Operating Income Increases in Third Quarter
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 Corporation and Subsidiaries
Unaudited Consolidated Balance Sheets
(in thousands except share and per share
amounts)
September 30, December 31, 2018 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 endedSeptember
30,
For the nine months endedSeptember 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 endedSeptember 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 248
16,154 Unbilled receivables, net 11,788 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
View source
version on businesswire.com: https://www.businesswire.com/news/home/20181030006134/en/
VSE Financial News Contact:Christine Kaineg, 703-329-3263
VSE (NASDAQ:VSEC)
Historical Stock Chart
From Mar 2024 to Apr 2024
VSE (NASDAQ:VSEC)
Historical Stock Chart
From Apr 2023 to Apr 2024