Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company, or an emerging growth company. See definitionthe definitions of "large accelerated filer," "accelerated filer"filer," "accelerated filer," "smaller reporting company," and "smaller reporting"emerging growth company" in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transaction period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. Yes [ ]    No [ ]☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).  Yes [ ]☐ No [x]☒

The aggregate market value of outstanding voting stock held by non-affiliates of the Registrant as of June 30, 2017,2022, the last business day of the registrant's most recently completed second quarter, was approximately $384$396 million based on the last reported sales price of the registrant's common stock on Thethe NASDAQ Global Select Market as of that date.

Portions of Registrant's definitive proxy statement for the Annual Meeting of Stockholders expected to be held on May 3, 2023, which is expected to be filed with the Securities and Exchange Commission on or about April 30, 2018, are2, 2023, have been incorporated herein by reference into Part III of this report.

This Annual Report on Form 10-K ("Form 10-K") contains statements that, to the extent they are not recitations of historical fact, constitute "forward looking statements" under federal securities laws.within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). All such statements are intended to be subject tocovered by the safe harbor protection provided by applicable securities laws. For discussions identifying some important factors that could cause actual VSE Corporation ("VSE," the "Company," "us," "our," or "we") results to differ materially from those anticipated in the forward lookingprovisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995 and include this filing, see below VSE's "Narrative Descriptionstatement for purposes of Business" (Items 1,such safe harbor provisions.

“Forward-looking” statements, as such term is defined by the Securities and Exchange Commission (the “SEC”) in its rules, regulations and releases, represent our expectations or beliefs, including, but not limited to, statements concerning our operations, economic performance, financial condition, growth and acquisition strategies, investments and future operational plans. Without limiting the generality of the foregoing, words such as “may,” “will,” “expect,” “believe,” “anticipate,” “intend,” “forecast,” “seek,” “plan,” “predict,” “project,” “could,” “estimate,” “might,” “continue,” “seeking” or the negative or other variations thereof or comparable terminology are intended to identify forward-looking statements. These statements, by their nature, involve substantial risks and uncertainties, certain of which are beyond our control, and actual results may differ materially depending on a variety of important factors, including, but not limited to, those identified in Item 1A, 2"Risk Factors” in this Form 10-K. All forward-looking statements made herein are qualified by these cautionary statements and 3),risk factors and Item 7 "Management's Discussion and Analysis of Financial Condition and Results of Operations." there can be no assurance that the actual results, events or developments referenced herein will occur or be realized.

Readers are cautioned not to place undue reliance on these forward lookingforward-looking statements, which reflect management's analysis only as of the date hereof. The Company undertakes no obligation to publicly revise these forward lookingforward-looking statements to reflect events or circumstances that occur or arise after the date hereof. Readers should also carefully review the risk factors described in other documents the Company files from time to time with the Securities and Exchange Commission, including Quarterly Reports on Form 10-Q filed by the Company subsequent to this Form 10-K and any Current Reports on Form 8-K filed by the Company.

We areVSE Corporation is a diversified aftermarket products and services andcompany providing repair services, parts distribution, logistics, supply chain management company that assists our clients in sustaining, extendingand consulting services for land, sea and air transportation assets to commercial and government markets. The terms "we," "us," "our," "VSE" and the service life,"Company" means VSE Corporation and improvingits operating businesses unless the performance of their transportation equipment, and other assets and systems.context indicates otherwise. We provide logistics and distribution services for legacy systems and equipment and professional and technical services to commercial customers; the United States Government (the "government"),government, including the United States Department of Defense ("DoD"), the United States Postal Service ("USPS"),; and federal civilian agencies, and commercial and other customers. Our largest customers are the DoD and the USPS.agencies. Our operations include supply chain management solutions, parts supply and distribution, and maintenance, repair and overhaul (“MRO”("MRO") services for vehicle fleet, aviation, maritime and other clients;customers. We also provide vehicle and equipment maintenancerefurbishment, logistics, engineering support, data management and refurbishment; logistics; engineering;healthcare IT solutions, and clean energy and environmental services; IT and health care IT solutions; and consulting services.

In 2021, we acquired Global Parts Group, Inc. ("Global Parts"), which provides distribution and MRO services for business and general aviation ("B&GA") aircraft families. The acquisition expands our existing B&GA focus and further diversifies our product and platform offerings to include additional airframe components, while expanding our Supply Chain Management Group, Aviation Group,customer base of regional and Federal Services Group. The term "VSE" or "Company" means VSE and its subsidiaries and divisions unless the context indicates operations of only VSE as the parent company.global B&GA customers.

Our Fleet segment accounted for 27%, 31%, and 37% of our consolidated revenues in 2022, 2021 and 2020, respectively. The Fleet segment provides parts distribution, inventory management, e-commerce fulfillment, logistics and other services to assist aftermarket commercial and government agencies with their supply chain management. Fleet segment operations are conducted within three reportable segments alignedunder the brand Wheeler Fleet Solutions, which supports government and commercial truck fleets with our operating groups: (1) Supply Chain Management, which generated approximately 28.2%parts, sustainment solutions and managed inventory services. Revenues for this business are derived from the sale of vehicle parts and mission critical supply chain services to support client truck fleets.

Our Federal and Defense segment accounted for 30%, 36%, and 38% of our consolidated revenues in 2017; (2) Aviation,2022, 2021 and 2020, respectively. The Federal and Defense segment provides aftermarket refurbishment and sustainment services to extend and maintain the life cycle of military vehicles, ships and aircraft for the DoD. The segment provides foreign military sales services, engineering, logistics, maintenance, configuration management, prototyping, technology, and field support services to the DoD and other customers. We also provide energy consulting services and IT solutions to various DoD, federal civilian agencies and commercial clients.

In 2021, we acquired HAECO Special Services, LLC ("HSS"), which generated approximately 17.7%offers scheduled depot maintenance, contract field deployment and unscheduled drop-in maintenance for the DoD, primarily for the sustainment of our revenues in 2017; and (3) Federal Services, which generated approximately 54.1%the U.S. Air Force ("USAF") KC-10 fleet.

We applyprovide a broad array of capabilities and resources to support our clients’ aftermarket transportation assets, vehicle fleets, aircraft, systems, equipment and processes. We focus on creating value by sustaining and extending the life and improving the performance of our client assets through core offerings in supply chain management, parts supply and distribution, MRO, equipment refurbishment, logistics and engineering. We also provide IT solutions health care IT, and energy consulting services.

Typical offerings include supply chain and inventory management services; vehicle fleet sustainment programs; vehicle fleet parts supply and distribution; MRO of aircraft enginescomponents and engine components;accessories; aircraft engineand airframe parts supply and distribution; engineering support for military vehicles; military equipment refurbishment and modification; ship MRO and follow-on technical support; logistics management support; machinery condition analysis; specification preparation for ship alterations; ship’s force crew training; life cycle support for ships; ship communication systems; energy conservation, energy efficiency, sustainable energy supply and electric power grid modernization projects; technology road-mapping;projects, IT enterprise architecture development, information assurance/business continuity, security riskinfrastructure and data management, and network services; medical logistics;IT data services for health and medical command and control.public safety. See Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” below for more information regarding our business.

We offer our products and professional services through various ordering arrangements, including master service agreements (MSAs), commercial contracts, and federal contract awards. Our revenues are derived from the delivery of products and from contract services performed for our clients. We offercustomers for each of our products and professional and technical services through various ordering agreements and negotiated and competitive contract arrangements.three segments as follows:

FundedOur funded backlog represents a measurethe estimated remaining value of work to be performed under firm contracts under our Federal and Defense segment. Bookings for our Aviation and Fleet segments occur at the time of sale, and therefore, these segments do not generally have funded contract backlog and backlog is not an indicator of their potential future revenues from work performed by our Federal Services Group on government contracts. Funded backlog is defined by us as the total value of contracts that has been appropriated and funded by the procuring agencies, less the amount of revenues that have already been recognized on such contracts. Our reported backlog is comprised of funding received by us in incremental amounts for work that is generally expected to be completed within six to 12 months following the award of the funding.revenues. Our funded backlog for our Federal Services Groupand Defense segment as of December 31, 2017,2022, 2021 and 2020 was approximately $324$187 million, $185 million and as of December 31, 2016 and 2015 it was approximately $322 million and $238$183 million, respectively. ChangesFor a complete description of our backlog, see "Bookings and Funded Backlog" in funded backlog on contracts are sometimes unpredictable due to uncertainties associated with changing government program priorities"Management's Discussion and availabilityAnalysis of funds, which is heavily dependent upon the congressional authorizationFinancial Condition and appropriation process. DelaysResults of Operations" in Part II of this process may temporarily diminish the availabilityreport.

Our marketing activities are conducted at the operating group level by each of our businesses by industry-specific sales representatives and professional marketing and business development staff and our professional staff of sales representatives, managers, and other personnel.staff. New customer contacts and information concerning new programs, requirements and opportunities become available through attendance atsales calls and client visits, negotiation with key business partners, and formal and informal briefings. We participate in various professional organizations and trade associations, and also attend industry trade shows and events through sales callsin order to increase our brand awareness and client servicing, through negotiation with key business partners, through formal and informal briefings, from participation in professional organizations, in the course of contract performance, and from literature published by government, trade associations, professional organizations and commercial entities.strengthen our service offerings.

Our employees have a variety of specialized experience, training and skills that provide the expertise required to service our clients. Some have high levels of education.customers. As of December 31, 2017,2022, we had 2,306 employees, a decrease from 2,523 as of December 31, 2016.employed over 2,000 employees. Principal employee categories include (a) mechanics and vehicle, aircraft and equipment technicians, (b) logisticians, (c) warehouse and sales personnel, (d) engineers and technicians in mechanical, electronic, industrial, energy and environmental services, and (e) information technology professionals in computer systems, applications and products, configuration, change and data management disciplines. The expertise required

We are committed to providing a safe working environment for our employees. Supported by our customers frequently includes knowledgeHealth, Environmental and Safety Program, we strive to minimize the risk of government regulationsinjury or illness to workers. We provide our employees with upfront and ongoing 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.

The supply chain, logistics,All of our businesses operate in highly competitive industries that include numerous competitors, many of which are larger in size and MRO services offered by our Supply Chain Management and Aviation groups and the federally contracted professional and technical services offered by our Federal Services Group are conducted in very competitive operating environments.

Government agencies emphasize awarding contracts on a competitive basis, as opposed to a sole source or other noncompetitive basis. Most of the significant contracts under which weour Federal and Defense segment currently performperforms services were either initially awarded on a competitive basis or have been renewed at least once on a competitive basis. There isThese contracts may be indefinite delivery/indefinite quantity type contracts for which the government makes awards for work among several other eligible contract holders, or they may be single award contracts with multiple option years that may or may not be exercised. Accordingly, there can be no assurance regarding the level of work we may obtain under some of these contracts. Government budgets, and in particular the budgets of certain government agencies, can also affect competition in our business.

A reallocation of government spending priorities or reallocation of work for small business set-aside programs that results in lower levels of potential business in the markets we serve or the services we offer willcan cause increased competition.

The extent of competition that we will encounter as a result 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, technical and financial qualifications, past performance, government budgetary stress,priorities, sales force initiatives and price, which has been more heavily weighted in recent years.price.

The extent of the impact of COVID-19 or other epidemics, pandemics, crises or public health concerns on our business, including our ability to execute our near-term and long-term business strategies and initiatives in the expected time frame, will depend on numerous evolving factors that we cannot accurately predict or assess, including the negative impact it has on global and regional economies and economic activity; decisions by our customers to delay contract awards and fundingthe use of, or permanently retire, certain aircraft, demand levels for aviation disruption inventory, which could result in a and adversely affect our abilityresults of operations; write-down of existing inventory to continue work underadjust to current market trends; and disruption in demand, which adversely impacts our government contracts. Additionally, federal procurement directivescommercial customers in the Aviation segment. Any of these events could resultexacerbate the other risks and uncertainties described herein, or in our loss of work on current programs to small business set-asides and large multiple award contracts.

Due to current economic and geopolitical uncertainty and supply chain disruptions, our business could be adversely impacted by delays or the inability to source products and services for our customers. If our suppliers experience increased disruptions to their operations as a result of these dynamics, they may be unable to fill our supply needs in a timely, compliant and cost-effective manner. We have incurred and may in the future incur additional costs and delays in our business, including higher prices, schedule delays or the costs associated with identifying alternative suppliers. In instances where we may not be able to mitigate these consequences, our ability to perform work under new and existing contracts. We have experienced delays in contract awards and funding on our contracts in recent years that have adversely affected our ability to continue existing work and to replace expiring work. Additionally, our government business is subject to the risk that one or more of our potential contracts or contract extensions may be diverted byimpacted, which could result in reduced revenues and profits.

We continue to monitor these dynamics and assess potential implications to our business, supply chain and customers, and take certain actions in an effort to mitigate potential adverse impacts. Given the contracting agencyuncertainties, we are unable to a smallpredict the extent, nature or disadvantaged or minority-owned business pursuant to set-aside programs administered by the Small Business Administration, or may be bundled into large multiple award contracts for very large businesses. These risks can potentially have an adverse effect on our revenue growth and profit margins.duration of these impacts at this time.

The eventual expiration of large government programs or the loss of or disruption of revenues on a single contract may reduce our revenues and profits. Such revenue losses could also erode profits on our remaining programs that would have to absorb a larger portion of the fixed corporate costs previously allocated to the expiring programs or discontinued contract work. Our USPS managed inventory program (“MIP”) and our foreign military sales program with the U.S. Navy (“FMS Program”)Program each constitute a material portion of our revenues.revenues and profits. This concentration of our revenue subjects us to the risk of material adverse revenue disruptions if customer operational decisions, government contractual or other issues prevent or delay the fulfillment of work requirements associated with these key programs. In recent years, revenue levels for our FMS Program have fluctuated widely enough to cause material changes in our

overall revenue levels and affect our profit margins. Similarly, variations in volume and types of parts purchased by the USPS in recent years have caused changes in our profit margins.

The USPS has initiated a fleet replacement program for a next generation of the delivery vehicle fleet. The timing of both the roll out of a new fleet and the retirement of the current vehicles and their decision on how many of such vehicles will remain in the fleet could potentially have a significant affectimpact on our future revenues and profits.

Revenues from our government programs for which work is performed in or products delivered to foreign countries are subject to economic conditions in these countries and to political risks posed by ongoing foreign conflicts and potential terrorist activity. Services performed by our employees on our FMS Program are, to a certain extent, dependent on our placement of employees in a client country. Significant domestic and political unrest in client countries can constrain our ability to maintain consistent staffing levels, resulting in a fluctuating level of services performed by our employees. We cannot predict when these conditions will occur or the effect it will have on our FMS Program revenues. Regime changes in these countries can result in government restrictions upon the continuation of ongoing work.

Recently, inflation has increased throughout the natureU.S. economy. Inflation can adversely affect us by increasing the costs of labor, material and other costs. In addition, inflation is often accompanied by higher interest rates, which could increase the cost of our workoutstanding debt obligations. In an inflationary environment, depending on economic conditions, we could potentiallymay be exposedunable to legal actions arising fromraise prices enough to keep up with the rate of inflation, which would reduce our operations.

Our financial performance is heavily dependent on the abilities of our operating and administrative staff with respect to technical skills, operating performance, pricing, cost management, safety, and administrative and compliance efforts. A wide diversity of contract types, nature of work, work locations, and legal and regulatory complexities challenges our administrative staff and skill sets. We also face challenges associated with our quality of workforce, quality of work, safety, and labor relations compliance. Our current and projected work in foreign countries exposes us to challenges associated with export and ethics compliance, local laws and customs, workforce issues, extended supply chain, political unrest and war zone threats. Failure to attract or retain an adequately skilled workforce, lack of knowledge or training in critical functions, or inadequate staffing levels can result in lost work, reduced profit margins, losses from cost overruns, performance deficiencies, workplace accidents, and regulatory noncompliance.

Disruption of our operations due to internal or external system or service failures, accidents or incidents involving employees or third parties working in high-risk locations, or natural disasters, health crisis, epidemics or pandemics, including the COVID-19

pandemic, or other crises could adversely affect our financial performance and condition. The COVID-19 pandemic could potentially impact our global supply chain network for any of our segments. A fire, flood, earthquake, or other natural disaster, health crises, epidemic, pandemic or other crisis at or affecting physical facilities that support key revenue generating operations, or a procurement system or contractual delay could potentially interrupt the revenues from our operations.

Our government business is subject to funding delays, terminations (including at the impositiongovernment's convenience), reductions, in-sourcing, extensions and moratoriums associated with the government’s budgeting and contracting process. The federal procurement environment is unpredictable and could adversely affect our ability to perform work under new and existing contracts. We have experienced delays in contract awards and funding on our contracts in recent years that have adversely affected our ability to continue existing work and to replace expiring work. Additionally, our government business is subject to the risk that one or more of fines and penalties or the termination ofour potential contracts or debarmentcontract extensions may be diverted by the contracting agency to a small or disadvantaged or minority-owned business pursuant to set-aside programs administered by the U.S. Small Business Administration, or may be bundled into large multiple award contracts for very large businesses. These risks can potentially have an adverse effect on our revenue growth and profit margins.

The defense industry has experienced, and we expect will continue to experience, significant changes to business practices resulting from working or biddinggreater DoD focus on government contracts.

Government agencies, including the Defense Contract Audit Agency, the Defense Contract Management Agency and the Department of Labor, routinely audit and investigate government contractors. These agencies review a contractor’s performance under its contracts, cost structure and compliance with applicable laws, regulations and standards. The government also may review the adequacy of, and a contractor’s compliance with, its internal control systems and policies, including the

contractor’s purchasing, property, estimating, compensation and management information systems. Any costs found to be improperly allocated to a specific contract will not be reimbursed and any such costs already reimbursed must be refunded.

If an audit or investigation uncovers improper or illegal activities, we may be subject to civil and criminal penalties and administrative sanctions, including termination of contracts, forfeiture of profits, suspension of payments, fines and suspension or debarment from doing business with the government. In addition, we could suffer serious harm to our reputation if allegations of impropriety were made. Performance of international work can expose us to risks associated with the Foreign Corrupt Practices Act and Export Control Act compliance.

We must comply with and are affected by laws and regulations relating to the award, administration and performance of government contracts. A violation of laws or regulations could result in the imposition of fines and penalties or the termination of contracts or debarment from working or bidding on government contracts.

The aviation industry is highly regulated by the FAA and similar regulatory agencies in other countries. Aviation engines, engine accessories and components that we sell must meet certain airworthiness standards established by the FAA or the equivalent agencies in certain other countries. We also operate repair facilities that are licensed by the FAA and equivalent agencies of certain other countries to perform such services. New and more stringent regulations may be adopted in the future that could have an adverse effect on us.

Our work includes many manual tasks, including warehousing, shipping and packing of truck parts inventory, maintaining and repairing military and non-military vehicles, aircraft and equipment, and maintaining and overhauling U.S. Navy ships. Some of our work efforts involve the handling of hazardous materials. These services may pose certain challenges that could cause losses if certainus to be exposed to legal and other liabilities arising from performance issues, work is disruptedrelated incidents or discontinued.

Some of our contract work includes the use of chemical solvents and the handling of hazardous materials to maintain, repair, and refurbish vehicles, aircraft engines, and equipment. This exposes us to certain environmental and pollution risks. Various federal, state, and local environmental laws and regulations impose restrictions on the discharge of pollutants into the environment and establish standards for the transportation, storage, and disposal of toxic and hazardous wastes. Substantial fines, penalties, and criminal sanctions may be imposed for noncompliance, and certain environmental laws impose joint and several "strict liability" for remediation of spills and releases of oil and hazardous substances. Such laws and regulations impose liability upon a party for environmental cleanup and remediation costs and damage without regard to negligence or fault on the part of such party and could expose us to liability for the conduct of or conditions caused by third parties.

Further, from time-to-time, government agencies investigate whether our operations are being conducted in accordance with applicable contractual and regulatory requirements. Government investigations of us, whether relating to government contracts or conducted for other reasons, could result in administrative, civil or criminal liabilities, including repayments, fines or penalties being imposed upon us, or could lead to suspension or debarment from future government contracting. Government investigations often take years to complete and many result in no adverse action against us. We believe, based upon current information, that the outcome of any such government disputes and investigations will not have a material adverse effect on our results of operations, financial position,condition or cash flows.

Not applicable.

VSE common stock, par value $0.05 per share, is traded on Thethe NASDAQ Global Select Market ("NASDAQ"), trading symbol, "VSEC," Newspaper listing, "VSE."VSEC."

Pursuant to our bank loan agreement, (seeas discussed in Note 7, Debt, of "Notes(7) "Debt" to our Consolidated Financial Statements"Statements included in Item 8 of this annual report on Form 10-K),10-K, the payment of cash dividends is subject to annual rate restrictions. We have paid cash dividends each year since 1973 and have increased our dividend each year since 2004.1973.

During the fiscal year covered by this Form 10-K, VSE did not sell any of its equity securities that were not registered under the Securities Act of 1933, as amended.Act. During the fourth quarter of the fiscal year covered by this Form 10-K, no purchases of equity securities of VSE were made by or on behalf of VSE or any "affiliated purchaser" (as defined in Exchange Act Rule 10b-18 (a)(3)) under the Exchange Act) other than 12,47323,044 shares of our restricted common stock that were voluntarily forfeited to VSE by participants in its 2006 Restricted Stock Plan (the "2006 Plan") to cover their personal tax liability for restrictedvesting stock awards.awards under the 2006 Plan.

We have two compensation plans approved by our stockholders under which our equity securities are authorized for issuance to employees and directors: (i)the 2006 Plan and the VSE Corporation 2004 Non-Employee Directors2021 Employee Stock Purchase Plan ("ESPP"). The following table sets forth the amounts of securities authorized for issuance under the 2006 Plan and (ii) the VSE Corporation 2006 Restricted Stock Plan.

See Note (10) "Stock-Based Compensation Plans" to our Consolidated Financial Statements included in Item 8 of VSE common stock were availablethis annual report on Form 10-K for future issuance underadditional information regarding the VSE Corporation 2004 Non-Employee Directors Stock2006 Plan and 436,532 sharesthe ESPP.

We are a diversified aftermarket products and services andcompany providing repair services, parts distribution, logistics, supply chain management company that assists our clients in sustaining, extending the service life, and improving the performance of their transportation equipment, and other assets and systems. We provide logistics and distributionconsulting services for legacy systemsland, sea and equipmentair transportation assets to government and professional and technical services to the United States Government (the "government"), including the United States Department of Defense ("DoD"), the United States Postal Service ("USPS") and federal civilian agencies, and to commercial and other customers. Our largest customers are the DoD and the USPS. Our operations include supply chain management solutions, parts supply and distribution, and maintenance, repair, and overhaul (“MRO”) services for vehicle fleet, aviation, and other clients; vehicle and equipment maintenance and refurbishment; logistics; engineering; energy and environmental services; IT and health care IT solutions; and consulting services. See Item 1 “Business - Revenues and Contracts” above for revenues by customer.

Our Aviation segment has seen favorable results due to successful investments in 2017, we havegrowth initiatives, resulting in a 65% increase in annual revenue, totaling $408 million. The expansion of our distribution services was driven by new initiatives offering comprehensive “tip-to-tail” product-line solutions. Our repair business experienced growth from both the recovery of the commercial market and increased market share in the business and general aviation sector. These factors, combined our former IT, Energy and Management Consulting Group with our Federal Services Group.growth initiatives, led to a 75% increase in distribution revenue and a 42% increase in repair revenue in 2022 compared to the prior period. In 2022, we secured key multi-year distribution deals for both domestic and new international markets. The new distribution initiatives are expected to bring in sustainable and recurring revenue with growth opportunities, contributing to future positive results. With continued growth in the distribution business and recovery in commercial markets, our focus is on investing in businesses and programs that will broaden our portfolio and reach new customers. The January 2023 acquisition of Precision Fuel Components expands our product offerings and customer base, offering strategic cross-selling opportunities and market share in niche B&GA related markets. The Aviation segment is expected to see continued growth due to progress on new initiatives, offering a favorable outlook for 2023.

being a major contributor for the revenue increase. We look forwardexperienced margin impacts from an unfavorable contract mix and recognized a loss on a non-Department of Defense contract with a foreign customer that was completed in 2022. To address these challenges, the Federal and Defense segment is reshaping its presence in the federal market by investing in business development. This includes a change in leadership and a focus on maintaining core operations while expanding our client base and capabilities. We aim to achievingenhance our services and pursue new opportunities to support long-term growth for this segment.

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

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 mixstatutory U.S. federal income tax rate and our effective tax rate.

A summary of our bookings, and revenues for our Federal Services Group for the years ended December 31, 2017, 2016 and 2015, and funded contract backlog for this group as of December 31, 2017, 2016our Federal and 2015Defense segment is as follows (in millions):

For the year ended December 31, 2022, Federal and Defense segment bookings decreased 6% year-over-year to $294 million, while total funded backlog increased 1% year-over-year to $187 million.

Cash provided by operating activities was $8.1 million in 2022 compared to cash used in operating activities of $17.6 million in 2021. The change was primarily due to lower use of cash for inventory purchases and timing of vendor payments, partially offset by increased accounts receivable as a descriptionresult of recently announced accounting standards, includingoverall revenue growth and timing of collections.

Cash used in investing activities decreased $59.3 million in 2022 compared to 2021 primarily due to cash paid for acquisitions, net of cash acquired, of $53.3 million related to the expected datesacquisitions of adoptionour HSS and estimated effects, if any,Global Parts subsidiaries in the prior year.

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 revenues and inventory, accounts receivable and accounts payable 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 contract work we perform, by the timing of large materials purchases and subcontractor efforts used in our contracts, and by delays in the award of contractual coverage and funding and payments. Government funding delays can cause delays in our ability to invoice for revenues earned, presenting a potential negative impact on our consolidated financial statements, see "Recently Issued Accounting Pronouncements"days sales outstanding. In addition to operating cash flows, other significant factors that affect our overall management of liquidity include capital expenditures; investments in Note 1expansion; improvement and maintenance of our operational and administrative facilities; and investments in the acquisition of businesses.

Our primary source of external financing is our loan agreement with a bank group and includes a term loan facility and a revolving loan facility, with an aggregate maximum borrowing capacity of $350 million. Under the loan agreement we may elect to increase the maximum availability of the Notesterm loan facility, the revolving loan facility, or a combination of both facilities, subject to customary lender commitment approvals. The aggregate limit of increases is $100 million.

See Note (7) "Debt" to our Consolidated Financial Statements for information regarding our loan agreement.

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 bank loan debt to be approximately $20.6 million for 2023, $19.8 million for 2024 and $16.2 million for 2025. The estimates do not take into account future drawdowns and repayments on the debt or changes in this Form 10-K.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, 2022. The interest payments are estimated through the maturity date of our term loan. Interest payments under our revolver loans have been excluded because a reasonable estimate of timing and amount of cash out flows cannot be determined.

Our consolidated financial statements are prepared in accordance with United States generally accepted accounting principles generally accepted in the United States,("U.S. GAAP"), which require us to make estimates and assumptions. We believe the followingCertain 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.

RevenueWe account for revenue in accordance with 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. 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 persuasive evidencethe performance obligation is satisfied. The majority of an arrangement exists, delivery has occurredour contracts have a single performance obligation as the promise to transfer the respective goods or services have been rendered,is not separately identifiable from other promises in the feecontracts and is, fixedtherefore, not distinct. For product sales, each product sold to a customer typically represents a distinct performance obligation. Our performance obligations are satisfied over time as work progresses or determinable,at a point in time based on transfer of control of products and collection is probable.services to our customers.

Substantially all of our Supply Chain Management GroupFleet segment revenues result from the sale of vehicle parts to clients. We recognize revenuecustomers 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.

Our Aviation segment revenues result from the sale of vehicleaircraft parts and 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 customer takes ownership ofparts are shipped. Our Aviation segment recognizes revenues for MRO services over time as the parts.services are transferred to the customer. MRO services revenue recognized 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.

Our Aviation GroupFederal and Defense segment revenues are recognized upon the shipment or delivery of products to customers based on when title or risk of loss transfers to the customer. Sales returnsresult from professional and allowances are not significant.

Revenues on cost-type contracts are recorded as contract allowable costs are incurred and fees are earned. Our FMS Program contractVariable consideration is included in the estimated transaction price, to the extent that it is probable that a significant reversal will not occur, when there is a cost plusbasis to reasonably estimate the amount of the fee. These estimates are based on historical award fee contract. This contract has terms that specify award fee payments that are determined byexperience, anticipated performance and level of contract activity. Award fees are made during the year through a contract modification authorizing the award fee that is issued subsequent to the period in which the work is performed. Award fee evaluations occur three times per yearour best judgment based on current facts and in 2017 and prior years we recognized award fee revenue and income in the period we received contractual notification of the award when the fees became fixed or determinable. We recognized award fee revenue and income in 2017 from three award fee notifications.circumstances.

Revenue recognition methods on fixed-price contracts will vary depending on the nature of the work and the contract terms. Revenues on fixed-price service contracts are recorded as work is performed typically ratably over the period. We generally recognize revenue using the time-elapsed output method for our fixed-price service period. Revenues onoffering performance obligations. For certain deliverable-based fixed-price performance obligations, revenue is recognized over time using costs incurred to date relative to total estimated costs at completion. For such contracts, that require deliverywe estimate total costs at the inception of specific items are recordedthe contract based on our assumptions of the cost elements required to complete the associated tasks of the contract and assess the effects of the risks on our estimates of total costs to complete the contract. Our cost estimates are based on assumptions that include the complexity of the work, our employee labor costs, the cost of materials and the performance of our subcontractors. These cost estimates are subject to change as we perform under the contract and as a price per unitresult, the timing of revenues and amount of profit on a contract may change as unitsthere are delivered.changes in estimated costs to complete the contract. Such adjustments are recognized on a cumulative catch-up basis in the period we identify the changes.

Revenues for time and materials contracts are recorded based on the amount for which we have the right to invoice our customers, because the amount directly reflects the value of our work performed for the customer. Revenues are recorded on the basis of contract allowable labor hours worked multiplied by the contract defined billing rates, plus the direct costs and indirect cost burdens associated with materials and subcontract work used in performance on the contract. Generally, profits on time and materials contracts result from the difference between the cost of services performed and the contract defined billing rates for these services.

Inventories are stated at the lower of cost or net realizable value using the first-in, first-out ("FIFO") method. Inventories for our Fleet segment consist primarily of vehicle replacement parts, and also include related purchasing, storage and handling costs. 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. We recognize this “risk funding”periodically evaluate the carrying value of inventory, giving consideration to factors such as revenueits physical condition, sales patterns and expected future 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 upon future economic conditions, customer inventory levels or competitive factors that were not foreseen or did not exist when the associatedestimated write-downs were made.

We account 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. Any excess of the purchase price over the fair value of the separately identifiable assets acquired and liabilities assumed is allocated to goodwill. 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 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. Acquisition costs are incurredexpensed as incurred. The results of operations of businesses acquired are included in the consolidated financial statements from their dates of acquisition.

As part of the agreement to acquire certain subsidiaries, we may be obligated to pay contingent consideration should the acquired entity meet certain earnings objectives subsequent to the date of acquisition. As of the acquisition date, contingent consideration is recorded at fair value as determined through the use of a probability-based scenario analysis approach. Under this approach, a set of potential future subsidiary earnings is estimated based on various revenue growth rate assumptions for each scenario. A probability of likelihood is then assigned to each potential future earnings estimate and the resultant contingent consideration is calculated and discounted using a weighted average discount rate. The fair value is measured each reporting period subsequent to the acquisition date and any changes are recorded within cost and operating expenses within our consolidated statement of income. Changes in either the revenue growth rates, related earnings or the work is performed. We are at riskdiscount rate could result in a material change to the amount of loss for any risk funding not received. Revenues recognized as of December 31, 2017 include approximately $4.0 million for which we have not received formalized funding. We believe that we are entitled to reimbursement and expect to receive all of this funding.the contingent consideration accrued.

Intangible assets with finite lives are amortized using the method that best reflects how their economic benefits are utilized or, if a negative changepattern of economic benefits cannot be reliably determined, on a straight-line basis over their estimated useful lives. Intangible assets with finite lives are assessed for impairment whenever events or changes in the key assumptions used in the annual impairment analysis or an increase incircumstances indicate that the carrying value may result in anot be recoverable.

Income taxes are accounted for under the asset and liability method. Under the asset and liability method, deferred tax assets and liabilities are recognized for the estimated future impairmenttax consequences attributable to differences between the financial statement carrying amounts of this reporting unit's goodwill. For example, keeping all other assumptionsexisting assets and liabilities and their respective tax basis. This method also requires the same, an additional 50 basis points increaserecognition of future tax benefits, such as net operating loss and capital loss carryforwards, to the extent that realization of such benefits is more likely than not. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the discount rateyears in which those temporary differences are expected to be recovered or an increasesettled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the carrying value would likely result in an impairment inperiod that includes the reporting unit's goodwill.enactment date.