VSE Reports Financial Results for First Quarter 2010
Earnings per Share Increases 14% Year over Year
ALEXANDRIA, Va.-- VSE Corporation (Nasdaq: VSEC) reported the following consolidated financial results for its first quarter ended March 31, 2010.
Financial Results Quarter ended March 31, (in thousands, except per-share data and 2010 2009 % Change percentages) Revenues $228,176 $240,455 (5.1)% Operating income $8,651 $7,444 16.2% Operating margin 3.8% 3.1% 22.6% Net income $5,398 $4,640 16.3% Diluted EPS $1.04 $0.91 14.3%
For the first quarter of 2010, revenues were $228.2 million compared to $240.5 million in the first quarter of 2009. Operating income for the first quarter of 2010 was $8.7 million compared to $7.4 million in the first quarter of 2009.
The decrease in revenue for the first quarter of 2010 as compared to the first quarter of 2009 was primarily caused by the expiration of the Army Equipment Support Program under U.S. Army CECOM's Rapid Response contract and decreases in engineering and technical services provided to the U.S. Navy. This decline was partially offset by increased equipment repair and refurbishment services performed in Southwest Asia for the U.S. Army and increased ship repair and transfer services.
Operating income for the first quarter of 2010 was $8.7 million, an increase of 16.2% compared to $7.4 million in the first quarter of 2009. The year-over-year increases in operating income and operating margin were primarily due to an increase in equipment repair and refurbishment services performed in Southwest Asia for the U.S. Army, which is primarily our direct labor generated revenue; and to other direct labor revenue increases associated with our ship transfer services and work performed by our G&B Solutions and Energetics subsidiaries.
Net income for the first quarter of 2010 was $5.4 million, or $1.04 per diluted share, compared to $4.6 million, or $0.91 per diluted share in the first quarter of 2009.
Bookings were $210 million in the first quarter of 2010 compared to $232 million in the first quarter of 2009. Funded contract backlog at March 31, 2010 was $457 million, compared to $476 million at December 31, 2009.
Operational Highlights in First Quarter 2010
-- International Group's GLOBAL Division was awarded contracts with a combined value of $40 million to provide management, engineering, technical, training and logistics support for the Egyptian Navy and Taiwan Navy Foreign Military Sales programs. -- Additionally, GLOBAL Division completed the reactivation of ex-USNS Andrew J. Higgins (renamed Almirante Montt) for Chile. GLOBAL also received a firm fixed-price contract directly from the government of Chile to perform follow-on technical services on Almirante Montt. This contract is our GLOBAL Division's first direct commercial sale with a foreign customer. -- Federal Group received a $61 million task order ceiling award in February 2010 to continue depot maintenance support for the Army Reserve Legacy Systems. -- G&B Solutions achieved Capability Level 3 of the Software Engineering Institute's (SEI) Capability Maturity Model Integration (CMMI) (R) v1.2. The CMMI(R) rating is a prerequisite and an evaluation factor for the acquisition of many military and government programs with significant systems and software engineering content. -- Our subsidiary ICRC was awarded an indefinite delivery/indefinite quantity Professional Engineering Services contract by the GSA that has a five-year base period and 15 option years, rendering ICRC qualified to provide construction management services to the federal government as well as certain state and international assistance organizations.
Commenting on VSE's financial results for the first quarter of 2010, Maurice "Mo" Gauthier, VSE's CEO said, "Our markets have been impacted by pressure on federal discretionary spending. Our revenues in the first quarter declined as a result of reduced subcontract work. The increase in operating income and operating margin in the first quarter was driven by continued expansion of our direct labor workforce. We continue to pursue new business opportunities, independently as well as with our business partners, as we extend our capabilities and presence in the marketplace for professional services provided to the United States government, in both defense and civilian agencies."
"Our core areas of expertise - sustainment of legacy systems, operational support for the warfighter, engineering support for foreign military sales, IT services, construction management, and technical and management consulting for federal civilian agencies - remain well-aligned with national funding priorities. We are well positioned for the future, and expect to see continued bottom-line improvement in 2010."
VSE is a diversified Federal Services company of choice with over 50 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, 2009 and subsequent reports filed with the Securities and Exchange Commission.
VSE Corporation and Subsidiaries Unaudited Consolidated Financial Statements Consolidated Balance Sheets (Unaudited) (in thousands except share and per share amounts) March 31, December 31, 2010 2009 Assets Current assets: Cash and cash equivalents $ 2,188 $ 8,024 Receivables, principally U.S. Government, net 154,209 175,185 Deferred tax assets 1,586 2,036 Other current assets 8,113 7,979 Total current assets 166,096 193,224 Property and equipment, net 24,035 24,683 Intangible assets 8,877 9,336 Goodwill 20,930 19,530 Other assets 7,598 7,217 Total assets $ 227,536 $ 253,990 Liabilities and Stockholders' Equity Current liabilities: Accounts payable $ 86,877 $ 112,995 Accrued expenses 28,849 34,069 Dividends payable 260 258 Total current liabilities 115,986 147,322 Deferred compensation 4,011 3,934 Deferred income taxes 182 324 Other liabilities 1,106 1,100 Total liabilities 121,285 152,680 Commitments and contingencies Stockholders' equity: Common stock, par value $0.05 per share, authorized 15,000,000 shares; issued and outstanding 5,191,213 and 260 258 5,170,190, respectively Additional paid-in capital 15,521 15,720 Retained earnings 90,470 85,332 Total stockholders' equity 106,251 101,310 Total liabilities and stockholders' equity $ 227,536 $ 253,990
VSE Corporation and Subsidiaries Consolidated Financial Statements Consolidated Statements of Income (Unaudited) (in thousands except share and per share amounts) For the three months ended March 31, 2010 2009 Revenues $ 228,176 $ 240,455 Contract costs 219,227 232,809 Selling, general and 298 202 administrative expenses Operating income 8,651 7,444 Interest income, net 5 59 Income before income taxes 8,656 7,503 Provision for income taxes 3,258 2,863 Net income $ 5,398 $ 4,640 Basic earnings per share: $ 1.04 $ 0.91 Basic weighted average shares 5,180,410 5,112,356 outstanding Diluted earnings per share: $ 1.04 $ 0.91 Diluted weighted average shares 5,180,410 5,126,629 outstanding Dividends declared per share $ 0.050 $ 0.045
VSE Corporation and Subsidiaries Consolidated Financial Statements Consolidated Statements of Cash Flows (Unaudited) (in thousands) For the three months ended March 31, 2010 2009 Cash flows from operating activities: Net income $ 5,398 $ 4,640 Adjustments to reconcile net income to net cash used in operating activities: Depreciation and amortization 2,152 1,633 Loss (gain) on sale of property and equipment 3 (147 ) Deferred taxes 308 (156 ) Stock-based compensation 205 294 Changes in operating assets and liabilities: Receivables, net 20,976 (15,299 ) Other current assets and noncurrent assets (544 ) 1,028 Accounts payable and deferred compensation (26,041 ) 402 Accrued expenses (6,577 ) (3,818 ) Other liabilities 6 132 Net cash used in operating activities (4,114 ) (11,291 ) Cash flows from investing activities: Purchases of property and equipment (1,019 ) (2,484 ) Contingent consideration payments (445 ) (1,624 ) Net cash used in investing activities (1,464 ) (4,108 ) Cash flows from financing activities: Borrowings on loan arrangement 56,808 75,490 Repayments on loan arrangement (56,808 ) (60,342 ) Dividends paid (258 ) (229 ) Net cash (used in) provided by financing activities (258 ) 14,919 Net decrease in cash and cash equivalents (5,836 ) (480 ) Cash and cash equivalents at beginning of year 8,024 638 Cash and cash equivalents at end of year $ 2,188 $ 158
Source: VSE Corporation
Released April 29, 2010