VSE Delivers 17.4% Revenue and 9.7% Operating
Income Growth
VSE Corporation (Nasdaq: VSEC), a leading provider of repair
services, supply chain management support and consulting services
for land, sea and air transportation assets in the public and
private sectors, reported the following unaudited consolidated
financial results for the third quarter of 2019.
Third Quarter Updates
- Revenues were $198 million, up 17.4% as compared to the third
quarter 2018.
- Operating income was $17 million, up 9.7% as compared to the
third quarter of 2018.
- Net income was $11 million, up 4.9% as compared to the third
quarter of 2018.
- Earnings per share (diluted) was $0.95, up 3.3% as compared to
the third quarter of 2018.
- Adjusted EBITDA (non-GAAP, as described below) was $24.7
million, up 22.0% as compared to the third quarter of 2018.
- Debt repayment for the quarter was approximately $10.7
million.
- In September, Rob Moore joined VSE as President of our Federal
Services Group.
John Cuomo, VSE President and Chief Executive Officer,
commented, “Our third quarter growth was balanced and diverse,
representing strong performance from our legacy Aviation businesses
as well as our recent 1st Choice acquisition. We successfully
executed on growth initiatives and the results reflect strong third
quarter increases in both our Aviation and Supply Chain Management
Groups. During the quarter, our Aviation Group expanded repair
capabilities with new offerings and was awarded new distribution
partnerships; additionally, Aviation won new repair work on strong
platforms, supporting both near-term results and future backlog.
Our Supply Chain Management Group continued its customer, product
and service diversification strategy with success in the quarter.
Both businesses have clearly defined strategies for growth and
proven success in test markets.”
Mr. Cuomo continued, “We are pleased to welcome Rob Moore as
President of our Federal Services Group. Rob brings broad federal
experience and a proven track record in business development and
market expansion that will drive a renewed focus on near and
long-term growth opportunities in our federal and defense segment.
We are focused on the future of this business group, redefining VSE
in the federal marketplace, and aggressively building backlog.”
Third Quarter Results (unaudited)
(in thousands, except per share data)
Three months ended September
30,
Nine months ended September
30,
2019
2018
% Change
2019
2018
% Change
Revenues
$
198,326
$
168,931
17.4%
$
557,356
$
516,222
8.0%
Operating income
$
17,215
$
15,697
9.7%
$
45,444
$
41,145
10.4%
Net income
$
10,527
$
10,034
4.9%
$
27,028
$
25,837
4.6%
EPS (Diluted)
$
0.95
$
0.92
3.3%
$
2.45
$
2.37
3.4%
VSE reported improved operating results for the third quarter of
2019 with increases in revenues and operating income over the third
quarter of 2018. As previously reported, our operating income in
the third quarter of 2018 included a one-time gain of $1.7 million
for the sale of a contract recorded within our Federal Services
Group.
Non-GAAP Financial Information
The non-GAAP Financial Information (unaudited) set forth 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, however, 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 executive
succession costs, including our CEO and Federal Services Group
President transitions and 1st Choice Aerospace acquisition-related
costs.
Non-GAAP Financial Information (unaudited)
(in thousands)
Three Month Results ended
September 30,
Nine Month Results ended
September 30,
2019
2018
% Change
2019
2018
% Change
Net Income
$
10,527
$
10,034
4.9
%
$
27,028
$
25,837
4.6
%
Interest Expense
3,706
2,340
58.4
%
10,262
6,697
53.2
%
Income Taxes
2,982
3,323
(10.3
)%
8,154
8,611
(5.3
)%
Amortization of Intangible Assets
5,014
4,005
25.2
%
14,985
12,013
24.7
%
Depreciation and Other Amortization
1,971
2,256
(12.6
)%
5,637
6,971
(19.1
)%
EBITDA
24,200
21,958
10.2
%
66,066
60,129
9.9
%
Acquisition Related and Executive
Succession Costs
518
—
—
%
2,290
—
—
%
Gain on sale of IT Contract
—
(1,700
)
—
%
—
(1,700
)
—
%
Adjusted EBITDA
$
24,718
$
20,258
22.0
%
$
68,356
$
58,429
17.0
%
Capital Expenditures
Purchases of property and equipment totaled $7.7 million for the
first nine months of 2019 compared to $2.5 million for the same
period of 2018. We purchased a new facility for one of our 1st
Choice Aerospace locations for $5 million in the second quarter of
2019.
Third Quarter Segment Results
The following is a summary and commentary of revenues and
operating income for the three- and nine-month periods ended
September 30, 2019 and September 30, 2018:
Three months ended September
30,
Nine months ended September
30,
2019
2018
2019
2018
Revenues:
Supply Chain Management Group
$
55,369
$
51,834
$
160,878
$
161,961
Aviation Group
59,186
34,000
163,553
102,554
Federal Services Group
83,771
83,097
232,925
251,707
Total revenues
$
198,326
$
168,931
$
557,356
$
516,222
Operating Income:
Supply Chain Management Group
$
7,843
$
7,783
$
22,388
$
23,547
Aviation Group
6,568
2,184
14,820
7,291
Federal Services Group
4,524
6,186
12,968
12,270
Corporate/unallocated expenses
(1,720
)
(456
)
(4,732
)
(1,963
)
Operating income
$
17,215
$
15,697
$
45,444
$
41,145
Supply Chain Management Group
Revenues for our Supply Chain Management Group increased
approximately $3.5 million or 6.8% for the third quarter of 2019
and decreased approximately $1.1 million or 0.7% for the first nine
months of 2019 compared to the same periods of 2018.
Operating income was substantially unchanged for the third
quarter and decreased approximately $1.2 million or 4.9% for the
nine months. The decrease in operating income was primarily
attributable to an increase in administrative and growth-focused
expenses.
Aviation Group
Revenues for our Aviation Group increased approximately $25.2
million, or 74.1% for the third quarter and approximately $61.0
million or 59.5% for the first nine months of 2019, compared to the
same periods of 2018. The revenue increase was primarily driven by
the addition of revenues from organic growth in both our
distribution and repair businesses and results in our 1st Choice
Aerospace acquisition from early January 2019.
Operating income increased approximately $4.4 million or 200.7%
for the third quarter and approximately $7.5 million or 103.3% for
the nine months. The increases in operating income were
attributable primarily to our 1st Choice Aerospace acquisition and
the increases in revenues from our legacy repair and distribution
businesses.
Federal Services Group
Revenues for our Federal Services Group were substantially
unchanged for the third quarter of 2019 and decreased approximately
$18.8 million or 7.5% for the first nine months of 2019 as compared
to the same periods of 2018.
Operating income decreased approximately $1.7 million or 26.9%
for the third quarter and increased approximately $698 thousand or
5.7% for the nine months. The decrease in operating income for the
quarter was primarily attributable to the gain on sale of a
contract in 2018. Revenue declines for the nine months occurred in
our lower margin work, resulting in minimal loss of operating
income. We have increased operating income for this group through
margin improvements on our other work.
Bookings in our Federal Services Group were $190 million for the
first nine months of 2019 compared to revenue for this group of
$233 million. Funded contract backlog on September 30, 2019 was
$252 million, compared to $269 million on June 30, 2019 and $345
million on September 30, 2018.
About VSE
VSE maintains, extends and enhances legacy and next-generation
systems and assets for our federal, defense and commercial clients
by delivering solutions for fleet vehicle, ship, and aircraft
sustainment, supply chain management, platform modernization,
mission enhancement, and program management since 1959. VSE also
provides 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,
2019 for more details on our 2019 third 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)
September 30,
December 31,
2019
2018
Assets
Current assets:
Cash and cash equivalents
$
1,095
$
162
Receivables, net
69,793
60,004
Unbilled receivables, net
54,151
41,255
Inventories, net
202,811
166,392
Other current assets
12,652
13,407
Total current assets
340,502
281,220
Property and equipment, net
43,792
49,606
Intangible assets, net
142,907
94,892
Goodwill
259,212
198,622
Operating lease right-of-use assets
24,375
—
Other assets
16,845
14,488
Total assets
$
827,633
$
638,828
Liabilities and Stockholders' equity
Current liabilities:
Current portion of long-term debt
$
10,716
$
9,466
Accounts payable
71,668
57,408
Current portion of earn-out obligation
10,700
—
Accrued expenses and other current
liabilities
45,314
37,133
Dividends payable
987
871
Total current liabilities
139,385
104,878
Long-term debt, less current portion
257,815
151,133
Deferred compensation
17,417
17,027
Long-term lease obligations, less current
portion
—
18,913
Long-term operating lease liabilities
25,124
—
Earn-out obligation
14,300
—
Deferred tax liabilities
17,732
18,482
Total liabilities
471,773
310,433
Commitments and contingencies
Stockholders' equity:
Common stock, par value $0.05 per share,
authorized 15,000,000 shares; issued and outstanding 10,970,123 and
10,886,036, respectively
549
544
Additional paid-in capital
29,411
26,632
Retained earnings
327,191
301,073
Accumulated other comprehensive (loss)
income
(1,291
)
146
Total stockholders' equity
355,860
328,395
Total liabilities and stockholders'
equity
$
827,633
$
638,828
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,
2019
2018
2019
2018
Revenues:
Products
$
96,832
$
85,886
$
279,608
$
264,678
Services
101,494
83,045
277,748
251,544
Total revenues
198,326
168,931
557,356
516,222
Costs and operating expenses:
Products
81,988
72,256
237,661
222,816
Services
93,568
77,810
256,355
239,536
Selling, general and administrative
expenses
541
863
2,911
2,412
Amortization of intangible assets
5,014
4,005
14,985
12,013
Total costs and operating expenses
181,111
154,934
511,912
476,777
Gain on sale of contract
—
1,700
—
1,700
Operating income
17,215
15,697
45,444
41,145
Interest expense, net
3,706
2,340
10,262
6,697
Income before income taxes
13,509
13,357
35,182
34,448
Provision for income taxes
2,982
3,323
8,154
8,611
Net income
$
10,527
$
10,034
$
27,028
$
25,837
Basic earnings per share
$
0.96
$
0.92
$
2.47
$
2.38
Basic weighted average shares
outstanding
10,970,123
10,881,106
10,953,581
10,874,331
Diluted earnings per share
$
0.95
$
0.92
$
2.45
$
2.37
Diluted weighted average shares
outstanding
11,060,081
10,935,112
11,035,951
10,916,989
Dividends declared per share
$
0.09
$
0.08
$
0.26
$
0.23
VSE Corporation and
Subsidiaries
Unaudited Consolidated Statements of
Cash Flows
(in thousands)
For the nine months ended
September 30,
2019
2018
Cash flows from operating activities:
Net income
$
27,028
$
25,837
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization
20,622
18,984
Deferred taxes
(1,230
)
(1,733
)
Stock-based compensation
2,592
2,146
Gain on sale of contract
—
(1,700
)
Changes in operating assets and
liabilities, net of impact of acquisitions:
Receivables, net
(2,380
)
738
Unbilled receivables, net
(12,896
)
11,298
Inventories, net
(29,540
)
(36,448
)
Other current assets and noncurrent
assets
(481
)
3,518
Accounts payable and deferred
compensation
11,793
(14,972
)
Accrued expenses and other current and
noncurrent liabilities
1,931
(3,010
)
Long-term lease obligations
—
(1,237
)
Net cash provided by operating
activities
17,439
3,421
Cash flows from investing activities:
Purchases of property and equipment
(7,689
)
(2,522
)
Proceeds from the sale of property and
equipment
4
51
Proceeds from the sale of contract
—
1,700
Cash paid for acquisitions, net of cash
acquired
(112,660
)
—
Net cash used in investing activities
(120,345
)
(771
)
Cash flows from financing activities:
Borrowings on loan agreement
382,501
468,949
Repayments on loan agreement
(274,969
)
(465,521
)
Payment of debt financing costs
—
(1,702
)
Payments on capital lease obligations
—
(1,077
)
Payments of taxes for equity
transactions
(955
)
(641
)
Dividends paid
(2,738
)
(2,393
)
Net cash provided by (used in) financing
activities
103,839
(2,385
)
Net increase in cash and cash
equivalents
933
265
Cash and cash equivalents at beginning of
period
162
624
Cash and cash equivalents at end of
period
$
1,095
$
889
View source
version on businesswire.com: https://www.businesswire.com/news/home/20191029006115/en/
VSE Financial News Contact: Christine Kaineg -- (703)
329-3263
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