Form 8-K NCI, Inc. For: Jan 22

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 8-K

 

 

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(D)

OF THE SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of earliest event reported): January 22, 2017

 

 

 

NCI, INC.

(Exact name of registrant as specified in its charter)

 

 

 

Delaware		000-51579		20-3211574
(State or other jurisdiction of incorporation)		(Commission File Number)		(IRS Employer Identification No.)
11730 Plaza American Drive, Reston, VA				20190
(Address of principal executive offices)				(Zip Code)

Registrant’s telephone number, including area code: (703) 707-6900

N/A

(Former Name or Former Address, if Changed Since Last Report)

 

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

☐	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

☐	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

☐	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

☐	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 

 

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Item 4.02. Non-Reliance on Previously Issued Financial Statements or a Related Audit Report or Completed Interim Review.

(a) On January 22, 2017, the board of directors (the “Board”) of NCI, Inc. (the “Company”) concluded that, as a result of the preliminary information obtained to date in connection with an ongoing internal investigation, (i) the unaudited interim financial statements included in the Company’s Quarterly Report on Form 10-Q for the three-months ending March 31, 2016, filed on April 29, 2016; (ii) the unaudited interim financial statements included in the Company’s Quarterly Report on Form 10-Q for the three- and six-months ending June 30, 2016, filed on August 1, 2016; and (iii) the unaudited interim financial statements included in the Company’s Quarterly Report on Form 10-Q for the three- and nine-months ending September 30, 2016, filed on November 7, 2016, should no longer be relied upon. On the same date, the Board also determined that investors, analysts and other persons should not rely upon management’s report on internal controls over financial reporting or the Company’s independent registered public accounting firm’s report on the effectiveness of the Company’s internal controls over financial reporting filed with the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2015.

The Board’s determination was a result of the Company’s preliminary findings in an ongoing internal investigation, after the Company discovered that its controller embezzled approximately $18 million from the Company over the last six years, with approximately $5 million taken during 2016. The Company’s preliminary findings indicate that these funds were reflected as expenses in the Company’s financial statements and that those expenses were treated as allowable indirect costs on the Company’s government contracts but should have been classified as unallowable costs. The Company has concluded that the unaudited interim financial statements for the nine-month period ending September 30, 2016 contain material errors related to the theft and the Company will provide amended financial results for that nine-month period as part of the completion of its financial reporting process for the fiscal year 2016.

The Audit Committee and the Company’s executive management have discussed the matters described herein with the Company’s independent registered public accounting firm.

A copy of the press release announcing these events is attached hereto as Exhibit 99.1 and incorporated herein by reference.

Item 9.01. Financial Statements and Exhibits.

 

Exhibit No.		Description of Exhibit
Exhibit 99.1		Press Release, dated January 23, 2017.

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SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

Date: January 24, 2017

Exhibit 99.1

NCI ANNOUNCES INTERNAL INVESTIGATION

RESTON, Va.—January 23, 2017—NCI, Inc. (NASDAQ: NCIT) (“NCI” or the “Company”), a leading provider of information technology and professional services and solutions to U.S. Federal Government agencies, announced today that, based upon preliminary findings, it has discovered that its controller, acting alone, embezzled money from the Company. The employment of the controller has been terminated, and the Company has commenced an internal investigation with the help of outside counsel and forensic accountants.

While the investigation is ongoing, the Company believes that its former controller embezzled approximately $18 million over the last six years. NCI is working with legal counsel and cooperating with federal authorities to determine the best course of action from a legal, regulatory and recovery perspective and will provide further information as soon as practicable. NCI believes that after direct recovery from its former controller and after giving effect to available insurance coverage, it will be able to recover a large portion of the embezzled funds.

Of the estimated $18 million of embezzled funds, the Company believes that approximately $5 million was taken during 2016 and the remaining $13 million was taken over the prior five years. The Company’s preliminary findings indicate that these funds were reflected as expenses in the Company’s financial statements. These expenses were treated as allowable indirect costs on its government contracts but should have been classified as unallowable costs. The Company has concluded that the unaudited interim financial statements for the nine-month period ending September 30, 2016, contain material errors related to the theft in that period. Therefore, the unaudited financial statements contained in the Company’s Quarterly Reports on Form 10-Q for the first three quarters of 2016 should not be relied upon by investors. As part of the completion of its financial reporting process for the fiscal year 2016, the Company will provide amended financial results for that nine-month period.

The Company has performed a preliminary analysis of the financial effect of the estimated $13 million in theft losses incurred in years before 2016. Based upon preliminary findings, the Company believes that it is unlikely that there are any material misstatements relating to the embezzled funds in the financial statements for fiscal years 2015, 2014 and 2013. At this time, the Company is not aware of any other possible misstatements in the financial statements. If any material errors are discovered through the active investigation and forensic analysis, the Company will make timely disclosure at that time.

In addition, as part of the investigation, the Company is reviewing its internal controls over financial reporting. Although the investigation is ongoing, the Company believes that material weaknesses existed in its internal controls during the relevant periods during which the embezzlement occurred. As a result of these weaknesses, investors, analysts and other persons should not rely on management’s reports on internal controls over financial reporting or the Company’s independent registered public accounting firm’s audit reports on the effectiveness of the Company’s internal controls over financial reporting filed with the Company’s Form 10-K for the fiscal year ended December 31, 2015. The Company is implementing steps to strengthen its internal controls and to remediate the weaknesses that it has identified.

About NCI, Inc.

NCI is a leading provider of enterprise solutions and services to U.S. defense, intelligence, health and civilian government agencies. The Company has the expertise and proven track record to solve its customers’ most important and complex mission challenges through technology and innovation. NCI’s team of highly skilled professionals focuses on delivering cost-effective solutions and services in the areas of agile development and integration; cybersecurity and information assurance; engineering and

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logistics; big data and data analytics; IT infrastructure optimization and service management; and health and program integrity. Headquartered in Reston, Virginia, NCI has approximately 2,000 employees operating at more than 100 locations worldwide. For more information, visit www.nciinc.com or email [email protected].

Forward Looking Statements

Portions of this press release may constitute “forward-looking statements,” and assumptions underlying such forward-looking statements, within the meaning of the Private Securities Litigation Reform Act of 1995 (the “PSLRA”), Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Any such forward-looking statements are made within the “safe-harbor” protections of the PSLRA and should not be relied upon as representing our views as of any subsequent date. We are under no obligation to, and expressly disclaim any responsibility to, update or alter these forward-looking statements, whether as a result of new information, future events or otherwise. Forward-looking statements in this filing include those regarding: (a) the magnitude of the theft and the time period over which it occurred; (b) the effect of the theft on our financial statements, including the treatment of embezzled funds in the Company’s historical financial statements, the estimated impact of the misstatements on our revenue and earnings before income taxes and the periods effected; (c) potential adjustments to our periodic reports and the financial statements contained therein; and (d) the scope of the investigation. The statements are based on the current beliefs and expectations of management and as such are subject to significant risks and uncertainties. Such forward-looking statements are based on information available to us as of the date of this release and involve a number of risks and uncertainties, some beyond our control, that could cause actual results to differ materially from those anticipated by these forward-looking statements. Such risks include the uncertainty surrounding the timing and results of the Company’s investigation, the potential need for restatement of our prior period financial statements, potential legal or regulatory action related to the matters under investigation, and the potential impact on our business and stock price of any announcements regarding any of the foregoing. Additional information that could lead to material changes in our performance is contained in our filings with the Securities and Exchange Commission.

NCI, Inc.

IR Contact

Lawrence Delaney, Jr.

Investor Relations Advisor

714-734-5142

or

Media Contact

Joelle Shreves

Vice President, Marketing & Corporate Communications

703-707-6904

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