Greetings and welcome to the Vectrus Fourth Quarter 2016 Earnings Conference Call. At this time, all participants are in a listen-only mode. An interactive question-and-answer session will follow formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. I’d like to turn the conference over to your host, Mr. Michael Smith, Director of Investor Relations and Corporate Development. Thank you. You may begin.

Thank you. Good morning, everyone. Welcome to the Vectrus fourth quarter and full-year 2016 earnings conference call. Joining us today are Chuck Prow, President and Chief Executive Officer, and Matt Klein, Senior Vice President and Chief Financial Officer. Slides for today’s presentation are available on our Investor Relations website, investors.vectrus.com. Please turn to Slide 2. During today’s presentation, management will be making forward-looking statements pursuant to the Safe Harbor provisions of the federal securities laws. Please review our Safe Harbor statement in our press release and presentation material for a description of some of the factors that may cause actual results to differ materially from the results contemplated by these forward-looking statements. We assume no obligation to update our forward-looking statements. Also, we will be making reference to non-GAAP financial measures during this call. We remind you that these non-GAAP financial measures are not a substitute for their comparable GAAP measures. You can find the non-GAAP reconciliations and other disclosures in our earnings release, and in our presentation slides, which are publicly available on the Vectrus website at investors.vectrus.com. At this time, I’d like to turn the call over to Chuck Prow.

Thank you, Mike. Good afternoon, everyone, and thank you for joining us on the call. Please turn to Slide 3. Before we get started, I’d like to say that, I’m excited and privileged to have joined Vectrus at this pivotal time. Since joining the company in December, I have visited several of our overseas and U.S. programs to meet with clients and employees. The feedback I received from clients regarding the contributions of our employees was outstanding. Vectrus employee work side by side with clients oftentimes in challenging environments supporting some of the most important missions around the world. Our employees commitment and dedication to our client success is second to none and is one of the reasons Vectrus as a trusted partner. Overall, I believe there’s significant opportunity to build on Vectrus as a global footprint, capabilities, market positioning, and client relationship to create a higher value platform. Now, I would like to discuss our full-year 2016 financial results and highlights. I’m happy to report that 2016 revenue, operating margin, and earnings per share were all in line with our full-year guidance while net cash provided by operating activities exceeded our guidance. Revenue for the full-year at $1.19 billion, up $10 million year-over-year, or up 1%. Operating margin was 3.6% and was still in line with guidance despite some non-recurring one-time items in the fourth quarter. Diluted earnings per share were $2.16. In 2016, net cash provided by operating activities was strong at $37 million, exceeding our $30 million to $34 million estimate. That payments equal $29 million for the year with $15 million being voluntary. Our total debt was $85 million at year-end, representing a leverage ratio of 1.63 times. During 2016, we were awarded and have since successfully phased in a $21 million installation services past quarter…

Thank you, Chuck. Good afternoon, everyone. Please turn to Slide 6. Today, I will be discussing our financial results for the three months and year-ended December 31, 2016. In the fourth quarter, revenue was $288 million, down $23 million, or 7.4% compared to the same period of 2015. The decrease was due to lower revenue of $28 million from Afghanistan programs and $18 million from U.S. and European programs, partially offset by a $23 million increase in Middle East programs. Operating income was $8.6 million, or 3% operating margin in the fourth quarter of 2016 compared to $11.3 million, or 3.6% operating margin in the fourth quarter of 2015. The $2.7 million, or 24% decrease is impacted by the year-over-year decrease in revenue and $1.5 million in additional one-time costs associated with the CEO transition. Interest expense decreased $700,000 for the three months ended December 31, 2016. When compared to the same period in 2015 due to a lower long-term debt balance. The tax rate increased in the fourth quarter of 2016 to 39.7% from 36.4% in the fourth quarter of 2015, and the tax expense decreased in the fourth quarter related to the revenue and operating income declines previously discussed. Diluted earnings per share for the fourth quarter were $0.40 compared to diluted earnings per share of $0.55 in the fourth quarter of 2015. This is primarily driven by the year-over-year decrease in revenue, higher selling and general administrative or SG&A expenses, and offset partially by the lower interest and tax expense in the period. Also, on Slide 6, the comparisons of the year-ended December 31, 2016 and 2015 financial results. The year-to-date financial results for 2015 reflect the generally accepted accounting principles financial results, but also reflect the adjusted financial results to operating income, operating margin, and diluted…

Thank you. At this time, we’ll be conducting a question-and-answer session. [Operator Instructions] Our first question comes from Brian Ruttenbur from Drexel Hamilton. Please go ahead.

Yes, thank you very much. A couple quick housekeeping. D&A you just stated in 2017 was what, I did catch it?

2017, it’s $2.3 million.

Okay.

CapEx is about a $1 million.

Okay. In 2016, how much was CapEx and D&A?

CapEx is a little less than a $1 million and D&A is very close to what we reported in 2017, there’s some more.

Okay, perfect. And then what are the big rebids beside K-BOSSS, obviously, coming up, what else is out there?

That we talked about for a couple of years really now APS-5, K-BOSSS and Maxwell, K-BOSSS is still in play. Maxwell is also expected to decide really in the next month or so unless something changes. So we will get those resolved. And as a reminder, we’ve been tracking APS and K-BOSSS and they were a material part of our business over – 40% to 50% of our overall revenue streams. As we go forward, we expect to re-compete ratio to come down to a more normalized number no more than 20% of our overall revenue streams, as you look forward into 2018 and beyond. That’s a little….

Maxwell rebids, I’m sorry, I interrupted, I apologize, Matt. Maxwell re-competes, when do you find out, or what you have and more importantly, what if you’ve got in the estimates?

So we expect to hear in the next couple of months to be honest. The government published a begin data, if you will of mid-May. So we could hear it any time on Maxwell, doesn’t mean it’ll play out that way. But we believe that procurements far enough along that will hear pretty soon sometime this year for sure. With constellation…

In our guidance you have Maxwell through Q2 or do you have Maxwell continuing?

Through our guidance we have Maxwell through our period of performance, which is really may right now.

Okay.

In our guidance contemplates various assumptions on extensions, re-compete wins, and pipeline success. And we’ve got that all baked into what we’ve guided to in 2017. The big variable that we’ve tried to communicate is really the K-BOSSS situation. If K-BOSSS awards relatively quickly and there’s a change, that could change our guidance. If it continues to extend beyond what we think it’s going to be at this point, which is really the third quarter of this year, that could also push us to the upper-end of our 2017 range.

Okay. And then just a couple of other, you mentioned restructuring, Chuck. It sounded like restructuring where are you going to infuse technology in the current business. Can you – just talk about that how is that going to help you on the K-BOSSS rebid?

Sure. Yes, we didn’t view – we do not use the word restructuring, if not the intent. We have initiated a series of strategic initiatives that will, as you say, allow us to infuse technologies not only into our current programs, but into the $6 billion of pipeline that we have in play. With regard to K-BOSSS specifically, it’s a bit late for that in terms of any new business activity. But again, very aggressively we’re working with all of our existing programs to infuse technology and new operating approaches wherever we can.

Great. Well, thank you very much.

Thanks, Brian.

Thank you, Brian.

[Operator Instructions] And if there are no further questions, I’d like to turn the floor back over to Mr. Prow for any closing comments.

Thank you very much, and thank you for joining us on the call today. Once again, I’d like to reiterate it’s an honor to be leading Vectrus during this pivotal time and I look forward to talking to you about our progress in future periods Thanks a lot, again.

This concludes today’s teleconference. Thank you for your participation. You may disconnect the lines at this time.