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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q
(Mark One)
 
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2020 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Transition Period from _____ to _____

Commission File Number:  000-03676

VSE CORPORATION
(Exact Name of Registrant as Specified in its Charter)
Delaware
 
 
 
54-0649263
(State or Other Jurisdiction of
 
 
 
(I.R.S. Employer
Incorporation or Organization)
 
 
 
Identification No.)

6348 Walker Lane
 
 
 
 
Alexandria,
Virginia
 
 
 
22310
(Address of Principal Executive Offices)
 
 
 
(Zip Code)

Registrant's Telephone Number, Including Area Code:  (703) 960-4600

Securities registered pursuant to Section 12(b) of the Act:
Title of each class
 
Trading Symbol
 
Name of each exchange on which registered
Common Stock, par value $0.05 per share
 
VSEC
 
The NASDAQ Global Select Market

Securities registered pursuant to Section 12(g) of the Act:  None

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes     No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes     No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of "accelerated filer and large accelerated filer" in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer
Accelerated filer
Non-accelerated filer
Smaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transaction period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Yes     No




Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes     No

Number of shares of Common Stock outstanding as of July 22, 2020: 11,043,246



 
TABLE OF CONTENTS
 
 
 
 
 
 
 
 
 
Page
 
 
 
 
 
ITEM 1.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
ITEM 2.
 
 
 
ITEM 3.
 
 
 
ITEM 4.
 
 
 
 
 
 
 
 
ITEM 1.
 
 
 
ITEM 1A.
 
 
 
ITEM 2.
 
 
 
ITEM 6.
 
 
 
 
 
 
 



-3-

Table of Contents

VSE Corporation and Subsidiaries


Forward Looking Statements

This quarterly report on Form 10-Q (“Form 10-Q”) contains statements that, to the extent they are not recitations of historical fact, constitute "forward looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). All such statements are intended to be covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995 and includes this statement for purposes of such safe harbor provisions.

“Forward-looking” statements, as such term is defined by the Securities Exchange Commission (the “SEC”) in its rules, regulations and releases, represent our expectations or beliefs, including, but not limited to, statements concerning our operations, economic performance, financial condition, the impact of widespread health developments, such as the ongoing COVID-19 outbreak, the health and economic impact thereof and the governmental, commercial, consumer and other responses thereto, growth and acquisition strategies, investments and future operational plans. Without limiting the generality of the foregoing, words such as “may,” “will,” “expect,” “believe,” “anticipate,” “intend,” “forecast,” “seek,” “plan,” “predict,” “project,” “could,” “estimate,” “might,” “continue,” “seeking” or the negative or other variations thereof or comparable terminology are intended to identify forward-looking statements. These statements, by their nature, involve substantial risks and uncertainties, certain of which are beyond our control, and actual results may differ materially depending on a variety of important factors, including, but not limited to, those identified elsewhere in this document, including in Item 1A, Risk Factors, Item 2, Management’s Discussion and Analysis of Financial Condition and Results of Operations, and Item 3, Quantitative and Qualitative Disclosures About Market Risk, as well as with respect to the risks described in Item 1A, Risk Factors, to our Annual Report on Form 10-K for the fiscal year ended December 31, 2019 filed with the SEC on March 9, 2020 (“2019 Form 10-K). All forward-looking statements made herein are qualified by these cautionary statements and risk factors and there can be no assurance that the actual results, events or developments referenced herein will occur or be realized.

Readers are cautioned not to place undue reliance on these forward looking-statements, which reflect management's analysis only as of the date hereof. The Company undertakes no obligation to publicly revise these forward-looking statements to reflect events or circumstances that occur or arise after the date hereof.



-4-

Table of Contents

PART I.  Financial Information

Item 1.    Financial Statements

VSE Corporation and Subsidiaries

Unaudited Consolidated Balance Sheets
(in thousands except share and per share amounts)
 
June 30,
 
December 31,
 
2020

2019
Assets
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
213

 
$
734

Receivables, net
58,615

 
70,630

Unbilled receivables, net
41,859

 
46,279

Inventories, net
223,134

 
218,627

Other current assets
30,257

 
19,071

Total current assets
354,078

 
355,341

 
 
 
 
Property and equipment, net
36,987

 
43,465

Intangible assets, net
111,912

 
132,175

Goodwill
238,126

 
276,450

Operating lease - right-of-use assets
21,395

 
20,943

Other assets
25,064

 
17,490

Total assets
$
787,562

 
$
845,864

 
 
 
 
Liabilities and Stockholders' equity
 

 
 

Current liabilities:
 

 
 

Current portion of long-term debt
$
18,504

 
$
16,883

Accounts payable
76,183

 
68,099

Current portion of earn-out obligation
3,600

 
31,700

Accrued expenses and other current liabilities
47,472

 
46,514

Dividends payable
994

 
987

Total current liabilities
146,753

 
164,183

 
 
 
 
Long-term debt, less current portion
241,612

 
253,128

Deferred compensation
20,535

 
18,146

Long-term operating lease obligations
24,272

 
24,441

Earn-out obligation, less current portion

 
5,000

Deferred tax liabilities
11,436

 
17,865

Total liabilities
444,608

 
482,763

 
 
 
 
Commitments and contingencies (Note 7)


 


 
 
 
 
Stockholders' equity:
 

 
 

Common stock, par value $0.05 per share, authorized 15,000,000 shares; issued and outstanding 11,043,246 and 10,970,123, respectively
552

 
549

Additional paid-in capital
31,494

 
29,411

Retained earnings
312,965

 
334,246

Accumulated other comprehensive loss
(2,057
)
 
(1,105
)
Total stockholders' equity
342,954

 
363,101

Total liabilities and stockholders' equity
$
787,562

 
$
845,864

The accompanying notes are an integral part of these unaudited consolidated financial statements.

-5-

Table of Contents

VSE Corporation and Subsidiaries

Unaudited Consolidated Statements of (Loss) Income
(in thousands except share and per share amounts)
 
 
For the three months ended June 30,
 
For the six months ended June 30,
 
 
2020
 
2019
 
2020
 
2019
Revenues:
 
 
 
 
 
 
 
 
Products
 
$
85,747

 
$
76,959

 
$
162,089

 
$
150,700

Services
 
82,968

 
112,152

 
184,044

 
208,330

Total revenues
 
168,715

 
189,111

 
346,133

 
359,030

 
 
 
 
 
 
 
 
 
Costs and operating expenses:
 
 

 
 

 
 

 
 

Products
 
76,522

 
65,255

 
142,049

 
128,112

Services
 
73,932

 
101,472

 
164,690

 
190,348

Selling, general and administrative expenses
 
1,295

 
988

 
1,543

 
2,370

Amortization of intangible assets
 
4,464

 
4,980

 
9,187

 
9,971

Total costs and operating expenses
 
156,213

 
172,695

 
317,469

 
330,801

 
 
 
 
 
 
 
 
 
 
 
12,502

 
16,416

 
28,664

 
28,229

 
 
 
 
 
 
 
 
 
Loss on sale of a business entity and certain assets
 
(678
)
 

 
(8,214
)
 

Gain on sale of property
 

 

 
1,108

 

Goodwill and intangible asset impairment
 
(33,734
)
 

 
(33,734
)
 

 
 
 
 
 
 
 
 
 
Operating (loss) income
 
(21,910
)
 
16,416

 
(12,176
)
 
28,229

 
 
 
 
 
 
 
 
 
Interest expense, net
 
3,072

 
3,398

 
6,558

 
6,556

 
 
 
 
 
 
 
 
 
(Loss) income before income taxes
 
(24,982
)
 
13,018

 
(18,734
)
 
21,673

 
 
 
 
 
 
 
 
 
Provision for income taxes
 
(2,358
)
 
3,120

 
558

 
5,172

 
 
 
 
 
 
 
 
 
Net (loss) income
 
$
(22,624
)
 
$
9,898

 
$
(19,292
)
 
$
16,501

 
 
 
 
 
 
 
 
 
Basic (loss) earnings per share
 
$
(2.05
)
 
$
0.91

 
$
(1.75
)
 
$
1.51

 
 
 
 
 
 
 
 
 
Basic weighted average shares outstanding
 
11,041,235

 
10,969,899

 
11,020,720

 
10,945,172

 
 
 
 
 
 
 
 
 
Diluted (loss) earnings per share
 
$
(2.05
)
 
$
0.89

 
$
(1.75
)
 
$
1.50

 
 
 
 
 
 
 
 
 
Diluted weighted average shares outstanding
 
11,041,235

 
11,072,745

 
11,020,720

 
11,023,685

 
 
 
 
 
 
 
 
 
Dividends declared per share
 
$
0.09

 
$
0.09

 
$
0.18

 
$
0.17






The accompanying notes are an integral part of these unaudited consolidated financial statements.

-6-

Table of Contents

VSE Corporation and Subsidiaries

Unaudited Consolidated Statements of Comprehensive (Loss) Income
(in thousands)
 
 
For the three months ended June 30,
 
For the six months ended June 30,
 
 
2020
 
2019
 
2020
 
2019
Net (loss) income
 
$
(22,624
)
 
$
9,898

 
$
(19,292
)
 
$
16,501

 
 
 
 
 
 
 
 
 
Change in fair value of interest rate swap agreements, net of tax
 
(79
)
 
(729
)
 
(952
)
 
(1,421
)
 
 
 
 
 
 
 
 
 
Other comprehensive loss, net of tax
 
(79
)
 
(729
)
 
(952
)
 
(1,421
)
 
 
 
 
 
 
 
 
 
Comprehensive (loss) income
 
$
(22,703
)
 
$
9,169

 
$
(20,244
)
 
$
15,080










































The accompanying notes are an integral part of these unaudited consolidated financial statements.

-7-

Table of Contents

VSE Corporation and Subsidiaries

Unaudited Consolidated Statements of Stockholders' Equity
(in thousands except per share data)

 
Three months ended June 30, 2020
 
 
 
 
 
Additional
Paid-In
Capital
 
Retained
Earnings
 
Accumulated
Other
Comprehensive
Loss
 
Total
Stockholders'
Equity
 
Common Stock
 
 
 
 
 
Shares
 
Amount
 
 
 
 
Balance at March 31, 2020
11,029

 
$
551

 
$
31,244

 
$
336,584

 
$
(1,978
)
 
$
366,401

Net loss

 

 

 
(22,624
)
 

 
(22,624
)
Stock-based compensation
14

 
1

 
250

 

 

 
251

Other comprehensive loss, net of tax

 

 

 

 
(79
)
 
(79
)
Dividends declared ($0.09 per share)

 

 

 
(995
)
 

 
(995
)
Balance at June 30, 2020
11,043

 
$
552

 
$
31,494

 
$
312,965

 
$
(2,057
)
 
$
342,954




 
Three months ended June 30, 2019
 
 
 
 
 
Additional
Paid-In
Capital
 
Retained
Earnings
 
Accumulated
Other
Comprehensive
Loss
 
Total
Stockholders'
Equity
 
Common Stock
 
 
 
 
 
Shares
 
Amount
 
 
 
 
Balance at March 31, 2019
10,950

 
$
547

 
$
28,788

 
$
308,742

 
$
(546
)
 
$
337,531

Net income

 

 

 
9,898

 

 
9,898

Stock-based compensation
20

 
2

 
623

 

 

 
625

Other comprehensive loss, net of tax

 

 

 

 
(729
)
 
(729
)
Dividends declared ($0.09 per share)

 

 

 
(988
)
 

 
(988
)
Balance at June 30, 2019
10,970

 
$
549

 
$
29,411

 
$
317,652

 
$
(1,275
)
 
$
346,337
























The accompanying notes are an integral part of these unaudited consolidated financial statements.



-8-

Table of Contents

VSE Corporation and Subsidiaries

Unaudited Consolidated Statements of Stockholders' Equity (continued)
(in thousands except per share data)

 
Six months ended June 30, 2020
 
 
 
 
 
Additional
Paid-In
Capital
 
Retained
Earnings
 
Accumulated
Other
Comprehensive
Loss
 
Total
Stockholders'
Equity
 
Common Stock
 
 
 
 
 
Shares
 
Amount
 
 
 
 
Balance at December 31, 2019
10,970

 
$
549

 
$
29,411

 
$
334,246

 
$
(1,105
)
 
$
363,101

Net loss

 

 

 
(19,292
)
 

 
(19,292
)
Stock-based compensation
73

 
3

 
2,083

 

 

 
2,086

Other comprehensive loss, net of tax

 

 

 

 
(952
)
 
(952
)
Dividends declared ($0.18 per share)

 

 

 
(1,989
)
 

 
(1,989
)
Balance at June 30, 2020
11,043

 
$
552

 
$
31,494

 
$
312,965

 
$
(2,057
)
 
$
342,954




 
Six months ended June 30, 2019
 
 
 
 
 
Additional
Paid-In
Capital
 
Retained
Earnings
 
Accumulated
Other
Comprehensive
Income (Loss)
 
Total
Stockholders'
Equity
 
Common Stock
 
 
 
 
 
Shares
 
Amount
 
 
 
 
Balance at December 31, 2018
10,886

 
$
544

 
$
26,632

 
$
301,073

 
$
146

 
$
328,395

Cumulative effect of adoption of ASU 2016-02, net of tax

 

 

 
1,944

 

 
1,944

Net income

 

 

 
16,501

 

 
16,501

Stock-based compensation
84

 
5

 
2,779

 

 

 
2,784

Other comprehensive loss, net of tax

 

 

 

 
(1,421
)
 
(1,421
)
Dividends declared ($0.17 per share)

 

 

 
(1,866
)
 

 
(1,866
)
Balance at June 30, 2019
10,970

 
$
549

 
$
29,411

 
$
317,652

 
$
(1,275
)
 
$
346,337






















The accompanying notes are an integral part of these unaudited consolidated financial statements.

-9-

Table of Contents

VSE Corporation and Subsidiaries

Unaudited Consolidated Statements of Cash Flows
(in thousands)
 
 
For the six months ended June 30,
 
 
2020
 
2019
Cash flows from operating activities:
 
 
 
 
Net (loss) income
 
$
(19,292
)
 
$
16,501

Adjustments to reconcile net income to net cash provided by operating activities:
 
 

 
 

Depreciation and amortization
 
12,403

 
13,637

Deferred taxes
 
(2,980
)
 
(312
)
Stock-based compensation
 
1,313

 
1,982

Loss on sale of a business entity and certain assets
 
8,214

 

Gain on sale of property and equipment
 
(1,000
)
 

Goodwill and intangible asset impairment
 
33,734

 

Earn-out obligation fair value adjustment
 
(1,399
)
 

  Changes in operating assets and liabilities, net of impact of acquisitions:
 
 

 
 

Receivables
 
4,588

 
(6,599
)
Unbilled receivables
 
193

 
(4,706
)
Inventories
 
(19,884
)
 
(23,942
)
Other current assets and noncurrent assets
 
(8,320
)
 
(3,914
)
Accounts payable and deferred compensation
 
11,512

 
14,149

Accrued expenses and other current and noncurrent liabilities
 
3,726

 
(2,744
)
 
 
 
 
 
Net cash provided by operating activities
 
22,808

 
4,052

 
 
 
 
 
Cash flows from investing activities:
 
 

 
 

Purchases of property and equipment
 
(1,828
)
 
(6,303
)
Proceeds from the sale of property and equipment
 
2,424

 
4

Proceeds from the sale of a business entity and certain assets
 
20,753

 

Cash paid for acquisitions, net of cash acquired
 

 
(112,660
)
 
 
 
 
 
Net cash provided by (used in) investing activities
 
21,349

 
(118,959
)
 
 
 
 
 
Cash flows from financing activities:
 
 

 
 

Borrowings on loan agreement
 
235,118

 
300,726

Repayments on loan agreement
 
(244,843
)
 
(182,516
)
Earn-out obligation payments
 
(31,701
)
 

Payment of debt financing costs
 
(636
)
 

Payments of taxes for equity transactions
 
(635
)
 
(955
)
Dividends paid
 
(1,981
)
 
(1,750
)
 
 
 
 
 
Net cash (used in) provided by financing activities
 
(44,678
)
 
115,505

 
 
 
 
 
Net (decrease) increase in cash and cash equivalents
 
(521
)
 
598

Cash and cash equivalents at beginning of period
 
734

 
162

Cash and cash equivalents at end of period
 
$
213

 
$
760


Supplemental disclosure of noncash investing and financing activities:
 
 
 
 
Notes receivable from the sale of a business entity and certain assets
 
$
13,482

 
$


The accompanying notes are an integral part of these unaudited consolidated financial statements.

-10-


VSE CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2020
Table of Contents



(1) Basis of Presentation

Our accompanying unaudited consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles ("U.S. GAAP") for interim financial information and in accordance with the instructions to SEC Form 10-Q and Article 10 of SEC Regulation S-X. Therefore, such financial statements do not include all of the information and footnotes required by U.S. GAAP for complete financial statements and should be read in conjunction with the consolidated financial statements and footnotes thereto included in our 2019 Form 10-K. In our opinion, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three and six months ended June 30, 2020 are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2020

The preparation of financial statements in conformity with U.S. GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Significant estimates affecting the financial statements include accruals for contract disallowance reserves, award fee revenues, costs to complete on fixed price contracts, recoverability of goodwill and intangible assets, and earn-out obligations.

Coronavirus (COVID-19) Pandemic

On March 11, 2020, the World Health Organization declared the outbreak of the novel coronavirus disease, known as COVID-19, as a global pandemic. The pandemic and the containment and mitigation efforts by governments to attempt to control its spread created uncertainties and disruptions in the economic and financial markets. The impact of COVID-19 on us is evolving and its future effects are highly uncertain and unpredictable. We are closely monitoring the effects and risks of COVID-19 to assess its impact on our business, financial condition and results of operations. In April 2020, we completed a cost reduction plan which included a reduction in workforce. We maintain a robust continuity plan to adequately respond to situations such as the COVID-19 pandemic, including a framework for remote work arrangements, in order to effectively maintain operations, including financial reporting systems, internal controls over financial reporting and disclosure controls and procedures.

Reclassifications

Certain reclassifications have been made to the prior periods' financial information in order to conform to the current period's presentation which include reclassification of products and services revenue and the renaming of our three operating segments as further described in Note (8) "Business Segments and Customer Information." These reclassifications had no effect on the reported results of operations.

Recently Adopted Accounting Pronouncements

In August 2018, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2018-13, Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement, which eliminates certain disclosures related to transfers and the valuation process, modifies disclosures for investments that are valued based on net asset value, clarifies the measurement uncertainty disclosure, and requires additional disclosures for Level 3 fair value measurements. The new standard is effective for fiscal years beginning after December 15, 2019 with early adoption permitted. We adopted ASU 2018-13 in the first quarter of 2020. The adoption did not have a material impact on our consolidated financial position, results of operations or cash flows.

In August 2018, the FASB issued ASU No. 2018-15, Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract, which clarifies the accounting for implementation costs in cloud computing arrangements. The new standard is effective for fiscal years beginning after December 15, 2019 with early adoption permitted. We adopted ASU 2018-15 in the first quarter of 2020 and applied the standard prospectively. The adoption did not have a material impact on our consolidated financial position, results of operations or cash flows.
In June 2016, the FASB issued ASU No. 2016-13, Measurement of Credit Losses on Financial Instruments, which changes the methodology for measuring credit losses on financial instruments and certain other instruments, including trade receivables and contract assets. The new standard replaces the current incurred loss model for measurement of credit losses on financial assets with a forward-looking expected loss model based on historical experience, current conditions, and reasonable and supportable forecasts. The new standard is effective for reporting periods beginning after December 15, 2019. We adopted the standard in the first quarter

-11-


VSE CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2020
Table of Contents


of 2020 using the modified-retrospective approach, which requires the standard to be applied on a prospective basis with a cumulative-effect adjustment to retained earnings as of the beginning of the period in which the guidance is effective. Upon adoption, we did not record an adjustment to opening retained earnings as of January 1, 2020 because the adoption did not have a material impact on our financial position, results of operations or cash flows.

(2) Acquisition

On January 10, 2019, our wholly owned subsidiary VSE Aviation, Inc. ("VSE Aviation") acquired 100% of the equity of 1st Choice Aerospace Inc. ("1st Choice Aerospace"), a provider of maintenance, repair and overhaul ("MRO") services and products for new generation and legacy commercial aircraft. 1st Choice Aerospace has operations in Florida and Kentucky. We retained key members of 1st Choice Aerospace's management team under three-year employment contracts with five-year non-compete covenants.

We may be required to make earn-out payments of up to $40 million if 1st Choice Aerospace meets certain financial targets during 2019 and 2020. In January 2020, after obtaining the sellers' consent to our proposed amount of the earn-out payment for the 2019 performance year, we made a payment of approximately $31.7 million to satisfy the 2019 performance year obligation. Included in earn-out obligation on our June 30, 2020 balance sheet is approximately $3.6 million classified as the current portion of earn-out obligation, which represents the fair value of such earn-out obligation for the 2020 performance year. Changes in the fair value of the earn-out obligations are recognized in earnings in the period of change through settlement.


(3) Divestiture

Prime Turbines Sale
On January 28, 2020, VSE’s subsidiary VSE Aviation, Inc. entered into two definitive agreements to sell (1) Prime Turbines LLC ("Prime Turbines") and (2) certain related inventory assets to PTB Holdings USA, LLC ("PTB"). The transaction was completed on February 26, 2020 with cash proceeds of $20.0 million, including final working capital adjustments, and a note receivable of $8.3 million received as consideration.
Prime Turbines is a provider of turboprop aircraft engine repair, maintenance and overhaul, including for Pratt & Whitney Canada PT6A and PT6T series engines. Prime Turbines was included in our Aviation segment.
The divestiture of Prime Turbines will not have a material impact on our operations and financial results, and therefore does not qualify for reporting as a discontinued operation.
As a result of the sale of the business and inventory, we derecognized the assets and liabilities of Prime Turbines and recorded a $7.5 million non-cash loss in the first quarter of 2020 which is reflected within loss on sale of a business entity and certain assets in the consolidated statements of income. The note receivable from PTB of $5.4 million and $1.4 million is included in other assets, and other current assets in our consolidated balance sheets as of June 30, 2020, respectively, which represents the present value of the consideration to be received with an imputed interest rate discount.
CT Aerospace Asset Sale
On June 26, 2020, VSE's subsidiary VSE Aviation, Inc. entered into an asset purchase agreement to sell CT Aerospace, LLC ("CT Aerospace") inventory and certain assets to Legacy Turbines, LLC ("Legacy Turbines") for $6.9 million, with a note receivable received as consideration. As a result of the sale, the we recorded a $678 thousand non-cash loss during the three months ended June 30, 2020 which is reflected within loss on sale of a business entity and certain assets in the consolidated statements of income. The note receivable from Legacy Turbines of $6.7 million, net of a variable discount of $275 thousand, is included in other assets in our consolidated balance sheets as of June 30, 2020.



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VSE CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2020
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(4) Revenue

Disaggregated Revenue
Our revenues are derived from contract services performed for the United States Department of Defense ("DoD") agencies or federal civilian agencies and from the delivery of products to our customers. Our customers also include various other government agencies and commercial clients.

A summary of revenues for our operating segments by customer for the three and six months ended June 30, 2020 are as follows (in thousands):
 
 
Three months ended June 30, 2020
 
 
Aviation
 
Fleet
 
Federal and Defense
 
Total
DoD
 
$
837

 
$
5,095

 
$
58,955

 
$
64,887

Other government
 
214

 
57,602

 
5,850

 
63,666

Commercial
 
31,170

 
8,525

 
467

 
40,162

 
 
$
32,221

 
$
71,222

 
$
65,272

 
$
168,715


 
 
Six months ended June 30, 2020
 
 
Aviation
 
Fleet
 
Federal and Defense
 
Total
DoD
 
$
837

 
$
9,662

 
$
118,522

 
$
129,021

Other government
 
244

 
97,417

 
11,995

 
109,656

Commercial
 
89,220

 
17,347

 
889

 
107,456

 
 
$
90,301

 
$
124,426

 
$
131,406

 
$
346,133


A summary of revenues for our operating segments by customer for the three and six months ended June 30, 2019 are as follows (in thousands):
 
 
Three months ended June 30, 2019
 
 
Aviation
 
Fleet
 
Federal and Defense
 
Total
DoD
 
$
260

 
$
6,461

 
$
68,359

 
$
75,080

Other government
 
651

 
42,254

 
11,950

 
54,855

Commercial
 
54,086

 
5,090

 

 
59,176

 
 
$
54,997

 
$
53,805

 
$
80,309

 
$
189,111



 
 
Six months ended June 30, 2019
 
 
Aviation
 
Fleet
 
Federal and Defense
 
Total
DoD
 
$
1,155

 
$
11,303

 
$
125,323

 
$
137,781

Other government
 
651

 
85,136

 
22,727

 
108,514

Commercial
 
102,561

 
9,070

 
1,104

 
112,735

 
 
$
104,367

 
$
105,509

 
$
149,154

 
$
359,030


We changed our disaggregated revenue by type presentation below in the first quarter of 2020 to better align with our operating segments. Revenues from our Aviation and Fleet segment are derived from repair and distribution services primarily through shorter term purchase orders from customers. Our Federal and Defense segment's revenue results from services provided on longer term contracts, including cost plus, fixed price and time and materials contract types. This change provides a clearer picture of the nature

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VSE CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2020
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of each segment's contractual arrangements, how revenues derived from those contracts are affected by economic factors, and underlying performance trends impacting each segment. Additionally, the presentation is more in-line with how each segments' results are evaluated by our Chief Executive Officer in deciding how to allocate resources and evaluate performance.

The change in disaggregated revenue presentation did not result in any changes in our reported segments and had no effect on the reported results of operations.

A summary of revenues by type and operating segment for the three and six months ended June 30, 2020 is as follows (in thousands):

 
 
Three months ended June 30, 2020
 
 
Aviation
 
Fleet
 
Federal and Defense
 
Total
Repair
 
$
16,848

 
$

 
$

 
$
16,848

Distribution
 
15,373

 
71,222

 

 
86,595

Cost Plus Contract
 

 

 
23,307

 
23,307

Fixed Price Contract
 

 

 
36,079

 
36,079

T&M Contract
 

 

 
5,886

 
5,886

     Total
 
$
32,221

 
$
71,222

 
$
65,272

 
$
168,715


 
 
Six months ended June 30, 2020
 
 
Aviation
 
Fleet
 
Federal and Defense
 
Total
Repair
 
$
49,656

 
$

 
$

 
$
49,656

Distribution
 
40,645

 
124,426

 

 
165,071

Cost Plus Contract
 

 

 
42,988

 
42,988

Fixed Price Contract
 

 

 
74,995

 
74,995

T&M Contract
 

 

 
13,423

 
13,423

     Total
 
$
90,301

 
$
124,426

 
$
131,406

 
$
346,133


A summary of revenues by type and operating segment for the three and six months ended June 30, 2019 is as follows (in thousands):
 
 
Three months ended June 30, 2019
 
 
Aviation
 
Fleet
 
Federal and Defense
 
Total
Repair
 
$
29,560

 
$

 
$

 
$
29,560

Distribution
 
25,437

 
53,805

 

 
79,242

Cost Plus Contract
 

 

 
33,496

 
33,496

Fixed Price Contract
 

 

 
19,153

 
19,153

T&M Contract
 

 

 
27,660

 
27,660

     Total
 
$
54,997

 
$
53,805

 
$
80,309

 
$
189,111



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VSE CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2020
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Six months ended June 30, 2019
 
 
Aviation
 
Fleet
 
Federal and Defense
 
Total
Repair
 
$
54,994

 
$

 
$

 
$
54,994

Distribution
 
49,373

 
105,509

 

 
154,882

Cost Plus Contract
 

 

 
61,336

 
61,336

Fixed Price Contract
 

 

 
39,020

 
39,020

T&M Contract