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 March 31, 1996 Commission File Number 1-9309
----------------- --------
VERSAR, INC.
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(Exact name of registrant as specified in its charter)
DELAWARE 54-0852979
- --------------------------------------- -------------------------------------
(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 offices) (Zip Code)
Registrant's telephone number, including area code (703) 750-3000
----------------------------
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 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 April 30, 1996
--------------------- -----------------------------
$ .01 par value 4,961,493 shares
VERSAR, INC. AND SUBSIDIARIES
INDEX TO FORM 10-Q
PAGE
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<TABLE>
<CAPTION>
<S> <C>
PART I - FINANCIAL INFORMATION
ITEM 1 - Financial Statements
Consolidated Balance Sheets as of
March 31, 1996 and June 30, 1995. 3
Consolidated Statements of Operations for the
Three-Month and Nine-Month Periods Ended
March 31, 1996 and 1995. 4
Consolidated Statements of Cash Flows
for the Nine-Month Periods Ended March 31,
1996 and 1995. 5
Notes to Consolidated Financial Statements 6-8
ITEM 2 - Management's Discussion and Analysis
of Financial Condition and Results of Operations 8-11
PART II - OTHER INFORMATION
ITEM 1 - Legal Proceedings 12
ITEM 6 - Exhibits and Reports on Form 8-K 13
SIGNATURES 14
</TABLE>
VERSAR, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(In thousands)
<TABLE>
<CAPTION>
March 31, June 30,
1996 1995
----------- -----------
(unaudited)
<S> <C> <C>
ASSETS
Current assets
Cash. . . . . . . . . . . . . . . . . . $ 58 $ 58
Accounts receivable, net. . . . . . . . 12,962 11,723
Prepaid expenses and other current
assets . . . . . . . . . . . . . . . . 1,442 1,099
Assets of Sarnia transferred. . . . . . --- 434
Deferred income taxes . . . . . . . . . 536 536
--------- ---------
Total current assets . . . . . . . 14,998 13,850
Property and equipment, net . . . . . . 1,789 1,457
Assets of Sarnia transferred. . . . . . --- 12,871
Other assets. . . . . . . . . . . . . . --- 17
--------- ---------
Total assets . . . . . . . . . . . $16,787 $28,195
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Liabilities of Sarnia transferred . . . $ --- $ 2,133
Accounts payable. . . . . . . . . . . . 2,599 1,950
Bank line of credit . . . . . . . . . . 222 438
Notes Payable . . . . . . . . . . . . . 512 335
Accrued salaries and vacation . . . . . 1,536 1,390
Other liabilities . . . . . . . . . . . 2,233 1,564
Liabilities of discontinued
operations, net. . . . . . . . . . . . --- 615
--------- ---------
Total current liabilities. . . . . 7,102 8,425
Long-term debt. . . . . . . . . . . . . . 3 4
Liabilities of Sarnia transferred . . . . --- 12,450
Other long-term liabilities . . . . . . . 1,015 1,026
Reserve on guarantee of real
estate debt. . . . . . . . . . . . . . . 1,420 ---
--------- ---------
Total liabilities. . . . . . . . . 9,540 21,905
--------- ---------
Commitments and Contingencies
Stockholders' equity
Common stock, $.01 par value; 10,000,000
shares authorized; 4,961,493 shares and
4,813,236 shares issued and outstanding
at March 31, 1996 and June 30, 1995,
respectively . . . . . . . . . . . . . 50 48
Capital in excess of par value. . . . . 13,194 12,816
Accumulated deficit . . . . . . . . . . (5,947) (6,565)
--------- ---------
7,297 6,299
Less treasury stock, at cost (14,869
shares at March 31, 1996 and 3,327
shares at June 30, 1995) . . . . . . . (50) (9)
--------- ---------
Total stockholders' equity . . . . . 7,247 6,290
--------- ---------
Total liabilities and
stockholders' equity $16,787 $28,195
========= =========
</TABLE>
The accompanying notes are an integral part of
these consolidated financial statements.
3
VERSAR, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
(Unaudited - in thousands, except per share amounts)
<TABLE>
<CAPTION>
For the Three-Month For the Nine-Month
Periods Ended March 31, Periods Ended March 31,
----------------------- -----------------------
1996 1995 1996 1995
------- ------- ------- -------
<S> <C> <C> <C> <C>
GROSS REVENUE . . . . . . . . . $11,389 $10,054 $33,686 $28,837
Purchased services and
materials, at costs . . . . . 3,165 2,640 9,718 6,995
-------- -------- -------- --------
NET SERVICE REVENUE . . . . . . 8,224 7,414 23,968 21,842
Direct costs of services
and overhead. . . . . . . . . 6,883 6,030 19,669 17,938
Selling, general and
administrative expenses . . . 1,103 1,315 3,427 3,502
Other (income). . . . . . . . . (7) (172) (21) (195)
Losses on Sarnia operations . . -- 51 142 212
-------- -------- -------- --------
OPERATING INCOME. . . . . . . . 245 190 751 385
Interest expense. . . . . . . . 22 23 95 93
Income tax expense. . . . . . . 10 15 38 38
-------- -------- -------- --------
NET INCOME. . . . . . . . . . . $ 213 $ 152 $ 618 $ 254
======== ======== ======== ========
NET INCOME PER SHARE. . . . . . $ .04 $ .03 $ .12 $ .05
======== ======== ======== ========
WEIGHTED AVERAGE NUMBER
OF SHARES OUTSTANDING . . . . . 5,216 4,853 5,167 4,784
======== ======== ======== ========
</TABLE>
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)
<TABLE>
<CAPTION>
For the Nine-Month
Periods Ended March 31,
-----------------------
1996 1995
------- -------
<S> <C> <C>
Cash flows from operating activities
Net income . . . . . . . . . . . . . . . . . $ 618 $ 254
Adjustments to reconcile net income to
net cash provided by operating activities
Depreciation and amortization . . . . . 491 541
Provision for doubtful accounts
receivable . . . . . . . . . . . . . . 52 (28)
Common stock issued to ESSOP and
stock bonus. . . . . . . . . . . . . . 114 231
Taxes payable . . . . . . . . . . . . . --- (95)
Changes in assets and liabilities,
net of asset dispositions
Increase in accounts receivable . . . . (1,291) (800)
(Increase) decrease in prepaids
and other assets . . . . . . . . . . . (342) 697
Increase in accounts payable. . . . . . 649 483
Increase (decrease) in accrued
salaries and vacation. . . . . . . . . 146 (163)
Increase (decrease) in other
liabilities. . . . . . . . . . . . . . 836 (411)
Net change in assets and liabilities
of Sarnia. . . . . . . . . . . . . . . 142 212
-------- --------
Net cash from continuing operations . 1,415 921
Changes in net liabilities of
discontinued operations. . . . . . . . (615) (97)
-------- --------
Net cash provided by operating
activities . . . . . . . . . . . . . 800 824
Cash flows from investing activities
Purchase of property and equipment . . . . . (808) (184)
-------- --------
Cash flows from financing activities
Net (payments) borrowings on the line
of credit . . . . . . . . . . . . . . . . . (216) 230
Principal payments on long-term debt . . . . (1) (949)
Proceeds from issuance of the Company's
common stock . . . . . . . . . . . . . . . 225 63
-------- --------
Net cash provided by (used in)
financing activities . . . . . . . . 8 (656)
-------- --------
Net decrease in cash . . . . . . . . . . . . . 0 (16)
Cash at the beginning of the year. . . . . . . 58 72
-------- --------
Cash at the end of the year. . . . . . . . . . $ 58 $ 56
======== ========
Supplemental disclosure of cash flow information:
Cash paid during the period for
Interest. . . . . . . . . . . . . . . . . $ 78 $ 114
Income taxes. . . . . . . . . . . . . . . 5 144
</TABLE>
The accompanying notes are an integral part of
these condensed consolidated financial statements.
5
VERSAR, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(A) Basis of Presentation
The accompanying consolidated 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 generally accepted accounting
principles or those normally made in Versar, Inc.'s ("Versar" or the
"Company") Annual Report on Form 10-K filed with the 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 30, 1995
for additional information.
The financial information has been prepared in accordance with the
Company's customary accounting practices. In the opinion of Management, the
information reflects all adjustments necessary for a fair presentation of the
Company's consolidated financial position as of March 31, 1996, and the
results of operations for the three-month and nine-month periods ended March
31, 1996 and 1995. The results of operations for such periods, however, are
not necessarily indicative of the results to be expected for a full fiscal
year.
The assets, liabilities, and results of operations of Sarnia Corporation
were in the Company's financial statements for fiscal year ended June 30,
1995. At December 31, 1995, the assets and liabilities have been removed from
Versar's balance sheet due to the refinancing of Sarnia's debt (refer to Note
B for further information on the Sarnia refinancing). Refer to Note D for
further information regarding the financial treatment of the former real
estate operations.
The Company's analytical laboratory operations assets and liabilities
have been netted together and presented as a net liability on the balance
sheet as of June 30, 1995.
Certain Balance Sheet, Statement of Operations, and Statement of Cash
Flows items have been restated for comparative financial statement purposes.
(B) Debt
Versar maintained a bank line of credit for working capital purposes
with Riggs National Bank ("Riggs"). Prior to January 25, 1996, the line
provided for advances up to $1,500,000. On January 25, 1996, Versar obtained
a new line of credit with Riggs National Bank which provides for advances up
to $3,000,000. Borrowings on the line are at the prime rate of interest plus
1/2% (8.75% at March 31, 1996). A fee of 1/4% on the unused portion of the
line of credit is also charged. The line is guaranteed by the Company and
each subsidiary individually and is collectively secured by accounts
receivable, equipment and intangibles, plus all insurance policies on property
constituting collateral. Borrowing availability under the bank line of credit
is restricted to the borrowing base of qualifying receivables less $1,500,000.
Unused borrowing availability at March 31, 1996 was $2,778,000. Advances
under the line are due upon demand or on December 31, 1996. The Company must
also obtain Riggs' approval prior to paying dividends. Additionally, the loan
has certain covenants related to maintenance of financial ratios. The Company
was in compliance with the financial covenants at March 31, 1996.
6
VERSAR, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (continued)
As previously reported, Versar has guaranteed certain debt of Sarnia
Corporation. At June 30, 1995 the total mortgage debt of Sarnia Corporation
("Sarnia") (formerly Versar Virginia, Inc., which was spun-off to Versar
shareholders on June 30, 1994) was approximately $12,062,000. On January 25,
1996, Sarnia refinanced its outstanding debt. Sarnia obtained a first
mortgage of $9,000,000 with I.D.S. Life Insurance Company, a $500,000 second
mortgage with Riggs and a $1,500,000 seven year term loan with Riggs. In
addition, Sarnia has issued $750,000 of its Series A Cumulative Convertible
Preferred stock to a group of private investors. Versar currently guarantees
Sarnia's $1,500,000 term loan and Versar has established a reserve of
$1,420,000 against the loan. As a result of the refinancing, Versar's
guarantee of Sarnia's debt has decreased from approximately $12,000,000 to
$1,500,000. As the term loan is repaid, the reserve will be reduced and added
to Versar's equity.
(C) Income Taxes
At June 30, 1995, the Company has $2.0 million net deferred tax assets
which primarily relate to net operating loss and tax credit carryforwards.
Due to the Company's history of operating losses, a valuation allowance of
$1.4 million has been established. With increased profitability, such net
operating loss and tax credit carryforwards would be utilized and the
valuation allowance would be adjusted accordingly.
(D) Sarnia Corporation
Sarnia Corporation owns and operates an 18.3 acre office park in
Springfield, Virginia, consisting of two office buildings which aggregate
229,000 square feet of which Versar leases approximately 35% of the buildings.
On June 30, 1994, Sarnia was spun-off to the Versar shareholders. The
spin-off did not relieve Versar of the risks of ownership due to Versar's
guarantee of Sarnia's debt. On January 25, 1996, Sarnia refinanced its
existing debt (Refer to Note B). As a part of the refinancing, Versar's
guarantee was reduced from $12,000,000 to $1,500,000. Versar has a reserve of
$1,420,000 against this loan. As of January 1, 1996, the results of
operations of Sarnia are no longer included in Versar's consolidated financial
statements. Sarnia's results of operations were presented as single line
items in Versra's Consolidated Statement of Operations for the six-month
period ended December 31, 1995 and the nine-month period ended March 31, 1995.
Sarnia's assets and liabilities are presented as separate line items in
Versar's Consolidated Balance Sheet for fiscal year ended June 30, 1995.
7
VERSAR, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (continued)
(E) 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 condition and results of operations.
(F) Net Income Per Share
Net income per share is computed by dividing the net income for a period
by the weighted average number of common shares outstanding and exercisable
options during the applicable period being reported.
(G) Common Stock
In fiscal year 1996, Versar has issued approximately 32,000 shares to
various employee benefit plans as part of the Company's contribution to
employee benefits for fiscal year 1995. In the fiscal year 1995, Versar
issued approximately 140,000 shares to various employee benefit plans as part
of the Company's contribution to employee benefits for fiscal years 1995 and
1994.
ITEM 2 Management's Discussion and Analysis of Financial Condition and
Results of Operations
Results of Operations
- ---------------------
Third Quarter Comparison for Fiscal Year 1996 and 1995
- ------------------------------------------------------
Versar's gross revenue for the third quarter ended March 31, 1996
totaled $11,389,000, an increase of $1,335,000 (13%) compared to gross revenue
of $10,054,000 for the third quarter of the prior fiscal year. The increase
is primarily due to task orders being performed in the Company's Midwest and
Rocky Mountain regions in support of the Air Force Center for Environmental
Excellence contract.
Purchased services and materials for the third quarter of fiscal year
1996 increased by $525,000 (20%) compared to costs for the previous year. The
increase is principally due to the increase in gross revenue as mentioned
above.
Net service revenue is derived by deducting the costs of purchased
services from the gross revenue. Versar considers it appropriate to analyze
operating margins and other ratios in relation to net service revenue because
such revenues reflect the actual work performed by the Company. Net service
revenue increased by 11% compared to the third quarter of fiscal year 1995.
The increase is due to the higher volume in gross revenue as described above.
Direct costs of services and overhead include the cost to Versar of
direct and overhead staff, including recoverable overhead costs and
unallowable costs that are directly attributable to contracts. The percentage
of costs to net service revenue increased to 83.7% in the third quarter of
fiscal year 1996 compared to 81.3% in the third quarter of fiscal year 1995.
The increase is attributable to lower direct labor utilization as a result of
the government shutdown in January 1996 and poor weather conditions on the
east coast.
8
ITEM 2 Management's Discussion and Analysis of Financial Condition and
Results of Operations (continued)
Selling, general and administrative expenses approximated 13% of net
service revenue in the third quarter of fiscal year 1996, compared to 18% in
the third quarter of fiscal year 1995. The decrease is the result of higher
net service revenue and lower proposal efforts during the quarter.
Other income include the costs and revenues that are not directly
attributable to contracts. For the third quarter of fiscal year 1996, the
Company recognized non-compete income from the sale of its majority-owned
subsidiary, Gammaflux, Inc. of $7,000 compared to $12,000 recognized in the
third quarter of fiscal year 1995. In addition, the Company reversed $160,000
of accrued real estate cost in the third quarter of fiscal year 1995 that were
no longer required.
Losses on Sarnia operations are from the Company's former real estate
operations that were spun-off to shareholders on June 30, 1994. Because the
risks of ownership had not transferred, due to Versar's guarantee of Sarnia's
debt, Sarnia's losses were included in Versar's financial statements through
December 31, 1995. On January 25, 1996, Sarnia refinanced its debt and
Versar's guarantee of Sarnia's indebtedness decreased to $1,500,000.
Therefore, the results of operations and financial position of Sarnia are no
longer included in Versar's consolidated financial statements. Sarnia had
losses of $51,000 that were included in the third quarter of fiscal year 1995.
See Note (B) and (D) to the Notes of Consolidated Financial Statements.
Operating income for the third quarter of fiscal year 1996 was $245,000,
an increase of $55,000 over the third quarter of fiscal year 1995. The
increase is primarily due to the completion of the spin-off of Sarnia as
mentioned above.
Interest expense during the third quarter of fiscal year decreased
slightly compared to costs for the comparable period of the previous year.
The decrease reflects the lower utilization of the Company's line of credit
during the quarter.
Versar had net income of $213,000 in the third quarter of fiscal year
1996 compared to net income of $152,000 in the third quarter of fiscal year
1995. The increase is primarily the result of the higher revenue volume and
the completion of the spin-off of Sarnia.
Nine-Month Comparison of Fiscal Years 1996 and 1995
- ---------------------------------------------------
Versar's gross revenue for the first nine months ended March 31, 1996
totaled $33,686,000, an increase of $4,849,000 (17%) compared to gross revenue
of $28,837,000 for the nine months of the prior fiscal year. The increase is
primarily due to task orders being performed in the Company's Rocky Mountain
region in support of the Air Force Center for Environmental Excellence
contract.
Purchased services and materials for the nine months of fiscal year 1996
increased by $2,723,000 (39%) compared to costs for the previous year. The
increase is principally due to the increase in gross revenue as mentioned
above.
Net service revenue increased by 10% compared to the nine months of
fiscal year 1995. The increase is due to the higher volume in gross revenue.
The percentage of direct costs of services and overhead remained stable
for the nine months of fiscal year 1996 in relation to the nine months of
fiscal year 1995.
9
ITEM 2 Management's Discussion and Analysis of Financial Condition and
Results of Operations (continued)
Selling, general and administrative expenses approximated 14% of net
service revenue in the nine months of fiscal year 1996, compared to 16% in the
nine months of fiscal year 1995. The reduction is due to the increased net
service revenue while continuing to stabilize the selling, general and
administrative expenses.
Losses on Sarnia operations are from the Company's former real estate
operations that were spun-off to shareholders on June 30, 1994. Because the
risks of ownership had not transferred, due to Versar's guarantee of Sarnia's
debt, Sarnia's losses were included in Versar's financial statements through
December 31, 1995. On January 25, 1996, Sarnia refinanced its debt and
Versar's guarantee of Sarnia's indebtedness decreased to $1,500,000.
Therefore, effective January 1, 1996, the results of operations and financial
position of Sarnia are no longer included in Versar's consolidated financial
statements. Sarnia had losses of $142,000 for the first six months of fiscal
year 1996 that were included in the nine months of fiscal year 1996 compared
to $212,000 in the first nine months of fiscal year 1995. See Note (B) and
(D) to the Notes of Consolidated Financial Statements.
Operating income for the nine months of fiscal year 1996 was $751,000,
an increase of $366,000 over the nine months of fiscal year 1995. The
increase is the result of higher gross revenues as mentioned above.
Interest expense during the nine months of fiscal year 1996 increased by
$2,000 (2%) compared to costs for the comparable period of the previous year.
The increase for the nine months was due to higher usage of the Company's line
of credit as a result of the increased revenue volume earlier in the fiscal
year.
Versar had net income of $618,000 for the nine months of fiscal year
1996 compared to net income of $254,000 for the nine months of fiscal year
1995. The increase is primarily the result of the higher gross revenues as
mentioned above.
Liquidity and Capital Resources
- -------------------------------
The Company's working capital at March 31, 1996 approximated $7,896,000,
an increase of $2,471,000 (46%) over June 30, 1995. The increase is primarily
due to the removal of Sarnia's assets and liabilities from the Company's
balance sheet as a result of Sarnia's refinancing of its mortgages and due to
improved earnings of the Company.
Versar maintains a bank line of credit for working capital purposes with
Riggs National Bank ("Riggs"). Prior to January 25, 1996, the line of credit
provided for advances up to $1,500,000. On January 25, 1996, Versar obtained
a new line of credit with Riggs National Bank which provides for advances up
to $3,000,000. Borrowings on the line are at the prime rate of interest plus
1/2% (8.75% at March 31, 1996). A fee of 1/4% on the unused portion of the
line of credit is also charged. The line is guaranteed by the Company and
each subsidiary individually and is collectively secured by accounts
receivable, equipment and intangibles, plus all insurance policies on the
property constituting collateral. Borrowing availability under the bank line
of credit is restricted to the borrowing base of qualifying receivables less
$1,500,000. Unused borrowing availability at March 31, 1996 was $2,778,000.
Advances under the line are due upon demand or December 31, 1996. The Company
must also obtain Riggs' approval prior to paying dividends. Additionally, the
loan has certain covenants related to maintenance of financial ratios. The
Company was in compliance with the financial covenants at March 31, 1996.
10
ITEM 2 Management's Discussion and Analysis of Financial Condition and
Results of Operations (continued)
As previously reported, Versar has guaranteed certain debt of Sarnia
Corporation. At June 30, 1995 the total mortgage debt of Sarnia Corporation
("Sarnia") (formerly Versar Virginia, Inc., which was spun-off to Versar
shareholders on June 30, 1994) was approximately $12,062,000. On January 25,
1996, Sarnia refinanced its outstanding debt. Sarnia obtained a first
mortgage of $9,000,000 with I.D.S. Life Insurance Company, a $500,000 second
mortgage with Riggs and a $1,500,000 seven year term loan with Riggs. In
addition, Sarnia has issued $750,000 of its Series A Cumulative Convertible
Preferred stock to a group of private investors. Versar currently guarantees
Sarnia's $1,500,000 term loan and Versar has established a reserve of
$1,420,000 against the loan. As a result of the refinancing, Versar's
guarantee of Sarnia's debt has decreased from approximately $12,000,000 to
$1,500,000. As the term loan is repaid, the reserve will be reduced and added
to Versar's equity.
Approximately $300,000 will be required for capital expenditures during
the remainder of fiscal year 1996 and will be funded out of current working
capital.
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 one year or
less or are cost plus fixed-fee type contracts and, accordingly, are less
susceptible to the effects of inflation. Multi-year contracts provide for
projected increases in labor and other costs.
THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK
11
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
On June 28, 1990, Gary R. Windolph, a former officer and director of
Versar Architects & Engineers, Inc. ("VA&E", formerly ARIX Corporation, a
former subsidiary of Versar, which was merged into the parent in July 1993)
and a former officer of Versar, filed an action in the District Court for the
City and County of Denver, State of Colorado, entitled Gary R. Windolph v.
ARIX Corporation, Versar, Inc., et al., Case NO. 90-CV-7155. On October 21,
1991, the jury returned verdicts for Mr. Windolph on two defamation claims
against the Company and awarded him damages in the amount of $200,000. The
jury also returned verdicts for Mr. Windolph on certain of his statutory and
common law securities claims and awarded damages in the amount of $1.00 each
on all such claims. On January 6, 1992, the Court ruled that, based upon the
evidence presented at trial, the $200,000 awarded to Mr. Windolph by the jury
was excessive as a matter of law and ordered a new damage trial on those
claims. The retrial of damages on these claims ended on October 21, 1992 with
the jury returning a verdict against Versar in the total amount of $1,000,001
including $500,000 for damages to Mr. Windolph's reputation and $500,001 for
personal humiliation, mental anguish and suffering.
Versar promptly filed appropriate post-trial motions seeking either a
new trial or the entry of judgment in an amount less than the jury's verdict.
On January 10, 1993, the Court granted Versar's motion, in part, and gave the
plaintiff the choice of accepting the entry of judgment in the amount of
$75,000, or retrying for a third time the amount of damages for the defamation
claim. The Court also decided, as a matter of law, that the maximum amount
Mr. Windolph could recover was $250,000 due to a statutory limit on non-
economic damages. At the same time, the Court ordered the parties to
participate in good faith in a mandatory settlement conference to try to
settle this matter. The parties were unable to reach a settlement as a result
of the settlement conference held in April, 1993, and the plaintiff rejected
the opportunity to have judgment entered for $75,000 or proceed with a new
trial. On June 16, 1993, the trial court entered final judgment on all
outstanding issues.
Both parties appealed to the Colorado Court of Appeals. On May 25, 1995
the Court issued its decision affirming in part, reversing in part and
remanding a part of the case to the trial court. The Court of Appeals
reversed the trial court's dismissal of Windolph's promissory estoppel claim,
and remanded with directions for a new trial on that matter only. The Court
of Appeals affirmed the trial court as to all other matters, including the
trial court's refusal to enter judgment in Windolph's favor on the two jury
verdicts relating to the defamation claim. Both parties filed motions for
rehearing with the Court of Appeals, which were denied on August 10, 1995.
In September 1995, Windolph sought review of this case by the Colorado
Supreme Court which was denied on February 20, 1996. The case is now before
the trial court to proceed on the promissory estoppel claim only. A bench
trial without jury is set for January 27, 1997. Based upon the Court of
Appeals' decision and consultation with outside council, management believes
the outcome of this lawsuit will not have a material impact on Versar's
consolidated financial condition and results of operations.
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 condition and results of operations.
12
Item 6 - Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit 27 - Financial Data Schedules
(b) Reports on Form 8-K
None
13
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)
By: \s\ Benjamin M. Rawls
-----------------------------------
Benjamin M. Rawls
Chairman and Chief
Executive Officer
By: \s\ Lawrence W. Sinnott
-----------------------------------
Lawrence W. Sinnott
Vice President, Chief
Financial Officer, and
Treasurer
Date: May 15, 1996
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0
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