Indiana | 38-3924636 | |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |
2424 Garden of the Gods Road, Colorado Springs, Colorado 80919 | ||
(Address of Principal Executive Offices) (Zip Code) | ||
Registrant’s telephone number, including area code: | ||
(719) 591-3600 |
Title of each class | Trading symbol(s) | Name of each exchange on which registered |
Common Stock, Par Value $0.01 Per Share | VEC | New York Stock Exchange |
Large accelerated filer ¨ | Accelerated filer þ | Non-accelerated filer ¨ | |
Smaller reporting company ¨ | Emerging growth company ¨ |
Page No. | |||
Three Months Ended | ||||||||
April 3, | March 29, | |||||||
(In thousands, except per share data) | 2020 | 2019 | ||||||
Revenue | $ | 351,734 | $ | 325,906 | ||||
Cost of revenue | 319,693 | 295,596 | ||||||
Selling, general, and administrative expenses | 19,558 | 19,919 | ||||||
Operating income | 12,483 | 10,391 | ||||||
Interest expense, net | (1,703 | ) | (1,575 | ) | ||||
Income from operations before income taxes | 10,780 | 8,816 | ||||||
Income tax expense | 2,112 | 1,742 | ||||||
Net income | $ | 8,668 | $ | 7,074 | ||||
Earnings per share | ||||||||
Basic | $ | 0.75 | $ | 0.63 | ||||
Diluted | $ | 0.74 | $ | 0.62 | ||||
Weighted average common shares outstanding - basic | 11,545 | 11,292 | ||||||
Weighted average common shares outstanding - diluted | 11,745 | 11,399 |
Three Months Ended | ||||||||
April 3, | March 29, | |||||||
(In thousands) | 2020 | 2019 | ||||||
Net income | $ | 8,668 | $ | 7,074 | ||||
Other comprehensive income, net of tax | ||||||||
Changes in derivative instruments: | ||||||||
Net change in fair value of interest rate swap | (1,386 | ) | (361 | ) | ||||
Net change in fair value of foreign currency forward contracts | (261 | ) | (98 | ) | ||||
Tax benefit | 357 | 99 | ||||||
Net change in derivative instruments | (1,290 | ) | (360 | ) | ||||
Foreign currency translation adjustments, net of tax | (1,934 | ) | (823 | ) | ||||
Accounting Standards Update (ASU) 2018-02 reclassification of certain tax effects to Retained Earnings | — | (259 | ) | |||||
Other comprehensive loss, net of tax | (3,224 | ) | (1,442 | ) | ||||
Total comprehensive income | $ | 5,444 | $ | 5,632 |
April 3, | December 31, | |||||||
(In thousands, except share information) | 2020 | 2019 | ||||||
Assets | ||||||||
Current assets | ||||||||
Cash | $ | 146,172 | $ | 35,318 | ||||
Receivables | 263,601 | 269,144 | ||||||
Other current assets | 21,212 | 16,154 | ||||||
Total current assets | 430,985 | 320,616 | ||||||
Property, plant, and equipment, net | 18,540 | 18,844 | ||||||
Goodwill | 261,983 | 261,983 | ||||||
Intangible assets, net | 13,911 | 14,926 | ||||||
Right-of-use assets | 12,390 | 14,654 | ||||||
Other non-current assets | 5,789 | 5,366 | ||||||
Total non-current assets | 312,613 | 315,773 | ||||||
Total Assets | $ | 743,598 | $ | 636,389 | ||||
Liabilities and Shareholders' Equity | ||||||||
Current liabilities | ||||||||
Accounts payable | $ | 147,364 | $ | 148,015 | ||||
Compensation and other employee benefits | 42,131 | 53,155 | ||||||
Short-term debt | 122,000 | 6,500 | ||||||
Other accrued liabilities | 39,331 | 37,409 | ||||||
Total current liabilities | 350,826 | 245,079 | ||||||
Long-term debt, net | 61,139 | 63,041 | ||||||
Deferred tax liability | 47,294 | 49,407 | ||||||
Other non-current liabilities | 20,096 | 19,997 | ||||||
Total non-current liabilities | 128,529 | 132,445 | ||||||
Total liabilities | 479,355 | 377,524 | ||||||
Commitments and contingencies (Note 13) | ||||||||
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; 11,587,719 and 11,523,691 shares issued and outstanding as of April 3, 2020 and December 31, 2019, respectively | 116 | 115 | ||||||
Additional paid in capital | 78,690 | 78,757 | ||||||
Retained earnings | 193,743 | 185,075 | ||||||
Accumulated other comprehensive loss | (8,306 | ) | (5,082 | ) | ||||
Total shareholders' equity | 264,243 | 258,865 | ||||||
Total Liabilities and Shareholders' Equity | $ | 743,598 | $ | 636,389 |
Three Months Ended | ||||||||
April 3, | March 29, | |||||||
(In thousands) | 2020 | 2019 | ||||||
Operating activities | ||||||||
Net income | $ | 8,668 | $ | 7,074 | ||||
Adjustments to reconcile net income to net cash provided by (used in) operating activities: | ||||||||
Depreciation expense | 996 | 788 | ||||||
Amortization of intangible assets | 1,015 | 571 | ||||||
Stock-based compensation | 2,367 | 1,462 | ||||||
Amortization of debt issuance costs | 99 | 99 | ||||||
Changes in assets and liabilities: | ||||||||
Receivables | 3,942 | (12,650 | ) | |||||
Other assets | (5,715 | ) | 94 | |||||
Accounts payable | (162 | ) | (11,367 | ) | ||||
Deferred taxes | (1,522 | ) | (1,090 | ) | ||||
Compensation and other employee benefits | (9,733 | ) | 6,724 | |||||
Other liabilities | 1,182 | 1,909 | ||||||
Net cash provided by (used in) operating activities | 1,137 | (6,386 | ) | |||||
Investing activities | ||||||||
Purchases of capital assets and intangibles | (917 | ) | (9,886 | ) | ||||
Net cash used in investing activities | (917 | ) | (9,886 | ) | ||||
Financing activities | ||||||||
Repayments of long-term debt | (1,500 | ) | (1,000 | ) | ||||
Proceeds from revolver | 144,000 | 48,000 | ||||||
Repayments of revolver | (29,000 | ) | (48,000 | ) | ||||
Proceeds from exercise of stock options | 1 | 602 | ||||||
Payments of employee withholding taxes on share-based compensation | (1,787 | ) | (683 | ) | ||||
Net cash provided by (used in) financing activities | 111,714 | (1,081 | ) | |||||
Exchange rate effect on cash | (1,080 | ) | (618 | ) | ||||
Net change in cash | 110,854 | (17,971 | ) | |||||
Cash-beginning of year | 35,318 | 66,145 | ||||||
Cash-end of period | $ | 146,172 | $ | 48,174 | ||||
Supplemental disclosure of cash flow information: | ||||||||
Interest paid | $ | 1,469 | $ | 988 | ||||
Income taxes paid (refunded) | $ | 36 | $ | (296 | ) | |||
Non-cash investing activities: | ||||||||
Purchase of capital assets on account | $ | (606 | ) | $ | (966 | ) |
Common Stock Issued | Additional Paid-in Capital | Accumulated Other Comprehensive Loss | Total Shareholders' Equity | ||||||||||||||||||||
(In thousands) | Shares | Amount | Retained Earnings | ||||||||||||||||||||
Balance at December 31, 2018 | 11,267 | $ | 113 | $ | 71,729 | $ | 151,640 | $ | (3,158 | ) | $ | 220,324 | |||||||||||
Net income | 7,074 | 7,074 | |||||||||||||||||||||
Cumulative effects of adoption of ASU 2018-02 reclassification of certain tax effects from AOCI | 259 | (259 | ) | — | |||||||||||||||||||
Foreign currency translation adjustments | (823 | ) | (823 | ) | |||||||||||||||||||
Unrealized loss on cash flow hedge | (360 | ) | (360 | ) | |||||||||||||||||||
Employee stock awards and stock options | 85 | 1 | (82 | ) | (81 | ) | |||||||||||||||||
Stock-based compensation | 1,117 | 1,117 | |||||||||||||||||||||
Balance at March 29, 2019 | 11,352 | $ | 114 | $ | 72,764 | $ | 158,973 | $ | (4,600 | ) | $ | 227,251 | |||||||||||
Balance at December 31, 2019 | 11,524 | $ | 115 | $ | 78,757 | $ | 185,075 | $ | (5,082 | ) | $ | 258,865 | |||||||||||
Net income | 8,668 | 8,668 | |||||||||||||||||||||
Foreign currency translation adjustments | (1,934 | ) | (1,934 | ) | |||||||||||||||||||
Unrealized loss on cash flow hedge | (1,290 | ) | (1,290 | ) | |||||||||||||||||||
Employee stock awards and stock options | 64 | 1 | (1,787 | ) | (1,786 | ) | |||||||||||||||||
Stock-based compensation | 1,720 | 1,720 | |||||||||||||||||||||
Balance at April 3, 2020 | 11,588 | $ | 116 | $ | 78,690 | $ | 193,743 | $ | (8,306 | ) | $ | 264,243 |
Three Months Ended March 29, 2019 | ||||||||||||
(In thousands, except per share data) | As Previously Reported | Correction | As Corrected | |||||||||
Revenue | $ | 325,928 | $ | (22 | ) | $ | 325,906 | |||||
Operating income | 10,413 | (22 | ) | 10,391 | ||||||||
Income from operations before income taxes | 8,838 | (22 | ) | 8,816 | ||||||||
Income tax expense | 1,747 | (5 | ) | 1,742 | ||||||||
Net income | $ | 7,091 | $ | (17 | ) | $ | 7,074 | |||||
Earnings per share | ||||||||||||
Basic | $ | 0.63 | $ | — | $ | 0.63 | ||||||
Diluted | $ | 0.62 | $ | — | $ | 0.62 |
Three months ended March 29, 2019 | ||||||||||||
(In thousands) | As Previously Reported | Correction | As Corrected | |||||||||
Net income | $ | 7,091 | $ | (17 | ) | $ | 7,074 | |||||
Total comprehensive income | $ | 5,649 | $ | (17 | ) | $ | 5,632 |
December 31, 2019 | ||||||||||||
(In thousands) | As Previously Reported | Correction | As Corrected | |||||||||
Receivables | $ | 269,239 | $ | (95 | ) | $ | 269,144 | |||||
Total current assets | 320,711 | (95 | ) | 320,616 | ||||||||
Total Assets | 636,484 | (95 | ) | 636,389 | ||||||||
Other accrued liabilities | 34,587 | 2,822 | 37,409 | |||||||||
Total current liabilities | 242,257 | 2,822 | 245,079 | |||||||||
Deferred tax liability | 49,808 | (401 | ) | 49,407 | ||||||||
Total non-current liabilities | 132,846 | (401 | ) | 132,445 | ||||||||
Total Liabilities | 375,103 | 2,421 | 377,524 | |||||||||
Retained earnings | 187,591 | (2,516 | ) | 185,075 | ||||||||
Total shareholders' equity | 261,381 | (2,516 | ) | 258,865 | ||||||||
Total Liabilities and Shareholders' Equity | $ | 636,484 | $ | (95 | ) | $ | 636,389 |
Three months ended March 29, 2019 | ||||||||||||
(In thousands) | As Previously Reported | Correction | As Corrected | |||||||||
Net income | $ | 7,091 | $ | (17 | ) | $ | 7,074 | |||||
Changes in other liabilities | 1,892 | 17 | 1,909 | |||||||||
Net cash used in operating activities | $ | (6,386 | ) | $ | — | $ | (6,386 | ) |
Three months ended March 29, 2019 | ||||||||||||||||||||||||
Retained Earnings | Total Shareholders' Equity | |||||||||||||||||||||||
(In thousands) | As Previously Reported | Correction | As Corrected | As Previously Reported | Correction | As Corrected | ||||||||||||||||||
Balance at December 31, 2018 | $ | 152,616 | $ | (976 | ) | $ | 151,640 | $ | 221,300 | $ | (976 | ) | $ | 220,324 | ||||||||||
Net income | 7,091 | (17 | ) | 7,074 | 7,091 | (17 | ) | 7,074 | ||||||||||||||||
Balance at March 29, 2019 | $ | 159,966 | $ | (993 | ) | $ | 158,973 | $ | 228,244 | $ | (993 | ) | $ | 227,251 |
April 3, | December 31, | |||||||
(In thousands) | 2020 | 2019 | ||||||
Performance Obligations | $ | 1,217,349 | $ | 849,389 |
Three Months Ended | ||||||||
April 3, | March 29, | |||||||
(In thousands) | 2020 | 2019 | ||||||
Cost-plus and cost-reimbursable ¹ | $ | 256,319 | $ | 251,456 | ||||
Firm-fixed-price | 95,415 | 74,450 | ||||||
Total revenue | $ | 351,734 | $ | 325,906 | ||||
¹ Includes time and material contracts |
Three Months Ended | ||||||||
April 3, | March 29, | |||||||
(In thousands) | 2020 | 2019 | ||||||
Middle East | $ | 237,937 | $ | 226,416 | ||||
United States | 81,469 | 71,388 | ||||||
Europe | 32,328 | 28,102 | ||||||
Total revenue | $ | 351,734 | $ | 325,906 |
Three Months Ended | ||||||||
April 3, | March 29, | |||||||
(In thousands) | 2020 | 2019 | ||||||
Prime contractor | $ | 333,393 | $ | 307,058 | ||||
Subcontractor | 18,341 | 18,848 | ||||||
Total revenue | $ | 351,734 | $ | 325,906 |
Three Months Ended | ||||||||
April 3, | March 29, | |||||||
(In thousands) | 2020 | 2019 | ||||||
Army | $ | 247,555 | $ | 226,692 | ||||
Air Force | 73,341 | 67,931 | ||||||
Navy | 15,237 | 15,088 | ||||||
Other | 15,601 | 16,195 | ||||||
Total revenue | $ | 351,734 | $ | 325,906 |
(In thousands) | Allocation of Purchase Price | |||
Receivables | $ | 11,535 | ||
Other current assets | 2,719 | |||
Property, plant and equipment | 155 | |||
Goodwill | 28,364 | |||
Intangible assets | 8,300 | |||
Other non-current assets | 1,868 | |||
Accounts payable | (4,223 | ) | ||
Other current liabilities | (1,519 | ) | ||
Accrued compensation | (907 | ) | ||
Other non-current liabilities | (1,218 | ) | ||
Purchase price, net of cash acquired | $ | 45,074 |
April 3, 2020 | December 31, 2019 | |||||||||||||||||||||||
(In thousands) | Gross Carrying Amount | Accumulated Amortization | Net Carrying Amount | Gross Carrying Amount | Accumulated Amortization | Net Carrying Amount | ||||||||||||||||||
Contract backlogs and recompetes | $ | 11,600 | $ | (4,886 | ) | $ | 6,714 | $ | 11,600 | $ | (4,300 | ) | $ | 7,300 | ||||||||||
Customer contracts | 7,200 | (1,064 | ) | 6,136 | 7,200 | (692 | ) | 6,508 | ||||||||||||||||
Trade names and other | 1,236 | (175 | ) | 1,061 | 1,236 | (118 | ) | 1,118 | ||||||||||||||||
Balance | $ | 20,036 | $ | (6,125 | ) | $ | 13,911 | $ | 20,036 | $ | (5,110 | ) | $ | 14,926 |
Period | Amortization | |||||
2020 (excluding the three months ended April 3, 2020) | $ | 3,014 | ||||
2021 | $ | 4,029 | ||||
2022 | $ | 2,501 | ||||
2023 | $ | 2,404 | ||||
2024 | $ | 1,297 | ||||
After 2024 | $ | 530 |
Three Months Ended | ||||||||
April 3, | March 29, | |||||||
(In thousands, except per share data) | 2020 | 2019 | ||||||
Net income | $ | 8,668 | $ | 7,074 | ||||
Weighted average common shares outstanding | 11,545 | 11,292 | ||||||
Add: Dilutive impact of stock options | 41 | 29 | ||||||
Add: Dilutive impact of restricted stock units | 159 | 78 | ||||||
Diluted weighted average common shares outstanding | 11,745 | 11,399 | ||||||
Earnings per share | ||||||||
Basic | $ | 0.75 | $ | 0.63 | ||||
Diluted | $ | 0.74 | $ | 0.62 |
Three Months Ended | ||||||
April 3, | March 29, | |||||
(In thousands) | 2020 | 2019 | ||||
Anti-dilutive stock options | — | 13 | ||||
Anti-dilutive restricted stock units | 1 | 4 | ||||
Total | 1 | 17 |
April 3, | December 31, | |||||||
(In thousands) | 2020 | 2019 | ||||||
Billed receivables | $ | 52,296 | $ | 71,068 | ||||
Unbilled receivables (contract assets) | 199,576 | 186,365 | ||||||
Other | 11,729 | 11,711 | ||||||
Total receivables | $ | 263,601 | $ | 269,144 |
(In thousands) | Payments due | |||
2020 (excluding the three months ended April 3, 2020) | $ | 5,000 | ||
2021 | 8,600 | |||
2022 | 55,400 | |||
Total | $ | 69,000 |
(In thousands) | Fair Value | |||||
Balance sheet caption | Amount | |||||
Interest rate swap designated as cash flow hedge | Other accrued liabilities | $ | 980 | |||
Interest rate swap designated as cash flow hedge | Other non-current liabilities | $ | 1,426 |
(In thousands) | Fair Value | |||||
Balance sheet caption | Amount | |||||
Interest rate swap designated as cash flow hedge | Other accrued liabilities | $ | 323 | |||
Interest rate swap designated as cash flow hedge | Other non-current liabilities | $ | 686 |
(In thousands) | Fair Value | |||||
Balance sheet caption | Amount | |||||
Foreign currency forward designated as cash flow hedge | Other accrued liabilities | $ | 423 | |||
Foreign currency forward designated as cash flow hedge | Other non-current liabilities | $ | 23 |
(In thousands) | Fair Value | |||||
Balance sheet caption | Amount | |||||
Foreign currency forward designated as cash flow hedge | Other accrued liabilities | $ | 185 |
Three Months Ended | ||||||||
(In thousands) | April 3, 2020 | March 29, 2019 | ||||||
Operating lease expense | $ | 2,964 | $ | 3,416 | ||||
Variable lease expense | 170 | 173 | ||||||
Short-term lease expense | 10,690 | 11,197 | ||||||
Total lease expense | $ | 13,824 | $ | 14,786 |
April 3, | December 31, | |||||||
(In thousands) | 2020 | 2019 | ||||||
Right-of-use assets | $ | 12,390 | $ | 14,654 | ||||
Current lease liabilities (recorded in other accrued liabilities) | $ | 3,903 | $ | 5,743 | ||||
Long-term lease liabilities (recorded in other non-current liabilities) | 9,407 | 9,811 | ||||||
Total operating lease liabilities | $ | 13,310 | $ | 15,554 |
(In thousands) | Payments due | |||
2020 (excluding the three months ended April 3, 2020) | $ | 4,599 | ||
2021 | 3,192 | |||
2022 | 2,437 | |||
2023 | 1,430 | |||
2024 | 1,046 | |||
2025 and beyond | 3,292 | |||
Total lease payments | 15,996 | |||
Less: Imputed interest | (2,686 | ) | ||
Total operating lease liabilities | $ | 13,310 |
Three Months Ended | ||||||||
(In thousands) | April 3, 2020 | March 29, 2019 | ||||||
Compensation costs for equity-based awards | $ | 1,720 | $ | 1,117 | ||||
Compensation costs for liability-based awards | 647 | 345 | ||||||
Total compensation costs, pre-tax | $ | 2,367 | $ | 1,462 | ||||
Future tax benefit | $ | 511 | $ | 316 |
NQOs | RSUs | |||||||||||||
(In thousands, except per share data) | Shares | Weighted Average Exercise Price Per Share | Shares | Weighted Average Grant Date Fair Value Per Share | ||||||||||
Outstanding at January 1, 2020 | 77 | $ | 23.30 | 301 | $ | 30.30 | ||||||||
Granted | — | $ | — | 103 | $ | 53.05 | ||||||||
Exercised | — | $ | — | — | $ | — | ||||||||
Vested | — | $ | — | (112 | ) | $ | 28.24 | |||||||
Forfeited or expired | — | $ | — | (1 | ) | $ | 27.74 | |||||||
Outstanding at April 3, 2020 | 77 | $ | 23.30 | 291 | $ | 39.14 |
% of Total Revenue | ||||
Three Months Ended | ||||
Contract Name | April 3, 2020 | March 29, 2019 | ||
Kuwait Base Operations and Security Support Services (K-BOSSS) | 35.1% | 37.3% | ||
Operations, Maintenance and Defense of Army Communications in Southwest Asia and Central Asia (OMDAC-SWACA) | 15.8% | 15.6% |
April 3, | December 31, | |||||||
(In millions) | 2020 | 2019 | ||||||
Funded backlog | $ | 1,034 | $ | 707 | ||||
Unfunded backlog | 3,034 | 2,044 | ||||||
Total backlog | $ | 4,068 | $ | 2,751 |
Three Months Ended | Change | ||||||||||||||
(In thousands, except for percentages) | April 3, 2020 | March 29, 2019 | $ | % | |||||||||||
Revenue | $ | 351,734 | $ | 325,906 | $ | 25,828 | 7.9 | % | |||||||
Cost of revenue | 319,693 | 295,596 | 24,097 | 8.2 | % | ||||||||||
% of revenue | 90.9 | % | 90.7 | % | |||||||||||
Selling, general and administrative | 19,558 | 19,919 | (361 | ) | (1.8 | )% | |||||||||
% of revenue | 5.6 | % | 6.1 | % | |||||||||||
Operating income | 12,483 | 10,391 | 2,092 | 20.1 | % | ||||||||||
Operating margin | 3.5 | % | 3.2 | % | |||||||||||
Interest expense, net | (1,703 | ) | (1,575 | ) | 128 | 8.1 | % | ||||||||
Income before taxes | 10,780 | 8,816 | 1,964 | 22.3 | % | ||||||||||
% of revenue | 3.1 | % | 2.7 | % | |||||||||||
Income tax expense | 2,112 | 1,742 | 370 | 21.2 | % | ||||||||||
Effective income tax rate | 19.6 | % | 19.8 | % | |||||||||||
Net Income | $ | 8,668 | $ | 7,074 | $ | 1,594 | 22.5 | % |
Three Months Ended | Change | ||||||||||||||
(In thousands, except for percentages) | April 3, 2020 | March 29, 2019 | $ | % | |||||||||||
Interest income | $ | 31 | $ | 39 | $ | (8 | ) | (21 | )% | ||||||
Interest expense | (1,734 | ) | (1,614 | ) | (120 | ) | (7 | )% | |||||||
Interest expense, net | $ | (1,703 | ) | $ | (1,575 | ) | $ | (128 | ) | (8 | )% |
Three Months Ended | ||||||||
(In thousands) | April 3, 2020 | March 29, 2019 | ||||||
Operating activities | $ | 1,137 | $ | (6,386 | ) | |||
Investing activities | (917 | ) | (9,886 | ) | ||||
Financing activities | 111,714 | (1,081 | ) | |||||
Foreign exchange1 | (1,080 | ) | (618 | ) | ||||
Net change in cash | $ | 110,854 | $ | (17,971 | ) | |||
1 Impact on cash balances due to changes in foreign exchange rates. |
10.1 | |
31.1 | |
31.2 | |
32.1 | |
32.2 | |
101 | The following materials from Vectrus, Inc.’s Quarterly Report on Form 10-Q for the quarter ended April 3, 2020, formatted in XBRL (Extensible Business Reporting Language): (i) Unaudited Condensed Consolidated Statements of Income, (ii) Unaudited Condensed Consolidated Statements of Comprehensive Income, (iii) Unaudited Condensed Consolidated Balance Sheets, (iv) Unaudited Condensed Consolidated Statements of Cash Flows, (v) Unaudited Condensed Consolidated Statements of Changes to Shareholders' Equity and (vi) Notes to Condensed Consolidated Financial Statements. # |
VECTRUS, INC. | |
/s/ William B. Noon | |
By: William B. Noon | |
Corporate Vice President and Chief Accounting Officer | |
(Principal Accounting Officer) | |
Date: May 12, 2020 |
1. | I have reviewed this quarterly report on Form 10-Q of Vectrus, Inc.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c) | Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d) | Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and |
5. | The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): |
a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
Date: May 12, 2020 | |
/s/ Charles L. Prow | |
Charles L. Prow | |
President and Chief Executive Officer |
1. | I have reviewed this quarterly report on Form 10-Q of Vectrus, Inc.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c) | Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d) | Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and |
5. | The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): |
a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
Date: May 12, 2020 | |
/s/ Susan D. Lynch | |
Susan D. Lynch | |
Senior Vice President and Chief Financial Officer | |
(1) | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and |
(2) | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
Date: May 12, 2020 | |
/s/ Charles L. Prow | |
Charles L. Prow | |
President and Chief Executive Officer |
(1) | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and |
(2) | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
Date: May 12, 2020 | |
/s/ Susan D. Lynch | |
Susan D. Lynch | |
Senior Vice President and Chief Financial Officer | |
Description of Business and Summary of Significant Accounting Policies - Immaterial Restatement of Prior Period Balances (Details) - USD ($) $ / shares in Units, $ in Thousands |
3 Months Ended | 12 Months Ended | ||||||
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Apr. 03, 2020 |
Dec. 31, 2019 |
Sep. 27, 2019 |
Jun. 28, 2019 |
Mar. 29, 2019 |
Dec. 31, 2019 |
Dec. 31, 2018 |
Dec. 31, 2017 |
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Error Corrections and Prior Period Adjustments Restatement [Line Items] | ||||||||
Decrease in retained earnings | $ (193,743) | $ (185,075) | $ (185,075) | |||||
Net income | $ (8,668) | $ (7,074) | ||||||
Decrease in diluted earnings per share (in dollars per share) | $ (0.74) | $ (0.62) | ||||||
Correction | ||||||||
Error Corrections and Prior Period Adjustments Restatement [Line Items] | ||||||||
Decrease in retained earnings | $ 2,516 | 2,516 | ||||||
Net income | $ 17 | $ 1,500 | ||||||
Decrease in diluted earnings per share (in dollars per share) | $ (0.00) | $ 0.13 | $ (0.00) | $ (0.00) | $ 0.13 | $ 0.02 | $ 0.01 |
Description of Business and Summary of Significant Accounting Policies - Condensed Consolidated Statement of Cash Flow (Details) - USD ($) $ in Thousands |
3 Months Ended | 12 Months Ended | |
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Apr. 03, 2020 |
Mar. 29, 2019 |
Dec. 31, 2019 |
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Error Corrections and Prior Period Adjustments Restatement [Line Items] | |||
Net income | $ 8,668 | $ 7,074 | |
Other liabilities | 1,182 | 1,909 | |
Net cash used in operating activities | $ 1,137 | (6,386) | |
As Previously Reported | |||
Error Corrections and Prior Period Adjustments Restatement [Line Items] | |||
Net income | 7,091 | ||
Other liabilities | 1,892 | ||
Net cash used in operating activities | (6,386) | ||
Correction | |||
Error Corrections and Prior Period Adjustments Restatement [Line Items] | |||
Net income | (17) | $ (1,500) | |
Other liabilities | 17 | ||
Net cash used in operating activities | $ 0 |
Label | Element | Value |
---|---|---|
AOCI Attributable to Parent [Member] | ||
Cumulative Effect of New Accounting Principle in Period of Adoption | us-gaap_CumulativeEffectOfNewAccountingPrincipleInPeriodOfAdoption | $ (259,000) |
Retained Earnings [Member] | ||
Cumulative Effect of New Accounting Principle in Period of Adoption | us-gaap_CumulativeEffectOfNewAccountingPrincipleInPeriodOfAdoption | $ 259,000 |
Earnings Per Share |
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Earnings Per Share | EARNINGS PER SHARE Basic earnings per share (EPS) is computed by dividing net income by the weighted average number of common shares outstanding for the period. Diluted EPS reflects potential dilution that could occur if securities to issue common stock were exercised or converted into common stock. Diluted EPS includes the dilutive effect of stock-based compensation outstanding after application of the treasury stock method.
The following table provides a summary of securities that could potentially dilute basic earnings per share in the future that were not included in the computation of diluted earnings per share because to do so would have been anti-dilutive for the periods presented:
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Revenue |
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Revenue from Contract with Customer [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Revenue | REVENUE Performance Obligations A performance obligation is a promise in a contract to transfer a distinct good or service to the customer and is the unit of account for revenue in ASC Topic 606. A contract’s transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied. To determine the proper revenue recognition method, consideration is given as to whether a single contract should be accounted for as more than one performance obligation. For most of our contracts, the customer contracts with us to perform an integrated set of tasks and deliverables as a single service solution, whereby each service is not separately identifiable from other promises in the contract and therefore is not distinct. As a result, when this integrated set of tasks exists, the contract is accounted for as one performance obligation. The vast majority of our contracts have a single performance obligation. Unexercised contract options and indefinite delivery and indefinite quantity (IDIQ) contracts are considered to be separate performance obligations when the option or IDIQ task order is exercised or awarded. Contract modifications are routine in the performance of our contracts. Contracts are often modified to account for changes in contract specifications or requirements. In most instances, contract modifications are for goods or services that are not distinct, and therefore, are accounted for as part of the existing contract. Modifications to exercise option years create new enforceable rights and obligations and therefore are treated as separate performance obligations. The Company's performance obligations are typically satisfied over time as services are provided throughout the contract term. We recognize revenue over time using the input method (e.g., costs incurred to date relative to total estimated costs at completion) to measure progress. Our over time recognition is reinforced by the fact that our customers simultaneously receive and consume the benefits of our services as they are performed. This continuous transfer of control requires that we track progress towards completion of performance obligations in order to measure and recognize revenue. Determining progress on performance obligations requires us to make judgments that affect the timing of revenue recognition. Remaining performance obligations represent firm orders by the customer and excludes potential orders under IDIQ contracts, unexercised contract options, and contracts awarded to us that are being protested by competitors with the U.S. Government Accountability Office (GAO) or in the U.S. Court of Federal Claims. The level of order activity related to contracts can be affected by the timing of government funding authorizations and their project evaluation cycles. Year-over-year comparisons could, at times, be impacted by these factors, among others. The Company's contracts are multi-year contracts and typically include an initial period of one year or less with annual one-year (or less) option periods. The number of option periods varies by contract, and there is no guarantee that an option period will be exercised. The right to exercise an option period is at the sole discretion of the U.S. Government when we are the prime contractor or of the prime contractor when we are a subcontractor. We expect to recognize a substantial portion of our performance obligations as revenue within the next 12 months. However, the U.S. Government or the prime contractor may cancel any contract at any time through a termination for convenience or for cause. Substantially all of our contracts have terms that would permit us to recover all or a portion of our incurred costs and fees for work performed in the event of a termination for convenience. Remaining performance obligations increased by $368.0 million as of April 3, 2020 as compared to December 31, 2019. We expect to recognize approximately 72% of the remaining performance obligations as of April 3, 2020 as revenue in 2020, and the remaining 28% during 2021. Remaining performance obligations as of April 3, 2020 and December 31, 2019 are presented in the following table:
Contract Estimates Accounting for contracts involves the use of various techniques to estimate total contract revenue and costs. We estimate the profit on our contracts as the difference between the total estimated revenue and expected costs to complete a contract and recognize that profit over the life of the contract. Contract estimates are based on various assumptions to project the outcome of future events. These assumptions include labor productivity and availability; the complexity of the services being performed; the cost and availability of materials; the performance of subcontractors; and the availability and timing of funding from the customer. The impact of adjustments in contract estimates on our operating income can be reflected in either revenue or cost of revenue. Cumulative adjustments for the three months ended April 3, 2020 and March 29, 2019 were unfavorable by $2.3 million and $1.1 million, respectively For the three months ended April 3, 2020, and March 29, 2019, the net unfavorable adjustments to operating income decreased revenue by $1.6 million and $0.4 million, respectively. Revenue by Category Generally, the sales price elements for our contracts are cost-plus, cost-reimbursable or firm-fixed-price. We commonly have elements of cost-plus, cost-reimbursable and firm-fixed-price contracts on a single contract. On a cost-plus type contract, we are paid our allowable incurred costs plus a profit, which can be fixed or variable depending on the contract’s fee arrangement, up to funding levels predetermined by our customers. On cost-plus type contracts, we do not bear the risks of unexpected cost overruns, provided that we do not incur costs that exceed the predetermined funded amounts. Most of our cost-plus contracts also contain a firm-fixed-price element. Cost-plus type contracts with award and incentive fee provisions are our primary variable contract fee arrangement. Award fees provide for a fee based on actual performance relative to contractually specified performance criteria. Incentive fees provide for a fee based on the relationship between total allowable and target cost. On most of our contracts, a cost-reimbursable element captures consumable materials required for the contract. Typically, these costs do not bear fees. On a firm-fixed-price type contract, we agree to perform the contractual statement of work for a predetermined contract price. A firm-fixed-price type contract typically offers higher profit margin potential than a cost-plus type contract, which is commensurate with the greater levels of risk we assume on a firm-fixed-price type contract. Although a firm-fixed-price type contract generally permits us to retain profits if the total actual contract costs are less than the estimated contract costs, we bear the risk that increased or unexpected costs may reduce our profit or cause us to sustain losses on the contract. Although the overall scope of work required under the contract may not change, profit may be adjusted as experience is gained and as efficiencies are realized or costs are incurred. The following tables present our revenue disaggregated by several categories. Revenue by contract type for the three months ended April 3, 2020 and March 29, 2019 is as follows:
Revenue by geographic region in which the contract is performed for the three months ended April 3, 2020 and March 29, 2019 is as follows:
Revenue by contract relationship for the three months ended April 3, 2020 and March 29, 2019 is as follows:
Revenue by customer for the three months ended April 3, 2020 and March 29, 2019 is as follows:
Contract Balances The timing of revenue recognition, billings and cash collections results in billed and unbilled accounts receivable (contract assets) and customer advances and deposits (contract liabilities) on the Condensed Consolidated Balance Sheets. Amounts are billed as work progresses in accordance with agreed-upon contractual terms at periodic intervals (e.g., biweekly or monthly). Generally, billing occurs subsequent to revenue recognition, resulting in contract assets. However, we may receive advances or deposits from our customers, before revenue is recognized, resulting in contract liabilities. These advance billings and payments are not considered significant financing components because they are frequently intended to ensure that both parties are in conformance with the primary contract terms. These assets and liabilities are reported on the Condensed Consolidated Balance Sheets on a contract-by-contract basis at the end of each reporting period. As of April 3, 2020 and December 31, 2019, we had contract assets of $199.6 million and $186.4 million, respectively. Refer to Note 8, "Receivables" for additional information regarding the composition of our receivable balances. As of both April 3, 2020 and December 31, 2019, our contract liabilities were insignificant. |
Leases |
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Leases [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Leases | Leases We determine whether an arrangement contains a lease at inception. We have operating leases for office space, apartments, vehicles, and machinery and equipment. Our operating leases have lease terms of less than one year to ten years. We do not separate lease components from non-lease components (e.g., common area maintenance, property taxes and insurance) but account for both components in a contract as a single lease component. The components of lease expense are as follows:
Supplemental balance sheet information related to our operating leases is as follows:
Additional ROU assets of $0.5 million were recognized as non-cash asset additions that resulted from new operating lease liabilities during the first quarter of 2020. The weighted average remaining lease term and discount rate for our operating leases at April 3, 2020 were 3.8 years and 6.3%, respectively. Maturities of lease liabilities at April 3, 2020 were as follows:
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Receivables - Schedule of Receivables (Details) - USD ($) $ in Thousands |
Apr. 03, 2020 |
Dec. 31, 2019 |
---|---|---|
Receivables [Abstract] | ||
Billed receivables | $ 52,296 | $ 71,068 |
Unbilled receivables (contract assets) | 199,576 | 186,365 |
Other | 11,729 | 11,711 |
Total receivables | 263,601 | $ 269,144 |
Estimate of unbilled contract receivables | $ 7,000 |
Goodwill and Intangible Assets - Schedule of Identifiable Assets (Details) - USD ($) $ in Thousands |
Apr. 03, 2020 |
Dec. 31, 2019 |
---|---|---|
Finite-Lived Intangible Assets [Line Items] | ||
Gross Carrying Amount | $ 20,036 | $ 20,036 |
Accumulated Amortization | (6,125) | (5,110) |
Net Carrying Amount | 13,911 | 14,926 |
Contract backlogs and recompetes | ||
Finite-Lived Intangible Assets [Line Items] | ||
Gross Carrying Amount | 11,600 | 11,600 |
Accumulated Amortization | (4,886) | (4,300) |
Net Carrying Amount | 6,714 | 7,300 |
Customer contracts | ||
Finite-Lived Intangible Assets [Line Items] | ||
Gross Carrying Amount | 7,200 | 7,200 |
Accumulated Amortization | (1,064) | (692) |
Net Carrying Amount | 6,136 | 6,508 |
Trade names and other | ||
Finite-Lived Intangible Assets [Line Items] | ||
Gross Carrying Amount | 1,236 | 1,236 |
Accumulated Amortization | (175) | (118) |
Net Carrying Amount | $ 1,061 | $ 1,118 |
Leases - Balance Sheet Information Related to Leases (Details) - USD ($) $ in Thousands |
Apr. 03, 2020 |
Dec. 31, 2019 |
---|---|---|
Leases [Abstract] | ||
Right-of-use assets | $ 12,390 | $ 14,654 |
Current lease liabilities (recorded in other accrued liabilities) | 3,903 | 5,743 |
Long-term lease liabilities (recorded in other non-current liabilities) | 9,407 | 9,811 |
Total operating lease liabilities | $ 13,310 | $ 15,554 |
Derivative Instruments - Interest Rate Hedges in the Condensed Consolidated Balance Sheets (Details) - Cash Flow Hedging - Designated as hedging instrument - Interest Rate Swap - USD ($) $ in Thousands |
Apr. 03, 2020 |
Dec. 31, 2019 |
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Other accrued liabilities | ||
Derivative [Line Items] | ||
Interest rate swap designated as cash flow hedge, liability | $ 980 | $ 323 |
Other non-current liabilities | ||
Derivative [Line Items] | ||
Interest rate swap designated as cash flow hedge, liability | $ 1,426 | $ 686 |
Revenue - Revenue by Contract Type (Details) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Apr. 03, 2020 |
Mar. 29, 2019 |
|
Disaggregation of Revenue [Line Items] | ||
Total revenue | $ 351,734 | $ 325,906 |
Cost-plus and cost-reimbursable | ||
Disaggregation of Revenue [Line Items] | ||
Total revenue | 256,319 | 251,456 |
Firm-fixed-price | ||
Disaggregation of Revenue [Line Items] | ||
Total revenue | $ 95,415 | $ 74,450 |
Revenue - Revenue Contract Balances (Details) - USD ($) $ in Millions |
Apr. 03, 2020 |
Dec. 31, 2019 |
---|---|---|
Revenue from Contract with Customer [Abstract] | ||
Contract assets | $ 199.6 | $ 186.4 |
Contract liability | $ 0.0 |
Earnings Per Share (Tables) |
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Reconciliation of Basic and Diluted Weighted Average Shares Outstanding |
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Schedule of Antidilutive Securities Excluded from Computation of Earnings Per Share | The following table provides a summary of securities that could potentially dilute basic earnings per share in the future that were not included in the computation of diluted earnings per share because to do so would have been anti-dilutive for the periods presented:
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Description of Business and Summary of Significant Accounting Policies (Tables) |
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Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Error Corrections and Prior Period Adjustments | The effects of the corrections to each of the individual affected line items in our Condensed Consolidated Statements of Income were as follows:
The effects of the corrections to each of the individual affected line items on our Condensed Consolidated Statements of Comprehensive Income were as follows:
The effects of the corrections to each of the individual affected line items on our Condensed Consolidated Balance Sheet were as follows:
The effects of the corrections to each of the individual affected line items on our Condensed Consolidated Statements of Cash Flows were as follows:
The effects of the corrections to each of the individual affected line items on our Condensed Consolidated Statements of Changes in Shareholders' Equity were as follows:
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Condensed Consolidated Statements of Comprehensive Income (Unaudited) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Apr. 03, 2020 |
Mar. 29, 2019 |
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Net income | $ 8,668 | $ 7,074 |
Changes in derivative instruments: | ||
Tax benefit | 357 | 99 |
Net change in derivative instruments | (1,290) | (360) |
Foreign currency translation adjustments, net of tax | (1,934) | (823) |
Accounting Standards Update (ASU) 2018-02 reclassification of certain tax effects to Retained Earnings | 0 | (259) |
Other comprehensive loss, net of tax | (3,224) | (1,442) |
Total comprehensive income | 5,444 | 5,632 |
Interest Rate Swap | ||
Changes in derivative instruments: | ||
Net change in fair value of derivative instruments | (1,386) | (361) |
Foreign Currency Forward Contracts | ||
Changes in derivative instruments: | ||
Net change in fair value of derivative instruments | $ (261) | $ (98) |
Commitments and Contingencies - Additional Information (Details) - USD ($) $ in Millions |
Apr. 03, 2020 |
Dec. 31, 2019 |
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Contract compliance | ||
Loss Contingencies [Line Items] | ||
Contracts loss contingency accrual | $ 12.3 | $ 12.1 |
Leases - Maturities of Lease Liabilities (Details) - USD ($) $ in Thousands |
Apr. 03, 2020 |
Dec. 31, 2019 |
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Leases [Abstract] | ||
2020 (excluding the three months ended April 3, 2020) | $ 4,599 | |
2021 | 3,192 | |
2022 | 2,437 | |
2023 | 1,430 | |
2024 | 1,046 | |
2025 and beyond | 3,292 | |
Total lease payments | 15,996 | |
Less: Imputed interest | (2,686) | |
Total operating lease liabilities | $ 13,310 | $ 15,554 |
Derivative Instruments - Forward Contract Hedges in the Consolidated Condensed Balance Sheets (Details) - Cash Flow Hedging - Designated as hedging instrument - Foreign Currency Forward Contracts - USD ($) $ in Thousands |
Apr. 03, 2020 |
Dec. 31, 2019 |
---|---|---|
Other accrued liabilities | ||
Derivative [Line Items] | ||
Foreign currency forward designated as cash flow hedge, liability | $ 423 | $ 185 |
Other non-current liabilities | ||
Derivative [Line Items] | ||
Foreign currency forward designated as cash flow hedge, liability | $ 23 |
Revenue - Revenue Contract Estimates (Details) - USD ($) $ in Millions |
3 Months Ended | |
---|---|---|
Apr. 03, 2020 |
Mar. 29, 2019 |
|
Revenue from Contract with Customer [Abstract] | ||
Unfavorable adjustments | $ 2.3 | $ 1.1 |
Unfavorable adjustments to operating income | $ 1.6 | $ 0.4 |
Revenue - Revenue by Customer (Details) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Apr. 03, 2020 |
Mar. 29, 2019 |
|
Disaggregation of Revenue [Line Items] | ||
Total revenue | $ 351,734 | $ 325,906 |
Army | ||
Disaggregation of Revenue [Line Items] | ||
Total revenue | 247,555 | 226,692 |
Air Force | ||
Disaggregation of Revenue [Line Items] | ||
Total revenue | 73,341 | 67,931 |
Navy | ||
Disaggregation of Revenue [Line Items] | ||
Total revenue | 15,237 | 15,088 |
Other | ||
Disaggregation of Revenue [Line Items] | ||
Total revenue | $ 15,601 | $ 16,195 |
Receivables (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Receivables [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Receivables | Receivables were comprised of the following:
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Condensed Consolidated Statements of Income (Unaudited) - USD ($) shares in Thousands, $ in Thousands |
3 Months Ended | |
---|---|---|
Apr. 03, 2020 |
Mar. 29, 2019 |
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Income Statement [Abstract] | ||
Revenue | $ 351,734 | $ 325,906 |
Cost of revenue | 319,693 | 295,596 |
Selling, general and administrative expenses | 19,558 | 19,919 |
Operating income | 12,483 | 10,391 |
Interest expense, net | (1,703) | (1,575) |
Income from operations before income taxes | 10,780 | 8,816 |
Income tax expense | 2,112 | 1,742 |
Net income | $ 8,668 | $ 7,074 |
Earnings per share | ||
Basic (in dollars per share) | $ 0.75 | $ 0.63 |
Diluted (in dollars per share) | $ 0.74 | $ 0.62 |
Weighted average common shares outstanding - basic (in shares) | 11,545 | 11,292 |
Diluted weighted average common shares outstanding - diluted (in shares) | 11,745 | 11,399 |
Revenue (Tables) |
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Revenue from Contract with Customer [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Remaining Performance Obligation | Remaining performance obligations as of April 3, 2020 and December 31, 2019 are presented in the following table:
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Disaggregation of Revenue | The following tables present our revenue disaggregated by several categories. Revenue by contract type for the three months ended April 3, 2020 and March 29, 2019 is as follows:
Revenue by geographic region in which the contract is performed for the three months ended April 3, 2020 and March 29, 2019 is as follows:
Revenue by contract relationship for the three months ended April 3, 2020 and March 29, 2019 is as follows:
Revenue by customer for the three months ended April 3, 2020 and March 29, 2019 is as follows:
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Description of Business and Summary of Significant Accounting Policies - Additional Information (Details) |
3 Months Ended |
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Apr. 03, 2020
segment
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Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Number of reportable segments | 1 |
Stock-Based Compensation |
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Share-based Payment Arrangement [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stock-Based Compensation | STOCK-BASED COMPENSATION We maintain an equity incentive plan (the 2014 Omnibus Plan) to govern awards granted to Vectrus employees and directors, including nonqualified stock options (NQOs), restricted stock units (RSUs), total shareholder return (TSR) awards and other awards. We account for NQOs and stock-settled RSUs as equity-based compensation awards. TSR awards, described below, and cash-settled RSUs are accounted for as liability-based compensation awards. Stock-based compensation expense and the associated tax benefits impacting our Condensed Consolidated Statements of Income were as follows:
Liability-based awards are revalued at the end of each reporting period to reflect changes in fair value. As of April 3, 2020, total unrecognized compensation costs related to equity-based awards and liability-based awards were $8.3 million and $5.6 million, respectively, which are expected to be recognized ratably over a weighted average period of 2.15 years and 2.14 years, respectively. The following table provides a summary of the activities for NQOs and RSUs for the three months ended April 3, 2020:
For employee RSUs, one-third of the award vests on each of the three anniversary dates following the grant date. Director RSUs are granted on the date of an annual meeting of shareholders and vest on the business day immediately prior to the next annual meeting. The fair value of each RSU grant was determined based on the closing price of Vectrus common stock on the date of grant. Stock compensation expense will be recognized ratably over the vesting period of the awards. Total Shareholder Return Awards TSR awards are performance-based cash awards that are subject to a three-year performance period. Any payments earned are made in cash following completion of the performance period according to the achievement of specified performance goals. During the three months ended April 3, 2020, we granted TSR awards with an aggregate target TSR value of $3.0 million. The fair value of TSR awards is measured quarterly and is based on the Company’s performance relative to the performance of the Aerospace and Defense Companies in the S&P 1500 Index. Depending on the Company’s performance during the three-year performance period, payments can range from 0% to 200% of the target value. |
Receivables |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Apr. 03, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Receivables [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Receivables | RECEIVABLES Receivables were comprised of the following:
As of April 3, 2020 and December 31, 2019, substantially all billed receivables are due from the U.S. Government, either directly as prime contractor to the U.S. Government or as subcontractor to another prime contractor to the U.S. Government. Because our billed receivables are with the U.S. Government, we do not believe they represent a material credit risk exposure. Unbilled receivables are contract assets that represent revenue recognized on long-term contracts in excess of amounts billed as of the balance sheet date. We estimate that approximately $7.0 million of our unbilled receivables as of April 3, 2020 may not be collected within the next 12 months. These amounts relate to the timing of the U.S. Government review of indirect rates and contract line item realignments with our customers. Changes in the balance of receivables are primarily due to the timing differences between our performance and customers' payments. |
Income Taxes |
3 Months Ended |
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Apr. 03, 2020 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | INCOME TAXES Effective Tax Rate Income tax expense during interim periods is based on an estimated annual effective income tax rate, plus any significant unusual or infrequently occurring items recorded in interim periods. The computation of the annual estimated effective income tax rate at each interim period requires certain estimates and judgment including, but not limited to, the expected operating income for the year, projections of the proportion of income earned and taxed in various jurisdictions, permanent and temporary differences, and the likelihood of recovering deferred tax assets generated in the current year. For the three months ended April 3, 2020 and March 29, 2019 we recorded income tax provisions of $2.1 million and $1.7 million, respectively, representing effective income tax rates of 19.6% and 19.8%, respectively. The comparison of effective income tax rates between periods and to the federal statutory rate of 21.0% are affected by the above mentioned items. Uncertain Tax Provisions As of April 3, 2020 and December 31, 2019, unrecognized tax benefits from uncertain tax positions were $8.7 million and $7.9 million, respectively. |
Goodwill and Intangible Assets - Amortization Expense (Details) |
Apr. 03, 2020
USD ($)
|
---|---|
Goodwill and Intangible Assets Disclosure [Abstract] | |
2020 (excluding the three months ended April 3, 2020) | $ 3,014 |
2021 | 4,029 |
2022 | 2,501 |
2023 | 2,404 |
2024 | 1,297 |
After 2024 | $ 530 |
Income Taxes - Additional Information (Details) - USD ($) $ in Thousands |
3 Months Ended | ||
---|---|---|---|
Apr. 03, 2020 |
Mar. 29, 2019 |
Dec. 31, 2019 |
|
Income Tax Disclosure [Abstract] | |||
Provision for income taxes | $ 2,112 | $ 1,742 | |
Effective income tax rate | 19.60% | 19.80% | |
Unrecognized tax benefits | $ 8,700 | $ 7,900 |
Revenue - Revenue Performance Obligations (Details) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Apr. 03, 2020 |
Dec. 31, 2019 |
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Revenue from Contract with Customer [Abstract] | ||
Performance obligations timing | The Company's contracts are multi-year contracts and typically include an initial period of one year or less with annual one-year (or less) option periods | |
Increase in remaining performance obligations | $ 368,000 | |
Performance Obligations | $ 1,217,349 | $ 849,389 |
Revenue - Revenue by Geographic Region (Details) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Apr. 03, 2020 |
Mar. 29, 2019 |
|
Disaggregation of Revenue [Line Items] | ||
Total revenue | $ 351,734 | $ 325,906 |
Middle East | ||
Disaggregation of Revenue [Line Items] | ||
Total revenue | 237,937 | 226,416 |
United States | ||
Disaggregation of Revenue [Line Items] | ||
Total revenue | 81,469 | 71,388 |
Europe | ||
Disaggregation of Revenue [Line Items] | ||
Total revenue | $ 32,328 | $ 28,102 |
Leases - Components of Lease Expense (Details) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Apr. 03, 2020 |
Mar. 29, 2019 |
|
Leases [Abstract] | ||
Operating lease expense | $ 2,964 | $ 3,416 |
Variable lease expense | 170 | 173 |
Short-term lease expense | 10,690 | 11,197 |
Total lease expense | $ 13,824 | $ 14,786 |
Goodwill and Intangible Assets (Tables) |
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Goodwill and Intangible Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Identifiable Intangible Assets | Identifiable intangible assets consist of the following:
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Schedule of Amortization Expense | The estimated amortization expense for the next five years is as follows (in thousands):
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Description of Business and Summary of Significant Accounting Policies (Policies) |
3 Months Ended |
---|---|
Apr. 03, 2020 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Our Business and Basis of Presentation | Our Business Vectrus, Inc. is a leading provider of services to the United States Government (U.S. Government) worldwide. The Company operates as one segment and provides the following services and offerings: facility and logistics services, information technology and network communications services, and operational technologies and converged solutions. Vectrus was incorporated in the State of Indiana on February 4, 2014. On September 27, 2014, Exelis Inc. (Exelis) completed a spin-off (the Spin-off) of Vectrus, and Vectrus became an independent, publicly traded company. Basis of Presentation Our quarterly financial periods end on the Friday closest to the last day of the calendar quarter (April 3, 2020 for the first quarter of 2020 and March 29, 2019 for the first quarter of 2019), except for the last quarter of the fiscal year, which ends on December 31. For ease of presentation, the quarterly financial statements included herein are described as three months ended. The unaudited interim Condensed Consolidated Financial Statements of Vectrus have been prepared pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (SEC). Accordingly, certain information and footnote disclosures normally included in annual financial statements prepared in accordance with generally accepted accounting principles in the U.S. (GAAP) have been omitted. These unaudited interim Condensed Consolidated Financial Statements should be read in conjunction with our audited Consolidated Financial Statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2019. It is management’s opinion that these financial statements include all normal and recurring adjustments necessary for a fair presentation of the Company’s financial position and operating results. Revenue and net income for any interim period are not necessarily indicative of future or annual results. |
Accounting Standards Issued But Not Yet Effective and Accounting Standards That Were Adopted | RECENT ACCOUNTING STANDARDS UPDATE Accounting Standards Issued but Not Yet Effective In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740) Simplifying the Accounting for Income Taxes (ASU 2019-12). The objectives of ASU 2019-12 are (i) to simplify the accounting for income taxes by removing certain exceptions, (ii) to update certain requirements to simplify the accounting for income taxes, and (iii) to make minor codification improvements for income taxes. The guidance is effective for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years. Early adoption is permitted. The Company does not expect the adoption of this standard to have a material impact on the Company’s financial statements. Accounting Standards That Were Adopted In August 2018, the FASB issued ASU 2018-15, Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40) (ASU 2018-15). The objective of ASU 2018-15 is to align the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with those incurred to develop or obtain internal-use software. The guidance is effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. Early adoption is permitted. The amendments can be applied either retrospectively or prospectively. We adopted ASU 2018-15 on January 1, 2020 using the retrospective method. As a result of the adoption, $0.3 million was reclassified from 2019 year-end property, plant and equipment, net, to other non-current assets on our Condensed Consolidated Balance Sheet. In addition, $0.3 million of cash outflows from investing activities incurred during the third and fourth quarters of 2019 was reclassified to cash outflows from operating activities. In January 2017, the FASB issued ASU 2017-04, Simplifying the Test for Goodwill Impairment (ASU 2017-04). The objective of ASU 2017-04 is to simplify the subsequent measurement of goodwill by entities performing their annual goodwill impairment tests by comparing the fair value of a reporting unit, including income tax effects from any tax-deductible goodwill, with its carrying amount and recognizing an impairment charge for the amount by which the carrying amount exceeds fair value. ASU 2017-04 is effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. ASU 2017-04 should be applied on a prospective basis. We adopted ASU 2017-04 on January 1, 2020. The adoption of the standard did not have a material impact on our financial statements. In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Loses (Topic 326) (ASU 2016-13). The objective of ASU 2016-13 is to provide financial statement users with more useful information about the expected credit losses on financial instruments and other commitments to extend credit held by a reporting entity at each reporting date. Under the new guidance, an entity recognizes as an allowance its estimate of expected credit losses, which the FASB believes will result in more timely recognition of such losses. We adopted the standard on January 1, 2020. The adoption of the standard did not have a material impact on our financial statements. |
Derivative Instruments (Tables) |
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Derivative Instruments and Hedging Activities Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Derivative Liabilities at Fair Value | The following table summarizes the amount at fair value and location of the derivative instruments used for our interest rate hedges in the Condensed Consolidated Balance Sheets as of April 3, 2020:
The following table summarizes the amount at fair value and location of the derivative instruments used for our interest rate hedges in the Condensed Consolidated Balance Sheets as of December 31, 2019:
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Schedule of Foreign Exchange Contracts, Statement of Financial Position | The following table summarizes the amount at fair value and location of the derivative instruments used for our forward contract hedges in the Condensed Consolidated Balance Sheets as of April 3, 2020:
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Schedule of Notional Amounts of Outstanding Derivative Positions | The following table summarizes the amount at fair value and location of the derivative instruments used for our forward contract hedges in the Condensed Consolidated Balance Sheets as of December 31, 2019:
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Description of Business and Summary of Significant Accounting Policies |
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Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Description of Business and Summary of Significant Accounting Policies | DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Description of Business and Basis of Presentation Our Business Vectrus, Inc. is a leading provider of services to the United States Government (U.S. Government) worldwide. The Company operates as one segment and provides the following services and offerings: facility and logistics services, information technology and network communications services, and operational technologies and converged solutions. Vectrus was incorporated in the State of Indiana on February 4, 2014. On September 27, 2014, Exelis Inc. (Exelis) completed a spin-off (the Spin-off) of Vectrus, and Vectrus became an independent, publicly traded company. Unless the context otherwise requires, references in these notes to "Vectrus", "we," "us," "our," "the Company" and "our Company" refer to Vectrus, Inc. References in these notes to Exelis or "Former Parent" refer to Exelis Inc. and its consolidated subsidiaries (other than Vectrus). Basis of Presentation Our quarterly financial periods end on the Friday closest to the last day of the calendar quarter (April 3, 2020 for the first quarter of 2020 and March 29, 2019 for the first quarter of 2019), except for the last quarter of the fiscal year, which ends on December 31. For ease of presentation, the quarterly financial statements included herein are described as three months ended. The unaudited interim Condensed Consolidated Financial Statements of Vectrus have been prepared pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (SEC). Accordingly, certain information and footnote disclosures normally included in annual financial statements prepared in accordance with generally accepted accounting principles in the U.S. (GAAP) have been omitted. These unaudited interim Condensed Consolidated Financial Statements should be read in conjunction with our audited Consolidated Financial Statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2019. It is management’s opinion that these financial statements include all normal and recurring adjustments necessary for a fair presentation of the Company’s financial position and operating results. Revenue and net income for any interim period are not necessarily indicative of future or annual results. Immaterial Restatement of Prior Period Balances Subsequent to the issuance of our Annual Report on Form 10-K for the year ended December 31, 2019, we identified an error in our historical financial statements related to estimated contract costs for the year ended December 31, 2019 as well as an error in our historical financial statements related to overbilling for a separate contract dating back to 2013, prior to the Spin-off. In the first instance, management determined that additional subcontractor costs should have been included as part of estimated contract costs, resulting in a misstatement in other accrued liabilities and cost of revenue as well as revenue and accounts receivable to a lesser extent. In the second instance, management identified that certain contract costs were incorrectly included in customer billings for one contract, resulting in a misstatement in revenue and other accrued liabilities. The cumulative impact of the errors was a $2.5 million decrease in retained earnings as of December 31, 2019. The impact of the errors on net income for the year ended December 31, 2019 is $1.5 million. The impact on diluted earnings per share is a decrease of $0.13 for the year ended December 31, 2019. The impact to diluted earnings per share in the second, third, and fourth quarters of 2019 is a decrease of $0.00, $0.13, and $0.00, respectively. The impact on diluted earnings per share is a decrease of $0.02 and $0.01 for the years ended December 31, 2018 and 2017, respectively. Accordingly, the Company is restating the relevant financial statements and related footnotes for all applicable periods for these errors and related tax effect and will correct the respective financial statements as they appear in future filings. Management has evaluated the materiality of these misstatements and concluded they were not material to prior periods. The effects of the corrections to each of the individual affected line items in our Condensed Consolidated Statements of Income were as follows:
The effects of the corrections to each of the individual affected line items on our Condensed Consolidated Statements of Comprehensive Income were as follows:
The effects of the corrections to each of the individual affected line items on our Condensed Consolidated Balance Sheet were as follows:
The effects of the corrections to each of the individual affected line items on our Condensed Consolidated Statements of Cash Flows were as follows:
The effects of the corrections to each of the individual affected line items on our Condensed Consolidated Statements of Changes in Shareholders' Equity were as follows:
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Derivative Instruments |
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Derivative Instruments and Hedging Activities Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Derivative Instruments | DERIVATIVE INSTRUMENTS During the periods covered by this report, we have made no changes to our policies or strategies for the use of derivative instruments and there has been no change in our related accounting methods. Interest Rate Derivative Instruments Our interest rate swaps are designated and qualify as effective cash flow hedges. The contracts, with expiration dates through November 2022 and notional amounts totaling $51.9 million at April 3, 2020, are recorded at fair value. The following table summarizes the amount at fair value and location of the derivative instruments used for our interest rate hedges in the Condensed Consolidated Balance Sheets as of April 3, 2020:
The following table summarizes the amount at fair value and location of the derivative instruments used for our interest rate hedges in the Condensed Consolidated Balance Sheets as of December 31, 2019:
We regularly assess the creditworthiness of the counterparty. As of April 3, 2020, the counterparty to the interest rate swaps had performed in accordance with its contractual obligations. Both the counterparty credit risk and our credit risk were considered in the fair value determination. Net interest rate derivative losses of $0.1 million and interest rate derivative gains of less than $0.1 million were reclassified from accumulated other comprehensive loss to interest expense, net in our Condensed Consolidated Statements of Income during the first quarters of 2020 and 2019, respectively. We expect $1.0 million of existing interest rate swap losses reported in accumulated other comprehensive loss as of April 3, 2020 to be reclassified into earnings within the next 12 months. Foreign Currency Derivative Instruments The following table summarizes the amount at fair value and location of the derivative instruments used for our forward contract hedges in the Condensed Consolidated Balance Sheets as of April 3, 2020:
The following table summarizes the amount at fair value and location of the derivative instruments used for our forward contract hedges in the Condensed Consolidated Balance Sheets as of December 31, 2019:
At April 3, 2020, we had outstanding foreign currency forward contracts, for the exchange of U.S. dollars and Euros, with a notional amount of $8.9 million and expiration dates through June 2021. Counterparty default risk is considered low because the forward contracts that we entered into are over-the-counter instruments transacted with highly-rated financial institutions. We were not required to, and did not, post collateral as of April 3, 2020. Net foreign currency derivative losses of $0.1 million were recognized in selling, general and administrative expenses during the first quarters of 2020 and 2019. We expect $0.4 million of existing foreign currency forward contract losses reported in accumulated other comprehensive loss as of April 3, 2020 to be reclassified into earnings within the next 12 months. |
Goodwill and Intangible Assets |
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Goodwill and Intangible Assets Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Goodwill and Intangible Assets | GOODWILL AND INTANGIBLE ASSETS As of both April 3, 2020 and December 31, 2019 the carrying amount of goodwill was $262.0 million. There was no new goodwill activity during the first quarter of 2020. The Company tests goodwill for impairment as of October 1 each year, or more frequently should circumstances change or events occur that would more likely than not reduce the fair value of a reporting unit below its carrying amount. Due to the global outbreak of the coronavirus disease 2019 (COVID-19) pandemic and the negative effect to the U.S. and global economy, the Company completed a qualitative assessment to evaluate whether or not it is more likely than not that the fair value of goodwill is less than its carrying amount. Based on our assessment of the totality of events and circumstances as of April 3, 2020, including the estimated impact of the COVID-19 pandemic on our business forecast and the Company's market capitalization, we determined that it is not more likely than not that the fair value of our reporting unit is below its carrying amount. The annual tests performed in the three years ended December 31, 2019 also resulted in no impairment of goodwill. Identifiable intangible assets consist of the following:
Identifiable intangible asset amortization expense relating to the Company's acquisitions in 2018 and 2019 was $1.0 million and $0.6 million during the three months ended April 3, 2020, and March 29, 2019, respectively. As of April 3, 2020, the remaining average intangible asset amortization period was 4.0 years. The estimated amortization expense for the next five years is as follows (in thousands):
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Leases (Tables) |
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Leases [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Components of lease expense | The components of lease expense are as follows:
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Balance sheet information related to leases | Supplemental balance sheet information related to our operating leases is as follows:
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Maturity of lease liabilities | Maturities of lease liabilities at April 3, 2020 were as follows:
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Earnings Per Share - Anti-dilutive Options (Details) - shares shares in Thousands |
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Apr. 03, 2020 |
Mar. 29, 2019 |
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Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
Anti-dilutive stock options (in shares) | 1 | 17 |
Anti-dilutive stock options | ||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
Anti-dilutive stock options (in shares) | 0 | 13 |
Anti-dilutive restricted stock units | ||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
Anti-dilutive stock options (in shares) | 1 | 4 |
Goodwill and Intangible Assets - Narrative (Details) - USD ($) |
3 Months Ended | 12 Months Ended | |||
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Mar. 29, 2019 |
Dec. 31, 2019 |
Dec. 31, 2018 |
Dec. 31, 2017 |
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Goodwill and Intangible Assets Disclosure [Abstract] | |||||
Goodwill | $ 261,983,000 | $ 261,983,000 | |||
Goodwill impairment loss | 0 | $ 0 | $ 0 | ||
Intangible assets | 13,911,000 | $ 14,926,000 | |||
Amortization expense | $ 1,015,000 | $ 571,000 | |||
Remaining average life intangible assets | 4 years |
Derivative Instruments - Additional Information (Details) - USD ($) $ in Millions |
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Apr. 03, 2020 |
Mar. 29, 2019 |
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Foreign Currency Forward Contracts | ||
Derivative [Line Items] | ||
Gain (loss) on derivative instruments, net, pretax | $ (0.1) | $ (0.1) |
Cash Flow Hedging | Interest Rate Swap | Designated as hedging instrument | ||
Derivative [Line Items] | ||
Derivative, notional amount | 51.9 | |
Gain (loss) on derivative instruments, net, pretax | (0.1) | $ 0.1 |
Losses reported in accumulated other comprehensive loss | 1.0 | |
Cash Flow Hedging | Foreign Currency Forward Contracts | Designated as hedging instrument | ||
Derivative [Line Items] | ||
Derivative, notional amount | 8.9 | |
Losses reported in accumulated other comprehensive loss | $ 0.4 |
Debt |
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Apr. 03, 2020 | ||||||||||||||||||||||||||||||||||||
Debt Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||
Debt | DEBT Senior Secured Credit Facilities Term Loan and Revolver. In September 2014, we and our wholly-owned subsidiary, VSC, entered into a credit agreement with a group of lenders, including JPMorgan Chase Bank, N.A. as administrative agent. The credit agreement was subsequently amended in November 2017 by the Amendment and Restatement Agreement (the Amendment Agreement) with a group of lenders, including JPMorgan Chase Bank, N.A., as administrative agent. The Amendment Agreement provides for $200.0 million in senior secured financing, consisting of a $80.0 million five-year term loan facility (the Amended Term Loan) and a $120.0 million five-year senior secured revolving credit facility (the Amended Revolver, and together with the Amended Term Loan, the Amended Credit Facilities). Additionally, the Amendment Agreement includes an accordion feature that allows the Company to draw up to an additional $100.0 million subject to the lender's consent on the same terms and conditions as the existing commitments. The Amendment Agreement also permits the Company to borrow up to $75.0 million in unsecured debt as long as the aggregated sum of both the unsecured debt and the accordion does not exceed $100.0 million. The Amended Revolver is available for working capital, capital expenditures, and other general corporate purposes. Up to $25.0 million of the Amended Revolver is available for the issuance of letters of credit. As of April 3, 2020, there was $115.0 million of outstanding borrowings under the Amended Revolver and two letters of credit outstanding in the aggregate amount of $2.4 million. Both reduced our borrowing availability to $2.6 million under the Amended Revolver. The Amended Revolver will mature and the commitments thereunder will terminate on November 15, 2022. The aggregate scheduled maturities of the Amended Term Loan, are as follows:
We may voluntarily prepay the Amended Term Loan in whole or in part at any time without premium or penalty, subject to the payment of customary breakage costs under certain conditions. Amounts borrowed under the Amended Term Loan that are repaid or prepaid may not be re-borrowed. The Amended Credit Facilities contain customary covenants, including covenants that, under certain circumstances and subject to certain qualifications and exceptions: limit or restrict our ability to incur additional indebtedness; merge, dissolve, liquidate or consolidate; make acquisitions, investments, advances or loans; dispose of or transfer assets; pay dividends; redeem or repurchase certain debt; and enter into certain restrictive agreements. In addition, we are required to comply with (a) a maximum ratio of total consolidated indebtedness to consolidated earnings before interest, tax, depreciation and amortization (EBITDA) of 3.00 to 1.00 (3.25 to 1.00 for the 12 months following a qualified acquisition), and (b) a minimum ratio of consolidated EBITDA to consolidated interest expense (net of cash interest income) of 4.50 to 1.00. As of April 3, 2020, we had a ratio of total consolidated indebtedness to EBITDA of 2.62 to 1.00 and a ratio of consolidated EBITDA to consolidated interest expense of 11.28 to 1.00. We were in compliance with all covenants related to the Amended Credit Facilities as of April 3, 2020. Interest Rates and Fees. Outstanding borrowings under the Amended Credit Facilities accrue interest, at our option, at a per annum rate of (i) LIBOR plus the applicable margin, which ranges from 1.75% to 2.50% depending on the leverage ratio, or (ii) a base rate plus the applicable margin, which ranges from 0.75% to 1.50% depending on the leverage ratio. The interest rate under the Amended Credit Facilities at April 3, 2020 was 3.00%. Carrying Value and Fair Value. As of April 3, 2020 and December 31, 2019, the fair value of the Amended Credit Facilities approximated the carrying value because the debt bears interest at a floating rate of interest. The fair value is based on observable inputs of interest rates that are currently available to us for debt with similar terms and maturities for non-public debt. |
Acquisitions |
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Apr. 03, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Business Combinations [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Acquisitions | ACQUISITIONS Advantor On July 8, 2019, we acquired Advantor from Infrasafe Holding, Inc. and Infrasafe, LLC (collectively, Infrasafe). Advantor is a leading provider of integrated electronic security systems to the U.S. Government. In accordance with ASC Topic 805, Business Combinations, we accounted for this transaction using the acquisition method. We conducted valuations of certain acquired assets and liabilities for inclusion in our Condensed Consolidated Balance Sheets as of the date of acquisition. Assets that normally would not be recorded in ordinary operations (i.e. intangibles related to contractual relationships) were recorded at their estimated fair values. The excess purchase price over the estimated fair value of the net assets acquired was recorded as goodwill. The total net consideration paid for the acquisition was $45.1 million, consisting of the purchase price of $44.0 million, net of cash acquired, and $1.1 million for working capital in excess of the working capital requirement agreed upon in the stock purchase agreement. The acquisition was funded by utilizing cash on hand and available capacity from our Amended Revolver (as defined in Note 9, “Debt”). A breakdown of the preliminary purchase price allocation, net of cash acquired, is as follows:
Adjustments, if any, to the initial purchase accounting for the acquired net assets will be completed, as needed, up to one year from the acquisition date as we obtain additional information regarding facts and circumstances that existed as of the acquisition date. The Company recognized two intangible assets related to customer contracts (backlog) and the Advantor trade name arising from the acquisition. The fair value of the customer contracts was $7.2 million, and the fair value of the Advantor trade name was $1.1 million with amortization periods of 5.0 years and 4.5 years, respectively. As of April 3, 2020, the remaining weighted-average amortization period for these intangible assets was 4.2 years. The Company recorded amortization expense of $0.4 million during the first quarter of 2020. The amortization expense is included in cost of revenue in our Condensed Consolidated Statements of Income. Additionally, the Company recognized goodwill of $28.4 million arising from the acquisition, which relates primarily to acquired product and services strengthening our advance into a higher value, technology-enabled and differentiated platform, as well as extending our facilities and logistics services to include the electronic protection and security of facilities. Goodwill also includes other intangibles that do not qualify for separate recognition. The goodwill recognized for the Advantor acquisition is fully deductible for income tax purposes. Advantor's results of operations have been included in our Condensed Consolidated Statements of Income for the period subsequent to acquisition on July 8, 2019. For the quarter ended April 3, 2020, Advantor contributed $11.2 million of revenue and an insignificant amount of income from operations before income taxes. For the quarter ended March 29, 2019, on a pro forma basis, the acquired business would have recognized revenue of $10.2 million and an insignificant amount of income from operations before income taxes. |
Stock-Based Compensation (Tables) |
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Apr. 03, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Share-based Payment Arrangement [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Impact of Stock-Based Compensation in Consolidation and Combined Statements of Income | Stock-based compensation expense and the associated tax benefits impacting our Condensed Consolidated Statements of Income were as follows:
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Schedule of Non-Qualified Stock Options, Activity | The following table provides a summary of the activities for NQOs and RSUs for the three months ended April 3, 2020:
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Description of Business and Summary of Significant Accounting Policies - Condensed Consolidated Statements of Comprehensive Income (Details) - USD ($) $ in Thousands |
3 Months Ended | 12 Months Ended | |
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Apr. 03, 2020 |
Mar. 29, 2019 |
Dec. 31, 2019 |
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Error Corrections and Prior Period Adjustments Restatement [Line Items] | |||
Net income | $ 8,668 | $ 7,074 | |
Total comprehensive income | $ 5,444 | 5,632 | |
As Previously Reported | |||
Error Corrections and Prior Period Adjustments Restatement [Line Items] | |||
Net income | 7,091 | ||
Total comprehensive income | 5,649 | ||
Correction | |||
Error Corrections and Prior Period Adjustments Restatement [Line Items] | |||
Net income | (17) | $ (1,500) | |
Total comprehensive income | $ (17) |
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