SECTION 2. FINANCIAL INFORMATION
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| ITEM 2.02. |
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Results of Operations and Financial Condition |
The information set forth under Item 8.01 is hereby incorporated by reference into this Item 2.02.
Item 8.01 Other Events
The information set forth in this Current Report on Form 8-K will be included as part of the
financial information being provided (“Financial Information”) by affiliates of Providence Equity
Partners LLC (“Providence”) to potential lenders to finance the merger consideration pursuant to
the Agreement and Plan of Merger, dated as of March 31, 2011, with Providence, whereby SRA
International, Inc. (“SRA”) would become a wholly-owned subsidiary of Providence. The transaction
is currently expected to be financed by a combination of cash, contribution of shares of SRA common
stock and debt financing, including a $875 million senior secured term loan facility, a $100
million senior secured revolving credit facility and a $415 million senior unsecured interim loan
facility (or alternatively, senior unsecured fixed rate notes in a high yield offering pursuant to
Rule 144A).
Subsequent to its June 30, 2010 fiscal year end, in the second quarter of fiscal 2011, SRA
sold the Airport Operations Solutions division of Era Systems Corporation (“Era”), and in the third
quarter of fiscal 2011, SRA made the decision to divest the remainder of Era and its contract
research organization, SRA Global Clinical Development LLC (“GCD”). SRA is filing this Form 8-K to
present Era and GCD as discontinued operations in the Financial Information.
Attached to this Form 8-K and incorporated herein by reference are Exhibits 99.1, 99.2 and
99.3, respectively, “Item 6: Selected Financial Data”, “Item 7: Management’s Discussion and
Analysis of Financial Condition and Results of Operations” and “Item 8: Financial Statements and
Supplementary Data”; which reflect the presentation of Era and GCD as discontinued operations.
Except for the discontinued operations reclassification and to update footnote 17 “Subsequent
Events” in Exhibit 99.3, the information in Exhibits 99.1, 99.2 and 99.3 has not been updated or
amended to reflect any other information, uncertainties, transactions, risks, events or trends
occurring or known to management, including other matters that have occurred subsequent to August 12,
2010, the date we filed our Annual Report on Form 10-K with the SEC. More current information
is included in other SRA filings with the SEC. This Form 8-K should be read in conjunction with
SRA’s 2010 Annual Report, SRA’s Quarterly Reports on Form 10-Q for the periods ended September 30,
2010, December 31, 2010, and March 31, 2011 and SRA’s other SEC filings.
Forward-Looking Statements
Any statements in this Form 8-K about future expectations, plans, and prospects for SRA,
including statements about the acquisition of SRA (the “Merger”) by an affiliate of Providence
Equity Partners LLC, the estimated value of the contract and work to be performed, and other
statements containing the words “estimates,” “believes,” “anticipates,” “plans,” “expects,” “will,”
and similar expressions, constitute forward-looking statements within the meaning of The Private
Securities Litigation Reform Act of 1995. Factors or risks that could cause our actual results to
differ materially from the results we anticipate include, but are not limited to: (i) the inability
to complete the Merger due to the failure (a) to obtain stockholder approval for the Merger; (b) to
satisfy other conditions to the completion of the Merger, including that a governmental entity may
prohibit, delay or refuse to grant approval for the consummation of the transaction; or (c) to
obtain the necessary financing arrangements set forth in the debt and equity commitment letters
delivered pursuant to the merger agreement; (ii) the outcome of any legal proceedings, regulatory
proceedings or enforcement matters that have been or may be instituted against us and others
relating to the Merger; (iii) the occurrence of any other event, change or circumstance that could
give rise to a termination of the merger agreement; (iv) the fact that, if the Merger is not
consummated due to a breach of the merger agreement by Providence Equity Partners LLC or Merger
Sub, SRA’s remedy may be limited to receipt of a termination fee of $112.9 million, and if the
Merger is not consummated under certain circumstances, SRA is not entitled to receive any such
termination fee; (v) if the merger agreement is terminated under specified circumstances, SRA may
be required to pay Providence Equity Partners LLC a termination fee of up to $47 million; (vi) the
diversion of management’s attention from ongoing business concerns due to the announcement and
pendency of the Merger; (vii) the effect of the announcement of the Merger on our business
relationships, operating results and business generally; (viii) the effect of the merger
agreement’s contractual restrictions on the conduct of our business prior to the completion of the
Merger; (ix) the possible adverse effect on the price of our common stock if the Merger is not
completed in a timely matter or at all; (x) the amount of the costs, fees, expenses and charges
related to the Merger; (xi) reduced spending levels and changing budget priorities of our largest
customer, the United States federal government, which accounts for more than 95% of our revenue;
(xii) failure to comply with complex U.S. government procurement-related laws and other
regulations, including but not limited to, punitive damage liabilities under the False Claims Act
and other laws, and financial incentives under so-called “whistleblower” statutes, awarding the
whistleblower with a percentage of the recovery if the claims are successfully waged; (xiii)
possible delays or overturning of our government contract awards due to bid protests by competitors
or loss of contract revenue or diminished opportunities based on the existence of organizational
conflicts of interest; (xiv) entry into new markets or foreign legal jurisdictions or operation of
our business in various foreign jurisdictions, including incurring liabilities in hazardous areas;
(xv) failure to comply with laws such as the Foreign Corrupt Practices Act or regulations on
government gratuities; (xvi) failure to comply with Federal Acquisition Regulations and Cost
Accounting Standards or the Fair Labor Standards Act; (xvii) security threats, attacks or other
disruptions on our information infrastruct
ure, and failure to comply with complex network security
and data privacy legal and contractual obligations or to protect sensitive information; (xviii)
force majeure incidents in international markets, such as weather, governmental action or inaction,
or political unrest; (xix) any violation of third party intellectual rights; (xx) unlimited
contractual damages, liability for consequential damages, liquidated damages, or third party
product liability associated with some commercial product sales; (xxi) adverse changes in federal
government practices such as insourcing; (xxii) delays in the U.S. government adopting
appropriations necessary for program funding and future appropriation uncertainties adversely
impacting customer spending plans; (xxiii) intense competition to win U.S. government contracts or
recompetes and commoditization of services we offer; (xxiv) failure of the customer to fund a
contract, issue task orders or exercise options to extend contacts, or our inability to
successfully execute awarded contracts; (xxv) any adverse results of audits and investigations
conducted by the Defense Contract Audit Agency or any of the Inspectors General for various
agencies with which we contract, including, without limitation, any determination that our
contractor business systems or contractor internal control systems are deficient; (xxvi)
difficulties accurately estimating contract costs and contract performance requirements; (xxvii)
challenges in attracting and retaining key personnel or high-quality employees, particularly those
with security clearances; (xxviii) failure to manage acquisitions, divestures or restructures
successfully,
including identifying and valuating acquisitions targets, integrating acquired companies, realizing
benefits from such acquisitions, or contingent liabilities associated with divestures; and (xxix)
adverse weather conditions or unexpected employee leave patterns reducing our expected billable
labor revenue.
Many of these and other risk factors are more fully described in our Annual Report on Form 10-K for
the fiscal year ended June 30, 2010, previously filed with the Securities and Exchange Commission
(SEC) on August 12, 2010, and may be updated from time to time in Item 1A. of Part II of our
quarterly reports or other filings with the SEC. Although we believe that the expectations
reflected in the forward-looking statements are reasonable, we cannot guarantee future results,
levels of activity, performance or achievements. You should not place undue reliance on these
forward-looking statements, which apply only as of the date of this Form 8-K. Subsequent events and
developments may cause our views to change. While we may elect to update these forward-looking
statements at some point in the future, we specifically disclaim any obligation to do so.
Important Additional Information
In connection with the proposed acquisition, SRA filed a preliminary proxy statement and other
relevant documents concerning the acquisition with the SEC on April 18, 2011. When completed, a
definitive proxy statement and a form of proxy will be mailed to shareholders of the Company. This
press release does not constitute a solicitation of any vote or approval. We urge investors to
read the proxy statement and any other documents to be filed with the SEC in connection with the
acquisition or incorporated by reference in the proxy statement because they will contain important
information.
Investors will be able to obtain these documents free of charge at the SEC’s Web site
(www.sec.gov). In addition, documents filed with the SEC by SRA will be available free of charge
from SRA International, Inc., c/o Investor Relations, 4350 Fair Lakes Court, Fairfax, VA 22033, or
by telephone at 703.502.7731 or by email to Investor@sra.com.
The directors, executive officers and certain other members of management and employees of SRA may
be deemed “participants” in the solicitation of proxies from stockholders of SRA in favor of the
acquisition. Information regarding the persons who may, under the rules of the SEC, be considered
participants in the solicitation of the stockholders of SRA in connection with the proposed
acquisition will be set forth in the proxy statement and the other relevant documents to be filed
with the SEC. You can find information about the SRA’s executive officers and directors in its
Annual Report on Form 10-K for the year ended June 30, 2010 and in its definitive proxy statement
filed with the SEC on September 17, 2010.
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| Item 9.01 |
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Financial Statements and Exhibits |
(d) Exhibits
The following are filed as Exhibits to this Report:
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Exhibit 23
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Consent of Independent Registered Public Accounting Firm |
Exhibit 99.1
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Item 6: Selected Financial Data |
Exhibit 99.2
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Item 7: Management’s Discussion and Analysis of Financial Condition and Results of Operations |
Exhibit 99.3
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Item 8: Financial Statements and Supplementary Data |