SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_______________
FORM 11-K
ANNUAL REPORT
PURSUANT TO SECTION 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
[ X ] Annual Report Pursuant to Section 15(d) of the Securities
Exchange Act of 1934
For the fiscal year ended December 27, 1995
OR
[ ] Transition Report Pursuant to Section 15(d) of the Securities
Exchange Act of 1934
For the transition period ________________
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VSE CORPORATION
EMPLOYEE
ESOP/401(k)
PLAN
(Full Title of the Plan)
VSE Corporation
2550 Huntington Avenue
Alexandria, Virginia 22303
(Name and Address of Issuer)
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Required information
The VSE Corporation ESOP/401(k) Plan (the Plan ) is subject to ERISA
and the financial statements and schedules have been prepared in
accordance with the financial reporting requirements of ERISA.
Financial Statement
-------------------
Statements of Net Assets Available for Benefits as of
December 27, 1995 and 1994
Statements of Changes in Net Assets Available for Benefits
for the years ended December 27, 1995 and 1994
Notes to Financial Statements as of December 27, 1995 and 1994
Schedule of Assets Held for Investment Purposes as of
December 27, 1995
Schedule of Reportable Transactions for the Year Ended
December 27, 1995
EXHIBITS
None
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the trustees have duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
VSE CORPORATION EMPLOYEE ESOP 401(k)
PLAN
By: /s/ M. A. Robin
-----------------
M. A. Robin
Senior Vice President, Director of Human
Resources, Trustee
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VSE Corporation
ESOP/401(k) Plan
Financial Statements
As of December 27, 1995 and 1994
Together With Auditors' Report
<PAGE>
Report of Independent Public Accounts
To the Trustees of the VSE Corporation Employee ESOP/401(k) Plan:
We have audited the accompanying statements of net assets available
for benefits, of the VSE Corporation Employee ESOP/401(k) Plan as of
December 27, 1995 and 1994, and the related statements of changes in
net assets available for benefits for the years then ended. These
financial statements and the schedules referred to below are the
responsibility of the Plan's management. Our responsibility is to
express an opinion on these financial statements based on our
audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the net assets available for
benefits of the VSE Corporation Employee ESOP/401(k) Plan as of
December 27, 1995 and 1994, and the changes in net assets available
for benefits for the years then ended in conformity with generally
accepted accounting principles.
Our audits were performed for the purpose of forming an opinion on
the basic financial statements taken as a whole. The supplemental
schedules of Assets Held for Investment Purposes and Reportable
Transactions are presented for the purpose of additional analysis
and are not a required part of the basic financial statements but
are supplementary information required by the Department of Labor's
Rules and Regulations for Reporting and Disclosure under the Employee
Retirement Income Security Act of 1974. The supplemental schedules
have been subjected to the auditing procedures applied in the audits
of the basic financial statements and, in our opinion, are fairly
stated in all material respects in relation to the basic financial
statements taken as a whole.
/s/ Arthur Andersen LLP
Washington, D.C.,
March 12, 1996
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CONTENTS
Description Page
----------- ____
Statements of Net Assets Available for Benefits as of
December 27, 1995 and 1994 1
Statements of Changes in Net Assets Available for Benefits
for the Years Ended December 27, 1995 and 1994 2
Notes to Financial Statements as of December 27, 1995 and 1994 3
Schedule of Assets Held for Investment Purposes as of
December 27, 1995 10
Schedule of Reportable Transactions for the Year Ended
December 27, 1995 11
SCHEDULES OMITTED AS NOT APPLICABLE
FOR THE YEAR ENDED DECEMBER 27, 1995
Description
-----------
Schedule of Loans or Fixed Income Obligations
Schedule of Leases in Default or Classified as Uncollectible
Schedule of Nonexempt Transactions
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<TABLE>
VSE CORPORATION EMPLOYEE ESOP/401(k) PLAN
STATEMENTS OF NET ASSETS
AVAILABLE FOR BENEFITS
AS OF DECEMBER 27
<CAPTION>
1995 1994
---------- ----------
<S> <C> <C>
ASSETS
Investments at fair value (Exhibit A and Note 2)
VSE Corporation common stock (Note 4)
PAYSOP/ESOP $ 6,972,836 $ 4,059,881
401(k) Stock Fund 1,447,741 839,191
Mutual funds
George Putnam Fund of Boston 3,394,695 0
Putnam Fund for Growth and Income 479,802 0
Putnam Global Growth Fund 400,369 0
Putnam Voyager Fund 2,410,135 0
Putnam Diversified Income Trust 915,783 0
Putnam Asset Allocation Fund - Conservative Portfo 249,333 0
Vanguard Wellington 0 3,182,395
American Capital Comstock 0 1,399,392
American Capital Government Securities 0 479,382
---------- ----------
16,270,694 9,960,241
Investments at contract value
Putnam Stable Value Fund 1,765,464 0
Government Separate Accounts 2,746,149 3,082,689
Guaranteed Interest Contracts 1,186,271 3,553,986
Vanguard U.S. Treasury
Money Market Portfolio 0 330,443
Notes receivable (Note 1) 432,158 438,833
Cash surrender value of life insurance policies 136,419 152,350
---------- ----------
Total investments 22,537,155 17,518,542
Cash, principally in interest-bearing accounts 398,577 443,476
Contribution receivable from employer 162,658 17,267
Other receivable 21,882 0
---------- ----------
Total assets 23,120,272 17,979,285
LIABILITIES
Other liabilities 5,015 5,015
---------- ----------
Total liabilities 5,015 5,015
---------- ----------
NET ASSETS AVAILABLE FOR BENEFITS $23,115,257 $17,974,270
========== ==========
The accompanying notes are an integral part of these financial statements.
</TABLE>
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<TABLE>
VSE CORPORATION EMPLOYEE ESOP/401(k) PLAN
STATEMENTS OF CHANGES IN NET ASSETS
AVAILABLE FOR BENEFITS
FOR THE YEARS ENDED DECEMBER 27
<CAPTION>
1995 1994
---------- ----------
<S> <C> <C>
INCREASES
Contributions (Note 1)
Employee Stock Ownership Plan $ 472,294 $ 480,477
401(k) 1,811,961 1,676,709
(Decrease)/increase in cash surrender value of life
insurance policies (15,931) 8,584
Income from investments
Interest 299,795 524,561
Dividends 704,362 585,731
Net realized/unrealized gains on investments (Note 2) 4,771,615 263,982
---------- ----------
8,044,096 3,540,044
---------- ----------
DECREASES
Insurance premiums 11,152 18,467
Distributions (Note 1) 2,891,957 2,399,232
---------- ----------
2,903,109 2,417,699
---------- ----------
NET INCREASE 5,140,987 1,122,345
BEGINNING NET ASSETS AVAILABLE
FOR BENEFITS 17,974,270 16,851,925
---------- ----------
ENDING NET ASSETS AVAILABLE
FOR BENEFITS $23,115,257 17,974,270
========== ==========
The accompanying notes are an integral part of these financial statements.
</TABLE>
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VSE CORPORATION EMPLOYEE ESOP/401(k) PLAN
NOTES TO FINANCIAL STATEMENTS
AS OF DECEMBER 27, 1995 AND 1994
1. DESCRIPTION OF THE PLAN
Internal Revenue Service (IRS) Qualification
--------------------------------------------
The VSE Corporation Employee ESOP/401(k) Plan (the "Plan") was adopted
by the Board of Directors of VSE Corporation (the "Company") in 1984.
The Plan, as amended through March 24, 1987, was determined to be a
qualified pension plan under Internal Revenue Code Section 401 via a
determination letter dated March 24, 1987. As a result, the underlying
trust was exempt from Federal taxes. In December 1995, the Plan was
amended to meet certain requirements of the Tax Reform Act of 1986 and
other regulations. The Trustees subsequently filed a restated Plan and
Trust Agreement with the Internal Revenue Service for a determination
of continued Plan qualification. The Trustees are of the opinion that
the Plan meets the IRS requirements and therefore the Trust continues
to be tax exempt.
Change in Plan Administrator
----------------------------
Effective January 1, 1995, the Board of Directors of the Company has
appointed Putnam Investments ("Putnam") as a third party plan
administrator. Putnam provides fund investments and daily
recordkeeping services for the Plan. Plan assets were transferred to
Putnam during 1995.
Eligibility
-----------
Effective January 1, 1995, employees are eligible to participate in the
Plan after attaining age 18 and completing 1,000 hours of service in
a plan year.
Contributions
-------------
The Company may elect to make a contribution to the Plan principally
for the purchase of Company stock on behalf of each participant based
upon a percentage of each participant's compensation in the plan year
or other uniform formula. This contribution is allocated to each
participant's account on the last day of the plan year (December 27)
unless the employee returns a signed waiver of participation to the
Trustees. For the plan years ended December 27, 1995 and 1994, the
Company elected to make a contribution equal to 2.0 percent of each
participant's annual compensation, subject to Plan provisions. The
Company stock is held by the Plan for the participants, and each
participant is entitled to certain stockholder rights.
Employee Stock Ownership Plan ("ESOP") contributions are subject to a
graded vesting schedule: 20 percent vested after three years of
service, then increasing in 20 percent increments to 100 percent vested
after seven years. Any forfeitures of nonvested benefits are
recognized after the terminated participant has incurred a one-year
break in service (as defined in the Plan), with the forfeiture applied
to reduce the Company's contribution in subsequent years. Total
forfeitures applied as a reduction of the Company's contribution were
$92,047 and $85,503 for 1995 and 1994, respectively.
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Participants may also elect to defer a portion of earnings into the
Plan each pay period pursuant to Section 401(k) of the Internal Revenue
Code. The minimum salary deferral is $10 per pay period. The maximum
salary deferral depends upon participation levels and Federal
guidelines.
Distributions
-------------
Participants (or their beneficiaries) are eligible to receive Plan
benefits upon retirement, disability, termination of employment, or
death. Benefits are generally paid following termination of
employment. Participants generally receive benefits in a lump sum.
Distributions are typically made in cash from liquidation of the
participant's account or from the Plan's repurchase of the individual
account balance.
The Plan permits participants to borrow against their respective 401(k)
accounts, subject to Plan provisions and procedures prescribed by the
Trustees. After-tax repayments of principal and interest are credited
to the participant's account. Loans are reflected in the Statement of
Net Assets Available for Benefits as notes receivable. Participants
may apply in certain limited situations to withdraw funds from their
401(k) accounts due to a qualifying financial hardship in accordance
with IRS regulations.
Ownership Rights (Vesting)
--------------------------
Participants are 100 percent vested in their 401(k) salary deferral
contributions and their Payroll-based Stock Ownership Plan ("PAYSOP")
contributions allocated prior to 1987. No contributions were made to
the PAYSOP after 1986. All contributions to the ESOP, beginning in
1987, are subject to a graded vesting schedule as described in the
subsection "Contributions" within this note.
Termination
-----------
In the event of Plan termination, each participant is fully vested in
amounts held within the Plan for the participant's benefit.
Plan Continuation
-----------------
The Company expects to continue the Plan indefinitely, but reserves the
right to change, modify, or discontinue it in whole or in part at any
time, subject to the provisions of ERISA. However, no such action will
divest a participant of the vested rights and benefits provided by
contributions allocated to the participant's account.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Investments
-----------
Company stock is purchased in the over-the-counter market or from
stockholders. Participants direct the investment of their respective
401(k) accounts among the investment options available under the Plan.
Marketable securities, excluding Company Stock, and mutual funds are
valued at quoted market prices as of December 27, 1995 and 1994, or as
of the closest preceding day on which a transaction occurred. To
minimize potential price fluctuations, as the Company's stock is thinly
traded, the Plan uses the average closing price over the previous 30
days to value Company stock.
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Dividends and realized capital gains are reinvested. Guaranteed
interest contracts (GICs) are valued at principal plus interest paid
or accrued as of December 27, 1995 and 1994, respectively. Each GIC
yields a fixed rate of return until maturity of the contract for
contributions received during a stated contribution period. The
Trustees are of the opinion that contract value plus interest accrued
approximates the fair value of the GICs. The remaining GIC as of
December 27, 1995, was liquidated subsequent to plan year end at the
existing contract value.
Like GICs, government separate accounts (GSAs) yield a fixed rate of
return until contact maturity for contributions received during a
stated contribution period. The insurance carrier invests the
contributions in U. S. Treasury and other Federal agency securities.
GSAs are valued at principal plus interest paid or accrued as of
December 27, 1995 and 1994. The Trustees are of the opinion that
contract value plus interest accrued approximates the fair value of the
GSAs. The GSAs were liquidated subsequent to plan year end at existing
contract values.
Life insurance offered under the Plan builds cash value as determined
by the insurance carrier. In accordance with Federal regulations, no
more than 25 percent of a participant's contributions for the plan year
may be invested in life insurance. On August 12, 1994, an Order of
Rehabilitation was placed on the assets of Confederation Life Insurance
Company. As a result of this court order, Confederation Life policies
are subject to certain restrictions, such as access to surrender
values, until a rehabilitation plan is approved and put into effect.
Confederation Life is still under the Order of Rehabilitation as of
December 27, 1995. For the plan year ended December 27, 1995, the Plan
owned 19 Confederation Life policies with a total cash value of
$129,663.
There are no sales commissions on the purchase or sale of Putnam mutual
funds.
Participants may redirect the investment of their salary deferral
contributions through Putnam on a daily basis. A participant may also
elect to transfer funds from one Putnam mutual fund (other than the
life insurance and the fixed rate contracts) into another Putnam option
on a daily basis.
As of February 1, 1996, participants may no longer invest 401(k)
contributions in VSE stock. Existing account balances in VSE stock
will remain unless transferred by each participant to a Putnam
investment.
The following investments exceed 5% of net assets as of December 27,
1995:
VSE Corporation Common Stock $ 8,420,577
George Putnam Fund of Boston 3,394,695
Putnam Voyager Fund 2,410,135
GSA with Metropolitan Life Insurance Company 1,880,461
Putnam Stable Value Fund 1,765,464
GIC with Massachusetts Mutual Life Insurance Company 1,186,271
Other 3,479,552
----------
Total Investments $22,537,155
==========
Due to Participants
-------------------
In accordance with generally accepted accounting principles, amounts
allocated to accounts of participants who have terminated from the
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Company but have not submitted their distribution election as of year
end are not reported as liabilities on the Statement of Net Assets
Available for Benefits. Additionally, since these accounts have not
been processed and approved for distribution, they are not reflected
as liabilities on IRS Form 5500 (Annual Return/Report of Employee
Benefit Plan.)
Realized and Unrealized Gains and Losses
----------------------------------------
To comply with Department of Labor regulations, the Plan has calculated
realized and unrealized gains and losses based on the value of
investments at the beginning of the plan year or at time of purchase
during the plan year. Realized gains\(losses) on Company stock were
$37,097 and $0, and on mutual fund shares were $424,228 and ($16,211),
for the plan years ended December 27, 1995 and 1994, respectively.
Unrealized gains\(losses) of $3,513,894 and $823,529 were recorded for
Company stock, and unrealized gains\(losses) of $796,396 and $(543,336)
were recorded for mutual fund shares respectively, for the plan years
ended December 27, 1995 and 1994.
1994 Reclassification
---------------------
Certain 1994 balances have been reclassified to conform to the 1995
presentation.
3. REPORTABLE TRANSACTIONS
The Plan reports each transaction or series of transactions involving
the purchase or sale of assets exceeding five percent of Plan assets
as of the beginning of the plan year. Reportable transactions for the
plan year ended December 27, 1995, are included in Exhibit B.
Party-in-interest Transactions
------------------------------
The Plan made certain purchases of Company stock through Wachtel & Co.,
Inc., and Koonce Securities, Inc., which have representatives serving
on the Company's Board of Directors. The Trustees are of the opinion
that transactions are made on terms equivalent to those otherwise
available from other brokers or financial institutions.
Certain investments are managed by Putnam Investments through the
Putnam Fiduciary Trust Company. Putnam Investments is a third party
administrator as defined by the Plan, therefore, these transactions
qualify as party-in-interest.
4. EMPLOYER SECURITIES
Section 407(b) of ERISA permits the Plan to hold an investment in
Company stock in excess of ten percent of the fair market value of the
Plan's assets.
Acquisition Loans
-----------------
The Trustees may incur loans to finance the acquisition of Company
stock for the ESOP. For the plan years ended December 27, 1995 and
1994, there were no such loans outstanding.
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5. ADMINISTRATIVE EXPENSES
The administrative expenses of the Plan are paid by the Company.
6. DETAIL OF SIGNIFICANT ACCOUNT BALANCES BY INVESTMENT ALTERNATIVE
The Plan provides for participant-directed account balances. The
summary of significant account balances by investment alternative as
of December 27, 1995, and for the year then ended is detailed in the
chart on the following page.
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<TABLE>
<CAPTION>
_______________________________________________________________________________________________________________
Participant
Directed
_______________________________________________________________________________________________________________
Mutual Funds
_______________________________________________
Putnam Investments
_______________________________________________
Diversi- VSE
Guaranteed Government Putnam fied Life Notes Corp.
Investment Separate Stable George Growth Global Income Insurance Receiv- Common
Contract Accounts Value Putnam and Income Growth Voyager Trust Policies able Stock
__________ _________ ________ _________ _________ _______ _________ _______ ________ _______ _________
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Investments at market,
contract, or
cash value 1,186,271 2,746,149 1,765,464 3,394,695 479,802 400,369 2,410,135 915,783 136,419 432,158 1,447,741
Investment income
Interest (A) 97,452 157,042 - - - - - - - 25,944 -
Dividends (A) - - 63,754 228,675 27,803 22,709 130,739 43,804 - - 21,058
Unrealized gains (A) - - - 360,500 33,426 10,848 341,643 45,749 - - 600,939
Realized gains (A) - - - 62,316 2,745 5,110 61,260 2,207 - - 37,097
Participant
contributions (A) - - 322,508 228,272 277,765 270,622 402,691 98,503 11,152 - 134,834
Distributions to
participants (A) 657,471 458,140 116,599 314,056 13,441 39,185 278,699 34,087 - 57,642 86,922
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______________________ __________
Total
Participant
Non-Particpant and Non-Particpant
Directed Directed
______________________ __________________
VSE
Corp. Putnam
Common Asset
Stock Allocation
__________ __________ _________________
<S> <C> <C> <C>
Investments at market,
contract, or
cash value 6,972,836 249,333 22,537,155
Investment income
Interest (A) - - 280,438
Dividends (A) 91,862 11,034 641,438
Unrealized gains (A) 2,912,955 4,230 4,310,290
Realized gains (A) - 348 171,083
Participant
contributions (A) - - 1,746,34
Distributions to
participants (A) 571,868 10,994 2,639,104
(A) Interest income above differs from the statement of changes in net assets available for benefits by $19,357 which represents
interest earned from the Plan's operating cash accounts. Dividend income above differs from the statement of changes in net
assets available for benefits by $62,924 which represents dividends earned on the Plan's prior mutual fund investments. The
total of realized and unrealized gains above differs from the statement of changes in net assets available for benefits by
$290,242 which represents gains earned on the sale of the Plan's prior mutual fund investments. Distributions to participants
above differs from the statement of changes in net assets available for benefits by $252,853 which represents distributions
from the Plan's prior mutual fund investments. Participant contributions above differs from the 401(k) contributions on the
statement of changes in net assets available for benefits by $65,614 which represents year-end contributions not received by
Putnam until after December 27, 1995.
</TABLE>
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<TABLE>
VSE CORPORATION EMPLOYEE ESOP/401(k) PLAN
SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES
AS OF DECEMBER 27, 1995
<CAPTION>
Contract or
Description Cost Market Value
- ----------- --------- ----------
<S> <C> <C>
VSE Corporation common stock
* PAYSOP/ESOP $ 3,034,871 $ 6,972,836
* 401(k) Stock Fund 724,624 1,447,741
Mutual funds
*George Putnam Fund of Boston 3,034,195 3,394,695
* Putnam Fund for Growth and Income 447,798 479,802
* Putnam Global Growth Fund 389,521 400,369
* Putnam Voyager Fund 2,068,491 2,410,135
* Putnam Diversified Income Trust 870,034 915,783
* Putnam Asset Allocation Fund - Conservative
Portfolio 245,103 249,333
---------- ----------
$10,814,637 $16,270,694
========== ==========
Guaranteed Interest Contract
Massachusetts Mutual Life Insurance Company,
8.25% effective annual yield
Maturity date - January 1, 1996 1,186,271
Government Separate Accounts
Massachusetts Mutual Life Insurance Company,
6.45% effective annual yield
Maturity date - January 2, 1996 865,688
Metropolitan Life Insurance Company,
5.20% effective annual yield
Maturity date - December 31, 1995 1,880,461
* Putnam Stable Value Fund 1,765,464
----------
Total Fixed Income Investment Contracts 5,697,884
----------
Notes receivable - loans to participants
(interest rates vary from 6.0% to 10.5% with maturities
of 1 to 4 years) 432,158
----------
Life insurance policies (at cash surrender value)
Confederation Life Insurance Company 129,663
Lincoln National Life Insurance Company 6,756
----------
$22,537,155
* Party-in-interest. ==========
The accompanying notes are an integral part of this schedule.
</TABLE>
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<TABLE>
VSE CORPORATION EMPLOYEE ESOP/401(k) PLAN
SCHEDULE OF REPORTABLE TRANSACTIONS
FOR THE YEAR ENDED DECEMBER 27, 1995
<CAPTION>
Sales
____________________________________
Description Purchases Proceeds Cost Gain/(Loss)
___________ ________________________________________________
<S> <C> <C> <C> <C>
Mutual funds
* George Putnam Fund
of Boston $3,781,871 $809,993 $747,676 $62,317
* Putnam Voyager Fund $2,375,381 $368,150 $306,890 $61,260
* Putnam Diversified
Income Trust $941,037 $73,210 $71,003 $2,207
Vanguard
Wellington $27,646 $3,402,504 $3,210,041 $192,463
American Capital
Comstock $8,132 $1,487,320 $1,407,100 $80,220
Collective investment trust
* Putnam Stable Value Fund $2,411,677 $646,214 $646,214 $0
* Party-in-interest.
The accompanying notes are an integral part of this schedule.
</TABLE>
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