Profits declined in the second quarter for Colorado Springs-based defense contractor Vectrus Inc., but the company told shareholders to expect faster growth in the second half of the year.
Earnings from April through June fell 17.2% to $7.62 million, or 66 cents a share, despite a 3.3% increase in revenue to $331.6 million. Most of the earnings decline came from $1.2 million spent on the company's biggest acquisition in its six-year history and legal costs for its successful bid for $1.38 billion in contracts to provide logistics and other services to regional military commands in the Middle East and Asia.
Profits for the first half of the year also were down, but by just 3.9% to $14.7 million, or $1.28 a share, even as revenue edged higher by 2.5% to $657.5 million. The company said earnings would have been nearly flat during the six-month period without $2.3 million in acquisition and legal costs related to the contract, which is still under protest by three other bidders.
"The second quarter demonstrated continued momentum in the market place and in the execution of our strategy," Vectrus CEO Chuck Prow said Tuesday in a news release. "Our growth-related efforts continue to be successful, as we significantly increased our revenue with the Navy and the Air Force, won new contracts, including our first contract with the Department of State, expanded existing contracts, secured recompete business" and won the logistics work.
The company had not announced the State Department contract, which is shared with 10 other bidders and has a maximum value of $6 billion over the next five years. The 11 winning bidders will compete for individual contracts, including facility repair and maintenance, property renovation, travel support, food service and other operations.
Vectrus raised its revenue forecast based on the contract wins and acquisition by about $65 million, to between $1.37 billion and $1.39 billion. But the company also cut its earnings estimate by nearly $4 million, or 35 cents a share, to between $32.7 million and $35.3 million, or $2.82 to $4.05 a share, because it plans to accelerate capital spending to prepare for the contract wins and other growth.
Prow said he expects revenue to grow by double-digit percentages next year as the Logistics Civil Augmentation Program (LOGCAP) 5 contract begins generating revenue. He expects the Government Accountability Office to resolve protests by AECOM, Flour and PAE-Parsons by mid-August after rejecting DynCorp International's protest July 31.