, net |
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25,193 |
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18,171 |
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Prepaid expenses and other current assets |
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2,683 |
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2,011 |
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Total current assets |
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39,412 |
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36,214 |
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Fixed assets, net |
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3,343 |
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3,399 |
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Goodwill |
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10,767 |
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8,278 |
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Intangibles, net |
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1,558 |
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1,892 |
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Other assets |
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840 |
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895 |
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$ |
55,920 |
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$ |
50,678 |
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Liabilities and Stockholders Equity: |
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Current liabilities: |
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Accounts payable |
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$ |
2,039 |
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$ |
1,925 |
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Accrued compensation and related benefits |
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5,158 |
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2,550 |
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Accrued contingent consideration |
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3,859 |
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2,708 |
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Other current liabilities |
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159 |
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127 |
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Total current liabilities |
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11,215 |
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7,310 |
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Other liabilities |
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663 |
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|
785 |
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Total liabilities |
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11,878 |
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8,095 |
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Commitments and contingencies |
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Stockholders equity: |
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Preferred stock |
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Common stock |
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2 |
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2 |
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Additional paid-in capital |
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47,121 |
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45,450 |
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Treasury stock |
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(4,595 |
) |
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(1,506 |
) |
Retained earnings (accumulated deficit) |
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1,514 |
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(1,363 |
) |
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Total stockholders equity |
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44,042 |
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42,583 |
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$ |
55,920 |
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$ |
50,678 |
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Information Regarding Solicitation of Proxies
In connection with the proposed transaction, the Company will file proxy materials with the SEC
relating to the solicitation of proxies to vote at a special meeting of stockholders to be called
to approve the proposed transaction. The definitive proxy statement will be mailed to the
stockholders of the Company in advance of the special meeting. Stockholders of the Company are
urged to read the proxy statement and other relevant materials when they become available because
they will contain important information about the proposed transaction. Stockholders may obtain a
free copy of the proxy statements and any other relevant documents (when available) at the SECs
web site at http://www.sec.gov. The definitive proxy statements and these other documents will
also be available on the Companys website (www.smawins.com) and may be obtained free from the
Company by directing a request to SM&A, Attn: Investor Relations, 4695 MacArthur Court, 8th Floor,
Newport Beach, CA 92660.
Participants in the Solicitation
SM&A and its executive officers and directors may be deemed, under SEC rules, to be participants in
the solicitation of proxies from SM&A stockholders with respect to the proposed merger described
above. Information regarding the officers and directors of SM&A is included in its definitive
proxy statement for its 2008 annual meeting filed with the SEC on April 18, 2008. More detailed
information regarding the identity of potential participants, and their direct or indirect
interests, by securities, holdings or otherwise, will be set forth in the proxy statement and other
materials to be filed with the SEC in connection with the proposed merger.