VSE Reports Financial Results for First Quarter 2019

VSE Welcomes New CEO

ALEXANDRIA, Va.--(BUSINESS WIRE)-- VSE Corporation (Nasdaq: VSEC) reported the following unaudited consolidated financial results for the first quarter of 2019.

CEO Commentary

“As VSE’s newly appointed CEO, I look forward to building and executing on a plan of revenue and profit growth for our three operating groups, expanding our current customer, product, and service initiatives, and pursuing new strategic opportunities,” said John Cuomo, VSE’s CEO and President. “We remain focused on operational excellence and returning value to our stockholders.”

Mr. Cuomo continued, “While revenues declined compared to the first quarter of 2018, our operating income slightly improved. We are pleased with the contributions of our 1st Choice Aerospace acquisition, which is meeting expectations. Our international programs are growing, thus providing further uplift to our Aviation Group revenues in the first quarter. Our Supply Chain Management Group revenue decreases were partially offset by continuing increases in parts sales and distribution to new commercial customers. Despite revenue challenges in our Federal Services Group, we have increased this group’s operating income through margin and performance improvement.”

First Quarter Results (unaudited)

(in thousands, except per share data)
    Three months ended March 31,
2019     2018     % Change
Revenues $ 169,919     $ 176,897     (3.9 )%
Operating income $ 11,813     $ 11,593     1.9 %
Net income $ 6,603     $ 7,052     (6.4 )%
EPS (Diluted) $ 0.60     $ 0.65     (7.7 )%

Financial Information

Revenues were $169.9 million in the first quarter of 2019 compared to $176.9 million in the first quarter of 2018. The decrease in revenues is primarily attributable to our Federal Services and Supply Chain Management groups. The decrease was partially offset by an increase in revenue from our Aviation Group, which was primarily attributable to revenues from our 1st Choice Aerospace acquisition and increased parts distribution sales in our international markets.

Operating income was $11.8 million for the first quarter of 2019 compared to $11.6 million in the first quarter of 2018. The operating income increase was primarily attributable to our Aviation Group, and margin improvements in our Federal Services Group. Operating income for the first quarter of 2019 was reduced by non-recurring costs associated with our CEO transition and the acquisition of 1st Choice Aerospace.

Net income was $6.6 million for the first quarter of 2019, or $0.60 per diluted share, compared to $7.1 million, or $0.65 per diluted share for the first quarter of 2018. The decrease in net income is primarily attributable to increased interest expense.

Bookings in our Federal Services Group were $51 million for the first three months of 2019 compared to revenue for this group of $69 million. Funded contract backlog at March 31, 2019 was $278 million, compared to $290 million at December 31, 2018 and $261 million at March 31, 2018.

Non-GAAP Financial Information

The non-GAAP Financial Information (unaudited) listed below is not calculated in accordance with U.S. generally accepted accounting principles ("GAAP") under SEC Regulation G. We consider EBITDA a non-GAAP financial measure and an important indicator of performance and useful metric for management and investors to evaluate our business' ongoing operating performance on a consistent basis across reporting periods. EBITDA should not be considered in isolation or as a substitute for performance measures prepared in accordance with GAAP.

EBITDA represents net income before interest expense, income taxes, amortization of intangible assets and depreciation and other amortization. Adjusted EBITDA represents EBITDA (as defined above) adjusted for 1st Choice Aerospace acquisition related and CEO transition costs.

Non-GAAP Financial Information (unaudited)

(in thousands) Three Month Results ended March 31,
2019     2018     % Change
Net Income $ 6,603 $ 7,052 (6 )%
Interest Expense 3,158 2,175 45 %
Income Taxes 2,052 2,366 (13 )%
Amortization of Intangible Assets 4,991 4,004 25 %
Depreciation and Other Amortization   2,439       2,480     (2 )%
EBITDA $ 19,243 $ 18,077 6 %
Acquisition Related and CEO Transition Costs   1,121            
Adjusted EBITDA $ 20,364     $ 18,077     13 %

Capital Expenditures

Purchases of property and equipment were $601 thousand for the first quarter of 2019 compared to $1.1 million for the first quarter of 2018.

About VSE

Established in 1959, VSE is a diversified products and services company providing logistics solutions with integrity, agility, and value. VSE is dedicated to making our federal and commercial clients successful by delivering innovative solutions for vehicle, ship, and aircraft sustainment, supply chain management, platform modernization, mission enhancement, and program management, and providing energy, IT, and consulting services. For additional information regarding VSE services and products, please see the Company's web site at www.vsecorp.com or contact Christine Kaineg, VSE Investor Relations, at (703) 329-3263.

Please refer to the Form 10-Q that will be filed with the Securities and Exchange Commission (SEC) on or about May 3, 2019 for more details on our 2019 first quarter results. Also, refer to VSE’s Annual Report on Form 10-K for the year ended December 31, 2018 for further information and analysis of VSE’s financial condition and results of operations. VSE encourages investors and others to review the detailed reporting and disclosures contained in VSE’s public filings for additional discussion about the status of 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 SEC.

VSE Corporation and Subsidiaries
Unaudited Consolidated Balance Sheets

(in thousands except share and per share amounts)


March 31,


December 31,

Current assets:
Cash and cash equivalents $ 829 $ 162
Receivables, net 64,746 60,004
Unbilled receivables, net 44,450 41,255
Inventories, net 181,069 166,392
Other current assets   18,456     13,407
Total current assets 309,550 281,220
Property and equipment, net 40,167 49,606
Intangible assets, net 152,901 94,892
Goodwill 259,212 198,622
Operating lease right-of-use assets 26,371
Other assets   15,844     14,488
Total assets $ 804,045   $ 638,828
Liabilities and Stockholders' equity
Current liabilities:
Current portion of long-term debt $ 9,466 $ 9,466
Accounts payable 59,106 57,408
Current portion of earn-out obligation 10,700
Accrued expenses and other current liabilities 39,919 37,133
Dividends payable   876     871
Total current liabilities 120,067 104,878
Long-term debt, less current portion 265,681 151,133
Deferred compensation 20,909 17,027
Long-term lease obligations, less current portion 18,913
Long-term operating lease liabilities 26,845
Earn-out obligation 14,300
Deferred tax liabilities   18,712     18,482
Total liabilities   466,514     310,433
Commitments and contingencies
Stockholders' equity:
Common stock, par value $0.05 per share, authorized 15,000,000 shares; issued and outstanding 10,949,775 and 10,881,106, respectively 547 544
Additional paid-in capital 28,788 26,632
Retained earnings 308,742 301,073
Accumulated other comprehensive (loss) income   (546 )   146
Total stockholders' equity   337,531     328,395
Total liabilities and stockholders' equity $ 804,045   $ 638,828
VSE Corporation and Subsidiaries
Unaudited Consolidated Statements of Income

(in thousands except share and per share amounts)


For the three months ended
March 31,

2019     2018
Products $ 88,901 $ 88,673
Services   81,018   88,224
Total revenues 169,919 176,897
Costs and operating expenses:
Products 76,293 74,726
Services 75,440 85,755
Selling, general and administrative expenses 1,382 819
Amortization of intangible assets   4,991   4,004
Total costs and operating expenses   158,106   165,304
Operating income 11,813 11,593
Interest expense, net   3,158   2,175
Income before income taxes 8,655 9,418
Provision for income taxes   2,052   2,366
Net income $ 6,603 $ 7,052
Basic earnings per share $ 0.60 $ 0.65
Basic weighted average shares outstanding   10,920,171   10,860,555
Diluted earnings per share $ 0.60 $ 0.65
Diluted weighted average shares outstanding   10,974,081   10,896,504
Dividends declared per share $ 0.08 $ 0.07
VSE Corporation and Subsidiaries
Unaudited Consolidated Statements of Cash Flows

(in thousands)


For the three months ended
March 31,

2019     2018
Cash flows from operating activities:
Net income $ 6,603 $ 7,052
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 7,430 6,484
Deferred taxes (564 ) 283
Stock-based compensation 1,640 1,263
Changes in operating assets and liabilities, net of impact of acquisitions:
Receivables, net 2,667 (978 )
Unbilled receivables, net (3,195 ) 13,589
Inventories, net (7,798 ) (18,895 )
Other current assets and noncurrent assets (4,990 ) 3,169
Accounts payable and deferred compensation 2,653 11,681
Accrued expenses and other current and noncurrent liabilities (1,675 ) (9,949 )
Long-term lease obligations       (406 )
Net cash provided by operating activities   2,771     13,293  
Cash flows from investing activities:
Purchases of property and equipment (601 ) (1,053 )
Proceeds from the sale of property and equipment 3
Cash paid for acquisitions, net of cash acquired   (112,660 )    
Net cash used in investing activities   (113,258 )   (1,053 )
Cash flows from financing activities:
Borrowings on loan agreement 194,598 247,669
Repayments on loan agreement (80,183 ) (256,368 )
Payment of debt financing costs (1,702 ) (1,798 )
Payments on capital lease obligations (346 )
Payments of taxes for equity transactions (687 ) (641 )
Dividends paid   (872 )   (759 )
Net cash provided by (used in) financing activities   111,154     (12,243 )
Net increase (decrease) in cash and cash equivalents 667 (3 )
Cash and cash equivalents at beginning of period   162     624  
Cash and cash equivalents at end of period $ 829   $ 621  

VSE Financial News Contact:
Christine Kaineg -- (703) 329-3263

Source: VSE Corporation