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

FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2022

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
vsec-20220630_g1.jpg
VSE CORPORATION
(Exact Name of Registrant as Specified in its Charter)
Delaware54-0649263
(State or Other Jurisdiction of Incorporation or Organization)(I.R.S. Employer Identification No.)
6348 Walker Lane  
Alexandria,Virginia22310
(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 classTrading SymbolName of each exchange on which registered
Common Stock, par value $0.05 per shareVSECThe NASDAQ Global Select Market

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 every Interactive Data File required to be submitted 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 such files).  Yes     No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filerAccelerated filerNon-accelerated filerSmaller reporting companyEmerging 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.    

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, 2022: 12,794,421



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


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Table of Contents
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, 2021 filed with the SEC on March 11, 2022 (“2021 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.


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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,
20222021
Assets
Current assets:
Cash and cash equivalents$371 $518 
Receivables (net of allowance of $3.5 million and $1.7 million, respectively)
102,194 76,587 
Unbilled receivables41,310 31,882 
Inventories337,753 322,702 
Other current assets24,958 32,304 
Total current assets506,586 463,993 
Property and equipment (net of accumulated depreciation of $70 million and $66 million, respectively)
42,237 42,486 
Intangible assets (net of accumulated amortization of $116 million and $135 million, respectively)
99,090 108,263 
Goodwill248,837 248,753 
Operating lease - right-of-use assets25,241 27,327 
Other assets25,232 27,736 
Total assets$947,223 $918,558 
Liabilities and Stockholders' equity  
Current liabilities:  
Current portion of long-term debt$14,162 $14,162 
Accounts payable112,935 115,064 
Accrued expenses and other current liabilities48,226 49,465 
Dividends payable1,279 1,273 
Total current liabilities176,602 179,964 
Long-term debt, less current portion294,448 270,407 
Deferred compensation11,977 14,328 
Long-term operating lease obligations24,537 27,168 
Deferred tax liabilities8,376 9,108 
Other long-term liabilities 250 
Total liabilities515,940 501,225 
Commitments and contingencies (Note 6)
Stockholders' equity:  
Common stock, par value $0.05 per share, authorized 23,000,000 shares; issued and outstanding 12,794,421 and 12,726,659, respectively
640 636 
Additional paid-in capital91,051 88,515 
Retained earnings339,592 328,358 
Accumulated other comprehensive loss (176)
Total stockholders' equity431,283 417,333 
Total liabilities and stockholders' equity$947,223 $918,558 

The accompanying notes are an integral part of these unaudited consolidated financial statements.
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Table of Contents
VSE Corporation and Subsidiaries
Unaudited Consolidated Statements of Income (Loss)
(in thousands except share and per share amounts)

 For the three months ended June 30,For the six months ended June 30,
 2022202120222021
Revenues:
Products$143,576 $84,463 $280,807 $163,043 
Services98,137 90,649 192,145 177,050 
Total revenues241,713 175,112 472,952 340,093 
Costs and operating expenses:    
Products130,978 101,325 253,433 172,037 
Services91,282 80,848 182,510 161,188 
Selling, general and administrative expenses865 1,050 1,771 1,088 
Amortization of intangible assets4,437 4,603 9,173 8,891 
Total costs and operating expenses227,562 187,826 446,887 343,204 
Operating income (loss)14,151 (12,714)26,065 (3,111)
Interest expense, net3,872 2,666 7,481 5,696 
Income (loss) before income taxes10,279 (15,380)18,584 (8,807)
Provision for income taxes2,731 (3,014)4,792 (1,552)
Net income (loss)$7,548 $(12,366)$13,792 $(7,255)
Basic earnings (loss) per share$0.59 $(0.97)$1.08 $(0.59)
Basic weighted average shares outstanding12,778,355 12,702,366 12,760,026 12,391,166 
Diluted earnings (loss) per share$0.59 $(0.97)$1.08 $(0.59)
Diluted weighted average shares outstanding12,811,078 12,702,366 12,807,249 12,391,166 
Dividends declared per share$0.10 $0.09 $0.20 $0.18 












The accompanying notes are an integral part of these unaudited consolidated financial statements.
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Table of Contents
VSE Corporation and Subsidiaries
Unaudited Consolidated Statements of Comprehensive Income (Loss)
(in thousands)

 For the three months ended June 30,For the six months ended June 30,
 2022202120222021
Net income (loss)$7,548 $(12,366)$13,792 $(7,255)
Change in fair value of interest rate swap agreements, net of tax 152 176 663 
Other comprehensive income, net of tax 152 176 663 
Comprehensive income (loss)$7,548 $(12,214)$13,968 $(6,592)









































The accompanying notes are an integral part of these unaudited consolidated financial statements.
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VSE Corporation and Subsidiaries
Unaudited Consolidated Statements of Stockholders' Equity
(in thousands except per share data)


Three months ended June 30, 2022
Additional
Paid-In
Capital
Retained
Earnings
Accumulated
Other
Comprehensive
Loss
Total
Stockholders'
Equity
 Common Stock
 SharesAmount
Balance at March 31, 202212,769 $638 $89,830 $333,324 $ $423,792 
Net income— — — 7,548 — 7,548 
Stock-based compensation26 1,221 — — 1,223 
Other comprehensive income, net of tax— — — —   
Dividends declared ($0.10 per share)
— — — (1,280)— (1,280)
Balance at June 30, 202212,795 $640 $91,051 $339,592 $ $431,283 


Three months ended June 30, 2021
Additional
Paid-In
Capital
Retained
Earnings
Accumulated
Other
Comprehensive
Loss
Total
Stockholders'
Equity
 Common Stock
 SharesAmount
Balance at March 31, 202112,691 $635 $85,296 $329,064 $(692)$414,303 
Net loss— — — (12,366)— (12,366)
Stock-based compensation13 548— — 548 
Other comprehensive income, net of tax— — — — 152 152 
Dividends declared ($0.09 per share)
— — — (1,143)— (1,143)
Balance at June 30, 202112,704 $635 $85,844 $315,555 $(540)$401,494 



























The accompanying notes are an integral part of these unaudited consolidated financial statements.
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VSE Corporation and Subsidiaries
Unaudited Consolidated Statements of Stockholders' Equity (continued)
(in thousands except per share data)


Six months ended June 30, 2022
Additional
Paid-In
Capital
Retained
Earnings
Accumulated
Other
Comprehensive
Loss
Total
Stockholders'
Equity
 Common Stock
 SharesAmount
Balance at December 31, 202112,727 $636 $88,515 $328,358 $(176)$417,333 
Net income— — — 13,792 — 13,792 
Stock-based compensation68 4 2,536 — — 2,540 
Other comprehensive income, net of tax— — — — 176 176 
Dividends declared ($0.20 per share)
— — — (2,558)— (2,558)
Balance at June 30, 202212,795 $640 $91,051 $339,592 $ $431,283 


Six months ended June 30, 2021
Additional
Paid-In
Capital
Retained
Earnings
Accumulated
Other
Comprehensive
Loss
Total
Stockholders'
Equity
 Common Stock
 SharesAmount
Balance at December 31, 202011,055 $553 $31,870 $325,097 $(1,203)$356,317 
Issuance of common stock1,599 80 51,937 — — 52,017 
Net loss— — — (7,255)— (7,255)
Stock-based compensation50 2 2,037 — — 2,039 
Other comprehensive income, net of tax— — — — 663 663 
Dividends declared ($0.18 per share)
— — — (2,287)— (2,287)
Balance at June 30, 202112,704 $635 $85,844 $315,555 $(540)$401,494 


























The accompanying notes are an integral part of these unaudited consolidated financial statements.
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VSE Corporation and Subsidiaries
Unaudited Consolidated Statements of Cash Flows
(in thousands)

For the six months ended June 30,
 20222021
Cash flows from operating activities:
Net income (loss)$13,792 $(7,255)
Adjustments to reconcile net income to net cash provided by operating activities:  
Depreciation and amortization12,850 12,267 
Deferred taxes(790)(3,872)
Stock-based compensation2,675 2,256 
Inventory valuation adjustment1,094 24,420 
  Changes in operating assets and liabilities, net of impact of acquisitions:  
Receivables(25,607)(17,558)
Unbilled receivables(9,428)(4,378)
Inventories(16,145)(45,157)
Other current assets and noncurrent assets8,884 (16,693)
Accounts payable and deferred compensation(4,848)(8,017)
Accrued expenses and other current and noncurrent liabilities(2,615)10,019 
Net cash used in operating activities(20,138)(53,968)
Cash flows from investing activities:  
Purchases of property and equipment(2,746)(5,158)
Proceeds from the sale of property and equipment 14 
Proceeds from payments on notes receivable3,073 1,138 
Cash paid for acquisitions, net of cash acquired (14,785)
Net cash provided by (used in) investing activities327 (18,791)
Cash flows from financing activities:  
Borrowings on loan agreement236,194 258,497 
Repayments on loan agreement(212,572)(234,976)
Proceeds from issuance of common stock486 52,017 
Earn-out obligation payments(1,000) 
Payments of taxes for equity transactions(892)(681)
Dividends paid(2,552)(2,139)
Net cash provided by financing activities19,664 72,718 
Net decreases in cash and cash equivalents(147)(41)
Cash and cash equivalents at beginning of period518 378 
Cash and cash equivalents at end of period$371 $337 









The accompanying notes are an integral part of these unaudited consolidated financial statements.
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VSE CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2022
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(1) Nature of Operations and Basis of Presentation

Nature of Operations

VSE Corporation (“VSE,” the “Company,” “we,” “us,” or “our”) is a diversified aftermarket products and services company providing repair services, parts distribution, logistics, supply chain management and consulting services for land, sea and air transportation assets to commercial and government markets. Our operations are conducted under three reporting units aligned with our operating segments: (1) Aviation; (2) Fleet; and (3) Federal and Defense.

In February 2021, we completed the issuance and sale of 1,428,600 shares of the Company's common stock, in a public offering at a price of $35.00 per share. The underwriters exercised their option to purchase an additional 170,497 shares. The transaction closed on February 2, 2021. We received net proceeds of approximately $52 million after deducting underwriting discounts, commissions and offering related expenses, which were used for general corporate purposes, including financing strategic acquisitions and working capital requirements for new program launches.

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 Annual Report on Form 10-K for the fiscal year ended December 31, 2021 ("2021 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, 2022 are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2022. 

Use of Estimates

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 fair value measurements, inventory provisions, collectability of receivables, estimated profitability of long-term contracts, valuation allowances on deferred tax assets, fair value of goodwill and other intangible assets and contingencies.

Recent Accounting Pronouncements

Recently Adopted Accounting Pronouncements

In October 2021, the FASB issued ASU 2021-08, "Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers," which requires contract assets and contract liabilities acquired in a business combination to be recognized and measured by the acquirer on the acquisition date in accordance with ASC 606, "Revenue from Contracts with Customers," as if the acquirer had originated the contracts. The new standard is effective on a prospective basis for fiscal years and interim reporting periods within those fiscal years beginning after December 15, 2022, with early adoption permitted. We elected to early adopt this standard during the first quarter 2022 and will apply the guidance prospectively to business combinations entered into subsequent to adoption.


(2) Acquisitions

Global Parts Group, Inc.

On July 26, 2021, we acquired Global Parts Group, Inc. ("Global Parts") for a preliminary purchase price of $40 million, net of cash acquired. The purchase price includes $2 million of contingent consideration, representing the fair value recognized for
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VSE CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2022
Table of Contents

potential future earn-out payments. See Note (8) "Fair Value Measurements," for additional information regarding the earn-out obligation.

During the three and six months ended June 30, 2021, we incurred $0.2 million of acquisition-related expenses, which are included in selling, general and administrative expenses.

HAECO Special Services, LLC

On March 1, 2021, we acquired HAECO Special Services, LLC ("HSS") from HAECO Airframe Services, LLC, a division of HAECO Americas ("HAECO") for the purchase price of $14.8 million. HSS operating results are included in our Federal and Defense segment. The acquisition was not material to our consolidated financial statements.

During the six months ended June 30, 2021, we incurred $0.3 million of acquisition-related expenses, which are included in selling, general and administrative expenses.


(3) Revenue

Disaggregation of Revenues
Our revenues are derived from the delivery of products to our customers and from services performed for commercial customers, various government agencies, the United States Department of Defense ("DoD") or federal civilian agencies.

Revenues by customer for our each of our operating segments for the three and six months ended June 30, 2022 were as follows (in thousands):
Three months ended June 30, 2022
AviationFleetFederal and DefenseTotal
Commercial$103,349 $26,007 $166 $129,522 
DoD 1,264 59,260 60,524 
Other government1,670 37,471 12,526 51,667 
     Total$105,019 $64,742 $71,952 $241,713 

Six months ended June 30, 2022
AviationFleetFederal and DefenseTotal
Commercial$195,261 $53,863 $258 $249,382 
DoD 2,993 109,655 112,648 
Other government3,048 74,916 32,958 110,922 
     Total$198,309 $131,772 $142,871 $472,952 

Revenues by customer for our each of our operating segments for the three and six months ended June 30, 2021 were as follows (in thousands):
Three months ended June 30, 2021
AviationFleetFederal and DefenseTotal
Commercial$47,465 $17,630 $185 $65,280 
DoD 4,676 62,075 66,751 
Other government50 35,751 7,280 43,081 
     Total$47,515 $58,057 $69,540 $175,112 

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VSE CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2022
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Six months ended June 30, 2021
AviationFleetFederal and DefenseTotal
Commercial$91,811 $32,067 $503 $124,381 
DoD 7,778 104,861 112,639 
Other government75 72,959 30,039 103,073 
     Total$91,886 $112,804 $135,403 $340,093 

Revenues by type for our each of our operating segments for the three and six months ended June 30, 2022 were as follows (in thousands):
Three months ended June 30, 2022
AviationFleetFederal and DefenseTotal
Repair$25,966 $ $ $25,966 
Distribution79,053 64,742  143,795 
Cost Plus Contract  34,555 34,555 
Fixed Price Contract  22,278 22,278 
T&M Contract  15,119 15,119 
     Total$105,019 $64,742 $71,952 $241,713 

Six months ended June 30, 2022
AviationFleetFederal and DefenseTotal
Repair$48,329 $ $ $48,329 
Distribution149,980 131,772  281,752 
Cost Plus Contract  65,132 65,132 
Fixed Price Contract  40,639 40,639 
T&M Contract  37,100 37,100 
     Total$198,309 $131,772 $142,871 $472,952 

Revenues by type for our each of our operating segments for the three and six months ended June 30, 2021 were as follows (in thousands):
Three months ended June 30, 2021
AviationFleetFederal and DefenseTotal
Repair$19,021 $ $ $19,021 
Distribution28,494 58,057  86,551 
Cost Plus Contract  21,813 21,813 
Fixed Price Contract  32,430 32,430 
T&M Contract  15,297 15,297 
     Total$47,515 $58,057 $69,540 $175,112 

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VSE CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2022
Table of Contents

Six months ended June 30, 2021
AviationFleetFederal and DefenseTotal
Repair$37,337 $ $ $37,337 
Distribution54,549 112,804  167,353 
Cost Plus Contract  38,364 38,364 
Fixed Price Contract  56,361 56,361 
T&M Contract  40,678 40,678 
     Total$91,886 $112,804 $135,403 $340,093 

Contract Balances

Unbilled receivables (contract assets) represent our right to consideration in exchange for goods or services that we have transferred to the customer prior to us having the right to payment for such goods or services. Contract liabilities are recorded when customers remit contractual cash payments in advance of us satisfying related performance obligations under contractual arrangements, including those with performance obligations to be satisfied over a period of time.
We present our unbilled receivables and contract liabilities on a contract-by-contract basis. If a contract liability exists, it is netted against the unbilled receivables balance for that contract. Unbilled receivables were $41.3 million as of June 30, 2022 and $31.9 million as of December 31, 2021. Contract liabilities, which are included in accrued expenses and other current liabilities in our consolidated balance sheets, were $5.5 million as of June 30, 2022 and $7.1 million as of December 31, 2021. For the six months ended June 30, 2022 and 2021, we recognized revenue that was previously included in the beginning balance of contract liabilities of $2.6 million and $1.7 million, respectively.

Performance Obligations

Our performance obligations are satisfied either at a point in time or over time as work progresses. Revenues from products and services transferred to customers at a point in time accounted for approximately 59% for the three and six months ended June 30, 2022 and 49% of our revenues for the three and six months ended June 30, 2021, primarily related to the sale of vehicle and aircraft parts in our Fleet and Aviation segments. Revenues from products and services transferred to customers over time accounted for approximately 41% for the three and six months ended June 30, 2022 and 51% of our revenues for the three and six months ended June 30, 2021, primarily related to revenues in our Federal and Defense segment and MRO services in our Aviation segment.
As of June 30, 2022, the aggregate amount of transaction prices allocated to unsatisfied or partially unsatisfied performance obligations was $183 million. The performance obligations expected to be satisfied within one year and greater than one year are 94% and 6%, respectively. We have applied the practical expedient for certain parts sales and MRO services to exclude the amount of remaining performance obligations for (i) contracts with an original expected term of one year or less or (ii) contracts for which we recognize revenue in proportion to the amount we have the right to invoice for services performed.

During the six months ended June 30, 2022 and 2021, revenue recognized from performance obligations satisfied in prior periods was not material.












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VSE CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2022
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(4) Debt

Long-term debt consisted of the following (in thousands):
June 30,December 31,
 20222021
Bank credit facility - term loan$52,675 $60,175 
Bank credit facility - revolver loans257,681 226,559 
Principal amount of long-term debt310,356 286,734 
Less debt issuance costs(1,746)(2,165)
Total long-term debt308,610 284,569 
Less current portion(14,162)(14,162)
Long-term debt, less current portion$294,448 $270,407 

We had letters of credit outstanding totaling $1.2 million and $1.0 million as of June 30, 2022 and December 31, 2021, respectively.

We pay interest on the term and revolving loan borrowings at LIBOR plus a base margin or at a base rate (typically the prime rate) plus a base margin. As of June 30, 2022, the LIBOR margin was 2.25% and the base margin was 4.75%. The margins increase or decrease in increments as our Total Funded Debt/EBITDA Ratio increases or decreases. As of June 30, 2022, interest rates on our outstanding debt ranged from 4.62% to 7.00%, and the effective interest rate on our aggregate outstanding debt was 5.06%.

Interest expense incurred on bank loan borrowings and interest rate hedges was $3.7 million and $2.4 million for the three months ended June 30, 2022 and 2021, respectively, and $7.1 million and $5.1 million for the six months ended June 30, 2022 and 2021, respectively. As of June 30, 2022, there was no hedged portion of our debt as our two remaining hedges expired in February and March of 2022. As of December 31, 2021, the portion of our debt with interest rate swap agreements was $75 million.

Our required term and revolver loan principal payments after June 30, 2022 are as follows (in thousands):
Year EndingTerm LoanRevolver LoanTotal
Remainder of 2022$7,500 $ $7,500 
202315,000  15,000 
202430,175 257,681 287,856 
     Total$52,675 $257,681 $310,356 

We were in compliance with required ratios and other terms and conditions under our loan agreement as of June 30, 2022.


(5) Earnings Per Share

Basic earnings per share ("EPS") is computed by dividing net income by the weighted average number of shares of common stock outstanding during each period. Shares issued during the period are weighted for the portion of the period that they were outstanding. Our calculation of diluted earnings per common share includes the dilutive effects for the assumed vesting of outstanding stock-based awards. For the three and six month ended June 30, 2021, diluted earnings per share did not include an adjustment for the potential dilutive effect of the dilutive securities as the effect would have been anti-dilutive to the Company's net loss. The anti-dilutive common stock equivalents excluded from the diluted per share calculation were not material. Antidilutive common stock equivalents excluded from the diluted earnings per share calculation for the three and six month ended June 30, 2022 were not material.



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VSE CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2022
Table of Contents

The weighted-average number of shares outstanding used to compute basic and diluted EPS were as follows:
Three months ended June 30,Six months ended June 30,
 2022202120222021
Basic weighted average common shares outstanding12,778,355 12,702,366 12,760,026 12,391,166 
Effect of dilutive shares32,723  47,223  
Diluted weighted average common shares outstanding12,811,078 12,702,366 12,807,249 12,391,166 


(6) Commitments and Contingencies

Contingencies

We are involved in various claims and lawsuits arising in the normal conduct of its business, none of which we believe, based on current information, is expected to have a material adverse effect on our financial position, results of operations or cash flows.

Further, from time-to-time, government agencies audit or investigate whether our operations are being conducted in accordance with applicable contractual and regulatory requirements. Government audits or investigations of us, whether relating to government contracts or conducted for other reasons, could result in administrative, civil or criminal liabilities, including repayments, fines or penalties being imposed upon us, or could lead to suspension or debarment from future government contracting. Government investigations often take years to complete and many result in no adverse action against us. We believe, based upon current information, that the outcome of any such government disputes, audits and investigations will not have a material adverse effect on our results of operations, financial condition or cash flows.


(7) Business Segments and Customer Information

Business Segments

Management of our business operations is conducted under three reportable operating segments:

Aviation
Our Aviation segment provides aftermarket repair and distribution services to commercial, business and general aviation, cargo, military and defense, and rotorcraft customers globally. Core services include parts distribution, engine accessory maintenance, MRO services, rotable exchange and supply chain services.

Fleet
Our Fleet segment provides parts, inventory management, e-commerce fulfillment, logistics, supply chain support and other services to support the commercial aftermarket medium- and heavy-duty truck market, the United States Postal Service ("USPS"), and the DoD. Core services include vehicle parts distribution, sourcing, IT solutions, customized fleet logistics, warehousing, kitting, just-in-time supply chain management, alternative product sourcing, and engineering and technical support.

Federal and Defense
Our Federal and Defense segment provides aftermarket MRO and logistics services to improve operational readiness and extend the life cycle of military vehicles, ships and aircraft for the DoD, federal agencies and international defense customers. Core services include procurement; supply chain management; vehicle, maritime and aircraft sustainment services; base operations support; IT services and energy consulting.



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VSE CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2022
Table of Contents

We evaluate segment performance based on consolidated revenues and operating income. Net sales of our business segments exclude inter-segment sales as these activities are eliminated in consolidation. Corporate expenses are primarily selling, general and administrative expenses not allocated to segments. Our segment information is as follows (in thousands):

 Three months ended June 30,Six months ended June 30,
 2022202120222021
Revenues:
Aviation$105,019 $47,515 $198,309 $91,886 
Fleet64,742 58,057 131,772 112,804 
Federal and Defense71,952 69,540 142,871 135,403 
Total revenues$241,713 $175,112 $472,952 $340,093 
Operating income (loss):    
Aviation$6,450 $(22,272)$14,072 $(22,604)
Fleet5,366 4,000 11,747 9,741 
Federal and Defense2,552 6,999 1,864 12,024 
Corporate/unallocated expenses (217)(1,441)(1,618)(2,272)
Operating income (loss)$14,151 $(12,714)$26,065 $(3,111)


(8) Fair Value Measurements

The following table summarizes the financial assets and liabilities measured at fair value on a recurring basis as of June 30, 2022 and December 31, 2021 and the level they fall within the fair value hierarchy (in thousands):
Amounts Recorded at Fair ValueFinancial Statement ClassificationFair Value HierarchyFair Value June 30, 2022Fair Value December 31, 2021
Non-COLI assets held in Deferred Supplemental Compensation PlanOther assetsLevel 1$532 $598 
Interest rate swap agreementsAccrued expenses and other current liabilitiesLevel 2$ $234 
Earn-out obligation - short-termAccrued expenses and other current liabilitiesLevel 3$250 $1,000 
Earn-out obligation - long-termOther long-term liabilitiesLevel 3$