DynCorp International

Transcription

1 DynCorp International Delta Tucker Holdings, Inc. Parent of DynCorp International, Inc. 4th Quarter and Year-End 2013 Earnings Presentation March 14, 2014

2 Forward-Looking Statements and Non-GAAP Measures This presentation includes forward-looking statements about Company s future business and financial performance, plans, goals, beliefs, or expectations. All of these forward-looking statements are based on estimates and assumptions made by the Company s management that, although believed by the Company to be reasonable, are inherently uncertain. Forward-looking statements involve risks and uncertainties, including, but not limited to, our substantial level of indebtedness; the outcome of any litigation, government investigation, audit or other regulatory matters; award fee determination; termination or modification of key contracts; changes in the demand for services; acts of war or terrorist activities; changes in significant operating expenses; and other economic, competitive, governmental, political and technological factors outside of the Company s control. These risks and uncertainties may cause the Company s business, strategy or actual results or events to differ materially from the statements made herein. All forward looking statements included in this presentation are based upon information presently available. The Company undertakes no obligation to update or revise any forward-looking statement it makes to reflect events or circumstances after the date of this presentation or to reflect the occurrence of unanticipated events. The risks and uncertainties relating to the forward-looking statements in this presentation include those described under the caption Risk Factors and Forward-Looking Statements detailed from time to time in our reports filed with the SEC. This presentation includes non-gaap financial measures, including Adjusted EBITDA, that are different from financial measures calculated in accordance with GAAP and may be different from non-gaap calculations made by other companies. Management believes these non-gaap financial measures are useful in evaluating operating performance and are regularly used by investors, lenders and other interested parties in reviewing the Company. For a reconciliation of these non-gaap financial measures to the most comparable GAAP financial measures, see the earnings press release dated March 14, 2014, filed with the SEC on Current Report on Form 8-K and posted on our website. 2

3 CEO s 2013 Retrospective Impacts of Drawdown and U.S. Budget Uncertainty Were Realized $3.287 Billion Revenue $180.5 Million EBITDA 5.5% Margin New Business Awards Continued to Slide: Average 218 Day Slip In Actual Award Date vs. Anticipated Award Date Average 399 Day Acquisition Cycle (Submission to Award) Capitalized on Opportunities and Managed Controllable Factors Win Rate Remained Above 40% $127.3 million of Free Cash Flow Reduced Net Debt to $561.4 Million 44.2% Reduction Since Acquisition Identified Cost Savings Restructure and Footprint Rationalization Yielded $11.8 Million in Operating Efficiencies Grew Our Business Created DynGlobal to Grow Commercial and International Opportunities 3

4 Unprecedented Crises and Threats Geopolitical International Terrorism Crimea Crisis Lack of Clarity from the U.S. Political War Weariness Internal Focus Congressional Dysfunction Budgetary Debt & Deficit Pressures BCA Mandated Cuts Sequestration Strategic Challenges Abound 4

5 ($ Billions) ($ Billions) Bipartisan Budget Act Creates Stability for FY14-15 BIPARTISAN BUDGET AGREEMENT DEPARTMENT OF DEFENSE $800 $700 $600 $500 $400 $300 $200 $100 $- FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 Totals $479 $535 $601 $666 $666 $691 $687 $645 $584 $572 $575 OCO $76 $116 $166 $187 $146 $162 $159 $115 $82 $85 $79 Base Budget $400 $411 $432 $479 $513 $528 $528 $530 $502 $487 $496 Base Budget OCO $60 $50 $40 $30 DEPARTMENT OF STATE 10 $20 $10 $0 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 Totals $34.2 $34.3 $37.3 $40.5 $50.5 $55.1 $48.7 $53.5 $52.5 $49.1 $46.2 OCO $- $- $- $- $- $- $- $11.2 $10.5 $6.5 $5.9 Base Budget $34.2 $34.3 $37.3 $40.5 $50.5 $55.1 $48.7 $42.3 $42.0 $42.6 $40.3 Base Budget OCO $575B DOD Budget Request Essentially Flat BBA Delayed Sequestration, FY16 is Back to the Future $198.7B O&M Base Budget Request = $6.0B Above FY14 Active Army O&M $33.2B (+$1.6B) Active Navy/USMC O&M $45.2B (+$4.0B) Active USAF O&M $35.3B (+$2.1B) $79.4B OCO is Placeholder, Pending Afghanistan Decisions Readiness Shortfalls Mitigated in OCO O&M Proposed $26B Opportunity, Growth, and Security Initiative 40% (~$10.4B) Used for Readiness Buy-Back $46.2B DOS Budget Request Still Historically High 5

6 Global Challenges Create Defense Demand Iran Nuclear Deal Regional Distrust of Iran Growing Distrust of U.S. Building Military Capabilities Asia Pacific Chinese Assertiveness Regional Military Growth No Conflict Resolution Mechanism Russia Aggression Central/Eastern Europe Concerned Additional Defense Buy Expected Geopolitical Turmoil Driving Global Defense Surge 6

7 Operational Highlights 7

8 Full Year Operational Highlights - DynAviation Key Wins: Solomons Re-compete $27.0 Million RASM-W (AFM) $242.9 Million TASM-O (AFM) $307.5 Million M3-MAISR $86.6 Million Expansion into New Markets through Innovative Partnerships: Aviation Center of Excellence with Sierra Nevada Corporation High Customer Satisfaction Across Programs Tradition of Excellence and Superior Performance Continues: Achieved ISO/AS9100/AS9110 Certifications Federal Aviation Administration (FAA) Diamond Awards for Excellence 8

9 Full Year Operational Highlights - DynLogistics Key Wins: AFRICAP Mali APC CJPS Support in Haiti DLA Dispositions Services, Afghanistan EAGLE Fort Campbell Secured IDIQ Positions: MCLOGSS, USAID-ROL Soto Cano BOSS Diversification Continues: Secured Positions on Key Intel IDIQs Key Performance Indicators: Continuous Improvement Initiatives Provide EBIT Lift High Customer Satisfaction Across Programs 9

10 Full Year Operational Highlights DynGlobal Strong Team in Place Pipeline Remains Robust UK & Australian Offices Operational Leverage DI Core Competencies Land MRO Aviation MRO Base Operations Air Operations Logistics Training Expect to Announce First Award Soon 10

11 Financial Review 11

12 2013 Results Dollars in millions Q CY vs Revenue $711.8 $3,287.2 ($757.1) (18.7%) Adjusted EBITDA $37.1 $180.5 ($15.8) (8.1%) Adjusted EBITDA Margin 5.2% 5.5% 60 bps Total Backlog $3,980.3 ($1,298.3) (24.6%) Full Year Highlights T6 AFM RASM-W NASA CFT TASM-E Revenue Lower Op-Tempo: LOGCAP AMDP WPS INL Adjusted EBITDA CFT TASM-E CFT RASM-W GLS Operating Efficiencies LOGCAP Volume INL Volume Vehicle Maintenance Volume Contract Dispute 12

13 DynAviation Dollars in millions Q CY vs Revenue $310.6 $1,371.9 $ % Adjusted EBITDA $20.3 $98.3 ($9.3) (8.7%) Adjusted EBITDA Margin 6.5% 7.2% (80 bps) Total Backlog $2,325.4 ($193.2) (7.7%) Q4 Highlights INL AIRWING CFT Columbus T-6 AFM RASM-W Revenue Adjusted EBITDA INL AIRWING CFT T-6 AFM RASM-W CNTPO AFM CFT Total Backlog Pax River INL AIRWING T-6 13

14 DynLogistics Dollars in millions Q CY vs Revenue $401.7 $1,920.7 ($788.8) (29.1%) Adjusted EBITDA $17.7 $69.4 ($33.8) (32.8%) Adjusted EBITDA Margin 4.5% 3.6% (20 bps) Total Backlog $1,655.0 ($1,105.1) (40.0%) Q4 Highlights Lower Op-Tempo: LOGCAP AMDP WPS Vehicle Maintenance Revenue Adjusted EBITDA LOGCAP Volume AMDP Volume CIVPOL WRM EPSS Total Backlog AMDP WPS CSTC-Afghanistan 14

15 Financial Review 2013 Miscellaneous Items Working Capital (1) of $328 Million 10.0% of Revenue DSO at 69 Days Up 0.9 Days from Free Cash Flow of $127.3 Million $161Million of FCF Generated in Q4 Current Net Debt Position of $561.4 Million Paid Down $50 Million of Term Loan in 2013 Net Debt Reduced 44.2% Since Acquisition Cash Position of $170.8 Million 2013 Goodwill Write-Down of $310.3 Million Q4 Impairment of $281.5 Million (1) Working Capital= Accounts Receivable + Inventory +Work in Progress Accounts Payable Accrued Payroll and Employee Cost 15

16 2014 Financial Guidance Plan Revenue Decline Mid to High Teens Driven by Drawdown on LOGCAP & AMDP Programs Excluding LOGCAP & AMDP Low Single Digit Growth Expect Lower Revenue on AIRWING Op-Tempo & Q4 Recompete Plan Adj. EBITDA Margins of 5.5% at the Mid-Point Will Continue to Refine Our Cost Structure as Appropriate Free Cash Flow to Remain Strong Expect FCF to be Lower than 2013 levels Lower Earnings Higher Cash Taxes Expect to Pay Down At Least $50 Million of Debt in

17 Final Thoughts Challenges Persist U.S. Government Awards Continue to Slip U.S. Budgets Have Declined Path Forward in Afghanistan is Unclear Opportunities Abound Win Rate Continues to Beat Competitors DynGlobal Win Announcements Anticipated in Q2 Pipeline Remains Healthy Strategic Partnerships Are Opening New Possibilities 17

18 Q & A 18

19 Appendix 19

20 Condensed Consolidated Statement of Operations (Amounts in thousands) Year ended December 31, 2013 Year ended December 31, 2012 (unaudited) (unaudited) Revenue $ 3,287,184 $ 4,044,275 Cost of services (2,987,253) (3,698,932) Selling, general and administrative expenses (149,925) (149,362) Depreciation and amortization expense (48,628) (50,260) Earnings from equity method investees 4, Impairment of goodwill, intangibles and long lived assets (312,728) (50,663) Operating (loss) income (206,780) 95,883 Interest expense (78,826) (86,272) Loss on early extinguishment of debt (703) (2,094) Interest income Other (loss) income, net (810) 4,672 (Loss) income before income taxes (286,962) 12,306 Benefit (provision) for income taxes 37,461 (15,598) Net loss (249,501) (3,292) Noncontrolling interests (4,235) (5,645) Net loss attributable to Delta Tucker Holdings, Inc. (253,736) (8,937) Benefit (provision) for income taxes (37,461) 15,598 Interest expense, net of interest income 78,669 86,155 Depreciation and amortization (1) 50,279 51,814 EBITDA (2) (162,249) 144,630 Non-recurring unusual gains or losses or income or expenses and non-cash impairments (3) 323,930 54,354 Changes due to fluctuation in foreign exchange rates (366) (226) Earnings from affiliates not received in cash (4) 1,371 (699) Employee non-cash compensation, severance, and retention expense (5) 6,444 1,381 Management fees (6) 1,899 1,075 Acquisition accounting and Merger-related items (7) (4,146) (4,195) Annualized operational efficiencies (8) 11,798 - Other 1,774 (50) Adjusted EBITDA 180, ,270 (1) (2) (3) (4) Represents the difference between trailing twelve months of income booked from unconsolidated affiliates and the cash received from the affiliates during the same period. (5) Includes post-employment benefit expense related to severance in accordance with ASC Compensation, relocation expenses and stock based compensation expense. (6) Amount includes management fees paid to Cerberus Operations and Advisory Company. (7) Includes the amortization of intangibles arising pursuant to ASC Business Combination. (8) Amount includes certain depreciation and amortization amounts which are classified as Cost of services in the consolidated statements of operations of Delta Tucker Holdings, Inc. included elsewhere in this Annual Report on Form 10-K. We define EBITDA as GAAP net income (loss) attributable to DTH, Inc. adjusted for interest, taxes, depreciation and amortization. We believe these non-gaap financial measures are useful in evaluating operating performance and are regularly used by security analysts, institutional investors and other interested parties in reviewing the Company. Non-GAAP financial measures are not intended to be a substitute for any GAAP financial measure and, as calculated, may not be comparable to other similarly titled measures of the performance of other companies. Amount includes the impairment of our investment in the GLS joint venture, impairment of goodwill and the impairment of intangibles, restructuring costs, as well as certain unusual income and expense items as defined under our debt agreements. Represents a defined EBITDA adjustment under our debt agreements for the amount of cost savings, operating expense reductions and synergies projected as a result of specified actions taken or with respect to which substantial steps have been taken during the period. 20

21 Q4 Unaudited Adjusted EBITDA by Segment (Amounts in thousands) Headquarters/ Others DynAviation DynLogistics Consolidated Headquarters/ Others DynAviation DynLogistics Consolidated Operating (loss) income (16,407) (270,715) 16,128 (270,994) (14,828) 24,612 9,207 18,991 Depreciation and amortization expense (2) 12, ,809 12, ,028 Loss on early extinguishment of debt (474) - - (474) (615) - - (615) Noncontrolling interests (689) (689) (1,324) - - (1,324) Other income (loss), net (686) (686) (40) (60) 5 (95) EBITDA (3) (6,007) (270,167) 16,140 (260,034) (4,210) 24,742 9,453 29,985 Non-recurring or unusual gains or losses or income or expenses DTH, Inc. CY13 QTD Q4 (1) DTH, Inc. CY12 QTD Q4 (1) and non-cash impairments (4) 3, , , ,963 20,673 Changes due to fluctuation in foreign exchange rates - (82) - (82) - (149) - (149) Earnings from affiliates not received in cash (5) (24) - - (24) Employee non-cash compensation, severance, and retention expense (6) ,841 - (34) (60) (94) Management fees (7) (166) Acquisition accounting and Merger-related items (8) (1,092) - - (1,092) (87) Other 2, (242) 1, Adjusted EBITDA (881) 20,310 17,655 37,084 (3,544) 25,261 29,589 51,306 (1) In April 2013, we re-aligned our organizational structure into three operating segments. We recast prior year to present comparable segments. (2) Amount includes certain depreciation and amortization amounts which are classified as Cost of services in the consolidated statements of operations of Delta Tucker Holdings, Inc. (3) We define EBITDA as GAAP net income (loss) attributable to DTH, Inc. adjusted for interest, taxes, depreciation and amortization. We believe these non-gaap financial measures are useful in evaluating operating performance and are regularly used by security analysts, institutional investors and other interested parties in reviewing the Company. Non-GAAP financial measures are not intended to be a substitute for any GAAP financial measure and, as calculated, may not be comparable to other similarly titled measures of the performance of other companies. (4) Amount includes the impairment of our investment in the GLS joint venture, impairment of goodwill and the impairment of intangibles, restructuring costs, as well as certain unusual income and expense items as defined under our debt agreements. (5) Represents the difference between trailing twelve months of income booked from unconsolidated affiliates and the cash received from the affiliates during the same period. (6) Includes post-employment benefit expense related to severance in accordance with ASC Compensation, relocation expenses and stock based compensation expense. (7) Amount includes management fees paid to Cerberus Operations and Advisory Company. (8) Includes the amortization of intangibles arising pursuant to ASC Business Combination. 21

22 2013 Unaudited Adjusted EBITDA by Segment (Amounts in thousands) Headquarters/ Others DynAviation DynLogistics Consolidated Headquarters/ Others DynAviation DynLogistics Consolidated Operating (loss) income (48,157) (194,866) 36,243 (206,780) (58,385) 105,327 48,941 95,883 Depreciation and amortization expense (2) 48,108 1, ,279 50, ,043 51,814 Loss on early extinguishment of debt (703) - - (703) (2,094) - - (2,094) Noncontrolling interests (4,235) - - (4,235) (5,645) - - (5,645) Other income (loss), net (809) - - (809) 4, ,672 EBITDA (3) (5,796) (193,238) 36,786 (162,249) (11,392) 106,037 49, ,630 Non-recurring or unusual gains or losses or income or expenses and non-cash impairments (4) 4, ,442 30, ,930 2, ,514 54,354 Changes due to fluctuation in foreign exchange rates - (366) - (366) - (226) - (226) Earnings from affiliates not received in cash (5) 1, ,371 (699) - - (699) Employee non-cash compensation, severance, and retention expense (6) 2,996 1,809 1,639 6, ,106 1,381 Management fees (7) , ,075 Acquisition accounting and Merger-related items (8) (4,146) - - (4,146) (4,658) (4,195) Annualized operational efficiencies (9) 11,798 11, Other 1, ,774 (50) - - (50) Adjusted EBITDA 12,737 98,329 69, ,455 (14,594) 107, , ,270 (1) In April 2013, we re-aligned our organizational structure into three operating segments. We recast prior year to present comparable segments. (2) Amount includes certain depreciation and amortization amounts which are classified as Cost of services in the consolidated statements of operations of Delta Tucker Holdings, Inc. (3) (4) DTH, Inc. CY13 YTD (1) DTH, Inc. CY12 YTD (1) We define EBITDA as GAAP net income (loss) attributable to DTH, Inc. adjusted for interest, taxes, depreciation and amortization. We believe these non-gaap financial measures are useful in evaluating operating performance and are regularly used by security analysts, institutional investors and other interested parties in reviewing the Company. Non-GAAP financial measures are not intended to be a substitute for any GAAP financial measure and, as calculated, may not be comparable to other similarly titled measures of the performance of other companies. Amount includes the impairment of our investment in the GLS joint venture, impairment of goodwill and the impairment of intangibles, restructuring costs, as well as certain unusual income and expense items as defined under our debt agreements. (5) Represents the difference between trailing twelve months of income booked from unconsolidated affiliates and the cash received from the affiliates during the same period. (6) Includes post-employment benefit expense related to severance in accordance with ASC Compensation, relocation expenses and stock based compensation expense. (7) Amount includes management fees paid to Cerberus Operations and Advisory Company. (8) Includes the amortization of intangibles arising pursuant to ASC Business Combination. (9) Represents a defined EBITDA adjustment under our debt agreements for the amount of cost savings, operating expense reductions and synergies projected as a result of specified actions taken or with respect to which substantial steps have been taken during the period. 22

23 Condensed Consolidated Balance Sheets (Amounts in thousands) December 31, 2013 December 31, 2012 (unaudited) (unaudited) ASSETS Current assets: Cash and cash equivalents $ 170,845 $ 118,775 Restricted cash 1,659 1,659 Accounts receivable, net of allowances of $1,621 and $1,481, respectively 577, ,613 Other current assets 124,510 79,223 Total current assets 874, ,270 Non-current assets 625, ,446 Total assets $1,499,921 $1,970,716 LIABILITIES AND EQUITY Current portion of long-term debt Current liabilities 552, ,727 Total current liabilities 552, ,364 Long-term debt, less current portion 732, ,272 Long-term deferred taxes 17,359 50,303 Other long-term liabilities 7,632 11,023 Total equity attributable to Delta Tucker Holdings, Inc. 183, ,542 Noncontrolling interests 5,875 8,212 Total equity 189, ,754 Total liabilities and equity $ 1,499,921 $ 1,970,716 23

24 Other Contract Data (Amounts in millions) December 31, 2013 December 31, 2012 (unaudited) (unaudited) Backlog (1) : Funded backlog $ 1,541 $ 1,642 Unfunded backlog $ 2,439 $ 3,636 Total Backlog $ 3,980 $ 5,278 (1) Backlog consists of funded and unfunded amounts under contracts. Funded backlog is equal to the amounts appropriated by a customer for payment of goods and services less actual revenue recognized as of the measurement date under that appropriation. Unfunded backlog is the dollar value of unexercised, priced contract options, and the unfunded portion of exercised contract options. Most of our U.S. government contracts allow the customer the option to extend the period of performance of a contract for a period of one or more years. These priced options may or may not be exercised at the sole discretion of the customer. It has been our experience that the customer has typically exercised contract options. 24

25 Condensed Statement Cash Flow (Amounts in thousands) For the years ended December 31, 2013 December 31, 2012 (unaudited) (unaudited) Cash Flow Information: Net cash provided by operating activities $ 137,502 $ 144,190 Net cash used in investing activities (7,971) (12,163) Net cash used in financing activities (77,461) (83,457) Net cash provided by operating activities 137, ,190 Less: Purchase of property and equipment, net (7,628) (5,528) Proceeds from sale of property, plant and equipment Less: Purchase of software (2,718) (2,590) Free cash flow $ 127,338 $ 136,097 25

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