<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
/X/ Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For Three Months Ended January 27, 1995
Or
/ / Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from ______________________ to ____________________
Commission File No. 1-9232
VOLT INFORMATION SCIENCES, INC.
(Exact name of registrant as specified in its charter)
New York 13-5658129
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1221 Avenue of the Americas, New York, New York 10020
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (212) 704-2400
Not Applicable
(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months, and (2) has been subject to such filing requirements
for the past 90 days.
Yes X No
----- -----
The number of shares of Common Stock, $.10 par value, outstanding as of March 7,
1995 was 4,815,047.
<PAGE> 2
VOLT INFORMATION SCIENCES,INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
PART 1 - Financial Information
<TABLE>
<CAPTION>
Three Months Ended
------------------------------
January 27, January 28,
1995 1994
----------- -----------
(Dollars in thousands)
<S> <C> <C>
REVENUES
Sales of services $167,518 $130,216
Sales of products 15,778 12,338
Equity in net income (loss) of joint
ventures--Note F (1,448) 50
Interest income 480 230
Gains on sales of securities 1
Other income (expense) - net--Note B (268) 15
-------- --------
182,060 142,850
-------- --------
COSTS AND EXPENSES
Cost of sales 152,305 122,871
Services 10,405 8,026
Products 9,751 8,865
Selling and administrative 1,804 1,238
Research, development & engineering 2,796 2,644
Depreciation and amortization (59) 96
Foreign exchange (gain) loss - net 1,686 2,075
Interest expense -------- --------
178,688 145,815
-------- --------
Income (loss) before income tax provision
(benefit) and extraordinary item 3,372 (2,965)
Income tax provision (benefit)--Note H 1,349 (1,002)
-------- --------
Income (loss) before extraordinary item 2,023 (1,963)
Extraordinary item--Note D (189)
-------- --------
Net income (loss) $ 2,023 $ (2,152)
======== ========
(Per Share Data)
Income (loss) before extraordinary item $.42 $(.41)
Extraordinary item (.04)
---- -----
Net income (loss) $.42 $(.45)
==== =====
Number of shares used in computation-- Note G 4,804,204 4,802,026
========= =========
</TABLE>
See accompanying notes.
- 2 -
<PAGE> 3
VOLT INFORMATION SCIENCES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE
SHEETS (UNAUDITED)
<TABLE>
<CAPTION>
January 27, October 28,
1995 1994 (a)
----------- -----------
(Dollars in thousands)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 23,210 $ 17,049
Short-term investments 1,974 4,974
Trade accounts receivable less allowances of
$4,113 (1995) and $4,027 (1994)--Note B 101,522 98,795
Inventories--Note C 21,001 27,239
Deferred income taxes 3,908 2,966
Prepaid expenses and other assets 5,519 4,387
-------- --------
TOTAL CURRENT ASSETS 157,134 155,410
INVESTMENTS IN SECURITIES 3,805 3,121
INVESTMENTS IN JOINT VENTURES--Note F 12,123 11,997
PROPERTY, PLANT AND EQUIPMENT--
at cost--Note D
Land and buildings 33,491 33,513
Machinery and equipment 43,200 42,175
Leasehold improvements 2,882 2,819
-------- --------
79,573 78,507
Less allowances for depreciation
and amortization 28,546 28,555
-------- --------
51,027 49,952
DEPOSITS, RECEIVABLES AND OTHER ASSETS 2,483 1,562
INTANGIBLE ASSETS--net of accumulated
amortization of $3,643 (1995) and
$3,495 (1994) 4,714 4,862
-------- --------
$231,286 $226,904
======== ========
LIABILITIES AND STOCKHOLDERS'
EQUITY
CURRENT LIABILITIES
Notes payable to banks $ 5,219 $ 4,925
Current portion of long-term
debt--Note D 2,000 2,000
Accounts payable 19,286 25,018
Accrued expenses
Wages and commissions 19,335 19,859
Taxes other than income taxes 10,069 8,917
Insurance 17,656 15,039
Other 4,911 5,639
Customer advances and other liabilities 15,088 11,610
Income taxes 2,330 564
-------- --------
TOTAL CURRENT LIABILITIES 95,894 93,571
LONG-TERM DEBT--Note D 40,292 40,788
DEFERRED INCOME TAXES 2,869 2,700
-------- --------
139,055 137,059
STOCKHOLDERS' EQUITY--Notes
D, E and F
Preferred stock, par value $1.00
Authorized--500,000 shares;
issued--none
Common stock, par value $.10
Authorized--15,000,000 shares;
issued - 7,790,780 shares (1995)
and 7,789,580 shares (1994) 779 779
Paid-in capital 44,006 43,830
Retained earnings 93,678 91,655
Unrealized foreign currency
translation adjustment (169) (283)
Unrealized loss on
marketable securities (70) (47)
-------- --------
138,224 135,934
Less common stock held in treasury,
at cost--2,977,933 shares (1995)
and 2,986,554 shares (1994) 45,993 46,089
-------- --------
92,231 89,845
-------- --------
$231,286 $226,904
======== ========
</TABLE>
(a) The Balance Sheet at October 28, 1994 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 27, January 28,
1995 1994
----------- -----------
(Dollars in thousands)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ 2,023 $(2,152)
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Extraordinary loss 189
Depreciation and amortization 2,796 2,644
Equity in net (income) loss of joint ventures 1,448 (50)
Distributions from joint ventures 705
Accounts receivable provisions 625 237
Amortization of deferred debenture costs,
debt discounts and other deferred expenses 202 183
(Gains) losses on foreign currency translation (94) 19
Losses on dispositions of property, plant, and
equipment 52 7
Deferred income tax benefit (1,118) (56)
Gains on sales of securities (1)
Changes in operating assets and liabilities:
Increase in accounts receivable (3,673) (2,720)
Decrease in inventories 6,131 3,878
(Increase) decrease in prepaid expenses
and other current assets (1,123) 1,186
(Increase) decrease in other assets (974) 454
Decrease in accounts payable (7,066) (7,248)
Increase (decrease) in accrued expenses 2,899 (474)
Increase in customer advances and
other liabilities 3,508 5,087
Increase (decrease) in income taxes payable 2,036 (628)
------- -------
NET CASH PROVIDED BY OPERATING
ACTIVITIES 7,672 1,260
------- -------
</TABLE>
- 4 -
<PAGE> 5
VOLT INFORMATION SCIENCES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)--Continued
<TABLE>
<CAPTION>
Three Months Ended
------------------------------
January 27, January 28,
1995 1994
----------- -----------
(Dollars in thousands)
<S> <C> <C>
CASH FLOWS FROM INVESTING ACTIVITIES
Sales of investments 3,863
Maturities of investments 7,000 949
Purchases of investments (4,718) (1,282)
Investment in joint venture (1,387)
Proceeds from disposals of property, plant and
equipment 123 10
Purchases of property, plant and equipment (2,493) (3,782)
------- --------
NET CASH APPLIED TO
INVESTING ACTIVITIES (1,475) (242)
------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Payment of long-term debt (500) (20,000)
Exercise of stock options 22
Increase in notes payable to banks 473 263
------- --------
NET CASH APPLIED TO FINANCING ACTIVITIES (5) (19,737)
------- --------
Effect of exchange rate changes on cash (31) 25
------- --------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS 6,161 (18,694)
Cash and cash equivalents, beginning of period 17,049 41,081
------- --------
CASH AND CASH EQUIVALENTS,
END OF PERIOD $23,210 $ 22,387
======= ========
SUPPLEMENTAL INFORMATION
Cash paid (received) during the period
Interest expense $ 2,571 $ 4,299
Income taxes, net of refunds $ 336 $ (256)
</TABLE>
See accompanying notes.
- 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 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 January 27, 1995 and results of operations and cash flows
for the three months ended January 27, 1995 and January 28, 1994. Operating
results for the three months ended January 27, 1995 are not necessarily
indicative of the results that may be expected for the fiscal year ending
November 3, 1995.
These statements should be read in conjunction with the financial statements and
footnotes included in the Company's Annual Report on Form 10-K for the year
ended October 28, 1994. The accounting policies used in preparing these
financial statements are the same as those described in the Company's Annual
Report.
The Company's fiscal year ends on the Friday nearest October 31.
Note B--Accounts Receivable
In October 1993, the Company entered into a three-year agreement to sell, on a
limited recourse basis, up to $25,000,000 of undivided interests in a designated
pool of certain eligible accounts receivable. As collections reduce previously
sold undivided interests, new receivables may be sold up to the $25,000,000
level. At January 27, 1995 and October 28, 1994, $10,000,000 and $25,000,000,
respectively, of accounts receivable had been sold under this agreement. The
sold accounts receivable are reflected as a reduction of receivables in the
accompanying balance sheets. The Company pays fees based on the purchaser's
borrowing costs incurred on short-term commercial paper which financed the
purchase of receivables. Other income (expense) in the accompanying 1995 and
1994 statements of operations include fees related to the agreement of $312,000
and $354,000 respectively.
The purchaser may terminate the agreement on a minimum of six months' notice. In
addition, the agreement may be terminated if the Company does not maintain a
minimum tangible net worth, as defined, or exceeds a maximum ratio of debt to
tangible net worth.
- 6 -
<PAGE> 7
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)--Continued
Note C--Inventories
Inventories consist of:
<TABLE>
<CAPTION>
January 27, October 28,
1995 1994
----------- -----------
(Dollars in thousands)
<S> <C> <C>
Services:
Accumulated unbilled costs on:
Service contracts $ 9,038 $ 9,521
Long-term contracts 4,686 10,277
------- -------
13,724 19,798
------- -------
Products:
Materials and work-in-process 3,368 3,700
Service parts 972 949
Finished goods 2,937 2,792
------- -------
7,277 7,441
------- -------
Total $21,001 $27,239
======= =======
</TABLE>
The cumulative amounts billed, principally under long-term contracts, of
$47,975,000 at January 27, 1995 and $39,179,000 at October 28, 1994 are credited
against the related costs in inventory. Substantially all of the amounts billed
have been collected.
- 7 -
<PAGE> 8
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)--Continued
Note D--Long-Term Debt
Long-term debt consists of the following:
<TABLE>
<CAPTION>
January 27, October 28,
1995 1994
----------- -----------
(Dollars in thousands)
<S> <C> <C>
12-3/8% Senior Subordinated Debentures, due
July 1, 1998--net of unamortized discount of
$63,000 - 1995 and $67,000 - 1994 (a) $32,792 $32,788
Term loan (b) 9,500 10,000
------- -------
42,292 42,788
Less amounts due within one year 2,000 2,000
------- -------
Total long-term debt $40,292 $40,788
======= =======
</TABLE>
(a) The debentures provide for interest to be paid semi-annually on January 1
and July 1 and are redeemable at the option of the Company, in whole or in part,
at 100% plus accrued interest. In 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 and in May 1994, an
additional $10,000,000 of debentures which, together with previously redeemed
and repurchased debentures, satisfied all future sinking fund requirements. The
accompanying January 28, 1994 statement of operations reflects the early
redemption of $20,000,000 of debentures, at par, which resulted in an
extraordinary loss of $189,000, net of income taxes of $101,000, 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 27, 1995, the amount available for dividends, pursuant to
the terms of the indenture under which the debentures are issued, was
$24,649,000 and, if no dividend payments are made, the amount available for
capital stock repurchases was $34,649,000. However, under the terms of the
term loan agreement, at such date, only $7,891,000 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 January 27, 1995 - $15,790,000). Concurrently,
the Company repaid its $15,400,000 mortgage liability to Chemical Bank. The
term loan bears interest at 7.86% per annum and is repayable in twenty quarterly
principal installments of $500,000 together with interest. In October 1996, if
certain conditions are met, the loan may be extended for two years with a
subsequent reduction of principal payments to $225,000 per quarter and a final
payment of $1,725,000 due October, 2001. The agreement contains various
financial covenants, the most restrictive of which requires the Company to
maintain a tangible net worth of $79,000,000. The obligation is of two
subsidiaries and is guaranteed by the Company.
- 8 -
<PAGE> 9
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)--Continued
Note E--Stockholders' Equity
Changes in the major components of stockholders' equity for the three months
ended January 27, 1995 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 28, 1994 $779 $43,830 $91,655 $(46,089)
Net income for the three months 2,023
Contribution to ESOP - 8,621 shares 154 96
Stock options exercised - 1,200 shares 22
---- ------- ------- --------
Balance at January 27, 1995 $779 $44,006 $93,678 $(45,993)
==== ======= ======= ========
</TABLE>
The other components of stockholders' equity are a valuation allowance for the
unrealized loss on marketable securities and an unrealized foreign currency
translation adjustment due to the Company's investment in its Australian joint
venture, whose functional currency is the Australian dollar.
Note F--Summarized Financial Information of Joint Ventures
The Company owns 12-1/2% of the voting stock of Pacific Access Pty. Ltd.
("Pacific Access"), an international joint venture in Australia. This venture,
which commenced operations in July 1991, assumed responsibility throughout
Australia for the marketing, sales and compilation functions of all yellow
pages directories of Telstra Corporation Ltd., ("Telstra"), the Australian
Government-owned telephone company, under the terms of a twelve-year contract.
The venture produces a major portion of its revenues and significantly all of
its profits in the Company's second and third fiscal quarters. Telstra owns 50%
of the voting stock of Pacific Access. In the event of a change in control of
the Company, as defined, the Company may be required to sell its shares in the
venture to Telstra at a formula price based on various factors, including
earnings.
In July 1994, the Company entered into a long-term joint venture agreement to
publish the official White Pages, Yellow Pages and Street Guides for Rio de
Janeiro. The Company has invested $3,905,000 to acquire a 50% interest in the
common shares together with 75% of the issued preferred stock of Telelistas
Editora Ltda., a Brazilian company which has a contract to publish Rio's
telephone directories on behalf of TELERJ, the government-owned telephone
company. The agreement requires the Company to invest up to an additional
$4,300,000 (which, together with the original investment, will represent 50% of
the common shares and 75% of the agreed initial preferred stock and debt
financing by the venturers) in the joint venture in fiscal year 1995 as well as
to provide technology, expertise and key personnel in directory production,
sales and marketing.
Consolidated retained earnings at January 27, 1995 included $3,680,000
representing the undistributed earnings of the joint ventures. Income taxes
have been paid or provided on such earnings.
- 9 -
<PAGE> 10
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)--Continued
Note F--Summarized Financial Information of Joint Ventures--(Continued)
The following summarizes the financial information of the joint ventures:
<TABLE>
<CAPTION>
January 27, 1995 October 28, 1994
---------------------- ----------------------
(Dollars in thousands)
Company's Company's
Total Equity Total Equity
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Current assets $ 156,161 $ 233,907
Noncurrent assets 16,761 16,629
Current liabilities (123,906) (198,521)
--------- ---------
Equity of combined joint ventures $ 46,016 $ 52,015
========= =========
Equity of Australian joint ventures (a) $ 45,386 $ 9,234 $ 48,987 $ 9,677
Equity of Brazilian joint venture 3,630 2,889 3,028 2,320
--------- ------- --------- -------
$ 49,016 $ 52,015
========= =========
Investments in joint ventures $12,123 $11,997
======= =======
</TABLE>
(a) Pursuant to the Australian joint venture agreement, the initial capital
contributions of all venturers, other than Telstra, exceeded their proportionate
share of ownership interest in the corporate joint venture. The agreement
provides that, upon liquidation of the venture, the venturers will be entitled
to recover such excess contributions from the net assets of the venture.
<TABLE>
<CAPTION>
Three Months Ended
-----------------------------------------------------
January 27, 1995 October 28, 1994
---------------------- ----------------------
(Dollars in thousands)
Company's Company's
Total Equity Total Equity
------- --------- ------- ---------
<S> <C> <C> <C> <C>
Revenues $70,782 $62,063
Costs and expenses 79,104 67,141
Income tax benefit (2,047) (1,870)
------- -------
Net loss $(6,275) $(3,208)
======= =======
Net loss of Australian joint venture $(5,032) $ (629) $(4,276) $(484)
Net loss of Brazilian joint venture (1,243) (819)
Net income of United States joint venture (b) 1,068 534
------- ------- ------- -----
$(6,275) $(3,208)
======= =======
Company's equity in net income (loss) of
joint ventures $(1,448) $ 50
======= =====
</TABLE>
(b) Effective February 28, 1994, the Company sold its 50% interest in the United
States joint venture.
- 10 -
<PAGE> 11
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)--Continued
Note G--Per Share Data
Per share data are computed on the basis of the weighted average number of
shares of common stock outstanding and, if applicable, the assumed exercise of
dilutive outstanding stock options based on the treasury stock method.
Note H--Income Taxes
Significant components of the income tax expense (benefit) attributable to
operations are as follows:
<TABLE>
<CAPTION>
Three Months Ended
--------------------------
January January
27, 1995 28, 1994
-------- --------
(Dollars in thousands)
<S> <C> <C>
Current:
Federal $ 1,658 $ (961)
Foreign 212 54
State and local 597 (39)
------- -------
2,467 (946)
------- -------
Deferred:
Federal (902) (54)
State and local (216) (2)
------- -------
(1,118) (56)
------- -------
$ 1,349 $(1,002)
======= =======
</TABLE>
- 11 -
<PAGE> 12
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
THREE MONTHS ENDED JANUARY 27, 1995 COMPARED TO THE THREE MONTHS ENDED JANUARY
28, 1994
The information which appears below relates to prior periods, the results of
which are not necessarily indicative of the results which may be expected for
any subsequent periods.
The following summarizes the results of operations by segment:
<TABLE>
<CAPTION>
For The Three Months Ended
--------------------------------
January 27, January 28,
1995 1994
----------- -----------
(Dollars in thousands)
<S> <C> <C>
Revenues:
Technical Services and Temporary Personnel $118,918 $ 96,172
Electronic Publication and Typesetting Systems 16,000 12,493
Telephone Directory 12,662 11,888
Engineering and Construction 14,603 14,147
Computer Systems 22,251 8,813
Equity in net income (loss) of joint ventures (1,448) 50
Interest and other income-net 212 246
Elimination of intersegment revenues (1,138) (959)
-------- --------
$182,060 $142,850
======== ========
Income (Loss) Before Income Taxes
and Extraordinary Item
Operating Profit (Loss):
Technical Services and Temporary Personnel $ 4,947 $ 2,019
Electronic Publication and Typesetting Systems 280 48
Telephone Directory (1,032) (358)
Engineering and Construction 344 348
Computer Systems 4,094 (948)
Eliminations (22) 23
------- -------
Total Operating Profit 8,611 1,132
Equity in net income (loss) of joint ventures (1,448) 50
Interest and other income-net 212 246
General corporate expenses (2,376) (2,222)
Interest expense (1,686) (2,075)
Foreign exchange gain (loss)--net 59 (96)
------- -------
Income (Loss) Before Income Taxes
and Extraordinary Item $ 3,372 $ (2,965)
======= ========
</TABLE>
- 12 -
<PAGE> 13
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS--Continued
THREE MONTHS ENDED JANUARY 27, 1995 COMPARED TO THE THREE MONTHS ENDED JANUARY
28, 1994--Continued
Results of Operations - Consolidated
In 1995, revenues increased by $39,210,000, or 27%, to $182,060,000 and income
before income taxes was $3,372,000, as compared to a loss, before income tax
benefit and an extraordinary item, of $2,965,000 in 1994.
The Company's share of the net loss of its joint ventures was $1,448,000 in the
first quarter of 1995, compared to a profit of $50,000 in 1994. The loss was
due to a loss incurred by its Brazilian joint venture, a greater loss sustained
by the Australian venture, and the absence of profits from its U.S. joint
venture sold in February 1994. The Brazilian venture began in July 1994 and the
loss is due to start-up costs. Lower margins caused the increased loss in the
Australian venture, which produces a major portion of its revenues and
significantly all of its profits in the Company's second and third fiscal
quarters.
General corporate expenses increased by $154,000, or 7%, to $2,376,000 in 1995
to support the increased activities of the operating segments.
Research, development and engineering costs increased by $566,000, or 46%, to
$1,804,000 in 1995, due primarily to increases in the Computer Systems,
Telephone Directory and Electronic Publication and Typesetting Systems segments
to develop new products.
Interest expense decreased by $389,000, or 19%, to $1,686,000 in 1995 compared
to 1994 due to the redemption, in May 1994, of $10,000,000 of the Company's
12-3/8% Subordinated Debentures. In 1995 and 1994, other income was reduced by
charges of $312,000 and $354,000, respectively, for costs incurred in
conjunction with the sale of accounts receivable (see Note B of Notes to
Condensed Consolidated Financial Statements). Other income was further reduced
by sundry charges, while interest income increased in 1995 by $250,000 to
$480,000, due to higher prevailing interest rates and funds available.
Results of Operations - By Segment
The Technical Services and Temporary Personnel segment's sales increased by
$22,746,000, or 24%, to $118,918,000 and the operating profit increased by
$2,928,000 to $4,947,000 in 1995. One new customer accounted for approximately
$6,250,000 of the increase in sales. Although it is anticipated that services
to that customer will continue to be rendered over the near-term, the customer
may not always require the level of services now performed. The remainder of the
sales growth is predominantly due to increased business with existing customers.
The increase in operating profit was due to the increased sales volume and
- 13 -
<PAGE> 14
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS--Continued
THREE MONTHS ENDED JANUARY 27, 1995 COMPARED TO THE THREE MONTHS ENDED JANUARY
28, 1994--Continued
improved margins due to lower payroll taxes, workers' compensation insurance and
overheads expressed as a percentage of sales. Most of the contracts entered
into are of a relatively short duration and competition is intense.
The Electronic Publication and Typesetting Systems segment sales increased by
$3,507,000, or 28%, to $16,000,000 and the operating profit increased by
$232,000 to $280,000 in 1995. The sales increase was attributable to increased
shipments of machines to newspapers in both the domestic and foreign markets.
The operating profit increase was due to higher sales throughout the segment.
The Telephone Directory segment's sales increased by $774,000, or 7%, to
$12,662,000 while the operating loss increased by $675,000 to $1,032,000 in
1995. The sales increase in 1995 was primarily due to increased independent
directory publishing volume of $1,547,000 from two new directories and the
continued publication of a large directory in the first quarter of fiscal 1995
which was published in the second quarter of the prior year, partially offset by
declines in telephone directory production of $585,000 due to decreased customer
volumes. The operating loss increased despite the additional revenues, as new
directories published, did not, and historically do not, achieve normal margins
in their first year of publication. In addition, lower margins caused by lower
telephone directory production sales volume and an increase in costs to develop
new directory management systems contributed to the operating loss in 1995. This
segment's services are rendered under various short and long-term contracts. A
production contract with a customer that generated $9 million in revenue in the
year ended October 28, 1994 expired during the first quarter of fiscal 1995, and
was not renewed. Certain contracts expire in fiscal 1995 through 1997 and there
can be no assurance that they will be renewed on satisfactory terms.
The Engineering and Construction segment's sales increased by $456,000, or 3%,
to $14,603,000 and the operating profit decreased by $4,000 to $344,000 in 1995.
The sales increase was due to increased volume with customers in its business
systems installation division. Operating results slightly declined due to lower
gross margins, resulting from the intensely competitive telephone plant
construction, interconnect and engineering markets.
Sales of the Computer Systems segment increased by $13,438,000, or 152%, to
$22,251,000 in 1995. The segment's operating profit was $4,094,000 in 1995
compared to a loss of $948,000 in 1994. The increase in sales and operating
profit was due to customer acceptance in the first quarter of fiscal 1995 of two
Delta Operating Service Systems (DOSS) which did not require customization. In
fiscal years 1993 and 1994, the segment was awarded several additional
contracts. Deliveries and installations under such contracts, which require
significant customization, continue and customer acceptances are anticipated in
fiscal years 1995 and 1996. Profitability rates on such contracts are not
anticipated to be at the same levels as those earned on the DOSS contracts in
the first quarter of fiscal 1995.
- 14 -
<PAGE> 15
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS--Continued
THREE MONTHS ENDED JANUARY 27, 1995 COMPARED TO THE THREE MONTHS ENDED JANUARY
28, 1994--Continued
Sales under DOSS contracts are generally reported upon customer acceptance.
Accordingly, acceptance in a particular quarter may affect the comparability of
results with other quarters.
Liquidity and Source of Capital
Cash and cash equivalents increased by $6,161,000 in the three months ended
January 27, 1995 to $23,210,000 due to cash flows from operating activities.
However, working capital decreased by $599,000 in the three months to
$61,240,000 at January 27, 1995 due primarily to increases in property, plant
and equipment.
Cash of $7,672,000 was provided from operating activities in 1995 compared to
$1,260,000 in 1994. The increase was due primarily to the improvement in
profitability and reduction of inventories.
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 outstanding bank borrowings of $5,219,000 at
January 27, 1995, primarily supported by a $7,000,000 credit line with a
domestic bank which expires in November 1995, unless renewed. In addition, the
Company has the right to sell up to $15,000,000 of additional receivables under
its existing sales program.
In November 1993 and May 1994, the Company redeemed $20,000,000 and $10,000,000,
respectively, of its 12-3/8% Subordinated Debentures which, together with
previously redeemed and repurchased debentures, satisfied all future sinking
fund requirements. The Company repaid its $15,400,000 mortgage loan which was
due December 1994 and replaced it with a $10,000,000 five-year loan agreement
which is secured by a deed of trust on land and buildings.
At January 27, 1995, the Company's portfolio of investments had a market value
of $5,779,000 and an amortized cost of $5,894,000. Gross unrealized holding
losses of $115,000 are shown as a reduction of stockholders' equity.
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.
- 15 -
<PAGE> 16
PART II - Other Information
Items 1 through 5 were not applicable.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
15.01 Letter from Ernst & Young LLP
15.02 Letter from Ernst & Young LLP regarding interim financial information.
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the quarter ended January 27, 1995.
- 16 -
<PAGE> 17
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, 1995 JACK EGAN
Vice President - Corporate Accounting
(Principal Accounting Officer)
- 17 -
<PAGE> 18
EXHIBIT INDEX
15.01 Letter from Ernst & Young LLP
15.02 Letter from Ernst & Young LLP regarding interim financial information.
27 Financial Data Schedule (filed with electronic version only)
<PAGE> 1
ERNST & YOUNG LLP 787 Seventh Avenue Phone 212-773-3000
New York, New York 10019
INDEPENDENT ACCOUNTANTS' REPORT ON REVIEW OF INTERIM
FINANCIAL INFORMATION
To the Stockholders
Volt Information Sciences, Inc.
We have reviewed the accompanying unaudited condensed consolidated balance sheet
of Volt Information Sciences, Inc. and subsidiaries as of January 27, 1995 and
the related condensed consolidated statements of operations and cash flows for
the three month periods ended January 27, 1995 and January 28, 1994. These
financial statements are the responsibility of the Company's management.
We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical procedures to financial
data and making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in
accordance with generally accepted auditing standards, which will be performed
for the full year with the objective of expressing an opinion regarding the
financial statements taken as a whole. Accordingly, we do not express such an
opinion.
Based on our reviews, we are not aware of any material modifications that should
be made to the 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 28, 1994, and the
related consolidated statements of operations and cash flows for the year then
ended, not presented herein; and in our report dated December 19, 1994, we
expressed an unqualified opinion on these consolidated financial statements. In
our opinion, the information set forth in the accompanying condensed
consolidated balance sheet as of October 28, 1994, is fairly stated, in all
material respects, in relation to the consolidated balance sheet from which it
has been derived.
Ernst & Young LLP
March 1, 1995
<PAGE> 1
March 8, 1995
Securities and Exchange Commission
Washington, DC 20549
We are aware of the incorporation by reference in Post-Effective Amendment No. 2
to Registration Statement No. 2-75618 on Form S-8 dated September 12, 1988, Post
Effective Amendment No. 3 to Registration Statement No. 2-70180 on Form S-8
dated April 8, 1983, Registration Statement No. 2-88018 on Form S-3 dated
December 1, 1983 and Registration Statement No. 33-18565 on Form S-8 dated
December 14, 1987 of Volt Information Sciences, Inc., of our report dated March
1, 1995 relating to the unaudited condensed consolidated interim financial
statements of Volt Information Sciences, Inc. which are included in its Form
10-Q for the quarter ended January 27, 1995.
Pursuant to Rule 43(c) of the Securities Act of 1933, our report is not a part
of the registration statement prepared or certified by accountants within the
meaning of Section 7 or 11 of the Securities Act of 1993.
Ernst & Young LLP
New York, New York
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