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ý
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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o
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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Maryland
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27-1594952
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(State or other jurisdiction of
incorporation or organization)
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(I.R.S. Employer
Identification No.)
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Title of each class
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Name of each exchange on which registered
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Common Stock, $0.001 par value per share
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NASDAQ Global Select Market
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Large accelerated filer
o
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Accelerated filer
x
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Non-accelerated filer
o
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Smaller reporting company
o
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Emerging growth company
o
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Item No.
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Page
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PART I
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PART II
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PART III
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PART IV
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Item 1.
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BUSINESS
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•
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Offensive cyberspace operations that deliver capabilities through research and development, operations support, and intelligence analysis
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•
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Defensive cyberspace operations and training focused on capabilities development, secure mobile communication and software and hardware security engineering
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•
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Cyber mission training and exercises providing real-world training sessions to prepare for a wide range of cyber security challenges
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•
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Geospatial systems and analytics design and development to meet unique mission requirements
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•
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Software-reconfigurable radar sensors that are readily adaptable to diverse missions and a wide range of delivery platforms
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•
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Ultra high-resolution imaging systems
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•
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Custom-built sensors tailored to meet the strictest technical and operational requirements
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•
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Data discovery, transformation and analysis with a proven, adaptable approach
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•
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Data management and security solutions developed by data scientists who understand the complexities of handling and sharing sensitive data
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•
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Cloud infrastructure and engineering using Software as a Service (SaaS) and Infrastructure as a Service (IaaS) models to provide universal accessibility and improved manageability
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•
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Custom packaging and microelectronics with low-to medium-rate production for virtually any mission
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•
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Digital forensics providing unique digital evidence capture and triage devices designed for speed and simplicity
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•
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Signals Intelligence
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•
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Open Source Intelligence
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•
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Counterterrorism
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•
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Cyber Threat Analysis
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•
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Counterintelligence
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•
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Human Terrain
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•
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All-source Analysis
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•
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System Engineering Analysis
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•
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Document and Media Exploitation
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•
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Imagery Intelligence
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•
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Real-time sensor control and fusion
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•
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Data integration and correlation
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•
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Communications management
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•
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Cross-domain solutions
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•
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Knowledge management
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•
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Automated navigation systems and decision support systems
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•
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Electronics and acoustics
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•
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Electronic warfare
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•
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Radar
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•
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Optics
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•
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Chemistry
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•
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Plasma physics, among other areas
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•
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Sustaining key investments to strengthen intelligence collection and critical operational capabilities supporting counterterrorism, counterintelligence, and counterproliferation;
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•
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Protecting the IC’s core mission areas and maintaining global coverage to remain vigilant against emerging threats;
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•
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Promoting increased intelligence sharing and advancing IC integration through continued investment in enterprise-wide capabilities and use of cloud technology to facilitate greater efficiency and improve the safeguarding of information across the intelligence information environment; and
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•
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Identifying resources for strategic priorities, including advanced technology to improve strategic warning, evolved collection and exploitation capabilities, and increased resiliency.
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Year ended December 31, 2018
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|||||
Contract Type
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(in millions)
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(percentage)
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Time & Materials and Fixed-Price-Level-of-Effort
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$
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175.0
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34.5
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%
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Firm-Fixed-Price
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125.9
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24.9
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%
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Cost Reimbursement
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205.9
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40.6
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%
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Year ended December 31, 2017
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|||||
Contract Type
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(in millions)
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(percentage)
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Time & Materials and Fixed-Price-Level-of-Effort
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$
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167.8
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38.0
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%
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Firm-Fixed-Price
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102.1
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23.1
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%
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Cost Reimbursement
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171.7
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38.9
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%
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Year ended December 31, 2016
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|||||
Contract Type
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(in millions)
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(percentage)
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Time & Materials and Fixed-Price-Level-of-Effort
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$
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114.8
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39.9
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%
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Firm-Fixed-Price
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80.7
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28.0
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%
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Cost Reimbursement
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92.5
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32.1
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%
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Item 1A.
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RISK FACTORS
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•
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we were to lose, or there were to occur a significant reduction in, U.S. Government funding of one or more programs for which we are the prime contractor or in which we participate;
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•
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we were suspended or debarred from contracting with the U.S. Government; or
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•
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our reputation, relationships, or the reputations or relationships of our senior managers with the U.S. Government agencies with which we currently do business or seek to do business is impaired.
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•
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budgetary constraints affecting U.S. Government spending generally, or specific departments or agencies in particular, and changes in available funding, such as federal government sequestration (automatic spending cuts);
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•
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changes in U.S. Government programs or requirements; and
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•
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a prolonged U.S. Government shutdown and other potential delays in the appropriations process.
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•
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the FAR, which comprehensively regulates the formation, administration and performance of federal government contracts;
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•
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the Truth in Negotiations Act, which requires certification and disclosure of all cost and pricing data in connection with cost-type contracts;
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•
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the Cost Accounting Standards and Cost Principles, which impose accounting requirements that govern our right to reimbursement under certain cost-based federal government contracts;
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•
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laws and regulations that require us to divest work if an organizational conflict of interest (OCI) related to such work cannot be mitigated to the government’s satisfaction; and
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•
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laws, regulations and executive orders restricting the use and dissemination of classified information and, under U.S. export control laws, the export of certain products and technical data.
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•
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termination of contracts;
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•
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forfeiture of profits;
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•
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cost associated with triggering of price reduction clauses;
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•
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suspension of payments;
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•
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fines; and
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•
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suspension or debarment from doing business with the U.S. Government.
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•
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reduce or modify contracts or subcontracts;
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•
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cancel multi-year contracts and related orders if funds for contract performance for any subsequent year become unavailable;
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•
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claim certain rights (including, under certain circumstances, certain intellectual property rights) in products and systems produced by us; and
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•
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suspend or debar us from doing business with the U.S. Government.
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•
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identify or compete effectively for suitable acquisition candidates;
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•
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negotiate appropriate acquisition terms;
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•
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accurately estimate the financial effect of acquisitions and investments on our business, and realize anticipated synergies and/or improved operating performance;
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•
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obtain debt or equity financing that we may need to complete proposed acquisitions;
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•
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complete the proposed acquisitions; and
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•
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integrate the acquired business into our existing operations.
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•
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requiring us to dedicate a substantial portion of our cash flow to service our debt, which will reduce the funds available for working capital, capital expenditures and other general corporate purposes;
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•
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limiting our flexibility in planning for and reacting to changes in our business and in the industry in which we operate;
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•
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making us more vulnerable to adverse changes in general economic, industry and competitive conditions and adverse changes in government regulation;
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•
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limiting our ability to borrow additional amounts for working capital, capital expenditures, debt service requirements, execution of our strategy, or other general corporate purposes; and
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•
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placing us at a disadvantage compared to our competitors who have less debt.
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•
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the level of demand for our products and services;
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•
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the budgeting cycles and purchasing practices of our customers;
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•
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acquisitions of other businesses;
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•
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the sales cycle for our commercial products;
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•
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failure to accurately estimate or control costs under FFP contracts;
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•
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commencement, completion or termination of projects during any particular quarter; and
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•
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changes in senior U.S. Government officials that affect the timing of technology procurement.
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•
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stop selling, incorporating or using our products that include the challenged intellectual property;
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•
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obtain from the owner of any infringed intellectual property right a license to sell or use the relevant technology, which license may not be available on reasonable terms, or at all, or may require us to extend a cross-license to rights under our intellectual property;
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•
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pay substantial damages; and/or
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•
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re-design those products that use the technology.
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•
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lose revenue due to adverse customer reaction;
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•
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incur additional costs related to monitoring and increasing our cyber security;
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•
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incur additional costs related to remediation;
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•
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be sued by customers and other who were harmed;
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•
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reduce or negate the value of our proprietary information;
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•
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receive negative publicity, which could damage our reputation and adversely affect our ability to attract or retain customers;
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•
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be unable to successfully market services that rely on the creation and maintenance of secure IT systems:
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•
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damage the confidence of our employees in the management and systems of the company;
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•
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suffer claims for substantial damages, particularly as a result of any successful network or systems breach and exfiltration of customer information; or
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•
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incur significant costs complying with applicable federal or state laws, including laws governing protection of personal information.
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•
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failure to predict market demand accurately in terms of functionality and to supply products that meet demand in a timely fashion;
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•
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defects, errors or failures;
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•
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negative publicity about their performance or effectiveness;
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•
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delays in releasing our new products or enhancements to the market;
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•
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introduction or anticipated introduction of competing products by our competitors; and
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•
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poor business conditions for our end-customers, causing them to delay purchases.
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•
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quarterly variations in our operating results compared to market expectations;
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•
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changes in expectations as to our future financial performance, including financial estimates or reports by securities analysts;
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•
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changes in market valuations of similar companies;
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•
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liquidity and activity in the market for our common stock;
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•
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actual or expected sales of our common stock by our stockholders, including any of our significant stockholders;
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•
|
strategic moves by us or our competitors, such as acquisitions or restructurings;
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•
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general market conditions;
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•
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future sales of our common stock; and
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•
|
domestic and international economic, legal and regulatory factors unrelated to our performance.
|
•
|
Our charter permits our board of directors to issue preferred stock with terms that may discourage a third party from acquiring us.
Our charter permits our board of directors to issue up to 5 million shares of preferred stock, having preferences, conversion or other rights, voting powers, restrictions, limitations as to distributions, qualifications or terms or conditions of redemption as determined by our board of directors. Our board of directors could authorize the issuance of preferred stock with terms and conditions that could have the effect of discouraging a takeover or other transaction in which holders of some or a majority of our shares might receive a premium for their shares over the then-prevailing market price; and
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•
|
Our charter and bylaws contain other possible anti-takeover provisions
. Our charter and bylaws contain other provisions that may have the effect of delaying, deferring or preventing a change-of-control or the removal of existing directors and, as a result, could prevent our stockholders from being paid a premium for their common stock over the then-prevailing market price. These provisions include the advance notice requirements for stockholder proposals and director nominations.
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•
|
accept, recommend or respond to any proposal by a person seeking to acquire control of the corporation;
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•
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authorize the corporation to redeem any rights under, or modify or render inapplicable, any stockholder rights plan;
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•
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make a determination under the Maryland Business Combination Act or the Maryland Control Share Acquisition Act; or
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•
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act or fail to act solely because of the effect that the act or failure to act might have on an acquisition or potential acquisition of control of the corporation or the amount or type of consideration that may be offered or paid to the stockholders in an acquisition.
|
•
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senior in right of payment to any of our indebtedness that is expressly subordinated in right of payment to the notes;
|
•
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equal in right of payment to any of our liabilities that are not so subordinated;
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•
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effectively junior in right of payment to any of our secured indebtedness to the extent of the value of the assets securing such indebtedness; and
|
•
|
structurally junior to all indebtedness and other liabilities (including trade payables) of our subsidiaries.
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Item 1B.
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UNRESOLVED STAFF COMMENTS
|
Item 2.
|
PROPERTIES
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Item 3.
|
LEGAL PROCEEDINGS
|
Item 4.
|
MINE SAFETY DISCLOSURES
|
Item 5.
|
MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASE OF EQUITY SECURITIES
|
|
High
|
|
Low
|
||||
Year Ended December 31, 2018:
|
|
|
|
||||
First Quarter
|
$
|
8.40
|
|
|
$
|
5.33
|
|
Second Quarter
|
$
|
9.84
|
|
|
$
|
7.38
|
|
Third Quarter
|
$
|
9.81
|
|
|
$
|
6.58
|
|
Fourth Quarter
|
$
|
10.06
|
|
|
$
|
6.17
|
|
Year Ended December 31, 2017:
|
|
|
|
||||
First Quarter
|
$
|
12.40
|
|
|
$
|
8.58
|
|
Second Quarter
|
$
|
10.50
|
|
|
$
|
8.07
|
|
Third Quarter
|
$
|
9.43
|
|
|
$
|
6.18
|
|
Fourth Quarter
|
$
|
8.04
|
|
|
$
|
4.94
|
|
Plan Category
|
|
Number of Securities to be Issued upon Exercise of Outstanding Options, Warrants and Rights
(a)
|
|
Weighted-Average Exercise Price of Outstanding Options, Warrants and Rights (b)
|
|
Number of Securities Remaining Available for Future Issuance (Excluding Column (a)) (c)
|
||||
Equity compensation plans approved by security holders
(1)
|
|
1,372,966
|
|
|
$
|
10.28
|
|
|
1,242,735
|
|
Equity compensation plans not approved by security holders
(2)
|
|
1,315,000
|
|
|
—
|
|
|
—
|
|
|
TOTAL
|
|
2,687,966
|
|
|
|
|
|
1,242,735
|
|
(1)
|
The 2013 Plan, which took effect on January 1, 2013, replaced the 2009 Plan, and authorizes the issuance of up to 4,180,000 shares.
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(2)
|
During 2015, 2016, 2017 and 2018, the Company granted Long-Term Incentive Shares pursuant to employment agreements with certain new employees. The agreements provided for grants of inducement equity awards outside of the 2013 Plan. An aggregate of 1,215,000 shares were granted during 2015, 2016, 2017 and 2018 outside of the 2013 Plan to new hires, in accordance with NASDAQ Listing Rule 5635(c)(4) upon commencement of their employment. The remaining 100,000 shares were granted to two Sotera employees upon the Sotera acquisition in April 2017.
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Item 6.
|
SELECTED FINANCIAL DATA
|
|
Year ended December 31,
|
||||||||||||||||||
|
2018
|
|
2017
|
|
2016
|
|
2015
|
|
2014
|
||||||||||
|
(In thousands)
|
||||||||||||||||||
Cash and cash equivalents
|
$
|
36,133
|
|
|
$
|
17,832
|
|
|
$
|
41,871
|
|
|
$
|
21,227
|
|
|
$
|
39,601
|
|
Working capital
(1), (2)
|
59,768
|
|
|
46,658
|
|
|
68,569
|
|
|
63,915
|
|
|
82,475
|
|
|||||
Total assets
(1), (2)
|
675,981
|
|
|
683,606
|
|
|
444,392
|
|
|
453,579
|
|
|
463,490
|
|
|||||
Long-term obligations
(1), (2)
|
293,009
|
|
|
290,436
|
|
|
175,591
|
|
|
165,936
|
|
|
130,779
|
|
|||||
Total stockholders' equity
(1)
|
$
|
290,230
|
|
|
$
|
307,518
|
|
|
$
|
231,880
|
|
|
$
|
251,282
|
|
|
$
|
299,047
|
|
|
Year ended December 31,
|
||||||||||||||||||
|
2018
|
|
2017
|
|
2016
|
|
2015
|
|
2014
|
||||||||||
|
(In thousands, except per share data)
|
||||||||||||||||||
Revenue
|
$
|
506,840
|
|
|
$
|
441,586
|
|
|
$
|
288,027
|
|
|
$
|
297,935
|
|
|
$
|
279,250
|
|
Operating income (loss)
|
7,916
|
|
|
(7,672
|
)
|
|
13,190
|
|
|
15,873
|
|
|
18,494
|
|
|||||
Net (loss) income from continuing operations
|
(22,280
|
)
|
|
(13,389
|
)
|
|
1,352
|
|
|
(30,282
|
)
|
|
6,437
|
|
|||||
Net loss on discontinued operations
|
—
|
|
|
—
|
|
|
(27,593
|
)
|
|
(28,712
|
)
|
|
(20,125
|
)
|
|||||
Net loss
|
$
|
(22,280
|
)
|
|
$
|
(13,389
|
)
|
|
$
|
(26,241
|
)
|
|
$
|
(58,994
|
)
|
|
$
|
(13,688
|
)
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Basic net (loss) earnings per share:
|
|
|
|
|
|
|
|
|
|
||||||||||
Continuing operations
|
$
|
(0.45
|
)
|
|
$
|
(0.27
|
)
|
|
$
|
0.03
|
|
|
$
|
(0.78
|
)
|
|
$
|
0.17
|
|
Discontinued operations
|
—
|
|
|
—
|
|
|
(0.68
|
)
|
|
(0.74
|
)
|
|
(0.54
|
)
|
|||||
Basic net loss per share
|
$
|
(0.45
|
)
|
|
$
|
(0.27
|
)
|
|
$
|
(0.65
|
)
|
|
$
|
(1.52
|
)
|
|
$
|
(0.37
|
)
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Diluted net (loss) earnings per share:
|
|
|
|
|
|
|
|
|
|
||||||||||
Continuing operations
|
$
|
(0.45
|
)
|
|
$
|
(0.27
|
)
|
|
$
|
0.03
|
|
|
$
|
(0.78
|
)
|
|
$
|
0.16
|
|
Discontinued operations
|
—
|
|
|
—
|
|
|
(0.67
|
)
|
|
(0.74
|
)
|
|
(0.51
|
)
|
|||||
Diluted net loss per share
|
$
|
(0.45
|
)
|
|
$
|
(0.27
|
)
|
|
$
|
(0.64
|
)
|
|
$
|
(1.52
|
)
|
|
$
|
(0.35
|
)
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Adjusted EBITDA from continuing operations
|
$
|
49,634
|
|
|
$
|
40,154
|
|
|
$
|
31,182
|
|
|
$
|
35,885
|
|
|
$
|
38,376
|
|
•
|
we have various non-recurring transactions and expenses that directly impact our net income. Adjusted EBITDA from continuing operations is intended to approximate the net cash provided by operations by adjusting for non-recurring, non-operational items; and
|
•
|
securities analysts use adjusted EBITDA from continuing operations as a supplemental measure to evaluate the overall operating performance of companies.
|
•
|
as a measure of operating performance;
|
•
|
to determine a significant portion of management's incentive compensation;
|
•
|
for planning purposes, including the preparation of our annual operating budget; and
|
•
|
to evaluate the effectiveness of our business strategies.
|
•
|
adjusted EBITDA from continuing operations does not reflect our cash expenditures or future requirements for capital expenditures or other contractual commitments;
|
•
|
adjusted EBITDA from continuing operations does not reflect changes in, or cash requirements for, our working capital needs;
|
•
|
adjusted EBITDA from continuing operations does not reflect interest expense or interest income;
|
•
|
adjusted EBITDA from continuing operations does not reflect cash requirements for income taxes;
|
•
|
adjusted EBITDA from continuing operations does not include non-cash expenses related to share based compensation;
|
•
|
adjusted EBITDA from continuing operations does not include acquisition and integration costs;
|
•
|
adjusted EBITDA from continuing operations does not include non-cash loss on extinguishment of debt;
|
•
|
adjusted EBITDA from continuing operations does not include asset impairment charges;
|
•
|
adjusted EBITDA from continuing operations does not include other adjustments which are non-recurring expense;
|
•
|
although depreciation and amortization are non-cash charges, the assets being depreciated or amortized will often have to be replaced in the future, and adjusted EBITDA from continuing operations does not reflect any cash requirements for these replacements; and
|
•
|
other companies in our industry may calculate adjusted EBITDA from continuing operations or similarly titled measures differently than we do, limiting its usefulness as a comparative measure.
|
|
Adjusted EBITDA from Continuing Operations Reconciliation
|
||||||||||||||||||
|
Year ended December 31,
|
||||||||||||||||||
|
2018
|
|
2017
|
|
2016
|
|
2015
|
|
2014
|
||||||||||
|
(In thousands)
|
||||||||||||||||||
Net (loss) income from continuing operations
(1)
|
$
|
(22,280
|
)
|
|
$
|
(13,389
|
)
|
|
$
|
1,352
|
|
|
$
|
(30,282
|
)
|
|
$
|
6,437
|
|
Depreciation
(1)
|
11,768
|
|
|
10,700
|
|
|
6,726
|
|
|
6,050
|
|
|
5,489
|
|
|||||
Intangible amortization
|
12,120
|
|
|
11,416
|
|
|
6,113
|
|
|
7,087
|
|
|
7,737
|
|
|||||
Share-based compensation
|
4,908
|
|
|
4,228
|
|
|
3,472
|
|
|
5,524
|
|
|
6,421
|
|
|||||
Interest expense, net
|
23,407
|
|
|
17,015
|
|
|
10,812
|
|
|
10,299
|
|
|
8,934
|
|
|||||
Income tax (benefit)
expense
(1), (2)
|
(4,734
|
)
|
|
(10,862
|
)
|
|
2,452
|
|
|
35,896
|
|
|
3,254
|
|
|||||
Loss on extinguishment of debt
|
11,676
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Acquisition costs and other adjustments
(3)
|
12,769
|
|
|
21,046
|
|
|
255
|
|
|
1,311
|
|
|
104
|
|
|||||
Adjusted EBITDA from continuing operations
(1)
|
$
|
49,634
|
|
|
$
|
40,154
|
|
|
$
|
31,182
|
|
|
$
|
35,885
|
|
|
$
|
38,376
|
|
|
2018
|
|
2017
|
||||||||||||||||||||||||||||
|
Three Months Ended Mar. 31
|
|
Three Months Ended June 30
|
|
Three Months Ended Sept. 30
|
|
Three Months Ended Dec. 31
|
|
Three Months Ended Mar. 31
|
|
Three Months Ended June 30
|
|
Three Months Ended Sept. 30
|
|
Three Months Ended Dec. 31
|
||||||||||||||||
|
(In thousands, except per share data and unaudited)
|
||||||||||||||||||||||||||||||
Revenue
(1)
|
$
|
125,742
|
|
|
$
|
128,140
|
|
|
$
|
126,690
|
|
|
$
|
126,268
|
|
|
$
|
68,256
|
|
|
$
|
124,058
|
|
|
$
|
122,394
|
|
|
$
|
126,878
|
|
Operating income (loss)
(1), (2)
|
667
|
|
|
3,688
|
|
|
3,743
|
|
|
(182
|
)
|
|
(1,928
|
)
|
|
(10,550
|
)
|
|
534
|
|
|
4,272
|
|
||||||||
Net (loss) income from continuing operations
(1), (2)
|
(3,399
|
)
|
|
(11,394
|
)
|
|
(1,986
|
)
|
|
(5,501
|
)
|
|
(4,545
|
)
|
|
(18,386
|
)
|
|
(6,029
|
)
|
|
15,571
|
|
||||||||
(Loss) income from continuing operations per share of common stock-basic
(1), (2)
|
(0.07
|
)
|
|
(0.23
|
)
|
|
(0.04
|
)
|
|
(0.11
|
)
|
|
(0.10
|
)
|
|
(0.37
|
)
|
|
(0.12
|
)
|
|
0.31
|
|
||||||||
(Loss) income from continuing operations per share of common stock-diluted
(1), (2)
|
(0.07
|
)
|
|
(0.23
|
)
|
|
(0.04
|
)
|
|
(0.11
|
)
|
|
(0.10
|
)
|
|
(0.37
|
)
|
|
(0.12
|
)
|
|
0.31
|
|
||||||||
Adjusted EBITDA from continuing operations
(1), (2)
|
$
|
11,553
|
|
|
$
|
12,332
|
|
|
$
|
13,710
|
|
|
$
|
12,039
|
|
|
$
|
4,061
|
|
|
$
|
10,379
|
|
|
$
|
11,476
|
|
|
$
|
14,238
|
|
|
Adjusted EBITDA from Continuing Operations Reconciliation
|
||||||||||||||||||||||||||||||
|
2018
|
|
2017
|
||||||||||||||||||||||||||||
|
Three Months Ended Mar. 31
|
|
Three Months Ended June 30
|
|
Three Months Ended Sept. 30
|
|
Three Months Ended Dec. 31
|
|
Three Months Ended Mar. 31
|
|
Three Months Ended June 30
|
|
Three Months Ended Sept. 30
|
|
Three Months Ended Dec. 31
|
||||||||||||||||
|
(In thousands and unaudited)
|
||||||||||||||||||||||||||||||
Net (loss) income from continuing operations
(1), (2)
|
$
|
(3,399
|
)
|
|
$
|
(11,394
|
)
|
|
$
|
(1,986
|
)
|
|
$
|
(5,501
|
)
|
|
$
|
(4,545
|
)
|
|
$
|
(18,386
|
)
|
|
$
|
(6,029
|
)
|
|
$
|
15,571
|
|
Depreciation
(1)
|
3,117
|
|
|
2,709
|
|
|
2,953
|
|
|
2,989
|
|
|
1,702
|
|
|
2,724
|
|
|
3,087
|
|
|
3,187
|
|
||||||||
Intangible amortization
(2)
|
3,940
|
|
|
2,738
|
|
|
2,721
|
|
|
2,721
|
|
|
1,650
|
|
|
3,604
|
|
|
3,604
|
|
|
2,558
|
|
||||||||
Share-based compensation
|
1,180
|
|
|
1,069
|
|
|
1,252
|
|
|
1,407
|
|
|
958
|
|
|
1,140
|
|
|
956
|
|
|
1,174
|
|
||||||||
Interest expense, net
|
4,827
|
|
|
5,907
|
|
|
6,240
|
|
|
6,433
|
|
|
2,609
|
|
|
4,914
|
|
|
4,829
|
|
|
4,663
|
|
||||||||
Income tax (benefit) expense
(1), (3)
|
(756
|
)
|
|
(2,127
|
)
|
|
(686
|
)
|
|
(1,165
|
)
|
|
—
|
|
|
3,059
|
|
|
1,980
|
|
|
(15,901
|
)
|
||||||||
Loss on extinguishment of debt
|
—
|
|
|
11,429
|
|
|
166
|
|
|
81
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||||
Acquisition costs and other adjustments
(4)
|
2,644
|
|
|
2,001
|
|
|
3,050
|
|
|
5,074
|
|
|
1,687
|
|
|
13,324
|
|
|
3,049
|
|
|
2,986
|
|
||||||||
Adjusted EBITDA from continuing operations
(1), (2)
|
$
|
11,553
|
|
|
$
|
12,332
|
|
|
$
|
13,710
|
|
|
$
|
12,039
|
|
|
$
|
4,061
|
|
|
$
|
10,379
|
|
|
$
|
11,476
|
|
|
$
|
14,238
|
|
Item 7.
|
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|
•
|
Executive Level Overview.
Discussion of our business and overall analysis of financial and other highlights affecting our company in order to provide context for the remainder of MD&A and our overall strategy.
|
•
|
Critical Accounting Policies.
Accounting estimates that we believe are most important to understanding the assumptions and judgments incorporated in our reported financial results and forecasts.
|
•
|
Results of Operations.
An analysis of our financial results comparing
2018
to
2017
and comparing
2017
to
2016
.
|
•
|
Liquidity and Capital Resources.
An analysis of changes in our balance sheets and cash flows, and discussion of our financial condition and sources of and needs for liquidity.
|
•
|
Contractual Obligations and Commitments; Off-Balance-Sheet Arrangements.
Overview of contractual obligations, contingent liabilities, commitments, and off-balance-sheet arrangements outstanding as of
December 31, 2018
.
|
•
|
Revenue Recognition
|
•
|
Goodwill
|
•
|
Income Taxes
|
CONSOLIDATED OVERVIEW
(In thousands)
|
|
Year ended December 31, 2018
|
|
Year ended December 31, 2017
|
|
Year ended December 31, 2016
|
||||||||||||
Revenue
(1)
|
|
$
|
506,840
|
|
100.0
|
%
|
|
$
|
441,586
|
|
100.0
|
%
|
|
$
|
288,027
|
|
100.0
|
%
|
Cost of revenue, excluding amortization
(1)
|
|
374,838
|
|
74.0
|
%
|
|
332,716
|
|
75.3
|
%
|
|
196,908
|
|
68.4
|
%
|
|||
Operating expenses
(1)
|
|
107,700
|
|
21.2
|
%
|
|
105,126
|
|
23.8
|
%
|
|
71,816
|
|
24.9
|
%
|
|||
Intangible amortization
|
|
12,120
|
|
2.4
|
%
|
|
11,416
|
|
2.6
|
%
|
|
6,113
|
|
2.1
|
%
|
|||
Interest expense, net
|
|
23,407
|
|
4.6
|
%
|
|
17,015
|
|
3.9
|
%
|
|
10,812
|
|
3.8
|
%
|
|||
Income tax (benefit) expense, net on continuing operations
(1)
|
|
(4,734
|
)
|
(0.9
|
)%
|
|
(10,862
|
)
|
(2.5
|
)%
|
|
2,452
|
|
0.9
|
%
|
|||
Net loss on discontinued operations
|
|
$
|
—
|
|
—
|
%
|
|
$
|
—
|
|
—
|
%
|
|
$
|
(27,593
|
)
|
(9.6
|
)%
|
•
|
Eurodollar Loans will accrue interest, for any interest period, at the Eurodollar Rate (as defined in the First Lien Credit Agreement), plus an applicable margin of 4.5%.
|
•
|
Base Rate Loans will accrue interest, for any interest period, at (a) a base rate per annum equal to the highest of (i) the Federal funds rate plus 0.5%; (ii) the prime commercial lending rate announced by Royal Bank of Canada (RBC) from
|
•
|
The applicable margin for borrowings may be decreased if our consolidated net leverage ratio decreases.
|
•
|
Eurodollar Loans will accrue interest, for any interest period, at the Eurodollar Rate (as defined in the Second Lien Credit Agreements) plus an applicable margin of 8.75%.
|
•
|
Base Rate Loans will accrue interest, for any interest period, at (a) a base rate per annum equal to the highest of (i) the Federal funds rate plus 0.5%; (ii) the prime commercial lending rate announced by RBC from time to time as its prime lending rate; and (iii) the Eurodollar Rate for a one month interest period plus 1.0%, plus (b) an applicable margin of 7.75%.
|
|
Total
|
Less than
one year
|
1 – 3 years
|
3 – 5 years
|
More than
5 years
|
||||||||||
|
(In thousands)
|
||||||||||||||
Facilities/Office space
|
$
|
68,535
|
|
$
|
8,624
|
|
$
|
15,688
|
|
$
|
16,243
|
|
$
|
27,980
|
|
Office equipment
|
116
|
|
111
|
|
5
|
|
—
|
|
—
|
|
|||||
Total Operating Leases
|
68,651
|
|
8,735
|
|
15,693
|
|
16,243
|
|
27,980
|
|
|||||
Convertible Senior Notes
|
22,608
|
|
22,608
|
|
—
|
|
—
|
|
—
|
|
|||||
Term Loan Facility
|
275,000
|
|
—
|
|
—
|
|
—
|
|
275,000
|
|
|||||
Total Contractual Obligations
|
$
|
366,259
|
|
$
|
31,343
|
|
$
|
15,693
|
|
$
|
16,243
|
|
$
|
302,980
|
|
Item 7A.
|
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|
Item 8.
|
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
|
Item 9.
|
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
|
Item 9A.
|
CONTROLS AND PROCEDURES
|
•
|
Hired five new key accounting team members with the appropriate experience, certifications, education, and training including a new Chief Accounting Officer, Director of Technical Accounting (new position responsible for monitoring and reviewing all unique, complex, and/or significant accounting transactions), and Director of Internal Controls and SOX Compliance (new position responsible for overseeing the design of controls, remediation of prior control deficiencies, and enhancement of control activities);
|
•
|
Evaluated the competence of other accounting personnel, including outsourced service providers, and made necessary adjustments;
|
•
|
Developed and delivered relevant control related trainings to senior-level management, control owners, control preparers, and accounting personnel;
|
•
|
Completed a robust review of all internal controls to strengthen documentation, validate processes, and communicate accountability for performance of internal control related responsibilities;
|
•
|
Established an Internal Controls Council that serves as a monitoring function over the Company’s control environment, which includes recommending COSO framework improvements, and is comprised of key control owners across the organization and directly enforces accountability and ownership over internal control responsibilities; and
|
•
|
Implemented a quarterly management sub-representation letter process where key members of management certify to the accuracy of and completeness of financial data, disclosures, and internal controls.
|
•
|
Enhanced process and control documentation including the development of detailed control checklists that identify control owners, critical design and control elements, and responsibilities for effectively performing controls;
|
•
|
Implemented automated workflows to reduce reliance on manual processes in support of timely and effective control activities; and
|
•
|
Created and enforced adherence to a quarterly certification of internal controls by control owners and preparers.
|
Item 9B.
|
OTHER INFORMATION
|
Item 10.
|
DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
|
Item 11.
|
EXECUTIVE COMPENSATION
|
Item 12.
|
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
|
Item 13.
|
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
|
(a)
|
(1) Consolidated Financial Statements
|
(2)
|
Financial Statement Schedules — All financial statement schedules required by Item 8 and Item 15 of Form 10-K have been omitted because the information requested is not required, not applicable, or is shown in the Consolidated Financial Statements or Notes thereto.
|
(3)
|
Exhibits — See Exhibit Index, which is incorporated in this item by reference.
|
(b)
|
Exhibits — See Exhibit Index, which is incorporated in this item by reference.
|
(c)
|
Financial Statement Schedules — Included in Item 15(a)(2) above.
|
|
December 31,
2018 |
|
December 31,
2017 |
||||
ASSETS
|
|
|
|
|
|
||
Current assets:
|
|
|
|
|
|
||
Cash and cash equivalents
|
$
|
36,133
|
|
|
$
|
17,832
|
|
Accounts receivable, net
|
27,661
|
|
|
49,880
|
|
||
Unbilled receivables, net
|
59,357
|
|
|
37,785
|
|
||
Inventories, net
|
24,111
|
|
|
24,337
|
|
||
Prepaid expenses
|
2,797
|
|
|
2,266
|
|
||
Income tax receivable
|
155
|
|
|
210
|
|
||
Assets held for sale
|
2,296
|
|
|
—
|
|
||
Total current assets
|
152,510
|
|
|
132,310
|
|
||
Property and equipment, net
|
21,073
|
|
|
36,141
|
|
||
Goodwill
|
455,197
|
|
|
455,197
|
|
||
Other intangibles, net
|
43,604
|
|
|
57,045
|
|
||
Other assets
|
3,597
|
|
|
2,913
|
|
||
TOTAL ASSETS
|
$
|
675,981
|
|
|
$
|
683,606
|
|
|
|
|
|
||||
LIABILITIES AND STOCKHOLDERS' EQUITY
|
|
|
|
|
|
||
Current liabilities:
|
|
|
|
|
|
||
Accounts payable
|
$
|
15,578
|
|
|
$
|
25,609
|
|
Accrued expenses
|
17,236
|
|
|
15,545
|
|
||
Accrued salaries and wages
|
32,036
|
|
|
29,341
|
|
||
Term loan – current portion, net of discount
|
—
|
|
|
6,750
|
|
||
Convertible senior notes – current portion, net of discount
|
22,040
|
|
|
—
|
|
||
Deferred revenue
|
1,622
|
|
|
6,090
|
|
||
Other current liabilities
|
4,230
|
|
|
2,317
|
|
||
Total current liabilities
|
92,742
|
|
|
85,652
|
|
||
Convertible senior notes – non-current portion, net of discount
|
—
|
|
|
138,998
|
|
||
Term loan – non-current portion, net of discount
|
268,924
|
|
|
120,627
|
|
||
Deferred tax liability, net
|
13,955
|
|
|
19,367
|
|
||
Other non-current liabilities
|
10,130
|
|
|
11,444
|
|
||
TOTAL LIABILITIES
|
385,751
|
|
|
376,088
|
|
||
Commitments and contingencies
|
—
|
|
|
—
|
|
||
Stockholders' equity:
|
|
|
|
|
|
||
Preferred stock, $0.001 par value; 5,000 shares authorized, none issued
|
—
|
|
|
—
|
|
||
Common stock, $0.001 par value; 100,000 shares authorized, 49,996 and 49,876 shares issued and outstanding as of December 31, 2018 and 2017, respectively
|
50
|
|
|
50
|
|
||
Additional paid-in capital
|
430,209
|
|
|
422,901
|
|
||
Accumulated deficit
|
(138,709
|
)
|
|
(115,433
|
)
|
||
Accumulated other comprehensive loss
|
(1,320
|
)
|
|
—
|
|
||
Total stockholders' equity
|
290,230
|
|
|
307,518
|
|
||
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
|
$
|
675,981
|
|
|
$
|
683,606
|
|
|
Year Ended December 31,
|
||||||||||
|
2018
|
|
2017
|
|
2016
|
||||||
Revenues
|
$
|
506,840
|
|
|
$
|
441,586
|
|
|
$
|
288,027
|
|
Costs of revenue, excluding amortization
|
374,838
|
|
|
332,716
|
|
|
196,908
|
|
|||
Operating expenses
|
107,700
|
|
|
105,126
|
|
|
71,816
|
|
|||
Intangible amortization expense
|
12,120
|
|
|
11,416
|
|
|
6,113
|
|
|||
Asset impairment charges
|
4,266
|
|
|
—
|
|
|
—
|
|
|||
Operating income (loss)
|
7,916
|
|
|
(7,672
|
)
|
|
13,190
|
|
|||
Interest expense, net
|
23,407
|
|
|
17,015
|
|
|
10,812
|
|
|||
Loss on extinguishment of debt
|
11,676
|
|
|
—
|
|
|
—
|
|
|||
Other non-operating income, net
|
(153
|
)
|
|
(436
|
)
|
|
(1,426
|
)
|
|||
(Loss) earnings before income taxes from continuing operations
|
(27,014
|
)
|
|
(24,251
|
)
|
|
3,804
|
|
|||
Income tax (benefit) expense, net on continuing operations
|
(4,734
|
)
|
|
(10,862
|
)
|
|
2,452
|
|
|||
Net (loss) income from continuing operations
|
(22,280
|
)
|
|
(13,389
|
)
|
|
1,352
|
|
|||
Loss before income taxes from discontinued operations
|
—
|
|
|
—
|
|
|
(28,082
|
)
|
|||
Income tax benefit, net on discontinued operations
|
—
|
|
|
—
|
|
|
(489
|
)
|
|||
Net loss on discontinued operations
|
—
|
|
|
—
|
|
|
(27,593
|
)
|
|||
Net loss
|
$
|
(22,280
|
)
|
|
$
|
(13,389
|
)
|
|
$
|
(26,241
|
)
|
|
|
|
|
|
|
||||||
Weighted average common shares outstanding
|
|
|
|
|
|
|
|
|
|||
Basic
|
49,833
|
|
|
48,921
|
|
|
40,501
|
|
|||
Diluted
|
49,833
|
|
|
48,921
|
|
|
41,012
|
|
|||
|
|
|
|
|
|
||||||
Basic net (loss) earnings per share:
|
|
|
|
|
|
|
|
|
|||
Continuing operations
|
$
|
(0.45
|
)
|
|
$
|
(0.27
|
)
|
|
$
|
0.03
|
|
Discontinued operations
|
—
|
|
|
—
|
|
|
(0.68
|
)
|
|||
Basic net loss per share
|
$
|
(0.45
|
)
|
|
$
|
(0.27
|
)
|
|
$
|
(0.65
|
)
|
|
|
|
|
|
|
||||||
Diluted net (loss) earnings per share:
|
|
|
|
|
|
||||||
Continuing operations
|
$
|
(0.45
|
)
|
|
$
|
(0.27
|
)
|
|
$
|
0.03
|
|
Discontinued operations
|
—
|
|
|
—
|
|
|
(0.67
|
)
|
|||
Diluted net loss per share
|
$
|
(0.45
|
)
|
|
$
|
(0.27
|
)
|
|
$
|
(0.64
|
)
|
|
Common Stock
|
|
Additional
Paid-In
Capital
(APIC)
|
|
Accumulated Deficit
|
|
Accumulated Other Comprehensive Loss
|
|
Total
Shareholders' Equity |
|||||||||||||
|
Shares
|
|
Amount
|
|
||||||||||||||||||
Balance, January 1, 2016
|
39,941
|
|
|
$
|
40
|
|
|
$
|
327,045
|
|
|
$
|
(75,803
|
)
|
|
$
|
—
|
|
|
$
|
251,282
|
|
Net loss
|
—
|
|
|
—
|
|
|
—
|
|
|
(26,241
|
)
|
|
—
|
|
|
(26,241
|
)
|
|||||
Warrant exercise, net
|
821
|
|
|
1
|
|
|
1,919
|
|
|
—
|
|
|
—
|
|
|
1,920
|
|
|||||
Option exercise, net
|
82
|
|
|
—
|
|
|
537
|
|
|
—
|
|
|
—
|
|
|
537
|
|
|||||
Equity issued as part of acquisitions, net
|
129
|
|
|
—
|
|
|
1,130
|
|
|
—
|
|
|
—
|
|
|
1,130
|
|
|||||
Shares withheld for tax withholding on vesting of restricted stock
|
(20
|
)
|
|
—
|
|
|
(220
|
)
|
|
—
|
|
|
—
|
|
|
(220
|
)
|
|||||
Share-based compensation
|
24
|
|
|
—
|
|
|
3,472
|
|
|
—
|
|
|
—
|
|
|
3,472
|
|
|||||
Balance, December 31, 2016
|
40,977
|
|
|
41
|
|
|
333,883
|
|
|
(102,044
|
)
|
|
—
|
|
|
231,880
|
|
|||||
Net loss
|
—
|
|
|
—
|
|
|
—
|
|
|
(13,389
|
)
|
|
—
|
|
|
(13,389
|
)
|
|||||
Warrant exercise, net
|
14
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Option exercise, net
|
35
|
|
|
—
|
|
|
222
|
|
|
—
|
|
|
—
|
|
|
222
|
|
|||||
Shares withheld for tax withholding on vesting of restricted stock
|
(2
|
)
|
|
—
|
|
|
(9
|
)
|
|
—
|
|
|
—
|
|
|
(9
|
)
|
|||||
Stock issued in secondary offering, net of expenses
|
8,500
|
|
|
9
|
|
|
84,577
|
|
|
—
|
|
|
—
|
|
|
84,586
|
|
|||||
Share-based compensation
|
352
|
|
|
—
|
|
|
4,228
|
|
|
—
|
|
|
—
|
|
|
4,228
|
|
|||||
Balance, December 31, 2017
|
49,876
|
|
|
50
|
|
|
422,901
|
|
|
(115,433
|
)
|
|
—
|
|
|
307,518
|
|
|||||
Cumulative effect of adopting ASC 606
|
—
|
|
|
—
|
|
|
—
|
|
|
(996
|
)
|
|
—
|
|
|
(996
|
)
|
|||||
Net loss
|
—
|
|
|
—
|
|
|
—
|
|
|
(22,280
|
)
|
|
—
|
|
|
(22,280
|
)
|
|||||
Other comprehensive loss, net of tax
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1,320
|
)
|
|
(1,320
|
)
|
|||||
Option exercise, net
|
76
|
|
|
—
|
|
|
395
|
|
|
—
|
|
|
—
|
|
|
395
|
|
|||||
Shares withheld for tax withholding on vesting of restricted stock
|
(11
|
)
|
|
—
|
|
|
(113
|
)
|
|
—
|
|
|
—
|
|
|
(113
|
)
|
|||||
Share-based compensation
|
55
|
|
|
—
|
|
|
4,908
|
|
|
—
|
|
|
—
|
|
|
4,908
|
|
|||||
Settlement of capped call transactions
|
—
|
|
|
—
|
|
|
2,118
|
|
|
—
|
|
|
—
|
|
|
2,118
|
|
|||||
Balance, December 31, 2018
|
49,996
|
|
|
$
|
50
|
|
|
$
|
430,209
|
|
|
$
|
(138,709
|
)
|
|
$
|
(1,320
|
)
|
|
$
|
290,230
|
|
|
Year Ended December 31,
|
||||||||||
|
2018
|
|
2017
|
|
2016
|
||||||
Net loss
|
$
|
(22,280
|
)
|
|
$
|
(13,389
|
)
|
|
$
|
(26,241
|
)
|
Unrecognized loss on derivatives instruments, net of taxes
|
(1,320
|
)
|
|
—
|
|
|
—
|
|
|||
Comprehensive loss
|
$
|
(23,600
|
)
|
|
$
|
(13,389
|
)
|
|
$
|
(26,241
|
)
|
|
Year Ended December 31,
|
||||||||||
|
2018
|
|
2017
|
|
2016
|
||||||
Net loss
|
$
|
(22,280
|
)
|
|
$
|
(13,389
|
)
|
|
$
|
(26,241
|
)
|
Adjustments to reconcile net loss to net cash provided by operating activities:
|
|
|
|
|
|
|
|
|
|||
Share-based compensation
|
4,908
|
|
|
4,228
|
|
|
3,472
|
|
|||
Depreciation and amortization expense
|
23,888
|
|
|
22,110
|
|
|
13,855
|
|
|||
Impairment of goodwill from discontinued operations
|
—
|
|
|
—
|
|
|
6,980
|
|
|||
Loss on extinguishment of debt
|
11,676
|
|
|
—
|
|
|
—
|
|
|||
Non-cash interest expense
|
4,129
|
|
|
7,252
|
|
|
6,294
|
|
|||
Write-off of deferred financing costs
|
—
|
|
|
—
|
|
|
340
|
|
|||
Loss (gain) on disposal of assets
|
3,205
|
|
|
5
|
|
|
(3,447
|
)
|
|||
Asset impairment charges
|
4,266
|
|
|
—
|
|
|
3,568
|
|
|||
Deferred taxes
|
(4,604
|
)
|
|
(10,895
|
)
|
|
1,962
|
|
|||
Changes in assets and liabilities, net of effects of acquisitions:
|
|
|
|
|
|
|
|
|
|||
Accounts receivable, net
|
22,219
|
|
|
(12,867
|
)
|
|
6,245
|
|
|||
Unbilled receivables, net
|
(20,406
|
)
|
|
8,865
|
|
|
9,271
|
|
|||
Inventories, net
|
(430
|
)
|
|
(8,527
|
)
|
|
(1,296
|
)
|
|||
Prepaid expenses
|
(728
|
)
|
|
707
|
|
|
(775
|
)
|
|||
Accounts payable
|
(10,031
|
)
|
|
11,689
|
|
|
(4,694
|
)
|
|||
Accrued expenses
|
(1,310
|
)
|
|
(350
|
)
|
|
6,240
|
|
|||
Other non-current assets and liabilities
|
(1,461
|
)
|
|
(2,328
|
)
|
|
447
|
|
|||
Net cash provided by operating activities
|
13,041
|
|
|
6,500
|
|
|
22,221
|
|
|||
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
|||
Acquisitions, net of cash acquired
|
—
|
|
|
(235,856
|
)
|
|
(2,504
|
)
|
|||
Purchase of property and equipment
|
(4,932
|
)
|
|
(6,419
|
)
|
|
(17,536
|
)
|
|||
Proceeds from sale of assets
|
—
|
|
|
—
|
|
|
16,226
|
|
|||
Net cash used in investing activities
|
(4,932
|
)
|
|
(242,275
|
)
|
|
(3,814
|
)
|
|||
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
|||
Payment of debt extinguishment costs
|
(711
|
)
|
|
—
|
|
|
—
|
|
|||
Settlement of capped call transactions
|
2,118
|
|
|
—
|
|
|
—
|
|
|||
Principal payments of convertible senior notes
|
(126,892
|
)
|
|
—
|
|
|
—
|
|
|||
Proceeds from stock issuances, net
|
—
|
|
|
84,586
|
|
|
—
|
|
|||
Proceeds from issuance of term note
|
290,000
|
|
|
135,000
|
|
|
—
|
|
|||
Principal payments of term loan
|
(146,625
|
)
|
|
(3,375
|
)
|
|
—
|
|
|||
Payment of debt issuance costs
|
(7,482
|
)
|
|
(4,688
|
)
|
|
—
|
|
|||
Proceeds from revolver
|
25,000
|
|
|
10,000
|
|
|
—
|
|
|||
Repayment of revolver
|
(25,000
|
)
|
|
(10,000
|
)
|
|
—
|
|
|||
Other
|
(216
|
)
|
|
213
|
|
|
2,237
|
|
|||
Net cash provided by financing activities
|
10,192
|
|
|
211,736
|
|
|
2,237
|
|
|||
Net increase (decrease) in cash and cash equivalents
|
18,301
|
|
|
(24,039
|
)
|
|
20,644
|
|
|||
Cash and cash equivalents at beginning of period
|
17,832
|
|
|
41,871
|
|
|
21,227
|
|
|||
Cash and cash equivalents at end of period
|
$
|
36,133
|
|
|
$
|
17,832
|
|
|
$
|
41,871
|
|
Supplemental disclosure of cash flow information:
|
|
|
|
|
|
|
|
|
|||
Cash paid for interest
|
$
|
20,972
|
|
|
$
|
8,426
|
|
|
$
|
3,883
|
|
Cash (refunded) paid for taxes
|
$
|
(91
|
)
|
|
$
|
6
|
|
|
$
|
40
|
|
Equity issued for acquisitions, net
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,130
|
|
|
December 31, 2017
|
||||||||||
|
As Previously Reported
|
|
Adjustment
|
|
As Revised
|
||||||
Inventories, net
|
$
|
20,496
|
|
|
$
|
3,841
|
|
|
$
|
24,337
|
|
Property and equipment, net
|
43,283
|
|
|
(7,142
|
)
|
|
36,141
|
|
|||
TOTAL ASSETS
|
686,907
|
|
|
(3,301
|
)
|
|
683,606
|
|
|||
Deferred tax liability, net
|
19,174
|
|
|
193
|
|
|
19,367
|
|
|||
TOTAL LIABILITIES
|
375,895
|
|
|
193
|
|
|
376,088
|
|
|||
Accumulated deficit
|
(111,939
|
)
|
|
(3,494
|
)
|
|
(115,433
|
)
|
|||
TOTAL STOCKHOLDERS' EQUITY
|
$
|
311,012
|
|
|
$
|
(3,494
|
)
|
|
$
|
307,518
|
|
|
December 31, 2016
|
||||||||||
|
As Previously Reported
|
|
Adjustment
|
|
As Revised
|
||||||
Inventories, net
|
$
|
15,178
|
|
|
$
|
633
|
|
|
$
|
15,811
|
|
Property and equipment, net
|
40,615
|
|
|
(1,694
|
)
|
|
38,921
|
|
|||
TOTAL ASSETS
|
445,453
|
|
|
(1,061
|
)
|
|
444,392
|
|
|||
Deferred tax liability, net
|
30,409
|
|
|
(5
|
)
|
|
30,404
|
|
|||
TOTAL LIABILITIES
|
212,517
|
|
|
(5
|
)
|
|
212,512
|
|
|||
Accumulated deficit
|
(100,988
|
)
|
|
(1,056
|
)
|
|
(102,044
|
)
|
|||
TOTAL STOCKHOLDERS' EQUITY
|
$
|
232,936
|
|
|
$
|
(1,056
|
)
|
|
$
|
231,880
|
|
|
Year ended December 31, 2017
|
||||||||||
|
As Previously Reported
|
|
Adjustment
|
|
As Revised
|
||||||
Cost of revenue, excluding amortization
|
$
|
331,629
|
|
|
$
|
1,087
|
|
|
$
|
332,716
|
|
Operating expenses
|
103,973
|
|
|
1,153
|
|
|
105,126
|
|
|||
Operating loss
|
(5,432
|
)
|
|
(2,240
|
)
|
|
(7,672
|
)
|
|||
Loss before income taxes from continuing operations
|
(22,011
|
)
|
|
(2,240
|
)
|
|
(24,251
|
)
|
|||
Income tax (benefit) expense, net on continuing operations
|
(11,060
|
)
|
|
198
|
|
|
(10,862
|
)
|
|||
Net loss from continuing operations
|
(10,951
|
)
|
|
(2,438
|
)
|
|
(13,389
|
)
|
|||
Net loss
|
(10,951
|
)
|
|
(2,438
|
)
|
|
(13,389
|
)
|
|||
|
|
|
|
|
|
||||||
Basic net loss per share from continuing operations
|
$
|
(0.22
|
)
|
|
$
|
(0.05
|
)
|
|
$
|
(0.27
|
)
|
Basic net loss per share
|
$
|
(0.22
|
)
|
|
$
|
(0.05
|
)
|
|
$
|
(0.27
|
)
|
Diluted net loss per share from continuing operations
|
$
|
(0.22
|
)
|
|
$
|
(0.05
|
)
|
|
$
|
(0.27
|
)
|
Diluted net loss per share
|
$
|
(0.22
|
)
|
|
$
|
(0.05
|
)
|
|
$
|
(0.27
|
)
|
|
Year ended December 31, 2016
|
||||||||||
|
As Previously Reported
|
|
Adjustment
|
|
As Revised
|
||||||
Cost of revenue, excluding amortization
|
$
|
196,772
|
|
|
$
|
136
|
|
|
$
|
196,908
|
|
Operating expenses
|
71,434
|
|
|
382
|
|
|
71,816
|
|
|||
Operating income (loss)
|
13,708
|
|
|
(518
|
)
|
|
13,190
|
|
|||
Income (loss) before income taxes from continuing operations
|
4,322
|
|
|
(518
|
)
|
|
3,804
|
|
|||
Income tax expense (benefit), net on continuing operations
|
2,457
|
|
|
(5
|
)
|
|
2,452
|
|
|||
Net income (loss) from continuing operations
|
1,865
|
|
|
(513
|
)
|
|
1,352
|
|
|||
Net loss
|
(25,728
|
)
|
|
(513
|
)
|
|
(26,241
|
)
|
|||
|
|
|
|
|
|
||||||
Basic net earnings (loss) per share from continuing operations
|
$
|
0.05
|
|
|
$
|
(0.02
|
)
|
|
$
|
0.03
|
|
Basic net loss per share
|
$
|
(0.64
|
)
|
|
$
|
(0.01
|
)
|
|
$
|
(0.65
|
)
|
Diluted net earnings (loss) per share from continuing operations
|
$
|
0.05
|
|
|
$
|
(0.02
|
)
|
|
$
|
0.03
|
|
Diluted net loss per share
|
$
|
(0.63
|
)
|
|
$
|
(0.01
|
)
|
|
$
|
(0.64
|
)
|
|
Year ended December 31, 2017
|
||||||||||
|
As Previously Reported
|
|
Adjustment
|
|
As Revised
|
||||||
Net loss
|
$
|
(10,951
|
)
|
|
$
|
(2,438
|
)
|
|
$
|
(13,389
|
)
|
Depreciation and amortization expense
|
20,363
|
|
|
1,747
|
|
|
22,110
|
|
|||
Deferred taxes
|
(11,093
|
)
|
|
198
|
|
|
(10,895
|
)
|
|||
Inventory, net
|
(5,318
|
)
|
|
(3,209
|
)
|
|
(8,527
|
)
|
|||
Net cash provided (used) by operating activities
|
10,202
|
|
|
(3,702
|
)
|
|
6,500
|
|
|||
Purchase of property and equipment
|
(10,121
|
)
|
|
3,702
|
|
|
(6,419
|
)
|
|||
Net cash (used) provided in investing activities
|
$
|
(245,977
|
)
|
|
$
|
3,702
|
|
|
$
|
(242,275
|
)
|
|
Year ended December 31, 2016
|
||||||||||
|
As Previously Reported
|
|
Adjustment
|
|
As Revised
|
||||||
Net loss
|
$
|
(25,728
|
)
|
|
$
|
(513
|
)
|
|
$
|
(26,241
|
)
|
Depreciation and amortization expense
|
13,578
|
|
|
277
|
|
|
13,855
|
|
|||
Deferred taxes
|
1,967
|
|
|
(5
|
)
|
|
1,962
|
|
|||
Inventory, net
|
(663
|
)
|
|
(633
|
)
|
|
(1,296
|
)
|
|||
Net cash provided (used) by operating activities
|
23,095
|
|
|
(874
|
)
|
|
22,221
|
|
|||
Purchase of property and equipment
|
(18,410
|
)
|
|
874
|
|
|
(17,536
|
)
|
|||
Net cash (used) provided in investing activities
|
$
|
(4,688
|
)
|
|
$
|
874
|
|
|
$
|
(3,814
|
)
|
Goodwill as of December 31, 2016
|
$
|
290,710
|
|
Acquisition
|
164,487
|
|
|
Goodwill as of December 31, 2017
|
$
|
455,197
|
|
Goodwill as of December 31, 2018
|
$
|
455,197
|
|
|
December 31,
2018 |
|
December 31,
2017 |
|
December 31,
2016 |
||||||
Net (loss) income from continuing operations
|
$
|
(22,280
|
)
|
|
$
|
(13,389
|
)
|
|
$
|
1,352
|
|
Net loss on discontinued operations
|
—
|
|
|
—
|
|
|
(27,593
|
)
|
|||
Net loss
|
$
|
(22,280
|
)
|
|
$
|
(13,389
|
)
|
|
$
|
(26,241
|
)
|
|
|
|
|
|
|
||||||
Weighted-average shares – basic
|
49,833
|
|
|
48,921
|
|
|
40,501
|
|
|||
Effect of dilutive potential common shares
|
—
|
|
|
—
|
|
|
511
|
|
|||
Weighted-average shares – diluted
|
49,833
|
|
|
48,921
|
|
|
41,012
|
|
|||
|
|
|
|
|
|
||||||
Net (loss) income per share from continuing operations – basic
|
$
|
(0.45
|
)
|
|
$
|
(0.27
|
)
|
|
$
|
0.03
|
|
Net loss per share from discontinued operations – basic
|
—
|
|
|
—
|
|
|
(0.68
|
)
|
|||
Net loss per share – basic
|
$
|
(0.45
|
)
|
|
$
|
(0.27
|
)
|
|
$
|
(0.65
|
)
|
|
|
|
|
|
|
||||||
Net (loss) income per share from continuing operations – diluted
|
$
|
(0.45
|
)
|
|
$
|
(0.27
|
)
|
|
$
|
0.03
|
|
Net loss per share from discontinued operations – diluted
|
—
|
|
|
—
|
|
|
(0.67
|
)
|
|||
Net loss per share – diluted
|
$
|
(0.45
|
)
|
|
$
|
(0.27
|
)
|
|
$
|
(0.64
|
)
|
|
|
|
|
|
|
||||||
Anti-dilutive share-based awards, excluded
|
3,647
|
|
|
2,543
|
|
|
2,499
|
|
|
Year ended
|
|
|
|
Adjusted
|
||||||
|
December 31, 2017
|
|
Adjustments
|
|
January 1, 2018
|
||||||
|
(in thousands)
|
||||||||||
Assets:
|
|
|
|
|
|
||||||
Unbilled receivables, net
|
$
|
37,785
|
|
|
$
|
1,166
|
|
|
$
|
38,951
|
|
Inventories, net
|
24,337
|
|
|
(292
|
)
|
|
24,045
|
|
|||
Prepaid expenses
|
2,266
|
|
|
(403
|
)
|
|
1,863
|
|
|||
Liabilities:
|
|
|
|
|
|
|
|
|
|||
Accrued expenses
|
$
|
15,545
|
|
|
$
|
49
|
|
|
$
|
15,594
|
|
Deferred revenue
|
6,090
|
|
|
1,743
|
|
|
7,833
|
|
|||
Deferred tax liability, net
|
19,367
|
|
|
(325
|
)
|
|
19,042
|
|
|||
Equity:
|
|
|
|
|
|
|
|
|
|||
Accumulated deficit
|
$
|
(115,433
|
)
|
|
$
|
(996
|
)
|
|
$
|
(116,429
|
)
|
Cash
|
$
|
11,583
|
|
Receivables
|
37,521
|
|
|
Prepaid expenses
|
1,679
|
|
|
Fixed assets
|
1,499
|
|
|
Intangibles
|
60,590
|
|
|
Goodwill
|
164,487
|
|
|
Deferred tax assets
|
142
|
|
|
Other assets
|
1,149
|
|
|
Total assets acquired
|
278,650
|
|
|
Accounts payable
|
7,007
|
|
|
Accrued expenses
|
9,818
|
|
|
Accrued salaries and wages
|
10,784
|
|
|
Deferred revenue
|
1,505
|
|
|
Long-term obligations
|
2,097
|
|
|
Total liabilities assumed
|
31,211
|
|
|
Net assets acquired
|
$
|
247,439
|
|
Net cash paid
|
$
|
235,856
|
|
Actual cash paid
|
$
|
247,439
|
|
Intangible Asset Type
|
Weighted average amortization period
|
|
Fair Value
|
||
|
(in years)
|
|
(in thousands)
|
||
Customer relationships
|
16
|
|
$
|
56,700
|
|
Backlog
|
1
|
|
3,890
|
|
|
Total
|
|
|
$
|
60,590
|
|
|
Year Ended December 31,
|
||||||
|
2017
|
|
2016
|
||||
|
(unaudited and in thousands)
|
||||||
Revenues
|
$
|
503,531
|
|
|
$
|
551,549
|
|
Net (loss) income from continuing operations
|
(19,261
|
)
|
|
3,000
|
|
|
December 31, 2018
|
||||||
|
As Reported
(ASC 606) |
|
As Adjusted
(ASC 605) |
||||
|
(in thousands)
|
||||||
Assets:
|
|
|
|
||||
Unbilled receivables, net
|
$
|
59,357
|
|
|
$
|
59,825
|
|
Inventories, net
|
24,111
|
|
|
24,447
|
|
||
Prepaid expenses
|
2,797
|
|
|
2,395
|
|
||
Liabilities:
|
|
|
|
|
|
||
Accrued expenses
|
$
|
17,236
|
|
|
$
|
16,834
|
|
Deferred revenue
|
1,622
|
|
|
3,365
|
|
||
Deferred tax liability, net
|
13,955
|
|
|
13,722
|
|
||
Equity:
|
|
|
|
|
|
||
Accumulated deficit
|
$
|
(138,709
|
)
|
|
$
|
(139,415
|
)
|
|
Year ended December 31, 2018
|
||||||
|
As Reported
(ASC 606) |
|
As Adjusted
(ASC 605) |
||||
|
(in thousands, except per share amounts)
|
||||||
Revenues
|
$
|
506,840
|
|
|
$
|
505,566
|
|
Cost of revenue, excluding amortization
|
374,838
|
|
|
374,502
|
|
||
Operating income
|
7,916
|
|
|
6,978
|
|
||
Loss before income taxes
|
(27,014
|
)
|
|
(27,952
|
)
|
||
Income tax benefit, net
|
(4,734
|
)
|
|
(4,967
|
)
|
||
Net loss
|
(22,280
|
)
|
|
(22,985
|
)
|
||
|
|
|
|
|
|
||
Loss per share
|
|
|
|
|
|
||
Basic
|
$
|
(0.45
|
)
|
|
$
|
(0.46
|
)
|
Diluted
|
$
|
(0.45
|
)
|
|
$
|
(0.46
|
)
|
Revenue by Customer Type and Contract Type
|
Year ended December 31, 2018
|
||
|
(in thousands)
|
||
Department of Defense
|
|
||
Cost Reimbursement
|
$
|
199,566
|
|
Time & Materials and Fixed-Price-Level-of-Effort
|
95,017
|
|
|
Firm-Fixed-Price
|
93,313
|
|
|
Total Department of Defense
|
387,896
|
|
|
|
|
|
|
Non-Department of Defense U.S. Government
|
|
|
|
Cost Reimbursement
|
6,351
|
|
|
Time & Materials and Fixed-Price-Level-of-Effort
|
76,139
|
|
|
Firm-Fixed-Price
|
12,870
|
|
|
Total Non-Department of Defense U.S. Government
|
95,360
|
|
|
|
|
|
|
Commercial and other
|
|
|
|
Cost Reimbursement
|
—
|
|
|
Time & Materials and Fixed-Price-Level-of-Effort
|
3,846
|
|
|
Firm-Fixed-Price
|
19,738
|
|
|
Total Commercial and other
|
23,584
|
|
|
|
|
||
Total Revenues
|
$
|
506,840
|
|
|
Balance Sheet Classification
|
|
December 31,
2018 |
|
December 31,
2017 |
||||
Assets:
|
|
|
(in thousands)
|
||||||
Contract assets
|
Unbilled receivables, net
|
|
$
|
59,357
|
|
|
$
|
37,785
|
|
Liabilities:
|
|
|
|
|
|
||||
Contract liabilities
|
Deferred revenue
|
|
$
|
1,622
|
|
|
$
|
6,090
|
|
Level 1
|
Inputs are unadjusted quoted prices in active markets for identical assets or liabilities the Company has the ability to access.
|
Level 2
|
Inputs are other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly.
|
Level 3
|
Inputs are unobservable for the asset or liability and rely on management's own assumptions about what market participants would use in pricing the asset or liability.
|
|
Balance Sheet Classification
|
|
December 31,
2018 |
|
December 31,
2017 |
||||
Liabilities:
|
|
|
(in thousands)
|
||||||
Derivatives
|
Other current liabilities
|
|
$
|
1,850
|
|
|
$
|
—
|
|
|
Classification of (loss) gain recognized
|
|
December 31,
2018 |
|
December 31,
2017 |
||||
Cash Flow Hedges:
|
|
|
(in thousands)
|
||||||
Interest rate swaps
|
Accumulated other comprehensive (loss) income, net of tax
|
|
$
|
(1,320
|
)
|
|
$
|
—
|
|
|
|
|
|
|
|
||||
Interest rate swaps
|
Interest expense
|
|
$
|
(315
|
)
|
|
$
|
—
|
|
|
|
December 31,
2018 |
|
December 31,
2017 |
||||
|
|
(in thousands)
|
||||||
Aircraft
|
|
$
|
12,474
|
|
|
$
|
27,567
|
|
Leasehold improvements
|
|
21,983
|
|
|
23,506
|
|
||
Manufacturing Equipment
|
|
6,116
|
|
|
7,778
|
|
||
Software Development Costs
|
|
2,111
|
|
|
2,111
|
|
||
Office Equipment
|
|
9,767
|
|
|
15,884
|
|
||
Total
|
|
52,451
|
|
|
76,846
|
|
||
Less: Accumulated Depreciation
|
|
(31,378
|
)
|
|
(40,705
|
)
|
||
Property and Equipment, net
|
|
$
|
21,073
|
|
|
$
|
36,141
|
|
December 31, 2018
|
||||||||||||
Intangible Asset Type
|
|
Gross
Book Value
|
|
Accumulated Amortization
|
|
Net
Book Value
|
||||||
Customer Relationships and Contracts
|
|
$
|
56,700
|
|
|
$
|
(13,096
|
)
|
|
$
|
43,604
|
|
Total
|
|
$
|
56,700
|
|
|
$
|
(13,096
|
)
|
|
$
|
43,604
|
|
December 31, 2017
|
||||||||||||
Intangible Asset Type
|
|
Gross
Book Value
|
|
Accumulated
Amortization
|
|
Net
Book Value
|
||||||
Customer Relationships and Contracts
|
|
$
|
66,513
|
|
|
$
|
(11,039
|
)
|
|
$
|
55,474
|
|
Software Technology and Other
|
|
2,162
|
|
|
(591
|
)
|
|
1,571
|
|
|||
Total
|
|
$
|
68,675
|
|
|
$
|
(11,630
|
)
|
|
$
|
57,045
|
|
Fiscal Year Ending
|
|
|
||||||||
2019
|
|
|
|
|
|
|
|
$
|
8,600
|
|
2020
|
|
|
|
|
|
|
|
6,998
|
|
|
2021
|
|
|
|
|
|
|
|
5,695
|
|
|
2022
|
|
|
|
|
|
|
|
4,634
|
|
|
2023
|
|
|
|
|
|
|
|
3,771
|
|
|
Thereafter
|
|
|
|
|
|
|
|
13,906
|
|
|
Total
|
|
|
|
|
|
|
|
$
|
43,604
|
|
|
|
|
December 31, 2018
|
|
December 31, 2017
|
||||||||
|
Maturity Date
|
|
Amount
|
|
Effective Rate
|
|
Amount
|
|
Effective Rate
|
||||
|
|
|
(in thousands)
|
|
|
|
(in thousands)
|
|
|
||||
Senior secured term loans:
|
|
|
|
|
|
|
|
|
|
||||
$215 million First Lien Term Loan
|
May 8, 2024
|
|
$
|
200,000
|
|
|
7.2%
|
|
$
|
—
|
|
|
—%
|
$75 million Second Lien Term Loan
|
May 8, 2025
|
|
75,000
|
|
|
12.0%
|
|
—
|
|
|
—%
|
||
$135 million Term Loan
|
April 4, 2022
(1)
|
|
—
|
|
|
—%
|
|
131,625
|
|
|
6.2%
|
||
$50 million Revolver
|
May 8, 2023
|
|
—
|
|
|
—%
|
|
—
|
|
|
—%
|
||
Convertible Senior Notes
|
July 15, 2019
|
|
22,608
|
|
|
7.4%
|
|
149,500
|
|
|
6.9%
|
||
Total
|
|
|
297,608
|
|
|
|
|
281,125
|
|
|
|
||
Unamortized discount/issuance costs
|
|
|
(6,644
|
)
|
|
|
|
(14,750
|
)
|
|
|
||
Total
|
|
|
$
|
290,964
|
|
|
|
|
$
|
266,375
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Reported as:
|
|
|
|
|
|
|
|
|
|
||||
Term loan – current portion, net of discount
|
|
|
$
|
—
|
|
|
|
|
$
|
6,750
|
|
|
|
Convertible senior notes – current portion, net of discount
|
|
|
22,040
|
|
|
|
|
—
|
|
|
|
||
Term loan – non-current portion, net of discount
|
|
|
268,924
|
|
|
|
|
120,627
|
|
|
|
||
Convertible senior notes – non-current portion, net of discount
|
|
|
—
|
|
|
|
|
138,998
|
|
|
|
||
Total
|
|
|
$
|
290,964
|
|
|
|
|
$
|
266,375
|
|
|
|
•
|
Eurodollar Loans will accrue interest, for any interest period, at the Eurodollar Rate (as defined in the First Lien Credit Agreement), plus an applicable margin of
4.5%
.
|
•
|
Base Rate Loans will accrue interest, for any interest period, at (a) a base rate per annum equal to the highest of (i) the Federal funds rate plus
0.5%
; (ii) the prime commercial lending rate announced by Royal Bank of Canada (RBC) from time to time as its prime lending rate; and (iii) the Eurodollar Rate for a one month interest period plus
1.0%
, plus (b) an applicable margin of
3.5%
.
|
•
|
The applicable margin for borrowings may be decreased if our consolidated net leverage ratio decreases.
|
•
|
Eurodollar Loans will accrue interest, for any interest period, at the Eurodollar Rate (as defined in the Second Lien Credit Agreement) plus an applicable margin of
8.75%
.
|
•
|
Base Rate Loans will accrue interest, for any interest period, at (a) a base rate per annum equal to the highest of (i) the Federal funds rate plus
0.5%
; (ii) the prime commercial lending rate announced by RBC from time to time as its prime lending rate; and (iii) the Eurodollar Rate for a one month interest period plus
1.0%
, plus (b) an applicable margin of
7.75%
.
|
|
Loss on Extinguishment of Debt
|
|
Capitalized and Amortized Over Life of New Issuances
|
|
Total
|
||||||
|
(in thousands)
|
||||||||||
New debt issuance costs
|
$
|
364
|
|
|
$
|
7,118
|
|
|
$
|
7,482
|
|
Previously incurred unamortized debt issuance costs or discount
|
3,571
|
|
|
348
|
|
|
3,919
|
|
|||
Total
|
$
|
3,935
|
|
|
$
|
7,466
|
|
|
$
|
11,401
|
|
|
|
Unrecognized (loss) gain on derivative instruments
|
||
|
|
(in thousands)
|
||
Balance at January 1, 2018
|
|
$
|
—
|
|
Other comprehensive loss
|
|
(2,117
|
)
|
|
Taxes
|
|
482
|
|
|
Reclassification from accumulated other comprehensive (loss) income
|
|
315
|
|
|
Balance at December 31, 2018
|
|
$
|
(1,320
|
)
|
2013 Stock Incentive Plan
|
|
|
|
Total equity available to issue
|
|
4,180,000
|
|
Total equity outstanding or exercised
|
|
2,937,265
|
|
Total equity remaining
|
|
1,242,735
|
|
|
|
Number of Shares
|
|
Option Exercise Price
|
|
Weighted- Average Exercise Price
|
|
Options Outstanding 01/01/2016
|
|
2,332,889
|
|
|
|
|
|
Options Exercisable 01/01/2016
|
|
1,965,633
|
|
|
|
|
|
Granted
|
|
—
|
|
|
|
|
|
Exercised
|
|
(82,550
|
)
|
|
$5.00 - $11.99
|
|
$6.50
|
Cancelled
|
|
(1,014,117
|
)
|
|
$5.00 - $17.71
|
|
$13.62
|
Options Outstanding 12/31/2016
|
|
1,236,222
|
|
|
|
|
|
Options Exercisable 12/31/2016
|
|
1,193,911
|
|
|
|
|
|
Granted
|
|
—
|
|
|
|
|
|
Exercised
|
|
(34,862
|
)
|
|
$5.00 - $10.00
|
|
$6.37
|
Cancelled
|
|
(321,550
|
)
|
|
$5.50 - $17.71
|
|
$13.07
|
Options Outstanding 12/31/2017
|
|
879,810
|
|
|
|
|
|
Options Exercisable 12/31/2017
|
|
879,810
|
|
|
|
|
|
Granted
|
|
—
|
|
|
|
|
|
Exercised
|
|
(75,836
|
)
|
|
$5.00 - $9.25
|
|
$5.28
|
Cancelled
|
|
(79,124
|
)
|
|
$5.00 - $17.11
|
|
$10.63
|
Options Outstanding 12/31/2018
|
|
724,850
|
|
|
|
|
|
Options Exercisable 12/31/2018
|
|
724,850
|
|
|
|
|
|
Exercise Price
|
|
Options Vested and Outstanding
|
|
Intrinsic Value
|
|
Weighted-Average Remaining Life (Years)
|
|||
$5.00 - $5.50
|
|
161,500
|
|
|
$
|
192,435
|
|
|
0.84
|
$6.90 - $7.66
|
|
135,700
|
|
|
—
|
|
|
3.06
|
|
$7.96 - $9.25
|
|
113,176
|
|
|
—
|
|
|
2.18
|
|
$9.50 - $11.67
|
|
90,100
|
|
|
|
|
|
3.31
|
|
$11.99 - $12.97
|
|
83,150
|
|
|
—
|
|
|
3.43
|
|
$13.00 - $14.33
|
|
60,224
|
|
|
—
|
|
|
3.83
|
|
$14.88 - $17.11
|
|
81,000
|
|
|
—
|
|
|
5.06
|
|
|
|
724,850
|
|
|
$
|
192,435
|
|
|
|
|
|
Unvested Shares
|
|
Outstanding unvested 01/01/2016
|
|
959,733
|
|
Granted
|
|
184,791
|
|
Vested
|
|
(335,353
|
)
|
Cancelled
|
|
(162,793
|
)
|
Outstanding unvested 12/31/2016
|
|
646,378
|
|
Granted
|
|
281,201
|
|
Vested
|
|
(244,831
|
)
|
Cancelled
|
|
(47,525
|
)
|
Outstanding unvested 12/31/2017
|
|
635,223
|
|
Granted
|
|
82,934
|
|
Vested
|
|
(302,733
|
)
|
Cancelled
|
|
(79,475
|
)
|
Outstanding unvested 12/31/2018
|
|
335,949
|
|
|
Unvested Units
|
|
Outstanding unvested January 1, 2016
|
—
|
|
Granted
|
130,265
|
|
Vested
|
(2,002
|
)
|
Cancelled
|
(5,969
|
)
|
Outstanding unvested December 31, 2016
|
122,294
|
|
Granted
|
337,423
|
|
Vested
|
(118,326
|
)
|
Cancelled
|
(3,968
|
)
|
Outstanding unvested December 31, 2017
|
337,423
|
|
Granted
|
430,175
|
|
Vested
|
(54,174
|
)
|
Cancelled
|
(49,250
|
)
|
Outstanding unvested December 31, 2018
|
664,174
|
|
|
Unvested Performance Units
|
|
Outstanding January 1, 2017
|
—
|
|
Granted
|
17,557
|
|
Vested
|
—
|
|
Cancelled
|
—
|
|
Outstanding unvested December 31, 2017
|
17,557
|
|
Granted
|
229,646
|
|
Vested
|
—
|
|
Cancelled
|
(6,250
|
)
|
Outstanding unvested December 31, 2018
|
240,953
|
|
|
Long-Term Incentive Share Rights
|
|
Outstanding January 1, 2016
|
400,000
|
|
Granted
|
1,070,000
|
|
Cancelled
|
(30,000
|
)
|
Outstanding December 31, 2016
|
1,440,000
|
|
Granted
|
600,000
|
|
Cancelled
|
(315,000
|
)
|
Outstanding December 31, 2017
|
1,725,000
|
|
Granted
|
270,000
|
|
Cancelled
|
(190,000
|
)
|
Outstanding December 31, 2018
|
1,805,000
|
|
Exercise Price
|
|
Warrants Outstanding and Vested
|
|
Weighted-Average
Remaining Life (Years)
|
|||
$
|
12.65
|
|
|
158,116
|
|
|
0.86
|
|
Year Ended December 31,
|
||||||||||
|
2018
|
|
2017
|
|
2016
|
||||||
|
(in thousands)
|
||||||||||
Current:
|
|
|
|
|
|
||||||
Federal
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
State
|
—
|
|
|
35
|
|
|
1
|
|
|||
|
—
|
|
|
35
|
|
|
1
|
|
|||
Deferred
|
(4,734
|
)
|
|
(10,897
|
)
|
|
2,451
|
|
|||
Total provision for income taxes
|
$
|
(4,734
|
)
|
|
$
|
(10,862
|
)
|
|
$
|
2,452
|
|
|
December 31, 2018
|
|
December 31, 2017
|
||||||||||||
|
Asset
|
|
Liability
|
|
Asset
|
|
Liability
|
||||||||
|
(in thousands)
|
||||||||||||||
Net operating loss
|
$
|
55,622
|
|
|
$
|
—
|
|
|
$
|
52,006
|
|
|
$
|
—
|
|
Accrued compensation
|
3,314
|
|
|
—
|
|
|
2,979
|
|
|
—
|
|
||||
Share based compensation
|
3,169
|
|
|
—
|
|
|
2,811
|
|
|
—
|
|
||||
Tenant improvement allowance
|
381
|
|
|
—
|
|
|
168
|
|
|
—
|
|
||||
Inventory reserves
|
904
|
|
|
—
|
|
|
935
|
|
|
—
|
|
||||
Other deferred tax assets
|
2,212
|
|
|
—
|
|
|
2,149
|
|
|
—
|
|
||||
Tax credits
|
1,215
|
|
|
—
|
|
|
1,665
|
|
|
—
|
|
||||
Other deferred tax liabilities
|
—
|
|
|
(16
|
)
|
|
—
|
|
|
(285
|
)
|
||||
Convertible debt
|
—
|
|
|
(86
|
)
|
|
—
|
|
|
(735
|
)
|
||||
Deferred revenue – current
|
—
|
|
|
(626
|
)
|
|
—
|
|
|
(1,329
|
)
|
||||
Prepaid expenses
|
—
|
|
|
(119
|
)
|
|
—
|
|
|
(128
|
)
|
||||
Depreciation
|
1,655
|
|
|
—
|
|
|
576
|
|
|
—
|
|
||||
Intangible assets amortization – definite lived
|
883
|
|
|
—
|
|
|
338
|
|
|
—
|
|
||||
Intangible assets amortization – indefinite lived
|
—
|
|
|
(31,177
|
)
|
|
—
|
|
|
(26,263
|
)
|
||||
Internally developed software
|
—
|
|
|
(254
|
)
|
|
—
|
|
|
(377
|
)
|
||||
Interest limitation
|
4,247
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Unrecognized gain on derivatives
|
492
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Less: Valuation allowance
|
(55,771
|
)
|
|
—
|
|
|
(53,877
|
)
|
|
—
|
|
||||
Deferred tax assets and liabilities, net of valuation allowance
|
$
|
18,323
|
|
|
$
|
(32,278
|
)
|
|
$
|
9,750
|
|
|
$
|
(29,117
|
)
|
Net deferred liability
|
|
|
$
|
(13,955
|
)
|
|
|
|
$
|
(19,367
|
)
|
|
Year Ended December 31,
|
||||||||||
|
2018
|
|
2017
|
|
2016
|
||||||
|
(in thousands)
|
||||||||||
Unrecognized tax benefits at beginning of year
|
$
|
5,301
|
|
|
$
|
4,629
|
|
|
$
|
483
|
|
Increases as a result of tax positions taken in a prior period
|
—
|
|
|
2
|
|
|
—
|
|
|||
Increases as a result of tax positions taken in a prior periods rate change
|
—
|
|
|
670
|
|
|
—
|
|
|||
Increases as a result of tax positions taken during the current period
|
718
|
|
|
—
|
|
|
4,160
|
|
|||
Decreases as a result of tax positions taken in a prior period
|
(4,638
|
)
|
|
—
|
|
|
(14
|
)
|
|||
Unrecognized tax benefits at end of year
|
$
|
1,381
|
|
|
$
|
5,301
|
|
|
$
|
4,629
|
|
Major Jurisdictions
|
|
Open Years
|
United States
|
|
2012 through 2017
|
California
|
|
2013 through 2017
|
Maryland
|
|
2015 through 2017
|
Massachusetts
|
|
2015 through 2017
|
Virginia
|
|
2015 through 2017
|
|
Year Ended
|
|||||||
|
December 31,
2018 |
|
December 31, 2017
|
|
December 31, 2016
|
|||
|
|
|
|
|
|
|||
Department of Defense
|
76
|
%
|
|
78
|
%
|
|
92
|
%
|
Non-Department of Defense U.S. Government
|
19
|
%
|
|
16
|
%
|
|
2
|
%
|
Commercial and other
|
5
|
%
|
|
6
|
%
|
|
6
|
%
|
|
December 31, 2016
|
||
Receivables
|
$
|
3,000
|
|
|
|
||
Accounts payable and other accrued expenses
|
$
|
1,185
|
|
|
Year ended December 31, 2016
|
||
Revenues
|
$
|
2,894
|
|
Costs of revenues, excluding amortization
|
1,881
|
|
|
Operating expenses
|
16,225
|
|
|
Impairment of goodwill
|
6,980
|
|
|
Intangible amortization expense
|
381
|
|
|
Loss on disposal of Hexis
|
5,509
|
|
|
Loss before income taxes from discontinued operations
|
$
|
(28,082
|
)
|
Income tax benefit, net on discontinued operations
|
(489
|
)
|
|
Loss on discontinued operations
|
$
|
(27,593
|
)
|
|
Year ended December 31, 2016
|
||
Non-cash operating items
|
|
||
Depreciation and amortization expense
|
$
|
1,015
|
|
Impairment of goodwill
|
6,980
|
|
|
Loss on disposal of long-lived assets
|
$
|
3,568
|
|
Cash flows from investing activities
|
|
||
Acquisitions, net of cash acquired
|
$
|
—
|
|
Purchases of property and equipment
|
(471
|
)
|
|
Proceeds from Hexis asset divestiture
|
$
|
5,000
|
|
Exhibit No.
|
|
Exhibit Description
|
|
|
2.1
|
|
|
(22)
|
|
2.2
|
|
|
(23)
|
|
3.1
|
|
|
(2)
|
|
3.2
|
|
|
(9)
|
|
3.3
|
|
|
(15)
|
|
4.1
|
|
|
(1)
|
|
4.2
|
|
|
(14)
|
|
4.3
|
|
|
(14)
|
|
4.4
|
|
|
(14)
|
|
10.1*
|
|
|
(1)
|
|
10.2*
|
|
|
(1)
|
|
10.3*
|
|
|
(1)
|
|
10.4*
|
|
|
(1)
|
|
10.5*
|
|
|
(1)
|
|
10.6*
|
|
|
(11)
|
|
10.7*
|
|
|
(11)
|
|
10.8*
|
|
|
(11)
|
|
10.9*
|
|
|
(1)
|
|
10.10*
|
|
|
(1)
|
|
10.11*
|
|
|
(1)
|
|
10.12*
|
|
|
(1)
|
|
10.13
|
|
|
(10)
|
|
10.14*
|
|
|
(1)
|
|
10.15*
|
|
|
(6)
|
|
10.16*
|
|
|
(11)
|
|
10.17*
|
|
|
(11)
|
|
10.18*
|
|
|
X
|
|
10.19*
|
|
|
X
|
|
10.20*
|
|
|
(16)
|
|
10.21*
|
|
|
(20)
|
10.22
|
|
|
(24)
|
|
10.23
|
|
|
(25)
|
|
10.24*
|
|
|
(29)
|
|
10.25*
|
|
|
(33)
|
|
10.26*
|
|
|
(34)
|
|
10.27*
|
|
|
(35)
|
|
10.28
|
|
|
(36)
|
|
10.29
|
|
|
X
|
|
10.30
|
|
|
X
|
|
10.31
|
|
|
X
|
|
14.1
|
|
|
(2)
|
|
21.1
|
|
|
X
|
|
23.1
|
|
|
X
|
|
23.2
|
|
|
X
|
|
31.1
|
|
|
X
|
|
31.2
|
|
|
X
|
|
32.1**
|
|
|
X
|
|
101.INS
|
|
XBRL Instance Document
|
|
X
|
101.SCH
|
|
XBRL Taxonomy Extension Schema Document
|
|
X
|
101.CAL
|
|
XBRL Taxonomy Extension Calculation Linkbase Document
|
|
X
|
101.LAB
|
|
XBRL Taxonomy Extension Label Linkbase Document
|
|
X
|
101.PRE
|
|
XBRL Taxonomy Extension Presentation Linkbase Document
|
|
X
|
101.DEF
|
|
XBRL Taxonomy Extension Definition Linkbase Document
|
|
X
|
|
X
|
Filed herewith
|
*
|
Indicates management contract of compensatory agreements
|
**
|
These exhibits are being “furnished” with this periodic report and are not deemed “filed” with the Securities and Exchange Commission and are not incorporated by reference in any filing of the Company under the Securities Act of 1933 or the Securities Exchange Act of 1934, whether made before or after the date hereof and irrespective of any general incorporation by reference language in any such filing.
|
(1)
|
Incorporated by reference to the corresponding Exhibit number to the Registrant's Registration Statement on Form S-1, as amended (File No. 333-167608).
|
(2)
|
Filed as Exhibits 3.1 and 14.1, respectively, to Registrant's Form 10-K filed March 29, 2011, File No. 001-34891.
|
(3)
|
[Reserved]
|
(4)
|
[Reserved]
|
(5)
|
[Reserved]
|
(6)
|
Filed as Annex B to Registrant's Definitive Proxy Statement on Schedule 14A filed April 6, 2018.
|
(7)
|
[Reserved]
|
(8)
|
[Reserved]
|
(9)
|
Filed as Exhibit 3.1 to Registrant's Current Report on Form 8-K filed July 15, 2014, File No. 001-34891.
|
(10)
|
Filed as Exhibit 10.20 to the Registrant's Registration Statement on Form S-1, as amended File No. 333-167608.
|
(11)
|
Filed as Exhibits 10.6, 10.7, 10.8, 10.28 and 10.29, respectively, to the Registrant's Annual Report on Form 10-K for the year ended December 31, 2012, filed March 12, 2013, File No. 001-34891.
|
(12)
|
[Reserved]
|
(13)
|
[Reserved]
|
(14)
|
Filed as Exhibits 4.1, 4.2 and 4.3, respectively to the Registrant's Current Report on Form 8-K filed July 21, 2014, File No. 001-38491.
|
(15)
|
Filed as Exhibit 3.1 to the Registrant's Current Report on Form 8-K filed August 15, 2014, File No. 001-34891.
|
(16)
|
Filed as Exhibit 10.1 to the Registrant's Current Report on Form 8-K, filed August 31, 2015, File No. 001-34891.
|
(17)
|
[Reserved]
|
(18)
|
[Reserved]
|
(19)
|
[Reserved]
|
(20)
|
Filed as Exhibit 10.2 to the Registrant's Current Report on Form 8-K, filed May 27, 2016.
|
(21)
|
[Reserved]
|
(22)
|
Filed as Exhibit 2.1 to the Registrant’s Current Report on Form 8-K, filed April 7, 2017.
|
(23)
|
Filed as Exhibit 2.2 to the Registrant’s Current Report on Form 8-K, filed April 7, 2017.
|
(24)
|
Filed as Exhibit 10.1 to the Registrant’s Current Report on Form 8-K, filed May 8, 2018.
|
(25)
|
Filed as Exhibit 10.2 to the Registrant’s Current Report on Form 8-K, filed May 8, 2018.
|
(26)
|
[Reserved]
|
(27)
|
[Reserved]
|
(28)
|
[Reserved]
|
(29)
|
Filed as Exhibit 10.3 to the Registrant’s Current Report on Form 8-K, filed May 15, 2017.
|
(30)
|
[Reserved]
|
(31)
|
[Reserved]
|
(32)
|
[Reserved]
|
(33)
|
Filed as Exhibit 10.34 to the Registrant’s Annual Report on Form 10-K, filed March 16, 2018.
|
(34)
|
Filed as Exhibit 10.35 to the Registrant’s Annual Report on Form 10-K, filed March 16, 2018.
|
(35)
|
Filed as Exhibit 10.36 to the Registrant’s Annual Report on Form 10-K, filed March 16, 2018.
|
(36)
|
Filed as Exhibit 10.1 to the Registrant’s Current Report on Form 8-K, filed June 6, 2018.
|
|
THE KEYW HOLDING CORPORATION
(Registrant)
|
|
|
By:
|
/s/ William J. Weber
|
|
|
William J. Weber
President and Chief Executive Officer;
Principal Executive Officer
|
|
|
March 12, 2019
|
|
|
|
|
By:
|
/s/ Michael J. Alber
|
|
|
Michael J. Alber
Executive Vice President and Chief Financial Officer;
Principal Financial and Accounting Officer
|
|
|
March 12, 2019
|
/s/ Deborah A. Bonanni
|
|
/s/ Arthur L. Money
|
Deborah A. Bonanni, Director
|
|
Arthur L Money, Director
|
March 12, 2019
|
|
March 12, 2019
|
|
|
|
/s/ William I. Campbell
|
|
/s/ Caroline S. Pisano
|
William I. Campbell, Director
|
|
Caroline S. Pisano, Director
|
March 12, 2019
|
|
March 12, 2019
|
|
|
|
/s/ Shephard Hill
|
|
/s/ Mark Sopp
|
Shephard Hill, Director
|
|
Mark Sopp, Director
|
March 12, 2019
|
|
March 12, 2019
|
|
|
|
/s/ J. Chris Inglis
|
|
/s/ William J. Weber
|
J. Chris Inglis, Director
|
|
William J. Weber, Director
|
March 12, 2019
|
|
March 12, 2019
|
|
|
|
/s/ Kenneth A. Minihan
|
|
|
Kenneth A. Minihan, Director
|
|
|
March 12, 2019
|
|
|
Shares
|
|
Vesting Dated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restricted Stock/ Nontransferability
|
This grant is an award of Stock in the number of shares set forth on the cover sheet, at the purchase price set forth on the cover sheet, and subject to the vesting conditions described below ("Restricted Stock"). To the extent not yet vested, your Restricted Stock may not be transferred, assigned, pledged or hypothecated, whether by operation of law or otherwise, nor may the Restricted Stock be made subject to execution, attachment or similar process.
|
Vesting
|
The Company will issue your Restricted Stock in your name as of the Grant Date.
Your right to the Stock under this Restricted Stock Agreement vests per the vesting schedule as shown on the cover sheet provided you then continue in Service. The resulting aggregate number of vested shares of Stock will be rounded to the nearest whole number, and you cannot vest in more than the number of shares covered by this grant.
No additional shares of Stock will vest after your Service has terminated for any reason,
provided
,
however
, that if your Service is terminated on account of your death or Disability, any unvested shares of Stock will become fully vested.
|
Vesting Upon Change of Control
|
Notwithstanding the foregoing, in the event of a Change of Control, immediately prior to the scheduled consummation of a Change of Control, all restricted stock subject to performance requirements shall become immediately vested at the target number of shares set forth in this Agreement.
|
Forfeiture of Unvested Stock
|
Except as provided in this Agreement, in the event that your Service terminates for any reason, you will forfeit to the Company all of the shares of Stock subject to this grant that have not yet vested.
|
Issuance
|
The issuance of the Stock under this grant shall be evidenced in such a manner as the Company, in its discretion, will deem appropriate, including, without limitation, book-entry, registration or issuance of one or more Stock certificates, with any unvested Restricted Stock bearing the appropriate restrictions imposed by this Agreement. As your interest in the Stock vests as described above, the recordation of the number of shares of Restricted Stock attributable to you will be appropriately modified. To the extent certificates are issued with regard to unvested Stock, such certificates will be held in escrow with the Secretary of the Company while the Stock remains unvested.
|
Withholding Taxes
|
You agree, as a condition of this grant, that you will make acceptable arrangements, as determined by the Company in its sole discretion, to pay any withholding or other taxes that may be due as a result of the payment of dividends or the vesting of Stock acquired under this grant. In the event that the Company determines that any federal, state, local or foreign tax or withholding payment is required relating to the payment of dividends or the vesting of shares arising from this grant, the Company shall have the right to require such payments from you, or withhold such amounts from other payments due to you from the Company or any Affiliate (including by repurchasing vested shares of Stock under this Agreement).
|
Section 83(b)
Election
|
Under Section 83 of the Internal Revenue Code of 1986, as amended (the "Code"), the difference between the purchase price paid for the shares of Stock and their fair market value on the date any forfeiture restrictions applicable to such shares lapse will be reportable as ordinary income at that time. For this purpose, "forfeiture restrictions" include the forfeiture as to unvested Stock described above. You may elect to be taxed at the time the shares are acquired, rather than when such shares cease to be subject to such forfeiture restrictions, by filing an election under Section 83(b) of the Code with the Internal Revenue Service within thirty (30) days after the Grant Date. You will have to make a tax payment to the extent the purchase price is less than the fair market value of the shares on the Grant Date. No tax payment will have to be made to the extent the purchase price is at least equal to the fair market value of the shares on the Grant Date. The form for making this election is attached as
Exhibit A
hereto. Failure to make this filing within the thirty (30) day period will result in the recognition of ordinary income by you (in the event the fair market value of the shares as of the vesting date exceeds the purchase price) as the forfeiture restrictions lapse.
YOU ACKNOWLEDGE THAT IT IS YOUR SOLE RESPONSIBILITY, AND NOT THE COMPANY'S, TO FILE A TIMELY ELECTION UNDER SECTION 83(b), EVEN IF YOU REQUEST THE COMPANY OR ITS REPRESENTATIVES TO MAKE THIS FILING ON YOUR BEHALF. YOU ARE RELYING SOLELY ON YOUR OWN ADVISORS WITH RESPECT TO THE DECISION AS TO WHETHER OR NOT TO FILE ANY 83(b) ELECTION.
|
Market Stand-off Agreement
|
In connection with any underwritten public offering by the Company of its equity securities pursuant to an effective registration statement filed under the Securities Act of 1933 (the "Securities Act"), you agree not to sell, make any short sale of, loan, hypothecate, pledge, grant any option for the purchase of, or otherwise dispose or transfer for value or agree to engage in any of the foregoing transactions with respect to any shares of vested Stock without the prior written consent of the Company or its underwriters, for such period of time after the effective date of such registration statement as may be requested by the Company or the underwriters (not to exceed 180 days in length).
|
Non-Solicitation, Non-Interference
|
In consideration of (i) the grant of the option under this Agreement, and (ii) your continued employment with the Company, its parent, or a subsidiary of the Company or its parent (each a “Covered Party”), you hereby agree to the following:
During the period of your employment with the Company or another Covered Party and for a period ending six (6) months following the termination of your employment, for any reason, with a
Covered Party
, except with the prior written consent of the Company, you will not:
•
Solicit or induce, or in any manner attempt to solicit or induce, any Customer (as defined Below), to (1) cease being a customer of or to not become a customer of Covered Party, (2) divert any business of such Customer from a Covered Party, (3) reduce the amount of business that such Customer conducts or intends to conduct with any Covered Party; or (4) otherwise interfere with, disrupt, or attempt to interfere with or disrupt, the relationship between a Covered Party and any of its customers or clients, suppliers, consultants, or employees;
•
Participate in competition for the award of or perform services in connection with (1) any contract, task order or program for which a Covered Party is competing, or (2) any contract, task order or program that would replace, supersede, succeed, reduce or diminish any Covered Party’s work under a contract, task order or program;
•
Make false or disparaging statements regarding any Covered Party, or any of Covered Party’s respective officers, directors, shareholders, employees or affiliates in matters relating to a Covered Party or its business.
For purposes of this Agreement a “
Customer
” means any client or customer of the Company at the time of the termination of your employment or any prospective customer to which the Company has made or intends to make a proposal at such time, and includes in addition to any party with whom a Covered Party has a contract, the specific program office or directorate of a federal government department or agency to which products or services are ultimately provided under a contract to which a Covered Party is a party.
|
Retention Rights
|
This Agreement does not give you the right to be retained or employed by the Company (or any of its Affiliates) in any capacity. The Company (and any Affiliates) reserves the right to terminate your Service at any time and for any reason.
|
Shares
|
|
Vesting Dated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restricted Stock Unit/ Nontransferability
|
This grant is an award of Restricted Stock Units in the number of Units set forth on the cover sheet, at the purchase price set forth on the cover sheet, and subject to the vesting conditions described below (“Restricted Stock Units”). To the extent not yet vested, your Restricted Stock Units may not be transferred, assigned, pledged or hypothecated, whether by operation of law or otherwise, nor may the Restricted Stock Units be made subject to execution, attachment or similar process.
|
Vesting
|
Upon vesting you will receive one share of Common Stock (the “Stock”) for each vested Restricted Stock Unit.
Your right to the Stock under this Restricted Stock Unit Agreement vests per the vesting and/or performance schedule as shown on the cover sheet provided you then continue in Service. The resulting aggregate number of shares of Stock will be rounded to the nearest whole number, and you cannot vest in more than the number of Restricted Stock Units covered by this grant.
No additional Restricted Stock Units will vest after your Service has terminated for any reason,
provided
,
however
, that if your Service is terminated on account of your death or Disability, any unvested Restricted Stock Units will become fully vested.
|
Vesting Upon Change of Control
|
Notwithstanding the foregoing, in the event of a Change of Control, immediately prior to the scheduled consummation of a Change of Control, all restricted stock subject to performance requirements shall become immediately vested at the target number of shares set forth in this Agreement.
|
Forfeiture of Unvested Restricted Stock Units
|
Except as provided in this Agreement, in the event that your Service terminates for any reason, you will forfeit to the Company all of the Restricted Stock Units subject to this grant that have not yet vested.
|
Issuance of Stock upon Units Vesting
|
The issuance of the Stock under this grant shall be evidenced in such a manner as the Company, in its discretion, will deem appropriate, including, without limitation, book-entry, registration or issuance of one or more Stock certificates.
|
Withholding Taxes
|
You agree, as a condition of this grant, that you will make acceptable arrangements, as determined by the Company in its sole discretion, to pay any withholding or other taxes that may be due as a result of the vesting of the Restricted Stock Units acquired under this grant. In the event that the Company determines that any federal, state, local or foreign tax or withholding payment is required relating to the vesting of Restricted Stock Units arising from this grant, the Company shall have the right to require such payments from you, or withhold such amounts from other payments due to you from the Company or any Affiliate.
|
Market Stand-off Agreement
|
In connection with any underwritten public offering by the Company of its equity securities pursuant to an effective registration statement filed under the Securities Act of 1933 (the "Securities Act"), you agree not to sell, make any short sale of, loan, hypothecate, pledge, grant any option for the purchase of, or otherwise dispose or transfer for value or agree to engage in any of the foregoing transactions with respect to any shares of vested Stock without the prior written consent of the Company or its underwriters, for such period of time after the effective date of such registration statement as may be requested by the Company or the underwriters (not to exceed 180 days in length).
|
Non-Solicitation, Non-Interference
|
In consideration of (i) the grant of the option under this Agreement, and (ii) your continued employment with the Company, its parent, or a subsidiary of the Company or its parent (each a “Covered Party”), you hereby agree to the following:
During the period of your employment with the Company or another Covered Party and for a period ending six (6) months following the termination of your employment, for any reason, with a Covered Party, except with the prior written consent of the Company, you will not:
•
For Employee’s own account or for the account of any other Person (as defined below), directly or indirectly: (i) recruit, solicit, offer to hire, induce or attempt to induce, encourage to terminate or otherwise adversely affect or interfere with the relationship between the Company and any person who was employed by, or otherwise engaged to perform services for, the Company or its affiliates within the twelve-month period prior to Employee’s termination date (a “
Covered Employee
”) for employment or retention as a consultant or service provider or (ii) hire, or permit or facilitate the hire of, a Covered Employee, participate in the process of hire of any Covered Employee, or permit the hire of any Covered Employee where such Covered Employee would report directly or indirectly to Employee, or provide names or other information about a Covered Employee to any Person under circumstances which could lead to the use of that information for the purposes of recruiting or hiring
•
Solicit or induce, or in any manner attempt to solicit or induce, any Customer (as defined Below), to (1) cease being a customer of or to not become a customer of Covered Party, (2) divert any business of such Customer from a Covered Party, (3) reduce the amount of business that such Customer conducts or intends to conduct with any Covered Party; or (4) otherwise interfere with, disrupt, or attempt to interfere with or disrupt, the relationship between a Covered Party and any of its customers or clients, suppliers, consultants, or employees;
•
Participate in competition for the award of or perform services in connection with (1) any contract, task order or program for which a Covered Party is competing, or (2) any contract, task order or program that would replace, supersede, succeed, reduce or diminish any Covered Party’s work under a contract, task order or program;
•
Make false or disparaging statements regarding any Covered Party, or any of Covered Party’s respective officers, directors, shareholders, employees or affiliates in matters relating to a Covered Party or its business.
For purposes of this Agreement a “
Customer
” means any client or customer of the Company at the time of the termination of your employment or any prospective customer to which the Company has made or intends to make a proposal at such time, and includes in addition to any party with whom a Covered Party has a contract, the specific program office or directorate of a federal government department or agency to which products or services are ultimately provided under a contract to which a Covered Party is a party.
|
Retention Rights
|
This Agreement does not give you the right to be retained or employed by the Company (or any of its Affiliates) in any capacity. The Company (and any Affiliates) reserves the right to terminate your Service at any time and for any reason. Nothing in this Retention Rights section shall be construed to contravene the terms of any separate employment agreement between you and the Company.
|
No Shareholder Rights
|
Unless and until shares are issued in satisfaction of the Company’s obligations under this Agreement, in the time and manner specified above, you will have no rights as a Shareholder.
|
Adjustments
|
In the event of a stock split, a stock dividend or a similar change in the Company stock, the number of Restricted Stock Units covered by this grant may be adjusted (and rounded down to the nearest whole number) pursuant to the Plan. Your Restricted Stock Units shall be subject to the terms of the agreement of merger, liquidation or reorganization in the event the Company is subject to such corporate activity in accordance with the terms of the Plan.
|
Applicable Law
|
This Agreement will be interpreted and enforced under the laws of the State of Maryland, other than any conflicts or choice of law rule or principle that might otherwise refer construction or interpretation of this Agreement to the substantive law of another jurisdiction.
|
The Plan
|
The text of the Plan is incorporated in this Agreement by reference.
This Agreement and the Plan constitute the entire understanding between you and the Company regarding this grant of Restricted Stock Units. Any prior agreements, commitments or negotiations concerning this grant are superseded.
|
1.
|
Section 2.1(a) is amended by deleting the words “annual bonus of up to seventy-five percent (75%)” and replacing them with the words “annual bonus of up to eighty percent (80%)”.
|
2.
|
Section 2.2(g) is hereby deleted in its entirety and replaced with the following language:
|
3.
|
The following language shall be added to the end of Section 4.3, immediately following the sentence ending with “under the Affordable Care Act”:
|
4.
|
Section 7.3 of the Stock Incentive Plan is hereby deleted in its entirety and replaced with the following language:
|
5.
|
Capitalized terms used in this First Amendment shall have the meaning assigned to such terms in the Employment Agreement unless otherwise provided in this First Amendment.
|
6.
|
Except as modified herein, the Employment Agreement and all of the terms and provisions thereof shall remain unmodified and in full force and effect as originally written.
|
THE KEYW CORPORATION:
|
|
EMPLOYEE:
|
/s/ William J. Weber
|
|
/s/ John Sutton
|
William J. Weber
|
|
John Sutton
|
President and Chief Executive Officer
|
|
EVP and Chief Operating Officer
|
1.
|
Section 2.1(a) is amended by deleting the words “an annual bonus up to forty percent (40%)” and replacing them with the words “an annual bonus up to fifty percent (50%)”.
|
2.
|
Section 2.1(g) is hereby deleted in its entirety and replaced with the following language:
|
3.
|
The following language shall be added to the end of Section 4.3, immediately following the sentence ending with “under the Affordable Care Act”:
|
4.
|
Capitalized terms used in this Second Amendment shall have the meaning assigned to such terms in the Employment Agreement unless otherwise provided in this Second Amendment.
|
5.
|
Except as modified herein, the Employment Agreement and all of the terms and provisions thereof shall remain unmodified and in full force and effect as originally written.
|
THE KEYW CORPORATION:
|
|
EMPLOYEE:
|
/s/ William J. Weber
|
|
/s/ Philip Luci, Jr.
|
William J. Weber
|
|
Philip Luci, Jr.
|
President and Chief Executive Officer
|
|
EVP and General Counsel
|
1.
|
Section 2.1(g) of the Employment Agreement is hereby deleted in its entirety and replaced with the following language:
|
2.
|
Section 4.2 of the Employment Agreement is amended by deleting the word “SICP” and replacing it with the word “AIP”.
|
3.
|
Section 4.3 of the Employment Agreement is amended by deleting the word “SICP” and replacing it with the word “AIP”.
|
4.
|
Section 4.3 of the Employment Agreement is further amended by deleting the words “(ii) compensation and benefits set forth in Sections 4.2(i) and 4.2(iv)” and replacing them with the words “(ii) compensation and benefits set forth in Sections 4.2(i) and 4.2(v)”.
|
5.
|
Section 4.3 of the Employment Agreement is further amended by adding the following language to the end of Section 4.3, immediately following the sentence ending with “under the Affordable Care Act”:
|
6.
|
Section 7.3 of the Stock Incentive Plan included as Exhibit A of the Employment Agreement is hereby deleted in its entirety and replaced with the following language:
|
7.
|
Capitalized terms used in this Second Amendment shall have the meaning assigned to such terms in the Employment Agreement unless otherwise provided in this Second Amendment.
|
8.
|
Except as modified herein, the Employment Agreement and all of the terms and provisions thereof shall remain unmodified and in full force and effect as originally written.
|
THE KEYW CORPORATION:
|
|
EMPLOYEE:
|
/s/ William J. Weber
|
|
/s/ Kirk Herdman
|
William J. Weber
|
|
Kirk Herdman
|
President and Chief Executive Officer
|
|
EVP, Business Development and Strategy
|
Name
|
Jurisdiction of Organization
|
|
|
The KeyW Corporation
|
Maryland
|
|
|
Aeroptic, LLC (subsidiary of The KeyW Corporation)
|
Massachusetts
|
|
|
GeoVantage, Inc. (subsidiary of Aeroptic, LLC)
|
Delaware
|
|
|
Sotera Defense Solutions, Inc. (subsidiary of The KeyW Corporation)
|
Delaware
|
|
|
Potomac Fusion, LLC (subsidiary of Sotera Defense Solutions, Inc.)
|
Delaware
|
1.
|
I have reviewed this annual report on Form 10-K of The KeyW Holding Corporation;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15 (e) and 15d-15 (e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15-d-15(f)) for the registrant and have:
|
a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
c)
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
d)
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
5.
|
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
Date:
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March 12, 2019
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/s/ William J. Weber
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|
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William J. Weber
|
|
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President and Chief Executive Officer
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1.
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I have reviewed this annual report on Form 10-K of The KeyW Holding Corporation;
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2.
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Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
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3.
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Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
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4.
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The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15 (e) and 15d-15 (e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15-d-15(f)) for the registrant and have:
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a)
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Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
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b)
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Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
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c)
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Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
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d)
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Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
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5.
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The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
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a)
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All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
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b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
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Date:
|
March 12, 2019
|
/s/ Michael J. Alber
|
|
|
Michael J. Alber
|
|
|
Executive Vice President and Chief Financial Officer
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Date:
|
March 12, 2019
|
By:
|
/s/ William J. Weber
|
|
|
|
William J. Weber
|
|
|
|
President and Chief Executive Officer
|
Date:
|
March 12, 2019
|
By:
|
/s/ Michael J. Alber
|
|
|
|
Michael J. Alber
|
|
|
|
Executive Vice President and Chief Financial Officer
|