<PAGE> 1
FORM 10-K/A 2
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
/ X / Annual Report Pursuant to Section 13 or 15(d) of the Securities
- ----- Exchange Act of 1934 (Fee Required)
For the fiscal year ended October 28, 1994
or
/ / Transition Report Pursuant to Section 13 or 15(d) of the Securities
- ----- Exchange Act of 1934 (No Fee Required)
For the transition period from _______________ to _______________
Commission File Number: 1-9232
VOLT INFORMATION SCIENCES, INC.
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(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
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (212) 704-2400
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of each class which registered
------------------- ------------------------
12-3/8% Senior Subordinated Debentures, Philadelphia Stock Exchange
due July 1, 1998
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.10 par value
----------------------------
(Title of Class)
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 (or for such shorter period that the
Registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days. YES / X / NO / /
----- -----
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. / X /
-----
The aggregate market value of the common stock held by non-affiliates of the
Registrant as of January 20, 1995 (based on the closing price on the NASDAQ
National Market on that date) was approximately $64,000,000 (based on the
number of shares outstanding on that date exclusive of all shares held
beneficially by executive officers and directors and their spouses and the
Registrant's Savings Plan and Employee Stock Ownership Plan, without conceding
that all such persons or plans are "affiliates" of the Registrant).
The number of shares of common stock outstanding as of January 20, 1995 was
4,803,026.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Company's Proxy Statement for its 1995 Annual Meeting are
incorporated by reference into Part III of this Report.
<PAGE> 2
PART I
ITEM 1. BUSINESS
General
Volt Information Sciences, Inc., a New York corporation, incorporated in 1957,
and its subsidiaries (collectively "Volt" or the "Company", unless the context
otherwise requires) operate in the following industry segments:
(1) Technical Services and Temporary Personnel - This segment provides
technical and temporary personnel services to industry and government;
(2) Electronic Publication and Typesetting Systems - This segment designs,
develops, manufactures, markets and services computerized imagesetting and
publication systems and equipment;
(3) Telephone Directory - This segment provides telephone directory services,
data base management, licensing of directory systems and publication of
telephone directories;
(4) Engineering and Construction - This segment provides inside and outside
plant and business communication engineering, construction, installation and
other support services for the telecommunications industry; and
(5) Computer Systems - This segment designs, programs, sells, leases and
maintains customized computer information systems and related services and
provides services to public utilities emphasizing computer based projects.
In addition, the Company is a party to a joint venture with Telstra Corporation
Ltd., the Australian government-owned telephone company and others which
commenced operations in July 1991, for the marketing, selling and compilation
functions of yellow pages directories throughout Australia.
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 by acquiring an interest in 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 Company was also a party to a joint venture with a subsidiary of Pacific
Bell Directory which produced the directory ads and camera ready pages of
Pacific Bell Directory's yellow and white page directories published and
distributed in California and Nevada. Effective February 28, 1994, the Company
sold its 50% interest to its joint venture partner.
Information As To Industry Segments
The following tables set forth the relative contribution of each industry
segment to the Company's consolidated sales and operating profit (loss) for
each of the three fiscal years in the period ended October 28, 1994, and those
assets identifiable within each segment at the end of each of those years (see
Notes J and L of "Notes to Consolidated Financial Statements" and "Management's
Discussion and Analysis of Financial Condition and Results of Operations)":
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VOLT INFORMATION SCIENCES, INC. AND SUBSIDIARIES
INDUSTRY SEGMENT DATA
<TABLE>
<CAPTION>
October October October
28, 1994 29, 1993 30, 1992
---------- ---------- ----------
(Dollars in thousands)
<S> <C> <C> <C>
SALES
Technical Services and Temporary
Personnel:
Sales to unaffiliated customers $433,443 $340,301 $320,591
Intersegment sales 1,067 1,304 796
-------- -------- --------
434,510 341,605 321,387
-------- -------- --------
Electronic Publication and Typesetting
Systems:
Sales to unaffiliated customers 64,659 57,081 56,608
Intersegment sales 664 2,259 878
-------- -------- --------
65,323 59,340 57,486
-------- -------- --------
Telephone Directory:
Sales to unaffiliated customers 72,319 76,924 68,764
Intersegment sales 1,836 2,020 2,231
-------- -------- --------
74,155 78,944 70,995
-------- -------- --------
Engineering and Construction:
Sales to unaffiliated customers 51,391 46,417 36,111
Intersegment sales 1,285 1,056 197
-------- -------- --------
52,676 47,473 36,308
-------- -------- --------
Computer Systems:
Sales to unaffiliated customers 99,059 (a) 37,385 38,612
Intersegment sales 76 196 212
-------- -------- --------
99,135 37,581 38,824
-------- -------- --------
Eliminations of intersegment sales (4,928) (6,835) (4,314)
-------- -------- --------
Total sales $720,871 $558,108 $520,686
======== ======== ========
OPERATING PROFIT (LOSS)
Technical Services and Temporary Personnel $ 16,337 $ 7,360 $ 5,955 (b)
Electronic Publication and Typesetting Systems 1,334 2,040 1,054
Telephone Directory 6,695 8,153 6,544 (b)
Engineering and Construction 792 (1,128) (2,885)
Computer Systems (2,168) (8,549) (a) 2,043
Eliminations (8) (310) (346)
-------- -------- --------
Total operating profit 22,982 7,566 12,365
Interest and other income (expense) - net 790 2,125 3,074
Equity in net income of joint ventures 3,055 4,940 6,807
Gain on sale of joint venture 9,770
General corporate expenses (9,263) (8,769) (9,031)
Interest expense (7,468) (11,078) (11,569)
Foreign exchange gain (loss)-net (39) (378) 129
-------- -------- --------
Income (loss) before income taxes, extraordinary
item and cumulative effect of a change
in accounting $ 19,827 $ (5,594) $ 1,775
======== ======== ========
</TABLE>
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<PAGE> 4
VOLT INFORMATION SCIENCES, INC. AND SUBSIDIARIES
INDUSTRY SEGMENT DATA--Continued
<TABLE>
<CAPTION>
October October October
28, 1994 29, 1993 30, 1992
---------- ---------- ----------
(Dollars in thousands)
<S> <C> <C> <C>
IDENTIFIABLE ASSETS
Technical Services and Temporary
Personnel $ 40,230 (c) $ 30,248 (c) $ 51,756
Electronic Publication and Typesetting
Systems 36,276 32,350 31,218
Telephone Directory 28,941 (c) 31,830 (c) 34,294
Engineering and Construction 21,836 19,547 13,745
Computer Systems 50,273 39,394 30,751
Eliminations of intersegment items (645)
-------- -------- --------
177,556 153,369 161,119
Cash, investments, joint ventures
and other corporate assets 49,348 82,523 65,383
-------- -------- --------
Total assets $226,904 $235,892 $226,502
======== ======== ========
</TABLE>
(a) The results of operations for fiscal 1993 include a pretax charge of
$6,400,000 for estimated costs in excess of anticipated revenues under
contracts for two major directory systems. This represents the loss
incurred on such contracts. The completed contract method of
accounting was used for these contracts, and as a result, revenues and
the related costs (other than those costs in excess of anticipated
revenues recognized in 1993) are recognized in income in the year of
acceptance by the customer. In fiscal 1994, the Company received
customer acceptance under one of such contracts, which, because of the
pretax charge in the previous year related to such contract, had no
effect on the Company's earnings for 1994, although revenue (and costs)
of $59,000,000 were recognized in 1994.
(b) Operating results for fiscal 1992 include (i) a benefit of $1,070,000
from the recovery of a portion of prior years' state business taxes
applicable to the Technical Services and Temporary Personnel segment
and (ii) a pretax charge of $722,000 relating to a portion of a
facility under lease until fiscal 1994, which is no longer being
utilized by the Telephone Directory segment.
(c) In fiscal 1993, the Company entered into a three-year revolving
financing agreement (see Note C of Notes to Consolidated Financial
Statements) under which it sold a $25,000,000 undivided interest in a
certain pool of accounts receivable. As a result, the identifiable
assets of the Technical Services and Temporary Personnel and the
Telephone Directory segments were reduced by $23,000,000 and
$2,000,000 in 1994, respectively and by $22,875,000 and $2,125,000 in
1993, respectively.
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Technical Services and Temporary Personnel
Volt's Technical Services and Temporary Personnel segment provides, from
approximately 135 offices located throughout the United States, technical and
temporary personnel services to a wide range of customers.
Volt Technical Services provides contract engineering services and
professional, engineering, design, data processing, scientific and technical
support personnel for varying periods of time to companies and other
organizations (including government agencies) in a broad range of industries
which have a need for such personnel, but are unable, or do not choose, to
engage such personnel as their own employees. Volt Technical Services
furnishes services to such industries as the telecommunications, computer,
electronics, power (including certain nuclear and fossil fuel power plants),
aerospace, defense, marine, petrochemical, chemical, architectural, engineering
and transportation industries. Customers are located throughout the United
States with a small portion of such services being performed outside the United
States. Volt Technical Services maintains a computerized nationwide resume
data base consisting of approximately 300,000 technical, professional,
scientific, and other candidates from which it fills customer job requirements.
These individuals become Volt Technical employees during the period of their
assignment (which typically ranges from a few months to several years). As the
employer of record, Volt Technical Services is responsible for the payment of
salaries, payroll taxes, workers' compensation and unemployment insurance and
benefit packages, which may include sick days, holiday and vacation pay and
medical insurance.
Volt Temporary Services provides temporary help in administrative, clerical,
office automation, accounting, industrial and other job classifications to
clients for short and long-term assignments. Volt Temporary Services provides
clerks, typists, office automation personnel, secretaries, receptionists, sales
promotion personnel, bank personnel, telemarketers, data entry clerks,
inventory clerks, assemblers, warehousing personnel and other employees. Volt
Temporary Services furnishes temporary employees to meet various client
requests, such as substituting during vacation and sick leave, staffing high
turnover positions, filling in during the full-time hiring process or during a
hiring freeze and staffing seasonal peaks, special projects, conversions,
inventories and offices that are phasing down. It also provides management
personnel to coordinate special projects, thus relieving a customer of the need
to supervise temporary employees. Volt Accounting Specialists, a department of
Volt Temporary Services, provides specialized temporary personnel in
accounting, bookkeeping and other financial classifications. Volt Temporary
Services provides personnel to companies throughout a broad spectrum of
industries, including finance, banking, insurance, telecommunications,
utility, petrochemical, computer, electronics, aerospace, defense, retailing,
manufacturing, universities and government agencies. As in the case of
technical services employees, Volt, as the employer of record, is responsible
for the payment of salaries, payroll taxes, workers' compensation and
unemployment insurance and benefit packages, which may include sick days,
holiday and vacation pay and medical insurance.
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<PAGE> 6
Beginning in fiscal 1994, a substantial portion of the Volt Temporary Services
and Volt Technical Services offices have combined into Volt Services Group to
satisfy customer requests for a single source provider of all levels of
temporary help. This change also reflects the expanding range of services
offered to customers and the focus on providing these expanded services as a
full service supplier, including outsourcing services, as well as assuming full
responsibility for staffing, supervision and even productivity of large
projects. The consolidation of services under the umbrella of Volt Services
Group also enables the segment to bid on certain contracts where customers
insist on a single source provider which is a full-service organization. All
remaining offices of Volt Temporary Services and Volt Technical Services expect
to undergo the change to Volt Services Group during fiscal 1995.
During the week ended October 28, 1994, this segment employed approximately
19,000 people in furnishing services.
The segment is not dependent upon a single customer or a few customers, the
loss of which might have a materially adverse effect upon its business.
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.
The segment competes with many technical service and temporary personnel
firms, some of which are larger than Volt, as well as with individuals seeking
direct employment. The ability of Volt to compete successfully for customers
depends on its reputation, price and quality of service provided and its
ability to engage, in a timely manner, personnel meeting customer
requirements. Many of the contracts entered into by this segment are of
relatively short duration and competition is intense. Many of the contracts
under which the segment operates are awarded on the basis of competitive
proposals. Although Volt has been successful in obtaining contracts in the
past, there can be no assurance that Volt will receive additional or
replacement contracts on satisfactory terms.
Electronic Publication and Typesetting Systems
Volt, through its 99%-owned subsidiary, Autologic, Incorporated ("Autologic"),
designs, develops, manufactures, markets and services computerized imagesetting
and publication systems equipment and software, primarily for the newspaper,
publishing and commercial printing industries and for companies and other
organizations having internal publishing facilities. Autologic's products
are also utilized by certain of Volt's other segments. Foreign marketing and
servicing are provided directly by Autologic, through foreign subsidiaries and
branches, and by independent foreign distributors.
During fiscal 1994, Autologic's sales revenues increased by 10%, reflecting
significantly increased sales in the Australian and Latin American markets.
These increased sales were the result of improved local economic conditions,
increased sales and marketing efforts and competitive product offerings.
Revenues from sales in the United States and Europe were up slightly during the
year. Although the number of units were up significantly in all geographic
areas, the sales mix included more lower-priced units.
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<PAGE> 7
Increased sales revenues were also offset by declining prices and margins on
equipment and service sales. Technological advancements, "open system"
architecture and general market conditions have created a market where price
competition is commonplace.
As part of Autologic's program to increase its presence in the commercial
publication market while retaining its position in the technologically advanced
newspaper market, the US domestic sales force is being enlarged to focus on
commercial accounts, the product line has been expanded to support large format
(up to 34" x 44") multiple page imaging, direct-to-plate products have been
introduced focused on commercial printers and publishers, and services have
been augmented to address customer training, color system production and
network installation.
Autologic has successfully made the transition from selling principally
proprietary systems to being an industry leader in PostScript imaging systems.
(PostScript is a registered trademark of Adobe Systems Incorporated). Under
original equipment manufacturer license agreements, Autologic designs,
manufactures, sells and supports PostScript image systems which operate
independently or in conjunction with Autologic's proprietary PIP products. The
SoftPIP product line is completely PostScript Level 2-compliant and is known
for high performance, image quality, and reliability in high volume production
environments.
In response to the rapidly changing open system environment which dominates the
marketplace today, Autologic improved the performance and functional
capabilities of its computer server products during fiscal 1994. Highlights
include introduction of the APS-200 providing APS-100 capabilities on standard
platforms with significantly improved system performance, integration of
PostScript Level 2 features by the APS-200 OPI Server, support of mixed PC
Windows and Apple Macintosh workstation environments, and expanded graphic data
formats supported by the OPI Server.
The Company has developed a library of more than 2,000 digitized typefaces,
known as "fonts," which are stored on computer disks and licensed to purchasers
of Autologic typesetters. These fonts are offered in PIP and PostScript
formats, as well as for Autologic's earlier systems. CD-ROM-based
PostScript fonts created by Autologic, using the Company's and other licensed
typefaces, are also made available.
The manufacture of Autologic-built subassemblies and all system assembly is
performed in Autologic's facilities in Thousand Oaks, California. This segment
purchases certain completed subassemblies and manufactures others. Most of the
parts and subassemblies used in the production of this segment's products are
purchased from numerous suppliers and are integrated into Autologic products.
Autologic maintains a worldwide technical support and service organization
which supports and services the full range of Autologic products. Technical
support is headquartered in Thousand Oaks, California, with regional offices
located throughout the United States, in London, England, and in Sydney,
Australia. Wholly-owned subsidiaries operate in Australia, New Zealand, the
United Kingdom, Germany, France, Spain, Sweden and Israel. Local distributors
and agents sell and service Autologic products in the remainder of the
worldwide markets and Autologic has recently expanded its network of
distributors and agents with a view to increasing sales worldwide, especially
in areas of emerging economic growth.
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<PAGE> 8
Autologic's position in its markets depends largely upon its reputation, the
quality, design and pricing of its products, the timeliness of its
deliveries, and its field service. The markets in which the segment competes
are marked by rapidly changing technology and, although Volt continues its
investment 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 present products or new products can
be successfully marketed.
The market for this segment's products is highly competitive and price
competition is intense. A number of firms, some of which are substantially
larger and have substantially greater financial resources than Volt,
manufacture one or more products competing with one or more of the
segment's products. Some of these competitors sell their products as
complete systems, for some of which Autologic has no competing system.
The Company holds several patents and trademarks related to this segment's
products, but does not believe that these patents or trademarks are material
to the segment.
Export sales represented approximately 46% of Autologic's sales in fiscal 1994,
43% in fiscal 1993 and 46% in fiscal 1992. In the past, Autologic has been
adversely affected by general economic recessions in the United States and in
other countries where Autologic products are sold. In addition, a significant
portion of Autologic's business is in the newspaper publishing industry, which
has in the past, experienced significant revenue downturns during recessions.
These downturns resulted in reductions in capital expenditures by that
industry, adversely affecting Autologic's performance.
Telephone Directory
Volt's Telephone Directory segment, utilizing highly specialized proprietary
automated systems which it developed for directory management and production,
together with phototypesetting systems manufactured by Autologic, implements
and maintains the database, produces digitized display advertisements and
photocomposes pages with integrated graphics for yellow and white pages
directories. These services are performed for a number of the regional
telephone operating companies, independent directory publishers and others.
Volt believes that it is a leading independent producer of yellow pages
directories for telephone companies in the United States.
The segment also provides directory management systems and various
photocomposition services to a number of regional telephone and independent
directory publishers, licenses production system software to directory
publishers and provides commercial services, such as composition and data
processing and database management services, to other customers.
The Telephone Directory segment markets these proprietary directory management
and production systems, customized to meet the needs of publishers who desire
to perform their work in-house. The systems are marketed to publishers
incorporating "workflow management" by which ads are automatically routed
between workstations, increasing throughput and control.
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<PAGE> 9
The segment separately markets workstations which are used to facilitate the
creation of telephone directories. These include a graphics workstation
(RAD-GRAF), containing Volt-developed software, that facilitates incorporating
special graphic effects in the presentation of ads for merging text and
graphics on a finished page. Another workstation is the Real-time Incolumn
Display (RID) workstation, on-line electronic galley editors which allow last
minute alterations and insertions of ads and listings, while displaying the
composed results as they will appear on the finished page.
Services are rendered under various short and long-term contracts and are
performed primarily at facilities maintained by Volt in Blue Bell,
Pennsylvania; Indianapolis, Indiana; Anaheim and San Diego, California; and, in
one instance, at the customer's facility.
The segment also produces, publishes and prints white pages and yellow pages
directories, sells yellow pages advertising and performs commercial printing in
Uruguay. In addition, Volt's DataNational division publishes community and
university classified directories in the United States.
Volt's Advanced Technologies, Research & Development division provides the
services of researching and implementing new product lines and adopting new
computer technology for internal office automation and business processing
automation. It also provides consulting services and hardware and systems
technical support for other segments of Volt.
This segment faces intense competition with respect to all of these services
and products from other suppliers and from in-house facilities of potential
customers. Some of its significant competitors are companies which are
larger and have substantially greater financial resources than Volt. This
segment's sales to one customer represented approximately 23% of the total
sales of this segment for the 1994 fiscal year. The loss of this customer,
unless replaced, would have an adverse effect on this segment's business.
Volt's ability to compete in its Telephone Directory segment depends upon its
reputation, technical capabilities, price, quality of service and ability to
meet customer requirements in a timely manner. Volt believes that its
competitive position in this segment's areas of operations is augmented by its
ability to draw upon the expertise and resources of its other segments.
Certain of the services rendered by Volt's Telephone Directory segment require
highly trained technical personnel, and there can be no assurance that the
Company will continue to be able to employ sufficient technical personnel
necessary for the successful conduct of such services. A substantial portion
of Volt's business is obtained through submission of competitive proposals.
While the segment has obtained various short and long-term contracts, margins
under such contracts have decreased in many instances, certain contracts have
expired and there can be no assurance that contracts will be renewed on
satisfactory terms or that additional or replacement contracts will be awarded
to the Company.
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Engineering and Construction
Volt's Voltelcon division furnishes a wide range of telecommunications
services, including engineering, construction, maintenance, installation,
removals and distribution of telecommunications products. Its customers are
telephone operating companies, interexchange carriers, alternative local
transport carriers, telecommunications equipment manufacturers, cable
television and electric power companies, government units and private entities.
It performs these services primarily in the central office and outside plant
and at end user premises. The market in which Voltelcon operates is highly
competitive, often resulting in low margins.
Volt's Advanced Technology Services division was established in 1994 to meet
the critical challenges of the "Information Super Highway" and the evolutionary
merging of voice, data and video services to telephony, broadband and other
providers of information system services, such as telephone companies,
interexchange carriers, government and private industry.
This segment faces intense competition with respect to all of its
telecommunications services from other suppliers and from in-house capabilities
of potential customers. This segment experienced increased sales and realized
a profit in fiscal 1994, as compared to an operating loss in fiscal 1993. Some
of its significant competitors are larger and have substantially greater
financial resources than Volt. Other competitors are small, local companies
with lower overhead. This segment's sales to each of two customers represented
approximately 29% of the total sales of this segment for the 1994 fiscal year.
The loss of either of these customers, unless replaced, might have an adverse
effect on this segment's business.
Volt's ability to compete in this segment depends upon its reputation,
technical capabilities, price, quality of service and ability to meet customer
requirements in a timely manner. Volt believes that its competitive position
in this segment is augmented by its ability to draw upon the expertise and
resources of other Volt segments. A substantial portion of the segment's
business is obtained through submission of competitive proposals. While the
segment has obtained various short-term contracts, margins have decreased in
many instances. There can be no assurance that such contracts will be renewed
on satisfactory terms or that additional or replacement contracts will be
awarded to the Company.
Computer Systems
The Computer Systems segment is comprised of Volt Delta Resources and Volt
Viewtech.
Volt Delta Resources ("Volt Delta") is engaged in the design, programming, sale
and/or lease, and maintenance of computer information systems and services,
primarily for the telecommunications and utility industries. The main office
of this segment is located in New York City and its principal research and
development facility is located in Orange, California. Volt Delta operates as
two business units: Information Systems and Maintech.
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During fiscal 1992, Volt Delta's Information Systems division brought to market
its new generation directory assistance system, marketed as DOSS (Delta
Operator Services System). The new generation system allows telecommunications
customers to interface interactively with voice response units through the
touch tone pad of their telephones and via limited voice recognition
technology. These features provide new revenue sources to the telephone
company from such applications as call completion, customized intercept and
automated directory assistance. Although the basic DOSS system is offered to
customers, typically each customer will require some special features, and in
some instances, extensive customization.
The DOSS system operates on Tandem Computer's NonStop fault tolerant platform,
using Tandem's relational database technology, which allows telecommunications
companies to significantly expand the content of their databases in support of
enhanced information services, while continuing to achieve subsecond response
using Volt Delta's Xm retrieval software. This software employs a
process proprietary to Volt Delta. Although the physical implementation of
this process has been patented by Volt Delta with the United States Patent
Office, Volt Delta's competitors may be able to provide similar services to
customers without infringing on such patent.
In May 1991, Volt Delta entered into a contract with a major United States
telephone company to provide a DOSS system. Delivery and installation at the
customer's premises began during fiscal 1992 and continued during fiscal 1993
and 1994. System acceptance by this telephone company was obtained in the
fourth quarter of fiscal 1994.
During fiscal 1993, a pilot DOSS system was installed at a second
telecommunications customer and is being used commercially. In fiscal 1994, a
follow-up production system was delivered to that customer and is in the
process of final acceptance testing.
During 1993 and 1994, Volt Delta entered into additional contracts for DOSS and
DOSS related functionality with other telecommunications customers, one of
which is based in the United Kingdom, which are in various stages of
implementation.
Volt Delta's service division, Maintech, offers third party maintenance (TPM)
and other services to customers who have purchased computers and peripherals
from others, as well as those who have purchased or leased information systems,
including DOSS, from Volt Delta. Maintech is headquartered in Wallington, New
Jersey and provides TPM services on a national basis. Regional offices and
spare parts inventory facilities are located in Wallington, New Jersey and
Orange, California, with district service centers located throughout the
country and, in some instances, at customers' facilities.
Volt's Viewtech subsidiary provides energy and water conservation systems and
services, including custom information systems. In recent years, Viewtech has
expanded its traditional electric and gas utility markets to include water
utilities and has made substantial upgrades to Viewtech's information system
and energy audit software. Viewtech is headquartered in Orange, California,
and operates through four regional offices, located in Boston, Massachusetts;
Little Rock, Arkansas; Southfield, Michigan; and San Francisco, California,
with project offices located throughout the country.
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In order to fulfill its commitments under its contracts, Volt Delta is required
to develop advanced computer software programs and purchase substantial amounts
of computer and related equipment manufactured by unaffiliated corporations.
Much of the equipment required for these contracts is purchased as needed.
Except for Tandem's computer equipment, equipment used by Volt Delta is readily
available from a number of suppliers.
This segment's sales to its two largest customers in fiscal 1994, under a
number of different contracts, represented approximately 64% (which includes
one-time revenues described in Note L of Notes to Consolidated Financial
Statements) and 10%, respectively, of the segment's total revenues. Inability
to sell additional major systems would have an adverse effect on this segment's
business.
The business environment in which this segment operates is highly competitive.
Some of this segment's principal competitors are considerably larger than Volt
and have substantially greater financial resources. This segment's position
in its market depends largely upon its reputation, quality of services and
ability to develop, maintain, and implement information systems on a cost
competitive basis.
These services require highly trained technical personnel, certain
classifications of which are currently in short supply. There can be no
assurance that this segment will be able to obtain additional contracts or
additional orders under existing contracts, or that it will continue to be
able to employ sufficient personnel necessary for the successful conduct of
its business.
Joint Ventures
A subsidiary of the Company is a shareholder in Pacific Access Pty. Ltd.
("Pacific Access"), an international joint venture company 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., the Australian
Government-owned telephone company, under the terms of a twelve-year contract.
Telstra Corporation Ltd. owns fifty percent of the voting common stock of
Pacific Access, while subsidiaries of Volt, Southwestern Bell, Bell Canada and
Edward H. O'Brien Industries each hold twelve and one-half percent.
In July 1994, the Company acquired an interest, consisting of 50% of the common
shares and 75% of the redeemable preferred shares and debt, in Telelistas
Editora Ltda., a Brazilian company which has a long-term contract to publish
the official White Pages, Yellow Pages and Street Guides for the City of Rio de
Janeiro on behalf of TELERJ, the government-owned telephone company. Effective
February 28, 1994, the Company sold its 50% interest in Pacific Volt
Information Systems, a joint venture, for approximately $16,400,000, to its
joint venture partner. The sale resulted in a gain of $9,770,000 ($5,760,000,
net of income taxes, or $1.20 per share). Therefore, results of operations for
the fiscal year 1994 includes only four months of income attributable to this
joint venture.
For further information concerning the Company's operations and joint ventures,
see "Management's Discussion and Analysis of Financial Condition and
Results of Operations".
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<PAGE> 13
Research and Development
During the Company's 1994, 1993, and 1992 fiscal years, the Company expended
approximately $6,262,000, $5,830,000, and $5,694,000, respectively, on research
and development, all of which is Company sponsored. The major portion of
research and development expenditures are incurred in the Electronic
Publication and Typesetting Systems segment, the Telephone Directory segment
and the Computer Systems segment.
Customers
One customer represented more than 10% of the revenues for the year ended
October 28, 1994. The customer accepted a major directory assistance system
from the Computer Systems segment and used various services and products which,
under the completed-contract method of accounting, represented 11% of the
Company's consolidated revenues in fiscal 1994 (including one-time revenues
described in Note L of Notes to Consolidated Financial Statements).
Seasonality
Historically, the Company's results of operations have been lower in the first
fiscal quarter as a result of reduced requirements for its technical and
temporary personnel due to the holiday season. In addition, Pacific Access
(see "Joint Ventures" above) produces a major portion of its revenues and
significantly all of its profits in the Company's second and third fiscal
quarters. The Uruguayan telephone directory operation produces a major portion
of its revenues and most of its profits in the Company's fourth fiscal quarter,
and the DataNational telephone directory operation is adversely affected in the
Company's first fiscal quarter due to the seasonality of its directory closing
schedule.
Employees
During the week ended October 28, 1994, Volt employed approximately 23,000
persons, including approximately 19,000 persons who were on temporary
assignment for the Technical Services and Temporary Personnel segment. Volt is
a party to two collective bargaining agreements which cover a small number of
employees. Volt believes that it has satisfactory relations with its
employees.
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<PAGE> 14
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
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. The following discussion
should be read in conjunction with the Industry Segment Data in Item 1 of this
Report, the Selected Financial Data in Item 6 of this Report and the
Consolidated Financial Statements and Notes thereto in Item 8 of this Report.
Results of Operations - Summary
Revenues in fiscal 1994 increased by $169,313,000, or 30%, from fiscal 1993 as
sales increased by $162,763,000, or 29%. The increase in sales resulted
primarily from additional revenues of $59,000,000 from the completion and
recognition of a long-term contract in the Computer Systems segment and a
$92,905,000 increase in sales in the Technical Services and Temporary Personnel
segment. Revenues in fiscal 1993 increased by $34,606,000, or 7%, from fiscal
1992 as sales increased by $37,422,000, or 7%, partially offset by lower joint
venture and other income.
In fiscal 1994, the Company had income of $19,827,000 from operations before
income taxes and extraordinary items, compared to a loss of $5,594,000 from
operations before income taxes and a cumulative effect of a change in
accounting in fiscal 1993, and income from operations before income taxes of
$1,775,000 in fiscal 1992. The 1994 results include a $9,770,000 pretax gain
on the sale of a joint venture. The principal increases in the segment income
in 1994 were from Technical Services and Temporary Personnel, with an increase
of $8,977,000, and Computer Systems, where losses were reduced by $6,381,000.
The major reason for the loss in the Computer Systems segment in fiscal 1993
was the $6,400,000 pretax charge for non recoverable costs under two large
contracts.
The extraordinary item in fiscal 1994 was a loss of $271,000 due to the early
redemption at par of $30,000,000 face value of the Company's 12-3/8%
Subordinated Debentures.
The cumulative effect of a change in accounting of $959,000 in fiscal 1993 was
due to the Company adopting Statement of Financial Accounting Standards No.
109, "Accounting for Income Taxes".
Net income in fiscal 1994 was $11,773,000, compared to a net loss in fiscal
1993 of $2,715,000 and net income of $1,091,000 in fiscal 1992.
Results of Operations - By Segment
The Company's consolidated operating profit was $22,982,000 in fiscal 1994,
compared to $7,566,000 in fiscal 1993 and $12,365,000 in fiscal 1992. (See
Industry Segment Data in Item 1 of this Report and Note J of Notes to
Consolidated Financial Statements in Item 8 of this Report).
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<PAGE> 15
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS--Continued
The Technical Services and Temporary Personnel segment's sales increased by
$92,905,000, or 27%, in fiscal 1994 to $434,510,000 and by $20,218,000, or 6%,
in fiscal 1993 to $341,605,000. Operating profit of the segment increased by
$8,977,000, or 122%, to $16,337,000 in fiscal 1994 and by $1,405,000, or 24%,
to $7,360,000 in fiscal 1993. Approximately $60,000,000 of the segment's sales
increase in 1994 was the result of business with new customers, with
pre-existing customers accounting for the balance of the increase. The
increase in sales in 1993 was primarily the result of placements with new
customers. The operating profit increase in fiscal 1994 was due to the
increased sales volume, along with slightly improved gross margins and a 9/10
of 1 percentage point reduction in the percentage of overhead expended per
sales dollar. In fiscal 1993, the operating profit increase was due to the
increased sales volume with improved gross margins, partially offset by the
effect of a reversal, in fiscal 1992, of prior years' business tax expenses of
$1,070,000.
The Electronic Publication and Typesetting Systems segment's sales increased by
$5,983,000, or 10%, to $65,323,000 in fiscal 1994 and increased by $1,854,000,
or 3%, to $59,340,000 in fiscal 1993. The sales increases in fiscal 1994 and
1993 were primarily due to increased equipment sales in domestic and overseas
markets (primarily, in 1994, in the Australian and Latin American markets).
Despite the increase in sales, operating profits decreased by $706,000, or 35%,
in fiscal 1994 to $1,334,000. The decrease was primarily due to a change in
the product mix (a decrease in sales of some high margin products and an
increase in sales of some low margin items which are in direct competition with
other manufacturers) resulting in a reduction of 4 percentage points of gross
margin. The decrease in gross margin was partially offset by an improvement of
approximately 3 percentage points in overhead expended per sales dollar. The
segment's operating profits increased by $986,000, or 94%, in fiscal 1993 to
$2,040,000. The 1993 operating profit increase was due to the increased sales
and a reduction in the percentage of overhead expended, partially offset by a
slight decline in gross margins. The markets in which the segment competes are
marked by rapidly changing technology, with sales in fiscal years 1994, 1993
and 1992 of equipment introduced within three years of each of the fiscal years
comprising 84%, 65% and 66%, respectively, of equipment sales.
The Telephone Directory segment's sales decreased by $4,789,000, or 6%, to
$74,155,000 in fiscal 1994 and increased by $7,949,000, or 11%, to $78,944,000
in fiscal 1993. In fiscal 1994, the segment's operating profit decreased by
$1,458,000, or 18%, to $6,695,000. In fiscal 1993, the segment's operating
profit increased by $1,609,000, or 25%, to $8,153,000. The 1994 sales decline
is primarily due to the absence in 1994 of revenue from the sale of two
automated directory systems which occurred in 1993, and were not replaced by
similar sales in fiscal 1994, partially offset by a 20% increase in
publication sales of independent directories. The 1993 sales increase was
primarily due to increases in the Uruguayan publication operation and the sales
of the two automated directory management systems, while telephone directory
production revenue declined by 3% due to the expiration in 1993 of certain
contracts. The operating profit decline in 1994 was due to the absence of high
margin automated directory system shipments made in 1993. Operating
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<PAGE> 16
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS--Continued
profit increased in fiscal 1993 due to the increased sales volume, sales of
certain high margin automated directory system shipments and overhead cost
reductions. This segment's services are rendered under various short and
long-term contracts. A contract with a customer that generated $9 million in
revenue in fiscal 1994 expires in early fiscal 1995 and will not be renewed.
Other contracts expire in fiscal 1995 through 1997, and there can be no
assurance that they will be renewed or replaced on similar terms.
The Engineering and Construction segment's sales increased by $5,203,000, or
11%, to $52,676,000 in fiscal 1994 and by $11,165,000, or 31%, to $47,473,000
in fiscal 1993. In fiscal 1994, this segment had a profit of $792,000,
compared to a loss of $1,128,000 in 1993 and a loss of $2,885,000 in 1992. The
1994 sales increase was due to a 75% increase in advanced technology services
and installation services partially offset by a 4% decline in engineering
revenue. The fiscal 1993 sales increase was due to increased construction and
installation services offset by declines in engineering revenue. Operating
results improved in fiscal 1994 and 1993 due to increased sales volume and
improved gross margins.
The Computer Systems segment's sales increased by $61,554,000, or 164%, to
$99,135,000 in fiscal 1994 and decreased by $1,243,000, or 3%, to $37,581,000
in fiscal 1993. The segment's operating loss narrowed in 1994 by $6,381,000,
or 75%, to $2,168,000 from $8,549,000 in 1993. The 1994 sales increase was due
to customer acceptance which enabled the Company to recognize revenues of
$64,500,000 on two major Delta Operator Service Systems (DOSS) and increased
maintenance revenue. Operating profit improved in 1994, primarily due to the
absence in 1994 of a $6,400,000 charge taken in 1993 for estimated costs in
excess of anticipated revenues under one of these contracts and another
contract. Under the completed contract method of accounting, revenues together
with related costs equivalent to such revenues are recognized in income in the
year of acceptance by the customer. In fiscal 1994, the Company received
customer acceptance under one of such contracts, which, because of the pretax
charge in the previous year, had no effect on the Company earnings for 1994,
although revenue (and costs) of $59,000,000 were recognized in 1994. While
sales from this contract are not recurring, as noted below, the Company has
received other contracts. Other factors in the improved profitability of the
segment in fiscal 1994 were the acceptance of a third contract and the
increased maintenance revenues. During fiscal 1993, a pilot DOSS system was
installed at another telecommunications customer and is now being used
commercially by the customer. In fiscal 1994, a follow-up production system
was delivered to that customer and is in the process of final acceptance
testing. In fiscal years 1993 and 1994, the segment was awarded several
additional contracts, two of which necessitated the opening of a new branch
facility. Deliveries and installations under such contracts, which require
significant customization, continue and customer acceptances are anticipated in
fiscal years 1995 and 1996. Since sales under DOSS contracts are generally
reported upon customer acceptance, acceptance in a particular year may affect
the comparability of results with other years.
Results of Operations - Other
Other items, discussed on a consolidated basis, affecting results of operations
were:
Interest income decreased by $45,000, or 3%, in fiscal 1994 and by $171,000, or
11%, in fiscal 1993. The decrease in both years was primarily due to reduced
funds available for investments in interest-bearing securities, (see "Liquidity
and Capital Resources", below) and in 1993, lower prevailing interest rates.
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<PAGE> 17
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS--Continued
The Company's equity in the income of its joint ventures was $3,055,000 in
1994, a decrease of $1,885,000, or 38%, and $4,940,000 in 1993, a decrease of
$1,867,000, or 27%. In February 1994, the Company sold for $16,400,000 its 50%
interest in Pacific Volt Information Systems, a joint venture, which composed
telephone directories in California under a contract that was due to expire in
1996. The sale resulted in a pretax gain of $9,770,000. The results for the
twelve months include only four months of income attributable to this joint
venture, or $661,000, compared to $2,327,000 in 1993 and $3,824,000 in 1992.
Profits of the joint venture were down 39% in 1993 due to reduced sales. The
Company's share of the income of its Australian joint ventures declined in 1994
by 1%, and in 1993 by 12%, primarily due to an arrangement which ended in 1993
in which the Company's share of the joint venture's income exceeded its 12-1/2%
ownership. The Australian venture produces a major portion of its revenues and
significantly all of its profits in the Company's second and third fiscal
quarters.
Selling and administrative expenses increased by $2,967,000, or 7%, to
$43,075,000 in 1994 and by $1,181,000, or 3%, to $40,108,000 in 1993 to support
the 29% and 7% increases in sales in the two years. These expenses expressed as
a percentage of sales were 6.0%, 7.2% and 7.5% for fiscal years 1994, 1993 and
1992, respectively.
Research and development expenditures increased $432,000, or 7%, in 1994 and
$136,000, or 2%, in 1993. The 1994 increase was comprised of a $1,545,000
increase in the Computer Systems segment, partially offset by decreases in the
Telephone Directory and Electronic Publication and Typesetting Systems segments
of $696,000 and $417,000, respectively. The 1993 increase was attributable to
the Telephone Directory segment.
Depreciation and amortization increased by $554,000, or 5%, to $10,745,000 in
1994 and decreased by $932,000, or 8%, to $10,191,000 in 1993. The 1994
increase is due to increased fixed asset expenditures in 1993 and 1994, while
the 1993 decrease is due to reduced fixed asset expenditures in earlier years.
Foreign exchange losses in fiscal year 1994 were lower than in 1993 due to
increased stability of European currency markets in 1994. The gain in fiscal
year 1992 was primarily attributable to bank debt denominated in Uruguayan
currency which was highly volatile.
Interest expense decreased by $3,610,000, or 33%, to $7,468,000 in 1994 and by
$491,000, or 4%, to $11,078,000 in 1993. The decreases in 1994 and 1993 were
due to reductions in the interest rate on a mortgage loan and to the repurchase
of a portion of the Company's 12-3/8% Subordinated Debentures. The Company has
established additional financing at lower costs through the sale of accounts
receivable, proceeds from which were used to call and redeem $20,000,000 of
debentures in November 1993. An additional $10,000,000 of debentures were
redeemed in May 1994 using the proceeds from the sale of a 50%-owned joint
venture. In fiscal 1994 and 1993, other income was reduced by charges of
$1,557,000 and $849,000 respectively, for costs incurred in conjunction with
the sale of accounts receivable. These costs partially offset the savings in
interest expense (see Note C of Notes to Consolidated Financial Statements).
See Note F of Notes to Consolidated Financial Statements for information
concerning the Company's effective tax rates for fiscal 1992 through fiscal
1994.
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<PAGE> 18
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS--Continued
The cumulative effect of a change in accounting for income taxes of $959,000 in
fiscal 1993 relates to the adoption by the Company of Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes", in the first
quarter of 1993. Due to the uncertainty as to their future utilization, tax
benefits have not been recognized for certain loss and credit carryforwards by
establishing a valuation allowance which will be periodically evaluated.
Liquidity and Capital Resources
Cash and cash equivalents decreased by $24,032,000 in fiscal year 1994 to
$17,049,000 and working capital increased by $750,000 in fiscal 1994 to
$61,839,000 at October 28, 1994.
Cash flows from operating activities contributed $14,513,000 to cash flows.
Many factors, reflected in the accompanying Consolidated Statements of Cash
Flows, affected the amount of cash flows from operating activities. Primary
among the factors providing cash flows to operating activities in fiscal 1994
were the Company's net income of $11,773,000, a non-cash expense of $10,745,000
for depreciation and amortization, and increases in accrued expenses of
$11,164,000 and customer advances of $4,928,000 due to the increased level of
activities, with the balance being contributed by several items. Among the
principal uses of cash in operating activities in fiscal 1994 were an increase
in the level of accounts receivable of $27,226,000 due to the increased level
of activity and a gain of $9,770,000 on the sale of a joint venture (the
proceeds relating to which are included in investing activities).
The principal factors in the application of $1,228,000 to investment activities
were the purchase of property, plant and equipment for $14,916,000 and
investment in joint ventures for $2,517,000, offset, in part, by the proceeds
of $16,382,000 received from the sale of a joint venture.
Cash of $36,348,000 was applied to financing activities. In November 1993, the
Company redeemed $20,000,000 of its 12-3/8% Subordinated Debentures and, in May
1994, redeemed an additional $10,000,000 of the debentures which, together with
previously redeemed and repurchased Debentures, has satisfied all future
sinking fund requirements until the debentures mature in 1998. In addition,
the Company repaid a $15,400,000 mortgage loan which was due in December 1994,
refinancing that mortgage with a $10,000,000 five-year loan which is secured by
a deed of trust on land and buildings.
The Company believes that its current financial position, working capital and
future cash flows will be sufficient to fund its presently contemplated
operations and satisfy its debt obligations. The Company has no material
capital commitments. The Company may determine, from time-to-time in the
future, to buy additional shares of its common stock and/or debentures in the
market or in privately negotiated transactions. In addition to its cash and
cash equivalents, at October 28, 1994, the Company's investment portfolio
included investments at a carrying value of $8,095,000. The Company also has a
$7,000,000 credit line with a domestic bank under a revolving credit agreement
which expires in November 1995, unless renewed. The Company has outstanding
bank borrowings under that line of $4,925,000 at October 28, 1994.
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<PAGE> 19
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Amendment to be signed on its behalf by the
undersigned, thereunto duly authorized.
VOLT INFORMATION SCIENCES, INC.
Dated: New York, New York
April 28, 1995 /s/ Jack Egan
------------------------------------
Jack Egan
Vice President, Corporate Accounting
(Principal Accounting Officer)
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