Reporting financial results for the first time, CSRA Inc. [CSRA] on Wednesday posted lower net income on separation and merger costs while sales rose in the third quarter.
Pre-tax expenses associated with the separation from CSC [CSC] were $44 million and CSRA also incurred a month of amortization costs related to its acquisition of SRA International on Nov. 30, 2015.
Sales increased 3 percent to just over $1 billion from $999 million a year ago. The results include one month of revenue from SRA. If SRA’s results were factored in for the full quarter, pro forma sales fell 5 percent to just under $1.3 billion driven by a reduction on the Army Logistics Modernization program and lower material purchases on several contracts with federal civilian agencies.
At the operating level, pro forma sales fell 13 percent to $545 million in CSRA’s Defense and Intelligence segment while Civil segment sales were up nearly 2 percent to $727 million.
Net income slipped 12 percent to $48.4 million, 29 cents earnings per share (EPS), from $55.1 million (40 cents EPS). Adjusted for non-recurring items, per share earnings were 48 cents in the quarter, nine cents above consensus estimates.
Larry Prior, CSRA’s president and CEO, said on the company’s earnings call that although sales were lighter than expected, the company is positioned for “sustainable organic growth.” Bookings in the quarter were a robust $1.8 billion driven by a potential $967 million Data Center 1 contract with the Department of Homeland Security to provide an array of managed services, private cloud offerings, hardware and software, network and security infrastructure, applications support, and project management.
CSRA maintained its long-terms expectations of 2 to 3 percent annual sales growth. In the fourth quarter pro forma sales are expected to be around $1.3 billion, which would be 1 to 5 percent lower than a year ago. Prior said the “market climate should support a return to growth” as “our customers are operating with appropriated budgets that show growth.”
Prior also highlighted the strength of the adjusted per share results, noting that the company is ahead of schedule in obtaining cost savings synergies with the SRA deal.
Backlog at the end of the quarter stood at $15.3 billion with $2.6 billion funded.