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
[email protected]

 

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SOURCE Vectrus, Inc.