-----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, F2yZ8swhlI54ZTg6mz56BXf7shd6np2KVtit0CMYAivok+HeAWLi53M6eJSGq9js 1GbRPG/0o8VXtlmicbBBnA== 0000102752-98-000016.txt : 19980703 0000102752-98-000016.hdr.sgml : 19980703 ACCESSION NUMBER: 0000102752-98-000016 CONFORMED SUBMISSION TYPE: 11-K PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19971227 FILED AS OF DATE: 19980702 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: SEC FILE NUMBER: 000-03676 FILM NUMBER: 98659512 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, 1997 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, 1997 and 1996 Statements of Changes in Net Assets Available for Benefits for the years ended December 27, 1997 and 1996 Notes to Financial Statements as of December 27, 1997 and 1996 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, 1997 and 1996 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, 1997 and 1996, 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, 1997 and 1996, 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 purposes 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. This information has been subjected to the auditing procedures applied in our audits of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole. /s/ Arthur Andersen LLP Washington, D.C. June 11, 1998 CONTENTS DESCRIPTION PAGE - ----------- ---- Statements of Net Assets Available for Benefits as of December 27, 1997 and 1996 1 Statements of Changes in Net Assets Available for Benefits for the Years Ended December 27, 1997 and 1996 2 Notes to Financial Statements as of December 27, 1997 and 1996 3 Schedule of Assets Held for Investment Purposes as of December 27, 1997 (Exhibit A) 10 Schedule of Reportable Transactions for the Year Ended December 27, 1997 (Exhibit B) 11 SCHEDULES OMITTED AS NOT APPLICABLE FOR THE YEAR ENDED DECEMBER 27, 1997 DESCRIPTION - ----------- Schedule of Loans or Fixed-Income Obligations Schedule of Leases in Default or Classified as Uncollectible Schedule of Nonexempt Transactions PAGE VSE CORPORATION EMPLOYEE ESOP/401(k) PLAN STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS AS OF DECEMBER 27
1997 1996 ------------- ------------- ASSETS Investments at fair value VSE Corporation common stock PAYSOP/ESOP $ 6,460,403 $ 9,184,643 401(k) Stock Fund 1,309,928 1,794,271 Mutual funds George Putnam Fund of Boston 2,856,620 3,136,380 Putnam Fund for Growth and Income 1,787,372 1,269,934 Putnam Global Growth Fund 780,774 739,309 Putnam Voyager Fund 3,965,341 3,387,602 Putnam Diversified Income Trust 1,365,652 1,040,728 Putnam Asset Allocation Fund - Conservative Portfolio - 231,533 ------------- ------------- 18,526,090 20,784,400 Investments at contract value Putnam Stable Value Fund 3,452,304 3,843,922 Notes receivable 478,989 637,540 Cash surrender value of life insurance policies 97,491 127,172 ------------- ------------- Total investments 22,554,874 25,393,034 Cash, principally in interest-bearing accounts 88,325 69,188 Other receivables 2,242 50,992 ------------- ------------- Total assets 22,645,441 25,513,214 LIABILITIES Due to VSE 686,106 376,253 Other liabilities 5,015 5,015 ------------- ------------- Total liabilities 691,121 381,268 ------------- ------------- NET ASSETS AVAILABLE FOR BENEFITS $ 21,954,320 $ 25,131,946 ============= ============= 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
1997 1996 ------------- ------------- INCREASES Contributions (Note 1) Employee Stock Ownership Plan $ 370,146 $ 374,737 401(k) 1,880,177 1,690,543 Income from investments Interest 39,179 51,899 Dividends 1,167,072 1,096,165 Net realized/unrealized (losses) gains on investments (Note 2) (2,313,071) 3,452,070 ------------- ------------- 1,143,503 6,665,414 ------------- ------------- DECREASES Insurance premiums 2,366 2,731 Decrease in cash surrender value of life insurance policies 29,681 9,247 Distributions to participants 4,289,082 4,636,747 ------------- ------------- 4,321,129 4,648,725 ------------- ------------- NET (DECREASE) INCREASE (3,177,626) 2,016,689 BEGINNING NET ASSETS AVAILABLE FOR BENEFITS 25,131,946 23,115,257 ------------- ------------- ENDING NET ASSETS AVAILABLE FOR BENEFITS $ 21,954,320 $ 25,131,946 ============= ============= 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, 1997 AND 1996 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 Internal Revenue Service has determined and informed the Company by a letter dated April 29, 1996 that the Plan, as amended through December 21, 1995, is designed in accordance with Internal Revenue Code Section ("IRC") 401. The Plan trustees believe that the Plan is currently being operated in compliance with the applicable requirements of the IRC. Therefore, no provision for income taxes has been included in the Plan's financial statements. Plan Administration - ------------------- 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. Certain officers and/or employees serve as trustees (the "Trustees") of the Plan. Eligibility - ----------- Effective January 1, 1997, employees attaining age 18 are eligible to participate in the Plan on the first day of the month after commencing employment. 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. The Company stock is purchased and held by the Plan for the participants, and each participant is entitled to certain stockholder rights. For the plan years ended December 27, 1997 and 1996, the Company elected to make a contribution equal to two percent of each participant's annual compensation, subject to Plan provisions. 3 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 a reduction of the Company's contribution were $154,786 and $133,123 for 1997 and 1996, 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 contributions and their Payroll-based Stock Ownership Plan ("PAYSOP") contributions. No contributions have been made to the PAYSOP since 1986. All contributions to the ESOP, which began 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 - ----------- 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, excluding the Putnam Stable Value Fund, are valued at quoted market prices as of December 27, 1997 and 1996, or as of the closest preceding day on which a transaction occurred. Company stock is purchased in the over-the-counter market or from stockholders. 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. The Putnam Stable Value Fund consists primarily of a diversified portfolio of fixed-income investments which provide a fixed rate of return for a specified time period. The assets of the Putnam Stable Value Fund are stated at contract value. Dividends and realized capital gains on all mutual fund and VSE stock investments are reinvested. 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 were subject to certain restrictions, such as access to surrender values, until a rehabilitation plan was approved and put into effect. On October 23, 1996, the Plan of Rehabilitation for Confederation Life Insurance Company was confirmed and the Confederation policies were assumed by Pacific Mutual Life Insurance Company ("Pacific Mutual") effective, June 1, 1997. Participants were given the option to "Opt-in" to the assumption agreement and have their policies restructured and assumed by Pacific Mutual, or to terminate coverage. For the plan year ended December 27, 1997, the Plan owned 15 Pacific Mutual policies with a total cash value of $90,735. 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 into another Putnam fund option on a daily basis. The following investments exceed 5% of net assets as of December 27, 1997: VSE Corporation Common Stock $7,770,331 Putnam Voyager Fund 3,965,341 Putnam Stable Value Fund 3,452,304 George Putnam Fund of Boston 2,856,620 Putnam Fund for Growth and Income 1,787,372 Putnam Diversified Income Trust 1,365,652 Other 1,357,254 ----------- Total Investments $22,554,874 =========== 5 The Plan's investment in Company stock at December 27 is presented in the following table: 1997 1996 Allocated Unallocated Allocated Unallocated --------- ------------ ----------- ----------- Number of Shares 740,720 75,491 799,185 42,756 ========== ======== ============ ======== Cost $4,105,241 $418,388 $4,432,554 $237,139 ========== ======== =========== ======== Market $7,155,541 $614,790 $10,421,372 $557,542 ========== ======== =========== ======== Due to Participants - ------------------- In accordance with generally accepted accounting principles, amounts allocated to withdrawing participants' accounts 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:) December 27 1997 1996 ---- ---- Net assets available for benefits per the financial statements $21,954,320 $25,131,946 Amounts allocated to withdrawing participants (215,223) (329,086) ----------- ----------- Net assets available for benefits per Form 5500 $21,739,097 $24,802,860 =========== =========== The following is a reconciliation of benefits paid to participants per the financial statements to IRS Form 5500: Year ended December 27, 1997 1996 ---- ---- Benefits paid to participants per the financial statements $ 4,289,082 $ 4,636,747 Add: Amounts allocated to withdrawing participants at December 27, 1997 and 1996, respectively 215,223 329,086 Less: Amounts allocated to withdrawing participants at December 27, 1996 and 1995, respectively (329,086) 0 ---------- ---------- Benefits paid to participants per Form 5500 $ 4,175,219 $ 4,965,833 =========== =========== 6 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 the time of purchase during the plan year. Realized gains on Company stock were $0 and $50,418, and on mutual fund shares were $497,782 and $416,944, for the plan years ended December 27, 1997 and 1996, respectively. Unrealized (losses)/gains of $(2,864,501) and $2,771,933 were recorded for Company stock, and unrealized gains of $53,648 and $212,775 were recorded for mutual fund shares, respectively, for the plan years ended December 27, 1997 and 1996. Reclassifications - ----------------- Certain amounts in the prior year's financial statements have been reclassified to conform with the current year presentation. 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, 1997, are included in Exhibit B. Party-in-interest Transactions - ------------------------------ The Plan may execute certain transactions in 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. There were no such transactions for the plan year ended December 27, 1997. Certain investments are managed by Putnam through the Putnam Fiduciary Trust Company. Putnam is a third party administrator as defined by the Plan; therefore, these transactions qualify as party-in-interest transactions. There are no sales commissions on the purchase or sale of Putnam mutual funds. 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 non-interest bearing advances (loans) to finance the acquisition of Company stock for the ESOP. For the plan years ended December 27, 1997 and 1996, the loan balance was $680,000 and $350,000, respectively. In 1997 and 1996 the Plan entered into $330,000 and $350,000 loan agreements with the Company, respectively. The proceeds of these advances were used to purchase the Company's common stock from terminating participants. 7 The loan agreement provides for repayment by September 30, 1998 or as market conditions permit. The loan agreements are unsecured and do not require the payment of interest. Diversification - --------------- Participants who are 55 and have ten years of participation are eligible to diversify up to twenty-five percent of their ESOP account balance which is held in Company stock. This diversification option was inadvertently not offered to certain participants as of December 28, 1996. These participants have been notified and the Trustees and the Company are in the process of resolving this matter by providing the comparable benefits that would have been available had diversification been offered on a timely basis. Any additional contributions which may result to such participants will be made by the Company with no impact on the Plan or other participants. 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, 1997, and for the year then ended is detailed in the chart on the following page. 8 VSE CORPORATION EMPLOYEE ESOP/401(k) PLAN SUMMARY OF SIGNIFICANT ACCOUNT BALANCES BY INVESTMENT ALTERNATIVE AS OF AND FOR THE YEAR ENDED DECEMBER 27, 1997
Participant Directed ------------------------------------------------------------------------- Mutual Funds ------------------------------------------------------------ Putnam Investments Putnam ------------------------------------------------------------ Stable George Growth Global Diversified Value Putnam and Income Growth Voyager Income Trust ----- ------ ---------- ------ ------- ------------ Investments at fair value 3,452,304 2,856,620 1,787,372 780,774 3,965,341 1,365,652 Investment income Interest (A) - - - - - - Dividends 208,314 278,641 233,257 - 247,985 79,923 Unrealized gains/(losses) - 15,898 (23,608) (136,510) 197,895 12,405 Realized gains 31 191,808 64,763 24,865 197,739 6,626 Participant contributions 227,291 181,355 382,821 296,452 666,322 94,694 Distributions to participants (B) 819,073 624,822 296,270 113,936 563,947 167,628 (A) Interest income above differs from the statement of changes in net assets available for benefits by $53, which represents interest earned from the Plan's operating cash accounts. (B) Distributions to participants above differs from the statement of changes in net assets available for benefits by $5,075, which represents Putnam transaction fees.
9 VSE CORPORATION EMPLOYEE ESOP/401(k) PLAN SUMMARY OF SIGNIFICANT ACCOUNT BALANCES BY INVESTMENT ALTERNATIVE AS OF AND FOR THE YEAR ENDED DECEMBER 27, 1997
Particpant Non-Participant Directed Directed Total ---------------------------------------- --------------------------- ---------- Putnam Life Insurance Notes VSE Corp. VSE Corp. Asset Policies Receivable Common Stock Common Stock Allocation -------- ---------- ------------ ------------ ---------- Investments at fair value 97,491 478,989 1,309,928 6,460,403 - 22,554,874 Investment income Interest (A) - 39,126 - - - 39,126 Dividends - - 19,814 99,139 - 1,167,073 Unrealized gains/(losses) - - (484,343) (2,380,159) (12,431) (2,810,853) Realized gains - - - - 11,950 497,782 Participant contributions 2,366 - 28,876 - - 1,880,177 Distributions to participants (B) - 170,248 194,075 1,331,289 2,719 4,284,007 (A) Interest income above differs from the statement of changes in net assets available for benefits by $53, which represents interest earned from the Plan's operating cash accounts. (B) Distributions to participants above differs from the statement of changes in net assets available for benefits by $5,075, which represents Putnam transaction fees.
9 VSE CORPORATION EMPLOYEE ESOP/401(k) PLAN EXHIBIT A SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES AS OF DECEMBER 27, 1997
Contract or Description Cost Fair Value - ----------- ------------- ------------- VSE Corporation common stock * PAYSOP/ESOP $ 3,852,363 $ 6,460,403 * 401(k) Stock Fund 671,266 1,309,928 Mutual funds * George Putnam Fund of Boston 2,412,410 2,856,620 * Putnam Fund for Growth and Income 1,684,742 1,787,372 * Putnam Global Growth Fund 872,153 780,774 * Putnam Voyager Fund 3,390,789 3,965,341 * Putnam Diversified Income Trust 1,300,054 1,365,652 ------------- ------------- $ 14,183,777 $ 18,526,090 ------------- ------------- Fixed Income Investments * Putnam Stable Value Fund 3,452,304 3,452,304 ------------- ------------- Total Fixed Income Investments 3,452,304 3,452,304 ------------- ------------- Notes receivable - loans to participants (interest rates vary from 6.0% to 9.0% with maturities of 1 to 4 years) 478,989 478,989 ------------- ------------- Life insurance policies (at cash surrender value) Pacific Mutual Life Insurance Company 90,735 Lincoln National Life Insurance Company 6,756 ------------- $ 22,554,874 ============= * 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, 1997
Sales Description Purchases Proceeds Cost Gain/(Loss) ----------- --------- ---------- ----- ---------- Mutual funds ------------ * George Putnam Fund of Boston $625,891 $1,113,358 $921,550 $191,808 * Putnam Voyager Fund $1,418,083 $1,235,977 $1,038,238 $197,739 * Putnam Fund for Growth and Income $1,287,318 $811,035 $746,272 $64,763 Collective investment trust --------------------------- * Putnam Stable Value Fund $1,777,918 $2,169,567 $2,169,567 $0 * Party-in-interest. The accompanying notes are an integral part of this schedule.
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