UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 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 year ended December 31, 2005
[ ] TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the transition period from _____ to _____
Commission file number 001-08533
A. Full title of the plan and the address of the plan, if different from that
of the issuer named below:
ENGINEERED SUPPORT SYSTEMS, INC. 401(K) & EMPLOYEE
STOCK OWNERSHIP PLAN
(Formerly known as ENGINEERED SUPPORT SYSTEMS, INC. EMPLOYEE STOCK
OWNERSHIP PLAN)
B. Name of the issuer of the securities held pursuant to the plan and the
address of its principal executive offices:
Engineered Support Systems, Inc.
201 Evans Lane
St. Louis, Missouri 63121
Financial Statements and Exhibits
ENGINEERED SUPPORT SYSTEMS, INC.
401(K) & EMPLOYEE STOCK OWNERSHIP PLAN
December 31, 2005
Table of Contents
-----------------
Reports of Independent Registered Public Accounting Firms......................1
Financial Statements:
--------------------
Statement of Net Assets Available For Plan Benefits...................3
Statement of Changes In Net Assets Available For Plan Benefits........4
Notes to Financial Statements.........................................5
Supplemental Schedules:
----------------------
Report of Independent Registered Public Accounting Firm on
Supplementary Information............................................12
Schedule of Assets Held At End of Year...............................13
Schedule of Reportable Transactions..................................14
Schedule of Delinquent Participant Contributions.....................16
Exhibits:
--------
23.1 Consent of Independent Registered Public Accounting Firm
23.2 Consent of Independent Registered Public Accounting Firm
Report of Independent Registered Public Accounting Firm
To the Pension Committee of
Engineered Support Systems, Inc. 401(k) &
Employee Stock Ownership Plan
We have audited the accompanying statement of net assets available for benefits
of the Engineered Support Systems, Inc. 401(k) & Employee Stock Ownership Plan
(the "Plan") as of December 31, 2005 and the related statement of changes in net
assets available for benefits for the year then ended. These financial
statements are the responsibility of the Plan's management. Our responsibility
is to express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (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 consideration of
internal control over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, but not for the purposes
of expressing an opinion on the effectiveness of the Plan's internal control
over financial reporting, accordingly, we express no such opinion. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material aspects, the net assets available for benefits at December 31,
2005, and the changes in net assets available for benefits for the year then
ended, in conformity with accounting principles generally accepted in the United
States of America.
/s/ Rubin Brown LLP
St. Louis, Missouri
July 14, 2006
1
Report of Independent Registered Public Accounting Firm
To the Participants and Administrator of
Engineered Support Systems, Inc.
Employee Stock Ownership Plan
In our opinion, the accompanying statement of net assets available for benefits
and the related statement of changes in net assets available for benefits
present fairly, in all material respects, the net assets available for benefits
of Engineered Support Systems, Inc. Employee Stock Ownership Plan (the "Plan")
at December 31, 2004, and the changes in net assets available for benefits for
the year then ended in conformity with accounting principles generally accepted
in the United States of America. These financial statements are the
responsibility of the Plan's management. Our responsibility is to express an
opinion on these financial statements based on our audit. We conducted our audit
of these statements in accordance with the standards of the Public Company
Accounting Oversight Board (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, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
/s/ PricewaterhouseCoopers LLP
St. Louis, Missouri
June 28, 2005
2
Engineered Support Systems, Inc.
401(k) & Employee Stock Ownership Plan
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
December 31,
--------------------------------------
2005 2004
----------------- -----------------
Assets:
Investments, At Fair Value (Note C)
Common Collective Trusts............................................. $ - $ 16,636,950
Registered Investment Companies...................................... 49,058,805 36,486,181
Company Stock........................................................ 47,886,106 47,789,442
Guaranteed Income Fund............................................... 19,400,789 -
Participant Loans.................................................... 2,683,262 2,401,337
----------------- -----------------
119,028,962 103,313,910
Employer contributions receivable....................................... 6,053,200 4,312,996
----------------- -----------------
Net Assets Available For Benefits....................................... $ 125,082,162 $ 107,626,906
================= =================
See the accompanying notes to the financial statements.
3
Engineered Support Systems, Inc.
401(k) & Employee Stock Ownership Plan
STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
For the Years Ended
December 31,
-------------------------------------
2005 2004
----------------- -----------------
Addition To Net Assets Attributed To:
Investment Income (Note C):
Net realized and unrealized gain on Engineered Support Systems, Inc.
common stock........................................................... $ 2,592,575 $ 3,424,484
Net appreciation from common collective trusts............................ 93,496 615,401
Net appreciation from registered investment companies..................... 3,560,048 3,703,275
Net appreciation of the Guaranteed Income Fund............................ 568,480 -
Interest and dividend income.............................................. 621,796 497,307
----------------- -----------------
Net Investment Income.............................................. 7,436,395 8,240,467
----------------- -----------------
Contributions:
Salary Deferral........................................................... 6,889,382 5,230,952
Employer.................................................................. 7,249,455 5,254,044
----------------- -----------------
Total Contributions................................................ 14,138,837 10,484,996
----------------- -----------------
Transfers Into The Plan:
Transfer in from TAMSCO Tax Deferred Retirement Plan...................... - 9,467,438
Transfer in from Engineered Environments, Inc. 401(k) Retirement Plan..... - 1,097,645
Transfer in from Prospective Computer Analysts, Inc. Employee Savings and
Retirement Plan........................................................ 3,743,754 -
Transfer in from Spacelink International, LLC 401(k) Retirement Plan...... 761,001 -
Transfer in from Mobilized Systems, Inc. 401(k) Incentive Savings Plan.... 1,522,989 -
----------------- -----------------
Total Transfers Into The Plan.......................................... 6,027,744 10,565,083
----------------- -----------------
Total Additions.................................................... 27,602,976 29,290,546
----------------- -----------------
Deductions From Net Assets Attributed To:
Benefits paid directly to participants...................................... (10,099,320) (11,142,832)
Plan expenses............................................................... (48,400) (7,311)
----------------- -----------------
Total Deductions................................................... (10,147,720) (11,150,143)
----------------- -----------------
Net Increase....................................................... 17,445,256 18,140,403
Net Assets Available For Benefits:
Beginning Of Year......................................................... 107,626,906 89,486,503
----------------- -----------------
Net Assets Available For Benefits:
End Of Year............................................................... $ 125,082,162 $ 107,626,906
================= =================
See the accompanying notes to the financial statements.
4
NOTES TO FINANCIAL STATEMENTS
Engineered Support Systems, Inc.
401(k) & Employee Stock Ownership Plan
December 31, 2005 and 2004
NOTE A - DESCRIPTION OF THE PLAN
The Plan is a combined 401(k) savings plan and a payroll-based employee stock
ownership plan covering salaried employees and all non-salaried employees not
otherwise covered by a collective bargaining agreement of the Company's
following wholly-owned subsidiaries: Engineered Air Systems, Inc., Engineered
Specialty Plastics, Inc., Engineered Coil Company, d/b/a Marlo Coil, Keco
Industries, Inc., Engineered Electric Company, d/b/a Fermont, Radian, Inc.,
Universal Power Systems, Inc., Technical and Management Services Corp.,
Engineered Environments, Inc., System & Electronics Inc. employees hired after
2004, Spacelink International, LLC, Prospective Computer Analysts Inc., and
Mobilized Systems, Inc. Eligible employees who have attained age 21 may enroll
in the Plan. Upon enrollment, participants may elect to defer up to 50% of their
compensation in the Plan, up to a maximum of $14,000 for the year ended December
31, 2005 and $13,000 for the year ended December 31, 2004 as adjusted annually
by the Internal Revenue Service. For the years ended December 31, 2005 and 2004,
additional catch up contributions in the amounts of $4,000 and $3,000,
respectively, could be made by participants age 50 or older. The Plan allows
forfeitures to offset administrative expenses of the Plan in addition to
reducing employer contributions. The Plan allows for hardship withdrawals. The
Plan limits loan repayments to five (5) years.
Contributions under the Plan consist of the following:
1. The amount of the salary deferrals of all Plan participants (the
participant contribution)
2. The Company's discretionary contribution (the employer discretionary
contribution). In 2005 and 2004, the Company's discretionary
contribution was equal to 4.2% of eligible earnings
3. The Company's matching contribution of each participant's contribution
up to a maximum of 6% of the participant's eligible compensation (the
employer matching contribution). In 2005 and 2004, the Company's
matching contribution was 40% of each participant's eligible
contribution up to 6%.
All participant contributions are invested at the participant's discretion in
the investment funds offered by the Plan and selected by the participant.
Employee and employer contributions are 100% vested. All contributions by the
Company are made in the form of Engineered Support Systems, Inc. common stock or
cash.
Upon death, termination of service, or attainment of age 70 1/2, a participant
may elect to receive either a lump-sum amount equal to the value of the
participant's vested interest in his or her account, a single annuity, the
purchase of a joint and survivorship annuity with various survivor options, or a
series of installment payments.
Each participant's account is credited with the participant's contributions, the
employer's matching contribution or employer discretionary contribution, if
applicable, and an allocation of Plan earnings. The allocation of earnings is
determined by the earnings of the participant's investment selection based on
5
each participant's account balance, as defined in the Plan agreement. The
benefit to which a participant is entitled is the benefit that can be provided
from the participant's account.
The Plan allows participants to borrow from existing balances in their Plan
investments. Participant loan balances must not exceed 50% of the participants
vested account balance at the date the loan was processed with a minimum
borrowing of $1,000 up to a maximum of $50,000. These loans are to be repaid
with interest over a period not to exceed five years. The final installments are
due at various dates through April 2024.
The Plan Administrator is Engineered Support Systems, Inc. acting through an
Administrative Committee to administer the Plan. Prudential Trust Company is
the Trustee of the Plan and therefore a party-in-interest under ERISA (Employee
Retirement Income Security Act of 1974). Information about the Plan, including
provisions for vesting, allocation of earnings, withdrawal provisions and the
impact of Plan termination is contained in the Summary Plan Description. Copies
of the Summary Plan Description are available from the Company.
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The financial statements of the Engineered Support Systems, Inc. Employee Stock
Ownership Plan (the "Plan") are presented on the accrual basis of accounting,
except that benefits due to participants are recorded as a reduction in net
assets available for Plan benefits when paid.
Investments in the Engineered Support Systems, Inc. (the "Company") common stock
are stated at fair value based on the last reported sales price on December 31,
2005 and 2004, respectively. Investments in registered investment companies,
including the Dreyfus Premier Core Bond Fund-Class A, the EuroPacific Growth
Fund, the Alliance Bern Growth & Income Fund-Class A, the Janus Twenty Fund, the
Jennison Growth Fund-Class Z, the Dryden Stock Index Fund-Class Z, the INVESCO
Technology Fund II-Investor Shares, the Franklin Small Cap Growth Fund II, the
Jennison US Emerging Growth Fund-Class A, Vanguard Morgan Growth (Admiral
Class), Vanguard Total Stock Market (Admiral Class), Vanguard Windsor (Admiral
Class), Vanguard Institutional Index (Institutional Class), American Funds
Balanced Fund-Class A, Vanguard 500 Index-Class A, Lord Abbett Small Cap
Blend-Class A, and PIMCO Total Return-Class A are stated at the fair value of
the underlying portfolio of securities, as determined by the respective manager.
Investments in common collective trusts including the Prudential Stable Value
Fund (managed by Wells Fargo Bank Minnesota, N.A.) are stated at the fair value
of the underlying portfolio of securities, as determined by the respective
manager. Investments in the Guaranteed Income Fund are stated at fair value of
the underlying portfolio of securities, as determined by the respective manager.
Interest income is recorded on the accrual basis. Dividend income is recorded on
the ex-dividend date. Net realized appreciation or depreciation on security
transactions represent the difference between proceeds received and cost. The
Plan presents in the Statement of Changes in Net Assets Available for Benefits
the net appreciation (depreciation) in the fair value of its investments, which
consists of the realized gains or losses and the unrealized appreciation
(depreciation) on those investments.
Investments are exposed to various risks, such as interest rate, market and
credit risk. Due to the level of risk associated with certain investments and
the level of uncertainty related to changes in the value of investments, it is
at least reasonably possible that changes in risks in the near-term could
materially affect the amounts reported in the Statement of Net Assets Available
for Benefits.
Participant loans are valued at their outstanding principal amount. These notes
bear interest at a rate equal to the prime interest rate as of the effective
date of the loan plus one percentage point.
6
Administrative expenses of the Plan are paid by the Company or are taken from
balances available in the Plan forfeiture account with the exception of loan
expenses paid by the participants.
The preparation of these financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported amounts of
net assets and changes in net assets during the reporting period. Actual results
could differ from these estimates.
7
NOTE C--INVESTMENTS
The following schedule presents information regarding assets held for
investments:
December 31, 2005 December 31, 2004
------------------------------------------------------------
Fair Value Cost** Fair Value Cost**
--------------- -------------- ------------- -----------
Engineered Support Systems, Inc.
common stock, 1,150,003 and 806,981 shares,
respectively................................... *$ 47,886,106 $ 7,789,928 * $47,789,442 $13,478,857
Alliance Bern Growth & Income Fund-Class A,
2,523,861 and 2,491,857 shares, respectively... * 9,691,627 8,383,134 * 9,319,547 8,132,245
Janus Twenty Fund,
141,531 and 129,596 shares, respectively....... * 6,923,687 5,826,579 * 5,805,889 5,166,113
Dreyfus Premier Core Bond Fund-Class A,
0 and 274,466 shares, respectively............. - - 4,062,092 4,040,971
EuroPacific Growth Fund,
168,810 and 126,267 shares, respectively....... * 6,938,081 5,405,670 * 4,498,894 3,655,386
Franklin Small Cap Growth Fund II,
0 and 353,739 shares, respectively............. - - 4,188,268 3,457,555
Jennison US Emerging Growth Fund - Class Z,
316,113 and 214,884 shares, respectively....... 6,492,956 5,586,603 3,756,172 3,760,464
Jennison Growth Fund-Class Z,
133,355 and 123,180 shares, respectively....... 2,219,023 1,967,352 1,794,736 1,800,885
Dryden Stock Index Fund-Class Z,
0 and 63,094 shares, respectively.............. - - 1,701,015 1,499,198
INVESCO Technology Fund II,
0 and 53,442 shares, respectively.............. - 1,359,568 1,199,187
Lord Abbett Small Cap Blend Fund-Class A,
342,263 and 0 shares, respectively............. 5,746,598 5,429,532 - -
PIMCO Total Return Fund-Class A,
465,641 and 0 shares, respectively............. 4,889,228 4,948,184 - -
Vanguard Institutional Index-Institutional Class,
21,844 and 0 shares, respectively.............. 2,490,442 2,519,194 - -
Vanguard Windsor-Admiral Class,
33,400 and 0 shares, respectively.............. 1,933,164 1,940,181 - -
American Balanced Fund-Class A,
41,105 and 0 shares, respectively.............. 732,486 731,091 - -
Vanguard Morgan Growth-Admiral Class,
11,788 and 0 shares, respectively.............. 647,411 651,184 - -
Vanguard Total Stock Market-Admiral Class,
11,803 and 0 shares, respectively.............. 354,083 355,971 - -
Prudential LN AP Fund
19 and 0 shares, respectively.................. 19 19 - -
--------------- -------------- ------------- -----------
Total Registered Investment Companies.......... 49,058,805 43,744,694 36,486,181 32,712,004
Guaranteed Income Fund (Crediting Interest
Rate 3.85%).................................... 19,400,789 19,400,789 - -
Prudential Stable Value Fund
0 and 471,136 shares, respectively............. - - * 16,636,950 15,855,508
Participant loans................................. 2,683,262 2,683,262 2,401,337 2,401,337
--------------- -------------- ------------- -----------
Total....................................... $ 119,028,962 $ 83,618,673 $ 103,313,910 $64,447,706
=============== ============== ============= ===========
8
--------------------------
* Represents investments that are greater than 5% of plan assets at the
beginning of the plan year.
** Represents historical cost.
The Company has established a Pension Committee to oversee the activities of
the Plan and has appointed the Vice President of Finance to represent the
Company as the Plan Administrator. Prudential Investment Company of America is
the Trustee for the Plan and the Plan recordkeeper.
During 2005 and 2004, the Plan's investments (including investments bought,
sold, and held during the year) appreciated (depreciated) in value as follows:
2005 2004
----------------- -----------------
Engineered Support Systems, Inc. Common Stock.......................... $ 2,592,575 $ 3,424,484
Guaranteed Income Fund................................................. 568,480 -
Common Collective Trust................................................ 93,496 615,401
Registered Investment Companies........................................ 3,560,048 3,703,275
----------------- -----------------
$ 6,814,599 $ 7,743,160
================= =================
NOTE D - NONPARTICIPANT-DIRECTED INVESTMENTS
Effective January 1, 2005, the Plan was amended and restated to allow full
participant direction of all accounts including the Company stock account.
Information about the net assets and the significant components of the changes
in net assets relating to nonparticpant-directed investments, all of which
represent investments in Engineered Support Systems, Inc. common stock, at and
for the year ended December 31, 2004 is as follows:
Year Ended December 31
--------------------------------------
2005 2004
----------------- -----------------
Net Assets at Beginning of Year........................................ $ 38,143,219
Contributions.......................................................... 5,254,044
Investment Income...................................................... 2,545,031
Benefits Paid to Participants.......................................... (4,558,895)
Transfers to Participant-Directed Investments.......................... (280,357)
----------------- -----------------
Net Assets at End of Year.............................................. $ 41,103,042
================= =================
2004
----------------- -----------------
Engineered Support Systems, Inc. Common Stock.......................... $ 36,790,046
Employer Contribution Receivable....................................... 4,312,996
----------------- -----------------
Net Assets at End of Year.............................................. $ 41,103,042
================= =================
NOTE E - CHANGES IN THE PLAN
The Plan was restated January 1, 2005 to incorporate the 13 (thirteen) prior
amendments into the Plan document. The Plan was further amended to include
Systems & Electronics Inc. (SEI) employees hired on or after January 1, 2005 as
eligible to participate in the Plan, change the name of the Plan to Engineered
Support Systems, Inc. 401(k) and Employee Stock Ownership Plan from Engineered
Support Systems, Inc. Employee Stock Ownership Plan, provide rollover IRAs for
small balance cash-outs for terminated employees, permit pass-through of
dividends on employer securities, and eliminate the two years of plan
participation previously required to diversify employer contributions made in
Company stock.
9
On May 1, 2003, the Company acquired all of the outstanding common stock of
Technical and Management Services Corp. (TAMSCO). TAMSCO had previously
sponsored the TAMSCO Tax Deferred Retirement Plan, a qualified defined
contribution plan which last received a favorable determination letter from the
Internal Revenue Service in October 2002. As of March 31, 2004, the TAMSCO Tax
Deferred Retirement Plan had net assets available for benefits totaling
$9,467,438. Effective April 1, 2004, the TAMSCO Tax Deferred Retirement Plan was
merged into the Plan.
On September 24, 2003, the Company acquired all of the outstanding common stock
of Engineered Environments, Inc. (EEI). EEI had previously sponsored the
Engineered Environments, Inc. 401(k) Plan, a qualified defined contribution plan
which last received a favorable determination letter from the Internal Revenue
Service in January 1997. As of July 31, 2004, the Engineered Environments, Inc.
401(k) Plan had net assets available for benefits totaling $1,097,645. Effective
August 1, 2004, the Engineered Environments, Inc. 401(k) Plan was merged into
the Plan.
On January 7, 2005, the Company acquired all of the outstanding common stock of
Prospective Computer Analysts (PCA). PCA had previously sponsored the
Prospective Computer Analysts, Inc. Employee Savings and Retirement Plan, a
qualified defined contribution plan which last received a favorable
determination letter from the Internal Revenue Service on April 23, 2002. As of
June 30, 2005, the PCA Employee Savings and Retirement Plan had net assets
available for benefits totaling $3,743,754. Effective July 1, 2005, the PCA
Employee Savings and Retirement Plan was merged into the Plan.
On February 1, 2005, the Company acquired all of the outstanding common stock of
Spacelink International LLC (Spacelink). Spacelink had previously sponsored the
Spacelink International LLC 401(k) Retirement Plan, a qualified defined
contribution plan which received a favorable determination letter from the
Internal Revenue Service dated January 3, 1991. As of June 30, 2005, the
Spacelink International LLC 401(k) Retirement Plan had net assets available for
benefits totaling $761,001. Effective July 1, 2005, the Spacelink International
LLC 401(k) Retirement Plan was merged into the Plan.
On May 2, 2005, the Company acquired all of the outstanding common stock of
Mobilized Systems, Inc. (MSI). MSI had previously sponsored the Mobilized
Systems, Inc. 401(k) Incentive Savings Plan, a qualified defined contribution
plan which last received a favorable determination letter from the Internal
Revenue Service in August 7, 2001. As of October 17, 2005, the Mobilized
Systems, Inc. 401(k) Incentive Savings Plan had net assets available for
benefits totaling $1,522,989. Effective October 18, 2005, the Mobilized Systems,
Inc. 401(k) Incentive Savings Plan was merged into the Plan.
NOTE F - INCOME TAX STATUS
The Plan received a favorable letter of determination from the Internal Revenue
Service dated May 23, 2002 indicating compliance with section 401(a) of the
Internal Revenue Code and exemption under the provisions of section 501(a). The
Plan has been amended since receiving the determination letter. However, the
Plan Administrator believes the Plan is currently designed and being operated in
compliance with the applicable requirements of the Internal Revenue Code. Thus,
provision for an income tax is not required in the accompanying financial
statements.
NOTE G - RELATED PARTY AND PARTY-IN-INTEREST
The Company, as Plan administrator and sponsor, is a related party to the Plan.
At December 31, 2005 and 2004, the Plan held shares of Company common stock with
a market value of $47,886,106 and $47,789,442, respectively. For the year ended
December 31, 2005, the Plan purchased $8,789,560 and sold $11,285,474 of Company
common stock. For the year ended December 31, 2004, the Plan purchased
$6,928,257 and sold $10,551,775 of Company common stock.
Prudential Trust Company as Trustee of the Plan's assets is a party-in-interest
as defined by ERISA. For Plan assets managed by Prudential, with the exception
of the Guaranteed Income Fund,
10
the Plan held $8,711,979 of investment funds and short-term investments at
December 31, 2005 and $7,251,923 of investment funds and short-term investments
at December 31, 2004. In 2005, the Plan incurred $48,400 in trustee fees or
other administrative expenses. In 2004, the Plan incurred $7,311 in trustee fees
or other administrative expenses paid from Plan assets.These transactions are
exempt party-in-interest transactions under Section 408 (b) (8) of the ERISA
statutes.
NOTE H - PLAN TERMINATION
The Company has the right under the Plan to discontinue its contributions at
any time and to terminate the Plan, subject to provisions of ERISA.
NOTE I - SUBSEQUENT EVENTS
The Board of Directors advised the Trustees that they entered into an Agreement
and Plan of Merger with DRS Technologies, Inc. ("DRS") and Maxco, Inc. dated
September 21, 2005 (the "Merger Agreement") under which all of the Sponsor's
shares of stock (including those held by the Plan) were exchanged for shares of
DRS and cash on January 31, 2006. As required by the Merger Agreement,
Engineered Support Systems, Inc. amended the Plan to provide for its termination
effective January 30, 2006. On May 1, 2006, the Plan submitted an application to
the IRS for a favorable determination on the termination of the Plan. Upon
receipt of the favorable determination, participants will direct the disposition
of their accounts.
NOTE J - NEW ACCOUNTING PRONOUNCEMENT
In December 2005, the Financial Accounting Standards Board (FASB) issued FASB
Staff Position (FSP) AAG INV-1 and SOP 94-4-1 Reporting of Fully
Benefit-Responsive-Investment Contracts Held by Certain Investment Companies
Subject to the AICPA Investment Company Guide and Defined-Contribution Health
and Welfare and Pension Plans, which affects defined contribution pension plans
that hold fully benefit-responsive investment contracts. The FSP is effective
for all investment contracts as of the last day of the annual period ending
after December 15, 2006. The Plan will implement the new accounting standard for
the year ending December 31, 2006 and will apply the standard retrospectively to
the year ended December 31, 2005, if applicable.
11
Report of Independent Registered Public
Accounting Firm on Supplementary Information
Our audit was performed for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental schedules of assets held
at end of year and schedule of reportable transactions are presented for
purposes 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 Income Security Act of 1974. Those supplemental schedules are the
responsibility of the Plan's management. These supplemental schedules have been
subjected to the auditing procedures applied in the audit 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/ Rubin Brown LLP
St. Louis, Missouri
July 14, 2006
12
Engineered Support Systems, Inc.
401(k) & Employee Stock Ownership Plan
EIN: 43-1313242 Plan Number: 003
Schedule I
Schedule of Assets Held At End Of Year
At December 31, 2005
(b) (c) (d) (e)
(a) Identity of Issue Description of Investment Cost** Current Value
---------------------------------------------------------------------------------------------------------------------
* Engineered Support Systems, Inc. Common Stock $.01 par value $ 17,789,928 $ 47,886,106
------------- -------------
Common Stock 17,789,928 47,886,106
Alliance Bern Growth & Income Fund- Class A Large-cap value equity mutual fund 8,383,134 9,691,627
Janus Twenty Fund Large-cap growth equity mutual 5,826,579 6,923,687
EuroPacific Growth Fund Non-U.S. equity mutual fund 5,405,670 6,938,081
Jennison US Emerging Growth Fund-Class Z Mid-cap growth equity mutual fund 5,586,603 6,492,956
Jennison Growth Fund-Class Z Large-cap growth equity mutual 1,967,352 2,219,023
Lord Abbett Small Cap Blend- Class A Small-cap growth equity fund 5,429,532 5,746,598
PIMCO Total Return Fund - Class A Intermediate-term bond mutual 4,948,184 4,889,228
Vanguard Institutional Index Fund -
Institutional Class Large-cap blend equity mutual 2,519,194 2,490,442
Vanguard Windsor-Admiral Class Large cap value equity fund 1,940,181 1,933,164
American Balanced Fund-Class A Moderate allocation mutual fund 731,091 732,486
Vanguard Morgan Growth - Admiral Class Mid- and Large-Cap equity fund 651,184 647,411
Vanguard Total Stock Market - Admiral Class Large-cap blend equity fund 355,971 354,083
Prudential LN AP Fund Loan AP fund 19 19
------------- -------------
Total Registered Investment Companies 43,744,694 49,058,805
* Guaranteed Income Fund Fixed income fund 19,400,789 19,400,789
Loans to Plan participants
bearing interest rates from 4.00%
to 11.50% due at various dates
Participant Loans through April 2024 2,683,262 2,683,262
------------- -------------
Total 83,618,673 119,028,962
============= =============
* Investments represent allowable transactions with a party-in-interest.
** Value represents historical cost.
The above information is required disclosure for Form 5500, Schedule H, Part IV,
line 4i:
13
Engineered Support Systems, Inc.
401(k) & Employee Stock Ownership Plan
Schedule II
EIN: 43-1313242 Plan Number: 003
Schedule of Reportable Transactions
Year Ended December 31, 2005
(h) Current
(f) Expense value of
(a) Identity incurred asset on (i) Net
of party (b) Description (c) Purchase (d) Selling (e) Lease with (g) Cost of transaction gain
involved asset price price rental transaction asset date or (loss)
----------------------------------------------------------------------------------------------------------------------------
Individual Transactions:
Prudential Guaranteed Int
Investments Account $16,825,550 $ - $ - $ - $16,825,550 $16,825,550 $ -
Prudential Pru Stable
Investments Value Fd 65 $ - $16,871,303 $ - $ - $16,014,441 $16,871,303 $ 856,862
Series of Transactions:
Engineered Common stock,
Support $.01 par value
Systems, Inc. per share $7,049,340 $ - $ - $ - $7,049,340 $7,049,340 $ -
Engineered Common stock,
Support $.01 par value
Systems, Inc. per share $ - $9,545,253 $ - $ - $4,303,159 $9,545,253 $5,242,094
Prudential L A Small Cap
Investments Blend Fund $6,027,215 $ - $ - $ - $6,027,215 $6,027,215 $ -
Prudential L A Small Cap
Investments Blend Fund $ - $ 606,282 $ - $ - $ 603,038 $ 606,282 $ 3,244
Prudential PIMCO Total
Investments Return A $5,623,761 $ - $ - $ - $5,623,761 $5,623,761 $ -
Prudential PIMCO Total
Investments Return A $ - $ 675,471 $ - $ - $ 675,718 $ 675,471 $ (247)
Prudential Vanguard Index
Investments Trust500 $2,738,974 $ - $ - $ - $2,738,974 $2,738,974 $ -
Prudential Vanguard Index
Investments Trust 500 $ - $2,860,546 $ - $ - $2,739,562 $2,860,546 $ 120,984
Prudential Pru Stable
Investments Value Fd 65 $ 737,909 $ - $ - $ - $ 737,909 $ 737,909 $ -
Prudential Pru Stable
Investments Value Fd 65 $ - $17,468,355 $ - $ - $16,594,411 $17,468,355 $ 873,944
Transactions or series of transactions in excess of five percent of the current
value of the Plan's assets as of the beginning of the Plan Year, as defined in
29 CFR Section 2520.103-6 of the Department of Labor Rules & Regulations for
Reporting and Disclosure under ERISA.
The above information is required disclosure for Form 5500, Schedule H, Part IV,
line 4j:
14
Engineered Support Systems, Inc.
401(k) & Employee Stock Ownership Plan
EIN: 43-1313242 Plan Number: 003
Schedule of Delinquent Participant Contributions
December 31, 2005
Participant Contributions
Transferred to Plan Late
------------------------------
$ 6,354
=======
The above information is a required disclosure for Form 5500, Schedule H, Part
IV, line 4a.
15
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Plan
Administrator has duly caused this Annual Report to be signed on its behalf by
the undersigned thereunto duly authorized.
ENGINEERED SUPPORT SYSTEMS, INC.
401(K) & EMPLOYEE STOCK OWNERSHIP PLAN
Date: July 14, 2006 /s/ Richard A. Schneider
------------------------------------------
Richard A. Schneider
Executive Vice President & Chief Financial
Officer of DRS Technologies, Inc. and
Member of the Pension Committee of the Plan
EXHIBIT INDEX
Exhibit
Number Description
------ -----------
23.1 Consent of Independent Registered Public Accounting Firm
23.2 Consent of Independent Registered Public Accounting Firm