-----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, V4Bz8CCFPaKB+Y0hZdmmg0Lx9wVPmhrfeRpaRuTTXp25R2k3Cjq0cIB+KtjJY2/m LZ6rxpoh28d5YlmDlZxagw== 0000950123-95-001702.txt : 19950613 0000950123-95-001702.hdr.sgml : 19950613 ACCESSION NUMBER: 0000950123-95-001702 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19950428 FILED AS OF DATE: 19950612 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: 95546389 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 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 Six Months Ended April 28, 1995 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 June 7, 1995 was 4,818,897. 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 Six Months and Three Months Ended April 28, 1995 and April 29, 1994 3 Condensed Consolidated Balance Sheets April 28, 1995 and October 28, 1994 4 Condensed Consolidated Statements of Cash Flows Six Months Ended April 28, 1995 and April 29, 1994 5 Notes to Condensed Consolidated Financial Statements 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Six Months and Three Months Ended April 28, 1995 Compared to the Six Months and Three Months Ended April 29, 1994 14 PART II - OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K 22 SIGNATURE 23 -2- 3 PART I - FINANCIAL INFORMATION ITEM 1--FINANCIAL STATEMENTS VOLT INFORMATION SCIENCES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
Six Months Ended Three Months Ended ---------------- ------------------- April 28, April 29, April 28, April 29, 1995 1994 1995 1994 --------- --------- --------- --------- (Dollars in thousands) REVENUES: Sales of services $342,539 $276,026 $175,021 $145,810 Sales of products 31,353 28,213 15,575 15,875 Equity in net income (loss) of joint ventures--Note F (1,353) 990 95 940 Gain on sale of joint venture--Note F 9,770 9,770 Interest income 953 542 473 312 Losses on sales of securities (8) (9) Other income (expense) - net--Note B (242) (201) 26 (216) -------- -------- -------- -------- 373,250 315,332 191,190 172,482 -------- -------- -------- -------- COSTS AND EXPENSES: Cost of sales Services 314,159 257,696 161,854 134,825 Products 20,397 18,382 9,992 10,356 Selling and administrative 20,134 19,657 10,383 10,792 Research, development & engineering 3,876 3,577 2,072 2,339 Depreciation and amortization 5,765 5,304 2,969 2,660 Foreign exchange (gain) loss - net (11) 121 48 25 Interest expense 3,422 4,038 1,736 1,963 -------- -------- -------- -------- 367,742 308,775 189,054 162,960 -------- -------- -------- -------- Income before income tax provision and extraordinary item 5,508 6,557 2,136 9,522 Income tax provision--Note H 2,055 2,719 706 3,721 -------- -------- -------- -------- Income before extraordinary item 3,453 3,838 1,430 5,801 Extraordinary item--Note D (189) -------- -------- -------- -------- Net income $3,453 $3,649 $1,430 $5,801 ======== ======== ======== ======== (Per Share Data) Income before extraordinary item $.72 $.80 $.30 $1.21 Extraordinary item (.04) ---- ---- ---- ----- Net income $.72 $.76 $.30 $1.21 ==== ==== ==== ===== Number of shares used in computation -- Note G 4,810,182 4,802,466 4,816,161 4,802,905 ========= ========= ========= ==========
See accompanying notes. -3- 4 VOLT INFORMATION SCIENCES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
April 28, October 28, 1995 1994 (a) --------- ----------- (Dollars in thousands) ASSETS CURRENT ASSETS Cash and cash equivalents $ 13,506 $ 17,049 Short-term investments 1,989 4,974 Trade accounts receivable less allowances of $3,911 (1995) and $4,027 (1994)--Note B 108,476 98,795 Inventories--Note C 24,718 27,239 Recoverable income taxes 135 Deferred income taxes 1,080 2,966 Prepaid expenses and other assets 5,397 4,387 -------- -------- TOTAL CURRENT ASSETS 155,301 155,410 INVESTMENTS IN SECURITIES 3,933 3,121 INVESTMENTS IN JOINT VENTURES--Note F 13,405 11,997 PROPERTY, PLANT AND EQUIPMENT-- at cost--Note D Land and buildings 33,496 33,513 Machinery and equipment 44,377 42,175 Leasehold improvements 2,935 2,819 -------- -------- 80,808 78,507 Less allowances for depreciation and amortization 29,318 28,555 -------- -------- 51,490 49,952 DEPOSITS, RECEIVABLES AND OTHER ASSETS 2,578 1,562 INTANGIBLE ASSETS--net of accumulated amortization of $3,806 (1995) and $3,495 (1994) 5,646 4,862 -------- -------- $232,353 $226,904 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Notes payable to banks $ 4,910 $ 4,925 Current portion of long-term debt--Note D 12,000 2,000 Accounts payable 20,408 25,018 Accrued expenses Wages and commissions 20,736 19,859 Taxes other than income taxes 7,697 8,917 Insurance 19,123 15,039 Other 5,489 5,639 Customer advances and other liabilities 15,368 11,610 Income taxes 564 -------- -------- TOTAL CURRENT LIABILITIES 105,731 93,571 LONG-TERM DEBT--Note D 29,795 40,788 DEFERRED INCOME TAXES 3,169 2,700 -------- -------- 138,695 137,059 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 - 7,796,830 shares (1995) and 7,789,580 shares (1994) 780 779 Paid-in capital 44,127 43,830 Retained earnings 95,108 91,655 Unrealized foreign currency translation adjustment (322) (283) Unrealized loss on marketable securities (42) (47) -------- -------- 139,651 135,934 Less common stock held in treasury at cost--2,977,933 shares (1995) and 2,986,554 (1994) (45,993) (46,089) -------- -------- 93,658 89,845 -------- -------- $232,353 $226,904 ======== ========
(a) The Balance Sheet at October 28, 1994 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)
Six Months Ended ------------------------ April 28, April 29, 1995 1994 --------- --------- (Dollars in thousands) CASH FLOWS FROM OPERATING ACTIVITIES Net income $ 3,453 $ 3,649 Adjustments to reconcile net income to cash provided by operating activities: Extraordinary loss 189 Depreciation and amortization 5,765 5,304 Equity in net (income) loss of joint ventures 1,353 (990) Gain on sale of joint venture (9,770) Distributions from joint ventures 1,153 Accounts receivable provisions 965 1,134 Amortization of deferred debenture costs, debt discounts and other deferred charges 427 339 (Gains) losses on foreign currency translation 174 (258) Gains on dispositions of fixed assets (7) (13) Deferred income tax provision (benefit) 2,074 (40) (Gains) losses on sales of securities (7) 8 Other 31 27 Changes in operating assets and liabilities: (Increase) decrease in accounts receivable (10,855) 5,398 (Increase) decrease in inventories 1,812 (1,780) Increase in recoverable income taxes (135) Increase in prepaid expenses and other current assets (1,030) (1,211) (Increase) decrease in deposits, receivables and other assets (1,125) 800 Decrease in accounts payable (4,407) (4,542) Increase in accrued expenses 3,962 5,763 Increase in customer advances and other liabilities 3,702 5,106 Increase (decrease) in income tax liability (294) 2,878 -------- -------- NET CASH PROVIDED BY OPERATING ACTIVITIES 5,858 13,144 -------- --------
-5- 6 VOLT INFORMATION SCIENCES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)--Continued
Six Months Ended ----------------------- April 28, April 29, 1995 1994 --------- --------- (Dollars in thousands) CASH FLOWS FROM INVESTING ACTIVITIES Sales of investments 6,851 Maturities of investments 8,000 949 Purchases of investments (5,811) (4,236) Investment in joint ventures (2,824) Proceeds from disposal of property, plant and equipment 370 92 Purchases of property, plant and equipment (7,016) (6,656) Proceeds from the sale of a joint venture 16,383 Other (1,125) -------- -------- NET CASH PROVIDED BY (APPLIED TO) INVESTING ACTIVITIES (8,406) 13,383 -------- -------- CASH FLOWS FROM FINANCING ACTIVITIES Payment of long-term debt (1,000) (20,000) Exercise of stock options 143 Increase (decrease) in notes payable to banks 88 (1,290) -------- -------- NET CASH APPLIED TO FINANCING ACTIVITIES (769) (21,290) -------- -------- Effect of exchange rate changes on cash (226) 127 -------- -------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (3,543) 5,364 Cash and cash equivalents, beginning of period 17,049 41,081 -------- -------- CASH AND CASH EQUIVALENTS, END OF PERIOD $ 13,506 $ 46,445 -------- -------- SUPPLEMENTAL INFORMATION Cash paid (received) during the period Interest expense $ 3,315 $ 4,997 Income taxes, net of refunds $ 350 $ (73)
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 April 28, 1995 and results of operations for the six and three months ended April 28, 1995 and April 29, 1994 and cash flows for the six months ended April 28, 1995 and April 29, 1994. Operating results for the six and three months ended April 28, 1995 are not necessarily indicative of the results that may be expected for the fiscal year ending November 3, 1995. 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 28, 1994. 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 Company increased this limit to $45,000,000. As collections reduce previously sold undivided interests, interests in new receivables may be sold up to the $45,000,000 level. At April 28, 1995, and October 28, 1994, $10,000,000 and $25,000,000, respectively, of interests in 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 on the purchaser's borrowing costs incurred on short-term commercial paper which financed the purchase of receivables. Other income (expense) in the accompanying statements of income reflects $690,000 and $708,000 for such fees in the six months ended, and $378,000 and $354,000 in the three months ended, April 28, 1995 and April 29, 1994, respectively. The program extends through March 15, 1998; however, 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 stated minimum tangible net worth, as defined, or exceeds a stated maximum ratio of debt to tangible net worth. -7- 8 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)--Continued Note C--Inventories Inventories consist of:
April 28, October 28, 1995 1994 --------- ----------- (Dollars in thousands) Services: Accumulated unbilled costs on: Service contracts $11,710 $ 9,521 Long-term contracts 5,136 10,277 ------- ------- 16,846 19,798 ------- ------- Products: Materials and work-in-process 3,608 3,700 Service parts 1,139 949 Finished goods 3,125 2,792 ------- ------- 7,872 7,441 ------- ------- Total $24,718 $27,239 ======= =======
The cumulative amounts billed, principally under long-term contracts, of $55,418,000 at April 28, 1995 and $39,179,000 at October 28, 1994 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:
April 28, October 28, 1995 1994 --------- ----------- (Dollars in thousands) 12-3/8% Senior Subordinated Debentures, due July 1, 1998--net of unamortized discount of $60,000 - 1995 and $67,000 - 1994 (a) $32,795 $32,788 Term loan (b) 9,000 10,000 ------- ------- 41,795 42,788 Less amounts due within one year 12,000 2,000 ------- ------- Long-term debt $29,795 $40,788 ======= =======
(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 accompanying statement of income for the six months ended April 29, 1994 reflects an extraordinary charge of $189,000, net of an income tax benefit of $101,000, related to the redemption of $20,000,000 of debentures. In April 1995, the Company called, and on May 8, 1995 redeemed an additional $10,000,000 of the debentures which, together with previously redeemed and repurchased debentures, reduces the remaining principal amount to $22,855,000, which is due July 1, 1998. The debentures are subordinated to all existing and future senior indebtedness (as defined) of the Company. At April 28, 1995, the amount available for dividends, pursuant to the terms of the indenture under which the debentures are issued, was $25,479,000 and, if no dividend payments are made, the amount available for capital stock repurchases was $35,479,000. However, under the terms of the term loan agreement, at such date, only $8,314,000 was available for such payments (see (b) below). (b) In October 1994, two subsidiaries of 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 April 28, 1995 - $15,700,000). The obligation is guaranteed by Volt. 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 $79,000,000. As a result, only $8,314,000 was available for the payment of dividends and stock repurchases at April 28, 1995. -9- 10 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)--Continued Note E--Stockholders' Equity Changes in the major components of stockholders' equity for the six months ended April 28, 1995 are as follows:
Common Paid-In Retained Treasury Stock Capital Earnings Stock -------- -------- -------- -------- (Dollars in thousands) Balance at October 28, 1994 $ 779 $ 43,830 $ 91,655 $(46,089) Net income for the six months 3,453 Contribution to ESOP - 8,621 shares 154 96 Stock options exercised - 7,250 shares 1 143 -------- -------- -------- -------- Balance at April 28, 1995 $ 780 $ 44,127 $ 95,108 $(45,993) ======== ======== ======== =========
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 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. The Company has invested $5,341,000 to acquire a 50% interest in the common shares, together with 75% of the issued preferred stock, of 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. The agreement requires the Company to invest up to an additional $2,863,000 (which, together with the original investment, will represent 50% of the common shares and 75% of the agreed initial preferred stock and debt financing by the venturers) in the joint venture in fiscal year 1995 as well as to provide technology, expertise and key personnel in directory production, sales and marketing. -10- 11 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)--Continued Note F--Summarized Financial Information of Joint Ventures--(Continued) 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. Consolidated retained earnings at April 28, 1995 included $4,771,000, representing the undistributed earnings of Pacific Access. Income taxes have been paid or provided on such earnings. The following summarizes the financial information of the joint ventures:
April 28, 1995 October 28, 1994 --------------------------- ------------------------- (Dollars in thousands) Company's Company's Total Equity Total Equity --------- --------- --------- --------- Current assets $ 185,592 $ 233,907 Noncurrent assets 16,337 16,629 Current liabilities (145,309) (198,521) --------- --------- Equity of combined joint ventures $ 56,620 $ 52,015 ========= ========= Equity of Australian joint venture (a) $ 52,354 $ 10,061 $ 48,987 $ 9,677 Equity of Brazilian joint venture 4,266 3,344 3,028 2,320 --------- --------- --------- --------- $ 56,620 $ 52,015 ========= ========= Investments in joint ventures $ 13,405 $ 11,997 ========= =========
(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. -11- 12 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)--Continued Note F--Summarized Financial Information of Joint Ventures--(Continued)
Six Months Ended ----------------------------------------------------------- April 28, 1995 April 29, 1994 -------------------------- -------------------------- (Dollars in thousands) Company's Company's Total Equity Total Equity --------- --------- ---------- --------- Revenues $ 215,736 $ 202,146 Costs and expenses 210,318 196,606 Income tax provision 4,230 1,645 --------- --------- Net income $ 1,188 $ 3,895 ========= ========= Net income of Australian joint venture $ 3,707 $ 448 $ 2,423 $ 329 Net loss of Brazilian joint venture (b) (2,519) (1,801) Net income of United States joint venture (c) 1,472 661 --------- --------- --------- --------- $ 1,188 $ 3,895 ========= ========= Company's equity in net income (loss) of joint ventures $ (1,353) $ 990 ========= =========
Three Months Ended ----------------------------------------------------------- April 28, 1995 April 29, 1994 --------------------------- ------------------------ (Dollars in thousands) Company's Company's Total Equity Total Equity --------- --------- --------- --------- Revenues $ 144,954 $ 140,083 Costs and expenses 131,214 129,465 Income tax provision 6,277 3,515 --------- --------- Net income $ 7,463 $ 7,103 ========= ========= Net income of Australian joint venture $ 8,739 $ 1,077 $ 6,699 $ 813 Net loss of Brazilian joint venture (b) (1,276) (982) Net income of United States joint venture (c) 404 127 --------- --------- --------- --------- $ 7,463 $ 7,103 ========= ========= Company's equity in net income of joint ventures $ 95 $ 940 ========= =========
(b) The Company's portion of the net loss of the Brazilian joint venture included losses on foreign currency of $394,000 and $409,000 for the six and three months ended April 28, 1995, respectively. (c) Effective February 28, 1994, the Company sold its 50% interest in the United States joint venture. -12- 13 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. Note H--Income Taxes Significant components of the income tax provision attributable to operations are as follows:
Six Months Ended Three Months Ended ---------------- ------------------ April 28, April 29, April 28, April 29, 1995 1994 1995 1994 --------- --------- --------- --------- (Dollars in thousands) Current: Federal $ (763) $ 1,985 $(2,421) $ 2,946 Foreign 519 232 307 178 State and local 225 542 (372) 581 ------- ------- ------- ------- (19) 2,759 (2,486) 3,705 ------- ------- ------- ------- Deferred: Federal 1,658 (38) 2,560 16 Foreign 20 20 State and local 396 (2) 612 ------- ------- ------- ------- 2,074 (40) 3,192 16 ------- ------- ------- ------- $ 2,055 $ 2,719 $ 706 $ 3,721 ======= ======= ======= =======
-13- 14 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS SIX MONTHS AND THREE MONTHS ENDED APRIL 28, 1995 COMPARED TO THE SIX MONTHS AND THREE MONTHS ENDED APRIL 29, 1994 The information which appears below relates to the current and prior periods, the results of operations for which periods 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 SIX FOR THE THREE MONTHS ENDED MONTHS ENDED ------------ ------------ April 28, April 29, April 28, April 29, 1995 1994 1995 1994 --------- --------- --------- --------- (Dollars in thousands) Revenues: Technical Services and Temporary Personnel $ 253,952 $ 205,692 $ 135,034 $ 109,520 Electronic Publication and Typesetting Systems 32,703 28,561 16,703 16,068 Telephone Directory 26,656 29,673 13,994 17,785 Engineering and Construction 29,137 25,429 14,534 11,282 Computer Systems 33,542 17,049 11,291 8,236 Equity in net income (loss) of joint ventures (1,353) 990 95 940 Gain on sale of joint venture 9,770 9,770 Interest and other income - net 711 333 499 87 Elimination of intersegment revenues (2,098) (2,165) (960) (1,206) --------- --------- --------- --------- $ 373,250 $ 315,332 $ 191,190 $ 172,482 ========= ========= ========= ========= Income Before Income Tax Provision and Extraordinary Item: Operating Profit (Loss): Technical Services and Temporary Personnel $ 11,891 $ 6,063 $ 6,944 $ 4,044 Electronic Publication and Typesetting Systems 387 364 107 316 Telephone Directory (1,451) 361 (419) 719 Engineering and Construction 1,176 (221) 832 (569) Computer Systems 2,256 (2,281) (1,838) (1,333) Eliminations (31) 13 (9) (10) --------- --------- --------- --------- Total Operating Profit 14,228 4,299 5,617 3,167 Equity in net income (loss) of joint ventures (1,353) 990 95 940 Gain on sale of joint venture 9,770 9,770 Interest and other income - net 711 333 499 87 General corporate expenses (4,666) (4,676) (2,290) (2,454) Interest expense (3,422) (4,038) (1,736) (1,963) Foreign exchange gain (loss) - net 10 (121) (49) (25) --------- --------- --------- --------- Income Before Income Tax Provision and Extraordinary Item $ 5,508 $ 6,557 $ 2,136 $ 9,522 ========= ========= ========= =========
-14- 15 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS--Continued SIX MONTHS ENDED APRIL 28, 1995 COMPARED TO THE SIX MONTHS ENDED APRIL 29, 1994--Continued Results of Operations - Summary In the six month period of 1995, revenues increased by $57,918,000, or 18%, from fiscal 1994 as sales increased by $69,653,000, or 23%. The increase in sales resulted primarily from a $48,260,000 increase in the sales of the Technical Services and Temporary Personnel segment and a $16,493,000 increase in the sales of the Computer Systems segment. The Company had pretax income of $5,508,000 in 1995, compared to $6,557,000 in 1994. The 1994 income included a $9,770,000 pretax gain on the sale of a joint venture. The operating profit of the Company's segments increased by $9,929,000 to $14,228,000 in 1995. The principal increases in the segments' operating income were from the Technical Services and Temporary Personnel segment, with an increase of $5,828,000 to $11,891,000, and the Computer Systems segment, where the $2,256,000 profit represented a $4,537,000 favorable change from 1994. The extraordinary item in fiscal 1994 was a charge, net of taxes, of $189,000, due to the early redemption at par of $20,000,000 face value of the Company's 12-3/8% Subordinated Debentures. Net income in 1995 was $3,453,000, compared to a net income of $3,649,000 in 1994. Results of Operations - By Segment The Technical Services and Temporary Personnel segment's sales increased by $48,260,000, or 23%, in 1995 to $253,952,000 and operating profit increased by $5,828,000, or 96%, to $11,891,000. Approximately $32,000,000 of the segment's sales increase in 1995 was the result of business with new customers. One new customer accounted for approximately $16,000,000 of the increase in sales. Although it is anticipated that services to that customer will continue to be rendered over the near-term, the level of services now being performed may be reduced. The increase in operating profit was due to the increased sales volume and an increase in gross margin of 1.7 percentage points due to lower payroll taxes and workers' compensation insurance. -15- 16 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS--Continued SIX MONTHS ENDED APRIL 28, 1995 COMPARED TO THE SIX MONTHS ENDED APRIL 29, 1994--Continued The Electronic Publication and Typesetting Systems segment's sales increased by $4,142,000, or 15%, to $32,703,000 in 1995, while operating profit increased by $23,000, or 6%. The sales increase was primarily due to increased equipment sales in the U.S. and Pacific markets. The increase in operating profit was due to the increased sales volume and a 1.4 percentage point decrease in overhead expended per sales dollar, offset to a significant extent by a reduction in the gross margin of 1.6 percentage points. 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). The markets in which the segment competes are marked by rapidly changing technology, with sales in fiscal year 1995 of equipment introduced within the last three years comprising approximately 93% of equipment sales. The Telephone Directory segment's sales decreased by $3,017,000, or 10%, to $26,656,000 in fiscal 1995, while the segment incurred an operating loss of $1,451,000, as compared to a profit of $361,000 in 1994. The sales decline is due to lower telephone directory production volume, primarily related to the expiration of a contract in early 1995. The operating loss was due to the lower telephone directory production sales volume, an increase in costs to develop new directory management systems and start-up losses incurred in the automated production of newspaper display advertisements. This segment's services are rendered under various short and long-term contracts. Certain contracts expire in fiscal 1995 through 1997, 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 $3,708,000, or 15%, to $29,137,000 in fiscal 1995 and operating profit was $1,176,000, compared to a loss of $221,000 in 1994. The sales increase was due to a 25% increase in the business systems division and a 17% increase in the construction division. Operating results improved due to the increased sales volume and a 7.6 percentage point decrease in overhead expended per sales dollar, partially offset by a reduction in the gross margin of 2.7 percentage points. The Computer Systems segment's sales increased by $16,493,000, or 97%, to $33,542,000 in 1995 and the operating profit was $2,256,000, as compared to a loss of $2,281,000 in 1994. The increase in sales and operating profit was primarily due to customer acceptance of two Delta Operating Service Systems (DOSS) in the first quarter of 1995 which did not require customization. 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 contracts, which require significant customization, continue and customer acceptances are anticipated later in 1995 and 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 the first half of 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 SIX MONTHS ENDED APRIL 28, 1995 COMPARED TO THE SIX MONTHS ENDED APRIL 29, 1994--Continued Results of Operations - Other Other items, discussed on a consolidated basis, affecting results of operations for the six month periods were: Interest income increased by $411,000, or 76%, in 1995. The increase was primarily due to higher prevailing interest rates and funds available for investment in interest-bearing securities. The Company's equity in the net loss of its joint ventures was $1,353,000 in 1995, as compared to a net income of $990,000 in 1994. The loss was due to the start-up and foreign currency related losses incurred by the Brazilian joint venture which began operations in July 1994 and the absence of profits from the U.S. joint venture sold in February 1994. The Company's share of the income 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 $119,000, due to increased revenue. Selling and administrative expenses increased by $477,000, or 2%, to $20,134,000 in 1995 to support the increase in sales. However, these expenses expressed as a percentage of sales were 5% in 1995 and 6% in 1994. Research, development and engineering expenditures increased by $299,000, or 8%, to $3,876,000 in 1995. The increase was due to additional product development by the Telephone Directory and Electronic Publication and Typesetting Systems segments. Depreciation and amortization increased by $461,000, or 9%, to $5,765,000 in 1995. The increase is due to increased fixed asset expenditures in 1993, 1994 and the first half of 1995. Interest expense decreased by $616,000, or 15%, to $3,422,000 in 1995. The decrease was due to the redemption, in May 1994, of $10,000,000 of the Company's 12-3/8% Subordinated Debentures. The Company's effective tax rate was reduced to 37% in 1995, compared to 41% in 1994. The 1995 tax provision reflects the use of domestic net operating loss and foreign tax carryforwards which were not previously recognized due to tax code limitations. -17- 18 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS--Continued THREE MONTHS ENDED APRIL 28, 1995 COMPARED TO THE THREE MONTHS ENDED APRIL 29, 1994--Continued Results of Operations - Summary In the three month period of 1995, revenues increased by $18,708,000, or 11%, from fiscal 1994 as sales increased by $28,911,000, or 18%. The increase in sales resulted primarily from a $25,514,000 increase in the sales of the Technical Services and Temporary Personnel segment. The Company had pretax income of $2,136,000, compared to $9,522,000 in 1994. The 1994 income included a $9,770,000 pretax gain on the sale of a joint venture. Operating profit increased by $2,450,000, or 77%, to $5,617,000. The principal increases were an increase in operating profit of $2,900,000 by the Technical Services and Temporary Personnel segment, and Engineering and Construction, with an increase of $1,401,000, partially offset by decreases of $1,138,000 in the Telephone Directory segment, $505,000 in Computer Systems and $209,000 in Electronic Publication and Typesetting Systems. Net income in fiscal 1995 was $1,430,000, compared to a net income of $5,801,000 in 1994. Results of Operations - By Segment The Technical Services and Temporary Personnel segment's sales increased by $25,514,000, or 23%, in 1995 to $135,034,000 and operating profit increased by $2,900,000, or 72%, to $6,944,000. Approximately $19,000,000 of the segment's sales increase in 1995 was the result of business with new customers. The operating profit increase in 1995 was due to the increased sales volume and an increased gross margin of 1.6 percentage points. The Electronic Publication and Typesetting Systems segment's sales increased by $635,000, or 4%, to $16,703,000 in 1995, while operating profit decreased by $209,000 to $107,000. The sales increase was primarily due to increased equipment sales in the Pacific market, partially offset by decreases in the U.S and European markets. The decrease in operating profit was primarily due to a reduction in the gross margin of 1.9 percentage points, partially offset by the increase in sales and a .6 percentage point decrease in overhead expended per sales dollar. 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). The Telephone Directory segment's sales decreased by $3,791,000, or 21%, to $13,994,000 in fiscal 1995 while the segment incurred an operating loss of $419,000, as compared to a profit of $719,000 in 1994. The sales decline was due to lower telephone directory production volume, primarily related to the termination of a contract in early 1995 and a 25% decrease in publication sales of independent directories. The reduction in the publication sales of independent directories primarily relates to two directories published in the second quarter of fiscal 1994, which will be published in the third quarter of fiscal 1995. The operating loss was due to the lower telephone directory production and -18- 19 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS--Continued THREE MONTHS ENDED APRIL 28, 1995 COMPARED TO THE THREE MONTHS ENDED APRIL 29, 1994--Continued independent directory publication sales volumes, an increase in costs to develop new directory management systems and start-up losses incurred in the automated production of newspaper display advertisements. The Engineering and Construction segment's sales increased by $3,252,000, or 29%, to $14,534,000 in fiscal 1995, with an operating profit of $832,000, compared to a loss of $569,000 in 1994. The sales increase was due to a 39% increase in the construction division and a 19% increase in the business systems division. Operating results improved due to the increased sales volume and a 10.3 percentage point decrease in overhead expended per sales dollar. The Computer Systems segment's sales increased by $3,055,000, or 37%, to $11,291,000 in 1995, while the operating loss increased by $505,000, or 38%, to $1,838,000. The sales increase was attributable to greater DOSS maintenance revenue and an increase in sales of conservation services to utilities. The operating loss increased due to additional expenditures on new business development and high start-up costs incurred under maintenance contracts. 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. Results of Operations - Other Other items, discussed on a consolidated basis, affecting results of operations for the three month periods were: Interest income increased by $161,000, or 52%, in 1995. The increase was primarily due to higher prevailing interest rates and funds available for investment in interest-bearing securities. In the three month period of 1995, the Company's equity in the net income of its joint ventures decreased by $845,000, or 90%, to $95,000. The decrease was due to the start-up and foreign currency related losses incurred by the Brazilian joint venture which began operations in July 1994. The Company's share of the income of its Australian joint venture increased by $264,000 due to increased revenue. Selling and administrative expenses decreased by $409,000, or 4%, to $10,383,000 in 1995, due principally to the expenses incurred in 1994 in relocating the corporate offices. These expenses expressed as a percentage of sales were 5% in 1995 and 7% in 1994. -19- 20 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS--Continued THREE MONTHS ENDED APRIL 28, 1995 COMPARED TO THE THREE MONTHS ENDED APRIL 29, 1994--Continued Depreciation and amortization increased by $309,000, or 12%, to $2,969,000 in 1995. The increase is due to increased fixed asset expenditures in 1993, 1994 and the first half of 1995. Interest expense decreased by $227,000, or 12%, to $1,736,000 in 1995. The decrease was due to the redemption, in May 1994, of $10,000,000 of the Company's 12-3/8% Subordinated Debentures. The Company's effective tax rate was reduced to 33% in 1995 compared to 39% in 1994. The 1995 tax provision reflects the use of domestic net operating loss and foreign tax carryforwards which were not previously recognized due to tax code limitations. -20- 21 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS--Continued Liquidity and Capital Resources Cash and cash equivalents decreased by $3,543,000 in 1995 to $13,506,000 and working capital decreased by $12,269,000 to $49,570,000. The decrease in working capital was primarily due to the inclusion in current liabilities of $10,000,000 of debentures called by the Company in April 1995 for redemption on May 8, 1995. Cash flows provided by operating activities for the six months ended April 28, 1995 were $5,858,000 compared with $13,144,000 in the six months ended April 29, 1994. The decrease primarily relates to an increase in the level of accounts receivable, due in part to a $15,000,000 reduction in interests in accounts receivable sold at April 28, 1995 compared with October 28, 1994. 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. In addition to its cash and cash equivalents, at April 28, 1995, the Company's investment portfolio, primarily U.S. Treasury Notes and certificates of deposit, had a carrying value of $5,922,000. The Company also has a $10,000,000 credit line with a domestic bank under a revolving credit agreement which expires in February 1996, unless renewed. The Company had outstanding bank borrowings under that line of $4,910,000 at April 28, 1995. In addition, at April 28, 1995, the Company had the right to sell up to $35,000,000 of additional interests in receivables under its existing sales program. In May 1995, an additional $10,000,000 of the interests was sold to finance the redemption of the debentures. -21- 22 PART II - OTHER INFORMATION ITEM 6-- EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits: 15.01 Acknowledgment letter from Ernst & Young LLP 15.02 Independent Accountants' Report on Review of Interim Financial Information from Ernst & Young LLP (b) Reports on Form 8-K: The only report on Form 8-K filed during the quarter ended April 28, 1995 was a report dated March 31, 1995 (date of earliest event reported), reporting under Item 5. Other Events. -22- 23 SIGNATURE 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: June 9, 1995 JACK EGAN Vice President - Corporate Accounting (Principal Accounting Officer) -23- 24 EXHIBIT INDEX 15.01 Acknowledgment letter from Ernst & Young LLP 15.02 Independent Accountants' Report on Review of Interim Financial Information from Ernst & Young LLP 27 Financial Data Schedule EX-15.01 2 ACKNOWLEDGMENT LETTER FROM ERNST & YOUNG 1 EXHIBIT 15.01 June 12, 1995 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 May 31, 1995 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 April 28, 1995. 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-15.02 3 ACCOUNTANT'S REPORT ON INTERIM FINANCIAL INFO. 1 EXHIBIT 15.02 ERNST & YOUNG LLP 787 Seventh Avenue Phone # 212-773-3000 New York, New York 10019 INDEPENDENT ACCOUNTANTS' REPORT ON REVIEW OF INTERIM FINANCIAL INFORMATION TO THE STOCKHOLDERS VOLT INFORMATION SCIENCES, INC. We have reviewed the accompanying unaudited condensed consolidated balance sheet of Volt Information Sciences, Inc. and subsidiaries as of April 28, 1995, and the related condensed consolidated statements of operations for the six and three month periods ended April 28, 1995 and April 29, 1994, and the related condensed consolidated statements of cash flows for the six month periods ended April 28, 1995 and April 29, 1994. 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 28, 1994, and the related consolidated statements of operations and cash flows for the year then ended, not presented herein; and in our report dated December 19, 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 28, 1994, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived. Ernst & Young LLP May 31, 1995 EX-27 4 FINANCIAL DATA SCHEDULE
5 1,000 6-MOS NOV-3-1995 OCT-29-1994 APR-28-1995 13,506 1,989 112,387 3,911 24,718 155,301 80,808 29,318 232,353 105,731 29,795 0 0 780 92,878 232,353 31,353 373,250 20,397 334,656 28,799 965 3,422 5,508 2,055 3,453 0 0 0 3,453 .72 .72
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