Exhibit 99.1
vselogoa08.jpg
VSE Reports Financial Results for Third Quarter 2018
Operating Income Increases in Third Quarter

Alexandria, Virginia, October 30, 2018 - VSE Corporation (Nasdaq: VSEC) reported the following unaudited consolidated financial results for the third quarter of 2018.

CEO Commentary
"Our operating income increase for the third quarter of 2018, as compared to 2017, was driven primarily by our Federal Services Group,” said Maurice “Mo” Gauthier, VSE President and CEO. “We improved our margins on some Federal programs, reduced costs, and sold an IT services prime contract, which we continue to perform as a subcontractor.”

Mr. Gauthier continued, “Our Aviation Group, which has shown growth on both new and existing lines of business, also contributed to our higher operating income. Our Singapore operation, which began in the second quarter, continues to build on early positive results. Despite an increase in inventory due to new commercial initiatives, we have experienced an increase in free cash flow this quarter. We continue to keep our total debt at reasonable levels and remain well positioned to pursue further strategic initiatives.”
 
Third Quarter Results (unaudited)
(in thousands, except per share data)
 
Three months ended September 30,
 
Nine months ended September 30,
 
 
2018
 
2017
 
% Change
 
2018
 
2017
 
% Change
 
Revenues
$
168,931

 
$
174,164

 
(3.0
)%
 
$
516,222

 
$
565,318

 
(8.7
)%
 
Operating income
$
15,697

 
$
12,237

 
28.3
 %
 
$
41,145

 
$
41,438

 
(0.7
)%
 
Net income
$
10,034

 
$
6,639

 
51.1
 %
 
$
25,837

 
$
21,739

 
18.9
 %
 
EPS (Diluted)
$
0.92

 
$
0.61

 
50.8
 %
 
$
2.37

 
$
2.00

 
18.5
 %
 

Financial Information
Revenues were $168.9 million in the third quarter of 2018 compared to $174.2 million in the third quarter of 2017. For the first nine months, revenues were $516.2 million in 2018 compared to $565.3 million in 2017. These decreases were primarily attributable to a reduction in work in our Federal Services Group.

Operating income was $15.7 million for the third quarter of 2018 compared to $12.2 million in the third quarter of 2017. For the first nine months, operating income was $41.1 million in 2018 and $41.4 million in 2017. The operating income increase for the quarter was primarily attributable to a sale of an IT services contract, a loss recorded in 2017 attributable to a completed contract and other increases from our Federal Services and Aviation groups.





Net income was $10.0 million for the third quarter of 2018, or $0.92 per diluted share, compared to $6.6 million, or $0.61 per diluted share for the third quarter of 2017. Net income was $25.8 million for the first nine months of 2018, or $2.37 per diluted share, compared to $21.7 million, or $2.00 per diluted share for the first nine months of 2017. The increase in net income for the quarter was due to an increase in our overall operating income and a reduction to the Federal Income Tax rate due to the enactment of the Tax Cuts and Jobs Act in December 2017.

Bookings in our Federal Services Group were $284 million for the first nine months of 2018 compared to revenue for this group of $252 million. Funded contract backlog at September 30, 2018 was $345 million, compared to $338 million at June 30, 2018 and $403 million at September 30, 2017.

Operational Highlights
•
Our Federal Services Group received several delivery orders to provide services under its Foreign Military Sales (FMS) support contract by the Naval Sea Systems Command (NAVSEA) International Fleet Support Program Office. We will provide maritime program support including logistics, planning, repair and maintenance management, supply support, technical assistance, training and engineering support to four of our allied countries. The combined funded value for all delivery orders is approximately $40.8 million.
•
Our Federal Services Group received task order awards to provide the U.S. Department of Justice (DOJ) with various maritime logistics support services, including operations management of the vessels and their crew, upkeep of maintenance requirements, ship relocations and marketing efforts. The combined funded value for the DOJ International Asset Recovery Support Services (IARSS) Time & Materials (T&M) task orders is approximately $4.3 million for the third quarter and $9.2 million year to date.
•
Our Federal Services Group was selected as a prime contractor for the Department of Army’s Responsive Strategic Sourcing for Services (RS3) multiple award Indefinite Delivery/Indefinite Quantity (IDIQ) contract by the Army Contracting Command, Aberdeen Proving Ground. This contract has a 10-year base ordering period and one five-year optional ordering period and a total combined ceiling for all awardees over 15 years of $37.4 billion.
•
We completed the sale of an IT services contract we had been awarded by the National Institutes of Health (NIH) for $1.7 million to a company with more extensive IT client relationships. We were able to retain the work we are currently performing as a subcontractor and will have access to the contract for future potential work.
•
VSE Aviation was awarded seven Honeywell T53 helicopter engine conversions under our State Department contract with an estimated value of approximately $4.2 million.

Non-GAAP Financial Disclosure
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.  These non-GAAP financial measures consist of EBITDA and Adjusted EBITDA. We consider these non-GAAP financial measures an important indicator of performance and useful metrics for management and investors to evaluate our business' ongoing operating performance on a consistent basis across reporting periods. These adjusted financial measures are intended to highlight non-operational, unusual or non-recurring items. They should not, however, 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 the gain on sale of the IT services contract.








Non-GAAP Financial Information (unaudited)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(in thousands)
 
Three Month Results
 
Nine Month Results
 
 
 
2018
 
2017
 
% Change
 
2018
 
2017
 
% Change
Net Income
 
$
10,034

 
$
6,639

 
51
 %
 
$
25,837

 
$
21,739

 
19
 %
 
Interest Expense
 
2,340

 
2,347

 
—
 %
 
6,697

 
7,158

 
(6
)%
 
Income Taxes
 
3,323

 
3,251

 
2
 %
 
8,611

 
12,541

 
(31
)%
 
Amortization of Intangible Assets
 
4,005

 
4,005

 
—
 %
 
12,013

 
12,013

 
—
 %
 
Depreciation and Other Amortization
 
2,256

 
2,375

 
(5
)%
 
6,971

 
7,571

 
(8
)%
EBITDA
 
$
21,958

 
$
18,617

 
18
 %
 
$
60,129

 
$
61,022

 
(1
)%
 
Gain on Sale of IT Contract
 
(1,700
)
 
—

 


 
(1,700
)
 
—

 
 
Adjusted EBITDA
 
$
20,258

 
$
18,617

 
9
 %
 
$
58,429

 
$
61,022

 
(4
)%
 
 
 
 
 
 
 
 
 
 
 
 
 
 

Capital Expenditures
Purchases of property and equipment were $2.5 million for the first nine months of 2018 compared to $2.4 million for the first nine months of 2017.

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 October 31, 2018 for more details on our 2018 third quarter results. Also, refer to VSE’s Annual Report on Form 10-K for the year ended December 31, 2017 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 Financial News Contact: Christine Kaineg -- (703) 329-3263.












VSE Corporation and Subsidiaries

Unaudited Consolidated Balance Sheets
(in thousands except share and per share amounts)
 
September 30, 2018

December 31, 2017
Assets
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
889

 
$
624

Receivables, net
55,512

 
55,760

Unbilled receivables, net
35,771

 
42,577

Inventories, net
166,486

 
132,591

Other current assets
13,933

 
16,988

Total current assets
272,591

 
248,540

 
 
 
 
Property and equipment, net
51,192

 
55,146

Intangible assets, net
98,896

 
110,909

Goodwill
198,622

 
198,622

Other assets
15,766

 
15,796

Total assets
$
637,067

 
$
629,013

 
 
 
 
Liabilities and Stockholders' equity
 

 
 

Current liabilities:
 

 
 

Current portion of long-term debt
$
9,466

 
$
6,960

Accounts payable
48,219

 
66,015

Accrued expenses and other current liabilities
36,282

 
40,243

Dividends payable
870

 
759

Total current liabilities
94,837

 
113,977

 
 
 
 
Long-term debt, less current portion
165,393

 
165,614

Deferred compensation
18,649

 
16,323

Long-term lease obligations, less current portion
19,344

 
20,581

Deferred tax liabilities
18,337

 
19,423

Total liabilities
316,560

 
335,918

 
 
 
 
Commitments and contingencies
 
 
 
 
 
 
 
Stockholders' equity:
 

 
 

Common stock, par value $0.05 per share, authorized 15,000,000 shares; issued and outstanding 10,881,106 and 10,838,747, respectively
544

 
542

Additional paid-in capital
26,490

 
24,470

Retained earnings
292,930

 
267,902

Accumulated other comprehensive income
543

 
181

Total stockholders' equity
320,507

 
293,095

Total liabilities and stockholders' equity
$
637,067

 
$
629,013







VSE Corporation and Subsidiaries

Unaudited Consolidated Statements of Income
(in thousands except share and per share amounts)

 
 
For the three months ended September 30,
 
For the nine months ended September 30,
 
 
2018
 
2017
 
2018
 
2017
Revenues:
 
 
 
 
 
 
 
 
Products
 
$
85,886

 
$
82,314

 
$
264,678

 
$
260,585

Services
 
83,045

 
91,850

 
251,544

 
304,733

Total revenues
 
168,931

 
174,164

 
516,222

 
565,318

 
 
 
 
 
 
 
 
 
Costs and operating expenses:
 
 

 
 

 
 

 
 

Products
 
72,256

 
68,678

 
222,816

 
217,606

Services
 
77,810

 
88,989

 
239,536

 
293,083

Selling, general and administrative expenses
 
863

 
255

 
2,412

 
1,178

Amortization of intangible assets
 
4,005

 
4,005

 
12,013

 
12,013

Total costs and operating expenses
 
154,934

 
161,927

 
476,777

 
523,880

 
 
 
 
 
 
 
 
 
Gain on sale of contract
 
1,700

 
—

 
1,700

 
—

 
 
 
 
 
 
 
 
 
Operating income
 
15,697

 
12,237

 
41,145

 
41,438

 
 
 
 
 
 
 
 
 
Interest expense, net
 
2,340

 
2,347

 
6,697

 
7,158

 
 
 
 
 
 
 
 
 
Income before income taxes
 
13,357

 
9,890

 
34,448

 
34,280

 
 
 
 
 
 
 
 
 
Provision for income taxes
 
3,323

 
3,251

 
8,611

 
12,541

 
 
 
 
 
 
 
 
 
Net income
 
$
10,034

 
$
6,639

 
$
25,837

 
$
21,739

 
 
 
 
 
 
 
 
 
Basic earnings per share
 
$
0.92

 
$
0.61

 
$
2.38

 
$
2.01

 
 
 
 
 
 
 
 
 
Basic weighted average shares outstanding
 
10,881,106

 
10,838,435

 
10,874,331

 
10,833,237

 
 
 
 
 
 
 
 
 
Diluted earnings per share
 
$
0.92

 
$
0.61

 
$
2.37

 
$
2.00

 
 
 
 
 
 
 
 
 
Diluted weighted average shares outstanding
 
10,935,112

 
10,856,675

 
10,916,989

 
10,855,983

 
 
 
 
 
 
 
 
 
Dividends declared per share
 
$
0.08

 
$
—

 
$
0.23

 
$
0.13







VSE Corporation and Subsidiaries

Unaudited Consolidated Statements of Cash Flows
(in thousands)

 
 
For the nine months ended September 30,
 
 
2018
 
2017
Cash flows from operating activities:
 
 
 
 
Net income
 
$
25,837

 
$
21,739

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
 
Depreciation and amortization
 
18,984

 
19,584

Deferred taxes
 
(1,733
)
 
(1,947
)
Stock-based compensation
 
2,146

 
1,935

Gain on sale of contract
 
(1,700
)
 
—

  Changes in operating assets and liabilities:
 
 
 
 
Receivables, net
 
738

 
16,154

Unbilled receivables, net
 
11,298

 
12,190

Inventories, net
 
(36,448
)
 
815

Other current assets and noncurrent assets
 
3,518

 
(3,392
)
Accounts payable and deferred compensation
 
(14,972
)
 
(42,441
)
Accrued expenses and other current liabilities
 
(3,010
)
 
15,916

Long-term lease obligations
 
(1,237
)
 
(1,042
)
 
 
 
 
 
Net cash (used in) provided by operating activities
 
3,421

 
39,511

 
 
 
 
 
Cash flows from investing activities:
 
 
 
 
Purchases of property and equipment
 
(2,522
)
 
(2,387
)
Proceeds from the sale of property and equipment
 
51

 
689

Proceeds from the sale of contract
 
1,700

 
—

 
 
 
 
 
Net cash used in investing activities
 
(771
)
 
(1,698
)
 
 
 
 
 
Cash flows from financing activities:
 
 
 
 
Borrowings on loan agreement
 
468,949

 
258,657

Repayments on loan agreement
 
(465,521
)
 
(292,913
)
Payment of debt financing costs
 
(1,702
)
 
—

Payments on capital lease obligations
 
(1,077
)
 
(954
)
Payments of taxes for equity transactions
 
(641
)
 
(500
)
Dividends paid
 
(2,393
)
 
(2,059
)
 
 
 
 
 
Net cash provided by (used in) financing activities
 
(2,385
)
 
(37,769
)
 
 
 
 
 
Net (decrease) increase in cash and cash equivalents
 
265

 
44

Cash and cash equivalents at beginning of period
 
624

 
428

Cash and cash equivalents at end of period
 
$
889

 
$
472