VSE Reports Financial Results for First Quarter 2012

Operating income, margin, EPS and bookings improve

ALEXANDRIA, Va.-- VSE Corporation (Nasdaq: VSEC) reported the following unaudited consolidated financial results for the three month period ended March 31, 2012.

Financial Results (Unaudited)
(in thousands, except per-share data and percentages)
      Three Months Ended March 31
      2012     2011     % Change
Revenues     $ 144,341     $ 151,244     (5)%
Operating income     $ 12,343     $ 6,909     79.0%
Operating margin       8.6%       4.6%     Up 400 bp
Net income     $ 6,668     $ 4,172     60.0%
Basic EPS     $ 1.27     $ 0.80     59.0%
Diluted EPS     $ 1.26     $ 0.80     57.5%

“Though we believe we are positioned to withstand market challenges in the long term, our company and our industry continue to face an operating environment that is constraining revenue levels,” said Maurice “Mo” Gauthier, VSE CEO. “We are pleased that our recent acquisitions, particularly Wheeler Brothers, Inc. (WBI) last June, resulted in strong earnings per share (EPS) growth, improved profit margins, and more diversification between DoD and Federal civilian agencies, including the United States Postal Service (USPS). Performance in these areas is meeting our expectations, and we are aggressively cross-selling traditional VSE services into new markets. Despite budget constraints, work through our U.S. Army Reserve and Navy Foreign Military Sales (FMS) programs is enabling us to continue our role as a key provider of legacy systems sustainment and equipment refurbishment services for DoD.”

For the first quarter of 2012, revenues were $144.3 million compared to $151.2 million in the first quarter of 2011. Operating income for the first quarter of 2012 was $12.3 million compared to $6.9 million in the first quarter of 2011.

The decrease in first quarter 2012 revenues was primarily due to an approximate $33 million revenue decrease resulting from the expiration of delivery orders on our U.S. Army CECOM Rapid Response "R2" contract in early 2011. The revenue decline was largely offset by the inclusion of revenues from WBI, which is included in our Supply Chain Management Group.

Operating margin for the first quarter of 2012 was 8.6%, an increase of 400 bp, compared to 4.6% in the first quarter of 2011. The year-over-year increase in operating margin was primarily due to the inclusion of WBI.

Net income for the first quarter of 2012 was $6.7 million, or $1.26 per diluted share, compared to $4.2 million, or $.80 per diluted share in the first quarter of 2011.

Bookings were $168 million in the first quarter of 2012 compared to $107 million in the first quarter of 2011. Funded contract backlog at March 31, 2012 was $307 million, compared to $289 million at December 31, 2011.

Q1 Operational Highlights

  • Our International Group retained our Navy FMS contract after an unsuccessful protest by a competitor. The FMS contract has an initial term of one year for $277 million with a potential of up to $1.5 billion over five years if all options are exercised.
  • International Group also received a letter contract valued at $9.5 million for continued support of the Treasury Executive Office of Asset Forfeiture program. The letter contract has a three-month base and two one-month options.
  • International Group also was awarded a USAF Design and Engineering Support Program (DESP III) contract as a prime and as a team member of a small business prime. This five-year ID/IQ contract has a potential cumulative value of $1.9 billion.
  • We delivered a prototype, fuel efficient, repowered gasoline Long Life Vehicle (LLV) testing by the USPS. The vehicle was delivered with a prototype RFD6 Re-Power Kit, developed by our Federal Group and WBI subsidiary, which may increase the current vehicle’s fuel efficiency by as much as 75% with a proportionate reduction in the vehicle’s carbon footprint.
  • Our Akimeka subsidiary has been awarded a 10-year US Air Force Services Agency (AFSVA) contract valued at approximately $10 million to implement and support an enterprise Point-of-Sale Golf Management Solution for 70 golf courses located world-wide.
  • Akimeka also was awarded a five-year U.S. Army Medical Materiel Agency (USAMMA) contract valued at $4.2 million to develop and deploy web-based medical equipment training for soldiers in the operational theater.

About VSE

Established in 1959, VSE is a diversified federal services company with 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, consulting and supply chain management. 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.

Safe Harbor

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, 2011 and subsequent reports filed with the Securities and Exchange Commission.

VSE Corporation and Subsidiaries
Unaudited Condensed Consolidated Financial Statements
Unaudited Condensed Consolidated Balance Sheets
(in thousands except share and per share amounts)      
March 31, December 31,



Current assets:
Cash and cash equivalents $ 368 $ 451
Receivables, principally U.S. Government, net 112,850 117,568
Inventories 42,454 41,990
Deferred tax assets 385 1,355
Other current assets   17,233   17,083
Total current assets 173,290 178,447
Property and equipment, net 64,107 57,113
Intangible assets, net 103,734 106,536
Goodwill 98,879 98,879
Deferred tax assets - 231
Other assets   15,776   13,306
Total assets $ 455,786 $ 454,512
Liabilities and Stockholders’ Equity
Current liabilities:
Current portion of long-term debt $ 18,587 $ 18,587
Accounts payable 38,729 50,353
Accrued expenses and other current liabilities 38,062 38,017
Dividends payable   370   367
Total current liabilities 95,748 107,324
Long-term debt, less current portion 151,970 144,759
Deferred compensation 10,515 8,215
Long-term lease obligations, less current portion 34,136 33,938
Deferred income taxes 1,010 -
Earn-out obligations, less current portion 11,356 16,415
Other liabilities   376   261
Total liabilities   305,111   310,912
Commitments and contingencies
Stockholders’ equity:

Common stock, par value $0.05 per share, authorized 15,000,000 shares; issued and outstanding 5,286,706 and 5,246,527, respectively

264 262
Additional paid-in capital 18,040 17,069
Retained earnings 133,258 126,961
Accumulated other comprehensive loss   (887)   (692)
Total stockholders’ equity   150,675   143,600
Total liabilities and stockholders’ equity $ 455,786 $ 454,512

VSE Financial News Contact:
Christine Kaineg, 703-329-3263

Source: VSE Corporation