MTC Technologies Inc. (MTCT)
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Technologies has begun to augment their outstanding history of organic growth with some
very selective and strategic acquisitions
Mr. Gutridge: My vision in many ways consists of continuing on the track that we have been on for many years. The company has an outstanding history of organic growth and we have just recently begun to augment that with some very selective and strategic acquisitions. My vision is to continue that strategy, pretty much intact, with a view toward accelerating the acquisition part of that strategy.
CEOCFOinterviews: What does MTC do?
Mr. Gutridge: If you want a real nutshell answer, I would say we provide engineering and other technical services to the department of defense. If you look at our business, about 95% of our revenue is derived from various DOD (Department of Defense) and intelligence agencies.
CEOCFOinterviews: What is it that you are actually doing for them?
Mr. Gutridge: In many cases they have found that it is advantageous for them to use contractors like ourselves to perform some of their tasks. We have been at war in Iraq now for over a year and you can go back before that to the Afghanistan conflict and see that the ops tempo for the Department of Defense is greatly accelerated since then. Many of the DOD personnel that perform operations we typically do, have been required to fly a plane, carry a rifle or otherwise be directly involved in the conflict. That means that they need contractors like us to do what soldiers and airmen may have been doing otherwise. Some of our services consist of managing various programs for the army or the air force. By that, I mean we come in and help the government assess what needs to be done, such as a refurbishment of a tank or refurbishment of an aircraft. We can assemble the subcontract team necessary to take care of that refurbishment, and we can manage the final installation of that refurbishment or technology upgrade of the aircraft or tank. In addition to program management, there is quite a broad list of things that we do. We get involved with IT projects and Intelligence Analysis; we assist in operations management for some of the ISR activities (intelligence, surveillance, reconnaissance activity). We are involved in many aspects of the operations of U2 flights from helping to plan the missions, schedule the missions, and analyze the data that is collected during those intelligence missions. That is a brief list of some of the activities that we cover.
CEOCFOinterviews: Are there segments of our services evenly divided?
Mr. Gutridge: We
have selected our areas strategically. We have tried to involve ourselves in areas that we
think will have ongoing requirements for many years to come, and at the same time will be
areas that congress will decide definitely need to be funded for many years to come. Those
are a couple of the key criteria, which we would look at in determining where we want to
focus our business. One example of an area meeting these requirements is one I mentioned
before: the acquisition processes, where we have been involved in the aircraft acquisition
process for many years. If you look at us for the last 18-20 years, we probably have been
involved with the acquisition of every major Air Force airplane that has come along.
In the interim, we have leveraged that capability to build an aircraft
modernization business with an emphasis on Special Operations Forces aircraft.
CEOCFOinterviews: You have announced a couple of new contracts recently; will you tell us about them?
Mr. Gutridge: The
most recent win was a ten-million-dollar win by our Vitronics division, where they are
involved in programming for army avionics. They have been working on that contract
for many years and the government has expanded that contract for another five years.
CEOCFOinterviews: Has there been much competition for you and why are you being chosen ?
Mr. Gutridge: There is always a lot of competition; there always has been and as far as we can tell, always will be. The reason that we have been successful is that we always pay very careful attention to the needs of the customer. Our company vision and the training we provide our people are geared toward amazing the customer with the level of service that we give them. It starts with the selection of the people; we look hard to find the people that have the right background and qualifications for the job, and in many cases, that means a very particular type of expertise. For instance, in some cases, we may need somebody that has expertise with C-130 aircraft, or a particular expertise with H53 helicopters. We will go out and find the people that have that kind of expertise. We cant do a lot of recruiting at colleges; we typically need somebody with years of experience working with the finer points of our customers mission. We go from there and give them additional training to be absolutely responsive to the customers needs, always looking to provide our customers with the highest level of customer service. We have enveloped that with our ISO 9001 System, which helps provide procedures to maintain our quality level at the highest levels of quality.
CEOCFOinterviews: MTC is linking imagination and innovation. What does that mean for MTC and what does it mean for your customers?
Mr. Gutridge: It goes back to the customer service aspect; most of the time when we are working on a problem for the government, they are looking for more than just a standard answer, they are looking for somebody that is going to look at all the contingent factors that might come into play involving a particular problem. For instance, we had a project from a customer involving what it would take to put additional gas tanks on a C-130 aircraft. The government was wowed by the response that we came back with. Of course, we came up with the solution for how to best mount the tanks, but we also told them that when installing this solution it will be necessary to also think about different problems the tanks will cause on landing, on take off, and/or problems you might encounter if you are going to land in a jungle area. Our team imagined all of the types of issues that might be encountered by this modified aircraft and then came back with a very innovative solution to resolve all of those issues. That is a great example of where we took that slogan and put it into real life practice.
CEOCFOinterviews: What do you need to do to be ready to do these projects and bid on these projects?
Mr. Gutridge: Our biggest expense is people and our next biggest expense is places for people to work, although probably over 70% of the people work at our customers locations; they are typically co-located with the customer on the base. In some cases it is having people with the right backgrounds and in other cases, we need a certain level of security clearance. Other situations might require our lab facilities. It varies from customer to customer.
CEOCFOinterviews: Is it difficult to recruit people?
Mr. Gutridge: By and large, we have not had issues in recruiting folks. With the set of benefits and the corporate culture that we have, we have found that it is very conducive to finding good people. That is not to say that there arent pockets of difficulty from time-to-time; I think our Washington D.C. office has a little more difficulty finding people from time to time.
CEOCFOinterviews: You mentioned strategic acquisitions; what kinds of things are you looking for and what would you like to add to MTC?
Mr. Gutridge: If
we look at the typical profile of a company that we would like to acquire, they will
probably have revenues of $30 to $80 million, an outstanding track record, and a
management team that made that track record happen that is going to continue with the
company. We dont have extra people waiting around to be parachuted into a company
that isnt doing well, so you wont see us buy turn-arounds. We want strong
companies with an established management team that is focused in one of the three major
thrusts of our business: air forces, land forces or national security customers.
CEOCFOinterviews: Does the change of administrations have any affect on you?
Mr. Gutridge: One can never be sure about that; every administration likes to put its own imprint on DOD and other government programs. In our situation, it goes back to being involved in a lot of different programs and with many different customers. Last year, we had over 400 different task orders, and only one of those task orders was as much as 7% of our business, so we have a great deal of diversity in the business that we do, plus it is spread over a lot of different customers. Our view is that someone would have to come in and cut very broadly and deeply to have a material impact on our business. Having said that, we think it is a risky proposition for any president or any congress, given the state of affairs in the world right now and the threat of terrorism, to make significant cuts across the board.
CEOCFOinterviews: In closing, what would you like to say to potential investors?
People who follow the DOD space are frequently people who follow the large original
equipment manufacturers and these companies have a history of years of feast or famine and
a lot of fixed investment. Our business model is much different from that and we
have very little fixed investment. Most of our investment is working capital that tends to
go up and down with the business.
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