vsec-20240930

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2024


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Transition Period from _____ to _____

Commission File Number: 000-03676

VSE CORPORATION

(Exact Name of Registrant as Specified in its Charter)


Delaware			54-0649263
(State or Other Jurisdiction of Incorporation or Organization)			(I.R.S. Employer Identification No.)

3361 Enterprise Way

Miramar,

Florida

33025

(Address of Principal Executive Offices)

(Zip Code)

Registrant's Telephone Number, Including Area Code: (954) 430-6600

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol

Name of each exchange on which registered

Common Stock, par value $0.05 per share

VSEC

The NASDAQ Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☐

Accelerated filer

☒

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transaction period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ☐ No ☒

Number of shares of Common Stock outstanding as of November 1, 2024: 20,411,712


	TABLE OF CONTENTS


		Page
PART I	FINANCIAL INFORMATION

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

ITEM 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	24

ITEM 3.	Quantitative and Qualitative Disclosures About Market Risk	30

ITEM 4.	Controls and Procedures	30

PART II	OTHER INFORMATION

ITEM 1.	Legal Proceedings	30

ITEM 1A.	Risk Factors	30

ITEM 2.	Unregistered Sales of Equity Securities, Use of Proceeds and Issuer Purchases of Equity Securities	31

ITEM 5.	Other Information	31

ITEM 6.	Exhibits	32

Signatures		33

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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 respect to the risks described in Item 1A, Risk Factors, to our Annual Report on Form 10-K for the fiscal year ended December 31, 2023 filed with the SEC on March 8, 2024 (“2023 Form 10-K") and in Item 1A. Risk Factors of this report. All forward-looking statements made herein are qualified by these cautionary statements and risk factors and there can be no assurance that the actual results, events or developments referenced herein will occur or be realized.

Readers are cautioned not to place undue reliance on these forward-looking statements, which reflect management's analysis only as of the date hereof. The Company undertakes no obligation to publicly revise these forward-looking statements to reflect events or circumstances that occur or arise after the date hereof.

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PART I. FINANCIAL INFORMATION

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 these consolidated financial statements.

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VSE Corporation and Subsidiaries

Consolidated Statements of Income

(Unaudited)


	Three months ended September 30,				Nine months ended September 30,
(in thousands, except share and per share amounts)	2024		2023		2024		2023
Revenues:
Products	$	188,334	$	184,691	$	564,092	$	505,135
Services	85,279		46,662		217,019		120,028
Total revenues	273,613		231,353		781,111		625,163

Costs and operating expenses:
Products	166,139		160,326		495,177		442,714
Services	77,014		40,004		197,454		102,908
Selling, general and administrative expenses	2,605		2,556		9,721		6,121
Lease abandonment and termination (benefits) costs	(652)		—		12,205		—
Amortization of intangible assets	4,809		3,203		12,550		10,743
Total costs and operating expenses	249,915		206,089		727,107		562,486
Operating income	23,698		25,264		54,004		62,677

Interest expense, net	8,983		8,459		27,996		21,805
Income from continuing operations before income taxes	14,715		16,805		26,008		40,872
Provision for income taxes	3,065		4,694		5,035		10,554
Net income from continuing operations	11,650		12,111		20,973		30,318
Loss from discontinued operations, net of tax	—		(2,554)		(18,711)		(2,789)
Net income	$	11,650	$	9,557	$	2,262	$	27,529

Earnings per share:
Basic
Continuing operations	$	0.63	$	0.81	$	1.22	$	2.23
Discontinued operations	—		(0.17)		(1.09)		(0.20)
	$	0.63	$	0.64	$	0.13	$	2.03
Diluted
Continuing operations	$	0.63	$	0.80	$	1.22	$	2.22
Discontinued operations	—		(0.17)		(1.09)		(0.20)
	$	0.63	$	0.63	$	0.13	$	2.02

Weighted average shares outstanding:
Basic	18,425,643		15,001,908		17,125,502		13,585,391
Diluted	18,479,123		15,050,062		17,211,825		13,639,064

Dividends declared per share	$	0.10	$	0.10	$	0.30	$	0.30

The accompanying notes are an integral part of these consolidated financial statements.

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VSE Corporation and Subsidiaries

Consolidated Statements of Comprehensive Income

(Unaudited)


	Three months ended September 30,				Nine months ended September 30,
(in thousands)	2024		2023		2024		2023
Net income	$	11,650	$	9,557	$	2,262	$	27,529
Other comprehensive (loss) income, net of tax:
Change in fair value of interest rate swap agreements, net of tax	(4,645)		1,647		(1,920)		2,010
Total other comprehensive (loss) income, net of tax	(4,645)		1,647		(1,920)		2,010
Comprehensive income, net of tax	$	7,005	$	11,204	$	342	$	29,539

The accompanying notes are an integral part of these consolidated financial statements.

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VSE Corporation and Subsidiaries

Consolidated Statements of Stockholders' Equity

(Unaudited)


	Three Months Ended September 30, 2024
				Additional Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Income		Total Stockholders' Equity
	Common Stock
(in thousands, except per share data)	Shares	Amount
Balance at June 30, 2024	18,420	$	921	$	403,666	$	371,872	$	4,857	$	781,316
Net income	—	—		—		11,650		—		11,650


Stock-based compensation	9	—		1,317		—		—		1,317
Other comprehensive loss, net of tax	—	—		—		—		(4,645)		(4,645)
Dividends declared ($0.10 per share)	—	—		—		(1,842)		—		(1,842)
Balance at September 30, 2024	18,429	$	921	$	404,983	$	381,680	$	212	$	787,796


	Three Months Ended September 30, 2023
				Additional Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Income		Total Stockholders' Equity
	Common Stock
(in thousands, except per share data)	Shares	Amount
Balance at June 30, 2023	12,898	$	645	$	96,471	$	366,690	$	5,331	$	469,137
Net income	—	—		—		9,557		—		9,557
Issuance of common stock	2,846	142		128,968						129,110
Stock-based compensation	3	—		1,644		—		—		1,644
Other comprehensive income, net of tax	—	—		—		—		1,647		1,647
Dividends declared ($0.10 per share)	—	—		—		(1,575)		—		(1,575)
Balance at September 30, 2023	15,747	$	787	$	227,083	$	374,672	$	6,978	$	609,520

The accompanying notes are an integral part of these consolidated financial statements.

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VSE Corporation and Subsidiaries

Consolidated Statements of Stockh

SEC Form 10-Q filed by VSE Corporation