UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549 FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934.
For the Quarterly Period Ended December 26, 2008
------------------------
[ ] Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the transition period from _______ to _______
Commission File Number 1-9309
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VERSAR, INC.
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(Exact name of registrant as specified in its charter)
DELAWARE 54-0852979
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
6850 Versar Center
Springfield, Virginia 22151
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(Address of principal executive (Zip Code)
offices)
Registrant's telephone number, including area code (703) 750-3000
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Not Applicable
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(Former name, former address and former fiscal year, if changed since last
report.)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that
the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes [X] No [ ]
Indicate by check mark whether the registrant is a large accelerated filer,
an accelerated filer, a non-accelerated filer, or a smaller reporting
company. See the definitions of "large accelerated filer", "accelerated
filer", and "smaller reporting company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer [ ] Accelerated filer [ ]
Non-accelerated filer [ ] Smaller reporting company [X]
(Do not check if a smaller reporting
company)
Indicate by check mark whether the registrant is a shell company (as
defined in Rule 12b-2 of the Exchange Act).
Yes [ ] No [X]
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practical date.
Class of Common Stock Outstanding at January 30, 2009
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$.01 par value 9,126,235
VERSAR, INC. AND SUBSIDIARIES
INDEX TO FORM 10-Q
PAGE
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PART I - FINANCIAL INFORMATION
ITEM 1 - Financial Statements - Unaudited
Consolidated Balance Sheets as of
December 26, 2008 and June 27, 2008 3
Consolidated Statements of Income for
the Three-Month and Six-Month Periods
Ended December 26, 2008 and December 28, 2007 4
Consolidated Statements of Cash Flows for
the Six-Month Periods Ended December 26, 2008
and December 28, 2007 5
Notes to Consolidated Financial Statements 6-10
ITEM 2 - Management's Discussion and Analysis
of Financial Condition and Results of Operations 11-18
ITEM 3 - Quantitative and Qualitative Disclosures About
Market Risk 18
ITEM 4T - Controls and Procedures 18
PART II - OTHER INFORMATION
ITEM 1 - Legal Proceedings 18
ITEM 4 - Submission of Matters to a Vote of Stockholders 19
ITEM 6 - Exhibits 19
SIGNATURES 20
EXHIBITS 21-24
VERSAR, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(In Thousands)
December 26, June 27,
2008 2008
------------ ------------
ASSETS (Unaudited)
Current assets
Cash and cash equivalents $ 7,723 $ 11,938
Accounts receivable, net 24,660 21,596
Prepaid expenses and other current assets 1,347 1,080
Deferred income taxes 861 1,015
------------ ------------
Total current assets 34,591 35,629
Property and equipment, net 2,490 2,152
Deferred income taxes 496 517
Goodwill 776 776
Other assets 688 754
------------ ------------
Total assets $ 39,041 $ 39,828
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable $ 7,194 $ 7,731
Billings in excess of revenue --- 156
Accrued salaries and vacation 1,867 1,719
Accrued bonus 600 2,066
Other liabilities 1,345 1,686
------------ ------------
Total current liabilities 11,006 13,358
Other long-term liabilities 1,433 1,417
------------ ------------
Total liabilities 12,439 14,775
------------ ------------
Commitments and contingencies
Stockholders' equity
Common stock, $.01 par value;
30,000,000 shares authorized;
9,078,135 shares and 9,059,135
shares issued; 8,993,189 shares
and 8,975,101 shares outstanding
at December 26, 2008 and June 27,
2008, respectively 91 91
Capital in excess of par value 27,637 27,115
Accumulated deficit (465) (1,554)
Treasury stock (581) (578)
Accumulated other comprehensive loss (80) (21)
------------ ------------
Total stockholders' equity 26,602 25,053
------------ ------------
Total liabilities and stockholders'
equity $ 39,041 $ 39,828
============ ============
The accompanying notes are an integral part of these
consolidated financial statements.
3
VERSAR, INC. AND SUBSIDIARIES
Consolidated Statements of Income
(Unaudited - in thousands, except per share amounts)
For the Three-Month For the Six-Month
Periods Ended Periods Ended
-------------------------- --------------------------
December 26, December 28, December 26, December 28,
2008 2007 2008 2007
------------ ------------ ------------ ------------
GROSS REVENUE $ 27,967 $ 29,355 $ 52,965 $ 58,237
Purchased services
and materials,
at cost 15,651 17,965 29,200 36,136
Direct costs of
services and
overhead 9,111 8,323 17,382 15,535
------------ ------------ ------------ ------------
GROSS PROFIT 3,205 3,067 6,383 6,566
Selling, general
and administrative
expenses 2,198 1,856 4,234 3,632
------------ ------------ ------------ ------------
OPERATING INCOME 1,007 1,211 2,149 2,934
OTHER EXPENSE
(Gain) loss on
marketable
securities (7) --- 346 ---
Interest expense
(income) 74 (52) 19 (116)
------------ ------------ ------------ ------------
INCOME BEFORE INCOME
TAXES 940 1,263 1,784 3,050
Income tax expense 375 518 695 1,288
------------ ------------ ------------ ------------
NET INCOME $ 565 $ 745 $ 1,089 $ 1,762
============ ============ ============ ============
NET INCOME PER
SHARE - BASIC $ 0.06 $ 0.08 $ 0.12 $ 0.20
============ ============ ============ ============
NET INCOME PER
SHARE - DILUTED $ 0.06 $ 0.08 $ 0.12 $ 0.19
============ ============ ============ ============
WEIGHTED AVERAGE
NUMBER OF SHARES
OUTSTANDING -
BASIC 9,068 8,871 9,064 8,840
============ ============ ============ ============
WEIGHTED AVERAGE
NUMBER OF SHARES
OUTSTANDING -
DILUTED 9,112 9,231 9,134 9,243
============ ============ ============ ============
The accompanying notes are an integral part of these
consolidated financial statements.
4
VERSAR, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(Unaudited - in thousands)
For the Six-Month Periods Ended
-------------- --------------
December 26, December 28,
2008 2007
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Cash flows from operating activities
Net income $ 1,089 $ 1,762
Adjustments to reconcile net income
to net cash used in operating
activities
Depreciation and amortization 496 427
Provision for doubtful accounts
receivable --- 1
Loss on marketable securities 346 ---
Loss (gain) on life insurance
policy cash surrender value 146 (20)
Share based compensation 514 462
Deferred taxes 178 1,195
Changes in assets and liabilities
(Increase) decrease in accounts
receivable (3,067) 1,154
(Increase) decrease in prepaids
and other assets (303) 437
Decrease in accounts payable (461) (3,479)
Increase in accrued salaries and
vacation 149 96
Decrease in other liabilities (2,079) (2,064)
-------------- --------------
Net cash used in operating
activities (2,992) (29)
-------------- --------------
Cash flows used in investing
activities
Purchase of property and equipment (848) (469)
Purchase of marketable securities (3,000) ---
Proceeds from sale of marketable
securities 2,654 ---
Premium paid on life insurance
policies (40) (38)
-------------- --------------
Net cash used in investing
activities (1,234) (507)
-------------- --------------
Cash flows from financing activities
Proceeds from issuance of common stock 8 697
Purchase of treasury stock (3) ---
-------------- --------------
Net cash provided by financing
activities 5 697
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Effect of exchange rate changes 6 45
-------------- --------------
Net (decrease) increase in cash and
cash equivalents (4,215) 206
Cash and cash equivalents at the
beginning of the period 11,938 6,296
-------------- --------------
Cash and cash equivalents at the
end of the period $ 7,723 $ 6,502
============== ==============
Supplementary disclosure of cash
flow information:
Cash paid during the period for
Interest $ 22 $ 22
Income taxes 1,469 92
The accompanying notes are an integral part of these
consolidated financial statements.
5
VERSAR, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(A) Basis of Presentation
The accompanying consolidated condensed financial statements are
presented in accordance with the requirements of Form 10-Q and consequently
do not include all of the disclosures normally required by accounting
principles generally accepted in the United States of America or those
normally made in Versar, Inc.'s Annual Report on Form 10-K filed with the
United States Securities and Exchange Commission. These financial
statements should be read in conjunction with the Company's Annual Report
filed on Form 10-K for the year ended June 27, 2008 for additional
information.
The accompanying consolidated financial statements include the
accounts of Versar, Inc. and its wholly-owned subsidiaries ("Versar"
or the "Company"). All significant intercompany balances and transactions
have been eliminated in consolidation. The financial information has been
prepared in accordance with the Company's customary accounting practices.
Certain adjustments to the financial statements are necessary for fair
presentation and are of a normal recurring nature as part of the operations
of the business. In the opinion of management, the information reflects
all adjustments necessary for a fair presentation of the Company's
consolidated financial position as of December 26, 2008, and the results
of operations for the six-month periods ended December 26, 2008 and
December 28, 2007. The results of operations for such periods, however,
are not necessarily indicative of the results to be expected for a full
fiscal year.
(B) Accounting Estimates
The preparation of 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 assets and liabilities and disclosure of contingent
assets and liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting period.
Actual results may differ from those estimates.
(C) Contract Accounting
Contracts in process are stated at the lower of actual cost incurred
plus accrued profits or net estimated realizable value of incurred costs,
reduced by progress billings. The Company records income from major
fixed-price construction and engineering contracts, extending over more
than one accounting period, using the percentage-of-completion method.
During performance of such contracts, estimated final contract prices and
costs are periodically reviewed and revisions are made as required. The
effects of these revisions are included in the periods in which the
revisions are made. On cost-plus-fee contracts, revenue is recognized
to the extent of costs incurred plus a proportionate amount of fee earned,
and on time-and-material contracts, revenue is recognized to the extent
of billable rates times hours delivered plus material and other
reimbursable costs incurred. Losses on contracts are recognized when
they become known. Disputes arise in the normal course of the Company's
business on projects where the Company is contesting with customers for
collection of funds because of events such as delays, changes in contract
specifications and questions of cost allowability or collectibility.
Such disputes, whether claims or unapproved change orders in the process
of negotiation, are recorded at the lesser of their estimated net
realizable value or actual costs incurred and only when realization is
probable and can be reliably estimated. Claims against the Company are
recognized where loss is considered probable and reasonably determinable
in amount. Management reviews outstanding receivables on a regular basis
and assesses the need for reserves taking into consideration past
collection history and other events that bear on the collectibility of
such receivables.
(D) Income Taxes
At December 26, 2008, the Company had approximately $1.3 million
in deferred tax assets, which primarily relate to temporary differences
between financial statement and income tax reporting. Such differences
include depreciation, deferred compensation, accruals and reserves.
Given the Company's continued improved financial performance and funded
backlog over the last three years, management believes the Company will
be able to utilize the full benefit of the tax asset.
6
VERSAR, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (continued)
(E) Debt
The Company has a line of credit facility with United Bank
(the Bank) that provides for advances up to $7.5 million based upon
qualifying receivables. Interest on borrowings is based upon the prime
rate of interest minus 0.5% (2.75% as of December 26, 2008). In
October 2006, the Company obtained a letter of credit of approximately
$1.6 million which serves as collateral for surety bond coverage
provided by the Company's insurance carrier against project construction
work. The letter of credit has subsequently been reduced to $455,147
in January 2009. The letter of credit reduces the Company's availability
on the line of credit. Availability under the line of credit at December
26, 2008 was $5.9 million. Obligations under the credit facility are
guaranteed by Versar and each subsidiary individually and are secured
by accounts receivable, equipment and intangibles, plus all insurance
policies on property constituting collateral of Versar and its
subsidiaries. The line of credit matures in November 2009 and is
subject to certain covenants related to the maintenance of financial
ratios. These covenants require a minimum tangible net worth of $15
million; a maximum total liabilities to tangible net worth ratio not to
exceed 2.5 to 1; and a minimum current ratio of at least 1.25 to 1. The
Company was in compliance with such covenants as of December 26, 2008.
The Company had no borrowings outstanding under the line of credit as of
December 26, 2008.
(F) Goodwill and Other Intangible Assets
On January 30, 1998, Versar completed the acquisition of The
Greenwood Partnership, P.C. subsequently renamed Versar Global Solutions,
Inc. or (VGSI). The transaction was accounted for as a purchase.
Goodwill resulting from this transaction was approximately $1.1 million.
Currently, the carrying value of goodwill is approximately $776,000
relating to the acquisition of VGSI, which is now part of the Company's
Program Management business segment. The Company began reporting the
Program Management business segment separately in fiscal year 2007,
primarily due to the increase in business volume in Iraq and in United
States construction related work. In performing its goodwill impairment
analysis, management has utilized a market-based valuation approach to
determine the estimated fair value of the Program Management business
segment. Management engages outside professionals and valuation experts,
as necessary, to assist in performing this analysis. An analysis was
performed on public companies and company transactions to prepare a
market-based valuation. Based upon the analysis, the estimated fair
value of the Program Management business segment substantially exceeded
the carrying value of the net assets of $6.5 million as of June 27, 2008.
Should the Program Management business segment's financial performance
not meet estimates, then impairment of goodwill would have to be further
assessed to determine whether a write down of goodwill value would be
warranted. If such a write down were to occur, it would negatively impact
the Company's financial position and results of operations. However, it
would not impact the Company's cash flow or financial debt covenants.
(G) Net Income Per Share
Basic net income per common share is computed by dividing net
income by the weighted average number of common shares outstanding
during the period. Diluted net income per common share also includes
common stock equivalents outstanding during the period, if dilutive.
The Company's common stock equivalents consist of stock options and
restricted stock awards.
For the Three-Month For the Six-Month
Periods Ended Periods Ended
-------------------------- --------------------------
December 26, December 28, December 26, December 28,
2008 2007 2008 2007
------------ ------------ ------------ ------------
Weighted average
common shares
outstanding - basic 9,068,212 8,871,477 9,064,080 8,840,366
Effect of assumed
exercise of options
and vesting of
restricted stock
awards (treasury
stock method) 44,221 359,530 69,632 402,566
------------ ------------ ------------ ------------
Weighted average
common shares
outstanding -
diluted 9,112,433 9,231,007 9,133,712 9,242,932
============ ============ ============ ============
7
VERSAR, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (continued)
For fiscal year 2009, options to purchase approximately 64,000 shares
of common stock were not included in the computation of diluted earnings
per share because the effect would be anti-dilutive.
(H) Common Stock
Effective January 1, 2005, the Company implemented an Employee Stock
Purchase Plan (ESPP) to allow eligible employees of Versar the opportunity
to acquire an ownership interest in the Company's common stock. As
amended, the Plan permits employees to purchase shares of Versar common
stock from the open market at 95% of its fair market value. The Plan
qualifies as an "employee stock purchase plan" under Section 423 of the
Internal Revenue Code.
(I) Stock-Based Compensation
In September 2008, the Company awarded 90,000 shares of restricted
stock to executive officers and employees. The awards vest over a period
of 4.5 months to 16.5 months. Stock-based compensation expense relating
to restricted stock and option awards totaled $514,000 and $462,000 for
the six months ended December 26, 2008 and December 28, 2007,
respectively. This expense is included in the direct costs of services
and overhead line of the Consolidated Statements of Income. During the
first six months of fiscal year 2009, 3,000 shares of Incentive Stock
Option with intrinsic value of approximately $4,500 were exercised.
In November 2005, the stockholders approved the Versar, Inc. 2005
Stock Incentive Plan (the "2005 Plan"). The 2005 Plan provides for
grants of incentive awards, including stock options, SARS, restricted
stock, restricted stock units and performance based awards, to directors,
officers and employees of the Company and its affiliates as approved from
time to time by the Company's Compensation Committee. Only employees may
receive stock options classified as "incentive stock options", also known
as "ISO's". The per share exercise price for options and SARS granted
under the 2005 Plan shall not be less than the fair market value of the
common stock on the date of grant. A maximum of 400,000 shares of common
stock may be awarded under the 2005 Plan. No single director, officer,
or employee may receive awards of more than 100,000 shares of common stock
during the term of the 2005 Plan. The ability to make awards under the
2005 Plan will terminate in November 2015. As of December 26, 2008,
approximately 141,000 shares are available for future grant under the
2005 Plan.
The Company also maintains the Versar 2002 Stock Incentive Plan
(the "2002 Plan"), the Versar 1996 Stock Option Plan (the "1996 Plan")
and the Versar 1992 Stock Option Plan (the "1992 Plan").
Under the 2002 Plan, restricted stock and other types of stock-based
awards were granted to any employee, service provider or director to whom
a grant was approved from time to time by the Company's Compensation
Committee. A "service provider" is defined for purposes of the 2002
Plan as an individual who is neither an employee nor a director of the
Company or any of its affiliates but who provides the Company or one of
its affiliates substantial and important services. No shares remain
for future grant under the 2002 Plan. The Company will continue to
maintain the plan until all previously granted securities have vested,
been forfeited or retired. As of December 26, 2008, there were vested
stock options to purchase 283,970 shares of common stock under the 2002
Plan.
Under the 1996 Plan, options were granted to key employees,
directors and service providers at the fair market value on the date
of grant. Each option expires on the earlier of the last day of the
tenth year after the date of grant or after expiration of a period
designated in the option agreement. The 1996 Plan has expired and no
additional options may be granted under this plan. The Company will
continue to maintain the plan until all previously granted options have
been exercised, forfeited or expire. As of December 26, 2008, there
were vested stock options to purchase 176,761 shares of common stock
under the 1996 Plan.
Under the 1992 Plan, options were granted to key employees at
the fair market value on the date of grant and became exercisable
during the five-year period from the date of the grant at 20% per
year. Options were granted with a ten year term and expire if not
exercised by the tenth anniversary of the grant date. The 1992 Plan
has expired and no additional options may be granted under this plan.
The Company will continue to maintain the plan until all previously
granted options have been exercised, forfeited or expire. As of
December 26, 2008, there were vested stock options to purchase 83,500
shares of common stock under the 1992 Plan.
8
VERSAR, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (continued)
A summary of activity under the Company's stock incentive plans as
of December 26, 2008, and changes during the first six months of fiscal
year 2009 are presented below:
Weighted-
Weighted- Average Aggregate
Options Average Remaining Intrinsic
Shares Exercise Contractual Value
(in thousands) Price Term ($000)
---------------------- -------------- ----------- ----------- ----------
Outstanding at June
28, 2008 571 $ 3.05
Exercised (3) 2.63
Cancelled (2) 3.43
-------------- ----------- ----------- -----------
Outstanding at
December 26, 2008 566 $ 3.05 4.58 $ 984
============== =========== =========== ===========
Exercisable at
December 26, 2008 556 $ 2.96 4.38 $ 942
============== =========== =========== ===========
As of December 26, 2008, there were unvested options to purchase
approximately 10,000 shares outstanding under the plans. Vesting of these
options is conditioned on the Company's stock price reaching certain
thresholds over a fixed period. The Company expects to recognize estimated
compensation costs of $42,000 if the pricing and service conditions of
these options are met in the future.
(J) Business Segments
The Company's business is operated through four business segments as
follows: Program Management, Compliance and Environmental Programs,
Professional Services, and National Security. The Company evaluates and
measures the performance of its business segments based on gross revenue,
gross profit and operating income. As such, selling, general and
administrative expenses, interest and income taxes have not been allocated
to the Company's business segments. These segments were segregated based
on the nature of the work, business processes, customer base and business
environment in which each of the segments operates.
The Program Management business segment manages larger, more
complex projects whose business processes and management are unique to
the rest of the Company. The Compliance and Environmental Programs
business segment provides consulting support to several federal
government and municipal agencies. The Professional Services business
segment provides outsourced personnel to various government agencies
providing our clients with cost-effective resources. The National
Security business segment provides unique solutions to the federal
government including testing and evaluation and personal protective
solutions to meet our clients' needs.
9
VERSAR, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (continued)
Summary of financial information for each of the Company's
segments follows:
For the Three-Month For the Six-Month
Periods Ended Periods Ended
-------------------------- --------------------------
December 26, December 28, December 26, December 28,
2008 2007 2008 2007
------------ ------------ ------------ ------------
GROSS REVENUE
-------------
Program Management $ 17,080 $ 16,541 $ 32,730 $ 33,804
Compliance and
Environmental
Programs 5,704 8,699 10,464 16,925
Professional
Services 2,784 2,323 4,962 3,778
National Security 2,399 1,792 4,809 3,730
------------ ------------ ------------ ------------
$ 27,967 $ 29,355 $ 52,965 $ 58,237
============ ============ ============ ============
GROSS PROFIT(A)
---------------
Program Management $ 2,158 $ 2,090 $ 4,471 $ 4,372
Compliance and
Environmental
Programs 309 480 535 1,160
Professional
Services 388 366 809 614
National Security 350 133 568 420
------------ ------------ ------------ ------------
$ 3,205 $ 3,067 $ 6,383 $ 6,566
Selling, general
and administrative
expenses (2,198) (1,856) (4,234) (3,632)
------------ ------------ ------------ ------------
OPERATING INCOME $ 1,007 $ 1,211 $ 2,149 $ 2,934
============ ============ ============ ============
(A)Gross profit is defined as gross revenue less purchased services and
materials and direct costs of services and overhead.
Periods Ended
------------------------------
December 26, June 27,
2008 2008
------------ ------------
(In thousands)
IDENTIFIABLE ASSETS
-------------------
Program Management $ 14,956 $ 11,405
Compliance and
Environmental Programs 6,805 8,762
Professional Services 2,938 1,554
National Security 2,687 2,693
Corporate and Other 11,655 15,414
------------ ------------
Total Assets $ 39,041 $ 39,828
============ ============
(K) Marketable Securities
During the first quarter of fiscal year 2009, the Company recorded
a $352,000 loss on marketable securities the Company was holding in the
FISCO Income Plus Funds. The FISCO fund received an immediate demand
margin call from its broker, UBS. Rather than allow the fund the
customary time to satisfy the margin call at the end of the day, UBS
demanded the fund cover all calls and puts at high premiums immediately
or indicated it would take control of the fund and start liquidating the
fund itself. The fund has terminated its relationship with UBS and
transferred the assets to a new custodian. The fund has indicated it
will seek legal action against UBS to cover its losses. The Company
will participate in any recovery from any such action. The Company has
reallocated its remaining assets from marketable securities to its
primary bank due to the volatile nature of the market.
10
ITEM 2 Management's Discussion and Analysis of Financial Condition
and Results of Operations
This report contains certain forward-looking statements which
are based on current expectations. Actual results may differ materially.
The forward-looking statements include without limitation, those
regarding the continued award of future work or task orders from
government and private clients, cost controls and reductions, the
expected resolution of delays in billing of certain projects, and the
possible impact of current and future claims against the Company based
upon negligence and other theories of liability. Forward-looking
statements involve numerous risks and uncertainties that could cause
actual results to differ materially, including, but not limited to, the
possibility that the demand for the Company's services may decline as a
result of possible changes in general and industry specific economic
conditions and the effects of competitive services and pricing; the
possibility that the Company will not be able to perform work within
budget or contractual limitations; one or more current or future claims
made against the Company may result in substantial liabilities; the
possibility that the Company will not be able to attract and retain key
professional employees; changes to or failure of the Federal government
to fund certain programs in which the Company participates; delays in
project funding; and such other risks and uncertainties, described in
our Form 10-K for fiscal year ended June 27, 2008 and in other reports
and other documents filed by the Company from time to time with the
Securities and Exchange Commission.
Financial Trends
----------------
In fiscal year 2006, the Company's gross revenues declined
primarily due to the continuation of federal government delays in
federal government funding, which in certain instances, spanned as
much as nine months and the continued diversion of funding to the
war in Iraq. The Company adapted to the funding shifts by expanding
its services in Iraq work under existing contracts and seeking new
contract work in Iraq. By the end of fiscal year 2006, the project
funding began to return to normal levels and as a result the Company's
funded backlog increased by 55% to $48 million. By the end of fiscal
year 2007, as a result of continued efforts to grow the business and
with new contracts, funded backlog had increased by an additional 19%
to $57 million. During fiscal year 2008, backlog continued to grow,
increasing by 12% to $64 million at June 27, 2008.
In the first six months of fiscal year 2009, the Company was
awarded an additional $88 million in additional work, which increased
funded backlog to $99 million as of December 26, 2008. The Company
has continued to experience success with the award of additional work.
During the first six months of fiscal year 2009, the Company experienced
a 9% decline in gross revenues. This decline was primarily attributable
to a decrease in the award of construction projects in the U.S. in the
Project Management segment in fiscal year 2009 and a decline in aquatic
facility work in the Compliance and Environmental Programs segment.
Several awards of new, larger projects for the Project Management
segment were received late during the first quarter of fiscal year 2009
and the Company anticipates that these new awards will result in
additional construction work during the second half of fiscal year 2009.
There continues to be a decline in the award of additional aquatic
facility work and the Company expects the Compliance and Environmental
Program segment to continue to experience a decline in revenues during
the 2009 fiscal year.
Approximately 53% of the Company's business volume was related
to the reconstruction efforts in Iraq for fiscal year 2008. However,
the Company is taking steps during fiscal year 2009 to further diversify
its business to prepare for a time when opportunities in Iraq may be
reduced or eliminated. The Company's primary focus is on BRAC efforts
and requirements which have been delayed as a result of the war in Iraq.
We continue to follow the funding shifts in Iraq and Afghanistan to
maintain and expand our business basis. We believe the funding of BRAC
work world-wide represents our greatest opportunity for growth in the
second half of fiscal year 2009.
There are a number of risk factors or uncertainties that could
significantly impact our future financial performance including the
following:
* General economic or political conditions;
* Threatened or pending litigation;
* The timing of expenses incurred for corporate initiatives;
* Employee hiring, utilization, and turnover rates;
* The seasonality of spending in the federal government and
for commercial clients;
* Delays in project contracted engagements;
* Unanticipated contract changes impacting profitability;
* Increased pricing competition due to reductions in prices
by our competitors;
11
ITEM 2 Management's Discussion and Analysis of Financial Condition
and Results of Operations (continued)
* The ability to obtain follow-on project work;
* Failure to properly manage projects resulting in additional
costs;
* The cost of compliance for the Company's laboratories;
* The results of a negative government audit potentially
impacting our costs, reputation and ability to work with
the federal government;
* Loss of key personnel;
* The ability to compete in a highly competitive environment;
and
* Federal funding delays due to the war in Iraq.
Results of Operations
---------------------
Second Quarter Comparison of Fiscal Year 2009 and 2008
------------------------------------------------------
For the Three-Month Periods Ended
---------------------------------
December 26, December 28,
2008 2007
-------------- --------------
GROSS REVENUE
-------------
Program Management $ 17,080 $ 16,541
Compliance and Environmental
Programs 5,704 8,699
Professional Services 2,784 2,323
National Security 2,399 1,792
-------------- --------------
$ 27,967 $ 29,355
============== ==============
Gross revenue for the second quarter of fiscal year 2009 was
$27,967,000, a decrease of $1,388,000 (5%) from the second quarter of
fiscal year 2008. Gross revenue in the Program Management business segment
for the second quarter of fiscal year 2009 was $17,080,000, an increase of
$539,000 (3%) from that reported in the second quarter of fiscal year 2008.
The increase is due to new project work in the United Arab Emirates.
Gross revenue in the Compliance and Environmental Programs business segment
for the second quarter was $5,704,000, a decrease of $2,995,000 (34%) from
the second quarter of fiscal year 2008. The decrease is due to the
completion of several large municipal aquatic facility projects at the
end of fiscal year 2008, and a reduction in new aquatic facility projects
due to municipal budget constraints resulting from the poor economy.
Gross revenue in the Professional Services business segment for the second
quarter of fiscal year 2009 was $2,784,000, an increase of $461,000 (20%)
from the second quarter of fiscal year 2008. The increase is attributable
to continuing work in larger professional services outsourcing awards
received in fiscal year 2008. Gross revenue for the National Security
business segment for the second quarter of fiscal year 2009 was $2,399,000,
an increase of $607,000 (34%) from the second quarter of fiscal year 2008.
The increase is attributable to additional chemical laboratory work,
personal protective suit sales and meteorological work during the quarter.
Purchased services and materials decreased by $2,314,000 (13%) in
the second quarter of fiscal year 2009 compared to the second quarter of
fiscal year 2008. The decrease is attributable to the decrease in
municipal aquatic facility work in the Compliance and Environmental
Programs business segment as mentioned above.
Direct costs of services and overhead include the cost to Versar
of direct and overhead staff, including recoverable and unallowable costs
that are directly attributable to contracts. Direct costs of services
and overhead increased by $788,000 (9%) in the second quarter of fiscal
year 2009 compared to the second quarter of 2008. The increase is
primarily due to additional costs required to support business growth
efforts in the Program Management business segment supporting United
Arab Emirates business expansion and Continental United States based
construction activity.
12
ITEM 2 Management's Discussion and Analysis of Financial Condition
and Results of Operations (continued)
Gross profit for the second quarter of fiscal year 2009 was
$3,205,000, an increase of $138,000 (4%) from the second quarter of fiscal
year 2008. The increase is primarily due to improved profitability in
the National Security business segment, offset in part by a decline in
the Compliance and Environmental Programs segment, as shown in the table
below.
For the Three-Month Periods Ended
---------------------------------
December 26, December 28,
2008 2007
-------------- --------------
GROSS PROFIT
------------
Program Management $ 2,158 $ 2,090
Compliance and Environmental
Programs 309 480
Professional Services 388 366
National Security 350 133
-------------- --------------
$ 3,205 $ 3,067
============== ==============
Gross profit for the Program Management business segment for the
second quarter of fiscal year 2009 was $2,158,000, an increase of $68,000
(3%) from the second quarter of fiscal year 2008. Gross profit in the
Compliance and Environmental Programs business segment for the second
quarter of fiscal year 2009 was $309,000, a decrease of $171,000 (36%)
compared to the second quarter of fiscal year 2008. The decrease is
due to the reduced gross revenues as previously mentioned above
resulting from poor economic conditions. Gross profit in the Professional
Services business segment for the second quarter of fiscal year 2009 was
$388,000, an increase of $22,000 (6%) over that reported in the second
quarter of fiscal year 2008. Gross profit in the National Security
business segment for the second quarter of fiscal year 2009 was $350,000,
an increase of $217,000 (163%) from the second quarter of fiscal year 2008.
The increase is directly attributable to the increased gross revenue as
mentioned above.
Selling, general and administrative expenses increased by $342,000
(18%) during the second quarter of fiscal year 2009 compared to the second
quarter of fiscal year 2008. The increase is primarily due to increased
business development activities.
Operating income for the second quarter of fiscal year 2009 was
$1,007,000, a decrease of $204,000 (17%) compared to the second quarter
of fiscal year 2008. The decrease is attributable to the higher selling,
general and administrative costs as mentioned above.
Interest expense for the second quarter of fiscal year was $74,000,
compared to interest income of $52,000 reported in the second quarter of
fiscal year 2008. The expense is attributable to the cost of financing
the Company's various insurance policies together with a reduction in
interest income as a result of the reduced federal government borrowing
rates on the Company's cash balances invested in overnight repurchase
agreements.
Income tax expense for the second quarter of fiscal year 2009 was
$375,000 compared to $518,000 in the second quarter of fiscal year 2008.
The effective tax rates were 40% and 41% for the second quarter of fiscal
years 2009 and 2008, respectively.
Versar's net income for the second quarter of fiscal year 2009 was
$565,000 compared to $745,000 in the second quarter of fiscal year 2008.
The decreased gross revenues coupled with higher selling, general and
administrative costs accounted for the reduced net income for the second
quarter of fiscal year 2009.
13
ITEM 2 Management's Discussion and Analysis of Financial Condition
and Results of Operations (continued)
Six Month Comparison of Fiscal Year 2009 and 2008
-------------------------------------------------
For the Six-Month Periods Ended
---------------------------------
December 26, December 28,
2008 2007
-------------- --------------
GROSS REVENUE
-------------
Program Management $ 32,730 $ 33,804
Compliance and Environmental
Programs 10,464 16,925
Professional Services 4,962 3,778
National Security 4,809 3,730
-------------- --------------
$ 52,965 $ 58,237
============== ==============
Gross revenue for the first six months of fiscal year 2009 was
$52,965,000, a decrease of $5,272,000 (9%) from the first six months of
fiscal year 2008. Gross revenue in the Program Management business
segment for the first six months of fiscal year 2009 was $32,730,000,
a decrease of $1,074,000 (3%) from the first six months of fiscal year
2008. The decrease is due to lower construction related work in the
United States as several large projects in the pipeline were not
awarded until late in the first quarter of fiscal year 2009. Gross
revenue in the Compliance and Environmental Programs business segment
for the first six months was $10,464,000, a decrease of $6,461,000 (38%)
from the first six months of fiscal year 2008. The decrease is due to
the completion of several large municipal aquatic facility projects at
the end of fiscal year 2008, and a reduction in new aquatic facility
projects due to municipal budget constraints resulting from the poor
economy. Gross revenue in the Professional Services business segment
for the first six months of fiscal year 2009 was $4,962,000, an increase
of $1,184,000 (31%) from the first six months of fiscal year 2008. The
increase is attributable to continuing work on larger professional services
outsourcing awards received in fiscal year 2008. Gross revenue for the
National Security business segment for the first six months of fiscal
year 2009 was $4,809,000, an increase of $1,079,000 (29%) from the first
six months of fiscal year 2008. The increase is attributable to additional
chemical laboratory work, personal protective suit sales and meteorological
work during the period.
Purchased services and materials decreased by $6,936,000 (19%) in the
first six months of fiscal year 2009 compared to the first six months of
fiscal year 2008. The decrease is attributable to the decrease in
construction work in the Program Management business segment and in
municipal aquatic facility work in the Compliance and Environmental
Programs business segment as mentioned above.
Direct costs of services and overhead include the cost to Versar
of direct and overhead staff, including recoverable and unallowable
costs that are directly attributable to contracts. Direct costs of
services and overhead increased by $1,847,000 (12%) in the first six
months of fiscal year 2009 compared to the first six months of 2008.
The increase is primarily due to additional costs required to support
business growth efforts in the Program Management and Professional
Services business segments.
14
ITEM 2 Management's Discussion and Analysis of Financial Condition
and Results of Operations (continued)
Gross profit for the first six months of fiscal year 2009 was
$6,383,000, a decrease of $183,000 (3%) from the first six months
of fiscal year 2008. The decrease is primarily attributable to
reduced gross revenues and profitability in the Compliance and
Environmental Programs business segment offset in part by increases
in the Professional Services and National Security business segments
as shown in the table below.
For the Six-Month Periods Ended
---------------------------------
December 26, December 28,
2008 2007
-------------- --------------
GROSS PROFIT
------------
Program Management $ 4,471 $ 4,372
Compliance and Environmental
Programs 535 1,160
Professional Services 809 614
National Security 568 420
-------------- --------------
$ 6,383 $ 6,566
============== ==============
Gross profit for the Program Management business segment for the
first six months of fiscal year 2009 was $4,471,000, an increase of
$99,000 (2%) from the first six months of fiscal year 2008. Gross
profit in the Compliance and Environmental Programs business segment
for the first six months of fiscal year 2009 was $535,000, a decrease of
$625,000 (54%) compared to the first six months of fiscal year 2008.
The decrease is due to the reduced gross revenues as mentioned above
resulting from poor economic conditions. Gross profit in the
Professional Services business segment for the first six months of
fiscal year 2009 was $809,000, an increase of $195,000 (32%) from the
first six months of fiscal year 2008. Gross profit in the National
Security business segment for the first six months of fiscal year 2009
was $568,000, an increase of $148,000 (35%) from the first six months
of fiscal year 2008. These increases are directly attributable to the
increased gross revenue as mentioned above.
Selling, general and administrative expenses increased by
$602,000 (17%) during the first six months of fiscal year 2009
compared to that reported in the first six months of fiscal year 2008.
The increase is primarily due to increased business development
activities.
Operating income for the first six months of fiscal year 2009
was $2,149,000, a decrease of $785,000 (27%) compared to the first six
months of fiscal year 2008. The decreased is primarily attributable to
the higher selling, general and administrative costs as mentioned above.
During the first quarter of fiscal year 2009, the Company
recorded a $352,000 loss on marketable securities the Company was
holding in the FISCO Income Plus Funds. The FISCO fund received an
immediate demand margin call from its broker, UBS. Rather than allow
the fund the customary time to satisfy the margin call at the end of
the day, UBS demanded the fund cover all calls and puts at high
premiums immediately or indicated it would take control of the fund
and start liquidating the fund itself. The fund has terminated its
relationship with UBS and transferred the assets to a new custodian.
The fund has indicated it will seek legal action against UBS to cover
its losses. The Company will participate in any recovery from any
such action. The Company has reallocated its remaining assets from
marketable securities to its primary bank due to the volatile nature
of the market.
Interest expense for the first six months of fiscal year 2009
was $19,000, compared to interest income of $116,000 for the first
six months of fiscal year 2008. The expense is attributable to the
cost of financing the Company's various insurance policies together
with reduced interest income resulting from reduced federal
government borrowing rates on the Company's cash balances invested
in overnight repurchase agreements.
Income tax expense for the first six months of fiscal year
2009 was $695,000 compared to $1,288,000 in the first six months
of fiscal year 2008. The effective tax rates were 39% and 41% for
the first six months of fiscal years 2009 and 2008, respectively.
15
ITEM 2 Management's Discussion and Analysis of Financial Condition
and Results of Operations (continued)
Versar's net income for the first six months of fiscal year
2009 was $1,089,000 compared to $1,762,000 in the first six months of
fiscal year 2008. The decrease in gross revenue along with higher
selling, general and administrative costs, and the loss on marketable
securities accounted for the reduced net income for the first six
months of fiscal year 2009.
Liquidity and Capital Resources
-------------------------------
The Company's working capital as of December 26, 2008
approximated $23,585,000, an increase of $1,314,000 (6%) from June 27,
2008. In addition, at December 26, 2008, the Company's current ratio
was 3.14, an improvement over the 2.67 current ratio reported on June
27, 2008. The increase was due to the reduction of current liabilities
during the first six months of fiscal year 2009.
The Company has a line of credit facility with United Bank
(the Bank) that provides for advances up to $7.5 million based upon
qualifying receivables. Interest on borrowings is based upon the
prime rate of interest minus 0.5% (2.75% as of December 26, 2008).
In October 2006, the Company obtained a letter of credit of
approximately $1.6 million which serves as collateral for surety bond
coverage provided by the Company's insurance carrier against project
construction work. The letter of credit has subsequently been reduced
to $455,147 in January 2009. The letter of credit reduces the Company's
availability on the line of credit. Availability under the line of
credit at December 26, 2008 was $5.9 million. There are no borrowings
outstanding under the line of credit as of December 26, 2008.
Obligations under the credit facility are guaranteed by Versar and
each subsidiary individually and are secured by accounts receivable,
equipment and intangibles, plus all insurance policies on property
constituting collateral of Versar and its subsidiaries. The line of
credit matures in November 2009 and is subject to certain covenants
related to the maintenance of financial ratios. These covenants require
a minimum tangible net worth of $15 million; a maximum total liabilities
to tangible net worth ratio not to exceed 2.5 to 1; and a minimum current
ratio of at least 1.25 to 1. The Company was in compliance with such
covenants as of December 26, 2008.
Management believes that the current cash balance of over $7.7
million along with anticipated cash from operations and existing
availability under the line of credit, are sufficient to meet its
liquidity needs within the next year. Expected capital requirements
for the remainder of fiscal year 2009 are approximately $450,000
primarily to maintain our existing information technology systems and
software applications. Such capital requirements will be funded
through existing working capital.
The global economic business downturn has primarily impacted
our commercial and state and municipal work in our Compliance and
Environmental Programs business segment. As such, we are adjusting
the Company's cost structure to minimize the impact to the overall
Company financial performance.
Critical Accounting Policies and Related Estimates That Have a
Material Effect on Versar's Consolidated Financial Statements
Below is a discussion of the accounting policies and related
estimates that we believe are the most critical to understanding the
Company's consolidated financial position and results of operations,
which require management judgments and estimates, or involve
uncertainties. Information regarding our other accounting policies
is included in the notes to our consolidated financial statements
included elsewhere in this report on Form 10-Q and in our annual
report on Form 10-K filed for the 2008 fiscal year.
Revenue recognition: Contracts in process are stated at the
lower of actual costs incurred plus accrued profits or incurred
costs reduced by progress billings. On cost-plus fee contracts,
revenue is recognized to the extent of costs incurred plus a
proportionate amount of fee earned, and on time-and-material
contracts, revenue is recognized to the extent of billable rates
times hours delivered plus material and other reimbursable costs
incurred. The Company records income from major fixed-price
contracts, extending over more than one accounting period, using
the percentage-of-completion method. During the performance of
such contracts, estimated final contract prices and costs are
periodically reviewed and revisions are made as required. Fixed
price contracts can be significantly impacted by changes in
contract performance, contract delays, liquidated damages and
penalty provisions and contract change orders, which may affect the
revenue recognition on a project. Revisions to such estimates are
made when they become known.
16
ITEM 2 Management's Discussion and Analysis of Financial Condition
and Results of Operations (continued)
There is the possibility that there will be currently
unforeseeable adjustments to our estimated contract revenues, costs and
margins for fixed price contracts in the future, particularly in the
later stages of these contracts. Such adjustments are common in the
construction industry given the nature of the contracts. These
adjustments could either positively or negatively impact our estimates
due to the circumstances surrounding the negotiations of change orders,
the impact of schedule slippage, subcontractor claims and contract
disputes which are normally resolved at the end of the contract.
Allowance for doubtful accounts: Disputes arise in the normal
course of the Company's business on projects where the Company is
contesting with customers for collection of funds because of events
such as delays, changes in contract specifications and questions of
cost allowability and collectibility. Such disputes, whether claims
or unapproved change orders in process of negotiation, are recorded at
the lesser of their estimated net realizable value or actual costs
incurred and only when realization is probable and can be reliably
estimated. Management reviews outstanding receivables on a regular
basis and assesses the need for reserves, taking into consideration
past collection history and other events that bear on the collectibility
of such receivables.
Asset retirement obligation: The Company has recorded an asset
retirement obligation associated with the estimated clean-up costs for
its chemical laboratory in its National Security business segment.
In accordance with SFAS 143, the Company estimated the costs to clean up
the laboratory and return it to its original state at a present value of
approximately $497,000. The Company currently estimates the amortization
and accreation expense to be approximately $180,000 to $190,000 per year
over the next 2 1/2 years. The Company is rigorously pursuing
reimbursement for such costs and other costs from the U.S. Army as a
significant portion of the chemical agent that was used in the chemical
laboratory was government owned. If the Company determines that the
estimated clean up cost is higher than expected or the likelihood of
recovery from the U.S. Army is remote, such adjustments will be reflected
when they become known in accordance with SFAS 143. At December 26, 2008,
the Company has accrued approximately $562,000 long-term liability to clean
up the chemical laboratory.
Goodwill and other intangible assets: The carrying value of goodwill
relating to the acquisition of Versar Global Solutions, Inc., which is now
part of the Program Management business segment is approximately $776,000.
In performing its goodwill impairment analysis, management has utilized a
market-based valuation approach to determine the estimated fair value of
the Program Management business segment. Management engages outside
professionals and valuation experts, as necessary, to assist in performing
this analysis on an annual basis. An analysis is performed on public
companies and company transactions to prepare a market-based valuation.
Based upon the latest analysis as of June 27, 2008, the estimated fair
value of the Program Management business segment exceeded the carrying
value of the net assets of $6.5 million on an enterprise value basis by a
substantial margin. Should the Program Management business segment,s
financial performance not meet estimates, then impairment of goodwill
would have to be further assessed to determine whether a write down of
goodwill value would be warranted. If such a write down were to occur,
it would negatively impact the Company's financial position and results
of operations. However, it would not impact the Company's cash flow or
financial debt covenants.
New accounting pronouncements: In February 2007, the FASB issued
Statement of Financial Accounting Standards No. 159, The Fair Value Option
for Financial Assets and Financial Liabilities, including an Amendment of
FASB Statement No. 115 ("SFAS 159"). SFAS 159 permits entities to measure
many financial instruments and certain other items at fair value to improve
financial reporting by providing entities with the opportunity to mitigate
volatility in reported earnings caused by measuring related assets and
liabilities differently without having to apply complex hedge accounting.
Most of the provisions in SFAS 159 are elective and may be applied
prospectively. Early adoption is permitted, provided the Company also
elects to apply the provisions of SFAS 157. The Company has adopted the
provisions of SFAS 159 in fiscal year 2009 and determined that there was
no material impact on its financial position, results of operations or
cash flows.
In November 2008, the Financial Accounting Standards Board ratified
a consensus opinion reached by the Emerging Issues Task Force (EITF) on
EITF Issue 08-6, "Equity Method Investment Accounting Considerations," to
clarify accounting and impairment considerations involving equity method
investments after the effective date of both FASB Statement 141 (revised
2007), Business Combinations, and FASB Statement 160, Noncontrolling
Interests in Consolidated Financial Statements. EITF Issue 08-6 includes
the Task Force's conclusions on how an equity method investor should
(1) initially measure its equity method investment, (2) account for
impairment charges recorded by its investee, and (3) account for shares
issued by the investee. EITF Issue 08-6 is effective for fiscal years
beginning on or after December 15, 2008. The Company intends to adopt
EITF Issue 08-6 effective January 1, 2009 on a prospective basis. The
Company does not currently have any
17
ITEM 2 Management's Discussion and Analysis of Financial Condition
and Results of Operations (continued)
investments that are accounted for under the equity method and as a result,
does not believe the adoption of EITF Issue 08-6 will have a significant
effect on its financial statements.
Impact of Inflation
Versar seeks to protect itself from the effects of inflation. The
majority of contracts the Company performs are for a period of a year or
less or are cost-plus-fixed-fee type contracts and, accordingly, are less
susceptible to the effects of inflation. Multi-year contracts include
provisions for projected increases in labor and other costs.
Contingencies
Versar and its subsidiaries are parties to various legal actions
arising in the normal course of business. The Company believes that the
ultimate resolution of these legal actions will not have a material
adverse effect on its consolidated financial position and results of
operations. (See Part II, Item 1 - Legal Proceedings).
Business Segments
Versar currently has four business segments: Program Management,
Compliance and Environmental Programs, Professional Services, and
National Security. See Note J of the Notes to the Consolidated
Financial Statements for details regarding these segments.
Item 3 - Quantitative and Qualitative Disclosures About Market Risk
The Company has not entered into any transactions using derivative
financial instruments or derivative commodity instruments and believes
that its exposure to interest rate risk and other relevant market risk
is not material.
Item 4T - Controls and Procedures
As of the last day of the period covered by this report, the
Company carried out an evaluation, under the supervision of the Company's
Chief Executive Officer and Chief Financial Officer, of the effectiveness
of the design and operation of the Company's disclosure controls and
procedures pursuant to Exchange Act Rule 13a-15. Based upon that
evaluation, the Chief Executive Officer and Chief Financial Officer
concluded that the Company's disclosure controls and procedures are
effective, as of such date, to ensure that required information will be
disclosed on a timely basis in its reports under the Exchange Act.
Further, our Chief Executive Officer and Chief Financial Officer
concluded that our disclosure controls and procedures have been designed
to ensure that information required to be disclosed in reports filed by
us under the Exchange Act is accumulated and communicated to our
management, including the Chief Executive Officer and Chief Financial
Officer, in a manner to allow timely decisions regarding the required
disclosure.
There were no changes in the Company's internal control over
financial reporting during the last quarter that have materially
affected, or are reasonably likely to materially affect, the Company's
internal control over financial reporting.
PART II - OTHER INFORMATION
Item 1 - Legal Proceedings
Versar and its subsidiaries are parties from time to time to
various legal actions arising in the normal course of business.
The Company believes that any ultimate unfavorable resolution of these
legal actions will not have a material adverse effect on its
consolidated financial condition and results of operations.
18
Item 4 - Submission of Matters to a Vote of Stockholders
The Company's Annual Meeting of Stockholders (the "Annual Meeting")
was held on November 19, 2008. The matters voted on at the Annual Meeting
were as follows:
(1) The Election of Directors
The election of ten nominees to serve as directors of the
Company was approved as indicated below:
For Withheld
----------- -----------
Robert L. Durfee 7,016,980 792,386
Fernando V. Galaviz 6,457,885 1,351,481
James L. Gallagher 7,671,703 138,145
James V. Hansen 7,629,428 179,938
Amoretta M. Hoeber 7,673,303 136,063
Paul J. Hoeper 7,671,703 137,663
Michael Markels, Jr. 7,037,394 771,972
Amir A. Metry 7,671,103 138,263
Anthony L. Otten 7,672,803 136,563
Theodore M. Prociv 7,669,242 140,124
(2) The appointment of Grant Thornton LLP as independent
accountants for fiscal year 2009 was ratified as indicated
below:
For Against Abstain
----------- ------------ -----------
7,735,431 40,632 33,303
Item 6 - Exhibits
(a) Exhibits
31.1 and 31.2 - Certification pursuant to Securities Exchange
Act Section 13a-14.
32.1 and 32.2 - Certification under Section 906 of the
Sarbanes-Oxley Act of 2002.
19
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
VERSAR, INC.
------------
(Registrant)
/S/ Theodore M. Prociv
By:________________________
Theodore M. Prociv
Chief Executive Officer,
President, and Director
/S/ Lawrence W. Sinnott
By:________________________
Lawrence W. Sinnott
Executive Vice President,
Chief Operating Officer,
Chief Financial Officer,
Treasurer, and Principal
Accounting Officer
Date: February 6, 2009
20