VSE (VSEC) - 2022 Q2 - Quarterly Report

PART I. Financial Information This section presents the company's unaudited consolidated financial statements and management's discussion and analysis for the reporting period ITEM 1. Financial Statements This section presents VSE Corporation's unaudited consolidated financial statements, including balance sheets, income, equity, cash flows, and detailed notes Unaudited Consolidated Balance Sheets This chapter presents the company's consolidated balance sheets as of June 30, 2022, and December 31, 2021 Consolidated Balance Sheet Highlights (in thousands) | Metric | June 30, 2022 | December 31, 2021 | | :----------------------------------- | :------------ | :---------------- | | Total current assets | $506,586 | $463,993 | | Total assets | $947,223 | $918,558 | | Total current liabilities | $176,602 | $179,964 | | Total liabilities | $515,940 | $501,225 | | Total stockholders' equity | $431,283 | $417,333 | - Total assets increased by $28.665 million from December 31, 2021, to June 30, 2022, primarily driven by an increase in receivables and inventories[12] Unaudited Consolidated Statements of Income (Loss) This chapter details the company's consolidated income and loss for the three and six months ended June 30, 2022 and 2021 Consolidated Statements of Income (Loss) Highlights (in thousands, except per share) | Metric | 3 Months Ended Jun 30, 2022 | 3 Months Ended Jun 30, 2021 | 6 Months Ended Jun 30, 2022 | 6 Months Ended Jun 30, 2021 | | :--------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Total revenues | $241,713 | $175,112 | $472,952 | $340,093 | | Operating income (loss) | $14,151 | $(12,714) | $26,065 | $(3,111) | | Net income (loss) | $7,548 | $(12,366) | $13,792 | $(7,255) | | Basic earnings (loss) per share | $0.59 | $(0.97) | $1.08 | $(0.59) | | Diluted earnings (loss) per share | $0.59 | $(0.97) | $1.08 | $(0.59) | | Dividends declared per share | $0.10 | $0.09 | $0.20 | $0.18 | - Total revenues increased by 38% for the three months and 39% for the six months ended June 30, 2022, compared to the prior year[13] - The company reported a significant turnaround from net loss to net income, with basic EPS of $0.59 for Q2 2022 (vs. $(0.97) in Q2 2021) and $1.08 for H1 2022 (vs. $(0.59) in H1 2021)[13] Unaudited Consolidated Statements of Comprehensive Income (Loss) This chapter presents the consolidated comprehensive income and loss for the three and six months ended June 30, 2022 and 2021 Consolidated Statements of Comprehensive Income (Loss) Highlights (in thousands) | Metric | 3 Months Ended Jun 30, 2022 | 3 Months Ended Jun 30, 2021 | 6 Months Ended Jun 30, 2022 | 6 Months Ended Jun 30, 2021 | | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Net income (loss) | $7,548 | $(12,366) | $13,792 | $(7,255) | | Other comprehensive income, net of tax | — | $152 | $176 | $663 | | Comprehensive income (loss) | $7,548 | $(12,214) | $13,968 | $(6,592) | - Comprehensive income for the three and six months ended June 30, 2022, was $7,548 thousand and $13,968 thousand, respectively, a significant improvement from losses in the prior year[15] Unaudited Consolidated Statements of Stockholders' Equity This chapter outlines changes in consolidated stockholders' equity for the six months ended June 30, 2022 Consolidated Stockholders' Equity Highlights (in thousands) | Metric | Balance at Dec 31, 2021 | Net Income (H1 2022) | Stock-based Compensation (H1 2022) | Other Comprehensive Income (H1 2022) | Dividends Declared (H1 2022) | Balance at Jun 30, 2022 | | :-------------------------- | :---------------------- | :------------------- | :--------------------------------- | :----------------------------------- | :--------------------------- | :---------------------- | | Total Stockholders' Equity | $417,333 | $13,792 | $2,540 | $176 | $(2,558) | $431,283 | - Total stockholders' equity increased from $417.3 million at December 31, 2021, to $431.3 million at June 30, 2022, primarily due to net income and stock-based compensation, partially offset by dividends[19] Unaudited Consolidated Statements of Cash Flows This chapter presents the consolidated cash flow activities for the six months ended June 30, 2022 and 2021 Consolidated Statements of Cash Flows Highlights (in thousands) | Cash Flow Activity | 6 Months Ended Jun 30, 2022 | 6 Months Ended Jun 30, 2021 | | :------------------------------------ | :-------------------------- | :-------------------------- | | Net cash used in operating activities | $(20,138) | $(53,968) | | Net cash provided by (used in) investing activities | $327 | $(18,791) | | Net cash provided by financing activities | $19,664 | $72,718 | | Net decreases in cash and cash equivalents | $(147) | $(41) | - Net cash used in operating activities decreased by $33.8 million, indicating improved operational cash management[21] - Investing activities shifted from a net use of $18.8 million in H1 2021 to a net provision of $0.3 million in H1 2022, largely due to lower acquisition payments and property/equipment purchases[21] Notes to Unaudited Consolidated Financial Statements This chapter provides detailed explanatory notes to the unaudited consolidated financial statements (1) Nature of Operations and Basis of Presentation This note describes VSE Corporation's diversified aftermarket business and its basis of financial statement presentation - VSE Corporation is a diversified aftermarket products and services company, operating in Aviation, Fleet, and Federal and Defense segments[24] - The company early adopted ASU 2021-08, 'Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers,' in the first quarter of 2022[28] (2) Acquisitions This note details the company's recent acquisitions, including Global Parts Group and HAECO Special Services - Acquired Global Parts Group, Inc. on July 26, 2021, for a preliminary purchase price of $40 million, including $2 million in contingent consideration[29] - Acquired HAECO Special Services, LLC on March 1, 2021, for $14.8 million, integrating its operations into the Federal and Defense segment[33] (3) Revenue This note provides a detailed breakdown of the company's revenues by customer and type Revenues by Customer (in thousands) | Customer | 3 Months Ended Jun 30, 2022 | 3 Months Ended Jun 30, 2021 | 6 Months Ended Jun 30, 2022 | 6 Months Ended Jun 30, 2021 | | :--------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Commercial | $129,522 | $65,280 | $249,382 | $124,381 | | DoD | $60,524 | $66,751 | $112,648 | $112,639 | | Other government | $51,667 | $43,081 | $110,922 | $103,073 | | Total | $241,713 | $175,112 | $472,952 | $340,093 | Revenues by Type (in thousands) | Revenue Type | 3 Months Ended Jun 30, 2022 | 3 Months Ended Jun 30, 2021 | 6 Months Ended Jun 30, 2022 | 6 Months Ended Jun 30, 2021 | | :--------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Repair | $25,966 | $19,021 | $48,329 | $37,337 | | Distribution | $143,795 | $86,551 | $281,752 | $167,353 | | Cost Plus Contract | $34,555 | $21,813 | $65,132 | $38,364 | | Fixed Price Contract | $22,278 | $32,430 | $40,639 | $56,361 | | T&M Contract | $15,119 | $15,297 | $37,100 | $40,678 | | Total | $241,713 | $175,112 | $472,952 | $340,093 | - Unbilled receivables increased to $41.3 million as of June 30, 2022, from $31.9 million as of December 31, 2021[41] - Revenues from products and services transferred at a point in time accounted for approximately 59% of total revenues for the three and six months ended June 30, 2022, up from 49% in the prior year[42] - As of June 30, 2022, the aggregate amount of transaction prices allocated to unsatisfied or partially unsatisfied performance obligations was $183 million, with 94% expected to be satisfied within one year[43] (4) Debt This note details the company's long-term debt, interest rates, interest expense, and loan covenant compliance Long-term Debt Composition (in thousands) | Debt Type | June 30, 2022 | December 31, 2021 | | :-------------------------- | :------------ | :---------------- | | Bank credit facility - term loan | $52,675 | $60,175 | | Bank credit facility - revolver loans | $257,681 | $226,559 | | Principal amount of long-term debt | $310,356 | $286,734 | | Total long-term debt (net of issuance costs) | $308,610 | $284,569 | | Long-term debt, less current portion | $294,448 | $270,407 | - Interest rates on outstanding debt ranged from 4.62% to 7.00% as of June 30, 2022, with an effective interest rate of 5.06%[48] - Interest expense, net, increased to $3.7 million for Q2 2022 (from $2.4 million in Q2 2021) and $7.1 million for H1 2022 (from $5.1 million in H1 2021)[49] - The company was in compliance with all required ratios and terms under its loan agreement as of June 30, 2022[50] (5) Earnings Per Share This note provides weighted-average common shares outstanding for basic and diluted earnings per share calculations Weighted-Average Shares Outstanding for EPS Calculation | Metric | 3 Months Ended Jun 30, 2022 | 3 Months Ended Jun 30, 2021 | 6 Months Ended Jun 30, 2022 | 6 Months Ended Jun 30, 2021 | | :------------------------------------ | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Basic weighted average common shares outstanding | 12,778,355 | 12,702,366 | 12,760,026 | 12,391,166 | | Diluted weighted average common shares outstanding | 12,811,078 | 12,702,366 | 12,807,249 | 12,391,166 | (6) Commitments and Contingencies This note discusses management's assessment of potential impacts from claims, lawsuits, and government disputes - Management believes that the outcome of current claims, lawsuits, government disputes, audits, and investigations will not have a material adverse effect on the company's financial position, results of operations, or cash flows[54][55] (7) Business Segments and Customer Information This note presents financial information by the company's three reportable segments: Aviation, Fleet, and Federal and Defense - The company operates under three reportable segments: Aviation, Fleet, and Federal and Defense, providing aftermarket repair, distribution, logistics, and MRO services[56][57][58] Segment Revenues (in thousands) | Segment | 3 Months Ended Jun 30, 2022 | 3 Months Ended Jun 30, 2021 | 6 Months Ended Jun 30, 2022 | 6 Months Ended Jun 30, 2021 | | :------------------ | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Aviation | $105,019 | $47,515 | $198,309 | $91,886 | | Fleet | $64,742 | $58,057 | $131,772 | $112,804 | | Federal and Defense | $71,952 | $69,540 | $142,871 | $135,403 | | Total revenues | $241,713 | $175,112 | $472,952 | $340,093 | Segment Operating Income (Loss) (in thousands) | Segment | 3 Months Ended Jun 30, 2022 | 3 Months Ended Jun 30, 2021 | 6 Months Ended Jun 30, 2022 | 6 Months Ended Jun 30, 2021 | | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Aviation | $6,450 | $(22,272) | $14,072 | $(22,604) | | Fleet | $5,366 | $4,000 | $11,747 | $9,741 | | Federal and Defense | $2,552 | $6,999 | $1,864 | $12,024 | | Corporate/unallocated expenses | $(217) | $(1,441) | $(1,618) | $(2,272) | | Operating income (loss) | $14,151 | $(12,714) | $26,065 | $(3,111) | (8) Fair Value Measurements This note provides information on financial assets and liabilities measured at fair value Financial Assets and Liabilities Measured at Fair Value (in thousands) | Item | June 30, 2022 | December 31, 2021 | | :------------------------------------------------- | :------------ | :---------------- | | Non-COLI assets held in Deferred Supplemental Compensation Plan | $532 | $598 | | Interest rate swap agreements | — | $234 | | Earn-out obligation - short-term | $250 | $1,000 | | Earn-out obligation - long-term | — | $250 | - Interest rate swap agreements expired in February and March 2022, resulting in no fair value recorded as of June 30, 2022[62] - The earn-out obligation related to the Global Parts acquisition decreased from $1.25 million at December 31, 2021, to $0.25 million at June 30, 2022, due to payments[65] (9) Income Taxes This note presents effective tax rates for the three and six months ended June 30, 2022 and 2021 Effective Tax Rates | Period | 2022 | 2021 | | :-------------------------- | :----- | :----- | | Three months ended June 30, | 26.6% | 19.6% | | Six months ended June 30, | 25.8% | 17.6% | - The effective tax rate increased primarily due to book expense related to the decline in value of Company Owned Life Insurance (COLI) assets in H1 2022, which was reversed for tax purposes[67] (10) Subsequent Events This note discloses significant events after the reporting period, including forward-starting fixed interest rate swaps - Subsequent to June 30, 2022, the company executed forward-starting fixed interest rate swaps to hedge $150 million of floating rate debt, with the tenor beginning on October 31, 2022[68] ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's analysis of VSE Corporation's financial condition and operating results Business Overview This chapter provides an overview of VSE Corporation's diversified aftermarket products and services business - VSE Corporation is a diversified aftermarket products and services company providing repair, parts distribution, logistics, supply chain management, and consulting services for land, sea, and air transportation assets[70] - Operations are conducted within three reportable segments: Aviation, Fleet, and Federal and Defense[71] Recent Acquisitions This chapter refers to detailed information on recent acquisitions in the notes to the financial statements - Refer to Note (2) 'Acquisitions' in the Consolidated Financial Statements for additional information on recent acquisitions[72] Impact of the COVID-19 Pandemic This chapter discusses the company's continued operational improvements and uninterrupted service delivery despite the COVID-19 pandemic - The company experienced continued improvement in operating results during the six months ended June 30, 2022, following the impact of the COVID-19 pandemic[73] - All repair, distribution, and base operations facilities remain open and operational, delivering products and services without interruption[73] Business Trends This chapter analyzes key business trends and performance drivers across all operating segments Aviation Segment This chapter highlights the Aviation segment's revenue growth from commercial market recovery and acquisitions - Aviation segment revenue increased by 121% year-over-year to $105 million for Q2 2022, driven by recovery in commercial market activity and share gains in business & general aviation[76] - Distribution revenue increased by 175% and repair revenue by 29% year-over-year for the first six months of 2022[77] - The acquisition of Global Parts in July 2021 expanded product lines and client base, contributing to growth[76] Fleet Segment This chapter details the Fleet segment's revenue growth from commercial customers and e-commerce fulfillment - Commercial customer revenue in the Fleet segment increased by approximately 48% for Q2 2022 and 68% for H1 2022 year-over-year, driven by growth in e-commerce fulfillment[79] - Commercial revenues constituted 40.9% of total Fleet segment revenue for H1 2022, up from 28.4% in H1 2021, reflecting successful diversification[79] Federal and Defense Segment This chapter focuses on the Federal and Defense segment's revenue growth from NAVSEA Foreign Military Sales programs - Revenue growth in the Federal and Defense segment was driven by strong performance in Naval Sea Systems Command (NAVSEA) Foreign Military Sales (FMS) programs[80] - Activity on the FMS Program increased, including work to transfer a frigate to Bahrain[80] Results of Operations This chapter provides a detailed analysis of the company's consolidated and segment-specific operating results Consolidated Results of Operations This chapter summarizes the company's overall financial performance, highlighting increases in revenues, operating income, and net income Consolidated Results of Operations (in thousands) | Metric | 3 Months Ended Jun 30, 2022 | 3 Months Ended Jun 30, 2021 | Change ($) | Change (%) | 6 Months Ended Jun 30, 2022 | 6 Months Ended Jun 30, 2021 | Change ($) | Change (%) | | :-------------------------- | :-------------------------- | :-------------------------- | :--------- | :--------- | :-------------------------- | :-------------------------- | :--------- | :--------- | | Revenues | $241,713 | $175,112 | $66,601 | 38% | $472,952 | $340,093 | $132,859 | 39% | | Operating income | $14,151 | $(12,714) | $26,865 | 211% | $26,065 | $(3,111) | $29,176 | 938% | | Net income | $7,548 | $(12,366) | $19,914 | 161% | $13,792 | $(7,255) | $21,047 | 290% | - Consolidated revenues increased by $66.6 million (38%) for Q2 2022 and $132.9 million (39%) for H1 2022, driven by growth across all segments[81][82] - Operating income saw a significant turnaround, increasing by $26.9 million (211%) for Q2 2022 and $29.2 million (938%) for H1 2022, primarily due to Aviation and Fleet segment improvements[84][85] - Interest expense increased by 45% for Q2 2022 and 31% for H1 2022 due to higher average interest rates and debt balances[86] Segment Operating Results This chapter provides a detailed breakdown of the operating performance for each reportable segment Aviation Segment Results This chapter analyzes the Aviation segment's revenue growth and operating income turnaround Aviation Segment Results (in thousands) | Metric | 3 Months Ended Jun 30, 2022 | 3 Months Ended Jun 30, 2021 | Change ($) | Change (%) | 6 Months Ended Jun 30, 2022 | 6 Months Ended Jun 30, 2021 | Change ($) | Change (%) | | :-------------------------- | :-------------------------- | :-------------------------- | :--------- | :--------- | :-------------------------- | :-------------------------- | :--------- | :--------- | | Revenues | $105,019 | $47,515 | $57,504 | 121% | $198,309 | $91,886 | $106,423 | 116% | | Operating income (loss) | $6,450 | $(22,272) | $28,722 | 129% | $14,072 | $(22,604) | $36,676 | 162% | | Profit (loss) percentage | 6.1% | (46.9%) | | | 7.1% | (24.6%) | | | - Aviation segment revenues increased by $57.5 million (121%) for Q2 2022 and $106.4 million (116%) for H1 2022, driven by distribution contract wins, Global Parts acquisition, and improved repair demand[89] - Operating income improved significantly, turning from a loss of $(22.3) million in Q2 2021 to a profit of $6.5 million in Q2 2022[92] - Costs and operating expenses for Q2 2022 included a $2.3 million non-cash charge to write down accounts receivable and inventory related to Russia and Ukrainian markets[90][91] Fleet Segment Results This chapter examines the Fleet segment's revenue and operating income growth from commercial customer sales Fleet Segment Results (in thousands) | Metric | 3 Months Ended Jun 30, 2022 | 3 Months Ended Jun 30, 2021 | Change ($) | Change (%) | 6 Months Ended Jun 30, 2022 | 6 Months Ended Jun 30, 2021 | Change ($) | Change (%) | | :-------------------------- | :-------------------------- | :-------------------------- | :--------- | :--------- | :-------------------------- | :-------------------------- | :--------- | :--------- | | Revenues | $64,742 | $58,057 | $6,685 | 12% | $131,772 | $112,804 | $18,968 | 17% | | Operating income | $5,366 | $4,000 | $1,366 | 34% | $11,747 | $9,741 | $2,006 | 21% | | Profit percentage | 8.3% | 6.9% | | | 8.9% | 8.6% | | | - Fleet segment revenues increased by $6.7 million (12%) for Q2 2022 and $19.0 million (17%) for H1 2022, driven by a 47.5% (Q2) and 68.0% (H1) increase in commercial customer sales, partially offset by decreased DoD revenues[95][96] - Operating income increased by 34% for Q2 2022 and 21% for H1 2022, primarily due to increased commercial customer revenues[99] Federal and Defense Segment Results This chapter analyzes the Federal and Defense segment's revenue growth and operating income decline Federal and Defense Segment Results (in thousands) | Metric | 3 Months Ended Jun 30, 2022 | 3 Months Ended Jun 30, 2021 | Change ($) | Change (%) | 6 Months Ended Jun 30, 2022 | 6 Months Ended Jun 30, 2021 | Change ($) | Change (%) | | :-------------------------- | :-------------------------- | :-------------------------- | :--------- | :--------- | :-------------------------- | :-------------------------- | :--------- | :--------- | | Revenues | $71,952 | $69,540 | $2,412 | 3% | $142,871 | $135,403 | $7,468 | 6% | | Operating income | $2,552 | $6,999 | $(4,447) | (64)% | $1,864 | $12,024 | $(10,160) | (84)% | | Profit percentage | 3.5% | 10.1% | | | 1.3% | 8.9% | | | - Federal and Defense segment revenues increased by 3% for Q2 2022 and 6% for H1 2022, driven by FMS programs with the U.S. Navy, partially offset by U.S. Army program completions[100] - Operating income decreased significantly by 64% for Q2 2022 and 84% for H1 2022, due to U.S. Army program completions, an unfavorable contract mix (more cost-type contracts), and a $3.5 million loss on a fixed-price contract in H1 2022[103][104][105] Bookings and Funded Backlog This chapter provides an overview of the Federal and Defense segment's bookings and funded contract backlog Federal and Defense Segment Bookings and Funded Backlog (in millions) | Metric | 2022 | 2021 | | :---------------------- | :--- | :--- | | Bookings | $155 | $170 | | Revenues | $143 | $135 | | Funded Contract Backlog | $183 | $224 | - For the Federal and Defense segment, bookings decreased 9% year-over-year to $155 million, and total funded backlog decreased 18% year-over-year to $183 million for the six months ended June 30, 2022[107] Liquidity and Capital Resources This chapter discusses the company's liquidity sources, capital structure, and cash flow activities Liquidity This chapter outlines the company's primary liquidity sources and compliance with loan terms - Primary sources of liquidity are operating activities and a bank loan agreement with a maximum credit availability of $350 million[108][109] - Bank debt increased by approximately $23.6 million for the six months ended June 30, 2022[109] - As of June 30, 2022, the company had approximately $91 million of unused bank loan commitments and was in compliance with all loan agreement terms[109][110] Cash Flows This chapter summarizes the company's cash flow activities for the six months ended June 30, 2022 and 2021 Summary of Cash Flows (in thousands) | Cash Flow Activity | 6 Months Ended Jun 30, 2022 | 6 Months Ended Jun 30, 2021 | | :------------------------------------ | :-------------------------- | :-------------------------- | | Net cash used in operating activities | $(20,138) | $(53,968) | | Net cash provided by (used in) investing activities | $327 | $(18,791) | | Net cash provided by financing activities | $19,664 | $72,718 | | Net decreases in cash and cash equivalents | $(147) | $(41) | - Net cash used in operating activities decreased by $33.8 million, primarily due to increased accounts receivable from revenue growth and lower cash use for inventory purchases[113] - Cash provided by investing activities improved by $19.1 million, mainly due to $14.8 million less cash paid for acquisitions and lower property and equipment purchases[114] - Cash provided by financing activities decreased by $53.1 million, primarily due to $52 million from a common stock offering in the prior year and lower net debt borrowings[115] Other Obligations and Commitments This chapter states no material changes to other obligations and commitments since the previous annual report - There have been no material changes to other obligations and commitments since the 2021 Annual Report on Form 10-K[117] Inflation and Pricing This chapter indicates no material changes to inflation and pricing disclosure from the most recent annual report - There have been no material changes to the disclosure regarding inflation and pricing from the most recently filed Annual Report on Form 10-K[118] Off-Balance Sheet Arrangements This chapter confirms no off-balance sheet arrangements are likely to materially affect financial condition or results - The company does not have any off-balance sheet arrangements that are reasonably likely to have a material effect on its financial condition or results of operations[119] Disclosures About Market Risk This chapter discusses the company's exposure to interest rate risk and hedging strategies - The company is exposed to interest rate risk due to variable interest rates on its bank loan agreement[120] - Previous interest rate swap agreements expired in February and March 2022, leaving no debt covered by swaps as of June 30, 2022[121] - In July 2022, the company executed forward-starting fixed interest rate swaps to hedge $150 million of floating rate debt, effective October 31, 2022[121] Critical Accounting Policies, Estimates and Judgments This chapter confirms no significant changes in critical accounting estimates during the six months ended June 30, 2022 - There have been no significant changes in critical accounting estimates during the six months ended June 30, 2022, from those disclosed in the 2021 Annual Report on Form 10-K[123] Recently Issued Accounting Pronouncements This chapter directs readers to the financial statement notes for details on recent accounting standards - Refer to Note (1) 'Nature of Business and Significant Accounting Policies — Recent Accounting Pronouncements' for details on recently announced accounting standards[124] ITEM 3. Quantitative and Qualitative Disclosures About Market Risks This section refers to Item 2 for quantitative and qualitative disclosures regarding market risks - Refers to 'Disclosures About Market Risk' in Item 2 for relevant information[125] ITEM 4. Controls and Procedures Management confirmed effective disclosure controls and procedures as of June 30, 2022, with no material changes in internal control - Disclosure controls and procedures were evaluated and deemed effective as of June 30, 2022[126] - No material changes in internal control over financial reporting occurred during the quarterly period[127] PART II. Other Information This section provides additional information including legal proceedings, risk factors, equity sales, exhibits, and signatures ITEM 1. Legal Proceedings This section confirms no material legal proceedings were reported during the period covered by the report - No material legal proceedings were reported[129] ITEM 1A. Risk Factors This section indicates no material changes to risk factors previously disclosed in the 2021 Form 10-K - No material changes to the previously disclosed risk factors in the 2021 Form 10-K[130] ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds This section confirms no equity security purchases and outlines loan agreement restrictions on cash dividends - The company did not purchase any of its equity securities during the period[131] - VSE's loan agreement restricts cash dividends to an aggregate of $6 million in any fiscal year, subject to no event of default[132] ITEM 6. Exhibits This section lists all exhibits filed with the Form 10-Q, including CEO and CFO certifications and XBRL documents - Includes Section 302 and 906 certifications from the CEO and CFO, along with XBRL instance and taxonomy documents[134] Signatures This section contains the signatures of the company's principal executive and financial officers, dated July 28, 2022 - The report was signed by John A. Cuomo, CEO and President, and Stephen D. Griffin, Senior Vice President and CFO, on July 28, 2022[138]