Attached files
| file | filename |
|---|---|
| 8-K - FORM 8-K - Vectrus, Inc. | d791887d8k.htm |
| EX-10.1 - EXHIBIT 10.1 - Vectrus, Inc. | d791887dex101.htm |
 VECTRUS
INVESTOR PRESENTATION
SEPTEMBER 19, 2014 |
 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
ABOUT
THE
SEPARATION
OF
VECTRUS,
INC.
(THE
“COMPANY”) FROM EXELIS INC., THE TERMS AND THE EFFECT OF THE SEPARATION,
THE NATURE AND IMPACT OF SUCH A SEPARATION, CAPITALIZATION
OF
THE
COMPANY,
FUTURE
STRATEGIC
PLANS
AND
OTHER
STATEMENTS
THAT
DESCRIBE
THE
COMPANY'S
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"
AND
OTHER
TERMS
OF
SIMILAR
MEANING
ARE
INTENDED
TO
IDENTIFY
SUCH
FORWARD-LOOKING
STATEMENTS.
FORWARD-
LOOKING
STATEMENTS
ARE
UNCERTAIN
AND
TO
SOME
EXTENT
UNPREDICTABLE,
AND
INVOLVE
KNOWN
AND
UNKNOWN
RISKS,
UNCERTAINTIES
AND OTHER
IMPORTANT
FACTORS
THAT
COULD
CAUSE
ACTUAL
RESULTS
TO
DIFFER
MATERIALLY
FROM
THOSE
EXPRESSED
OR
IMPLIED
IN,
OR
REASONABLY INFERRED FROM, SUCH FORWARD-LOOKING STATEMENTS.
SUCH
FORWARD-LOOKING
STATEMENTS
INCLUDE
FACTORS
THAT
COULD
CAUSE
RESULTS
TO
DIFFER
MATERIALLY
FROM
THOSE
ANTICIPATED
INCLUDE, BUT ARE NOT LIMITED TO: ECONOMIC, POLITICAL AND SOCIAL CONDITIONS IN THE
COUNTRIES IN WHICH WE CONDUCT OUR BUSINESSES;
CHANGES
IN
U.S.
OR
INTERNATIONAL
GOVERNMENT
DEFENSE
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;
DELAYS
IN
COMPLETION
OF
THE
U.S.
GOVERNMENT’S
BUDGET;
OUR
SUCCESS
IN
EXPANDING
OUR
GEOGRAPHIC
FOOTPRINT
OR
BROADENING
OUR
CUSTOMER
BASE;
OUR
ABILITY
TO REALIZE
THE
FULL
AMOUNTS
REFLECTED
IN
OUR
BACKLOG;
IMPAIRMENT
OF
GOODWILL;
MISCONDUCT
OF
OUR
EMPLOYEES,
SUBCONTRACTORS,
AGENTS
AND
BUSINESS
PARTNERS;
OUR
ABILITY
TO
CONTROL
COSTS;
OUR
LEVEL
OF
INDEBTEDNESS;
SUBCONTRACTOR
PERFORMANCE;
ECONOMIC
AND
CAPITAL
MARKETS
CONDITIONS;
ABILITY
TO
RETAIN
AND
RECRUIT
QUALIFIED
PERSONNEL;
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 GENERALLY ACCEPTED
ACCOUNTING PRINCIPLES; AND OTHER FACTORS SET FORTH
IN
OUR
REGISTRATION
STATEMENT
ON
FORM
10
AND
OUR
OTHER
FILINGS
WITH
THE
SECURITIES
AND
EXCHANGE
COMMISSION.
IN
ADDITION, THERE ARE RISKS
AND
UNCERTAINTIES
RELATING
TO
THE
SEPARATION,
INCLUDING
WHETHER
THOSE
TRANSACTIONS
WILL
RESULT
IN ANY TAX
LIABILITY,
THE
OPERATIONAL
AND
FINANCIAL
PROFILE
OF
THE
COMPANY
OR
ANY
OF
ITS
BUSINESSES
AFTER
GIVING
EFFECT
TO
THE
SEPARATION, AND THE ABILITY
OF
THE
COMPANY
TO
OPERATE
AS
AN
INDEPENDENT
ENTITY.
THE COMPANY
UNDERTAKES
NO
OBLIGATION
TO
UPDATE
ANY
FORWARD-LOOKING
STATEMENTS,
WHETHER
AS
A
RESULT
OF
NEW
INFORMATION, FUTURE EVENTS OR OTHERWISE. |
 TRANSACTION OVERVIEW
Page 3
DISTRIBUTING COMPANY
Exelis Inc.
(NYSE:XLS)
DISTRIBUTED COMPANY
Vectrus, Inc.
TICKER
VEC
EXCHANGE
NYSE
DISTRIBUTION RATIO
18 shares of Exelis : 1 share of Vectrus
EXPECTED VEC SHARES O/S
10.46M
CAPITAL STRUCTURE
$140M Term Loan A with a
$75M Revolving Credit facility
KEY DATES
•
When-Issued Trading
September 16, 2014
•
Record Date
September 18, 2014
•
Distribution Date
September 27, 2014
•
Regular-Way Trading Begins
September 29, 2014
Presentation
may
be
found
at
http://www.exelisinc.com/transformation |
 AGENDA
Page 4
Opening Remarks – Cindy Frothingham, Vectrus Director of Investor Relations Introduction
– Dave Melcher, Exelis CEO and President
Corporate Overview – Ken Hunzeker, Vectrus CEO Business
Strategy – Ted Wright, Vectrus COO
Customers and Programs – Chuck Anderson, Vectrus SVP of Programs
Business Development – Janet Oliver, Vectrus SVP of Business
Development
Financial Overview – Matt Klein, Vectrus CFO
Summary – Ken Hunzeker, Vectrus CEO Q&A |
 INTRODUCTION
DAVE MELCHER –
EXELIS CHIEF EXECUTIVE OFFICER AND PRESIDENT |
 CORPORATE OVERVIEW
KEN HUNZEKER –
VECTRUS CHIEF EXECUTIVE OFFICER |
 VECTRUS: TRUE TO YOUR MISSION
Page 7
Our
Mission
We deliver large-scale IT, logistics, and
Our
Vision
Be the customer’s first choice and most
trusted partner.
infrastructure services to enable customer
success. |
 EXPERIENCED LEADERSHIP TEAM
Page 8
Ken Hunzeker
Chief Executive
Officer
•
Joined company in 2010
•
President, Mission Systems
•
Vice President for Government Relations,
ITT Defense and Information Solutions
•
Lieutenant General (Ret.), U.S. Army
•
Deputy Commander, United States
Forces —
Iraq
Ted Wright
Chief Operating Officer
•
Joined company in 1995 (9 years);
rejoined in 2013
•
President and CEO, Academi
•
President, KBR North American
Government and Defense
•
President of Technology Solutions and
Services Division, BAE Systems
Matt Klein
Chief Financial Officer
•
Joined company in 1996
•
Chief Financial Officer, Mission Systems
•
Assistant Controller, ITT Electronic
Systems, Communications Systems
•
Assistant Controller, ITT Electronic
Systems, Radar, Reconnaissance and
Acoustic Systems
•
CPA
Chuck Anderson
SVP, Programs
•
Joined company in 2011
•
Vice President & General Manager, Base
Operations & Logistics Programs
•
Major General (Ret.), U.S. Army
•
Commanding General of Training
Division West at Fort Hood, TX
Janet Oliver
SVP, Business Dev.
•
Joined company in 2009
•
Vice President & Director, U.S. & Europe
Programs
•
Vice President, Mission Support
Services, Shaw Group
•
Executive VP, Marketing & Business
Development, Fluor Government Group
subsidiary |
 VECTRUS OVERVIEW
Page 9
Vectrus Today
(1) As of June 30, 2014. Total backlog represents firm orders and potential
options on multi-year contracts, excluding potential orders under indefinite delivery / indefinite quantity
(IDIQ) contracts.
Our Legacy
2014
1945
Founded as ITT
Federal
Electric, Inc.
Vectrus Spins
Out of Exelis
Proven 50+ year history of deploying resources
rapidly and with precision to support the mission
success of our customers
1990
Moved to Colorado
Springs; Renamed ITT
Federal Services Corp.
Renamed ITT
Corp., Systems
Division
2011
1997
Renamed Exelis
Systems
Corporation
•
Leading provider of:
–
Infrastructure asset management
–
Information technology and network
communication services
–
Logistics and supply chain management
services
•
Revenue $1.1B -
$1.2B 2014E
•
Deep, long-term customer relationships
•
Robust backlog of $2.4B
(1)
and healthy new
business pipeline
•
Global service solutions in 18 countries, with
approximately 5,600 current global employees
•
Headquartered in Colorado Springs, CO |
 INVESTMENT HIGHLIGHTS
•
> $1B business supporting customers’
mission
•
Long-term foundational contracts with $2.4B in backlog
(1)
•
Accomplished management team
Page 10
Strong Core Business
Enduring Customer
Relationships
Significant Market
Opportunity
Large Pipeline and Proven
Growth Strategy
Solid Financial Position
•
More than 50-year legacy supporting customers’
key missions
•
Recent expansion into new customers
•
Proven ability to win and execute large-scale, mission critical
global programs involving complex logistics and supply chains
•
Opportunity to capture larger share of a ~$111B fragmented
market
•
~$10B 3-year pipeline of qualified contract opportunities
•
Won over $2B of new awards and seven new IDIQ contracts
in past 18 months
•
Free cash flow conversion
(2)
~100% of net income
•
Scalable cost structure
(1)
As of June 30, 2014. Total backlog represents firm orders and potential options on
multi-year contracts, excluding potential orders under indefinite
delivery / indefinite quantity (IDIQ) contracts.
(2)
Free Cash Flow Conversion is calculated by taking GAAP net cash from operating
activities, less capital expenditures divided by net income |
 •
Relentless focus on controlling indirect costs
•
Deep customer and mission knowledge critical to delivering mission success
at competitive cost
Grow the top line
•
Successful program execution
•
Enables client mission success
True to customers’
missions
•
Integrity, respect, responsibility
•
Strong governance and compliance
Values and reputation
enable success
•
All business systems approved by the Government
•
Business disciplines, e.g. ISO, CMMI, Lean Six Sigma
Consistent delivery of
services
VECTRUS VALUE PROPOSITION
•
Historically have received high award fees
•
Current excellent assessment of performance by customers
Customer satisfaction
Page 11
Customer Focus – Deep understanding of customer needs Performance
Excellence – Vectrus performs on contracts
Operational Excellence – Culture of continuous improvement Honorable Values
– Vectrus lives its values
Cost Leadership
–
Know how to win in a competitive environment |
 MARKET DYNAMICS
Page 12
•
Vectrus-provided services remain critical to government outsourcing
efforts •
Balance between performance, cost and schedule remains a priority for the
customer •
U.S. global reach requires extensive international experience
•
Expeditionary capability remains critical to support U.S. efforts around the
world •
DoD base O&M budget projected to increase |
 AFGHANISTAN
•
Agility and positioning enabled Vectrus to
win significant amount of work related to
OCO funding in Afghanistan
•
Base business aligns with government
spending priorities
•
Revenue from existing Afghanistan
programs projected to decline with U.S.
combat troop levels
•
Cost, capital, management structure,
strategy and business development
aligned with post-Afghanistan
(1)
Source:
OMB
March
2014;
President’s
Budget
FY15;
OCO
forecast
represents
Vectrus’
estimates
based
on
CBO
Sequestration
allocation
methodology, with Vectrus’
estimates for OCO O&M allocation
(2)
Afghanistan revenue projection for full year 2014.
DoD Base O&M Budget
(1)
($B)
Vectrus’
Afghanistan Revenue
Adapting to the realities of a post-Afghanistan environment
($M)
Page 13
(2) |
 EMPLOYEES
Page 14
•
Approximately 5,600 current global employees
•
110 locations in 18 countries with over 75% of employees stationed abroad
•
Over 60% of program managers and 30% of employees reporting a military
background Denotes Vectrus employee locations supporting customer
requirements |
 BUSINESS STRATEGY
TED WRIGHT –
VECTRUS CHIEF OPERATING OFFICER |
 CORE
CAPABILITIES Page 16
Infrastructure
Asset
Management
Logistics &
Supply Chain
Management
Services
Information
Technology &
Network
Communication
Services
Services
Key Contracts
Three Service Lines * Large Contracts * Challenging Environments
•
Infrastructure sustainment
services including base
maintenance, public works, civil
engineering and minor
construction/renovations
•
Base support including
transportation, emergency
services and life support services
•
Lifecycle management of IT
systems & components
•
Network systems management,
network defense, information
assurance
•
Military communications
operations & maintenance
•
Equipment maintenance and
repair
•
Warehouse management and
distribution
•
Ammunition
and
fuel
–
issue,
maintenance and storage
•
Kuwait Base Operations and
Security Support Services
•
Maxwell Air Force Base
Operations Support
•
Kaiserslautern Facilities
Engineering
•
Army Communications in Southwest
Asia and Central Asia
•
Navy Fleet Systems Engineering
Team
•
U.S. Army Corps of Engineers IT
Support Services
•
Army Pre-Positioned Stocks
Kuwait and Qatar
•
Fort Rucker Logistics Support
Services
•
Marine Corps Logistics Support
Services |
 GLOBAL ADDRESSABLE MARKETS
•
Large fragmented market both
domestically and overseas
•
Significant opportunity to grow
and expand to new DoD
customers and new geographies
Page 17
Infrastructure
Asset
Management
Logistics &
Supply Chain
Management
Services
Information
Technology &
Network
Communication
Services
FY14 Estimated
Markets
Comments
$48B
$45B
$18B
•
Growing, attractive market as
U.S. continues to leverage
technological advantages
•
Recent major wins (two re-
competes, two new) set the stage
to address multiple customers
•
Current work primarily with Army
•
Opportunities with Marine Corps
and allied international
governments
Sources: Federal Procurement Data System (FPDS), TechAmerica
Army
Air Force
Navy
Other DoD
DOE
Other Civil U.S.G.
International
Army
Navy
Other DoD
Other Civil U.S.G.
International
Army
Air Force
Navy
Other DoD
DOS
Other Civil U.S.G.
International |
 LONG-TERM STRATEGY
Balance the Portfolio
Expand the Diversity of
Revenue Streams in Core
Offerings through New
Customers and Geographies
Enhance Solid Foundation
Continued Focus on the
Competitiveness of our
Core Business
Provide More Value
Enhance and Extend
Offerings to Increase
Value
Page 18
Strengthen Base
Grow Top Line
Expand Margins
•
Add capabilities that allow
us to deliver higher value-
added and differentiated
service solutions
•
Evaluate and pursue
acquisitions on a strategic
basis
•
Continue to manage
internal costs
•
Broaden customer base
•
Expand geographic
footprint
•
Enterprise-wide focus on
Business Development
•
Continued excellent
performance on existing
contracts
•
Manage costs
•
Balance between
performance and cost
•
Enterprise-wide focus on re-
competes |
 CUSTOMERS AND PROGRAMS
CHUCK ANDERSON –
VECTRUS SENIOR VICE PRESIDENT OF PROGRAMS |
 CUSTOMER RELATIONSHIPS
Page 20
Customer
Relationship
Length
(Years)
Customer
Relationship
Length
(Years)
U.S. Army Network
Enterprise Technology
Command
38+
U.S. Air Force
Combat Command
32+
U.S. Army Materiel
Command
12+
U.S. Air Force –
Europe
32+
U.S. Army Europe
12+
U.S. Air Force Air
Education & Training
Command
12+
U.S. Army Central
Command
12+
U.S. Navy Space and
Naval Warfare
Systems Command
15+
U.S. Army Installation
Management Command
4+
Missile Defense
Agency
2+
U.S. Army Corps of
Engineers
4+
U.S. Marine Corps
Logistics Command
1+
Strong relationships with agencies critical to our Nation’s security
Denotes different funding source within U.S. Army |
 Locations
Camps Arifjan, Virginia,
and Buehring; Ali Al
Salem; Camp Patriot;
Airport and Seaport
Customer
Operational: Area
Support Group
-
Kuwait
Contract Type
Cost Plus Award Fee
and Award Term
Contract Award /
Length
February 2011 /
5 years
Page 21
KUWAIT BASE OPERATIONS
AND SECURITY SUPPORT SERVICES
DESCRIPTION
•
K-BOSSS provides full-spectrum life support and
base operations services including transportation,
logistics, public works, information management,
medical support services, range operations, and
security, fire, and emergency services for all U.S.
Army facilities in the Kuwait Area of Responsibility
•
Awarded contract value: $1.3B
PROGRAM HIGHLIGHTS AND
SUCCESSES
•
All “Exceptional”
government ratings
•
97% and 98% Award Fee scores for most recent
2-year period
•
Growth in contract value from an initial $1.3B to
$2.3B today (increased scope due to retrograde
from Iraq) |
 Locations
Afghanistan,
Bahrain, Kuwait and
Qatar
Customer
U.S. Army NETCOM
and 160 Signal
Brigade
Contract Type
Cost Plus Fixed Fee
w/Award Term
Contract Award /
Length
July 2013 / 5 years
OPERATIONS, MAINTENANCE, AND DEFENSE OF
ARMY COMMUNICATIONS
DESCRIPTION
•
OMDAC-SWACA provides network & systems
management, communications O&M, network
defense and information assurance services to
support U.S. Army, USARCENT, and USCENTCOM
requirements
•
Total contract value: $788M
PROGRAM HIGHLIGHTS AND
SUCCESSES
•
All “Exceptional”
government ratings
•
Operate the largest overseas Army Cyber Center
(Kuwait)
•
Successfully executed network transition optimization
plan in sync with military mission realignments
•
Earned first award term period in August 2014
•
Successor contract
Page 22
th |
 Locations
Arifjan, Kuwait and
Camp As Sayliyah,
Qatar
Customer
Operational:
Army Field Support
Battalions –
Kuwait/Qatar
Contract Type
Cost Plus Award Fee
and Fixed Price
Contract Award /
Length
Kuwait & Qatar 2010 /
5 years
ARMY PREPOSITIONED STOCKS –
KUWAIT AND QATAR
Page 23
DESCRIPTION
•
APS5 KU and APS5 QT provides multifunctional
logistics -
sustainment level maintenance, retail and
wholesale
supply,
and
multimodal
transportation
-
in
support of Army units, theater retrograde operations,
and direct theater support to units operating in the
Middle East
•
Configure and prepare for issue to military units
equipment sets and supplies
•
Awarded contract value: $545M
PROGRAM HIGHLIGHTS AND
SUCCESSES
•
Key hubs for retrograde
•
Transferred equipment sets from outdoor locations to
inside climate-controlled buildings
•
Successfully executed numerous equipment draws
•
Facilitated worldwide equipment distribution |
 Location
Maxwell Air Force
Base Montgomery,
AL
Customer
Air Education and
Training Command
Contract Type
Fixed Price, Firm
Target, Incentive
Contract Award
May 2009 / 5.5 years
(Base Period +
5 Option Years)
MAXWELL AIR FORCE BASE OPERATIONS
SUPPORT SERVICES
•
Services include facilities, communications and
information technology, custodial services,
emergency management, energy management,
engineering services, environmental, site
maintenance, survival equipment services, human
resources, community services, transportation,
supply, fuel services, airfield management, weather
•
Total contract value: $359M
Page 24
PROGRAM HIGHLIGHTS AND
SUCCESSES
DESCRIPTION
•
Earned 99% possible performance profit
•
Customer feedback: “Best base operations support
contract in Air Force Education and Training
Command”
•
The only contractor in the U.S. Air Force to achieve
a grade of “Outstanding”
on the Logistics
Compliance Assessment Program
•
All “Exceptional”
government ratings |
 FLEET SYSTEMS ENGINEERING TEAM
Page 25
Locations
Worldwide Support with
Major Presence in
Japan, Bahrain, Italy,
Maryland, Virginia,
California, Florida,
Washington, Hawaii
Customer
SPAWAR Fleet
Readiness Division
Contract Type
Cost Plus Fixed Fee
w/Award Term
Contract Award /
Length
November 2013 /
5 years
DESCRIPTION
•
FSET provides ashore and afloat fleet systems
engineers in support of Navy networks and Complex
Command, Control, Communications, Computer,
Intelligence, Surveillance and Reconnaissance
(C4ISR) Systems Worldwide
•
Awarded contract value: $122M
PROGRAM HIGHLIGHTS AND
SUCCESSES
•
Onboard all large deck / command ships and their
associated carrier strike groups
•
Perform critical communications functions from 11
shore locations covering seven time zones
•
All “Exceptional”
government ratings for 15
consecutive years |
 PERFORMANCE
•
“Senior leadership does not view Exelis as
simply a contractor, rather a mission partner
willing to do what it takes to get the mission
done.”
•
“The contractor continually provides
exceptional quality and customer service in all
logistical areas.”
•
“Extremely responsive to unexpected
missions and short notice requirements-all
requirements executed with 100%
accountability.”
•
“This Team makes my job look easy. They
are flexible, reliable, and knowledgeable.”
•
“Proficiently maintains cost and actively seeks
to contain cost without diminishing contract
performance.”
•
“Their open and honest communications
coupled with their top-down driven culture of
cooperation and “Can-Do”
attitude help
ensure mission success every day.”
Page 26
Exceptional
Very Good
Satisfactory Marginal
Unsatisfactory
Government Documented Comments
Performance drives base business
Government Ratings
(1)
93% Exceptional
or Very Good
(1)
Top seven programs from base business (excluding Afghanistan), encompassing 88%
of revenue
81%
12% |
 BUSINESS DEVELOPMENT
JANET OLIVER – VECTRUS SENIOR VICE PRESIDENT OF BUSINESS DEVELOPMENT |
 VECTRUS BUSINESS DEVELOPMENT
Page 28
•
Centralized Business Development organization creates efficiency,
consistency and alignment with strategic plan
•
Regional offices positioned to remain close to target customers and
support centralized strategy
•
$8.8B in contract wins in the last 5 years
•
Healthy pipeline to build future business |
 LARGE OPPORTUNITY FOR GROWTH
Page 29
APPROX. $25B 3-YEAR NEW BUSINESS
IDENTIFIED PIPELINE
$1.5B currently under evaluation + 7 IDIQ
•
Approx. $25B 3-year new
business identified pipeline
–
$10B qualified
–
$1.5B currently under
evaluation (expect to award
in the next 6-12 months)
–
IDIQ prime contracts carry
no value in pipeline
–
11% of bid value related to
recompetes
•
Nearly half of opportunities
>$100M in value
•
Domestic and overseas
opportunities split evenly
•
40% of bids outside DoD
Identified
Submitted
Qualified
Capture |
 PORTFOLIO TRANSFORMATION
Page 30
2014E Revenue Mix
Future Revenue Mix
Balance
Service Lines
Strategic
Intent
Diversify
Client Base
Balance
Geographies |
 MAJOR COMPETITORS
Page 31
IT and Network
Communication
Infrastructure Asset
Management
Logistics and Supply
Chain Management |
 RECENT CONTRACT WINS
Page 32
Date
Awarded
Customer
Program
Period of
Performance
Value of
Award
September
2014
(1)
U.S. Air
Forces
Europe
Turkey/Spain Base Maintenance
Contract
7 years
$458M
August
2014
(2)
U.S. Army
Corps of
Engineers
U.S. Army Corps of Engineers
Enterprise Information
Management/Information
Technology
5 years
$517M
June 2014
U.S. Air
Forces
Europe
Kaiserslautern Military
Community Family Housing
Maintenance Services
June 2014 –
September
2019
$32M
September
2013
U.S. Navy,
Space and
Naval
Warfare
Systems
Command
Fleet Systems Engineering Team
Support Services for SPAWAR
FRD Fleet Support
September
2013 –
September
2018
$122M
May 2013
U.S. Army,
Network
Command
Operations Maintenance and
Defense of Army
Communications Southwest Asia
and Central Asia
May 2013 –
January 2018
$788M
June 2012
U.S. Army
Installation
Management
Command
Total Maintenance Contract
Kaiserslautern Military
Community Germany
June 2012 –
September
2020
$393M
(1)
The
Turkey/Spain
Base
Maintenance
contract
was
awarded
on
September
17,
2014.
Until
the
protest
period
ends,
this
contract
award
is
subject
to
the
ordinary
protest
procedures
and
stay
of
performance
under
the
Competition
in
Contracting
Act.
(2)
This
contract
was
awarded
on
August
15,
2014.
The
incumbent
contractor
filed
a
protest
with
the
GAO
on
September
2,
2014.
Under
the
Competition
in
Contracting
Act,
the
protest
operated
to
stay
the
transition
of
the
contract
pending
the
results
of
the
protest.
Generally,
a
GAO
decision
on
a
protest
is
due
within
100
days
of
the
protest’s
submission. |
 FINANCIAL OVERVIEW
MATT KLEIN –
VECTRUS CHIEF FINANCIAL OFFICER |
 FINANCIAL OVERVIEW
Page 34
•
> $1B business supporting customers’
mission critical programs
•
Substantial pipeline of new business opportunities aligned with
strategy
•
Backlog of $2.4B provides significant revenue visibility
(1)
•
Highly scalable and controllable cost structure
•
Strong cash flow generation for incremental growth
•
Capital allocation that provides strong return for our shareholders
(1) As of June 30, 2014. Total backlog represents firm orders and potential
options on multi-year contracts, excluding potential orders under indefinite delivery /
indefinite quantity (IDIQ) contracts |
 FINANCIAL PERFORMANCE
Revenue
•
Historical revenues include Middle East and
Afghanistan contract wins
•
Key strategy to broaden customer base and
geographic footprint
•
Revenue
$1.1B
-
$1.2B
2014E
Income
•
Strong operating margin in 2012-2013 due to
operational efficiencies on fixed price
programs
•
Demand for expeditionary services drives
historical income
•
Margins
expected
to
normalize
in
the
4%
-
5%
range
Adjusted Revenue
(1)
Adjusted Operating Income and Margin
(1)
Page 35
(1)
Excludes Tethered Aerostat Radar System (TARS) historical revenue and cost
and the impact of separation costs to become a stand-alone public company. See Appendix for
reconciliation.
(2)
For six months ended June 30, 2014; extrapolation is not indicative of full year
forecast. (2)
(2) |
 BACKLOG DRIVES PREDICTABILITY
(1)
•
Funded backlog four to six months in advance of work
•
2013 Book-to-Bill
(2)
= 1.2; 2014 YTD June = 0.8
•
Funded backlog excludes K-BOSSS funding of $445M received in Q3 2014
•
Backlog excludes ACE-IT
(3)
& Turkey/Spain contract wins of $975M in Q3 2014
Page 36
($B)
(1)
Total backlog represents firm orders and potential options on multi-year
contracts, excluding potential orders under indefinite delivery / indefinite quantity (IDIQ) contracts.
(2)
Book-to-Bill is the amount of funded orders divided by revenue for the
reporting period. (3)
This
contract
was
awarded
on
August
15,
2014.
The
incumbent
contractor
filed
a
protest
with
the
GAO
on
September
2,
2014.
Under
the
Competition
in
Contracting
Act,
the
protest
operated
to
stay
the
transition
of
the
contract
pending
the
results
of
the
protest.
Generally,
a
GAO
decision
on
a
protest
is
due
within
100
days
of
the
protest’s
submission. |
 ORGANIZATIONAL COST TRENDS
(1)
Page 37
•
Leveraging technology to
centralize data centers
•
Centralizing transaction
services to HQ
•
Implementing lean,
repeatable solutions
•
Stand-alone costs tracking
at or below historical
allocations
Local G&A
Down 10%
Stand-Alone Costs
Down
Balancing Costs with Operational Excellence
Middle East Office
Consolidation
(1) Reductions based on a comparison of actual 2013 expenses to anticipated 2014
expenses. Centralized
Data Centers
•
Direct costs flex with
program & competitive
requirements
•
Low fixed costs to run
operations
•
Low CapEx
•
Future solutions focused on
government service
requirements only lowering
future costs
Scalable Cost Structure
Cost Trends |
 CAPITAL STRUCTURE AND CASH FLOW
Page 38
Capital Summary
Cash Flow Commentary
•
Predictable cash flows
•
Low receivables and inventory risk
•
Continued focus on working capital
•
Minimal capital expenditures
•
Free cash flow conversion
(1)
~ 100%
of net income
•
Credit Facility
$140M 5-year Term Loan A
$75M revolving line of credit
•
Assumed $25M for letters of credit under
a $35M sublimit
•
Remaining amounts (estimated at $50M)
available for other business requirements
•
Balanced liquidity position
(1)
Free Cash Flow Conversion is calculated by taking GAAP net cash from operating
activities, less capital expenditures divided by Net Income |
 SUMMARY
KEN HUNZEKER –
VECTRUS CHIEF EXECUTIVE OFFICER |
 Q&A |
 APPENDIX |
 RECONCILIATION OF NON-GAAP MEASURES
42
The
primary
financial
performance
measures
Vectrus
uses
to
manage
its
business
and
monitor
results
of
operations
are
revenue
trends
and
operating
income
trends.
In
addition,
we
consider
adjusted
revenue
and
adjusted
operating
income
to
be
useful
to
management
and
investors
in
valuating
our
operating
performance
for
the
periods
presented,
and
to
provide
a
tool
for
evaluating
our
ongoing
operations.
This
information
can
assist
investors
in
assessing
our
financial
performance
and
measures
our
ability
to
generate
capital
for
deployment
among
competing
strategic
alternatives
and
initiatives.
Adjusted
revenue
and
adjusted
operating
income,
however,
is
not
a
measure
of
financial
performance
under
generally
accepted
accounting
principles
in
the
United
States
of
America
(GAAP)
and
should
not
be
considered
a
substitute
for
revenue,
operating
income,
income
from
continuing
operations,
or
net
cash
from
operating
activities
as
determined
in
accordance
with
GAAP.
A
reconciliation
of
adjusted
revenue
and
adjusted
operating
income
from
net
income
is
provided
below.
“Adjusted
revenue”
is
defined
as
revenue
adjusted
to
exclude
the
TARS
program
revenue
which
will
be
retained
by
Exelis.
“Adjusted
operating
income”
is
defined
as
net
income,
adjusted
to
exclude
income
taxes
TARS
operating
income
and
items
that
include,
but
are
not
limited
to,
significant
charges
or
credits
that
impact
current
results,
but
are
not
related
to
our
ongoing
operations,
unusual
and
infrequent
non-
operating
items
and
non-operating
tax
settlements
or
adjustments.
A
reconciliation
of
adjusted
revenue
and
adjusted
operating
income
is
provided
below.
Adjusted Revenue (Non-GAAP Measure)
2009
2010
2011
2012
2013
YTD 2014
Revenue
$1,078
$1,132
$1,806
$1,828
$1,512
$617
TARS revenue
(26)
(34)
(32)
(37)
(37)
(19)
Adjusted revenue
$1,052
$1,098
$1,774
$1,791
$1,475
$598
Adjusted Operating Income (Non-GAAP Measure)
2009
2010
2011
2012
2013
YTD 2014
Net income
$39
$22
$54
$75
$84
$17
Income taxes
23
13
33
35
47
10
Operating income
$62
$35
$87
$110
$131
$27
TARS operating income (pretax)
(2)
(6)
(4)
(4)
(3)
(1)
Separation costs ?¹? (pretax)
-
-
-
-
1
6
Adjusted operating income
$60
$29
$83
$106
$129
$32
(1) Costs incurred to become a stand-alone public company
(2) For six months ended June 30, 2014
(2)
(2)
(1) |
 ACE-IT
Army Corps of Engineers Enterprise Information
Management / Information Technology
AFB
Air Force Base
ANSF (N&S)
Afghan National Security Forces (ANSF) Operations
and Maintenance
APS5 KU
Army Prepositioned Stocks -5 Kuwait
APS5 QT
Army Prepositioned Stocks -5 Qatar
BAE
British Aerospace
BD
Business Development
BOS
Base Operations Support
CAGR
Compounded Annual Growth Rate
CapEx
Capital Expenditure
CBO
Congressional Budget Office
CEO
Chief Executive Officer
CFO
Chief Financial Officer
CIM
Confidential Information Memorandum
CMMI
Capability Maturity Model Integration
COO
Chief Operating Officer
CTSS
Communication Technical Support Services
DoD
Department of Defense
DoE
Department of Energy
EBITDA
Earnings Before Interest, Taxes, Depreciation, and
Amortization
EPS
Earnings per Share
FRD
Fleet Readiness Directorate
FSET
Fleet Systems Engineering Team
GAAP
Generally Accepted Accounting Principles
G&A
General & Administrative Expense
GAO
Government Accountability Office
HQ
Headquarters
ISO
International Organization for Standardization
IDIQ
Indefinite Delivery/Indefinite Quantity
IRAD
Independent Research and Development
ISR
Intelligence, Surveillance, and Reconnaissance
IT
Information Technology
Kaiserslautern TMC
Kaiserslautern Total Maintenance Contract
K-BOSSS
Kuwait Base Operations Support and Security Services
KBR
Kellogg, Brown & Root
KMOD
Kuwait Ministry of Defense
MBA
Master of Business Administration
MCLOGSS
Marine Corps Logistics Support Services
NETCOM
U.S. Army Network Enterprise Technology Command
NTP
Notice to Proceed
NYSE
New York Stock Exchange
O&M
Operations & Maintenance
OCO
Overseas Contingency Operations
OMDAC-SWACA
Operations, Maintenance & Defense of Army
Communications-Southwest Asia and Central Asia
OMB
Office of Management and Budget
Op
Opportunities
OPMAS-E
Operations Maintenance and Supply –
Europe
Qatar BOSS
Qatar Base Operation Support Services
Q&A
Question & Answer
SG&A
Selling, General & Administrative Expense
SPAWAR
Space and Naval Warfare Systems Command
SVP
Senior Vice President
SWA
Southwest Asia
TARS
Tethered Aerostat Radar System
TBD
To Be Determined
TSBMC
Turkey Spain Base Maintenance Contract
USARCENT
U.S. Army Central
USCENTCOM
U.S. Central Command
USG
U.S. Government
VEC
Vectrus Stock Symbol
XLS
Exelis Stock Symbol
YE
Year End
YTD
Year-to-Date
ACRONYM CHART
Page 43 |
 BOARD OF DIRECTORS
Page 44
Name
Background
Louis Giuliano
Chairman of the
Board
•
Director, Accudyne Industries
•
Chairman of the Board, Meadowkirk Retreat
Center
•
Former Chairman, U.S. Post Office Board of
Governors
•
Senior Advisor, The Carlyle Group
•
Former Chairman, CEO & President, ITT
Corporation
Stephen
Waechter
Director & Chair,
Audit
•
Chair, Audit Committee, Social & Scientific
Systems, Inc.
•
Chair, Audit Committee for CareFirst, Inc.
•
Member, Executive, Strategic Planning &
Nominating Committees, CareFirst, Inc.
•
Former Vice President, Business Operations &
Chief Financial Officer, ARINC Incorporated
•
Former Executive Vice President & Chief
Financial Officer, CACI
Bradford Boston
Director & Chair,
Comp & Personnel
•
Director, NetNumber, Inc
•
Chair, Comp. Committee & Audit Committee
Member, Aap3, Inc.
•
President & Chief Executive Officer,
NetNumber Inc.
•
Former Senior Vice President, Global
Government Solutions & Corporate Security
Programs Office, Cisco Systems, Inc.
Eric Pillmore
Director & Chair,
Nom & Gov
•
Director, Cardone Industries, Focus on the
Family, & the CEO Forum
•
Former Senior Advisor, Center for Corporate
Governance of Deloitte LLP
•
Former Senior Vice President, Corporate
Governance, Tyco International Corporation
•
Former SVP and CFO -
General Instrument
Corp.
Name
Background
William Murdy
Director
•
Chair, Comp. Committee & Audit Committee
Member, UIL Holdings
•
Chair, Comp. Committee & Nominating
Committee Member, Kaiser Aluminum
•
Comp. Committee & Strategic Committee,
LSB Industries, Inc.
•
Former Chairman & Chief Executive Officer,
Comfort Systems U.S.A.
Mel Parker
Director
•
President, North America, Brink’s Company
•
Director, Board of the National Black MBA
Association
•
Member, Executive Leadership Council
•
Former Vice President & General Manager,
North America Consumer & Small Business
Division, Dell, Inc.
Mary Howell
Director
•
Director, Esterline Corporation
•
Executive Committee, Atlantic Council
•
Chair, Development Committee, Philips
Collection
•
Chief Executive Officer, Howell Strategy Group
•
Former Executive Vice President, Textron Inc.
Phillip Widman
Director
•
Chair, Audit Committee & Risk Oversight
Committee Member, Sturm, Ruger & Co, Inc.
•
Audit Committee Member, Harsco Corporation
•
Former Senior Vice President & Chief
Financial Officer, Terex Corporation
•
Former Executive Vice President & Chief
Financial Officer, Philip Services Corporation |