Annual report pursuant to Section 13 and 15(d)

Stock-Based Compensation Plans

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Stock-Based Compensation Plans
 12 Months Ended
Dec. 31, 2012
Stock-Based Compensation Plans [Abstract]  
Stock-based Compensation
(9) Stock-Based Compensation Plans

(a)  Restricted Stock Plan

In 2006, our stockholders approved the VSE Corporation 2006 Restricted Stock Plan for its directors, officers and other employees (the "2006 Plan").  On May 3, 2011, the stockholders approved amendments to the 2006 Plan extending the term thereof until May 3, 2016.  Under the provisions of the 2006 Plan, we are authorized to issue up to 250,000 shares of our common stock.  The Compensation Committee is responsible for the administration of the 2006 Plan, and determines each recipient of an award under the 2006 Plan, the number of restricted shares of common stock subject to such award and the period of continued employment required for the vesting of such award.  These terms are included in award agreements between us and the recipients of the award.  As of December 31, 2012, 91,264 restricted shares were available for issuance under the 2006 Plan.

Non-employee directors were awarded 10,800 and 9,800 shares of restricted stock on January 3, 2012 and January 2, 2011, respectively, under the 2006 Plan. The grant-date fair value of these restricted stock grants was $25.22 per share and $33.16 per share for the shares awarded in 2012 and 2011, respectively. The shares issued vested immediately and cannot be sold, transferred, pledged or assigned before the second anniversary of the grant date. Compensation expense related to these grants was approximately $272 thousand and $325 thousand during 2012 and 2011, respectively. 
In January of every year since 2007, we have notified certain employees that they are eligible to receive awards under our 2006 Restricted Stock Plan based on our financial performance for the respective fiscal years.  These restricted stock awards are expensed and a corresponding liability is recorded ratably over the vesting period of approximately three years.  Upon issuance of shares on each vesting date, the liability is reduced and additional paid-in capital is increased.   During 2010, we reclassified approximately $1.1 million from stockholders' equity to accrued expenses related to our restricted stock awards. The date of award determination is expected to be in March 2013 for the 2012 awards.   The date of award determination for the 2011 awards and the 2010 awards was March 2, 2012 and 2011, respectively. On each vesting date, 100% of the vested award is paid in our shares.   The number of shares issued is based on the fair market value of our common stock on the vesting date.  The earned amount is expensed ratably over the vesting period of approximately three years. On March 2, 2012, the employees eligible for the 2011 awards, 2010 awards and 2009 awards received 29,379 shares of common stock.  The grant-date fair value of these awards was $23.86 per share.
 
The stock-based compensation amounts of approximately $744 thousand, $1.0 million and $1.7 million shown on the accompanying statements of cash flows for the years ended December 31, 2012, 2011 and 2010, respectively, are included in contract costs on the accompanying consolidated statements of income and are net of the tax withholding associated with the awards issued of approximately $332 thousand, $393 thousand and $307 thousand, in the years ended December 31, 2012, 2011 and 2010, respectively.  As of December 31, 2012, the total compensation cost related to non-vested awards not yet recognized was approximately $295 thousand with a weighted average amortization period of 1.3 years.
 
The total stock-based compensation expense related to restricted stock awards for the years ended December 31, are as follows (in thousands):

 
  
2012
    
2011
    
2010
  
Employees
  
$
650
    
$
882
    
$
1,656
  
Non-employee Directors
    
272
      
347
      
298
  
   Total
  
$
922
    
$
1,229
    
$
1,954
  

(b) Stock-Based Compensation Expense

Stock-based compensation, which includes compensation recognized on stock option grants and restricted stock awards, was included in contract costs and the following line items on the accompanying statements of income for the years ended December 31, 2012, 2011 and 2010 (in thousands):

 
  
2012
    
2011
    
2010
  
Stock-based compensation included in contract costs
  
$
1,076
    
$
1,427
    
$
2,012
  
Income tax benefit recognized for stock-based compensation
    
(414
)
    
(546
)
    
(772
)
  Total stock-based compensation expense,  net of income tax benefit
  
$
662
    
$
881
    
$
1,240