VSE Corporation Annual report [Section 13 and 15(d), not S-K Item 405]

Annual report [Section 13 and 15(d), not S-K Item 405]

Discontinued Operations

Discontinued Operations

12 Months Ended

Dec. 31, 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 (17) "Fair Value Measurements" for information regarding the fair value of the earn-out. 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 year ended December 31, 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 (loss) income from discontinued operations, net of tax in the consolidated statements of operations. In the fourth quarter of the year ended December 31, 2025, the Company recognized an additional $8.7 million income tax provision as a result of a change in the tax treatment of the sale transaction from an asset sale to a stock sale.

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 year ended December 31, 2025 related to the settlement of net working capital, and a pre-tax loss of $15.2 million and transaction fees of $2.5 million for the year ended December 31, 2024. All such losses and transaction fees are included in (loss) income from discontinued operations, net of tax in the consolidated statements of operations.

The components of (loss) income from discontinued operations, net of tax consist of the following (in thousands):


	For the years ended December 31,
	2025		2024		2023
Revenues	$	75,358	$	320,145	$	568,934
Costs and operating expenses	71,865		305,890		536,740
Income from discontinued operations	3,493		14,255		32,194
Other impairment	33,708		4,204		—
Loss on the sale of discontinued operations	13,338		15,199		—
(Loss) income from discontinued operations before income taxes	(43,553)		(5,148)		32,194
(Benefit) provision for income taxes	(1,763)		(1,070)		7,625
(Loss) income from discontinued operations, net of tax	$	(41,790)	$	(4,078)	$	24,569

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


		As of 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 years ended December 31,
	2025		2024		2023
Depreciation and amortization	$	731	$	2,951	$	7,314
Stock-based compensation (a)	$	(225)	$	202	$	1,006
Purchases of property and equipment	$	208	$	2,343	$	2,280
(a) Stock-based compensation benefit was recognized during the year ended December 31, 2025 due to forfeitures in the period.