2003 Annual Report
2003 Annual Report
and Form 10-K
and Form 10-K
Letter to Shareholders
Fellow Shareholders:
VSE reported improved financial performance in 2003,
with revenues of $134.5 million and net income of $2.0
million ($.92 a share). While VSE does not predict
revenues or earnings, and setbacks may occur, we expect
the positive trends we experienced in 2003 to continue
into 2004 and 2005. We are doing a better job of
identifying, bidding, and winning new work, and we are
working the jobs we have won with more focus on
customer quality and profitability. As a result, I expect
VSE to achieve a higher level of operations success and
financial performance, and I look forward to reporting on
our progress.
Outlook for Growth
As an example of progress this year, we recently
announced that our BAV Division received a delivery
order for $100 million to support the reactivation and
transfer of four KIDD-class destroyers, a multiyear
effort extending into 2007. We are performing ahead of
schedule, and our customer has indicated satisfaction
with our efforts. BAV's contract with the U.S. Navy is
VSE's largest contract, contributing 48% of total VSE
revenues in 2003, and the KIDD delivery order received
in early 2004 is the single largest delivery order ever
received by VSE. We are proud of the trust and
confidence placed in us by the Navy and by our Taiwan
customers. Needless to say, we are also extraordinarily
proud of the BAV Division employees and staff
employees who, together with our BAV subcontractors,
work very hard to ensure that our customer receives
superior value.
We are also pleased with the continuing effort to spur
revenue growth and profit in each of our other business
units. Each of our divisions has set goals to exceed their
revenue and profit performance in 2003, and our board of
directors is encouraging their effort with an incentive
bonus plan. Our workforce grew about 10% in 2003, and
we hope to exceed that growth rate in 2004. With a
substantial $83 million backlog to start the year 2004, we
intend to build on our success.
As you know, about a year ago we announced that the
board of directors determined to discontinue VSE's
previously announced pursuit of strategic business
alternatives, including the potential sale of the company.
Having considered certain strategic alternatives,
including a review of offers by third parties, the board
determined that superior value could be achieved for
shareholders through continuing to operate VSE in
accordance with its ongoing business plan. The results of
this decision are reflected in the positive trends and
growing shareholder value we have seen over the past
year. VSE will continue, however, to review promising
strategic business opportunities that may arise from time
to time, including potential acquisitions to accelerate our
growth.
VSE People
VSE depends on the contribution and dedication of each
employee and every VSE business partner, consultant,
supplier and subcontractor. We have an active board of
directors, a unified management team, a staff of
experienced and qualified employees, and a commitment
to our quality management system registered to the
international ISO 9001 quality standard. Together we will
continue to set high goals and strive to achieve them.
VSE welcomed James F. Lafond as a director in 2003. Jim
is a talented and experienced professional from the
independent audit community, and we look forward to his
leadership role on VSE's audit committee and to his
contribution to the board of directors.
VSE performs an important role in the defense of our
nation. Our services for the Departments of Defense,
Energy, and Homeland Security make a difference in
readiness and field support, in policy and technology, and
in government preparedness. We are proud of what we
accomplish every day.
Your company passed an important milestone on
January 22, 2004, celebrating 45 years of continuous
service and support. While it is a pleasure to stop and
recognize all that has gone before, and on which we have
been given the good fortune to build, we are working very
hard as a team to assure that VSE's next five years achieve
a higher level of value for our customers as well as
corporate growth and profitability for our shareholders
and employees.
As always, your comments and suggestions for
improvement are welcome at any time.
D. M. Ervine
Chairman of the Board
President and CEO/COO
March 9, 2004
Financial Highlights
Selected Financial Data
(In thousands, except per share data)
Revenues, principally from contracts ........................................
$ 134,459
$ 134,379
$ 111,572
$ 122,269
$ 157,354
2003
2002
2001
2000
1999
Income from continuing operations ..........................................
Loss from discontinued operations ..........................................
Loss on disposal of discontinued
operations ................................................................................
Net income ............................................................................
$ 2,011
$
-
652 $
-
855 $ 1,385 $ 2,364
(256)
-
-
-
$ 2,011
-
$ 652
-
$ 855
(417)
$ 968
(574)
$ 1,534
Basic earnings per common share:
Income from continuing operations ........................................
Loss from discontinued operations ..........................................
Net income ............................................................................
$
.92
-
$ .92
$
.30 $
.40 $
.65 $ 1.12
-
$ .30
-
$ .40
(.19)
$ .46
(.39)
$ .73
Diluted earnings per common share:
Income from continuing operations ........................................
Loss from discontinued operations ..........................................
Net income ............................................................................
$
.90
-
$ .90
$
.30 $
.40 $
.65 $ 1.12
-
$ .30
-
$ .40
(.19)
$ .46
(.39)
$ .73
Working Capital ..........................................................................
$ 13,390
$ 10,762
$ 8,807
$ 8,364
$ 7,078
Total assets ..................................................................................
$ 40,776
$ 32,075
$ 33,209
$ 31,523
$ 31,250
Long-term debt ...........................................................................
$ -
$ -
$ 351
$ -
$ -
Stockholders' investment ...........................................................
$ 19,058
$ 17,043
$ 16,475
$ 15,793
$ 15,145
Cash dividends per common share ............................................
$ .16
$ .16
$ .16
$ .16
$ .144
This consolidated summary of selected financial data should be read in conjunction with the consolidated financial
statements and related notes included in VSE's Securities and Exchange Commission filings, including VSE's Annual
Report on Form 10-K and other current and quarterly reports. The historical results set forth above are not necessarily
indicative of the results of operations to be expected in the future.
About the Cover
The photographs on the cover show two of the four
KIDD-class destroyers being transferred by the
United States to the Taiwan Navy. In January 2004
VSE was awarded a delivery order for $100 million
to continue its reactivation planning and
availability services in connection with the sale and
transfer. The delivery order requires VSE to
provide advance planning services, upgrades and
alterations planning, industrial services, services
supporting the Taiwan Navy reactivation planning
and management team, and reactivation site
project planning support.
Work is being performed by VSE's BAV Division
and its team of subcontractors under BAV's ten-
year, $1.1 billion Navy contract supporting the
reactivation and transfer of ex-U.S. Navy ships to
foreign navies.
Corporate Profile
VSE Corporation is a diversified professional
The
services company established in 1959.
company and its subsidiaries provide services and
products to the engineering, energy and
environment, defense and homeland security
markets around the world.
VSE's principal
customers are agencies of the U.S. Government
and other government prime contractors.
Operations are conducted by VSE's professional
staff of 500 employees located at offices across the
United States and around the world.
Further information about VSE is available at the
company's website at www.vsecorp.com.
Stockholder Inquiries
VSE is an employee and publicly owned company,
and its shares are traded on the Nasdaq National
Market System under the symbol VSEC.
Inquiries about stock ownership, dividends, and
stockholder changes of address may be directed to
our transfer agent: Registrar and Transfer
Company 10 Commerce Drive Cranford, New
Jersey 07016-3572, 800-866-1340 or to VSE at
2550 Huntington Avenue Alexandria, Virginia
22303-1499, Attention: Corporate Secretary,
703-329-4770
Quality Systems Management
VSE's policy is to provide products and services of
the highest quality to meet the expectations and
requirements of our customers on time and at a fair
price.
VSE's quality management system is
registered to the ISO 9001:2000 standard.
Forward Looking Statements
This report contains statements which, to the extent
they are not recitations of historical fact, constitute
"forward looking statements" within the meaning of
Section 27A of the Securities Act of 1933 and Section
21E of the Securities Act of 1934. All forward
looking statements involve risks and uncertainties.
The forward looking statements in this document
are intended to be subject to the safe harbor
protection provided by Sections 27A and 21E.
For discussions identifying some important factors
that could cause actual VSE results to differ
materially from those anticipated in the forward
looking statements, please see VSE's Securities and
Exchange Report on Form 10-K for the fiscal year
ended December 31, 2003, including discussions
captioned "Narrative Description of Business,"
"Management's Discussion and Analysis," and
"Notes to Consolidated Financial Statements."
Readers are cautioned not to place undue reliance
on the forward looking statements, which reflect
management's analysis only as of the date hereof.
VSE undertakes no obligation to publicly revise the
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 VSE files from time
to time with the Securities and Exchange
Commission, including the Quarterly Reports on
Form 10-Q to be filed by VSE and any Current
Reports on Form 8-K.
Design and layout by Julie Chappell,
Energetics, Incorporated.
VSE Corporation
helps organizations succeed through the
effective use of people, systems, and
technology. In helping others succeed, we
increase shareholder value by capturing new
work, delighting our customers, increasing our
technical competence, and building great
industry teammates.
Our reputation for
success and our quality management system
are based on honesty and integrity in
everything we do; on communications, on
teamwork and leadership; and on an enduring
commitment to help our customers,
employees, and teaming partners succeed
with cost effective solutions, continuous
learning, and process improvement.
Celebrating
45 years
of Excellence
Corporate Officers
Board of Directors
Chairman, President and CEO/COO
Donald M. Ervine
Executive Vice Presidents
James M. Knowlton
Craig S. Weber, CAO, Secretary
Senior Vice Presidents
Thomas G. Dacus
Michael E. Hamerly
Thomas R. Loftus, CFO
Jayne M. Tuohig
Vice Presidents
Bryan E. Adams, Comptroller
Stephen W. Austin
James S. Fallon
Peter J. Desrosiers
Richard J. Hannah, Treasurer
H. Eugene Hosier
Assistant Vice Presidents
David W. Chivers
Louis G. Lawrence
Elizabeth M. Price
Director Emeritus
Harold P. Weinberg
formerly Senior Vice President
and Director (1961-1996)
VSE Corporation
Donald M. Ervine
Chairman of the Board,
President and CEO/COO
VSE Corporation
Robert J. Kelly
Admiral, USN (Ret.);
Chairman of the Board and President
Energetics, Incorporated
Clifford M. Kendall
Private Investor; formerly
Chairman and CEO,
Computer Data Systems, Inc.
Calvin S. Koonce, Ph.D.
Chairman, Koonce Securities, Inc.
Securities Broker/Dealer
James F. Lafond, CPA
Retired Executive; formerly
Washington Area Managing Partner
PricewaterhouseCoopers LLP
David M. Osnos, Esq.
Of Counsel
Arent Fox PLLC
Attorneys-at-Law
Jimmy D. Ross
General, USA (Ret.);
Senior Logistics Consultant
Cypress International, Inc.
Bonnie K. Wachtel
Vice President and General Counsel
Wachtel & Co., Inc.
Facilities Information
VSE Executive Offices
2550 Huntington Avenue
Alexandria, Virginia 22303
(703) 960-4600 or (703) 329-4602
VSE Divisions and Subsidiaries:
BAV Division
2550 Huntington Avenue
Alexandria, Virginia 22303
(703) 317-5200
Charleston, South Carolina
Alexandria, Egypt
Tokyo, Japan
Mancanillo, Mexico
Suoa and Tsoying, Taiwan
Sattahip, Thailand
Golchuk, Turkey
Communications and Engineering
Division
170 Avenue at the Common
Shrewsbury, New Jersey 07702
(732) 389-3324
Coast Guard Division
2550 Huntington Avenue
Alexandria, Virginia 22303
(703) 317-5200
Energetics, Incorporated
7164 Gateway Drive
Columbia, Maryland 21046
(410) 290-0370
Washington, D.C.
Morgantown, West Virginia
VSS Division
2550 Huntington Avenue
Alexandria, Virginia 22303
(703) 329-4234
Fleet Maintenance Division
500 Woodlake Drive, Suite 1
Chesapeake, Virginia 23320
(757) 523-7200
San Diego, California
Jacksonville, Florida
Indian Head, Maryland
Lexington Park, Maryland
Bridgeport, New Jersey
Haddon Heights, New Jersey
Langley, Virginia
HRSI and Postal Programs
2550 Huntington Avenue
Alexandria, Virginia 22303
(703) 329-4234
Management Sciences Division
11545 West Bernardo Court
Suite 209
San Diego, California 92127
(858) 385-1902
Systems Engineering Division
2550 Huntington Avenue
Alexandria, Virginia 22303
(703) 329-4205
Warner Robins, Georgia
Sterling Heights, Michigan
Ladysmith, Virginia
VSE Services International, Inc.
2550 Huntington Avenue
Alexandria, Virginia 22303
(703) 329-4601
“Our 45th Year”
“Our 45th Year”
2550 Huntington Avenue
Alexandria, Virginia
22303-1499
www.vsecorp.com