VSE Corporation Quarterly report [Sections 13 or 15(d)]

Quarterly report [Sections 13 or 15(d)]

Discontinued Operations

Discontinued Operations

9 Months Ended

Sep. 30, 2025

Discontinued Operations and Disposal Groups [Abstract]

Sale of Fleet Segment

On April 1, 2025, VSE completed the sale of its Fleet segment for a total consideration of up to $230 million (the “Fleet Sale”). This consideration is comprised of $136.2 million of cash, net of $4.8 million cash divested. The consideration also includes a $25 million seller note and a potential earn-out payment of up to $65 million, subject to the achievement of certain milestones. The seller note is scheduled to mature in July 2030. See Note (11) "Fair Value Measurements" for information regarding the fair value of the earn-out, as the Company elected the fair value option in order to value the earn-out receivable. The Fleet Sale is consistent with the Company's long-term strategy of transforming to a pure-play aviation business focused on higher margin and higher growth aftermarket parts distribution and MRO businesses.

During the three months ended September 30, 2025, the Company recorded a pre-tax gain of $0.2 million related to a settlement of net working capital. During the nine months ended September 30, 2025, the Company recorded a total pre-tax loss of $46.8 million, inclusive of $3.8 million of transaction fees. The loss was comprised of a pre-tax impairment charge on the Fleet assets held-for-sale of $33.7 million and a pre-tax loss on the Fleet Sale of $13.1 million, which was primarily attributable to a $8.3 million adjustment of a deferred tax liability related to the pre-tax impairment from the first quarter of 2025 and the impact of working capital adjustments of $4.8 million. The total loss is included in income (loss) from discontinued operations, net of tax in the consolidated statements of operations.

Sale of Federal and Defense Segment

In February 2024, VSE entered into two separate agreements to sell substantially all the Federal and Defense segment's operational assets ("FDS Sale") for cash consideration of $42.9 million. The FDS Sale is consistent with the Company's long-term strategic growth strategy of transforming to a pure-play aviation business focused on higher margin and higher growth aftermarket parts distribution and MRO businesses. The Company recorded a pre-tax loss on the FDS Sale of $0.2 million during the nine months ended September 30, 2025 related to a settlement of net working capital, and a pre-tax loss of $12.7 million and transaction fees of $2.5 million for the nine months ended September 30, 2024. All such losses and transaction fees are included in income (loss) from discontinued operations, net of tax in the consolidated statements of operations.

The components of income (loss) from discontinued operations, net of tax for the three and nine months ended September 30, 2025 and 2024, consist of the following (in thousands):


	For the three months ended September 30,				For the nine months ended September 30,
	2025		2024		2025		2024
Revenues	$	—	$	69,970	$	75,358	$	248,526
Costs and operating expenses	—		66,341		71,865		241,194
Income from discontinued operations	—		3,629		3,493		7,332
Other impairment	—		—		33,708		4,204
(Gain) loss on the sale of discontinued operations	(157)		—		13,338		12,663
Total income (loss) before income taxes	157		3,629		(43,553)		(9,535)
(Benefit) provision for income taxes	(164)		721		(10,492)		(2,801)
Income (loss) from discontinued operations, net of tax	$	321	$	2,908	$	(33,061)	$	(6,734)

The assets and liabilities reported as held-for-sale consist of the following (in thousands):


		December 31,
		2024
Assets
	Cash and cash equivalents	$	(475)
	Receivables, net	39,459

	Inventories	142,259
	Prepaid expenses and other current assets	11,057
	Property and equipment, net	14,546
	Intangible assets, net	124
	Goodwill	63,190
	Operating lease right-of-use assets	10,101
	Other assets	2,559
	Total assets held-for-sale	$	282,820
Liabilities
	Accounts payable	$	42,099
	Accrued expenses and other current liabilities	9,446
	Long-term operating lease obligations	8,645
	Deferred tax liabilities	8,010
	Total liabilities held-for-sale	$	68,200

Selected financial information related to cash flows from discontinued operations is as follows (in thousands):


	For the nine months ended September 30,
	2025		2024
Depreciation and amortization	$	731	$	2,229
Stock-based compensation (a)	$	(225)	$	586
Purchases of property and equipment	$	208	$	2,040
(a) Stock-based compensation benefit was recognized during the nine months ended September 30, 2025 due to forfeitures in the period.