SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 11-K
[ X ] Annual Report Pursuant to Section 15(d) of the Securities
Exchange Act of 1934
For the fiscal year ended December 27, 2000
OR
[ ] Transition Report Pursuant to Section 15(d) of the Securities
Exchange Act of 1934
A. Full title of the plan and the address of the plan, if different from that
of the issuer named below:
VSE CORPORATION
EMPLOYEE ESOP/401(k) PLAN
B. Name of issuer of the securities held pursuant to the plan and the address
of its principal executive office:
VSE Corporation
2550 Huntington Avenue
Alexandria, Virginia 22303
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/ C. S. Weber
---------------
C. S. Weber
Executive Vice President and
Chief Financial Officer
VSE Corporation Employee ESOP/401(k) Plan
Financial statements
As of December 27, 2000 and 1999
Together with report of independent public accountants
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, 2000 and 1999, and the related statement of changes in net assets
available for benefits for the year ended December 27, 2000. These financial
statements and the schedule referred to below are the responsibility of the
Plan's sponsor. Our responsibility is to express an opinion on these financial
statements and schedule based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. 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, 2000 and 1999, and the changes in its net assets available for
benefits for the year ended December 27, 2000, in conformity with accounting
principles generally accepted in the United States.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental schedule of assets
held for investment purposes as of December 27, 2000, is presented for the
purpose of additional analysis and is not a required part of the basic
financial statements but is supplementary information required by the
Department of Labor Rules and Regulations for Reporting and Disclosure under
the Employee Retirement Income Security Act of 1974. The supplemental schedule
has been subjected to the auditing procedures applied in the audit 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.
Vienna, Virginia
June 19, 2001
VSE Corporation Employee ESOP/401(k) Plan
Table of contents
Statements of net assets available for benefits
As of December 27, 2000 and 1999. . . . . . . . . . . . . . 1
Statement of changes in net assets available for benefits
For the year ended December 27, 2000. . . . . . . . . . . . 2
Notes to financial statements
December 27, 2000 and 1999. . . . . . . . . . . . . . . . . 3
Schedule of assets held for investment purposes
As of December 27, 2000 . . . . . . . . . . . . . . . . . . 9
Schedules omitted as not applicable
As of and for the year ended December 27, 2000:
Loans or fixed income obligations in default or
classified as uncollectible
Leases in default or classified as uncollectible
Nonexempt transactions
Reportable transactions
Investment assets both acquired and disposed of
within the plan year
VSE Corporation Employee ESOP/401(k) Plan
Statements of net assets available for benefits
As of December 27, 2000 and 1999
2000 1999
---- ----
Assets
Cash, principally in interest-bearing accounts $ 228,537 $ 209,600
Assets held for investment purposes:
Investments at fair value 17,044,259 19,009,065
Investments at contract value 3,101,741 3,288,947
Participant loans 327,966 484,510
Cash surrender value of life insurance policies 1,929 19,190
----------- -----------
Total assets held for investment purposes 20,475,895 22,801,712
Receivables:
Due from VSE - 263,146
Other receivables 9,026 130,891
----------- -----------
Total receivables 9,026 394,037
----------- -----------
Net assets available for benefits $20,713,458 $23,405,349
=========== ===========
The accompanying notes are an integral part of these financial statements.
1
VSE Corporation Employee ESOP/401(k) Plan
Statement of changes in net assets available for benefits
For the year ended December 27, 2000
Additions:
Contributions $ 2,623,532
Income from investments-
Interest 33,102
Dividends 1,572,601
Other additions 18,937
-----------
4,248,172
-----------
Deductions:
Net realized/unrealized loss on investments 3,767,983
Decrease in cash surrender value of life insurance policies 17,260
Other deductions 197
Distributions to participants 3,154,623
-----------
6,940,063
-----------
Net decrease (2,691,891)
Net assets available for benefits:
Beginning of period 23,405,349
-----------
End of period $20,713,458
-----------
The accompanying notes are an integral part of this financial statement
2
VSE Corporation Employee ESOP/401(k) Plan
Notes to financial statements
December 27, 2000 and 1999
1. Description of the Plan:
General description
The VSE Corporation ESOP 401(k) Plan (the Plan) was adopted by the Board
of Directors of VSE Corporation (the Company) in 1984. The Plan is a
defined contribution plan and has an Employee Stock Ownership Plan (ESOP)
component covering all full-time and part-time employees who are employees
of the sponsor. The Plan is subject to the applicable provisions of the
Employee Retirement Income Security Act of 1974 (ERISA), as amended. The
above description of the Plan provides only general information.
Participants should refer to the Plan agreement for a more complete
description of the Plan's provisions.
Internal Revenue Service (IRS) qualification
The IRS has determined and informed the Company by a letter dated November 20,
1998 that the Plan, as amended through July 14, 1998, is designed in accordance
with Internal Revenue Code (the IRC) Section 401. The Plan Trustees (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. An ESOP is an employee
stock ownership plan within the meaning of IRC Sections 401(a) and 4975(e)(7).
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 of the Company serve as Trustees of the Plan.
Eligibility
Employees become eligible to participate in the Plan on the first day of the
month following the date of hire. If the employee's first day of employment
falls on the first day of the month (or on the first regular working day of
the month), the employee will immediately be eligible to participate in the
Plan.
Contributions
In 1999, the Company had the option to 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 practice was discontinued beginning
April 1, 1999. This contribution was allocated to each participant's account
on the last day of the Plan year (December 27) unless the employee returned a
signed waiver of participation to the Trustees. The Company stock was purchased
and is held by the Plan for the participants, and each participant is entitled
to certain stockholder rights. For the plan year ended December 27, 1999, the
Company
3
elected to make ESOP contributions equal to two percent of each participant's
eligible compensation earned from January 1, 1999, through March 31, 1999,
subject to Plan provisions.
Each participant with stock in the PAYSOP and/or ESOP accounts is entitled to
exercise voting rights attributable to his or her account and is notified by
the Plan Trustee prior to the time that such rights are to be exercised. If
participants with stock in the PAYSOP and/or ESOP fail to exercise their voting
rights, the Plan Trustees will vote this stock. For participants with stock in
the 401(k), the Plan Trustees vote this stock.
Effective April 1, 1999, the Company added a Company matching 401(k)
contribution, which replaced the Company ESOP contribution. The Company
contributes 50 cents for each dollar of salary that a participant defers on
the first five percent of salary. The Company makes a cash contribution for
the match and this contribution is allocated to each eligible participant's
account each pay period. The Company may change the matching contribution
formula.
ESOP and Company matching 401(k) 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 the following year. Total
forfeitures applied as a reduction of the Company's contribution were $140,791
and $111,596 for 2000 and 1999, respectively.
Participants may also elect to defer up to 18 percent of earnings into the Plan
each pay period pursuant to Section 401(k) of the IRC. The maximum salary
deferrals for 2000 and 1999 were $10,500 and $10,000, respectively, subject to
Plan provisions and participation levels. The 401(k) Company match does not
count towards the maximum salary deferral limits. These contributions are
invested at the discretion of the participant, in any of the 11 separately
managed funds under the Plan. Earnings are allocated in the same proportion
that each participant's account bears to the total of all participants'
accounts (not including Company stock accounts).
Distributions
Participants (or their beneficiaries) are eligible to receive Plan benefits on
retirement, disability, termination of employment, or death. Benefits are
usually distributed in a lump sum. Distributions of Putnam funds are typically
made in cash from liquidation of the participant's account and distributions of
Company stock are typically made in Company stock. Participants with fractional
shares or fewer than 100 shares are paid in cash. All other distributions of
Company stock are made in stock.
The Plan permits a participant to borrow against the participant's 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 statements of net assets
available for benefits as participant loans. 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 any Payroll-Based Stock Ownership Plan (PAYSOP) contributions. No
contributions have been
4
made to the PAYSOP since 1986. All contributions to the ESOP, which began in
1987, and the Company 401(k) match, which began in 1999, are subject to a
graded vesting schedule as described in the subsection "Contributions" above.
Plan termination
In the event of Plan termination, each participant would be fully vested in
amounts held within the Plan for the participant's benefit. 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. No such action will divest a participant of the vested rights and
benefits provided by contributions allocated to the participant's account.
2. Summary of significant accounting policies:
Basis of accounting
The accompanying financial statements are prepared on the accrual basis of
accounting.
Use of estimates
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires management to make estimates
and assumptions in determining the reported amounts of the Plan's assets,
liabilities, revenue, and expenses and disclosure of contingent assets and
liabilities. Actual results could differ from those estimates.
3. Investments:
Investments
Investment of a participant's 401(k) account is directed by the participant
among options available under the Plan. Marketable securities, excluding
Company stock and the Putnam Stable Value Fund, are valued at quoted market
prices as of December 27, 2000 and 1999, 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. The Putnam Stable Value Fund consists
primarily of a diversified portfolio of fixed-income investments that 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 are reinvested quarterly at fair market
value.
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. The Trustees sold the majority of these insurance policies to
their respective policyholders in 1999 and 2000.
5
The following investments exceed five percent of net assets as of December 27,
2000 and 1999:
Investment 2000 1999
- ----------------------------------------------- ---- ----
Putnam Voyager Fund $5,795,391 $7,094,867
Putnam Stable Value Fund 3,101,741 3,288,947
VSE Corporation Common Stock 2,930,703 4,152,172
The Putnam Fund for Growth and Income 2,243,402 2,171,496
The George Putnam Fund of Boston 2,154,265 2,341,661
Putnam Global Growth Fund 1,773,032 2,478,516
The Plan's investment in Company stock at December 27, 2000 and 1999, is
presented in the following table:
2000 1999
---- ----
Number of Shares 521,014 582,761
========== ==========
Cost $3,433,482 $3,875,361
========== ==========
Market $2,930,703 $4,152,172
========== ==========
Nonparticipant-directed investments
Nonparticipant-directed investments, held in the Plan as of December 27, 2000
and 1999, consisted entirely of VSE Corporation stock. These net assets, and
changes are as follows:
Net assets 2000 1999
- --------------------------------------------- ---- ----
VSE Corporation common stock $2,930,703 $4,152,172
For the year ended
December 27, 2000
------------------
Changes in net assets:
Net realized/unrealized loss on investments $ 827,523
Distributions to participants 393,946
----------
$1,221,469
==========
During 2000, the Plan's investments (including gains and losses on investments
bought and sold, as well as held during the year) depreciated in value as a
result of net changes in the market values of the investments held
(principally stock mutual funds) by $3,767,983 as follows:
Mutual funds $2,940,460
Common stock 827,523
----------
$3,767,983
==========
6
Distributions to participants
In accordance with accounting principles generally accepted in the United
States, amounts allocated to withdrawing participants' accounts are not reported
as liabilities on the Statements 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
2000 1999
---- ----
Net assets available for benefits per the financial
statements $20,713,458 $23,405,349
Amounts allocated to withdrawing participants (357,477) (1,635)
----------- -----------
Net assets available for benefits per Form 5500 $20,355,981 $23,403,714
=========== ===========
The following is a reconciliation of benefits paid to participants per the
financial statements to IRS Form 5500:
For the year ended
December 27, 2000
------------------
Benefits paid to participants per the financial
statements $3,154,623
Add Amounts allocated to withdrawing participants
at December 27, 2000 357,477
Less Amounts allocated to withdrawing participants
at December 27, 1999 (1,635)
----------
Benefits paid to participants per Form 5500 $3,510,465
==========
4. Participant loans
Participants may be granted loans not to exceed the lesser of $50,000 or 50
percent of the participant's vested account balance. Participant loans bear
interest at the prime rate of interest plus 1 percent determined at the time
the loan is requested. Loans are secured by the participant's account, having
a maximum term of five years, and are recorded as participant loans in the
accompanying financial statements.
5. Reportable transactions:
There were no reportable transactions for the Plan year ended December 27, 2000.
Party-in-interest transactions
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.
6. Employer securities:
Section 407(b) of ERISA permits the Plan to hold an investment in Company stock
in excess of 10 percent of the fair market value of the Plan's assets.
Diversification
Participants who are age 55 and have 10 years of participation in the Plan are
eligible to diversify up to 25 percent of their ESOP account balance held in
Company stock.
7
7. Administrative expenses:
The administrative expenses of the Plan are paid by the Company.
8. Divestiture of subsidiary:
In 1999, VSE Corporation divested CMstat Corporation (CMstat), a wholly owned
subsidiary. An asset transfer of the participants' account balances to a new
plan adopted by CMstat was completed in February 2000.
8
VSE Corporation Employee ESOP/401(k) Plan
Schedule of assets held for investment purposes
As of December 27, 2000
Identity of issue Asset description Cost Fair value
- ----------------- ----------------- ---- ----------
The George Putnam Fund of
Boston Mutual Fund shares $ 2,154,265
The Putnam Fund for Growth
and Income* Mutual Fund shares 2,243,402
Putnam Global Growth
Fund* Mutual Fund shares 1,773,032
Putnam Voyager Fund* Mutual Fund shares 5,795,391
Putnam Diversified Income
Trust* Mutual Fund shares 543,425
Putnam American Government
Income Fund* Mutual Fund shares 37,694
Putnam Health Sciences Trust
Fund* Mutual Fund shares 399,895
Putnam Vista Fund* Mutual Fund shares 870,680
Putnam Asset Allocation:
Balanced Fund* Mutual Fund shares 211,602
VSE Corporation Common
Stock-ESOP* ** Common Stock shares $2,770,527 2,327,793
VSE Corporation Common
Stock-401(k)* Common Stock shares 602,910
-----------
17,044,259
Putnam Stable Value Fixed income investment 3,101,741
Participant Loans (interest
rates varied from 8.75% to
10.50% during 2000)* Participant loans 327,966
Life insurance policies (at cash
surrender value) Life insurance policies 1,929
------------
Total assets held for
investment purposes $20,475,895
===========
* Represents a party-in-interest.
** Represents nonparticipant-directed investments.
The accompanying notes are an integral part of this schedule.
9
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/ C. S. Weber
---------------
C. S. Weber
Executive Vice President and
Chief Financial Officer