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Enters into a Definitive Agreement to Acquire Turbine Controls Inc., Enhancing VSE Aviation's OEM Authorized Repair Capabilities and Further Increasing its Competency in the High-Growth Aviation MRO Market
Completes the Divestiture of Substantially All of the Federal & Defense Segment
Initiates a Process to Explore and Evaluate Strategic Alternatives Involving the Fleet Segment
Pre-Announces Preliminary Fourth Quarter and Full-Year 2023 Financial Results and Provides Update on Full-Year 2024 Guidance
VSE Corporation ("VSE" or the "Company") (NASDAQ:VSEC), a leading provider of aftermarket distribution and repair services, announces three significant strategic actions to transform its portfolio and strengthen its position in the Aviation aftermarket. The Company is also announcing preliminary fourth quarter and full year 2023 financial results and providing an update on full year 2024 guidance. The Company plans to provide additional details and updates during its upcoming earnings call on March 7, 2024.
MANAGEMENT COMMENTARY
"Today marks another important milestone in the execution of VSE's transformation," said John Cuomo, President and CEO of VSE Corporation. "We completed the divestiture of substantially all of the Federal and Defense segment assets, announced a strategic review of our Fleet segment, and entered into a definitive agreement to acquire a market-leading highly technical OEM centric Aviation MRO business. These actions reaffirm our commitment to simplify our business and go-to-market strategy, as we solidify our position as a leading provider of Aviation aftermarket distribution and repair services."
Mr. Cuomo continued, "I am proud to announce the agreement to acquire Turbine Controls, Inc. ("TCI"). Their strong reputation as an MRO leader, along with their commitment to quality and OEM partnership is uniquely aligned with VSE's operating and strategic model. TCI has a long history of serving as a critical OEM partner to the major commercial engine and accessory OEMs. Their diverse repair capabilities across engine components and airframe accessories, serving commercial, military, and business and general aviation markets, will allow us to broaden our OEM Authorized MRO capabilities, expand into new markets, and serve new customers. We are excited to welcome the TCI team to the VSE Aviation family and look forward to building on their history of success as a specialized, highly technical MRO market leader."
Mr. Cuomo concluded, "An ongoing objective of VSE is to drive long-term value for our stakeholders, which includes continuously evaluating our portfolio to ensure we are best positioned to execute on our strategic objectives, and strengthen our balance sheet. We believe an evaluation of strategic alternatives for our Fleet segment is a prudent approach at this time. Throughout this process, we will continue to fully support the growth of our business, our outstanding employees, and our customer and supplier partners."
ACQUISITION OF TURBINE CONTROLS, INC.
VSE announced today that it has signed a definitive agreement to acquire Turbine Controls, Inc., 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. TCI has a strong presence across a large installed base of engine platforms, including several key next-generation platforms. Operating from their MRO centers of excellence in Connecticut and Florida, TCI's offering of jet engine component and accessory repair services includes rotating and static engine components; reduction, transfer and accessory gearboxes; and pneumatic, hydraulic, fuel and oil accessories. TCI's 45-year history of customer excellence and strong original equipment manufacturer ("OEM")-focused repair approach aligns with VSE's OEM-partner focused strategy. VSE will acquire TCI for a total consideration of approximately $120 million, comprising $110 million in cash and $10 million of common shares of the Company, subject to working capital adjustments. The acquisition is expected to close in the second quarter of 2024, subject to customary closing conditions.
FEDERAL AND DEFENSE DIVESTITURE UPDATE
VSE also announced today that the Company has completed the sale of substantially all of its Federal and Defense segment ("FDS") operating assets. The FDS divestitures were completed in two transactions with two buyers for a total cash consideration of $44.0 million, which included $10.0 million of estimated net working capital adjustments (subject to post-closing adjustments). Associated with the sale of the FDS assets, VSE will cease use of the one remaining non-core FDS facility and complete all transition work by the second quarter of 2024. Concurrent with the sale and to reduce expenses and consolidate its operating footprint, VSE will reposition its Alexandria, VA headquarters facility and relocate its corporate headquarters later in 2024.
REVIEW OF STRATEGIC ALTERNATIVES FOR THE FLEET SEGMENT
VSE has initiated a process to explore and evaluate strategic alternatives involving the Company's Fleet segment with a view to enhance shareholder value (the "Strategic Process"). The Strategic Process could include, among other alternatives, a possible sale of the Fleet segment. The Company has not set a definitive timetable for the completion of the Strategic Process, and there can be no assurances that the process will result in a transaction. Any potential strategic alternative will be evaluated by the Board of Directors. The Company does not intend to discuss developments with respect to the evaluation process unless a transaction is approved, or disclosure becomes appropriate. Jefferies LLC has been engaged as the financial advisor in connection with this Strategic Process.
PRELIMINARY FOURTH QUARTER AND FULL YEAR 2023 RESULTS(1)
| 4Q'23 (Preliminary - unaudited) | FY'23 (Preliminary - unaudited) | |||
| Revenue | ~$235 million | ~$860 million | ||
| GAAP Net Income | ~$13 million | ~$43 million | ||
| GAAP EPS (Diluted) | ~$0.82 | ~$3.04 | ||
| Adjusted EBITDA(2) | ~$31 million | ~$114 million | ||
| Adjusted EPS(2) | ~$0.85 | ~$3.31 | ||
| Free Cash Flow(2) | ~$20 million | ~$(40) million |
| (1) | From continuing operations | |
| (2) | Non-GAAP measures, see additional information at the end of this release regarding non-GAAP financial measures |
Posted In: VSEC
