SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended December 31, 2000 Commission File Number: 0-3676
VSE CORPORATION
(Exact Name of Registrant as Specified in its Charter)
DELAWARE 54-0649263
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
2550 Huntington Avenue
Alexandria, Virginia 22303-1499
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code (703) 960-4600
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, par value $.05 per share
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes [x] No [ ]
Aggregate market value of voting stock held by nonaffiliates of the registrant
as of March 7, 2001, was approximately $6.9 Million.
Number of shares of Common Stock outstanding as of March 7, 2001: 2,125,863.
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's Proxy Statement for the Annual Meeting of
Stockholders expected to be held on May 2, 2001, are incorporated by reference
into Part III of this report.
TABLE OF CONTENTS
Page
----
PART I
ITEM 1. Business 3
ITEM 2. Properties 8
ITEM 3. Legal Proceedings 8
ITEM 4. Submission of Matters to a Vote of Security Holders 9
Executive Officers of the Registrant 10
PART II
ITEM 5. Market for Registrant's Common Stock and Related
Stockholder Matters 11
ITEM 6. Selected Financial Data 12
ITEM 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations 13
ITEM 8. Financial Statements and Supplementary Data 20
ITEM 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure 35
PART III
ITEM 10. Directors and Executive Officers of the Registrant 36
ITEM 11. Executive Compensation 36
ITEM 12. Security Ownership of Certain Beneficial Owners and
Management 36
ITEM 13. Certain Relationships and Related Transactions 36
PART IV
ITEM 14. Exhibits, Financial Statement Schedules and Reports on
Form 8-K 37
Signatures 38
2
Forward Looking Statements
This filing contains statements which, to the extent they are not
recitations of historical fact, constitute "forward looking statements" under
federal securities laws. All such statements are intended to be subject to the
safe harbor protection provided by applicable securities laws. For discussions
identifying some important factors that could cause actual VSE Corporation
("VSE" or the "company") results to differ materially from those anticipated in
the forward looking statements contained in this statement, see VSE's "Narrative
Description of Business", "Management's Discussion and Analysis" and "Notes to
Consolidated Financial Statements". Readers are cautioned not to place undue
reliance on these forward looking statements, which reflect management's
analysis only as of the date hereof. The company undertakes no obligation to
publicly revise these forward looking statements to reflect events or
circumstances that arise after the date hereof. Readers should carefully review
the risk factors described in other documents the company files from time to
time with the Securities and Exchange Commission, including the Quarterly
Reports on Form 10-Q to be filed by the company subsequent to this Annual
Report on Form 10-K and any Current Reports on Form 8-K filed by the company.
Part I
ITEM 1. Business
(a) General Development of Business
VSE was established and incorporated in Delaware in January 1959. The
company's business operations consist of the operations of the parent company,
operations of the company's wholly owned subsidiaries and operations of the
company's divisions. Wholly owned subsidiaries include Energetics Incorporated
("Energetics"), Human Resource Systems, Inc. ("HRSI"), Ship Remediation and
Recycling, Inc. ("SRR") and VSE Services International, Inc. ("VSI").
Unincorporated divisions include BAV Division ("BAV"), Fleet Maintenance
Division ("Fleet Maintenance"), Ordnance Division ("Ordnance"), GSA Services
Division ("GSA Services"), Telecommunications Technologies Division ("TTD"), and
Value Systems Services Division ("VSS"). The term "VSE" or "company" means VSE
and its subsidiaries and divisions unless the context indicates operations of
the parent company only.
TTD was established in 2000, and GSA Services, SRR and VSI were established
in 1999. VSE also acquired certain assets from a TTD strategic partner in 2000.
The Health Care Services division of HRSI was sold in 2000 and CMstat
Corporation ("CMstat") was sold in 1999 (see Item 7. "Management's Discussion
and Analysis of Financial Condition and Results of Operations" for a discussion
of the sale of CMstat).
The company's business operations consist primarily of diversified
engineering, technical, and management services, performed on a contract basis.
Substantially all of the company's contracts are with agencies of the United
States Government (the "government") and other government prime contractors. The
company's customers also include non-government organizations and commercial
entities.
3
VSE seeks to provide its customers with competitive, cost effective
solutions to specific problems. These problems generally require a detailed
technical knowledge of materials, processes, functional characteristics,
information systems, technology and products, and an in-depth understanding of
the basic requirements for effective systems and equipment. Customers are
generally billed for a specified level-of-effort incurred in performing a
project or providing a service or, less frequently, for installed products,
systems and maintenance charges.
(b) Financial Information
VSE operations are conducted within a single industry and financial
information is presented on a company-wide basis. Financial information for the
three years ended December 31, 2000 appears in the "Consolidated Statements of
Operations" contained in this Form 10-K.
(c) Narrative Description of Business
Services and Products
VSE engineering, technical, management and information technology services
include a broad array of capabilities and resources used in program planning;
design and engineering, including prototype development; ship reactivation and
transfer support; logistics management; ship maintenance, repair, overhaul
planning and follow-on technical support; ship dismantlement and recycling
services; the design and installation of intelligent conference rooms; office
automation systems and support; training; technology research, development and
demonstration programs involving energy conservation and efficiency, advanced
technology transfers, and feasibility, assessment and development programs.
Typical engineering and technical services projects include sustaining
engineering support for military vehicles and combat trailers; depot repair
operations; logistics management support; machinery condition analysis;
specification preparation for ship alterations and repairs; ship force crew
training; ship dismantlement and ship sales; energy conservation and advanced
technology demonstration projects; technical data package preparation;
multimedia, computer LAN, and telecommunications systems; cross-platform
technical data, product data and technical manual support; bar coding and
inventory application; and database management and control.
Contracts
Depending on solicitation requirements and other factors, VSE offers its
professional and technical services and products through various competitive
contract arrangements and business units which are responsive to customer
requirements and which may also provide an opportunity for diversification. Such
arrangements include prime contracts, subcontracts, cooperative arrangements,
joint ventures, dedicated ventures, dedicated cost centers (divisions) and
subsidiaries.
4
Substantially all of the company's revenues are derived from contract
services performed for the government. The U.S. Navy is VSE's largest single
customer. Other significant customers include: the U.S. Army, the U.S. Postal
Service, and the Department of Energy. The company's customers also include
various other government agencies, non-government organizations, and commercial
entities.
VSE Revenues by Customer
(Dollars in Thousands)
2000 1999 1998
Customer Revenues % Revenues % Revenues %
- -------- -------- - -------- - -------- -
U.S. Navy $ 87,828 71.8 $109,993 69.9 $128,773 72.7
U.S. Army 9,497 7.8 19,468 12.4 19,577 11.1
All other government 23,457 19.2 27,558 17.5 27,991 15.8
Commercial 1,487 1.2 335 0.2 733 0.4
-------- ----- -------- ----- -------- -----
Total $122,269 100.0 $157,354 100.0 $177,074 100.0
======== ===== ======== ===== ======== =====
The government's procurement practices in recent years have tended toward
the bundling of various work efforts under large comprehensive ("omnibus")
management contracts. As a result, the growth opportunities available to the
company will probably continue to occur in large unpredictable increments. The
company has elected to pursue these larger efforts by assembling teams of
subcontractors and forming joint venture partnerships to offer the range of
technical competencies required by these omnibus contracts. The company has also
elected to pursue more of its contract work through its operating divisions and
subsidiaries to focus on particular lines of work or specific customer bases.
As a result of the bundling trend described above, the company has several
divisions for which revenues are derived predominantly from one major contract
effort. During 2000, the company's four largest contracts accounted for
approximately 75% of total revenues. The company's largest contract, performed
by BAV, is with the U.S. Navy and accounted for approximately 41% and 50% of
consolidated revenues in 2000 and 1999, respectively. This contract is a ten
year contract awarded in 1995, and it has the potential to generate total
revenues of over one billion dollars from 1995 through 2005. Other major
contracts include U.S. Navy contracts performed by VSE (parent company) and
Ordnance, and a U.S. Army contract performed by VSE (parent company).
The company's contracts with the government are typically performed under
cost plus fee, time and materials, or fixed price contracts. Under cost plus fee
contracts, the customer reimburses the company for its allowable costs and pays
a fee as determined by the contract terms. Under time and materials contracts,
the customer pays the company contract specific hourly rates for labor services
and reimburses the company for the cost of materials. Under fixed price
contracts, the customer pays a contract specific price for services or products.
Some of the contracts permit the contracting agency to issue delivery orders or
task orders in an expeditious manner to satisfy relatively short-term
requirements for engineering and technical services. The services ordered
pursuant to such arrangements are normally performed and completed within one
year. During 2000, the company provided services to the government and other
customers under approximately 200 contracts and approximately 800 delivery
orders or task orders.
5
Backlog
During 2000 and 1999, VSE was awarded contracts and delivery orders having
potential ceiling values of approximately $119 million and $115 million,
respectively.
VSE's funded backlog of contract work as of December 31, 2000, 1999 and
1998 was approximately $81 million, $108 million and $122 million, respectively.
Funded backlog is defined as orders for services that have not been fully
rendered and for which funding has been provided either at the time of award or
thereafter. Substantially all the funded backlog is expected to be completed
within one year.
The excess of unfulfilled contract estimates over the incremental funding
authorized represents an unfunded backlog. Based on the total estimated value of
contracts actually awarded, the company's potential revenues for work remaining
to be performed under existing contracts (both funded and unfunded backlog) was
approximately $804 million, $946 million and $1 billion, as of December 31,
2000, 1999 and 1998, respectively. The company has no reasonable basis on which
to determine when or if such unfunded backlog will be funded. Because of
uncertainties associated with changing program requirements and the ultimate
availability of funds, VSE believes that measurements of unfunded backlog are of
limited use in evaluating future workload.
As of December 31, 2000, VSE had proposals pending for engineering services
contracts covering approximately $300 million in services for the Department of
Defense or other government agencies or prime contractors. If these contracts
are awarded to VSE, resulting ordering periods could extend through 2006. There
is no assurance that VSE will be the successful bidder for any of these
contracts. Additionally, there can be no assurance that contracts awarded will
result in revenues to VSE because (a) contract awards may be rescinded as a
result of the government's bid protest procedures, (b) contracts may not be
funded at the nominal amounts cited in competitive bid announcements and (c)
contracts when funded may be terminated at the convenience of the government.
Marketing
VSE marketing activities are conducted by its professional staff of
engineers, analysts, program managers, contract administrators and other
personnel, with these activities centrally coordinated through the company's
Strategic Planning and Business Development Department. Information concerning
new programs and requirements becomes available in the course of contract
performance, through formal and informal briefings, from participation in
professional organizations, and from literature published by the government,
trade associations, professional organizations and commercial entities.
Personnel
VSE services are provided by a staff of professional, scientific, and
technical personnel having high levels of education, experience, training and
skills. As of February 2001, VSE employed approximately 600 employees,
including approximately 150 part-time personnel.
6
Principal categories of VSE personnel include (a) engineers, scientists and
technicians in mechanical, electrical, electronic, chemical, industrial, energy
and environmental services, marine and ocean engineering disciplines, (b)
information technology professionals in computer systems, applications and
products, configuration, change and data management disciplines, (c) technical
editors and writers, (d) multimedia and computer design engineers, and (e)
graphic designers and technicians. The expertise required by VSE customers also
frequently includes knowledge of government administrative procedures. Many VSE
employees have had experience as government employees or have served in the U.S.
armed forces. The company considers its relationships with employees to be
excellent.
Competition and Risks
Competition. The professional and technical services industry in which VSE
is engaged is very competitive. There are a substantial number of other
organizations, including large, diversified firms with greater financial
resources and larger technical staffs, which are capable of providing
essentially the same services as those offered by VSE. Such companies may be
publicly owned or privately held and may be divisions of much larger organiza-
tions including large manufacturing corporations. Competition in the government
contract business has intensified in recent years due to declining government
budgets.
Government agencies have placed an increased emphasis on awarding contracts
of the types performed by VSE on a competitive basis as opposed to a non-
competitive basis. All significant contracts currently being performed by VSE
were either initially awarded on a competitive basis or have been renewed at
least once on a competitive basis. Government agencies also order work through
contracts awarded by the General Services Administration ("GSA") which provides
a schedule of services at fixed prices which may be ordered outside of the
solicitation process. The company has been awarded four separate GSA schedule
contracts for various classes of services, but there is no assurance regarding
the level of work under these contract arrangements.
It is not possible to predict the extent and range of competition that VSE
will encounter as a result of changing economic or competitive conditions,
customer requirements, or technological developments. VSE believes the principal
competitive factors for the professional and technical services business in
which it is engaged are technical and financial qualifications, quality and
innovation of services and products, past performance and low price.
Risks. In recent years, the government has initiated a series of changes
designed to improve and streamline its acquisition policies and procedures. Such
changes include an emphasis on very large contracts, which may make it more
difficult for VSE to qualify as a potential bidder; past performance, which may
be used to exclude entrance into new government markets; and multiple-award
schedules, which may result in unequal contract awards between successful
contractors.
7
VSE's business with the government is subject to the risk that one or more
of its potential contracts or contract extensions may be awarded by the
contracting agency to a "small and disadvantaged" or minority-owned business
pursuant to "set-aside" programs administered by the Small Business
Administration or may be bundled into omnibus contracts for very large
businesses. In addition, government contract business is subject to funding
delays, extensions, and moratoriums caused by political and administrative
disagreements. To date, the effect of such negotiations and disagreements on the
company has not been material; however, no assurances can be given about such
risks with respect to future years.
Government contracts are subject to termination at the government's
convenience, which means that the government may terminate the contract at any
time, without cause. If a government contract is terminated for convenience, the
contractor is generally reimbursed for its allowable costs to the date of
termination and is paid a proportionate amount of the stipulated profit or fee
for the work actually performed. VSE has not suffered any material losses or
disruptions of its business due to government terminations for convenience.
VSE's business is subject to the risks arising from global economic
conditions associated with potential foreign customers served through the
company's contracts with the U.S. Government. For example, economic slowdowns in
certain countries served under the BAV contract could potentially affect BAV
sales. In addition, the company's subsidiary VSI is also expected to serve
foreign customers on a direct sales basis and may be subject to such economic
slowdowns.
ITEM 2. Properties
VSE's principal executive and administrative offices are located in a five
story building in Alexandria, Virginia, leased by VSE through April 30, 2003.
This building contains approximately 108,000 square feet of engineering, shop,
and administrative space. VSE also provides services and products from
approximately 11 U.S. branch offices located at or near customer sites to
facilitate communications and enhance project performance. Branch offices are
generally occupied under short term leases and currently include an aggregate of
approximately 195,000 square feet of office and warehouse space. VSE employees
often provide services at customer facilities, limiting VSE's requirement for
additional space. BAV provides services from several locations outside of the
United States (generally at foreign shipyards); these services are often of
short duration based on "tiger team" or "as-ordered" requirements.
VSE owns and operates an engineering test center in Ladysmith, Virginia,
consisting of approximately 44 acres of land and an improved storage and vehicle
maintenance facility. This facility has been used by VSE to test military and
commercial equipment for which VSE provides system technical support or other
engineering services and to supplement Alexandria, Virginia, office and shop
facilities.
ITEM 3. Legal Proceedings
None.
8
ITEM 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of stockholders, through the
solicitation of proxies or otherwise, during the three month period ended
December 31, 2000.
9
EXECUTIVE OFFICERS OF THE REGISTRANT
The following table sets forth information concerning the executive
officers of the Registrant as of March 7, 2001. Each person named has served
as an executive officer of VSE, or has served in a similar executive capacity in
VSE, for more than the past five years, except for Mr. Todd.
The executive officers are chosen annually to serve until the first meeting
of the Board of Directors following the next annual meeting of stockholders and
until their successors are elected and have qualified, or until death,
resignation or removal, whichever is sooner.
Name Age Position with Registrant
- ---- --- ------------------------
Byron S. Bartholomew 73 Executive Vice President, Business
Development
Donald M. Ervine 64 Chairman and Chief Executive Officer
Michael E. Hamerly 55 Senior Vice President and General Manager,
anager Fleet Maintenance and Ordnance Divisions
James M. Knowlton 58 Executive Vice President and President,
BAV Division, President, Ship Remediation
and Recycling, Inc., President, VSE
Services International, Inc., General
Manager, Telecommunications Technologies
Division
Thomas R. Loftus 45 Senior Vice President and Comptroller
James M. Todd* 54 President and Chief Operating Officer
Jayne M. Tuohig 54 Senior Vice President and General Manager,
VSS and Postal Divisions
John J. Werbowski 51 Senior Vice President, Strategic Planning
and New Business Development
Craig S. Weber 56 Executive Vice President, Chief Financial
Officer and Secretary
* Prior to joining VSE in November 2000, Mr. Todd served as Vice President of
the Industrial Consulting and Systems Group of American Management Systems,
Inc., where he worked as a program manager since 1993. He has worked as a
program manager in industry since 1991 and, before that, as a program manager
for the U.S. Navy during a distinguished career from 1969 to his retirement as
a Captain in 1991.
10
PART II
ITEM 5. Market for Registrant's Common Stock and Related Stockholder
Matters
(a) Market Information
The company's common stock ($.05 par value) is traded in the Nasdaq
National Market System, trading symbol: VSEC, Newspaper listing: VSE.
The following table sets forth the range of high and low sales price
information on VSE common stock for each quarter and annually during the last
two years based on information reported by the Nasdaq National Market System.
Quarter Ended High Low Dividends
------------- ---- --- ---------
2000:
March 31 $ 9.00 $6.25 $.04
June 30 8.125 5.50 .04
September 30 7.188 5.75 .04
December 31 8.00 5.125 .04
For the Year $ 9.00 $5.125 $.16
1999:
March 31 $11.75 $8.25 $.036
June 30 11.00 6.75 .036
September 30 10.50 8.125 .036
December 31 9.875 7.125 .036
For the Year $11.75 $6.75 $.144
(b) Holders
There were about 1,400 stockholders of VSE common stock as of March 7,
2001, consisting of approximately 300 stockholders of record plus the number of
beneficial owner proxy sets provided in connection with VSE's 2001 Annual
Meeting of Stockholders to (a) brokers, banks, and nominees and (b) participants
in the VSE Corporation Employee ESOP/401(k) Plan.
(c) Dividends
Cash dividends were declared at the rate of $.16 per share during 2000 and
$.144 per share during 1999. Pursuant to its bank loan agreement (see Note 4 of
"Notes to Consolidated Financial Statements"), the payment of cash dividends by
VSE is subject to annual rate restrictions. VSE has paid cash dividends each
year since 1973.
11
ITEM 6. Selected Financial Data
- ------------------------------------------------------------------------------------------------
(In thousands, except per share data)
2000 1999 1998 1997 1996
---- ---- ---- ---- ----
Revenues, principally from contracts . . . . . $122,269 $157,354 $177,074 $152,522 $115,592
======== ======== ======== ======== ========
Income from continuing operations . . . . . . $ 1,385 $ 2,364 $ 3,015 $ 2,566 $ 1,942
Loss from discontinued operations . . . . . - (256) (1,420) (4,013) (21)
Loss on disposal of discontinued
operations . . . . . . . . . . . . . . . . (417) (574) - - (179)
-------- -------- -------- -------- --------
Net income (loss) . . . . . . . . . . . $ 968 $ 1,534 $ 1,595 $ (1,447) $ 1,742
======== ======== ======== ======== ========
Basic earnings per common share:
Income from continuing operations . . . . . $ .65 $ 1.12 $ 1.42 $ 1.21 $ .89
Loss from discontinued operations . . . . . (.19) (.39) (.67) (1.89) (.09)
-------- -------- -------- -------- --------
Net income (loss) . . . . . . . . . . . $ .46 $ .73 $ .75 $ (.68) $ .80
======== ======== ======== ======== ========
Diluted earnings per common share:
Income from continuing operations . . . . . $ .65 $ 1.12 $ 1.42 $ 1.21 $ .88
Loss from discontinued operations . . . . . (.19) (.39) (.67) (1.89) (.09)
-------- -------- -------- -------- --------
Net income (loss) . . . . . . . . . . . .46 $ .73 $ .75 $ (.68) $ .79
======== ======== ======== ======== ========
Working Capital . . . . . . . . . . . . . . . $ 8,364 $ 7,078 $ 5,801 $ 6,258 $ 9,839
======== ======== ======== ======== ========
Total assets . . . . . . . . . . . . . . . . . $ 31,523 $ 31,250 $ 47,248 $ 43,413 $ 49,353
======== ======== ======== ======== ========
Long-term debt . . . . . . . . . . . . . . . . $ - $ - $ 1,503 $ 3,444 $ 5,384
======== ======== ======== ======== ========
Stockholders' investment . . . . . . . . . . . $ 15,793 $ 15,145 $ 13,852 $ 12,481 $ 14,595
======== ======== ======== ======== ========
Cash dividends per common share . . . . . . . $ .16 $ .144 $ .144 $ .144 $ .138
======== ======== ======== ======== ========
Per share amounts have been adjusted to reflect stock splits effected in 1996
and 1997.
This consolidated summary of selected financial data should be read in
conjunction with the consolidated financial statements and related notes
included elsewhere in this Form 10-K.
12
ITEM 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations
The term "VSE" or "company" means VSE and its subsidiaries and divisions
unless the context indicates operations of the parent company only. VSE's
business operations consist of the operations of the parent company, operations
of the company's wholly owned subsidiaries and operations of the company's
divisions. Wholly owned subsidiaries include Energetics Incorporated
("Energetics"), Human Resource Systems, Inc. ("HRSI"), Ship Remediation and
Recycling, Inc. ("SRR") and VSE Services International, Inc. ("VSI").
Unincorporated divisions include BAV Division ("BAV"), Ordnance Division
("Ordnance"), Value Systems Services Division ("VSS"), Fleet Maintenance
Division ("Fleet Maintenance"), Telecommunications Technologies Division
("TTD") formed in September 2000, and GSA Services Division ("GSA Services").
The company is engaged principally in providing engineering, logistics,
management and technical services to the U.S. Government (the "government") and
other government prime contractors. All significant intercompany transactions
have been eliminated in consolidation. Certain prior year balances have been
reclassified for comparative purposes.
Results of Operations
Revenues
The following table shows the revenues from operations of VSE, its
subsidiaries and divisions, and such revenues as a percent of total revenues:
Revenues from Operations
(dollars in thousands)
2000 1999 1998
Company or Business Unit Revenues % Revenues % Revenues %
- ------------------------ -------- - -------- - -------- -
VSE (parent company). . . . . $ 39,165 32.0 $ 44,337 28.1 $ 51,972 29.3
BAV . . . . . . . . . . . . . 49,801 40.7 78,791 50.1 93,564 52.8
Ordnance . . . . . . . . . . 11,170 9.2 6,116 3.9 1,531 0.9
Energetics . . . . . . . . . 10,546 8.6 11,683 7.4 11,984 6.8
VSS . . . . . . . . . . . . . 4,233 3.5 10,271 6.5 10,182 5.8
HRSI . . . . . . . . . . . . 3,947 3.2 5,770 3.7 7,841 4.4
Fleet Maintenance . . . . . . 1,224 1.0 273 0.2 - 0.0
SRR . . . . . . . . . . . . . 1,104 0.9 - 0.0 - 0.0
TTD . . . . . . . . . . . . . 813 0.7 - 0.0 - 0.0
GSA Services . . . . . . . . 265 0.2 107 0.1 - 0.0
VSI . . . . . . . . . . . . . 1 0.0 6 0.0 - 0.0
-------- ----- -------- ----- -------- -----
$122,269 100.0 $157,354 100.0 $177,074 100.0
======== ===== ======== ===== ======== =====
VSE's largest customer is the U.S. Department of Defense ("Defense"),
including agencies of the U.S. Army, Navy and Air Force. The company's revenues
have historically been subject to annual fluctuations resulting from changes in
the level of Defense spending. Accordingly, there can be no assurance that
future fluctuations in Defense spending will not have a material impact on the
company's results of operations or financial position.
13
Substantially all of the company's revenues depend on the ability of the
company to win new contracts and on the amount of work ordered by the government
under the company's existing contracts. The company's ability to win new
contracts is affected by government acquisition policies and procedures,
including government procurement practices that in recent years have tended
toward bundling work efforts under large comprehensive ("omnibus") management
contracts. This emphasis on large contracts presents challenges to winning new
contract work, including making it more difficult for the company to qualify as
a bidder, increases in the level of competition due to the award of fewer
contracts, and forcing the company into competition with larger organizations
that have greater financial resources and larger technical staffs. Other
government procurement practices that can affect the company's revenues are
the use of past performance criteria that may preclude entrance into new
government markets and government social programs that limit contract work to
small, woman, or minority owned businesses. Additional risk factors that could
potentially affect the company's revenues are the government's right to
terminate contracts for convenience, the government's right to not exercise
all of the option periods on a contract, and funding delays caused by government
political or administrative actions. In 2000, 1999, and 1998, the company did
not experience any terminations of contracts for the convenience of the
government nor any non-exercise of option periods on current contracts which
were material to the company's results of operations or financial position.
Several of the company's operating divisions were formed in recent years
to bid on and perform contract work that had been traditionally performed by VSE
(parent company). The formation of these divisions has enabled the company to
use an operating structure that is better suited to perform certain types of
contract work. The company anticipates that it will continue using its operating
divisions to bid and perform new contract work to better serve the needs of
customers. As the use of operating divisions for new contracts increases, the
company expects that the revenue of VSE (the parent company) will be reduced in
the future as parent company contracts are replaced by operating division
contracts. Management believes that the use of operating divisions to perform
future work and the associated improvements in servicing customers will better
position the consolidated entity for future revenue growth.
BAV Contract. VSE's BAV Division has a contract with the U.S. Navy to
provide engineering, technical and logistical support services associated with
the sale, lease, or transfer of Navy ships to foreign governments. The contract
accounted for approximately 41% and 50% of consolidated revenues from operations
during 2000 and 1999, respectively. The level of revenues generated by this
contract varies depending on a number of factors including the timing of ship
transfers and associated support services ordered by foreign governments and
economic conditions of potential customers worldwide. The decline in the
company's revenues during 2000 as compared to 1999 and in 1999 as compared to
1998 is primarily due to the decline in services ordered through this contract.
The company has experienced significant quarterly and annual revenue fluctua-
tions and anticipates that future quarterly and annual revenues will be subject
to significant variations primarily due to changes in the level of activity on
this contract.
VSS Contract. VSE's VSS Division had a U.S. Navy contract to provide data
management and documentation, logistics support services and configuration
management services to the Naval Air Systems command. VSS began work on this
14
contract in 1994 and the last option year was scheduled to end in 1999. The
government extended the contract through April 28, 2000. VSS was not awarded
the successor contract and work on this contract effort terminated as of April
28, 2000. The contract accounted for a majority of the work in the VSS Division
during the period from 1995 through 1999, but represented less than 10% of the
company's revenues during this time. The loss of revenues associated with the
expiration of this contract contributed to the decline in revenues in 2000 as
compared to prior years.
Income from Continuing Operations Before Income Taxes
The following table shows consolidated revenues and income from continuing
operations before income taxes of VSE, other items of income and expense, and
such amounts as a percent of revenues.
Income from Continuing Operations Before Income Taxes
(dollars in thousands)
Description 2000 % 1999 % 1998 %
- ----------- ---- - ---- - ---- -
Revenues . . . . . . . $122,269 100.0 $157,354 100.0 $177,074 100.0
Costs and expenses . . 119,937 98.1 152,684 97.0 171,510 96.9
-------- ----- -------- ----- -------- -----
Gross profit . . . . . 2,332 1.9 4,670 3.0 5,564 3.1
Selling, general and
administrative expenses 239 0.2 684 0.4 592 0.3
Interest (income) expense (98) (0.1) 87 0.1 24 0.0
-------- ----- -------- ----- -------- -----
Income from continuing
operations before
income taxes . . . . $ 2,191 1.8 $ 3,899 2.5 $ 4,948 2.8
======== ===== ======== ===== ======== =====
Costs and expenses of operations, as a percentage of revenues, increased
slightly in 2000 as compared to 1999 and 1998. This increase on a percentage
basis is primarily attributable to the decrease in revenues while a portion of
the costs and expenses of operating the company remain fixed. Other factors that
affect the percentage of costs and expenses to revenues include (a) differences
between costs incurred and costs billable (whether they may be billed based on
contract provisions), (b) the effects of increases or decreases in facility and
equipment lease renewals, fringe benefit programs and similar period expenses,
(c) costs associated with contract start-up and termination phases, (d) narrower
profit margins on new work due to increased competition, (e) increased labor
costs reflecting a more competitive marketplace for attracting and retaining our
employees, (f) the amount of work performed on certain contracts as a percentage
of total revenues, (g) the timing of contract award fees and (h) effective
project and cost management.
Selling, general and administrative expenses as a percentage of revenues
decreased slightly in 2000 as compared to 1999 and increased slightly in 1999 as
compared to 1998. Selling, general and administrative expenses will vary from
year to year due to various types of nonreimbursable costs.
The application of earnings to reduce average bank borrowings and invest
short term cash surpluses, reduced receivables financing requirements due to the
reduction in revenues, and improved cash collection cycles on government
15
contracts resulted in interest income in 2000 as compared to interest expense in
1999. Interest expense as a percentage of revenues increased slightly in 1999 as
compared to 1998 due to an increase in average levels of bank debt resulting
from the fluctuation in activity among various different contracts.
Discontinued Operations
On May 21, 1999, the company sold all of its interests in the SPS
segment. This entailed selling its CMstat subsidiary for an $800 thousand
promissory note. While the sale was a divestiture for legal and tax purposes,
for accounting purposes, the sale was not originally provided discontinued
operations treatment under Staff Accounting Bulletin No. 30 "Accounting for
Divestiture of a Subsidiary or Other Business Operation"("SAB No. 30") since the
sale did not transfer the risks of ownership because the sales price was
primarily dependent on the buyer's ability to repay the promissory note.
As of December 31, 2000, the company has determined that the promissory
note acquired from the sale of its CMstat subsidiary is not collectible and has
written off the remaining balance. Accordingly, the consolidated financial
statements have been restated to reflect the disposition of its CMstat
subsidiary as discontinued operations. The revenues, costs and expenses, assets
and liabilities and cash flows from the CMstat subsidiary have been excluded
from the respective captions in the Consolidated Statement of Operations,
Balance Sheets, Cash Flows and related footnotes.
Financial Condition
VSE's financial condition did not change materially during 2000. The
company's largest asset is its accounts receivable and its largest liabilities
are its accounts payable and accrued expenses. These assets and liabilities
remained substantially unchanged at December 31, 2000 as compared to December
31, 1999. The increase in total stockholder's investment in 2000 resulted from
earnings and dividend activity.
Liquidity and Capital Resources
A net increase in cash and cash equivalents of $585 thousand during 2000
resulted from approximately $1.8 million provided by continuing operations,
approximately $1.1 million used in investing activities, $311 thousand used in
financing activities, and $248 thousand provided by discontinued operations.
Significant investing activities included $700 thousand associated with the
acquisition of certain contract and marketing rights and $424 thousand used to
purchase property and equipment. Financing activities consisted primarily of
$331 thousand used to pay cash dividends. Cash flows provided by continuing
operations decreased in 2000 as compared to 1999 due primarily to the changes in
the levels of accounts receivable and accounts payable on the BAV contract in
2000 as compared to 1999, as well as a decrease in the company's net income.
The company's level of net cash and cash equivalents did not change
significantly during 1999. Approximately $12.2 million in net cash was provided
by continuing operations. Discontinued operations used approximately
$8 million, financing activities used approximately $3.1 million, and
16
investing activities used approximately $1.1 million. Significant financing
activities included decreases in long-term bank loans and the current portion
of long-term bank debt of approximately $1.5 million and $1.3 million,
respectively. Significant investing activities included approximately $1.1
million associated with the purchase of property and equipment, primarily
computer equipment. Cash flows provided by continuing operations increased in
1999 as compared to 1998 due primarily to changes in the levels of accounts
receivable and accounts payable in 1999 resulting from a decrease in revenues
on the BAV contract as compared with the previous year.
A net increase in cash and cash equivalents of $34 thousand during 1998
resulted from approximately $3 million provided by operations, approximately
$1.5 million used in investing activities and approximately $1.4 million used
in financing activities. Significant financing activities included a decrease
in long-term bank loans of approximately $1.9 million. Significant investing
activities included approximately $1.5 million associated with the purchase of
property and equipment, primarily computer equipment.
The company's internal sources of liquidity result primarily from operating
activities, specifically from changes in the level of revenues and associated
accounts receivable from period to period and from profitability. Significant
increases or decreases in revenue and accounts receivable can cause significant
increases or decreases in internal liquidity. The decrease in revenues and
associated accounts receivable in the current year has resulted in an increase
in internally generated cash flows. Accounts receivable arise primarily from
billings made by the company to the government or other government prime
contractors for services rendered and generally do not present collection
problems. The company has made use of recent electronic billing and payment
initiatives implemented by the government to decrease the time to collect billed
accounts receivable, thereby improving internal liquidity. Accounts receivable
levels can also be affected by contract retainages, start-up and termination
costs associated with new or completed contracts, and differences between the
provisional billing rates authorized by the government compared to the costs
actually incurred by the company. Internal liquidity is also affected by the
acquisition of capital assets for office and computer support and by the payment
of cash dividends. Purchases of capital assets for office and computer support
have not varied significantly in recent years.
VSE's external sources of liquidity consist of a revolving bank loan
agreement that provides loan financing based on the company's accounts
receivable. (See Note 4 of "Notes to Consolidated Financial Statements".) The
bank financing complements the internal sources of liquidity by providing
increasing levels of borrowing capacity as accounts receivable levels increase.
The bank loan agreement provided loan financing up to a maximum commitment of
$15 million dollars as of December 31, 2000. This loan agreement replaced the
previous loan agreement that had a maximum commitment of $30 million dollars.
The company determined that the new loan agreement was adequate to cover current
and future liquidity requirements.
Performance of work under the BAV contract has the potential to cause
substantial requirements for cash; however, management believes that the cash
flows from future operations and the bank loan commitment are adequate to meet
current operating cash requirements.
17
Cash dividends were declared at the rate of $.16 per share during 2000 and
$.144 per share during 1999 and 1998. Pursuant to its bank loan agreement (see
Note 4 of "Notes to Consolidated Financial Statements"), the payment of cash
dividends by VSE is subject to annual rate restrictions. VSE has paid cash
dividends each year since 1973.
Inflation and Pricing
Most of the contracts performed by VSE provide for estimates of future
labor costs to be escalated for any option periods provided by the contracts,
while the non-labor costs included in such contracts are normally considered
reimbursable at cost. VSE property and equipment consists principally of
computer systems equipment and furniture and fixtures. The overall impact of
inflation on replacement costs of such property and equipment is expected to be
insignificant.
Forward-Looking Disclosures
U. S. Postal Service Contract
VSE had a contract to provide engineering support services to the U.S.
Postal Service. The last option year on this contract was scheduled to end
December 31, 2000. The contract was extended through January 2001. VSE was not
awarded the successor contract, and work on this contract effort terminated as
of January 31, 2001. Revenues on this contract represented approximately 8% of
the company's revenues during 2000. The company's future revenues will be
reduced by the loss of revenues associated with the expiration of this contract.
New Business
VSE has begun several new business initiatives during 2000 and 1999. The
company expects each of these new business initiatives to contribute to future
revenue growth.
In August 2000, VSE formed TTD to continue a strategy to support customers
with effective knowledge management and information technology solutions. In
December 2000, VSE invested $960 thousand in the acquisition of certain contract
and marketing rights to enhance TTD's growth opportunities. TTD markets the
company's growing capability to provide customers with the latest products,
services, and support in network, multimedia, and audio-visual technology. TTD
specializes in maintaining and staffing products and services to create state of
the art, network and multimedia technology systems. This includes "turnkey"
design, installation, management and support for a wide variety of voice, data,
multimedia and related projects.
In August 1999, VSE formed VSI to expand VSE's international presence and
perform services for foreign governments and commercial customers similar to the
services it has traditionally provided in the United States.
In June 1999, VSE formed SRR to pursue business opportunities associated
with dismantling ships that are no longer usable. SRR is a partner in a joint
venture that was awarded a contract associated with a new government program to
18
dismantle and recycle inactive U.S. Navy ships. The contract requires the joint
venture to dismantle U.S. Navy ships and recover costs by selling salvageable
materials and parts. Work on this contract began in February 2000.
In January 1999, VSE formed GSA Services to bid on and perform work issued
through the government's Federal Supply Schedule Program. Services are performed
under these schedules primarily by other VSE divisions and subsidiaries. VSE's
divisions and subsidiaries performed approximately $1.6 million and $161
thousand of services for GSA Services in 2000 and 1999, respectively. These
amounts are included in the revenues of the divisions or subsidiaries that
performed the services.
Quantitative and Qualitative Disclosures about Market Risk
Global Economic Conditions
VSE's business is subject to the risks arising from global economic
conditions associated with potential foreign customers served through VSE's
contracts with the U.S. Government. For example, an economic slowdown in
countries served under the BAV contract could potentially affect BAV sales.
Management is unable to predict what, if any, impact such conditions may have on
the company's financial position or results of operations.
Derivative Instruments
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities" ("SFAS No. 133"). SFAS No. 133 establishes accounting
and reporting standards for derivative instruments, including certain derivative
instruments embedded in other contracts (collectively referred to as
derivatives), and for hedging activities. It requires that an entity recognize
all derivatives as either assets or liabilities in the statement of financial
position and measure those instruments at fair value. In June 1999, the
effective date of SFAS No. 133 was amended to be effective for all fiscal
quarters of all fiscal years beginning after June 15, 2000 by Statement of
Financial Accounting Standards No. 137, "Accounting for Derivative Instruments
and Hedging Activities Deferral of Effective Date of FASB Statement No. 133".
The Company does not use derivative instruments. The aggregate fair value of
the company's financial instruments approximates the carrying value at December
31, 2000.
19
ITEM 8. Financial Statements and Supplementary Data
Index To Financial Statements
Page
----
Report of Independent Public Accountants 21
Consolidated Balance Sheets as of December 31, 2000 and 1999 22
Consolidated Statements of Operations for the years ended
December 31, 2000, 1999 and 1998 23
Consolidated Statements of Stockholders' Investment
for the years ended December 31, 2000, 1999 and 1998 24
Consolidated Statements of Cash Flows for the years ended
December 31, 2000, 1999 and 1998 25
Notes to Consolidated Financial Statements 26
20
Report of Independent Public Accountants
To the Stockholders of VSE Corporation:
We have audited the accompanying consolidated balance sheets of VSE
Corporation (a Delaware corporation) and subsidiaries as of December 31, 2000
and 1999, and the related consolidated statements of operations, stockholders'
investment and cash flows for the three years ended December 31, 2000. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements 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 consolidated financial statements referred to above
present fairly, in all material respects, the financial position of VSE
Corporation as of December 31, 2000 and 1999, and the results of its operations
and its cash flows for the three years ended December 31, 2000 in conformity
with accounting principles generally accepted in the United States.
ARTHUR ANDERSEN LLP
Vienna, Virginia
February 23, 2001
21
VSE Corporation and Subsidiaries
Consolidated Balance Sheets As of December 31,
- -----------------------------------------------------------------------------
(in thousands, except share amounts)
2000 1999
---- ----
Assets
Current assets:
Cash and cash equivalents . . . . . . . . . . . . . . . $ 647 $ 62
Accounts receivable, principally
U.S. Government, net . . . . . . . . . . . . . . . . . 19,215 19,361
Deferred tax assets . . . . . . . . . . . . . . . . . . 853 927
Other current assets . . . . . . . . . . . . . . . . . . 1,533 974
------- -------
Total current assets . . . . . . . . . . . . . . . . 22,248 21,324
Property and equipment, net . . . . . . . . . . . . . . . 3,336 4,377
Deferred tax assets . . . . . . . . . . . . . . . . . . . 847 728
Intangible assets, net . . . . . . . . . . . . . . . . . . 2,134 1,267
Note receivable from discontinued operations . . . . . . . - 665
Other assets . . . . . . . . . . . . . . . . . . . . . . . 2,958 2,889
------- -------
Total assets . . . . . . . . . . . . . . . . . . . . $31,523 $31,250
======= =======
Liabilities and Stockholders' Investment
Current liabilities:
Accounts payable . . . . . . . . . . . . . . . . . . . . $ 8,678 $ 8,193
Accrued expenses . . . . . . . . . . . . . . . . . . . . 5,121 5,977
Dividends payable . . . . . . . . . . . . . . . . . . . 85 76
------- -------
Total current liabilities . . . . . . . . . . . . . 13,884 14,246
Deferred compensation . . . . . . . . . . . . . . . . . . 1,846 1,859
------- -------
Total liabilities . . . . . . . . . . . . . . . . . 15,730 16,105
------- -------
Commitments and contingencies
Stockholders' investment:
Common stock, par value $.05 per share, authorized
5,000,000 shares; issued 2,197,863 in 2000 and
2,194,289 in 1999 . . . . . . . . . . . . . . . . . . 110 110
Paid-in surplus . . . . . . . . . . . . . . . . . . . . 3,914 3,894
Retained earnings . . . . . . . . . . . . . . . . . . . 12,561 11,933
Treasury stock, at cost (72,000 shares) . . . . . . . . (792) (792)
------- -------
Total stockholders' investment . . . . . . . . . . . 15,793 15,145
------- -------
Total liabilities and stockholders' investment . . . $31,523 $31,250
======= =======
See accompanying notes
22
VSE Corporation and Subsidiaries
Consolidated Statements of Operations For the years ended December 31,
- -----------------------------------------------------------------------------
(in thousands, except share amounts)
2000 1999 1998
---- ---- ----
Revenues, principally from contracts . . . . $ 122,269 $ 157,354 $ 177,074
Costs and expenses of contracts . . . . . . 119,937 152,684 171,510
--------- --------- ---------
Gross profit . . . . . . . . . . . . . . . . 2,332 4,670 5,564
Selling, general and administrative expenses 239 684 592
Interest (income) expense . . . . . . . . . (98) 87 24
--------- --------- ---------
Income from continuing operations before
income taxes . . . . . . . . . . . . . . . 2,191 3,899 4,948
Provision for income taxes . . . . . . . . . 806 1,535 1,933
--------- --------- ---------
Income from continuing operations. . . . . . 1,385 2,364 3,015
Discontinued operations, net of tax:
Loss from operations (net of tax benefit
of $145 in 1999 and $842 in 1998) . . . - (256) (1,420)
Loss on disposal (net of tax benefit
of $271 in 2000 and $524 in 1999) . . . (417) (574) -
--------- --------- ---------
Net income $ 968 $ 1,534 $ 1,595
========= ========= =========
Basic earnings per share:
Income from continuing operations . . . . $ 0.65 $ 1.12 $ 1.42
Loss from discontinued operations . . . . (0.19) (0.39) (0.67)
--------- --------- ---------
Net income . . . . . . . . . . . . . . . . . $ 0.46 $ 0.73 $ 0.75
========= ========= =========
Basic weighted average shares outstanding 2,122,564 2,115,569 2,126,151
========= ========= =========
Diluted earnings per share:
Income from continuing operations . . . . $ 0.65 $ 1.12 $ 1.42
Loss from discontinued operations . . . . (0.19) (0.39) (0.67)
--------- --------- ---------
Net income . . . . . . . . . . . . . . . . . $ 0.46 $ 0.73 $ 0.75
========= ========= =========
Diluted weighted average shares outstanding 2,122,564 2,115,569 2,126,151
========= ========= =========
See accompanying notes
23
VSE Corporation and Subsidiaries
Consolidated Statements of Stockholders' Investment
- ---------------------------------------------------------------------------------
(in thousands)
Common Stock Paid-In Retained Treasury ESOP
Shares Amount Surplus Earnings Stock Obligation
------ ------ ------- -------- ----- ----------
Balance at
December 31, 1997 2,165 $ 108 $ 3,631 $ 9,422 $ - $ (680)
Net income for
the year - - - 1,595 - -
ESOP Obligation - - - - - (112)
Purchase of Treasury
Stock - - - - (792) 792
Issuance of stock 22 1 201 - - -
Dividends
declared ($.144) - - - (314) - -
----- ----- ------- -------- ------- ------
Balance at
December 31, 1998 2,187 109 3,832 10,703 (792) -
Net income for
the year - - - 1,534 - -
Issuance of stock 7 1 62 - - -
Dividends
declared ($.144) - - - (304) - -
----- ----- ------- -------- ------- ------
Balance at
December 31, 1999 2,194 110 3,894 11,933 (792) -
Net income for
the year - - - 968 - -
Issuance of stock 4 - 20 - - -
Dividends
declared ($.16) - - - (340) - -
----- ----- ------- -------- ------- ------
Balance at
December 31, 2000 2,198 $ 110 $ 3,914 $ 12,561 $ (792) $ -
===== ===== ======= ======== ======= ======
See accompanying notes
24
VSE Corporation and Subsidiaries
Consolidated Statements of Cash Flows For the years ended December 31,
- ---------------------------------------------------------------------------------------------
(in thousands)
2000 1999 1998
---- ---- ----
Cash flows from operating activities:
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . $ 968 $ 1,534 $ 1,595
Loss from discontinued operations . . . . . . . . . . . . . . . - 256 1,420
Loss on disposal of discontinued operations . . . . . . . . . . 417 574 -
------- ------- -------
Income from continuing operations . . . . . . . . . . . . . . . 1,385 2,364 3,015
Adjustments to reconcile net income
to net cash provided by (used in) operating activities:
Depreciation and amortization . . . . . . . . . . . . . . . 1,563 1,829 1,603
Loss (gain) on sale of property and equipment . . . . . . . 17 (124) 5
Deferred compensation plan expense . . . . . . . . . . . . 117 29 140
Net (payments of) proceeds from deferred compensation . . . (168) (45) 188
Change in deferred taxes . . . . . . . . . . . . . . . . . (45) (549) 317
Change in operating assets and liabilities:
(Increase) decrease in:
Accounts receivable . . . . . . . . . . . . . . . . . . . 146 14,835 (3,817)
Other current assets and noncurrent assets . . . . . . . . (650) 1,569 (509)
Increase (decrease) in:
Accounts payable . . . . . . . . . . . . . . . . . . . . . 523 (7,733) 1,999
Accrued expenses . . . . . . . . . . . . . . . . . . . . . (1,116) 42 9
------- ------- -------
Net cash provided by operating activities of
continuing operations 1,772 12,217 2,950
------- ------- -------
Cash flows from investing activities:
Purchase of property and equipment,
(net of proceeds from dispositions) . . . . . . . . . . . . . (424) (1,081) (1,530)
Purchase of intangible assets . . . . . . . . . . . . . . . . . (700) - -
------- ------- -------
Net cash used in investing activities of
continuing operations (1,124) (1,081) (1,530)
------- ------- -------
Cash flows from financing activities:
Net payments on long-term bank loans . . . . . . . . . . . . . - (1,503) (1,941)
Current borrowings under long-term bank debt . . . . . . . . . - - 778
Payment of current portion of long-term bank debt . . . . . . - (1,333) -
Cash dividends paid . . . . . . . . . . . . . . . . . . . . . (331) (304) (314)
Repayment from ESOP . . . . . . . . . . . . . . . . . . . . . - - 680
Purchase of Treasury stock . . . . . . . . . . . . . . . . . - - (792)
Issuance of common stock . . . . . . . . . . . . . . . . . . 20 63 202
------- ------- -------
Net cash used in financing activities of
continuing operations (311) (3,077) (1,387)
------- ------- -------
Net cash provided by (used in) discontinued
operations 248 (8,046) 1
------- ------- -------
Net increase in cash and cash equivalents . . . . . . . . . . . . 585 13 34
Cash and cash equivalents at beginning of year . . . . . . . . 62 49 15
------- ------- -------
Cash and cash equivalents at end of year . . . . . . . . . . . $ 647 $ 62 $ 49
======= ======= =======
Supplemental cash flow disclosures (in thousands):
2000 1999 1998
---- ---- ----
Cash paid during the year for:
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 127 $ 321 $ 537
Income taxes . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,026 $ 1,261 $ 903
Noncash investing and financing activities:
Note receivable from discontinued operations . . . . . . . . . $ - $ 800 $ -
Write off of note receivable from discontinued operations . . $ 688 $ - $ -
Payable related to purchase of intangible assets . . . . . . . $ 260 $ - $ -
See accompanying notes
25
VSE Corporation and Subsidiaries
Notes to Consolidated Financial Statements
(1) Summary of Significant Accounting Policies
Principles of Consolidation
The consolidated financial statements consist of the operations of the
parent company, operations of the company's wholly owned subsidiaries, and
operations of the company's divisions. Wholly owned subsidiaries include
Energetics Incorporated ("Energetics"), Human Resource Systems, Inc. ("HRSI"),
Ship Remediation and Recycling, Inc. ("SRR"), and VSE Services International,
Inc. ("VSI"). Unincorporated divisions include BAV Division ("BAV"), Ordnance
Division ("Ordnance"), Value Systems Services Division ("VSS"), Fleet
Maintenance Division ("Fleet Maintenance"), Telecommunications Technologies
Division ("TTD"), and GSA Services Division ("GSA Services"). The company is
engaged principally in providing engineering, testing, management and informa-
tion technology services to the U.S. Government (the "government") and other
government prime contractors.
The term "VSE" or "company" means VSE and its subsidiaries and divisions
unless the context indicates operations of the parent company only. Inter-
company sales are principally at cost. All significant intercompany
transactions have been eliminated in consolidation. Certain prior year balances
have been reclassified for comparative purposes.
Segment Information
The company operates within one reportable segment. Prior to May 21, 1999,
VSE had two reportable segments: the engineering, logistics, management, and
technical services segment ("ELMTS"), which provides diversified engineering,
technical and management services principally to agencies of the United States
Government and to other government prime contractors, and the software products
and services segment ("SPS"), which provided application software and services
related to the installation of the software to primarily commercial customers.
The SPS segment was sold on May 21, 1999, and is reflected as a discontinued
operation (see note 10).
Use of Estimates in the Preparation of Financial Statements
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
26
and Hedging Activities" ("SFAS No. 133"). SFAS No. 133 establishes accounting
and reporting standards for derivative instruments, including certain derivative
instruments embedded in other contracts (collectively referred to as
derivatives), and for hedging activities. It requires that an entity recognize
all derivatives as either assets or liabilities in the statement of financial
position and measure those instruments at fair value. In June 1999 the
effective date of SFAS No. 133 was amended to be effective for all fiscal
quarters of all fiscal years beginning after June 15, 2000 by Statement of
Financial Accounting Standards No. 137, "Accounting for Derivative Instruments
and Hedging Activities Deferral of Effective Date of FASB Statement No. 133".
The Company does not use derivative instruments.
In December 1999, the Securities and Exchange Commission released Staff
Accounting Bulletin No. 101, "Revenue Recognition In Financial Statements" ("SAB
No. 101"). SAB No. 101 establishes guidelines in applying generally accepted
accounting principles to the recognition of revenue in financial statements
based on the following four criteria; persuasive evidence of an arrangement
exists, delivery has occurred or services have been rendered, the seller's
price to the buyer is fixed or determinable, and collectibility is reasonably
assured. In the opinion of management, the adoption of SAB No. 101 will not have
a material effect, if any, on the company's financial position or results of
operations.
Stockholders' Investment and Earnings Per Share
At December 31, 2000, options to purchase 144,330 shares, 32,500 shares,
37,125 shares, 53,000 shares, 66,500 shares and 10,000 shares of common stock at
$10.91, $13.04, $9.42, $10.93, $8.03 and $6.94 per share, respectively, were
outstanding. There was no dilutive impact on reported earnings per share for
2000, 1999 and 1998, due to the market value of VSE stock.
Cash and Cash Equivalents
Cash and cash equivalents reported by the company consist of cash balances
in the company's bank accounts and short term temporary invested balances
connected to the bank accounts with sweep arrangements, netted by checks issued
on the company's bank accounts that have not yet been presented to the bank for
collection. The company considers all highly liquid investments with an original
maturity of three months or less to be cash equivalents.
The company has classified all debt and equity securities as available-for-
sale. Available-for-sale securities are carried at fair value with unrealized
gains and losses, net of tax, reported as a component of stockholders'
investment. Realized gains and losses are included in other income. Available-
for-sale debt securities as of December 31, 2000 and December 31, 1999 consisted
of overnight money market accounts of $853 thousand and $1.7 million,
respectively, secured by Government agency securities. The estimated fair value
of these securities approximated cost, and the amount of gross unrealized gains
and losses was not significant.
27
Concentration of Credit Risk/Fair Value of Financial Instruments
Financial instruments that potentially subject the company to concentration
of credit risk consist primarily of cash, cash equivalents and trade accounts
receivable. The company believes that concentrations of credit risk with
respect to trade accounts receivable are limited as they are primarily
Government receivables. The company believes that the fair market value of all
financial instruments approximates book value.
Contract Revenues
Substantially all of the company's revenues result from contract services
performed for the Government or for contractors engaged in work for the
Government under a variety of contracts. Revenues on cost-type contracts are
recorded on the basis of recoverable costs incurred and fees earned.
Revenues on fixed price contracts are recorded as services are performed,
using the percentage-of-completion method of accounting, primarily based on
contract costs incurred to date compared with total estimated costs at
completion. Revenues on time and material contracts are recorded on the basis
of billable rates times hours delivered plus material and other reimbursable
costs incurred.
Potential revenue related to work performed at risk is not recognized
either as income or as an offset against a potential loss until it can be
reliably estimated and its realization is probable. The company provides for
anticipated losses on contracts by a charge to income during the period in which
losses are first identified.
A substantial portion of the contract and administrative costs is subject
to audit by the Defense Contract Audit Agency. The company's indirect cost
rates have been audited and approved for 1998 and prior years. In the opinion
of management, the audits of the indirect cost rates for 2000 and 1999 will not
result in material adjustments, if any, to the company's results of operations
or financial position.
Property and Equipment
Property and equipment (valued at cost) consisted of the following (in
thousands):
2000 1999
---- ----
Computer systems equipment . . . . . . . . . . . . . $ 6,083 $ 7,916
Furniture, fixtures, equipment and other . . . . . . 3,791 4,736
Leasehold improvements . . . . . . . . . . . . . . . 1,585 1,608
Buildings . . . . . . . . . . . . . . . . . . . . . 302 302
Land and land improvements . . . . . . . . . . . . . 385 385
------- -------
12,146 14,947
Less accumulated depreciation . . . . . . . . . . . (8,810) (10,570)
------- -------
$ 3,336 $ 4,377
======= =======
28
Depreciation and amortization expense for property and equipment was
approximately $1.4 million for 2000, $1.6 million for 1999 and $1.3 million for
1998. Depreciation of computer systems equipment is provided principally by the
double-declining method over periods of four to six years. Depreciation of
furniture and fixtures is provided principally by the straight-line method over
approximately nine years. Depreciation of all other property and equipment is
provided principally by the double-declining method over periods of three to
twenty years. Depreciation of buildings and land improvements is provided
principally by the straight-line method over approximately thirty years.
Deferred Compensation Plans
Deferred compensation plan expense for the years ended December 31, 2000,
1999 and 1998 was $117 thousand, $29 thousand and $140 thousand, respectively.
Included in other assets are assets of the deferred compensation plans
which include equity securities recorded at fair value. The fair value of
these securities was approximately $1.8 million as of December 31, 2000 and
1999. Because plan participants are at risk for market value changes in these
assets, the liability to plan participants fluctuates with the asset values.
Impairment Review
The company performs a periodic review of certain assets to determine if
impairment has occurred. If impaired, the company writes down the asset to
its fair market value.
(2) Goodwill and Intangible Assets
As part of the August 29, 1995, acquisition of Energetics, the company
recorded approximately $1.7 million of goodwill in connection with this
acquisition, including approximately $200 thousand of additional goodwill due to
contingency requirements established in the purchase agreement. Goodwill is
being amortized by the straight-line method over fifteen years, and
approximately $1.2 million of unamortized goodwill remains on the books as of
December 31, 2000.
On December 28, 2000, VSE invested $960 thousand in the acquisition of
certain contract and marketing rights. The company will amortize this
intangible asset over a period not to exceed five years.
Amortization expense for goodwill and intangible assets was $115 thousand,
$180 thousand and $337 thousand for 2000, 1999, and 1998, respectively.
29
(3) Accounts Receivable
The components of accounts receivable as of December 31, 2000 and 1999,
were as follows (in thousands):
2000 1999
---- ----
Billed . . . . . . . . . . . . . . . . . . . . $ 7,192 $ 7,967
Unbilled:
Retainages . . . . . . . . . . . . . . . . . 71 71
Other (principally December work billed in
January) . . . . . . . . . . . . . . . . . . 12,012 11,400
Less-Allowance for doubtful accounts . . . . . (60) (77)
------- -------
Total accounts receivable $19,215 $19,361
======= =======
The "Unbilled: Other" included in accounts receivable are reported net of
an allowance for contract disallowances of $201 thousand as of December 31, 2000
and $422 thousand as of December 31, 1999. "Unbilled: Other" also includes
certain costs for work performed at risk which are not reimbursable under
current contracts, but which the company believes will be reimbursable on
execution of contract documentation or amendments increasing funding. Amounts
not presently reimbursable included in "Unbilled: Other" were $307 thousand and
$287 thousand as of December 31, 2000, and 1999, respectively.
Contracts with the Government, primarily with the U.S. Department of
Defense, accounted for more than 95% of revenues in all years presented. These
contracts were primarily for engineering services. A contract awarded in 1995
with the U.S. Navy accounted for approximately 40%, 50% and 52% of such revenues
in 2000, 1999 and 1998, respectively.
The company generally expects to collect all accounts receivable other than
retainages within one year.
(4) Debt
VSE has a revolving loan agreement with a bank on which the company can
borrow up to $15 million, subject to a borrowing formula based on billed
receivables. Under terms of the agreement, the company pays a fixed amount
annual commitment fee and interest on any borrowings at a prime-based rate or
an optional LIBOR-based rate. The expiration date of the revolving loan is
May 31, 2002. The loan agreement contains collateral requirements by which
company assets secure amounts outstanding, restrictive covenants that include
minimum tangible net worth and profitability requirements, a limit on annual
dividends, and other affirmative and negative covenants. There were no
outstanding amounts borrowed on the loan as of December 31, 2000. The company
had a similar predecessor revolving loan agreement with the same bank as of
December 31, 1999. There were no outstanding amounts borrowed under this loan
agreement as of December 31, 1999.
Due to losses incurred by VSE's CMstat subsidiary, the disposal of CMstat,
and the write off of the CMstat note receivable (see Note 10 "Discontinued
Operations"), the company was not in compliance with certain original loan
covenants during 2000 and 1999. The company's bank amended the loan agreements
in these years to restate certain terms and conditions of the loans, including
the covenants with which the company was not compliant. The
30
company was in compliance during 2000 and 1999 with all covenants of the loan
agreements as amended.
(5) Accrued Expenses
The components of accrued expenses as of December 31, 2000 and 1999, were
as follows (in thousands):
2000 1999
---- ----
Accrued salaries . . . . . . . . . . . . . . . . $1,490 $1,766
Accrued vacation . . . . . . . . . . . . . . . . 1,518 1,619
Estimated future losses on fixed-price and
time and material contracts . . . . . . . . . . 293 583
Other accrued expenses . . . . . . . . . . . . . 1,820 2,009
------ ------
Total accrued expenses $5,121 $5,977
====== ======
(6) ESOP/401(k) Plan and Profit Sharing Plan
VSE established an ESOP/401(k) plan in 1984. Under the provisions of the
ESOP, VSE and certain of its operating entities made contributions into a trust
which purchased VSE stock on behalf of employees who met certain age and service
requirements and were employed at the end of the plan year. Contributions at the
rate of up to 2% of eligible employee compensation were permitted at the
discretion of the VSE board of directors and were allocated, subject to a
vesting schedule, on a pro rata basis on eligible employee compensation. The
401(k) segment of the plan allows employees meeting certain age and service
requirements to contribute a portion of their salary to certain investment
trusts. As of April 1, 1999, the ESOP portion was discontinued and replaced by
a plan provision whereby employer 401(k) contributions are made on behalf of the
eligible employee participants based on the employees' 401(k) payroll deferrals.
The employer contribution is equal to 50% of the employee deferral on the first
5% of the employee pay deferred. The company expense associated with this plan
for 2000, 1999, and 1998 was $245 thousand, $333 thousand, and $359 thousand,
respectively.
The ESOP/401(k) plan held 521,014 shares and 582,761 shares of VSE stock
as of December 31, 2000 and 1999, respectively. Such shares receive dividend
payments and are included in the weighted average shares for earnings per share
calculations.
Energetics maintains a profit sharing plan for employees. All employees
who have completed two years of service are members of the profit sharing plan.
At its discretion, Energetics may make contributions to the plan. The plan
expense for 2000, 1999, and 1998 was $400 thousand, $312 thousand, and $443
thousand, respectively.
31
(7) Stock Option Plans
1996 and 1998 Stock Option Plans
The company accounts for the VSE Corporation 1996 Stock Option Plan (the
"1996 Plan") and the 1998 Stock Option Plan (the "1998 Plan") pursuant to APB
Opinion No. 25, "Accounting for Stock Issued to Employees," under which no
compensation cost has been recognized because the exercise price of the stock
options equals the market price of the underlying stock on the date of grant.
Had compensation costs for the 1996 Plan and 1998 Plan been determined based on
SFAS No. 123, "Accounting for Stock-Based Compensation," the company's net
income and earnings per share would have been as follows (in thousands, except
per share amounts):
2000 1999 1998
---- ---- ----
Net income: As reported $ 968 $1,534 $1,595
====== ====== ======
Pro forma $ 874 $1,463 $1,542
====== ====== ======
Earnings per share: As reported $ 0.46 $ 0.73 $ 0.75
====== ====== ======
Pro forma $ 0.41 $ 0.69 $ 0.73
====== ====== ======
Under the 1996 Plan, the company may grant options for and sell up to an
aggregate of 273,698 shares of the common stock of the company. Through
December 31, 2000 the company has granted options for 223,955 shares of common
stock priced at 100% of the fair value of the stock at the time of the grant of
the option. The maximum term of the options granted is five years. The vesting
period is three years and allows for 25% vesting immediately upon date of the
grant and an additional 25% on each successive anniversary date thereafter.
Vesting may be accelerated for shares granted to certain individuals as
determined by the Board of Directors. The 1996 Plan will terminate on the
earliest of February 5, 2006, or the date on which all options under the 1996
plan have been exercised or terminated.
Under the 1998 Plan, the company may grant options for and sell up to an
aggregate of 343,750 shares of common stock. Of the shares available for grant,
15,625 shares may be granted to non-employee directors of VSE, and 328,125
shares may be granted to executive officers and key employees. Through December
31, 2000 the company has granted options for 119,500 shares of common stock
priced at 100% of the fair value of the stock at the time of the grant of the
option. The vesting period is three years and allows for 25% vesting immediately
upon date of the grant and an additional 25% on each successive anniversary date
thereafter. The 1998 Plan will terminate on the earliest of May 6, 2008, or
the date on which all options under the 1998 Plan have been exercised or
terminated.
32
Information with respect to stock options is as follows:
Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise
2000 Price 1999 Price 1998 Price
---- ----- ---- ----- ---- -----
Number of shares under
stock options:
Outstanding at beginning
of year 279,085 $11.01 234,273 $10.95 205,283 $11.38
Granted 79,000 7.89 69,750 10.93 47,000 9.42
Exercised - - (313) 9.42 - -
Forfeited (14,630) 11.29 (24,625) 10.32 (18,010) 11.80
------- ------ ------- ------ ------- ------
Outstanding at end
of year 343,455 $10.28 279,085 $11.01 234,273 $10.95
======= ====== ======= ====== ======= ======
Exercisable at end
of year 247,486 $10.80 213,585 $11.02 142,642 $11.07
======= ====== ======= ====== ======= ======
Weighted average remaining
contractual life 5 years 6 years 7 years
Weighted average fair
value of options granted $3.32 $2.36 $2.14
===== ===== =====
The fair value of the options is estimated on the date of grant using the
Black-Scholes option pricing model. The following assumptions were used in the
pricing calculation for 2000, 1999 and 1998:
2000 1999 1998
---- ---- -----
Risk free interest rate 6.42% 4.57% 5.47%
Dividend yield 2.00% 2.00% 2.00%
Expected life 3 years 3 years 3 years
Expected volatility 61.95% 29.00% 29.00%
(8) Income Taxes
The company files consolidated federal income tax returns with all of its
subsidiaries. The components of the provision for income taxes for the years
ended December 31, 2000, 1999 and 1998 are as follows (in thousands):
2000 1999 1998
---- ---- ----
Current
Federal . . . . . . . . . . . . . . . . . . $ 682 $1,691 $1,324
State . . . . . . . . . . . . . . . . . . . 169 393 289
------ ------ ------
851 2,084 1,613
Deferred
Federal . . . . . . . . . . . . . . . . . . (36) (432) 249
State . . . . . . . . . . . . . . . . . . (9) (117) 71
------ ------ ------
(45) (549) 320
------ ------ ------
Provision for income taxes $ 806 $1,535 $1,933
====== ====== ======
33
The differences between the amount of tax computed at the federal statutory
rate of 34% and the provision for income taxes for 2000, 1999 and 1998 are as
follows (in thousands):
2000 1999 1998
---- ---- ----
Tax at statutory federal income
tax rate at 34% . . . . . . . . . . . . . . $ 744 $1,326 $1,682
Increases (decreases) in tax resulting from:
State taxes, net of federal tax benefit . . 112 180 238
Permanent differences, net . . . . . . . . - 9 30
Other, net . . . . . . . . . . . . . . . . (50) 20 (17)
------ ------ ------
Provision for income taxes $ 806 $1,535 $1,933
====== ====== ======
The company's deferred tax assets (liabilities) as of December 31, 2000 and
1999, which represent the tax effects of temporary differences between tax and
financial accounting bases of assets and liabilities and are measured using
presently enacted tax rates, are as follows (in thousands):
2000 1999
---- ----
Current deferred tax assets . . . . . . . . . . $1,035 $1,334
Current deferred tax liabilities . . . . . . . . (182) (407)
------ ------
Net current deferred tax assets . . . . . . . . 853 927
------ ------
Noncurrent deferred tax assets . . . . . . . . . 1,101 1,031
Noncurrent deferred tax liabilities . . . . . . . (254) (253)
Valuation allowance . . . . . . . . . . . . . . . - (50)
------ ------
Net noncurrent deferred tax assets . . . . . . 847 728
------ ------
Net deferred tax assets . . . . . . . . . . . . . $1,700 $1,655
====== ======
A valuation allowance is provided when it is more likely than not that some
portion of the deferred tax asset will not be realized. The company had
established such a valuation allowance for the deferred tax asset associated
with certain real property because of the uncertainty that the deferred tax
asset would be fully realized. It was determined that this valuation allowance
was no longer necessary. As a result, the allowance was reversed as of
December 31, 2000.
The tax effect of temporary differences representing deferred tax assets
and liabilities as of December 31, 2000 and 1999, are as follows (in thousands):
2000 1999
---- ----
Deferred compensation . . . . . . . . . . . . . . $1,317 $1,377
Accrued expenses . . . . . . . . . . . . . . . . 205 263
Accelerated depreciation . . . . . . . . . . . . 84 6
Allowance for contract and other disallowances . 68 163
Bad debt expense . . . . . . . . . . . . . . . . 25 32
Retainages not taxed until billed. . . . . . . . (61) (68)
Deferred revenues . . . . . . . . . . . . . . . . (90) (338)
Intangible assets . . . . . . . . . . . . . . . . 37 41
Other . . . . . . . . . . . . . . . . . . . . . . 115 229
------ ------
1,700 1,705
Valuation allowance . . . . . . . . . . . . . . . - (50)
------ ------
Net deferred tax assets $1,700 $1,655
====== ======
34
(9) Commitments and Contingencies
Leases
The principal facilities of the company and its subsidiaries are generally
rented under noncancelable operating leases for periods of one to ten years.
The company and its subsidiaries also lease furniture and equipment generally
under noncancelable operating leases for periods of one to five years. Rent
expense for 2000, 1999 and 1998 was approximately $1.9 million, $1.9 million,
and $2.1 million, respectively, which was net of sublease income of $694
thousand, $686 thousand and $464 thousand, respectively. The future minimum
annual rental required under leases having remaining noncancelable lease terms
in excess of one year, net of noncancelable sublease income, will approximate
$1.7 million in 2001 and 2002 and $1.3 million 2003, 2004 and 2005, and $1.4
million thereafter.
Litigation
The company and its subsidiaries have, in the normal course of business,
certain claims against them and against other parties. The company is not aware
of any present claims which would have a material adverse effect on the
company's financial condition or results of operations.
(10) Discontinued Operations
On May 21, 1999, the company sold all of its interests in the SPS
segment. This entailed selling its CMstat subsidiary for an $800 thousand
promissory note. While the sale was a divestiture for legal and tax purposes,
for accounting purposes, the sale was not originally provided discontinued
operations treatment under Staff Accounting Bulletin No. 30 "Accounting for
Divestiture of a Subsidiary or Other Business Operation"("SAB No. 30") since the
sale did not transfer the risks of ownership because the sales price was
primarily dependent on the buyer's ability to repay the promissory note.
As of December 31, 2000, the company has determined that the promissory
note acquired from the sale of its CMstat subsidiary is not collectible and has
written off the remaining balance. Accordingly, the consolidated financial
statements have been restated to reflect the disposition of its CMstat
subsidiary as discontinued operations. The revenues, costs and expenses, assets
and liabilities and cash flows from the CMstat subsidiary have been excluded
from the respective captions in the Consolidated Statement of Operations,
Balance Sheets, Cash Flows and related footnotes.
ITEM 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
There have been no changes in the company's independent public accountants
or disagreements with such accountants on accounting principles or practices or
financial statement disclosures.
35
PART III
ITEM 10. Directors and Executive Officers of the Registrant
Information with respect to Directors of the company is incorporated by
reference from the registrant's definitive proxy statement for its annual
meeting of stockholders to be filed not later than 120 days after December 31,
2000, with the Securities and Exchange Commission pursuant to Regulation 14A
(the "Proxy Statement"). Certain information relating to Executive Officers
of the company appears on page 10 of this Form 10-K Annual Report.
ITEM 11. Executive Compensation
Information with respect to this item is incorporated by reference from the
Proxy Statement.
ITEM 12. Security Ownership of Certain Beneficial Owners and
Management
Information with respect to this item is incorporated by reference from the
Proxy Statement.
ITEM 13. Certain Relationships and Related Transactions
Information with respect to this item is incorporated by reference from the
Proxy Statement.
36
PART IV
ITEM 14. Exhibits, Financial Statement Schedules and Reports
on Form 8-K
(a) Exhibits
See "Exhibit Index" hereinafter contained and
incorporated by reference.
(b) Supplemental Financial Statement Schedule
Schedules not included herein have been omitted because of the
absence of conditions under which they are required or because
the required information, where material, is shown in the
consolidated financial statements, financial notes, or
supplementary financial information.
(c) Reports on Form 8-K
None.
37
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
VSE CORPORATION
Date: March 7, 2001 By: /s/ C. S. Weber
-----------------------------
C. S. Weber, Executive Vice
President and Chief Financial
Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below on March 6, 2001, by the following persons on
behalf of the Registrant and in the capacities indicated.
Principal Executive Officers:
/s/ D. M. Ervine
---------------------------------------------------------------
D. M. Ervine, Chairman of the Board and Chief Executive Officer
/s/ J. M. Todd
---------------------------------------------------------------
J. M. Todd, President and Chief Operating Officer
(b) Principal Financial Officer: (c) Principal Accounting Officer:
/s/ C. S. Weber /s/ T. R. Loftus
----------------------------- ----------------------------
C. S. Weber, Executive Vice T. R. Loftus, Senior Vice
President and Chief Financial President and Comptroller
Officer
Directors:
/s/ D. M. Ervine /s/ D. M. Osnos
----------------------------- ----------------------------
D. M. Ervine D. M. Osnos
/s/ R. J. Kelly /s/ J. D. Ross
----------------------------- ----------------------------
R. J. Kelly J. D. Ross
/s/ B. K. Wachtel
----------------------------- ----------------------------
C. M. Kendall B. K. Wachtel
/s/ C. S. Koonce
-----------------------------
C. S. Koonce
38
EXHIBIT INDEX
Reference No. Exhibit No.
per Item 601 of in this
Regulation S-K Description of Exhibit Form 10-K
- -------------- ---------------------- ---------
2 Plan of acquisition, reorganization, arrangement,
liquidation or succession
Exchange Agreement dated as of March 25, 1992,
amended as of September 1, 1992, by and between VSE
Corporation and JBT Holding Corp., et al. (Exhibit A
to Exhibit 1, Proxy Statement, filed on
Form 8-K on November 2, 1992) *
3 Articles of incorporation and by-laws
Restated Certificate of Incorporation of VSE
Corporation dated as of February 6, 1996 *
By-Laws of VSE Corporation as amended through
May 16, 2000 (Exhibit 3.2 to Form 10-Q dated
October 27, 2000) *
4 Instruments defining the rights of security holders,
including indentures
Specimen Stock Certificate as of May 19, 1983
(Exhibit 4 to Registration Statement No. 2-83255
dated April 22, 1983 on Form S-2) *
9 Voting trust agreement Not Applicable
10 Material contracts
Employment Agreement entered into as of December 10,
1997, by and between VSE Corporation and
Byron S. Bartholomew Exhibit VI
Employment Agreement entered into as of December 10,
1997, by and between VSE Corporation and
Jayne M. Tuohig Exhibit VII
Employment Agreement entered into as of December 10,
1997, by and between VSE Corporation and
Craig S. Weber Exhibit VIII
Employment Agreement entered into as of October 21,
1998, by and between VSE Corporation and
Donald M. Ervine (Exhibit VI to Form 10-K dated
March 18, 1999) *
Employment Agreement entered into as of January 15,
1999, by and between VSE Corporation and
Energetics, Incorporated and Robert J. Kelly
(Exhibit VII to Form 10-K dated March 18, 1999) *
Employment Agreement entered into as of June 3,
1999, by and between VSE Corporation and
James M. Knowlton (Exhibit V to Form 10-K dated
March 15, 2000) *
Employment Agreement dated as of November 1,
2000, by and between VSE Corporation and
James M. Todd Exhibit V
VSE Corporation Deferred Supplemental Compensation
Plan effective January 1, 1994 (Exhibit III to
Form 10-K dated March 23, 1995) *
39
EXHIBIT INDEX
Reference No. Exhibit No.
per Item 601 of in this
Regulation S-K Description of Exhibit Form 10-K
- -------------- ---------------------- ---------
Stock Purchase Agreement dated August 29, 1995 by
and between VSE Corporation and the shareholders
of Energetics Incorporated (Exhibit 2 to Form 8-K
dated September 13, 1995 and Amendment 1 on Form
8-K/A dated November 9, 1995) *
VSE Corporation 1996 Stock Option Plan (Appendix A to
Registrant's definitive proxy statement dated
April 3, 1996)
VSE Corporation 1998 Stock Option Plan (Appendix A to
Registrant's definitive proxy statement for the Annual
Meeting of Stockholders held on May 6, 1998)
VSE Corporation 1998 Non-employee Directors Stock Plan
(Appendix B to Registrant's definitive proxy statement
for the Annual Meeting of Stockholders held on May 6, 1998)
12 Statements re computation of ratios Not Applicable
13 Annual report to security holders, Form 10-Q
or quarterly report to security holders Exhibit II
16 Letter re change in certifying accountant Not Applicable
18 Letter re change in accounting principles Not Applicable
21 Subsidiaries of the registrant Exhibit I
22 Published report regarding matters submitted
to vote of security holders Not Applicable
23 Consents of independent public accountants and
counsel Exhibit IV
24 Power of attorney Not Applicable
27 Financial Data Schedule Exhibit III
99 Additional exhibits Not Applicable
*Document has been filed as indicated and is incorporated by reference herein.
40