VSE CORP 10-K

ITEM 9A. Controls and Procedures Evaluation of Disclosure Controls and Procedures Our management has evaluated, with the participation of our Chief Executive Officer and Chief Financial Officer, the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15(d)-15(e) under the Exchange Act). Based on this evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that, as of December 31, 2020, our disclosure controls and procedures were effective to ensure that information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. Management's Report on Internal Control Over Financial Reporting Management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rules 13a-15(f) and 15d-15(f). Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we conducted an assessment of the effectiveness of our internal control over financial reporting as of December 31, 2020 based on the framework in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 Framework). Based on our assessment under the framework in Internal Control – Integrated Framework , our management concluded that our internal control over financial reporting was effective as of December 31, 2020. Grant Thornton LLP, our independent registered public accounting firm, has issued an opinion on our internal control over financial reporting. This opinion appears in the Report of Independent Registered Public Accounting Firm set forth below. Change in Internal Controls During the fourth quarter of fiscal year 2020, there were no changes in our internal control over financial reporting, as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that have materially affected these controls, or are reasonably likely to materially affect these controls subsequent to the evaluation of these controls. -72- Table of Contents Report of Independent Registered Public Accounting Firm Board of Directors and Stockholders VSE Corporation Opinion on internal control over financial reporting We have audited the internal control over financial reporting of VSE Corporation (a Delaware corporation) and subsidiaries (the “Company”) as of December 31, 2020, based on criteria established in the 2013 Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2020, based on criteria established in the 2013 Internal Control—Integrated Framework issued by COSO. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the consolidated financial statements of the Company as of and for the year ended December 31, 2020, and our report dated March 5, 2021 expressed an unqualified opinion on those financial statements. Basis for opinio n The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Definition and limitations of internal control over financial reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. /s/ GRANT THORNTON LLP Arlington, Virginia March 5, 2021 -73- Table of Contents ITEM 9B. Other Information None. PART III Except as otherwise indicated below, the information required by Items 10, 11, 12, 13 and 14 of Part III of Form 10-K has been omitted in reliance of General Instruction G(3) to Form 10-K and is incorporated herein by reference to our definitive proxy statement to be filed with the SEC not later than 120 days after December 31, 2020 in respect of the Annual Meeting of VSE's stockholders scheduled to be held on May 5, 2021 (the "Proxy Statement"). ITEM 10. Directors, Executive Officers and Corporate Governance Information called on by Item 10 will be set forth in our Proxy Statement, which information is incorporated herein by reference. ITEM 11. Executive Compensation Information called on by Item 11 will be set forth in our Proxy Statement, which information is incorporated herein by reference. ITEM 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters Except for the "Equity Compensation Plan Information" disclosed in Item 5 above, the information called on by this Item 12 will be set forth in our Proxy Statement, which information is incorporated herein by reference. ITEM 13. Certain Relationships and Related Transactions, and Director Independence Information called on by Item 13 will be set forth in our Proxy Statement, which information is incorporated herein by reference. ITEM 14. Principal Accountant Fees and Services Information called on by Item 14 will be set forth in our Proxy Statement, which information is incorporated herein by reference. PART IV ITEM 15. Exhibits and Financial Statement Schedules 1. Financial Statements The consolidated financial statements are listed under Item 8 of this Form 10-K. 2. Supplemental Financial Statement Schedules The following financial statement schedule is included herein: Sc hedule II - Valuation and Qualifying Accounts All other schedules have been omitted because they are not applicable, not required, or the information has been otherwise supplied in the financial statements or notes to the financial statements. 3. Exhibits See "Exhibit Index" hereinafter contained and incorporated by reference. -74- Table of Contents ITEM 16. Form 10-K Summary None. -75- Table of Contents VSE Corporation and Subsidiaries Schedule II - Valuation and Qualifying Accounts Balance at Beginning of Year Additions Charged to Statement of Income Accounts Other (1) Deductions Balance at End of Year (in thousands) Allowance for credit losses on accounts receivable Year ended December 31, 2020 396 1,767 (2) — 670 1,493 Year ended December 31, 2019 79 244 148 75 396 Valuation allowance for deferred tax assets Year ended December 31, 2020 1,165 6,761 (3) — — 7,926 Year ended December 31, 2019 107 1,165 — 107 1,165 (1) Represents opening allowance balance related to acquisition made during the period indicated. (2) Increase in 2020 primarily due to allowances booked as a result of the financial impact from the COVID-19 pandemic. (3) Increase in 2020 primarily due to full valuation allowance established against capital loss DTA in connection with the Prime Turbines stock sale and full valuation allowance against foreign tax loss DTA. -76- Table of Contents EXHIBIT INDEX Reference No. Per Item 601 of Regulation S-K Description of Exhibit Exhibit No. In this Form 10-K 3.1 Restated Certificate of Incorporation of VSE Corporation dated as of March 4, 1996 (filed herewith) Exhibit 3.1 3.2 C ertificate of Amendment of the Restated Certificate of Incorporation of VSE Corporation dated as of May 2 , 2006 (Exhibit 3. 1 to Form 10- Q dated August 1,2006) * 3.3 By-Laws of VSE Corporation as amended through July 31, 2013 (Exhibit 3.1 to Form 8-K dated August 23, 2013) * 4.1 Specimen Stock Certificate as of May 19, 1983 (Exhibit 4 to Registration Statement No. 2-83255 dated April 22, 1983 on Form S-2) * + P 4.2 Description of VSE Corporation Securities Registered Pursuant to Section 12 of the Securities Act of 1934 (filed herewith) Exhibit 4.2 10.1 Employment Agreement dated as of July 1, 2004, by and between VSE Corporation and Thomas R. Loftus (Exhibit 10.1 to Form 10-Q dated July 30, 2004) * + 10.2 Severance and Mutual Protection Agreement dated as of November 7, 2008, by and between VSE Corporation and Thomas M. Kiernan (Exhibit 10.3 to Form 10-K dated March 3, 2009) * + 10.3 Employment Agreement dated as of March 15, 2019, by and between VSE Corporation and John A. Cuomo (Exhibit 10.1 to Form 8-K dated March 9, 2019) * + 10.4 Executive Employment Agreement dated as of September 24, 2019, by and between VSE Corporation and Robert Moore (Exhibit 10.1 to Form 8-K dated September 27, 2019) * + 10.5 Executive Employment Agreement dated as of September 21, 2020 by and between VSE Corporation and Benjamin Thomas (Exhibit 10.1 to Form 8-K dated September 23, 2020) * + 10.6 Executive Employment Agreement dated as of October 14, 2020 by and between VSE Corporation and Stephen D. Griffin (Exhibit 10.1 to Form 8-K dated October 16, 2020) * + 10.7 Fourth Amended and Restated Business Loan and Security Agreement dated January 5, 2018 among VSE Corporation and its wholly owned subsidiaries, Citizens Bank N.A. and a syndicate of eight other banks (Exhibit 10.1 to Form 8-K dated January 8, 2018) * 10.8 First Amendment to Fourth Amended and Restated Business Loan and Security Agreement dated November 26, 2019 among VSE Corporation and its wholly owned subsidiaries, Citizens Bank N.A. and a syndicate of nine other banks (Exhibit 10.1 to Form 8-K dated December 2, 2019) * 10.9 Second Amendment to Fourth Amended and Restated Business Loan and Security Agreement dated June 29, 2020 among VSE Corporation and its wholly owned subsidiaries, Citizens Bank N.A. and certain other banks (Exhibit 10.1 to Form 10-Q dated July 31, 2020.) 10.10 Lease Agreement by and between Metropark 7 LLC and VSE Corporation (Exhibit 10.2 to Form 8-K dated November 4, 2009) * -77- Table of Contents 10.11 VSE Corporation Deferred Supplemental Compensation Plan effective January 1, 1994 as amended by the Board through March 9, 2004 (Exhibit 10.2 to Form 10-Q dated April 28, 2004) * + 21.1 Subsidiaries of the Registrant Exhibit 21 23.1 Consent of Grant Thornton LLP, Independent Registered Public Accounting Firm Exhibit 23.1 23.2 Consent of Ernst and Young LLP, Independent Registered Public Accounting Firm Exhibit 23.2 31.1 Section 302 CEO Certification Exhibit 31.1 31.2 Section 302 CFO and PAO Certification Exhibit 31.2 32.1 Section 906 CEO Certification Exhibit 32.1 32.2 Section 906 CFO and PAO Certification Exhibit 32.2 99.1 Audit Committee Charter (as adopted by the Board Of Directors of VSE Corporation on March 9, 2004)(Appendix A to Registrant's definitive proxy statement for the Annual Meeting of Stockholders held on May 3, 2004) * 101.INS XBRL Instance Document 101.SCH XBRL Taxonomy Extension Schema Document 101.CAL XBRL Taxonomy Extension Calculation Linkbase Document 101.DEF XBRL Taxonomy Extension Definition Linkbase Document 101.LAB XBRL Taxonomy Extension Label Linkbase Document 101.PRE XBRL Taxonomy Extension Presentation Linkbase Document 104 The cover page from VSE Corporation's Annual Report on Form 10-K for the fiscal year ended December 31, 2020 has been formatted in Inline XBRL. * Document has been filed as indicated and is incorporated by reference herein. + Indicates management contract or compensatory plan or arrangement. P I ndicates exhibit was submitted to the Securities and Exchange Commission as a paper filing prior to the time that electronic filing on EDGAR became mandatory. -78- Table of Contents SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. VSE CORPORATION Date: March 5, 2021 By: /s/ John A. Cuomo John A. Cuomo Chief Executive Officer and President Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons on behalf of Registrant and in the capacities and on the dates indicated. Name Title Date /s/ John A. Cuomo Director, Chief Executive March 5, 2021 John A. Cuomo Officer and President (Principal Executive Officer) /s/ Stephen D. Griffin Senior Vice President March 5, 2021 Stephen D. Griffin and Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer) /s/ Ralph E. Eberhart Chairman/Director March 5, 2021 Ralph E. Eberhart /s/ Calvin S. Koonce Director March 5, 2021 Calvin S. Koonce /s/ James F. Lafond Director March 5, 2021 James F. Lafond /s/ Bonnie K. Wachtel Director March 5, 2021 Bonnie K. Wachtel /s/ Jack C. Stultz Director March 5, 2021 Jack C. Stultz /s/ John E. Potter Director March 5, 2021 John E. Potter /s/ Mark E. Ferguson III Director March 5, 2021 Mark E. Ferguson III -79-