UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
þ QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934.
For the Quarterly Period Ended
December 26, 2014
¨
Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the transition period from _______ to
_______
Commission File Number 1-9309
(Exact name of registrant as specified in
its charter)
DELAWARE |
|
54-0852979 |
(State or other jurisdiction of
incorporation or organization) |
|
(I.R.S. Employer Identification No.) |
|
|
|
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 þ
No ¨
Indicate by check mark whether the registrant has submitted
electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant
to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files).
Yes þ
No ¨
Indicate by check mark whether the registrant is a large accelerated
filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated
filer”, “accelerated filer”, and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ¨ |
Accelerated filer ¨ |
Non-accelerated filer ¨ (Do not check if a smaller reporting company) |
Smaller reporting company þ |
Indicate by check mark whether the registrant is a shell company
(as defined in Rule 12b-2 of the Exchange Act).
Yes ¨
No þ
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 February 3, 2014 |
$.01 par value |
|
9,808,346 |
VERSAR, INC. AND SUBSIDIARIES
INDEX TO FORM 10-Q
VERSAR, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(In thousands, except share amounts)
| |
As of | |
| |
December 26, 2014 (Unaudited) | | |
June 27, 2014 | |
ASSETS | |
| | | |
| | |
Current assets | |
| | | |
| | |
Cash and cash equivalents | |
$ | 165 | | |
$ | 9,674 | |
Accounts receivable, net | |
| 34,187 | | |
| 25,983 | |
Inventory, net | |
| 1,428 | | |
| 1,294 | |
Prepaid expenses and other current assets | |
| 1,745 | | |
| 1,303 | |
Deferred income taxes | |
| 2,209 | | |
| 2,254 | |
Income tax receivable | |
| 2,262 | | |
| 2,325 | |
Total current assets | |
| 41,996 | | |
| 42,833 | |
Property and equipment, net | |
| 2,413 | | |
| 2,389 | |
Deferred income taxes, non-current | |
| 542 | | |
| 533 | |
Goodwill | |
| 15,808 | | |
| 8,073 | |
Intangible assets, net | |
| 5,171 | | |
| 2,930 | |
Other assets | |
| 1,084 | | |
| 1,003 | |
Total assets | |
$ | 67,014 | | |
$ | 57,761 | |
| |
| | | |
| | |
LIABILITIES AND STOCKHOLDERS' EQUITY | |
| | | |
| | |
Current liabilities | |
| | | |
| | |
Accounts payable | |
$ | 11,350 | | |
$ | 11,272 | |
Accrued salaries and vacation | |
| 3,751 | | |
| 2,912 | |
Line of credit | |
| 394 | | |
| - | |
Other current liabilities | |
| 2,206 | | |
| 3,568 | |
Notes payable, current | |
| 2,166 | | |
| 958 | |
Total current liabilities | |
| 19,867 | | |
| 18,710 | |
Notes payable, non-current | |
| 8,093 | | |
| 156 | |
Other long-term liabilities | |
| 1,126 | | |
| 1,110 | |
Total liabilities | |
| 29,086 | | |
| 19,976 | |
| |
| | | |
| | |
Commitments and contingencies | |
| - | | |
| - | |
Stockholders' equity | |
| | | |
| | |
Common stock $.01 par value; 30,000,000 shares authorized; 10,123,286 shares issued and 9,801,609 shares outstanding as of December 26, 2014, 9,849,773 shares issued and 9,708,107 shares outstanding as of June 27, 2014. | |
| 101 | | |
| 100 | |
Capital in excess of par value | |
| 30,615 | | |
| 30,393 | |
Retained earnings | |
| 9,222 | | |
| 9,032 | |
Treasury stock, at cost | |
| (1,452 | ) | |
| (1,396 | ) |
Accumulated other comprehensive loss; foreign currency translation | |
| (558 | ) | |
| (344 | ) |
Total stockholders' equity | |
| 37,928 | | |
| 37,785 | |
Total liabilities and stockholders' equity | |
$ | 67,014 | | |
$ | 57,761 | |
The accompanying notes are an integral part of these condensed
consolidated financial statements.
VERSAR, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
(Unaudited - in thousands, except per share
amounts)
| |
For the Three Months Ended | | |
For the Six Months Ended | |
| |
December 26, 2014 | | |
December 27, 2013 | | |
December 26, 2014 | | |
December 27, 2013 | |
| |
| | |
| | |
| | |
| |
GROSS REVENUE | |
$ | 34,162 | | |
$ | 28,037 | | |
$ | 63,748 | | |
$ | 57,158 | |
Purchased services and materials, at cost | |
| 17,031 | | |
| 14,359 | | |
| 29,258 | | |
| 28,769 | |
Direct costs of services and overhead | |
| 13,682 | | |
| 10,864 | | |
| 28,434 | | |
| 22,229 | |
GROSS PROFIT | |
| 3,449 | | |
| 2,814 | | |
| 6,056 | | |
| 6,160 | |
| |
| | | |
| | | |
| | | |
| | |
Selling, general and administrative expenses | |
| 2,925 | | |
| 2,898 | | |
| 5,616 | | |
| 5,161 | |
OPERATING INCOME (LOSS) | |
| 524 | | |
| (84 | ) | |
| 440 | | |
| 999 | |
| |
| | | |
| | | |
| | | |
| | |
OTHER EXPENSE | |
| | | |
| | | |
| | | |
| | |
Interest income | |
| - | | |
| (13 | ) | |
| - | | |
| (13 | ) |
Interest expense | |
| 142 | | |
| 42 | | |
| 198 | | |
| 67 | |
INCOME (LOSS) BEFORE INCOME TAXES, from continuing operations | |
| 382 | | |
| (113 | ) | |
| 242 | | |
| 945 | |
| |
| | | |
| | | |
| | | |
| | |
Income tax expense (benefit) | |
| 105 | | |
| (34 | ) | |
| 52 | | |
| 364 | |
| |
| | | |
| | | |
| | | |
| | |
NET INCOME (LOSS) from continuing operations | |
$ | 277 | | |
$ | (79 | ) | |
$ | 190 | | |
$ | 581 | |
Income from discontinued operations, net of tax expense of $105 | |
| - | | |
| 179 | | |
| - | | |
| 176 | |
NET INCOME | |
| 277 | | |
| 100 | | |
| 190 | | |
| 757 | |
NET INCOME (LOSS) PER SHARE-BASIC and DILUTED | |
| | | |
| | | |
| | | |
| | |
Continuing operations | |
$ | 0.03 | | |
$ | (0.01 | ) | |
$ | 0.02 | | |
$ | 0.06 | |
Discontinued operations | |
| - | | |
| 0.02 | | |
| - | | |
| 0.02 | |
NET INCOME PER SHARE-BASIC and DILUTED | |
$ | 0.03 | | |
$ | 0.01 | | |
$ | 0.02 | | |
$ | 0.08 | |
| |
| | | |
| | | |
| | | |
| | |
| |
| | | |
| | | |
| | | |
| | |
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING-BASIC | |
| 9,775 | | |
| 9,653 | | |
| 9,742 | | |
| 9,611 | |
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING-DILUTED | |
| 9,821 | | |
| 9,789 | | |
| 9,783 | | |
| 9,748 | |
The accompanying notes are an integral part
of these condensed consolidated financial statements
VERSAR, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Comprehensive
Income (Loss)
(Unaudited - in thousands)
| |
For the Three Months Ended | | |
For the Six Months Ended | |
| |
December 26, 2014 | | |
December 27, 2013 | | |
December 26, 2014 | | |
December 27, 2013 | |
COMPREHENSIVE INCOME | |
| | | |
| | | |
| | | |
| | |
Net income | |
$ | 277 | | |
$ | 100 | | |
$ | 190 | | |
$ | 757 | |
Foreign currency translation adjustments | |
| (132 | ) | |
| (172 | ) | |
| (214 | ) | |
| (22 | ) |
TOTAL COMPREHENSIVE INCOME (LOSS) | |
$ | 145 | | |
$ | (72 | ) | |
$ | (24 | ) | |
$ | 735 | |
The accompanying notes are an integral part of these condensed
consolidated financial statements.
VERSAR, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash
Flows
(Unaudited - in thousands)
| |
For the Six Months Ended | |
| |
December 26,
2014 | | |
December 27,
2013 | |
Cash flows from operating activities: | |
| | | |
| | |
Net income | |
$ | 190 | | |
$ | 757 | |
Adjustments to reconcile net income to net cash provided by operating activities: | |
| | | |
| | |
Depreciation and amortization | |
| 1,318 | | |
| 951 | |
Loss on sale of property and equipment | |
| - | | |
| 23 | |
Recovery for doubtful accounts receivable | |
| (93 | ) | |
| (199 | ) |
Loss on life insurance policy cash surrender value | |
| (16 | ) | |
| (57 | ) |
Deferred income taxes | |
| 36 | | |
| 90 | |
Share based compensation | |
| 222 | | |
| 258 | |
Changes in assets and liabilities: | |
| | | |
| | |
(Increase) decrease in accounts receivable | |
| (3,217 | ) | |
| 382 | |
Increase in prepaid and other assets | |
| - | | |
| (112 | ) |
(Increase) decrease in inventories | |
| (257 | ) | |
| 117 | |
Decrease in accounts payable | |
| (1,508 | ) | |
| (959 | ) |
Decrease in accrued salaries and vacation | |
| (520 | ) | |
| (160 | ) |
Increase in income tax payable | |
| 65 | | |
| 131 | |
Decrease in other assets and liabilities | |
| (946 | ) | |
| (1,583 | ) |
Net cash used in operating activities | |
| (4,726 | ) | |
| (361 | ) |
Cash flows from investing activities: | |
| | | |
| | |
Purchase of property and equipment | |
| (411 | ) | |
| (217 | ) |
Payment for Waller acquisition, net of cash acquired | |
| (6,544 | ) | |
| - | |
Payment for GMI acquisition, net of cash acquired | |
| - | | |
| (3,100 | ) |
Premiums paid on life insurance policies | |
| (23 | ) | |
| (24 | ) |
Net cash used in investing activities | |
| (6,978 | ) | |
| (3,341 | ) |
Cash flows from financing activities: | |
| | | |
| | |
Proceeds from exercise of stock options | |
| - | | |
| 84 | |
Net borrowings on line of credit | |
| 394 | | |
| - | |
Loan for Waller Purchase | |
| 4,000 | | |
| - | |
Repayment of Loan for Waller Purchase | |
| (808 | ) | |
| - | |
Repayments of notes payable | |
| (1,379 | ) | |
| (884 | ) |
Purchase of treasury stock | |
| (56 | ) | |
| (171 | ) |
Net cash provided by (used in) financing activities | |
| 2,151 | | |
| (971 | ) |
Effect of exchange rate changes on cash and cash equivalents | |
| 44 | | |
| (10 | ) |
Net decrease in cash and cash equivalents | |
| (9,509 | ) | |
| (4,683 | ) |
Cash and cash equivalents at the beginning of the period | |
| 9,674 | | |
| 8,728 | |
| |
| | | |
| | |
Cash and cash equivalents at the end of the period | |
$ | 165 | | |
$ | 4,045 | |
Supplemental disclosure of cash and non-cash activities: | |
| | | |
| | |
Promissory notes-payable issued in connection with Waller acquisition | |
$ | 6,000 | | |
$ | - | |
Promissory notes-payable issued in connection with GMI acquisition | |
$ | - | | |
$ | 2,250 | |
Cash paid for interest | |
$ | 198 | | |
$ | 86 | |
Cash paid for income taxes | |
$ | 14 | | |
$ | 1,964 | |
The accompanying notes are an integral part
of these condensed consolidated financial statements.
VERSAR, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (UNAUDITED)
NOTE A – BASIS OF PRESENTATION
The condensed consolidated
financial statements of Versar, Inc. and its wholly-owned subsidiaries (“Versar” or the “Company”) presented
in this report are unaudited, but reflect all normal recurring adjustments that, in the opinion of management, are necessary for
the fair presentation of the results of the interim periods reflected. All intercompany balances and transactions have been eliminated
in consolidation. Certain information and footnote disclosures normally included in the consolidated financial statements prepared
in accordance with accounting principles generally accepted in the United States of America (“GAAP”) have been omitted
pursuant to applicable rules and regulations of the Securities and Exchange Commission (“SEC”). Therefore, these condensed
consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included
in the Company’s Annual Report on Form 10–K for the fiscal year ended June 27, 2014. The results of operations for
the three-month and six-month periods reported herein are not necessarily indicative of results that may be expected for the full
year. The fiscal year-end balance sheet data included in this report was derived from audited financial statements. The Company’s
fiscal year is based upon a 52 - 53 week calendar, and ends on the last Friday of the fiscal period. The three-month and six-month
periods ended December 26, 2014 and December 27, 2013 each included 13 weeks and 26 weeks, respectively. Fiscal year 2015 and 2014
both include 52 weeks.
Recent Accounting Pronouncements
On May 28, 2014, the
Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2014-09, Revenue from Contracts with Customers.
ASU 2014-09 supersedes existing revenue recognition guidance, including Accounting Standards Codification (ASC) No. 605-35, Revenue
Recognition - Construction-Type and Production-Type Contracts. ASU 2014-09 outlines a single set of comprehensive principles for
recognizing revenue under U.S. GAAP. Among other things, it requires companies to identify contractual performance obligations
and determine whether revenue should be recognized at a specific point in time or over time. These concepts, as well as other aspects
of ASU 2014-09, may change the method and/or timing of revenue recognition for certain of our contracts. ASU 2014-09 will be effective
January 1, 2017, and may be applied either retrospectively or through the use of a modified-retrospective method. We are currently
evaluating both methods of adoption, as well as the potential effect ASU 2014-09 will have on the Company’s consolidated
financial position, results of operations and cash flows. Other accounting standards updates effective after December 26, 2014,
are not expected to have a material effect on the Company’s consolidated financial position or its annual results of operations
and cash flows.
NOTE B – BUSINESS SEGMENTS
The Company is organized
into three reportable segments: Engineering and Construction Management (“ECM”), Environmental Services (“ESG”),
and Professional Services (“PSG”), all described below.
This business segment
performs Title I Design Services, Title II Construction Management Services, and Title III Construction Services. This business
segment also provides other related engineering and construction type services both in the United States and internationally and
provides national security services in several markets that require ongoing services and support and which have received funding
priority from the federal government. Additionally, Versar’s subsidiary Professional Protective Systems Limited (“PPS”),
a leading United Kingdom manufacturer and distributor of decontamination equipment and personal protective equipment, operates
within this business segment.
This business segment
provides full-service environmental solutions and includes the Company’s remediation and compliance, exposure and risk assessment,
natural resources, unexploded ordnance (“UXO”)/military munitions response program (“MMRP”), air, greenhouse
gas, and cultural resources services. Clients include a wide-range of federal and state agencies, as well as some commercial clients.
This business segment
provides onsite environmental management, planning and engineering services to the Department of Defense (“DOD”) installations
and to the U.S. Department of Commerce (“DOC”). Versar provides on-site or staff augmentation services that enhance
the customer’s mission through the use of subject matter experts who are fully dedicated to accomplish mission objectives.
These services are particularly attractive as the DOD shifts emphasis to its core military mission and downsizes due to increasing
budgetary pressure. Primarily at the U.S. Army Installation level or DOD Joint Base level (two or more DOD facilities realigning
management functions to establish a single entity), this segment also serves government clients by supporting them in areas where
their capabilities and capacities are lacking.
Presented below is
summary operating information by segment for the Company for the three-month and six-month periods ended December 26, 2014 and
December 27, 2013.
| |
For the Three Months Ended | | |
For the Six Months Ended | |
| |
December
26, 2014 | | |
December
27, 2013 | | |
December
26, 2014 | | |
December
27, 2013 | |
| |
(in thousands) | | |
(in thousands) | |
GROSS REVENUE | |
| | | |
| | | |
| | | |
| | |
ECM | |
$ | 15,975 | | |
$ | 13,474 | | |
$ | 29,024 | | |
$ | 25,895 | |
ESG | |
| 12,415 | | |
| 11,861 | | |
| 22,680 | | |
| 24,876 | |
PSG | |
| 5,772 | | |
| 2,702 | | |
| 12,044 | | |
| 6,387 | |
| |
$ | 34,162 | | |
$ | 28,037 | | |
$ | 63,748 | | |
$ | 57,158 | |
| |
| | | |
| | | |
| | | |
| | |
GROSS PROFIT (a) | |
| | | |
| | | |
| | | |
| | |
ECM | |
$ | 2,079 | | |
$ | 1,599 | | |
$ | 3,599 | | |
$ | 3,374 | |
ESG | |
| 638 | | |
| 987 | | |
| 954 | | |
| 1,786 | |
PSG | |
| 732 | | |
| 228 | | |
| 1,503 | | |
| 1,000 | |
| |
$ | 3,449 | | |
$ | 2,814 | | |
$ | 6,056 | | |
$ | 6,160 | |
| |
| | | |
| | | |
| | | |
| | |
Selling, general and administrative expenses | |
| 2,925 | | |
| 2,898 | | |
| 5,616 | | |
| 5,161 | |
OPERATING INCOME (LOSS) | |
$ | 524 | | |
$ | (84 | ) | |
$ | 440 | | |
$ | 999 | |
(a) - Gross profit is defined as gross
revenues less purchased services and materials, at cost, less direct costs of services and overhead allocated on a proportional
basis. During fiscal year 2015, the Company’s management has changed the method of allocating business development ("BD")
costs to the reportable segments in order to refine the information used by our Chief Operating Decision Maker (“CODM”).
The new methodology allocates BD costs to the selling, general, and administrative expense line, while the old methodology allocated
BD costs to contract costs. The presentation of 2014 has been reclassified to conform to the 2015 presentation. Approximately $0.5
and $0.9 million has been recast for the three and six-month periods ended December 27, 2013, respectively.
NOTE C – ACQUISITIONS
On July 1, 2014, Versar
acquired all of the issued and outstanding capital stock of J.M. Waller Associates, Inc. (“JMWA”), a Virginia corporation.
JMWA was a service disabled veteran owned small business providing architectural, design, planning, construction management, environmental,
facilities, and logistical consulting services to federal, state, municipal and commercial clients. The outstanding capital stock
of JMWA was acquired by Versar pursuant to a Stock Purchase Agreement by and among Versar, JMWA, and the stockholders of JMWA and
entered into on June 30, 2014 (the “Stock Purchase Agreement”). The aggregate purchase price for the outstanding capital
stock of JMWA was $13.0 million, which was comprised of: (i) cash in the amount of $7.0 million paid pro rata in accordance with
each stockholder’s ownership interest in JMWA at closing; and (ii) three seller notes with an aggregate principal amount
of $6.0 million issued by Versar to the stockholders, pro rata in accordance with each stockholders’ ownership interest in
JMWA at closing. The seller notes bear interest at a rate of 5.00% per annum and mature on the third business day of January 2019.
The purchase price is subject to a post-closing adjustment based on an agreed target net working capital of JMWA as of the date
of closing. The Stock Purchase Agreement contains customary representations and warranties and requires the JMWA stockholders to
indemnify Versar for certain liabilities arising under the agreement, subject to certain limitations and conditions.
The preliminary purchase price allocation
in the table below reflects the Company’s estimate of the fair value of the assets acquired and liabilities assumed on the
July 1, 2014 acquisition date. Goodwill has been preliminarily allocated between our ECM, ESG, and PSG segments based on a percentage
of segment specific JMWA revenue dollars for the first six months of fiscal year 2015. Goodwill represents the value in excess
of fair market value that the Company paid to acquire JMWA, less identified intangible assets. The Company incurred approximately
$0.1 million in transaction costs related to the JMWA acquisition. During the second quarter of fiscal year 2015, the Company recorded
measurement period adjustments totaling approximately $0.2 million related to accounts receivable, intangible assets, goodwill,
accounts payable, and other liabilities. The Company will continue to assess the purchase price allocation and anticipates completing
the final purchase price allocation in the third quarter of the current fiscal year. As of the date of the filing of this Form
10-Q, the Company intends to elect to treat the acquisition of JMWA as an asset purchase for tax purposes under Section 338(h)(10)
of the Internal Revenue Code.
| |
Amount | |
Description | |
(in thousands) | |
Cash | |
$ | 456 | |
Accounts receivable | |
| 4,996 | |
Property and equipment | |
| 382 | |
Other assets | |
| 147 | |
Intangibles | |
| 2,833 | |
Goodwill | |
| 7,735 | |
Assets Acquired | |
| 16,549 | |
| |
| | |
Account payable | |
| 1,603 | |
Other liabilities | |
| 1,946 | |
Liabilities Assumed | |
| 3,549 | |
| |
| | |
Purchase Price | |
$ | 13,000 | |
The table below summarizes
the unaudited pro forma statements of operations for the three months and six months ended December 27, 2013, assuming the JMWA
acquisition had been completed as of the first day of each three-month and six-month period. These pro forma statements do not
include any adjustments that may have resulted from synergies derived from the acquisition or for amortization of intangibles other
than during the period the acquired entity was part of the Company. For the three and six months ended December 26, 2014, JMWA
has contributed approximately $6.4 million and $14.3 million of revenue and approximately $5.1 million and $10.8 million of expenses
to operations, respectively.
| |
For the Three Months ended December 27, 2013 (in thousands) | | |
For the Six Months ended December 27, 2013 (in thousands) | |
| |
Versar | | |
JMWA | | |
Pro Forma Combined | | |
Versar | | |
JMWA | | |
Pro Forma Combined | |
| |
| | |
| | |
| | |
| | |
| | |
| |
GROSS REVENUE | |
$ | 28,037 | | |
| 7,487 | | |
| 35,524 | | |
$ | 57,158 | | |
| 16,331 | | |
| 73,489 | |
Purchased services and materials, at cost | |
| 14,359 | | |
| 1,118 | | |
| 15,477 | | |
| 28,769 | | |
| 2,597 | | |
| 31,366 | |
Direct costs of services and overhead | |
| 10,864 | | |
| 5,022 | | |
| 15,886 | | |
| 22,229 | | |
| 10,544 | | |
| 32,773 | |
GROSS PROFIT | |
| 2,814 | | |
| 1,347 | | |
| 4,161 | | |
| 6,160 | | |
| 3,190 | | |
| 9,350 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Selling, general and administrative expenses | |
| 2,898 | | |
| 902 | | |
| 3,800 | | |
| 5,161 | | |
| 2,035 | | |
| 7,196 | |
OPERATING (LOSS) INCOME | |
| (84 | ) | |
| 445 | | |
| 361 | | |
| 999 | | |
| 1,155 | | |
| 2,154 | |
OTHER EXPENSE | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Interest income | |
| (13 | ) | |
| (13 | ) | |
| (26 | ) | |
| (13 | ) | |
| (58 | ) | |
| (71 | ) |
Interest expense | |
| 42 | | |
| 50 | | |
| 92 | | |
| 67 | | |
| 50 | | |
| 117 | |
INCOME (LOSS) BEFORE INCOME TAXES, from continuing operations | |
| (113 | ) | |
| 408 | | |
| 295 | | |
| 945 | | |
| 1,163 | | |
| 2,108 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Income tax (benefit) expense | |
| (34 | ) | |
| 156 | | |
| 122 | | |
| 364 | | |
| 442 | | |
| 806 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
NET (LOSS) INCOME from continuing operations | |
$ | (79 | ) | |
| 252 | | |
| 173 | | |
$ | 581 | | |
| 721 | | |
| 1,302 | |
Income from discontinued operations, net of tax (expense) benefit of $(105) | |
| 179 | | |
| - | | |
| 179 | | |
| 176 | | |
| - | | |
| 176 | |
NET INCOME | |
$ | 100 | | |
| 252 | | |
| 352 | | |
$ | 757 | | |
| 721 | | |
| 1,478 | |
NOTE D – FAIR VALUE MEASUREMENT
Versar applies ASC
820 – Fair Value Measurements and Disclosures in determining the fair value to be disclosed for financial and nonfinancial
assets and liabilities.
ASC 820 defines fair
value as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in an orderly transaction
between market participants at the measurement date. It establishes a fair value hierarchy and a framework which requires categorizing
assets and liabilities into one of three levels based on the assumptions (inputs) used in valuing the asset or liability. Level
1 provides the most reliable measure of fair value, while Level 3 generally requires significant management judgment.
Level 1 inputs
are unadjusted, quoted market prices in active markets for identical assets or liabilities.
Level 2 inputs
are observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets or liabilities in
active markets or quoted prices for identical assets or liabilities in inactive markets.
Level 3 inputs
include unobservable inputs that are supported by little, infrequent, or no market activity and reflect management’s own
assumptions about inputs used in pricing the asset or liability.
As a result of the
acquisition of JMWA, the Company is required to report at fair value the assets and liabilities it acquired as a result of the
acquisition. The valuation techniques utilized in the fair value measurement of the assets and liabilities presented are preliminary
and were based on the definitions outlined above and the methodologies used by an external valuation firm, primarily an income
approach for assigning value to the acquired intangible assets. Additionally, a market approach and an asset-based approach were
used as secondary methodologies.
NOTE E – ACCOUNTS RECEIVABLE
| |
As of | |
| |
December 26, 2014 | | |
June 27, 2014 | |
| |
(in thousands) | |
Billed receivables | |
| | | |
| | |
U.S. Government | |
$ | 13,079 | | |
$ | 8,373 | |
Commercial | |
| 4,151 | | |
| 3,484 | |
Unbilled receivables | |
| | | |
| | |
U.S. Government | |
| 17,036 | | |
| 14,295 | |
Commercial | |
| 384 | | |
| 474 | |
Total receivables | |
| 34,650 | | |
| 26,626 | |
Allowance for doubtful accounts | |
| (463 | ) | |
| (643 | ) |
Accounts receivable, net | |
$ | 34,187 | | |
$ | 25,983 | |
The acquisition of
JMWA contributed approximately $5.0 million in total accounts receivable. We have preliminarily allocated these receivables within
the categories in the schedule above, and will make adjustments as we finalize the purchase price accounting for the JMWA acquisition
in subsequent quarters.
Unbilled receivables
represent amounts earned which have not yet been billed and other amounts which can be invoiced upon completion of fixed-price
contract milestones, attainment of certain contract objectives, or completion of federal and state governments’ incurred
cost audits. Management anticipates that such unbilled receivables will be substantially billed and collected within one year;
therefore, in accordance with industry practice, they have been presented as current assets.
NOTE F – GOODWILL AND INTANGIBLE ASSETS
Goodwill
The preliminary carrying
value of goodwill at December 26, 2014 was $15.8 million and the carrying value of goodwill at June 27, 2014 was $8.1. The Company’s
goodwill balance was derived from the acquisition of JMWA in fiscal year 2015, the acquisition of Geo-Marine, Inc. (“GMI”)
in fiscal year 2014, the acquisition of Charron Construction Consulting, Inc. (“Charron”) in fiscal year 2012, the
acquisitions of PPS and ADVENT Environmental, Inc. (“ADVENT”) in fiscal year 2010, and the acquisition of Versar Greenwood,
Inc. in fiscal year 1998. The Company recorded a preliminary goodwill balance with a fair value of $7.7 million from the acquisition
of JMWA and allocated the balance between the ECM, ESG, and PSG segments based on segment specific JMWA revenue dollars for the
first six months of fiscal year 2015 (as presented in the table below):
| |
Goodwill Balances | |
| |
ECM | | |
ESG | | |
PSG | | |
Total | |
Balance, June 27, 2014 | |
$ | 5,302 | | |
$ | 2,771 | | |
$ | - | | |
$ | 8,073 | |
JMWA Acquisition | |
| 1,742 | | |
| 1,403 | | |
| 4,590 | | |
| 7,735 | |
Balance, December 26, 2014 | |
$ | 7,044 | | |
$ | 4,174 | | |
$ | 4,590 | | |
$ | 15,808 | |
Intangible Assets
In connection with
the acquisitions of JMWA, GMI, Charron, PPS, and ADVENT, the Company identified certain intangible assets. These intangible assets
were customer-related, marketing-related and technology-related. A summary of the Company’s intangible asset balances as
of December 26, 2014 and June 27, 2014, as well as their respective amortization periods, is as follows (in thousands):
| |
Gross Carrying Amount | | |
Accumulated Amortization | | |
Net Carrying Amount | | |
Amortization Period |
As of December 26, 2014 | |
| | |
| | |
| | |
|
| |
| | | |
| | | |
| | | |
|
Customer-related | |
$ | 5,689 | | |
$ | (1,333 | ) | |
$ | 4,356 | | |
5-15 yrs |
Marketing-related | |
| 1,084 | | |
| (522 | ) | |
| 562 | | |
2-7 yrs |
Technology-related | |
| 841 | | |
| (588 | ) | |
| 253 | | |
7 yrs |
| |
| | | |
| | | |
| | | |
|
Total | |
$ | 7,614 | | |
| (2,443 | ) | |
$ | 5,171 | | |
|
| |
Gross Carrying Amount | | |
Accumulated Amortization | | |
Net Carrying Amount | | |
Amortization Period |
As of June 27, 2014 | |
| | | |
| | | |
| | | |
|
| |
| | | |
| | | |
| | | |
|
Customer-related | |
$ | 3,568 | | |
$ | (1,027 | ) | |
$ | 2,541 | | |
5-15 yrs |
Marketing-related | |
| 372 | | |
| (296 | ) | |
| 76 | | |
5-7 yrs |
Technology-related | |
| 841 | | |
| (528 | ) | |
| 313 | | |
7 yrs |
| |
| | | |
| | | |
| | | |
|
Total | |
$ | 4,781 | | |
| (1,851 | ) | |
$ | 2,930 | | |
|
Amortization expense
for intangible assets was approximately $0.3 million and $0.6 million for the three-month and six-month periods ending December
26, 2014, respectively. Amortization expense for intangible assets was approximately $0.1 million and $0.3 million for the three-month
and six-month periods ending December 27, 2013, respectively. Expected future amortization expense for the remainder of fiscal
year 2015 and the subsequent years is as follows:
Years | |
Amounts | |
| |
(in thousands) | |
2015 | |
$ | 521 | |
2016 | |
| 998 | |
2017 | |
| 548 | |
2018 | |
| 455 | |
2019 | |
| 455 | |
| |
| | |
Thereafter | |
| 2,194 | |
Total | |
$ | 5,171 | |
NOTE G – INVENTORY
The Company’s inventory balance includes
the following:
| |
As of | |
| |
December 26, 2014 | | |
June 27, 2014 | |
| |
(in thousands) | |
Raw Materials | |
$ | 900 | | |
$ | 908 | |
Finished Goods | |
| 409 | | |
| 276 | |
Work-in-process | |
| 177 | | |
| 152 | |
Reserve | |
| (58 | ) | |
| (42 | ) |
Total | |
$ | 1,428 | | |
$ | 1,294 | |
NOTE H – OTHER CURRENT LIABILITIES
The Company’s
other current liabilities balance includes the following:
| |
As of | |
| |
December 26, 2014 | | |
June 27, 2014 | |
| |
(in thousands) | |
Project related reserves | |
$ | 10 | | |
$ | 693 | |
Non-project related reserves | |
| 281 | | |
| 642 | |
Payroll related | |
| 244 | | |
| 483 | |
Deferred rent | |
| 776 | | |
| 716 | |
Severance accrual | |
| 33 | | |
| 69 | |
Acquired capital lease liability | |
| 256 | | |
| 263 | |
Other | |
| 606 | | |
| 702 | |
Total | |
$ | 2,206 | | |
$ | 3,568 | |
As of December 26,
2014, other accrued liabilities include accrued legal, audit, value added tax liabilities, and foreign entity obligations. Additionally,
we have preliminarily allocated the current liabilities assumed from the JMWA acquisition within “Other” in the schedule
and will make necessary adjustments as we finalize the purchase price accounting for the JMWA acquisition in subsequent quarters.
NOTE I – DEBT
Notes Payable
As part of the purchase
price for JMWA in July 2014, the Company issued notes payable to the three stockholders with an aggregate principal balance of
up to $6.0 million, which are payable quarterly over a four and a half-year period with interest accruing at a rate of 5% per year
(the “JMWA Notes”). Accrued interest is recorded within the note payable line item in the consolidated balance sheet.
The Company also has outstanding notes payable from the acquisitions of GMI and Charron. As of December 26, 2014, the outstanding
principal balance of the JMWA notes payable was $5.7 million, the principal balance of GMI notes payable was $0.5 million, the
principal balance of the Charron notes payable was $0.2 million, and the principle balance for our general insurance financing
notes payable was $0.8 million.
Amended
and Restated Loan Agreements
In connection with
the JMWA acquisition, on June 30, 2014, the Company and certain of its wholly-owned subsidiaries (“Co-borrowers”) named
therein entered into a Second Amended and Restated Loan and Security Agreement (as further modified by a certain First Modification
Agreement dated as of July 1, 2014 (reflecting certain payments) the “Agreement”) with United Bank (the “Bank”),
providing for a term loan in the aggregate principal amount of $5 million (subsequently reduced to $4 million) to fund
a portion of the acquisition purchase price and amending and restating certain provisions of the Amended and Restated Loan and
Security Agreement dated September 13, 2012 (as modified by a certain Joinder Agreement dated December 12, 2013), and also executed
a Second Amended and Restated Revolving Commercial Note in the aggregate principal amount of up to $15.0 million (the “Revolving
Note”), amending and restating certain provisions of the Amended and Restated Revolving Commercial Note dated September 13,
2012 (as modified by a certain First Modification Agreement dated December 12, 2013). Interest accrues on the term loan at a rate
of 4% per annum and it matures on June 30, 2019. As of December 26, 2014, the outstanding principal balance of the Agreement
was $3.1 million.
As of December 26,
2014, the Company’s aggregate outstanding debt was $10.3 million, with the following maturity schedule:
Years | | |
Amounts | |
| | |
(in thousands) | |
| 2015 | | |
$ | 2,201 | |
| 2016 | | |
| 2,210 | |
| 2017 | | |
| 2,150 | |
| 2018 | | |
| 2,251 | |
| 2019 | | |
| 1,447 | |
| Total | | |
$ | 10,259 | |
Debt Covenants
On December 30, 2014, Versar and the Co-borrowers
entered into a second modification agreement with the Bank modifying the Agreement (the “Second Modification Agreement”).
The Second Modification Agreement was dated and is effective as of December 23, 2014. The Agreement as modified requires that the
Company maintain (1) a Liabilities to Tangible Net Worth ratio of Versar’s and its Consolidated Subsidiaries Total Consolidated
Liabilities to its Tangible Net Worth, each as defined by the Agreement, not exceed 2.50 to 1.00 as of the end of each fiscal quarter
and (ii) a Minimum Tangible Net Worth, as defined by the Agreement, of not less than $13.5 million as of the end of any fiscal
quarter.
Line of Credit
The Company cumulatively
borrowed $0.4 million in funds under the Revolving Note with an interest rate of 3.5% during the three-month period ended December
26, 2014. The Company did not borrow any funds during the three and six-month periods ended December 27, 2013.
NOTE J – NET INCOME
PER SHARE
Basic net income per
common share is computed by dividing net income by the weighted average number of common shares outstanding during the period.
Diluted net income per common share also includes common stock equivalents outstanding during the period, if dilutive. The Company’s
common stock equivalent shares consist of shares to be issued under outstanding stock options and unvested restricted stock units.
| |
For the Three Months Ended | | |
For the Six Months Ended | |
| |
December 26, 2014 | | |
December 27, 2013 | | |
December 26, 2014 | | |
December 27, 2013 | |
| |
(in thousands) | | |
(in thousands) | |
Weighted average common shares outstanding-basic | |
| 9,775 | | |
| 9,653 | | |
| 9,742 | | |
| 9,611 | |
Effect of assumed exercise of options and vesting of restricted stock unit awards, using the treasury stock method | |
| 46 | | |
| 136 | | |
| 41 | | |
| 137 | |
Weighted average common shares outstanding-diluted | |
| 9,821 | | |
| 9,789 | | |
| 9,783 | | |
| 9,748 | |
For the three-month
and six-month periods ended December 26, 2014 there were approximately 3,000 shares related to incentive options that were excluded
from the computation of diluted earnings per share because the effect would be anti-dilutive.
NOTE K – SHARE-BASED
COMPENSATION
Restricted Stock Unit
Activity
In November 2010, the
stockholders approved the Versar, Inc. 2010 Stock Incentive Plan (the “2010 Plan”), under which the Company may grant
incentive awards to directors, officers, and employees of the Company and its affiliates and to service providers to the Company
and its affiliates. One million shares of Versar common stock were reserved for issuance under the 2010 Plan. The 2010 Plan is
administered by the Compensation Committee of the Board of Directors. Through December 26, 2014, a total of 457,995 restricted
stock units have been issued under the 2010 Plan. There are 545,005 shares remaining available for future issuance of awards (including
restricted stock units) under the 2010 Plan.
During the six-month
period ended December 26, 2014, the Company awarded 74,400 restricted stock units to certain employees, which vest over a two year
period following the date of grant. The total unrecognized compensation cost, measured on the grant date, that relates to non-vested
restricted stock awards at December 26, 2014, was approximately $0.4 million, which if earned, will be recognized over the weighted
average remaining service period of two years. Share-based compensation expense relating to all outstanding restricted stock unit
awards totaled approximately $0.1 million for each of the three months ended December 26, 2014 and December 27, 2013. Share-based
compensation expense relating to all outstanding restricted stock unit awards totaled approximately $0.1 million and $0.2 million
for each of the three and six- month periods ended December 26, 2014 and December 27, 2013. These expenses were included in the
direct costs of services and overhead and general and administrative lines of the Company’s Condensed Consolidated Statements
of Operations.
Stock Option Activity
There were approximately
3,500 incentive stock options outstanding and exercisable as of December 26, 2014 with a weighted average exercise price of $4.30,
weighted average remaining contractual life of 0.04 years, with no intrinsic value. No stock options were issued during the three
and six months ended December 26, 2014.
Total qualified and
non-qualified stock options granted under the Company’s 2010 Plan and prior stock incentive plans are as follows:
Exercisable qualified stock options outstanding at December
26, 2014 are as follows:
| |
Option Shares | | |
Weighted Average Option Price Per Share | | |
Total | |
| |
(in thousands, except share price) | |
Outstanding at June 27, 2014 | |
| 14 | | |
$ | 3.99 | | |
$ | 57 | |
Exercised | |
| - | | |
| - | | |
| - | |
Cancelled | |
| 11 | | |
| 3.90 | | |
| 42 | |
| |
| | | |
| | | |
| | |
Outstanding at December 26, 2014 | |
| 3 | | |
$ | 4.30 | | |
$ | 15 | |
Exercisable non-qualified stock options outstanding at December
26, 2014 are as follows:
| |
Option Shares | | |
Weighted Average Option Price Per Share | | |
Total | |
| |
(in thousands, except share price) | |
Outstanding at June 27, 2014 | |
| 8 | | |
$ | 4.58 | | |
$ | 37 | |
Exercised | |
| - | | |
| - | | |
| - | |
Cancelled | |
| 8 | | |
| 5 | | |
| 37 | |
| |
| | | |
| | | |
| | |
Outstanding at December 26, 2014 | |
| - | | |
$ | - | | |
$ | - | |
NOTE L – INCOME
TAXES
As of December 26, 2014 and June 27, 2014, the Company had approximately
$2.8 million in net deferred income tax assets, which are primarily related to temporary differences between financial statement
and income tax reporting. Such differences included net operating loss carryforwards, depreciation, deferred compensation, accruals,
and reserves. The Company regularly reviews the recoverability of its deferred tax assets and establishes a valuation allowance
as deemed appropriate. As of December 26, 2014, the Company had $0.6 million recorded as a valuation allowance. The effective tax
rates were approximately 21.5% and 38.3% for the first six months of fiscal 2015 and 2014, respectively. The tax expense for the
first six months of fiscal 2015 included a discrete benefit of $38 thousand related to adjustments made to deferred tax and tax
receivable balances acquired in the prior year. Excluding this discrete benefit, the effective tax rate for the first six months
of fiscal 2015 was 37.2%.
NOTE M – SUBSEQUENT
EVENTS
In connection with
the preparation of its financial statements for the three months ended December 26, 2014, the Company has evaluated events that
occurred subsequent to December 26, 2014, to determine whether any of these events required recognition or disclosure in the period
ended December 26, 2014. Based on this review, the Company is not aware of any subsequent events that would require recognition
or disclosure in the financial statements.
ITEM 2. Management’s Discussion
and Analysis of Financial Condition and Results of Operations
General Information
The following discussion
and analysis relates to the Company’s financial condition and results of operations for the three-month and six-month periods
ended December 26, 2014 and December 27, 2013. This discussion should be read in conjunction with the condensed consolidated financial
statements and other information disclosed herein as well as the “Management’s Discussion and Analysis of Financial
Condition and Results of Operations” contained in our Annual Report on Form 10-K for the fiscal year ended June 27, 2014,
including the critical accounting policies and estimates discussed therein. Unless this Form 10-Q indicates otherwise or the context
otherwise requires, the terms “we,” “our,” the “Company,” “us,” or “Versar”
as used in this Form 10-Q refer collectively to Versar, Inc. and its subsidiaries.
This quarterly report
on Form 10-Q contains forward-looking statements in accordance with the safe harbor provisions of the Private Securities Litigation
Reform Act of 1995, which are subject to risks and uncertainties. Forward-looking statements typically include assumptions, estimates
or descriptions of our future plans, strategies and expectations, are generally identifiable by the use of the words “anticipate,”
“will,” “believe,” “estimate,” “expect,” “intend,” “seek,”
or other similar expressions. Examples of these include discussions regarding our operations and financial growth strategy, projections
of revenue, income or loss, and future operations.
These forward-looking
statements and our future financial performance, may be affected by a number of factors, including, but not limited to, the “Risk
Factors” contained in Part I, Item 1A., “Risk Factors” of our Annual Report on Form 10-K for the fiscal year
ended June 27, 2014. Actual operations and results may differ materially from those forward-looking statements expressed in this
Form 10-Q.
Overview
We are a global project
management company providing sustainable value oriented solutions to government and commercial clients primarily in three business
segments: (1) Engineering and Construction Management (“ECM”); (2) Environmental Services (“ESG”); and
(3) Professional Services (“PSG”). We also provide tailored and secure solutions in harsh environments and offer specialized
abilities in classified projects and hazardous material management.
Business Segments
ECM
This business segment
performs Title I Design Services, Title II Construction Management Services, and Title III Construction Services, all of which
are discussed further in the initial bullet below. This business segment also provides other related engineering and construction
type services both in the United States and internationally. It provides national security solutions in several product and service
areas that have received funding priority and require ongoing services and support. Our services in this segment include the following:
| · | Title I Design Services entail a broad range of expertise including
master planning; land use planning; space utilization studies; requirements definition and scoping; programming; cost estimates;
infrastructure and traffic planning; privatization studies; and other feasibility studies. Title II
Construction Management Services involve construction oversight, inspection, job site evaluations, and construction documentation
among other areas. Other related services include system optimization and commissioning, scheduling, and quality assurance/control.
Title III Construction Services are actual construction services. Certain staff members in this business segment hold security
clearances enabling Versar to provide services for classified construction efforts. |
| · | This segment consists of federal, state, local, international, and commercial clients. Examples
of federal work include construction and construction management services for the U.S. Air Force (“USAF”) and U.S.
Army, construction management and personal services including engineering, construction inspection, operations and maintenance
and administrative support to the U.S. Army Corps of Engineers (“USACE”) and project and construction management services
for the District of Columbia Courts. |
| · | In conjunction with our ESG business unit, ECM pursues opportunities in energy/green initiatives.
Our acquisition of GMI has expanded our capacity to provide such energy-related services. |
| · | Versar’s subsidiary PPS is a leading UK manufacturer and distributor of decontamination equipment
and personal protective equipment, specializing in providing complete solution packages to a wide variety of hazard prone industries
throughout the world. |
ESG
This business segment
provides full-service environmental solutions and includes our remediation and compliance, exposure and risk assessment, natural
resources, unexploded ordnance (“UXO”)/military munitions response program (“MMRP”), air, greenhouse gas,
energy, and cultural resources services. Clients include a wide-range of federal, state, and commercial agencies. Some examples
include the following:
| · | We provide support to USACE, USAF, the U.S. Navy, and many local municipal entities assisting with
environmental compliance, remediation, biological assessments, and natural resource management. This work includes performance-based
remediation (“PBR”) contracts for United States Air Force Civil Engineer Center (“AFCEC”). |
| · | For more than 30 years, Versar has supported the states of Virginia, Maryland, New York, Pennsylvania
and Delaware on a variety of complex environmental projects. For example, we have supported the State of Maryland in the assessment
of the ecological health and natural resources risk of the Chesapeake Bay. We assist several counties in Maryland and Virginia
with their watershed programs, identifying impaired watersheds and providing cost-effective solutions for their restoration programs.
We also provide energy feasibility review, measurement and verification to the State of New York. |
| · | ESG provides munitions response services at two of the world’s largest ranges, the National
Training Center at Fort Irwin, California and one of the largest U.S. Air Force testing and training ranges, Nellis Air Force base
in Nevada. Our services include operational range clearance, operations and maintenance, and range sustainment services at both
installations. |
| · | ESG is the prime contractor on three PBR Task Orders under Versar’s 2009 United States Air
Force Worldwide Environmental Restoration and Construction (“WERC”) contract for AFCEC. Each of the three contracts
provides multi-year environmental remediation programs focused on achieving site-specific performance objectives (outcomes) for
numerous project sites on USAF facilities in the Southwest, Midwest and Northeast. We are also a key team member on a fourth
PBR program for AFCEC providing similar services at Western USAF facilities. |
| · | The acquisition of GMI has allowed the Company to expand its portfolio of clients to include the
U.S. Navy and increased our Cultural Resources staff by more than five times and doubled our Natural Resources capabilities. |
| · | We have supported the U.S. Environmental Protection Agency for the past 30 years providing a wide-range
of regulatory mandated services involving exposure assessment and regulatory review. |
| · | The acquisition of JMWA has allowed the Company to expand its remediation capabilities and provide
support to EPA Region 4 as well as expand our fence-to-fence services for our DoD clients. |
PSG
This business segment
provides an array of environmental management, planning and engineering services to the Department of Defense (“DOD”)
installations and to the U.S. Department of Commerce (“DOC”). Versar provides on-site or staff augmentation services
that enhance the customer’s mission through the use of subject matter experts who are fully dedicated to accomplish mission
objectives. These services are particularly attractive as the DOD shifts emphasis to its core military mission and downsizes due
to increasing budgetary pressure. Primarily at the U.S. Army Installation level or DOD Joint Base level (two or more DOD facilities
realigning management functions to establish a single entity), this segment also serves government clients by supporting them in
areas where their capabilities and capacities are lacking.
| · | We provide expert services for the U.S. Army’s Net Zero energy, water, and solid waste programs
for several U.S. Army and U.S. Army Reserve installations. Net Zero energy means that the installation produces as much energy/water/solid
waste onsite as it uses. Our professionals facilitate establishment of strategic initiatives, develop implementation plans, conduct
outreach, and apply technologies to deliver progress towards site-specific goals and objectives. |
| · | We field installation restoration managers under the Defense Environmental Restoration Program
to clean-up landfill and disposal sites throughout the nation. |
| · | Versar serves the DOD Joint Base communities by providing facility and utilities integration, National
Environmental Policy Act considerations, water program management and air quality program management. |
| · | We provide staff augmentation services ranging from field support of archaeological investigations
to senior level advisors. Our archaeological and historic preservation professionals advise government officials regarding the
protection of our nation’s cultural resources. |
| · | We provide biological and physical sciences support to the National Oceanic Atmospheric Administration
to ensure efficiencies and accuracies in the lab environment. |
| · | We provide logistics program management, operations, budgeting, and transportation support to the
U.S. Army’s Rapid Equipping Force (REF). |
| · | We support the U.S. Army Reserve Facilities Program by providing onsite professional services oriented
on successful maintenance and operation of facilities and systems at Reserve facilities nationwide. |
Financial Trends
Our business and financial
performance is affected by the overall level of federal government spending and the alignment of our offerings and capabilities
with the budget priorities of the federal government. We carefully follow federal budget, legislative and contracting trends and
activities and evolve our strategies to take these into consideration as our financial performance is impacted by federal government
spending levels, particularly defense spending. The federal government budget deficit and the national U.S. debt have created pressure
to examine and reduce spending across all federal agencies. Baseline spending for the DOD for the next 10 years has been reduced
and there may be further reductions. Adverse changes in fiscal and economic conditions, such as the manner in which spending reductions
are implemented, including sequestration, future government shutdowns, and issues related to the nation’s debt ceiling, could
materially impact our business.
In this challenging
economic environment, we will continue to focus on opportunities of critical importance to the federal government and which clearly
align with our customers in the program management services segment. Such activities include sustainable range management, UXO,
PBR, and construction contract management. We will also emphasize areas that we believe offer attractive enough returns to our
clients and in which they will continue to provide funding, such as construction type services both in the United States and internationally,
improvements in energy efficiency, and facility upgrades. While we have been proactive in managing costs in the business, there
is a level of costs, much of it fixed, that must be maintained and that will be covered as revenues increase with an improved funding
environment.
Specifically, we see
the following four elements driving our strategy going forward:
| · | Pursuit of larger contract opportunities. Our move to a large business, coincident with
continued development of a strong internal infrastructure and associated technologies, allows us to focus on pursuing larger prime
contracts and expand our pool of opportunities. We continue to strengthen our relationships with other contractors to create teaming
arrangements that better serve our clients. Where we have seen a shift in focus to contracts for qualified small businesses, we
are strengthening and developing relationships with qualified small businesses. |
| · | Leveraging of our services. The combination of our multiple skill sets and broad service
offerings will allow us to work efficiently in the new economic environment whether selling sustainable risk management services
utilizing our energy and environmental skill-sets, or via effective use of our project and construction management skills in relation
to complex project oversight. |
| · | Expanding our international footprint. While the Company is strong internationally in the
construction management business, we seek to offer our non-construction services to our overseas clients, thereby bringing our
proven domestic skills into the international market and meeting growing overseas client needs. |
| · | Geographic and client expansion through acquisition. We have an active acquisition strategy
and are focused on expanding our ability to offer our technical services to both new geographic areas and new clients, such as
the U.S. Navy and the U.S. Department of State. On July 1, 2014, we announced our acquisition of J.M. Waller Associates, Inc, (“JMWA”),
whose key long-term clients include the U.S. Army Corps of Engineers, U.S. Air Force, U.S. Navy, Environmental Protection Agency,
and the General Services Administration. JMWA is a valuable strategic asset for the Company and has broadened our technical capabilities,
list of clients, and geographic footprint. |
We believe that our
balance sheet is strong, and we are well positioned to surmount unforeseen challenges while we continue to pursue merger and acquisition
activity. As of the quarter ended December 26, 2014 we had $0.2 million of cash on hand, a decline due in part to our use of approximately
$7.0 million of cash to pay a portion of the JMWA purchase price, and a working capital balance of $22.1 million. We also continue
to have access to a line of credit of up to $15 million.
Consolidated Results of Operations
The table below
sets forth our consolidated results of operations for the three months and six months ended December 26, 2014 and December 27,
2013:
| |
For the Three Months Ended | | |
For the Six Months Ended | |
| |
December 26, 2014 | | |
December 27, 2013 | | |
December 26, 2014 | | |
December 27, 2013 | |
| |
(dollars in thousands) | | |
(dollars in thousands) | |
GROSS REVENUE | |
$ | 34,162 | | |
$ | 28,037 | | |
$ | 63,748 | | |
$ | 57,158 | |
Purchased services and materials, at cost | |
| 17,031 | | |
| 14,359 | | |
| 29,258 | | |
| 28,769 | |
Direct costs of services and overhead | |
| 13,682 | | |
| 10,864 | | |
| 28,434 | | |
| 22,229 | |
GROSS PROFIT | |
$ | 3,449 | | |
$ | 2,814 | | |
$ | 6,056 | | |
$ | 6,160 | |
Gross Profit percentage | |
| 10 | % | |
| 10 | % | |
| 10 | % | |
| 11 | % |
| |
| | | |
| | | |
| | | |
| | |
Selling general and administrative expenses | |
| 2,925 | | |
| 2,898 | | |
| 5,616 | | |
| 5,161 | |
OPERATING INCOME (LOSS) | |
| 524 | | |
| (84 | ) | |
| 440 | | |
| 999 | |
| |
| | | |
| | | |
| | | |
| | |
OTHER EXPENSE | |
| | | |
| | | |
| | | |
| | |
Interest income | |
| - | | |
| (13 | ) | |
| - | | |
| (13 | ) |
Interest expense | |
| 142 | | |
| 42 | | |
| 198 | | |
| 67 | |
INCOME (LOSS) BEFORE INCOME TAXES, from continuing operations | |
$ | 382 | | |
$ | (113 | ) | |
$ | 242 | | |
$ | 945 | |
Three Months Ended December 26, 2014
compared to the Three Months Ended December 27, 2013
Gross revenue for
the second quarter of fiscal year 2015 was $34.2 million, an increase of 22% compared to $28.0 million during the second
quarter of the last fiscal year. JMWA contributed approximately $7.9 million to contract revenue during the second quarter of
this fiscal year. An additional increase of $1.5 million in revenue within our ECM segment, attributable to the Dover Air
Force Base (DAFB) project and sales within PPS was partially offset by a decrease in international work within ECM, decreases in
revenue within the ESG segment due to the timing of our PBR contracts, and an approximate $1.5 million decrease in revenue
from PSG’s historical business lines. We continue to experience a decline in our contract positions in the PSG segment
largely due to the continued shift of contract solicitations to businesses that qualify for small business programs.
Purchased services
and materials for the second quarter of fiscal year 2015 was $17.0 million, an increase of 19% compared to $14.4 million during
the second quarter of the last fiscal year. We continue to see an increasing need to sub-contract our services within ECM in order
to offer a broader range of services to our customers in that segment. Additionally, within ECM, there has been an increase in
the proportion of revenue from single award task orders, where the Company acts as the general contractor and sub-contracts a
significant portion of the direct labor. However, within ESG, we anticipate a decrease in the percentage of services that we needed
to sub-contract in the future as we grow our internal capabilities through acquisitions.
Direct costs of
services and overhead for the second quarter of fiscal year 2015 were $13.7 million, an increase of 26% compared to $10.9 million
during the second quarter of the last fiscal year. This increase was primarily due to an increase in direct labor as a result
of our acquisition of JMWA.
Gross profit for the
second quarter of fiscal 2015 was $3.4 million, an increase of 23% compared to $2.8 million during the second quarter of the last
fiscal year. JMWA contributed approximately $2.0 million to our gross profit, and the sale of our chemical splash protective suits
through PPS generated margins significantly higher than we have seen within the ECM segment this year. Additionally, we expect
to see our margins within our PSG segment return to previous levels now that we are substantially complete with the integration
of JMWA. Increases to gross profit were offset in part by a decline in our Title II work in Iraq and Afghanistan within the ECM
segment.
Selling, general and
administrative expenses for the second quarter of fiscal 2015 remained relatively flat at $2.9 million, when compared to the second
quarter of last fiscal year. Management was able to aggressively control costs subsequent to the JMWA acquisition and have been
able to reflect a consistent overhead burden for the second quarter.
Income, before income
taxes, for the second quarter of fiscal year 2015 was $0.4 million, compared to a loss, before income taxes, of $0.1 million for
the second quarter of the last fiscal year. This improvement is attributable to the factors discussed above.
Six Months Ended December 26, 2014 compared
to the Six Months Ended December 27, 2013
Gross revenue for the
first six months of fiscal year 2015 was $63.7 million, an increase of 12% compared to $57.2 million during the first six months
of the last fiscal year. Although JMWA contributed approximately $14.3 million to contract revenue for the first six months of
this fiscal year, increases were offset by an approximate $1.5 million decrease in international work from ECM, an approximate
$4.0 million decrease in the timing of PBR revenue from ESG, and an approximate $1.5 million decrease in revenue from PSG’s
historical business lines, as we continue to see a decline in our contract positions largely due to the continued shift of contract
solicitations to businesses that qualify for small business programs.
Purchased services and materials for
the first six months of fiscal year 2015 were $29.3 million, an increase of 2% compared to $28.8 million during the first six months
of the last fiscal year resulting from an increasing need to sub-contract our services within ECM and the increase in ECM in the
proportion of revenue from single award task orders.
Direct costs of services and overhead
for the first six months of fiscal year 2015 were $28.4 million, an increase of 28% compared to $22.1 million during the first
six months of the last fiscal year. This increase was primarily due to the increase in direct labor as a result of our acquisition
of JMWA.
Gross profit for the
first six months of fiscal year 2015 was $6.1 million, a decrease of 3% compared to $6.3 million for the first six months of the
last fiscal year. JMWA contributed approximately $3.5 million to our gross profit; however, this increase was offset by losses
incurred on a series of construction projects managed out of our Knoxville office that were inherited through the acquisition of
GMI in fiscal year 2014 and by the decline in our Title II work in Iraq and Afghanistan within the ECM segment.
Selling, general and
administrative expenses for the first six months of fiscal year 2015 increased 7% to $5.6 million, when compared to $5.2 million
in the first six months of last fiscal year. We experienced a $0.3 million increase related to additional labor from JMWA and a
$0.1 million increase due to additional occupancy expense.
Income, before income
taxes, for the first six months of fiscal year 2015 was $0.2 million, a decrease of 74% when compared to $0.9 million for the first
six months of the last fiscal year. This decrease is attributable to the factors discussed above.
Backlog
We report “funded”
backlog, which represents orders for goods and services for which firm contractual commitments have been received. As of December
26, 2014, funded backlog was approximately $245 million, an increase of 115% compared to approximately $114 million of backlog
at the end of fiscal year 2014. This increase was primarily attributable to the DAFB task order award for $98.3 million that the
Company announced on August 13, 2014. This task order was awarded under Versar’s S/R&M Acquisition Task Order Contract
(SATOC) Indefinite Delivery, Indefinite Quantity (“IDIQ”) with the AFCEC, held with our joint venture partner, Johnson
Controls Federal Systems. The SATOC IDIQ primarily services AFCEC customers, providing a fast track, efficient method for execution
of all types of facility repairs, renovations and construction. Versar will be the general contractor managing all work with our
key subcontractors: American Infrastructure, Inc., Atlantic Electric LLC and Anthony Allega Cement Contractor, Inc.
Results of Operations by Reportable
Segment
The tables below set
forth our operating results by reportable segment for the three months and six months ended December 26, 2014 and December 27,
2013. (Dollar amounts in following tables are in thousands)
Engineering and Construction Management | |
| | |
| | |
| | |
| |
| |
For the Three Months Ended | | |
For the Six Months Ended | |
| |
December 26, 2014 | | |
December 27, 2013 | | |
December 26, 2014 | | |
December 27, 2013 | |
GROSS REVENUE | |
$ | 15,975 | | |
$ | 13,474 | | |
$ | 29,024 | | |
$ | 25,895 | |
Purchased services and materials, at cost | |
| 10,332 | | |
| 8,723 | | |
| 18,058 | | |
| 15,801 | |
Direct costs of services and overhead | |
| 3,564 | | |
| 3,152 | | |
| 7,367 | | |
| 6,720 | |
GROSS PROFIT, from continuing operations | |
$ | 2,079 | | |
$ | 1,599 | | |
$ | 3,599 | | |
$ | 3,374 | |
Income (Loss) from discontinued operations | |
| - | | |
| 284 | | |
| - | | |
| 281 | |
GROSS PROFIT | |
$ | 2,079 | | |
$ | 1,883 | | |
$ | 3,599 | | |
$ | 3,655 | |
Gross profit percentage from continuing operations | |
| 13 | % | |
| 12 | % | |
| 12 | % | |
| 13 | % |
Three Months Ended December 26, 2014
compared to the Three Months Ended December 27, 2013
Gross revenue for
the second quarter of fiscal year 2015 was $16.0 million, an increase of 19% compared to $13.5 million during the second
quarter of the last fiscal year. JMWA contributed approximately $2.0 million to this increase. An approximate increase of
$1.0 million attributable to our project at DAFB within our construction management business and an approximate increase of
$0.5 million, attributable to sales within our PPS business, were partially offset by decreases in international revenue
within our construction management business. However, although we expect our Title II work for the U.S. Air Force in
Afghanistan to be completed in fiscal year 2015, we continue to win and perform work on our Personal Services Contract with
the U.S. Army Corps of Engineers in Afghanistan.
Gross profit from
continuing operations for the second quarter of fiscal year 2015 was $2.1 million, an increase of 30% compared to $1.6
million during the second quarter of the last fiscal year. JMWA contributed approximately $1.1 million in additional expenses
to our design and construction management divisions; however, these additional expenses were offset by the gross profit we
have been able to achieve through our product sales in PPS.
Six Months Ended December 26, 2014 compared
to the Six Months Ended December 27, 2013
Gross revenue for the
first six months of fiscal 2015 was $29.0 million, an increase of 12% compared to $25.9 million during the first six months of
the last fiscal year. JMWA contributed approximately $3.2 million in additional revenue. Increases in revenue due to the ramp up
of the DAFB project within our construction management business and sales within our PPS business were offset by decreases in international revenue within our construction management business.
Gross profit from continuing
operations for the first six months of fiscal year 2015 was $3.6 million, an increase of 7% compared to $3.4 million during the
first six months of the last fiscal year. JMWA contributed approximately $2.2 million in additional expenses to our design and
construction management divisions; however, these additional expenses were offset by the gross profits we have been able to achieve
through the sale of our products in PPS.
Environmental Services Group | |
For the Three Months Ended | | |
For the Six Months Ended | |
| |
December
26, 2014 | | |
December
27, 2013 | | |
December
26, 2014 | | |
December
27, 2013 | |
GROSS REVENUE | |
$ | 12,415 | | |
$ | 11,861 | | |
$ | 22,680 | | |
$ | 24,876 | |
Purchased services and materials, at cost | |
| 6,066 | | |
| 5,345 | | |
| 10,203 | | |
| 12,447 | |
Direct costs of services and overhead | |
| 5,711 | | |
| 5,529 | | |
| 11,523 | | |
| 10,643 | |
GROSS PROFIT | |
$ | 638 | | |
$ | 987 | | |
$ | 954 | | |
$ | 1,786 | |
Gross profit percentage | |
| 5 | % | |
| 8 | % | |
| 4 | % | |
| 7 | % |
Three Months Ended December 26, 2014 compared to the Three
Months Ended December 27, 2013
Gross revenue for the
second quarter of fiscal year 2015 was $12.4 million, an increase of 5% compared to $11.9 million during the second quarter of
the last fiscal year. This increase was primarily due to approximately $1.4 million in additional revenue attributable to JMWA,
partially offset by a decrease in revenue related to the timing of our work on our PBR contracts.
Gross profit for the second quarter of
fiscal year 2015 was $0.6 million, a decrease of 35% compared to $1.0 million in the first six months of the last fiscal year.
JMWA contributed approximately $1.1 million in additional expenses offsetting any benefit from increases in revenue. As we grow
our internal capabilities through acquisitions, we are pursuing larger contract vehicles and expect to see an increasing amount
of sub-contractor costs shift to direct labor, and therefore, expect our margins to improve in future quarters.
Six Months Ended December 26, 2014 compared to the Six Months
Ended December 27, 2013
Gross revenue for the
first six months of fiscal year 2015 was $22.7 million, a decrease of 9% compared to $24.9 million during the first six months
of the last fiscal year. Approximately $2.6 million in additional revenue attributable to JMWA was offset by a decrease of
approximately $4.8 million in revenue related to the timing of the work on our PBR contracts.
Gross profit for the
first six months of fiscal year 2015 was $1.0 million, a decrease of 47% compared to $1.8 million in the first six months of the
last fiscal year. JMWA contributed approximately $2.1 million in additional expenses contributing to this decrease.
Professional Services Group | |
For the Three Months Ended | | |
For the Six Months Ended | |
| |
December
26, 2014 | | |
December
27, 2013 | | |
December
26, 2014 | | |
December
27, 2013 | |
GROSS REVENUE | |
$ | 5,772 | | |
$ | 2,702 | | |
$ | 12,044 | | |
$ | 6,387 | |
Purchased services and materials, at cost | |
| 633 | | |
| 291 | | |
| 997 | | |
| 521 | |
Direct costs of services and overhead | |
| 4,407 | | |
| 2,183 | | |
| 9,544 | | |
| 4,866 | |
GROSS PROFIT | |
$ | 732 | | |
$ | 228 | | |
$ | 1,503 | | |
$ | 1,000 | |
Gross profit percentage | |
| 13 | % | |
| 8 | % | |
| 12 | % | |
| 16 | % |
Three Months Ended December 26, 2014 compared to the Three
Months Ended December 27, 2013
Gross revenue for the
second quarter of fiscal year 2015 was $5.8 million, an increase of 114% compared to $2.7 million during the second quarter of
the last fiscal year. This was the result of a $4.4 million contribution by JMWA partially offset by a $1.4 million decline in
revenue from our historical PSG business. We continue to see a decline in our contract positions, largely due to the continued
shift of more contract solicitations to businesses that qualify for small business programs.
Gross profit for the
second quarter of fiscal year 2015 was $0.7 million, an increase of 221% compared to $0.2 million in the second quarter of the
last fiscal year largely due to the increase in revenues. JMWA contributed approximately $3.4 million in additional expenses during
the quarter and, due to the increase in direct labor as a result of the acquisition of JMWA. PSG had a larger proportionate share
of allocable costs because our cost allocation methodology uses direct labor dollars as a basis for allocation. As PSG increases
in size, relative to our other two segments, it will continue to be burdened with a higher proportionate share of allocable costs,
which will continue to put pressure on margins. However, as we continue to eliminate excess overhead costs, we anticipate maintaining
our current levels in the range of 10% to 15%.
Six Months Ended December 26, 2014 compared to the Six Months
Ended December 27, 2013
Gross revenue for the
first six months of fiscal year 2015 was $12.0 million, an increase of 89% compared to $6.4 million during the first six months
of the last fiscal year. This was the result of an $8.5 million revenue contribution by JMWA partially offset by a $2.8 million
decline in revenue from our historical PSG business resulting from the decline in our contract positions largely due to the continued
shift of more contract solicitations to businesses that qualify for small business programs.
Gross profit for the
first six months of fiscal year 2015 was $1.5 million, an increase of 50% compared to $1.0 million in the first six months of the
last fiscal year. JMWA contributed approximately $6.6 million in additional expenses during the quarter and, due to the increase
in direct labor as a result of the acquisition of JMWA, PSG had a larger proportionate share of allocable costs because our cost
allocation methodology uses direct labor dollars as a basis for allocation resulting a decline in our gross profit margin.
Liquidity and Capital Resources
Our working capital
as of December 26, 2014 was approximately $22.1 million compared to working capital at June 27, 2014 of $24.1 million. This decrease
was primarily due to the decrease in cash as a result the use of approximately $7.0 million of cash to pay a portion of the JMWA
purchase price. In addition, we utilized our line of credit during the second quarter to fund daily business operations which
resulted in an outstanding balance of $0.4 million at December 26, 2014. Our current ratio at December 26, 2014 was 2.11 compared
to 2.29 at June 27, 2014.
We believe that anticipated
cash flows from ongoing operations and the funds available from our line of credit facility will be sufficient to meet our ongoing
liquidity needs. Our expected capital requirements for the full 2015 fiscal year are approximately $1.0 million which will be
funded through existing working capital. These capital expenditures will be used primarily for upgrades to maintain our existing
information technology systems, equipment related to our range management projects, and upgrades to our personal protective equipment
manufacturing facility.
Critical Accounting Policies and Related
Estimates
There have been no
material changes with respect to the critical accounting policies and related estimates as disclosed in our Annual Report on Form
10-K for the fiscal year ended June 27, 2014.
ITEM 3. Quantitative
and Qualitative Disclosure about Market Risk
We have not entered
into any transactions using derivative financial instruments or derivative commodity instruments and we believe that our exposure
to interest rate risk and other relevant market risk is not material.
ITEM 4. Controls
and Procedures
As of the last day
of the period covered by this report, the Company carried out an evaluation, under the supervision of the Company’s Chief
Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure
controls and procedures pursuant to Exchange Act Rule 13a-15. Based upon that evaluation, the Chief Executive Officer and Chief
Financial Officer concluded that the Company’s disclosure controls and procedures are effective, as of such date, to ensure
that required information will be disclosed on a timely basis in its reports under the Exchange Act.
Further, our Chief
Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures have been designed to
ensure that information required to be disclosed in reports filed by us under the Exchange Act is accumulated and communicated
to our management, including the Chief Executive Officer and Chief Financial Officer, in a manner to allow timely decisions regarding
the required disclosure.
There were no changes
in the Company’s internal control over financial reporting during the quarter ended December 26, 2014 that have materially
affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
PART II – OTHER INFORMATION
ITEM 1.
Legal Proceedings
We are parties from
time to time to various legal actions arising in the normal course of business. We believe that any ultimate unfavorable resolution
of these legal actions will not have a material adverse effect on our consolidated financial condition and results of operations.
ITEM 6. Exhibits
Exhibit No. |
|
Description |
|
|
|
10.1 |
|
Second Modification Agreement dated as of December 23, 2014 among Versar, Inc., certain of Versar’s subsidiaries and United Bank (A) |
|
|
|
31.1 |
|
Certifications by Anthony L. Otten, Chief Executive Officer pursuant to Securities Exchange Rule 13a-14 |
|
|
|
31.2 |
|
Certifications by Cynthia A. Downes, Executive Vice President, Chief Financial Officer and Treasurer pursuant to Securities Exchange Act Rule 13a-14 |
|
|
|
32.1 |
|
Certifications Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 made by Anthony L. Otten, Chief Executive Officer |
|
|
|
32.2 |
|
Certifications Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 made by Cynthia A. Downes, Executive Vice President, Chief Financial Officer and Treasurer |
|
|
|
101 |
|
The following financial statements from Versar, Inc.’s Quarterly Report on Form 10-Q for the quarter ended September 26, 2014, formatted in eXtensible Business Reporting Language (“XBRL”): (i) Unaudited Condensed Consolidated Balance Sheets, (ii) Unaudited Condensed Consolidated Statements of Income, (iii) Unaudited Consolidated Statements of Comprehensive Income, (iv) Unaudited Condensed Consolidated Statements of Cash Flows, and (iiv) Notes to Condensed Consolidated Financial Statements, tagged as blocks of text |
* Indicates management contract or compensatory
plan or arrangement.
(A) |
|
Incorporated by reference to the similarly numbered exhibit to the Registrant’s Form 8-K filed with the Commission on December 30, 2014. |
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/ Anthony L. Otten |
|
Anthony L. Otten |
|
Chief Executive Officer |
|
|
|
By: |
/S/ Cynthia A. Downes |
|
Cynthia A. Downes |
|
Executive Vice President,Chief Financial Officer, and Treasurer |
Date: February 05, 2015
Exhibit 31.1
CERTIFICATION BY ANTHONY L. OTTEN PURSUANT
TO
SECURITIES EXCHANGE ACT RULE 13a-14
I, Anthony L. Otten, of Versar, Inc., certify
that:
1. |
|
I have reviewed this quarterly report on Form 10-Q of Versar, Inc. (the “Registrant”); |
2. |
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. |
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report; |
4. |
|
The Registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and we have: |
|
a) |
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
|
b) |
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
|
|
|
|
|
c) |
|
Evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
|
d) |
|
Disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscal quarter (the Registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting; and |
5. |
|
The Registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant’s auditors and the audit committee of the Registrant’s board of directors (or persons performing the equivalent functions): |
|
a) |
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and |
|
b) |
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting. |
Date: February 05, 2015 |
|
|
|
/S/ Anthony L. Otten |
|
|
|
|
|
Anthony L. Otten |
|
|
Chief Executive Officer |
|
Exhibit 31.2
CERTIFICATION BY CYNTHIA A. DOWNES PURSUANT
TO
SECURITIES EXCHANGE ACT RULE 13a-14
I, Cynthia A. Downes, of Versar, Inc.,
certify that:
1. |
|
I have reviewed this quarterly report on Form 10-Q of Versar, Inc. (the “Registrant”); |
2. |
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. |
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report; |
4. |
|
The Registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and we have: |
|
a) |
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
|
b) |
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
|
|
|
|
|
c) |
|
Evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
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d) |
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Disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscal quarter (the Registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting; and |
5. |
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The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant’s auditors and the audit committee of the Registrant’s board of directors (or persons performing the equivalent functions): |
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a) |
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All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and |
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b) |
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Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting. |
Date: February 05, 2015 |
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/S/ Cynthia A. Downes |
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Cynthia A. Downes |
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Executive Vice President, Chief Financial Officer and Treasurer |
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Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT
OF 2002
In connection with
the Quarterly Report of Versar, Inc. (the “Company”) on Form 10-Q for the period ending December 26, 2014 as filed
with the Securities and Exchange Commission on the date hereof (the “Report”), I, Anthony L. Otten, certify, pursuant
to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
| (1) | the Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange
Act of 1934; and |
| (2) | the information contained in the Report fairly presents, in all material aspects, the financial
condition and results of operations of the Company. |
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/S/ Anthony L. Otten |
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Anthony L. Otten |
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Chief Executive Officer |
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February 05, 2015
Exhibit 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT
OF 2002
In connection with
the Quarterly Report of Versar, Inc. (the “Company”) on Form 10-Q for the period ending December 26, 2014 as filed
with the Securities and Exchange Commission on the date hereof (the “Report”), I, Cynthia A. Downes, certify, pursuant
to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
| (1) | the Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange
Act of 1934; and |
| (2) | the information contained in the Report fairly presents, in all material aspects, the financial
condition and results of operations of the Company. |
|
/S/ Cynthia A. Downes |
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|
|
|
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Cynthia A. Downes |
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Executive Vice President, Chief Financial Officer and Treasurer |
February 05, 2015
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