UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q/A
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934.
For the Quarterly Period Ended September 30, 1998 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
---------------------------
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 October 31, 1998
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$ .01 par value 6,108,349 shares
<PAGE>
VERSAR, INC. AND SUBSIDIARIES
INDEX TO FORM 10-Q/A
PAGE
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PART I - FINANCIAL INFORMATION
ITEM 1 - Financial Statements
Consolidated Balance Sheets as of
September 30, 1998 and June 30, 1998. 3
Consolidated Statements of Operations for the
Three-Month Periods Ended September 30, 1998 and 1997. 4
Consolidated Statements of Cash Flows
for the Three-Month Periods Ended
September 30, 1998 and 1997. 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 11
ITEM 6 - Exhibits and Reports on Form 8-K 11
SIGNATURES 12
<PAGE>
VERSAR, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(In thousands)
September 30, June 30,
1998 1998
------------- -------------
ASSETS (unaudited)
Current assets
Cash and cash equivalents . . . . . . . . $ 66 $ 72
Accounts receivable, net. . . . . . . . . 16,445 14,631
Prepaid expenses and other
current assets . . . . . . . . . . . . . 768 1,378
Deferred income taxes . . . . . . . . . . 784 784
------------- -------------
Total current assets. . . . . . . . . 18,063 16,865
Property and equipment, net . . . . . . . . 2,711 2,779
Deferred income taxes . . . . . . . . . . . 502 502
Goodwill. . . . . . . . . . . . . . . . . . 1,051 1,069
Other assets. . . . . . . . . . . . . . . . 274 273
------------- -------------
Total assets. . . . . . . . . . . . . $ 22,601 $ 21,488
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable. . . . . . . . . . . . . $ 3,956 $ 3,303
Bank line of credit . . . . . . . . . . . 5,029 3,664
Current portion of long-term debt . . . . 897 1,114
Accrued salaries and vacation . . . . . . 2,108 1,495
Other liabilities . . . . . . . . . . . . 2,028 2,645
Liabilities of discontinued
operations, net. . . . . . . . . . . . . 983 1,524
------------- -------------
Total current liabilities . . . . . . 15,001 13,745
Long-term debt. . . . . . . . . . . . . . . 500 688
Other long-term liabilities . . . . . . . . 2,000 2,084
Liabilities of discontinued
operations, net. . . . . . . . . . . . . . 33 380
Reserve on guarantee of real estate debt. . 1,125 1,200
------------- -------------
Total liabilities . . . . . . . . . . 18,659 18,097
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Commitments and Contingencies
Stockholders' equity
Common stock, $.01 par value; 30,000,000
shares authorized; 6,108,349 shares and
6,071,887 shares issued and outstanding
at September 30 and June 30,
1998, respectively . . . . . . . . . . . 61 61
Capital in excess of par value. . . . . . 17,594 17,458
Accumulated deficit . . . . . . . . . . . (13,713) (14,128)
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Total stockholders' equity. . . . . . 3,942 3,391
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Total liabilities and stockholders'
equity. . . . . . . . . . . . . . . $ 22,601 $ 21,488
============= =============
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)
For the Three-Month
Periods Ended September 30,
---------------------------
1998 1997
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GROSS REVENUE . . . . . . . . . . . . . . . . $ 14,799 $ 10,838
Purchased services and materials, at costs. . 4,757 2,992
------------ ------------
NET SERVICE REVENUE . . . . . . . . . . . . . 10,042 7,846
Direct costs of services and overhead . . . . 8,121 6,352
Selling, general and administrative expenses. 1,265 1,213
------------ ------------
OPERATING INCOME. . . . . . . . . . . . . . . 656 281
OTHER EXPENSE
Interest expense. . . . . . . . . . . . . . . 87 63
Income tax expense. . . . . . . . . . . . . . 229 134
------------ ------------
INCOME FROM CONTINUING
OPERATIONS . . . . . . . . . . . . . . . . . 340 84
INCOME FROM DISCONTINUED
OPERATIONS . . . . . . . . . . . . . . . . . --- 119
------------ ------------
NET INCOME. . . . . . . . . . . . . . . . . . $ 340 $ 203
============ ============
NET INCOME PER SHARE - BASIC
AND DILUTED. . . . . . . . . . . . . . . . . $ .06 $ .04
============ ============
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING - BASIC . . . . . . . . . 6,097 5,168
============ ============
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING - DILUTED . . . . . . . . 6,097 5,447
============ ============
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)
For the Three-Month
Periods Ended September 30,
---------------------------
1998 1997
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Cash flows from operating activities
Net income . . . . . . . . . . . . . . . . . $ 340 $ 84
Adjustments to reconcile net income to
net cash (used in) provided by operating
activities
Income from discontinued operations . . . --- 119
Depreciation and amortization . . . . . . 181 189
Provision for doubtful accounts
receivable . . . . . . . . . . . . . . . 31 (8)
Loss on property retirements. . . . . . . 3 ---
Common stock issued to ESSOP. . . . . . . 123 ---
------------ ------------
Subtotal. . . . . . . . . . . . . . . . 678 384
Changes in assets and liabilities
(Increase) decrease in accounts
receivable . . . . . . . . . . . . . . . (1,845) 1,535
Decrease in prepaids and other assets . . 608 175
Decrease (increase) in accounts payable . 653 (983)
Increase in accrued salaries
and vacation . . . . . . . . . . . . . . 613 195
Decrease in other liabilities . . . . . . (700) (550)
------------ ------------
Net cash provided by continuing
operations . . . . . . . . . . . . . . 7 756
Changes in net assets/liabilities of
discontinued operations . . . . . . . . . . (888) (858)
Net cash (used in) provided by
continuing operations. . . . . . . . . (881) (102)
------------ ------------
Cash flows used in investing activities
Purchase of property and equipment . . . . . (98) (154)
------------ ------------
Cash flows from financing activities
Net borrowings on bank line of credit. . . . 1,365 392
Principal payments on long-term debt . . . . (405) (301)
Proceeds from issuance of the Company's
common stock. . . . . . . . . . . . . . . . 13 93
------------ ------------
Net cash provided by
financing activities . . . . . . . . . 973 184
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Net (decrease) in cash . . . . . . . . . . . . (6) (72)
Cash at the beginning of the year. . . . . . . 72 96
------------ ------------
Cash at the end of the period. . . . . . . . . $ 66 $ 24
============ ============
Supplementary disclosure of cash flow
information:
Cash paid during the period for
Interest. . . . . . . . . . . . . . . . . $ 138 $ 65
Income taxes. . . . . . . . . . . . . . . 16 47
The accompanying notes are an integral part of these
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/A
for the year ended June 30, 1998 for additional information. In
October 1998, as the Company was in the process of winding down
its discontinued engineering, design and construction business
acquired from SMC. Versar discovered an error in the June 30, 1998
financial statements. The Audit Committee of the Board of Directors
instituted an investigation of the circumstances surrounding the
creation of the error. The investigation concluded that the unbilled
receivables, primarily related to one large contract, of the
discontinued operations were overstated by approximately $1.6 million
at June 30, 1998. Appropriate remedial action has been taken to correct
Company procedures. The Company has restated its fiscal year 1998
financial statements to reflect the impact of this error.
The accompanying consolidated financial statements include
the accounts of Versar, Inc. and its majority-owned subsidiaries
("Versar" or the "Company"). All significant intercompany
balances and transactions have been eliminated in consolidation.
In September 1998, the Company decided to discontinue its
management services and engineering, design and construction
services businesses which are classified as discontinued
operations. Both of these businesses came from the acquisition
of Science Management Corporation ("SMC") in May 1997. The
Company's remaining business segments are environmental services,
energy conservation services and facility infrastructure
services. The energy conservation and facility infrastructure
segments are collectively less than 10% of consolidated revenues,
operating profit and identifiable assets. Both segments are
expected to grow and may become separate reportable segments in
fiscal year 1999.
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 September 30, 1998, and the results of
operations for the three-month periods ended September 30, 1998
and 1997. 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. 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 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
6
<PAGE>
VERSAR, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (continued)
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.
(D) Intangible Assets
On January 30, 1998, Versar completed the acquisition of The
Greenwood Partnership, P.C. ("Greenwood" or "TGP"). As a part of
the acquisition, the Company increased its current line of credit
by $2,000,000 and retired existing debt of Greenwood of
approximately $672,000, paid $300,000 in cash, recorded
additional notes payable to Greenwood stockholders of $450,000
payable over 4 years, and issued 228,572 shares of common stock.
The transaction was accounted for as a purchase. Goodwill
recorded as part of the transaction was approximately $1.1
million. Versar is amortizing the goodwill related to the
acquisition over 15 years, which was determined to be reasonable
based on the mature business of Greenwood. The assets of
Greenwood are now included as collateral as part of the Company's
line of credit.
(E) Discontinued Operations
As a result of poor performance following its acquisition of
SMC, the Company determined to discontinue operations of its
management services and engineering, design and construction
services segments (acquired from SMC), which provide services to
the commercial and the petrochemical industries. The
engineering, design and construction services segment was
severely impacted by the recent downturn in the petrochemical
industry and the winding down of a $20 million construction
project, which reduced its sales volume by over 80%. Such a
downturn could not be reasonably anticipated as several pending
projects were put on hold or cancelled because the reduced oil
prices did not make it economically feasible for the customers to
complete such projects. The management services segment of SMC
also suffered from loss of three large contracts which
represented 75% of the sales volume. The Company has completed
the sale of these two business segments for consideration
consisting mainly of assumption of certain liabilities, release
of other liabilities and potential payments based upon gross
revenue in the next two years.
In conjunction with the decision for discontinuance of these
businesses, the Company in the fourth quarter of fiscal year
1998, recorded a loss from discontinued operations of $8,829,000
net of $90,000 tax benefit due to the write-off of goodwill
associated with its acquisition of SMC and operating losses of
$5,776,000 (net of tax) and accrued reserves of $3,053,000 to
finalize the disposition. As part of the accrued reserves, the
Company reserved approximately $1,700,000 for operating losses in
the period prior to the sale or shut down.
As stated in footnote A, after June 30, 1998, Versar
discovered an error in the June 30, 1998 financial
statements at one of the divisions of SMC. The Company has
restated its June 30, 1998 financial statements by
reducing its net worth by a current estimate of $1,600,000. Such
restatement increases the loss from discontinued operations
to $10,429,000, which consists of $3,053,000 accrued reserves and
$7,376,000 (net of tax) of operating losses for fiscal year 1998.
7
<PAGE>
VERSAR, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (continued)
(F) Income Taxes
At June 30, 1998, the Company had $4.7 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 approximately $3.4 million has
been established. With stable profitability, such net operating
loss and tax credit carryforwards would be utilized and the
valuation allowance would be adjusted accordingly.
(G) 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.
(H) Net Income Per Share
The Company adopted Statement of financial Accounting
Standards (SFAS) No. 128 "Earnings Per Share," which requires
companies to present basic earnings per share and diluted
earnings per share. The Standard requires additional
informational disclosures along with the restatement of earnings
per share for all prior periods reported.
Basic income per share applicable to common stock is
computed by dividing net income applicable to common stock by the
weighted average number of shares outstanding during the
applicable period being reported upon. Diluted net income per
share is computed by dividing net income applicable to common
stock by the weighted average number of shares outstanding plus
the effect of assumed exercise of stock options using the
Treasury Stock Method.
(I) Common Stock
In the fiscal year 1998, Versar issued approximately 147,423
shares to various employee benefit plans as part of the Company's
contribution to employee benefits for fiscal years 1997 and 1998.
In the first quarter of fiscal year 1999, 36,462 shares were
issued to the employee benefit plans for contributions owed for
the fourth quarter of fiscal year 1998.
ITEM 2 Management's Discussion and Analysis of
Financial Condition and Results of Operations
Results of Operations
- ---------------------
First Quarter 1999 Compared to First Quarter 1998
- -------------------------------------------------
This report contains certain forward-looking statements
which are based on current expectations. Actual results may
differ materially. The forward-looking statements include those
regarding cost controls and reductions, the expected resolution
of delays in billing of certain projects, the possible impact of
current and future claims against the Company based upon
negligence and other theories of liability, the integration of
the recent or ongoing acquisitions, and the possibility of the
Company making acquisitions during the next 12 to 18 months.
Forward-looking statements involve numerous risks and
uncertainties that could cause actual results to differ
materially, including, but not limited to, the possibilities 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; one or
more current or future claims made against the Company may result in
substantial liabilities; the possibility that acquired entities may not
perform as well as expected; and such other risks and uncertainties as are
8
<PAGE>
ITEM 2 Management's Discussion and Analysis of
Financial Condition and Results of Operations (continued)
described in reports and other documents filed by the Company
from time to time with the Securities and Exchange Commission.
In October 1998, as the Company was in the process of
winding down its discontinued engineering, design and
construction business acquired from SMC, as mentioned above,
Versar discovered an error in the June 30, 1998 financial
statements. The Audit Committee of the Board of Directors
instituted an investigation of the circumstances surrounding the
creation of the error. The investigation concluded that the
unbilled receivables, primarily related to one large contract, of
the discontinued operations were overstated by approximately $1.6
million at June 30, 1998. Appropriate remedial action has been
taken to correct Company procedures. The Company has restated
its fiscal year 1998 financial statements to reflect the impact
of this error.
Versar's gross revenue for the first quarter of fiscal year
1999 increased by $3,961,000 (37%) compared to gross revenue for
the comparable period of fiscal year 1998. The increase is
predominately due to the increase in revenues from Versar's base
business of $2,720,000 and the balance of $1,241,000 is from the
revenues from The Greenwood Partnership ("TGP") acquired by Versar
in the third quarter of fiscal year 1998. Versar's base business
increased by 25% in the first quarter of fiscal year 1999. The
increase was across the board in all operating units with all
operating units showing increases in excess of 14%. The Rocky
Mountain Region increased by approximately $1,049,000 driven primarily
by new project work under the Company's Air Force Armstrong contract.
Purchased services and materials for the first quarter of
fiscal year 1999 increased by $1,765,000 (59%) compared to costs
for the comparable period of fiscal year 1998. The increase is
due to higher revenues generated by subcontracted efforts
primarily in the Rocky Mountain, Pacific, Geomet, and Northeast
operating units.
Net service revenue is derived by deducting the cost 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 28% compared to the first quarter of fiscal year
1998. The increase is due to the higher volume in gross revenue
as mentioned 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 these costs to net
service revenue decreased slightly to 80.9% in the first quarter
of fiscal year 1999 compared to 81.0% in the first quarter of
fiscal year 1998. The increase is due to improved labor
utilization during the quarter.
Selling, general and administrative expenses approximated
12.6% of net service revenue in the first quarter of fiscal year
1999 compared to 15.5% in the first quarter of fiscal year 1998.
The reduction is due to the 28% increase in net service revenue
as previously mentioned and cost reductions put in place and the
reduced administrative costs resulting from the discontinuation
of SMC in fiscal year 1998.
Operating income for the first quarter of fiscal year 1999
was $656,000, an increase of $375,000 compared to the first
quarter of fiscal year 1998. The increase is the result of the
higher net service revenue, improved labor utilization and cost
reductions as mentioned above.
9
<PAGE>
ITEM 2 Management's Discussion and Analysis of
Financial Condition and Results of Operations (continued)
Interest expense during the first quarter of fiscal year
1999 increased by $24,000 compared to costs for the comparable
period of the previous year. The increase is due to cost of
financing the acquisition of SMC and TGP and higher utilization
of the company's line of credit. The Company anticipates that
interest expenses will continue to increase for the next six
months as it winds down the discontinued operations of SMC.
Income tax expense during the first quarter increased by
$95,000 compared to costs for the comparable period of the
previous year. The increase is primarily due to the increase in
Versar's pretax income as compared to the first quarter of fiscal
year 1998. The Company continues to carry a tax valuation allowance
of approximately $3.4 million against the Company's deferred tax assets.
The Company has established the valuation allowance until the probability
of realization of these amounts becomes more certain.
Income from discontinued operations was $119,000 in the
first quarter of fiscal year 1998 for the consolidated results of
the discontinued operations of SMC. While results were positive
in the first quarter of fiscal year 1998, significant business
downturns occurred in the third and fourth quarters of fiscal
year 1998 causing the Company to discontinue the majority of
SMC's operations in the fourth quarter of fiscal year 1998.
Versar's net income for the first quarter of fiscal year
1999 was $340,000 compared to $203,000 in the first quarter of
fiscal year 1998. The increase is due to the improved results in
Versar's base business as mentioned above.
Liquidity and Capital Resources
- -------------------------------
The Company's working capital at September 30, 1998
approximated $3,062,000 or $58,000 (2%) lower than June 30,
1998. The decrease is primarily due to the increased usage of
line of credit. In addition, the Company's current ratio at
September 30, 1998 was 1.20 to 1, slightly less than the June 30,
1998 current ratio as a result of the increased gross revenues,
which translated into higher receivables and utilization of the
Company's line of credit.
The Company maintains a line of credit with NationsBank,
N.A. The line of credit is restricted to the borrowing base of
qualifying receivables less the $1,125,000 reserve for a
guarantee of debt of Sarnia and outstanding acquisition loan
balances (approximately $1,367,000 at September 30, 1998).
Borrowings on the line of credit are at the lower of the 30 day
London Interbank Rate ("LIBOR") plus 280 basis points or the
prime rate ( 8.16% at September 30, 1998). 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 wholly
owned subsidiaries individually and is collectively secured by
accounts receivables, equipment and intangibles, plus all
insurance policies on property constituting collateral. In July
1998, the Company increased the line to $6,500,000, which
included an increase to the interest rate of 30 basis points. In
October 1998, the Company further modified its existing line of
credit to include unbilled receivables in its borrowing base. As
a part of this amendment, the interest rate was increased by an
additional 30 basis points and a $40,000 fee was charged.
Additional monthly fees will be charged during the month where
the Company borrows against the unbilled receivables. Unused
borrowing availability at September 30, 1997 was approximately
$1,471,000. Advances on the line of credit are due on May 31,
1999. The Company was in compliance with the financial covenants
at September 30, 1998. Management believes that cash generated
by operations and borrowings available under the extension of the
existing line of credit will be adequate to meet the working
capital needs for fiscal year 1999.
Approximately $150,000 will be required for capital
expenditures during the remainder of fiscal year 1998 and will be
funded out of current working capital.
10
<PAGE>
ITEM 2 Management's Discussion and Analysis of
Financial Condition and Results of Operations (continued)
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.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
In December 1994, SMC Environmental Services Group, Inc.
("SMC"), an indirect subsidiary of Versar, a former employee of
SMC, and two other entities were sued by Edward A. Long, an
employee of an operator of a municipal waste transfer station.
Mr. Long alleges that in October 1992, while transferring
leachate from a holding tank to a tanker truck, he blacked-out
and suffered serious personal injuries. The lawsuit, entitled
Edward A. Long v. Lehigh Valley Recycling, Inc. et al., No. 94-20222,
was filed in the Court of Common Pleas of Montgomery County, Pennsylvania,
Civil Division. SMC and its employee, who had been retained by the owner
of the municipal waste transfer station to help finalize a permit
application with the Pennsylvania Department of Environmental Protection
in 1988, filed an answer denying the allegations. The parties have
undertaken certain discovery which remains ongoing. Because this
claim arose prior to the acquisition of SMC and its subsidiaries
by Versar, the Company is reviewing the insurance coverage
available to the Company. Based upon consultation with outside
counsel, management does not believe the ultimate outcome of this
lawsuit will have a material impact on Versar's consolidated
financial condition or its 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 6 - Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit 11 - Statement Re: Computation of Per Share Earnings
Exhibit 27 - Financial Data Schedules
(b) Reports on Form 8-K
None.
11
<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: December 29, 1998
12
Exhibit 11
VERSAR, INC.
Statement Re: Computation of Per Share Earnings
(Unaudited - in thousands, except per share data)
For the Three-Month
Periods Ended September 30,
---------------------------
1998 1997
------------ ------------
NET INCOME. . . . . . . . . . . . . . . . . . . $ 340 $ 203
============ ============
Weighted average common shares outstanding -
Basic . . . . . . . . . . . . . . . . . . . . 6,096,645 5,168,048
============ ============
NET INCOME PER SHARE - BASIC. . . . . . . . . . $ 0.06 $ 0.04
============ ============
Common shares from above. . . . . . . . . . . . 6,096,645 5,168,048
Assumed exercise of options (treasury stock
method). . . . . . . . . . . . . . . . . . . . --- 278,646
------------ ------------
6,096,645 5,446,694
============ ============
NET INCOME PER SHARE - DILUTED. . . . . . . . . $ 0.06 $ 0.04
============ ============
13
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<PERIOD-END> SEP-30-1998
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<PP&E> 11,290
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0
0
<COMMON> 61
<OTHER-SE> 3,881
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<INCOME-TAX> 229
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<EPS-PRIMARY> .06
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