0000950123-95-002590.txt : 19950914 0000950123-95-002590.hdr.sgml : 19950914 ACCESSION NUMBER: 0000950123-95-002590 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19950728 FILED AS OF DATE: 19950911 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: 95572493 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 VOLT INFORMATION SCIENCES, INC. - 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 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 September 7, 1995 was 4,813,534. 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 Nine Months and Three Months Ended July 28, 1995 and July 29, 1994 3 Condensed Consolidated Balance Sheets July 28, 1995 and October 28, 1994 4 Condensed Consolidated Statements of Cash Flows Nine Months Ended July 28, 1995 and July 29, 1994 5 Notes to Condensed Consolidated Financial Statements 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Nine Months and Three Months Ended July 28, 1995 Compared to the Nine Months and Three Months Ended July 29, 1994 14 PART II - OTHER INFORMATION Item 4. Submission of Matters to a Vote of Security Holders 22 Item 5. Other Information 22 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)
Nine Months Ended Three Months Ended ----------------- ------------------- July 28, July 29, July 28, July 29, 1995 1994 1995 1994 -------- --------- -------- -------- (Dollars in thousands) REVENUES: Sales of services $551,017 $426,025 $209,493 $149,999 Sales of products 48,799 44,151 16,431 15,938 Equity in net income of joint ventures--Note F 415 3,246 1,768 2,256 Gain on sale of joint venture--Note F 9,770 Interest income 1,427 944 474 402 Gains (losses) on sales of securities (7) 1 Other expense - net--Note B (656) (418) (414) (217) --------- --------- --------- --------- 601,002 483,711 227,752 168,379 --------- --------- --------- --------- COSTS AND EXPENSES: Cost of sales Services 503,990 395,499 191,213 137,803 Products 32,291 28,379 10,893 9,997 Selling and administrative 31,223 29,755 11,090 10,098 Research, development & engineering 6,064 5,863 1,807 2,286 Depreciation and amortization 8,817 7,961 3,052 2,657 Foreign exchange (gain) loss - net 12 45 22 (76) Interest expense 4,739 5,766 1,317 1,728 --------- --------- --------- --------- 587,136 473,268 219,394 164,493 --------- --------- --------- --------- Income before income tax provision and extraordinary item 13,866 10,443 8,358 3,886 Income tax provision--Note H 5,357 4,311 3,302 1,592 --------- --------- --------- --------- Income before extraordinary item 8,509 6,132 5,056 2,294 Extraordinary item--Note D (62) (271) (62) (82) --------- --------- --------- --------- Net income $ 8,447 $ 5,861 $ 4,994 $ 2,212 ========= ========= ========= ========= (Per Share Data) Income before extraordinary item $.88 $.64 $.53 $.24 Extraordinary item (.01) (.03) (.01) (.01) --------- --------- --------- --------- Net income $.87 $.61 $.52 $.23 ========= ========= ========= ========= Number of shares used in computation -- Note G 9,627,068 9,605,304 9,640,476 9,606,052 ========= ========= ========= =========
See accompanying notes. -3- 4 VOLT INFORMATION SCIENCES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
July 28, October 28, 1995 1994 (a) -------- ----------- (Dollars in thousands) ASSETS CURRENT ASSETS Cash and cash equivalents $17,859 $17,049 Short-term investments 2,081 4,974 Trade accounts receivable less allowances of $3,991 (1995) and $4,027 (1994)--Note B 97,873 98,795 Inventories--Note C 28,483 27,239 Deferred income taxes 2,329 2,966 Prepaid expenses and other assets 7,251 4,387 -------- -------- TOTAL CURRENT ASSETS 155,876 155,410 INVESTMENTS IN SECURITIES 4,130 3,121 INVESTMENTS IN JOINT VENTURES--Note F 14,801 11,997 PROPERTY, PLANT AND EQUIPMENT-- at cost--Note D Land and buildings 33,494 33,513 Machinery and equipment 45,66 742,175 Leasehold improvements 2,922 2,819 -------- -------- 82,083 78,507 Less allowances for depreciation and amortization 30,618 28,555 -------- -------- 51,465 49,952 DEPOSITS, RECEIVABLES AND OTHER ASSETS 2,710 1,562 INTANGIBLE ASSETS--net of accumulated amortization of $3,993 (1995) and $3,495 (1994) 5,459 4,862 -------- -------- $234,441 $226,904 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Notes payable to banks $4,464 $4,925 Current portion of long-term debt--Note D 2,000 2,000 Accounts payable 24,775 25,018 Accrued expenses Wages and commissions 21,840 19,859 Taxes other than income taxes 8,446 8,917 Insurance 16,841 15,039 Other 5,640 5,639 Customer advances and other liabilities 15,861 11,610 Income taxes 2,841 564 -------- -------- TOTAL CURRENT LIABILITIES 102,708 93,571 LONG-TERM DEBT--Note D 29,316 40,788 DEFERRED INCOME TAXES 3,553 2,700 -------- -------- 135,577 137,059 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 - 9,643,734 (1995) and 7,789,580 shares (1994) 964 779 Paid-in capital 26,838 43,830 Retained earnings 71,279 91,655 Unrealized foreign currency translation adjustment (292) (283) Unrealized gain (loss) on marketable securities 75 (47) -------- -------- 98,864 135,934 Less 2,986,554 common shares held in treasury at cost -- (46,089) ------- -------- 98,864 89,845 $234,441 $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)
Nine Months Ended ----------------------- July 28, July 29, 1995 1994 -------- -------- (Dollars in thousands) CASH FLOWS FROM OPERATING ACTIVITIES Net income $ 8,447 $ 5,861 Adjustments to reconcile net income to net cash provided by operating activities: Extraordinary loss 62 271 Depreciation and amortization 8,817 7,961 Equity in net income of joint ventures (415) (3,246) Gain on sale of joint venture (9,770) Distributions from joint ventures 1,904 1,153 Accounts receivable provisions 1,640 1,432 Amortization of deferred debenture costs, debt discounts and other deferred charges 662 534 Losses on foreign currency translation 234 204 Gains on dispositions of fixed assets (198) (1) Deferred income tax provision (benefit) 1,115 (953) (Gains) losses on sales of securities (14) 7 Other 47 28 Changes in operating assets and liabilities: Increase in accounts receivable (1,182) (9,185) (Increase) decrease in inventories (2,281) 1,546 Decrease in recoverable income taxes 1,700 Increase in prepaid expenses and other current assets (2,888) (535) (Increase) decrease in deposits, receivables and other assets (1,388) 1,252 Increase (decrease) in accounts payable 340 (516) Increase in accrued expenses 3,939 7,979 Increase in customer advances and other liabilities 4,200 7,241 Increase in income tax liability 2,589 -------- -------- NET CASH PROVIDED BY OPERATING ACTIVITIES 25,630 12,963 -------- --------
-5- 6 VOLT INFORMATION SCIENCES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)--Continued
Nine Months Ended ------------------------- July 28, July 29, 1995 1994 -------- ------- (Dollars in thousands) CASH FLOWS FROM INVESTING ACTIVITIES Sales of investments 6,851 Maturities of investments 9,740 1,949 Purchases of investments (7,641) (10,888) Investment in joint ventures (4,323) (1,690) Proceeds from disposal of property, plant and equipment 606 86 Purchases of property, plant and equipment (9,973) (11,326) Proceeds from the sale of a joint venture 16,383 Other (1,125) ------- ------- NET CASH PROVIDED BY (APPLIED TO) INVESTING ACTIVITIES (12,716) 1,365 ------- ------- CASH FLOWS FROM FINANCING ACTIVITIES Payment of long-term debt (11,500) (30,000) Exercise of stock options 209 Increase (decrease) in notes payable to banks (282) 931 ------- ------- NET CASH APPLIED TO FINANCING ACTIVITIES (11,573) (29,069) ------- ------- Effect of exchange rate changes on cash (531) (228) ------- ------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 810 (14,969) Cash and cash equivalents, beginning of period 17,049 41,081 ------- ------- CASH AND CASH EQUIVALENTS, END OF PERIOD $17,859 $26,112 ======= ======= SUPPLEMENTAL INFORMATION Cash paid during the period: Interest expense $ 5,585 $ 8,196 Income taxes, net of refunds $ 1,525 $ 3,582
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 July 28, 1995 and results of operations for the nine and three months ended July 28, 1995 and July 29, 1994 and cash flows for the nine months ended July 28, 1995 and July 29, 1994. Operating results for the nine and three months ended July 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 July 28, 1995 and October 28, 1994, $30,000,000 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 primarily 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 $1,479,000 and $1,118,000 for such fees in the nine months ended, and $789,000 and $410,000 in the three months ended, July 28, 1995 and July 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: July 28, October 28, 1995 1994 -------- ----------- (Dollars in thousands) Services: Accumulated unbilled costs on: Service contracts $ 14,168 $ 9,521 Long-term contracts 4,339 10,277 -------- -------- 18,507 19,798 -------- -------- Products: Materials and work-in-process 4,780 3,700 Service parts 1,150 949 Finished goods 4,046 2,792 -------- -------- 9,976 7,441 -------- -------- Total $ 28,483 $ 27,239 ======== ========
The cumulative amounts billed, principally under long-term contracts, of $43,206,000 and $39,179,000 at July 28, 1995 and October 28, 1994, respectively, are credited against the related costs in inventory. Substantially all of the amounts billed have been collected. Note D--Long-Term Debt
Long-term debt consists of the following: July 28, October 28, 1995 1994 -------- ----------- (Dollars in thousands) 12-3/8% Senior Subordinated Debentures, due July 1, 1998--net of unamortized discount of $39,000 - 1995 and $67,000 - 1994 (a) $ 22,816 $ 32,788 Term loan (b) 8,500 10,000 -------- -------- 31,316 42,788 Less amounts due within one year 2,000 2,000 -------- -------- Long-term debt $ 29,316 $ 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. In April 1995, the Company called, and on May 18, 1995 redeemed $10,000,000 of the debentures. The accompanying statements of income for the nine months ended July 28, 1995 and July 29, 1994, respectively, reflect extraordinary charges of $62,000 and $271,000, net of income tax benefits of $42,000 and $157,000, respectively, related to the redemption of $10,000,000 (1995) and $30,000,000 (1994) of the Company's debentures. -8- 9 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)--Continued Note D--Long-Term Debt--Continued The debentures are subordinated to all existing and future senior indebtedness (as defined) of the Company. At July 28, 1995, the amount available for dividends, pursuant to the terms of the indenture under which the debentures are issued, was $28,028,000 and, if no dividend payments are made, the amount available for capital stock repurchases was $38,028,000. However, under the terms of the term loan agreement, at such date, only $13,879,000 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 July 28, 1995 - $15,564,000). The obligation is guaranteed by the Company. 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 $13,879,000 was available for the payment of dividends and stock repurchases at July 28, 1995. Note E--Stockholders' Equity Changes in the major components of stockholders' equity for the nine months ended July 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 nine months 8,447 Contribution to ESOP - 8,621 shares 154 96 Stock options exercised - 10,250 shares 1 208 Cancellation of treasury stock at cost - 2,977,933 shares (298) (16,872) (28,823) 45,993 Issuance of 4,821,897 shares of common stock resulting from two-for-one stock split in the form of a 100% stock dividend 482 (482) ------- -------- -------- -------- Balance at July 28, 1995 $ 964 $ 26,838 $ 71,279 -- ======= ======== ======== ========
-9- 10 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)--Continued Note E--Stockholders' Equity--Continued On August 28, 1995, the Board of Directors cancelled the treasury stock and declared a two-for-one stock split of the Company's common stock which will be effected by a 100% stock dividend, to be distributed on October 6, 1995 to shareholders of record as of the close of business on September 12, 1995. The balance sheet at July 28, 1995 has been adjusted to reflect these transactions. The unrealized foreign currency translation adjustment included in stockholders' equity relates 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 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 $6,841,000 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 $1,382,000 (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. 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 July 28, 1995 included $5,306,000, representing the undistributed earnings of Pacific Access. Income taxes have been paid or provided on such earnings. -10- 11 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)--Continued Note F--Summarized Financial Information of Joint Ventures--Continued The following summarizes the financial information of the joint ventures:
July 28, 1995 October 28, 1994 ---------------------- ------------------------ (Dollars in thousands) Company's Company's Total Equity Total Equity -------- --------- -------- --------- Current assets $ 306,177 $ 233,907 Noncurrent assets 16,327 16,629 Current liabilities (259,902) (198,521) Noncurrent liability (263) --------- --------- Equity of combined joint ventures $ 62,339 $ 52,015 ========= ========= Equity of Australian joint venture (a) $ 57,051 $10,613 $ 48,987 $ 9,677 Equity of Brazilian joint venture 5,288 4,188 3,028 2,320 --------- ------- --------- ------- $ 62,339 $ 52,015 ========= ========= Investments in joint ventures $14,801 $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)
Nine Months Ended ----------------------------------------------------------- July 28, 1995 July 29, 1994 ------------------------- ------------------------- (Dollars in thousands) Company's Company's Total Equity Total Equity -------- --------- -------- --------- Revenues $440,188 $414,247 Costs and expenses 411,156 380,414 Income tax provision 9,091 11,304 -------- -------- Net income $ 19,941 $ 22,529 ======== ======== Net income of Australian joint venture $ 23,438 $ 2,871 $ 21,109 $2,611 Net loss of Brazilian joint venture (b) (3,497) (2,456) (52) (26) Net income of United States joint venture (c) 1,472 661 -------- ------- -------- ------ $ 19,941 $ 22,529 ======== ======== Company's equity in net income of joint ventures $ 415 $3,246 ======= ======
Three Months Ended ----------------------------------------------------------- July 28, 1995 July 29, 1994 ------------------------- ------------------------- (Dollars in thousands) Company's Company's Total Equity Total Equity -------- --------- -------- --------- Revenues $224,452 $212,101 Costs and expenses 200,838 183,808 Income tax provision 4,861 9,659 -------- -------- Net income $ 18,753 $ 18,634 ======== ======== Net income of Australian joint venture $ 19,731 $2,423 $ 18,686 $2,282 Net loss of Brazilian joint venture (b) (978) (655) (52) (26) -------- ------ -------- ------ $ 18,753 $ 18,634 ======== ======== Company's equity in net income of joint ventures $1,768 $2,256 ====== ======
(b) The Company's portion of the net loss of the Brazilian joint venture included losses on foreign currency of $583,000 and $189,000 for the nine and three months ended July 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, adjusted retroactively for the effect of the two-for-one stock split declared on August 28, 1995 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:
Nine Months Ended Three Months Ended ---------------------- ---------------------- July 28, July 29, July 28, July 29, 1995 1994 1995 1994 -------- -------- -------- -------- (Dollars in thousands) Current: Federal $ 2,151 $ 3,837 $ 2,914 $ 1,852 Foreign 995 439 476 207 State and local 1,096 988 871 446 ------- ------- ------- ------- 4,242 5,264 4,261 2,505 ------- ------- ------- ------- Deferred: Federal 885 (691) (773) (653) Foreign 20 State and local 210 (262) (186) (260) ------- ------- ------- ------- 1,115 (953) (959) (913) ------- ------- ------- ------- $ 5,357 $ 4,311 $ 3,302 $ 1,592 ======= ======= ======= =======
Note I--Pending Acquisition On June 26, 1995, a letter of intent was signed for the merger of Autologic, the Company's Electronic Publishing and Typesetting Systems segment, into Information International Inc. (Triple-I), a publicly traded company, for approximately 58% of Triple-I's shares. The transaction is subject to the execution of a definitive agreement, approval of the respective boards of directors, completion of due diligence, approval of the transaction by the shareholders of Triple-I and necessary regulatory approvals. -13- 14 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS NINE MONTHS AND THREE MONTHS ENDED JULY 28, 1995 COMPARED TO THE NINE MONTHS AND THREE MONTHS ENDED JULY 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 NINE FOR THE THREE MONTHS ENDED MONTHS ENDED ------------ ------------ July 28, July 29, July 28, July 29, 1995 1994 1995 1994 -------- -------- -------- -------- (Dollars in thousands) Revenues : Technical Services and Temporary Personnel $395,309 $317,395 $141,357 $111,703 Electronic Publication and Typesetting Systems 49,369 44,651 16,666 16,090 Telephone Directory 45,433 47,328 18,777 17,655 Engineering and Construction 45,620 38,593 16,483 13,164 Computer Systems 67,454 25,483 33,912 8,434 Equity in net income of joint ventures 415 3,246 1,768 2,256 Gain on sale of joint venture 9,770 Interest and other income - net 771 519 60 186 Elimination of intersegment revenues (3,369) (3,274) (1,271) (1,109) -------- -------- -------- -------- $601,002 $483,711 $227,752 $168,379 ======== ======== ======== ======== Income Before Income Tax Provision and Extraordinary Item: Operating Profit (Loss): Technical Services and Temporary Personnel $18,050 $10,442 $6,159 $4,379 Electronic Publication and Typesetting Systems 409 574 22 210 Telephone Directory (1,210) 1,616 241 1,255 Engineering and Construction 2,838 341 1,662 562 Computer Systems 4,413 (3,294) 2,157 (1,013) Eliminations (92) 1 (61) (12) -------- -------- -------- -------- Total Operating Profit 24,408 9,680 10,180 5,381 Equity in net income of joint ventures 415 3,246 1,768 2,256 Gain on sale of joint venture 9,770 Interest and other income - net 771 519 60 186 General corporate expenses (6,977) (6,961) (2,311) (2,285) Interest expense (4,739) (5,766) (1,317) (1,728) Foreign exchange gain (loss) - net (12) (45) (22) 76 -------- -------- -------- -------- Income Before Income Tax Provision and Extraordinary Item $13,866 $10,443 $8,358 $3,886 ======== ======== ======== ========
-14- 15 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS--Continued NINE MONTHS ENDED JULY 28, 1995 COMPARED TO THE NINE MONTHS ENDED JULY 29, 1994--Continued Results of Operations - Summary In the nine month period of 1995, revenues increased by $117,291,000 or 24%, from fiscal 1994 as sales increased by $129,640,000 or 28%. Revenues in the 1994 period included revenues of $9,770,000 from the gain on sale of a joint venture and $2,831,000 higher equity in the net income of joint ventures. The increase in sales resulted primarily from a $77,914,000 increase in sales by the Technical Services and Temporary Personnel segment and a $41,971,000 increase in the sales by the Computer Systems segment. The Company had pretax income of $13,866,000 in 1995, compared to $10,443,000 in 1994. The 1994 income included the $9,770,000 pretax gain on the sale of a joint venture. The operating profit of the Company's segments increased by $14,728,000 to $24,408,000 in 1995. The principal increases in the segments' operating income were from the Technical Services and Temporary Personnel segment, with an increase of $7,608,000 to $18,050,000, the Engineering and Construction segment, with an increase of $2,497,000 to $2,838,000 and the Computer Systems segment, where the $4,413,000 profit represented a $7,707,000 favorable change from 1994. The extraordinary charge to earnings in the nine months of fiscal 1995 is the result of the early redemption, in May 1995, at par, of $10,000,000 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 $42,000. In fiscal 1994, the Company redeemed $30,000,000 of debentures, at par. The nine months charge due to the related issuance and discount costs is net of an income tax benefit of $157,000. Net income in the nine months of 1995 was $8,447,000, compared to net income of $5,861,000 in the nine months of 1994. Results of Operations - By Segment The Technical Services and Temporary Personnel segment's sales increased by $77,914,000 or 25% in 1995 to $395,309,000 and the segment's operating profit increased by $7,608,000 or 73% to $18,050,000. Approximately $48,000,000 of the segment's sales increase in 1995 was the result of business with new customers. One new customer accounted for approximately $25,000,000 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 the segment's operating profit was due to the increased sales volume and an increase in gross margin of 1.4 percentage points resulting from lower workers' compensation insurance and other costs. -15- 16 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS--Continued NINE MONTHS ENDED JULY 28, 1995 COMPARED TO THE NINE MONTHS ENDED JULY 29, 1994--Continued The Electronic Publication and Typesetting Systems segment's sales increased by $4,718,000, or 11%, to $49,369,000 in 1995, while its operating profit was $409,000 compared to a profit of $574,000 in 1994. The sales increase was primarily due to increased equipment sales in the U.S. and Pacific markets. The decrease in operating profit was due to a reduction in the gross margin of 1.5 percentage points offset by increased sales volume and a 1.0 percentage point decrease in total operating expences 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 markets in which the segment competes are marked by rapidly changing technology, with sales in fiscal 1995 of equipment introduced within the last three years comprising approximately 84% of equipment sales. The Telephone Directory segment's sales decreased by $1,895,000, or 4%, to $45,433,000 in fiscal 1995, while the segment incurred an operating loss of $1,210,000, as compared to a profit of $1,616,000 in 1994. The sales decline is due to a $6,900,000 decrease in telephone directory production volume, primarily related to the expiration of a contract in early 1995, partially offset by increases in independent directory sales by the segment's DataNational division and increased volume in the Uruguayan printing operation of 35% and 32%, respectively. The operating loss was due to the lower telephone directory production sales volume, which included the loss of several high margin jobs, 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 $7,027,000, or 18% to $45,620,000 in fiscal 1995 and its operating profit was $2,838,000, an increase of $2,497,000. The sales increase was due to a 27% increase in the construction division partially offset by a 9% decrease in the business systems division. Operating results improved due to the increased sales volume and a 5.6 percentage point decrease in overhead expended per sales dollar, partially offset by a reduction in the gross margin of .8 percentage points. The Computer Systems segment's sales increased by $41,971,000, or 165%, to $67,454,000 in 1995 and its operating profit was $4,413,000, as compared to a loss of $3,294,000 in 1994. The increase in sales and operating profit was primarily due to customer acceptance of three Delta Operating Service Systems (DOSS), one in the third quarter of 1995 which required customization and two in the first quarter of 1995 which did not require customization, increased maintenance revenues and 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 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 nine months of fiscal 1995. -16- 17 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS--Continued NINE MONTHS ENDED JULY 28, 1995 COMPARED TO THE NINE MONTHS ENDED JULY 29, 1994--Continued 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 nine month periods were: Interest income increased by $483,000, or 51%, 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 income of its joint ventures was $415,000 in 1995, as compared to a net income of $3,246,000 in 1994. The decrease 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 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 $260,000, due to increased revenues. Selling and administrative expenses increased by $1,468,000, or 5%, to $31,223,000 in 1995 to support the increase in sales. However, these expenses expressed as a percentage of sales were 5% in 1995 compared to 6% in 1994. Research, development and engineering expenditures increased by $201,000, or 3%, to $6,064,000 in 1995. The increase was due to additional product development by the Telephone Directory segment. Depreciation and amortization increased by $856,000, or 11%, to $8,817,000 in 1995. The increase is due to increased fixed asset expenditures in fiscal 1993, 1994 and the nine months of 1995. Interest expense decreased by $1,027,000 or 18% to $4,739,000 in 1995. The decrease was due to the redemption of $10,000,000 in May 1995 and $10,000,000 in May 1994 of the Company's 12-3/8% Subordinated Debentures. The Company's effective tax rate was reduced to 39% in 1995, from 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 JULY 28, 1995 COMPARED TO THE THREE MONTHS ENDED JULY 29, 1994--Continued Results of Operations - Summary In the three month period of 1995, revenues increased by $59,373,000, or 35%, from fiscal 1994 as sales increased by $59,987,000, or 36%. The increase in sales resulted primarily from a $29,654,000 increase in sales by the Technical Services and Temporary Personnel segment and a $25,478,000 increase in the sales by the Computer Systems segment. The Company had pretax income of $8,358,000 compared to $3,886,000 in 1994. Operating profit increased by $4,799,000, or 89%, to $10,180,000. The principal increases in operating profit were $1,780,000 by the Technical Services and Temporary Personnel segment, $1,100,000 by the Engineering and Construction segment and $3,170,000 by the Computer Systems segment, partially offset by a decrease of $1,014,000 by the Telephone Directory segment. Net income in the three month period of 1995 was $4,994,000, compared to net income of $2,212,000 in the three month period of 1994. Results of Operations - By Segment The Technical Services and Temporary Personnel segment's sales increased by $29,654,000, or 27%, in 1995 to $141,357,000 and its operating profit increased by $1,780,000, or 41%, to $6,159,000. Approximately $19,000,000 of the segment's sales increase in 1995 was the result of business with new customers. One new customer accounted for approximately $9,000,000 of the increase in sales. The operating profit increase in 1995 was due to the increased sales volume and an increase in gross margin of .8 percentage points. The Electronic Publication and Typesetting Systems segment's sales increased by $576,000, or 4%, to $16,666,000 in 1995, while operating profit decreased by $188,000 to $22,000. The sales increase was primarily due to increased equipment sales in the U.S., Pacific and European markets. The decrease in operating profit was primarily due to a reduction in the gross margin of 1.3 percentage points, partially offset by the increase in sales. 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 increased by $1,122,000 or 6%, to $18,777,000 in fiscal 1995. The segment incurred an operating profit of $241,000, compared to $1,255,000 in 1994. The sales increase was due to increases in independent directory sales by the segment's DataNational division and increased volume in the Uruguayan printing operation of 90% and 63%, respectively, partially offset by lower telephone directory production volume of $3,700,000, primarily related to the termination of a contract in early 1995. The increase in independent directory sales was primarily due to two directories published in the fourth quarter of fiscal 1994, but published in the third quarter of fiscal 1995 and a -18- 19 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS--Continued THREE MONTHS ENDED JULY 28, 1995 COMPARED TO THE THREE MONTHS ENDED JULY 29, 1994--Continued new directory published in fiscal 1995. The decrease in operating profit was due to the lower telephone directory production, 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 $3,319,000, or 25%, to $16,483,000 in fiscal 1995, with an operating profit of $1,662,000, an increase of $1,100,000 or 196%. The sales increase was due to a 57% increase in the construction division partially offset by a 10% decrease in the business systems division. Operating results improved due to the increased sales volume, an increase in the gross margin of 2.2 percentage points and a 3.4 percentage point decrease in overhead expended per sales dollar. The Computer Systems segment's sales increased by $25,478,000, or 302%, to $33,912,000 in 1995, while the operating profit was $2,157,000 compared to a operating loss of $1,013,000 in 1994. The sales increase was attributable to customer acceptance of a major Delta Operating Service System (DOSS) project in the third quarter, greater DOSS maintenance revenue and an increase in sales of conservation services to utilities. The operating profit increased due to the recognition of the DOSS project and the increased sales volume and gross margins of the conservation services partially offset by 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: In the three month period of 1995, the Company's equity in the net income of its joint ventures decreased by $488,000, or 22%, to $1,768,000. 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 $141,000 due to increased revenues. Selling and administrative expenses increased by $992,000, or 10%, to $11,090,000 in 1995 to support the increase in sales. These expenses expressed as a percentage of sales were 5% in 1995 compared to 6% in 1994. Depreciation and amortization increased by $395,000, or 15%, to $3,052,000 in 1995. The increase is due to increased fixed asset expenditures in fiscal year 1993, 1994 and the three months of 1995. -19- 20 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS--Continued THREE MONTHS ENDED JULY 28, 1995 COMPARED TO THE THREE MONTHS ENDED JULY 29, 1994--Continued Interest expense decreased by $411,000, or 24%, to $1,317,000 in 1995. The decrease was due to the redemption of $10,000,000 in May 1995 and $10,000,000 in May 1994 of the Company's 12-3/8% Subordinated Debentures. The Company's effective tax rate was reduced to 39% in 1995 from 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. -20- 21 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS--Continued Liquidity and Capital Resources Cash and cash equivalents increased by $810,000 in 1995 to $17,859,000 for the reasons discussed below while working capital decreased by $8,671,000 to $53,168,000. The decrease in working capital was primarily due to the redemption of $10,000,000 of debentures in May 1995 and net increases in property, plant, equipment and other non-current assets, partially offset by the net income for the nine months. In addition to its cash and cash equivalents, at July 28, 1995, the Company's investment portfolio, primarily U.S. Treasury Notes and certificates of deposit, had a carrying value of $6,211,000. 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 $4,464,000 at July 28, 1995. In addition, at July 28, 1995, the Company had the right to sell up to $15,000,000 of additional interests in receivables under its existing sales program. Cash flows provided by operating activities for the nine months ended July 28, 1995 were $25,630,000 compared with $12,963,000 in the nine months ended July 29, 1994. The increase primarily relates to higher operating profit of the Company's segments in 1995 and an increase of $5,000,000 in interests in accounts receivable sold in 1995 under the Company's receivable securitization program partially offset by 1995 increases in receivables and inventories which are attributable to the growth experienced by the Company's segments. 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. -21- 22 PART II - OTHER INFORMATION ITEM 4-- SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS At the Company's 1995 Annual Meeting of Shareholders held on June 16, 1995, shareholders: (a) Elected the following to serve as Class II directors of the Corporation to serve until the 1997 Annual Meeting of the Shareholders, by the following votes:
For Vote Withheld --- ------------- William Shaw 3,971,280 563,799 Jerome Shaw 3,971,281 563,798 James J. Groberg 3,969,683 565,396
(b) approved the Corporation's 1995 Non-Qualified Stock Option Plan, by the following vote: For: 3,222,091 Against: 58,465 Abstain: 1,254,523 (c) reported that a majority of the votes cast at the meeting were voted in favor of the resolution to ratify the action of the Board of Directors in appointing Ernst & Young LLP as the Corporation's independent public accountants for the fiscal year ending November 3, 1995, by the following vote: For: 3,985,631 Against: 6,063 Abstain: 543,385 ITEM 5-- OTHER INFORMATION On August 28, 1995 the Board of Directors cancelled the treasury stock and declared a two-for-one stock split of the Company's common stock which will be effect in the form of a 100% stock dividend, to be distributed on October 6, 1995 to shareholders of record as of the close of business on September 12, 1995. 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 July 28, 1995 was a report dated June 26, 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 ---------------------------- JACK EGAN Vice President - Corporate Accounting (Principal Accounting Officer) Date: September 8, 1995 -23- 24 EXHIBIT INDEX Exhibit No. Description Page No. ---------- ----------- ------- EX-27 Financial Data Schedule EX-15.01 2 ACKNOWLEDGMENT LETTER FROM ERNST & YOUNG LLP 1 September 9, 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 August 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 July 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 ERNST & YOUNG LLP INDEPENDENT ACCOUNTANTS' REPORT 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 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 July 28, 1995, and the related condensed consolidated statements of income for the nine and three month periods ended July 28, 1995 and July 29, 1994, and the related condensed consolidated statements of cash flows for the nine month periods ended July 28, 1995 and July 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 August 28, 1995 EX-27 4 FINANCIAL DATA SCHEDULE
5 1000 9-MOS NOV-03-1995 JUL-28-1995 17,859 2,081 101,864 3,991 28,483 155,876 82,083 30,618 234,441 102,708 29,316 964 0 0 97,900 234,441 48,799 601,002 32,291 536,281 45,730 1,640 4,739 13,866 5,357 8,509 0 (62) 0 8,447 .87 .87