VSE Reports Financial Results for First Quarter 2011
Revenues & Operating Income Decline; Operating Margin Improves
ALEXANDRIA, Va.-- VSE Corporation (Nasdaq: VSEC) reported the following unaudited consolidated financial results for its first quarter ended March 31, 2011.
Financial Results (Unaudited) Three Months Ended March 31 (in thousands, except per-share data 2011 2010 % Change and percentages) Revenues $ 151,244 $ 228,176 (33.7 )% Operating income $ 6,909 $ 8,651 (20.1 )% Operating margin 4.6 % 3.8 % Up 80 bp Net income $ 4,172 $ 5,398 (22.7 )% Diluted EPS $ 0.80 $ 1.04 (23.1 )%
"The federal government continues to experience funding delays and budget constraints, presenting certain challenges for firms operating in our industry," said Maurice "Mo" Gauthier, VSE CEO. "This challenging budget environment, along with emerging global insecurity, affirms our continuing strategy to focus on markets that are closely aligned with federal budget priorities. Our long term strategic diversification into selected federal markets and service offerings through acquisitions, combined with our planned efforts to grow organically in our sustainable markets, continues to show intended results. We remain committed to this strategy."
For the first quarter of 2011, revenues were $151.2 million compared to $228.2 million in the first quarter of 2010. Operating income for the first quarter of 2011 was $6.9 million compared to $8.7 million in the first quarter of 2010.
The decrease in revenue for the first quarter 2011 as compared to the first quarter 2010 was primarily due to the expiration of delivery orders on our U.S. Army CECOM Rapid Response "R2" contract in January 2011, including the delivery orders supporting our Assured Mobility Systems and Route Clearance Vehicle "RCV" Modernization Programs.
Operating margin for the first quarter of 2011 was 4.6%, an increase of 80 bp compared to 3.8% in the first quarter of 2010. The year-over-year increase in operating margin was primarily due to the inclusion of Akimeka, LLC, which we acquired in August 2010, improved profitability on services provided by our Systems Engineering Division, an increase in energy and management consulting work by our Energetics subsidiary, and a reduction in low margin revenue.
Net income for the first quarter of 2011 was $4.2 million, or $.80 per diluted share, compared to $5.4 million, or $1.04 per diluted share in the first quarter of 2010.
Bookings were $107 million in the first quarter of 2011 compared to $210 million in the first quarter of 2010. Funded contract backlog at March 31, 2011 was $357 million, compared to $407 million at December 31, 2010. Federal budget constraints have affected the timeliness of awards in our market and the decrease in government funding activity has impacted our bookings and funded backlog in the first quarter of 2011.
The Federal Group was awarded a $410M, 5-year LOGWORLD task order at the end of January 2011 to continue providing equipment engineering, maintenance, and logistics readiness support services to the U.S. Army Reserve Command (USARC) and the 63rd and 88th Regional Support Commands (RSC). The award represents a recompete of existing work for Federal Group's Engineering and Logistics Directorate supporting the U.S. Army Reserve.
VSE is a diversified federal services company of choice with over 52 years of experience in solving issues of global significance with integrity, agility, and value. VSE is dedicated to making our clients successful by delivering talented people and innovative solutions for logistics, engineering, IT services, construction management and consulting. For additional information on VSE services and products, please see the Company's web site at www.vsecorp.com or contact Randy Hollstein, VSE Corporate Vice President of Sales and Marketing, at (703) 329-3206.
VSE encourages investors and others to review the detailed reporting and disclosures contained in VSE's public filings with the U.S. Securities and Exchange Commission for further information and analysis of VSE's financial condition and results of operations. The public filings include additional discussion about the status of specific customer programs and contract awards, risks, revenue sources and funding, dependence on material customers, and management's discussion of short and long term business challenges and opportunities.
This news release contains statements that to the extent they are not recitations of historical fact, constitute "forward looking statements" under federal securities laws. All such statements are intended to be subject to the safe harbor protection provided by applicable securities laws. For discussions identifying some important factors that could cause actual VSE results to differ materially from those anticipated in the forward looking statements in this news release, see VSE's public filings with the Securities and Exchange Commission, including VSE's annual report on Form 10-K for the year ended December 31, 2010 and subsequent reports filed with the Securities and Exchange Commission.
VSE Corporation and Subsidiaries Unaudited Consolidated Financial Statements Unaudited Consolidated Balance Sheets (in thousands except share and per share amounts) March 31, December 31, 2011 2010 Assets Current assets: Cash and cash equivalents $ 2,303 $ 5,764 Receivables, principally U.S. Government, net 137,931 156,938 Deferred tax assets 403 1,602 Other current assets 9,894 9,552 Total current assets 150,531 173,856 Property and equipment, net 43,324 42,315 Intangible assets 24,140 25,003 Goodwill 37,396 36,282 Deferred tax assets 958 838 Other assets 14,217 10,132 Total assets $ 270,566 $ 288,426 Liabilities and Stockholders' Equity Current liabilities: Current portion of long-term debt $ 6,667 $ 6,667 Accounts payable 59,609 75,724 Accrued expenses 29,413 36,584 Dividends payable 314 312 Total current liabilities 96,003 119,287 Long-term debt 9,444 11,111 Deferred compensation 8,882 6,034 Long-term lease obligations 21,868 20,258 Other liabilities 5,528 7,960 Total liabilities 141,725 164,650 Commitments and contingencies Stockholders' equity: Common stock, par value $0.05 per share, authorized 15,000,000 shares; issued and outstanding 5,235,947 262 260 and 5,193,891, respectively Additional paid-in capital 16,898 15,692 Retained earnings 111,681 107,824 Total stockholders' equity 128,841 123,776 Total liabilities and stockholders' equity $ 270,566 $ 288,426 VSE Corporation and Subsidiaries Unaudited Consolidated Financial Statements Unaudited Consolidated Statements of Income (in thousands except share and per share amounts) For the three months ended March 31, 2011 2010 Revenues $ 151,244 $ 228,176 Contract costs 143,514 219,227 Selling, general and administrative expenses 821 298 Operating income 6,909 8,651 Interest expense (income), net 144 (5) Income before income taxes 6,765 8,656 Provision for income taxes 2,593 3,258 Net income $ 4,172 $ 5,398 Basic earnings per share: $ 0.80 $ 1.04 Basic weighted average shares outstanding 5,214,334 5,180,410 Diluted earnings per share: $ 0.80 $ 1.04 Diluted weighted average shares outstanding 5,214,334 5,180,410 Dividends declared per share $ 0.06 $ 0.05 VSE Corporation and Subsidiaries Unaudited Consolidated Financial Statements Unaudited Consolidated Statements of Cash Flows (in thousands) For the three months ended March 31, 2011 2010 Cash flows from operating activities: Net income $ 4,172 $ 5,398 Adjustments to reconcile net income to net cash used in operating activities: Depreciation and amortization 2,382 2,152 Loss on sale of property and equipment 3 3 Deferred taxes 1,079 308 Stock-based compensation 164 205 Changes in operating assets and liabilities: Receivables, net 19,007 20,976 Other current assets and noncurrent assets (4,456) (544) Accounts payable and deferred compensation (13,267) (26,041) Accrued expenses (6,971) (6,577) Long-term lease obligations 10 6 Other liabilities (2,432) - Net cash used in operating activities (309) (4,114) Cash flows from investing activities: Purchases of property and equipment (904) (1,019) Proceeds from the sale of property and equipment 2 - Contingent consideration payments (270) (445) Net cash used in investing activities (1,172) (1,464) Cash flows from financing activities: Borrowings on loan arrangement 78,661 56,808 Repayments on loan arrangement (80,328) (56,808) Dividends paid (313) (258) Net cash used in financing activities (1,980) (258) Net decrease in cash and cash equivalents (3,461) (5,836) Cash and cash equivalents at beginning of period 5,764 8,024 Cash and cash equivalents at end of period $ 2,303 $ 2,188
Source: VSE Corporation