-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Im/yFWD5hWkO5GrjTtvOCILxfM6bgvk/SYF+e6j6tLBmEKZbuPNFO+olhvCI0BIL 4sl71sGsnhIvS3EVUtfrxA== 0000102752-97-000006.txt : 19970701 0000102752-97-000006.hdr.sgml : 19970701 ACCESSION NUMBER: 0000102752-97-000006 CONFORMED SUBMISSION TYPE: 11-K PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19961227 FILED AS OF DATE: 19970630 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: VSE CORP CENTRAL INDEX KEY: 0000102752 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-ENGINEERING SERVICES [8711] IRS NUMBER: 540649263 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 11-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-03676 FILM NUMBER: 97633154 BUSINESS ADDRESS: STREET 1: 2550 HUNTINGTON AVE CITY: ALEXANDRIA STATE: VA ZIP: 22303 BUSINESS PHONE: 7039604600 MAIL ADDRESS: STREET 1: 2550 HUNTINGTON AVENUE CITY: ALEXANDRIA STATE: VA ZIP: 22303-1499 FORMER COMPANY: FORMER CONFORMED NAME: VALUE ENGINEERING CO DATE OF NAME CHANGE: 19790612 11-K 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 _______________ FORM 11-K ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [ X ] Annual Report Pursuant to Section 15(d) of the Securities Exchange Act of 1934 For the fiscal year ended December 27, 1996 OR [ ] Transition Report Pursuant to Section 15(d) of the Securities Exchange Act of 1934 For the transition period ________________ VSE CORPORATION EMPLOYEE ESOP/401(k) PLAN (Full Title of the Plan) VSE Corporation 2550 Huntington Avenue Alexandria, Virginia 22303 (Name and Address of Issuer) Required information The VSE Corporation ESOP/401(k) Plan (the Plan ) is subject to ERISA and the financial statements and schedules have been prepared in accordance with the financial reporting requirements of ERISA. Financial Statement ------------------- Statements of Net Assets Available for Benefits as of December 27, 1996 and 1995 Statements of Changes in Net Assets Available for Benefits for the years ended December 27, 1996 and 1995 Notes to Financial Statements as of December 27, 1996 and 1995 EXHIBITS None SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the trustees have duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. VSE CORPORATION EMPLOYEE ESOP 401(k) PLAN By: /s/ M. A. Robin ----------------- M. A. Robin Senior Vice President, Director of Human Resources, Trustee VSE Corporation Employee ESOP 401(k) Plan Financial Statements As of December 27, 1996 and 1995 Together With Auditors' Report Report of Independent Public Accountants To the Trustees of the VSE Corporation Employee ESOP/401(k) Plan: We have audited the accompanying statements of net assets available for benefits of the VSE Corporation Employee ESOP/401(k) Plan (the "Plan") as of December 27, 1996 and 1995, and the related statements of changes in net assets available for benefits for the years then ended. These financial statements, and the schedules referred to below, are the responsibility of the Plan's management. Our responsibility is to express and opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the net assets available for benefits of the Plan as of December 27, 1996 and 1995, and the changes in net assets available for benefits for the years then ended in conformity with generally accepted accounting principles. Our audits were performed for the purpose of forming an opinion on the basic financial statements taken as a whole. The supplemental schedules of Assets Held for Investment Purposes (Exhibit A) and Reportable Transactions (Exhibit B) are presented for the purpose of additional analysis and are not a required part of the basic financial statements but are supplementary information required by the Department of Labor's Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974. The supplemental schedules have been subjected to the auditing procedures applied in the audits of the basic financial statements and, in our opinion, are fairly stated in all material respects in relation to the basic financial statements taken as a whole. /s/ Arthur Andersen LLP Washington, D.C. April 11, 1997 CONTENTS DESCRIPTION PAGE - ------------------------------------------ ---- Statements of Net Assets Available for Benefits as of December 27, 1996 and 1995 1 Statements of Changes in Net Assets Available for Benefits for the Years Ended December 27, 1996 and 1995 2 Notes to Financial Statements as of December 27, 1996 and 1995 3 Schedule of Assets Held for Investment Purposes as of December 27, 1996 (Exhibit A) 10 Schedule of Reportable Transactions for the Year Ended December 27, 1996 (Exhibit B) 11 SCHEDULES OMITTED AS NOT APPLICABLE FOR THE YEAR ENDED DECEMBER 27, 1996 DESCRIPTION - ------------------------------------------- Schedule of Loans or Fixed Income Obligations Schedule of Leases in Default or Classified as Uncollectible Schedule of Nonexempt Transactions VSE CORPORATION EMPLOYEE ESOP/401(k) PLAN STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS AS OF DECEMBER 27
1996 1995 ----------- ----------- ASSETS Investments at Fair Value (Exhibit A and Note 2) VSE Corporation common stock (Note 4) PAYSOP/ESOP $ 9,184,643 $ 6,972,836 401(k) Stock Fund 1,794,271 1,447,741 Mutual funds George Putnam Fund of Boston 3,136,380 3,394,695 Putnam Fund for Growth and Income 1,269,934 479,802 Putnam Global Growth Fund 739,309 400,369 Putnam Voyager Fund 3,387,602 2,410,135 Putnam Diversified Income Trust 1,040,728 915,783 Putnam Asset Allocation Fund - Conservative Portfolio 231,533 249,333 ---------- ---------- 20,784,400 16,270,694 Other investments Putnam Stable Value Fund 3,843,922 1,765,464 Government Separate Accounts at contract value - 2,746,149 Guaranteed Interest Contracts at contract value - 1,186,271 0 Notes receivable (Note 1) 637,540 432,158 Cash surrender value of life insurance policies 127,172 136,419 ---------- ---------- Total investments 25,393,034 22,537,155 0 10034682 Cash, principally in interest-bearing accounts 69,188 398,577 -10034682 Contribution receivable from employer 13,698 162,658 Other receivable 50,992 21,882 ---------- ---------- Total assets 25,526,912 23,120,272 LIABILITIES Due to VSE 389,951 0 Other Liabilities 5,015 5,015 ---------- ---------- Total liabilities 394,966 5,015 ---------- ---------- NET ASSETS AVAILABLE FOR BENEFITS $25,131,946 $23,115,257 ========== ========== The accompanying notes are an integral part of these financial statements.
-1- VSE CORPORATION EMPLOYEE ESOP/401(k) PLAN STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS FOR THE YEARS ENDED DECEMBER 27
1996 1995 ---------- ---------- INCREASES Contributions (Note 1) Employee Stock Ownership Plan $ 374,737 $ 472,294 401(k) 1,690,543 1,811,961 Income from investments Interest 51,899 299,795 Dividends 1,096,165 704,362 Net realized/unrealized gains on investments (Note 2) 3,452,070 4,771,615 ---------- ---------- 6,665,414 8,060,027 ---------- ---------- DECREASES Insurance premiums 2,731 11,152 Decrease in cash surrender value of life insurance policies 9,247 15,931 Distributions (Note 1) 4,636,747 2,891,957 ---------- ---------- 4,648,725 2,919,040 ---------- ---------- NET INCREASE 2,016,689 5,140,987 BEGINNING NET ASSETS AVAILABLE FOR BENEFITS 23,115,257 17,974,270 ---------- ---------- ENDING NET ASSETS AVAILABLE FOR BENEFITS $25,131,946 $23,115,257 ========== ========== The accompanying notes are an integral part of these financial statements.
-2- VSE CORPORATION EMPLOYEE ESOP/401(k) PLAN NOTES TO FINANCIAL STATEMENTS AS OF DECEMBER 27, 1996 AND 1995 1. DESCRIPTION OF THE PLAN Internal Revenue Service (IRS) Qualification - -------------------------------------------- The VSE Corporation Employee ESOP/401(k) Plan (the "Plan") was adopted by the Board of Directors of VSE Corporation (the "Company") in 1984. The Plan, as amended through December 21, 1995, was determined to be a qualified pension plan under Internal Revenue Code Section 401 via a determination letter dated April 29, 1996. As a result, the underlying trust was exempt from Federal taxes. Plan Administrator - ---- ------------- Putnam Investments ( Putnam ) serves as third party plan administrator. Putnam provides fund investments through the Putnam Fiduciary Trust Company and provides daily recordkeeping services for the Plan. Eligibility - ----------- Effective January 1, 1995, employees are eligible to participate in the Plan after attaining age 18 and completing 1,000 hours of service in a plan year. Contributions - ------------- The Company may elect to make a contribution to the Plan principally for the purchase of Company stock on behalf of each participant based upon a percentage of each participant's compensation in the plan year or other uniform formula. This contribution is allocated to each participant's account on the last day of the plan year (December 27) unless the employee returns a signed waiver of participation to the Trustees. For the plan years ended December 27, 1996 and 1995, the Company elected to make a contribution equal to 2.0 percent of each participant's annual compensation, subject to Plan provisions. The Company stock is held by the Plan for the participants, and each participant is entitled to certain stockholder rights. Employee Stock Ownership Plan ("ESOP") contributions are subject to a graded vesting schedule: 20 percent vested after three years of service, then increasing in 20 percent increments to 100 percent vested after seven years. Any forfeitures of nonvested benefits are recognized after the terminated participant has incurred a one-year break in service (as defined in the Plan), with the forfeiture applied to reduce the Company's contribution in subsequent years. Total forfeitures applied as -3- a reduction of the Company's contribution were $133,123 and $92,047 for 1996 and 1995, respectively. Participants may also elect to defer a portion of earnings into the Plan each pay period pursuant to Section 401(k) of the Internal Revenue Code. The minimum salary deferral is $10 per pay period. The maximum salary deferral depends upon participation levels and Federal guidelines. Distributions - ------------- Participants (or their beneficiaries) are eligible to receive Plan benefits upon retirement, disability, termination of employment, or death. Benefits are generally paid following termination of employment. Participants generally receive benefits in a lump sum. Distributions are typically made in cash from liquidation of the participant's account or from the Plan's repurchase of the individual account balance. The Plan permits participants to borrow against their respective 401(k) accounts, subject to Plan provisions and procedures prescribed by the Trustees. After-tax repayments of principal and interest are credited to the participant's account. Loans are reflected in the Statement of Net Assets Available for Benefits as notes receivable. Participants may apply in certain limited situations to withdraw funds from their 401(k) accounts due to a qualifying financial hardship in accordance with IRS regulations. Ownership Rights (Vesting) - -------------------------- Participants are 100 percent vested in their 401(k) salary deferral contribu- tions and their Payroll-based Stock Ownership Plan ("PAYSOP") contributions. No contributions were made to the PAYSOP after 1986. All contributions to the ESOP, beginning in 1987, are subject to a graded vesting schedule as described in the subsection "Contributions" within this note. Termination - ----------- In the event of Plan termination, each participant is fully vested in amounts held within the Plan for the participant's benefit. Plan Continuation - ----------------- The Company expects to continue the Plan indefinitely, but reserves the right to change, modify, or discontinue it in whole or in part at any time, subject to the provisions of ERISA. However, no such action will divest a participant of the vested rights and benefits provided by contributions allocated to the participant's account. -4- 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Investments - ----------- Company stock is purchased in the over-the-counter market or from stockholders. Participants direct the investment of their respective 401(k) accounts among the investment options available under the Plan. Marketable securities, excluding Company Stock, and mutual funds are valued at quoted market prices as of December 27, 1996 and 1995, or as of the closest preceding day on which a transaction occurred. To minimize potential price fluctuations, as the Company's stock is thinly traded, the Plan uses the average closing price over the previous 30 days to value Company stock. Dividends and realized capital gains are reinvested. Guaranteed interest contracts (GICs) matured in January, 1996, and were liquidated with the proceeds transferring to the Putnam Stable Value Fund from which participants may transfer funds to other Plan investment options. GICs were valued at principal plus interest paid or accrued as of December 27, 1995. Each GIC yielded a fixed rate of return until maturity of the contract for contributions received during a stated contribution period. The Trustees are of the opinion that contract value plus interest accrued approximated the fair value of the GICs. Like GICs, government separate accounts (GSAs) yielded a fixed rate of return until contact maturity in January, 1996, when the funds were liquidated at fair market value and transferred to the Putnam Stable Value Fund. The insurance carrier invested the contributions in U. S. Treasury and other Federal agency securities. GSAs were valued at principal plus interest paid or accrued as of December 27, 1995. The Trustees are of the opinion that contract value plus interest accrued approximated the fair value of the GSAs. Life insurance offered under the Plan builds cash value as determined by the insurance carrier. In accordance with Federal regulations, no more than 25 percent of a participant's contributions for the plan year may be invested in life insurance. On August 12, 1994, an Order of Rehabilitation was placed on the assets of Confederation Life Insurance Company. As a result of this court order, Confederation Life policies are subject to certain restrictions, such as access to surrender values, until a rehabilitation plan is approved and put into effect. Confederation Life is still under the Order of Rehabilitation as of December 27, 1996. On October 23, 1996, the Plan of Rehabilitation for Confederation Life Insurance Company was confirmed. The Plan provides for the assumption of the Confederation policies by Pacific Mutual Life Insurance Company. The closing date of this assumption will be during the second quarter of 1997. Participants will have the option to "Opt-in" to the assumption agreement and have their policies restructured and assumed by Pacific Mutual, or participants may request to terminate coverage ("Opt-out"). For the plan year ended December 27, 1996, the -5- Plan owned 19 Confederation Life policies with a total cash value of $120,416. There are no sales commissions on the purchase or sale of Putnam mutual funds. Participants may redirect the investment of their salary deferral contributions through Putnam on a daily basis. A participant may also elect to transfer funds from one Putnam mutual fund (other than the life insurance and the fixed rate contracts) into another Putnam option on a daily basis. The following investments exceed 5% of net assets as of December 27, 1996: VSE Corporation Common Stock $10,978,914 George Putnam Fund of Boston 3,136,380 Putnam Voyager Fund 3,387,602 Putnam Fund for Growth and Income 1,269,934 Putnam Stable Value Fund 3,843,922 Other 2,776,282 ---------- Total Investments $25,393,034 The Plan s investment in Company stock at December 27 is presented in the following table: 1996 1995 ---- ---- Allocated Unallocated Allocated Unallocated --------- ----------- --------- ----------- Number of Shares 639,348 34,205 691,146 0 ------------------------------------------------------------- Cost $7,790,198 $416,782 $4,906,683 $0 ============================================================= Market $10,421,372 $557,542 $8,420,577 $0 ============================================================= Due to Participants - ------------------- In accordance with generally accepted accounting principles, amounts allocated to withdrawing participants are not reported as liabilities on the Statement of Net Assets Available for Benefits. The following is a reconciliation of net assets available for benefits per the financial statements to IRS Form 5500 (Annual Return/Report of Employee Benefit Plan:) -6- December 27 1996 1995 ----------- ----------- Net assets available for benefits per the financial statements $25,131,946 $23,115,257 Amounts allocated to withdrawing participants (329,086) 0 ----------- ----------- Net assets available for benefits per Form 5500 $24,802,860 $23,115.257 The following is a reconciliation of benefits paid to participants per the financial statements to the Form 5500: Year ended December 27, 1996 ----------------- Benefits paid to participants per the financial statements $ 4,636,747 Add: Amounts allocated to withdrawing participants at December 27, 1996 329,086 Less: Amounts allocated to withdrawing participants at December 27, 1995 0 ----------- Benefits paid to participants per Form 5500 $ 4,965,833 Realized and Unrealized Gains and Losses - ---------------------------------------- To comply with Department of Labor regulations, the Plan has calculated realized and unrealized gains and losses based on the value of investments at the beginning of the plan year or at time of purchase during the plan year. Realized gains on Company stock were $50,418 and $37,097, and on mutual fund shares were $416,944 and $424,228, for the plan years ended December 27, 1996 and 1995, respectively. Unrealized gains of $2,771,933 and $3,513,894 were recorded for Company stock, and unrealized gains of $212,775 and $796,396 were recorded for mutual fund shares respectively, for the plan years ended December 27, 1996 and 1995. 3. REPORTABLE TRANSACTIONS The Plan reports each transaction or series of transactions involving the purchase or sale of assets exceeding five percent of Plan assets as of the beginning of the plan year. Reportable transactions for the plan year ended December 27, 1996, are included in Exhibit B. Party-in-interest Transactions - ------------------------------ The Plan made certain purchases of Company stock through Wachtel & Co., Inc., and Koonce Securities, Inc., which have representatives serving on the Company's Board of Directors. The Trustees are of the opinion that transactions are made on terms equivalent to those otherwise available from other brokers or financial institutions. -7- Certain investments are managed by Putnam Investments through the Putnam Fiduciary Trust Company. Putnam Investments is a third party administrator as defined by the Plan, therefore, these transactions qualify as party-in-interest. 4. EMPLOYER SECURITIES Section 407(b) of ERISA permits the Plan to hold an investment in Company stock in excess of ten percent of the fair market value of the Plan's assets. Acquisition Loans - ----------------- The Trustees may enter into loans to finance the acquisition of Company stock for the ESOP. For the plan years ended December 27, 1996 and 1995, the loan balance was $350,000 and $0, respectively. In 1996, the Plan entered into a $350,000 advance agreement with the Company. The proceeds of the advance were used to purchase the Company s common stock from terminating participants. The advance agreement provides for repayment by September 30, 1997. 5. ADMINISTRATIVE EXPENSES The administrative expenses of the Plan are paid by the Company. 6. DETAIL OF SIGNIFICANT ACCOUNT BALANCES BY INVESTMENT ALTERNATIVE The Plan provides for participant-directed account balances. The summary of significant account balances by investment alternative as of December 27, 1996, and for the year then ended is detailed in the chart on the following page. -8-
----------------------------------------------------------------------------------------------- Participant Directed ----------------------------------------------------------------------------------------------- Mutual Funds ------------------------------------------------------------- Putnam Investments Guaranteed Government Putnam ------------------------------------------------------------- Investment Separate Stable George Growth Global Diversified Contract Accounts Value Putnam and Income Growth Voyager Income Trust ---------- ---------- ------ ------ ---------- ------ ------- ------------ Investments at market, contract, or cash value 0 0 3,843,922 3,136,380 1,269,934 739,309 3,387,602 1,040,728 Investment income Interest (A) 1,288 13,364 - - - - - - Dividends - - 228,659 291,602 103,527 52,949 214,253 69,775 Unrealized gains - - - 70,388 85,632 24,200 20,352 3,992 Realized gains - - - 169,835 22,530 18,521 192,863 11,245 Participant contributions (A) - - 284,329 225,733 257,035 226,031 531,400 84,998 Distributions to participants 0 20,559 1,111,453 825,754 153,897 151,399 668,227 204,119 (A) Interest income above differs from the statement of changes in net assets available for benefits by $1,793 which represents interest earned from the Plan's operating cash accounts. Participant contributions above differs from the 401(k) contributions on the statement of changes in net assets available for benefits by $58,426 which represents year-end contributions not received by Putnam until after December 27, 1996 -------------------------------------- ------------------------ ----- Participant Non-Participant Directed Directed Total -------------------------------------- ------------------------ ----- Putnam Life Insurance Notes VSE Corp. VSE Corp. Asset Policies Receivable Common Stock Common Stock Allocation --------------- ---------- ------------ ------ ----- ---------- Investments at market, contract, or cash value 127,172 637,540 1,794,271 9,184,643 231,533 25,393,034 Investment income Interest (A) - 35,454 - - - 50,106 Dividends - - 20,508 99,380 15,512 1,096,165 Unrealized gains - - 453,136 2,318,797 8,210 2,984,707 Realized gains - - 50,418 - 1,951 467,363 Participant contributions (A) 2,731 - 19,860 - - 1,632,117 Distributions to participants - 66,144 219,007 1,177,255 38,933 4,636,747 (A) Interest income above differs from the statement of changes in net assets available for benefits by $1,793 which represents interest earned from the Plan's operating cash accounts. Participant contributions above differs from the 401(k) contributions on the statement of changes in net assets available for benefits by $58,426 which represents year-end contributions not received by Putnam until after December 27, 1996
-9- VSE CORPORATION EMPLOYEE ESOP/401(k) PLAN EXHIBIT A SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES AS OF DECEMBER 27, 1996
Contract or Description Cost Market Value - ----------- ---------- ------------ VSE Corporation common stock *PAYSOP/ESOP $ 6,865,845 $ 9,184,643 *401(k) Stock Fund 1,341,135 1,794,271 Mutual funds *George Putnam Fund of Boston 2,708,069 3,136,380 *Putnam Fund for Growth and Income 1,143,697 1,269,934 *Putnam Global Growth Fund 694,177 739,309 *Putnam Voyager Fund 3,010,945 3,387,602 *Putnam Diversified Income Trust 987,534 1,040,728 *Putnam Asset Allocation Fund - Conservative Portfolio 219,503 231,533 ---------- ---------- $16,970,905 20,784,400 ========== ========== *Putnam Stable Value Fund 3,843,922 3,843,922 ---------- ---------- Total Fixed Income Investments 3,843,922 3,843,922 ---------- ---------- Notes receivable - loans to participants (interest rates vary from 6.0% to 10.5% with maturities of 1 to 4 year 637,540 637,540 ---------- ---------- Life insurance policies (at cash surrender value) Confederation Life Insurance Company 120,416 Lincoln National Life Insurance Company 6,756 ---------- $25,393,034 ========== * Party-in-interest. The accompanying notes are an integral part of this schedule.
-10- VSE CORPORATION EMPLOYEE ESOP/401(k) PLAN EXHIBIT B SCHEDULE OF REPORTABLE TRANSACTIONS FOR THE YEAR ENDED DECEMBER 27, 1996
Sales ------------------------------------- Description Purchases Proceeds Cost Gain/(loss) - ----------- ---------- ---------- ---------- ----------- Mutual funds - ------------ * George Putnam Fund of Boston $1,086,611 $1,581,675 $1,412,737 $168,938 * Putnam Voyager Fund $2,067,727 $1,318,121 $1,125,273 $192,848 * Putnam Fund for Growth and Income $927,434 $254,062 $231,535 $22,527 Collective investment trust - --------------------------- * Putnam Stable Value Fund $5,424,193 $3,378,627 $3,378,627 $0 * Party-in-interest. The accompanying notes are an integral part of this schedule.
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