Item 1. Business
ITEM 1. Business
History and Organization
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. VSE was incorporated in Delaware in 1959.
Purpose, Vision and Our Core Values
Purpose and Vision Statement
We deliver trusted solutions to inspire the performance of tomorrow.
We are focused on enhancing the productivity and longevity of our customer's high-value, business-critical assets. We strive to achieve this through our dedication to creating better solutions, anticipating global needs, and building stronger relationships with our customers.
Core Values
• Customer Obsessed: Our exceptional service sets us apart
• Own It: Accountability is our responsibility
• Speak Up: Our experience and our voice matters
• Better Together: We collaborate to win
• Results Matter: We inspire and deliver our key results
Business Operations
Our business operations are managed under two reportable operating segments: Aviation and Fleet. Prior to the sale of the Federal and Defense segment, as discussed below, we operated in three reportable operating segments.
Aviation
The Aviation segment is a leading provider of aftermarket parts distribution and MRO services for components and engine accessories supporting commercial, business and general aviation ("B&GA") operators. This business offers a range of services to a diversified global client base of commercial airlines, regional airlines, air cargo transporters, MRO integrators and providers, aviation manufacturers, corporate and private aircraft owners, and fixed-base operators ("FBOs"). Our Aviation segment accounted for 73%, 63%, and 61% of our consolidated revenues in 2024, 2023 and 2022, respectively.
Fleet
The Fleet segment specializes in parts distribution, engineering solutions, and mission critical supply chain management services supporting the medium and heavy-duty fleet market. Fleet segment operations are conducted under the brand Wheeler Fleet Solutions, which supports the United States Postal Service ("USPS") and commercial truck fleets with parts, sustainment solutions and managed inventory services. Our Fleet segment accounted for 27%, 37%, and 39% of our consolidated revenues in 2024, 2023 and 2022, respectively.
Federal and Defense
Prior to its sale, the Federal and Defense segment provided aftermarket refurbishment and sustainment services to extend and maintain the life cycle of military vehicles, ships and aircraft for the United States Department of Defense ("DoD"). In February 2024, we entered into two separate agreements to sell substantially all of the Federal and Defense segment assets ("FDS Sale"). We have reflected the results of operations for this business as discontinued operations for all periods presented. See Note (3) "Discontinued Operations" to our Consolidated Financial Statements included in Item 8 of this annual report on Form 10-K for
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further information.
Products and Services
We provide a broad array of aftermarket parts distribution and service capabilities to support our clients’ aircraft and vehicle fleets. We focus on creating value by sustaining and extending the life and improving the performance of our client transportation assets through core offerings in parts supply and distribution, supply chain management, and MRO services.
We supply parts through our global distribution centers of excellence and provide MRO services from our strategically positioned repair facilities ensuring expedient delivery and turn-around of customers products enabling aircraft and fleet vehicles to return to service on time. See Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” for more information regarding our business operations.
Marketing
Our marketing activities are conducted separately by each of our two business segments by industry-specific sales representatives and professional marketing and business development staff. New customer contacts and information concerning new parts or programs, requirements and opportunities become available through sales calls and client visits, negotiation with key customer and supplier business partners, and formal and informal briefings. We participate in various professional organizations and trade associations, and attend global industry trade shows and events in order to increase our brand awareness and strengthen our service offerings.
Human Capital Resources
Workforce Demographics
Our employees have a variety of specialized experience, training and skills that provide the expertise required to service our customers. As of December 31, 2024, we employed approximately 1,400 employees. Principal employee categories include (i) mechanics and vehicle, aircraft and equipment technicians, (ii) logisticians, (iii) finance, information technology, and human resources support personnel, (iv) warehouse and sales personnel, and (v) engineers.
Employee Health and Safety
We are committed to providing a safe working environment for our employees. Supported by a Health, Environmental and Safety Program, we strive to minimize the risk of injury or illness to workers. We provide our employees with upfront and continuing safety training to communicate and implement safety policies and procedures. We also provide our employees with any additional information, leadership, support and equipment needed to safely perform their job function.
Talent Acquisition, Retention and Development
We strive to attract, develop and retain top talent at all levels of the company. To support this objective, we seek to provide opportunities for professional development and career growth to recognize and reward our employees for their contributions and accomplishments.
We encourage employees to provide feedback about their experience and we regularly conduct employee engagement surveys to gauge employee satisfaction and to understand the effectiveness of engaging our employees on all levels. These surveys provide valuable information on drivers of engagement and areas of improvement to help us maintain an employee-focused experience and culture. We also host quarterly town hall meetings to provide an open and frequent line of communication for all employees.
Company culture is a priority. We model our values and focus on reinforcing these through employee recognition. Our people and teams remain a key market differentiator for our business. Developing internal talent and sourcing for new talent that fits our culture is a key part of our strategy.
We offer competitive compensation and comprehensive benefits to attract, reward and retain a qualified and diverse workforce to achieve our vision and mission and meet the dynamic needs of employees and their families. In addition to competitive base pay, we offer bonus opportunities, a Company matched 401(k) plan, an employee stock purchase plan, healthcare insurance benefits, health savings and flexible spending accounts, paid time off, holiday pay, flexible work schedules, education reimbursement, and employee assistance programs.
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Inclusion
We embrace and encourage inclusion and strive to build a culture and company environment supporting inclusivity. Our initiatives include our practices on employee engagement, and the development of a work environment built on the premise of inclusion. We are focused on creating a framework and action plan for inclusion related initiatives across the organization, regularly hosts roundtable discussions aimed at increasing awareness and promoting dialogue to encourage a culture that values inclusive behavior in our workplace.
We also support employee resource groups, which are voluntary, employee-led groups that are open to all employees and provide a forum for all employees to share experiences and support our company's initiatives. We firmly believe in the power of our employee resource groups to foster inclusivity in our workplace. These groups serve as platforms for employees from different backgrounds to connect, share experiences, and advocate for continuous improvement within our organization. We actively seek initiatives and participate in outreach programs to assist individuals who served in the U.S. Armed Forces. These efforts include an emphasis on hiring military veterans to enhance the quality of our workforce. In our continuous pursuit of creating a more inclusive and diverse workplace, we provide training programs to support these initiatives. The goal of this initiative is to increase awareness and promote cultural sensitivity among our employees.
Code of Business Conduct and Ethics
We are committed to the highest ethical standards, and we expect all of our directors, officers and employees to comply with our standards and applicable laws and regulations in the conduct of our business. Our Code of Business Conduct and Ethics (the "Code") sets forth our policies and expectations on what is appropriate behavior and guides ethical business decisions that maintain a commitment to integrity. In addition, we require annual ethics and compliance training for our employees to provide them with the knowledge necessary to maintain our standards of ethics and compliance.
Regulation and Supervision
Our businesses are subject to extensive regulation in the markets we serve. We work with numerous U.S. government agencies and entities, including but not limited to, the Federal Aviation Administration ("FAA") and the USPS. Similar government authorities and regulations exist in the other countries in which we do business.
The FAA regulates the manufacture, repair and operation of all aircraft and aircraft parts operated in the United States. Its regulations are designed to ensure that all aircraft and aviation equipment are continuously maintained in proper condition to ensure safe operation of the aircraft. The inspection, maintenance, and repair procedures for various types of aircraft and equipment are prescribed by these regulatory authorities and can be performed only at certified repair facilities utilizing certified technicians. Certification and conformance are required prior to installation of a part on an aircraft. The FAA requires that various maintenance routines be performed on aircraft components, and we currently satisfy these maintenance standards in our MRO services.
For additional information on regulations and risks affecting our business, refer to Item 1A., "Risk Factors".
Competition
Our businesses operate in highly competitive industries that include numerous competitors, many of which are larger in size and have greater name recognition, financial resources, and larger technical staff than we do. We also compete against smaller, more specialized competitors that concentrate their resources on narrower service offerings.
The extent of competition that we will encounter because of changing economic or competitive conditions, customer requirements or technological developments is unpredictable. We believe the principal competitive factors for our business are customer knowledge, product availability, technical and financial qualifications, past performance, repair turnaround time, government budgetary priorities, sales force initiatives and price.
Available Information
We maintain an internet website at www.vsecorp.com . We make available free of charge through our website, our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to those reports filed with or otherwise furnished to the SEC pursuant to Section 13(a) or 15(d) of the Exchange Act as soon as reasonably practicable after the reports are electronically filed with, or furnished to, the SEC. The information on or obtainable through our
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website is not intended to be incorporated into this Annual Report on Form 10-K. The SEC also maintains an internet website ( http://www.sec.gov ) that contains reports, proxy and information statements and other information regarding issuers that file electronically with the SEC.
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