VSE
Annual Report 2010

Plain-text annual report

INTEGRITY • AGILITY • VALUE 2010 VSE Annual Report and Form 10-K This document is printed using soy-based inks using FSC and Green Seal™ certified paper that contains recycled post-consumer fiber. 2010 VSE Annual Report and Form 10-K—INTEGRITY • AGILITY • VALUE 2010 Highlights Corporate Profile We conduct our business operations in more than 100 locations world-wide under four reportable operating segments: Federal; International; IT, Energy and Management Consulting; and Infrastructure. VSE’s offerings include:  Logistic Services–Multi-dimensional functions that converge to support one service task/ equipment system such as true field support, supply chain management and warehouse management.  Engineering and Equipment Refurbishment– Conceptual design, engineering of equipment,vehicle reset, parts supply, and advanced technologies.  IT Services–Complete enterprise architecture, data mining, public protection/security, and technical/ software engineering for systems, assessments and reviews.  Construction Management–Planning, preparation, permitting, feasibility studies, procurement, and construction management for major complexes as well as all civil works projects.  Technical and Management Consulting– Professional competencies in technology roadmaps and solutions, policy impacts, analysis, cyber-security and infrastructure protection and mitigation measurements. Stockholder Inquiries VSE is a publicly owned company and its shares are traded on the NASDAQ Global Select Market under the symbol VSEC. Inquiries about stock ownership, dividends, and stockholder changes of address may be directed to our Transfer Agent: Registrar and Transfer Company, 10 Commerce Drive, Cranford, New Jersey 07016-1340, or to VSE at 2550 Huntington Avenue, Alexandria, Virginia 22303-1499, Attention: Corporate Secretary, Telephone (703) 329-4770. Further information about VSE and its subsidiaries is available at www.vsecorp.com; www.icrcsolutions. com; www.gbsolutionsinc.com, www.energetics.com and www.akimeka.com. VSE had several notable accomplishments in 2010. For the third year in a row, Government Executive Magazine named VSE the “Number #1 Government Contractor (small);” Forbes magazine recognized VSE as the “Number #27 Best Small Business in America;” and the Association for Capital Growth named us the Top Corporate Growth Company (over $500 million) in the Washington, DC metro area. Deltek, Inc., named VSE the winner of the Business Impact Award, based on being one of the “fastest-growing and most innovative government contractors in the nation.” Finally, VSE was chosen as Letterkenny Army Depot’s Supplier of the Year. Akimeka LLC, a native Hawaiian health service information technology consulting company, was acquired by VSE on August, 19th. Akimeka recorded revenues during 2009 of approximately $38 million and operating income of about $6.5 million. Akimeka is headquartered in Kihei, Hawaii and has been serving the U.S. Government market for more than a decade with additional offices in Alexandria, VA; Orlando, FL and San Antonio, TX. Akimeka complements VSE’s prior acquisition in 2008, G&B Solutions, an established full-service IT provider to many federal agencies, including the Departments of Health and Human Services, Homeland Security, Labor, Social Security Administration, the Pension Benefits Guarantee Corporation, and the National Institutes of Health. The Federal Group CED business unit was awarded a prime contract to continue work under U.S. Army CECOM’ Rapid Response (“R2”) replacement program known as “Rapid Response- Third Generation (R2-3G).” VSE will compete for task orders under the Indefinite Delivery/Indefinite Quantity contract over a five-year period. Other contract award highlights include:  January 2011 award on our LOGWORLD omnibus contract to provide equipment refurbishment support services to the Army Reserve for a base year and four one-year options with a potential value of $410 million;  10-year, $80 million IDIQ contract with the Department of Justice, Bureau of Alcohol, Tobacco, Firearms, and Explosives (ATF) to provide services similar to the VSE Treasury Seized Asset Program;  $190 million/ five year IDIQ contract to provide Integration Kits (“VIKs”), spare VIK components, and engineering and installation support on tactical wheeled vehicles and combat vehicles for the U.S. Army and the U.S. Marine Corps. 3 2010 VSE Annual Report and Form 10-K—INTEGRITY • AGILITY • VALUE Financial Highlights Revenues ($M) Net Income ($M) Earnings Per Diluted Share ($) Stockholders’ Equity ($M) 1043.6 1014.6 866 653.2 363.7 ’06 ’07 ’09 ’10 ’08 Y E A R Funded Backlog ($M) 567 476 408 407 24 23.7 4.674.56 19 14.1 3.74 2.82 123.8 101.3 76.1 56.4 7.8 ’06 ’07 ’08 Y E A R ’09 ’10 1.61 ’06 ’07 ’08 Y E A R ’09 ’10 38.2 ’06 ’07 ’08 Y E A R ’09 ’10 Number of Employees Dividends Per Share ($) Stock Price, End of Year ($) 2897 2534 0.23 0.195 0.175 1920 0.155 0.135 48.84 45.08 39.23 33.02 1223 857 ’10 ’06 ’07 ’09 ’08 Y E A R ’10 ’06 ’07 ’09 ’08 Y E A R 16.95 ’10 ’06 ’07 ’09 ’08 Y E A R ’07 ’09 ’08 Y E A R ’10 299 ’06 Income Statement Data (in thousands, except share data) Year Ended December 31 2010 % CHANGE 2009 Revenues $ 866,036 -14.65% $ 1,014,639 Net income Earnings per share (diluted) 23,687 4.56 -1.40% -2.36% Weighted average shares (diluted) 5,189,263 24,024 4.67 5,146,347 Balance sheet data (in thousands, except percentages) December 31 2010 % CHANGE 2009 Total assets $ 288,426 Working capital Stockholders’ equity Return on equity 54,569 123,776 23.4% 13.56% 18.88% 22.18% $ 253,990 45,902 101,310 31.6% 4 2010 VSE Annual Report and Form 10-K—INTEGRITY • AGILITY • VALUE Message to Stockholders Overview Our operating results for 2010 reflect continuing efforts toward improved profitability. Operating margins increased from 3.8% to 4.4%. Accordingly, net operating income for 2010 remained strong despite the challenges to our revenues resulting from a decline in low margin “pass-through” work. Revenues generated by our direct labor remained strong and continued to provide a valuable contribution to our bottom line. Our improved profit margins in 2010 have enabled us to continue to provide our shareholders with an above average return on equity. Our efforts to further grow our bottom line results will continue to be focused on increases in our direct labor workforce and the pursuit of more profitable business markets. The acquisition of Akimeka represents a key initiative on both of these fronts, as this acquisition brought us over 200 highly skilled, professional employees performing services in one of our targeted strategic markets. Company-wide, we added 363 employees in 2010, ending the year with 2,897 employees. Strategic Planning 2011-2013 Our Strategic Planning process continues to be a successful tool for ensuring our continued success. Throughout 2010, we reviewed the 2010-2012 Strategic Plan on a quarterly basis. We updated the plan in mid-2010 and at the end of the year we launched our 2011-2013 plan. Key focus areas include:  Agility and flexibility are key strengths of VSE Corporation. We continue to operate our business through discreet operating groups dedicated to their unique business lines and customer bases. They have the autonomy to respond quickly to our customers’ needs.  Refinement of our key business metrics. We have established specific goals for each of our operating groups with the express intent to further increase shareholder value.  We continue to focus on improved profitability by securing work that is performed by our own direct labor and strategic partners. Operational Challenges As a federal technical services contractor, we depend upon the priorities and pace of funding of our primary client, the Federal Government. Retaining and expanding our workforce, while clients work through contract award delays and funding issues continues to be an especially challenging effort. We believe there will be a strong demand for expertise in our core areas, and that the composition of our workforce and services we offer are well aligned with near and long term government spending priorities. Declining budgets faced by our federal customers are challenging our efforts to sustain our business levels. Reductions in our customers’ budgets mean more competition for less work. Additionally, budget pressures have led to delayed awards and program launches and to an increasing number of protests. Our efforts to mitigate the delays in new contract awards include a revitalized focus on directing work toward our existing large omnibus contracts. We will continue to aggressively bid and win contracts while monitoring trends and opportunities as we move forward through 2011. Note of Appreciation We would like to take a moment to acknowledge Don Ervine for his exceptional leadership and dedication to the success of VSE Corporation. Throughout his tenure, Don has served VSE Corporation with great distinction, and we are grateful for his contributions to VSE as Chairman of the Board, CEO, COO and President.  Don has been an integral part of VSE’s growth and success over the past 25 years, guiding the company from a small business to $1 billion in revenue in 2008. His commitment to our customers, shareholders and our employees has been stellar. We thank Don for his dedication and extraordinary service, and wish him all the best in the years to come as he has decided to retire from the Board in May of this year. 5 2010 VSE Annual Report and Form 10-K—INTEGRITY • AGILITY • VALUE Looking Ahead While 2010 has been a challenging year for VSE, we have implemented strategies to strengthen our business operations that enhance our ability to secure and execute federal contracts. We have the talent, dedication, experience and leadership in place who remain focused on serving our clients with the same dedication and commitment VSE has always maintained throughout its 52 years of business. Our core values: Integrity – Agility – Value will continue to guide us through all aspects in our conduct of business. Maurice A Gauthier CEO/President/COO March 2011 Clifford M. Kendall Chairman of the Board March 2011 6 2010 VSE Annual Report and Form 10-K—INTEGRITY • AGILITY • VALUE Board of Directors Bonnie K. Wachtel Vice President and General Counsel, Wachtel & Co., Inc. Ralph E. Eberhart General, USAF (Ret.) President, Armed Forces Benefit Association Chairman and Director of 5Star Bank/Life/Funds/Investments Clifford M. Kendall Chairman of the Board 2011 Tech Council of Maryland Lifetime Achievement Award 2010 Government Contractor Hall of Fame Inductee Calvin S. Koonce, Ph.D. Chairman, Koonce Securities, Inc. Securities Broker/Dealer James F. Lafond, CPA Retired Executive; formerly Washington Area Managing Partner, PricewaterhouseCoopers LLP Jimmy D. Ross General, USA (Ret.) Senior Logistics Consultant, Cypress International, Inc. David M. Osnos, Esq. Of Counsel Arent Fox LLP Attorneys-at-Law Donald M. Ervine Retired President/CEO/COO Former VSE Chairman of the Board VSE Corporation Maurice A. Gauthier CEO/President/COO VSE Corporation 7 2010 VSE Annual Report and Form 10-K—INTEGRITY • AGILITY • VALUE VSE Corporation is the federal services company of choice for solving problems of global significance with agility, integrity and value. VSE is dedicated to making our clients successful through the effective use of highly experienced people, systems, and technology in logistics and equipment refurbishment, supply chain management, engineering, IT services, construction program management and consulting. In helping others succeed, we increase shareholder value by capturing new work, exceeding our customers’ expectations, increasing our technical competence, affording more employment opportunities and building great industry teammates. VSE specializes in improving the reliability of systems and equipment and reducing associated costs. Our reputation for success and our quality management system are based on self-governance, openness and honesty. The foundation of VSE’s success also is based on highly experienced leadership, state-of-the-art IT communications, creative thinking, teamwork and motivation. VSE’s policy is to provide services of the highest quality to meet or exceed the expectations and requirements of our customers on time and at a fair price. VSE’s quality management system is registered to the ISO 9001:2008 standard. VSE is proud of our continued growing support to the U.S. military, navies of allied nations and federal and civil agencies. VSE strives to provide our customers with competitive, cost effective solutions to specific problems while remaining true to our roots as a value engineering firm. VSE has adopted the primary community responsibility of assisting wounded warriors, military veterans and their families. NASDAQ: VSEC ISO 9001:2008 Celebrating 52 years of Excellence 8 2010 VSE Annual Report and Form 10-K—INTEGRITY • AGILITY • VALUE Facilities VSE Corporation Headquarters 2550 Huntington Avenue Alexandria, Virginia 22303 (703) 960-4600 or Toll-free: (800) 455-4873 United States Locations Huntsville, Alabama Anchorage, Alaska Fort Smith, Arkansas North Little Rock, Arkansas Texarkana, Arkansas Barstow, California Camp Parks, California China Lake, California Chula Vista, California Concord, California Dublin, California Fort Hunter Liggett, California Fort Irwin, California Fresno, California Jolon, California Los Alamitos, California Los Angeles, California Point Mugu, California Riverside, California Sacramento, California San Diego, California San Jose, California Santa Clara, California Vallejo, California Yermo, California Denver, Colorado Fort Carson, Colorado Lakewood, Colorado Bradley Airport, Connecticut Jacksonville, Florida Maitland, Florida Miami, Florida Tampa, Florida Orlando, Florida Valrico, Florida College Park, Georgia East Point, Georgia Forest Park, Georgia Fort McPherson, Georgia Fort Stewart, Georgia Warner Robbins, Georgia Anderson AFB, Guam Tamuning, Guam Hickam AFB, Hawaii Honolulu, Hawaii Artist rendition of new VSE Headquarters in Springfield, Virginia set to open in Spring 2012. 9 2010 VSE Annual Report and Form 10-K—INTEGRITY • AGILITY • VALUE Facilities Kaneohe Bay, Hawaii Kihei, Hawaii Schofield Barracks, Hawaii Boise, Idaho Mountain Home AFB, Idaho Darien, Illinois Hamel, Illinois Indianapolis, Indiana Des Moines, Iowa Belle Chase NAS, Louisiana Fort Polk, Louisiana Adelphi, Maryland Baltimore, Maryland Columbia, Maryland Fort Meade, Maryland Indian Head, Maryland Lexington Park, Maryland Sterling Heights, Michigan Long Beach, Mississippi Vicksburg, Mississippi Weldon Springs, Missouri Helena, Montana Bridgeport, New Jersey Fort Dix, New Jersey Shrewsbury, New Jersey South Brunswick, New Jersey Sparta, New Jersey Chaparral, New Mexico McGregor, New Mexico Cherry Point, North Carolina Fort Bragg, North Carolina Marine Corps Air Station New River, North Carolina Bismarck, North Dakota Broken Arrow, Oklahoma Fort Sill, Oklahoma Tinker AFB, Oklahoma Midwest City, Oklahoma Coraopolis, Pennsylvania Guaynabo, Puerto Rico Charleston, South Carolina Fort Jackson, South Carolina Marine Corps Air Station, Beaufort, South Carolina 10 Corpus Christi, Texas Fort Bliss, Texas Fort Hood, Texas Fort Sam Houston, Texas Gatesville, Texas Harlingen, Texas San Antonio, Texas Texarkana, Texas Ogden, Utah Salt Lake City, Utah Alexandria, Virginia Arlington, Virginia Ashburn, Virginia Chesapeake, Virginia Fort Monroe, Virginia Hampton, Virginia Ladysmith, Virginia Langley AFB, Virginia Reston, Virginia Ruther Glen, Virginia Fort Lewis, Washington Vancouver, Washington Morgantown, West Virginia Washington, D.C. Fort McCoy, Wisconsin International Locations Afghanistan Armed Forces Africa Alexandria, Egypt Kaiserslautern, Germany Iraq Rome, Italy Atsugi, Japan Kadena AFB/Torri Station, Okinawa, Japan Tokyo, Japan Kuwait Tuxpan, Vera Cruz, Mexico Osan Air Base, Republic of Korea Camp Carroll, South Korea Romania Raohsiong, Taiwan Golchuk, Turkey 2550 Huntington Avenue Alexandria, Virginia 22303-1499 www.vsecorp.com email: info@vsecorp.com (703) 960-4600 (800) 455-4873 7067 Columbia Gateway Drive, Suite 200 1861 Wiehle Avenue, Suite 200 2550 Huntington Avenue 1305 N. Holopono Street, Suite 3 Columbia, Maryland 21046 Reston, Virginia 20190 Alexandria, Virginia 22303 Kihei, Hawaii 96753 www.energetics.com www.gbsolutionsinc.com www.icrcsolutions.com www.akimeka.com (410) 290-0370 (703) 883-1140 (703) 519-9910 (808) 442-7100 

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