<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
____
/ X / Quarterly Report Under Section 13 or 15(d) of the Securities Exchange
Act of 1934
For Three Months Ended January 28, 1994
Or
___
/ / Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from ________________________ to
_______________________
Commission File No. 1-9232
VOLT INFORMATION SCIENCES, INC.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
New York 13-5658129
- --------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1133 Avenue of the Americas, New York, New York 10036
- ---------------------------------------------------- -----------
(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
year)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months, and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No _____
The number of shares of Common Stock, $.10 par value, outstanding as of March
7, 1994 was 4,803,026.
<PAGE> 2
PART I - Financial Information
VOLT INFORMATION SCIENCES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
------------------
January 28, January 29,
1994 1993
------------- --------------
(Dollars in thousands)
<S> <C> <C>
REVENUES
Sales of services $130,216 $111,755
Sales of products 12,338 11,576
Equity in income of
joint ventures--Note F 50 495
Interest income 230 358
Gains on sales of securities 1 162
Other income - net--Note B 15 227
------- -------
142,850 124,573
------- -------
COSTS AND EXPENSES
Cost of sales
Services 122,871 106,309
Products 8,026 6,940
Selling and administrative 8,865 8,270
Research, development & engineering 1,238 1,719
Depreciation and amortization 2,644 2,560
Foreign exchange loss - net 96 57
Interest 2,075 2,808
------- -------
145,815 128,663
------- -------
Loss before income tax benefit, extraordinary
item and cumulative effect of a change
in accounting (2,965) (4,090)
Income tax benefit--Note H 1,002 1,347
------- -------
Loss before extraordinary item and cumulative
effect of a change in accounting (1,963) (2,743)
Extraordinary item--Note I (189)
Cumulative effect of a change in accounting
for income taxes--Note H 959
------- -------
Net loss $(2,152) $(1,784)
======= =======
</TABLE>
<TABLE>
<CAPTION>
(Per Share Data)
<S> <C> <C>
Loss before extraordinary item and cumulative
effect of a change in accounting $(.41) $(.57)
Extraordinary item (.04)
Cumulative effect of a change in accounting
for income taxes .20
----- ------
Net loss $(.45) $(.37)
===== =====
Number of shares used in computation--
Note G 4,802,026 4,790,381
========= =========
See accompanying notes.
</TABLE>
- 2 -
<PAGE> 3
VOLT INFORMATION SCIENCES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
<TABLE>
<CAPTION>
January 28, October 29,
1994 1993 (a)
------------- --------------
(Dollars in thousands)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $22,387 $41,081
Short-term investments at
lower of cost or market--
market value $1,014 (1994) and
$2,264 (1993) 1,000 2,260
Trade accounts receivable less
allowances of $3,852 (1994)
and $3,960 (1993)--Note B 75,894 73,724
Inventories--Note C 24,671 28,539
Recoverable income taxes 5,425 4,695
Deferred income taxes 2,543 3,402
Prepaid expenses and other assets 3,934 5,121
------- -------
TOTAL CURRENT ASSETS 135,854 158,822
INVESTMENTS--market value $3,265
(1994) and $5,571 (1993) 3,215 5,502
INVESTMENTS in joint ventures--Note F 15,005 15,337
PROPERTY, PLANT AND EQUIPMENT--
at cost--Note D
Land and buildings 33,228 33,192
Machinery and equipment 42,033 41,767
Leasehold improvements 2,194 2,393
-------- -------
77,455 77,352
Less allowances for depreciation
and amortization 31,475 30,709
-------- --------
45,980 46,643
DEPOSITS, RECEIVABLES AND OTHER ASSETS 2,937 3,652
INTANGIBLE ASSETS--net of accumulated
amortization of $3,050 (1994) and $2,901 (1993) 5,787 5,936
-------- --------
$208,778 $235,892
======== ========
</TABLE>
<TABLE>
<CAPTION>
January 28, October 29,
1994 1993 (a)
-------------- --------------
(Dollars in thousands)
<C> <C>
LIABILITIES AND STOCKHOLDERS'
EQUITY
CURRENT LIABILITIES
Notes payable to banks $6,329 $6,207
Current portion of long-term debt--Note D 15,400 20,000
Accounts payable 17,257 26,402
Accrued expenses
Wages and commissions 16,979 17,268
Taxes other than income taxes 6,412 5,954
Insurance 10,920 9,344
Other 3,763 5,995
Customer advances and other liabilities 11,646 6,563
-------- --------
TOTAL CURRENT LIABILITIES 88,706 97,733
LONG-TERM DEBT--NOTE D 42,751 58,095
DEFERRED INCOME TAXES 1,585 2,386
------ ------
133,042 158,214
STOCKHOLDERS' EQUITY--Notes
D, E and F
Preferred stock, par value $1.00
Authorized--500,000 shares;
issued--none
Common stock, par value $.10
Authorized--15,000,000 shares;
issued - 7,789,580 shares 779 779
Paid-in capital 43,823 43,823
Retained earnings 77,730 79,882
Unrealized foreign currency
translation adjustment (496) (706)
------- --------
121,836 123,778
Less common stock held in treasury,
at cost--2,987,554 shares 46,100 46,100
------- -------
75,736 77,678
-------- --------
$208,778 $235,892
======== ========
</TABLE>
(a) The Balance Sheet at October 29, 1993 has been derived from the audited
financial statements at that date.
See accompanying notes.
- 3 -
<PAGE> 4
VOLT INFORMATION SCIENCES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
------------------------------------
January 28, January 29,
1994 1993
------------ ------------
(Dollars in thousands)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $(2,152) $(1,784)
Adjustments to reconcile net loss to cash
provided by (applied to) operating activities:
Extraordinary loss 189
Cumulative effect of a change in accounting (959)
Depreciation and amortization 2,644 2,560
Equity in income of joint ventures (50) (495)
Distributions from joint ventures 705 1,323
Accounts receivable provisions 237 326
Amortization of deferred debenture costs,
debt discounts and other deferred charges 183 193
(Gains) losses on foreign currency translation 19 (340)
(Gains) losses on dispositions of fixed assets 7 (3)
Deferred income tax benefit (56) (1,159)
Gains on sales of securities (1) (162)
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable (2,720) 9,553
Decrease in inventories 3,878 3,839
(Increase) decrease in prepaid expenses
and other current assets 1,186 (45)
(Increase) decrease in other assets 454 (409)
Increase (decrease) in accounts payable (7,248) 6,031
Decrease in accrued expenses (474) (1,676)
Increase in customer advances and
other liabilities 5,087 4,182
Decrease in income taxes (628) (582)
----- ------
NET CASH PROVIDED BY OPERATING
ACTIVITIES 1,260 20,393
------ ------
</TABLE>
- 4 -
<PAGE> 5
VOLT INFORMATION SCIENCES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS--CONTINUED
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
----------------------------------
January 28, January 29,
1994 1993
----------- -----------
(Dollars in thousands)
<S> <C> <C>
CASH FLOWS FROM INVESTING
ACTIVITIES
Sales of investments 3,863 819
Maturities of investments 949 300
Purchases of investments (1,282) (2,549)
Proceeds from disposals of property, plant and
equipment 10 22
Purchases of property, plant and equipment (3,782) (2,069)
------ ------
NET CASH APPLIED TO
INVESTING ACTIVITIES (242) (3,477)
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES
Decrease in long-term debt (20,000)
Increase in notes payable to banks 263 610
------- -------
NET CASH PROVIDED BY (APPLIED TO)
FINANCING ACTIVITIES (19,737) 610
------- -------
Effect of exchange rate changes on cash 25 162
------- --------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS (18,694) 17,688
Cash and cash equivalents, beginning of period 41,081 28,557
------- -------
CASH AND CASH EQUIVALENTS,
END OF PERIOD $22,387 $46,245
======= =======
SUPPLEMENTAL INFORMATION
Cash Paid:
Interest $4,299 $4,897
Income tax (refunds) payments-net $ (256) $ 359
See accompanying notes.
</TABLE>
- 5 -
<PAGE> 6
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Note A--Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with the instructions for Form 10-Q, and 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
normal recurring adjustments and accruals considered necessary for a fair
presentation of the Company's financial position at January 28, 1994 and
results of operations and cash flows for the three months ended January 28,
1994 and January 29, 1993. Operating results for the three months ended
January 28, 1994 are not necessarily indicative of the results that may
be expected for the fiscal year ending October 28, 1994.
These statements should be read in conjunction with the financial statements
and footnotes included in the Company's Annual Report on Form 10-K for the year
ended October 29, 1993. The accounting policies used in preparing these
financial statements are the same as those described in the Company's Annual
Report.
The Company's fiscal year ends on the Friday nearest October 31.
Note B--Accounts Receivable
In October 1993, the Company entered into a three-year agreement to sell, on a
limited recourse basis, up to $25,000,000 of undivided interests in a
designated pool of certain eligible accounts receivable. As collections reduce
previously sold undivided interests, new receivables may be sold up to the
$25,000,000 level. At January 28, 1994, $25,000,000 of accounts receivable had
been sold under this agreement. The sold accounts receivable are reflected as
a reduction of receivables in the accompanying 1994 balance sheet. The
proceeds from the sale were used to pay debt (see Note D). The Company pays
fees based on the purchaser's borrowing costs incurred on short-term commercial
paper which financed the purchase of receivables. Other income in the
accompanying 1994 statement of operations is reduced by $354,000 for such fees.
The purchaser may terminate the agreement on a minimum of six months' notice.
In addition, the agreement may be terminated if the Company does not maintain a
minimum tangible net worth, as defined, and a maximum ratio of debt to tangible
net worth.
- 6 -
<PAGE> 7
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--
CONTINUED (UNAUDITED)
Note C--Inventories
Inventories consist of:
<TABLE>
<CAPTION>
January 28, October 29,
1994 1993
----------- -----------
(Dollars in thousands)
<S> <C> <C>
Services:
Accumulated unbilled costs on:
Service contracts $9,075 $9,818
Long-term contracts 7,439 11,409
------- -------
16,514 21,227
------- -------
Products:
Materials 1,581 1,497
Work-in-progress 1,218 942
Service parts 1,372 968
Finished goods 3,986 3,905
------- -------
8,157 7,312
------- -------
Total $24,671 $28,539
======= =======
</TABLE>
The cumulative amounts billed, principally under long-term contracts of
$66,618,000 at January 28, 1994 and $53,371,000 at October 29, 1993 are
credited against the related costs in inventory. Substantially all the amounts
billed have been collected.
- 7 -
<PAGE> 8
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--
CONTINUED (UNAUDITED)
Note D--Long-Term Debt
Long-term debt consists of the following:
<TABLE>
<CAPTION>
January 28, October 29,
1994 1993
------------- --------------
(Dollars in thousands)
<S> <C> <C>
12-3/8% Senior Subordinated Debentures due,
July 1, 1998--net of unamortized discount of
$104,000-1994 and $160,000-1993 (a) $42,751 $62,695
Mortgage Payable, due
December 22, 1994 (b) 15,400 15,400
------- -------
58,151 78,095
Less amounts due within one year 15,400 20,000
------- -------
Long-term debt $42,751 $58,095
======= =======
</TABLE>
(a)-The debentures provide for interest to be paid semi-annually on January 1
and July 1. The debentures are redeemable at the option of the Company, in
whole or in part, at 100%, plus accrued interest. In October, 1993, as a
result of a financing agreement (see Note B), the Company called for the
redemption and, in November, 1993, redeemed $20,000,000 principal amount of
debentures which satisfied mandatory sinking fund payments through July 1, 1996
and reduced the sinking fund payment required on July 1, 1997 to $2,860,000.
The remaining $39,995,000 principal amount is due July 1, 1998. The early
redemption, at par, resulted in an extraordinary loss of $189,000, net of
income taxes, due to the write-off of related discount and issuance costs. The
debentures are subordinated to all existing and future senior indebtedness (as
defined) of the Company. At January 28, 1994, the amount available for
dividends, pursuant to the terms of the indenture under which the debentures
are issued, was $16,575,000 and, if no dividend payments are made, the amount
available for capital stock repurchases was $26,575,000. However, under the
terms of the aforementioned financing agreement (see Note B), at such date,
only $4,160,000 was available for such restricted payments.
(b)-The mortgage payable, secured by a deed of trust on land and a building
(book value at January 28, 1994 - $15,100,000), bears interest at 1/2% per
annum above the Chemical Bank base rate or 1-1/2% per annum above LIBOR plus
certain additional charges, at the option of the Company. Interest (4.9% at
January 28, 1994) is payable monthly with no principal payments required until
maturity. The obligation is of a subsidiary and is guaranteed by the Company.
The Company is currently investigating the replacement or extension of the
mortgage liability.
- 8 -
<PAGE> 9
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--
CONTINUED (UNAUDITED)
Note E--Stockholders' Equity
Changes in the major components of stockholders' equity for the three months
ended January 28, 1994 are as follows:
<TABLE>
<CAPTION>
Common Paid-In Retained Treasury
Stock Capital Earnings Stock
-------- ------- -------- ----------
(Dollars in thousands)
<S> <C> <C> <C> <C>
Balance at October 29, 1993 $779 $43,823 $79,882 $(46,100)
Net loss for the quarter (2,152)
---- ------- ------- --------
Balance at January 28, 1994 $779 $43,823 $77,730 ($46,100)
==== ======= ======= =======
</TABLE>
The other component of stockholders' equity is an unrealized foreign currency
translation adjustment due to the Company's investment in its Australian joint
ventures, whose functional currency is the Australian dollar.
Note F--Summarized Financial Information of Joint Ventures
The Company has investments in two active joint ventures. One 12-1/2% owned
corporate joint venture formed in 1991 with Telstra Corporation Ltd. (Telstra),
the Australian Government owned telephone company and others, assumed the
responsibility throughout Australia for the marketing, sales and compilation
functions of all yellow page directories for Telstra under the terms of a
twelve-year contract. The venture earns a major portion of its revenues and
significantly all of its profits in the Company's second and third fiscal
quarters. The Company's equity in income of the Australian joint ventures in
the first quarter of fiscal 1993 reflected the reversal of a tax liability as a
result of the completion of an Australian tax examination of a 50% owned,
inactive joint venture.
The other 50% owned joint venture, with a major telephone company, composes
telephone directories in the United States for the parent of the other joint
venturer under a contract expiring December 31, 1996, which can be terminated
by either party under certain conditions.
Consolidated retained earnings at January 28, 1994 includes $6,429,000
representing the undistributed earnings of the joint ventures. Income taxes
have been paid or provided for on such earnings.
- 9 -
<PAGE> 10
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--
CONTINUED (UNAUDITED)
Note F--Summarized Financial Information of Joint Ventures--(Continued)
The following summarizes the financial information of the joint ventures:
<TABLE>
<CAPTION>
January 28, 1994 October 29, 1993
------------------------------- -------------------------------
(Dollars in thousands)
Company's Company's
Total Equity Total Equity
----------- ------------ ----------- ------------
<S> <C> <C> <C> <C>
Current assets $126,319 $191,302
Noncurrent assets 18,946 17,852
Current liabilities (96,783) (160,110)
------- --------
Equity of combined joint ventures $48,482 $49,044
======= =======
Equity of Australian joint ventures (a) $35,661 $8,522 $35,789 $8,670
Equity of United States joint venture 12,821 6,411 13,255 6,627
Other capitalized costs, net 72 40
------- ------- ------- -------
$48,482 $49,044
======= =======
Investments in joint ventures $15,005 $15,337
======= =======
</TABLE>
(a)-Pursuant to the 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.
<TABLE>
<CAPTION>
Three Months Ended
-----------------------------------------------------------------
January 28, 1994 January 29, 1993
-------------------------------- -------------------------------
(Dollars in thousands)
Company's Company's
Total Equity Total Equity
--------- ------------ --------- ------------
<S> <C> <C> <C> <C>
Revenues $62,063 $58,595
Costs and expenses 67,141 64,922
Income tax benefit (1,870) (3,254)
------- ------
(Loss) before cumulative effect
of a change in accounting (3,208) (3,073)
Cumulative effect of a change in accounting
for Australian income taxes (a) 5,688
------- ------
Net income (loss) $(3,208) $2,615
======= ======
Income (loss) of Australian joint ventures before
cumulative effect of a change in accounting $(4,276) $(484) $(3,941) $61
Net income of United States joint venture 1,068 534 868 434
-------- ----- ------- -----
$(3,208) $(3,073)
======== =======
Company's equity in income of joint ventures $50 $495
==== =====
</TABLE>
(a) During the first quarter of fiscal 1993, the Company's Australian corporate
joint venture changed its method of accounting for income taxes by adopting the
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes." The cumulative effect of the change increased the joint venture's
income by $5,688,000 due to its ability to recognize deferred Australian tax
assets as permitted by Statement No. 109. The Company's portion of this
increase in income, net of United States taxes, is $432,000 and is included in
the Company's cumulative effect of a change in accounting for income taxes.
(see Note H).
- 10 -
<PAGE> 11
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--
CONTINUED (UNAUDITED)
Note G--Per Share Data
The computation of per share data for the three months ended January 28, 1994
and January 29, 1993 include only the weighted average number of shares of
Common Stock outstanding; the outstanding stock options have not been included
in the computation since inclusion would not have a material effect.
Note H--Income Taxes
Effective as of the beginning of the three months ended January 29, 1993, the
Company adopted Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes." Prior to the adoption of Statement No. 109,
income tax expense was determined using the liability method prescribed by
Statement No. 96, which is superseded by Statement No. 109. Among other
changes, Statement No. 109 changes the recognition and measurement criteria for
deferred tax assets included in Statement No. 96.
As permitted by Statement 109, the Company has elected not to restate the
financial statements of any prior years. The cumulative effect of adopting
Statement No. 109 at the beginning of the first quarter of fiscal 1993 was to
increase net income by $959,000 ($.20 per share), including $432,000
attributable to a corporate joint venture (see Note F).
Significant components of the income tax benefit attributable to operations are
as follows:
<TABLE>
<CAPTION>
Three Months Ended
-----------------------------
January January
28, 1994 29, 1993
----------- -----------
(Dollars in thousands)
<S> <C> <C>
Current:
Federal $(961) $(367)
Foreign 54 196
State and local (39) (17)
---- ----
(946) (188)
---- ----
Deferred:
Federal (54) (1,109)
State and local (2) (50)
------- -------
(56) (1,159)
------- ------
$(1,002) $(1,347)
======= =======
Note I--Extraordinary Item
</TABLE>
The extraordinary loss in the three months ended January 28, 1994 is the result
of the early redemption at par of $20,000,000 face value of the Company's
12-3/8% Subordinated Debentures. The loss was due to the write-off of the
related discount and issuance costs and is net of an income tax benefit of
$101,000.
- 11 -
<PAGE> 12
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
THREE MONTHS ENDED JANUARY 28, 1994 COMPARED
TO THE THREE MONTHS ENDED JANUARY 29, 1993
The information which appears below relates to prior periods, the results of
operations for which periods are not necessarily indicative of the results
which may be expected for any subsequent periods. Management has made no
predictions or estimates as to future operations, except as discussed below in
this analysis, and no inferences as to such future operations should be drawn.
The following summarizes the results of operations by segment:
<TABLE>
<CAPTION>
For The Three Months Ended
-------------------------------------
January 28, January 29,
1994 1993
------------- -------------
(Dollars in thousands)
<S> <C> <C>
Revenues:
Technical Services and Temporary Personnel $96,172 $76,862
Electronic Publication and Typesetting Systems 12,493 12,294
Telephone Directory 11,888 16,734
Engineering and Construction 14,147 11,661
Computer Systems 8,813 7,415
Equity in income of joint ventures 50 495
Interest and other income-net 246 747
Elimination of intersegment revenues (959) (1,635)
-------- --------
$142,850 $124,573
======== ========
Loss Before Income Tax Benefit, Extraordinary Item and
Cumulative Effect of a Change in Accounting:
Operating Profit (Loss):
Technical Services and Temporary Personnel $2,019 $768
Electronic Publication and Typesetting Systems 48 291
Telephone Directory (358) (909)
Engineering and Construction 348 (35)
Computer Systems (948) (155)
Eliminations 23 (302)
------- ------
Total Operating Profit (Loss) 1,132 (342)
Equity in income of joint ventures 50 495
Interest and other income-net 246 747
General corporate expenses (2,222) (2,125)
Interest expense (2,075) (2,808)
Foreign exchange loss--net (96) (57)
------- -------
Loss Before Income Tax Benefit, Extraordinary Item
and Cumulative Effect of a Change in Accounting $(2,965) $(4,090)
======= =======
</TABLE>
- 12 -
<PAGE> 13
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS--CONTINUED
THREE MONTHS ENDED JANUARY 28, 1994 COMPARED
TO THE THREE MONTHS ENDED JANUARY 29, 1993--CONTINUED
In 1994, revenues increased by $18,277,000 or 15% to $142,850,000 and the loss
before income taxes, an extraordinary item and, in 1993, the cumulative effect
of a change in accounting decreased by $1,125,000 or 28% to $2,965,000.
The Technical Services and Temporary Personnel segment's sales increased by
$19,310,000 or 25% to $96,172,000 in 1994 and operating profit increased by
$1,251,000 to $2,019,000 in 1994. The increase in sales and operating profit
was attributable to increased business with new and existing customers
throughout the segment. Most of the contracts entered into are of a relatively
short duration and competition is intense. Although the markets for the
segment's services include a broad range of industries throughout the United
States, general economic difficulties in specific geographic areas or
industrial sectors have in the past, and could in the future, affect the
profitability of this segment.
Sales of the Electronic Publication and Typesetting Systems segment increased
by $199,000 or 2% to $12,493,000 in 1994. The operating profit was $48,000
compared to $291,000 in 1993. The sales increase was in both the domestic and
foreign markets. The operating profit decline was due to lower gross margins
caused by competitive pressures, partially offset by reduced development,
engineering and administrative costs. The markets in which the segment
competes are marked by rapidly changing technology and, while the Company
continues its investments in research and development, there is no assurance
that this segment's present or future products will be competitive, that the
segment will continue to develop new products or that such present products or
new products can be successfully marketed.
The Telephone Directory segment's sales decreased by $4,846,000 or 29% to
$11,888,000 in 1994 while the operating loss decreased by $551,000 or 61% to
$358,000 in 1994. The sales decline in 1994 was primarily due to the sale in
1993 of an automated directory management system which accounted for 29% of the
segment's sales and, in 1994, lower commercial printing business in Uruguay.
The telephone directory production operations experienced an increase in sales
of $860,000 due to increased volumes. The reduction in operating loss was due
to higher margins on the new business and lower development costs. This
segment provides telephone directory production, publication of community and
university directories, publication services, commercial printing and directory
publishing in Uruguay and develops proprietary automated systems for directory
management and production for sale or license to directory publishers.
- 13 -
<PAGE> 14
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS--CONTINUED
THREE MONTHS ENDED JANUARY 28, 1994 COMPARED
TO THE THREE MONTHS ENDED JANUARY 29, 1993--CONTINUED
This segment's services are rendered under various short and long-term
contracts. Certain contracts expire in fiscal 1994 through 1996 and there can
be no assurance that they will be renewed on satisfactory terms.
The Engineering and Construction segment's sales increased by $2,486,000 or 21%
to $14,147,000 in 1994 and the operating profit was $348,000 in 1994 compared
to an operating loss of $35,000 in 1993. The sales increase was due primarily
to new business and increased volume with existing customers. Operating
results improved due to the increased sales and improved gross margins. The
segment operates in the intensely competitive telephone plant construction,
interconnect and engineering markets.
Sales of the Computer Systems segment increased by $1,398,000 or 19% to
$8,813,000 in 1994. The segment's operating loss was $948,000 in 1994 compared
to a loss of $155,000 in 1993. The increase in sales was due primarily to
increased maintenance revenue. The operating loss increase was due to higher
costs incurred at facilities established in 1993 to develop and market new
products and increased marketing, support and administrative costs related to
the existing product line, including the Delta Operator Services System (DOSS).
The first DOSS contract which is with a major telephone company was entered
into in 1991. Delivery and installation at the customer's premises began
during fiscal 1992 and continued through the first quarter of fiscal 1994.
Revenue from the contract will be recognized upon acceptance by the telephone
company. Although the system has been installed at most of the intended sites
and is being utilized commercially by the customer, it is still in the process
of implementation. While system acceptance is presently anticipated in fiscal
1994, a failure to obtain system acceptance from this customer could have a
significant adverse impact on this segment's operations and could jeopardize
its ability to continue to market the product. During 1992, Volt Delta also
entered into a second contract for DOSS with another major telecommunications
customer; in 1993, a pilot system was installed which is being used
commercially and is also in the process of acceptance testing. In fiscal 1993,
the segment was awarded three additional contracts, two of which necessitated
the opening of new branch facilities. In addition, a new marketing and
development facility was opened in 1993. There can be no assurance that the
Company will be able to obtain additional contracts or additional orders under
existing contracts.
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<PAGE> 15
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS--CONTINUED
THREE MONTHS ENDED JANUARY 28, 1994 COMPARED
TO THE THREE MONTHS ENDED JANUARY 29, 1993--CONTINUED
The Company's share of the income of its joint ventures was $50,000 in the
first quarter of 1994, a decrease of $445,000 from the first quarter of 1993.
The Company's portion of the loss of the Australian joint ventures was
$484,000 in 1994 compared to a profit of $61,000 in 1993. The profit in 1993
was primarily attributable to the reversal of a tax liability as a result of
the completion of an Australian tax examination. The venture earns a major
portion of its revenues and significantly all of its profits in the Company's
second and third fiscal quarters. Another joint venture, which composes
telephone directories in California under a contract that expires in 1996,
reported increased profits due primarily to higher margins and reduced costs.
Interest and other income decreased by $501,000 or 67% to $246,000 due
primarily to fees incurred in 1994 in conjunction with the sale of accounts
receivable (see Note B), and lower interest income in 1994.
General corporate expenses increased by $97,000 or 5% to $2,222,000 in 1994.
Interest expense decreased by $733,000 or 26% to $2,075,000 in 1994 compared to
1993 due to the early redemption of $20,000,000 of the Company's 12-3/8%
Subordinated Debentures and reductions in the principal and interest rate on a
mortgage loan.
Research, development and engineering costs decreased by $480,708 or 28% to
$1,238,345 in 1994 due primarily to reductions in the Telephone Directory and
Electronic Publication and Typesetting Systems segments.
- 15 -
<PAGE> 16
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS--CONTINUED
THREE MONTHS ENDED JANUARY 28, 1994 COMPARED
TO THE THREE MONTHS ENDED JANUARY 29, 1993--CONTINUED
Liquidity and Source of Capital
Cash and cash equivalents decreased by $18,694,000 in the three months ended
January 28, 1994 to $22,387,000 primarily due to the $20,000,000 redemption, at
par, of Subordinated Debentures. In addition, working capital decreased by
$13,941,000 in the three months to $47,148,000 at January 28, 1994 due
principally to the inclusion in current liabilities of a $15,400,000 mortgage
liability payable in December, 1994.
Cash of $1,260,000 was provided from operating activities in 1994 compared to
$20,393,000 in 1993. The decrease in the funds provided by operations in 1994
was due primarily to an increase in accounts receivable and a decrease in
accounts payable.
The Company believes that its current financial position, working capital and
future cash flow will be sufficient to fund operations and satisfy its debt
obligations. The Company has a $10,000,000 credit line with a domestic bank
expiring April 30, 1994, unless renewed. The Company is currently negotiating
the renewal of its credit line and is investigating the replacement or
extension of the mortgage liability.
At January 28, 1994, the Company's investment portfolio included investments
with a cost of $4,215,000 and unrealized gains of $64,000.
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.
- 16 -
<PAGE> 17
PART II - Other Information
Items 1 through 5 were not applicable.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
15.01 Letter from Ernst & Young
15.02 Letter from Ernst & Young regarding interim financial information.
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the quarter ended January 28, 1994.
- 17 -
<PAGE> 18
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
VOLT INFORMATION SCIENCES, INC.
(Registrant)
BY /s/ JACK EGAN
----------------------
(Signature)
Date: March 10, 1994 JACK EGAN
Vice President - Corporate Accounting
(Principal Accounting Officer)
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<PAGE> 19
EXHIBIT INDEX
EXHIBIT
NO. DESCRIPTION
- ------- -----------
15.01 Letter from Ernst & Young
15.02 Letter from Ernst & Young regarding interim financial information.
- 19 -
<PAGE> 1
March 2, 1994
Securities and Exchange Commission
Washington, DC 20549
We are aware of the incorporation by reference in Post-Effective Amendment No.
2 to Registration Statement No. 2-75618 on Form S-8 dated September 12, 1988,
Post Effective Amendment No. 3 to Registration Statement No. 2-70180 on Form
S-8 dated April 8, 1983, Registration Statement No. 2-88018 on Form S-3 dated
December 1, 1983 and Registration Statement No. 33-18565 on Form S-8 dated
December 14, 1987 of Volt Information Sciences, Inc., of our report dated March
2, 1994 relating to the unaudited condensed consolidated interim financial
statements of Volt Information Sciences, Inc. which are included in its Form
10Q for the quarter ended January 28, 1994.
Pursuant to Rule 436(c) of the Securities Act of 1933 our report is not a part
of the registration statement prepared or certified by accountants within the
meaning of Section 7 or 11 of the Securities Act of 1933.
Ernst & Young
New York, New York
<PAGE> 1
ERNST & YOUNG 787 Seventh Avenue Phone 212-773-3000
New York, New York 10019
INDEPENDENT ACCOUNTANTS' REPORT ON REVIEW OF INTERIM
FINANCIAL INFORMATION
Board of Directors
Volt Information Sciences, Inc.
We have reviewed the accompanying unaudited condensed consolidated balance
sheet of Volt Information Sciences, Inc. and subsidiaries as of January 28,
1994 and, the related condensed consolidated statements of operations and cash
flows for the three month periods ended January 28, 1994 and January 29, 1993.
These financial statements are the responsibility of the Company's management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures to
financial data and making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit conducted
in accordance with generally accepted auditing standards, which will be
performed for the full year with the objective of expressing an opinion
regarding the financial statements taken as a whole. Accordingly, we do not
express such an opinion.
Based on our reviews, we are not aware of any material modifications that
should be made to the condensed consolidated interim financial statements
referred to above for them to be in conformity with generally accepted
accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet as of October 29, 1993, and the
related consolidated statements of operations and cash flows for the year then
ended, not presented herein; and in our report dated January 5, 1994, we
expressed an unqualified opinion on these consolidated financial statements.
In our opinion, the information set forth in the accompanying condensed
consolidated balance sheet as of October 29, 1993, is fairly stated, in all
material respects, in relation to the consolidated balance sheet from which it
has been derived.
Ernst & Young
March 2, 1994
