VSE Reports Financial Results for Second Quarter 2012

Operating Income, Margin, Net Income and EPS Improves through Diversification Strategy

ALEXANDRIA, Va.-- VSE Corporation (Nasdaq: VSEC) reported the following unaudited consolidated financial results for its quarter ended June 30, 2012.

Financial Results (Unaudited)
(in thousands, except per-share data and percentages)
    Three Months Ended June 30   Six Months Ended June 30
    2012   2011   % Change   2012   2011   % Change
Revenues   $ 139,164     $ 158,546     (12.2 )%   $ 283,505     $ 309,790     (8.5 )%
Operating income   $ 12,032     $ 7,273     65.4 %   $ 24,375     $ 14,182     71.9 %
Operating margin     8.6 %     4.6 %   Up 400 bp     8.6 %     4.6 %   Up 400 bp
Net income   $ 6,295     $ 4,211     49.5 %   $ 12,963     $ 8,383     54.6 %
Basic EPS   $ 1.19     $ 0.80     48.8 %   $ 2.46     $ 1.60     53.8 %
Diluted EPS   $ 1.18     $ 0.80     47.5 %   $ 2.44     $ 1.60     52.5 %

“While it appears that market conditions will continue to be challenging through the balance of 2012, our diversification efforts have enhanced our prospects for future revenue and income,” said Maurice “Mo” Gauthier, VSE CEO. “The threat of sequestration has created uncertainty for our industry, but we are positioned to continue to provide quality services that will extend the life of aging fleets of military equipment. Also, our plan for diversification over the last several years has decreased our dependence on the Department of Defense market. The operating improvements directly result from our strong commitment to efficient program execution and sustained cost reduction throughout the Company.”

Mr. Gauthier added, “After successfully integrating our subsidiary Wheeler Bros., Inc. (“WBI”) over the past year, we are pursuing new markets for WBI’s exceptional supply chain management capabilities. We also continue to focus on our other key market areas, including legacy system sustainment, energy, IT and healthcare IT.”

Revenues were $139 million for the second quarter of 2012 compared to $159 million in the second quarter of 2011. For the first six months, revenues were $284 million in 2012 compared to $310 million in 2011.

Operating income was $12 million for the second quarter of 2012 compared to $7.3 million in the second quarter of 2011. For the first six months, operating income was $24.4 million in 2012 compared to $14.2 million in 2011.

Net income was $6.3 million for the second quarter of 2012, or $1.18 per diluted share, compared to $4.2 million, or $.80 per diluted share for the second quarter of 2011. Net income was $13 million for the first six months of 2012, or $2.44 per diluted share, compared to $8.4 million, or $1.60 per diluted share for the first six months of 2011.

Bookings were $273 million for the first six months of 2012 compared to $240 million for the first six months of 2011. Funded contract backlog at June 30, 2012 was $275 million, compared to $289 million at December 31, 2011.

Second Quarter Operational Highlights

  • VSE was awarded a prime contract by the National Institutes of Health (NIH), an agency of the Department of Health and Human Services (HHS). The Chief Information Officers-Solutions and Partners 3 (CIO-SP3) contract is a 10-year, multiple-award, indefinite-delivery/indefinite-quantity (IDIQ) government-wide acquisition contract (GWAC), and has a cumulative ceiling value of approximately $20 billion. VSE’s IT, Energy and Management Consulting Group is expected to perform our work under this contract.
  • Our subsidiary Akimeka, LLC was awarded a five-year prime multiple-award IDIQ contract supporting the Pacific Joint Information Technology Center (Pacific JITC) in Kihei, Maui, Hawaii, with a cumulative ceiling value of approximately $300 million.
  • International Group received several delivery orders totaling more than $19 million to continue work performed under its Foreign Military Sales Naval Ship Transfer and Repair (N*STAR) contract through the Naval Sea Systems Command (NAVSEA) International Fleet Support Program.
  • Our Federal Group was awarded a one-year $17.8 million firm-fixed price, level-of-effort task order under the Army’s Program Executive Office (PEO) for Combat Support and Combat Service Support (CS&CSS) Omnibus III contract to update technical manuals in accordance with the Army’s Two Level Maintenance (TLM) standards for the Army's Integrated Logistics Support Center (ILSC).
  • Our subsidiary Wheeler Bros., Inc. received a United States Postal Service Supplier Performance Award for 2011.
  • VSE moved to its new headquarters building in the Metro Park complex, located in the Franconia-Springfield area of Alexandria, VA.

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 regarding 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 (the “SEC”) 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 SEC, including VSE’s annual report on Form 10-K for the year ended December 31, 2011 and subsequent reports filed with the SEC.

VSE Corporation and Subsidiaries
Unaudited Condensed Consolidated Balance Sheet        
(in thousands except share and per share amounts)
June 30, December 31,



Current assets:
Cash and cash equivalents $442 $451
Receivables, principally U.S. Government, net 112,292 117,568
Inventories 43,119 41,990
Deferred tax assets 5 1,355
Other current assets 14,409 17,083
Total current assets 170,267 178,447
Property and equipment, net 64,302 57,113
Intangible assets, net 100,933 106,536
Goodwill 98,879 98,879
Deferred tax assets - 231
Other assets 14,999 13,306
Total assets $449,380 $454,512
Liabilities and Stockholders’ Equity
Current liabilities:
Current portion of long-term debt $20,149 $18,587
Accounts payable 38,044 50,353
Current portion of earn-out obligations 7,281 4,153
Accrued expenses and other current liabilities 29,987 33,864
Dividends payable 423 367
Total current liabilities 95,884 107,324
Long-term debt, less current portion 138,525 144,759
Deferred compensation 10,078 8,215
Long-term lease obligations, less current portion 34,238 33,938
Deferred income taxes 1,069 -
Earn-out obligations, less current portion 12,574 16,415
Other liabilities 490 261
Total liabilities 292,858 310,912
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 139,130 126,961
Accumulated other comprehensive loss -912 -692
Total stockholders’ equity 156,522 143,600
Total liabilities and stockholders’ equity $449,380 $454,512

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

Source: VSE Corporation