VSE Corp Files Q3 2024 10-Q

TL;DR

**VSE Corp Q3 10-Q is IN. Financials and ops details inside.**

AI Summary

VSE Corporation filed its 10-Q for the period ending September 30, 2024. The filing details financial performance and operational updates for the third quarter. Specific financial figures and segment performance are outlined within the report, providing insight into the company's current standing.

Why It Matters

This filing provides investors and analysts with the latest financial health and operational performance of VSE Corporation, crucial for investment decisions.

Risk Assessment

Risk Level: medium — As a 10-Q filing, it contains detailed financial information which can reveal both positive and negative trends, impacting investment risk.

Key Players & Entities

• VSE Corp (company) — Filer of the 10-Q
• September 30, 2024 (date) — End of reporting period
• 20240930 (date) — Conformed period of report
• 0000102752-24-000092 (other) — Accession number for the filing

FAQ

Key Financial Figures

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

Filing Documents

• vsec-20240930.htm (10-Q) — 1072KB
• vsec-93024ex311.htm (EX-31.1) — 11KB
• vsec-93024ex312.htm (EX-31.2) — 10KB
• vsec-93024ex321.htm (EX-32.1) — 5KB
• vsec-93024ex322.htm (EX-32.2) — 5KB
• vsec-20240930_g1.jpg (GRAPHIC) — 198KB
• 0000102752-24-000092.txt ( ) — 6901KB
• vsec-20240930.xsd (EX-101.SCH) — 39KB
• vsec-20240930_cal.xml (EX-101.CAL) — 95KB
• vsec-20240930_def.xml (EX-101.DEF) — 241KB
• vsec-20240930_lab.xml (EX-101.LAB) — 581KB
• vsec-20240930_pre.xml (EX-101.PRE) — 418KB
• vsec-20240930_htm.xml (XML) — 901KB

FINANCIAL INFORMATION

PART I FINANCIAL INFORMATION

Financial Statements

ITEM 1. Financial Statements Unaudited Consolidated Balance Sheets as of September 30, 2024 and December 31, 2023 4 Unaudited Consolidated Statements of Income for the three and nine months ended September 30, 2024 and 2023 5 Unaudited Consolidated Statements of Comprehensive Income for the three and nine months ended September 30, 2024 and 2023 6 Unaudited Consolidated Statements of Stockholders' Equity for t he three and nine months ended September 30, 2024 and 2023 7 Unaudited Consolidated Statements of Cash Flows for the nine months ended September 30, 2024 and 2023 9 Notes to Unaudited Consolidated Financial Statements 10

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 24

Quantitative and Qualitative Disclosures About Market Risk

ITEM 3. Quantitative and Qualitative Disclosures About Market Risk 30

Controls and Procedures

ITEM 4. Controls and Procedures 30

OTHER INFORMATION

PART II OTHER INFORMATION

Legal Proceedings

ITEM 1. Legal Proceedings 30

Risk Factors

ITEM 1A. Risk Factors 30

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 31

Other Information

ITEM 5. Other Information 31

Exhibits

ITEM 6. Exhibits 32

Signatures

Signatures 33 -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 anticipated risks, impacts or benefits of growth, acquisition and disposition strategies, investments and future operational plans, including the recent agreement to acquire Kellstrom Aerospace Group, Inc. 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 Disclosures About Market Risk, as well as with

FINANCIAL INFORMATION

PART I. FINANCIAL INFORMATION

Financial Statements

Item 1. Financial Statements VSE Corporation and Subsidiaries Consolidated Balance Sheets (Unaudited) September 30, December 31, (in thousands, except share and per share amounts) 2024 2023 Assets Current assets: Cash and cash equivalents $ 7,907 $ 7,768 Receivables (net of allowance of $ 6.8 million and $ 3.4 million, respectively) 162,665 127,958 Contract assets 29,549 8,049 Inventories 533,773 500,864 Other current assets 41,403 36,389 Current assets held-for-sale — 93,002 Total current assets 775,297 774,030 Property and equipment (net of accumulated depreciation of $ 45.4 million and $ 37.4 million, respectively) 74,631 58,076 Intangible assets (net of accumulated amortization of $ 78.8 million and $ 135.6 million, respectively) 160,580 114,130 Goodwill 390,636 351,781 Operating lease right-of-use assets 33,549 28,684 Other assets 29,306 23,637 Total assets $ 1,463,999 $ 1,350,338 Liabilities and Stockholders' Equity Current liabilities: Current portion of long-term debt $ 30,000 $ 22,500 Accounts payable 122,740 173,036 Accrued expenses and other current liabilities 55,524 36,383 Dividends payable 1,843 1,576 Current liabilities held-for-sale — 53,391 Total current liabilities 210,107 286,886 Long-term debt, less current portion 420,341 406,844 Deferred compensation 7,683 7,939 Long-term operating lease obligations 29,061 24,959 Deferred tax liabilities — 6,985 Other long-term liabilities 9,011 — Total liabilities 676,203 733,613 Commitments and contingencies (Note 8) Stockholders' equity: Common stock, par value $ 0.05 per share; authorized 23,000,000 shares; issued and outstanding 18,428,955 and 15,756,918 , respectively 921 788 Additional paid-in capital 404,983 229,103 Retained earnings 381,680 384,702 Accumulated other comprehensive income 212 2,132 Total stockholders' equity 787,796 616,725 Total liabilities and stockholders' equity $ 1,463,999 $ 1,350,338 The accompanying notes are an integral part of t

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) September 30, 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 and nine months ended September 30, 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 rel

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) September 30, 2024 Table of Contents Recent Accounting Pronouncement Recently Issued Accounting Pronouncement Not Yet Adopted In November 2023, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which requires public entities to disclose information about their reportable segments' significant expenses and other segment items on an interim and annual basis. Public entities with a single reportable segment are required to apply the disclosure requirements in ASU 2023-07, as well as all existing segment disclosures and reconciliation requirements in ASC 280 on an interim and annual basis. ASU 2023-07 is effective for fiscal years beginning after December 15, 2023, and for interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted. This guidance will be adopted by us beginning with the annual period of 2024. We are currently evaluating the impact that adoption of ASU 2023-07 may have on our consolidated financial statements and disclosure. (2) Acquisitions Turbine Controls, LLC On April 24, 2024, we completed the acquisition of TCI for a total consideration of $ 122.2 million, consisting of net cash consideration of $ 112.2 million, which included $ 1.5 million as a net working capital adjustment, and in-kind payment in the form of shares of the Company's common stock with a value equal to approximately $ 10.0 million. The purchase price of this acquisition was funded by borrowings under our revolving credit facility. TCI is a leading provider of aftermarket maintenance, repair and overhaul ("MRO") support services for complex engine components, as well as engine and airframe accessories, across commercial and military applications. The acquisition presents an opportunity for VSE's Aviation segment to accelerate its MRO strategy, i

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) September 30, 2024 Table of Contents The preliminary purchase price allocation is as follows (in thousands): Receivables $ 9,122 Contract assets 16,193 Inventories 5,512 Other current assets 570 Other assets 214 Property and equipment, net 6,434 Intangible asset - customer related 59,000 Goodwill 40,095 Operating lease right-of-use assets 7,832 Total assets acquired 144,972 Accounts payable ( 9,764 ) Accrued expense and other current liabilities ( 5,680 ) Long-term operating lease obligations ( 7,339 ) Total liabilities assumed ( 22,783 ) Net assets acquired, excluding cash $ 122,189 Cash consideration, net of cash acquired $ 112,189 VSE Common stock, at fair value 10,000 Total $ 122,189 Goodwill resulting from the acquisition of TCI reflects the strategic advantage of expanding our MRO services to new customers. The value attributed to goodwill and customer relationships is deductible for income tax purposes. The estimated value attributed to the customer relationship intangible assets is being amortized on a straight-line basis using a useful life of 10 years. We incurred $ 0.1 million and $ 2.2 million of acquisition-related expenses related to the TCI acquisition during the three and nine months ended September 30, 2024, respectively, which are included in selling, general and administrative expenses. The operating results of TCI were included in our consolidated results of operations from the date of acquisition. Our consolidated revenues and operating income include $ 30.7 million and $ 2.1 million, respectively, for the three months ended September 30, 2024, and $ 54.2 million and $ 3.9 million, respectively, for the nine months ended September 30, 2024, from the acquisition of TCI. Operating income does not include the impact of acquisition-related expenses incurred by VSE Corporation. The following unaudited pro forma financial information presents the combined results o

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) September 30, 2024 Table of Contents other transaction costs. 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. Precision Fuel Components, LLC On February 1, 2023, our Aviation segment acquired Precision Fuel Components, LLC ("Precision Fuel") for a purchase price of $ 11.7 million. Precision Fuel operating results are included in our Aviation segment beginning on the acquisition date. The acquisition was not material to our consolidated financial statements. During the nine months ended September 30, 2023, we incurred $ 0.2 million of acquisition-related expenses related to the acquisition of Precision Fuel, which are included in selling, general and administrative expenses. 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 cash consideration of $ 131.5 million . 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. During the nine months ended September 30, 2024, we adjusted the purchase price allocation as a result of certain measurement period adjustments to acquired assets and liabilities assumed due to updated valuation reports received from our external valuation specialist, revisions to internal estimates, and new information obtained about facts and circumstances that existed as of the acquisition date. The measurement period adjustments included: a decrease in deferred tax liabilities of $ 1.6 million and an increase in inventories of $ 0.1 million These adjustmen

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) September 30, 2024 Table of Contents deductible for income tax purposes. The estimated value attributed to the customer relationship intangible assets is being amorti

View Full Filing

View this 10-Q filing on SEC EDGAR