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Versar, Inc. (NYSEMKT:VSR)

F1Q09 Earnings Call

November 10, 2008 2:00 pm ET

Executives

James C. Dobbs - Senior Vice President, General Counsel, Secretary

Theodore M. Prociv - President, Chief Executive Officer, Director

Lawrence W. Sinnott - Chief Financial Officer, Chief Operating Officer, Executive Vice President, Treasurer

Analysts

[Harry Catchidorian] - Self Employed

David Starkey - Smith & Barney

[Vincent Stanton] - Wedbush Morgan

Jim Kennedy - Marathon Capital Management

[Bill Johnson]

[Brendon Rose - Linard Management]

Operator

My name is Sherry and I will be your conference operator today. At this time I would like to welcome everyone to the first quarter 2009 conference call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks there will be a question and answer session. (Operator Instructions) At this time I’ll turn the call over to Mr. James Dobbs.

James C. Dobbs

I’m James Dobbs, Versar’s General Counsel. With me are Versar’s President and CEO, Ted Prociv, and our Executive Vice President, Chief Operating Officer, and Chief Financial Officer, Larry Sinnott.

Before we begin let me make a brief statement about the contents of this call. Statements made on this call will include forward-looking statements which are based on management’s current expectations, estimates, forecasts and projections about the company’s business. These statements are forward-looking statements within the meaning of Section 27(a) of the Securities Act of 1933, Section 21(a) of the Securities Exchange Act of 1934, and the Private Securities Litigation Reform Act of 1995 and are subject to safe harbors created by such laws. Words such as expects, anticipates, plans and believes and similar expressions are intended to identify forward-looking statements. These statements are not guarantees of future performance and involved risks, uncertainties and assumptions which are difficult to predict. Therefore actual outcomes and results may differ materially from what is expressed on this call. We do not undertake to update publicly any forward-looking statements except as required by law. For a description of the factors that could cause actual results to differ materially from that anticipated on this call, you are referred to the company’s public filings including the Form 10K for fiscal year ended June 27, 2008.

Theodore M. Prociv

I want to welcome everybody to the call. As I reported recently in our previous investor conference last quarter, the state of the company is excellent. The future is bright; our backlog is a whopping $110 million, the strongest in our company’s history; we have no debt; and our cash on hand is well over $12 million. All of these factors contribute to good corporate strength position of stability. We’re very happy about the outcome of the company.

As many of you noticed the results of the first quarter were lower than prior years and this is primarily due to two issues that we’ve experienced.

One is simply the peaks and valleys that we see in our construction related work where last year we were finishing up a large recreational facility project. This year that project has gone past and we’re into other things. The strong backlog that we have however predicts that we will be in very good shape as we go into the future.

The second one was one we really couldn’t control. Having some of this cash on hand we invested a portion of it and we ended up experiencing a recall or a loss in one of our marketable securities. Our CFO, Larry Sinnott, will explain that to you in more detail later on in this conference call.

Our goal continues to be the growth of revenues and profits. That’s the strength of our company. What we cannot control and I wish we could is how equally we distribute these earnings and profits by quarters. In addition to that investment loss I mentioned to you, we experienced lower construction related work. However this is simply part and parcel of the cyclical nature of the work. Our backlog is large; we have a new manager that has just come on board that has a long history in the construction related businesses; and I expect that we’ll be seeing our numbers returning to normal and even probably improve over the following quarters.

In fact, recently we announced contracts of $22.4 million in additional construction management, $9 million for environmental work with the Corps of Engineers, and nearly $4 million with the Air Force for an energy conservation program. All of these are reflected in our future quarters. These awards are an affirmation of the confidence our clients have in Versar. I constantly keep in touch with them and comments are very good, the loyalty is very good and I believe that the repeat business will continue to come in both construction and environmental projects.

In addition we continue to actively seek opportunities with new clients on multiple projects which could greatly enhance our bottom line.

Also as I mentioned to you in the past, we are continuing to speak with principals of companies which are potentially candidates for us to either acquire or merge with in terms favorable to Versar. This is an ongoing project we hope will come to fruition.

Overall the big picture the way we see it is excellent. It’s going to get even better. I ask you to be patient and understanding. These are turbulent times. Many of you are following the economic situation and understand that things are a little difficult. I think we’re weathering the bad times very well and I really believe we’re going to come out of it very, very healthy.

I’m going to pass the baton over to Larry Sinnott at this point, the company’s COO and CFO, and he’ll cover in more detail the financial highlights.

Lawrence W. Sinnott

First I’m going to go through the financial highlights for the quarter and then go through the details on the financials.

As Ted mentioned earlier, the revenues were down 13% primarily due to the lower construction related work and the cyclical nature of that type of work. We were successful in the quarter obtaining an additional $22 million of construction related work as Ted just mentioned that is kicking off this quarter for a total of $71 million in new orders during the quarter, which is an outstanding new order quarter for us.

During the first quarter the company recorded a $352,000 loss on our marketable securities the company was holding with FISCO income plus funds. What happened is FISCO received an immediate demand margin call from its broker UBS. Rather than allowing the [inaudible] customary time to satisfy the margin call at the end of the day, UBS demanded that the funds be calls and premiums that were to take over the fund if they didn’t liquidate it within the next couple of hours. Usually the companies have within the day or the next following day.

The fund has since terminated the relationship with UBS and transferred all its assets to a new custodian. The fund is also pursuing legal action against UBS to cover its losses and the company will participate in such settlement. The company has taken steps to redeem all of its assets from the marketable securities and reinvesting the money in the primary bank due to the volatile nature of the market.

Our funded backlog is at record lows of $110 million and should provide a strong foundation for our future in FY09. We still have several large procurements and several more in the pipeline in FY09.

Our balance sheet and financial ratios remain strong. Our current ratio is 3.47 and debt-to-equity ratio is 0.4.

Going into details for the quarter, the gross revenue was roughly about $25 million which I just mentioned earlier was 13% lower in the first quarter compared to quarter one FY08. The lower revenue was due to the lack of follow-on municipal aquatic renovation work and slow construction work. As mentioned earlier we have obtained $22 million of new business starting in the second quarter of this year.

Purchase services in turn were lower by 25% during the quarter as primarily related to the subcontractor construction work that we do as part of providing that work.

Direct cost of services increased by 15% due to the increase in business growth in our professional services business; our Port Lewis job that we won out this time in the previous year; and the additional cost required to support the business growth efforts in our program management business segment.

Our gross profit decreased by 9% during the first quarter FY09 primarily due to the lower profitability in compliance and environmental programs business segment as a result of the lower municipal aquatic work, projected funding delays as well as some of the poor economic conditions that affect some of our municipality work.

Our SG&A increased by 15% due to higher business development and marketing costs during the quarter. At the end of quarter one FY09 our funded backlog again was at an all-time high and we are pumping out quite a bit of business activity in proposal development.

Operating income was approximately $1.14 million for the first quarter fiscal year 2009, a decrease of 34% from the prior fiscal year. The decrease is due to the lower revenues and higher SG&A costs as we just mentioned.

The loss of marketable securities that we just mentioned was $352,000. As mentioned we had given instructions to liquidate all those funds and return them to our overnight investment account that we currently are holding with United Bank. The impact of that loss is roughly about $0.02 per share.

Interest income for the first quarter FY09 was $9,000 lower primarily due to lower interest rates as compared to this time last year.

Income tax expense was lower due to the reduced earnings for the quarter. The effective income tax rate for FY09 quarter one and quarter one FY08 were 38% and 43% respectively.

Net income for the first quarter of fiscal year 2009 was $525,000 or $0.06 per share compared to just over $1 million and $0.11 per share the previous year.

With that I’ll turn it back over to Ted.

Theodore M. Prociv

You might be tired of hearing this but I’m going to tell you that we’re pleased with the results. We occasionally see these ebbs and flows of contracts. We anticipate a very strong recovery totally based on our signed backlog which again is the largest that we’ve ever experienced in the history of this company. Our focus continues to be on delivering both the top and bottom line results for the company for our shareholders. Our cash flow remains very, very strong. Our balance sheet continues to remain strong.

As a company we’re well positioned to both expand internally as well as explore good acquisitions to continue our growth. We continue to heavily invest in business development. This is one of the larger investments we’ve made and it’s starting to pay off. $110 million of backlog didn’t happen accidentally. It was based on the investments we’ve made in the last two years. We’ve increased some of those investments and we’re heading for larger and larger business volume.

I look forward to our next meeting and we’ll be following this conversation with the Q&A. I’m going to turn this back over to Mr. Jamey Dobbs.

James C. Dobbs

We’re ready to take your questions. Do we have any questions?

Question-and-Answer Session

Operator

(Operator Instructions) Our first question comes from [Harry Catchidorian] - Self Employed.

[Harry Catchidorian] - Self Employed

While I understand your description of the quarter as being excellent, I see that as a decreasing income per share. I don’t see that as being excellent when there’s a downturn.

Theodore M. Prociv

Our perspective on this is a longer-term perspective than just a quarter. Maybe I should have qualified that. As part of the transformation, our goal has been to continually increase our backlog to create the viable type of work that’ll keep this company moving. There are a number of reasons that details that happened in the past quarter which I would not consider negative but they’re just details that happened in the course of business. From our standpoint those are behind us and the rest of the year should be very, very successful.

[Harry Catchidorian] - Self Employed

This leads to the second question. All of the results; backlog, earnings, etc.; all eventually get assimilated and represented by stock price. The stock price we can go back many years and we’re not showing progress. We’re regressing and the report card is price per share. And that leads into another question. Why with that money on the books is Versar, and I bought these shares with my own hard-earned money, why isn’t the company investing money in Versar? Why isn’t the company buying back shares rather than risking the money in other investments? We could have bought 100,000 shares with that money.

Theodore M. Prociv

We’ve had investment banks consult with us on that issue. That issue has come up a number of times. We have been advised and we certainly agree with the advice that it would not be a good time for us to buy back shares. One of our biggest problems in the market is liquidity. We don’t have a sufficient number of shares out there to be traded. The shares that are out there are being held and not traded. So by pulling back even more shares we would stifle the growth of the stock.

To answer your first question as to the stock. You just have to look at the whole market conditions that are going on out there. I track 19 other competitive companies that are in the CNE range. Those companies no more than three months ago were operating at an average PE of 22+. Today they’re operating at a PE of 8. So the entire market space has gone down that we’ve been tracking. I don’t know that there’s anything that anybody can explain about this market and certainly I’m not an expert on this market but I know that I’m not alone in this market. I don’t know what I can do better to get someone to come back.

Recently we have had a review by R.L. Lafferty, who is providing us some coverage, and if you look at their report, they predict some pretty good numbers for us. But again the report was actually done before the market crashed. So I don’t know how that’s going to affect us in general.

We announced the yearly results last year. They looked excellent, everything was positive and our stock went down half a dollar a share.

[Harry Catchidorian] - Self Employed

Yes. I’ve been a shareholder since it was $15 a share.

Theodore M. Prociv

It’s hard for us to predict what’s going on. The market started that decline just about the time that we peaked and no matter what our performance has been it seems that the stock price does not respond.

[Harry Catchidorian] - Self Employed

In the area of liquidity I appreciate that and understand that fully which leads me to another comment. That takeover of other companies scares the heck out of me because that would certainly reduce any cash on hand. I go back to my point that Versar is such a good company. Put the money right into Versar stock versus some “unknown” other entity.

Theodore M. Prociv

That’s a good point.

[Harry Catchidorian] - Self Employed

The other thing is that I know there’s expansion in the Manila office and expansion in the Abu Dhabi office. Where’s the payback? Where’s the return on investment on those? It costs a lot of money to go to Abu Dhabi and Manila. When are we going to start seeing some contracts written?

Theodore M. Prociv

The answer’s in the mail.

[Harry Catchidorian] - Self Employed

My last comment is I’m from Massachusetts. They’re going to be spending an awful lot of money on bridges here, infrastructure. It would be nice to have some domestic expansion. I know you’re doing a little in the Midwest, you did some stuff in California, but Massachusetts is ripe and it’s a short shuttle flight up.

Lawrence W. Sinnott

What Ted had mentioned earlier, the $22 million of construction work, that’s all [COINS] construction work.

Theodore M. Prociv

[COINS] meaning here in the United States.

[Harry Catchidorian] - Self Employed

Yes. I’m retired DOD. I’m familiar with the BRAC and those terminologies.

Theodore M. Prociv

The new hires we’re making are also for domestic-based operations. Right now there’s a true slump in the municipal business. All the infrastructure work will be done by municipal organizations; however they’re all suffering from budget cuts as you can see on the news, the reason being that they counted on all their income from rising real estate. Well, it’s gone.

The new economic stimulus act is supposed to focus on infrastructure so we’re keeping our contacts open. Everywhere we have an office we’re keeping our contacts open with the local municipalities hoping to be the first ones on the list when they get their money. But at this point it’s very bleak right now and only the Feds can bail this one out.

Operator

Our next question comes from David Starkey - Smith & Barney.

David Starkey - Smith & Barney

On this advice related to your stock buy-back, I think that would have been good advice when the stock was $12 or $13. But with it under $3 and really below book value here you really need to look at this and put $3 million of that $12 million into your stock at a 10% off of the market and increase your theoretically shareholder value by 10% right off the bat especially for this gentleman that was just talking. We definitely need to recommend you look at that. Stay with what you know and you know your own company and this is a great deal where it is right here. That’s my comment on that.

A quick question. Where are you invested in this fund? How much of that cash is in this fund which has been giving you troubles?

Lawrence W. Sinnott

There was roughly $1.2 million in it right now.

David Starkey - Smith & Barney

Is this fund liquidated at this point or is there still a potential for an additional write-down there?

Lawrence W. Sinnott

They had moved all the funds to treasuries and they’re basically going to be going back into there because that’s required in their prospective. They’re going to be going back into their investing strategy. Our redemption on the fund will be done on the 21st of November.

David Starkey - Smith & Barney

That redemption is taking you out of this fund completely? Is that what I understand?

Lawrence W. Sinnott

Yes.

David Starkey - Smith & Barney

You’ll be back in a money market type fund or a CD type investment or something like that where you’d have no principal risk?

Lawrence W. Sinnott

Correct.

David Starkey - Smith & Barney

You mentioned your United Bank. Is that a publicly-traded bank? How’s the financial condition of that bank and are you aware of the insurance levels there so we have this money in a place where you’re properly insured?

Lawrence W. Sinnott

United Bank’s a very strong and stable company. They are public. They’re a [tipper] UBSI. They have been minimally impacted by the financial crisis that’s happened. They did have a small investment that was impacted of about $10 million that they’ve written off, but it hasn’t impacted them. Our relationship with them is also very strong. We have talked to them during this whole process about what’s going on and where they are. We constantly monitor this stuff.

David Starkey - Smith & Barney

Do you know their stock symbol or where their stock is trading at right now or are there quite a few United Banks?

Lawrence W. Sinnott

I believe it’s UBSI.

David Starkey - Smith & Barney

On the new business are you going to start seeing the show up in the current quarter? Do you look for revenues to perk back up in the current quarter?

Lawrence W. Sinnott

I’d say the larger amount of the impact will be on the back half of the year because it does take some time to start up some of these construction contracts. We are moving forward on three or four of them but we’ve got to get the bonds in place and get the work plans and everything set up before we would mobilize out in the field.

David Starkey - Smith & Barney

When is your next Board meeting and can you make sure that they’re going to be discussing a potential stock buy-back in that meeting?

Lawrence W. Sinnott

It’s coming up here within the next 10 days.

David Starkey - Smith & Barney

You’re always talking about what a great deal the stock is but I haven’t seen for months and months and months any insider directors or higher level people buying any stock on the market. I would think it would be a good idea to try to get out there when your blackout periods are out and try to do some of that while the stock’s at these levels; give those shareholders that bought at $15 some votes of confidence that you guys are in there putting your money in there.

Lawrence W. Sinnott

We certainly discuss those types of things and we come out of blackout two days from now, right?

Theodore M. Prociv

Two more business days which include tomorrow because the markets open and the following day. So it would be Thursday and Friday.

Operator

Our next question comes from [Vincent Stanton] - Wedbush Morgan.

[Vincent Stanton] - Wedbush Morgan

What impact do you think the change in political administration will have on your business, if any?

Theodore M. Prociv

That’s a tough one. I’ll have to tell you that if everything goes the way we hear it’s going to go, and we’ve got eyes and ears running all over Congress trying to figure out what’s going on right now, then infrastructure will become the jobs program for the future. I think it’s going to be a way to revive the economic and we’re smack obviously in the middle of being positioned for that the way it is. Of course nobody knows what the president-elect has in mind for corporations and industries. That we can’t predict at all.

[Vincent Stanton] - Wedbush Morgan

Could you tell us what your revenue and profit goals are for the year in terms of growth?

Theodore M. Prociv

My General Counsel’s nodding no here. We are not comfortable enough to project where we’re going to be. We’re not required to. We are pushing, you’ll have to take our word for it, for the best performance we possibly can. We last year met our goals. The year before we met our goals. So two years in a row we have met the targets. We have a very strong pay-for-performance bonus program which keeps people on their toes. The only time that we as a management team get anything is if we meet and exceed our goals.

[Vincent Stanton] - Wedbush Morgan

Could you provide some update on any type of BRAC revenue?

Theodore M. Prociv

We have a couple of very large contracts that we recently won; one in Norfolk which will be virtually all BRAC. That’s for the Army. We have another one called [SAYTOCK] which was very hard fought and we’ve already gotten work out of it. [SAYTOCK] is out of Tyndall Air Force. It’s Panama City, Florida.

We’re positioned for a lot of BRAC work. The problem is that BRAC financing and BRAC funding is being bounced against Iraq funding. Until Congress gets a better grip on that we’re not going to see tremendous waves of that kind of money although we do have the first seeds of that money coming in right now.

Operator

Our next question comes from Jim Kennedy - Marathon Capital Management.

Jim Kennedy - Marathon Capital Management

Relative to BRAC, the backlog, defense spending, etc. is the spending on BRAC designed to actually reduce the overall spending of the military in this country? In other words if I go in and shut down a base, am I not indeed saving money or not?

Theodore M. Prociv

Yes; kind of in a different way. The base closure; the program was designed to provide the financing for modernization of the services. That was the whole point of the base closing. In some cases it’s proven to do well and in some cases it’s been very hard to even move some of those bases because they’re not really in desirable places.

The DOD now is looking at more rebasing than closure because they’re finding a lot of these units coming back from Iraq really don’t have a home. So now we’re seeing a shift where it’s becoming more what we call SRM, sustainability, restoration and modernization, where we’re actually taking the bases that might have been closed and rebuilding them for another mission. That would be one of the units coming back from Iraq.

So these contracts that we’ve been announcing lately that are domestic are tied to those two missions; either the closure or the rebasing. How much the DOD will benefit financially from these bases, I don’t know and there are some skeptics who say probably not much at all.

Jim Kennedy - Marathon Capital Management

In your domestic infrastructure, is it all military? I know you’ve got a playground project and things like that. How would you characterize your domestic infrastructure business and is there much for you to go after in this environment?

Theodore M. Prociv

The domestic infrastructure as I mentioned earlier is suffering right now because of the tax base. It’s mostly run by the municipalities.

Jim Kennedy - Marathon Capital Management

But what is your role? I mean, how would you classify yourself because if I’m reading things correctly with the change in administration, we are going to see additional spending as an earlier caller said on bridges, infrastructure, etc? Are you playing in that area or are you playing in a little different area?

Theodore M. Prociv

In each of the locations we’re in we have a small amount of I would say municipal work. We have a way like for instance here in Fairfax County we do all their storm water stuff and we do some of their underground storage tanks and that kind of things. So we’re playing in a small way; some of it environmental; some of it project management in a lot of different places.

We have a completely different marketing approach for when the money really shows up. When the money shows up, it’s going to show up as essentially federal grants which we typically don’t go after. But we’re going to have to work with the municipalities to make sure that they’re canned in such a way that we can actually bid on them.

Jim Kennedy - Marathon Capital Management

So you are planning on bidding on it one way or the other?

Theodore M. Prociv

Absolutely. Now again it depends on how this economic stimulus bill turns out. If our consultants are right and it’s all infrastructure, absolutely. There are two kinds of infrastructure we’re interest in. One is decaying and the other one is the infrastructure due to the increasing population. Particularly everything that we’ve learned in the SRM business, we’re ready to do that. Our program management guys are ready to do that. It’s just a matter of getting the money on the table.

Jim Kennedy - Marathon Capital Management

Ted, can you characterize a little bit this record backlog? How much is military? How much is foreign? How much is domestic? How much is nonmilitary?

Theodore M. Prociv

I’m actually going to punt and give that to Larry because I think I know the numbers but he’s on top of it every day.

Lawrence W. Sinnott

Roughly $40 million to $45 million is international. There’s probably about $30 million that’s US federal based construction type of activities. Only about 5% of our work is commercial. Then we have a number of things that are state and local that we do pretty much across the country where we work for various different municipalities. There is a heavy DOD component and I’d say probably roughly about $40 million of that is in our international work that we use to support DOD in Iraq and Afghanistan in their Title 2 as well as their army [inaudible] that we do out there.

Jim Kennedy - Marathon Capital Management

Only $40 million of your $110 million is international?

Lawrence W. Sinnott

Right.

Jim Kennedy - Marathon Capital Management

In the growth of that, where did you see most of the growth? Was it in international or domestic over this past couple of quarters?

Lawrence W. Sinnott

I’d actually say both. There are a lot of other opportunities that we’re chasing in both arenas.

Theodore M. Prociv

The domestic has recovered very nicely. It was at least on the defense side pretty much dead during the early parts of Iraq but we’re seeing a real shift in Iraq, Afghanistan and US with a lot more determination by the federal government to grow those. For instance we see a decline in Iraq but a real buildup in Afghanistan. We see opportunities in the Abu Dhabi area and I think we’re going to be very successful on the commercial side there because we’re building the right kind of bridges.

Jim Kennedy - Marathon Capital Management

How much of the $40 million international is nonmilitary or is commercial? Any of it?

Lawrence W. Sinnott

I’d say right now it’s about 10%.

Jim Kennedy - Marathon Capital Management

So about $4 million?

Lawrence W. Sinnott

Right.

Jim Kennedy - Marathon Capital Management

Are those recent wins?

Lawrence W. Sinnott

No. We won them probably about six months ago.

Jim Kennedy - Marathon Capital Management

Ted, I know you don’t want to give forward-looking guidance or whatever but if we hold this call a year from now and I’ll assume that your military backlog stays the same internationally at $40 million. Would you be unhappy if you didn’t have $10 million or $20 million in the backlog for commercial international projects?

Theodore M. Prociv

Yes. I would be unhappy because we have a pretty healthy pipeline there and that pipeline so far we see the money there now. There’s another issue happening that we really can’t control and that’s the price of oil. That pipeline was built based on an estimate of about $30 a barrel of oil. If oil drops below that, that work could dry up. But at least we have a good indicator. We can keep an eye on it. I don’t think it’ll ever get back to $30 but who knows.

Jim Kennedy - Marathon Capital Management

I’d just like to weigh in on the stock buy-back. I look at it just the opposite. I think you guys ought to be paying the stock dividend and why not if you’re not going to pay a cash dividend or you’re not going to use your cash to buy back shares, why not give a 5% stock dividend? It affects your per share but by 4% or 5%. What do you have? 9.9% out. And then that also increases your liquidity and it gives people some extra paper.

Theodore M. Prociv

I need your help here Jim. I’ll get back to you on that.

Jim Kennedy - Marathon Capital Management

Just a thought. Anyway I’d rather see a stock dividend than a buy-back personally but that’s just my opinion.

Theodore M. Prociv

We’re just in discussion on that. It’s going to take a little selling to some of our folks on the Board.

Jim Kennedy - Marathon Capital Management

Give me a holler if I can help.

Operator

Our next question comes from [Bill Johnson].

[Bill Johnson]

Of your $40 million international, how much of that’s coming from Iraq this year?

Lawrence W. Sinnott

Probably about $30 million of it.

[Bill Johnson]

So about 30% of your total backlog is accounted for in Iraq. How’s the prognosis for Iraq the next few years though?

Lawrence W. Sinnott

There are all sorts of opportunities. As Ted mentioned we expect to have Air Force wind down but then there’s the transition over to the Army that we’re working on as well as we have the Army client that we work with.

[Bill Johnson]

You have that one secured?

Lawrence W. Sinnott

We’ve been working with them for almost three years as you well know. It’s been a very full relationship.

[Bill Johnson]

I just want to make sure. You had about $12 million cash in the bank, we’ve had one investment at a loss, and there are no acquisitions on the books so far?

Lawrence W. Sinnott

We’re pursuing all sorts of different opportunities but we’re not at a point where we can announce anything.

Operator

Our next question comes from [Brendon Rose - Linard Management].

[Brendon Rose - Linard Management]

Could you just share with us what your investment policies are for working capital and if they have changed since this recent loss that you’ve experienced?

Theodore M. Prociv

The investment strategy has always been preservation of our capital and that was our strategy when we looked at the marketable securities. Because of the unprecedented changes that happened in the market that is what caused the problem for us. The strategy has not changed. But we’ve always been very conservative in how we look at our cash and how it’s managed and how we invest it. We are looking to get further earnings than we’re getting in overnight repos. We’re looking currently at a combination of CDs and looking at tax advantaged opportunities right now.

Operator

At this time there are no further questions in queue.

James C. Dobbs

There being no further questions we want to thank you for being on the call. We will try to continue a dialogue with our investors and potential investors and look forward to speaking with you in approximately three months. Thank you.

Operator

This concludes today’s conference call. You may now disconnect.

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Source: Versar, Inc. F1Q09 (Quarter End 9/26/08) Earnings Call Transcript
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