-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, NsfZvtHY8jNvb17JTtveAzmtbvOsGc5j0mLJ2G3KyLkFemJvFOISciwkEDMwMcoL GSsySJWrY1k6Jl8zE5OP8A== 0000950123-96-001163.txt : 19960319 0000950123-96-001163.hdr.sgml : 19960319 ACCESSION NUMBER: 0000950123-96-001163 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19960202 FILED AS OF DATE: 19960318 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: VOLT INFORMATION SCIENCES INC CENTRAL INDEX KEY: 0000103872 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-HELP SUPPLY SERVICES [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: 001-09232 FILM NUMBER: 96535782 BUSINESS ADDRESS: STREET 1: 1221 AVENUE OF THE AMERICAS CITY: NEW YORK STATE: NY ZIP: 10020 BUSINESS PHONE: 2127042400 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 QUARTERLY REPORT FOR PERIOD ENDED FEBRUARY 2, 1996 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 Three Months Ended February 2, 1996 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 March 11, 1996 was 9,687,543. 2 VOLT INFORMATION SCIENCES, INC. AND SUBSIDIARIES FORM 10-Q TABLE OF CONTENTS PART I - FINANCIAL INFORMATION Item 1. Financial Statements Condensed Consolidated Statements of Income Three Months Ended February 2, 1996 and January 27, 1995 3 Condensed Consolidated Balance Sheets February 2, 1996 and November 3, 1995 4 Condensed Consolidated Statements of Cash Flows Three Months Ended February 2, 1996 and January 27, 1995 5 Notes to Condensed Consolidated Financial Statements 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Three Months Ended February 2, 1996 Compared to the Three Months Ended January 27, 1995 14 PART II - OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K 19 SIGNATURE 20 -2- 3 PART I - FINANCIAL INFORMATION ITEM 1 - FINANCIAL STATEMENTS VOLT INFORMATION SCIENCES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
Three Months Ended ------------------ February 2, January 27, 1996 1995 ----------- ----------- (Dollars in thousands) REVENUES Sales of services $ 208,477 $ 167,518 Sales of products 16,336 15,778 Equity in net loss of joint ventures--Note F (1,957) (1,448) Interest income 605 480 Gain on sale of interest in subsidiaries--Note I 3,666 Other expense - net--Note B (517) (268) ----------- ----------- 226,610 182,060 ----------- ----------- COSTS AND EXPENSES Cost of sales Services 192,595 152,305 Products 12,470 10,405 Selling and administrative 11,449 9,751 Research, development & engineering 1,943 1,804 Depreciation and amortization 3,188 2,796 Minority interest in net loss of consolidated subsidiaries--Note I 69 Foreign exchange (gain) loss - net 140 (59) Interest expense 1,155 1,686 ----------- ----------- 223,009 178,688 ----------- ----------- Income before income tax provision 3,601 3,372 Income tax provision--Note H 1,334 1,349 ----------- ----------- Net income $ 2,267 $ 2,023 =========== =========== (Per Share Data) Net income $ .23 $ .21 =========== =========== Number of shares used in computation-- Note G 9,673,803 9,608,408 =========== ===========
See accompanying notes. - 3 - 4 VOLT INFORMATION SCIENCES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
February 2, November 3, 1996 1995 (a) ---- -------- (Dollars in thousands) ASSETS CURRENT ASSETS Cash and cash equivalents $ 34,793 $ 25,350 Short-term investments 2,359 1,047 Trade accounts receivable less allowances of $5,132 (1996) and $3,943 (1995)--Note B 99,988 111,696 Inventories--Note C 32,905 28,207 Deferred income taxes 10,651 8,711 Prepaid expenses and other assets 5,915 7,204 -------- -------- TOTAL CURRENT ASSETS 186,611 182,215 INVESTMENTS IN SECURITIES 2,324 4,136 INVESTMENTS IN JOINT VENTURES--Note F 14,139 13,903 PROPERTY, PLANT AND EQUIPMENT-- at cost--Note D Land and buildings 33,639 33,591 Machinery and equipment 61,063 51,233 Leasehold improvements 2,918 2,818 -------- -------- 97,620 87,642 Less allowances for depreciation and amortization 35,999 32,057 -------- -------- 61,621 55,585 DEPOSITS, RECEIVABLES AND OTHER ASSETS 1,100 2,764 INTANGIBLE ASSETS--net of accumulated amortization of $4,417 (1996) and $4,181 (1995)--Note I 16,305 5,408 $282,100 $264,011 ======== ========
February 2, November 3, 1996 1995 (a) ---- -------- (Dollars in thousands) LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Notes payable to banks $ 5,776 $ 5,154 Current portion of long-term debt--Note D 2,799 2,000 Accounts payable 29,851 30,786 Accrued expenses Wages and commissions 23,316 23,403 Taxes other than income taxes 11,707 10,059 Insurance 18,606 18,893 Other 10,388 6,686 Customer advances and other liabilities 16,211 15,250 Income taxes 1,056 12,401 --------- --------- TOTAL CURRENT LIABILITIES 119,710 124,632 LONG-TERM DEBT--Note D 31,116 28,819 DEFERRED INCOME TAXES 354 3,433 --------- --------- 151,180 156,884 MINORITY INTEREST--Note I 21,077 STOCKHOLDERS' EQUITY--Notes D, E, F, and G Preferred stock, par value $1.00 Authorized--500,000 shares; issued--none Common stock, par value $.10 Authorized--15,000,000 shares; issued - 9,687,543 shares (1996) and 9,664,794 shares (1995) 969 966 Paid-in capital 27,666 27,098 Retained earnings 81,424 79,157 Unrealized foreign currency translation adjustment (267) (168) Unrealized gain on marketable securities 51 74 --------- --------- 109,843 107,127 $ 282,100 $ 264,011 ========= =========
(a) The Balance Sheet at November 3, 1995 has been derived from the audited financial statements at that date. See accompanying notes. - 4 - 5 VOLT INFORMATION SCIENCES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Three Months Ended -------------------------- February 2, January 27, 1996 1995 ------------ ----------- (Dollars in thousands) CASH FLOWS FROM OPERATING ACTIVITIES Net income $ 2,267 $ 2,023 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 3,188 2,796 Gain on sale of interest in subsidiaries (3,666) Equity in net loss of joint ventures 1,957 1,448 Minority interest 69 Accounts receivable provisions 576 625 Amortization of deferred debenture costs, debt discounts and other deferred expenses 274 202 Gains on foreign currency translation (257) (94) (Gains) losses on dispositions of property, plant, and equipment (25) 52 Deferred income tax provision (benefit) 859 (1,118) Changes in operating assets and liabilities, net of effect from acquisitions: (Increase) decrease in accounts receivable 15,767 (3,673) (Increase) decrease in inventories (1,946) 6,131 (Increase) decrease in prepaid expenses and other current assets 1,178 (1,123) (Increase) decrease in other assets 1,693 (974) Decrease in accounts payable (4,676) (7,066) Increase (decrease) in accrued expenses (59) 2,899 Increase in customer advances and other liabilities 107 3,508 Increase (decrease) in income taxes payable (11,345) 2,036 -------- ------- NET CASH PROVIDED BY OPERATING ACTIVITIES 5,961 7,672 -------- -------
- 5 - 6 VOLT INFORMATION SCIENCES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)--Continued
Three Months Ended ------------------ February 2, January 27, 1996 1995 ------------- ------- (Dollars in thousands) CASH FLOWS FROM INVESTING ACTIVITIES Maturities of investments 1,047 7,000 Purchases of investments (1,061) (4,718) Investment in joint venture (2,360) (1,387) Cash of acquired subsidiaries, less transaction costs 8,421 Acquisition of subsidiary (1,006) Proceeds from disposals of property, plant and equipment 63 123 Purchases of property, plant and equipment (2,769) (2,493) -------- -------- NET CASH PROVIDED BY (APPLIED TO) INVESTING ACTIVITIES 2,335 (1,475) -------- -------- CASH FLOWS FROM FINANCING ACTIVITIES Payment of long-term debt (500) (500) Exercise of stock options 71 22 Increase in notes payable to banks 823 473 -------- -------- NET CASH PROVIDED BY (APPLIED TO) FINANCING ACTIVITIES 394 (5) -------- -------- Effect of exchange rate changes on cash 753 (31) -------- -------- NET INCREASE IN CASH AND CASH EQUIVALENTS 9,443 6,161 Cash and cash equivalents, beginning of period 25,350 17,049 -------- -------- CASH AND CASH EQUIVALENTS, END OF PERIOD $ 34,793 $ 23,210 ======== ======== SUPPLEMENTAL INFORMATION Cash paid during the period: Interest expense $ 1,836 $ 2,571 Income taxes $ 11,697 $ 336
See accompanying notes. - 6 - 7 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 February 2, 1996 and results of operations and cash flows for the three months ended February 2, 1996 and January 27, 1995. Operating results for the three months ended February 2, 1996 are not necessarily indicative of the results that may be expected for the fiscal year ending November 1, 1996. 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 November 3, 1995. The accounting policies used in preparing these financial statements are the same as those described in the Company's Annual Report. 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. In March 1995, the limit was increased to $45,000,000 and the agreement was extended to March 1998. As collections reduce previously sold undivided interests, new receivables may be sold up to the $45,000,000 level. At February 2, 1996 and November 3, 1995, $30,000,000 of accounts receivable had 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 primarily on the purchaser's borrowing costs incurred on short-term commercial paper which financed the purchase of receivables. Other expense in the accompanying 1996 and 1995 statements of income include fees related to the agreement of $541,000 and $312,000, 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. - 7 - 8 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)--Continued Note C--Inventories Inventories consist of:
February 2, November 3, 1996 1995 ----------- ----------- (Dollars in thousands) Services: Accumulated unbilled costs on: Service contracts $17,236 $15,909 Long-term contracts 3,827 2,980 ------- ------- 21,063 18,889 ------- ------- Products: Materials and work-in-process 6,570 4,818 Service parts 1,683 1,124 Finished goods 3,589 3,376 ------- ------- 11,842 9,318 ------- ------- Total $32,905 $28,207 ======= =======
The cumulative amounts billed under service and long-term contracts of $2,240,000 at February 2, 1996 and $3,469,000 at November 3, 1995 are credited against the related costs in inventory. Substantially all of the amounts billed have been collected. - 8 - 9 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)--Continued Note D--Long-Term Debt Long-term debt consists of the following:
February 2, November 3, 1996 1995 ----------- ----------- (Dollars in thousands) 12-3/8% Senior Subordinated Debentures, due July 1, 1998--net of unamortized discount of $33,000 - 1996 and $36,000 - 1995 (a) $22,822 $22,819 Term loan (b) 7,500 8,000 Notes payable (c) (d) 3,593 ------- ------- 33,915 30,819 Less amounts due within one year 2,799 2,000 ------- ------- Total long-term debt $31,116 $28,819 ======= =======
(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. The debentures are subordinated to all existing and future senior indebtedness (as defined) of the Company. At February 2, 1996, the amount available for dividends, pursuant to the terms of the indenture under which the debentures are issued, was $33,593,000 and, if no dividend payments are made, the amount available for capital stock repurchases was $43,593,000. However, under the terms of the term loan agreement, at such date, only $28,230,000 was available for such payments (see (b) below). (b) In October 1994, the Company entered into a $10,000,000 five-year loan agreement with National Westminster Bank, which is secured by a deed of trust on land and buildings (book value at February 2, 1996 - $15,292,000). The term loan bears interest at 7.86% per annum and is repayable in twenty quarterly principal installments of $500,000, together with interest. In October 1996, if certain conditions are met, the loan may be extended for two years with a subsequent reduction of principal payments to $225,000 per quarter and a final payment of $1,725,000 due October, 2001. The agreement contains various financial covenants, the most restrictive of which requires the Company to maintain a tangible net worth of $86,000,000. (c) Includes two notes payable (which bear interest at 90 day commercial paper rates) each for $550,000, due on January 2, 1997 and January 2, 1998, respectively. (d) An unsecured loan of $2,493,000 from Chemical Bank was made to a foreign subsidiary on January 18, 1996 to finance a printing press. The five-year loan, guaranteed by the Company, is to be repaid in ten semi-annual payments including interest calculated at LIBOR (5.4% at February 2, 1996) plus .25% beginning September 15, 1996. - 9 - 10 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)--Continued Note E--Stockholders' Equity Changes in the major components of stockholders' equity for the three months ended February 2, 1996 are as follows:
Common Paid-In Retained Stock Capital Earnings ----- ------- -------- (Dollars in thousands) Balance at November 3, 1995 $966 $27,098 $79,157 Net income for the three months 2,267 Issuance of 18,349 shares to ESOP 2 498 Stock options exercised - 4,400 shares 1 70 ---- ------- ------- Balance at February 2, 1996 $969 $27,666 $81,424 ==== ======= =======
The other components of stockholders' equity are the unrealized gain on marketable securities and the 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 The Company owns 12-1/2% of the voting stock of Pacific Access Pty. Ltd. ("Pacific Access"), an international joint venture in Australia. This venture, which commenced operations in July 1991, assumed responsibility throughout Australia for the marketing, sales and compilation functions of all yellow pages directories of Telstra Corporation Ltd., ("Telstra"), the Australian government-owned telephone company, under the terms of a twelve-year contract. The venture produces a major portion of its revenues and significantly all of its profits in the Company's second and third fiscal quarters. Telstra owns 50% of the voting stock of Pacific Access. In the event of a change in control of the Company, as defined, the Company may be required to sell its shares in the venture to Telstra at a formula price based on various factors, including earnings. 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. As of February 2, 1996, the Company has made investments in and loans aggregating $9,929,000 to Telelistas Editora Ltda., a Brazilian company which has a contract to publish Rio's telephone directories on behalf of TELERJ, the government-owned telephone company. Such agreement resulted in the acquisition of a 50% interest in the common shares together with 75% of the issued preferred stock. The agreement, as amended, requires the Company to invest additional amounts in the joint venture, as well as provide technology, expertise and key personnel in directory production, sales and marketing. As a result of the funding requirements, during the start-up period, the Company is recognizing 75% of the losses incurred by the venture. At such time as the venture becomes profitable, the Company will recognize 75% of the venture's net income until start-up losses are recovered and 50% of any profits subsequent thereto. - 10 - 11 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)--Continued Note F--Summarized Financial Information of Joint Ventures--(Continued) Consolidated retained earnings at February 2, 1996 included $4,205,000, representing the undistributed earnings of the Australian joint venture. Income taxes have been paid or provided on such earnings.
February 2, 1996 November 3, 1995 ----------------------------- ------------------------ (Dollars in thousands) Company's Company's Total Equity Total Equity -------- --------- -------- --------- Current assets $174,317 $270,495 Non-current assets 16,395 17,207 Current liabilities (137,387) (227,749) Non-current liabilities (240) (259) -------- ------- Equity of combined joint ventures $ 53,085 $ 59,694 ======== ======== Equity of Australian joint venture (a) $ 48,409 $ 9,519 $ 55,733 $10,436 Equity of Brazilian joint venture 4,676 4,620 3,961 3,467 -------- ------- -------- ------- $ 53,085 $ 59,694 ======== ======== Investments in joint ventures $14,139 $13,903 ======= =======
(a)-Pursuant to the Australian joint 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.
Three Months Ended ------------------------------------------------------------ February 2, 1996 January 27, 1995 -------------------------------- ------------------------ (Dollars in thousands) Company's Company's Total Equity Total Equity -------- --------- -------- --------- Revenues $62,896 $70,782 Costs and expenses 73,892 79,104 Income tax benefit (3,271) (2,047) ------- ------- Net loss $(7,725) $(6,275) ======= ======= Net loss of Australian joint venture $(6,038) $ (749) $(5,032) $ (629) Net loss of Brazilian joint venture (1,687) (1,208) (1,243) (819) ------- ------ ------- ------- $(7,725) $(6,275) ======= ======= Company's equity in net loss of joint ventures $(1,957) $(1,448) ======= =======
- 11 - 12 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)--Continued Note G--Per Share Data Per share data are computed on the basis of the weighted average number of shares of common stock outstanding and, if applicable, the assumed exercise of dilutive outstanding stock options based on the treasury stock method. Per share data have been adjusted for the three months ended January 27, 1995, for the effect of a two-for-one-stock split distributed on October 6, 1995. Note H--Income Taxes Significant components of the income tax expense (benefit) attributable to operations are as follows:
Three Months Ended -------------------------------- February 2, January 27, 1996 1995 ----------- ----------- (Dollars in thousands) Current: Federal $203 $1,658 Foreign (182) 212 State and local 454 597 ------ ------ 475 2,467 ------ ------ Deferred: Federal 803 (902) State and local 56 (216) ------ ------ 859 (1,118) ------ ------ $1,334 $1,349 ====== ======
Note I--Acquisition and Sale of Subsidiaries On November 15, 1995, the Company acquired a technical services business for $2,106,000 in cash and notes which resulted in an increase in intangible assets of $2,052,000. The effect on operations for the three months ended January 27, 1995, assuming the acquisition occurred at the beginning of such period, is not material. On January 29, 1996, the Company merged its wholly-owned subsidiary, Autologic, Incorporated and related foreign subsidiaries ("Autologic"), representing its Electronic Publication and Typesetting Systems segment, with Information International, Inc. ("Triple- I"), resulting in the formation of a new publicly traded company, Autologic Information International, Inc. ("AII"). Triple-I was a publicly traded company in the business of electronic publishing prepress systems. - 12 - 13 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)--Continued Note I--Acquisition and Sale of Subsidiaries (Continued) In connection with the merger, the stockholders of Triple-I received 41% of AII's common stock based on one share of AII being issued for each outstanding share of Triple-I and the Company received 59% of the outstanding shares of AII common stock. The merger has been accounted for as a purchase of a 41% interest in Triple-I and a corresponding sale of a 59% interest in Autologic to the former shareholders of Triple-I. The accompanying 1996 financial statements include the accounts of Autologic and Triple-I with the former Triple-I shareholders 41% in AII shown as a Minority Interest in the Condensed Consolidated Balance Sheet. The results of operations of Triple-I are included in the accompanying consolidated statement of income since the date of acquisition. The sale of 41% of Autologic resulted in a pretax gain of $3,666,000, net of transaction costs and also resulted in 41% of Autologic's assets being reflected in the 1996 balance sheet at fair value, resulting in an intangible of $5,215,000 with a corresponding increase in the minority interest. Amortization of such intangible will be charged to the Minority Interest. In addition, the purchase of the assets of Triple-I resulted in an intangible of $3,847,000. Such intangible will be amortized over a period of five years. In connection with the merger, Autologic restructured its operations and included a charge of $700,000 related principally to the termination of employees. Such charge is included in the results of operations for the three months ended February 2, 1996. The following unaudited pro forma information presents a summary of consolidated results of operations as if the acquisitions had occurred at the beginning of the respective periods with pro forma adjustments to give effect to amortization of intangibles, minority interest share in operations and certain income tax adjustments. The pro forma financial information is not necessarily indicative of the results of operations as they would have been had the transactions been effected on the assumed dates, or of future results of operations of the consolidated entities.
Three Months Ended ------------------ February 2, January 27, 1996 1995 ----------- ----------- (Dollars in thousands, except per share amounts) Revenue $237,331 $192,515 Income from continuing operations $ 3,265 $ 2,479 Net income $ 3,265 $ 1,479 Income from continuing operations per share $ .34 $ .25 Net income per share $ .34 $ .15
- 13 - 14 ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS THREE MONTHS ENDED FEBRUARY 2, 1996 COMPARED TO THE THREE MONTHS ENDED JANUARY 27, 1995 The information which appears below relates to prior periods, the results of which are not necessarily indicative of the results which may be expected for any subsequent periods. The following summarizes the results of operations by segment:
For The Three Months Ended -------------------------- February 2, January 27, 1996 1995 ----------- ----------- (Dollars in thousands) Revenues: Technical Services and Temporary Personnel $ 155,699 $ 118,918 Electronic Publication and Typesetting Systems 16,547 16,000 Telephone Directory 13,569 12,662 Engineering and Construction 19,491 14,603 Computer Systems 20,607 22,251 Equity in net loss of joint ventures (1,957) (1,448) Gain on sale of interest in subsidiaries 3,666 Interest and other income-net 88 212 Elimination of intersegment revenues (1,100) (1,138) --------- --------- $ 226,610 $ 182,060 ========= ========= Income Before Income Taxes Operating Profit (Loss): Technical Services and Temporary Personnel $ 5,444 $ 4,947 Electronic Publication and Typesetting Systems (2,410) 280 Telephone Directory (1,010) (1,032) Engineering and Construction 1,361 344 Computer Systems 2,138 4,094 Eliminations 71 (22) --------- --------- Total Operating Profit 5,594 8,611 Equity in net loss of joint ventures (1,957) (1,448) Gain on sale of interest in subsidiaries 3,666 Interest and other income-net 88 212 General corporate expenses (2,495) (2,376) Interest expense (1,155) (1,686) Foreign exchange gain (loss)--net (140) 59 --------- --------- Income Before Income Taxes $ 3,601 $ 3,372 ========= =========
- 14 - 15 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS--Continued THREE MONTHS ENDED FEBRUARY 2, 1996 COMPARED TO THE THREE MONTHS ENDED JANUARY 27, 1995--Continued Results of Operations - Summary In the three-month period of fiscal 1996, revenues increased by $44,550,000, or 24%, from fiscal 1995, as sales increased by $41,517,000, or 23%. Revenues in the 1996 period included a gain of $3,666,000 from the sale of an interest in the Company's Electronic Publication and Typesetting Systems segment. The increase in sales resulted primarily from a $36,781,000 increase in sales of the Technical Services and Temporary Personnel segment and a $4,888,000 increase in sales of the Construction and Engineering segment. The Company's pretax income was $3,601,000 in 1996, compared to $3,372,000 in 1995. The 1996 income included the $3,666,000 pretax gain discussed above. The operating profit of the Company's segments decreased by $3,017,000 to $5,594,000 in 1996. The principal decreases in the segments' operating income were from the Electronic Publication and Typesetting Systems segment, with a decrease of $2,690,000 to a loss of $2,410,000 and the Computer Systems segment, with a decrease of $1,956,000 to a profit of $2,138,000 partially offset by the Engineering and Construction segment, where the $1,361,000 profit represented a $1,017,000 favorable change from 1995. Net income in the three months of 1996 was $2,267,000, compared to a net income of $2,023,000 in the three months of 1995. Results of Operations - By Segment The Technical Services and Temporary Personnel segment's sales increased by $36,781,000, or 31%, in 1996 to $155,699,000 and the segment's operating profit increased by $497,000, or 10%, to $5,444,000 compared to $4,947,000 in 1995. The segment will no longer provide services to one customer which accounted for $6,300,000, or 4% of the segment's 1996 sales. Approximately $5,800,000 of the segment's sales increase in 1996 was the result of business with new customers. In addition, $8,000,000, or 22% of the sales increase was due to pass-through costs primarily related to subcontractors to service large national contracts. The increase in the segment's operating profit was due to the increased sales volume, partially offset by a decrease in gross margin of approximately 1 percentage point, primarily due to higher subcontractor usage, billed without a mark-up, and an increase in unemployment insurance costs. The Electronic Publication and Typesetting Systems segment's sales increased by $547,000, or 3%, to $16,547,000 in 1996, while the segment incurred an operating loss of $2,410,000, compared to a profit of $280,000 in 1995. The sales increase was primarily due to increased equipment sales in the European and Pacific markets. The decrease in operating profit was due to a reduction in the gross margin of 10 percentage points and a .7 percentage point increase in total operating expenses expended per sales dollar, partially offset by the increased sales volume. The decrease in the gross margin percentage resulted from a change in the product mix (a decrease in sales of some high margin products and an increase in sales of some low margin items which are in direct competition with other manufacturers' products). In addition, the segment incurred $700,000 of restructuring - 15 - 16 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS--Continued THREE MONTHS ENDED FEBRUARY 2, 1996 COMPARED TO THE THREE MONTHS ENDED JANUARY 27, 1995--Continued charges and experienced a temporary delay in shipments due to the merger with Triple-I. (See Note I). The markets in which the segment competes are marked by rapidly changing technology, with sales in fiscal 1996 of equipment introduced within the last three years comprising approximately 94% of equipment sales. The Telephone Directory segment's sales increased by $907,000, or 7%, to $13,569,000 in fiscal 1996, while the segment incurred an operating loss of $1,010,000, a decrease of $22,000, as compared to a loss of $1,032,000 in 1995. The sales increase is due to a $329,000 increase in telephone directory production volume and an increase in independent directory sales by the segment's DataNational division of 23%. The operating losses in 1996 and 1995 were due to start-up losses incurred in the automated production of newspaper display advertisements, costs to enter a new regional independent directory market and higher operating costs in the Uruguayan printing operation, partially offset in 1996, by higher telephone directory production revenue. This segment's services are rendered under various short and long-term contracts. Certain contracts expire in fiscal 1996 through 2000, and there can be no assurance that they will be renewed on similar terms or replaced. The Engineering and Construction segment's sales increased by $4,888,000 to $19,491,000 in fiscal 1996 and its operating profit was $1,361,000, an increase of $1,017,000, as compared to $344,000 in 1995. The sales increase was due to a 53% increase in the construction division partially offset by a 4% decrease in the business systems division. Operating results improved due to the increased sales volume and a 7 percentage point decrease in overhead expended per sales dollar, partially offset by a reduction in the gross margin of 2 percentage points. The Computer Systems segment's sales decreased by $1,644,000, or 7%, to $20,607,000 in 1996 and its operating profit was $2,138,000, as compared to $4,094,000 in 1995. The decrease in sales and operating profit was primarily due to higher sales and profits on customer acceptance of Delta Operating Service Systems (DOSS) in 1995, compared to 1996, partially offset by increased sales and profits on conservation services to utilities. Under the completed contract method of accounting used by this segment, revenues together with related costs are recognized in income upon acceptance by the customer. Deliveries and installations under other DOSS contracts continue and customer acceptances are anticipated later in 1996. Profitability rates on such contracts are not anticipated to be at the same levels as those earned on the DOSS contracts accepted in fiscal 1995. This segment's results on a quarter-to-quarter basis are highly dependent on the acceptance by customers under contract for the segment's directory assistance systems, which occurs periodically rather than evenly. - 16 - 17 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS--Continued THREE MONTHS ENDED FEBRUARY 2, 1996 COMPARED TO THE THREE MONTHS ENDED JANUARY 27, 1995--Continued Results of Operations: Other Other items, discussed on a consolidated basis, affecting the results of operations for the three-month periods were: Interest income increased by $125,000, or 26%, in 1996. The increase was primarily due to additional funds invested. The Company's equity in the net loss of its joint ventures was $1,957,000 in 1996, as compared to a loss of $1,448,000 in 1995. The increase was due to the start-up and foreign currency related losses incurred by the Company's Brazilian joint venture which began operations in July 1994. The Company's share of the net loss of its Australian joint venture, which produces a major portion of its revenues and significantly all of its profit in the Company's second and third fiscal quarters, increased by $120,000 due to lower revenues. Selling and administrative expenses increased by $1,698,000, or 17%, to $11,449,000 in 1996 to support the increase in sales. However, these expenses expressed as a percentage of sales were 5% in 1996 and 1995. Research, development and engineering expenditures increased by $139,000, or 8%, to $1,943,000 in 1996. The increase was due to additional product development by the Computer Systems segment. Depreciation and amortization increased by $392,000, or 14%, to $3,188,000 in 1996. The increase was due to increased fixed asset expenditures in fiscal 1994, 1995 and the three months of 1996. Interest expense decreased by $531,000, or 31%, to $1,155,000 in 1996. The decrease was primarily due to the redemption of $10,000,000, in May 1995 of the Company's 12-3/8% Subordinated Debentures. The Company's effective tax rate was reduced to 37% in 1996, from 40% in 1995. The 1996 tax provision reflects full utilization of foreign tax credits generated while such use in 1995 was limited due to tax code limitations. - 17 - 18 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS--Continued THREE MONTHS ENDED FEBRUARY 2, 1996 COMPARED TO THE THREE MONTHS ENDED JANUARY 27, 1995--Continued Liquidity and Source of Capital Cash and cash equivalents increased by $9,443,000 in 1996 to $34,793,000, and working capital increased by $9,318,000 to $66,901,000. Cash flows from operating activities for the three months ended February 2, 1996 were $5,961,000. Many factors, reflected in the accompanying Consolidated Statements of Cash Flows affected the amount of cash flows from operating activities. Primary among the factors providing cash flows to operating activities in 1996 were the reduction in accounts receivable of $15,767,000 and the non-cash expense of $3,188,000 for depreciation and amortization, partially offset by the payment of income taxes of $11,697,000. The principal factor in the cash provided by investing activities of $2,335,000 was the cash balance resulting from the acquisition of a subsidiary of $8,421,000, net of transaction costs, partially offset by net increases in property, plant and equipment of $2,706,000 and investment in joint ventures of $2,360,000. In addition to its cash and cash equivalents, at February 2, 1996, the Company's investment portfolio, primarily U.S. Treasury Notes and certificates of deposit, had a carrying value of $4,683,000. The Company also has a $10,000,000 credit line with a domestic bank under a revolving credit agreement which expires August 1, 1997, unless renewed. The Company had outstanding bank borrowing under that line of $5,776,000 at February 2, 1996. In addition, at February 2, 1996, the Company had the right to sell up to $15,000,000 of additional interest in receivables under its existing sales program. The Company believes that its current financial position, working capital and future cash flows will be sufficient to fund its presently contemplated operations and satisfy its debt obligations. The company has no material capital commitments. The Company may determine, from time-to-time in the future, to buy additional shares of its common stock and/or debentures in the market or in privately negotiated transactions. - 18 - 19 PART II - OTHER INFORMATION Items 1 through 5 were not applicable. 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. (b) Reports on Form 8-K: The only report on Form 8-K filed during the quarter ended February 2, 1996 was a report dated January 29, 1996 (date of earliest event reported), reporting Item 2. Acquisition or Disposition of Assets, and Item 7. Financial Statements and Exhibits filing the following financial statements: (i) The combined audited financial statements of Autologic, Incorporated and Affiliates: Combined Balance Sheets as at October 28, 1994 and November 3, 1995, Combined Statements of Operations for the years ended October 29, 1993, October 28, 1994 and November 3, 1995, Combined Statements of Parent's Investment and Statements of Cash Flows for the years ended October 29, 1993, October 28, 1994 and November 3, 1995. (ii) The consolidated financial statements of Information International, Inc.: Consolidated Balance Sheets as at April 30, 1993, December 31, 1993 and 1994 (audited) and September 30, 1995 (unaudited); Consolidated Statements of Operations, Consolidated Statements of Shareholders' Equity and Consolidated Statements of Cash Flows of Information International, Inc. for the periods ended April 30, 1992 and 1993, December 31, 1993 and 1994 (audited) and September 30, 1994 and 1995 (unaudited). - 19 - 20 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 (Signature) Date: March 14, 1996 JACK EGAN Vice President - Corporate Accounting (Principal Accounting Officer) - 20 - 21 EXHIBIT INDEX Exhibit No. Description - ---------- ------------ 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 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 February 2, 1996 and the related condensed consolidated statements of income and cash flows for the three month periods ended February 2, 1996 and January 27, 1995. 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 condensed consolidated interim 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 as of November 3, 1995, and the related consolidated statements of income and cash flows for the year then ended, not presented herein; and in our report dated January 2, 1996, we expressed an unqualified opinion on these consolidated financial statements. In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of November 3, 1995, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived. Ernst & Young LLP March 8, 1996 EX-15.02 3 ERNST & YOUNG LETTER 1 March 14, 1996 Securities and Exchange Commission Washington, DC 20549 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 March 8, 1996 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 February 2, 1996. Pursuant to Rule 43(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 FINANCIAL DATA SCHEDULE
5 1000 3-MOS NOV-01-1996 FEB-02-1996 34793 2359 105120 5132 32905 186611 97620 35999 282100 119710 31116 0 0 969 108874 282100 16336 226610 12470 205065 16213 576 1155 3601 1334 2267 0 0 0 2267 .23 .23
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