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Acquisition | 9 Months Ended
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Sep. 30, 2019
Business Combinations [Abstract] |
Acquisition | Acquisition On January 10, 2019, our wholly owned subsidiary VSE Aviation, Inc. ("VSE Aviation") acquired 100% of the equity of 1st Choice Aerospace Inc. ("1st Choice Aerospace"), a provider of maintenance, repair and overhaul ("MRO") services and products for new generation and legacy commercial aircraft. 1st Choice Aerospace has operations in Florida and Kentucky. We have retained key members of 1st Choice Aerospace's management team under three-year employment contracts with five-year non-compete covenants. The initial purchase consideration paid at closing for 1st Choice Aerospace was approximately $113 million, which included $1.1 million as an estimated net working capital adjustment. We will also be required to make earn-out payments of up to $40 million if 1st Choice Aerospace meets certain financial targets during 2019 and 2020. Approximately $1.1 million of our closing payments was deposited into an escrow account to secure the sellers' indemnification obligations. Any amount remaining in such escrow account at the end of the indemnification period less any then pending indemnification claims will be distributed to the sellers. 1st Choice Aerospace's results of operations are included in our Aviation Group in the accompanying unaudited consolidated financial statements beginning on the acquisition date of January 10, 2019. 1st Choice Aerospace had unaudited revenues of approximately $45.1 million and operating income of approximately $10.5 million before amortization of intangible assets of approximately $3.0 million and allocated corporate costs of approximately $1.2 million from the acquisition date through September 30, 2019. We have not finalized our assessment of the fair values of the assets acquired and liabilities assumed as there has been insufficient time between the acquisition date and the issuance of these financial statements to complete our fair value review and final determination. As the amounts recorded for certain assets and liabilities are preliminary in nature, they are subject to adjustment as additional information is obtained about the facts and circumstances that existed at the acquisition date. The final determination of fair values of certain assets and liabilities will be completed within the measurement period of up to one-year from the acquisition date as permitted under U.S. GAAP. The 1 st Choice Aerospace acquisition requires the need to use the full one-year measurement period to adequately analyze and assess several factors used in establishing the asset acquired and liability assumed fair values as of the acquisition date, including intangibles, inventory and finalizing the estimated probability of each year’s earn-out obligation target being achieved. Any potential adjustments made could be material in relation to the preliminary values presented in the table below. Based on our preliminary valuation, the total estimated purchase price has been allocated to assets acquired (including identifiable intangible assets and goodwill) and liabilities assumed, as follows (in thousands):
Description |  | Fair Value
Cash |  | $ | 396 |
Accounts receivable |  | 7,409 |
Inventories |  | 6,879 |
Prepaid expenses and other current assets |  | 382 |
Property and equipment |  | 4,044 |
Intangibles - customer related |  | 55,000 |
Intangibles - trade name |  | 8,000 |
Goodwill |  | 60,590 |
Operating lease right-of-use assets |  | 2,643 |
Other assets |  | 333 |
Other current liabilities |  | (5,244 | )
Long-term operating lease liabilities |  | (2,376 | )
|  | $ | 138,056 |
Cash consideration |  | $ | 113,056 |
Acquisition date estimated fair value of earn-out obligation |  | 25,000 |
Total |  | $ | 138,056 |
The estimated value attributed to customer relationships is being amortized on a straight-line basis using weighted average useful lives of 17 years. The estimated value attributed to trade name is being amortized on a straight-line basis over nine years. The preliminary amount of goodwill recorded for our 1st Choice Aerospace acquisition was approximately $61 million, all of which is expected to be amortizable for income tax purposes. The goodwill recognized reflects the strategic advantage of expanding our sustainment services into the aviation supply chain market. We incurred approximately $408 thousand of acquisition-related expenses for the nine months ended September 30, 2019, which are included in selling, general and administrative expenses. The following VSE consolidated pro forma results are prepared as if the 1st Choice Aerospace acquisition had occurred on January 1, 2018. This information is for comparative purposes only and does not necessarily reflect the results that would have occurred or may occur in the future. The unaudited consolidated pro forma results of operations are as follows (in thousands except per share amounts):
|  | Three months ended September 30, |  | Nine months ended September 30,
|  | 2019 |  | 2018 |  | 2019 |  | 2018
Revenue |  | $ | 198,326 |  |  | $ | 181,464 |  |  | $ | 558,915 |  |  | $ | 550,452 |
Net Income |  | $ | 10,532 |  |  | $ | 10,294 |  |  | $ | 27,596 |  |  | $ | 26,465 |
Basic earnings per share |  | $ | 0.96 |  |  | $ | 0.94 |  |  | $ | 2.52 |  |  | $ | 2.43 |
Diluted earnings per share |  | $ | 0.95 |  |  | $ | 0.94 |  |  | $ | 2.50 |  |  | $ | 2.42 |

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- Definition The entire disclosure for a business combination (or series of individually immaterial business combinations) completed during the period, including background, timing, and recognized assets and liabilities. The disclosure may include leverage buyout transactions (as applicable). + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -URI http://asc.fasb.org/topic&trid=2303972 + Details
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- References No definition available. + Details
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