With cost cuts under their belt, contractors report solid quarters

August 4, 2013

Many government contractors, from Booz Allen Hamilton to NCI, reported significant profit growth for their most recent quarter, buoyed by cost-cutting measures taken in previous months in preparation for federal belt-tightening.

Still, there were signs among others, including ManTech International, of a more challenging market. As government spending shrinks, there will be growing variances in how companies handle it, said George A. Price Jr., senior equity research analyst for aerospace, defense and government services at BB&T Capital Markets.

Contractors’ results are diverging, “given their mix [of business] ... and how capable they are at managing the business,” Price said. “You’re going to see some more of that.”

For McLean-based Booz Allen Hamilton, the quarter was a solid one. Though the company saw a small decline in revenue, profits jumped 13.5 percent to $70.3 million.

Booz Allen executives attributed the growth to adjustments it made in its workforce. Since March 31, the contractor has cut its head count by more than 1,000, to just shy of 23,400.

Samuel R. Strickland, Booz Allen’s chief financial officer, said in a call with analysts last week that the company has also made changes to compensation and benefits.

But Booz Allen primarily cited its success in aligning its staff to work that could be billed to specific contracts. “Back in the growth years, that was something that we focused on, but not nearly as diligently as we needed to focus on in the environment that we’re in,” Strickland said.

Horacio D. Rozanski, Booz Allen’s chief operating officer, said the contractor is trying to very precisely match the size of its workforce to the level of demand. “We can produce a lot more direct labor and, therefore a lot more revenue, with fewer people,” he said.

Reston-based IT contractor NCI saw a similar trend, reporting a decline in revenue but significant boost in profit.

“The companies have been performing better than expected,” said Michael S. Lewis, managing director of the Silverline Group, a consulting firm. Automatic government spending cuts have “not had as much of a negative impact on the businesses as expected.”

NCI saw sales drop about 9 percent for the quarter ended June 30, but profit rose more than 22 percent to $1.8 million.

Brian Clark, the contractor’s president, said in a call with analysts last week that the company has already taken cost-cutting measures, but could do more.

NCI has gone through “restructurings, realignments of how we’re set up, we’ve gotten out of facilities,” he said. Salaries have not been cut, but “if that was something we had to do, we would do it ourselves.”

NCI estimated it will lose about $10 million in revenue this year because of sequestration.

At Fairfax-based ICF International, both revenue and profit were essentially flat. The company said its federal sales were stable, but it was aided by growth in its commercial business.

For Fairfax-based ManTech International, the quarter was more difficult. The contractor saw revenue decline by about 5 percent to about $605 million, while profit fell about 13 percent, hitting $21.6 million.

Still, the company, which is seeing its work abroad shrink, said the spending cuts, known as sequestration, were not causing major damage. Instead, the largest toll came from delays in awarding contracts, said Kevin M. Phillips, ManTech’s chief financial officer.

Rozanski of Booz Allen said there is considerable uncertainty about future government spending. “The reality is that we’re once again operating in unchartered territory,” he said.

SECTION: {section=business, subsection=capitalbusiness}!!!
INITIAL commentConfig: {includereply=true, canvas_permalink_id=washpost.com/8bvh5zpd9k, allow_comments=true, commentmaxlength=2000, includeshare=true, display_comments=true, canvas_permalink_app_instance=bg52e9xhqr, display_more=true, moderationrequired=false, includefeaturenotification=true, comments_period=14, defaultsort=reverseChronological, canvas_allcomments_id=washpost.com/km4ey0dajm, includevoteofftopic=false, allow_videos=false, includesorts=true, markerdisplay=post_commenter:Post Commenter|staff:Post Writer|top_commenter:Post Forum|top_local:Washingtologist|top_sports:SuperFan|fact_checker:Fact Checker|post_recommended:Post Recommended|world_watcher:World Watcher|cultuer_connoisseur:Culture Connoisseur|weather_watcher:Capital Weather Watcher|post_contributor:Post Contributor, childrenitemsperpage=3, includeheader=true, includeverifiedcommenters=true, defaulttab=all, includerecommend=true, includereport=true, maxitemstop=3, source=washpost.com, allow_photos=false, maxitems=15, display_ugc_photos=false, includepause=true, canvas_allcomments_app_instance=6634zxcgfd, includepermalink=false}!!!

UGC FROM ARTICLE: {allow_comments=true, allow_photos=false, allow_videos=false, comments_period=14, comments_source=washpost.com, default_sort=, default_tab=, display_comments=true, is_ugc_gallery=false, max_items_to_display=15, max_items_to_display_top=3, moderation_required=false, stream_id=}!!!

FINAL commentConfig: {includereply=true, canvas_permalink_id=washpost.com/8bvh5zpd9k, allow_comments=true, commentmaxlength=2000, includeshare=true, display_comments=true, canvas_permalink_app_instance=bg52e9xhqr, display_more=true, moderationrequired=false, includefeaturenotification=true, comments_period=14, defaultsort=reverseChronological, canvas_allcomments_id=washpost.com/km4ey0dajm, includevoteofftopic=false, allow_videos=false, includesorts=true, markerdisplay=post_commenter:Post Commenter|staff:Post Writer|top_commenter:Post Forum|top_local:Washingtologist|top_sports:SuperFan|fact_checker:Fact Checker|post_recommended:Post Recommended|world_watcher:World Watcher|cultuer_connoisseur:Culture Connoisseur|weather_watcher:Capital Weather Watcher|post_contributor:Post Contributor, childrenitemsperpage=3, includeheader=true, includeverifiedcommenters=true, defaulttab=all, includerecommend=true, includereport=true, maxitemstop=3, source=washpost.com, allow_photos=false, maxitems=15, display_ugc_photos=false, includepause=true, canvas_allcomments_app_instance=6634zxcgfd, includepermalink=false}!!
Comments
SECTION: {section=business, subsection=capitalbusiness}!!!
INITIAL commentConfig: {includereply=true, canvas_permalink_id=washpost.com/8bvh5zpd9k, allow_comments=true, commentmaxlength=2000, includeshare=true, display_comments=true, canvas_permalink_app_instance=bg52e9xhqr, display_more=true, moderationrequired=false, includefeaturenotification=true, comments_period=14, defaultsort=reverseChronological, canvas_allcomments_id=washpost.com/km4ey0dajm, includevoteofftopic=false, allow_videos=false, includesorts=true, markerdisplay=post_commenter:Post Commenter|staff:Post Writer|top_commenter:Post Forum|top_local:Washingtologist|top_sports:SuperFan|fact_checker:Fact Checker|post_recommended:Post Recommended|world_watcher:World Watcher|cultuer_connoisseur:Culture Connoisseur|weather_watcher:Capital Weather Watcher|post_contributor:Post Contributor, childrenitemsperpage=3, includeheader=true, includeverifiedcommenters=true, defaulttab=all, includerecommend=true, includereport=true, maxitemstop=3, source=washpost.com, allow_photos=false, maxitems=15, display_ugc_photos=false, includepause=true, canvas_allcomments_app_instance=6634zxcgfd, includepermalink=false}!!!

UGC FROM ARTICLE: {allow_comments=true, allow_photos=false, allow_videos=false, comments_period=14, comments_source=washpost.com, default_sort=, default_tab=, display_comments=true, is_ugc_gallery=false, max_items_to_display=15, max_items_to_display_top=3, moderation_required=false, stream_id=}!!!

FINAL commentConfig: {includereply=true, canvas_permalink_id=washpost.com/8bvh5zpd9k, allow_comments=true, commentmaxlength=2000, includeshare=true, display_comments=true, canvas_permalink_app_instance=bg52e9xhqr, display_more=true, moderationrequired=false, includefeaturenotification=true, comments_period=14, defaultsort=reverseChronological, canvas_allcomments_id=washpost.com/km4ey0dajm, includevoteofftopic=false, allow_videos=false, includesorts=true, markerdisplay=post_commenter:Post Commenter|staff:Post Writer|top_commenter:Post Forum|top_local:Washingtologist|top_sports:SuperFan|fact_checker:Fact Checker|post_recommended:Post Recommended|world_watcher:World Watcher|cultuer_connoisseur:Culture Connoisseur|weather_watcher:Capital Weather Watcher|post_contributor:Post Contributor, childrenitemsperpage=3, includeheader=true, includeverifiedcommenters=true, defaulttab=all, includerecommend=true, includereport=true, maxitemstop=3, source=washpost.com, allow_photos=false, maxitems=15, display_ugc_photos=false, includepause=true, canvas_allcomments_app_instance=6634zxcgfd, includepermalink=false}!!
Show Comments
Most Read Business