EXHIBIT 99.1
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CAUTIONARY LANGUAGE CONCERNING FORWARD-LOOKING STATEMENTS
Statements herein regarding the proposed transaction between Anteon
International Corporation and General Dynamics Corporation, future financial and
operating results, benefits and synergies of the transaction, future
opportunities for the combined company and any other statements about future
expectations constitute forward looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995. Such statements are based upon
current beliefs and expectations and are subject to significant risks and
uncertainties. There are a number of important factors that could cause actual
results or events to differ materially from those indicated by such forward
looking statements, including: the ability to obtain governmental approvals of
the transaction on the proposed terms and schedule and the failure of Anteon
International Corporation stockholders to approve the transaction. Additional
factors that may affect future results are contained in each company's filings
with the Securities and Exchange Commission ("SEC"), including each company's
Annual Report on Form 10-K for the year ended December 31, 2004, which are
available at the SEC's Web site http://www.sec.gov. The information set forth
herein speaks only as of the date hereof, and any intention or obligation to
update any forward looking statements as a result of developments occurring
after the date hereof is hereby disclaimed.
IMPORTANT ADDITIONAL INFORMATION WILL BE FILED WITH THE SEC
In connection with the proposed transaction, Anteon International Corporation
plans to file with the SEC a Proxy Statement. INVESTORS AND SECURITY HOLDERS OF
ANTEON INTERNATIONAL CORPORATION ARE URGED TO READ THE PROXY STATEMENT AND ANY
OTHER RELEVANT DOCUMENTS FILED WITH THE SEC WHEN THEY ARE AVAILABLE BECAUSE THEY
WILL CONTAIN IMPORTANT INFORMATION ABOUT ANTEON INTERNATIONAL CORPORATION, THE
PROPOSED TRANSACTION AND RELATED MATTERS. The final Proxy Statement will be
mailed to stockholders of Anteon International Corporation. Investors and
security holders of Anteon International Corporation will be able to obtain
copies of the Proxy Statement, when they become available, as well as other
filings with the SEC that will be incorporated by reference into such documents,
containing information about Anteon International Corporation, without charge,
at the SEC's Internet site (http://www.sec.gov). These documents may also be
obtained for free from Anteon International Corporation by directing a request
to Anteon International Corporation, Investor Relations, 3211 Jermantown Road,
Fairfax, Virginia 22030-2801 or at Anteon International Corporation's Investor
Relations page on its corporate website at www.anteon.com.
PARTICIPANTS IN SOLICITATION
Anteon International Corporation and its respective directors and executive
officers and other members of management and employees may be deemed to be
participants in the solicitation of proxies from Anteon International
Corporation's stockholders in respect of the proposed transaction. Information
regarding Anteon International Corporation's participants is available in Anteon
International Corporation's proxy statement, dated April 22, 2005, for its 2005
annual meeting of stockholders, which is filed with the SEC. Additional
information regarding the interests of such participants will be included in the
Proxy Statement to be filed with the SEC.
GENERAL DYNAMICS-ANTEON INTERNATIONAL ACQUISITION ANNOUNCEMENT
DECEMBER 14, 2005
9:00 A.M., EDT
OPERATOR: Good morning, ladies and gentlemen. My name is Shae and I'll be your
conference facilitator.
At this time I would like to welcome everyone to the General Dynamics conference
call. All lines have been placed on mute to prevent any background noise.
After the speakers' remarks there will be a question-and-answer period. If you'd
like to ask a question at that time, please press star-one on your telephone
keypad. If you'd like to withdraw your question you may press the pound key.
It is now my pleasure to turn the floor over to your host, Ray Lewis, Staff Vice
President of Investor Relations.
RAY LEWIS, STAFF VICE PRESIDENT OF INVESTOR RELATIONS, GENERAL DYNAMICS: Well
thank you very much and welcome to our conference call to all of you on the
phone and also in the room today.
I would like to remind people that we are likely to make some forward-looking
statements during the course of our discussion today. These are our best
estimates of future possibilities but they are subject to the risks inherent in
any business endeavor and I would recommend that you look at our 10-Ks and 10-Qs
for further discussion of that.
And with that said, I'd like to turn it over to Nick Chabraja, CEO of General
Dynamics.
NICK CHABRAJA, CHIEF EXECUTIVE OFFICER, GENERAL DYNAMICS: Thank you, Ray, and
good morning everyone.
As you all know by now as indicated by your presence either here or on the
phone, yesterday we entered into a plan, an agreement to merge Anteon
International and General Dynamics. I thought I'd give you a little bit of the
prosaic financial information right up from the get-go. This is a transaction
that is in cash, $55.50 per share. There's about a hundred million of net debt
on the balance sheet, so that gives us a total enterprise value for the
transaction of about $2.2 billion.
This transaction is, of course, subject to Anteon shareholder vote and normal
regulatory approvals. And we expect that the transaction should close early in
the second quarter 2006. It's possible that it - that it could be sooner. We
don't anticipate any Hart-Scott-Rodino issues here. These businesses are
complimentary, supplemental in many respects; they do not compete with each
other. And from General Dynamics' perspective, this transaction is immediately
accretive to earnings without synergies.
Anteon, as many of you may know, although as I look across this audience I see
analysts who cover General Dynamics and not so many who cover Anteon - it's a
splendid company that provides high-value integration and systems engineering
services to customers with demanding mission service requirements.
On the financial metrics side, Anteon has a significant backlog relative to its
size, about $6.6 billion. And on 85 percent of its contracts it serves as prime.
9,500 employees, significantly 6,200 of those employees hold security clearances
of various kinds.
As a result of our due diligence we can give you some guidance as to what we
anticipate Anteon will do. In 2006 we see sales of a little bit over $1.7
billion and an EBITDA of about $170 million. That would result in
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transaction metrics based on 2006 anticipated numbers of about 1.3 times sales
and between 13.1 and 13.2 as a multiple of EBITDA.
What I really want to do today, that having been said, is introduce to you Joe
Kampf, my colleague, Chairman and Chief Executive Officer of Anteon, to describe
to you his thoughts and views as we entered into this discussion and agreement.
And then I'd like to bring up Jerry DeMuro, our Executive Vice President, the
group executive of Information Systems and Technology, and he'll tell you a
little bit about the fit of these two splendid organizations from a General
Dynamics perspective.
But first Joe.
JOE KAMPF, CHAIRMAN AND CEO, ANTEON: Thank you, Nick.
Good morning, everyone, good morning to everyone on the call.
It's a very exciting day for me and obviously Anteon shareholders, customers and
employees alike. We've articulated over the past several years our long-term
goal of achieving tier one status in the federal services marketplace. We're a
systems integration engineering company. We work on mission-critical systems
across the globe for the Department of Defense, the Department of Homeland
Security and the military intelligence community. And we compete on a daily
basis with the likes of other tier one A&D companies who have a large footprint
in the federal services marketplace, that being Lockheed, Northrop, CSC, SAIC,
to name just a few.
And when this deal closes, as Nick indicated, together we'll be able to look
those companies right in the eye. We will be tier one in what we characterize as
a $150 billion federal services marketplace.
General Dynamics has a footprint but not a tier one footprint in that space. We
have a very large footprint in that space comparatively speaking. And together
we are a tier one and that's a very exciting future for General Dynamics.
We're a high-growth organization. We expect as part of Jerry DeMuro's
organization, the IS&T organization within GD, to be able to generate a lot of
synergy across GD and to bid for larger and larger opportunities within that
federal services footprint. There are a lot of opportunities coming up well
above the $100 million mark and probably into the billions over the years to
come.
And I'm very excited personally. I bought the company with a group of investors
in 1996; it was doing about $100 million in revenue. This year we'll approach
$1.5 billion and that's a very exciting track record for us. Many of you may
know our track record more intimately but today I'm very excited about the
future. And I think our employees and customers are as well.
So with that let me turn the podium over to Jerry and he'll give you his
feelings about the transaction and the future.
Thank you.
JERRY DEMURO, EXECUTIVE VICE PRESIDENT INFORMATION SYSTEMS AND TECHNOLOGY,
GENERAL DYNAMICS: Good morning. Thank you, Joe.
I'm pleased to be here to speak about the opportunity to bring these two
powerful organizations together and hopefully to provide you some insight into
the logic behind this and the fit that we see for not only our employees but our
customers, and the added value that we can bring on both sides of that equation.
As both gentlemen talked about, we see these organizations as highly
complimentary to each other. In particular we have great strength today within
General Dynamics in the enterprise IT section, infrastructure as well as some
logistic support and field support.
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Anteon brings particular strength in the areas of enterprise architecture, the
high-end skills to design those networks, to integrate those networks and
software systems, as well as a very strong business in modeling, simulation and
training, lifecycle support, and also in the growing market of fed outsourcing.
Joe alluded to them being a systems engineering corporation. I believe about
two-thirds of Anteon's work comes through systems integrations, systems
engineering, modeling and simulation. So a very strong record fits very well
within the portfolio. And I'm going to show you a little later a notional model
to help you get a sense of how we see these organizations fitting together.
About 90 percent of their revenue comes from those markets we consider core;
DoD, the intelligence community, and homeland security. So a very good match in
that regard as well, not only in the skill sets but in the markets that we wish
to address.
Next slide please.
The markets in which Anteon currently participates and those that we hope to
gain a growing share are healthy markets. By any estimates the budgets look like
they're going to grow somewhere in the five to seven percent range but we in
particular are focused on some areas that we believe are faster moving than that
and Anteon brings us the ability to compete and have a greater probability of
win and market share in those areas.
They bring domain expertise particularly in mission-critical systems, as Joe
alluded to, which bridge that gap between our strong position that I mentioned
in infrastructure and our markets in C4ISR for the war fighter as well as the
intelligence community.
We strongly believe that the combination of these two organizations now gives us
the breadth and scale to provide our customers with another first-tier choice
out there as a competitor for these large-scale opportunities that are upcoming.
I mentioned a notional model of how we look at this. If you look at our Network
Systems business, about a $1.7 billion enterprise today, primarily we have
strengths in the area of IT infrastructure, network build-out, and IT support.
Anteon gives us the ability to bridge that gap to the war fighter and the
frontline intelligence community users by providing the mission-critical systems
and integration skills that we're lacking today from our Network Systems
business and gives us a nice bridge and compliment to some things that we
acquired a couple of years ago with Veridian now to that C4ISR market that you
see on the far right of this chart.
So that's a little bit about the rationale. We think the teams are very
complimentary. We do not see much overlap. We do not see each other very often
in the market space. Anteon brings some nice channels to the market that we
don't have, some very large government-wide contracts - Millennia Lite. I
believe Anteon has more awards under the ANSWER contract than any other
participant in the fed IT space.
So we're very much looking forward to being able to exploit that.
And Anteon also brings a very innovative engine for addressing these
government-wide types of contracts on a very rapid and cost-effective basis that
we think when we add that to our already existing capabilities in Network
Systems is going to give us an opportunity to grow even more rapidly in
something that we can leverage extensively throughout our enterprise today.
Unless there are any questions of me, I will turn it back over to Ray.
UNIDENTIFIED: Thank you.
We'd like to start the Q&A today with the audience that's present in the room
and once we have finished with that we'll take questions from the telephone
audience. And when we get to that point I'll ask the operator to explain how you
can get into the queue.
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So we can start with questions in the room today. And by the way, wait to speak
until you have a microphone so the folks on the telephone can hear your
question.
SAM PEARLSTEIN, WACHOVIA: Sam Pearlstein from Wachovia, I was just wondering if
you could talk a little bit about the - any margin opportunity at Anteon in
terms of when we look at things going forward is there anything General Dynamics
can bring to Anteon to drive those margins higher? And on a reported basis what
will those margins look like when we add in the intangibles?
NICK CHABRAJA: Sam, you wouldn't be surprised at the end of the day we have plan
on that - on that score. But look, this is very early to try and quantify and
identify all of the synergies we see. But there are obviously cost synergies.
We have two - if you look at it from a Network Systems point of view and an
Anteon point of view - two organizations that both today do well from a margin
perspective. They will both be plus nine. And putting them together creates some
obvious opportunities that we think we'll fully exploit.
But I think that the more exciting thing here is the marketing synergy that
Jerry and Joe have attempted to explain to you. OK.
Next.
Heidi?
HEIDI WOOD, MORGAN STANLEY: Heidi Wood, Morgan Stanley. Nick, can you talk to us
about any overlap on audit issues and with 39 percent of sales from the Navy at
Anteon, is there any conflict of interest or any impact on GD's Navy sales?
NICK CHABRAJA: Heidi, during the course of due diligence, of course, one of the
things that we wanted to take a hard look at was whether there was going to be a
value detractor somewhere here from a organizational conflict of interest point
of view.
I think what we've discovered is that it's quite modest and that there either
exists already outstanding firewalls that are proven - time proven and that the
customer is pleased with or that we have other workarounds and it's not a
disabler in any respect to this transaction.
HEIDI WOOD: I have a second question.
NICK CHABRAJA: Yeah, go ahead.
HEIDI WOOD: The ANSWER is going to be competed again I guess in June of 2006. I
guess the new program is Alliant. Can you talk about what your expectations are,
how GD is going to adding to the - to the - that competition and...
NICK CHABRAJA: Well, let's ...
HEIDI WOOD: ... does that fold into your expectations?
NICK CHABRAJA: Let's turn this one over to the experts in this program
competition, both Joe and Jerry. But Joe is really the guy on the spot so.
JOE KAMPF: Anteon is the largest holder of task order value on the ANSWER
contract. We actually owned, as a single award, the predecessor contract for
five years prior to ANSWER. So we have a long, established relationship with GSA
and we have a tremendous customer base on ANSWER.
In fact, all of the ANSWER tasking will continue on ANSWER even after Alliant is
awarded. So, A, we expect to be a prime contractor on Alliant, if I can be that
bold since the RFP is not out yet, and we also
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expect to retain all of our ANSWER work. I think together we can build quite a
bit of additional momentum because with General Dynamics and Jerry's networks
and communications capabilities, a technology gap that Anteon had which is a
terrific fill for us, we'll be able to pursue a lot more large, you know,
hundreds of millions of dollars worth of network business and communications
business which tends to be merging now with IT. And we think that Alliant will
provide a platform for us to grow together.
TODD ERNST, NEUBERGER BERMAN: Todd Ernst, Neuberger Berman. Nick, in the past
when we've talked about defense IT acquisitions, you've expressed concern about
doing such acquisitions in that certain people work on the technology side, you
know, if you lose a deal you change your business card and, you know, the guys
are working for somebody else.
NICK CHABRAJA: This is not what we're talking about here.
TODD ERNST: Right. How do - how does this - as you look at Anteon what makes you
feel differently about it and how are you going to address ...
NICK CHABRAJA: You know I think that Jerry and Joe, by at least by inference if
not explicitly, attempted to address that.
Joe's fine company - you know we're buying these splendid people. They work at
the very highest end of the integration in this mission-systems world. This is -
you know, we attach the word service to this because it is what it is, it is not
product. On the other hand, let's - let's not mistake that these are mundane
services to be bid and disposed of by changing a uniform. This is not that kind
of work - work of the highest order of complexity where we need to achieve
critical mass, both in our engineering skill set and the talent that we bring to
the game.
So I - you've heard me say a lot of things about that end of the service
business and you've also heard me say that I'm generally ginger about diving
into the federal-Civ IT marketplace. It's not that we don't bid there, but if
you notice, when we got together with a company, we got together with a company
that's really focused in our core markets, as you could see. They have some
fed-Civ work - Jerry, you want to add something here, or Joe, if I haven't
driven it home here?
JERRY DEMURO: To reinforce Nick's point with some empirical data, Joe alluded to
the success that they've had under the ANSWER contract and the long-term
customer loyalty. That speaks to the domain expertise that they specifically
have in the mission area of the customers and they can bring to bear on the
solutions that they are providing.
This is not just straight IT services. Yes, there's an element of that certainly
in what both companies currently provide to its customers. But it's that in
combination with the mission expertise and integration of the software and
systems that they need to complete the tasks.
So higher-end engineering talent is applied. It's, as I alluded to, 60-some
percent, roughly two-thirds systems integration, systems development work. So
that helps to define it. And I would point to this long-standing relationship
with a number of customers and repeat business that demonstrate that there is
real domain knowledge that's being applied as these customers continue to
iterate their mission and evolve over time, and look at open architecture and
information assurance, and how they can apply that better to the missions that
they have.
That is a particular skill set as well as the modeling and simulation that we
see is most attractive. And they are the people within Anteon that bring that.
We are buying people primarily here and not a franchise and a platform business
- - and it's that talent and domain expertise.
And I believe Anteon's track record is similar to General Dynamics in terms of
employee retention as well, so we would look to continue that. As you may have
noted from some of the charts we see companies with very similar cultures in
terms of employee appreciation of focus on their customers. So it will be
important to us and I think our track record over the last half dozen years in
integrating these companies is ensuring that
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people are excited about the work that they're doing. It's a number one issue
with these highly talented engineers and technical people.
Number two, we provide the right kind of an environment for them to succeed and
feel that they can be part of something very important and serving the
customers. So we're not at all concerned on that end.
Joe, I don't know if you have anything you want to add.
JOE KAMPF: I guess I would drive this home by saying that Anteon has also been
an acquirer, as many of you know. We've done nine acquisitions since 1996, and
we've done a very good job of integrating them. And we understand the
methodology behind retaining talent and we've done a good job of it. So we've
had no flight of people talent in our acquisitions and we don't expect that
we're going to see any here as we move into General Dynamics. They're very good
at it, we're very good at it; we're both integrators and together we're going to
create a lot of value.
We'll have some internal synergies but we'll have a lot of business synergy. And
that business synergy is going to create a lot of glue for our key people.
NICK CHABRAJA: Now I want to pick up on a point that Joe just made. You know
we've had an opportunity over my tour of duty to look at an awful lot of
companies. Many of them have grown markedly in this space we're talking about
today. They've done so through really outstanding organic growth, but also they
are companies that you sometimes refer to as rollups; that is they've made a
number of acquisitions.
As we looked at Anteon during the course of due diligence, you could not find
the seams of the prior acquisitions. That's a very unusual phenomena from my
perspective. This was seamless entity, fully integrated where there was no trace
of what had gone before that was visible to anyone examining the business.
So, remarkable job and kudos to Joe and his team on the system that they've put
in place to make acquisitions and fully and seamlessly integrate those
businesses. It made me very fond of what I was looking at.
Howard.
Howard is getting a microphone here so we'll have a second delay.
HOWARD RUBEL, JEFFERIES & COMPANY: Hi, it's Howard Rubel at Jefferies & Company.
Nick, you brought up the word accretion. And if we kind of do it on the back of
the envelope it looks like it could be on the order of a dime for '06. How does
that sort of square with your thinking?
NICK CHABRAJA: If we had a full year, which we won't. If you - if you wanted to
do it ...
HOWARD RUBEL: It's in that ballpark.
NICK CHABRAJA: Give or take.
HOWARD RUBEL: Yes, all right. And then actually on follow-up ...
NICK CHABRAJA: That's pre-synergy, Howard.
HOWARD RUBEL: Yes.
NICK CHABRAJA: I think you're a little bit high in the first year, but OK.
HOWARD RUBEL: And then just on the merger agreement, is there a break-up fee and
....
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NICK CHABRAJA: Yes, yes there is.
HOWARD RUBEL: And how much?
NICK CHABRAJA: Two percent of the purchase price.
HOWARD RUBEL: Thank you very much.
NICK CHABRAJA: George and then Doug.
George Shapiro and Doug Harned.
GEORGE SHAPIRO, CITIGROUP: George Shapiro, Citigroup. Nick, how much of a
premium do you expect from growth in this business to justify paying, you know,
13 times EBITDA when your own stock is selling something north of eight times
EBITDA?
NICK CHABRAJA: This business, George, has exhibited really stunning organic
growth. And their internal plans show a range of anticipated growth organically
between 12 and 15 percent. Our due diligence team believes that this is highly
achievable. For the purposes of our calculation we were obviously conservative
so it has some ability to outperform.
Doug.
DOUG HARNED, SANFORD BERNSTEIN: Doug Harned, Sanford Bernstein. Nick, I know
you've - I believe you've looked at Anteon and others in this area before. You
know why now? Why not - why didn't we see this a couple of years ago?
NICK CHABRAJA: Look at I think is a strong word because it implies that one has
done some diligence. I mean we have, from a strategic planning perspective
looked at most of the companies in this space. In fact, Joe and I are friends.
We've many times over the years had visits, broke bread together. And a couple
of years ago we began to have I'd say tentative discussion is the way I would
describe them, about the potential that existed between the two organizations
strategically.
I think from my perspective about that time we were deploying an awful lot of
capital. We would - had done GM Canada, GM defense business and Veridian right
at about that time and I think Joe was of the view that he - I should let him
speak for himself - but I had the sense from talking to him that he had in his
own mind some value creation opportunities in the near term that he wanted to
exploit before he went on to this discussion about the creation of a tier one
competitor. And we had some things to do.
So this was a natural for us to revisit as time went by. We had opportunities to
speak again and you have us standing before you today.
DOUG HARNED: And presumably one of the big opportunities here is a complimentary
customer base. Could you talk a little bit about what customers or even types of
customers you see providing leverage to some of your business AIS, Network
Systems?
NICK CHABRAJA: I'm going to let Jerry and Joe tackle that one from a
customer-base perspective.
But, go ahead, guys.
JERRY DEMURO: A primary example, Doug, would be the Alliant contract. Anteon
brings an incumbency, a long-standing incumbency as well as a portfolio out of
ANSWER, which we believe gives us the ability to step up and to become a first
tier prime on some of these government-wide contracts. There are similar
programs coming down.
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And as you look at the customer behavior on many of these contracts they're
looking for a solution, an offering that brings end-to-end from the front-end
business consulting and business process kind of look. I'll give you an example
of one that we're bidding today that if we had Anteon in the fold they could add
tremendous value. We are bidding the automation of some of the census collection
where we're crossing that entire gamut from revising their business practices to
bringing technology to help those collectors better locate the - and identify
those homes that they have to go to, the actual technology development in the
handheld all the way to the collection and the infrastructure system to manage
that volume of data in a secure fashion.
So it's those kinds of programs where customers are looking for us to bring
end-to-end solutions that we now have the ability in-house to bring more to bear
that breath.
Secondly, as Joe alluded to earlier, there is a blurring of the lines between
the front line war fighter, whether that's on the Intel side or the actual
individual in a Stryker or carrying a rifle. And getting that information out to
the edge and the systems that have to operate seamlessly and interface whether
that's Intel information or command and control information, as you look forward
to what the Army's trying to do in it's transformation and all ground forces in
truth, the Marines - this whole netcentricity when we talk about fast lanes and
transformation fast currents within the markets, it's that netcentricity, that
transformation, the global war on terror, pushing this information and
collecting the information from the edge will blur those lines and give us the
opportunity to better exploit that.
NICK CHABRAJA: Why don't we take a couple of questions from those on the
telephone? So if there's a question on the - on the phone?
OPERATOR: Callers, at this time I would like to remind you that if you do want
to ask a question please press star-one on your touch-tone phone. We'll pause
for just a moment to compile the Q&A roster.
Our first question comes from Pete Skibitski from CSFB.
Please pose your question.
PETE SKIBITSKI, CSFB: Hi, Nick, just wondering - just talking about our critical
mass and stuff like that, you know, Lockheed has the old IBM Federal, Northrop
has Logicon, and they've done - both have a lot of other acquisitions to gain
critical mass which you referred to earlier. Is this kind of the end for you
guys in the IT space? Do you really have the critical mass that you need or are
we going to see some more portfolio shaping from you guys to kind of build
yourself up the software expertise scale?
NICK CHABRAJA: Well, I think we are where we need to be. That doesn't preclude
us from making other acquisitions. You might have noticed that we picked one up
yesterday, about $150 million of revenue in a - in a place where we had a little
technology gap.
I think that both our Network Systems business and Anteon had active strategic
planning ongoing. They each had entities that they had looked at and liked,
pursued to some degree, you know, episodically and carefully. And I wouldn't be
surprised if that activity continued under the General Dynamics' banner with
additional resources to pursue it equally aggressively.
So I think we have achieved what all of us conclude is really splendid critical
mass. That doesn't mean we don't want to make it better as we go along.
The next question on the telephone.
OPERATOR: Our next question comes from Myles Walton from CIBC World Markets.
Please pose your question.
MYLES WALTON, CIBC WORLD MARKETS: Thanks.
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Nick, Anteon looks like it's going to add about 34 percent to your IS&T payroll
but only 22 percent additional sales. Is closing that productivity gap between
Anteon and GD IS&T really your biggest opportunity or is there something in the
nature of the work that Anteon is doing that's a little different than your core
IS&T business?
NICK CHABRAJA: Myles, don't come too quickly to that pencil. You're comparing
apples and oranges. If you would compare our service side of IS&T, you'd find
the productivity very equivalent to Anteon's. And I'm not even prepared to tell
you which is more productive but these are people businesses.
On the other side of our Information Systems and Technology business, we are
product companies in addition to being engineering companies. So the
productivity is very much different when you begin to manufacture product and
even outsource some of that work. You just get different metrics.
So, you know, I mean, Myles, this is not a ...
MYLES WALTON: So is it most comparable to your Network Systems business ...
NICK CHABRAJA: Oh, absolutely, absolutely.
MYLES WALTON: And there, though, you have 6,000 employees and $1.6 billion in
revenue which gets you to $270 (thousand) per employee compared to an Anteon
$180 (thousand).
NICK CHABRAJA: Yes, but we're in an infrastructure business there where we work
very extensively with subcontractors.
MYLES WALTON: OK.
NICK CHABRAJA: We manage subcontract relationships.
So it's why I tell you it's kind of, you know, it's a silly exercise when we
start getting into productivity when the businesses have significant differences
in the way they approach executing their charge.
MYLES WALTON: Fair enough, thank you.
NICK CHABRAJA: One more on the - on the telephone. They're giving me the high
sign that we're close to the - to the end of our time.
Go ahead.
OPERATOR: Our next question is coming from David Strauss from UBS.
DAVID STRAUSS, UBS: Good morning. Nick, could you compare and contrast the deal
a little bit with Veridian in terms of price and opportunity?
NICK CHABRAJA: Yes.
DAVID STRAUSS: It appears like you're paying a similar price today as you did
for Veridian. Obviously deal multiples in this space were much higher back a few
years ago.
NICK CHABRAJA: I think as I took a rough look at parametrics - which don't mean
as much to me as they do to you - but they are the tool that you have to look
at, right? I mean we're looking internally at discounted cash flow analyses and
other more fine measures. But from a parametric point of view, this transaction
bears a striking similarity to those that resulted from the Veridian
transaction.
And by the way, it looks very much like what L3 did in connection with the Titan
organization. The metrics are very similar and that shouldn't surprise anybody,
right?
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So I think, you know, the way I'd summarize this is it is a full and fair price
for the Anteon shareholders. Like every transaction I've ever been in, I wish I
got it a buck and a half cheaper but Joe wasn't letting me off the hook. And
here we have it. It's something we're very satisfied with from a General
Dynamics perspective.
DAVID STRAUSS: And could you maybe just touch on the opportunity that you see as
compared to Veridian and how Veridian has lived up to, you know, to the
expectations that you had when you bought it?
NICK CHABRAJA: You know Veridian was an entirely different transaction. We were
buying Veridian for our Advanced Information Systems business, almost
exclusively in the classified world. With respect to Veridian, we saw some
interesting opportunities on the cost side that were apparent and that we in
fact achieved.
This is a transaction where there are more modest cost synergy opportunities. On
the other hand, much more exciting market expansion and dynamic market expansion
opportunities for both Anteon and General Dynamics Network Systems.
And frankly, if you were listening to Jerry and Joe, there's an opportunity here
as we blur the line with what is resident in our C4 Systems business and for
that matter AIS. So this is a market expansion what some people call marketing
synergies play with less emphasis on cost synergies. There will be some. We'll
capture them together. But that's not the driving force here.
DAVID STRAUSS: Thank you.
NICK CHABRAJA: One more in the audience and then it's - then it's time for us to
all go back to work.
George, one last - George Shapiro.
Last question goes to the quickest hand.
GEORGE SHAPIRO: Just a follow-up on the question before, I mean Anteon last -
this year looks like it's growing maybe 16 percent, grew organically 14 before,
and you're saying they're projecting 12 to 15. Why wouldn't that slow in the
context of overall slowing budgets and, you know, kind of what do they look at
to sit there and be able to forecast similar growth rates in a slowing
environment?
NICK CHABRAJA: Yes, I think there's two things at work here, George. One is both
we and they - Anteon - believe that we have identified currents of growth that
are significantly faster than the overall budget.
The second thing is Anteon has as fine a business development organization and a
system for engineering internal growth as I have seen. We think that coupled
with some, you know, secret sauce, if you will, that we have ourselves is going
to be a splendid thing together.
So I think this is one of those transactions where it's my hearty belief that
one and one is three. I don't come to you very often saying that. You usually
hear me talk about we're going to take a little cost out here there and yawn,
and we'll be fine. Here's one where we're going to grow the business, grow it
together. It will be exciting.
Thanks for being with us. We appreciate your interest.
OPERATOR: Thank you. This does conclude today's teleconference. You may
disconnect your lines at this time and have a wonderful day.
END
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