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Vectrus Announces Second Quarter 2017 Results

- Second quarter 2017 diluted EPS of $0.49 and 3.5 percent operating margin

- Awarded $97 million Keesler Air Force Base contract

- Sue Deagle joined Vectrus as Chief Growth Officer

- Reaffirming 2017 guidance

Company Release - 8/8/2017 4:10 PM ET

COLORADO SPRINGS, Colo., Aug. 8, 2017 /PRNewswire/ -- Vectrus, Inc. (NYSE:VEC) announced second quarter 2017 financial results. For the second quarter, revenue was $259.3 million, operating income was $9.2 million, and diluted earnings per share were $0.49. As of June 30, 2017, year-to-date net cash provided by operating activities was $5.7 million.

Vectrus Logo.

"Our position in the marketplace continues to improve and I am pleased with the progress we made in the second quarter. During the quarter, we were awarded a $97 million firm fixed-price contract to provide base operations support services at Keesler Air Force Base," said Chuck Prow, president and chief executive officer of Vectrus. "Keesler was a strategic win for Vectrus, which further expands our work with the Air Force and builds on our recent $278 million Maxwell Air Force Base re-compete win."

"During the quarter, Sue Deagle joined the Vectrus executive management team as Chief Growth Officer," said Prow. "Sue brings significant federal market experience and will play a major role in the implementation and execution of our growth strategy."

Second Quarter 2017 Results

  • Revenue $259.3 million
  • Operating income $9.2 million
  • Operating margin 3.5%
  • Diluted earnings per share $0.49

Second quarter 2017 revenue of $259.3 million decreased $48.6 million or 15.8 percent compared to the second quarter of 2016. The decrease in revenue was attributable to lower activity from our Middle East programs of $24.3 million, our Afghanistan programs of $16.8 million, and our U.S. programs of $9.6 million, offset by an increase of $2.1 million from our European programs.

Operating income was $9.2 million or 3.5 percent operating margin in the second quarter of 2017, compared to $11.3 million or 3.7 percent operating margin in the second quarter of 2016.

Second quarter 2017 diluted earnings per share were $0.49 compared to $0.55 in the second quarter 2016.

Year-to-date June 30, 2017, net cash provided by operating activities was $5.7 million, a decrease of $13.5 million compared to the 2016 period.  Days sales outstanding was 59 days in the second quarter of 2017 compared to 52 days in the second quarter of 2016.

The Company ended the second quarter of 2017 with a total debt balance of $78.0 million, which was down from $85.0 million at the end of 2016.  As of June 30, 2017, the Company had a total consolidated indebtedness to consolidated EBITDA (total leverage ratio) of 1.61 to 1.00x.

The Company ended the second quarter 2017 with total backlog of $2.8 billion and funded backlog of $0.9 billion.

2017 Guidance

"We are reaffirming our 2017 guidance for revenue, operating margin, net income, diluted EPS, and net cash provided by operating activities," said Matt Klein, chief financial officer of Vectrus.

2017 guidance details include:

$ millions, except for operating margin and per share amounts

2017 Guidance

Revenue

$990

to

$1,090

Operating Margin

3.40%

to

3.60%

Net Income

$18.7

to

$22.3

Diluted EPS1

$1.68

to

$2.00

Net Cash Provided by Operating Activities

$22.0

to

$28.0

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 5 p.m. EDT on Tuesday, August 8, 2017. 

U.S.based participants may dial into the conference call at 877-407-0792, while international participants may dial 201-689-8263. 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 August 22, 2017, at 844-512-2921 (domestic) or 412-317-6671 (international) with pass code 13667564.

Footnotes:

1 2017 diluted EPS guidance is calculated using the estimated weighted average diluted common shares outstanding at December 31, 2017 of 11.2 million.

About Vectrus

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, 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 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.

VECTRUS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)




Three Months Ended


Six Months Ended



June 30,


July 1,


June 30,


July 1,

(In thousands, except per share data)


2017


2016


2017


2016

Revenue


$

259,318


$

307,895


$

549,380


$

618,577

Cost of revenue


233,583


280,644


498,283


564,354

Selling, general and administrative expenses


16,531


15,953


30,244


31,113

Operating income


9,204


11,298


20,853


23,110

Interest (expense) income, net


(1,070)


(1,736)


(2,204)


(3,048)

Income from operations before income taxes


8,134


9,562


18,649


20,062

Income tax expense


2,673


3,512


6,520


7,422

Net income


$

5,461


$

6,050


$

12,129


$

12,640










Earnings per share









Basic


$0.50


$0.57


$1.11


$1.19

Diluted


$0.49


$0.55


$1.09


$1.16

Weighted average common shares outstanding - basic


10,987


10,702


10,948


10,665

Weighted average common shares outstanding - diluted


11,191


10,958


11,132


10,913

 

VECTRUS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS




June 30,


December 31,

(In thousands, except share information)


2017


2016

Assets


(unaudited)



Current assets





Cash


$

49,489



$

47,651


Receivables


165,082



172,072


Costs incurred in excess of billings


18,604



11,002


Other current assets


6,517



13,412


Total current assets


239,692



244,137


Property, plant, and equipment, net


2,975



3,061


Goodwill


216,930



216,930


Other non-current assets


1,374



1,177


Total non-current assets


221,279



221,168


Total Assets


$

460,971



$

465,305


Liabilities and Shareholders' Equity





Current liabilities





Accounts payable


104,809



118,055


Billings in excess of costs


2,707



1,421


Compensation and other employee benefits


34,326



34,917


Short-term debt


19,250



15,750


Other accrued liabilities


18,989



17,693


Total current liabilities


180,081



187,836


Long-term debt, net


57,723



67,842


Deferred tax liability


85,844



89,667


Other non-current liabilities


3,082



2,559


Total non-current liabilities


146,649



160,068


Total liabilities


326,730



347,904


Commitments and contingencies (Note 12)





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


66,768



63,910


Retained earnings


70,047



57,959


Accumulated other comprehensive loss


(2,685)



(4,577)


Total shareholders' equity


134,241



117,401


Total Liabilities and Shareholders' Equity


$

460,971



$

465,305


 

VECTRUS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)




Six Months Ended



June 30,


July 1,

(In thousands)


2017


2016

Operating activities





Net income


$

12,129



$

12,640


Adjustments to reconcile net income to net cash provided by operating activities:





Depreciation and amortization expense


794



1,012


Loss on disposal of property, plant, and equipment




389


Stock-based compensation


2,995



3,268


Amortization of debt issuance costs


381



578


Changes in assets and liabilities:





Receivables


8,791



33,458


Other assets


(640)



1


Accounts payable


(14,793)



(25,459)


Billings in excess of costs


1,286



346


Deferred taxes


(4,553)



(5,265)


Compensation and other employee benefits


(1,411)



3,134


Other liabilities


757



(4,820)


Net cash provided by operating activities


$

5,736



$

19,282


Investing activities





Purchases of capital assets


(364)



(317)


Proceeds from the disposition of assets




111


Distributions from equity investment




89


Net cash (used in) investing activities


$

(364)



$

(117)


Financing activities





Repayments of long-term debt


(7,000)



(9,000)


Proceeds from revolver


18,000



69,000


Repayments of revolver


(18,000)



(69,000)


Proceeds from exercise of stock options


1,886



431


Payment of debt issuance costs




(221)


Payments of employee withholding taxes on share-based compensation


(612)



(651)


Net cash (used in) financing activities


$

(5,726)



$

(9,441)


Exchange rate effect on cash


2,192



270


Net change in cash


1,838



9,994


Cash-beginning of year


47,651



39,995


Cash-end of period


$

49,489



$

49,989


Supplemental Disclosure of Cash Flow Information:





Interest paid


$

2,021



$

3,060


Income taxes paid


$

2,629



$

13,494


Non-cash investing activities:





Purchase of capital assets on account


$

344



$


  

SUPPLEMENTAL INFORMATION

Revenue by military branch for the periods presented below was as follows:




Three Months Ended


Six Months Ended



June 30,


July 1,


June 30,


July 1,

(In thousands)


2017


2016


2017


2016

Military branch


Revenue


% of
Total


Revenue


% of
Total


Revenue


% of
Total


Revenue


% of
Total

Army


$

216,554



84

%


$

258,193



84

%


$

468,693



85

%


$

521,220



84

%

Navy


5,255



2

%


4,697



1

%


10,188



2

%


9,496



2

%

Air Force


37,509



14

%


45,005



15

%


70,499



13

%


87,861



14

%

Total Revenue


$

259,318





$

307,895





$

549,380





$

618,577























Three Months Ended


Six Months Ended



June 30,


July 1,


June 30,


July 1,

(in thousands)


2017


2016


2017


2016

Contract type


Revenue


% of
Total


Revenue


% of
Total


Revenue


% of Total


Revenue


% of
Total

Firm-Fixed-Price


$

63,232



24

%


$

77,233



25

%


$

135,039



25

%


$

157,626



25

%

Cost-Plus and Cost Reimbursable ¹


196,086



76

%


230,662



75

%


414,341



75

%


460,951



75

%

Total Revenue


$

259,318





$

307,895





$

549,380





$

618,577





















¹ Includes time and material contracts



































Three Months Ended


Six Months Ended



June 30,


July1,


June 30,


July1,

(In thousands)


2017


2016


2017


2016

Contract Relationship


Revenue


% of
Total


Revenue


% of
Total


Revenue


% of
Total


Revenue


% of
Total

Prime Contractor


$

251,990



97

%


$

285,156



93

%


$

537,040



98

%


$

570,820



92

%

Sub Contractor


7,328



3

%


22,739



7

%


12,340



2

%


47,757



8

%

Total Revenue


$

259,318





$

307,895





$

549,380





$

618,577




CONTACT:

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

 

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SOURCE Vectrus, Inc.