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Section 1: 8-K (8-K)

Document


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): November 7, 2017

VECTRUS, INC.

(Exact name of Registrant as specified in its charter)

Indiana
0001-36341
38-3924636
(State or other jurisdiction of incorporation of organization)
(Commission File Number)
(I.R.S. Employer Identification No.)

655 Space Center Drive
Colorado Springs, CO 80915
(Address of principal executive offices) (Zip Code)

Registrant's telephone number, including area code: (719) 591-3600

Not Applicable
(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))
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ¨
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨





ITEM 2.02 Results of Operations and Financial Condition.

Attached hereto as Exhibit 99.1 and incorporated by reference herein is a press release issued by Vectrus, Inc. (the “Company”) on November 7, 2017 that includes financial information for the Company for the third quarter of 2017 and updated guidance for fiscal 2017. This information shall not be deemed filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) or incorporated by reference into any filing under the Securities Act of 1933, as amended (the “Securities Act”), or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.

ITEM 7.01 Regulation FD Disclosure.

Mr. Charles Prow, President and Chief Executive Officer, and Mr. Matthew Klein, Senior Vice President and Chief Financial Officer, will present the financial information for the Company for the third quarter of 2017 and updated guidance for fiscal 2017 on November 7, 2017. A copy of the presentation is attached hereto and incorporated by reference herein as Exhibit 99.2. This information is furnished pursuant to Item 7.01 Regulation FD Disclosure and shall not be deemed filed for purposes of Section 18 of the Exchange Act or incorporated by reference into any filing under the Securities Act or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.






ITEM 9.01 Financial Statements and Exhibits

(d) Exhibits.

Exhibit No.
 
Description
 
Press Release of Vectrus, Inc. dated November 7, 2017
 
Presentation slides issued by Vectrus, Inc. on November 7, 2017





SIGNATURES

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 hereunto duly authorized.

Date: November 7, 2017
VECTRUS, INC.
 
By:
/s/ Kathryn S. Lamping
 
Its:
Assistant Secretary



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Section 2: EX-99.1 (EXHIBIT 99.1)

Exhibit

Exhibit 99.1 

PRESS RELEASE

CONTACT:

Mike Smith, CFA
719-637-5773
michael.smith@vectrus.com


Vectrus Announces Third Quarter 2017 Results

Third quarter 2017 revenue $269.6 million and operating margin of 3.7 percent
Diluted earnings per share (EPS) of $0.51
Increasing full-year 2017 guidance
Awarded nearly $400 million, sixteen year Range Support Services subcontract

COLORADO SPRINGS, Colo., Nov. 7, 2017 — Vectrus, Inc. (NYSE:VEC) announced third quarter 2017 financial results. For the third quarter, revenue was $269.6 million, operating income was $10.1 million, and diluted earnings per share were $0.51. As of September 29, 2017, year-to-date net cash provided by operating activities was $22.4 million.

"We reported solid third quarter results, which were driven by progression on our strategic imperatives and strong program execution. Additionally, I'm pleased to announce that during the quarter, Vectrus was awarded a significant long-term subcontract in support of the Air Force Range Support Services II program," said Chuck Prow, president and chief executive officer of Vectrus. "The new contract, worth approximately $400 million, extends through the first quarter of 2034 and is expected to increase our U.S. based facilities and logistics work with the Air Force. This was a notable win for our team and is the largest new business contract awarded to Vectrus this year. We are proud to be a part of the RSS II team and look forward to delivering exceptional results on this long-term program."
 
"We remain focused on future growth and our efforts so far in 2017 have resulted in over $1.3 billion of contract bookings," explained Prow. "Our contract awards have driven our total backlog to $3.1 billion, which now represents almost three times our updated 2017 revenue guidance mid-point."

Third Quarter 2017 Results

Revenue $269.6 million
Operating income $10.1 million
Operating margin 3.7%
Diluted earnings per share $0.51

1



Exhibit 99.1 


Third quarter 2017 revenue of $269.6 million decreased $14.2 million, or 5.0 percent, compared to the third quarter of 2016. The decrease in revenue was attributable to lower activity from our Middle East programs of $14.1 million and our U.S programs of $2.9 million, partially offset by increases from our European programs of $2.3 million and from our Afghanistan programs of $0.5 million.

Operating income was $10.1 million or 3.7 percent operating margin in the third quarter of 2017, compared to $11.2 million or 3.9 percent operating margin in the third quarter of 2016.

Third quarter 2017 diluted earnings per share were $0.51 compared to $0.60 in the third quarter 2016.

Year-to-date September 29, 2017, net cash provided by operating activities was $22.4 million, a decrease of $11.1 million compared to the 2016 period. Days sales outstanding was 57 days in the third quarter of 2017 compared to 55 days in the third quarter of 2016.

"We remain focused on cash generation and our team continues to evolve our processes to enhance cash collections," said Matt Klein, chief financial officer of Vectrus.

The Company ended the third quarter of 2017 with a total debt balance of $74.5 million, which was down from $85.0 million at December 31, 2016. As of September 29, 2017, the Company had a total consolidated indebtedness to consolidated EBITDA (total leverage ratio) of 1.58 to 1.00x.

"With approximately $11 million in net debt1, our balance sheet remains in excellent shape," said Klein. "Our increased visibility and strong financial position has allowed us to negotiate commitment letters and a term sheet for a new and expanded credit facility. Our planned new credit facility, which we expect to close in the fourth quarter, will allow for even greater financial flexibility to support our business growth objectives and capital allocation strategy."
  
The Company ended the third quarter 2017 with total backlog of $3.1 billion and funded backlog of $0.8 billion.


2



Exhibit 99.1 

2017 Guidance
"We are increasing our 2017 guidance for revenue, operating margin, net income, diluted EPS, and net cash provided by operating activities," said Klein.

2017 guidance details include:
$ millions, except for operating margin and per share amounts
(Prior) 2017 Guidance
 
(Updated) 2017 Guidance 2
Revenue
$990
to
$1,090
 
$1,080
to
$1,100
Operating Margin
3.40
%
to
3.60
%
 
3.50
%
to
3.70
%
Net Income
$18.7
to
$22.3
 
$21.1
to
$23.0
Diluted EPS
$1.68
to
$2.00
 
$1.87
to
$2.03
Net Cash Provided by Operating Activities
$22.0
to
$28.0
 
$24.0
to
$30.0

The Company notes that forward-looking statements of future performance made in this release, including 2017 guidance, are based upon current expectations and are subject to factors that could cause actual results to differ materially from those suggested here, including those factors set forth in the Safe Harbor Statement below.

Investor Call
Management representatives will conduct an investor briefing and conference call at 4:30 p.m. EST on Tuesday, November 7, 2017.

U.S.-based participants may dial into the conference call at 855-327-6837, while international participants may dial 631-891-4304. For all other listeners, a live webcast of the briefing and conference call will be available on the Vectrus Investor Relations website at http://investors.vectrus.com.
A replay of the briefing will be posted on the Vectrus website shortly after completion of the call, and will remain available for one year. A telephonic replay will also be available through November 21, 2017, at 844-512-2921 (domestic) or 412-317-6671 (international).





About Vectrus

3



Exhibit 99.1 

Vectrus is a leading, global government services company with a history in the services market that dates back more than 70 years. The company provides facility and logistics services and information technology and network communication services to U.S. government customers around the world. Vectrus is differentiated by operational excellence, superior program performance, a history of long-term customer relationships, and a strong commitment to their mission success. Vectrus is headquartered in Colorado Springs, Colo., and includes about 5,600 employees spanning 143 locations in 18 countries. In 2016, Vectrus generated sales of $1.2 billion. For more information, visit our website at www.vectrus.com or connect with us on Facebook, Twitter, LinkedIn, and YouTube.

Safe Harbor Statement
Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995 (the "Act"): Certain material presented herein includes forward-looking statements intended to qualify for the safe harbor from liability established by the Act. These forward-looking statements include, but are not limited to, statements in 2017 Guidance above about our revenue, operating margin, net income, EPS and net cash provided by operating activities for 2017 and other assumptions contained therein for purposes of such guidance, our new credit facility, cash and cash collections, debt payments, expense savings, contract opportunities, bids and awards, collections, business strategy, outlook, objectives, plans, intentions or goals, and any discussion of future operating or financial performance. Whenever used, words such as "may," "are considering," "will," "likely," "anticipate," "estimate," "expect," "project," "intend," "plan," "believe," "target," "could," "potential," "continue," or similar terminology are forward-looking statements. These statements are based on the beliefs and assumptions of our management based on information currently available to management. Forward-looking statements are not guarantees of future performance and are subject to risks and uncertainties that could cause actual results to differ materially from the results contemplated by the forward-looking statements, our historical experience and our present expectations or projections. These risks and uncertainties include, but are not limited to: our dependence on a few large contracts for a significant portion of our revenue; competition in our industry; our ability to submit proposals for and/or win potential opportunities in our pipeline; our ability to retain and renew our existing contracts; protests of new awards; our international operations, including the economic, political and social conditions in the countries in which we conduct our businesses; changes in U.S. government military operations, including its operations in Afghanistan; changes in, or delays in the completion of, U.S. or international government budgets; government regulations and compliance therewith, including changes to the Department of Defense procurement process; changes in technology; intellectual property matters; governmental investigations, reviews, audits and cost adjustments; contingencies related to actual or alleged environmental contamination, claims and concerns; our success in expanding our geographic footprint or broadening our customer base, markets and capabilities; our ability to realize the full amounts reflected in our backlog; our maintaining our good relationship with the U.S. government; impairment of goodwill; our performance of our contracts and our ability to control costs; our

4



Exhibit 99.1 

level of indebtedness; our compliance with the terms of our credit agreement; subcontractor and employee performance and conduct; our teaming arrangements with other contractors; economic and capital markets conditions; any future acquisitions, investments or joint ventures; our ability to retain and recruit qualified personnel; our maintenance of safe work sites and equipment; our compliance with applicable environmental health and safety regulations; our ability to maintain required security clearances; any disputes with labor unions; costs of outcome of any legal proceedings; security breaches and other disruptions to our information technology and operations; changes in our tax provisions or exposure to additional income tax liabilities; changes in U.S. generally accepted accounting principles; accounting estimates made in connection with our contracts; our exposure to interest rate risk; our compliance with public company accounting and financial reporting requirements; timing of payments by the U.S. government; risks and uncertainties relating to the spin-off from our former parent; and other factors set forth in Part I, Item 1A, – “Risk Factors,” and elsewhere in our 2016 Annual Report on Form 10-K and described from time to time in our future reports filed with the Securities and Exchange Commission. We undertake no obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.


Footnotes:
1 Net debt defined as total debt less cash.
2 2017 guidance assumptions. Capital expenditures approximately $2.0 million. Depreciation and amortization approximately $2.3 million. 2017 mandatory debt payments $11.5 million. Interest expense $5.1 million. Estimated tax rate 35.5%. 2017 diluted EPS assumes 11.3 million weighted average diluted shares outstanding at December 31, 2017.






5



Exhibit 99.1 

VECTRUS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
 
 
Three Months Ended
 
Nine Months Ended
 
 
September 29,
 
September 30,
 
September 29,
 
September 30,
(In thousands, except per share data)
 
2017
 
2016
 
2017
 
2016
Revenue
 
$
269,625

 
$
283,782

 
$
819,005

 
$
902,359

Cost of revenue
 
245,219

 
257,687

 
743,502

 
822,042

Selling, general and administrative expenses
 
14,316

 
14,933

 
44,560

 
46,046

Operating income
 
10,090

 
11,162

 
30,943

 
34,271

Interest (expense) income, net
 
(1,058
)
 
(1,348
)
 
(3,262
)
 
(4,396
)
Income from operations before income taxes
 
9,032

 
9,814

 
27,681

 
29,875

Income tax expense
 
3,232

 
3,207

 
9,751

 
10,629

Net income
 
$
5,800

 
$
6,607

 
$
17,930

 
$
19,246

 
 
 
 
 
 
 
 
 
Earnings per share
 
 
 
 
 
 
 
 
Basic
 
$0.52
 
$0.62
 
$1.63
 
$1.80
Diluted
 
$0.51
 
$0.60
 
$1.61
 
$1.76
Weighted average common shares outstanding - basic
 
11,075

 
10,733

 
10,991

 
10,688

Weighted average common shares outstanding - diluted
 
11,272

 
11,061

 
11,168

 
10,966



6



Exhibit 99.1 

VECTRUS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
 
 
September 29,
 
December 31,
(In thousands, except share information)
 
2017
 
2016
Assets
 
(unaudited)
 
 
Current assets
 
 
 
 
Cash
 
$
63,446

 
$
47,651

Receivables
 
174,943

 
172,072

Costs incurred in excess of billings
 
11,751

 
11,002

Other current assets
 
8,509

 
13,412

Total current assets
 
258,649

 
244,137

Property, plant, and equipment, net
 
3,259

 
3,061

Goodwill
 
216,930

 
216,930

Other non-current assets
 
2,413

 
1,177

Total non-current assets
 
222,602

 
221,168

Total Assets
 
$
481,251

 
$
465,305

Liabilities and Shareholders' Equity
 
 
 
 
Current liabilities
 
 
 
 
Accounts payable
 
109,100

 
118,055

Billings in excess of costs
 
3,070

 
1,421

Compensation and other employee benefits
 
42,770

 
34,917

Short-term debt
 
21,000

 
15,750

Other accrued liabilities
 
18,996

 
17,693

Total current liabilities
 
194,936

 
187,836

Long-term debt, net
 
52,653

 
67,842

Deferred tax liability
 
89,710

 
89,667

Other non-current liabilities
 
2,322

 
2,559

Total non-current liabilities
 
144,685

 
160,068

Total liabilities
 
339,621

 
347,904

Commitments and contingencies
 
 
 
 
Shareholders' Equity
 
 
 
 
Preferred stock; $0.01 par value; 10,000,000 shares authorized; No shares issued and outstanding
 

 

Common stock; $0.01 par value; 100,000,000 shares authorized; 11,075,220 and 10,894,924 shares issued and outstanding
 
111

 
109

Additional paid in capital
 
67,464

 
63,910

Retained earnings
 
75,847

 
57,959

Accumulated other comprehensive loss
 
(1,792
)
 
(4,577
)
Total shareholders' equity
 
141,630

 
117,401

Total Liabilities and Shareholders' Equity
 
$
481,251

 
$
465,305



7



Exhibit 99.1 

VECTRUS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
 
 
Nine Months Ended
 
 
September 29,
 
September 30,
(In thousands)
 
2017
 
2016
Operating activities
 
 
 
 
Net income
 
$
17,930

 
$
19,246

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
 
Depreciation and amortization expense
 
1,141

 
1,453

Loss on disposal of property, plant, and equipment
 

 
402

Stock-based compensation
 
3,341

 
3,542

Amortization of debt issuance costs
 
561

 
915

Changes in assets and liabilities:
 
 
 
 
Receivables
 
(96
)
 
47,501

Other assets
 
3,196

 
(2,954
)
Accounts payable
 
(11,470
)
 
(31,593
)
Billings in excess of costs
 
1,649

 
(2,828
)
Deferred taxes
 
(1,007
)
 
(7,138
)
Compensation and other employee benefits
 
6,817

 
9,252

Other liabilities
 
336

 
(4,314
)
Net cash provided by operating activities
 
$
22,398

 
$
33,484

Investing activities
 
 
 
 
Purchases of capital assets
 
(901
)
 
(400
)
Proceeds from the disposition of assets
 

 
116

Distributions from equity investment
 

 
346

Net cash (used in) investing activities
 
$
(901
)
 
$
62

Financing activities
 
 
 
 
Repayments of long-term debt
 
(10,500
)
 
(20,500
)
Proceeds from revolver
 
27,500

 
74,000

Repayments of revolver
 
(27,500
)
 
(74,000
)
Proceeds from exercise of stock options
 
1,886

 
568

Payment of debt issuance costs
 

 
(221
)
Payments of employee withholding taxes on share-based compensation
 
(612
)
 
(651
)
Net cash (used in) financing activities
 
$
(9,226
)
 
$
(20,804
)
Exchange rate effect on cash
 
3,524

 
614

Net change in cash
 
15,795

 
13,356

Cash-beginning of year
 
47,651

 
39,995

Cash-end of period
 
$
63,446

 
$
53,351

Supplemental Disclosure of Cash Flow Information:
 
 
 
 
Interest paid
 
$
3,014

 
$
4,224

Income taxes paid
 
$
3,801

 
$
20,598

Non-cash investing activities:
 
 
 
 
Purchase of capital assets on account
 
$
438

 
$


8



Exhibit 99.1 


SUPPLEMENTAL INFORMATION
Revenue by military branch for the periods presented below was as follows:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended
 
Nine Months Ended
 
 
September 29,
 
September 30,
 
September 29,
 
September 30,
(In thousands)
 
2017
 
2016
 
2017
 
2016
Military branch
 
Revenue
 
% of Total
 
Revenue
 
% of Total
 
Revenue
 
% of Total
 
Revenue
 
% of Total
Army
 
$
214,152

 
80
%
 
$
241,601

 
85
%
 
$
682,891

 
83
%
 
$
762,818

 
85
%
Navy
 
6,038

 
2
%
 
5,482

 
2
%
 
16,218

 
2
%
 
14,975

 
2
%
Air Force
 
49,435

 
18
%
 
36,699

 
13
%
 
119,896

 
15
%
 
124,566

 
14
%
Total Revenue
 
$
269,625

 
 
 
$
283,782

 
 
 
$
819,005

 
 
 
$
902,359

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended
 
Nine Months Ended
 
 
September 29,
 
September 30,
 
September 29,
 
September 30,
(in thousands)
 
2017
 
2016
 
2017
 
2016
Contract type
 
Revenue
 
% of Total
 
Revenue
 
% of Total
 
Revenue
 
% of Total
 
Revenue
 
% of Total
Firm-Fixed-Price
 
$
74,643

 
28
%
 
$
72,978

 
26
%
 
$
209,682

 
26
%
 
$
230,604

 
26
%
Cost-Plus and Cost-Reimbursable ¹
 
194,982

 
72
%
 
210,804

 
74
%
 
609,323

 
74
%
 
671,755

 
74
%
Total Revenue
 
$
269,625

 
 
 
$
283,782

 
 
 
$
819,005

 
 
 
$
902,359

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
¹ Includes time and material contracts
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended
 
Nine Months Ended
 
 
September 29,
 
September 30,
 
September 29,
 
September 30,
(In thousands)
 
2017
 
2016
 
2017
 
2016
Contract Relationship
 
Revenue
 
% of Total
 
Revenue
 
% of Total
 
Revenue
 
% of Total
 
Revenue
 
% of Total
Prime Contractor
 
$
262,372

 
97
%
 
$
277,787

 
98
%
 
$
799,439

 
98
%
 
$
848,582

 
94
%
Sub Contractor
 
7,253

 
3
%
 
5,995

 
2
%
 
19,566

 
2
%
 
53,777

 
6
%
Total Revenue
 
$
269,625

 
 
 
$
283,782

 
 
 
$
819,005

 
 
 
$
902,359

 
 

Source: Vectrus, Inc.

9

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Section 3: EX-99.2 (EXHIBIT 99.2)

q3earningsdeckfinal
VECTRUS THIRD QUARTER 2017 RESULTS CHUCK PROW PRESIDENT AND CHIEF EXECUTIVE OFFICER MATT KLEIN SENIOR VICE PRESIDENT AND CHIEF FINANCIAL OFFICER NOVEMBER 7, 2017


 
SAFE HARBOR STATEMENT Page 2 SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 (THE "ACT"): CERTAIN MATERIAL PRESENTED HEREIN INCLUDES FORWARD-LOOKING STATEMENTS INTENDED TO QUALIFY FOR THE SAFE HARBOR FROM LIABILITY ESTABLISHED BY THE ACT. THESE FORWARD-LOOKING STATEMENTS INCLUDE, BUT ARE NOT LIMITED TO, STATEMENTS IN 2017 GUIDANCE ABOUT OUR REVENUE, OPERATING MARGIN, NET INCOME, EPS AND NET CASH PROVIDED BY OPERATING ACTIVITIES FOR 2017 AND OTHER ASSUMPTIONS CONTAINED THEREIN FOR PURPOSES OF SUCH GUIDANCE, OUR NEW CREDIT FACILITY, DEBT PAYMENTS, EXPENSE SAVINGS, CONTRACT OPPORTUNITIES, BIDS AND AWARDS, COLLECTIONS, BUSINESS STRATEGY, OUTLOOK, OBJECTIVES, PLANS, INTENTIONS OR GOALS, AND ANY DISCUSSION OF FUTURE OPERATING OR FINANCIAL PERFORMANCE. WHENEVER USED, WORDS SUCH AS "MAY," "WILL," "LIKELY," "ANTICIPATE," "ESTIMATE," "EXPECT," "PROJECT," "INTEND," "PLAN," "BELIEVE," "TARGET," "COULD," "POTENTIAL,” “ARE CONSIDERING,” "CONTINUE," OR SIMILAR TERMINOLOGY ARE FORWARD-LOOKING STATEMENTS. THESE STATEMENTS ARE BASED ON THE BELIEFS AND ASSUMPTIONS OF OUR MANAGEMENT BASED ON INFORMATION CURRENTLY AVAILABLE TO MANAGEMENT. FORWARD-LOOKING STATEMENTS ARE NOT GUARANTEES OF FUTURE PERFORMANCE AND ARE SUBJECT TO RISKS AND UNCERTAINTIES THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THE RESULTS CONTEMPLATED BY THE FORWARD-LOOKING STATEMENTS, OUR HISTORICAL EXPERIENCE AND OUR PRESENT EXPECTATIONS OR PROJECTIONS. THESE RISKS AND UNCERTAINTIES INCLUDE, BUT ARE NOT LIMITED TO: OUR DEPENDENCE ON A FEW LARGE CONTRACTS FOR A SIGNIFICANT PORTION OF OUR REVENUE; COMPETITION IN OUR INDUSTRY; OUR ABILITY TO SUBMIT PROPOSALS FOR AND/OR WIN POTENTIAL OPPORTUNITIES IN OUR PIPELINE; OUR ABILITY TO RETAIN AND RENEW OUR EXISTING CONTRACTS; PROTESTS OF NEW AWARDS; OUR INTERNATIONAL OPERATIONS, INCLUDING THE ECONOMIC, POLITICAL AND SOCIAL CONDITIONS IN THE COUNTRIES IN WHICH WE CONDUCT OUR BUSINESSES; CHANGES IN U.S. GOVERNMENT MILITARY OPERATIONS, INCLUDING ITS OPERATIONS IN AFGHANISTAN; CHANGES IN, OR DELAYS IN THE COMPLETION OF, U.S. OR INTERNATIONAL GOVERNMENT BUDGETS; GOVERNMENT REGULATIONS AND COMPLIANCE THEREWITH, INCLUDING CHANGES TO THE DEPARTMENT OF DEFENSE PROCUREMENT PROCESS; CHANGES IN TECHNOLOGY; INTELLECTUAL PROPERTY MATTERS; GOVERNMENTAL INVESTIGATIONS, REVIEWS, AUDITS AND COST ADJUSTMENTS; CONTINGENCIES RELATED TO ACTUAL OR ALLEGED ENVIRONMENTAL CONTAMINATION, CLAIMS AND CONCERNS; OUR SUCCESS IN EXPANDING OUR GEOGRAPHIC FOOTPRINT OR BROADENING OUR CUSTOMER BASE, MARKETS AND CAPABILITIES; OUR ABILITY TO REALIZE THE FULL AMOUNTS REFLECTED IN OUR BACKLOG; OUR MAINTAINING OUR GOOD RELATIONSHIP WITH THE U.S. GOVERNMENT; IMPAIRMENT OF GOODWILL; OUR PERFORMANCE OF OUR CONTRACTS AND OUR ABILITY TO CONTROL COSTS; OUR LEVEL OF INDEBTEDNESS; OUR COMPLIANCE WITH THE TERMS OF OUR CREDIT AGREEMENT; SUBCONTRACTOR AND EMPLOYEE PERFORMANCE AND CONDUCT; OUR TEAMING ARRANGEMENTS WITH OTHER CONTRACTORS; ECONOMIC AND CAPITAL MARKETS CONDITIONS; ANY FUTURE ACQUISITIONS, INVESTMENTS OR JOINT VENTURES; OUR ABILITY TO RETAIN AND RECRUIT QUALIFIED PERSONNEL; OUR MAINTENANCE OF SAFE WORK SITES AND EQUIPMENT; OUR COMPLIANCE WITH APPLICABLE ENVIRONMENTAL, HEALTH AND SAFETY REGULATIONS; OUR ABILITY TO MAINTAIN REQUIRED SECURITY CLEARANCES; ANY DISPUTES WITH LABOR UNIONS; COSTS OF OUTCOME OF ANY LEGAL PROCEEDINGS; SECURITY BREACHES AND OTHER DISRUPTIONS TO OUR INFORMATION TECHNOLOGY AND OPERATIONS; CHANGES IN OUR TAX PROVISIONS OR EXPOSURE TO ADDITIONAL INCOME TAX LIABILITIES; CHANGES IN U.S. GENERALLY ACCEPTED ACCOUNTING PRINCIPLES; ACCOUNTING ESTIMATES MADE IN CONNECTION WITH OUR CONTRACTS; OUR EXPOSURE TO INTEREST RATE RISK; OUR COMPLIANCE WITH PUBLIC COMPANY ACCOUNTING AND FINANCIAL REPORTING REQUIREMENTS; TIMING OF PAYMENTS BY THE U.S. GOVERNMENT; RISKS AND UNCERTAINTIES RELATING TO THE SPIN-OFF FROM OUR FORMER PARENT; AND OTHER FACTORS SET FORTH IN PART I, ITEM 1A, – “RISK FACTORS,” AND ELSEWHERE IN OUR 2016 ANNUAL REPORT ON FORM 10-K AND DESCRIBED FROM TIME TO TIME IN OUR FUTURE REPORTS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. WE UNDERTAKE NO OBLIGATION TO UPDATE ANY FORWARD-LOOKING STATEMENTS, WHETHER AS A RESULT OF NEW INFORMATION, FUTURE EVENTS OR OTHERWISE, EXCEPT AS REQUIRED BY LAW.


 
Q3 2017 HIGHLIGHTS Page 3 • Q3 2017 financial results o Revenue of $269.6 million o Operating Income $10.1 million o Operating margin of 3.7% o Diluted EPS of $0.51 o Year-to-date net cash provided by operating activities of $22.4 million • Awarded the Range Support Services (RSS) II subcontract adding annual revenue in excess of $20 million through March 2034 • Successfully phased-in contracts • Keesler BOS • Thule Base Maintenance Contract • Year to date contract bookings of $1.3 billion increased backlog to $3.1 billion • Ended Q3 2017 with total debt of $74.5 million; net debt(1) $11.1 million (1) Net Debt is defined as total debt less cash


 
BUSINESS UPDATE Page 4 • Updating 2017 guidance • New business and contract update o Over $6 billion in potential new business opportunities identified over the next 12 months o Approx. $400 million of proposals submitted and pending potential award • K-BOSSS and LOGCAP V update • Negotiated commitment letters and a term sheet for a new and expanded credit facility • Capital deployment will focus on organic and inorganic growth opportunities that aligns with our strategy and increases shareholder value


 
2017 FINANCIAL RESULTS Page 5 (in millions except Operating Margin and Diluted Earnings Per Share) Q3 2017 Q3 2016 vs 2016 Q3 2017 Q3 2016 vs 2016 Revenue 269.6$ 283.8$ (14.2)$ 819.0$ 902.4$ (83.4)$ Operating Income 10.1$ 11.2$ (1.1)$ 30.9$ 34.3$ (3.3)$ Operating Margin 3.7 % 3.9 % (0.2)% 3.8 % 3.8 % 0.0% Net Income 5.8$ 6.6$ (0.8)$ 17.9$ 19.2$ (1.3)$ Diluted Earnings Per Share 0.51$ 0.60$ (0.09)$ 1.61$ 1.76$ (0.15)$ Net Cash Provided by Operating Activities 22.4$ 33.5$ (11.1)$ Three Months Ended Nine Months Ended


 
$140.0 $137.4 $114.0 $85.0 $74.5 12.0 15.0 2.6 11.4 14.0 3.5 3.5 3.5 $50 $60 $70 $80 $90 $100 $110 $120 $130 $140 $150 9/30/14 Debt Balance 2014 12/31/14 Debt Balance 2015 2015 12/31/15 Debt Balance 2016 2016 12/31/16 Debt Balance 1Q17 2Q17 3Q17 9/29/2017 Debt Balance Voluntary Payments Mandatory Payments DEBT PROFILE Page 6 ($M) Total Debt Payment History: Mandatory $38.5M Voluntary $27.0M Total $65.5M Cash balance end of Q3: $63.4M Net debt (1) end of Q3: $11.1M (1) Net Debt is defined as total debt less cash


 
BACKLOG(1) Page 7 (2) (1) Total backlog represents firm orders and potential options on multi-year contracts, excluding potential orders under IDIQ contracts. Backlog also excludes contracts awarded to Vectrus but currently in protest with the GAO or the Federal Court of Claims. • Total backlog $3,058 million as of September 29, 2017 o Funded backlog $824 million o Unfunded backlog $2,234 million $0.8 $0.7 $0.9 $0.9 $0.8 $1.3 $1.7 $2.0 $1.9 $2.3 $- $0.5 $1.0 $1.5 $2.0 $2.5 $3.0 $3.5 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Funded Unfunded $2.4 $2.9 $2.8 $2.1 $3.1 ($B)


 
2017 GUIDANCE SUMMARY Page 8 2017 guidance assumptions: • Capital expenditures approximately $2.0 million • Depreciation and amortization approximately $2.3 million • 2017 mandatory debt payments $11.5 million • Interest expense approximately $5.1 million • Estimated tax rate of 35.5% • Diluted EPS assumes 11.3 million weighted average diluted shares outstanding at December 31, 2017 Updating 2017 guidance: (in millions except Operating Margin and Dluted Earnings Per Share) (Prior) 2017 Mid (Updated) 2017 Mid 2016 Var to Updated 2017 Mid %Var Revenue 990$ to 1,090$ 1,080$ to 1,100$ 1,040$ 1,090$ $1,191 (101)$ (8.4)% Operating Margin 3.40 % to 3.60 % 3.50 % to 3.70 % 3.50 % 3.60 % 3.6 % 0 bps Net Income 18.7$ to 22.3$ 21.1$ to 23.0$ 20.5$ 22.0$ $23.7 (1.7)$ (7.3)% Diluted EPS 1.68$ to 2.00$ 1.87$ to 2.03$ 1.84$ 1.95$ $2.16 (0.21)$ (9.7)% Net Cash Provided by Operating Activities 22.0$ to 28.0$ 24.0$ to 30.0$ 25.0$ 27.0$ $36.6 (9.6)$ (26.2)% (Prior) 2017 Guidance (Updated) 2017 Guidance


 
CHUCK PROW PRESIDENT AND CHIEF EXECUTIVE OFFICER MATT KLEIN SENIOR VICE PRESIDENT AND CHIEF FINANCIAL OFFICER VECTRUS THIRD QUARTER 2017 RESULTS


 
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