V2X, INC. 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 endedDecember 31, 2020 . 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. OverviewVectrus is a leading provider of global service solutions with a history in the services market that dates back more than 75 years. The company provides facility and base operations; supply chain and logistics services; information technology mission support; and engineering and digital technology services primarily toU.S. government customers around the world.Vectrus is differentiated by operational excellence, superior program performance, a history of long-term customer relationships and a strong commitment to its clients' mission success. Our primary customer is theU.S. Department of Defense (DoD ), with a high concentration in theU.S. Army . For the three months endedApril 2, 2021 andApril 3, 2020 , we had total revenue of$434.0 million and$351.7 million , respectively, substantially all of which was derived fromU.S. government customers. For the three months endedApril 2, 2021 andApril 3, 2020 , we generated approximately 59% and 70% of our total revenue from theU.S. Army , respectively. Executive Summary Our revenue increased$82.3 million , or 23.4%, for the three months endedApril 2, 2021 compared to the three months endedApril 3, 2020 . The increase in revenue was attributable to a$13.4 million expansion on our existing contracts and$68.9 million from our acquisitions ofZenetex and HHB. Revenue from ourU.S. ,Europe andMiddle East programs increased by$70.1 million ,$8.3 million , and$3.9 million , respectively. Operating income for the three months endedApril 2, 2021 , was$16.5 million , an increase of$4.1 million , or 32.4%, compared to the three months endedApril 3, 2020 . The increase was due to$2.7 million of operating income from theZenetex acquisition and improved operating performance. 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 21
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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 catch-up 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 catch-up adjustments due to aggregate changes in contract estimates decreased operating income by$1.3 million and$2.3 million for the three months endedApril 2, 2021 andApril 3, 2020 , respectively. Cumulative catch-up 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 endedApril 2, 2021 , compared to the three months endedApril 3, 2020 , are contained in the "Discussion of Financial Results" section. Recent Developments Information regarding certain significant contracts is discussed in "Significant Contracts" below. COVID-19 Impact The global outbreak of COVID-19 was declared a pandemic by theWorld Health Organization and a national emergency by theU.S. government inMarch 2020 and has negatively affected theU.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, to work with our customers to minimize ultimate potential disruptions, and to support our community in addressing the challenges posed by this global pandemic. The extent of the ultimate 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 theU.S. government, state and local government officials, and international governments to prevent disease spread, all of which remain uncertain and cannot be predicted. For the three months endedApril 2, 2021 , the impact of COVID-19 was immaterial to our financial results. In accordance with theDoD guidance issued inMarch 2020 designating the Defense Industrial Base as a critical infrastructure workforce, ourU.S. facilities have continued to operate in support of essential products and services required to meet our commitments to theU.S. government and theU.S. military; however, facility closures or work slowdowns or supply chain disruptions have affected our financial results and projections. In addition, other countries are responding to the pandemic differently which have affected our international operations and the operations of our suppliers and customers. However, any closures to date have not significantly impactedVectrus' business. 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 endedApril 2, 2021 andApril 3, 2020 : % of Total Revenue Three Months Ended Contract Name April 2, 2021 April 3, 2020
Kuwait Base Operations and
27.0% 35.1%
Operations, Maintenance and Defense of Army
Communications in Southwest Asia and Central Asia
(OMDAC-SWACA) 10.8% 15.8%
Revenue associated with a contract will fluctuate based on increases or
decreases in the work being performed on the contract, award fee payment
assumptions, 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, 2021 . K-BOSSS,
our largest base operations support services contract, 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 . The K-BOSSS contract contributed $117 million and $124 million of revenue
for the three months ended April 2, 2021 and April 3, 2020 , respectively.
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OnDecember 29, 2020 , theUS Army announced thatVectrus Systems Corporation (VSC), our wholly-owned subsidiary was awarded an$882.5 million cost-plus-fixed-fee contract to continue Operations, Maintenance, and Defense ofArmy Communications inSouthwest Asia andCentral Asia (OMDAC-SWACA). Work will be based inKuwait with additional locations throughoutSoutheast Asia . OnMarch 8, 2021 , the Government received a protest from a competitor, which was filed at the Government Accountability Office (GAO). The GAO decision is due byJune 16, 2021 .Vectrus is performing services under an extension contract to the predecessor OMDAC contract pending the GAO decision. The estimated completion date isDecember 26, 2025 . The OMDAC-SWACA contract contributed$47 million and$55 million of revenue for the three months endedApril 2, 2021 andApril 3, 2020 , respectively. Backlog Total backlog includes remaining performance obligations, consisting of both funded backlog (firm orders for which funding is contractually authorized and appropriated 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 theU.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 theU.S. government when we are the prime contractor or of the prime contractor when we are a subcontractor. TheU.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, theU.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 endedApril 2, 2021 , total backlog decreased by$513 million due to the OMDAC protest which was partially offset by an increase in the K-BOSSS backlog. The following is a summary of our backlog as ofApril 2, 2021 andDecember 31, 2020 : April 2, December 31, (In millions) 2021 2020 Funded backlog$ 908 $ 843 Unfunded backlog 3,643 4,221 Total backlog$ 4,551 $ 5,064 Funded orders (different from funded backlog) represent orders for which funding was received during the period. We received funded orders of$427.5 million during the three months endedApril 2, 2021 , which was an decrease of$529.6 million compared to the three months endedApril 3, 2020 . Economic Opportunities, Challenges and Risks TheU.S. government's investment in services and capabilities in response to changing security challenges creates a complex and fluid business environment forVectrus and other firms in this market segment. The pace and depth ofU.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 theU.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, theDoD budget remains the largest in the world and management believes our addressable portion of theDoD budget offers substantial opportunity for growth. TheU.S. government's FY begins onOctober 1 and ends onSeptember 30 . OnFebruary 10, 2020 the Administration submitted the FY 2021 budget, which provides$741 billion in discretionary funding for national defense and includes$672 billion in base funding and$69 billion in overseas contingency operations funding. The approved funding is in accordance with the Bipartisan Budget Act of 2019. OnJanuary 1, 2021 , the$741 billion National Defense Authorization Act became law. OnApril 9, 2021 , theBiden Administration introduced the initial FY 2022 discretionary budget plan. The proposal requests$753 billion in discretionary funding for national defense and includes$715 billion for theDoD . The$715 billion DoD request compares to the FY 2021 enacted amount of$704 billion . While a proposal has been introduced, risks remain to FY 2022 as the budget has not yet been passed. 23
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There are risks associated with the timing and amount of future appropriations. If annual appropriations bills are not enacted, theU.S. government may operate under a CR, restricting new contract or program starts and additional government shutdowns, which might involve all government agencies, including theDoD , could arise. Future CR's and government shutdowns may lead to delays in procurement of services due to lack of funding, and those delays may adversely affect our revenue, results of operations and cash flow. Finally, there remains uncertainty surrounding future discretionary defense funding levels and priorities of the Administration andCongress , which could adversely impact demand for our services. We believe spending on operation and maintenance of defense assets, as well as civilian agency infrastructure and equipment, will continue to be aU.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. 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 endedDecember 31, 2020 and the matters identified under the caption "Forward-Looking Statement Information" herein. DISCUSSION OF FINANCIAL RESULTS Three months endedApril 2, 2021 , compared to three months endedApril 3, 2020 Selected financial highlights are presented in the following table: Three Months Ended Change (In thousands, except for percentages) April 2, 2021 April 3, 2020 $ % Revenue$ 434,004 $ 351,734 $ 82,270 23.4 % Cost of revenue 393,648 319,693 73,955 23.1 % % of revenue 90.7 % 90.9 % Selling, general, and administrative expenses 23,823 19,558 4,265 21.8 % % of revenue 5.5 % 5.6 % Operating income 16,533 12,483 4,050 32.4 % Operating margin 3.8 % 3.5 % Interest expense, net (1,932) (1,703) (229) 13.4 % Income from operations before income taxes 14,601 10,780 3,821 35.4 % % of revenue 3.4 % 3.1 % Income tax expense 2,553 2,112 441 20.9 % Effective income tax rate 17.5 % 19.6 % Net Income$ 12,048 $ 8,668 $ 3,380 39.0 % Revenue Revenue for the three months endedApril 2, 2021 was$434.0 million , an increase of$82.3 million , or 23.4%, as compared to the three months endedApril 3, 2020 . The increase in revenue was attributable to a$13.4 million expansion on our existing contracts and$68.9 million from our acquisitions ofZenetex and HHB. Revenue from ourU.S. ,Europe andMiddle East programs increased by$70.1 million ,$8.3 million , and$3.9 million , respectively. Cost of Revenue Cost of revenue as a percentage of revenue was 90.7% compared to 90.9% for the three months endedApril 2, 2021 andApril 3, 2020 , respectively. The increase in cost of revenue of$74.0 million , or 23.1%, for the three months endedApril 2, 2021 , as compared to the three months endedApril 3, 2020 , was primarily due to the volume fluctuations described for revenue. Selling, General, & Administrative (SG&A) Expenses For the three months endedApril 2, 2021 , SG&A expenses of$23.8 million increased by$4.3 million , or 21.8%, as compared to theApril 3, 2020 . The increase was primarily due to the addition of SG&A expenses fromZenetex and HHB. 24
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Operating Income Operating income for the three months endedApril 2, 2021 increased by$4.1 million , or 32.4%, as compared to the three months endedApril 3, 2020 . The increase was due to$2.7 million of operating income from theZenetex acquisition and improved operating performance. Operating income as a percentage of revenue was 3.8% for the three months endedApril 2, 2021 , compared to 3.5% for the three months endedApril 3, 2020 . Aggregate cumulative catch-up adjustments decreased operating income by$1.3 million and$2.3 million for the three months endedApril 2, 2021 andApril 3, 2020 , respectively. The aggregate cumulative catch-up adjustments for the three months endedApril 2, 2021 andApril 3, 2020 related to lower margins associated with contract staffing and increased Other Direct Costs (ODCs). Interest (Expense) Income, Net Interest (expense) income, net for the three months endedApril 2, 2021 andApril 3, 2020 was as follows: Three Months Ended Change (In thousands, except for percentages) April 2, 2021 April 3, 2020 $ % Interest income $ 25 $ 31$ (6) (19.3) % Interest expense (1,957) (1,734) 223 12.9 % Interest expense, net$ (1,932) $ (1,703) $ 229 13.5 % 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$0.2 million for the three months endedApril 2, 2021 compared to the three months endedApril 3, 2020 was due to the use of our revolving credit facility in 2021 for theDecember 31, 2020 acquisitions ofZenetex and HHB. Income Tax Expense We recorded income tax expense of$2.6 million and$2.1 million , for the three months endedApril 2, 2021 andApril 3, 2020 , respectively, representing effective income tax rates of 17.5% and 19.6%, 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 what 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, (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. 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. This amount was repaid in full during the second quarter of 2020.Vectrus had net debt of$138.7 million as ofApril 2, 2021 and$112.1 million as ofDecember 31, 2020 . AtApril 2, 2021 , there were$115.0 million of outstanding borrowings under the Amended Revolver that were used for theDecember 31, 2020 acquisitions ofZenetex and HHB. In addition, onMarch 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 benefitVectrus 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. 25
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The cash presented on our Condensed Consolidated Balance Sheets consists ofU.S. and international cash from wholly owned subsidiaries. Approximately$18.0 million of our total$38.3 million in unrestricted cash atApril 2, 2021 is held by our foreign subsidiaries and is not available to fundU.S. operations unless repatriated. We do not currently expect that we will be required to repatriate undistributed earnings of foreign subsidiaries. We expect ourU.S. domestic cash resources will be sufficient to fund ourU.S. operating activities and cash commitments for financing activities. InSeptember 2014 , we and our wholly-owned subsidiary, VSC, entered into a credit agreement. The credit agreement was subsequently amended, with the most recent amendment occurringDecember 24,2020 and is collectively referred to as the Amended Agreement. The Amended Agreement consists of a term loan (Amended Term Loan) and a$270.0 million revolving credit facility (Amended Revolver). AtApril 2, 2021 , 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$152.6 million . Dividends We do not currently plan to pay a regular dividend on our common stock. The declaration of any future cash dividends and the amount of any such dividends, if declared, 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 73 and 66 days as ofApril 2, 2021 andDecember 31, 2020 , respectively. Strong collections in the fourth quarter of 2020 impacted the DSO performance in the first quarter of 2021. The following table sets forth net cash used in operating activities, investing activities and financing activities: Three Months Ended (In thousands) April 2, 2021 April 3, 2020 Operating activities$ (21,729) $ 1,137 Investing activities (2,611) (917) Financing activities (4,071) 111,714 Foreign exchange1 (191) (1,080)
Net change in cash, cash equivalents and restricted cash
Net cash used in operating activities for the three months endedApril 2, 2021 consisted of outflows for net working capital requirements of$35.7 million and other long-term assets and liabilities of$4.9 million , partially offset by cash inflows from net income of$12.0 million and non-cash items of$6.9 million . The net working capital outflows were largely from increases in accounts receivable partially offset by increases in accounts payable and accrued compensation. Net cash provided by operating activities during the three months endedApril 3, 2020 consisted of net income of$8.7 million and non-cash items of$4.5 million . Net cash used in operating activities consisted of net increases 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 decreases in other long-term liabilities and assets resulted in an additional$2.4 million of operating cash outflows. Net cash used in investing activities for the three months endedApril 2, 2021 andApril 3, 2020 consisted of$2.6 million and$0.9 million , respectively, of capital expenditures for the purchase of software and hardware, and vehicles and equipment related to ongoing operations. 26
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Net cash used in financing activities during the three months endedApril 2, 2021 consisted of payments related to employee withholding taxes on share-based compensation of$2.2 million and repayments of long-term debt of$2.0 million offset by$0.1 million received from the exercise of stock options. During the three months endedApril 2, 2021 , we borrowed and repaid$110.0 million on the Amended Revolver. Net cash used in financing activities during the three months endedApril 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 endedApril 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. Capital Resources AtApril 2, 2021 , we held unrestricted cash of$38.3 million , which included$18.0 million held by foreign subsidiaries, and had$152.6 million of available borrowing capacity under the Amended Revolver, which expires onNovember 15, 2022 . We believe that our cash atApril 2, 2021 , 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 theSEC that became effective inJanuary 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 endedApril 2, 2021 , we paid$2.0 million in quarterly installment payments on the Amended Term Loan. See Note 9, "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 permits borrowings up to$270.0 million , of which$25.0 million is available for the issuance of letters of credit. AtDecember 31, 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$152.6 million . The aforementioned 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, business combinations, goodwill and other intangible assets, 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 endedDecember 31, 2020 . 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. 27
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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 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 continued impact of COVID-19 on the global economy; 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 theU.S. government; protests of new awards; economic, political and social conditions in the countries in which we conduct our businesses; changes inU.S. or international government defense budgets; government regulations and compliance therewith, including changes to theDoD 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 theU.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; our ability 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 contained below under Part II, Item 1A, "Risk Factors," and described in Item 1A, "Risk Factors" and elsewhere in our Annual Report on Form 10-K for the year endedDecember 31, 2020 and described from time to time in our future reports filed with theSEC .
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