-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, eYd6VXfJgZcdOgeBsv0HmjjTEY7pFgnpoLr9SDjhP6BVYYPUbyuimE50qiqGAl/h To4eGyvM+UkZL7Jwt3A3zA== 0000950123-94-001491.txt : 19940915 0000950123-94-001491.hdr.sgml : 19940915 ACCESSION NUMBER: 0000950123-94-001491 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19940729 FILED AS OF DATE: 19940909 FILER: COMPANY DATA: COMPANY CONFORMED NAME: VOLT INFORMATION SCIENCES INC CENTRAL INDEX KEY: 0000103872 STANDARD INDUSTRIAL CLASSIFICATION: 7363 IRS NUMBER: 135658129 STATE OF INCORPORATION: NY FISCAL YEAR END: 1031 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-03932 FILM NUMBER: 94548495 BUSINESS ADDRESS: STREET 1: 1133 6TH AVENUE STREET 2: 24TH FLOOR CITY: NEW YORK STATE: NY ZIP: 10036 BUSINESS PHONE: 2127021270 MAIL ADDRESS: STREET 1: 1133 6TH AVENUE STREET 2: 24H FLOOR CITY: NEW YORK STATE: NY ZIP: 10036 FORMER COMPANY: FORMER CONFORMED NAME: VOLT TECHNICAL CORP DATE OF NAME CHANGE: 19680913 10-Q 1 FORM 10-Q 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 10-Q --- /X / Quarterly Report Pursuant to Section 13 or 15(d) of the Securities - - --- Exchange Act of 1934 For Nine Months Ended July 29, 1994 Or --- / / Transition Report Pursuant to Section 13 or 15(d) of the Securities - - --- Exchange Act of 1934 For the transition period from ___________________ to ____________________ Commission File No. 1-9232 VOLT INFORMATION SCIENCES, INC. -------------------------------------------- (Exact name of registrant as specified in its charter) New York 13-5658129 - - --------------------------------- ------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 1221 Avenue of the Americas, New York, New York 10020 - - ---------------------------------------------------- ----------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (212) 704-2400 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, and (2) has been subject to such filing requirements for the past 90 days. Yes X No ----- ----- The number of shares of Common Stock, $.10 par value, outstanding as of September 10, 1994 was 4,803,026. 2 PART I - Financial Information VOLT INFORMATION SCIENCES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
Nine Months Ended Three Months Ended --------------------------- --------------------------- July 29, July 30, July 29, July 30, 1994 1993 1994 1993 ---------- ---------- --------- --------- (Dollars in thousands) REVENUES: Sales of services $426,025 $357,512 $149,999 $124,670 Sales of products 44,151 38,986 15,938 14,364 Equity in income of joint ventures--Note F 3,246 4,420 2,256 1,708 Gain on sale of a joint venture--Note F 9,770 Interest income 944 1,036 402 275 Gains (losses) on sale of securities (7) 168 1 Other income (expense), net--Note B (418) 1,083 (217) 316 --------- --------- --------- --------- 483,711 403,205 168,379 141,333 --------- --------- --------- --------- COSTS AND EXPENSES: Cost of sales Services--Note J 395,499 335,143 137,803 116,750 Products 28,379 23,872 9,997 8,577 Selling and administrative 29,755 27,890 10,098 9,994 Research, development & engineering 5,863 5,281 2,286 1,743 Depreciation and amortization 7,961 7,671 2,657 2,508 Foreign exchange (gain) loss - net 45 162 (76) 26 Interest 5,766 8,149 1,728 2,703 --------- --------- --------- --------- 473,268 408,168 164,493 142,301 --------- --------- --------- --------- Income (loss) before income tax provision (benefit), extraordinary item and cumulative effect of a change in accounting 10,443 (4,963) 3,886 (968) Income tax provision (benefit) --Note H 4,311 (1,640) 1,592 (313) --------- --------- --------- --------- Income (loss) before extraordinary item and cumulative effect of a change in accounting 6,132 (3,323) 2,294 (655) Extraordinary item--Note I (271) (82) Cumulative effect of a change in accounting for income taxes--Note H 959 --------- --------- --------- --------- Net income (loss) $5,861 $(2,364) $2,212 $(655) ========= ========= ========= =========
(Per Share Data) Income (loss) before extraordinary item and cumulative effect of a change in accounting $1.28 $(.69) $.48 $(.14) Extraordinary item (.06) (.02) Cumulative effect of a change in accounting for income taxes .20 --------- --------- --------- --------- Net income (loss) $1.22 $(.49) $.46 $(.14) ========= ========= ========= ========= Number of shares used in computation -- Note G 4,802,652 4,797,809 4,803,026 4,802,026 ========= ========= ========= =========
See accompanying notes. - 2 - 3 VOLT INFORMATION SCIENCES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
July 29, October 29, 1994 1993 (a) ----------- ------------ (Dollars in thousands) ASSETS CURRENT ASSETS Cash and cash equivalents $26,112 $41,081 Short-term investments at lower of cost or market 5,652 2,260 Trade accounts receivable less allowances of $3,983 (1994) and $3,960 (1993)--Note B 81,212 73,724 Inventories--Note C 26,993 28,539 Recoverable income taxes 3,169 4,695 Deferred income taxes 5,002 3,402 Prepaid expenses and other assets 5,677 5,121 -------- -------- TOTAL CURRENT ASSETS 153,817 158,822 MARKETABLE SECURITIES--at lower of cost or market 4,130 5,502 INVESTMENTS in joint ventures--Note F 13,223 15,337 PROPERTY, PLANT AND EQUIPMENT-- at cost--Note D Land and buildings 33,326 33,192 Machinery and equipment 42,778 41,767 Leasehold improvements 2,776 2,393 -------- -------- 78,880 77,352 Less allowances for depreciation and amortization 30,741 30,709 -------- -------- 48,139 46,643 DEPOSITS, RECEIVABLES AND OTHER ASSETS 1,982 3,652 INTANGIBLE ASSETS--net of accumulated amortization of $3,347 (1994) and $2,901 (1993) 5,490 5,936 -------- -------- $226,781 $235,892 ======== ========
July 29, October 29, 1994 1993 (a) -------------- --------------- (Dollars in thousands) LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Notes payable to banks $6,852 $6,207 Current portion of long-term debt--Note D 15,400 20,000 Accounts payable 24,148 26,402 Accrued expenses Wages and commissions 18,199 17,268 Taxes other than income taxes 7,817 5,954 Insurance 16,750 9,344 Other 3,768 5,995 Customer advances and other liabilities 13,883 6,563 -------- -------- TOTAL CURRENT LIABILITIES 106,817 97,733 LONG-TERM DEBT--Note D 32,784 58,095 DEFERRED INCOME TAXES 3,273 2,386 -------- -------- 142,874 158,214 STOCKHOLDERS' EQUITY--Notes D, E and F Preferred stock, par value $1.00 Authorized--500,000 shares; issued--none Common stock, par value $.10 Authorized--15,000,000 shares; issued - 7,789,580 shares 779 779 Paid-in capital 43,830 43,823 Retained earnings 85,743 79,882 Unrealized loss on marketable securities (25) Unrealized foreign currency translation adjustment (331) (706) -------- -------- 129,996 123,778 Less common stock held in treasury at cost--2,986,554 shares (1994) and 2,987,554 shares (1993) 46,089 46,100 -------- -------- 83,907 77,678 -------- -------- $226,781 $235,892 ======== ========
(a) The Balance Sheet at October 29, 1993 has been derived from the audited financial statements at that date. See accompanying notes. - 3 - 4 VOLT INFORMATION SCIENCES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Nine Months Ended -------------------------------- July 29, July 30, 1994 1993 ----------- ------------- (Dollars in thousands) CASH FLOWS FROM OPERATING ACTIVITIES Net income (loss) $5,861 $(2,364) Adjustments to reconcile net income (loss) to cash provided by operating activities: Extraordinary item 271 Cumulative effect of a change in accounting (959) Depreciation and amortization 7,961 7,671 Equity in income of joint ventures (3,246) (4,420) Gain on sale of a joint venture (9,770) Distributions from joint ventures 1,153 2,572 Accounts receivable provisions 1,432 1,387 Amortization of deferred debenture costs, debt discounts and other deferred charges 534 470 (Gains) losses on foreign currency translation 204 (936) Gains on dispositions of fixed assets (1) (19) Deferred income tax expense (benefit) (953) 115 (Gains) losses on sales of securities 7 (168) Other 28 (6) Changes in operating assets and liabilities: Increase in accounts receivable (9,185) (2,344) (Increase) decrease in inventories 1,546 (3,678) (Increase) decrease in recoverable income taxes 1,700 (3,342) Increase in prepaid expenses and other current assets (535) (1,312) Decrease in deposits, receivables and other assets 1,252 6,103 Decrease in accounts payable (516) (1,257) Increase in accrued expenses 7,979 988 Increase in customer advances and other liabilities 7,241 6,539 Decrease in income taxes payable (417) --------- --------- NET CASH PROVIDED BY OPERATING ACTIVITIES 12,963 4,623 --------- ---------
- 4 - 5 VOLT INFORMATION SCIENCES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS--CONTINUED (UNAUDITED)
Nine Months Ended ----------------------------- July 29, July 30, 1994 1993 --------- --------- (Dollars in thousands) CASH FLOWS FROM INVESTING ACTIVITIES Sales of investments 6,851 1,827 Maturities of investments 1,949 800 Purchases of investments (10,888) (6,316) Proceeds from disposal of property, plant and equipment 86 126 Purchases of property, plant and equipment (11,326) (6,277) Investment in joint venture (1,690) Proceeds from the sale of a joint venture 16,383 -------- -------- NET CASH PROVIDED BY (APPLIED TO) INVESTING ACTIVITIES 1,365 (9,840) -------- -------- CASH FLOWS FROM FINANCING ACTIVITIES Repayment of long-term debt (30,000) (5,045) Proceeds from notes payable to banks 931 1,354 -------- -------- NET CASH APPLIED TO FINANCING ACTIVITIES (29,069) (3,691) -------- -------- Effect of exchange rate changes on cash (228) 542 -------- -------- NET DECREASE IN CASH AND CASH EQUIVALENTS (14,969) (8,366) Cash and cash equivalents, beginning of period 41,081 28,557 -------- -------- CASH AND CASH EQUIVALENTS, END OF PERIOD $26,112 $20,191 ======== ======== SUPPLEMENTAL INFORMATION Cash Paid Interest $8,196 $10,457 Income taxes (net of refunds) $3,582 $2,037
See accompanying notes. - 5 - 6 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) Note A--Basis of Presentation The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with the instructions for Form 10-Q and Article 10 of Regulation S-X and, therefore, do not include all information and footnotes necessary for a fair presentation of financial position, results of operations and cash flows in conformity with generally accepted accounting principles. In the opinion of management, the accompanying unaudited condensed consolidated financial statements contain all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation of the Company's financial position at July 29, 1994 and results of operations for the nine and three months ended July 29, 1994 and July 30, 1993 and cash flows for the nine months ended July 29, 1994 and July 30, 1993. Operating results for the nine and three months ended July 29, 1994 are not necessarily indicative of the results that may be expected for the fiscal year ending October 28, 1994. These statements should be read in conjunction with the financial statements and footnotes included in the Company's Annual Report on Form 10-K for the year ended October 29, 1993. The accounting policies used in preparing these financial statements are the same as those described in the Company's Annual Report on Form 10-K. The Company's fiscal year ends on the Friday nearest October 31. Note B--Accounts Receivable In October 1993, the Company entered into a three-year agreement to sell, on a limited recourse basis, up to $25,000,000 of undivided interests in a designated pool of certain eligible accounts receivable. As collections reduce previously sold undivided interests, new receivables may be sold up to the $25,000,000 level. At July 29, 1994, $25,000,000 of accounts receivable has been sold under this agreement. The sold accounts receivable are reflected as a reduction of receivables in the accompanying balance sheets. The Company pays fees based on the purchaser's borrowing costs incurred on short-term commercial paper which financed the purchase of receivables. Other income (expense) in the accompanying 1994 statements of operations reflects $1,118,000 and $410,000 for such fees in the nine and three months ended July 29, 1994, respectively. The purchaser may terminate the agreement on a minimum of six months' notice. In addition, the agreement may be terminated if the Company does not maintain a minimum tangible net worth, as defined, or exceeds a maximum ratio of debt to tangible net worth. - 6 - 7 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)--CONTINUED Note C--Inventories Inventories consist of:
July 29, October 29, 1994 1993 --------- ---------- (Dollars in thousands) Services: Accumulated unbilled costs on: Service contracts $9,015 $9,818 Long-term contracts 9,097 11,409 ------- ------- 18,112 21,227 ------- ------- Products: Materials 1,731 1,497 Work-in-progress 1,696 942 Service parts 1,214 968 Finished goods 4,240 3,905 ------- ------- 8,881 7,312 ------- ------- Total $26,993 $28,539 ======= =======
The cumulative amounts billed, principally under long-term contracts, of $88,201,000 at July 29, 1994 and $53,371,000 at October 29, 1993 are credited against the related costs in inventory. Substantially all of the amounts billed have been collected. - 7 - 8 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)--CONTINUED Note D--Long-Term Debt Long-term debt consists of the following:
July 29, October 29, 1994 1993 --------- -------- (Dollars in thousands) 12-3/8% Senior Subordinated Debentures, due July 1, 1998-- net of unamortized discount of $71,000 - 1994 and $160,000 - 1993 (a) $32,784 $62,695 Mortgage Payable, due December 22, 1994 (b) 15,400 15,400 ------- ------- 48,184 78,095 Less amounts due within one year 15,400 20,000 ------- ------- Long-Term Debt $32,784 $58,095 ======= =======
(a) The debentures provide for interest to be paid semi-annually on January 1 and July 1 and are redeemable at the option of the Company in whole or in part, at 100% plus accrued interest. In October 1993, as a result of a financing agreement (see Note B), the Company called for the redemption and, in November 1993, redeemed $20,000,000 principal amount of debentures. In May 1994, the Company redeemed an additional $10,000,000 of the debentures which, together with previously redeemed and repurchased debentures, satisfied all future sinking fund requirements. The early redemptions, at par, resulted in an extraordinary loss of $271,000, net of income taxes, due to the write-off of related discount and issuance costs. The remaining $32,855,000 principal amount is due July 1, 1998. The debentures are subordinated to all existing and future senior indebtedness (as defined) of the Company. At July 29, 1994, the amount available for dividends, pursuant to the terms of the indenture under which the debentures are issued, was $20,582,000 and, if no dividend payments are made, the amount available for capital stock repurchases was $30,582,000. However, under the terms of the financing agreement (see Note B), at July 29, 1994, only $12,863,000 was available for such restricted payments. (b) The mortgage payable, secured by a deed of trust on land and a building (book value at July 29, 1994 - $14,900,000), bears interest at 1/2% per annum above the Chemical Bank base rate or 1-1/2% per annum above LIBOR plus certain additional charges, at the option of the Company. Interest (5.3% at July 29, 1994) is payable monthly with no principal payments required until maturity at December 22, 1994. The obligation is of a subsidiary and is guaranteed by the Company. The Company has reached an agreement in principle to refinance $10,000,000 of the $15,400,000 mortgage liability, the balance of which will be repaid by the Company. - 8 - 9 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)--CONTINUED Note E--Stockholders' Equity Changes in the major components of Stockholders' Equity for the nine months ended July 29, 1994 are as follows:
Common Paid-In Retained Treasury Stock Capital Earnings Stock ------- ------- -------- -------- (Dollars in thousands) Balance at October 29, 1993 $779 $43,823 $79,882 $(46,100) Stock award-1,000 shares 7 11 Net income for the nine months 5,861 -------- -------- -------- -------- Balance at July 29, 1994 $779 $43,830 $85,743 $(46,089) ======== ======== ======== ========
The other components of Stockholders' Equity are a valuation allowance for the unrealized loss on marketable securities and an unrealized foreign currency translation adjustment due to the Company's investment in its Australian joint venture, whose functional currency is the Australian dollar. Note F--Summarized Financial Information of Joint Ventures In July 1994, the Company entered into a long-term joint venture agreement to publish the official White Pages, Yellow Pages and Street Guides for Rio de Janeiro. The Company paid $1,690,000 to acquire a 50% interest in Telelistas Editora Ltda., a Brazilian company which recently obtained a contract to publish Rio's telephone directories on behalf of TELERJ, the government-owned telephone company in Rio. The agreement requires the Company to invest up to an additional $6,500,000 (representing 75% of the agreed initial financing by the venturers) in the joint venture over the next twelve months as well as to provide technology, expertise and key personnel in directory production, sales and marketing. Effective February 1994, the Company's 50% interest in Pacific Volt Information Systems, a joint venture with a subsidiary of Pacific Bell Directory was redeemed by the joint venture for approximately $16,400,000. Pacific Volt Information Systems composes telephone directories in California for Pacific Bell Directory under a contract expiring December 31, 1996. The sale of the Company's interest resulted in a gain of $9,770,000 ($5,760,000, net of income taxes, or $1.20 per share). - 9 - 10 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)--CONTINUED Note F--Summarized Financial Information of Joint Ventures--(Continued) The Company owns a 12-1/2% interest in a corporate joint venture formed in 1991 with Telstra Corporation Ltd. (Telstra), the Australian Government-owned telephone company, and others. The joint venture assumed the responsibility throughout Australia for the marketing, sales, and compilation functions of all yellow page directories for Telstra under the terms of a twelve-year contract. The agreement for the venture provided that the Company's share of profits or losses from the joint venture in its initial term of operations through April 30, 1993 could exceed 12-1/2%, based on sales levels achieved. During the nine months ended July 30, 1993 based on the venture's sales, the Company's share of the venture's profits amounted to $2,391,000, of which $740,000 exceeded 12-1/2% of the venture's net income. The venture earns a major portion of its revenues and significantly all of its profits in the Company's second and third fiscal quarters. The Company's equity in income of the joint ventures for the nine months ended July 30, 1993 also reflects the reversal of a tax liability as a result of the completion of a tax examination of a 50% owned inactive Australian joint venture. Consolidated retained earnings at July 29, 1994 included $5,176,000 representing the undistributed earnings of the joint ventures. Income taxes have been paid or provided for on such earnings. The following summarizes the financial information of the joint ventures:
July 29, 1994 October 29, 1993 --------------------------------- --------------------------------- (Dollars in thousands) Company's Company's Total Equity Total Equity ---------- ------------ ----------- ------------ Current assets $265,555 $191,302 Noncurrent assets 16,061 17,852 Current liabilities (217,426) (160,110) -------- -------- Equity of combined joint ventures $64,190 $49,044 ======== ======== Equity of Australian joint ventures (a) $61,289 $11,559 $35,789 $8,670 Equity of Brazilian joint venture (b) 2,901 1,664 Equity of United States joint venture 13,255 6,627 Other capitalized costs, net 40 -------- -------- -------- -------- $64,190 $49,044 ======== ======== Investments in joint ventures $13,223 $15,337 ======== ========
(a)-Pursuant to the Australian venture agreement, the initial capital contributions of all venturers, other than Telstra, exceeded their proportionate share of ownership interest in the corporate joint venture. The agreement provides that, upon liquidation of the venture, the venturers will be entitled to recover such excess contributions from the net assets of the venture. (b)-Pursuant to the Brazilian joint venture agreement, the initial contributions of the Company will exceed its proportionate share of ownership interest in the joint venture. The agreement provides that as net assets of the joint venture become available, or upon liquidation of the joint venture, the Company will be entitled to recover such excess contributions from the net assets of the joint venture. - 10 - 11 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)--CONTINUED Note F--Summarized Financial Information of Joint Ventures--(Continued)
Nine Months Ended -------------------------------------------------------------------------- July 29, 1994 July 30, 1993 ------------------------------- --------------------------- (Dollars in thousands) Company's Company's Total Equity Total Equity -------- ------------ --------- ------------ Revenues $414,247 $386,066 Costs and expenses 380,414 361,098 Income tax provision 11,304 10,014 -------- -------- Income before cumulative effect of a change in accounting 22,529 14,954 Cumulative effect of a change in accounting for Australian income taxes (a) 5,688 -------- -------- Net income $22,529 $20,642 ======== ======== Income of Australian joint ventures before cumulative effect of a change in accounting $21,109 $2,611 $11,535 $2,710 Net loss of Brazilian joint venture (52) (26) Net income of United States joint venture 1,472 661 3,419 1,710 -------- -------- -------- -------- $22,529 $14,954 ======== ======== Company's equity in income of joint ventures $3,246 $4,420 ======== ========
(a) During the first quarter of fiscal 1993, the Company's Australian corporate joint venture changed its method of accounting for income taxes by adopting the Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes." The cumulative effect of the change increased the joint venture's income by $5,688,000, due to its ability to recognize deferred Australian tax assets as permitted by Statement No. 109. The Company's portion of this increase in income, net of United States taxes, is $432,000 and is included in the Company's cumulative effect of a change in accounting for income taxes (see Note H).
Three Months Ended -------------------------------------------------------------------------- July 29, 1994 July 30, 1993 -------------------------------- ------------------------------- (Dollars in thousands) Company's Company's Total Equity Total Equity ----------- ---------- ----------- --------- Revenues $212,101 $189,444 Costs and expenses 183,808 168,588 Income tax provision 9,659 9,662 -------- -------- Net income $ 18,634 $ 11,194 ======== ======== Net income of Australian joint ventures $ 18,686 $ 2,282 $ 9,964 $ 1,093 Net loss of Brazilian joint venture (52) (26) Net income of United States joint venture 1,230 615 -------- -------- -------- -------- $18,634 $11,194 ======== ======== Company's equity in net income of joint ventures $2,256 $1,708 ======== ========
- 11 - 12 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)--CONTINUED Note G--Per Share Data The computation of per share data for the nine and three months ended July 29, 1994 and July 30, 1993 include only the weighted average number of shares of Common Stock outstanding. Outstanding stock options have not been included in the computation since inclusion would not have a material effect. Note H--Income Taxes Effective October 31, 1992, the Company adopted Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes." Prior to the adoption of Statement No. 109, income tax expense was determined using the liability method prescribed by Statement No. 96, which is superseded by Statement No. 109. Among other changes, Statement No. 109 changes the recognition and measurement criteria for deferred tax assets included in Statement No. 96. As permitted by Statement No. 109, the Company has elected not to restate the financial statements of any prior years. The cumulative effect of adopting Statement No. 109 at the beginning of fiscal 1993 was to increase net income by $959,000 or $.20 per share, including $432,000 attributable to a corporate joint venture (see Note F). Significant components of the income tax provision (benefit) attributable to operations are as follows:
Nine Months Ended Three Months Ended ------------------------------- ------------------------------- July July July July 29, 1994 30, 1993 29, 1994 30, 1993 -------- -------- -------- -------- (Dollars in thousands) Current: Federal $3,837 $(1,880) $1,852 $(480) Foreign 439 207 207 28 State and local 988 (82) 446 (19) ------ ------- ------ ----- 5,264 (1,755) 2,505 (471) ------ ------- ------ ----- Deferred: Federal (691) 110 (653) 151 State and local (262) 5 (260) 7 ------ ------- ------ ----- (953) 115 (913) 158 ------ ------- ------ ----- Total $4,311 $(1,640) $1,592 $(313) ====== ======= ====== =====
- 12 - 13 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)--CONTINUED Note I--Extraordinary Item The extraordinary charge to earnings in the nine months ended July 29, 1994 is the result of the early redemption at par of $30,000,000 face value of the Company's 12-3/8% Subordinated Debentures. The charge was due to the related discount and issuance costs and is net of an income tax benefit of $157,000. Note J--Significant Item Included in Operations The results of operations for the third quarter and nine months of fiscal 1993 included a $2,100,000 ($.28 per share) provision for a loss due to costs not recoverable under a major contract of the Computer Systems segment. - 13 - 14 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The information which appears below relates to prior periods, the results of operations for which periods are not necessarily indicative of the results which may be expected for any subsequent periods. Management has made no predictions or estimates as to future operations, and no inferences as to such future operations should be drawn. The following summarizes the results of operations by segment:
FOR THE NINE FOR THE THREE MONTHS ENDED MONTHS ENDED ------------ ------------ July July July July 29, 1994 30, 1993 29, 1994 30, 1993 -------- -------- -------- -------- (Dollars in thousands) Revenues: - - -------- Technical Services and Temporary Personnel $317,395 $246,802 $111,703 $86,844 Electronic Publication and Typesetting Systems 44,651 40,647 16,090 14,730 Telephone Directory 47,328 52,244 17,655 19,358 Engineering and Construction 38,593 32,942 13,164 10,079 Computer Systems 25,483 28,837 8,434 9,604 Equity in income of joint ventures 3,246 4,420 2,256 1,708 Gain on sale of a joint venture 9,770 Interest and other income, net 519 2,287 186 591 Elimination of intersegment revenues (3,274) (4,974) (1,109) (1,581) -------- -------- -------- -------- $483,711 $403,205 $168,379 $141,333 ======== ======== ======== ======== Income (Loss) Before Income Tax Provision (Benefit), - - ---------------------------------------------------- Extraordinary Item and Cumulative Effect of a - - --------------------------------------------- Change in Accounting: - - --------------------- Operating Profit (Loss): - - ------------------------ Technical Services and Temporary Personnel $10,442 $4,636 $4,379 $1,670 Electronic Publication and Typesetting Systems 574 184 210 406 Telephone Directory 1,616 2,183 1,255 2,347 Engineering and Construction 341 (1,043) 562 (458) Computer Systems (3,294) (2,382) (1,013) (2,249) Eliminations 1 (368) (12) (22) -------- -------- -------- -------- Total Operating Profit 9,680 3,210 5,381 1,694 Equity in income of joint ventures 3,246 4,420 2,256 1,708 Gain on sale of a joint venture 9,770 Interest and other income, net 519 2,287 186 591 General corporate expenses (6,961) (6,569) (2,285) (2,232) Interest expense (5,766) (8,149) (1,728) (2,703) Foreign exchange gain (loss), net (45) (162) 76 (26) -------- -------- -------- -------- Income (Loss) Before Income Tax Provision (Benefit), Extraordinary Item and Cumulative Effect of a Change in Accounting $10,443 $(4,963) $3,886 $(968) ======== ======== ======== ========
- 14 - 15 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS NINE MONTHS ENDED JULY 29, 1994 COMPARED TO THE NINE MONTHS ENDED JULY 30, 1993 In the nine month period of 1994, revenues increased by $80,506,000 or 20% to $483,711,000 and the income before income taxes, an extraordinary item and, in 1993, the cumulative effect of a change in accounting was $10,443,000 in 1994 compared to a loss of $4,963,000 in 1993. The Technical Services and Temporary Personnel segment's sales increased by $70,593,000 or 29% to $317,395,000 in 1994 and its operating profit increased by $5,806,000 to $10,442,000 in 1994. The increase in sales was attributable to increased business over a broad spectrum, primarily with existing customers. The operating profit increased due to the increased sales throughout the segment and improved gross margins in the Temporary Personnel division partially offset by higher overhead to support the sales increase. Competition is intense, and although some contracts entered into range from a few months to several years, most are of a relatively short duration. Although the markets for the segment's services include a broad range of industries throughout the United States, general economic difficulties in specific geographic areas or industrial sectors have in the past, and could in the future, affect the profitability of this segment. Sales of the Electronic Publication and Typesetting Systems segment increased by $4,004,000 or 10% to $44,651,000 in 1994 and its operating profit was $574,000 compared to $184,000 in 1993. The sales increase was in both the domestic and overseas markets. The increase in profit was due to the increased sales and reduced development and administrative costs partially offset by lower gross margins. The markets in which the segment competes are marked by rapidly changing technology and, while the Company continues to invest in research and development, there is no assurance that this segment's present or future products will be competitive, that the segment will continue to develop new products or that such present products or new products can be successfully marketed. The Telephone Directory segment's sales decreased by $4,916,000 or 9% to $47,328,000 in 1994 while its operating profit was $1,616,000 compared to $2,183,000 in 1993. The higher level of sales in 1993 was primarily due to the sale of automated directory management systems which accounted for 16% of the segment's sales in 1993. Sales of the telephone directory production operations increased due to increased volume with existing customers. The DataNational division, which publishes independent directories, reported a revenue increase of $1,996,000 which included the first publication of two new community directories in a new market. Profitability declined due to lower gross margins caused by a change in the business mix and fewer high margin system sales than in 1993. The Directory segment's services are rendered under various short and long-term contracts. Certain contracts expire in fiscal years 1994 through 2001 and there can be no assurance that they will be renewed or renewed on similar terms. - 15 - 16 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS NINE MONTHS ENDED JULY 29, 1994 COMPARED TO THE NINE MONTHS ENDED JULY 30, 1993--(CONTINUED) The Engineering and Construction segment's sales increased by $5,651,000 or 17% to $38,593,000 in 1994 and its operating profit was $341,000 compared to a loss of $1,043,000 in 1993. The sales increase was due primarily to increased sales in the construction and business system areas. Profitability increased due to the increased sales and improved gross margins. This segment operates in the intensely competitive telephone plant construction, interconnect and engineering markets and there can be no assurance that profitability will continue. Sales of the Computer Systems segment decreased by $3,354,000 or 12% to $25,483,000 in 1994 and the segment's operating loss increased by $912,000 to $3,294,000 in 1994 compared to a loss of $2,382,000 in 1993. The decrease in sales was due primarily to the completion of several large contracts in 1993. The operating loss in 1993 included a charge of $2,100,000 to provide for costs not recoverable under a Delta Operator Services System (DOSS) contract. The operating loss increased in 1994 due to the lower sales, lower gross margins and higher overhead costs incurred as a result of establishing additional facilities in 1993 to develop and market new products and increased marketing, support and administrative costs related to the existing product line, including DOSS. The first DOSS contract, which is with a major telephone company, was entered into in 1991. Delivery and installation at the customer's premises began during fiscal 1992 and continued through the third quarter of fiscal 1994. The system has been installed at most of the intended sites and is being utilized commercially by the customer. The Company has received acceptance of the first half of the system in the third quarter of fiscal 1994 and expects acceptance of the second half in the fourth quarter of fiscal 1994 at which time revenue will be recognized. Acceptance will have no effect on operating profit. During 1992, Volt Delta also entered into a second contract for DOSS with another major telecommunications customer; and, in 1993, a pilot system was installed which is being used commercially. Orders have been received in 1994 for a follow-up production system. In fiscal years 1993 and 1994, the segment was awarded several additional contracts, one of which is anticipated to be completed in the forth quarter of fiscal 1994. There can be no assurance that the Company will be able to obtain additional contracts or additional orders under existing contracts. - 16 - 17 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS NINE MONTHS ENDED JULY 29, 1994 COMPARED TO THE NINE MONTHS ENDED JULY 30, 1993--(CONTINUED) The Company's share of the income of its joint ventures was $3,246,000 for the nine months of 1994, a decrease of $1,174,000 or 27% from 1993. The Company's portion of the income of the Australian joint ventures was $2,611,000 in 1994 compared to $2,710,000 in 1993. During the nine months of fiscal 1993, the Company's share of profits from its Australian joint venture exceeded its 12-1/2% ownership percentage by $740,000 under an arrangement which ended April 30, 1993. Exclusive of such amounts, the Company's share of profits increased by $641,000 in 1994 due to increased earnings in 1994 of the venture due to higher revenue from the sale of yellow page directory advertising. Effective February 1994, the Company sold its 50% interest in Pacific Volt Information Systems, a joint venture, for approximately $16,400,000. The sale resulted in a pretax gain of $9,770,000. As a result of the sale, the equity in income of joint ventures for the current nine months includes only four months of income attributable to this joint venture. In July 1994, the Company entered into a long-term joint venture agreement to publish the official White Pages, Yellow Pages and Street Guides for Rio de Janeiro. The Company acquired a 50% interest in Telelistas Editora Ltda., a Brazilian company which recently obtained a contract to publish Rio's telephone directories on behalf of TELERJ, the government-owned telephone company in Rio. See Note F of Notes to Condensed Consolidated Financial Statements for additional information. Interest and other income, net decreased by $1,768,000 to $519,000, due primarily to fees incurred in 1994 in conjunction with the sale of accounts receivable (see Note B). General corporate expenses increased by 6% to $6,961,000 in 1994 principally due to costs incurred in relocating the Corporate offices. Interest expense decreased by $2,383,000 or 29% to $5,766,000 in 1994 compared to 1993 due to the early redemption of $30,000,000 of the Company's 12-3/8% Subordinated Debentures and a reduction in the principal amount of a mortgage loan. Research, development and engineering costs increased by $582,000 or 11% to $5,863,000 in 1994 due to increased product development by the Computer Systems segment, partially offset by decreases in the Telephone Directory and Electronic Publication and Typesetting Systems segments. - 17 - 18 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS THREE MONTHS ENDED JULY 29, 1994 COMPARED TO THE THREE MONTHS ENDED JULY 30, 1993 In the third quarter of 1994, revenues increased by $27,046,000 or 19% to $168,379,000 and income before taxes was $3,886,000 in 1994 compared to a loss of $968,000 in 1993. The Technical Services and Temporary Personnel segment's sales increased by $24,859,000 or 29% to $111,703,000 and its operating profit increased by $2,709,000 to $4,379,000 in 1994. The increase in sales was due to additional business throughout the segment primarily with existing customers and the operating profit increase was due to the increased sales volume and improved gross margins partially offset by increases in overhead to support the additional sales. Sales of the Electronic Publication and Typesetting Systems segment increased by $1,360,000 or 9% to $16,090,000 in 1994 while its operating profit decreased by 48% to $210,000 compared to $406,000 in 1993. The sales increase was attributable to both the domestic and overseas markets. The decline in profit was due to lower gross margins as a result of product mix and competitive pressures. The Telephone Directory segment's sales decreased by $1,703,000 or 9% to $ 17,655,000 in 1994 while its operating profit decreased by $1,092,000 or 47% to $1,255,000. The sales decrease was due to reduced sales of graphic workstations and the absence, in 1994, of revenue from the sales of automated directory management systems. The decrease in operating profit compared to last year was due to lower margins as a result of a change in the mix of business among the segment's operations. The Engineering and Construction segment's sales increased by $3,085,000 or 31% to $13,164,000 and the operating profit was $562,000 compared to a loss of $458,000 in 1993. The sales and operating profit increases were due to volume increases in the construction and business systems operations. Sales of the Computer Systems segment decreased by $1,170,000 or 12% to $8,434,000 in 1994. The segment sustained an operating loss of $1,013,000 in 1994 compared to a loss of $2,249,000 in 1993. The decrease in sales is due to the completion of several large contracts in 1993. The operating loss in 1993 included a charge of $2,100,000 to provide for costs not recoverable under a Delta Operator Services System contract. Results in 1994 reflect higher development, marketing and support costs. - 18 - 19 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS THREE MONTHS ENDED JULY 29, 1994 COMPARED TO THE THREE MONTHS ENDED JULY 30, 1993--(CONTINUED) The Company's share of the income of its joint ventures was $2,256,000 in the third quarter of 1994, an increase of $548,000 or 32% from the third quarter of 1993. The Company's portion of the income of the Australian joint venture was $2,282,000 in 1994 compared to $1,093,000 in 1993 due principally to the joint venture's increased revenue from the sale of yellow page directory advertising accompanied by a reduction in certain costs. In the second quarter of 1994, the Company sold its 50% interest in Pacific Volt Information Systems, a United States joint venture, which accounted for $615,000 of equity in income of joint ventures in last year's third quarter. Interest and other income, net decreased by $405,000 to $186,000 due primarily to fees incurred in 1994 in conjunction with the sale of accounts receivable (see Note B). Interest expense decreased by $975,000 or 36% to $1,728,000 in 1994 compared to 1993 due to the early redemption of $30,000,000 of the Company's 12-3/8% Subordinated Debentures and reductions in the principal amount of a mortgage loan. Research, development and engineering costs increased by $543,000 or 31% to $2,286,000 in 1994 due primarily to increased product development by the Computer Systems segment. - 19 - 20 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Liquidity and Source of Capital Cash and cash equivalents decreased by $14,969,000 in the nine months ended July 29, 1994 to $26,112,000 due primarily to the redemption, at par, of $30,000,000 of Subordinated Debentures and the expenditure of $11,326,000 for purchases of property, plant and equipment partially offset by $16,383,000 received from the sale of the Company's 50% interest in a joint venture and $12,963,000 of funds provided from operations. Working capital decreased by $14,089,000 in the nine months to $47,000,000 at July 29, 1994 primarily due to the inclusion in current liabilities of a $15,400,000 mortgage payable and the redemption of $10,000,000 of debentures, partially offset by $16,383,000 received from the sale of the Company's investment in a joint venture. The Company believes that its current financial position, working capital and future cash flow will be sufficient to fund operations and satisfy its debt obligations. The Company has a line of credit with a domestic bank at July 29, 1994 of approximately $7 million, which expires October 31, 1994, unless renewed. The Company has reached an agreement in principle to refinance $10,000,000 of the $15,400,000 mortgage liability which is due in December 1994. The balance will be repaid by the Company. In the nine months ended July 29, 1994, the Company's investment portfolio was increased by $2,020,000 and at July 29, 1994 included investments carried at their market value of $9,782,000. The Company expects to invest an additional $6,500,000 over the next twelve months in its new Brazilian joint venture (see Note F). There are no other material capital commitments. The Company may determine from time to time in the future to buy additional shares of its Common Stock and Debentures in the market or in privately negotiated transactions. - 20 - 21 PART II - OTHER INFORMATION Item 4. Submission of Matters to a Vote of Security Holders At the Company's 1994 Annual Meeting of Shareholders held on June 10, 1994, Shareholders: (a) elected the following to serve as Class I directors to serve until the Company's 1996 Annual Meeting of Shareholders and until their respective successors are elected and qualified, by the following vote:
For Vote Withheld ---------- ------------- Irwin B. Robins 3,403,347 45,418 John R. Torell, III 3,403,347 45,418 Mark N. Kaplan 3,403,347 45,418
(b) ratified the action of the Board of Directors in appointing Ernst & Young as the Company's independent public accountants for the Company's fiscal year ending October 28, 1994, by the following vote:
For Against Abstain ---------- --------- ------- 3,427,500 6,172 15,093
Item 6. Exhibits and Reports on Form 8-K (a) Exhibits 15.01 Letter from Ernst & Young LLP. 15.02 Letter from Ernst & Young LLP regarding interim financial information. 27 Financial Data Schedule (b) Reports on Form 8-K The only Report on Form 8-K filed during the quarter ended July 29, 1994 was a report dated July 7, 1994 (date of earliest event reported), reporting Item 5. Other Events. - 21 - 22 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. VOLT INFORMATION SCIENCES, INC. (Registrant) BY: s/ Jack Egan ----------------------------- Date: September 9, 1994 Jack Egan Vice President - Corporate Accounting (Principal Accounting Officer) - 22 - 23 EXHIBIT INDEX 15.01 Letter from Ernst & Young LLP. 15.02 Letter from Ernst & Young LLP regarding interim financial information. 27 Financial Data Schedule EX-15.01 2 LETTER FROM ERNST & YOUNG LLP 1 Exhibit 15.01 ERNST & YOUNG LLP 787 Seventh Avenue Phone # 212-773-3000 New York, New York 10019 INDEPENDENT ACCOUNTANTS' REPORT ON REVIEW OF INTERIM FINANCIAL INFORMATION Board of Directors Volt Information Sciences, Inc. We have reviewed the accompanying unaudited condensed consolidated balance sheet of Volt Information Sciences, Inc. and subsidiaries as of July 29, 1994, and the related condensed consolidated statements of operations for the nine and three month periods ended July 29, 1994 and July 30, 1993, and the related condensed consolidated statements of cash flows for the nine month periods ended July 29, 1994 and July 30, 1993. These financial statements are the responsibility of the Company's management. We conducted our review in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of applying analytical procedures to financial data and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with generally accepted auditing standards, which will be performed for the full year with the objective of expressing an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion. Based on our reviews, we are not aware of any material modifications that should be made to the accompanying condensed consolidated financial statements referred to above for them to be in conformity with generally accepted accounting principles. We have previously audited, in accordance with generally accepted auditing standards, the consolidated balance sheet of Volt Information Sciences, Inc. as of October 29, 1993, and the related consolidated statements of operations and cash flows for the year then ended, not presented herein; and in our report dated January 5, 1994, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of October 29, 1993, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived. Ernst & Young LLP August 30, 1994 EX-15.02 3 LTR. FROM ERNST & YOUNG RE INTERIM FINANCIAL INFO. 1 Exhibit 15.02 September 8, 1994 Board of Directors Volt Information Sciences, Inc. We are aware of the incorporation by reference in Post-Effective Amendment No. 2 to Registration Statement No. 2-75618 on Form S-8 dated September 12, 1988, Post-Effective Amendment No. 3 to Registration Statement No. 2-70180 on Form S-8 dated April 8, 1983, Registration Statement No. 2-88018 on Form S-3 dated December 1, 1983 and Registration Statement No. 33-18565 on Form S-8 dated December 14, 1987 of Volt Information Sciences, Inc., of our report dated August 30, 1994 relating to the unaudited condensed consolidated interim financial statements of Volt Information Sciences, Inc. which are included in its Form 10-Q for the quarter ended July 29, 1994. Pursuant to Rule 436(c) of the Securities Act of 1933 our report is not a part of the registration statement prepared or certified by accountants within the meaning of Section 7 or 11 of the Securities Act of 1933. Ernst & Young LLP New York, New York EX-27 4 ARTICLE 5 FDS FOR 3Q94 10-Q
5 1,000 9-MOS OCT-28-1994 OCT-30-1993 JUL-29-1994 $26,112 $5,652 $85,195 $3,983 $26,993 $153,817 $78,880 $30,741 $226,781 $106,817 $32,784 $779 0 0 $83,128 $226,781 $44,151 $483,711 $28,379 $423,878 $42,192 $1,432 $5,766 $10,443 $4,311 $6,132 0 $(271) 0 $5,861 $1.22 $1.22
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