Versar, Inc. Announces Fiscal Year 2016 Financial Results

SPRINGFIELD, VA / ACCESSWIRE / March 28, 2017 / Versar, Inc. (NYSE MKT: VSR) today announced financial results for the fourth quarter and fiscal year ended July 1, 2016.

FY16 Gross Revenue of $167.9 Million
Funded Backlog of $136 Million as of July 1, 2016
FY16 Operating Loss (before taxes) of $36.6 Million
FY16 Adjusted EBITDA of $3.6 Million1

Additionally, Versar reiterated that it expects to adhere to its previously announced timeline for completing its remaining delinquent filings. The Company continues to work towards filing its Form 10-Q for the first fiscal quarter ended September 30, 2016 and the second fiscal quarter ended December 30, 2016 by the end of April. At that time, Versar expects to return to being on-time in its filings and meeting the requirements of both the Securities and Exchange Commission and the New York Stock Exchange.

Consistent with its obligations to its lender, Bank of America, N.A., the Company continues to seek a replacement credit facility or other financial arrangement. In parallel, Versar has successfully implemented improvements to its cost structure, financial strength and business focus, making it a leaner, more focused company to maximize profitable growth at scale and optimize its funded backlog, standing at $136 million as of July 1, 2016.

Financial Results

Fiscal 2016 gross revenue increased 5% to $167.9 million, compared to revenues of $159.9 million in fiscal 2015. Versar Security Systems (VSS) and the Dover Air Force Base (DAFB) projects contributed primarily to this increase. These two elements of the Company’s business also contributed to the increase in Purchased Services and Materials from $90.3 million in fiscal 2015 to $107.2 million in fiscal 2016. VSS requires the purchase of services and equipment to provide its specialized security services and the DAFB project requires significant use of subcontracted services. The increase in Purchased Services and Materials, along with a number of other non-recurring charges, resulted in a decrease in gross profit from $13.8 million in fiscal 2015 to $3.2 million in fiscal 2016. The non-recurring charges include: a loss of $2.1 million in our PPS subsidiary, which we are in the process of divesting, $0.9 million to complete the Homestead Air Force Base project, which we obtained as part of the GMI acquisition, $1.2 million for a dispute involving working capital adjustments in the acquisition of GMI, and $1.3 million in contingency accruals related to ESG projects.

Selling, General and Administrative (SG&A) expenses increased from fiscal 2015 by approximately $2.0 million to $13.0 million in fiscal 2016. This increase can be evenly attributed to: (1) acquisition and integration costs for VSS, (2) fees associated with borrowings from Bank of America, and (3) costs associated with exiting leased facilities that the Company no longer required. Operating Loss in fiscal 2016 was $35.9 million, compared to operating income of $2.8 million in fiscal 2015. This swing is the result of three non-cash one-time write downs: (1) Goodwill associated with previous acquisitions, (2) Intangibles associated with previous acquisitions, and (3) the loss on a potential sale of the PPS subsidiary, since the subsidiary is currently classified as held for sale.

1Non-GAAP metric – see definition at end of this earnings release

These non-cash one-time write downs flowed through to Net Income and Earnings/Loss Per Share. Fiscal 2016 Net Loss was $37.9 million, compared with Net Income of $1.4 million in fiscal 2015. Fiscal 2015 earnings per share were $0.14, while fiscal 2016 loss per share was $3.84.

Versar CEO, Tony Otten, said, “We are pleased to be able to share our financial results with the public as we continue our drive to return to profitability. Versar continues to provide superb services to a wide variety of clients throughout the world and we’re excited about taking the next steps in our corporate growth.”

To assist our investors and other users of our financial statements, we have provided a non-GAAP metric to show company performance without the non-cash and one-time write-downs. We are calling this metric Adjusted EBITDA. More details can be found at the end of this earnings release.

Conference Call

Versar will host a conference call today, March 28, 2017 at 2:00 p.m. Eastern Time to discuss its operational performance and financial results for fourth quarter and fiscal year ended July 1, 2016.

The dial in number for the U.S. and Canada is toll free, 866-682-6100. The international dial in number is 862-255-5401. Participants should call in a few minutes before 2:00 PM Eastern Time.

For those unable to attend the conference call, a replay of the teleconference will be available until April 11, 2017 and may be accessed domestically by dialing 877-481-4010 and international callers may dial 919-882-2331. Callers must enter conference ID number 10266. Additionally, the replay will be available on Versar’s Investor Relations website, http://www.versar.com/investorrelations/index.html.

VERSAR, INC., headquartered in Springfield, Virginia, is a publicly-traded global project management company providing sustainable value oriented solutions to government and commercial clients in the construction management, environmental services, and professional services market areas.

VERSAR operates the following websites: www.versar.com and www.versarpps.com.

Find out more about VERSAR at

https://twitter.com/VersarInc
https://www.facebook.com/VersarInc
http://www.linkedin.com/company/38251

This news release contains forward-looking information. The forward-looking statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements may be significantly impacted by certain risks and uncertainties described herein and in Versar’s Annual Report on Form 10-K filed with the Securities and Exchange Commission for the fiscal year ended July 1, 2016, as updated from time to time in the Company’s periodic filings. The forward-looking statements are made as of the date hereof and Versar does not undertake to update its forward-looking statements.

Contact:

Karin Weber
M&A, Investor Relations Manager
Versar, Inc.
(703) 642-6706
kweber@versar.com

Robert Ferri
Robert Ferri Partners
(415) 575-1589
robert.ferri@robertferri.com

VERSAR, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(In thousands, except share amounts)

As of

July 1,

2016

June 26,

2015

ASSETS

Current assets

Cash and cash equivalents

$
1,549

$
2,109

Accounts receivable, net

47,675

57,171

Inventory, net

221

1,188

Prepaid expenses and other current assets

1,007

1,540

Deferred income taxes

–

1,366

Income tax receivable

1,513

2,373

Total current assets

51,965

65,747

Property and equipment, net

1,328

2,084

Deferred income taxes, non-current

–

414

Goodwill

–

16,066

Intangible assets, net

7,248

4,643

Other assets

775

252

Total assets

$
61,316

$
89,206

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities

Accounts payable

$
18,156

$
35,852

Billings in excess of revenue

7,156

–

Accrued salaries and vacation

2,478

3,332

Bank line of credit

14,854

–

Notes payable, current

3,831

2,313

Other current liabilities

7,724

1,114

Total current liabilities

54,199

42,611

Notes payable, non-current

2,494

5,835

Other long-term liabilities

3,555

1,390

Total liabilities

60,248

49,836

Commitments and contingencies

Stockholders’ equity

Common stock $.01 par value; 30,000,000 shares authorized;

10,217,227 shares issued and 9,982,778 shares outstanding

as of July 1, 2016; 10,128,923 shares issued and 9,805,082 shares

outstanding as of June 26, 2015. “(10,217,277 shares issued and

9,950,958 shares outstanding as of March 1, 2017)”

102

101

Capital in excess of par value

31,128

30,798

(Accumulated deficit) Retained earnings

(27,448
)

10,439

Treasury stock, at cost

(1,480
)

(1,460
)

Accumulated other comprehensive loss; foreign currency translation

(1,234
)

(508
)

Total stockholders’ equity

1,068

39,370

Total liabilities and stockholders’ equity

$
61,316

$
89,206

VERSAR, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
(In thousands, except per share amounts)

For the Fiscal Year Ended

July 1, 2016

June 26, 2015

June 27, 2014

GROSS REVENUE

$
167,917

$
159,877

$
110,280

Purchased services and materials, at cost

107,199

90,289

55,108

Direct costs of services and overhead

57,544

55,797

46,653

GROSS (LOSS) PROFIT

3,174

13,791

8,519

Selling, general and administrative expenses

13,031

11,003

10,175

Other operating expense ( income)

1,937

–

(1,596
)

Goodwill impairment

20,331

–

1,381

Intangible impairment

3,812

–

OPERATING (LOSS) INCOME

(35,937
)

2,788

(1,441
)

OTHER (INCOME) EXPENSE

Interest income

(19
)

(2
)

(15
)

Interest expense

702

447

133

(LOSS) INCOME BEFORE INCOME TAXES, FROM CONTINUING OPERATIONS

(36,620
)

2,343

(1,559
)

Income tax expense (benefit)

1,267

936

(1,043
)

NET (LOSS) INCOME FROM CONTINUING OPERATIONS

(37,887
)

1,407

(516
)

Income (Loss) from discontinued operations, net of tax

–

182

NET (LOSS) INCOME

$
(37,887
)

$
1,407

$
(334
)

NET (LOSS) INCOME PER SHARE-BASIC and DILUTED

Continuing operations

$
(3.84
)

0.14

$
(0.05
)

Discontinued operations

–

0.02

NET (LOSS) INCOME PER SHARE-BASIC and DILUTED

$
(3.84
)

$
0.14

$
(0.03
)

WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING-BASIC

9,857

9,771

9,663

WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING-DILUTED

9,857

9,771

9,663

VERSAR, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(In thousands)

For the Fiscal Year Ended

July 1, 2016

June 26, 2015

June 27, 2014

Cash flows from operating activities:

Net income (loss)

$
(37,887
)

$
1,407

$
(334
)

Adjustments to reconcile net income (loss) from continuing operations to net cash provided by operating activities:

Depreciation and amortization

5,756

2,566

1,973

(Gain) loss on sale of property and equipment

(79
)

Change in contingent notes

–

(1,590
)

Provision for (recovery of) doubtful accounts receivable

1,001

(27
)

(886
)

Loss on life insurance policy cash surrender value

–

(35
)

(63
)

Provision (benefit) for income taxes expense

1,779

1,008

(913
)

Share based compensation

329

405

502

Goodwill impairment

20,331

–

1,381

Intangible impairment

3,812

–

Changes in assets and liabilities:

Decrease (increase) in accounts receivable

15,192

(26,239
)

10,682

(Increase) decrease in income tax receivables

–

Decrease (increase) in prepaid and other assets

1,148

(344
)

356

(Increase) decrease in inventories

(96
)

(Decrease) increase in accounts payable

(19,635
)

23,013

(2,190
)

Decrease in accrued salaries and vacation

(1,055
)

(938
)

(130
)

Decrease in income tax payable

829

(15
)

(141
)

Decrease in inter-company transactions

–

(705
)

(1,998
)

Decrease (increase) in other assets and liabilities

6,503

(705
)

(1,998
)

Net cash (used in) provided by operating activities

(2,072
)

162

6,747

Cash flows from investing activities:

Purchase of property and equipment

(686
)

(839
)

(971
)

Payment for VSS acquisition, net of cash acquired

(11,080
)

–

Payment for JMWA acquisition, net of cash acquired

–

(7,164
)

–

Payment for GMI acquisition, net of cash acquired

–

(2,788
)

Proceeds from sale of office equipment

270

–

Premiums paid on life insurance policies

–

(23
)

Proceeds received on life insurance policies

–

835

–

Proceeds from sale of property and equipment

–

Net cash used in investing activities

(11,496
)

(7,191
)

(3,782
)

Cash flows from financing activities:

Borrowings on line of credit

73,464

19,943

–

Repayments on line of credit

(58,611
)

(19,943
)

–

Loan for JMWA Purchase

–

4,000

–

Repayment of Loan for JMWA Purchase

(1,266
)

(1,189
)

–

Loan for VSS Purchase

5,000

–

Repayment of Loan for VSS Purchase

(2,500
)

–

Proceeds from exercise of stock options

–

Repayments of notes payable

(3,058
)

(3,559
)

(2,045
)

Purchase of treasury stock

(20
)

(64
)

(171
)

Net cash provided by (used in) financing activities

13,009

(812
)

(2,117
)

Effect of exchange rate changes on cash and cash equivalents

(1
)

276

Net decrease in cash and cash equivalents

(560
)

(7,565
)

946

Cash and cash equivalents at the beginning of the period

2,109

9,674

8,728

Cash and cash equivalents at the end of the period

$
1,549

$
2,109

$
9,674

Supplemental disclosure of cash and non-cash activities:

Promissory notes-payable issued in connection with JMWA acquisition

$
–

$
6,000

$
–

Promissory notes-payable issued in connection with GMI acquisition

$
–

$
1,250

Contingent consideration payable related to VSS acquisition

$
3,154

$
–

Cash paid for interest

$
133

$
429

$
133

Cash paid for income taxes

$
254

$
48

$
254

Versar, Inc. Fiscal Year 2016: Non-GAAP Financial Measures Disclosure

Reported GAAP Operating (Loss) before taxes

$
(36,619,000
)

One-Time Adjustments

Impairments (Goodwill and Intangibles)

24,144,000

Abandon Lease Accruals (Office Furniture and Office Leaseholds)

921,100

Bank of America Outside Auditor Fees

145,000

JCSS Acquisition (Transaction and Integration Costs)

1,284,800

ARA/GMI Working Capital Accrual

1,200,000

ESG Related Expenses (GSA Rate audit, PBR pump, Ft. Irwin Class Action Suit)

1,174,300

Homestead AFB Project

868,000

PPS Adjustments (Fiscal Year Operating Loss and Loss in excess of sale proceeds)

4,031,700

Total One-Time Adjustments

33,768,900

Adjusted Operating (Loss)

(2,850,100
)

EBITDA Add-backs

Interest Expense

702,000

Depreciation and Amortization

5,756,000

6,458,000

Adjusted EBITDA

$
3,607,900

Non-GAAP Financial Measures Disclosure: This earnings release contains non-GAAP (Generally Accepted Accounting Principles) financial measures, as defined by the Securities and Exchange Commission Regulation G and indicated by a footnote in the text of the release. While we believe that investors and other users of our financial statements may find these non-GAAP financial measures useful in evaluating our financial performance and operational trends, they should be considered as supplemental in nature, and therefore, should not be considered as a substitute for financial information prepared in accordance with GAAP. Reconciliations of these non-GAAP measures are provided in the table above. Other companies may define these measures differently or may use different non-GAAP measures.

SOURCE: Versar, Inc.

ReleaseID: 458285

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