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Versar, Inc. Announces First Quarter Fiscal 2013 Results

Reports Improved Backlog, Net Income and Gross Margins

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SPRINGFIELD, Va., Nov. 8, 2012 /PRNewswire/ -- Versar, Inc. (NYSE MKT: VSR) today announced financial results for the fiscal first quarter ended September 28, 2012.

Net income for the first quarter of fiscal year 2013 was $0.85 million, an increase of 3% compared to net income of $0.82 million in the first quarter of fiscal year 2012. Earnings per share were $0.09 per basic and diluted share.

The Company achieved gross margins of 14% in the first quarter as compared to 11% in the same quarter last year and operating income margins improved to 5.9% from 4.1% in the same quarter last year. The improved margins were largely due to the Company's continued focus on controlling costs and improving project management.

Gross revenue for the first quarter of fiscal year 2013 was $23.6 million, a decrease of 29% compared to revenue of $33.3 million reported in the first quarter of fiscal year 2012. This decrease was primarily attributable to lower domestic revenue of $4 million related to Versar's completion of the Tooele Chemical Demilitarization project in fiscal year 2012, reduced company activity in Iraq and Afghanistan and delays in new awards that were not realized until the end of the U.S. government's fiscal year.

As of September 28, 2012, Versar recorded funded backlog of approximately $106 million, an increase of 24% compared to approximately $84 million at September 30, 2011 and an 11.8% increase when compared to the $93 million of backlog at the end of fiscal year 2012. This increase was due largely to new performance-based remediation ("PBR") awards for the U.S Air Force at various installations across the United States. Subsequent to the end of Versar's quarter, additional awards were received prior to the end of the U.S. government's fiscal year and, as of October 1, 2012, the company's backlog reached $122 million, driven by task orders under a new prime contract with the U.S. Army Corps of Engineers (USACE) for up to $170 million for personal services in Afghanistan.

Tony Otten, CEO of Versar said, "Our ninth consecutive quarter of improved margins is characterized by solid profitability coupled with one of the highest funded backlog totals in our 43-year history. Our investment in business development is paying off – during the quarter we announced two new PBR contracts for up to $7 million and $25 million for air force bases in the Front Range and Great Lakes regions, respectively, and the two year $9.7 million extension of our Professional Services work at Joint Base Lewis McChord. Following the close of the first quarter, we announced a new prime contract with a maximum capacity of $170 million, with the U.S. Army Corps of Engineers Middle East District, to perform on-site construction management support services for assigned projects supporting two USACE Engineer Districts in Afghanistan. We are also pleased to report that our integration of Charron Consulting, a strategically attractive U.S.-focused project and construction management company that we acquired in May 2012, is now complete and meeting our pro-forma financial expectations."

Mr. Otten continued, "Due to the financial successes achieved in fiscal year 2012 and prior fiscal years, our balance sheet is strong. We generate strong free cash flow and our cash position now stands at $10.6 million with working capital of $23 million. We remain well positioned to drive organic growth and to pursue our acquisition strategy."

Conference Call:

The Company will host a conference call today, November 8, 2012 at 2:00 p.m. Eastern Time to discuss its operational performance and financial results. The conference call may be accessed in the U.S. and Canada by dialing toll-free (877) 407-8033. International callers may access the call by dialing (201) 689-8033.

Participants should call in a few minutes before 2:00 p.m. Eastern Time. For those unable to attend the conference call, replays will be available on Versar's website, www.versar.com.

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, munitions response, and telecommunication and technology integration market areas.

VERSAR operates a number of web sites, including the corporate web sites, www.versar.com, www.geomet.com, www.viap.com, www.dtaps.com, www.adventenv.com, www.charronconsulting.com, and www.ppsgb.com.

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 June 29, 2012, 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.

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Contact:	Michael J. Abram	John Nesbett or Jennifer Belodeau
	Senior Vice President	Institutional Marketing Services (IMS)
	Versar, Inc.	(203) 972-9200
	(703) 642-6706	jnesbett@institutionalms.com
	mabram@versar.com

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

		As of
		September 28, 2012		June 29, 2012
		(unaudited)
ASSETS
Current assets
Cash and cash equivalents	$	10,589	$	8,012
Accounts receivable, net		19,826		25,598
Inventory		1,389		1,428
Prepaid expenses and other current assets		1,701		1,938
Tax receivable		105		---
Deferred income taxes		2,158		2,305
Total current assets		35,768		39,281
Property and equipment, net		3,088		3,341
Deferred income taxes, non-current		5		193
Goodwill		7,515		7,418
Intangible assets, net		2,208		2,283
Other assets		894		861
Total assets	$	49,478	$	53,377
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable	$	3,901	$	5,415
Accrued salaries and vacation		2,553		3,124
Other current liabilities		5,763		7,409
Income tax payable		---		677
Notes payable, current		250		333
Total current liabilities		12,467		16,958
Notes payable, non-current		667		667
Deferred income taxes		79		332
Other long-term liabilities		1,058		1,037
Total liabilities		14,271		18,994
Commitments and contingencies
Stockholders' equity
Common stock, $.01 par value; 30,000,000 shares
authorized; 9,723,399 shares and 9,645,149 shares issued; 9,458,825 shares and 9,391,575 shares outstanding		97		96
Capital in excess of par value		29,209		29,047
Retained earnings		7,808		6,963
Treasury stock, at cost (264,574 and 253,574 shares, respectively)		(1,202)		(1,166)
Accumulated other comprehensive loss; foreign currency translation		(705)		(557)
Total stockholders' equity		35,207		34,383
Total liabilities and stockholders' equity	$	49,478	$	53,377

VERSAR, INC. AND SUBSIDIARIES Condensed Consolidated Statements of Income (Unaudited - in thousands, except share amounts)

		For the Three-Months Ended
		September 28, 2012		September 30, 2011

GROSS REVENUE	$	23,551	$	33,284
Purchased services and materials, at cost		8,325		16,158
Direct costs of services and overhead		11,913		13,393
GROSS PROFIT		3,313		3,733
Selling, general and administrative expenses		1,925		2,352
Other expense		---		34
OPERATING INCOME		1,388		1,347
OTHER (INCOME) EXPENSE
Interest (income)		(1)		(29)
Interest expense		24		60
INCOME BEFORE INCOME TAXES		1,365		1,316
Income tax expense		520		492

NET INCOME	$	845	$	824
NET INCOME PER SHARE – BASIC	$	0.09	$	0.09
NET INCOME PER SHARE – DILUTED	$	0.09	$	0.09
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING
– BASIC		9,392		9,341
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING
– DILUTED		9,424		9,356