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 31, 1996 Commission File Number 1-9309
------------------ -------
VERSAR, INC.
- -------------------------------------------------------------------------------
(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
- ---------------------------------------- ------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (703) 750-3000
----------------------------
Not Applicable
- ------------------------------------------------------------------------------
(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 January 31, 1997
--------------------- -------------------------------
$ .01 par value 5,013,052 shares
<PAGE>
VERSAR, INC. AND SUBSIDIARIES
INDEX TO FORM 10-Q
PAGE
----
<TABLE>
<CAPTION>
<S> <C>
PART I - FINANCIAL INFORMATION
ITEM 1 - Financial Statements
Consolidated Balance Sheets as of
December 31, 1996 and June 30, 1996. 3
Consolidated Statements of Operations
for the Three-Month and Six-Month
Periods Ended December 31, 1996 and 1995. 4
Consolidated Statements of Cash Flows
for the Six-Month Periods Ended
December 31, 1996 and 1995. 5
Notes to Consolidated Financial Statements 6-7
ITEM 2 - Management's Discussion and Analysis
of Financial Condition and Results of
Operations 7-10
PART II - OTHER INFORMATION
ITEM 1 - Legal Proceedings 11-12
ITEM 4 - Submission of Matters to a Vote of Stockholders 12-13
ITEM 6 - Exhibits and Reports on Form 8-K 13
SIGNATURES 14
EXHIBIT 3 - Certificate of Amendment of Restated
Certificate of Incorporation of Versar, Inc. 15
EXHIBIT 11 - Computation of Per Share Earnings 17
</TABLE>
<PAGE>
VERSAR, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(In thousands)
<TABLE>
<CAPTION>
December 31, June 30,
1996 1996
------------ -----------
(unaudited)
<S> <C> <C>
ASSETS
Current assets
Cash . . . . . . . . . . . . . . . . . $ 94 $ 83
Accounts receivable, net . . . . . . . 12,319 12,376
Prepaid expenses and other current
assets. . . . . . . . . . . . . . . . 956 1,365
Deferred income taxes. . . . . . . . . 690 473
Total current assets. . . . . . . 14,059 14,297
--------- ---------
Property and equipment, net. . . . . . 2,084 2,038
Deferred income taxes. . . . . . . . . 441 300
Other assets . . . . . . . . . . . . . 335 344
--------- ---------
Total assets. . . . . . . . . . . $ 16,919 $ 16,979
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable. . . . . . . . . . . . $ 2,044 $ 2,098
Bank line of credit . . . . . . . . . . 288 492
Accrued salaries and vacation . . . . . 1,824 1,619
Other liabilities . . . . . . . . . . . 1,786 2,459
--------- ---------
Total current liabilities. . . . . 5,942 6,668
Other long-term liabilities . . . . . . . 992 1,035
Reserve on guarantee of real
estate debt. . . . . . . . . . . . . . . 1,500 1,500
--------- ---------
Total liabilities. . . . . . . . . 8,434 9,203
--------- ---------
Commitments and Contingencies
Stockholders' equity
Common stock, $.01 par value; 30,000,000
shares authorized; 5,013,051 shares
and 4,994,693 shares issued and
outstanding at December 31 and
June 30, 1996, respectively. . . . . . 50 50
Capital in excess of par value. . . . . 13,352 13,299
Accumulated deficit . . . . . . . . . . (4,917) (5,573)
--------- ---------
Total stockholders' equity . . . . 8,485 7,776
Total liabilities and
stockholders' equity . . . . . . . $ 16,919 $ 16,979
========= =========
</TABLE>
The accompanying notes are an integral part of
these consolidated financial statements.
3
<PAGE>
VERSAR, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
(Unaudited - in thousands, except per share amounts)
<TABLE>
<CAPTION>
For the Three-Month For the Six-Month
Periods Ended December 31, Periods Ended December 31,
-------------------------- --------------------------
1996 1995 1996 1995
-------- -------- -------- --------
<S> <C> <C> <C> <C>
GROSS REVENUE . . . . . . . . . . . $10,749 $11,807 $22,207 $22,297
Purchased services and
materials, at costs . . . . . . . 3,009 3,677 6,593 6,553
-------- -------- -------- --------
NET SERVICE REVENUE . . . . . . . . 7,740 8,130 15,614 15,744
Direct costs of services
and overhead. . . . . . . . . . . 6,300 6,633 12,702 12,786
Selling, general and
administrative expenses . . . . . 1,229 1,152 2,400 2,324
Other (income). . . . . . . . . . . (11) (7) (21) (14)
Losses on Sarnia operations . . . . --- 59 --- 142
-------- -------- -------- --------
OPERATING INCOME. . . . . . . . . . 222 293 533 506
OTHER EXPENSE
Interest expense. . . . . . . . . . 18 49 37 73
Income tax (benefit) expense. . . . (187) 14 (160) 28
-------- -------- -------- --------
NET INCOME. . . . . . . . . . . . . $ 391 $ 230 $ 656 $ 405
======== ======== ======== ========
NET INCOME PER SHARE. . . . . . . . $ .08 $ .04 $ .13 $ .08
======== ======== ======== ========
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING. . . . . . . . . 5,073 5,130 5,078 5,139
======== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of
these consolidated financial statements.
4
<PAGE>
VERSAR, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(Unaudited - in thousands)
<TABLE>
<CAPTION>
For the Six-Month
Periods Ended December 31,
--------------------------
1996 1995
-------- --------
<S> <C> <C>
Cash flows from operating activities
Net income. . . . . . . . . . . . . . . . . . $ 656 $ 405
Adjustments to reconcile net income to
net cash provided by operating activities
Depreciation and amortization. . . . . . 355 327
Provision for doubtful accounts
receivable. . . . . . . . . . . . . . . (78) (7)
Common stock issued to ESSOP . . . . . . 26 114
Deferred tax benefit . . . . . . . . . . (358) ---
-------- --------
Subtotal. . . . . . . . . . . . . . . 601 839
Changes in assets and liabilities,
net of asset dispositions
Decrease (increase) in accounts
receivable. . . . . . . . . . . . . . 135 (1,052)
Decrease (increase) in prepaids
and other assets. . . . . . . . . . . 408 (206)
(Decrease) increase in accounts
payable . . . . . . . . . . . . . . . (54) 960
Increase in accrued salaries and
vacation. . . . . . . . . . . . . . . 205 342
Decrease in other liabilities . . . . . . (716) (606)
Net change in assets and liabilities
of Sarnia . . . . . . . . . . . . . . --- 142
-------- --------
Net cash from continuing
operations . . . . . . . . . . . . . 579 419
Changes in net liabilities of
discontinued operations. . . . . . . . . --- (165)
-------- --------
Net cash provided by operating
activities. . . . . . . . . . . . . . 599 254
-------- --------
Cash flows from investing activities
Purchase of property and equipment. . . . . . (391) (600)
-------- --------
Cash flows from financing activities
Net (payments) borrowings on bank line
of credit . . . . . . . . . . . . . . . . . (204) 262
Proceeds from issuance of the Company's
common stock. . . . . . . . . . . . . . . . 27 84
-------- --------
Net cash (used in) provided by
financing activities. . . . . . . (177) 346
-------- --------
Net increase in cash. . . . . . . . . . . . . . 11 ---
Cash at the beginning of the year . . . . . . . 83 58
-------- --------
Cash at the end of the period . . . . . . . . . $ 94 $ 58
======== ========
Supplementary disclosure of cash flow information:
Cash paid during the period for
Interest. . . . . . . . . . . . . . . . . . $ 41 $ 46
Income taxes. . . . . . . . . . . . . . . . 200 5
</TABLE>
The accompanying notes are an integral part of
these condensed consolidated financial statements.
5
<PAGE>
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, 1996 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 December 31, 1996, and the
results of operations for the six-month periods ended December 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.
(B) Accounting Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles 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.
(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 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 in the period in which 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 is reasonably
determinable in amount.
It is the Company's policy to provide reserves for the collectibility of
accounts receivable when it is determined that it is probable that the Company
will not collect all amounts due and the amount of reserve requirements can be
reasonably estimated.
6
<PAGE>
VERSAR, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (continued)
(D) Income Taxes
At June 30, 1996, the Company had a net deferred tax asset of approximately
$1.5 million, which was offset by a valuation allowance of approximately $.7
million. During the first six months of fiscal year 1997, the valuation
allowance was reduced by $358,000 due to the increasing likelihood that the
Company will realize the remainder of its deferred tax assets.
(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 net income by the fully
diluted weighted average number of common shares outstanding during the
applicable period being reported.
(G) Common Stock
In fiscal year 1997 to date, Versar issued approximately 7,498 shares to
various employee benefit plans as part of the Company's contribution to employee
benefits for fiscal year 1996. In fiscal year 1996, Versar issued approximately
32,348 shares to various employee benefit plans as part of the Company's
contribution to employee benefits for fiscal year 1995.
ITEM 2 Management's Discussion and Analysis of Financial Condition
and Results of Operations
Results of Operations
- ---------------------
Second Quarter Comparison of Fiscal Years 1997 and 1996
- -------------------------------------------------------
Versar's gross revenue for fiscal quarter ended December 31, 1996 totaled
$10,749,000 a decrease of $1,058,000 (9%) compared to gross revenue of
$11,807,000 for the second quarter of the prior fiscal year. The decrease is
due to the completion of the Presidio asbestos survey contract in the Company's
Pacific region in support of the Sacramento Corps of Engineers.
Purchased services and materials for the second quarter of fiscal year 1997
decreased by $668,000 (18%) compared to costs for the comparable period of the
previous fiscal year. The decrease is primarily due to the decrease in gross
revenue as mentioned above.
Net service revenue is derived by deducting the costs of purchased services
from 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
decreased by 5% compared to the second quarter of fiscal year 1996. The
decrease is due to the lower volume in gross revenue.
7
<PAGE>
ITEM 2 Management's Discussion and Analysis of Financial Condition and
Results of Operations (continued)
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 decreased slightly to 81.4% in the second quarter of fiscal year
1997 compared to 81.6% in the second quarter of fiscal year 1996.
Selling, general and administrative expenses were 15.9% of net service
revenue in the second quarter of fiscal year 1997, compared to 14.2% in the
second quarter of fiscal year 1996. The increase is the result of higher
proposal activities and legal fees during the second quarter of fiscal year 1997
and the lower net service revenue as discussed above.
Other costs include the costs and revenues that are not attributable to
contracts. For the second quarter of fiscal year 1997, the Company recognized
non-compete income for the sale of its majority-owned subsidiary, Gammaflux,
Inc. of $11,000 compared to $7,000 recognized in the second quarter of fiscal
year 1996.
Versar no longer includes the results of operations and financial position
of Sarnia Corporation ("Sarnia") in the Company's consolidated financial
statements. In January 1996, Sarnia obtained new financing which reduced
Versar's guarantee of Sarnia's indebtedness from $12,400,000 to $1,500,000.
Versar has a reserve of $1,500,000 against the guarantee.
Operating income for the second quarter of fiscal year 1997 was $222,000, a
decrease of $71,000 compared to the second quarter of fiscal year 1996. The
decrease is the result of the lower gross revenue as mentioned above.
Interest expense during the second quarter of fiscal year 1997 decreased by
$31,000 compared to costs for the comparable period of the previous fiscal year.
The decrease is due to lower usage of the Company's line of credit during the
second quarter of fiscal year 1997.
Income tax expense during the second quarter of fiscal year 1997 decreased
by $201,000 compared to costs for the comparable period of the previous fiscal
year. The decrease in income tax expense is due to the reduction of the
Company's valuation allowance against its deferred tax assets during the
quarter. (See Note D on page 7)
Versar had a net income of $391,000 in the second quarter of fiscal year
1997 compared to net income of $230,000 in the second quarter of fiscal year
1996. The increase is primarily due to the reduction of the Company's valuation
allowance against its deferred tax assets as mentioned above.
Six Month Comparison of Fiscal Years 1997 and 1996
- --------------------------------------------------
Versar's gross revenue for the six months ended December 31, 1996 totaled
$22,207,000 a slight decrease of $90,000 compared to the gross revenue of
$22,297,000 for the six months of the prior fiscal year. The decrease was due
to the winding down of the Presidio contract in the Company's Pacific region,
which was offset by higher gross revenues in the Company's Rocky Mountain and
Midwest regions in support of the Air Force Center for Environmental Excellence
contract.
Purchased services and materials for the first six months of fiscal year
1997 increased by $40,000 (1%) compared to costs for the comparable period of
the previous year. The increase is principally due to the changes in gross
revenue as mentioned above.
8
<PAGE>
ITEM 2 Management's Discussion and Analysis of Financial Condition and
Results of Operations (continued)
Net service revenue decreased by 1% compared to the first six months of
fiscal year 1996. The decrease is due to more competitive pricing pressures on
the Company's margins.
The percentage of direct costs and services and overhead to net service
revenue increased slightly to 81.4% in the first six months of 1997 compared to
81.2% in the first six months of fiscal year 1996. The increase is due to lower
direct labor utilization in the first six months of fiscal year 1997.
Selling, general and administrative expenses approximated 15.4% of net
service revenue in the first six months of fiscal year 1997, compared to 14.8%
in the first six months of fiscal year 1996. The increase was due to higher
proposal activities and legal costs incurred in the second quarter of fiscal
year 1997.
Other costs include costs and revenues that are not directly attributable
to contracts. For the first six months of fiscal year 1997, the Company
recognized non-compete income from the sale of its majority-owned subsidiary,
Gammaflux, Inc. of $21,000 compared to $14,000 recognized in the first six
months of fiscal year 1996.
Operating income for the first six months of fiscal year 1997 was $533,000
an increase of $27,000 over the first six months of fiscal year 1996. The
increase is the result of the exclusion of Sarnia losses in the first six months
of fiscal year 1997.
Interest expense during the first six months of fiscal year 1997 decreased
by $36,000 (49%) compared to costs for the comparable period of the previous
fiscal year. The decrease is due to the lower usage of the Company's line of
credit during the first six months of fiscal year 1997.
Income tax expense during the first six months of fiscal year 1997
decreased by $188,000 compared to costs for the comparable period of the
previous fiscal year. The decrease in income tax expense is due to the
reduction of the Company's valuation allowance against its deferred tax assets
during the quarter. (See Note D on page 7)
Versar had net income of $656,000 for the first six months of fiscal year
1997 compared to net income of $405,000 for the first six months of fiscal year
1996. The increase is primarily the result of the reductions of the Company's
valuation allowance against its deferred tax assets and the exclusion of Sarnia
losses.
Liquidity and Capital Resources
- -------------------------------
The Company's working capital at December 31, 1996 approximated $8,117,000
or $488,000 (6%) higher than at June 30, 1996. In addition, the Company's
current ratio at December 31, 1996 was 2.37 to 1, 11% higher than that reported
at the end of fiscal year 1996.
Versar maintains a line of credit for working capital purposes with Riggs
National Bank ("Riggs"), 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
December 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 of the
Company's subsidiaries individually and is collectively secured by accounts
receivable, equipment and intangibles, plus all insurance policies on property
constituting collateral.
9
<PAGE>
ITEM 2 Management's Discussion and Analysis of Financial Condition and
Results of Operations (continued)
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 December 31, 1996 was $2,712,000. Advances under the line are
due upon demand or on March 31, 1998. The Company must also obtain Riggs'
approval prior to paying dividends. Additionally, the loan has certain
covenants related to the maintenance of financial ratios. The Company was in
compliance with the financial covenants at December 31, 1996. Management
believes that cash generated by operations and borrowings available under the
line of credit will be adequate to meet the working capital needs for fiscal
year 1997.
Approximately $200,000 will be required for capital expenditures during the
remainder of fiscal year 1997 and will be funded from 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
10
<PAGE>
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 Versar 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 was held on January 27, 1997. Based upon the Court of Appeals'
decision and consultation with outside counsel, management believes an adverse
outcome of this lawsuit will not have a material impact on Versar's consolidated
financial condition and results of operations.
As part of the agreement to sell its laboratory assets and operations to
Kemron Environmental Services, Inc. (Kemron) in July 1994, Versar agreed to
refer its analytical laboratory work for a period of 48 months after the closing
date to Kemron subject to certain limitations and exclusions including federal
procurement requirements and the ability of Kemron to perform the required
services. On July 31, 1996, Kemron filed an action in the Circuit Court of
Fairfax County, Commonwealth of Virginia, entitled Kemron Environmental
Services, Inc. vs. Versar Laboratories, Inc. and Versar, Inc., Law No. L154205.
Kemron alleged the defendants breached certain covenants that Versar would refer
laboratory work to Kemron in the Asset Acquisition Agreement and alleged damages
in the amount of not less than $3,000,000.
11
<PAGE>
Item 1. Legal Proceedings (continued)
Versar responded by denying the allegations and filed a counterclaim
alleging various material breaches of the Asset Acquisition Agreement by Kemron
and seeking a declaratory judgment that Kemron's breaches have terminated
Versar's obligations under the Agreement. A status conference with the court
was held on December 10, 1996 and a trial date was scheduled for July 7, 1997.
Based upon an initial evaluation of the Company's defense and potential
exposure, management believes that an adverse 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 other legal actions
arising in the normal course of business. The Company believes that an ultimate
unfavorable resolution of these other legal actions will not have a material
adverse effect on its consolidated financial condition and results of
operations.
Item 4. Submission of Matters to a Vote of Stockholders
The Company's Annual Meeting of Stockholders was held on November 14, 1996.
The matters voted on at the Annual meeting were as follows:
(1) The Election of Directors
The nomination of Rawls, Markels, Durfee, Shields, Rice, Horton,
Judkins and Gray to serve as directors of the Company was approved
as indicated below:
Vote Withheld
for Authority
--------- ---------
Benjamin M. Rawls 3,742,657 211,528
Michael Markels, Jr. 3,689,414 264,771
Robert L. Durfee 3,740,791 213,394
Thomas J. Shields 3,752,305 201,880
M. Lee Rice 3,702,305 251,880
John P. Horton 3,703,805 250,380
Charles I. Judkins 3,743,257 210,928
John E. Gray 3,703,805 250,380
(2) Issuance of additional shares for the ESSOP
The issuance of 600,000 additional shares for use of the Company's
Employee Savings and Stock Ownership Plan was approved as follows:
For Against Abstain
--------- ------- -------
2,747,401 235,558 55,358
12
<PAGE>
Item 4. Submission of Matters to a Vote of Stockholders (continued)
(3) Approval of 1996 Stock Option Plan
The 1996 stock option plan was approved as follows:
For Against Abstain
--------- ------- -------
2,597,382 405,676 35,259
(4) Amendment to Certificate of Incorporation
The certificate of incorporation amendment to increase the
authorized common stock from 10,000,000 to 30,000,000 and to
authorize the issuance of 10,000,000 shares of undesignated
preferred stock was approved as follows:
For Against Abstain
--------- ------- -------
2,524,600 461,555 52,162
(5) Ratification of the appointment of Arthur Andersen LLP as independent
accountants for fiscal year 1997
Arthur Andersen was ratified as the Company's independent
accountants as follows:
For Against Abstain
--------- ------- -------
3,924,737 12,605 16,843
Item 6 - Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit 3 - Certificate of Amendment of Restated Certificate of
Incorporation of Versar, Inc.
Exhibit 11 - Statement Re: Computation of Per Share Earnings
Exhibit 27 - Financial Data Schedules
(b) Reports on Form 8-K
None
13
<PAGE>
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,
Treasurer, and Principal Accounting
Officer
Date: February 7, 1997
14
<PAGE>
Exhibit 11
VERSAR, INC.
Statement Re: Computation of Per Share Earnings
(Unaudited - in thousands, except per share data)
<TABLE>
<CAPTION>
For the Three-Month For the Six-Month
Periods Ended December 31, Periods Ended December 31,
-------------------------- --------------------------
1996 1995 1996 1995
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
NET INCOME . . . . . . . . . $ 391 $ 230 $ 656 $ 405
========= ========= ========= =========
Weighted average common shares
outstanding . . . . . . . . 5,012,073 4,874,055 5,005,094 4,854,711
========= ========= ========= =========
NET INCOME PER SHARE -
PRIMARY . . . . . . . . . . $ .08 $ .04 $ .13 $ .08
========= ========= ========= =========
Common shares from above . . 5,012,073 4,874,055 5,005,094 4,854,711
Assumed exercise of options
(treasury stock method). . 56,148 255,775 72,754 284,257
--------- --------- --------- ---------
5,068,221 5,129,830 5,077,848 5,138,968
========= ========= ========= =========
NET INCOME PER SHARE - FULLY
DILUTED . . . . . . . . . . $ .08 $ .04 $ .13 $ .08
========= ========= ========= =========
Common shares from above . . 5,012,073 4,874,055 5,005,094 4,854,711
Assumed exercise of options
(treasury stock method). . 61,068 255,775 72,754 284,257
--------- --------- --------- ---------
5,073,141 5,129,830 5,077,848 5,138,968
========= ========= ========= =========
</TABLE>
17
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> DEC-31-1996
<CASH> 94
<SECURITIES> 0
<RECEIVABLES> 12,923
<ALLOWANCES> 604
<INVENTORY> 0
<CURRENT-ASSETS> 14,059
<PP&E> 9,374
<DEPRECIATION> 7,290
<TOTAL-ASSETS> 16,919
<CURRENT-LIABILITIES> 5,942
<BONDS> 0
0
0
<COMMON> 50
<OTHER-SE> 8,435
<TOTAL-LIABILITY-AND-EQUITY> 16,919
<SALES> 0
<TOTAL-REVENUES> 22,207
<CGS> 0
<TOTAL-COSTS> 21,695
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 37
<INCOME-PRETAX> 496
<INCOME-TAX> (160)
<INCOME-CONTINUING> 656
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 656
<EPS-PRIMARY> 0.13
<EPS-DILUTED> 0.13
</TABLE>
EXHIBIT 3
CERTIFICATE OF AMENDMENT
OF
RESTATED CERTIFICATE OF INCORPORATION
OF
VERSAR. INC.
Versar, Inc., a corporation organized and existing under the General
Corporation Law of the State of Delaware (the "Corporation"), does hereby
certify:
First: That a meeting of the Board of Directors of the Corporation, duly
called and held on the 8th day of February, 1996, resolutions were duly adopted
setting forth a proposed amendment of the Restated Certificate of Incorporation
of the Corporation, adopting such amendment subject to the approval of the
stockholders of the Corporation, and authorizing the calling of a stockholder
meeting for the purposes of considering such amendment. The Board of Directors
proposed that the Restated Certificate of Incorporation be amended by deleting
the existing first paragraph of Article FOURTH in its entirety and by
substituting in lieu thereof the following:
"FOURTH: The total number of shares of stock that the
Corporation shall have authority to issue is forty million
(40,000,000) of which thirty million (30,000) shall be
designated common stock, $.01 par value per share, and ten
million (10,000,000) shall be designated preferred stock, $25
par value per share.
Shares of preferred stock may be issued from time to time in
one or more series. Authority is hereby vested in the Board
of Directors of the Corporation to amend this Certificate of
Incorporation from time to time to establish series of
preferred stock, to establish the number of shares to be
included in each such series and to fix the preferences,
limitations and relative, participating, optional, conversion
and other special rights and qualifications, limitations or
restrictions, of each such series.
15
<PAGE>
Second: That thereafter, the annual meeting of the stockholders of the
Corporation was duly called and held on the 14th day of November, 1996, upon
notice in accordance with Section 222 of the General Corporation Law of the
State of Delaware at which meeting the necessary number of shares of Common
Stock of the Corporation as required by statute were voted in favor of the
amendment of the Restated Certificate of Incorporation set forth herein.
Third: That said amendment was duly adopted in accordance with the
provisions of Section 242 of the General Corporation Law of the State of
Delaware.
IN WITNESS WHEREOF, Versar, Inc. has caused this Certificate to be signed
and attested by its duly authorized officers this 6th day of November, 1996.
VERSAR, INC.
By: /S/ James Charles Dobbs
----------------------------------
Name: James Charles Dobbs
--------------------------------
Title: Vice President
-------------------------------
16
