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What changed in VSE CORP's 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of VSE CORP's 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+153 added−155 removedSource: 10-K (2025-03-03) vs 10-K (2024-03-08)

Top changes in VSE CORP's 2024 10-K

153 paragraphs added · 155 removed · 125 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

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Biggest changeFederal and Defense The Federal and Defense segment provides aftermarket refurbishment and sustainment services to extend and maintain the life cycle of military vehicles, ships and aircraft for the DoD. The segment provides foreign military sales services, engineering, logistics, maintenance, field support services, energy consulting services and IT solutions to the DoD, federal civilian agencies and commercial customers.
Biggest changeOur Fleet segment accounted for 27%, 37%, and 39% of our consolidated revenues in 2024, 2023 and 2022, respectively. Federal and Defense Prior to its sale, the Federal and Defense segment provided aftermarket refurbishment and sustainment services to extend and maintain the life cycle of military vehicles, ships and aircraft for the United States Department of Defense ("DoD").
Prior to the sale of the Federal and Defense segment, as discussed below, we operated in three reportable operating segments. Aviation The Aviation segment is a leading provider of aftermarket parts distribution and MRO services for components and engine accessories supporting commercial, business and general aviation operators ("B&GA").
Prior to the sale of the Federal and Defense segment, as discussed below, we operated in three reportable operating segments. Aviation The Aviation segment is a leading provider of aftermarket parts distribution and MRO services for components and engine accessories supporting commercial, business and general aviation ("B&GA") operators.
We supply parts through our global distribution centers of excellence and provide MRO services from our strategically positioned repair facilities ensuring expedient delivery and turn-around of customers products enabling aircraft and fleet vehicles to return to service on time. See Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” for more information regarding our business.
We supply parts through our global distribution centers of excellence and provide MRO services from our strategically positioned repair facilities ensuring expedient delivery and turn-around of customers products enabling aircraft and fleet vehicles to return to service on time. See Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” for more information regarding our business operations.
The information on or obtainable through our website is not intended to be incorporated into this Annual Report on Form 10-K. The SEC also maintains an internet website ( http://www.sec.gov ) that contains reports, proxy and information statements and other information regarding issuers that file electronically with the SEC. -8- Table of Contents
The information on or obtainable through our -7- Table of Contents website is not intended to be incorporated into this Annual Report on Form 10-K. The SEC also maintains an internet website ( http://www.sec.gov ) that contains reports, proxy and information statements and other information regarding issuers that file electronically with the SEC. -8- Table of Contents
Talent Acquisition, Retention and Development We strive to attract and retain top talent at all levels of the company. To support this objective, we seek to provide opportunities for professional development and career growth to recognize and reward our employees for their contributions and accomplishments.
Talent Acquisition, Retention and Development We strive to attract, develop and retain top talent at all levels of the company. To support this objective, we seek to provide opportunities for professional development and career growth to recognize and reward our employees for their contributions and accomplishments.
Developing internal talent and sourcing for new talent that fits our culture is a key part of our strategy. -6- Table of Contents We offer competitive compensation and comprehensive benefits to attract, reward and retain a qualified and diverse workforce to achieve our vision and mission and meet the dynamic needs of employees and their families.
Developing internal talent and sourcing for new talent that fits our culture is a key part of our strategy. We offer competitive compensation and comprehensive benefits to attract, reward and retain a qualified and diverse workforce to achieve our vision and mission and meet the dynamic needs of employees and their families.
This business offers a range of services to a diversified global client base of commercial airlines, regional airlines, cargo transporters, MRO integrators and providers, aviation manufacturers, corporate and private aircraft owners, and fixed-base operators ("FBOs"). Our Aviation segment accounted for 63%, 61%, and 51% of our consolidated revenues in 2023, 2022 and 2021, respectively.
This business offers a range of services to a diversified global client base of commercial airlines, regional airlines, air cargo transporters, MRO integrators and providers, aviation manufacturers, corporate and private aircraft owners, and fixed-base operators ("FBOs"). Our Aviation segment accounted for 73%, 63%, and 61% of our consolidated revenues in 2024, 2023 and 2022, respectively.
Fleet The Fleet segment specializes in part distribution, engineering solutions, and supply chain management services supporting the medium and heavy-duty fleet market. Fleet segment operations are conducted under the brand Wheeler Fleet Solutions, which supports government and commercial truck fleets with parts, sustainment solutions and managed inventory services.
Fleet The Fleet segment specializes in parts distribution, engineering solutions, and mission critical supply chain management services supporting the medium and heavy-duty fleet market. Fleet segment operations are conducted under the brand Wheeler Fleet Solutions, which supports the United States Postal Service ("USPS") and commercial truck fleets with parts, sustainment solutions and managed inventory services.
Certification and conformance are required prior to installation of a part on an aircraft. The FAA requires that various maintenance routines be performed on aircraft components, and we currently satisfy these maintenance standards in our MRO services. For additional information on regulations and risks affecting our business, refer to Item 1A., "Risk Factors".
The FAA requires that various maintenance routines be performed on aircraft components, and we currently satisfy these maintenance standards in our MRO services. For additional information on regulations and risks affecting our business, refer to Item 1A., "Risk Factors".
As of December 31, 2023, we employed approximately 1,200 employees. Principal employee categories include (a) mechanics and vehicle, aircraft and equipment technicians, (b) logisticians, (c) finance, information technology, and human resources support personnel, (d) warehouse and sales personnel, and (e) engineers. Employee Health and Safety We are committed to providing a safe working environment for our employees.
As of December 31, 2024, we employed approximately 1,400 employees. Principal employee categories include (i) mechanics and vehicle, aircraft and equipment technicians, (ii) logisticians, (iii) finance, information technology, and human resources support personnel, (iv) warehouse and sales personnel, and (v) engineers. Employee Health and Safety We are committed to providing a safe working environment for our employees.
ITEM 1. Business History and Organization VSE Corporation, together with its consolidated subsidiaries, is a leading provider of aftermarket distribution and maintenance, repair and overhaul ("MRO") services for air and land transportation assets for commercial and government markets. VSE was incorporated in Delaware in 1959.
ITEM 1. Business History and Organization VSE Corporation, through its subsidiaries (collectively, "VSE," the "Company," "we," "us," or "our"), is a leading provider of aftermarket distribution and maintenance, repair and overhaul ("MRO") services for air and land transportation assets for commercial and government markets. VSE was incorporated in Delaware in 1959.
In addition to competitive base pay, we offer bonus opportunities, a Company matched 401(k) plan, an employee stock purchase plan, healthcare insurance benefits, health savings and flexible spending accounts, paid time off, holiday pay, flexible work schedules, education reimbursement, and employee assistance programs.
In addition to competitive base pay, we offer bonus opportunities, a Company matched 401(k) plan, an employee stock purchase plan, healthcare insurance benefits, health savings and flexible spending accounts, paid time off, holiday pay, flexible work schedules, education reimbursement, and employee assistance programs. -6- Table of Contents Inclusion We embrace and encourage inclusion and strive to build a culture and company environment supporting inclusivity.
The goal of this initiative is to increase awareness and promote cultural sensitivity among our employees. Code of Business Conduct and Ethics We are committed to the highest ethical standards, and we expect all of our directors, officers and employees to comply with our standards and applicable laws and regulations in the conduct of our business.
Code of Business Conduct and Ethics We are committed to the highest ethical standards, and we expect all of our directors, officers and employees to comply with our standards and applicable laws and regulations in the conduct of our business.
Competition Our businesses operate in highly competitive industries that include numerous competitors, many of which are larger in size and have greater name recognition, financial resources, and larger technical staff than we do.
Competition Our businesses operate in highly competitive industries that include numerous competitors, many of which are larger in size and have greater name recognition, financial resources, and larger technical staff than we do. We also compete against smaller, more specialized competitors that concentrate their resources on narrower service offerings.
We also support employee resource groups, which are voluntary, employee-led groups that are open to all employees and provide a forum for diverse employees and allies from a variety of backgrounds to share experiences and support our company's diversity initiatives.
We also support employee resource groups, which are voluntary, employee-led groups that are open to all employees and provide a forum for all employees to share experiences and support our company's initiatives. We firmly believe in the power of our employee resource groups to foster inclusivity in our workplace.
Regulation and Supervision Our businesses are subject to extensive regulation in the markets we serve. We work with numerous U.S. government agencies and entities, including but not limited to, the Federal Aviation Administration ("FAA"), the United States Postal Service ("USPS"), and the Department of Defense ("DoD").
Regulation and Supervision Our businesses are subject to extensive regulation in the markets we serve. We work with numerous U.S. government agencies and entities, including but not limited to, the Federal Aviation Administration ("FAA") and the USPS. Similar government authorities and regulations exist in the other countries in which we do business.
In 2020, we formed the VSE Inclusion & Diversity Council ("I&D Council"), a leader-led group focused on creating a framework and action plan for inclusion and diversity related initiatives across the organization. Our I&D Council regularly hosts roundtable discussions aimed at increasing cultural awareness and promoting dialogue to encourage a culture that values inclusive behavior in our workplace.
Our initiatives include our practices on employee engagement, and the development of a work environment built on the premise of inclusion. We are focused on creating a framework and action plan for inclusion related initiatives across the organization, regularly hosts roundtable discussions aimed at increasing awareness and promoting dialogue to encourage a culture that values inclusive behavior in our workplace.
See Note (18) "Subsequent Events" to our Consolidated Financial Statements for further information. Products and Services We provide a broad array of aftermarket parts distribution and service capabilities to support our clients’ aircraft and vehicle fleets.
See Note (3) "Discontinued Operations" to our Consolidated Financial Statements included in Item 8 of this annual report on Form 10-K for -5- Table of Contents further information. Products and Services We provide a broad array of aftermarket parts distribution and service capabilities to support our clients’ aircraft and vehicle fleets.
Its regulations are designed to ensure that all aircraft and aviation equipment are continuously maintained in proper condition to ensure safe operation of the aircraft. The inspection, maintenance, and repair procedures for various types of aircraft and equipment are prescribed by these regulatory authorities and can be performed only at certified repair facilities utilizing certified technicians.
The inspection, maintenance, and repair procedures for various types of aircraft and equipment are prescribed by these regulatory authorities and can be performed only at certified repair facilities utilizing certified technicians. Certification and conformance are required prior to installation of a part on an aircraft.
We actively seek initiatives and participate in outreach programs to assist individuals who served in the U.S. Armed Forces. These efforts include an emphasis on hiring military veterans to enhance the quality of our workforce. In our continuous pursuit of creating a more inclusive and diverse workplace, we recently launched an inclusion and diversity training program.
These groups serve as platforms for employees from different backgrounds to connect, share experiences, and advocate for continuous improvement within our organization. We actively seek initiatives and participate in outreach programs to assist individuals who served in the U.S. Armed Forces. These efforts include an emphasis on hiring military veterans to enhance the quality of our workforce.
We believe the principal competitive factors for our business are customer knowledge, product availability, technical and financial qualifications, past performance, repair turnaround time, government budgetary priorities, sales force initiatives and price. Available Information We maintain an internet website at www.vsecorp.com .
The extent of competition that we will encounter because of changing economic or competitive conditions, customer requirements or technological developments is unpredictable. We believe the principal competitive factors for our business are customer knowledge, product availability, technical and financial qualifications, past performance, repair turnaround time, government budgetary priorities, sales force initiatives and price.
The terms "we," "us," "our," "VSE" and the "Company" mean VSE Corporation and its operating businesses unless the context indicates otherwise. Purpose, Vision and Our Core Values Purpose and Vision Statement We deliver trusted solutions to inspire the performance of tomorrow. We are focused on enhancing the productivity and longevity of our customer's high-value, business-critical assets.
Purpose, Vision and Our Core Values Purpose and Vision Statement We deliver trusted solutions to inspire the performance of tomorrow. We are focused on enhancing the productivity and longevity of our customer's high-value, business-critical assets. We strive to achieve this through our dedication to creating better solutions, anticipating global needs, and building stronger relationships with our customers.
In May 2023, we announced our decision to sell our Federal and Defense segment. As a result, we have reflected the results of operations for the Federal and Defense segment as discontinued operations for all periods presented.
In February 2024, we entered into two separate agreements to sell substantially all of the Federal and Defense segment assets ("FDS Sale"). We have reflected the results of operations for this business as discontinued operations for all periods presented.
Similar government authorities and regulations exist in the other countries in which we do business. Commercial Aircraft The FAA regulates the manufacture, repair and operation of all aircraft and aircraft parts operated in the United States.
The FAA regulates the manufacture, repair and operation of all aircraft and aircraft parts operated in the United States. Its regulations are designed to ensure that all aircraft and aviation equipment are continuously maintained in proper condition to ensure safe operation of the aircraft.
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We strive to achieve this through our dedication to creating better solutions, anticipating global needs, and building stronger relationships with our customers.
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In our continuous pursuit of creating a more inclusive and diverse workplace, we provide training programs to support these initiatives. The goal of this initiative is to increase awareness and promote cultural sensitivity among our employees.
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Revenues for this business are derived from the sale of vehicle parts and mission critical supply chain services to support client truck fleets. Our Fleet segment accounted for 37%, 39%, and 49% of our consolidated revenues in 2023, 2022 and 2021, respectively.
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Available Information We maintain an internet website at www.vsecorp.com .
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See Note (3) -5- Table of Contents "Discontinued Operations" to our Consolidated Financial Statements included in Item 8 of this annual report on Form 10-K for further information. In February 2024, we entered into two separate agreements to sell substantially all of the Federal and Defense segment assets.
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Typical offerings include aircraft and airframe parts supply and distribution, supply chain and inventory management services; MRO of aircraft components and engine accessories; vehicle fleet sustainment programs; vehicle fleet parts supply and parts distribution.
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Inclusion and Diversity We embrace and encourage inclusion and strive to build a culture and company environment supporting inclusion and diversity. Our inclusion and diversity initiatives include our practices and policies on employee recruitment and hiring, professional training and development, employee engagement and the development of a work environment built on the premise of diversity and equity.
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We firmly believe in the power of our employee resource groups, which include Women in the Workforce, Pride, Latinos Unidos, and Veterans, to foster diversity and inclusivity in our workplace. These groups serve as platforms for employees from different backgrounds to connect, share experiences, and advocate for continuous improvement within our organization.
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We also compete against smaller, more specialized competitors that concentrate their resources on narrower service offerings. -7- Table of Contents The extent of competition that we will encounter because of changing economic or competitive conditions, customer requirements or technological developments is unpredictable.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeBusiness acquisitions involve estimates, assumptions, and judgments to determine acquisition prices, which are allocated among acquired assets, including goodwill, based upon fair market values. Notwithstanding our analyses, due diligence processes, and business integration efforts, actual operating results of acquired businesses may vary significantly from initial estimates.
Biggest changeAs part of our business strategy, we make acquisitions and investments following careful analysis and due diligence processes designed to achieve a desired return or strategic objective. Business acquisitions involve estimates, assumptions, and judgments to determine acquisition prices, which are allocated among acquired assets, including goodwill, based upon fair market values.
The adoption of new environmental laws and regulations, stricter enforcement of existing laws and regulations, imposition of new cleanup requirements, discovery of previously unknown or more extensive contamination, litigation involving environmental impacts, our inability to recover related costs under our government contracts, or the financial insolvency of other responsible parties could cause us to incur costs that could have a material adverse effect on our financial position, results of operations, or cash flows. -12- Table of Contents Technology Risks Technology and cybersecurity threats and risks could potentially impact our financial results.
The adoption of new environmental laws and regulations, stricter enforcement of existing laws and regulations, imposition of new cleanup requirements, discovery of previously unknown or more extensive contamination, litigation involving environmental impacts, our inability to recover related costs under our government contracts, or the financial insolvency of other responsible parties could cause us to incur costs that could have a material adverse effect on our financial position, results of operations, or cash flows. -12- Table of Contents Technology Risks Technology and cybersecurity threats, risks, and incidents could potentially impact our financial results.
Our success is highly dependent on the performance of the aviation aftermarket, which could be impacted by lower demand for business aviation and commercial air travel or airline fleet changes causing lower demand for our goods and services. General global industry and economic conditions that affect the aviation industry may also affect our business.
Operational Risks Our success is highly dependent on the performance of the aviation aftermarket, which could be impacted by lower demand for business aviation and commercial air travel or airline fleet changes causing lower demand for our goods and services. General global industry and economic conditions that affect the aviation industry may also affect our business.
In -11- Table of Contents addition, if the package delivery companies on which we rely on experience delays resulting from inclement weather or other disruptions, we may be unable to maintain appropriate stock of inventory or deliver products to our customers on a timely basis, which may adversely affect our results of operations and financial condition.
In addition, if the package delivery companies on which we rely experience delays resulting from inclement weather or other disruptions, we may be unable to maintain appropriate stock of inventory or deliver products to our customers on a timely basis, which may adversely affect our results of operations and financial condition.
Public health crises pose a risk that we or our employees, customers, suppliers, manufacturers, and other partners may be prevented from conducting business activities for an indefinite period of time, including due to the spread of the disease or shutdowns requested or mandated by governmental authorities.
Public health crises pose a risk that we or our employees, customers, suppliers, manufacturers, and other partners may be prevented from conducting -11- Table of Contents business activities for an indefinite period of time, including due to the spread of the disease or shutdowns requested or mandated by governmental authorities.
The potential consequences of a material cybersecurity incident include financial loss, reputational damage, damage to our IT systems, data loss, litigation with third parties, theft of intellectual property, fines, customer attrition, diminution in the value of our investment in research and development, and increased cybersecurity protection and remediation costs due to the increasing sophistication and proliferation of threats, which in turn could adversely affect our competitiveness and results of operations.
The potential consequences of a material cybersecurity incident include financial loss, reputational damage, damage to our IT systems, data loss, litigation with third parties, theft of intellectual property, fines, customer attrition, diminution in the value of our investment in research and development, costs related to remediation or the payment of ransom, and increased cybersecurity protection and remediation costs due to the increasing sophistication and proliferation of threats, which in turn could adversely affect our competitiveness and results of operations.
Further, the aviation industry has historically, from time to time, been subject to downward cycles which reduce the overall demand for jet engine and aircraft component replacement parts and repair and overhaul services, and such downward cycles -10- Table of Contents result in lower sales and greater credit risk.
Further, the aviation industry has historically, from time to time, been subject to downward cycles which reduce the overall demand for jet engine and aircraft component replacement parts and repair and overhaul services, and such downward cycles result in lower sales and greater credit risk.
We are dependent on access to and the performance of third-party package delivery companies. Our ability to provide efficient distribution of the products we sell to our customers is an integral component of our overall business strategy, both domestic and international. We do not maintain our own delivery networks, and instead rely on third‑party package delivery companies.
Our ability to provide efficient distribution of the products we sell to our customers is an integral component of our overall business strategy, both domestic and international. We do not maintain our own delivery networks, and instead rely on third‑party package delivery companies.
In an inflationary environment, depending on economic conditions, we may be unable to raise prices enough to keep up with the rate of inflation, which would reduce our profit margins. We have experienced, and continue to experience, increases in the prices of labor, materials, and other costs of providing service. Continued inflationary pressures could impact our profitability.
In an inflationary environment, depending on economic conditions, we may be unable to raise prices enough to keep up with the rate of inflation, which would reduce our profit margins. We have experienced, and continue to experience, increases in the prices of labor, materials, and other costs of providing service.
Declines in asset values or increases in liabilities, including liabilities associated with benefit plans and assets and liabilities associated with taxes, can reduce stockholders’ equity. A deficit in stockholders’ equity could limit our ability under Delaware law to pay dividends. Our debt exposes us to certain risks.
Declines in asset values or increases in liabilities, including liabilities associated with benefit plans and assets and liabilities associated with taxes, can reduce stockholders’ equity. A deficit in stockholders’ equity could limit our ability under Delaware law to pay dividends.
Operational Risks We face various risks related to health epidemics, pandemics and similar outbreaks, which could adversely affect our business. We face a wide variety of risks related to health epidemics, pandemics, and similar outbreaks. These events have adversely affected, and may continue to adversely affect, our operations, supply chains and distribution systems.
We face a wide variety of risks related to health epidemics, pandemics, and similar outbreaks. These events have adversely affected, and may continue to adversely affect, our operations, supply chains and distribution systems.
We may not be successful in managing these or any other significant risks that we may encounter in divesting or discontinuing a business or product line, which could have a material adverse effect on our business.
We may not be successful in managing these or any other significant risks that we may encounter in divesting or discontinuing a business or product line, which could have a material adverse effect on our business. Certain customers comprise a material portion of our revenue.
Our current and projected work in foreign countries exposes us to challenges associated with export and ethics compliance, local laws and customs, workforce issues, extended supply chain, political unrest, and war zone threats.
We also face challenges associated with our quality of workforce, quality of work, safety, and labor relations compliance. Our current and projected work in foreign countries exposes us to challenges associated with export and ethics compliance, local laws and customs, workforce issues, extended supply chain, political unrest, and war zone threats.
Failure to attract or retain an adequately skilled workforce, lack of knowledge or training in critical functions, or inadequate staffing levels, can result in lost work, reduced profit margins, losses from cost overruns, performance deficiencies, workplace accidents, and regulatory noncompliance.
Failure to attract or retain an adequately skilled workforce, lack of knowledge or training in critical functions, or inadequate staffing levels, can result in lost work, reduced profit margins, losses from cost overruns, performance deficiencies, workplace accidents, and regulatory noncompliance. Acquisitions, which are a part of our business strategy, present certain risks.
If our systems, data, or any third party service that we use is unavailable to us for any reason, our customers may experience service interruptions, which could significantly impact our operations, reputation, business, and financial results.
Our ability to monitor such third parties’ security measures and the full impact of the systemic risk is limited. If our systems, data, or any third party service that we use is unavailable to us for any reason, our customers may experience service interruptions, which could significantly impact our operations, reputation, business, and financial results.
Our business could be adversely affected by incidents that could cause an interruption in our operations or impose a significant financial liability on us. Disruption of our operations due to internal or external system or service failures, accidents or incidents involving employees or third parties working in high-risk locations, or other crises could adversely affect our financial performance and condition.
Disruption of our operations due to internal or external system or service failures, accidents or incidents involving employees or third parties working in high-risk locations, or other crises could adversely affect our financial performance and condition.
Global economic conditions and political factors could adversely affect our revenues. Revenues for work performed in or products delivered to foreign countries are subject to economic conditions in these countries and to political risks posed by ongoing foreign conflicts and potential terrorist activity.
Revenues for work performed in or products delivered to foreign countries are subject to economic conditions in these countries and to political risks posed by ongoing foreign conflicts, including the ongoing Russia-Ukraine conflict and Middle East conflicts, and potential terrorist activity.
The occurrence of any or all of these events may adversely affect our ability to fund our operations, meet contractual commitments, make future investments or desirable acquisitions, or respond to competitive challenges.
The occurrence of any or all of these events may adversely affect our ability to fund our operations, meet contractual commitments, make future investments or desirable acquisitions, or respond to competitive challenges. There can be no assurance we will continue to pay dividends at current levels or in the future.
The USPS has initiated a fleet replacement program for the next generation of the delivery vehicle fleet. The timing of the new vehicle deployment and the retirement of existing vehicles could potentially have a significant impact on our future revenues and profits. Acquisitions, which are a part of our business strategy, present certain risks.
The USPS has initiated a fleet replacement program for the next generation of the delivery vehicle fleet. The timing of the new vehicle deployment and the retirement of existing vehicles could potentially have a significant impact on our future revenues and profits. We face various risks related to health epidemics, pandemics and similar outbreaks, which could adversely affect our business.
The loss of or disruption of revenues on a single customer may reduce our revenues and profits. Our USPS managed inventory program constitutes a material portion of our revenues and profits.
Our work on large government fleets present a risk to revenue growth and sustainability and profit margins. The loss of or disruption of revenues on a single customer may reduce our revenues and profits. Our USPS managed inventory program constitutes a material portion of our revenues and profits.
We test acquired intangible assets for impairment whenever events or changes in circumstances indicate their carrying value may be impaired. The impairment tests are based on several factors requiring judgments. As a general matter, a significant decrease in expected cash flows or changes in market conditions may indicate potential impairment of recorded goodwill or intangible assets.
We test our goodwill for impairment annually in the fourth quarter or when evidence of potential impairment exists. We test acquired intangible assets for impairment whenever events or changes in circumstances indicate their carrying value may be impaired. The impairment tests are based on several factors requiring judgments.
We may periodically divest or seek to divest certain businesses, including remaining assets in our former Federal and Defense segment that are no longer a part of our ongoing strategic plan and are held for sale.
We may periodically divest or seek to divest certain businesses that are no longer a part of our ongoing strategic plan.
We may not be able to successfully execute our acquisition strategy, and the failure to do so could have a material adverse effect on our business, financial condition, and results of operations. -9- Table of Contents Circumstances associated with divestitures could adversely affect the Company's results of operations and financial condition.
We may not be able to successfully execute our acquisition strategy, and the failure to do so could have a material adverse effect on our business, financial condition, and results of operations. We are dependent on access to and the performance of third-party package delivery companies.
A fire, flood, earthquake, other natural disaster, or other crisis at or affecting physical facilities, procurement systems, or contractual deliveries could potentially interrupt the revenues from our operations. Investments in inventory and facilities could cause losses if certain work is disrupted or discontinued.
A fire, flood, earthquake, other natural disaster, or other crisis at or affecting physical facilities, procurement systems, or contractual deliveries could potentially interrupt the revenues from our operations. The nature of our operations and work performed by our employees presents certain challenges related to workforce management.
New and more stringent regulations may be adopted in the future that could have an adverse effect on us. Lastly, border tariffs and new trade deals could have significant effects on our customers and, in turn, on our suppliers, which may impact our business.
New and more stringent regulations may be adopted in the future that could have an adverse effect on us.
Some of our original equipment manufacturer ("OEM") competitors have greater name recognition than VSE or our subsidiaries, as well as complementary lines of business and financial, marketing and other resources that we do not have. In addition, OEMs, aircraft maintenance providers, leasing companies and U.S.
The aviation and vehicle parts industries are highly fragmented, have several highly visible leading companies, and are characterized by intense competition. Some of our original equipment manufacturer ("OEM") competitors have greater name recognition than VSE or our subsidiaries, as well as complementary lines of business and financial, marketing and other resources that we do not have.
The nature of our operations and work performed by our employees presents certain challenges related to workforce management. Our financial performance is heavily dependent on the abilities of our operating and administrative staff with respect to technical skills, operating performance, pricing, cost management, safety, and administrative and compliance efforts.
Our financial performance is heavily dependent on the abilities of our operating and administrative staff with respect to technical skills, operating performance, pricing, cost management, safety, and administrative and compliance efforts. A wide diversity of contract types, nature of work, work locations, and legal and regulatory complexities challenge our administrative staff and skill sets.
Demand for commercial air travel can be influenced by airline industry profitability, world trade policies, government-to-government relations, terrorism, disease outbreaks, environmental constraints imposed upon aircraft operations, technological changes, price, and other competitive factors. These global industry and economic conditions may have a material adverse effect on our business, financial condition, and results of operations.
Demand for commercial air travel can be influenced by airline industry profitability, world trade policies, government-to-government relations, terrorism, political unrest, war (including the ongoing Russia-Ukraine conflict and Middle East conflicts), disease outbreaks, environmental constraints imposed upon aircraft operations, technological changes, price, and other competitive factors.
In such events, we may be required to write down our carrying value of the related goodwill and/or purchased intangible assets. In addition, declines in the trading price of our common stock or the market as a whole can result in goodwill and/or purchased intangible asset impairment charges associated with our existing businesses.
In addition, declines in the trading price of our common stock or the market as a whole could result in goodwill and/or purchased intangible asset impairment charges associated with our existing businesses. As of December 31, 2024, goodwill and intangible assets, net of amortization, accounted for 28% and 11%, respectively, of our total assets.
Changes in future business conditions could cause business investments, recorded goodwill, and/or purchased intangible assets to become impaired, resulting in substantial losses and write-downs that would reduce our operating income. As part of our business strategy, we make acquisitions and investments following careful analysis and due diligence processes designed to achieve a desired return or strategic objective.
Continued inflationary pressures could impact our profitability. -10- Table of Contents Changes in future business conditions could cause business investments, recorded goodwill, and/or purchased intangible assets to become impaired, resulting in substantial losses and write-downs that would reduce our operating income.
We have made investments in inventory, facilities, and lease commitments to support specific business programs, work requirements, and service offerings. A slowing or disruption of these business programs, work requirements, or service offerings that results in operating below intended levels could cause us to suffer financial losses.
We have made investments in inventory, facilities, and lease commitments to support specific business programs, work requirements, and service offerings.
In instances where we may not be able to mitigate these consequences, our ability to perform on our contracts may be impacted, which could result in reduced revenues and profits. Certain customers comprise a material portion of our revenue. Our work on large government fleets present a risk to revenue growth and sustainability and profit margins.
In instances where we may not be able to mitigate these consequences, our ability to perform on our contracts may be impacted, which could result in reduced revenues and profits. Competition from existing and new competitors may harm our business.
Any such impairments that result in us recording goodwill or intangible asset impairment charges could have a material adverse effect on our financial position or results of operations. Competition from existing and new competitors may harm our business. The aviation and vehicle parts industries are highly fragmented, have several highly visible leading companies, and are characterized by intense competition.
Any such impairments that result in us recording goodwill or intangible asset impairment charges could have a material adverse effect on our financial position or results of operations. Circumstances associated with divestitures could adversely affect the Company's results of operations and financial condition.
Federal Aviation Administration ("FAA") certificated repair facilities may attempt to bundle their services and product offerings in the supply industry, thereby significantly increasing industry competition.
In addition, OEMs, aircraft maintenance providers, leasing companies and U.S. FAA certificated repair facilities may attempt to bundle their services and product offerings in the supply industry, thereby significantly increasing industry competition. Investments in inventory and facilities could cause losses if certain work is disrupted or discontinued.
Any imposition of liability, particularly liability that is not covered by insurance or is in excess of insurance coverage, could materially harm our operating results and financial condition. Financial Risks There can be no assurance we will continue to pay dividends at current levels or in the future.
Any imposition of liability, particularly liability that is not covered by insurance or is in excess of insurance coverage, could materially harm our operating results and financial condition. Financial Risks Our debt exposes us to certain risks. As of December 31, 2024, we had $430 million of total debt outstanding (net of unamortized debt issuance costs).
We also rely on third-parties to host certain enterprise systems and manage and host our data and that of our customers. Our ability to monitor such third parties’ security measures and the full impact of the systemic risk is limited.
Cybersecurity threat actors also may attempt to exploit vulnerabilities through software including that is software commonly used by companies in cloud-based services and bundled software. We also rely on third-parties to host certain enterprise systems and manage and host our data and that of our customers.
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As of December 31, 2023, goodwill and intangible assets, net of amortization, accounted for 28% and 9%, respectively, of our total assets (excluding assets held for sale). We test our goodwill for impairment annually in the fourth quarter or when evidence of potential impairment exists.
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These global industry and economic conditions may have a material adverse effect on our business, financial condition, and results of operations. Global economic conditions and political factors could adversely affect our revenues.
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A wide diversity of contract types, nature of work, work locations, and legal and regulatory complexities challenge our administrative staff and skill sets. We also face challenges associated with our quality of workforce, quality of work, safety, and labor relations compliance.
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A slowing or disruption of these business programs, work requirements, or service offerings that results in operating below intended levels could cause us to suffer financial losses. -9- Table of Contents Our business could be adversely affected by incidents that could cause an interruption in our operations or impose a significant financial liability on us.
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As of December 31, 2023, we had $429 million of total debt outstanding (net of unamortized debt issuance costs).
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Notwithstanding our analyses, due diligence processes, and business integration efforts, actual operating results of acquired businesses may vary significantly from initial estimates. In such events, we may be required to write down our carrying value of the related goodwill and/or purchased intangible assets.
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As a general matter, a significant decrease in expected cash flows or changes in market conditions may indicate potential impairment of recorded goodwill or intangible assets.
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Additionally, border tariffs and new trade deals, of which new border tariffs and trade deals may be introduced domestically as indicated by the new presidential administration, could have significant effects on our customers and, in turn, on our suppliers, which may impact our business.
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Cybersecurity incidents and similar attacks vary in their form and can include the deployment of harmful malware or ransomware, denial-of-services attacks, and other attacks, which may affect business continuity and threaten the availability, confidentiality and integrity of our systems and data.
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Cybersecurity incidents can also include employee or personnel failures, fraud, phishing or other social engineering attempts or other methods to cause confidential information, payments, account access or access credentials, or other data to be transmitted to an unintended recipient.
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Additionally, sophistication of cybersecurity threats, including through the use of artificial intelligence, continues to increase, and the controls and preventative actions we take to reduce the risk of cybersecurity incidents and protect our systems, including the regular testing of our incident response plan, may be insufficient.

Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeSenior management including our Chief Information Security Officer (CISO) engages in regular discussions with the Board regarding cybersecurity risks, trends, and any material incidents that may arise. Furthermore, the Board receives briefings on cybersecurity matters from the CISO on our cybersecurity and information security.
Biggest changeSenior management including our Chief Information Security Officer ("CISO") engages in regular discussions with the Board regarding cybersecurity risks, -14- Table of Contents trends, and any material incidents that may arise. Furthermore, the Board receives briefings on cybersecurity matters from the CISO on our cybersecurity and information security.
Our CISO promptly informs and updates the Board about any information security incidents that may pose a significant risk to the Company. To date, we have not identified any cybersecurity incidents that have materially affected or are reasonably likely to materially affect our business strategy, results of our operations, or financial condition.
Our CISO promptly informs and updates the Board about any information regarding security incidents that may pose a significant risk to the Company. To date, we have not identified any cybersecurity incidents that have materially affected or are reasonably likely to materially affect our business strategy, results of our operations, or financial condition.
Our CISO manages the Company's information security and oversees our data security personnel and our incident response and business continuity management programs to assess and manage the cybersecurity element of our risk management program, including policies, cybersecurity training, security operations and -14- Table of Contents engineering, cyber threat detection and incident response.
Our CISO manages the Company's information security and oversees our data security personnel and our incident response and business continuity management programs to assess and manage the cybersecurity element of our risk management program, including policies, cybersecurity training, security operations and engineering, cyber threat detection and incident response.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeOur major operations are at the following locations: Aviation - Doral and Miramar, Florida; Independence and Augusta, Kansas; Hebron, Kentucky; Phoenix, Arizona; Montebello and San Bernardino, California; Memphis, Tennessee; Lydney and Southend-on-Sea, United Kingdom; and Norderstedt, Germany Fleet - Somerset, Pennsylvania; Olive Branch, Mississippi; and Grand Prairie, Texas Corporate - Alexandria, Virginia The following is a summary of the square footage our of floor space as of December 31, 2023 (in thousands): Owned Leased Total Aviation Segment 91 598 689 Fleet Segment 271 572 843 Corporate — 95 95 Total 362 1,265 1,627 We consider our facilities to be in good operating condition and sufficient to meet our operational needs for the foreseeable future.
Biggest changeOur major operations are at the following locations: Aviation - Doral, Miramar and Davie, Florida; Independence and Augusta, Kansas; Hebron, Kentucky; Phoenix, Arizona; Montebello and San Bernardino, California; Bloomfield, Connecticut; Roselle, Illinois; Lydney and Southend-on-Sea, United Kingdom; Shannon and Dublin, Ireland; and Norderstedt, Germany Fleet - Somerset, Pennsylvania; Olive Branch, Mississippi; and Grand Prairie, Texas The following is a summary of the square footage of our floor space as of December 31, 2024 (in thousands): Owned Leased Total Aviation Segment 91 990 1,081 Fleet Segment 271 572 843 Corporate (1) — 4 4 Total 362 1,566 1,928 (1) Represents the square footage of our corporate offices in Vienna, Virginia.
ITEM 2. Properties As of December 31, 2023, we owned or leased building space (including offices, warehouses, shops, and other facilities) at 24 locations.
ITEM 2. Properties As of December 31, 2024, we owned or leased building space (including offices, warehouses, shops, and other facilities) at 33 locations.
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Our corporate headquarters in Miramar, Florida is shared with our Aviation segment and the square footage is included under the Aviation segment Leased square footage caption. We consider our facilities to be in good operating condition and sufficient to meet our operational needs for the foreseeable future.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeWe believe, based upon current information, that the outcome of any such government disputes and investigations will not have a material adverse effect on our results of operations, financial condition or cash flows.
Biggest changeWe believe, based upon current information, that the outcome of any such government disputes and investigations will not have a material adverse effect on our results of operations, financial condition or cash flows. -15- Table of Contents

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeCertain Sales and Repurchases of VSE Common Stock During the fiscal year covered by this Form 10-K, we did not sell any of its equity securities that were not registered under the Securities Act.
Biggest changeCertain Sales and Repurchases of VSE Common Stock During the fiscal year covered by this Form 10-K, we acquired Turbine Controls, Inc. ("TCI") on April 24, 2024 and Kellstrom Aerospace Group, Inc. ("Kellstrom Aerospace") on December 3, 2024.
The graph assumes an initial investment of $100 on 12/31/18 and that all dividends have been reinvested. The comparisons are not intended to be indicative of future performance of our common stock. *$100 invested on 12/31/18 in stock or index, including reinvestment of dividends. Fiscal year ending December 31.
The graph assumes an initial investment of $100 on 12/31/19 and that all dividends have been reinvested. The comparisons are not intended to be indicative of future performance of our common stock. *$100 invested on 12/31/19 in stock or index, including reinvestment of dividends. Fiscal year ending December 31.
During the fourth quarter of the fiscal year covered by this Form 10-K, no purchases of equity securities of VSE were made by or on behalf of VSE or any "affiliated purchaser" (as defined in Rule 10b-18 (a)(3) under the Exchange Act) other than 25,854 shares of our common stock that were voluntarily forfeited to VSE by participants in its 2006 Restricted Stock Plan (the "2006 Plan") to cover their personal tax liability for vesting stock awards under the 2006 Plan. -16- Table of Contents Equity Compensation Plan Information We have two compensation plans approved by our stockholders under which our equity securities are authorized for issuance to employees and directors: the 2006 Restricted Stock Plan, as amended (the "2006 Plan"), and the VSE Corporation 2021 Employee Stock Purchase Plan ("ESPP").
During the fiscal year covered by this Form 10-K, no purchases of equity securities of VSE were made by or on behalf of VSE or any "affiliated purchaser" (as defined in Rule 10b-18 (a)(3) under the Exchange Act) other than 34,233 shares of our common stock that were voluntarily forfeited to VSE by participants in its 2006 Restricted Stock Plan (the "2006 Plan") to cover their personal tax liability for vesting stock awards under the 2006 Plan. -16- Table of Contents Equity Compensation Plan Information We have two compensation plans approved by our stockholders under which our equity securities are authorized for issuance to employees and directors: the 2006 Plan, and the VSE Corporation 2021 Employee Stock Purchase Plan ("ESPP").
Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities VSE common stock, par value $0.05 per share, is traded on the NASDAQ Global Select Market ("NASDAQ"), trading symbol, "VSEC." Common Stock - Dividend Paid Per Share Dividend Paid Per Share Quarter Ended 2023 2022 March 31 $ 0.10 $ 0.10 June 30 $ 0.10 $ 0.10 September 30 $ 0.10 $ 0.10 December 31 $ 0.10 $ 0.10 For the Year $ 0.40 $ 0.40 Holders As o f February 1, 2024, VSE common stock, par value $0.05 per share, was held by approximately 199 stockholders of record.
Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities VSE common stock, par value $0.05 per share, is traded on the NASDAQ Global Select Market ("NASDAQ"), trading symbol, "VSEC." Common Stock - Dividend Paid Per Share Dividend Paid Per Share Quarter Ended 2024 2023 March 31 $ 0.10 $ 0.10 June 30 $ 0.10 $ 0.10 September 30 $ 0.10 $ 0.10 December 31 $ 0.10 $ 0.10 For the Year $ 0.40 $ 0.40 Holders As o f February 3, 2025, VSE common stock, par value $0.05 per share, was held by approximately 196 stockholders of record.
The following table sets forth the amounts of securities authorized for issuance under the 2006 Plan and the ESPP as of December 31, 2023.
The following table sets forth the amounts of securities authorized for issuance under the 2006 Plan and the ESPP as of December 31, 2024.
Plan Category Number of securities to be issued upon exercise of outstanding options, warrants and rights Weighted-average exercise price of outstanding options, warrants and rights Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) (a) (b) (c) Equity compensation plans approved by security holders 266,125 $ 43.25 768,489 Equity compensation plans not approved by security holders — $ — — Total 266,125 $ 43.25 768,489 See Note (10) "Stock-Based Compensation Plans" to our Consolidated Financial Statements included in Item 8 of this annual report on Form 10-K for additional information regarding the 2006 Plan and the ESPP. -17- Table of Contents Performance Graph The following graph compares the cumulative total return on our common stock with (i) a performance index for the broad market, the NASDAQ Global Select Market, on which our common stock is traded, and (ii) a published industry index, the S&P 500 Aerospace & Defense Index.
Plan Category Number of securities to be issued upon exercise of outstanding options, warrants and rights Weighted-average exercise price of outstanding options, warrants and rights Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) (a) (b) (c) Equity compensation plans approved by security holders 229,617 $ 43.59 649,202 Equity compensation plans not approved by security holders — $ — — Total 229,617 $ 43.59 649,202 See Note (10) "Stock-Based Compensation Plans" to our Consolidated Financial Statements included in Item 8 of this annual report on Form 10-K for additional information regarding the 2006 Plan and the ESPP. -17- Table of Contents Performance Graph The following graph compares the cumulative total return on our common stock with (i) a performance index for the broad market, the NASDAQ Global Select Market, on which our common stock is traded, and (ii) a published industry index, the S&P 500 Aerospace & Defense Index.
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Performance Graph Table 2018 2019 2020 2021 2022 2023 VSE 100.00 128.58 131.83 210.33 163.32 226.80 NASDAQ Composite 100.00 136.69 198.10 242.03 163.28 236.17 S&P Aerospace & Defense 100.00 130.33 109.39 123.86 145.37 155.21
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The purchase price of these acquisitions consisted of a combination of cash consideration and in-kind payment in the form of shares of the Company's common stock (127,268 shares and 172,414 shares were issued in connection with the acquisition of TCI and Kellstrom Aerospace, respectively).
Added
The common stock issued in connection with both acquisitions was not registered under the Securities Act of 1933, in accordance with Section 4(a)(2) and Rule 506(b) of Regulation D thereunder, as transactions by an issuer not involving any public offering. See Note (2) "Acquisitions" for further information.
Added
Performance Graph Table 2019 2020 2021 2022 2023 2024 VSE 100.00 102.53 163.58 127.02 176.39 260.93 NASDAQ Composite 100.00 144.92 177.06 119.45 172.77 223.87 S&P Aerospace & Defense 100.00 83.94 95.03 111.54 119.09 136.24

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeCash used in investing activities increased $233.3 million in 2023 compared to 2022 primarily due to cash paid for acquisitions, net of cash acquired, of $218.6 million in connection with acquisitions during the current period as discussed in Note (2) "Acquisitions" to the consolidated financial statements. -22- Table of Contents Cash provided by financing activities was $265.0 million in 2023 compared to cash used in financing activities of $5.7 million in 2022.
Biggest changeCash used in investing activities increased $28.0 million in 2024 compared to 2023 primarily due to an increase of $64.5 million in net cash paid for acquisitions completed in the current period as discussed in Note (2) "Acquisitions" to the consolidated financial statements, partially offset by cash provided of $40.2 million related to the FDS sale as discussed in Note (3) "Discontinued Operations" to the consolidated financial statements. -22- Table of Contents Cash provided by financing activities increased $50.8 million in 2024 compared to 2023 primarily due to an increase of $196.0 million in proceeds related to our public underwritten offerings of our common stock in the current period as compared to the prior year, partially offset by a decrease in net borrowings of our debt during the current period of $144.9 million.
Our credit agreement is with a bank group and includes a term loan and a revolving facility, with an aggregate maximum borrowing capacity under our revolving facility of $350.0 million. Under the credit agreement we may elect to increase the maximum availability of the term loan, the revolving facility, or a combination of both, subject to customary lender commitment approvals.
Our credit agreement is with a bank group and includes a term loan and revolving facility, with an aggregate maximum borrowing capacity under our revolving facility of $350.0 million. Under the credit agreement we may elect to increase the maximum availability of the term loan, the revolving facility, or a combination of both, subject to customary lender commitment approvals.
Liquidity Our internal sources of liquidity are primarily from operating activities, specifically from changes in our level of revenues and associated inventory, accounts receivable and accounts payable, and from profitability. Significant increases or decreases in revenues and inventory, accounts receivable and accounts payable can affect our liquidity.
Liquidity Our internal sources of liquidity are primarily from operating activities, specifically from changes in our level of revenues and associated inventory, accounts receivable and accounts payable, and from profitability. Significant increases or decreases in these operating activities can affect our liquidity.
We periodically evaluate the carrying value of inventory, considering factors such as its physical condition, sales patterns and expected future demand in order to estimate the amount necessary to write down any slow moving, obsolete or damaged inventory.
We periodically evaluate the carrying value of inventory, considering factors such as its physical condition, sales patterns and demand in order to estimate the amount necessary to write down any slow moving, obsolete or damaged inventory.
Deferred tax assets are evaluated quarterly to determine if valuation allowances are required or should be adjusted. -25- Table of Contents Recent Accounting Pronouncements See "Nature of Business and Summary of Significant Accounting Policies—Recent Accounting Pronouncements" in Note (1) to our Consolidated Financial Statements included below in Item 8 of this annual report on Form 10-K for additional information.
Deferred tax assets are evaluated quarterly to determine if valuation allowances are required or should be adjusted. Recent Accounting Pronouncements See "Recent Accounting Pronouncements" in Note (1) "Nature of Business and Summary of Significant Accounting Policies" to our Consolidated Financial Statements included below in Item 8 of this annual report on Form 10-K for additional information.
The following generally discusses 2023 and 2022 items and year-to-year comparisons between 2023 and 2022. Discussions of 2021 items and year-to-year comparisons between 2022 and 2021 that are not included in this Form 10-K can be found under Item 7.
The following generally discusses 2024 and 2023 items and year-to-year comparisons between 2024 and 2023. Discussions of 2022 items and year-to-year comparisons between 2023 and 2022 that are not included in this Form 10-K can be found under Item 7.
"Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report on Form 10-K for fiscal year ended December 31, 2022, filed with the SEC on March 10, 2023.
"Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report on Form 10-K for fiscal year ended December 31, 2023, filed with the SEC on March 8, 2024.
The majority of our contracts have a single performance obligation to transfer goods or services. Our performance obligations are satisfied over time as work progresses or at a point in time based on transfer of control of products and services to our customers. Our Aviation segment revenues result from the sale of aircraft parts and the performance of MRO services.
Our performance obligations are satisfied over time as work progresses or at a point in time based on transfer of control of products and services to our customers. Our Aviation segment revenues result from the sale of aircraft parts and the performance of MRO services.
We paid cash dividends totaling approximately $5.4 million, or $0.40 per share, in 2023. Pursuant to our credit agreement, our payment of cash dividends is subject to annual restrictions. We have paid cash dividends each year since 1973.
We paid cash dividends totaling approximately $7.1 million, or $0.40 per share, in 2024. Pursuant to our credit agreement, our payment of cash dividends is subject to annual restrictions. We have paid cash dividends each year since 1973.
In addition, costs and operating expenses for this segment included expenses for amortization of intangible assets associated with acquisitions and allocated corporate costs. Expense for amortization of intangible assets increased $2.4 million in 2023 to $11.7 million from $9.3 million in 2022 driven by newly acquired intangibles in connection with acquisitions completed in the current year.
In addition, costs and operating expenses for this segment included expenses for amortization of intangible assets associated with acquisitions and allocated corporate costs. Expense for amortization of intangible assets increased $5.9 million in 2024 to $17.6 million from $11.7 million in 2023 driven by newly acquired intangibles in connection with acquisitions completed in the current year.
In 2023, we secured key multi-year distribution deals for both domestic and new international markets, including an expansion of our flagship distribution agreement with Pratt & Whitney Canada supporting Europe, the Middle East, and Africa. These new distribution initiatives are expected to drive sustainable and recurring revenue with growth opportunities, contributing to future positive results.
In 2024, we ramped up several multi-year distribution and repair programs for both domestic and new international markets, including an expansion of our flagship distribution agreement with Pratt & Whitney Canada supporting Europe, the Middle East, and Africa. These new programs are expected to drive sustainable and recurring revenue with growth opportunities, contributing to future positive results.
Business Overview We are a leading provider of aftermarket distribution and maintenance, repair and overhaul ("MRO") services for air and land transportation assets for commercial and government markets. Our operations are conducted within two reportable segments aligned with our operating segments: Aviation and Fleet.
Business Overview VSE Corporation, through its subsidiaries (collectively, "VSE," the "Company," "we," "us," or "our"), is a leading provider of aftermarket distribution and maintenance, repair and overhaul ("MRO") services for air and land transportation assets for commercial and government markets. Our operations are conducted within two reportable segments aligned with our operating segments: Aviation and Fleet.
Substantially all Fleet segment revenues from the sale of vehicle parts to customers are recognized at the point in time of the transfer of control to the customer.
Substantially all Fleet segment revenues from the sale of vehicle parts to customers are recognized at the point in time of the transfer of control to the customer. Sales returns and allowances for vehicle parts are not significant.
In addition, costs and operating expenses for this segment included expense for amortization of intangible assets associated with acquisitions and allocated corporate costs. Expense for amortization of intangible assets decreased $3.8 million in 2023 to $2.6 million from $6.4 million in 2022 driven by intangibles becoming fully amortized during the current year.
In addition, costs and operating expenses for this segment included expense for amortization of intangible assets associated with acquisitions and allocated corporate costs. Expense for amortization of intangible assets decreased $2.5 million in 2024 to $0.1 million from $2.6 million in 2023 driven by substantially all intangibles becoming fully amortized during the prior year.
Costs and operating expenses for our operating segments increase and decrease in conjunction with the level of business -20- Table of Contents activity and revenues generated by each segment. See "Segment Operating Results" section below for further discussion of costs and operating expenses by segment. Operating Income.
Costs and operating expenses increased $226.2 million, or 29%, in 2024 compared to 2023. Costs and operating expenses for our operating segments increase and decrease in conjunction with the level of business -20- Table of Contents activity and revenues generated by each segment. See "Segment Operating Results" section below for further discussion of costs and operating expenses by segment.
We believe our existing balances of cash and cash equivalents, along with our cash flows from operations and debt instruments under our credit agreement mentioned above, will provide sufficient liquidity for our business operations as well as capital expenditures, dividends, and other capital requirements associated with our business operations over the next twelve months and thereafter for the foreseeable future. -23- Table of Contents Other Obligations and Commitments See Note (7) "Debt" to our Consolidated Financial Statements for information regarding our long-term debt obligations.
We believe our existing balances of cash and cash equivalents, along with our cash flows from operations and debt instruments under our credit agreement mentioned above, will provide sufficient liquidity for our business operations as well as capital expenditures, dividends, and other capital requirements associated with our business operations over the next twelve months and thereafter for the foreseeable future.
We estimate the fair value of our reporting units using a weighting of fair values derived from the income approach and market approach. The analysis relies on significant judgements and assumptions about expected future cash flows, weighted-average cost of capital, discount rates, expected long-term growth rates, and financial measures derived from observable market data of comparable public companies.
The analysis relies on significant judgements and assumptions about expected future cash flows, weighted-average cost of capital, discount rates, expected long-term growth rates, and financial measures derived from observable market data of comparable public companies.
See Note (2) "Acquisitions" to the consolidated financial statements for further information. Underwritten Public Offering In July 2023, we initiated a public offering of the Company's common stock relating to the issuance and sale of 2,846,250 shares at a public offering price of $48.50 per share.
See Note (2) "Acquisitions" to the consolidated financial statements for further information. Underwritten Public Offerings In May 2024, we initiated a public offering of the Company's common stock relating to the issuance and sale of 2,429,577 shares at a public offering price of $71.00 per share.
The development and selection of these critical accounting policies have been determined by our management. Due to the significant judgment involved in selecting certain of the assumptions used in these policies, it is possible that different parties could choose different assumptions and reach different conclusions. We consider our policies relating to the following matters to be critical accounting policies.
Due to the significant judgment involved in selecting certain of the assumptions used in these policies, it is possible that different parties could choose different assumptions and reach different conclusions. We consider our policies relating to the following matters to be critical accounting policies. Revenue Recognition We account for revenue in accordance with ASC 606.
Revenue Recognition We account for revenue in accordance with ASC 606. The unit of account in ASC 606 is a performance obligation. At the inception of each contract with a customer, we determine our performance obligations under the contract and the contract's transaction price.
The unit of account in ASC 606 is a performance obligation. At the inception of each contract with a customer, we determine our performance obligations under the contract and the contract's transaction price. A performance obligation is a promise in a contract to transfer a distinct good or service to the customer and is defined as the unit of account.
We evaluate goodwill for our reporting units for impairment at least annually on the first day of the fourth quarter, or whenever events or other changes in circumstances indicate that the carrying value may not be fully recoverable. We estimate and compare the fair value of each reporting unit to its respective carrying value including goodwill.
We recognize purchased intangible assets in connection with our business acquisitions at fair value on the acquisition date. We evaluate goodwill for our reporting units for impairment at least annually on the first day of the fourth quarter, or whenever events or other changes in circumstances indicate that the carrying value may not be fully recoverable.
Based on the annual goodwill impairment test performed during the fourth quarter of 2023, we determined that each reporting unit's fair value significantly exceeded its carrying value.
Based on the annual goodwill impairment test performed during the fourth quarter of 2024, our qualitative impairment test determined that it was more likely than not that each reporting unit's fair value exceeded its carrying value.
See Note (12) "Leases" to our Consolidated Financial Statements for information pertaining to future minimum lease payments relating to our operating lease obligations. Inflation and Pricing Our Aviation and Fleet segments have experienced broad-based inflationary impacts consistent with overall trends in the aerospace and industrial distribution market, due primarily to increased materials, labor, and services costs.
Inflation and Pricing Our Aviation and Fleet segments have experienced broad-based inflationary impacts consistent with overall trends in the aerospace and industrial distribution market, due primarily to increased materials, labor, and services costs.
Repair revenue increased $49.8 million, or 46%, driven by an expansion of repair capabilities, improved end market demand, and share gains with commercial and B&GA customers. Costs and Operating Expenses. Costs and operating expenses increased $101.2 million, or 27%, in 2023 compared to 2022 primarily due to increased revenues as discussed above.
Repair revenue increased $135.9 million, or 86%, driven by an expansion of repair capabilities, improved end market demand, share gains with commercial and B&GA customers, and contributions from the acquisition of TCI (April 2024). Costs and Operating Expenses. Costs and operating expenses increased $212.0 million, or 45%, in 2024 compared to 2023 primarily due to increased revenues as discussed above.
Off-Balance Sheet Arrangements We do not have any off-balance sheet arrangements that have, or are reasonably likely to have, a current or future material effect on our financial condition, changes in financial condition, revenue or expenses, results of operations, liquidity, capital expenditures or capital resources.
Off-Balance Sheet Arrangements We do not have any off-balance sheet arrangements that have, or are reasonably likely to have, a current or future material effect on our financial condition, changes in financial condition, revenue or expenses, results of operations, liquidity, capital expenditures or capital resources. -23- Table of Contents Critical Accounting Policies, Estimates and Judgments Our consolidated financial statements are prepared in accordance with United States generally accepted accounting principles ("U.S.
Critical Accounting Policies, Estimates and Judgments Our consolidated financial statements are prepared in accordance with United States generally accepted accounting principles ("U.S. GAAP"), which require us to make estimates and assumptions. Certain critical accounting policies affect the more significant accounts, particularly those that involve judgments, estimates and assumptions used in the preparation of our consolidated financial statements.
GAAP"), which require us to make estimates and assumptions. Certain critical accounting policies affect the more significant accounts, particularly those that involve judgments, estimates and assumptions used in the preparation of our consolidated financial statements. The development and selection of these critical accounting policies have been determined by our management.
Revenues increased $191.0 million, or 29%, in 2023 compared to 2022 due to revenue growth in our Aviation segment of $135.9 million and our Fleet segment of $55.1 million. See "Segment Operating Results" section below for further discussion of revenues by segment. Costs and Operating Expenses. Costs and operating expenses increased $156.6 million, or 25%, in 2023 compared to 2022.
Revenues increased $219.6 million, or 26%, in 2024 compared to 2023 due to revenue growth in our Aviation segment of $242.2 million, partially offset by a decline in our Fleet segment of $22.6 million. See "Segment Operating Results" section below for further discussion of revenues by segment. Costs and Operating Expenses.
The offering closed in two transactions, and net proceeds of $129.1 million were received by the Company, which were used to repay outstanding borrowings under our revolving credit facility and for general corporate purposes. See Note (15) "Capital Stock" to the consolidated financial statements for further information.
The offering closed on October 17, 2024, and net proceeds of $163.8 million were received by the Company, which were used to finance a portion of the cash consideration for the Kellstrom Aerospace acquisition and repay outstanding borrowings under our revolving facility. See Note (15) "Capital Stock" to the consolidated financial statements for further information.
("TCI"), a leading provider of aftermarket MRO support services for complex engine components, as well as engine and airframe accessories, across commercial and military applications.
("TCI"), a leading provider of aftermarket MRO support services for complex engine components, as well as engine and airframe accessories, across commercial and military applications. In December 2024, we completed the acquisition of Kellstrom Aerospace Group, Inc. ("Kellstrom Aerospace"), a diversified global distributor and service provider supporting the commercial aerospace engine aftermarket.
Revenues increased $135.9 million, or 33%, in 2023 compared to 2022. Distribution revenue increased $86.2 million, or 29%, driven by strong program execution on new and existing distribution contracts and contributions from the acquisition of Desser Aerospace (which occurred in July 2023).
Revenues increased $242.2 million, or 45%, in 2024 compared to 2023. Distribution revenue increased $106.3 million, or 27%, driven by strong program execution on new and existing distribution programs and contributions from the acquisitions of Desser Aerospace (July 2023) and Kellstrom Aerospace (December 2024).
Expense for allocated corporate costs was $12.9 million for 2023 and 2022, respectively. Operating Income.
Expense for allocated corporate costs was $18.5 million for 2024 as compared to $12.9 million for 2023. Operating Income.
A performance obligation is a promise in a contract to transfer a distinct good or service to the customer and is defined as the unit of account. A contract’s transaction price is allocated to each distinct performance obligation and recognized as revenue when the performance obligation is satisfied.
A contract’s transaction price is allocated to each distinct performance obligation and recognized as revenue when the performance obligation is satisfied. The majority of our contracts have a single performance obligation to transfer goods or services.
Liquidity and Capital Resources Cash Flows The following table summarizes our cash flows (in thousands): Year ended December 31, 2023 2022 Net cash (used in) provided by operating activities $ (21,829) $ 8,051 Net cash used in investing activities (235,690) (2,377) Net cash provided by (used in) financing activities 264,971 (5,714) Net increase (decrease) in cash and cash equivalents $ 7,452 $ (40) Cash used in operating activities was $21.8 million in 2023 compared to cash provided by operating activities of $8.1 million in 2022.
Liquidity and Capital Resources Cash Flows The following table summarizes our cash flows (in thousands): For the years ended December 31, 2024 2023 Net cash used in operating activities $ (31,037) $ (21,829) Net cash used in investing activities (263,669) (235,690) Net cash provided by financing activities 315,806 264,971 Net increase in cash and cash equivalents $ 21,100 $ 7,452 Cash used in operating activities increased $9.2 million in 2024 compared to 2023 primarily due to the working capital impact of the FDS Sale and related expenses incurred.
Operating income increased $34.8 million, or 95%, in 2023 compared to 2022 primarily due to revenue growth and a favorable shift in sales mix and pricing. -21- Table of Contents Fleet Segment Results The results of operations for our Fleet segment were as follows (in thousands): Years ended December 31, 2023 2022 Change ($) Change (%) Revenues $ 316,468 $ 261,336 $ 55,132 21 % Costs and operating expenses 285,211 237,425 47,786 20 % Operating income $ 31,257 $ 23,911 $ 7,346 31 % Revenues.
Operating income increased $30.2 million, or 42%, in 2024 compared to 2023 primarily due to revenue growth and a favorable shift in sales mix and pricing, partially offset by an increase in intangible amortization and allocated corporate costs. -21- Table of Contents Fleet Segment Results The results of operations for our Fleet segment were as follows (in thousands): Years ended December 31, 2024 2023 Change ($) Change (%) Revenues $ 293,876 $ 316,468 $ (22,592) (7) % Costs and operating expenses 276,858 285,211 (8,353) (3) % Operating income $ 17,018 $ 31,257 $ (14,239) (46) % Profit percentage 5.8 % 9.9 % Revenues.
Our outstanding borrowings under our term loan and revolving facility increased $144 million, and we had $216 million of unused commitments under the credit agreement as of December 31, 2023.
Financial Condition There has been no material adverse change in our financial condition in 2024. Our outstanding borrowings under our term loan and revolving facility decreased $0.5 million, and we had $194 million of unused commitments under the credit agreement as of December 31, 2024.
Fleet is executing its revenue diversification strategy by acquiring new customers and expanding product options for the e-commerce fulfillment business. Commercial customer revenue continues to experience strong growth, increasing 45% in 2023 compared to the prior year. We anticipate continued growth as we extend our reach to meet the increasing demand from the commercial market.
Fleet Segment Our Fleet segment continues to see growth in revenue from commercial fleet customers and e-commerce fulfillment, as the segment moves towards revenue diversification. Fleet is executing its revenue diversification strategy by continuing to scale our Olive Branch, MS, e-commerce fulfillment distribution facility, acquiring new customers, and expanding product options for our commercial business.
For tax purposes, current year COLI book income was nontaxable income resulting in a reduction to our effective tax rate as opposed to 2022 nondeductible COLI loss that increased our effective tax rate. Our tax rate is also affected by discrete items that may occur in any given year but may not be consistent from year to year.
The decrease in our effective tax rate primarily resulted from a favorable excess stock tax deduction and lower pre-tax book income in 2024. Our tax rate is also affected by discrete items that may occur in any given year but may not be consistent from year to year.
Valuation of Goodwill and Intangible Assets Goodwill represents the excess of fair value of consideration paid for an acquisition over the fair value of the net assets acquired and liabilities assumed as of the acquisition date. We recognize purchased intangible assets in connection with our business acquisitions at fair value on the acquisition date.
The results of operations of businesses acquired are included in the consolidated financial statements from their dates of acquisition. -24- Table of Contents Valuation of Goodwill and Intangible Assets Goodwill represents the excess of fair value of consideration paid for an acquisition over the fair value of the net assets acquired and liabilities assumed as of the acquisition date.
Recent Developments Sale of Federal and Defense Segment In May 2023, we announced our decision to sell our Federal and Defense segment. As a result, we have reported the results of operations for the Federal and Defense segment as discontinued operations for all periods presented. See Note (3) "Discontinued Operations" to our Consolidated Financial Statements for further information.
Recent Developments Sale of Federal and Defense Segment In February 2024, we entered into two separate agreements to sell substantially all of the Federal and Defense segment assets ("FDS Sale"). We have reported the results of operations for the Federal and Defense segment as discontinued operations for all periods presented.
Segment Operating Results Aviation Segment Results The results of operations for our Aviation segment were as follows (in thousands): Years ended December 31, 2023 2022 Change ($) Change (%) Revenues $ 544,020 $ 408,112 $ 135,908 33 % Costs and operating expenses 472,852 371,696 101,156 27 % Operating income $ 71,168 $ 36,416 $ 34,752 95 % Revenues.
Segment Operating Results Aviation Segment Results The results of operations for our Aviation segment were as follows (in thousands): Years ended December 31, 2024 2023 Change ($) Change (%) Revenues $ 786,256 $ 544,020 $ 242,236 45 % Costs and operating expenses 684,869 472,852 212,017 45 % Operating income $ 101,387 $ 71,168 $ 30,219 42 % Profit percentage 12.9 % 13.1 % Revenues.
Expense for allocated corporate costs was $7.8 million for 2023 and $7.5 million for 2022. Operating Income. Operating income increased $7.3 million, or 31%, in 2023 compared to 2022, primarily driven by increased revenues, a change in mix of products sold, and decreased amortization expense. Financial Condition There has been no material adverse change in our financial condition in 2023.
Expense for allocated corporate costs was $7.2 million for 2024 as compared to $7.8 million for 2023. Operating Income. Operating income decreased $14.2 million, or 46%, in 2024 compared to 2023, primarily driven by a shift in sales mix, the result of decreased revenues from our USPS vehicle fleet program, partially offset by decreased amortization expense and allocated corporate costs.
We estimate cash requirements for interest payments on our debt facilities to be approximately $32.1 million for 2024, $28.7 million for 2025, and $23.0 million for 2026. The estimates do not take into account future draw downs and repayments on the debt or changes in the variable interest rate, and actual interest may be different.
The estimates do not take into account future draw downs and repayments on the debt or changes in the variable interest rate, and actual interest may be different. The estimates included variable rate interest obligations estimated based on rates as of December 31, 2024. The interest payments are estimated through the maturity date of our term loan.
Results of Operations The following table summarizes our consolidated results of operations (in thousands): Years ended December 31, 2023 2022 Change ($) Change (%) Revenues $ 860,488 $ 669,448 $ 191,040 29 % Costs and operating expenses 772,492 615,844 156,648 25 % Operating income 87,996 53,604 34,392 64 % Interest expense, net 31,083 17,893 13,190 74 % Income from continuing operations before income taxes 56,913 35,711 21,202 59 % Provision for income taxes 13,761 9,052 4,709 52 % Net income from continuing operations $ 43,152 $ 26,659 $ 16,493 62 % Revenues.
Results of Operations The following table summarizes our consolidated results of operations (in thousands): Years ended December 31, 2024 2023 Change ($) Change (%) Revenues $ 1,080,132 $ 860,488 $ 219,644 26 % Costs and operating expenses 998,713 772,492 226,221 29 % Operating income 81,419 87,996 (6,577) (7) % Interest expense, net 34,939 31,083 3,856 12 % Income from continuing operations before income taxes 46,480 56,913 (10,433) (18) % Provision for income taxes 9,982 13,761 (3,779) (27) % Net income from continuing operations $ 36,498 $ 43,152 $ (6,654) (15) % Revenues.
Sales returns and allowances for vehicle parts are not significant. -24- Table of Contents Inventory Valuation Inventories are stated at the lower of cost or net realizable value using the first-in, first-out ("FIFO") method.
We have applied the practical expedient for our parts sales and MRO services to exclude the amount of remaining performance obligations for contracts with an original expected term of one year or less. Inventory Valuation Inventories are stated at the lower of cost or net realizable value using the first-in, first-out ("FIFO") method.
The expansion of our distribution services was driven by strong execution of new and existing programs. Our repair business experienced growth driven by increased market share in the commercial and B&GA sectors.
Our repair business's growth was driven by the expansion of new repair capabilities, market share gains in the commercial and business and general aviation ("B&GA") markets, improved throughput across our MRO facilities, and contributions from the TCI acquisition.
The operating income increase attributable to our segments was partially offset by an increase in corporate costs, including acquisition and integration costs incurred during the current period. Interest Expense. Interest expense increased approximately $13.2 million, or 74% in 2023 compared to 2022 primarily due to an increase in our debt facility borrowings and higher average interest rates on borrowings outstanding.
Interest expense increased approximately $3.9 million, or 12% in 2024 compared to 2023 primarily due to an increase in our average debt facility borrowings during the current period. Provision for Income Taxes. The effective tax rate for continued operations was 21.5% in 2024 compared to 24.2% in 2023.
Revenues increased $55.1 million, or 21%, in 2023 compared to 2022. The increase was primarily from commercial customers of $46.7 million, or 45%, and other government customers (primarily USPS) of $11.5 million, or 7%. Commercial customer revenue growth was driven by our commercial fleet and e-commerce fulfillment business.
Revenues from other government customers decreased primarily due to lower maintenance activity within the USPS vehicle fleet program driven by USPS' transition to a new FMIS. Commercial customer revenue growth was driven by our commercial fleet and e-commerce fulfillment business. Costs and Operating Expenses. Costs and operating expenses decreased $8.4 million, or 3%, primarily due to decreased revenues.
In July 2023, we completed an underwritten public offering of 2,846,250 shares of the Company's common stock, generating proceeds of $129.1 million in connection with the offering, net of issuance costs.
In May and October 2024, we completed underwritten public offerings of the Company's common stock, generating proceeds, net of issuance costs, of $162.0 million and $163.8 million, respectively.
The estimates included variable rate interest obligations estimated based on rates as of December 31, 2023. The interest payments are estimated through the maturity date of our term loan. Interest payments under our revolving facility have been excluded because a reasonable estimate of timing and amount of cash out flows cannot be determined.
Interest payments under our revolving facility have been excluded because a reasonable estimate of timing and amount of cash out flows cannot be determined. See Note (12) "Leases" to our Consolidated Financial Statements for information pertaining to future minimum lease payments relating to our operating lease obligations.
In February 2024, we entered into two separate agreements to sell substantially all of the Federal and Defense segment assets. See Note (18) "Subsequent Events" for further information. Acquisition of Turbine Controls, Inc. On February 29, 2024, we signed a definitive agreement to acquire Turbine Controls, Inc.
See Note (3) "Discontinued Operations" to our Consolidated Financial Statements for further information. Sale of Fleet Segment In February 2025, we entered into an agreement to sell the Fleet segment. See Note (19) "Subsequent Event" for further information. 2024 Acquisitions In April 2024, we completed the acquisition of Turbine Controls, Inc.
Business Trends The following discussion provides a brief description of some of the key business factors impacting our results of operations detailed by segment. -19- Table of Contents Aviation Segment Our Aviation segment has seen favorable results due to successful investments in growth initiatives, resulting in a 33% increase in annual revenue, totaling $544 million in 2023.
Business Trends The following discussion provides a brief description of some of the key business factors impacting our results of operations detailed by segment. -19- Table of Contents Aviation Segment Our strong program execution of new and existing distribution awards, our expanded portfolio of MRO capabilities and contributions from recent acquisitions resulted in record revenue of $786 million for the year ended December 31, 2024, a 45% increase year-over-year.
Investments in the Aviation segment are focused on businesses and programs that broaden our portfolio and reach new customers and geographies. The February 2023 acquisition of Precision Fuel expands our product offerings and customer base, offering strategic cross-selling opportunities and market share in niche B&GA related markets.
Investments in the Aviation segment are focused on businesses and programs that broaden our portfolio of products, expand our repair capabilities and reach new customers and geographies. The April 2024 acquisition of TCI strengthens our position in the commercial aviation engine MRO aftermarket, while providing additional opportunities for organic growth.
Removed
See Note (18) "Subsequent Events" for further information. 2023 Acquisitions In February 2023, we completed the acquisition of Precision Fuel Components, LLC ("Precision Fuel"), a provider of MRO services for engine accessories and fuel systems supporting the business and general aviation ("B&GA") market.
Added
The offering closed in two transactions, and net proceeds of $162.0 million were received by the Company, which were used to repay outstanding borrowings under our revolving credit facility, including amounts borrowed to pay the purchase price of the TCI acquisition and for general corporate purposes.
Removed
In July 2023, we completed the acquisition of Desser Holding Company LLC ("Desser Aerospace"), a global aftermarket solutions provider of specialty distribution and MRO services. In September 2023, we entered into an Asset Purchase and License Agreement with Honeywell International Inc. to exclusively manufacture, sell, market, distribute, and repair certain Honeywell fuel control systems (the "Honeywell FCS Acquisition").
Added
In October 2024, we initiated a public offering of the Company's common stock relating to the issuance and sale of 1,982,757 shares at a public offering price of $87.00 per share.
Removed
These factors, combined with our growth initiatives, led to a 29% increase in distribution revenue and a 46% increase in repair revenue in 2023 compared to the prior year.
Added
Distribution and repair revenue increased 27% and 86%, respectively, during the year ended December 31, 2024, compared to the same period in the prior year. Growth of our distribution business was driven by strong execution of new and existing programs, and contributions from recent acquisitions.
Removed
The July 2023 acquisition of Desser Aerospace supports our tip-to-tail aircraft distribution and MRO services strategy and provides a platform for international expansion. The September 2023 Honeywell FCS Acquisition allows us to exclusively manufacture and support certain of Honeywell's fuel control systems on four key engine platforms.
Added
The December 2024 acquisition of Kellstrom Aerospace improves our position in the commercial aviation engine aftermarket, expands our aftermarket product and capability offerings, and broadens our global footprint. The Aviation segment is expected to see continued growth due to progress on new and existing programs, an expansion of repair capabilities, and synergies from recent acquisitions.
Removed
The Aviation segment is expected to see continued growth due to progress on new initiatives and recent acquisitions, offering a favorable outlook for 2024. Fleet Segment Our Fleet segment continues to see growth in revenue from commercial fleet customers and e-commerce fulfillment, as the segment moves towards revenue diversification.
Added
Commercial customer revenue continues to experience strong growth, increasing 18% in 2024 compared to the prior year. We anticipate continued growth as we extend our reach to meet the increasing demand from the commercial market. In 2024, commercial revenues were 61% of total Fleet segment revenue compared to 48% in 2023, demonstrating the continued success of our revenue diversification strategy.
Removed
In 2023, commercial revenues were 48% of total Fleet segment revenue compared to 40% in 2022, demonstrating the continued success of our revenue diversification strategy. To support commercial revenue, Fleet opened a new distribution warehouse and e-commerce center of excellence in Olive Branch, MS (near Memphis, TN), in January 2023.
Added
The United States Postal Services ("USPS") revenue in 2024 decreased 30%, as compared to the prior year. During 2024, USPS elected to migrate all of their vehicle maintenance facilities ("VMFs") to a new Fleet Management Information System ("FMIS"), resulting in a temporary decline in maintenance activity. The transition to the new FMIS was completed in the third quarter of 2024.
Removed
The new facility, which is 450,000 square feet, enhances Fleet's geographical coverage and product offerings for customers. The launch of this new location allowed Fleet to keep up with the growing demand for e-commerce fulfillment.
Added
As of the fourth quarter of 2024, maintenance activity has begun to improve, which has resulted in increased demand for our parts. We remain committed to supporting the USPS as they emerge from their FMIS conversion.
Removed
Additionally, we generated steady revenue from our support of the United States Postal Services ("USPS") delivery vehicle fleet through supplying parts and managing inventory, with revenue increasing 8% in 2023 compared to the prior year. We continue to monitor USPS vehicle procurement and are ready to support both new vehicles added to the fleet and existing vehicles still in service.
Added
Operating income decreased $6.6 million, or 7%, in 2024 compared to 2023 primarily attributable to an increase in corporate costs, including net lease abandonment and termination charges of $12.2 million, corporate restructuring charges of $4.2 million, and acquisition-related expenses incurred in connection with current year acquisitions, and a decrease in operating income for our Fleet segment of $14.2 million.
Removed
Our experience and understanding of the USPS' needs strategically position us to remain a key partner. We are committed to remaining agile and supporting the USPS during its vehicle transition. We expect continued growth within our commercial channels, coupled with stable contributions from the USPS.
Added
These operating income decreases were partially offset by an increase of $30.2 million for our Aviation segment. See "Segment Operating Results" section below for further discussion of operating income by segment. Interest Expense.
Removed
Operating income increased $34.4 million, or 64%, in 2023 compared to 2022 attributable to increases of $34.8 million for our Aviation segment and $7.3 million for our Fleet segment. See "Segment Operating Results" section below for further discussion of operating income by segment.
Added
Revenues decreased $22.6 million, or 7%, in 2024 compared to 2023. The decrease was primarily driven by a decline in revenues from other government customers of $50.1 million, or 30%, partially offset by an increase in revenues from commercial customers of $27.7 million, or 18%.
Removed
Provision for Income Taxes. The effective tax rate for continued operations was 24.2% in 2023 compared to 25.3% in 2022. The decrease in our effective tax rate primarily resulted from book income in connection with an increase in the fair market value of our corporate owned life insurance ("COLI") plan assets in 2023 versus book expense recorded in 2022.
Added
Other Obligations and Commitments See Note (7) "Debt" to our Consolidated Financial Statements for information regarding our long-term debt obligations. We estimate cash requirements for interest payments on our debt facilities to be approximately $30.1 million for 2025 and $24.2 million for 2026.
Removed
Revenues from other government customers increased primarily due to increased support of legacy USPS vehicle fleets. These increases were partially offset by a decrease in sales to DoD customers of $3 million, or 94%. Costs and Operating Expenses. Costs and operating expenses increased $47.8 million, or 20%, primarily due to increased revenues.
Added
When testing goodwill for impairment, we may initially qualitatively assess whether it is necessary to perform a quantitative goodwill impairment test, which is only required if we conclude that it is more likely than not that a reporting unit's fair value is less than its carrying amount.
Removed
The change was primarily due to greater use of cash for inventory purchases.
Added
In evaluating whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount, we considered the totality of all relevant events and circumstances that affect the fair value or carrying amount of a reporting unit in accordance with ASC 350-20-35-3C.
Removed
The change was primarily due to the receipt of $129.1 million in proceeds related to our public underwritten offering of our common stock in July 2023 and overall higher proceeds from net borrowings of our debt during the current period primarily related to the increase in our term loan facility borrowings to fund cash paid for acquisitions.
Added
In the event we deem a quantitative impairment test necessary, we estimate and compare the fair value of each reporting unit to its respective carrying value including goodwill. We estimate the fair value of our reporting units using a weighting of fair values derived from the income approach and market approach.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeFor additional information related to our debt and interest rate swap agreements, see Note (7) and Note (8), respectively, to our Consolidated Financial Statements contained in this report. -26- Table of Contents
Biggest changeA hypothetical 1% increase to interest rates would have increased interest expense by approximately $4.6 million and would have decreased our net income and operating cash flows by a comparable amount. -25- Table of Contents For additional information related to our debt and interest rate swap agreements, see Note (7) and Note (8), respectively, to our Consolidated Financial Statements contained in this report. -26- Table of Contents
Removed
A hypothetical 1% increase to interest rates would have increased interest expense by approximately $4.0 million and would have decreased our net income and operating cash flows by a comparable amount.

Other VSEC 10-K year-over-year comparisons