VSE Corp Files 10-Q for Period Ending March 31, 2024

TL;DR

<b>VSE Corp filed its Q1 2024 10-Q, detailing financial performance and balance sheet information.</b>

AI Summary

VSE CORP (VSECU) filed a Quarterly Report (10-Q) with the SEC on May 9, 2024. VSE Corp reported financial results for the quarter ended March 31, 2024. The filing includes data for the periods January 1, 2024 to March 31, 2024, and January 1, 2023 to March 31, 2023. Key financial statement elements such as common stock, additional paid-in capital, retained earnings, and accumulated other comprehensive income are detailed for various dates. The company's fiscal year ends on December 31. VSE Corp is categorized under Services-Engineering Services (SIC 8711).

Why It Matters

For investors and stakeholders tracking VSE CORP, this filing contains several important signals. This filing provides investors with an updated view of VSE Corp's financial health and operational performance for the first quarter of 2024. The detailed segment information and balance sheet figures allow for analysis of the company's financial position and trends compared to the prior year.

Risk Assessment

Risk Level: low — VSE CORP shows low risk based on this filing. The filing is a standard quarterly report (10-Q) with no immediate red flags, indicating routine disclosure.

Analyst Insight

Monitor VSE Corp's revenue and net income trends in subsequent filings to assess growth and profitability.

Key Numbers

• 2024-03-31 — Period End Date (CONFORMED PERIOD OF REPORT)
• 2024-05-09 — Filing Date (FILED AS OF DATE)
• 1231 — Fiscal Year End (FISCAL YEAR END)
• 8711 — SIC Code (STANDARD INDUSTRIAL CLASSIFICATION)

Key Players & Entities

• VSE CORP (company) — FILER
• VSECU (company) — Ticker Symbol
• 2024-03-31 (date) — CONFORMED PERIOD OF REPORT
• 2024-05-09 (date) — FILED AS OF DATE
• 8711 (industry_code) — STANDARD INDUSTRIAL CLASSIFICATION
• DE (state) — STATE OF INCORPORATION
• 1231 (date) — FISCAL YEAR END
• 7039604600 (phone) — BUSINESS PHONE

FAQ

Industry Context

VSE Corp operates in the engineering services sector, providing specialized services to government and commercial clients.

Regulatory Implications

The filing is a standard 10-Q, adhering to SEC regulations for quarterly financial reporting under the Securities Exchange Act of 1934.

What Investors Should Do

1. Review the full 10-Q document for detailed financial statements and management discussion.
2. Compare Q1 2024 performance against Q1 2023 data for year-over-year trends.
3. Analyze segment performance if detailed revenue breakdowns are provided in the full filing.

Key Dates

• 2024-03-31: Quarterly Period End — End of the reporting period for the 10-Q filing.
• 2024-05-09: Filing Date — Date the 10-Q report was officially submitted to the SEC.

Year-Over-Year Comparison

This is the first 10-Q filing for the fiscal year 2024, providing updated financial information compared to the previous year's filings.

Key Financial Figures

• $0.05 — ich registered Common Stock, par value $0.05 per share VSEC The NASDAQ Global Select

Filing Documents

• vsec-20240331.htm (10-Q) — 760KB
• vse-exhibit41.htm (EX-4.1) — 13KB
• vse-fourthamendedandrestat.htm (EX-10.1) — 1033KB
• vsec-33124ex311.htm (EX-31.1) — 11KB
• vsec-33124ex312.htm (EX-31.2) — 11KB
• vsec-33124ex321.htm (EX-32.1) — 5KB
• vsec-33124ex322.htm (EX-32.2) — 5KB
• vsec-20240331_g1.jpg (GRAPHIC) — 198KB
• 0000102752-24-000052.txt (&nbsp;) — 6865KB
• vsec-20240331.xsd (EX-101.SCH) — 34KB
• vsec-20240331_cal.xml (EX-101.CAL) — 93KB
• vsec-20240331_def.xml (EX-101.DEF) — 196KB
• vsec-20240331_lab.xml (EX-101.LAB) — 499KB
• vsec-20240331_pre.xml (EX-101.PRE) — 361KB
• vsec-20240331_htm.xml (XML) — 650KB

FINANCIAL INFORMATION

PART I FINANCIAL INFORMATION

Financial Statements

ITEM 1. Financial Statements Unaudited Consolidated Balance Sheets as of March 31, 2024 and December 31, 2023 4 Unaudited Consolidated Statements of (Loss) Income for the three months ended March 31, 2024 and 2023 5 Unaudited Consolidated Statements of Comprehensive (Loss) Income for the three months ended March 31, 2024 and 2023 6 Unaudited Consolidated Statements of Stockholders' Equity for the three months ended March 31, 2024 and 2023 7 Unaudited Consolidated Statements of Cash Flows for the three months ended March 31, 2024 and 2023 8 Notes to Unaudited Consolidated Financial Statements 9

Management's Discussion and Analysis of Financial Condition and Results of Operations

ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 20

Quantitative and Qualitative Disclosures About Market Risk

ITEM 3. Quantitative and Qualitative Disclosures About Market Risk 24

Controls and Procedures

ITEM 4. Controls and Procedures 24

OTHER INFORMATION

PART II OTHER INFORMATION

Legal Proceedings

ITEM 1. Legal Proceedings 26

Risk Factors

ITEM 1A. Risk Factors 26

Unregistered Sales of Equity Securities, Use of Proceeds and Issuer Purchases of Equity Securities

ITEM 2. Unregistered Sales of Equity Securities, Use of Proceeds and Issuer Purchases of Equity Securities 26

Other Information

ITEM 5. Other Information 28

Exhibits

ITEM 6. Exhibits 27

Signatures

Signatures 28 -2- Table of Contents

Forward-Looking Statements

Forward-Looking Statements This quarterly report on Form 10-Q ("Form 10-Q") contains statements that, to the extent they are not recitations of historical fact, constitute "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). All such statements are intended to be covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995 and this statement is included for purposes of such safe harbor provisions. "Forward-looking" statements, as such term is defined by the Securities Exchange Commission (the "SEC") in its rules, regulations and releases, represent our expectations or beliefs, including, but not limited to, statements concerning our operations, economic performance, financial condition, the impact of widespread health developments, the health and economic impact thereof and the governmental, commercial, consumer and other responses thereto, such as growth, acquisition and disposition strategies, investments and future operational plans. Without limiting the generality of the foregoing, words such as "may," "will," "expect," "believe," "anticipate," "intend," "forecast," "seek," "plan," "predict," "project," "could," "estimate," "might," "continue," "seeking" or the negative or other variations thereof or comparable terminology are intended to identify forward-looking statements. These statements, by their nature, involve substantial risks and uncertainties, certain of which are beyond our control, and actual results may differ materially depending on a variety of important factors, including, but not limited to, those identified elsewhere in this document, including in Item 1A, Risk Factors, Item 2, Management's Discussion and Analysis of Financial Condition and Results of Operations, and Item 3, Quantitative and Qualitative Di

FINANCIAL INFORMATION

PART I. FINANCIAL INFORMATION

Financial Statements

Item 1. Financial Statements VSE Corporation and Subsidiaries Consolidated Balance Sheets (Unaudited) March 31, December 31, (in thousands, except share and per share amounts) 2024 2023 Assets Current assets: Cash and cash equivalents $ 10,569 $ 7,768 Receivables (net of allowance of $ 4.6 million and $ 3.4 million, respectively) 145,427 127,958 Contract assets 10,800 8,049 Inventories 521,247 500,864 Other current assets 55,053 36,389 Current assets held-for-sale — 93,002 Total current assets 743,096 774,030 Property and equipment (net of accumulated depreciation of $ 46.8 million and $ 37.4 million, respectively) 66,559 58,076 Intangible assets (net of accumulated amortization of $ 69.6 million and $ 135.6 million, respectively) 110,749 114,130 Goodwill 351,112 351,781 Operating lease right-of-use assets 35,123 28,684 Other assets 30,285 23,637 Total assets $ 1,336,924 $ 1,350,338 Liabilities and Stockholders' Equity Current liabilities: Current portion of long-term debt $ 30,000 $ 22,500 Accounts payable 155,478 173,036 Accrued expenses and other current liabilities 35,988 36,383 Dividends payable 1,584 1,576 Current liabilities held-for-sale — 53,391 Total current liabilities 223,050 286,886 Long-term debt, less current portion 451,622 406,844 Deferred compensation 7,677 7,939 Long-term operating lease obligations 31,431 24,959 Deferred tax liabilities 7,406 6,985 Other long-term liabilities 3,000 — Total liabilities 724,186 733,613 Commitments and contingencies (Note 8) Stockholders' equity: Common stock, par value $ 0.05 per share, authorized 23,000,000 shares; issued and outstanding 15,834,164 and 15,756,918 , respectively 792 788 Additional paid-in capital 230,805 229,103 Retained earnings 376,505 384,702 Accumulated other comprehensive income 4,636 2,132 Total stockholders' equity 612,738 616,725 Total liabilities and stockholders' equity $ 1,336,924 $ 1,350,338 The accompanying notes are an integral part o

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) March 31, 2024 Table of Contents (1) Nature of Operations and Basis of Presentation Nature of Operations VSE Corporation (collectively, with its consolidated subsidiaries), "VSE," the "Company," "us," "we," or "our" is a leading provider of aftermarket parts distribution and maintenance, repair and overhaul ("MRO") services for air and land transportation assets for commercial and government markets. We operate in two reportable segments aligned with our operating segments: Aviation and Fleet. Basis of Presentation Our accompanying unaudited consolidated financial statements have been prepared in accordance with U.S. Generally Accepted Accounting Principles ("U.S. GAAP") for interim financial information and in accordance with the instructions to SEC Form 10-Q and Article 10 of SEC Regulation S-X. Therefore, such financial statements do not include all the information and footnotes required by U.S. GAAP for complete financial statements and should be read in conjunction with the consolidated financial statements and footnotes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2023 ("2023 Form 10-K"). In our opinion, all adjustments, including normal recurring items, considered necessary for a fair presentation of results for the interim periods have been included in the accompanying unaudited consolidated financial statements. Operating results for the three months ended March 31, 2024, are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2024. In February 2024, we entered into two separate agreements to sell substantially all of the Federal and Defense segment assets. See Note (3) "Discontinued Operations" for further information. The consolidated financial statements reflect the Federal and Defense segment's results of operations as discontinued operations for all periods presented, and the related assets and l

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) March 31, 2024 Table of Contents Desser Aerospace On July 3, 2023, we completed the acquisition of Desser Holding Company LLC ("Desser Aerospace"), a global aftermarket solutions provider of specialty distribution and MRO services. We purchased Desser Aerospace for a preliminary cash consideration of $ 133.7 million, which included $ 9.5 million as an estimated net working capital adjustment (subject to post-closing adjustments). Concurrent with the closing of the transaction, we immediately sold, in a separate transaction, Desser Aerospace's propriety solutions businesses to Loar Group Inc. ("Loar") for a cash consideration of $ 31.8 million, which included $ 1.8 million as an estimated net working capital adjustment (the "Loar Sale"). The purchase price for Desser Aerospace was allocated on a preliminary basis, among assets acquired, and liabilities assumed, at fair value based on the best available information on the acquisition date, with the excess purchase price recorded as goodwill. The fair values of the non-financial assets acquired, and liabilities assumed, were determined based on preliminary estimates, assumptions, and other information compiled by management, including independent valuations utilizing established industry valuation techniques. We have not yet finalized the determination of the fair values allocated to various assets and liabilities, including, but not limited to, working capital and income taxes. Therefore, the allocation of the total consideration for the acquisition to the tangible and identifiable intangible assets acquired, and liabilities assumed, is preliminary until we obtain final information regarding their fair values, which could potentially result in changes to the Desser Aerospace opening balance sheet. During the first quarter of 2024, we adjusted the purchase price allocation as a result of certain measurement period adjustments to acquired assets and liabi

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) March 31, 2024 Table of Contents The following unaudited pro forma financial information presents the combined results of operations for Desser Aerospace and VSE Corporation for the three months ended March 31, 2024 and 2023, respectively. The unaudited consolidated pro forma results of operations are as follows (in thousands): For the three months ended March 31, 2024 2023 Revenue $ 241,539 $ 212,500 Income from continuing operations $ 12,100 $ 9,353 The unaudited pro forma combined financial information presented above has been prepared from historical financial statements that have been adjusted to give effect to the acquisition of Desser Aerospace as though it had occurred on January 1, 2023 and includes adjustments for intangible asset amortization; interest expense and debt issuance costs on long-term debt; acquisition and other transaction costs; and certain costs allocated from the former parent. The unaudited pro forma financial information is not intended to reflect the actual results of operations that would have occurred if the acquisition had occurred on January 1, 2023, nor is it indicative of future operating results. Honeywell Fuel Control Systems On September 27, 2023, our Aviation segment entered into an Asset Purchase and License Agreement with Honeywell International Inc., for a purchase price of $ 105.0 million, to exclusively manufacture, sell, market, distribute, and repair certain Honeywell fuel control systems (the "Honeywell FCS Acquisition"). The purchase price of this acquisition was funded by borrowings under our revolving credit facility. This agreement expands existing distribution and MRO capabilities supporting certain Honeywell's fuel control systems and associated subcomponents. The acquisition was accounted for as a business combination under ASC 805, Business Combinations. The purchase price for the acquisition was allocated on a preliminary basis, among a

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) March 31, 2024 Table of Contents (3) Discontinued Operations In February 2024, we entered into two separate agreements to sell substantially all the Federal and Defense segment's operational assets ("FDS Sale") for a cash consideration of $ 44.0 million, including amounts in escrow, subject to post-closing adjustments. The FDS Sale is consistent with our long-term strategic growth strategy focused on higher margin and higher growth aftermarket parts distribution and MRO businesses. We recorded a pre-tax loss on the FDS sale of $ 12.7 million and transaction fees of $ 2.5 million for the three months ended March 31, 2024, which are included in (loss) income from discontinued operations, net of tax in the consolidated statements of (loss) income. The components of (loss) income from discontinued operations, net of tax for the three months ended March 31, 2024 and 2023, consist of the following (in thousands): For the three months ended March 31, 2024 2023 Revenues $ 26,268 $ 66,846 Costs and operating expenses 34,629 65,689 (Loss) income from discontinued operations ( 8,361 ) 1,158 Other FDS impairment 4,204 — Loss on the sale of discontinued operations 12,663 — Total (loss) income before income taxes ( 25,228 ) 1,158 Provision for income taxes ( 6,517 ) 160 (Loss) income from discontinued operations, net of tax $ ( 18,711 ) $ 997 Certain assets and liabilities previously reported as held-for-sale were excluded from the FDS sale and were reclassified as held and used, at their respective fair values, on the consolidated balance sheet as of March 31, 2024. The reclassification primarily related to our Alexandria, VA headquarters and consisted of an operating lease right-of-use-asset of $ 7.1 million, property and equipment of $ 2.6 million and an operating lease obligation of $ 11.0 million. -12- VSE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) March 31, 2024 Table of Contents The assets and liabilities reported as held-for-sale consist of the following (in thousands): December 31, 2023 Assets Cash and cash equivalents $ 162 Receivables, net 10,805 Contract assets 25,109 Inventories 472 Other current assets 6,154 Property and equipment, net 6,102 Intangible assets, net 3,505 Goodwill 31,575 Operating lease right-of-use assets 9,097 Other assets 21 Total assets held-for-sale $ 93,002 Liabilities Accounts payable $ 20,893 Accrued expenses and other current liabilities 19,537 Long-term operating lease obligations 8,942 Deferred tax liabilities 4,019 Total liabilities held-for-sale $ 53,391 Selected financial information related to cash flows from discontinued operations is as follows (in thousands): For the three months ended March 31, 2024 2023 Depreciation and amortization $ 150 $ 794 Purchases of property and equipment $ — $ 25 -13- VSE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) March 31, 2024 Table of Contents (4) Revenue Disaggregation of Revenues Our revenues are derived from the delivery of products to our customers and from services performed for commercial and government customers. A summary of revenues by customer for each of our operating segments for the three months ended March 31, 2024 and 2023 is as follows (in thousands): Three months ended March 31, 2024 Aviation Fleet Total Commercial $ 157,984 $ 44,599 $ 202,583 Other government 4,399 34,557 38,956 Total $ 162,383 $ 79,156 $ 241,539 Three months ended March 31, 2023 Aviation Fleet Total Commercial $ 112,060 $ 32,544 $ 144,604 Other government 1,175 42,808 43,983 Total $ 113,235 $ 75,352 $ 188,587 A summary of revenues by type for each of our operating segments for the three months ended March 31, 2024 and 2023 is as follows (in thousands): Three months ended March 31, 2024 Aviation Fleet Total Repair $ 50,674 $ — $ 50,674 Distribution 111,709 79,156 190,865 Total $ 162,383 $ 79,156 $ 241,539 Three months ended March 31, 2023 Aviation Fleet Total Repair $ 32,054 $ — $ 32,054 Distribution 81,181 75,352 156,533 Total $ 113,235 $ 75,352 $ 188,587 Contract Balances Contract balances were as follows (in thousands): March 31, December 31, Financial Statement Classification 2024 2023 Billed and billable receivables Receivables, net $ 145,427 $ 127,958 Contract assets - unbilled receivables Contract assets $ 10,800 $ 8,049 Contract liabilities Accrued expenses and other current liabilities $ 3,196 $ 2,785 For the three months ended March 31, 2024 and 2023, we recognized revenue that was previously included in the beginning balance of contract liabili

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