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Item 7. Management’s Discussion and Analysis

2026-02-27 compared with 2025-03-03 · 119 added, 170 removed, 70 unchanged (81% of the section changed)

Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis should be read in conjunction with our consolidated statements and related notes included in Item 8.

The following discussion and analysis should be read in conjunction with the Company's consolidated statements and related notes included in Item 8.

"Financial Statements and Supplementary Data" of this Annual Report on Form 10-K.

1 unchanged sentence

Discussions of 2023 items and year-to-year comparisons between 2024 and 2023 that are not included in this Form 10-K can be found under Item 7.

"Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report on Form 10-K for fiscal year ended December 31, 2023, filed with the SEC on March 8, 2024.

"Management's Discussion and Analysis of Financial Condition and Results of Operations" in the Company's Annual Report on Form 10-K for fiscal year ended December 31, 2024, filed with the SEC on March 3, 2025.

Business Overview

VSE Corporation, through its subsidiaries (collectively, "VSE," the "Company," "we," "us," or "our"), is a leading provider of aftermarket distribution and maintenance, repair and overhaul ("MRO") services for air and land transportation assets for commercial and government markets.

Our operations are conducted within two reportable segments aligned with our operating segments:

Aviation and Fleet.

VSE Corporation, through its subsidiaries (collectively, "VSE" or the "Company"), is a leading provider of aftermarket distribution and maintenance, repair and overhaul ("MRO") services for air transportation assets for commercial and government markets.

The Company operates as a single reportable segment aligned with the Company's operating segment:

Recent Developments

Sale of Federal and Defense Segment

In February 2024, we entered into two separate agreements to sell substantially all of the Federal and Defense segment assets ("FDS Sale").

We have reported the results of operations for the Federal and Defense segment as discontinued operations for all periods presented.

See Note (3) "Discontinued Operations" to our Consolidated Financial Statements for further information.

Sale of Fleet Segment

In February 2025, we entered into an agreement to sell the Fleet segment.

See Note (19) "Subsequent Event" for further information.

In April 2025, the Company completed the sale of its Fleet segment.

See Note (3) "Discontinued Operations" to the consolidated financial statements for further information.

New Credit Agreement

In May 2025, the Company entered into a new credit agreement, which fully replaced its previous credit agreement.

See Note (7) "Debt" to the consolidated financial statements for further information.

2025 Acquisitions

In April 2024, we completed the acquisition of Turbine Controls, Inc.

("TCI"), a leading provider of aftermarket MRO support services for complex engine components, as well as engine and airframe accessories, across commercial and military applications.

In December 2024, we completed the acquisition of Kellstrom Aerospace Group, Inc.

("Kellstrom Aerospace"), a diversified global distributor and service provider supporting the commercial aerospace engine aftermarket.

In May 2025, the Company completed the acquisition of Turbine Weld Industries, LLC ("Turbine Weld"), a specialized MRO provider of complex technical and proprietary engine components for business and general aviation platforms.

In December 2025, the Company entered into an Asset Purchase and License Agreement with an original equipment manufacturer to exclusively manufacture, sell, market, and distribute certain fuel pumps for use on the Pratt & Whitney PT6 engine series.

In December 2025, the Company completed the acquisition of GenNx/AeroRepair IntermediateCo Inc., the parent company of Aero 3, Inc.

("Aero 3"), a diversified global MRO service provider and distributor supporting the wheel and brake aftermarket.

See Note (2) "Acquisitions" to the consolidated financial statements for further information.

PAG Acquisition

In January 2026, the Company entered into a stock purchase agreement (the “Purchase Agreement”) to acquire Precision Aviation Group (“PAG”), a portfolio company of GenNx360 Capital Partners.

PAG is a leading global provider of aviation aftermarket MRO, distribution, and supply chain services supporting B&GA, rotorcraft, and defense markets (such acquisition, the “PAG Acquisition”).

See Note (19) “Subsequent Events” to the consolidated financial statements for further information.

PAG Financing Transactions

In connection with and pursuant to the Purchase Agreement, concurrently with the signing of the Purchase Agreement, the Company entered into a debt commitment letter (the “Debt Commitment Letter”) with one or more financial institutions (collectively, the “Commitment Parties”).

Subject to the terms of the Debt Commitment Letter, the Commitment Parties have committed to provide new senior secured financing, which currently consists of, (i) a term loan B facility (the “New Term Loan B Facility”), (ii) an upsize of the Company's existing revolving facility (as amended, the “New Revolving Facility”), and (iii) an upsize of the Company's $300.0 million senior secured term loan A facility from $296.25 million (as amended, the “New Term Loan A Facility”.

Following the satisfaction of certain conditions under the Debt Commitment Letter, certain commitments

within the Debt Commitment Letter to provide a bridge loan facility and a backstop facility were reduced to $0, and the New Term Loan A Facility and the New Term Loan B Facility commitments may also be reduced.

See Note (19) “Subsequent Events” to the Consolidated Financial Statements for further information.

Underwritten Public Offerings

In May 2024, we initiated a public offering of the Company's common stock relating to the issuance and sale of 2,429,577 shares at a public offering price of $71.00 per share.

The offering closed in two transactions, and net proceeds of $162.0 million were received by the Company, which were used to repay outstanding borrowings under our revolving credit facility, including amounts borrowed to pay the purchase price of the TCI acquisition and for general corporate purposes.

In October 2024, we initiated a public offering of the Company's common stock relating to the issuance and sale of 1,982,757 shares at a public offering price of $87.00 per share.

The offering closed on October 17, 2024, and net proceeds of $163.8 million were received by the Company, which were used to finance a portion of the cash consideration for the Kellstrom Aerospace acquisition and repay outstanding borrowings under our revolving facility.

In October 2025, the Company initiated a public offering of its common stock relating to the issuance and sale of 2,705,882 shares at a public offering price of $170.00 per share.

The offering closed on October 29, 2025, and net proceeds of $441.6 million were received by the Company, which were used to finance the cash consideration for the Aero 3 acquisition and general corporate purposes, including repaying outstanding borrowings under the Company's revolving facility.

See Note (15) "Capital Stock" to the consolidated financial statements for further information.

In February 2026, the Company initiated concurrent public offerings of (1) 4,587,766 shares of its common stock at a public offering price of $188.00 per share (the “Common Stock Offering”) and (2) 9,200,000 5.750% tangible equity units, each with a stated value of $50.00 (the “Units Offering,” and together with the Common Stock Offering, the “Offerings”).

The Common Stock Offering closed on February 4, 2026, and the Units Offering closed on February 5, 2026.

The net proceeds of approximately $1.3 billion were received by the Company, which are expected to be used to finance a portion of the cash consideration for the PAG Acquisition.

If for any reason the PAG Acquisition is not consummated, the Company intends to use the net proceeds from the Offerings, after payment of any cash redemption amount and repurchase price, for general corporate purposes, which may include repayment of outstanding indebtedness.

See Note (19) “Subsequent Events” to the consolidated financial statements for further information.

Business Trends

The following discussion provides a brief description of some of the key business factors impacting our results of operations detailed by segment.

Aviation Segment

Our strong program execution of new and existing distribution awards, our expanded portfolio of MRO capabilities and contributions from recent acquisitions resulted in record revenue of $786 million for the year ended December 31, 2024, a 45% increase year-over-year.

Distribution and repair revenue increased 27% and 86%, respectively, during the year ended December 31, 2024, compared to the same period in the prior year.

Growth of our distribution business was driven by strong execution of new and existing programs, and contributions from recent acquisitions.

Our repair business's growth was driven by the expansion of new repair capabilities, market share gains in the commercial and business and general aviation ("B&GA") markets, improved throughput across our MRO facilities, and contributions from the TCI acquisition.

In 2024, we ramped up several multi-year distribution and repair programs for both domestic and new international markets, including an expansion of our flagship distribution agreement with Pratt & Whitney Canada supporting Europe, the Middle East, and Africa.

These new programs are expected to drive sustainable and recurring revenue with growth opportunities, contributing to future positive results.

Investments in the Aviation segment are focused on businesses and programs that broaden our portfolio of products, expand our repair capabilities and reach new customers and geographies.

The April 2024 acquisition of TCI strengthens our position in the commercial aviation engine MRO aftermarket, while providing additional opportunities for organic growth.

The December 2024 acquisition of Kellstrom Aerospace improves our position in the commercial aviation engine aftermarket, expands our aftermarket product and capability offerings, and broadens our global footprint.

The Aviation segment is expected to see continued growth due to progress on new and existing programs, an expansion of repair capabilities, and synergies from recent acquisitions.

Fleet Segment

Our Fleet segment continues to see growth in revenue from commercial fleet customers and e-commerce fulfillment, as the segment moves towards revenue diversification.

Fleet is executing its revenue diversification strategy by continuing to scale our Olive Branch, MS, e-commerce fulfillment distribution facility, acquiring new customers, and expanding product options for our commercial business.

Commercial customer revenue continues to experience strong growth, increasing 18% in 2024 compared to the prior year.

We anticipate continued growth as we extend our reach to meet the increasing demand from the commercial market.

In 2024, commercial revenues were 61% of total Fleet segment revenue compared to 48% in 2023, demonstrating the continued success of our revenue diversification strategy.

The United States Postal Services ("USPS") revenue in 2024 decreased 30%, as compared to the prior year.

During 2024, USPS elected to migrate all of their vehicle maintenance facilities ("VMFs") to a new Fleet Management Information System ("FMIS"), resulting in a temporary decline in maintenance activity.

The transition to the new FMIS was completed in the third quarter of 2024.

As of the fourth quarter of 2024, maintenance activity has begun to improve, which has resulted in increased demand for our parts.

We remain committed to supporting the USPS as they emerge from their FMIS conversion.

Contributions from recent acquisitions, the Company's strong program execution of new and existing business awards with original equipment manufacturer ("OEM") distribution and repair partners, and expansion of product line and repair capabilities and capacity resulted in record revenue of $1.1 billion for the year ended December 31, 2025, representing a 41% increase compared to the prior year.

Distribution and repair revenue increased by 46% and 35%, respectively, for the year ended December 31, 2025, compared to the prior year period.

The Company believes its 2025 acquisitions are strongly aligned with its core business and increases its exposure to the higher-growth, higher-margin aviation aftermarket.

Results of Operations

The following table summarizes our consolidated results of operations (in thousands):

The following table summarizes the Company's consolidated results of operations (in thousands):

Years ended December 31,

9 unchanged sentences

$ 53,493 $ 19,402 $ 34,091 176 %

Revenues increased $219.6 million, or 26%, in 2024 compared to 2023 due to revenue growth in our Aviation segment of $242.2 million, partially offset by a decline in our Fleet segment of $22.6 million.

See "Segment Operating Results" section below for further discussion of revenues by segment.

Revenues increased driven by contributions from recent acquisitions, recently initiated distribution contract wins and improved demand for the Company's commercial aerospace and business and general aviation products and services.

Increased revenues were supported by strong end market conditions, reflecting sustained activity in air travel.

Aviation distribution revenue increased $221.1 million or 46% and repair revenue increased $104.9 million or 35%.

Costs and Operating Expenses.

Costs and operating expenses increased $226.2 million, or 29%, in 2024 compared to 2023.

Costs and operating expenses for our operating segments increase and decrease in conjunction with the level of business

activity and revenues generated by each segment.

See "Segment Operating Results" section below for further discussion of costs and operating expenses by segment.

Costs and operating expenses increased primarily as a result of increased revenues.

Costs and operating expenses include intangible asset amortization expense, which increased to $26.0 million for the year ended December 31, 2025, as compared to $17.6 million for prior year period, due to recent acquisitions.

In addition, during the year ended December 31, 2025, the Company recognized a $29.2 million charge related to the fair value remeasurement of the earn-out receivable associated with the Fleet Sale.

Operating Income.

Operating income decreased $6.6 million, or 7%, in 2024 compared to 2023 primarily attributable to an increase in corporate costs, including net lease abandonment and termination charges of $12.2 million, corporate restructuring charges of $4.2 million, and acquisition-related expenses incurred in connection with current year acquisitions, and a decrease in operating income for our Fleet segment of $14.2 million.

These operating income decreases were partially offset by an increase of $30.2 million for our Aviation segment.

See "Segment Operating Results" section below for further discussion of operating income by segment.

Interest Expense.

Interest expense increased approximately $3.9 million, or 12% in 2024 compared to 2023 primarily due to an increase in our average debt facility borrowings during the current period.

Operating income increased primarily attributable to revenue growth and the non-recurrence of certain one-time charges incurred in the prior year, including net lease abandonment charges of $12.2 million and corporate restructuring charges of $4.2 million.

The operating income increase was partially offset by higher intangible asset amortization expense, a charge related to the fair value remeasurement of the earn-out receivable, and increased corporate acquisition and integration costs incurred during the current period.

Interest Expense, Net.

Interest expense decreased primarily due to a reduction in the Company's average borrowings under its debt facilities and a lower average interest rate on outstanding borrowings during the period.

In addition, interest income earned on the utilization of excess cash proceeds from the October 2025 underwritten public offering and on the note receivable further contributed to the overall decrease in interest expense.

Provision for Income Taxes.

The effective tax rate for continued operations was 22.5% in 2025 compared to 18.5% in 2024.

The decrease in our effective tax rate primarily resulted from a favorable excess stock tax deduction and lower pre-tax book income in 2024.

Our tax rate is also affected by discrete items that may occur in any given year but may not be consistent from year to year.

In addition to state income taxes, certain federal and state tax credits and permanent book-tax differences such as foreign derived intangible income ("FDII") deduction, I.R.C.

Section 162(m) executive compensation limitation and unrealized investment income or loss from our COLI plan caused differences between the statutory U.S.

federal income tax rate and our effective tax rate.

Segment Operating Results

Aviation Segment Results

The results of operations for our Aviation segment were as follows (in thousands):

Years ended December 31,

2024 2023 Change ($)

Revenues $ 786,256 $ 544,020 $ 242,236 45 %

Costs and operating expenses 684,869 472,852 212,017 45 %

Operating income

$ 101,387 $ 71,168 $ 30,219 42 %

Profit percentage

12.9 % 13.1 %

Revenues increased $242.2 million, or 45%, in 2024 compared to 2023.

Distribution revenue increased $106.3 million, or 27%, driven by strong program execution on new and existing distribution programs and contributions from the acquisitions of Desser Aerospace (July 2023) and Kellstrom Aerospace (December 2024).

Repair revenue increased $135.9 million, or 86%, driven by an expansion of repair capabilities, improved end market demand, share gains with commercial and B&GA customers, and contributions from the acquisition of TCI (April 2024).

Costs and Operating Expenses.

Costs and operating expenses increased $212.0 million, or 45%, in 2024 compared to 2023 primarily due to increased revenues as discussed above.

In addition, costs and operating expenses for this segment included expenses for amortization of intangible assets associated with acquisitions and allocated corporate costs.

Expense for amortization of intangible assets increased $5.9 million in 2024 to $17.6 million from $11.7 million in 2023 driven by newly acquired intangibles in connection with acquisitions completed in the current year.

Expense for allocated corporate costs was $18.5 million for 2024 as compared to $12.9 million for 2023.

Operating Income.

Operating income increased $30.2 million, or 42%, in 2024 compared to 2023 primarily due to revenue growth and a favorable shift in sales mix and pricing, partially offset by an increase in intangible amortization and allocated corporate costs.

Fleet Segment Results

The results of operations for our Fleet segment were as follows (in thousands):

Years ended December 31,

2024 2023 Change ($)

Revenues $ 293,876 $ 316,468 $ (22,592) (7) %

Costs and operating expenses 276,858 285,211 (8,353) (3) %

Operating income $ 17,018 $ 31,257 $ (14,239) (46) %

Profit percentage

Revenues decreased $22.6 million, or 7%, in 2024 compared to 2023.

The decrease was primarily driven by a decline in revenues from other government customers of $50.1 million, or 30%, partially offset by an increase in revenues from commercial customers of $27.7 million, or 18%.

Revenues from other government customers decreased primarily due to lower maintenance activity within the USPS vehicle fleet program driven by USPS' transition to a new FMIS.

Commercial customer revenue growth was driven by our commercial fleet and e-commerce fulfillment business.

Costs and Operating Expenses.

Costs and operating expenses decreased $8.4 million, or 3%, primarily due to decreased revenues.

In addition, costs and operating expenses for this segment included expense for amortization of intangible assets associated with acquisitions and allocated corporate costs.

Expense for amortization of intangible assets decreased $2.5 million in 2024 to $0.1 million from $2.6 million in 2023 driven by substantially all intangibles becoming fully amortized during the prior year.

Expense for allocated corporate costs was $7.2 million for 2024 as compared to $7.8 million for 2023.

Operating Income.

Operating income decreased $14.2 million, or 46%, in 2024 compared to 2023, primarily driven by a shift in sales mix, the result of decreased revenues from our USPS vehicle fleet program, partially offset by decreased amortization expense and allocated corporate costs.

The higher tax rate in 2025 was primarily attributable to the reduced impact from favorable permanent adjustments, such as foreign derived intangible income ("FDII") and excess stock tax benefits, due to higher pre-tax book income in 2025, as well as adjustments to a tax settlement payment associated with a foreign subsidiary that is in the process of dissolution.

The Company's tax rate is also affected by discrete items that may occur in any given year but may not be consistent from year to year.

In addition to state income taxes, certain federal and state tax credits and permanent book-tax differences such as foreign derived intangible income deduction, I.R.C.

Section 162(m) executive compensation limitation and unrealized investment income or loss from the Company's COLI plan caused differences between the statutory U.S.

federal income tax rate and the effective tax rate.

Financial Condition

There has been no material adverse change in our financial condition in 2024.

Our outstanding borrowings under our term loan and revolving facility decreased $0.5 million, and we had $194 million of unused commitments under the credit agreement as of December 31, 2024.

In May and October 2024, we completed underwritten public offerings of the Company's common stock, generating proceeds, net of issuance costs, of $162.0 million and $163.8 million, respectively.

Changes to other asset and liability accounts were primarily due to our earnings;

our level of business activity;

the timing and level of inventory purchases to support new distribution programs, and vendor payments required to perform our work;

and collections from our customers.

There has been no material adverse change in the Company's financial condition in 2025.

The Company's outstanding borrowings under the Company's term loan and revolving facility decreased $136.3 million, and the Company had $399.4 million of unused commitments under the credit agreement as of December 31, 2025.

Changes to other asset and liability accounts were primarily due to the Company's earnings;

the level of business activity;

the sale of the Fleet segment;

the timing and level of inventory purchases to support new distribution programs, vendor payments required to perform work;

and collections from customers.

Liquidity and Capital Resources

The following table summarizes our cash flows (in thousands):

The following table summarizes the Company's cash flows (in thousands):

For the years ended December 31,

Net cash used in operating activities

Net cash provided by (used in) operating activities

$ 26,990 $ (31,037)

5 unchanged sentences

$ 40,328 $ 21,100

Cash used in operating activities increased $9.2 million in 2024 compared to 2023 primarily due to the working capital impact of the FDS Sale and related expenses incurred.

Cash used in investing activities increased $28.0 million in 2024 compared to 2023 primarily due to an increase of $64.5 million in net cash paid for acquisitions completed in the current period as discussed in Note (2) "Acquisitions" to the consolidated financial statements, partially offset by cash provided of $40.2 million related to the FDS sale as discussed in Note (3) "Discontinued Operations" to the consolidated financial statements.

Cash provided by financing activities increased $50.8 million in 2024 compared to 2023 primarily due to an increase of $196.0 million in proceeds related to our public underwritten offerings of our common stock in the current period as compared to the prior year, partially offset by a decrease in net borrowings of our debt during the current period of $144.9 million.

We paid cash dividends totaling approximately $7.1 million, or $0.40 per share, in 2024.

Pursuant to our credit agreement, our payment of cash dividends is subject to annual restrictions.

We have paid cash dividends each year since 1973.

Our internal sources of liquidity are primarily from operating activities, specifically from changes in our level of revenues and associated inventory, accounts receivable and accounts payable, and from profitability.

Significant increases or decreases in these operating activities can affect our liquidity.

Our inventory and accounts payable levels can be affected by the timing of large opportunistic inventory purchases and by distributor agreement requirements.

Our accounts receivable and accounts payable levels can be affected by changes in the level of work we perform and by the timing of large purchases.

In addition to operating cash flows, other significant factors that affect our overall management of liquidity include capital expenditures;

investments in expansion;

improvement and maintenance of our operational and administrative facilities;

and investments in the acquisition of businesses.

Our primary source of external financing is our credit agreement.

Our credit agreement is with a bank group and includes a term loan and revolving facility, with an aggregate maximum borrowing capacity under our revolving facility of $350.0 million.

Under the credit agreement we may elect to increase the maximum availability of the term loan, the revolving facility, or a combination of both, subject to customary lender commitment approvals.

The aggregate limit of increases is $25.0 million.

We believe our existing balances of cash and cash equivalents, along with our cash flows from operations and debt instruments under our credit agreement mentioned above, will provide sufficient liquidity for our business operations as well as capital expenditures, dividends, and other capital requirements associated with our business operations over the next twelve months and thereafter for the foreseeable future.

Cash provided by operating activities increased by $58.0 million primarily due to higher net income from continuing operations, adjusted for non-cash expenses.

Cash used in investing activities increased by $12.8 million primarily reflecting higher net cash paid for current year acquisitions of $111.0 million, partially offset by an increase in net cash proceeds from the sale of business segments of $98.8 million.

See Note (2) "Acquisitions" and Note (3) "Discontinued Operations" to the consolidated financial statement for further information.

Cash provided by financing activities decreased by $26.0 million primarily due to higher net repayments of the Company's debt during the current period of $135.8 million, partially offset by increased proceeds of $116.2 million from the issuance of common stock compared to the prior year.

The Company paid cash dividends totaling $8.3 million, or $0.40 per share, in 2025.

Pursuant to the Company's credit agreement, payment of cash dividends is subject to annual restrictions.

The Company has paid cash dividends each year since 1973.

The Company's internal sources of liquidity are primarily from operating activities, specifically from changes in the Company's level of revenues and associated inventory, accounts receivable and accounts payable, and from profitability.

Significant increases or decreases in these operating activities can affect the Company's liquidity.

Inventory and accounts payable levels can be affected by the timing of large opportunistic inventory purchases and by distributor agreement requirements.

Accounts receivable and accounts payable levels can be affected by changes in the level of work the Company performs and by the timing of large purchases.

In addition to operating cash flows, other significant factors that affect the Company's overall management of liquidity include capital expenditures, divestitures, and investments in the acquisition of businesses.

On May 2, 2025, the Company entered into a new credit agreement, which provides for a $300 million term loan facility and a $400 million revolving credit facility, both maturing on May 2, 2030.

The new debt agreement provides a lower interest rate, greater flexibility and increased borrowing capacity.

See Note (7) “Debt” to the consolidated financial statements for further information.

The Company's outstanding borrowings under the credit agreement decreased approximately $136.3 million for the year ended December 31, 2025.

The decrease was driven by the repayment of all outstanding borrowings under the revolving facility, principally from the utilization of proceeds from the Fleet Sale and the Company's October 2025 underwritten public offering.

See Note (3) "Discontinued Operations" and Note (15) "Capital Stock", respectively, for further information.

As of December 31, 2025, the Company had outstanding borrowings under its term loan of $296.3 million, outstanding letters of credit of $0.6 million, and $399.4 million of unused commitments under the credit agreement.

In October 2025, the Company initiated a public offering of its common stock that resulted in net proceeds of $441.6 million, which were used to finance the cash consideration for the Aero 3 acquisition and general corporate purposes, including repaying outstanding borrowings under the Company's revolving facility.

See Note (15) "Capital Stock" to the consolidated financial statements for further information.

The Company believes its existing balances of cash and cash equivalents, along with its cash flows from operations and debt instruments under its credit agreement mentioned above, will provide sufficient liquidity for business operations as well as capital expenditures, dividends, and other capital requirements associated with its business operations over the next twelve months and thereafter for the foreseeable future.

Other Obligations and Commitments

See Note (7) "Debt" to our Consolidated Financial Statements for information regarding our long-term debt obligations.

We estimate cash requirements for interest payments on our debt facilities to be approximately $30.1 million for 2025 and $24.2 million for 2026.

The estimates do not take into account future draw downs and repayments on the debt or changes in the variable interest rate, and actual interest may be different.

The Company's contractual cash obligations as of December 31, 2025 include payments of interest on its debt facilities and operating lease obligations.

See Note (7) "Debt" and Note (12) "Leases" to the Consolidated Financial Statements for information regarding the Company's long-term debt obligations and future minimum lease payments on operating lease obligations, respectively.

The Company estimates cash requirements for interest payments on its debt facilities to be approximately $15.3 million for 2026, $14.8 million for 2027, $13.9 million for 2028, $12.8 million for 2029, and $4.1 million for 2030 when the Company's facilities mature.

The estimates do not take into account future draw downs and repayments on the debt, the impact of interest rate swaps, or changes in the variable interest rate, and actual interest may be different.

The estimates included variable rate interest obligations estimated based on rates as of December 31, 2025.

The interest payments are estimated through the maturity date of our term loan.

Interest payments under our revolving facility have been excluded because a reasonable estimate of timing and amount of cash out flows cannot be determined.

See Note (12) "Leases" to our Consolidated Financial Statements for information pertaining to future minimum lease payments relating to our operating lease obligations.

The interest payments are estimated through the maturity date of the Company's term loan.

Interest payments under the revolving facility have been excluded because a reasonable estimate of timing and amount of cash out flows cannot be determined.

Inflation and Pricing

Our Aviation and Fleet segments have experienced broad-based inflationary impacts consistent with overall trends in the aerospace and industrial distribution market, due primarily to increased materials, labor, and services costs.

The effect of these increased costs on total company net income has been mitigated with improved efficiency in our underlying business through productivity improvements and pass-through price increases.

Given broader inflation in the economy, we are monitoring the risk inflation presents to active and future contracts.

The Company has experienced broad-based inflationary and tariff impacts consistent with overall trends in the aerospace industry, due primarily to increased materials, labor, and services costs.

The effect of these increased costs on consolidated net income has been mitigated with improved efficiency in the Company's underlying business through productivity improvements and pass-through price increases.

Given broader inflation in the economy, the Company is monitoring the risk inflation presents to active and future contracts.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements that have, or are reasonably likely to have, a current or future material effect on our financial condition, changes in financial condition, revenue or expenses, results of operations, liquidity, capital expenditures or capital resources.

Critical Accounting Policies, Estimates and Judgments

Our consolidated financial statements are prepared in accordance with United States generally accepted accounting principles ("U.S.

GAAP"), which require us to make estimates and assumptions.

Certain critical accounting policies affect the more significant accounts, particularly those that involve judgments, estimates and assumptions used in the preparation of our consolidated financial statements.

The development and selection of these critical accounting policies have been determined by our management.

Due to the significant judgment involved in selecting certain of the assumptions used in these policies, it is possible that different parties could choose different assumptions and reach different conclusions.

We consider our policies relating to the following matters to be critical accounting policies.

The Company does not have any off-balance sheet arrangements that have, or are reasonably likely to have, a current or future material effect on the Company's financial condition, changes in financial condition, revenue or expenses, results of operations, liquidity, capital expenditures or capital resources.

Critical Accounting Estimates and Judgments

The Company's consolidated financial statements are prepared in accordance with United States generally accepted accounting principles ("U.S.

GAAP"), which require the Company to make estimates and assumptions.

Certain critical accounting estimates affect the more significant accounts, particularly those that involve judgments and assumptions used in the preparation of the consolidated financial statements.

Due to the significant judgment involved in selecting certain of the assumptions used in these estimates, it is possible that different parties could choose different assumptions and reach different conclusions.

The Company considers estimates relating to the following matters to be critical accounting estimates.

Revenue Recognition

We account for revenue in accordance with ASC 606.

The Company accounts for revenue in accordance with Accounting Standards Codification ("ASC") Topic 606, Revenue from Contracts with Customers ("ASC 606").

The unit of account in ASC 606 is a performance obligation.

At the inception of each contract with a customer, we determine our performance obligations under the contract and the contract's transaction price.

At the inception of each contract with a customer, the Company determines its performance obligations under the contract and the contract's transaction price.

A performance obligation is a promise in a contract to transfer a distinct good or service to the customer and is defined as the unit of account.

A contract’s transaction price is allocated to each distinct performance obligation and recognized as revenue when the performance obligation is satisfied.

The majority of our contracts have a single performance obligation to transfer goods or services.

Our performance obligations are satisfied over time as work progresses or at a point in time based on transfer of control of products and services to our customers.

Our Aviation segment revenues result from the sale of aircraft parts and the performance of MRO services.

Our Aviation segment recognizes revenues for the sale of aircraft parts at a point in time when control is transferred to the customer, which usually occurs when the parts are shipped.

Our Aviation segment recognizes revenues for MRO services over time as the services are transferred to the customer.

The majority of the Company's contracts have a single performance obligation to transfer goods or services.

Performance obligations are satisfied over time as work progresses or at a point in time based on transfer of control of products and services to customers.

Revenues result from the sale of aircraft parts and the performance of MRO services.

The Company recognizes revenues for the sale of aircraft parts at a point in time when control is transferred to the customer, which usually occurs when the parts are shipped.

The Company recognizes revenues for MRO services over time as the services are transferred to the customer.

MRO services revenue recognition is measured based on the cost-to-cost input method, as costs incurred reflect the work completed, and therefore, the services transferred to date.

Sales returns and allowances are not significant.

Substantially all Fleet segment revenues from the sale of vehicle parts to customers are recognized at the point in time of the transfer of control to the customer.

Sales returns and allowances for vehicle parts are not significant.

We have applied the practical expedient for our parts sales and MRO services to exclude the amount of remaining performance obligations for contracts with an original expected term of one year or less.

The Company has applied the practical expedient for parts sales and MRO services to exclude the amount of remaining performance obligations for contracts with an original expected term of one year or less.

Inventory Valuation

Inventories are stated at the lower of cost or net realizable value using the first-in, first-out ("FIFO") method.

Inventories for our Aviation segment consist primarily of aftermarket parts for distribution, and general aviation engine accessories and parts, and also include related purchasing, overhaul labor, storage and handling costs.

Inventories for our Fleet segment consist primarily of vehicle replacement parts, and also include related purchasing, storage and handling costs.

We periodically evaluate the carrying value of inventory, considering factors such as its physical condition, sales patterns and demand in order to estimate the amount necessary to write down any slow moving, obsolete or damaged inventory.

Inventories consist primarily of aftermarket parts for distribution, and general aviation engine accessories and parts, and also include related purchasing, overhaul labor, storage and handling costs.

The Company periodically evaluates the carrying value of inventory, considering factors such as its physical condition, sales patterns and demand in order to estimate the amount necessary to write down any slow moving, obsolete or damaged inventory.

These estimates could vary significantly from actual amounts based on future economic conditions, customer inventory levels or competitive factors that were not foreseen or did not exist when the estimated write-downs were made.

Business Combinations

We account for business combinations under the acquisition method of accounting.

The Company accounts for business combinations under the acquisition method of accounting.

The purchase price of each business acquired is allocated to the tangible and intangible assets acquired and the liabilities assumed based on information regarding their respective fair values on the date of acquisition.

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Determining the fair value of assets acquired and liabilities assumed requires management's judgment and often involves the use of significant estimates and assumptions, including assumptions with respect to future cash inflows and outflows, discount rates, and market multiples, among other items.

We determine the fair values of intangible assets acquired generally in consultation with third-party valuation advisors.

The Company determines the fair values of intangible assets acquired generally in consultation with third-party valuation advisors.

The valuation of assets acquired and liabilities assumed requires a number of judgments and is subject to revision as additional information about the fair values becomes available.

We will recognize any adjustments to provisional amounts that are identified during the period not to exceed twelve months from the acquisition date (the "measurement period") in which the adjustments are determined.

The Company will recognize any adjustments to provisional amounts that are identified during the period not to exceed twelve months from the acquisition date (the "measurement period") in which the adjustments are determined.

Acquisition costs are expensed as incurred.

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Goodwill represents the excess of fair value of consideration paid for an acquisition over the fair value of the net assets acquired and liabilities assumed as of the acquisition date.

We recognize purchased intangible assets in connection with our business acquisitions at fair value on the acquisition date.

We evaluate goodwill for our reporting units for impairment at least annually on the first day of the fourth quarter, or whenever events or other changes in circumstances indicate that the carrying value may not be fully recoverable.

When testing goodwill for impairment, we may initially qualitatively assess whether it is necessary to perform a quantitative goodwill impairment test, which is only required if we conclude that it is more likely than not that a reporting unit's fair value is less than its carrying amount.

In evaluating whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount, we considered the totality of all relevant events and circumstances that affect the fair value or carrying amount of a reporting unit in accordance with ASC 350-20-35-3C.

In the event we deem a quantitative impairment test necessary, we estimate and compare the fair value of each reporting unit to its respective carrying value including goodwill.

We estimate the fair value of our reporting units using a weighting of fair values derived from the income approach and market approach.

The analysis relies on significant judgements and assumptions about expected future cash flows, weighted-average cost of capital, discount rates, expected long-term growth rates, and financial measures derived from observable market data of comparable public companies.

Based on the annual goodwill impairment test performed during the fourth quarter of 2024, our qualitative impairment test determined that it was more likely than not that each reporting unit's fair value exceeded its carrying value.

The Company recognizes purchased intangible assets in connection with business acquisitions at fair value on the acquisition date.

The Company evaluates goodwill for impairment at least annually on the first day of the fourth quarter, or whenever events or other changes in circumstances indicate that the carrying value may not be fully recoverable.

When testing goodwill for impairment, the Company may initially qualitatively assess whether it is necessary to perform a quantitative goodwill impairment test, which is only required if the Company concludes that it is more likely than not that a reporting unit's fair value is less than its carrying amount.

In evaluating whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount, the Company considered the totality of all relevant events and circumstances that affect the fair value or carrying amount of a reporting unit in accordance with ASC Topic 350, Intangibles - Goodwill and Other.

In the event the Company deems a quantitative impairment test necessary, the Company estimates and compares the reporting unit fair value to its respective carrying value including goodwill.

The Company estimates the reporting unit fair value using a weighting of fair values derived from the income approach and market approach.

The analysis relies on significant judgments and assumptions about expected future cash flows, weighted-average cost of capital, discount rates, expected long-term growth rates, and financial measures derived from observable market data of comparable public companies.

Intangible assets with finite lives are amortized using the method that best reflects how their economic benefits are utilized or, if a pattern of economic benefits cannot be reliably determined, on a straight-line basis over their estimated useful lives.

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The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

The carrying value of net deferred tax assets is based on assumptions regarding our ability to generate sufficient future taxable income to utilize these deferred tax assets within the carryback or carryforward periods provided for in the tax law for each applicable tax jurisdiction.

The carrying value of net deferred tax assets is based on assumptions regarding the Company's ability to generate sufficient future taxable income to utilize these deferred tax assets within the carryback or carryforward periods provided for in the tax law for each applicable tax jurisdiction.

Deferred tax assets are evaluated quarterly to determine if valuation allowances are required or should be adjusted.

Recent Accounting Pronouncements

See "Recent Accounting Pronouncements" in Note (1) "Nature of Business and Summary of Significant Accounting Policies" to our Consolidated Financial Statements included below in Item 8 of this annual report on Form 10-K for additional information.

See "Recent Accounting Pronouncements" in Note (1) "Nature of Business and Summary of Significant Accounting Policies" to the Consolidated Financial Statements included below in Item 8 of this annual report on Form 10-K for additional information.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis