<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 Six Months Ended May 3, 1996
Or
/ / Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the transition period from ________________ to ________________
Commission File No. 1-9232
VOLT INFORMATION SCIENCES, INC.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
New York 13-5658129
- -------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1221 Avenue of the Americas, New York, New York 10020
- ------------------------------------------------- -------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (212) 704-2400
Not Applicable
----------------------------------
(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months, and (2) has been subject to such filing requirements
for the past 90 days.
Yes X No
--- ---
The number of shares of Common Stock, $.10 par value, outstanding as of June 7,
1996 was 9,687,543.
<PAGE> 2
VOLT INFORMATION SCIENCES, INC. AND SUBSIDIARIES
FORM 10-Q
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Statements of Income
Six Months and Three Months Ended
May 3, 1996 and April 28, 1995 3
Condensed Consolidated Balance Sheets
May 3, 1996 and November 3, 1995 4
Condensed Consolidated Statements of Cash Flows
Six Months Ended May 3, 1996 and April 28, 1995 5
Notes to Condensed Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Six Months and Three Months Ended May 3, 1996 Compared
to the Six Months and Three Months Ended April 28, 1995 16
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 26
SIGNATURE 27
-2-
<PAGE> 3
PART I - FINANCIAL INFORMATION
ITEM 1--FINANCIAL STATEMENTS
VOLT INFORMATION SCIENCES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended Three Months Ended
---------------- -------------------
May 3, April 28, May 3, April 28,
1996 1995 1996 1995
--------- --------- -------- ----------
(Dollars in thousands)
<S> <C> <C> <C> <C>
REVENUES:
Sales of services $ 434,950 $ 342,539 $ 226,473 $ 175,021
Sales of products 42,176 31,353 25,840 15,575
Equity in net income (loss)
of joint ventures--Note F (1,783) (1,353) 174 95
Gain on sale of interest in subsidiaries--
Note I 3,666
Interest income 1,182 953 577 473
Other income (expense) - net--Note B (716) (242) (199) 26
---------- ---------- ---------- ----------
479,475 373,250 252,865 191,190
---------- ---------- ---------- ----------
COSTS AND EXPENSES:
Cost of sales
Services--Note J 398,640 314,159 206,045 161,854
Products 28,523 20,397 16,052 9,992
Selling and administrative 25,097 20,134 13,510 10,383
Research, development & engineering 5,657 3,876 3,715 2,072
Depreciation and amortization 6,765 5,765 3,577 2,969
Foreign exchange (gain) loss - net 277 (11) 137 48
Interest expense 2,360 3,422 1,205 1,736
---------- ---------- ---------- ----------
467,319 367,742 244,241 189,054
---------- ---------- ---------- ----------
Income before income tax provision and
minority interests 12,156 5,508 8,624 2,136
Income tax provision--Note H 4,930 2,055 3,596 706
Minority interests in operations of
consolidated subsidiaries--Note I (28) (97)
---------- ---------- ---------- ----------
Net income $ 7,198 $ 3,453 $ 4,931 $ 1,430
========== ========== ========== ==========
(Per Share Data)
Net income $ .74 $ .36 $ .51 $ .15
========== ========== ========== ==========
Number of shares used in computation
-- Note G 9,680,673 9,620,364 9,687,543 9,632,322
========== ========== ========== ==========
</TABLE>
See accompanying notes.
-3-
<PAGE> 4
VOLT INFORMATION SCIENCES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
<TABLE>
<CAPTION>
May 3, November 3,
1996 1995 (a)
-------- --------
(Dollars in thousands)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 23,444 $ 25,350
Short-term investments 2,353 1,047
Trade accounts receivable less allowances of
$5,102 (1996) and $3,943 (1995)--Note B 105,484 111,696
Inventories--Note C 29,385 28,207
Deferred income taxes 10,682 8,711
Prepaid expenses and other assets 6,495 7,204
-------- --------
TOTAL CURRENT ASSETS 177,843 182,215
INVESTMENTS IN SECURITIES 2,287 4,136
INVESTMENTS IN AND ADVANCES TO
JOINT VENTURES--Note F 18,221 13,903
PROPERTY, PLANT AND EQUIPMENT--
at cost--Note D
Land and buildings 33,661 33,591
Machinery and equipment 59,920 51,233
Leasehold improvements 2,603 2,818
-------- --------
96,184 87,642
Less allowances for depreciation
and amortization 34,529 32,057
-------- --------
61,655 55,585
DEPOSITS, RECEIVABLES AND OTHER
ASSETS 1,055 2,764
INTANGIBLE ASSETS--net of accumulated
amortization of $5,206 (1996) and $4,181
(1995) 15,654 5,408
-------- --------
$276,715 $264,011
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Notes payable to banks $ 5,658 $ 5,154
Current portion of long-term debt--Note D 3,049 2,000
Accounts payable 23,441 30,786
Accrued expenses
Wages and commissions 24,455 23,403
Taxes other than income taxes 11,382 10,059
Insurance 13,263 18,893
Other 9,420 6,686
Customer advances and other liabilities 17,569 15,250
Income taxes 985 12,401
-------- --------
TOTAL CURRENT LIABILITIES 109,222 124,632
LONG-TERM DEBT--Note D 30,369 28,819
DEFERRED INCOME TAXES 994 3,433
-------- --------
140,585 156,884
MINORITY INTERESTS--Note I 21,120
STOCKHOLDERS' EQUITY--Notes
D, E, F, and G
Preferred stock, par value $1.00
Authorized--500,000 shares;
issued--none
Common stock, par value $.10
Authorized--15,000,000 shares;
issued - 9,687,543 shares (1996)
and 9,664,794 shares (1995) 969 966
Paid-in capital 27,666 27,098
Retained earnings 86,355 79,157
Cumulative foreign currency
translation adjustment (1) (168)
Unrealized gain on
marketable securities 21 74
--------- ---------
115,010 107,127
--------- ---------
$ 276,715 $ 264,011
========= =========
</TABLE>
(a) The Balance Sheet at November 3, 1995 has been derived from the audited
financial statements at that date.
See accompanying notes.
-4-
<PAGE> 5
VOLT INFORMATION SCIENCES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended
----------------------
May 3, April 28,
1996 1995
-------- --------
(Dollars in thousands)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 7,198 $ 3,453
Adjustments to reconcile net income to cash
provided by operating activities:
Depreciation and amortization 6,765 5,765
Equity in net loss of joint ventures 1,783 1,353
Gain on sale of interest in subsidiaries (3,666)
Accounts receivable provisions 1,325 965
Minority interests 28
Amortization of deferred debenture costs,
debt discounts and other deferred charges 949 427
(Gains) losses on foreign currency translation (503) 174
Gains on dispositions of fixed assets (131) (7)
Deferred income tax provision 1,513 2,074
Gains on sales of securities (7)
Other 31
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable 9,008 (10,855)
Decrease in inventories 1,402 1,812
Increase in recoverable income taxes (135)
Increase in prepaid expenses
and other current assets (851) (1,030)
(Increase) decrease in deposits, receivables
and other assets 1,646 (1,125)
Decrease in accounts payable (5,488) (4,407)
Increase (decrease) in accrued expenses (5,380) 3,962
Increase in customer advances and
other liabilities 1,474 3,702
Decrease in income tax liability (11,607) (294)
-------- --------
NET CASH PROVIDED BY OPERATING
ACTIVITIES 5,465 5,858
-------- --------
</TABLE>
-5-
<PAGE> 6
VOLT INFORMATION SCIENCES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)--Continued
<TABLE>
<CAPTION>
Six Months Ended
----------------------
May 3, April 28,
1996 1995
-------- -------
(Dollars in thousands)
<S> <C> <C>
CASH FLOWS FROM INVESTING ACTIVITIES
Maturities of investments 2,108 8,000
Purchases of investments (2,122) (5,811)
Investments in and advances to joint ventures (5,838) (2,824)
Cash of acquired subsidiaries, less
transaction costs 8,421
Proceeds from disposals of property,
plant and equipment 49 370
Purchases of property, plant and equipment (10,316) (7,016)
Other (1,006) (1,125)
-------- -------
NET CASH APPLIED TO INVESTING
ACTIVITIES (8,704) (8,406)
-------- -------
CASH FLOWS FROM FINANCING ACTIVITIES
Payment of long-term debt (1,000) (1,000)
Exercise of stock options 71 143
Increase in minority interest 154
Increase in notes payable to banks 920 88
-------- -------
NET CASH PROVIDED BY (APPLIED TO)
FINANCING ACTIVITIES 145 (769)
-------- -------
Effect of exchange rate changes on cash 1,188 (226)
-------- -------
NET DECREASE IN CASH
AND CASH EQUIVALENTS (1,906) (3,543)
Cash and cash equivalents, beginning of period 25,350 17,049
-------- -------
CASH AND CASH EQUIVALENTS,
END OF PERIOD $ 23,444 $13,506
======== =======
SUPPLEMENTAL INFORMATION Cash paid during the period:
Interest expense $ 2,354 $ 3,315
Income taxes $ 15,312 $ 350
</TABLE>
See accompanying notes.
-6-
<PAGE> 7
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Note A--Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with the instructions for Form 10-Q and Article 10 of
Regulation S-X and, therefore, do not include all information and footnotes
necessary for a fair presentation of financial position, results of operations
and cash flows in conformity with generally accepted accounting principles. In
the opinion of management, the accompanying unaudited condensed consolidated
financial statements contain all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation of the Company's
financial position at May 3, 1996 and results of operations for the six and
three months ended May 3, 1996 and April 28, 1995 and cash flows for the six
months ended May 3, 1996 and April 28, 1995. Operating results for the six and
three months ended May 3, 1996 are not necessarily indicative of the results
that may be expected for the fiscal year ending November 1, 1996.
These statements should be read in conjunction with the financial statements and
footnotes included in the Company's Annual Report on Form 10-K for the year
ended November 3, 1995. The accounting policies used in preparing these
financial statements are the same as those described in the Company's Annual
Report.
The Company's fiscal year ends on the Friday nearest October 31.
Note B--Accounts Receivable
In October 1993, the Company entered into a three-year agreement to sell, on a
limited recourse basis, up to $25,000,000 of undivided interests in a designated
pool of certain eligible accounts receivable. In March 1995, the limit was
increased to $45,000,000 and the agreement was extended to March 1998. As
collections reduce previously sold undivided interests, new receivables may be
sold up to the $45,000,000 level. At May 3, 1996, and November 3, 1995,
$30,000,000 of interests in accounts receivable had been sold under this
agreement. The sold accounts receivable are reflected as a reduction of
receivables in the accompanying balance sheets. The Company pays fees based
primarily on the purchaser's borrowing costs incurred on short-term commercial
paper which financed the purchase of receivables. Other income (expense) in the
accompanying 1996 and 1995 statements of income includes fees related to the
agreement of $1,058,00 and $690,000 in the six months ended, and $517,000 and
$378,000 in the three months ended, May 3, 1996 and April 28, 1995,
respectively.
The purchaser may terminate the agreement on a minimum of six months' notice. In
addition, the agreement may be terminated if the Company does not maintain a
stated minimum tangible net worth, as defined, or exceeds a maximum ratio of
debt to tangible net worth.
-7-
<PAGE> 8
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)--Continued
Note C--Inventories
Inventories consist of:
<TABLE>
<CAPTION>
May 3, November 3,
1996 1995
------- -------
(Dollars in thousands)
<S> <C> <C>
Services:
Accumulated unbilled costs on:
Service contracts $16,014 $15,909
Long-term contracts 2,315 2,980
------- -------
18,329 18,889
------- -------
Products:
Materials and work-in-process 6,656 4,818
Service parts 1,897 1,124
Finished goods 2,503 3,376
------- -------
11,056 9,318
------- -------
Total $29,385 $28,207
======= =======
</TABLE>
The cumulative amounts billed, principally under long-term contracts, of
$2,858,000 at May 3, 1996 and $3,469,000 at November 3, 1995 are credited
against the related costs in inventory. Substantially all of the amounts billed
have been collected.
-8-
<PAGE> 9
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)--Continued
Note D--Long-Term Debt
Long-term debt consists of the following:
<TABLE>
<CAPTION>
May 3, November 3,
1996 1995
------- -------
(Dollars in thousands)
<S> <C> <C>
12-3/8% Senior Subordinated Debentures, due
July 1, 1998--net of unamortized discount of
$30,000 - 1996 and $36,000 - 1995(a) $22,825 $22,819
Term loan(b) 7,000 8,000
Notes payable(c)(d) 3,593
------- -------
33,418 30,819
Less amounts due within one year 3,049 2,000
------- -------
Total long-term debt $30,369 $28,819
======= =======
</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. The debentures are subordinated to all existing
and future senior indebtedness (as defined) of the Company. At May 3, 1996, the
amount available for dividends, pursuant to the terms of the indenture under
which the debentures are issued, was $36,058,000 and, if no dividend payments
are made, the amount available for capital stock repurchases was $46,058,000.
However, under the terms of the term loan agreement, at such date, only
$34,125,000 was available for such payments (see (b) below).
(b) In October 1994, the Company entered into a $10,000,000 five-year loan
agreement with National Westminster Bank, which is secured by a deed of trust on
land and buildings (book value at May 3, 1996 - $15,156,000). The term loan
bears interest at 7.86% per annum and is repayable in twenty quarterly principal
installments of $500,000, together with interest. In October 1996, if certain
conditions are met, the loan may be extended for two years with a subsequent
reduction of principal payments to $225,000 per quarter and a final payment of
$1,725,000 due October, 2001. The agreement contains various financial
covenants, the most restrictive of which requires the Company to maintain a
tangible net worth of $86,000,000.
(c) Includes two notes payable (which bear interest at 90 day commercial paper
rates), each for $550,000, due on January 2, 1997 and January 2, 1998,
respectively.
(d) An unsecured loan of $2,493,000 from Chemical Bank was made to a foreign
subsidiary on January 18, 1996 to finance a printing press. The five-year loan,
guaranteed by the Company, is to be repaid in ten semi-annual payments including
interest calculated at LIBOR (5.53% at May 3, 1996) plus .25% beginning
September 15, 1996.
-9-
<PAGE> 10
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)--Continued
Note E--Stockholders' Equity
Changes in the major components of stockholders' equity for the six months ended
May 3, 1996 are as follows:
<TABLE>
<CAPTION>
Common Paid-In Retained
Stock Capital Earnings
------ ------- -------
(Dollars in thousands)
<S> <C> <C> <C>
Balance at November 3, 1995 $ 966 $27,098 $79,157
Net income for the six months 7,198
Issuance of 18,349 shares to ESOP 2 498
Stock options exercised - 4,400 shares 1 70
------ ------- -------
Balance at May 3, 1996 $ 969 $27,666 $86,355
====== ======= =======
</TABLE>
The other components of stockholders' equity are the unrealized gain on
marketable securities and the cumulative foreign currency translation adjustment
due to the Company's investment in its Australian joint venture, whose
functional currency is the Australian dollar.
On April 22, 1996, the Company granted stock options to acquire 500,000 shares
of the Company's common stock to key employees at $27-1/8 per share, the average
of the high and low prices on such date. The options were granted under the
non-qualified stock option plan adopted in May 1995.
Note F--Summarized Financial Information of Joint Ventures
The Company owns 12-1/2% of the voting stock of Pacific Access Pty. Ltd.
("Pacific Access"), an international joint venture in Australia. This venture,
which commenced operations in July 1991, assumed responsibility throughout
Australia for the marketing, sales and compilation functions of all yellow pages
directories of Telstra Corporation Ltd., ("Telstra"), the Australian
government-owned telephone company, under the terms of a twelve-year contract.
The venture produces a major portion of its revenues and significantly all of
its profits in the Company's second and third fiscal quarters. Telstra owns 50%
of the voting stock of Pacific Access. In the event of a change in control of
the Company, as defined, the Company may be required to sell its shares in the
venture to Telstra at a formula price based on various factors, including
earnings.
In July 1994, the Company entered into a long-term joint venture agreement to
publish the official White Pages, Yellow Pages and Street Guides for Rio de
Janeiro. As of May 3, 1996, the Company has made an aggregate of $13,407,000 of
investments in and loans and advances to Telelistas Editora Ltda., a Brazilian
company which has a contract to publish Rio's telephone directories on behalf of
TELERJ, the government-owned telephone company. Such investment resulted in the
acquisition of a 50% interest in the common shares together with 75% of the
issued preferred stock. The agreement, as amended
-10-
<PAGE> 11
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)--Continued
Note F--Summarized Financial Information of Joint Ventures--(Continued)
requires the Company to provide technology, expertise and key personnel in
directory production, sales and marketing. It is likely that additional advances
will be made by the Company to the joint venture. Such advances will be repaid
before any other distributions of the net assets of the venture. As a result of
the funding requirements, during the start-up period, the Company is recognizing
75% of the losses incurred by the venture. At such time as the venture becomes
profitable, the Company will recognize 75% of the venture's net income until
start-up losses are recovered and 50% of any profits subsequent thereto.
Consolidated retained earnings at May 3, 1996 includes $5,214,000, representing
the undistributed earnings of Pacific Access. Income taxes have been paid or
provided on such earnings.
The following summarizes the financial information of the joint ventures:
<TABLE>
<CAPTION>
May 3, 1996 November 3, 1995
---------------------- -----------------------
(Dollars in thousands)
Company's
Advances Company's
Total and Equity Total Equity
--------- ---------- --------- ---------
<S> <C> <C> <C> <C>
Current assets $ 208,114 $ 270,495
Noncurrent assets 17,181 17,207
Current liabilities (158,136) (227,749)
Due to Volt (3,848) $ 3,848
Noncurrent liabilities (241) (259)
--------- ---------
Equity of combined joint ventures $ 63,070 $ 59,694
========= =========
Equity of Australian joint venture(a) $ 59,325 10,944 $ 55,733 $10,436
Equity of Brazilian joint venture 3,745 3,429 3,961 3,467
--------- ------- --------- -------
$ 63,070 $ 59,694
========= =========
Investments in and advances to
joint ventures $18,221 $13,903
======= =======
</TABLE>
(a) Pursuant to the Australian venture agreement, the initial capital
contributions of all venturers, other than Telstra, exceeded their proportionate
share of ownership interest in the corporate joint venture. The agreement
provides that, upon liquidation of the venture, the venturers will be entitled
to recover such excess contributions from the net assets of the venture.
-11-
<PAGE> 12
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)--Continued
Note F--Summarized Financial Information of Joint Ventures--(Continued)
<TABLE>
<CAPTION>
Six Months Ended
-------------------------------------------------
May 3, 1996 April 28 1995
---------------------- ---------------------
(Dollars in thousands)
Company's Company's
Total Equity Total Equity
-------- --------- -------- ---------
<S> <C> <C> <C> <C>
Revenues $221,695 $215,736
Costs and expenses 220,864 210,318
Income tax provision 1,309 4,230
-------- --------
Net income (loss) $ (478) $ 1,188
======== ========
Net income of Australian joint venture $ 2,168 $ 245 $ 3,707 $ 448
Net loss of Brazilian joint venture(b) (2,646) (2,028) (2,519) (1,801)
-------- ------- -------- -------
$ (478) $ 1,188
======== ========
Company's equity in net loss
of joint ventures $(1,783) $(1,353)
======= =======
</TABLE>
<TABLE>
<CAPTION>
Three Months Ended
-----------------------------------------------
May 3, 1996 April 28, 1995
------------------- ----------------------
(Dollars in thousands)
Company's Company's
Total Equity Total Equity
-------- --------- -------- ----------
<S> <C> <C> <C> <C>
Revenues $158,799 $144,954
Costs and expenses 146,972 131,214
Income tax provision 4,580 6,277
-------- --------
Net income $ 7,247 $ 7,463
======== ========
Net income of Australian joint venture $ 8,206 $ 994 $ 8,739 $1,077
Net loss of Brazilian joint venture (959) (820) (1,276) (982)
-------- ----- -------- ------
$ 7,247 $ 7,463
======== ========
Company's equity in net income of
joint ventures $ 174 $ 95
===== ======
</TABLE>
(b) The Company's portion of the net loss of the Brazilian joint venture
included losses on foreign currency of $136,000 and $394,000 for the six months
of fiscal 1996 and 1995, respectively.
-12-
<PAGE> 13
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)--Continued
Note G--Per Share Data
Per share data are computed on the basis of the weighted average number of
shares of common stock outstanding and, if applicable, the assumed exercise of
dilutive outstanding stock options based on the treasury stock method. Per share
data have been adjusted for the six and three months ended April 28, 1995, for
the effect of a two-for-one-stock split distributed on October 6, 1995.
Note H--Income Taxes
Significant components of the income tax provision attributable to operations
are as follows:
<TABLE>
<CAPTION>
Six Months Ended Three Months Ended
--------------------- ---------------------
May 3, April 28, May 3, April 28,
1996 1995 1996 1995
------- --------- ------- ---------
(Dollars in thousands)
<S> <C> <C> <C> <C>
Current:
Federal $2,454 $ (763) $2,251 $(2,421)
Foreign 282 519 464 307
State and local 681 225 227 (372)
------ ------ ------ -------
3,417 (19) 2,942 (2,486)
------ ------ ------ -------
Deferred:
Federal 1,205 1,658 402 2,560
Foreign 20 20
State and local 308 396 252 612
------ ------ ------ -------
1,513 2,074 654 3,192
------ ------ ------ -------
$4,930 $2,055 $3,596 $ 706
====== ====== ====== =======
</TABLE>
-13-
<PAGE> 14
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)--Continued
Note I--Acquisition and Sale of Subsidiaries
On November 15, 1995, the Company acquired a technical services business for
$2,106,000 in cash and notes which resulted in an increase in intangible assets
of $2,052,000.
On January 29, 1996, the Company merged its wholly-owned subsidiary, Autologic,
Incorporated and related foreign subsidiaries ("Autologic"), representing its
Electronic Publication and Typesetting Systems segment, with Information
International, Inc. ("Triple-I"), resulting in the formation of a new publicly
traded company, Autologic Information International, Inc. ("AII"). Triple-I was
a publicly traded company in the business of electronic publishing prepress
systems.
In connection with the merger, the stockholders of Triple-I received 41% of
AII's common stock based on one share of AII being issued for each outstanding
share of Triple-I and the Company received 59% of the outstanding shares of AII
common stock.
The merger has been accounted for as a purchase of a 59% interest in Triple-I
and a corresponding sale of a 41% interest in Autologic to the former
shareholders of Triple-I. The accompanying 1996 financial statements include the
accounts of AII with the former Triple-I shareholders' 41% interest in AII,
shown as a minority interest in the condensed consolidated balance sheet. The
results of operations of Triple-I are included in the accompanying consolidated
statement of income since the date of acquisition. The sale of 41% of Autologic
resulted in a pretax gain of $3,666,000, net of transaction costs, and also
resulted in 41% of Autologic's assets being reflected in the 1996 balance sheet
at fair value, resulting in an intangible of $5,215,000 with a corresponding
increase in the minority interest. Amortization of such intangible, which
amounted to $261,000 in the six and three months periods ended May 3, 1996 is
being charged to the minority interest. In addition, the purchase of the assets
of Triple-I resulted in an intangible of $3,847,000. These intangibles are being
amortized over a period of five years.
In connection with the merger, Autologic restructured its operations and
incurred a charge of $700,000 related principally to the termination of
employees. Such charge is included in the results of operations for the six
months ended May 3, 1996.
-14-
<PAGE> 15
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)--Continued
Note I--Acquisition and Sale of Subsidiaries (Continued)
The following unaudited pro forma information presents a summary of consolidated
results of operations as if the acquisitions had occurred at the beginning of
the respective periods with pro forma adjustments to give effect to amortization
of intangibles, minority interest share in operations and certain income tax
adjustments. The pro forma financial information is not necessarily indicative
of the results of operations as they would have been had the transactions been
effected on the assumed dates, or of future results of operations of the
consolidated entities.
<TABLE>
<CAPTION>
Six Months Ended
---------------------
May 3, April 28,
1996 1995
-------- ---------
(Dollars in thousands, except
per share amounts)
<S> <C> <C>
Revenue $490,196 $394,415
Net income $ 7,703 $ 1,571*
Net income per share $.80 $.16*
</TABLE>
* Reduced by $1,000,000 ($.10 per share) for discontinued operations of Triple-I
Note J--Significant Item in Operating Results
Net income for the six and three months ended May 3, 1996 include a cost
reduction of $2,625,000 ($1,600,000, net of taxes), or $.17 per share, and
$2,029,000 ($1,236,000, net of taxes), or $.13 per share, respectively, as a
result of an agreement to pay a premium to an insurance carrier to close out
prior years' retrospective insurance policies at an amount less than related
liabilities for workers' compensation insurance previously provided by the
Company. This adjustment had a favorable impact primarily on the operating
profit of the Technical Services and Temporary Personnel segment for the six and
three months ended May 3, 1996 of $2,100,000 and $1,645,000, respectively. In
addition, due to a new arrangement with its insurance carrier, the Company's
ongoing premiums will be at a significantly lower rate.
-15-
<PAGE> 16
ITEM 2--MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
SIX MONTHS AND THREE MONTHS ENDED MAY 3, 1996 COMPARED TO
THE SIX MONTHS AND THREE MONTHS ENDED APRIL 28, 1995
The information which appears below relates to the current and prior periods,
the results of operations for which periods are not necessarily indicative of
the results which may be expected for any subsequent periods.
The following summarizes the results of operations by segment:
<TABLE>
<CAPTION>
FOR THE SIX FOR THE THREE
MONTHS ENDED MONTHS ENDED
------------ ------------
May 3, April 28, May 3, April 28,
1996 1995 1996 1995
-------- -------- -------- --------
(Dollars in thousands)
<S> <C> <C> <C> <C>
Revenues:
Technical Services and Temporary Personnel $325,922 $253,952 $170,223 $135,034
Electronic Publication and Typesetting Systems 42,492 32,703 25,945 16,703
Telephone Directory 30,296 26,656 16,727 13,994
Engineering and Construction 42,542 29,137 23,051 14,534
Computer Systems 37,884 33,542 17,277 11,291
Equity in net income (loss) of joint ventures (1,783) (1,353) 174 95
Gain on sale of interest in subsidiaries 3,666
Interest and other income - net 466 711 378 499
Elimination of intersegment revenues (2,010) (2,098) (910) (960)
-------- -------- -------- --------
$479,475 $373,250 $252,865 $191,190
======== ======== ======== ========
Income Before Income Taxes and Minority Interests
Operating Profit (Loss):
Technical Services and Temporary Personnel $ 13,150 $ 11,891 $ 7,706 $ 6,944
Electronic Publication and Typesetting Systems (1,455) 387 955 107
Telephone Directory (1,570) (1,451) (560) (419)
Engineering and Construction 3,728 1,176 2,367 832
Computer Systems 3,397 2,256 1,259 (1,838)
Eliminations 2 (31) (9)
-------- -------- -------- --------
Total Operating Profit 17,252 14,228 11,727 5,617
Equity in net income (loss) of joint ventures (1,783) (1,353) 174 95
Gain on sale of interest in subsidiaries 3,666
Interest and other income - net 466 711 378 499
General corporate expenses (4,808) (4,666) (2,313) (2,290)
Interest expense (2,360) (3,422) (1,205) (1,736)
Foreign exchange gain (loss) - net (277) 10 (137) (49)
-------- -------- -------- --------
Income Before Income Taxes and Minority Interests $ 12,156 $ 5,508 $ 8,624 $ 2,136
======== ======== ======== ========
</TABLE>
-16-
<PAGE> 17
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS--Continued
SIX MONTHS ENDED MAY 3, 1996 COMPARED TO
THE SIX MONTHS ENDED APRIL 28, 1995--Continued
Results of Operations - Summary
In the six-month period of fiscal 1996, revenues increased by $106,225,000, or
28%, from fiscal 1995, as sales increased by $103,234,000, or 28%. Revenues in
the 1996 period included a pretax gain of $3,666,000 from the sale of an
interest in the Company's Electronic Publication and Typesetting Systems
segment. The increase in sales resulted primarily from a $71,970,000 increase in
sales of the Technical Services and Temporary Personnel segment, a $13,405,000
increase in sales of the Engineering and Construction segment and a $9,789,000
increase in the sales of the Electronic Publication and Typesetting Systems
segment.
The Company's pretax income was $12,156,000 in 1996, compared to $5,508,000 in
1995. The 1996 income included the $3,666,000 pretax gain discussed above. The
operating profit of the Company's segments increased by $3,024,000 to
$17,252,000 in 1996. The principal increases in the segments' operating income
were from the Technical Services and Temporary Personnel segment, with an
increase of $1,259,000, to a profit of $13,150,000 and the Engineering and
Construction segment, with an increase of $2,552,000, to a profit of $3,728,000,
partially offset by the Electronic Publication and Typesetting Systems segment,
with a decrease of $1,842,000, to a loss of $1,455,000 as compared to a profit
of $387,000 in 1995.
Net income in the six months of 1996 was $7,198,000, compared to a net income of
$3,453,000 in the six months of 1995.
Results of Operations - By Segment
The Technical Services and Temporary Personnel segment's sales increased by
$71,970,000, or 28%, in 1996 to $325,922,000 and the segment's operating profit
increased by $1,259,000, or 11%, to $13,150,000, as compared to $11,891,000 in
1995. Approximately $19,800,000, or 28% of the segment's 1996 sales increase was
due to pass-through costs primarily related to subcontractors to service large
national contracts and $13,600,000 of the sales increase was the result of
business with new customers. The remainder of the increased business was with
existing customers, partially offset by an $8,400,000 sales decrease with a high
margin customer who no longer requires our services. The increase in the
segment's operating profit was due to the $2,100,000 retrospective workers'
compensation insurance adjustment referred to in Note J in the accompanying
financial statements and the increase in sales volume, partially offset by a
decrease in gross margin of approximately 2 percentage points, primarily due to
higher subcontractor usage billed without a mark-up, lower margins on the
increasing business with the large national contracts, and an increase in
unemployment insurance costs.
-17-
<PAGE> 18
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS--Continued
SIX MONTHS ENDED MAY 3, 1996 COMPARED TO
THE SIX MONTHS ENDED APRIL 28, 1995--Continued
The Electronic Publication and Typesetting Systems segment's sales increased by
$9,789,000, or 30%, to $42,492,000 in 1996, while the segment incurred an
operating loss of $1,455,000, as compared to a profit of $387,000 in 1995. The
sales increase and the related effects on operating profit described below were
primarily due to the first quarter merger with Triple-I, described in Note I in
the accompanying financial statements. The decrease in operating profit was due
to a 1 percentage point increase in total operating expenses expended per sales
dollar, partially offset by the increased sales volume. In addition, the segment
incurred $700,000 of restructuring charges and a charge of $534,000 for
amortization of intangibles resulting from the merger. Gross margins expressed
as a percentage of sales were slightly less in 1996 than in 1995 due to a change
in the product mix, substantially offset by the benefits achieved by the merger.
The markets in which the segment competes are marked by rapidly changing
technology, with sales in fiscal 1996 of equipment introduced within the last
three years comprising approximately 96% of equipment sales.
The Telephone Directory segment's sales increased by $3,640,000, or 14%, to
$30,296,000 in fiscal 1996, while the segment incurred an operating loss of
$1,570,000, as compared to a loss of $1,451,000 in 1995. The sales increase is
due to a $1,349,000 increase in telephone directory production volume, an
increase in independent directory sales by the segment's DataNational division
of 19% and increased sales by the Uruguayan printing operation of 103%. The
operating losses in 1996 and 1995 were due to costs to enter a new regional
independent directory market, higher operating costs in the Uruguayan printing
operations (resulting, in 1996, from a move to a new facility and installation
of new equipment) and the start-up losses incurred in the automated production
of newspaper display advertisements, partially offset in 1996 by higher
telephone directory production revenues and profits. This segment's services are
rendered under various short and long-term contracts. Certain contracts expire
in fiscal 1998 through 2001, and there can be no assurance that they will be
renewed on similar terms or replaced.
The Engineering and Construction segment's sales increased by $13,405,000, or
46%, to $42,542,000 in fiscal 1996 and its operating profit tripled to
$3,728,000, as compared to $1,176,000 in 1995. The sales increase was due to a
75% increase in the construction division partially offset by a 4% decrease in
the business systems division. Operating results improved due to the increased
sales volume and a 4 percentage point decrease in overhead expended per sales
dollar.
-18-
<PAGE> 19
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS--Continued
SIX MONTHS ENDED MAY 3, 1996 COMPARED TO
THE SIX MONTHS ENDED APRIL 28, 1995--Continued
The Computer Systems segment's sales increased by $4,342,000, or 13%, to
$37,884,000 in 1996 and its operating profit increased by $1,141,000 to
$3,397,000, as compared to $2,256,000 in 1995. The increase in sales and
operating profit was primarily due to increased sales and profits on
conservation services to utilities and the sale of upgrades of a Delta Operating
Service System (DOSS) in 1996. Under the completed contract method of accounting
used by this segment, revenues together with related costs are recognized in
income upon acceptance by the customer. Deliveries and installations under other
DOSS contracts continue and customer acceptances are anticipated later in 1996.
Profitability rates on such contracts are not anticipated to be at the same
levels as those earned on the DOSS contracts accepted in fiscal 1995. This
segment's results on a quarter-to-quarter basis are highly dependent on the
acceptance by customers under contract for the segment's directory assistance
systems, which occurs periodically rather than evenly.
Results of Operations: Other
Other items, discussed on a consolidated basis, affecting the results of
operations for the six-month periods were:
Interest income increased by $229,000, or 24%, in 1996. The increase was
primarily due to additional funds invested.
Other income (expense) changed unfavorably by $474,000 in 1996 primarily due to
$368,000 of higher fees paid in connection with additional sales of receivables.
The Company's share of the net loss of its joint ventures was $1,783,000 in
1996, as compared to $1,353,000 in 1995. The increase was due to the start-up
and foreign currency related losses incurred by the Company's Brazilian joint
venture which began operations in July 1994. The Company's share of the net
income of its Australian joint venture, which produces a major portion of its
revenues and significantly all of its profit in the Company's second and third
fiscal quarters, decreased by $203,000 due to lower profit margins partially
offset by the effects of higher revenues.
Selling and administrative expenses increased by $4,963,000, or 25%, to
$25,097,000 in 1996 to support the increase in sales. However, these expenses
expressed as a percentage of sales were 5% in both 1996 and 1995.
Research, development and engineering expenditures increased by $1,781,000, or
46%, to $5,657,000 in 1996. The increase was due to additional product
development by the Computer Systems segment and the Electronic Publication and
Typesetting Systems segment.
-19-
<PAGE> 20
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS--Continued
SIX MONTHS ENDED MAY 3, 1996 COMPARED TO
THE SIX MONTHS ENDED APRIL 28, 1995--Continued
Depreciation and amortization increased by $1,000,000, or 17%, to $6,765,000 in
1996. The increase was due to increased fixed asset expenditures in fiscal 1994,
1995 and the six months of 1996.
Interest expense decreased by $1,062,000, or 31%, to $2,360,000 in 1996. The
decrease was primarily due to the redemption of $10,000,000, in May 1995 of the
Company's 12-3/8% Subordinated Debentures and lower interest rates in Uruguay.
The Company's effective tax rate increased to 41% in 1996, from 37% in 1995. The
1996 tax provision was unfavorably impacted by the effect of increased
nondeductible intangible amortization related to the Autologic merger and the
1995 tax provision was favorably impacted by the utilization of a net operating
loss carryforward.
-20-
<PAGE> 21
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS--Continued
THREE MONTHS ENDED MAY 3, 1996 COMPARED TO
THREE MONTHS ENDED APRIL 28, 1995--Continued
Results of Operations - Summary
In the three-month period of fiscal 1996, revenues increased by $61,675,000, or
32%, from fiscal 1995, as sales increased by $61,717,000 or 32%. The increase in
sales resulted primarily from a $35,189,000 increase in sales of the Technical
Services and Temporary Personnel segment, an increase in the sales of the
Electronic Publication and Typesetting Systems segment of $9,242,000, an
$8,517,000 increase in sales of the Engineering and Construction segment, and a
$5,986,000 increase in the sales of the Computer Systems segment. The Company's
pretax income was $8,624,000 in 1996, compared to $2,136,000 in 1995. The
operating profit of the Company's segments increased by $6,110,000 to
$11,727,000 in 1996. The principal increases in the segments' operating income
were from the Computer Systems segment, with an increase of $3,097,000, to a
profit of $1,259,000 compared to a $1,838,000 loss in 1995 and the Engineering
and Construction segment, with an increase of $1,535,000, to a profit of
$2,367,000 compared to $832,000 in 1995.
Net income in the second quarter of 1996 was $4,931,000, compared to a net
income of $1,430,000 in of 1995.
Results of Operations - By Segment
The Technical Services and Temporary Personnel segment's sales increased by
$35,189,000, or 26%, in 1996 to $170,223,000, and operating profit increased by
$762,000, or 11%, to $7,706,000, as compared to $6,944,000 in 1995.
Approximately $11,800,000, or 34%, of the segment's sales increase was due to
pass-through costs primarily related to subcontractors to service large national
contracts and $7,000,000 of the sales increase in 1996 was the result of
business with new customers. The remainder of the increased business was with
existing customers, partially offset by a $9,900,000 decrease with a high margin
customer who no longer requires our services. The increase in the segment's
operating profit was due to the $1,645,000 retrospective workers' compensation
insurance adjustment referred to in Note J in the accompanying financial
statements and the increased sales volume, partially offset by a decrease in
gross margin of approximately 2.8 percentage points, primarily due to higher
subcontractor usage billed without a mark-up, and an increase in unemployment
insurance costs.
-21-
<PAGE> 22
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS--Continued
THREE MONTHS ENDED MAY 3, 1996 COMPARED TO
THREE MONTHS ENDED APRIL 28, 1995--Continued
The Electronic Publication and Typesetting Systems segment's sales increased by
$9,242,000, or 55%, to $25,945,000 in 1996, and its operating profit was
$955,000, as compared to an operating profit of $107,000 in 1995. The sales
increase and the related effects on operating profit described below were
primarily due to the first quarter merger with Triple-I, described in Note I in
the accompanying financial statements. The increase in operating profit was due
to increased sales volume and an increase in the gross margin of 5 percentage
points. The increase in the gross margin percentage resulted from a change in
the product mix (an increase in sales of some high margin products and a
decrease in sales of some low margin items, which are in direct competition with
other manufacturers' products). As a result of the merger with Triple-I, some of
these high margin products which were previously purchased are now manufactured
by the segment. In addition, the segment's operating profit was reduced by a
charge of $534,000, for the amortization of intangibles resulting from the
merger. The markets in which the segment competes are marked by rapidly changing
technology, with sales in fiscal 1996 of equipment introduced within the last
three years comprising approximately 96% of equipment sales.
The Telephone Directory segment's sales increased by $2,733,000, or 20%, to
$16,727,000 in fiscal 1996, while the segment incurred an operating loss of
$560,000, an increase of $141,000, as compared to an operating loss of $419,000
in 1995. The sales increase is due to a $1,268,000 increase in telephone
directory production volume, an increase in independent directory sales by the
segment's DataNational division of 16% and an increase in sales of the segment's
Uruguayan printing division of 177%. The operating losses in 1996 and 1995 were
due to start-up losses incurred in the automated production of newspaper display
advertisements and higher operating costs in the Uruguayan printing operation
(resulting, in 1996, from a move to a new facility and installation of new
equipment) partially offset, in 1996 by higher telephone directory production
revenue. This segment's services are rendered under various short and long-term
contracts. Certain contracts expire in fiscal 1998 through 2001, and there can
be no assurance that they will be renewed on similar terms or replaced.
The Engineering and Construction segment's sales increased by $8,517,000, or
59%, to $23,051,000 in fiscal 1996 and its operating profit was $2,367,000, as
compared to an operating profit of $832,000 in 1995. The sales increase was due
to a 103% increase in the construction division partially offset by a 3%
decrease in the business systems division. Operating results improved due to the
increased sales volume and a 3.5 percentage point decrease in overhead expended
per sales dollar and an increase in the gross margin of .5 percentage points.
-22-
<PAGE> 23
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS--Continued
THREE MONTHS ENDED MAY 3, 1996 COMPARED TO
THREE MONTHS ENDED APRIL 28, 1995--Continued
The Computer Systems segment's sales increased by $5,986,000, or 53%, to
$17,277,000 in 1996 and its operating profit was $1,259,000, as compared to a
loss of $1,838,000 in 1995. The segment's operating results for the second
quarter of 1996 were a significant improvement compared to 1995 because of sales
of upgrades of a Delta Operating Service System (DOSS) in the 1996 quarter and
profits on conservation services to utilities.
Results of Operations: Other
Other items, discussed on a consolidated basis, affecting the results of
operations for the three-month periods were:
Interest income increased by $104,000, or 22%, in 1996. The increase was
primarily due to additional funds invested.
Other income (expense) changed unfavorably by $225,000 in 1996 primarily due to
$139,000 of higher fees paid in connection with additional sales of receivables.
The Company's equity in the net income of its joint ventures was $174,000 in
1996, as compared to $95,000 in 1995. The increase was due to the lower start-up
and foreign currency related losses incurred by the Company's Brazilian joint
venture which began operations in July 1994. The Company's share of the net
income of its Australian joint venture, which produces a major portion of its
revenues and significantly all of its profit in the Company's second and third
fiscal quarters, decreased by $83,000 due to lower profit margins partially
offset by higher revenues.
Selling and administrative expenses increased by $3,127,000, or 30%, to
$13,510,000 in 1996 to support the increase in sales. However, these expenses
expressed as a percentage of sales were 5% in both 1996 and 1995.
Research, development and engineering expenditures increased by $1,643,000, or
79%, to $3,715,000 in 1996. The increase was due to additional product
development by the Computer Systems segment and the Electronic Publication and
Typesetting Systems segment.
-23-
<PAGE> 24
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS--Continued
THREE MONTHS ENDED MAY 3, 1996 COMPARED TO
THREE MONTHS ENDED APRIL 28, 1995--Continued
Depreciation and amortization increased by $608,000, or 20%, to $3,577,000 in
1996. The increase was due to increased fixed asset expenditures in fiscal 1994,
1995 and the first half of 1996.
Interest expense decreased by $531,000, or 31%, to $1,205,000 in 1996. The
decrease was primarily due to the redemption of $10,000,000, in May 1995 of the
Company's 12-3/8% Subordinated Debentures and lower interest rates in Uruguay.
The Company's effective tax rate increased to 42% in 1996, from 33% in 1995. The
1996 tax provision was unfavorably impacted by the effect of increased
nondeductible intangible amortization related to the Autologic merger and the
1995 tax provision was favorably impacted by the utilization of a net operating
loss carryforward.
-24-
<PAGE> 25
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS--Continued
Liquidity and Source of Capital
Cash and cash equivalents decreased by $1,906,000 in 1996 to $23,444,000, and
working capital increased by $11,038,000 to $68,621,000. Cash flows from
operating activities for the six months ended May 3, 1996 were $5,465,000. Many
factors reflected in the accompanying consolidated statements of cash flows
affected the amount of cash flows from operating activities. The primary factors
in the cash provided by operating activities in 1996 were the net income of
$7,198,000, reduction in accounts receivable of $9,008,000 and the non-cash
expense of $6,765,000 for depreciation and amortization, partially offset by
decreases in income taxes payable of $11,607,000, accounts payable of
$5,488,000, and accrued expenses of $5,380,000.
The principal factors in the cash applied to investing activities of $8,704,000
were purchases of property, plant and equipment of $10,316,000, investments in
and advances to the Brazilian joint venture of $5,838,000, partially offset by
the cash resulting from the acquisition of subsidiaries of $8,421,000, net of
transaction costs.
In addition to its cash and cash equivalents, at May 3, 1996, the Company's
investment portfolio, primarily U.S. Treasury Notes and certificates of deposit,
had a carrying value of $4,640,000. The Company also has a $10,000,000 credit
line with a domestic bank under a revolving credit agreement which expires
August 1, 1997, unless renewed. The Company had outstanding bank borrowing under
that line of $5,658,000 at May 3, 1996. In addition, at May 3, 1996, the Company
had the right to sell up to $15,000,000 of additional interests in receivables
under its existing sales program. The Company sold an additional $10,000,000 on
May 24, 1996.
The Company believes that its current financial position, working capital and
future cash flows will be sufficient to fund its presently contemplated
operations and satisfy its debt obligations. The Company has no material capital
commitments. The Company may determine, from time-to-time in the future, to buy
additional shares of its common stock and/or debentures in the market or in
privately negotiated transactions.
-25-
<PAGE> 26
PART II - OTHER INFORMATION
ITEM 6-- EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
15.01 Acknowledgment letter from Ernst & Young LLP
15.02 Independent Accountants' Report on Review of
Interim Financial Information from Ernst & Young LLP
27.01 Financial Data Schedule
(b) Reports on Form 8-K:
The only Report on Form 8-K filed during the quarter ended May 3, 1996 was
an amendment dated March 29, 1996 (the "Amendment") to the Company's Report on
Form 8-K dated (date of earliest event reported) January 29, 1996 (the
"Report"). The Amendment reported under Item 7. Financial Statements and
Exhibits that the Company has determined that no pro forma financial information
relative to the transactions to which the Report pertained were required. A full
listing of the financial statements incorporated by reference in the Report is
contained in the Company's Quarterly Report on Form 10-Q for the quarter ended
February 2, 1996.
-26-
<PAGE> 27
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
VOLT INFORMATION SCIENCES, INC.
(Registrant)
BY: s/JACK EGAN
-------------------------------------
JACK EGAN
Vice President - Corporate Accounting
(Principal Accounting Officer)
Date: June 14, 1996
-27-
<PAGE> 28
EXHIBIT INDEX
Exhibit No. Description
15.01 Acknowledgment letter from
Ernst & Young LLP
15.02 Independent Accountants' Report
on Review of Interim Financial
Information from Ernst & Young LLP
27.01 Financial Data Schedule
-28-
<PAGE> 1
EXHIBIT 15.01
June 13, 1996
To the Stockholders
Volt Information Sciences, Inc.
We are aware of the incorporation by reference in Post-Effective Amendment No. 2
to Registration Statement No. 2-75618 on Form S-8 dated September 12, 1988,
Post-Effective Amendment No. 3 to Registration Statement No. 2-70180 on Form S-8
dated April 8, 1983, Registration Statement No. 2-88018 on Form S-3 dated
December 1, 1983 and Registration Statement No. 33-18565 on Form S-8 dated
December 14, 1987 of Volt Information Sciences, Inc., of our report dated June
3, 1996 relating to the unaudited condensed consolidated interim financial
statements of Volt Information Sciences, Inc. that are included in its Form 10-Q
for the quarter ended May 3, 1996.
Pursuant to Rule 436(c) of the Securities Act of 1933 our report is not a part
of the registration statement prepared or certified by accountants within the
meaning of Section 7 or 11 of the Securities Act of 1933.
Ernst & Young LLP
New York, New York
<PAGE> 1
EXHIBIT 15.02
[ERNST & YOUNG LLP LETTERHEAD]
INDEPENDENT ACCOUNTANTS' REPORT ON REVIEW OF INTERIM
FINANCIAL INFORMATION
TO THE STOCKHOLDERS
VOLT INFORMATION SCIENCES, INC.
We have reviewed the accompanying unaudited condensed consolidated balance sheet
of Volt Information Sciences, Inc. and subsidiaries as of May 3, 1996, and the
related condensed consolidated statements of operations for the six and three
month periods ended May 3, 1996 and April 28, 1995, and the related condensed
consolidated statements of cash flows for the six month periods ended May 3,
1996 and April 28, 1995. These financial statements are the responsibility of
the Company's management.
We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical procedures to financial
data and making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in accordance
with generally accepted auditing standards, which will be performed for the full
year with the objective of expressing an opinion regarding the financial
statements taken as a whole. Accordingly, we do not express such an opinion.
Based on our reviews, we are not aware of any material modifications that should
be made to the accompanying condensed consolidated financial statements referred
to above for them to be in conformity with generally accepted accounting
principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet of Volt Information Sciences, Inc. as
of November 3, 1995, and the related consolidated statements of operations and
cash flows for the year then ended, not presented herein; and in our report
dated January 2, 1996, we expressed an unqualified opinion on those consolidated
financial statements. In our opinion, the information set forth in the
accompanying condensed consolidated balance sheet as of November 3, 1995, is
fairly stated, in all material respects, in relation to the consolidated balance
sheet from which it has been derived.
Ernst & Young LLP
June 3, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> NOV-01-1996
<PERIOD-END> MAY-03-1996
<CASH> 23,444
<SECURITIES> 2,353
<RECEIVABLES> 110,586
<ALLOWANCES> 5,102
<INVENTORY> 29,385
<CURRENT-ASSETS> 177,843
<PP&E> 96,184
<DEPRECIATION> 34,529
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<CURRENT-LIABILITIES> 109,222
<BONDS> 30,369
0
0
<COMMON> 969
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<TOTAL-LIABILITY-AND-EQUITY> 276,715
<SALES> 42,176
<TOTAL-REVENUES> 479,475
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