Delaware
|
54-0649263
|
|
(State or other jurisdiction of
incorporation or organization)
|
(I.R.S. Employer
Identification No.)
|
Title of Each Class
|
Name of each exchange on which registered
|
|
Common Stock, $0.05 par value
|
The NASDAQ Global Select Market
|
Page
|
||
ITEM 1.
|
||
4
|
||
5
|
||
6
|
||
7
|
||
ITEM 2.
|
17
|
|
ITEM 3.
|
28
|
|
ITEM 4.
|
28
|
|
ITEM 2.
|
28
|
|
ITEM 6.
|
28
|
|
29
|
||
Unaudited Condensed Consolidated Balance Sheets |
(in thousands except share and per share amounts) |
June 30,
|
December 31,
|
||
2011
|
2010
|
||
Assets
|
|||
Current assets:
|
|||
Cash and cash equivalents
|
$ 648
|
$ 5,764
|
|
Receivables, principally U.S. Government, net
|
153,514
|
156,938
|
|
Inventories
|
38,605
|
-
|
|
Deferred tax assets
|
1,037
|
1,602
|
|
Other current assets
|
12,755
|
9,552
|
|
Total current assets
|
206,559
|
173,856
|
|
Property and equipment, net
|
45,259
|
42,315
|
|
Intangible assets, net
|
112,139
|
25,003
|
|
Goodwill
|
101,023
|
36,282
|
|
Deferred tax assets
|
1,323
|
838
|
|
Other assets
|
17,050
|
10,132
|
|
Total assets
|
$483,353
|
$288,426
|
|
Liabilities and Stockholders’ Equity
|
|||
Current liabilities:
|
|||
Current portion of long-term debt
|
$ 18,750
|
$ 6,667
|
|
Accounts payable
|
67,028
|
75,724
|
|
Accrued expenses
|
29,965
|
36,584
|
|
Dividends payable
|
367
|
312
|
|
Total current liabilities
|
116,110
|
119,287
|
|
Long-term debt
|
173,406
|
11,111
|
|
Deferred compensation
|
8,930
|
6,034
|
|
Long-term lease obligations
|
22,584
|
20,258
|
|
Earn-out obligations
|
29,634
|
7,807
|
|
Other liabilities
|
31
|
153
|
|
Total liabilities
|
350,695
|
164,650
|
|
Commitments and contingencies
|
|||
Stockholders’ equity:
|
|||
Common stock, par value $0.05 per share,
authorized 15,000,000 shares; issued and
outstanding 5,237,923 and 5,193,891,
respectively
|
262
|
260
|
|
Additional paid-in capital
|
16,871
|
15,692
|
|
Retained earnings
|
115,525
|
107,824
|
|
Total stockholders’ equity
|
132,658
|
123,776
|
|
Total liabilities and stockholders’ equity
|
$483,353
|
$288,426
|
Unaudited Condensed Consolidated Statements of Income
|
(in thousands except share and per share amounts) |
For the three months
|
For the six months
|
|||||||||||||||
ended June 30,
|
ended June 30,
|
|||||||||||||||
2011
|
2010
|
2011
|
2010
|
|||||||||||||
Revenues:
|
||||||||||||||||
Services
|
$ | 144,614 | $ | 207,763 | $ | 292,861 | $ | 434,527 | ||||||||
Products
|
13,932 | 4,710 | 16,929 | 6,122 | ||||||||||||
Total revenues
|
158,546 | 212,473 | 309,790 | 440,649 | ||||||||||||
Contract costs:
|
||||||||||||||||
Services
|
137,611 | 198,863 | 279,037 | 416,870 | ||||||||||||
Products
|
11,733 | 3,200 | 13,821 | 4,420 | ||||||||||||
Total contract costs
|
149,344 | 202,063 | 292,858 | 421,290 | ||||||||||||
Selling, general and administrative expenses
|
1,929 | 457 | 2,750 | 755 | ||||||||||||
Operating income
|
7,273 | 9,953 | 14,182 | 18,604 | ||||||||||||
Interest expense, net
|
440 | 19 | 584 | 14 | ||||||||||||
Income before income taxes
|
6,833 | 9,934 | 13,598 | 18,590 | ||||||||||||
Provision for income taxes
|
2,622 | 3,831 | 5,215 | 7,089 | ||||||||||||
Net income
|
$ | 4,211 | $ | 6,103 | $ | 8,383 | $ | 11,501 | ||||||||
Basic and diluted weighted average shares outstanding
|
5,237,337 | 5,191,909 | 5,225,899 | 5,186,191 | ||||||||||||
Basic and diluted earnings per share
|
$ | 0.80 | $ | 1.18 | $ | 1.60 | $ | 2.22 | ||||||||
Dividends declared per share
|
$ | 0.07 | $ | 0.06 | $ | 0.13 | $ | 0.11 |
Unaudited Condensed Consolidated Statements of Cash Flows |
(in thousands) |
For the six months
|
||||||||
ended June 30,
|
||||||||
2011
|
2010
|
|||||||
Cash flows from operating activities:
|
||||||||
Net income
|
$ | 8,383 | $ | 11,501 | ||||
Adjustments to reconcile net income to net cash
|
||||||||
provided by operating activities:
|
||||||||
Depreciation and amortization
|
5,409 | 4,267 | ||||||
(Gain) loss on sale of property and equipment
|
(1 | ) | 10 | |||||
Deferred taxes
|
80 | (51 | ) | |||||
Stock-based compensation
|
307 | 392 | ||||||
Earn-out obligation adjustment
|
(955 | ) | - | |||||
Changes in operating assets and liabilities, net of impact of acquisition:
|
||||||||
Receivables, net
|
15,377 | 36,652 | ||||||
Inventories
|
(1,081 | ) | - | |||||
Other current assets and noncurrent assets
|
(4,531 | ) | 738 | |||||
Accounts payable and deferred compensation
|
(14,060 | ) | (44,315 | ) | ||||
Accrued expenses
|
(7,582 | ) | (5,181 | ) | ||||
Long-term lease obligations
|
26 | (12 | ) | |||||
Other liabilities
|
(122 | ) | - | |||||
Net cash provided by operating activities
|
1,250 | 4,001 | ||||||
Cash flows from investing activities:
|
||||||||
Purchases of property and equipment
|
(2,101 | ) | (2,565 | ) | ||||
Proceeds from the sale of property and equipment
|
7 | - | ||||||
Cash paid for acquisition, net of cash acquired
|
(174,932 | ) | - | |||||
Earn-out obligation payments
|
(1,384 | ) | (1,845 | ) | ||||
Net cash used in investing activities
|
(178,410 | ) | (4,410 | ) | ||||
Cash flows from financing activities:
|
||||||||
Borrowings on loan arrangement
|
314,517 | 120,366 | ||||||
Repayments on loan arrangement
|
(140,139 | ) | (120,366 | ) | ||||
Payment of debt financing costs
|
(1,707 | ) | - | |||||
Dividends paid
|
(627 | ) | (518 | ) | ||||
Net cash provided by (used in) financing activities
|
172,044 | (518 | ) | |||||
|
||||||||
Net decrease in cash and cash equivalents
|
(5,116 | ) | (927 | ) | ||||
Cash and cash equivalents at beginning of period
|
5,764 | 8,024 | ||||||
Cash and cash equivalents at end of period
|
$ | 648 | $ | 7,097 |
Three months
|
Six months
|
|||||||||||||||
2011
|
2010
|
2011
|
2010
|
|||||||||||||
Revenues:
|
||||||||||||||||
Federal Group
|
$ | 52,747 | $ | 128,755 | $ | 119,095 | $ | 258,521 | ||||||||
International Group
|
54,682 | 52,939 | 106,392 | 122,187 | ||||||||||||
IT, Energy and Management
Consulting Group
|
27,603 | 21,336 | 54,966 | 41,628 | ||||||||||||
Infrastructure Group
|
12,838 | 9,443 | 18,661 | 18,313 | ||||||||||||
Supply Chain
Management Group
|
10,676 | - | 10,676 | - | ||||||||||||
Total revenues
|
$ | 158,546 | $ | 212,473 | $ | 309,790 | $ | 440,649 | ||||||||
Operating income:
|
||||||||||||||||
Federal Group
|
$ | 3,172 | $ | 6,059 | $ | 5,716 | $ | 10,843 | ||||||||
International Group
|
1,800 | 1,841 | 3,716 | 3,883 | ||||||||||||
IT, Energy and
Management Consulting
Group
|
3,133 | 2,450 | 5,477 | 4,434 | ||||||||||||
Infrastructure Group
|
214 | 188 | 446 | 469 | ||||||||||||
Supply Chain
Management Group
|
1,959 | - | 1,959 | - | ||||||||||||
Corporate/unallocated
expenses
|
(3,005 | ) | (585 | ) | (3,132 | ) | (1,025 | ) | ||||||||
Operating income
|
$ | 7,273 | $ | 9,953 | $ | 14,182 | $ | 18,604 | ||||||||
June 30,
|
December 31
|
|||||||||||||||
2011 | 2010 | |||||||||||||||
Total assets:
|
||||||||||||||||
Federal Group
|
$ | 51,784 | $ | 67,452 | ||||||||||||
International Group
|
57,005 | 62,062 | ||||||||||||||
IT, Energy and Management Consulting Group
|
29,095 | 24,658 | ||||||||||||||
Infrastructure Group
|
15,414 | 21,239 | ||||||||||||||
Supply Chain
Management Group
|
58,058 | - | ||||||||||||||
Corporate
|
271,997 | 113,015 | ||||||||||||||
Total assets
|
$ | 483,353 | $ | 288,426 |
Three months
|
Six months
|
|||||||||||||||
ended June 30,
|
ended June 30,
|
|||||||||||||||
Source of Revenues |
2011
|
2010
|
2011
|
2010
|
||||||||||||
Army/Army Reserve
|
$ | 64,615 | $ | 127,325 | $ | 140,263 | $ | 254,736 | ||||||||
Navy
|
38,842 | 37,989 | 74,932 | 91,765 | ||||||||||||
Department of Transportation
|
9,786 | 8,553 | 13,290 | 16,533 | ||||||||||||
U.S. Postal Service
|
9,581 | - | 9,581 | - | ||||||||||||
Department of Treasury
|
9,094 | 12,099 | 20,744 | 24,003 | ||||||||||||
Other
|
26,628 | 26,507 | 50,980 | 53,612 | ||||||||||||
Total revenues
|
$ | 158,546 | $ | 212,473 | $ | 309,790 | $ | 440,649 |
Fair
|
|||||
Description
|
Value
|
||||
Cash
|
$ | 3,163 | |||
Accounts receivable
|
11,953 | ||||
Inventories
|
37,524 | ||||
Other current assets
|
3,940 | ||||
Property and equipment
|
1,637 | ||||
Intangibles – customer-related
|
69,400 | ||||
Intangibles – acquired technologies
|
12,400 | ||||
Intangibles – trade name
|
7,600 | ||||
Current liabilities
|
(10,367 | ) | |||
Net identifiable assets acquired
|
137,250 | ||||
Goodwill
|
63,627 | ||||
Total consideration
|
$ | 200,877 | |||
Cash consideration
|
$ | 178,095 | |||
Acquisition date fair value of earn-out obligation
|
22,782 | ||||
Total consideration
|
$ | 200,877 | |||
Six months
ended June 30,
|
||||||||
2011
|
2010
|
|||||||
Revenues
|
$ | 378,227 | $ | 518,073 | ||||
Net income
|
$ | 15,302 | $ | 18,356 | ||||
Basic and diluted earnings per share
|
$ | 2.93 | $ | 3.54 |
Supply Chain
Management
|
IT, Energy and
Management
Consulting
|
Infrastructure
|
Total
|
|||||||||||||
Balance as of December 31, 2010
|
$ | - | $ | 29,769 | $ | 6,513 | $ | 36,282 | ||||||||
Increase from acquisition of WBI
|
63,627 | - | - | 63,627 | ||||||||||||
Earn-out obligation
|
- | 1,114 | - | 1,114 | ||||||||||||
Balance as of June 30, 2011
|
$ | 63,627 | $ | 30,883 | $ | 6,513 | $ | 101,023 |
June 30, 2011
|
Cost
|
Accumulated
Amortization
|
Net Intangible
Assets
|
|||||||||
Contract-related
|
$ | 96,884 | $ | (8,457 | ) | $ | 88,427 | |||||
Acquired technologies
|
12,400 | (78 | ) | 12,322 | ||||||||
Trade names – amortizable
|
9,170 | (210 | ) | 8,960 | ||||||||
Trade names – indefinite lived
|
2,430 | - | 2,430 | |||||||||
Total
|
$ | 120,884 | $ | (8,745 | ) | $ | 112,139 |
December 31, 2010
|
Cost
|
Accumulated
Amortization
|
Net Intangible
Assets
|
|||||||||
Contract-related
|
$ | 27,484 | $ | (6,417 | ) | $ | 21,067 | |||||
Trade name – amortizable
|
1,570 | (64 | ) | 1,506 | ||||||||
Trade names – indefinite lived
|
2,430 | - | 2,430 | |||||||||
Total
|
$ | 31,484 | $ | (6,481 | ) | $ | 25,003 |
Amounts Recorded at Fair Value
|
Financial Statement Classification
|
Fair Value Hierarchy
|
Fair Value
|
|||
Non-COLI assets held in DSC Plan
|
Other assets
|
Level 1
|
$ 313
|
|||
Deferred compensation liability related to the DSC Plan
|
Deferred compensation
|
Level 2
|
$ 8,930
|
|||
Earn-out obligation
|
Earn-out obligations
|
Level 3
|
$29,634
|
Concentration of Revenues
|
||||||||||||||||
(in thousands)
|
||||||||||||||||
For the six months ended June 30,
|
||||||||||||||||
2011
|
2010
|
|||||||||||||||
Source of Revenue
|
Revenue
|
%
|
Revenue
|
%
|
||||||||||||
CED Assured Mobility Systems
|
$ | 50,770 | 17 | $ | 92,759 | 21 | ||||||||||
GLOBAL FMS
|
50,459 | 16 | 57,915 | 13 | ||||||||||||
ELD US Army Reserve
|
32,797 | 11 | 30,331 | 7 | ||||||||||||
Treasury/ATF Seized Asset Programs
|
15,035 | 5 | 22,859 | 5 | ||||||||||||
PIEP Contract
|
13,290 | 4 | 16,533 | 4 | ||||||||||||
USPS NOA
|
9,581 | 3 | - | - | ||||||||||||
RCV Modernization
|
484 | - | 36,784 | 8 | ||||||||||||
Other
|
137,374 | 44 | 183,468 | 42 | ||||||||||||
Total Revenues
|
$ | 309,790 | 100 | $ | 440,649 | 100 |
(in millions)
|
||||||||
2011
|
2010
|
|||||||
Bookings
|
$ | 240 | $ | 458 | ||||
Revenues
|
$ | 310 | $ | 441 | ||||
Funded Contract Backlog
|
$ | 310 | $ | 491 |
Six months
ended June 30,
|
||||||||||||||||
Contract Type
|
2011
|
%
|
2010
|
%
|
||||||||||||
Cost-type
|
$ | 92,075 | 30 | $ | 109,203 | 25 | ||||||||||
Time and materials
|
164,182 | 53 | 305,326 | 69 | ||||||||||||
Fixed-price
|
53,533 | 17 | 26,120 | 6 | ||||||||||||
$ | 309,790 | 100 | $ | 440,649 | 100 |
Three months
|
Six months
|
Change
|
|||||||||||||||||||||||
ended June 30,
|
ended June 30,
|
Three
|
Six
|
||||||||||||||||||||||
2011
|
2010
|
2011
|
2010
|
Months
|
Months
|
||||||||||||||||||||
Revenues
|
$ | 158,546 | $ | 212,473 | $ | 309,790 | $ | 440,649 | $ | (53,927 | ) | $ | (130,859 | ) | |||||||||||
Contract costs
|
149,344 | 202,063 | 292,858 | 421,290 | (52,719 | ) | (128,432 | ) | |||||||||||||||||
Selling, general and administrative expenses
|
1,929 | 457 | 2,750 | 755 | 1,472 | 1,995 | |||||||||||||||||||
Operating Income
|
7,273 | 9,953 | 14,182 | 18,604 | (2,680 | ) | (4,422 | ) | |||||||||||||||||
Interest expense, net
|
440 | 19 | 584 | 14 | 421 | 570 | |||||||||||||||||||
Income before income taxes
|
6,833 | 9,934 | 13,598 | 18,590 | (3,101 | ) | (4,992 | ) | |||||||||||||||||
Provision for income taxes
|
2,622 | 3,831 | 5,215 | 7,089 | (1,209 | ) | (1,874 | ) | |||||||||||||||||
Net Income
|
$ | 4,211 | $ | 6,103 | $ | 8,383 | $ | 11,501 | $ | (1,892 | ) | $ | (3,118 | ) |
Three months
|
Six months
|
Change
|
||||||||||||||||||||||
ended June 30,
|
ended June 30,
|
Three
|
Six
|
|||||||||||||||||||||
2011
|
2010
|
2011
|
2010
|
Months
|
Months
|
|||||||||||||||||||
Revenues
|
$ | 52,747 | $ | 128,755 | $ | 119,095 | $ | 258,521 | $ | (76,008 | ) | $ | (139,426 | ) | ||||||||||
Operating Income
|
$ | 3,172 | $ | 6,059 | $ | 5,716 | $ | 10,843 | $ | (2,887 | ) | $ | (5,127 | ) | ||||||||||
Profit percentage
|
6.0 | % | 4.7 | % | 4.8 | % | 4.2 | % |
Three months
|
Six months
|
Change
|
||||||||||||||||||||||
ended June 30,
|
ended June 30,
|
Three
|
Six
|
|||||||||||||||||||||
2011
|
2010
|
2011
|
2010
|
Months
|
Months
|
|||||||||||||||||||
Revenues
|
$ | 54,682 | $ | 52,939 | $ | 106,392 | $ | 122,187 | $ | 1,743 | $ | (15,795 | ) | |||||||||||
Operating Income
|
$ | 1,800 | $ | 1,841 | $ | 3,716 | $ | 3,883 | $ | (41 | ) | $ | (167 | ) | ||||||||||
Profit percentage
|
3.3 | % | 3.5 | % | 3.5 | % | 3.2 | % |
Three months
|
Six months
|
Change
|
||||||||||||||||||||||
ended June 30,
|
ended June 30,
|
Three
|
Six
|
|||||||||||||||||||||
2011
|
2010
|
2011
|
2010
|
Months
|
Months
|
|||||||||||||||||||
Revenues
|
$ | 27,603 | $ | 21,336 | $ | 54,966 | $ | 41,628 | $ | 6,267 | $ | 13,338 | ||||||||||||
Operating Income
|
$ | 3,133 | $ | 2,450 | $ | 5,477 | $ | 4,434 | $ | 683 | $ | 1,043 | ||||||||||||
Profit percentage
|
11.4 | % | 11.5 | % | 10.0 | % | 10.7 | % |
Three months
|
Six months
|
Change
|
||||||||||||||||||||||
ended June 30,
|
ended June 30,
|
Three
|
Six
|
|||||||||||||||||||||
2011
|
2010
|
2011
|
2010
|
Months
|
Months
|
|||||||||||||||||||
Revenues
|
$ | 12,838 | $ | 9,443 | $ | 18,661 | $ | 18,313 | $ | 3,395 | $ | 348 | ||||||||||||
Operating Income
|
$ | 214 | $ | 188 | $ | 446 | $ | 469 | $ | 26 | $ | (23 | ) | |||||||||||
Profit percentage
|
1.7 | % | 2.0 | % | 2.4 | % | 2.6 | % |
Three months
|
Six months
|
Change
|
||||||||||||||||||||||
ended June 30,
|
ended June 30,
|
Three
|
Six
|
|||||||||||||||||||||
2011
|
2010
|
2011
|
2010
|
Months
|
Months
|
|||||||||||||||||||
Revenues
|
$ | 10,676 | $ | - | $ | 10,676 | $ | - | $ | 10,676 | $ | 10,676 | ||||||||||||
Operating Income
|
$ | 1,959 | $ | - | $ | 1,959 | $ | - | $ | 1,959 | $ | 1,959 | ||||||||||||
Profit percentage
|
18.3 | % | 18.3 | % |
Current Maximum Ratio
|
Actual Ratio
|
|
Total Funded Debt/EBITDA Ratio
|
3.50 to 1
|
2.54 to 1
|
Minimum Ratio
|
Actual Ratio
|
|
Fixed Charge Coverage Ratio
|
1.20 to 1
|
2.93 to 1
|
(a) Exhibits
|
|
Exhibit 101.INS
|
XBRL Instance Document
|
Exhibit 101.SCH
|
XBRL Taxonomy Extension Schema Document
|
Exhibit 101.CAL
|
XBRL Taxonomy Extension Calculation Linkbase Document
|
Exhibit 101.DEF
|
XBRL Taxonomy Extension Definition Linkbase Document
|
Exhibit 101.LAB
|
XBRL Taxonomy Extension Label Linkbase Document
|
Exhibit 101.PRE
|
XBRL Taxonomy Extension Presentation Document
|
VSE CORPORATION
|
|||
Date: August 1, 2011
|
By:
|
/s/ M. A. Gauthier
|
|
M. A. Gauthier
|
|||
Chief Executive Officer,
|
|||
President and Chief Operating
|
|||
Officer
|
Date: August 1, 2011
|
By:
|
/s/ T. R. Loftus
|
|
T. R. Loftus
|
|||
Executive Vice President and
|
|||
Chief Financial Officer
|
|||
(Principal Accounting Officer)
|
Date: August 1, 2011
|
/s/ M. A. Gauthier
|
|
M. A. Gauthier
|
||
Chief Executive Officer, President
|
||
and Chief Operating Officer
|
Date: August 1, 2011
|
/s/ T. R. Loftus
|
|
T. R. Loftus
|
||
Executive Vice President and
|
||
Chief Financial Officer
|
||
(Principal Accounting Officer)
|
Date: August 1, 2011
|
/s/ M. A. Gauthier
|
|
M. A. Gauthier
|
||
Chief Executive Officer, President
|
||
and Chief Operating Officer
|
Date: August 1, 2011
|
/s/ T. R. Loftus
|
|
T. R. Loftus
|
||
Executive Vice President and
|
||
Chief Financial Officer
|
||
(Principal Accounting Officer)
|
Condensed Consolidated Balance Sheets (Unaudited) (Parenthetical) (USD $)
|
Jun. 30, 2011
|
Dec. 31, 2010
|
---|---|---|
Stockholders' equity: | Â | Â |
Common stock, par value (in dollars per share) | $ 0.05 | $ 0.05 |
Common stock, authorized (in shares) | 15,000,000 | 15,000,000 |
Common stock, issued (in shares) | 5,237,923 | 5,193,891 |
Common stock, outstanding (in shares) | 5,237,923 | 5,193,891 |
Condensed Consolidated Statements of Income (Unaudited) (USD $)
In Thousands, except Share data |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2011
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Jun. 30, 2010
|
Jun. 30, 2011
|
Jun. 30, 2010
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Income Statement [Abstract] | Â | Â | Â | Â |
Services | $ 144,614 | $ 207,763 | $ 292,861 | $ 434,527 |
Products | 13,932 | 4,710 | 16,929 | 6,122 |
Revenue, Net | 158,546 | 212,473 | 309,790 | 440,649 |
Services | 137,611 | 198,863 | 279,037 | 416,870 |
Products | 11,733 | 3,200 | 13,821 | 4,420 |
Contract costs | 149,344 | 202,063 | 292,858 | 421,290 |
Selling, general and administrative expenses | 1,929 | 457 | 2,750 | 755 |
Operating income | 7,273 | 9,953 | 14,182 | 18,604 |
Interest expense (income), net | 440 | 19 | 584 | 14 |
Income before income taxes | 6,833 | 9,934 | 13,598 | 18,590 |
Provision for income taxes | 2,622 | 3,831 | 5,215 | 7,089 |
Net income | $ 4,211 | $ 6,103 | $ 8,383 | $ 11,501 |
Basic and diluted weighted average shares outstanding | 5,237,337 | 5,191,909 | 5,225,899 | 5,186,191 |
Basic and diluted earnings per share | $ 0.80 | $ 1.18 | $ 1.60 | $ 2.22 |
Dividends declared per share | $ 0.07 | $ 0.06 | $ 0.13 | $ 0.11 |
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Document And Entity Information (USD $)
|
6 Months Ended | |
---|---|---|
Jun. 30, 2011
|
Jun. 30, 2010
|
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Entity Registrant Name | VSE Corporation | Â |
Entity Central Index Key | 0000102752 | Â |
Current Fiscal Year End Date | --12-31 | Â |
Entity Well-known Seasoned Issuer | No | Â |
Entity Voluntary Filers | No | Â |
Entity Current Reporting Status | No | Â |
Entity Filer Category | Accelerated Filer | Â |
Entity Public Float | Â | $ 130,911,044 |
Entity Common Stock, Shares Outstanding | 5,237,923 | Â |
Document Fiscal Year Focus | 2011 | Â |
Document Fiscal Period Focus | Q2 | Â |
Document Type | 10-Q | Â |
Amendment Flag | false | Â |
Document Period End Date | Jun. 30, 2011 |
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Business Segments and Customer Information
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Jun. 30, 2011
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Business Segments and Customer Information [Abstract] | Â | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Business Segments and Customer Information | (7) Business Segments and Customer Information Business Segments Management of our business operations is conducted under five reportable operating segments: the Federal Group, the International Group, the IT, Energy and Management Consulting Group, the Infrastructure Group, and the Supply Chain Management Group. These segments operate under separate management teams and financial information is produced for each segment. The entities within each of the Federal Group, International Group, and IT, Energy and Management Consulting Group reportable segments meet the aggregation of operating segments criteria as defined by the accounting standard for segment reporting. We evaluate segment performance based on consolidated revenues and profits or losses from operations before income taxes. Federal Group - Our Federal Group provides legacy equipment sustainment, engineering, technical, management, integrated logistics support and information technology services to DoD and other government agencies. The Federal Group consists of four divisions: CED, ELD, FSS and SED. International Group - Our International Group provides engineering, industrial, logistics and foreign military sales services to the U.S. military and other government agencies. It consists of two divisions: GLOBAL and FMD. IT, Energy and Management Consulting Group – Our IT, Energy and Management Consulting Group provides technical and consulting services primarily to various civilian government agencies. This group consists of Energetics, G&B and, since August 2010, Akimeka. Infrastructure Group – Our Infrastructure Group is engaged principally in providing diversified technical and management services to the government, including transportation infrastructure services, construction management services and aerospace services. This group consists of ICRC. Supply Chain Management Group – Our Supply Chain Management Group supplies vehicle parts. This group consists of WBI, acquired on June 6, 2011. Our segment information is as follows (in thousands): For the three- and six-month periods ended June 30,
Customer Information Our revenue by customer is as follows (in thousands):
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Debt
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6 Months Ended |
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Jun. 30, 2011
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Debt [Abstract] | Â |
Debt | (3) Debt We have a loan agreement with a group of banks that was entered into in June 2011 to make the WBI acquisition and provide working capital for our continuing operations. The loan agreement consists of a term loan facility and a revolving loan facility, and the revolving loan facility provides us with letters of credit. The loan agreement, which expires in June 2016, replaced a loan agreement that also consisted of a term loan, revolving loan, and letters of credit. The term loan requires payments in quarterly installments based on an accelerating amortization schedule, with fifteen percent of the original $125 million principal amount due in each of the first two years, twenty percent due in each of years three and four, and thirty percent due in year five. The amount of term loan borrowings outstanding as of June 30, 2011 is approximately $120.3 million. The amount of term loan borrowings outstanding on the predecessor loan agreement as of December 31, 2010 was approximately $17.8 million. Our scheduled term loan payments are: $9.4 million before 2012, $18.8 million in 2012, $23.4 million in 2013, $25 million in 2014, $34.3 million in 2015, and $9.4 million in 2016. The maximum amount of credit available to us for revolving loans and letters of credit as of June 30, 2011 was $125 million and the loan agreement has a provision whereby we may elect to increase this maximum to a total of $175 million. We may borrow revolving loan amounts at any time and can repay the borrowings at any time without premium or penalty. We pay fees on letters of credit that are issued. We had approximately $71.9 million in revolving loan borrowings outstanding and $5 million of letters of credit outstanding as of June 30, 2011. We had approximately $6.9 million of letters of credit outstanding and no revolving loan borrowings outstanding as of December 31, 2010 on the predecessor loan agreement. Total borrowed funds outstanding as of June 30, 2011, including both term loan borrowings and revolving loan borrowings, were approximately $192.2 million. Total borrowed funds outstanding as of December 31, 2010, were approximately $17.8 million. We incurred financing costs of approximately $1.7 million in connection with this loan agreement. These costs were capitalized and will be amortized over the life of the loan, which is five years. We pay interest on the term loan borrowings and revolving loan borrowings at LIBOR plus a base margin or at a base rate (typically the prime rate) plus a base margin. The LIBOR base margin as of June 30, 2011 is 2.25% and the base rate base margin as of June 30, 2011 is 0.5%. The base margins decline in steps as our Total Funded Debt/Earnings Before Interest, Taxes, Depreciation and Amortization (“EBITDA”) ratio declines. As of June 30, 2011, interest rates on portions of our outstanding debt ranged from 2.44% to 3.75%. The effective interest rate on our aggregate outstanding debt as of June 30, 2011 was 2.51%. Interest expense incurred on bank loan borrowings for the three months ended June 30, 2011 was approximately $448 thousand and approximately $35 thousand for the same period of the prior year. Interest expense incurred on bank loan borrowings for the six months ended June 30, 2011 was approximately $614 thousand and approximately $67 thousand for the same period of the prior year. The loan agreement contains collateral requirements that secure our assets, restrictive covenants, other affirmative and negative covenants, and subjects us to certain conditions and limitations. Restrictive covenants include a maximum Total Funded Debt/EBITDA ratio, which decreases over time, and a minimum Fixed Charge Coverage Ratio. We were in compliance with required ratios and other terms and conditions at June 30, 2011. |
Goodwill and Intangible Assets
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Jun. 30, 2011
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Goodwill [Abstract] | Â | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Goodwill | (9) Goodwill and Intangible Assets Changes in goodwill for the six months ended June 30, 2011 are as follows (in thousands):
Under the terms of the ICRC and G&B acquisitions, additional consideration is due to the sellers if certain financial performance targets are achieved. G&B achieved certain financial performance targets for the final earn-out period ended on March 31, 2011. This resulted in a $1.1 million earn-out, which was recorded as goodwill and paid to the seller in the second quarter of 2011. Intangible assets consist of the value of contract-related intangible assets, acquired technologies and trade names acquired in the acquisitions of ICRC, G&B, Akimeka and WBI. Intangible assets with indefinite lives not subject to amortization consist of ICRC and G&B trade names of approximately $2.4 million as of June 30, 2011 and December 31, 2010. The trade names acquired in the Akimeka and WBI acquisitions are being amortized over nine years. Intangible assets consisted of the following (in thousands):
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Lease Commitments
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6 Months Ended |
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Jun. 30, 2011
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Lease Commitments [Abstract] | Â |
Lease Commitments | (10) Lease Commitments We signed a lease in November 2009 for a building that will serve as our headquarters beginning in the Spring of 2012. Certain terms in the lease agreement resulted in the capitalization of construction costs due to specific accounting rules. We have recorded a construction asset and corresponding long-term liability of approximately $21.5 million and $19.2 million, respectively, on the accompanying June 30, 2011 and December 31, 2010 consolidated balance sheets in connection with this lease, which represents the construction costs incurred by the landlord as of the respective balance sheet dates. |
Acquisitions
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Jun. 30, 2011
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Acquisition [Abstract] | Â | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Acquisition | (8) Acquisitions Wheeler Bros., Inc. On June 6, 2011, we acquired WBI, a supply chain management company headquartered in Somerset, PA. WBI supplies vehicle parts to the U.S. Postal Service and the Department of Defense (“DoD”). We see significant opportunities for leveraging WBI’s supply chain capabilities with our work of extending the service lives of legacy ships, vehicles, aircraft and their systems. Cash paid at closing was $180 million, which includes approximately $1.9 million of prepaid retention bonuses that are being expensed in the post-acquisition period as the employees provide service. As such, the initial cash purchase price was approximately $178.1 million. WBI’s results of operations are included in the accompanying consolidated financial statements beginning June 6, 2011. WBI had revenues of approximately $10.7 million and operating income of approximately $2 million from the acquisition date through June 30, 2011. For the acquisition of WBI, we recorded assets acquired and liabilities assumed at their fair values as of the acquisition date. We incurred acquisition-related transaction costs of approximately $1.4 million and $1.8 million for the three- and six-month periods ended June 30, 2011, respectively, which included financial advisory, legal, accounting and other external costs directly related to the acquisition and are included in the selling, general and administrative expenses in the accompanying statements of income. We plan to file an election under Internal Revenue Code Section 338(h) (10) to treat the WBI acquisition as a sale of assets for tax purposes. We will make a payment to the sellers for the sellers’ incremental tax liabilities as a result of the election. Tax advantages to us that will result from the 338(h) (10) election are expected to significantly exceed the additional payment that will be made to the sellers. The additional federal and state income tax liabilities paid to the sellers will be recorded as additional purchase price. We may be required to make additional payments of up to an aggregate of $40 million over a four year post-closing period if WBI achieves certain financial performance targets. Included in earn-out obligations on the June 30, 2011 balance sheet is an earn-out liability of approximately $22.8 million which represents our best estimate of the present value of the earn-out obligation. We are in the process of finalizing the detailed valuation of this earn-out obligation and the final result of the valuation may differ from management’s estimate currently recorded. The balance will be adjusted, if necessary, to reflect the final result. After the valuation of the earn-out obligation as of the acquisition date is finalized, it will be re-measured each reporting period and any changes will be recognized in our statement of operations for such period. The total estimated purchase price was allocated to WBI’s net assets based on their estimated fair value as of June 6, 2011. We recorded the excess of the purchase price over the net assets as goodwill. The allocation of the purchase price shown in the table below is preliminary and subject to change based on finalizing our detailed valuations. We allocated the purchase price as follows (in thousands):
The amount of goodwill recorded for the WBI acquisition as of the acquisition date was approximately $63.6 million and reflects the strategic advantage of adding supply chain management to the work we have historically performed to extend the life of military ships, vehicles, aircrafts and their installed systems. We believe that the supply chain capabilities we gain through the acquisition of WBI will enable vertical market expansion in our core business of sustaining legacy platforms and systems. The goodwill recognized is expected to be deductible for income tax purposes. Of the purchase price, $69.4 million was recorded as a customer-related intangible asset that will be amortized on a straight-line basis over 12 years. Approximately $12.4 million was recorded as an acquired technologies intangible asset that will be amortized on a straight-line basis over 11 years. In addition, $7.6 million was allocated to WBI’s trade name that will be amortized on a straight-line basis over nine years. The fair values assigned to the intangible assets acquired were based on preliminary estimates, assumptions, and other information compiled by management, including independent valuations that utilized established valuation techniques. The following unaudited pro forma information has been presented as if the WBI acquisition had occurred on January 1, 2010. This information is based on historical results of operations, adjusted for the allocation of purchase price and other acquisition accounting adjustments, and is not necessarily indicative of results had we completed the WBI acquisition on January 1, 2010. The proforma net income has been adjusted to exclude approximately $1.8 million and $5.0 million of VSE and WBI acquisition-related transaction costs for the six-month period ended June 30, 2011, respectively.
Akimeka On August 19, 2010, we acquired Akimeka, which is headquartered in Hawaii with offices in Virginia, Florida and Texas. Akimeka is a health services information technology consulting company serving the government market. Akimeka is a recognized leader in the DoD health services and logistics sector dedicated to delivering innovative IT solutions. Akimeka complements our subsidiary, G&B. Cash paid at closing was $33 million, which includes $725 thousand of prepaid retention bonuses that are being expensed in the post-acquisition period as the employees provide service. As such, the initial cash purchase price was $32.3 million. Additional cash consideration of approximately $363 thousand was paid in December 2010 to the sellers based on the final working capital calculation. Akimeka's results of operations are included in the accompanying consolidated financial statements beginning August 19, 2010. We may be required to make additional earn-out payments of up to an aggregate of $11 million over a three-year post-closing period if Akimeka achieves certain financial performance targets. Included in earn-out obligations on the June 30, 2011 balance sheet is an earn-out liability of approximately $6.9 million that represents our best estimate of the present value of the earn-out obligation. We estimated the fair value by using the expected cash flow approach with probability-weighted revenue inputs and using an appropriate discount rate. Interest expense and subsequent changes in the fair value of the earn-out obligations will be recognized in earnings in the period of the change through settlement. We recorded an adjustment of $955 thousand related to the decrease in the fair value of the earn-out obligation during the six months ended June 30, 2011 as a reduction of contract costs and earn-out obligations. |
Nature of Business and Basis of Presentation
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6 Months Ended |
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Jun. 30, 2011
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Nature of Business and Basis of Presentation [Abstract] | Â |
Nature of Business and Basis of Presentation | (1) Nature of Business and Basis of Presentation Our business is focused on providing sustainment services for U.S. Department of Defense ("DoD") legacy systems and equipment and professional services to DoD and Federal Civilian agencies. Our operations consist primarily of logistics, engineering, equipment refurbishment, supply chain management, information technology (“IT”) solutions, health care IT, construction management and consulting services performed on a contract basis. Substantially all of our contracts are with United States Government (“government”) agencies and other government prime contractors. Our active, unincorporated divisions include GLOBAL Division (“GLOBAL”), Communications and Engineering Division (“CED”), Engineering and Logistics Division (“ELD”), Field Support Services Division (“FSS”), Fleet Maintenance Division (“FMD”), and Systems Engineering Division (“SED”). Our active subsidiaries are Energetics Incorporated (“Energetics”), Integrated Concepts and Research Corporation (“ICRC”), G&B Solutions, Inc. (“G&B”), Akimeka, LLC (“Akimeka”), which we acquired on August 19, 2010, and Wheeler Bros., Inc. (“WBI”), which we acquired on June 6, 2011. Our accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements. In our opinion, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three- and six-months ended June 30, 2011 are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2011. For further information refer to the consolidated financial statements and footnotes thereto included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2010. The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Significant estimates affecting the financial statements include accruals for contract disallowance reserves, self-insured health claims and earn-out obligations related to acquisitions consummated after January 1, 2009. As a result of our acquisition of WBI, we are separately presenting revenue and contract costs for products and services. Revenue and contract costs amounts from the prior year have been reclassified to conform to the current year presentation. We have made the following additions to our significant accounting policies as a result of the acquisition of WBI (see Note 8): Inventories Inventories are stated at the lower of cost or market using the first-in, first-out (“FIFO”) method. Included in inventory are related purchasing, storage, and handling costs. Our inventory primarily consists of vehicle replacement parts. Revenue Recognition Substantially all of the revenues for WBI result from supplying vehicle parts to clients. We recognize revenue from the sale of vehicle parts when the product is delivered to the customer. Revenues from product sales are presented net of allowances for estimated sales returns, which are based on historical return rates. |
Stock-based Compensation
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6 Months Ended |
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Jun. 30, 2011
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Stock-based Compensation [Abstract] | Â |
Stock-based Compensation | (4) Stock-based Compensation In January of every year since 2007, we have notified certain employees that they are eligible to receive awards under our 2006 Restricted Stock Plan based on VSE’s financial performance for the respective calendar years. These restricted stock awards are expensed and a corresponding liability is recorded ratably over the vesting period of approximately three years. Upon issuance of shares on each vesting date, the liability is reduced and additional paid-in capital is increased. On March 2, 2011, the employees eligible for the restricted stock awards based on the financial performance of 2008, 2009 and 2010, received a total of 32,256 shares of restricted common stock. We also have awarded restricted stock to our non-employee Directors under our 2006 Restricted Stock Plan. On January 2, 2011, the non-employee Directors received a total of 9,800 shares of restricted common stock. Compensation expense related to these awards was approximately $325 thousand. The compensation expense related to all restricted stock awards discussed above and included in contract costs was approximately $176 thousand and $701 thousand for the three- and six-month periods ended June 30, 2011, respectively, and approximately $204 thousand and $699 thousand for the three- and six-month periods ended June 30, 2010, respectively. The stock-based compensation amount of approximately $307 thousand and $392 thousand shown on the accompanying statements of cash flows for the six months ended June 30, 2011 and 2010, respectively, is based on the compensation expense included in contract costs reduced by the tax withholding associated with the awards issued during the applicable periods. |
Earnings Per Share
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6 Months Ended |
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Jun. 30, 2011
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Earnings Per Share Note [Abstract] | Â |
Earnings Per Share | (5) Earnings Per Share Basic earnings per share (“EPS”) has been computed by dividing net income by the weighted average number of shares of common stock outstanding during each period. Shares issued during the period are weighted for the portion of the period that they were outstanding. There were no potentially dilutive instruments outstanding during the income statement period presented and, as such, basic and diluted common shares are the same. |
Commitments and Contingencies
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6 Months Ended |
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Jun. 30, 2011
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Commitments and Contingencies [Abstract] | Â |
Commitments and Contingencies | (6) Commitments and Contingencies We have, in the normal course of business, certain claims against us and against other parties and we may also be subject to various governmental investigations. In our opinion, the resolution of these claims and investigations will not have a material adverse effect on our results of operations or financial position. However, the results of any legal proceedings, including government investigations, cannot be predicted with certainty. |
Other Assets
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6 Months Ended |
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Jun. 30, 2011
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Other Assets [Abstract] | Â |
Othe Assets | (2) Other Assets Included in other assets as of June 30, 2011 is $1.5 million held in an escrow account to satisfy terms of a settlement agreement entered into during March 2011 between us and a subcontractor (“the Agreement”). The Agreement requires certain work share conditions to be satisfied over an 18-month period that expires August 31, 2012. We may be required to compensate the subcontractor up to $1.5 million from the escrow account if those conditions are not satisfied at the conclusion of the 18-month period. We believe that we will satisfy the work share requirements of the Agreement. |
Fair Value Measurements
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6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2011
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Fair Value Measurements [Abstract] | Â | ||||||||||||||||||||||||||||||||||||||||||
Fair Value Measurements | (11) Fair Value Measurements The accounting standard for fair value measurements defines fair value, and establishes a market-based framework or hierarchy for measuring fair value. The standard is applicable whenever assets and liabilities are measured at fair value. The fair value hierarchy established in the standard prioritizes the inputs used in valuation techniques into three levels as follows: Level 1 – Observable inputs – quoted prices in active markets for identical assets and liabilities; Level 2 – Observable inputs other than the quoted prices in active markets for identical assets and liabilities – includes quoted prices for similar instruments, quoted prices for identical or similar instruments in inactive markets, and amounts derived from valuation models where all significant inputs are observable in active markets; and Level 3 – Unobservable inputs – includes amounts derived from valuation models where one or more significant inputs are unobservable and require us to develop relevant assumptions. The following table summarizes the financial assets and liabilities measured at fair value on a recurring basis as of June 30, 2011 and the level they fall within the fair value hierarchy (in thousands):
Changes in the fair value of the Non-COLI assets held in the deferred supplemental compensation plan, as well as changes in the related deferred compensation obligation, are recorded as selling, general and administrative expenses. We determined the fair value of the earn-out obligations related to the Akimeka and WBI acquisitions by using a valuation model that included the evaluation of all possible outcomes and the application of an appropriate discount rate. At the end of each reporting period, the fair value of the contingent consideration is re-measured and any changes are recorded as contract costs. The fair value of the Akimeka earn-out obligation decreased approximately $955 thousand between December 31, 2010 and June 30, 2011. There was no change in the fair value of the WBI earn-out obligation between the acquisition date and June 30, 2011. |