-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, MU5moCMZCGAWBoShKXTfgbfB3fb68u90pqsXgAjSz7avTe1w49ZMbzH401qb90uf CoZ+bMfcNc3OBWP7bJNWQw== 0000950123-96-003079.txt : 19960618 0000950123-96-003079.hdr.sgml : 19960618 ACCESSION NUMBER: 0000950123-96-003079 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19960503 FILED AS OF DATE: 19960617 SROS: NONE 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: 96581824 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 THIS IS A QUARTERLY REPORT-END=5/3/96 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 May 3, 1996 Or / / Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from ________________ to ________________ Commission File No. 1-9232 VOLT INFORMATION SCIENCES, INC. ------------------------------------------------------ (Exact name of registrant as specified in its charter) New York 13-5658129 - -------------------------------- ------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 1221 Avenue of the Americas, New York, New York 10020 - ------------------------------------------------- ------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (212) 704-2400 Not Applicable ---------------------------------- (Former name, former address and former fiscal year, if changed since last report) Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months, and (2) has been subject to such filing requirements for the past 90 days. Yes X No --- --- The number of shares of Common Stock, $.10 par value, outstanding as of June 7, 1996 was 9,687,543. 2 VOLT INFORMATION SCIENCES, INC. AND SUBSIDIARIES FORM 10-Q TABLE OF CONTENTS PART I - FINANCIAL INFORMATION Item 1. Financial Statements Condensed Consolidated Statements of Income Six Months and Three Months Ended May 3, 1996 and April 28, 1995 3 Condensed Consolidated Balance Sheets May 3, 1996 and November 3, 1995 4 Condensed Consolidated Statements of Cash Flows Six Months Ended May 3, 1996 and April 28, 1995 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 May 3, 1996 Compared to the Six Months and Three Months Ended April 28, 1995 16 PART II - OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K 26 SIGNATURE 27 -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 ---------------- ------------------- May 3, April 28, May 3, April 28, 1996 1995 1996 1995 --------- --------- -------- ---------- (Dollars in thousands) REVENUES: Sales of services $ 434,950 $ 342,539 $ 226,473 $ 175,021 Sales of products 42,176 31,353 25,840 15,575 Equity in net income (loss) of joint ventures--Note F (1,783) (1,353) 174 95 Gain on sale of interest in subsidiaries-- Note I 3,666 Interest income 1,182 953 577 473 Other income (expense) - net--Note B (716) (242) (199) 26 ---------- ---------- ---------- ---------- 479,475 373,250 252,865 191,190 ---------- ---------- ---------- ---------- COSTS AND EXPENSES: Cost of sales Services--Note J 398,640 314,159 206,045 161,854 Products 28,523 20,397 16,052 9,992 Selling and administrative 25,097 20,134 13,510 10,383 Research, development & engineering 5,657 3,876 3,715 2,072 Depreciation and amortization 6,765 5,765 3,577 2,969 Foreign exchange (gain) loss - net 277 (11) 137 48 Interest expense 2,360 3,422 1,205 1,736 ---------- ---------- ---------- ---------- 467,319 367,742 244,241 189,054 ---------- ---------- ---------- ---------- Income before income tax provision and minority interests 12,156 5,508 8,624 2,136 Income tax provision--Note H 4,930 2,055 3,596 706 Minority interests in operations of consolidated subsidiaries--Note I (28) (97) ---------- ---------- ---------- ---------- Net income $ 7,198 $ 3,453 $ 4,931 $ 1,430 ========== ========== ========== ========== (Per Share Data) Net income $ .74 $ .36 $ .51 $ .15 ========== ========== ========== ========== Number of shares used in computation -- Note G 9,680,673 9,620,364 9,687,543 9,632,322 ========== ========== ========== ==========
See accompanying notes. -3- 4 VOLT INFORMATION SCIENCES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
May 3, November 3, 1996 1995 (a) -------- -------- (Dollars in thousands) ASSETS CURRENT ASSETS Cash and cash equivalents $ 23,444 $ 25,350 Short-term investments 2,353 1,047 Trade accounts receivable less allowances of $5,102 (1996) and $3,943 (1995)--Note B 105,484 111,696 Inventories--Note C 29,385 28,207 Deferred income taxes 10,682 8,711 Prepaid expenses and other assets 6,495 7,204 -------- -------- TOTAL CURRENT ASSETS 177,843 182,215 INVESTMENTS IN SECURITIES 2,287 4,136 INVESTMENTS IN AND ADVANCES TO JOINT VENTURES--Note F 18,221 13,903 PROPERTY, PLANT AND EQUIPMENT-- at cost--Note D Land and buildings 33,661 33,591 Machinery and equipment 59,920 51,233 Leasehold improvements 2,603 2,818 -------- -------- 96,184 87,642 Less allowances for depreciation and amortization 34,529 32,057 -------- -------- 61,655 55,585 DEPOSITS, RECEIVABLES AND OTHER ASSETS 1,055 2,764 INTANGIBLE ASSETS--net of accumulated amortization of $5,206 (1996) and $4,181 (1995) 15,654 5,408 -------- -------- $276,715 $264,011 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Notes payable to banks $ 5,658 $ 5,154 Current portion of long-term debt--Note D 3,049 2,000 Accounts payable 23,441 30,786 Accrued expenses Wages and commissions 24,455 23,403 Taxes other than income taxes 11,382 10,059 Insurance 13,263 18,893 Other 9,420 6,686 Customer advances and other liabilities 17,569 15,250 Income taxes 985 12,401 -------- -------- TOTAL CURRENT LIABILITIES 109,222 124,632 LONG-TERM DEBT--Note D 30,369 28,819 DEFERRED INCOME TAXES 994 3,433 -------- -------- 140,585 156,884 MINORITY INTERESTS--Note I 21,120 STOCKHOLDERS' EQUITY--Notes D, E, F, and G Preferred stock, par value $1.00 Authorized--500,000 shares; issued--none Common stock, par value $.10 Authorized--15,000,000 shares; issued - 9,687,543 shares (1996) and 9,664,794 shares (1995) 969 966 Paid-in capital 27,666 27,098 Retained earnings 86,355 79,157 Cumulative foreign currency translation adjustment (1) (168) Unrealized gain on marketable securities 21 74 --------- --------- 115,010 107,127 --------- --------- $ 276,715 $ 264,011 ========= =========
(a) The Balance Sheet at November 3, 1995 has been derived from the audited financial statements at that date. See accompanying notes. -4- 5 VOLT INFORMATION SCIENCES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Six Months Ended ---------------------- May 3, April 28, 1996 1995 -------- -------- (Dollars in thousands) CASH FLOWS FROM OPERATING ACTIVITIES Net income $ 7,198 $ 3,453 Adjustments to reconcile net income to cash provided by operating activities: Depreciation and amortization 6,765 5,765 Equity in net loss of joint ventures 1,783 1,353 Gain on sale of interest in subsidiaries (3,666) Accounts receivable provisions 1,325 965 Minority interests 28 Amortization of deferred debenture costs, debt discounts and other deferred charges 949 427 (Gains) losses on foreign currency translation (503) 174 Gains on dispositions of fixed assets (131) (7) Deferred income tax provision 1,513 2,074 Gains on sales of securities (7) Other 31 Changes in operating assets and liabilities: (Increase) decrease in accounts receivable 9,008 (10,855) Decrease in inventories 1,402 1,812 Increase in recoverable income taxes (135) Increase in prepaid expenses and other current assets (851) (1,030) (Increase) decrease in deposits, receivables and other assets 1,646 (1,125) Decrease in accounts payable (5,488) (4,407) Increase (decrease) in accrued expenses (5,380) 3,962 Increase in customer advances and other liabilities 1,474 3,702 Decrease in income tax liability (11,607) (294) -------- -------- NET CASH PROVIDED BY OPERATING ACTIVITIES 5,465 5,858 -------- --------
-5- 6 VOLT INFORMATION SCIENCES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)--Continued
Six Months Ended ---------------------- May 3, April 28, 1996 1995 -------- ------- (Dollars in thousands) CASH FLOWS FROM INVESTING ACTIVITIES Maturities of investments 2,108 8,000 Purchases of investments (2,122) (5,811) Investments in and advances to joint ventures (5,838) (2,824) Cash of acquired subsidiaries, less transaction costs 8,421 Proceeds from disposals of property, plant and equipment 49 370 Purchases of property, plant and equipment (10,316) (7,016) Other (1,006) (1,125) -------- ------- NET CASH APPLIED TO INVESTING ACTIVITIES (8,704) (8,406) -------- ------- CASH FLOWS FROM FINANCING ACTIVITIES Payment of long-term debt (1,000) (1,000) Exercise of stock options 71 143 Increase in minority interest 154 Increase in notes payable to banks 920 88 -------- ------- NET CASH PROVIDED BY (APPLIED TO) FINANCING ACTIVITIES 145 (769) -------- ------- Effect of exchange rate changes on cash 1,188 (226) -------- ------- NET DECREASE IN CASH AND CASH EQUIVALENTS (1,906) (3,543) Cash and cash equivalents, beginning of period 25,350 17,049 -------- ------- CASH AND CASH EQUIVALENTS, END OF PERIOD $ 23,444 $13,506 ======== ======= SUPPLEMENTAL INFORMATION Cash paid during the period: Interest expense $ 2,354 $ 3,315 Income taxes $ 15,312 $ 350
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 May 3, 1996 and results of operations for the six and three months ended May 3, 1996 and April 28, 1995 and cash flows for the six months ended May 3, 1996 and April 28, 1995. Operating results for the six and three months ended May 3, 1996 are not necessarily indicative of the results that may be expected for the fiscal year ending November 1, 1996. These statements should be read in conjunction with the financial statements and footnotes included in the Company's Annual Report on Form 10-K for the year ended November 3, 1995. The accounting policies used in preparing these financial statements are the same as those described in the Company's Annual Report. The Company's fiscal year ends on the Friday nearest October 31. Note B--Accounts Receivable In October 1993, the Company entered into a three-year agreement to sell, on a limited recourse basis, up to $25,000,000 of undivided interests in a designated pool of certain eligible accounts receivable. In March 1995, the limit was increased to $45,000,000 and the agreement was extended to March 1998. As collections reduce previously sold undivided interests, new receivables may be sold up to the $45,000,000 level. At May 3, 1996, and November 3, 1995, $30,000,000 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 1996 and 1995 statements of income includes fees related to the agreement of $1,058,00 and $690,000 in the six months ended, and $517,000 and $378,000 in the three months ended, May 3, 1996 and April 28, 1995, respectively. The purchaser may terminate the agreement on a minimum of six months' notice. In addition, the agreement may be terminated if the Company does not maintain a stated minimum tangible net worth, as defined, or exceeds a maximum ratio of debt to tangible net worth. -7- 8 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)--Continued Note C--Inventories Inventories consist of:
May 3, November 3, 1996 1995 ------- ------- (Dollars in thousands) Services: Accumulated unbilled costs on: Service contracts $16,014 $15,909 Long-term contracts 2,315 2,980 ------- ------- 18,329 18,889 ------- ------- Products: Materials and work-in-process 6,656 4,818 Service parts 1,897 1,124 Finished goods 2,503 3,376 ------- ------- 11,056 9,318 ------- ------- Total $29,385 $28,207 ======= =======
The cumulative amounts billed, principally under long-term contracts, of $2,858,000 at May 3, 1996 and $3,469,000 at November 3, 1995 are credited against the related costs in inventory. Substantially all of the amounts billed have been collected. -8- 9 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)--Continued Note D--Long-Term Debt Long-term debt consists of the following:
May 3, November 3, 1996 1995 ------- ------- (Dollars in thousands) 12-3/8% Senior Subordinated Debentures, due July 1, 1998--net of unamortized discount of $30,000 - 1996 and $36,000 - 1995(a) $22,825 $22,819 Term loan(b) 7,000 8,000 Notes payable(c)(d) 3,593 ------- ------- 33,418 30,819 Less amounts due within one year 3,049 2,000 ------- ------- Total long-term debt $30,369 $28,819 ======= =======
(a) The debentures provide for interest to be paid semi-annually on January 1 and July 1 and are redeemable at the option of the Company, in whole or in part, at 100% plus accrued interest. The debentures are subordinated to all existing and future senior indebtedness (as defined) of the Company. At May 3, 1996, the amount available for dividends, pursuant to the terms of the indenture under which the debentures are issued, was $36,058,000 and, if no dividend payments are made, the amount available for capital stock repurchases was $46,058,000. However, under the terms of the term loan agreement, at such date, only $34,125,000 was available for such payments (see (b) below). (b) In October 1994, the Company entered into a $10,000,000 five-year loan agreement with National Westminster Bank, which is secured by a deed of trust on land and buildings (book value at May 3, 1996 - $15,156,000). The term loan bears interest at 7.86% per annum and is repayable in twenty quarterly principal installments of $500,000, together with interest. In October 1996, if certain conditions are met, the loan may be extended for two years with a subsequent reduction of principal payments to $225,000 per quarter and a final payment of $1,725,000 due October, 2001. The agreement contains various financial covenants, the most restrictive of which requires the Company to maintain a tangible net worth of $86,000,000. (c) Includes two notes payable (which bear interest at 90 day commercial paper rates), each for $550,000, due on January 2, 1997 and January 2, 1998, respectively. (d) An unsecured loan of $2,493,000 from Chemical Bank was made to a foreign subsidiary on January 18, 1996 to finance a printing press. The five-year loan, guaranteed by the Company, is to be repaid in ten semi-annual payments including interest calculated at LIBOR (5.53% at May 3, 1996) plus .25% beginning September 15, 1996. -9- 10 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)--Continued Note E--Stockholders' Equity Changes in the major components of stockholders' equity for the six months ended May 3, 1996 are as follows:
Common Paid-In Retained Stock Capital Earnings ------ ------- ------- (Dollars in thousands) Balance at November 3, 1995 $ 966 $27,098 $79,157 Net income for the six months 7,198 Issuance of 18,349 shares to ESOP 2 498 Stock options exercised - 4,400 shares 1 70 ------ ------- ------- Balance at May 3, 1996 $ 969 $27,666 $86,355 ====== ======= =======
The other components of stockholders' equity are the unrealized gain on marketable securities and the cumulative foreign currency translation adjustment due to the Company's investment in its Australian joint venture, whose functional currency is the Australian dollar. On April 22, 1996, the Company granted stock options to acquire 500,000 shares of the Company's common stock to key employees at $27-1/8 per share, the average of the high and low prices on such date. The options were granted under the non-qualified stock option plan adopted in May 1995. Note F--Summarized Financial Information of Joint Ventures The Company owns 12-1/2% of the voting stock of Pacific Access Pty. Ltd. ("Pacific Access"), an international joint venture in Australia. This venture, which commenced operations in July 1991, assumed responsibility throughout Australia for the marketing, sales and compilation functions of all yellow pages directories of Telstra Corporation Ltd., ("Telstra"), the Australian government-owned telephone company, under the terms of a twelve-year contract. The venture produces a major portion of its revenues and significantly all of its profits in the Company's second and third fiscal quarters. Telstra owns 50% of the voting stock of Pacific Access. In the event of a change in control of the Company, as defined, the Company may be required to sell its shares in the venture to Telstra at a formula price based on various factors, including earnings. In July 1994, the Company entered into a long-term joint venture agreement to publish the official White Pages, Yellow Pages and Street Guides for Rio de Janeiro. As of May 3, 1996, the Company has made an aggregate of $13,407,000 of investments in and loans and advances to Telelistas Editora Ltda., a Brazilian company which has a contract to publish Rio's telephone directories on behalf of TELERJ, the government-owned telephone company. Such investment resulted in the acquisition of a 50% interest in the common shares together with 75% of the issued preferred stock. The agreement, as amended -10- 11 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)--Continued Note F--Summarized Financial Information of Joint Ventures--(Continued) requires the Company to provide technology, expertise and key personnel in directory production, sales and marketing. It is likely that additional advances will be made by the Company to the joint venture. Such advances will be repaid before any other distributions of the net assets of the venture. 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 May 3, 1996 includes $5,214,000, 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:
May 3, 1996 November 3, 1995 ---------------------- ----------------------- (Dollars in thousands) Company's Advances Company's Total and Equity Total Equity --------- ---------- --------- --------- Current assets $ 208,114 $ 270,495 Noncurrent assets 17,181 17,207 Current liabilities (158,136) (227,749) Due to Volt (3,848) $ 3,848 Noncurrent liabilities (241) (259) --------- --------- Equity of combined joint ventures $ 63,070 $ 59,694 ========= ========= Equity of Australian joint venture(a) $ 59,325 10,944 $ 55,733 $10,436 Equity of Brazilian joint venture 3,745 3,429 3,961 3,467 --------- ------- --------- ------- $ 63,070 $ 59,694 ========= ========= Investments in and advances to joint ventures $18,221 $13,903 ======= =======
(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 ------------------------------------------------- May 3, 1996 April 28 1995 ---------------------- --------------------- (Dollars in thousands) Company's Company's Total Equity Total Equity -------- --------- -------- --------- Revenues $221,695 $215,736 Costs and expenses 220,864 210,318 Income tax provision 1,309 4,230 -------- -------- Net income (loss) $ (478) $ 1,188 ======== ======== Net income of Australian joint venture $ 2,168 $ 245 $ 3,707 $ 448 Net loss of Brazilian joint venture(b) (2,646) (2,028) (2,519) (1,801) -------- ------- -------- ------- $ (478) $ 1,188 ======== ======== Company's equity in net loss of joint ventures $(1,783) $(1,353) ======= =======
Three Months Ended ----------------------------------------------- May 3, 1996 April 28, 1995 ------------------- ---------------------- (Dollars in thousands) Company's Company's Total Equity Total Equity -------- --------- -------- ---------- Revenues $158,799 $144,954 Costs and expenses 146,972 131,214 Income tax provision 4,580 6,277 -------- -------- Net income $ 7,247 $ 7,463 ======== ======== Net income of Australian joint venture $ 8,206 $ 994 $ 8,739 $1,077 Net loss of Brazilian joint venture (959) (820) (1,276) (982) -------- ----- -------- ------ $ 7,247 $ 7,463 ======== ======== Company's equity in net income of joint ventures $ 174 $ 95 ===== ======
(b) The Company's portion of the net loss of the Brazilian joint venture included losses on foreign currency of $136,000 and $394,000 for the six months of fiscal 1996 and 1995, respectively. -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. Per share data have been adjusted for the six and three months ended April 28, 1995, for the effect of a two-for-one-stock split distributed on October 6, 1995. Note H--Income Taxes Significant components of the income tax provision attributable to operations are as follows:
Six Months Ended Three Months Ended --------------------- --------------------- May 3, April 28, May 3, April 28, 1996 1995 1996 1995 ------- --------- ------- --------- (Dollars in thousands) Current: Federal $2,454 $ (763) $2,251 $(2,421) Foreign 282 519 464 307 State and local 681 225 227 (372) ------ ------ ------ ------- 3,417 (19) 2,942 (2,486) ------ ------ ------ ------- Deferred: Federal 1,205 1,658 402 2,560 Foreign 20 20 State and local 308 396 252 612 ------ ------ ------ ------- 1,513 2,074 654 3,192 ------ ------ ------ ------- $4,930 $2,055 $3,596 $ 706 ====== ====== ====== =======
-13- 14 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)--Continued Note I--Acquisition and Sale of Subsidiaries On November 15, 1995, the Company acquired a technical services business for $2,106,000 in cash and notes which resulted in an increase in intangible assets of $2,052,000. On January 29, 1996, the Company merged its wholly-owned subsidiary, Autologic, Incorporated and related foreign subsidiaries ("Autologic"), representing its Electronic Publication and Typesetting Systems segment, with Information International, Inc. ("Triple-I"), resulting in the formation of a new publicly traded company, Autologic Information International, Inc. ("AII"). Triple-I was a publicly traded company in the business of electronic publishing prepress systems. In connection with the merger, the stockholders of Triple-I received 41% of AII's common stock based on one share of AII being issued for each outstanding share of Triple-I and the Company received 59% of the outstanding shares of AII common stock. The merger has been accounted for as a purchase of a 59% interest in Triple-I and a corresponding sale of a 41% interest in Autologic to the former shareholders of Triple-I. The accompanying 1996 financial statements include the accounts of AII with the former Triple-I shareholders' 41% interest in AII, shown as a minority interest in the condensed consolidated balance sheet. The results of operations of Triple-I are included in the accompanying consolidated statement of income since the date of acquisition. The sale of 41% of Autologic resulted in a pretax gain of $3,666,000, net of transaction costs, and also resulted in 41% of Autologic's assets being reflected in the 1996 balance sheet at fair value, resulting in an intangible of $5,215,000 with a corresponding increase in the minority interest. Amortization of such intangible, which amounted to $261,000 in the six and three months periods ended May 3, 1996 is being charged to the minority interest. In addition, the purchase of the assets of Triple-I resulted in an intangible of $3,847,000. These intangibles are being amortized over a period of five years. In connection with the merger, Autologic restructured its operations and incurred a charge of $700,000 related principally to the termination of employees. Such charge is included in the results of operations for the six months ended May 3, 1996. -14- 15 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)--Continued Note I--Acquisition and Sale of Subsidiaries (Continued) The following unaudited pro forma information presents a summary of consolidated results of operations as if the acquisitions had occurred at the beginning of the respective periods with pro forma adjustments to give effect to amortization of intangibles, minority interest share in operations and certain income tax adjustments. The pro forma financial information is not necessarily indicative of the results of operations as they would have been had the transactions been effected on the assumed dates, or of future results of operations of the consolidated entities.
Six Months Ended --------------------- May 3, April 28, 1996 1995 -------- --------- (Dollars in thousands, except per share amounts) Revenue $490,196 $394,415 Net income $ 7,703 $ 1,571* Net income per share $.80 $.16*
* Reduced by $1,000,000 ($.10 per share) for discontinued operations of Triple-I Note J--Significant Item in Operating Results Net income for the six and three months ended May 3, 1996 include a cost reduction of $2,625,000 ($1,600,000, net of taxes), or $.17 per share, and $2,029,000 ($1,236,000, net of taxes), or $.13 per share, respectively, as a result of an agreement to pay a premium to an insurance carrier to close out prior years' retrospective insurance policies at an amount less than related liabilities for workers' compensation insurance previously provided by the Company. This adjustment had a favorable impact primarily on the operating profit of the Technical Services and Temporary Personnel segment for the six and three months ended May 3, 1996 of $2,100,000 and $1,645,000, respectively. In addition, due to a new arrangement with its insurance carrier, the Company's ongoing premiums will be at a significantly lower rate. -15- 16 ITEM 2--MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS SIX MONTHS AND THREE MONTHS ENDED MAY 3, 1996 COMPARED TO THE SIX MONTHS AND THREE MONTHS ENDED APRIL 28, 1995 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 ------------ ------------ May 3, April 28, May 3, April 28, 1996 1995 1996 1995 -------- -------- -------- -------- (Dollars in thousands) Revenues: Technical Services and Temporary Personnel $325,922 $253,952 $170,223 $135,034 Electronic Publication and Typesetting Systems 42,492 32,703 25,945 16,703 Telephone Directory 30,296 26,656 16,727 13,994 Engineering and Construction 42,542 29,137 23,051 14,534 Computer Systems 37,884 33,542 17,277 11,291 Equity in net income (loss) of joint ventures (1,783) (1,353) 174 95 Gain on sale of interest in subsidiaries 3,666 Interest and other income - net 466 711 378 499 Elimination of intersegment revenues (2,010) (2,098) (910) (960) -------- -------- -------- -------- $479,475 $373,250 $252,865 $191,190 ======== ======== ======== ======== Income Before Income Taxes and Minority Interests Operating Profit (Loss): Technical Services and Temporary Personnel $ 13,150 $ 11,891 $ 7,706 $ 6,944 Electronic Publication and Typesetting Systems (1,455) 387 955 107 Telephone Directory (1,570) (1,451) (560) (419) Engineering and Construction 3,728 1,176 2,367 832 Computer Systems 3,397 2,256 1,259 (1,838) Eliminations 2 (31) (9) -------- -------- -------- -------- Total Operating Profit 17,252 14,228 11,727 5,617 Equity in net income (loss) of joint ventures (1,783) (1,353) 174 95 Gain on sale of interest in subsidiaries 3,666 Interest and other income - net 466 711 378 499 General corporate expenses (4,808) (4,666) (2,313) (2,290) Interest expense (2,360) (3,422) (1,205) (1,736) Foreign exchange gain (loss) - net (277) 10 (137) (49) -------- -------- -------- -------- Income Before Income Taxes and Minority Interests $ 12,156 $ 5,508 $ 8,624 $ 2,136 ======== ======== ======== ========
-16- 17 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS--Continued SIX MONTHS ENDED MAY 3, 1996 COMPARED TO THE SIX MONTHS ENDED APRIL 28, 1995--Continued Results of Operations - Summary In the six-month period of fiscal 1996, revenues increased by $106,225,000, or 28%, from fiscal 1995, as sales increased by $103,234,000, or 28%. Revenues in the 1996 period included a pretax gain of $3,666,000 from the sale of an interest in the Company's Electronic Publication and Typesetting Systems segment. The increase in sales resulted primarily from a $71,970,000 increase in sales of the Technical Services and Temporary Personnel segment, a $13,405,000 increase in sales of the Engineering and Construction segment and a $9,789,000 increase in the sales of the Electronic Publication and Typesetting Systems segment. The Company's pretax income was $12,156,000 in 1996, compared to $5,508,000 in 1995. The 1996 income included the $3,666,000 pretax gain discussed above. The operating profit of the Company's segments increased by $3,024,000 to $17,252,000 in 1996. The principal increases in the segments' operating income were from the Technical Services and Temporary Personnel segment, with an increase of $1,259,000, to a profit of $13,150,000 and the Engineering and Construction segment, with an increase of $2,552,000, to a profit of $3,728,000, partially offset by the Electronic Publication and Typesetting Systems segment, with a decrease of $1,842,000, to a loss of $1,455,000 as compared to a profit of $387,000 in 1995. Net income in the six months of 1996 was $7,198,000, compared to a net income of $3,453,000 in the six months of 1995. Results of Operations - By Segment The Technical Services and Temporary Personnel segment's sales increased by $71,970,000, or 28%, in 1996 to $325,922,000 and the segment's operating profit increased by $1,259,000, or 11%, to $13,150,000, as compared to $11,891,000 in 1995. Approximately $19,800,000, or 28% of the segment's 1996 sales increase was due to pass-through costs primarily related to subcontractors to service large national contracts and $13,600,000 of the sales increase was the result of business with new customers. The remainder of the increased business was with existing customers, partially offset by an $8,400,000 sales decrease with a high margin customer who no longer requires our services. The increase in the segment's operating profit was due to the $2,100,000 retrospective workers' compensation insurance adjustment referred to in Note J in the accompanying financial statements and the increase in sales volume, partially offset by a decrease in gross margin of approximately 2 percentage points, primarily due to higher subcontractor usage billed without a mark-up, lower margins on the increasing business with the large national contracts, and an increase in unemployment insurance costs. -17- 18 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS--Continued SIX MONTHS ENDED MAY 3, 1996 COMPARED TO THE SIX MONTHS ENDED APRIL 28, 1995--Continued The Electronic Publication and Typesetting Systems segment's sales increased by $9,789,000, or 30%, to $42,492,000 in 1996, while the segment incurred an operating loss of $1,455,000, as compared to a profit of $387,000 in 1995. The sales increase and the related effects on operating profit described below were primarily due to the first quarter merger with Triple-I, described in Note I in the accompanying financial statements. The decrease in operating profit was due to a 1 percentage point increase in total operating expenses expended per sales dollar, partially offset by the increased sales volume. In addition, the segment incurred $700,000 of restructuring charges and a charge of $534,000 for amortization of intangibles resulting from the merger. Gross margins expressed as a percentage of sales were slightly less in 1996 than in 1995 due to a change in the product mix, substantially offset by the benefits achieved by the merger. The markets in which the segment competes are marked by rapidly changing technology, with sales in fiscal 1996 of equipment introduced within the last three years comprising approximately 96% of equipment sales. The Telephone Directory segment's sales increased by $3,640,000, or 14%, to $30,296,000 in fiscal 1996, while the segment incurred an operating loss of $1,570,000, as compared to a loss of $1,451,000 in 1995. The sales increase is due to a $1,349,000 increase in telephone directory production volume, an increase in independent directory sales by the segment's DataNational division of 19% and increased sales by the Uruguayan printing operation of 103%. The operating losses in 1996 and 1995 were due to costs to enter a new regional independent directory market, higher operating costs in the Uruguayan printing operations (resulting, in 1996, from a move to a new facility and installation of new equipment) and the start-up losses incurred in the automated production of newspaper display advertisements, partially offset in 1996 by higher telephone directory production revenues and profits. This segment's services are rendered under various short and long-term contracts. Certain contracts expire in fiscal 1998 through 2001, 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 $13,405,000, or 46%, to $42,542,000 in fiscal 1996 and its operating profit tripled to $3,728,000, as compared to $1,176,000 in 1995. The sales increase was due to a 75% increase in the construction division partially offset by a 4% decrease in the business systems division. Operating results improved due to the increased sales volume and a 4 percentage point decrease in overhead expended per sales dollar. -18- 19 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS--Continued SIX MONTHS ENDED MAY 3, 1996 COMPARED TO THE SIX MONTHS ENDED APRIL 28, 1995--Continued The Computer Systems segment's sales increased by $4,342,000, or 13%, to $37,884,000 in 1996 and its operating profit increased by $1,141,000 to $3,397,000, as compared to $2,256,000 in 1995. The increase in sales and operating profit was primarily due to increased sales and profits on conservation services to utilities and the sale of upgrades of a Delta Operating Service System (DOSS) in 1996. Under the completed contract method of accounting used by this segment, revenues together with related costs are recognized in income upon acceptance by the customer. Deliveries and installations under other DOSS contracts continue and customer acceptances are anticipated later in 1996. Profitability rates on such contracts are not anticipated to be at the same levels as those earned on the DOSS contracts accepted in fiscal 1995. This segment's results on a quarter-to-quarter basis are highly dependent on the acceptance by customers under contract for the segment's directory assistance systems, which occurs periodically rather than evenly. Results of Operations: Other Other items, discussed on a consolidated basis, affecting the results of operations for the six-month periods were: Interest income increased by $229,000, or 24%, in 1996. The increase was primarily due to additional funds invested. Other income (expense) changed unfavorably by $474,000 in 1996 primarily due to $368,000 of higher fees paid in connection with additional sales of receivables. The Company's share of the net loss of its joint ventures was $1,783,000 in 1996, as compared to $1,353,000 in 1995. The increase was due to the start-up and foreign currency related losses incurred by the Company's Brazilian joint venture which began operations in July 1994. The Company's share of the net 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, decreased by $203,000 due to lower profit margins partially offset by the effects of higher revenues. Selling and administrative expenses increased by $4,963,000, or 25%, to $25,097,000 in 1996 to support the increase in sales. However, these expenses expressed as a percentage of sales were 5% in both 1996 and 1995. Research, development and engineering expenditures increased by $1,781,000, or 46%, to $5,657,000 in 1996. The increase was due to additional product development by the Computer Systems segment and the Electronic Publication and Typesetting Systems segment. -19- 20 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS--Continued SIX MONTHS ENDED MAY 3, 1996 COMPARED TO THE SIX MONTHS ENDED APRIL 28, 1995--Continued Depreciation and amortization increased by $1,000,000, or 17%, to $6,765,000 in 1996. The increase was due to increased fixed asset expenditures in fiscal 1994, 1995 and the six months of 1996. Interest expense decreased by $1,062,000, or 31%, to $2,360,000 in 1996. The decrease was primarily due to the redemption of $10,000,000, in May 1995 of the Company's 12-3/8% Subordinated Debentures and lower interest rates in Uruguay. The Company's effective tax rate increased to 41% in 1996, from 37% in 1995. The 1996 tax provision was unfavorably impacted by the effect of increased nondeductible intangible amortization related to the Autologic merger and the 1995 tax provision was favorably impacted by the utilization of a net operating loss carryforward. -20- 21 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS--Continued THREE MONTHS ENDED MAY 3, 1996 COMPARED TO THREE MONTHS ENDED APRIL 28, 1995--Continued Results of Operations - Summary In the three-month period of fiscal 1996, revenues increased by $61,675,000, or 32%, from fiscal 1995, as sales increased by $61,717,000 or 32%. The increase in sales resulted primarily from a $35,189,000 increase in sales of the Technical Services and Temporary Personnel segment, an increase in the sales of the Electronic Publication and Typesetting Systems segment of $9,242,000, an $8,517,000 increase in sales of the Engineering and Construction segment, and a $5,986,000 increase in the sales of the Computer Systems segment. The Company's pretax income was $8,624,000 in 1996, compared to $2,136,000 in 1995. The operating profit of the Company's segments increased by $6,110,000 to $11,727,000 in 1996. The principal increases in the segments' operating income were from the Computer Systems segment, with an increase of $3,097,000, to a profit of $1,259,000 compared to a $1,838,000 loss in 1995 and the Engineering and Construction segment, with an increase of $1,535,000, to a profit of $2,367,000 compared to $832,000 in 1995. Net income in the second quarter of 1996 was $4,931,000, compared to a net income of $1,430,000 in of 1995. Results of Operations - By Segment The Technical Services and Temporary Personnel segment's sales increased by $35,189,000, or 26%, in 1996 to $170,223,000, and operating profit increased by $762,000, or 11%, to $7,706,000, as compared to $6,944,000 in 1995. Approximately $11,800,000, or 34%, of the segment's sales increase was due to pass-through costs primarily related to subcontractors to service large national contracts and $7,000,000 of the sales increase in 1996 was the result of business with new customers. The remainder of the increased business was with existing customers, partially offset by a $9,900,000 decrease with a high margin customer who no longer requires our services. The increase in the segment's operating profit was due to the $1,645,000 retrospective workers' compensation insurance adjustment referred to in Note J in the accompanying financial statements and the increased sales volume, partially offset by a decrease in gross margin of approximately 2.8 percentage points, primarily due to higher subcontractor usage billed without a mark-up, and an increase in unemployment insurance costs. -21- 22 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS--Continued THREE MONTHS ENDED MAY 3, 1996 COMPARED TO THREE MONTHS ENDED APRIL 28, 1995--Continued The Electronic Publication and Typesetting Systems segment's sales increased by $9,242,000, or 55%, to $25,945,000 in 1996, and its operating profit was $955,000, as compared to an operating profit of $107,000 in 1995. The sales increase and the related effects on operating profit described below were primarily due to the first quarter merger with Triple-I, described in Note I in the accompanying financial statements. The increase in operating profit was due to increased sales volume and an increase in the gross margin of 5 percentage points. The increase in the gross margin percentage resulted from a change in the product mix (an increase in sales of some high margin products and a decrease in sales of some low margin items, which are in direct competition with other manufacturers' products). As a result of the merger with Triple-I, some of these high margin products which were previously purchased are now manufactured by the segment. In addition, the segment's operating profit was reduced by a charge of $534,000, for the amortization of intangibles resulting from the merger. The markets in which the segment competes are marked by rapidly changing technology, with sales in fiscal 1996 of equipment introduced within the last three years comprising approximately 96% of equipment sales. The Telephone Directory segment's sales increased by $2,733,000, or 20%, to $16,727,000 in fiscal 1996, while the segment incurred an operating loss of $560,000, an increase of $141,000, as compared to an operating loss of $419,000 in 1995. The sales increase is due to a $1,268,000 increase in telephone directory production volume, an increase in independent directory sales by the segment's DataNational division of 16% and an increase in sales of the segment's Uruguayan printing division of 177%. The operating losses in 1996 and 1995 were due to start-up losses incurred in the automated production of newspaper display advertisements and higher operating costs in the Uruguayan printing operation (resulting, in 1996, from a move to a new facility and installation of new equipment) partially offset, in 1996 by higher telephone directory production revenue. This segment's services are rendered under various short and long-term contracts. Certain contracts expire in fiscal 1998 through 2001, 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 $8,517,000, or 59%, to $23,051,000 in fiscal 1996 and its operating profit was $2,367,000, as compared to an operating profit of $832,000 in 1995. The sales increase was due to a 103% increase in the construction division partially offset by a 3% decrease in the business systems division. Operating results improved due to the increased sales volume and a 3.5 percentage point decrease in overhead expended per sales dollar and an increase in the gross margin of .5 percentage points. -22- 23 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS--Continued THREE MONTHS ENDED MAY 3, 1996 COMPARED TO THREE MONTHS ENDED APRIL 28, 1995--Continued The Computer Systems segment's sales increased by $5,986,000, or 53%, to $17,277,000 in 1996 and its operating profit was $1,259,000, as compared to a loss of $1,838,000 in 1995. The segment's operating results for the second quarter of 1996 were a significant improvement compared to 1995 because of sales of upgrades of a Delta Operating Service System (DOSS) in the 1996 quarter and profits on conservation services to utilities. Results of Operations: Other Other items, discussed on a consolidated basis, affecting the results of operations for the three-month periods were: Interest income increased by $104,000, or 22%, in 1996. The increase was primarily due to additional funds invested. Other income (expense) changed unfavorably by $225,000 in 1996 primarily due to $139,000 of higher fees paid in connection with additional sales of receivables. The Company's equity in the net income of its joint ventures was $174,000 in 1996, as compared to $95,000 in 1995. The increase was due to the lower start-up and foreign currency related losses incurred by the Company's Brazilian joint venture which began operations in July 1994. The Company's share of the net 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, decreased by $83,000 due to lower profit margins partially offset by higher revenues. Selling and administrative expenses increased by $3,127,000, or 30%, to $13,510,000 in 1996 to support the increase in sales. However, these expenses expressed as a percentage of sales were 5% in both 1996 and 1995. Research, development and engineering expenditures increased by $1,643,000, or 79%, to $3,715,000 in 1996. The increase was due to additional product development by the Computer Systems segment and the Electronic Publication and Typesetting Systems segment. -23- 24 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS--Continued THREE MONTHS ENDED MAY 3, 1996 COMPARED TO THREE MONTHS ENDED APRIL 28, 1995--Continued Depreciation and amortization increased by $608,000, or 20%, to $3,577,000 in 1996. The increase was due to increased fixed asset expenditures in fiscal 1994, 1995 and the first half of 1996. Interest expense decreased by $531,000, or 31%, to $1,205,000 in 1996. The decrease was primarily due to the redemption of $10,000,000, in May 1995 of the Company's 12-3/8% Subordinated Debentures and lower interest rates in Uruguay. The Company's effective tax rate increased to 42% in 1996, from 33% in 1995. The 1996 tax provision was unfavorably impacted by the effect of increased nondeductible intangible amortization related to the Autologic merger and the 1995 tax provision was favorably impacted by the utilization of a net operating loss carryforward. -24- 25 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS--Continued Liquidity and Source of Capital Cash and cash equivalents decreased by $1,906,000 in 1996 to $23,444,000, and working capital increased by $11,038,000 to $68,621,000. Cash flows from operating activities for the six months ended May 3, 1996 were $5,465,000. Many factors reflected in the accompanying consolidated statements of cash flows affected the amount of cash flows from operating activities. The primary factors in the cash provided by operating activities in 1996 were the net income of $7,198,000, reduction in accounts receivable of $9,008,000 and the non-cash expense of $6,765,000 for depreciation and amortization, partially offset by decreases in income taxes payable of $11,607,000, accounts payable of $5,488,000, and accrued expenses of $5,380,000. The principal factors in the cash applied to investing activities of $8,704,000 were purchases of property, plant and equipment of $10,316,000, investments in and advances to the Brazilian joint venture of $5,838,000, partially offset by the cash resulting from the acquisition of subsidiaries of $8,421,000, net of transaction costs. In addition to its cash and cash equivalents, at May 3, 1996, the Company's investment portfolio, primarily U.S. Treasury Notes and certificates of deposit, had a carrying value of $4,640,000. The Company also has a $10,000,000 credit line with a domestic bank under a revolving credit agreement which expires August 1, 1997, unless renewed. The Company had outstanding bank borrowing under that line of $5,658,000 at May 3, 1996. In addition, at May 3, 1996, the Company had the right to sell up to $15,000,000 of additional interests in receivables under its existing sales program. The Company sold an additional $10,000,000 on May 24, 1996. 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. -25- 26 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 27.01 Financial Data Schedule (b) Reports on Form 8-K: The only Report on Form 8-K filed during the quarter ended May 3, 1996 was an amendment dated March 29, 1996 (the "Amendment") to the Company's Report on Form 8-K dated (date of earliest event reported) January 29, 1996 (the "Report"). The Amendment reported under Item 7. Financial Statements and Exhibits that the Company has determined that no pro forma financial information relative to the transactions to which the Report pertained were required. A full listing of the financial statements incorporated by reference in the Report is contained in the Company's Quarterly Report on Form 10-Q for the quarter ended February 2, 1996. -26- 27 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: June 14, 1996 -27- 28 EXHIBIT INDEX Exhibit No. Description 15.01 Acknowledgment letter from Ernst & Young LLP 15.02 Independent Accountants' Report on Review of Interim Financial Information from Ernst & Young LLP 27.01 Financial Data Schedule -28- EX-15.01 2 ERNST & YOUNG LLP ACKNOWLEDGMENT LETTER 1 EXHIBIT 15.01 June 13, 1996 To the Stockholders Volt Information Sciences, Inc. We are aware of the incorporation by reference in Post-Effective Amendment No. 2 to Registration Statement No. 2-75618 on Form S-8 dated September 12, 1988, Post-Effective Amendment No. 3 to Registration Statement No. 2-70180 on Form S-8 dated April 8, 1983, Registration Statement No. 2-88018 on Form S-3 dated December 1, 1983 and Registration Statement No. 33-18565 on Form S-8 dated December 14, 1987 of Volt Information Sciences, Inc., of our report dated June 3, 1996 relating to the unaudited condensed consolidated interim financial statements of Volt Information Sciences, Inc. that are included in its Form 10-Q for the quarter ended May 3, 1996. 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 INDEPENDENT ACC'TS' REPORT FROM ERNST & YOUNG LLP 1 EXHIBIT 15.02 [ERNST & YOUNG LLP LETTERHEAD] 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 May 3, 1996, and the related condensed consolidated statements of operations for the six and three month periods ended May 3, 1996 and April 28, 1995, and the related condensed consolidated statements of cash flows for the six month periods ended May 3, 1996 and April 28, 1995. These financial statements are the responsibility of the Company's management. We conducted our review in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of applying analytical procedures to financial data and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with generally accepted auditing standards, which will be performed for the full year with the objective of expressing an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion. Based on our reviews, we are not aware of any material modifications that should be made to the 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 November 3, 1995, and the related consolidated statements of operations and cash flows for the year then ended, not presented herein; and in our report dated January 2, 1996, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of November 3, 1995, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived. Ernst & Young LLP June 3, 1996 EX-27.01 4 FINANCIAL DATA SCHEDULE
5 1,000 6-MOS NOV-01-1996 MAY-03-1996 23,444 2,353 110,586 5,102 29,385 177,843 96,184 34,529 276,715 109,222 30,369 0 0 969 114,041 276,715 42,176 479,475 28,522 427,162 36,471 1,325 2,360 12,156 4,930 7,198 0 0 0 7,198 .74 .74
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