XML 38 R11.htm IDEA: XBRL DOCUMENT
v3.25.0.1

Acquisitions | 12 Months Ended
--- | ---
Dec. 31, 2024
Business Combination, Asset Acquisition, and Joint Venture Formation [Abstract] |
Acquisitions | Acquisitions Fiscal 2024 Turbine Controls, Inc. On April 24, 2024, we completed the acquisition of TCI for a total consideration of $122.4 million, consisting of net cash consideration of $112.4 million, which included $1.5 million as a net working capital adjustment, and in-kind payment in the form of shares of the Company's common stock with a value equal to approximately $10.0 million. The purchase price of this acquisition was funded by borrowings under our revolving credit facility. TCI is a leading provider of aftermarket MRO support services for complex engine components, as well as engine and airframe accessories, across commercial and military applications. The acquisition presents an opportunity for VSE's Aviation segment to accelerate its MRO strategy, including expanding our repair capability offerings and adding several new OEM relationships. The purchase price for TCI was allocated on a preliminary basis, among assets acquired and liabilities assumed at fair value based on the best available information on the acquisition date, with the excess purchase price recorded as goodwill. The fair values of the non-financial assets acquired, and liabilities assumed, were determined based on preliminary estimates, assumptions, and other information compiled by management, including independent valuations utilizing established industry valuation techniques. We have not yet finalized the determination of the fair values allocated to various assets and liabilities, including, but not limited to, income taxes. Therefore, the allocation of the total consideration for the acquisition to the tangible and identifiable intangible assets acquired, and liabilities assumed, is preliminary until we obtain final information regarding their fair values, which could potentially result in changes to the TCI opening balance sheet. During the year ended December 31, 2024, we adjusted the purchase price allocation as a result of working capital and measurement period adjustments. The adjustments were recorded as a result of new information obtained about facts and circumstances that existed as of the acquisition date and resulted in immaterial impacts to accrued expense and other current liabilities, goodwill, and cash consideration, net of cash acquired. The adjusted preliminary purchase price allocation is as follows (in thousands):
Receivables |  | $ | 9,122 |
Contract assets |  | 16,193 |
Inventories |  | 5,512 |
Prepaid expenses and other current assets |  | 570 |
Other assets |  | 214 |
Property and equipment, net |  | 6,434 |
Intangible asset - customer related |  | 59,000 |
Goodwill |  | 40,201 |
Operating lease right-of-use assets |  | 7,832 |
Total assets acquired |  | 145,078 |
Accounts payable |  | (9,764) |
Accrued expense and other current liabilities |  | (5,624) |
Long-term operating lease obligations |  | (7,339) |
Total liabilities assumed |  | (22,727) |
Net assets acquired, excluding cash |  | $ | 122,351 |
Cash consideration, net of cash acquired |  | $ | 112,351 |
VSE common stock, at fair value |  | 10,000 |
Total |  | $ | 122,351 |
Goodwill resulting from the acquisition of TCI reflects the strategic advantage of expanding our MRO services to new customers. The value attributed to goodwill and customer relationships is deductible for income tax purposes. The estimated value attributed to the customer relationship intangible assets is being amortized on a straight-line basis using a useful life of 10 years. The operating results of TCI were included in our consolidated results of operations from the date of acquisition. Our consolidated revenues and operating income for the year ended December 31, 2024 include $84.4 million and $7.1 million, respectively, from the acquisition of TCI. Operating income does not include the impact of acquisition-related expenses incurred by VSE Corporation. Acquisition-related expenses related to the TCI acquisition totaled $2.2 million for the year ended December 31, 2024, and are included in selling, general and administrative expenses. The following unaudited pro forma financial information presents the combined results of operations for TCI and VSE Corporation for the years ended December 31, 2024, and 2023, respectively. The unaudited consolidated pro forma results of operations are as follows (in thousands):
|  | For the years ended December 31,
|  | 2024 |  | 2023
Revenue |  | $ | 1,111,915 |  |  | $ | 949,019 |
Income from continuing operations |  | $ | 37,226 |  |  | $ | 38,981 |
The unaudited pro forma combined financial information presented above has been prepared from historical financial statements that have been adjusted to give effect to the acquisition of TCI as though it had occurred on January 1, 2023 and includes adjustments for intangible asset amortization; interest expense and debt issuance costs on long-term debt; and acquisition and other transaction costs. The unaudited pro forma financial information is not intended to reflect the actual results of operations that would have occurred if the acquisition had occurred on January 1, 2023, nor is it indicative of future operating results. Kellstrom Aerospace Group, Inc. On December 3, 2024, we completed the acquisition of Kellstrom Aerospace for a total consideration of approximately $191.0 million, subject to post-closing adjustments, consisting of net cash consideration of $170.8 million and in-kind payment in the form of shares of the Company's common stock with a value equal to approximately $20.3 million. The purchase price of this acquisition was funded by our October 2024 underwritten public offering and borrowings under our revolving credit facility. Kellstrom Aerospace is a diversified global distributor and service provider supporting the commercial aerospace engine aftermarket. The acquisition provides an opportunity to improve our position in the commercial aviation aftermarket by expanding product and capability offerings both domestically and internationally, including our participation in aircraft engine maintenance events. The purchase price for Kellstrom Aerospace was allocated on a preliminary basis, among assets acquired, and liabilities assumed, at fair value based on the best available information on the acquisition date, with the excess purchase price recorded as goodwill. The fair values of the non-financial assets acquired, and liabilities assumed, were determined based on preliminary estimates, assumptions, and other information compiled by management, including independent valuations utilizing established industry valuation techniques. We have not yet finalized the determination of the fair values allocated to various assets and liabilities, including, but not limited to, working capital and income taxes. Therefore, the allocation of the total consideration for the acquisition to the tangible and identifiable intangible assets acquired, and liabilities assumed, is preliminary until we obtain final information regarding their fair values, which could potentially result in changes to the Kellstrom Aerospace opening balance sheet. Adjustments or changes to goodwill, assets or liabilities remain possible. The preliminary purchase price is as follows (in thousands):
Receivables |  | $ | 27,379 |
Contract assets |  | 2,925 |
Inventories |  | 37,686 |
Prepaid expenses and other current assets |  | 2,723 |
Property and equipment, net |  | 10,301 |
Intangible asset - customer related |  | 41,900 |
Goodwill |  | 100,711 |
Operating lease right-of-use assets |  | 10,793 |
Total assets acquired |  | 234,418 |
Accounts payable |  | (27,750) |
Accrued expense and other current liabilities |  | (6,096) |
Deferred tax liabilities |  | (201) |
Long-term operating lease obligations |  | (9,348) |
Total liabilities assumed |  | (43,395) |
Net assets acquired, excluding cash |  | $ | 191,023 |
Cash consideration, net of cash acquired |  | $ | 170,756 |
VSE common stock, at fair value |  | 20,267 |
Total |  | $ | 191,023 |
Goodwill resulting from the acquisition reflects the strategic advantage of growing our distribution and MRO capabilities in the commercial aerospace aftermarket. The value attributed to goodwill and customer relationships is not deductible for income tax purposes. The estimated value attributed to the customer relationship intangible assets is being amortized on a straight-line basis using a useful life of 8 years. The operating results of Kellstrom Aerospace were included in our consolidated results of operations from the date of acquisition. Our consolidated revenues and operating income for the year ended December 31, 2024 include $17.0 million and $1.2 million, respectively, from the acquisition of Kellstrom Aerospace. Kellstrom Aerospace's operating income does not include the impact of acquisition-related expenses incurred by VSE Corporation. Acquisition-related expenses related to the Kellstrom Aerospace acquisition totaled $2.7 million for the year ended December 31, 2024, and are included in selling, general and administrative expenses. The following unaudited pro forma financial information presents the combined results of operations for Kellstrom Aerospace and VSE Corporation for the years ended December 31, 2024, and 2023, respectively. The unaudited consolidated pro forma results of operations are as follows (in thousands):
|  | For the years ended December 31,
|  | 2024 |  | 2023
Revenue |  | $ | 1,244,344 |  |  | $ | 1,021,260 |
Income from continuing operations |  | $ | 45,241 |  |  | $ | 48,528 |
The unaudited pro forma combined financial information presented above has been prepared from historical financial statements that have been adjusted to give effect to the acquisition of Kellstrom Aerospace as though it had occurred on January 1, 2023 and includes adjustments for intangible asset amortization; interest expense and debt issuance costs on long-term debt; and acquisition and other transaction costs. The unaudited pro forma financial information is not intended to reflect the actual results of operations that would have occurred if the acquisition had occurred on January 1, 2023, nor is it indicative of future operating results. Fiscal 2023 Precision Fuel Components, LLC ("Precision Fuel") On February 1, 2023, our Aviation segment acquired Precision Fuel Components, LLC for a purchase price of $11.7 million. Precision Fuel's operating results are included in our Aviation segment beginning on the acquisition date. The acquisition was not material to our consolidated financial statements. During the year ended December 31, 2023, we incurred $0.2 million of acquisition-related expenses related to the acquisition of Precision Fuel, which are included in selling, general and administrative expenses. Desser Holding Company, LLC On July 3, 2023, we completed the acquisition of Desser Aerospace, a global aftermarket solutions provider of specialty distribution and MRO services. We purchased Desser Aerospace for cash consideration of $131.5 million. Concurrent with the closing of the transaction, we immediately sold, in a separate transaction, Desser Aerospace’s propriety solutions businesses to Loar Group Inc. (“Loar”) for a cash consideration of $31.8 million. During the year ended December 31, 2024, we adjusted the purchase price allocation as a result of certain measurement period adjustments to acquired assets and liabilities assumed due to updated valuation reports received from our external valuation specialist, revisions to internal estimates, and new information obtained about facts and circumstances that existed as of the acquisition date. The measurement period adjustments included: a decrease in deferred tax liabilities of $1.6 million and an increase in inventories of $0.1 million. These adjustments resulted in a decrease to goodwill of $1.7 million. We completed the purchase accounting valuation for Desser Aerospace during the second quarter of 2024. The final purchase price is as follows (in thousands):
Receivables |  | $ | 7,383 |
Inventories |  | 31,228 |
Prepaid expenses and other current assets |  | 515 |
Property and equipment |  | 2,527 |
Intangible assets |  | 21,950 |
Goodwill |  | 53,942 |
Operating lease right-of-use-assets |  | 6,679 |
Total assets acquired |  | 124,224 |
Accounts payable |  | (10,128) |
Accrued expenses and other current liabilities |  | (5,793) |
Long-term operating lease obligations |  | (5,937) |
Deferred tax liabilities |  | (2,666) |
Total liabilities assumed |  | (24,524) |
Net assets acquired, excluding cash |  | $ | 99,700 |
Cash consideration, net of cash acquired |  | $ | 101,870 |
Post-close adjustment |  | (2,170) |
Total |  | $ | 99,700 |
Goodwill resulting from the acquisition of Desser Aerospace reflects the strategic advantage of expanding our specialty distribution and MRO services to new customers. The value attributed to goodwill and customer relationships is not fully deductible for income tax purposes. The estimated value attributed to the customer relationship intangible assets is being amortized on a straight-line basis using a weighted average useful life of 8.3 years. We incurred $3.2 million of acquisition-related expenses related to the Desser Aerospace acquisition during the year ended December 31, 2023, which are included in selling, general and administrative expenses. The following unaudited pro forma financial information presents the combined results of operations for Desser Aerospace and VSE Corporation for the years ended December 31, 2024, and 2023, respectively. The unaudited consolidated pro forma results of operations are as follows (in thousands):
| For the years ended December 31,
| 2024 |  | 2023
Revenue | $ | 1,080,132 |  |  | $ | 908,243 |
Income from continuing operations | $ | 36,498 |  |  | $ | 46,265 |
The unaudited pro forma combined financial information presented above has been prepared from historical financial statements that have been adjusted to give effect to the acquisition of Desser Aerospace as though it had occurred on January 1, 2023 and includes adjustments for intangible asset amortization; interest expense and debt issuance costs on long-term debt; acquisition and other transaction costs; and certain costs allocated from the former parent. The unaudited pro forma financial information is not intended to reflect the actual results of operations that would have occurred if the acquisition had occurred on January 1, 2023, nor is it indicative of future operating results. Honeywell Fuel Control Systems ("Honeywell FCS Acquisition") On September 27, 2023, our Aviation segment entered into an Asset Purchase and License Agreement with Honeywell International Inc. ("Honeywell"), for a purchase price of $105.0 million, to exclusively manufacture, sell, market, distribute, and repair certain Honeywell fuel control systems. The purchase price of this acquisition was funded by borrowings under our revolving credit facility. This agreement expands existing distribution and MRO capabilities supporting certain Honeywell fuel control systems and associated subcomponents. The acquisition was accounted for as a business combination under ASC 805, Business Combinations. During the year ended December 31, 2024, we adjusted the purchase price allocation as a result of a measurement period adjustment to acquired assets due to updated valuation reports received from Honeywell. The measurement period adjustment resulted in a decrease in prepaid expenses and other current assets of $0.5 million, with a corresponding increase to goodwill. We completed the purchase accounting valuation for the Honeywell FCS Acquisition during the third quarter of 2024. The final purchase price allocation is as follows (in thousands):
Prepaid expenses and other current assets (a) |  | $ | 11,500 |
Property and equipment |  | 2,714 |
Intangible assets |  | 16,200 |
Goodwill |  | 74,586 |
Total assets acquired |  | $ | 105,000 |
Cash consideration |  | $ | 105,000 |
Total consideration |  | $ | 105,000 |
(a) Represents prepaid inventory consisting of finished goods acquired but not in our physical possession as of the acquisition date.
Goodwill resulting from the acquisition reflects the expected synergies from the acquisition. The value attributed to goodwill and customer relationship is deductible for income tax purposes. The estimated value attributed to the customer relationship intangible asset is being amortized on a straight-line basis using a useful life of 10 years. We incurred $0.3 million of acquisition-related expenses related to the Honeywell FCS Acquisition during the year ended December 31, 2023, which are included in selling, general and administrative expenses. The pro-forma impact of the acquisition is not material to the Company’s results of operations.

X
- References No definition available. + Details
Name: | us-gaap_BusinessCombinationAndAssetAcquisitionAbstract
Namespace Prefix: | us-gaap_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration

X
- Definition The entire disclosure for business combinations, including leverage buyout transactions (as applicable), and divestitures. This may include a description of a business combination or divestiture (or series of individually immaterial business combinations or divestitures) completed during the period, including background, timing, and assets and liabilities recognized and reclassified or sold. This element does not include fixed asset sales and plant closings. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Topic 805 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org/805/tableOfContent Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef -Topic 205 -SubTopic 20 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org/205-20/tableOfContent + Details
Name: | us-gaap_MergersAcquisitionsAndDispositionsDisclosuresTextBlock
Namespace Prefix: | us-gaap_
Data Type: | dtr-types:textBlockItemType
Balance Type: | na
Period Type: | duration