VECTRUS : MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (form 10-Q)

The following discussion of our financial condition and results of operations
should be read in conjunction with the unaudited Condensed Consolidated
Financial Statements and notes thereto included in this Quarterly Report on Form
10-Q as well as the audited Consolidated Financial Statements and notes thereto
and the information under the heading "Management's Discussion and Analysis of
Financial Condition and Results of Operations" included in our Annual Report on
Form 10-K for the year ended December 31, 2019. This Quarterly Report provides
additional information regarding the Company, our services, industry outlook and
forward-looking statements that involve risks and uncertainties, including those
related to the potential impact of the novel coronavirus pandemic (COVID-19) and
its impact on us, our operations, or our future financial or operational
results. The forward-looking statements are not historical facts, but rather are
based on current expectations, estimates, assumptions and projections about our
industry, business and future financial results. Our actual results could differ
materially from the results contemplated by these forward-looking statements.
Refer to "Forward-Looking Information" for further information regarding
forward-looking statements. Amounts presented in and throughout this Item 2 are
rounded and, as such, any rounding differences could occur in period over period
changes and percentages reported.
Overview
Vectrus is a leading provider of critical mission support services to the U.S.
Government worldwide. We operate in one segment and offer facility and logistics
services and information technology and network communications services. Most of
our work provides life support and maintenance services for enduring military
bases and mission critical IT networks.
Our primary customer is the U.S. Department of Defense (DoD), with a high
concentration in the U.S. Army. For the three months ended April 3, 2020 and
March 29, 2019, we had total revenue of $351.7 million and $325.9 million,
respectively, substantially all of which was derived from U.S. Government
customers. For the three months ended both April 3, 2020 and March 29, 2019, we
generated approximately 70% of our total revenue from the U.S. Army.
Executive Summary
Our revenue increased by $25.8 million, or 7.9%, for the three months ended
April 3, 2020 compared to the three months ended March 29, 2019. The increase in
revenue was attributable to a $14.6 million expansion on our existing contracts
and $11.2 million from our acquisition of Advantor. Revenue from our Middle East
programs increased by $11.5 million, our U.S. programs $10.1 million, and our
European programs $4.2 million.
Operating income for the three months ended April 3, 2020, was $12.5 million, an
increase of $2.1 million, or 20.1%, compared to the three months ended March 29,
2019. This increase was primarily due to an increase of $6.3 million from our
Middle East programs offset by decreases of $1.4 million from our U.S. programs
and $2.8 million from our European programs.
During the performance of our contracts, we periodically review estimated final
contract prices and costs and make revisions as required, which are recorded as
changes in revenue and cost of revenue in the periods in which they are
determined. Additionally, the fees under certain contracts may be increased or
decreased in accordance with cost or performance incentive provisions which
measure actual performance against established targets or other criteria. Such
incentive fee awards or penalties are included in revenue when there is
sufficient information to reasonably assess anticipated contract performance.
Amounts representing contract change orders, claims, requests for equitable
adjustment, or limitations in funding on contracts are recorded only if it is
probable the claim will result in additional contract revenue and the amounts
can be reliably estimated. Changes in estimated revenue, cost of revenue and the
related effect to operating income are recognized using cumulative adjustments,
which recognize in the current period the cumulative effect of the changes on
current and prior periods based on a contract's percentage of completion.
Cumulative adjustments due to aggregate changes in contract estimates decreased
operating income by $2.3 million and $1.1 million for the three months ended
April 3, 2020 and March 29, 2019, respectively. Cumulative adjustments are
driven by changes in contract terms, program performance, customer scope changes
and changes to estimates in the reported period. These changes can increase or
decrease operating income depending on the dynamics of each contract.
Further details related to our financial results for the three months ended
April 3, 2020, compared to the three months ended March 29, 2019, are contained
in the "Discussion of Financial Results" section.
Recent Developments
On April 12, 2019, the U.S. Army Contracting Command-Rock Island (ACC-RI)
awarded four IDIQ, Multiple Award Task Order Contracts (MATOC), for the
Logistics Civil Augmentation Program (LOGCAP) V support services in support of
the U.S. military worldwide. The services are to support the Geographical
Combatant Commands (GCCs) and Army Service Component Commands (ASCCs) throughout
the full range of military operations. Each basic IDIQ contract ordering period
will be an initial five-year ordering period and options for five additional
one-year ordering periods.
Vectrus is one of four award recipients of the basic IDIQ contract and received
the following task orders: INDOPACOM Setting the Theater Task Order and
associated Performance Task Order; and CENTCOM Setting the Theater Task Order
and associated Performance Task Order. Each task order has its own period of
performance. Four of the LOGCAP V offerors filed protests of the awards with the
U.S. Government Accountability Office (GAO) and, after the GAO denied two of the
protests,

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those four offerors filed protests at the U.S. Court of Federal Claims (the
Court). At the Court's request, the GAO issued advisory opinions that rejected
the two remaining protests. On February 5, 2020, the Army completed its
corrective action review of the LOGCAP V Award and affirmed its initial
decision. On February 21, 2020, the Court of Federal Claims dismissed three of
the four protests, and the remaining protest has been fully briefed and is
awaiting the court's final adjudication. One of the protestors filed a notice of
appeal with the U.S. Court of Appeals for the Federal Circuit. A second
protestor filed a notice of appeal, but subsequently withdrew its notice. No
other protestors have filed an appeal, and the deadline for filing such appeal
has passed. On March 2, 2020, the Court dismissed the remaining offeror's
request for a temporary restraining order through March 11, 2020 and Vectrus
received a notice to proceed with transition activities related to LOGCAP V on
March 3, 2020.
On February 28, 2020, Vectrus Systems Corporation (VSC), our wholly-owned
subsidiary, received notice of a $121.8 million modification of the OMDAC-SWACA
contract for enterprise network capabilities and services support of the U.S.
Central Command. Work will be based in Kuwait with additional locations
throughout Southwest Asia. The estimated completion date is August 28,2020.
Information regarding certain other significant contracts is discussed in
"Significant Contracts" below.
COVID-19
The global outbreak of the coronavirus disease 2019 (COVID-19) was declared a
pandemic by the World Health Organization and a national emergency by the U.S.
Government in March 2020 and has negatively affected the U.S. and global
economy, disrupted global supply chains, resulted in significant travel and
transport restrictions, including mandated closures and orders to
"shelter-in-place," and created significant disruption of the financial
markets.  We have taken measures to protect the health and safety of our
employees, work with our customers to minimize potential disruptions and support
our community in addressing the challenges posed by this global pandemic. The
extent of the impact of the COVID-19 pandemic on our operational and financial
performance, including our ability to execute our programs in the expected
timeframe, will depend on future developments, including the duration and spread
of the pandemic and related actions taken by the U.S. Government, state and
local government officials, and international governments to prevent disease
spread, all of which are uncertain and cannot be predicted. The outbreak did not
have a material impact on our operating results or business in the first quarter
of 2020. However, we are beginning to experience some issues in each of our
business areas related to COVID-19, primarily in access to some locations and
delays of supplier deliveries.
During the first quarter of 2020, it is estimated that COVID-19 caused a $2.2
million reduction in our revenue and a $0.02 reduction in our earnings per
share. This impact was related to certain government actions to restrict access
to a U.S. base by Vectrus personnel and the preemptive draw on the Company's
revolver to ensure liquidity during the pandemic.
In accordance with the DoD guidance issued in March 2020 designating the Defense
Industrial Base as a critical infrastructure workforce, our U.S. facilities have
continued to operate in support of essential products and services required to
meet our commitments to the U.S. Government and the U.S. military; however,
facility closures or work slowdowns or supply chain disruptions could affect our
financial results and projections. In addition, other countries are responding
to the pandemic differently which can affect our international operations and
the operations of our suppliers and customers. However, any closures to date
have not impacted Vectrus' business materially.
We continue to work with our customers, employees, suppliers and communities to
address the impacts of COVID-19. We continue to assess possible implications to
our business, supply chain and customers, and to take actions in an effort to
mitigate adverse consequences in order to support our customers' mission
critical business and national security.
Significant Contracts
The following table reflects contracts that accounted for more than 10% of our
total revenue for the three months ended April 3, 2020 and March 29, 2019:
                                                          % 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%

Revenue associated with a contract will fluctuate based on increases or decreases in the work being performed on the contract, award fee payments, and other contract modifications within the term of the contract resulting in changes to the total contract value. See "Backlog" below. The K-BOSSS contract currently is exercised through September 28, 2020. K-BOSSS supports geographically-dispersed locations within the State of Kuwait, including several camps and a range training complex. The K-BOSSS contract was re- competed as a task order under the LOGCAP V contract vehicle, which was awarded April 12, 2019 (see "Recent Developments"

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above). The K-BOSSS contract contributed $124 million and $121 million of
revenue for the three months ended April 3, 2020 and March 29, 2019,
respectively.
The OMDAC-SWACA contract is currently exercised through August 20, 2020. The
contract provides for enterprise network capabilities and services support of
the U.S. Central Command. Work is based in Kuwait with additional locations
throughout Southwest Asia. Vectrus has been the incumbent on OMDAC-SWACA since
May 2013. The OMDAC-SWACA contract contributed $55 million and $51 million of
revenue for the three months ended April 3, 2020 and March 29, 2019,
respectively.
Backlog
Total backlog includes remaining performance obligations, consisting of funded
backlog (firm orders for which funding is contractually obligated by the
customer) and unfunded backlog (firm orders for which funding is not currently
contractually obligated by the customer, and unexercised contract options).
Total backlog excludes potential orders under IDIQ contracts and contracts
awarded to us that are being protested by competitors with the GAO or in the
U.S. Court of Federal Claims. The value of the backlog is based on anticipated
revenue levels over the anticipated life of the contract. Actual values may be
greater or less than anticipated. Total backlog is converted into revenue as
work is performed. The level of order activity related to programs 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.
Our contracts are multi-year contracts and typically include an initial period
of one year or less with annual one-year (or less) option periods for the
remaining contract period. The number of option periods vary 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. The U.S. Government may also extend the term of a program by
issuing extensions or bridge contracts, typically for periods of one year or
less.
We expect to recognize a substantial portion of our funded backlog 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. Most
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.
For the three months ended April 3, 2020, total backlog increased by $1,317
million. As of April 3, 2020, total backlog (funded and unfunded) was $4.1
billion as set forth in the following table:
                    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

Funded orders (different from funded backlog) represent orders for which funding was received during the period. We received funded orders of $957.1 million during the three months ended April 3, 2020, which was an increase of $311.1 million compared to the three months ended March 29, 2019. Economic Opportunities, Challenges and Risks The U.S. Government's investment in services and capabilities in response to changing security challenges creates a complex and fluid business environment for Vectrus and other firms in this market segment. The pace and depth of U.S. Government acquisition reform and cost savings initiatives, combined with increased industry competitiveness to win long-term positions on key programs, could add pressure to revenue levels and profit margins going forward. However, we expect the U.S. Government will continue to place a high priority on national security and will continue to invest in affordable solutions for its facilities, logistics, equipment, operational technology, and communication needs, which aligns with our services and strengths. Further, the DoD budget remains the largest in the world and management believes our addressable portion of the DoD budget offers substantial opportunity for growth. On December 20, 2019, the President signed the annual FY 2020 appropriations bill, which provides $738 billion in discretionary funding for national defense and includes $667 billion in base funding and $71 billion in overseas contingency operations funding. The approved funding is in accordance with the Bipartisan Budget Act of 2019. We believe spending on operation and maintenance of defense assets, as well as civilian agency infrastructure and equipment, will continue to be a U.S. Government priority. Our focus is on sustaining facilities, equipment, and IT networks, while utilizing operational technologies and converged solutions to improve efficiency and the outcomes of our clients' missions. We believe this aligns with our customers' intent to utilize existing equipment and infrastructure rather than executing new purchases. Many of the core functions we perform are mission-essential. The following are examples of a few of these core functions: (i) keeping communications networks operational; (ii) maintaining airfields; and (iii) providing emergency services. While customers may reduce the level of services required from us, we do not currently anticipate the complete elimination of these services.

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Currently, the ongoing outbreak of Coronavirus (COVID-19) has caused disruptions
to national and global economies. The impact that the COVID-19 pandemic is
having on societies, governments, markets, businesses and social norms is
significant. As an essential business and operator of critical infrastructures
primarily for the DoD and the Intelligence Communities, we have continued to
conduct our operations to support client missions while implementing measures to
protect the health and safety of our employees. However, the recent COVID-19 or
other outbreaks could negatively impact our business, results of operations and
financial condition. The impact to our business is currently unknown due to the
uncertainty around the duration of the pandemic and its broader impact on the
global economy, our clients, and employees. Potential impacts could arise from
our employee's inability to access our facilities or the facilities of our
clients as well as any change in performance or cost on our contracts that might
not fully recoverable. Additionally, travel restrictions and the availability of
our employee population could impact our ability to support existing and new
contracts.
The information provided above does not represent a complete list of trends and
uncertainties that could impact our business in either the near or long-term and
should be considered along with the risk factors identified under the caption
"Risk Factors" identified in Part 1, Item 1A in our Annual Report on Form 10-K
for the year ended December 31, 2019 and the matters identified under the
caption "Forward-Looking Statement Information" and Part II, Item 1A, "Risk
Factors" herein.
DISCUSSION OF FINANCIAL RESULTS
Three months ended April 3, 2020, compared to three months ended March 29, 2019
Selected financial highlights are presented in the following table:
                                       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  %


Revenue
Revenue for the three months ended April 3, 2020 was $351.7 million, an increase
of $25.8 million, or 7.9%, as compared to the three months ended March 29, 2019.
The increase in revenue was attributable to a $14.6 million expansion on our
existing contracts and $11.2 million from our acquisition of Advantor. Revenue
from our Middle East programs increased by $11.5 million, our U.S. programs
$10.1 million, and our European programs $4.2 million.
Cost of Revenue
Cost of revenue as a percentage of revenue was 90.9% compared to 90.7% for the
three months ended April 3, 2020 and the three months ended March 29, 2019,
respectively. The increase in cost of revenue of $24.1 million, or 8.2%, for the
three months ended April 3, 2020, as compared to the three months ended March
29, 2019, was primarily due to increased revenue as described above.
Selling, General & Administrative (SG&A) Expenses
For the three months ended April 3, 2020, SG&A expenses of $19.6 million
decreased by $0.4 million, or 1.8%, as compared to the three months ended March
29, 2019 due primarily to the decrease in business acquisition expense of $1.0
million and an increase in various miscellaneous expenses of $0.6 million.

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Operating Income
Operating income for the three months ended April 3, 2020 increased by $2.1
million, or 20.1%, as compared to the three months ended March 29, 2019. This
increase was primarily due to higher operating income of $6.3 million from our
Middle East programs offset by decreases of $1.4 million from our U.S. programs
and $2.8 million from our European programs.
Operating income as a percentage of revenue was 3.5% for the three months ended
April 3, 2020, compared to 3.2% for the three months ended March 29, 2019.
Aggregate cumulative adjustments decreased operating income by $2.3 million and
$1.1 million for the three months ended April 3, 2020 and March 29, 2019,
respectively. The aggregate cumulative adjustments for the three months ended
April 3, 2020 related to lower margins associated with contract staffing and
increased Other Direct Costs (ODCs). The aggregate cumulative adjustments for
the three months ended March 29, 2019 related to lower margins associated with
labor-related items and contract staffing.
Interest (Expense) Income, Net
Interest (expense) income, net for the three months ended April 3, 2020 and
March 29, 2019 was as follows:
                                       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 )%


Interest income is directly related to interest earned on our cash. Interest
expense is directly related to borrowings under our senior secured credit
facilities, with the amortization of debt issuance costs and derivative
instruments used to hedge a portion of our exposure to interest rate risk. The
increase in interest expense of $0.1 million for the three months ended April 3,
2020 compared to the three months ended March 29, 2019 was due to increased use
of our revolving credit facility in 2020 primarily to mitigate potential
liquidity risk in the financial markets due to COVID-19.
Income Tax Expense
We recorded income tax expense of $2.1 million and $1.7 million, for the three
months ended April 3, 2020 and March 29, 2019, respectively, representing
effective income tax rates of 19.6% and 19.8%, respectively.
LIQUIDITY AND CAPITAL RESOURCES
Liquidity
We have generated operating cash flow sufficient to fund our working capital,
capital expenditures, and financing requirements. We expect to fund our ongoing
working capital, capital expenditure and financing requirements, and pursue
additional growth through new business development and potential acquisition
opportunities by using cash flows from operations, cash on hand, our credit
facilities and access to capital markets. When necessary we will utilize our
revolving credit facility to satisfy short-term working capital requirements.
If our cash flows from operations are less than we expect, we may need to access
the long-term or short-term capital markets. Although we believe that our
current financing arrangements will permit us to finance our operations on
acceptable terms and conditions, our access to and the availability of financing
on acceptable terms and conditions in the future will be impacted by many
factors, including: (i) our credit ratings or absence of a credit rating, (ii)
the liquidity of the overall capital markets and (iii) the current state of the
economy. We cannot provide assurance that such financing will be available to us
on acceptable terms or that such financing will be available at all.
To date, COVID-19 has not had a significant impact on our liquidity, cash flows
or capital resources. However, the continued spread of COVID-19 has also led to
disruption and volatility in the global capital markets, which, depending on
future developments, could impact our capital resources and liquidity in the
future. In addition, to meet current and potential short-term working capital
requirements and strengthen the Company's cash position in response to COVID-19
uncertainties, Vectrus drew $115 million from its revolving credit facility
during the first quarter of 2020 and had net debt of $37.8 million which was
relatively flat compared to the fourth quarter ended December 31, 2019. A
significant portion of the revolver has subsequently been repaid.
In addition, on March 27, 2020, in response to the COVID-19 pandemic, President
Trump signed into law the CARES Act, which provides for the deferral of certain
tax payments. The CARES Act also contains numerous other provisions which may
benefit Vectrus and we continue to review ongoing government guidance on both
the CARES Act and COVID-19 to assess potential impacts on our liquidity and
capital resources.
The cash presented on our Condensed Consolidated Balance Sheets consists of U.S.
and international cash from wholly owned subsidiaries. Approximately $13.7
million of our total $146.2 million in cash at April 3, 2020 is held by our
foreign subsidiaries and is not available to fund U.S. operations unless
repatriated. We do not currently expect that we will be required to repatriate

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undistributed earnings of foreign subsidiaries. We expect our U.S. domestic cash
resources will be sufficient to fund our U.S. operating activities and cash
commitments for financing activities.
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 amended as of April 19, 2016, to
modify certain financial and negative covenants (as so amended, the Credit
Agreement). On November 15, 2017, we and VSC entered into an Amendment and
Restatement Agreement (the Amendment Agreement) with a group of lenders,
including JPMorgan Chase Bank, N.A., as administrative agent, which provides for
the amendment and restatement of the Credit Agreement. 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). We used $74.6 million from the Amended Term Loan to repay principal
and accrued but unpaid interest on the Credit Agreement. There were $115.0
million outstanding borrowings under the Amended Revolver at April 3, 2020. At
April 3, 2020, there were two letters of credit outstanding in the aggregate
amount of $2.4 million, which reduced our borrowing availability under the
Amended Revolver to $2.6 million.
Dividends
We do not currently plan to pay a regular dividend on our common stock. The
declaration of any future cash dividends and if declared, the amount of any such
dividends, will depend upon our financial condition, earnings, capital
requirements, financial covenants and other contractual restrictions and the
discretion of our Board of Directors. In deciding whether to pay future
dividends on our common stock, our Board of Directors may take into account such
matters as general business conditions, industry practice, our financial
condition and performance, our future prospects, our cash needs and capital
investment plans, income tax consequences, applicable law and such other factors
as our Board of Directors may deem relevant.
Sources and Uses of Liquidity
Cash, accounts receivable, unbilled receivables, and accounts payable are the
principal components of our working capital and are generally driven by our
level of revenue with other short-term fluctuations related to payment practices
by our customers and the timing of our billings. Our receivables reflect amounts
billed to our customers, as well as the revenue that was recognized in the
preceding month, which is normally billed the month following each balance sheet
date.
The total amount of our accounts receivable can vary significantly over time and
is sensitive to revenue levels and the timing of payments received from our
customers. Days sales outstanding (DSO) is a metric used to monitor accounts
receivable levels. The Company determines its DSO by calculating the number of
days necessary to exhaust its ending accounts receivable balance based on its
most recent historical revenue. Our DSO was 66 days as of both April 3, 2020 and
December 31, 2019.
The following table sets forth net cash used in operating activities, investing
activities and financing activities:
                                                                 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.

Trends in our operating cash flows tend to follow trends in operating income, excluding non-cash charges. Net cash provided by operating activities for the three months ended April 3, 2020 consisted of net income of $8.7 million, increased by non-cash items of $4.5 million and offset by unfavorable net changes to working capital of $9.7 million, primarily due to the timing of payments of compensation and other employee benefits and prepaid expenses partially offset by increased collections of accounts receivable. Net changes in other long-term liabilities and assets resulted in an additional $2.4 million of operating cash outflows. Net cash used in operating activities during the three months ended March 29, 2019 consisted of net income of $7.1 million, increased by non-cash items of $2.9 million and offset by unfavorable net changes working capital changes of $13.5 million primarily due to the timing of cash collections and payments as reflected in an increase in receivables and net decrease in payables. Unfavorable net changes in other long-term assets and liabilities contributed an additional $2.9 million to operating cash outflows. Net cash used in investing activities for the three months ended April 3, 2020 consisted of capital expenditures for the purchase of software and hardware, and vehicles and equipment related to ongoing operations. Net cash used in investing activities during the three months ended March 29, 2019 consisted of capital expenditures for the purchase of intangible assets, software and hardware, leasehold improvements, and vehicles and equipment related to ongoing operations.

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Net cash used in financing activities during the three months ended April 3,
2020 consisted of net draw downs of $115.0 million from our revolver, partially
offset by repayments of long-term debt of $1.5 million and payments related to
employee withholding taxes on share-based compensation in the amount of $1.8
million. During the three months ended April 3, 2020, we borrowed $144.0 million
and repaid $29.0 million on the Amended Revolver to meet current and potential
short-term working capital requirements and strengthen the Company's cash
position in response to COVID-19 uncertainties.
Net cash used in financing activities for the three months ended March 29, 2019
consisted of repayments of long-term debt of $1.0 million and payments related
to employee withholding taxes on share-based compensation in the amount of $0.7
million, offset by $0.6 million in cash received from the exercise of stock
options. During the three months ended March 29, 2019, we borrowed and repaid a
total of $48.0 million from the prior revolving credit facility to meet
short-term working capital requirements.
Capital Resources
At April 3, 2020, we held cash of $146.2 million, which included $13.7 million
held by foreign subsidiaries, and had $2.6 million of available borrowing
capacity under the Amended Revolver, which expires on November 15, 2022. We
believe that our cash at April 3, 2020, as supplemented by cash flows from
operations and the Amended Revolver, will be sufficient to fund our anticipated
operating costs, capital expenditures and current debt repayment obligations for
at least the next 12 months.
We have a shelf registration statement with the SEC that became effective in
January 2020 under which we may issue, from time to time, up to $250 million of
common stock, preferred stock, depository shares, warrants, rights and debt
securities. If necessary, we may seek to obtain additional term loans or issue
debt or equity under the registration statement to supplement our working
capital and investing requirements or to fund acquisitions. A financing
transaction may not be available on terms acceptable to us, or at all, and a
financing transaction may be dilutive to our current stockholders.
Contractual Obligations
During the three months ended April 3, 2020, we paid $1.5 million in quarterly
installment payments on the Amended Term Loan. See Note 11, "Leases" for
additional contractual obligation information.
Off-Balance Sheet Arrangements
We have obligations relating to operating leases and letters of credit
outstanding. Our 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 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. These arrangements have not had, and management does not
believe it is likely that they will in the future have, a material effect on our
liquidity, capital resources, operations or financial condition.
CRITICAL ACCOUNTING POLICIES, ESTIMATES AND JUDGMENTS
The preparation of financial statements in conformity with GAAP requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities, the disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of revenue and
expenses during the reporting periods. Estimates are revised as additional
information becomes available. Management believes that the accounting estimates
employed and the resulting balances are reasonable; however, actual results in
these areas could differ from management's estimates under different assumptions
or conditions.
We believe that the assumptions and estimates associated with revenue
recognition, goodwill impairment assessments and income taxes have the greatest
potential impact on our financial statements. Therefore, we consider these to be
our critical accounting policies and estimates. There have been no material
changes in our critical accounting policies and estimates from those discussed
in our Annual Report on Form 10-K for the year ended December 31, 2019.
New Accounting Pronouncements
Refer to Part I, Item 1,   Note 2   "Recent Accounting Standards Update" in the
notes to our unaudited Condensed Consolidated Financial Statements included in
this Quarterly Report on Form 10-Q for information regarding accounting
pronouncements and accounting standards updates.
FORWARD-LOOKING INFORMATION
This Quarterly Report on Form 10-Q and certain information incorporated herein
by reference contain forward-looking statements within the meaning of Section
21E of the Securities Exchange Act of 1934, as amended (the Exchange Act), and
Section 27A of the Securities Act of 1933, as amended (the Securities Act), and
the Private Securities Litigation Reform Act of 1995 and, as such, may involve
risks and uncertainties. All statements included or incorporated by reference in
this report, other than statements that are purely historical, are
forward-looking statements. Forward-looking statements generally can be
identified by the use of forward-looking terminology such as "may," "will,"
"expect," "intend," "estimate," "anticipate," "believe," "could," "potential,"
"continue" or similar terminology. These statements are based on the beliefs and
assumptions of the management of the Company based on information currently
available to management. Forward-looking statements are not guarantees of

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future performance and are subject to risks and uncertainties that could cause actual results to differ materially from the results contemplated by the forward-looking statements. We undertake no obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law. In addition, forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from the Company's historical experience and our present expectations or projections. These risks and uncertainties include, but are not limited to: the impact of the coronavirus (COVID-19) on the global economy; and other factors contained below under Part II, Item 1A, "Risk Factors," our ability to submit proposals for and/or win all potential opportunities in our pipeline; our ability to retain and renew our existing contracts; our ability to compete with other companies in our market; security breaches and other disruptions to our information technology and operation; our mix of cost-plus, cost- reimbursable, and firm-fixed-price contracts; maintaining our reputation and relationship with the U.S. Government; protests of new awards; our acquisition of Advantor and its integration into our business; economic, political and social conditions in the countries in which we conduct our businesses; changes in U.S. or international government defense budgets; government regulations and compliance therewith, including changes to the DoD procurement process; changes in technology; intellectual property matters; governmental investigations, reviews, audits and cost adjustments; contingencies related to actual or alleged environmental contamination, claims and concerns; delays in completion of the U.S. Government's budget; our success in extending, deepening, and enhancing our technical capabilities; our success in expanding our geographic footprint or broadening our customer base; our ability to realize the full amounts reflected in our backlog; impairment of goodwill; misconduct of our employees, subcontractors, agents, prime contractors and business partners; our ability to control costs; our level of indebtedness; and terms of our credit agreement; interest rate risk; subcontractor performance; economic and capital markets conditions; our ability to maintain safe work sites and equipment; our ability to retain and recruit qualified personnel; and to maintain good relationships with our workforce; our teaming relationships with other contractors; changes in our accounting estimates; the adequacy of our insurance coverage; volatility in our stock price; changes in our tax provisions or exposure to additional income tax liabilities; risks and uncertainties relating to the Spin-off; changes in GAAP; and other factors described in Item 1A, "Risk Factors," and elsewhere in our Annual Report on Form 10-K for the year ended December 31, 2019 and described from time to time in our future reports filed with the SEC.

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