<PAGE> 1
FORM 10-K
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 (No Fee Required) For the fiscal year ended
November 1, 1996
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.
(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 10020-1579
(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: None
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 17, 1997 (based on the closing price on the NASDAQ
National Market on that date) was approximately $ 221,000,000 (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 17, 1997 was
9,708,143.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Company's Proxy Statement for its 1997 Annual Meeting are
incorporated by reference into Part III of this Report.
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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 three major businesses, consisting of the
following five industry segments, and two joint ventures:
STAFFING SERVICES
(1) Technical Services and Temporary Personnel - This segment provides employee
staffing services, including temporary help and other contingent staffing
services, employment and personnel placement services, technical personnel
placement, payrolling services, employment outsourcing services and employee
leasing services, as well as some permanent placement services, to a wide range
of customers.
TELECOMMUNICATIONS & INFORMATION SOLUTIONS
(2) Telephone Directory - This segment provides telephone directory production,
commercial printing, database management, sales and marketing services,
licensing of directory production and contract management software systems to
directory publishers and is an independent publisher of telephone directories.
(3) Telecommunications Services - This segment provides telecommunications
services, including engineering, design, construction, installation,
maintenance, removals and distribution of telecommunications products in the
outside plant and central office, and within end-user premises.
(4) Computer Systems - This segment designs, develops, integrates, markets,
sells, leases and maintains computer-based directory assistance and other
database management and telecommunications systems and related services for the
telecommunications industry and provides services, principally computer-based
projects, to public utilities.
PREPRESS PUBLISHING SYSTEMS
(5) Electronic Publication and Typesetting Systems - This segment designs,
develops, manufactures, integrates, markets, sells and services computerized
imagesetting and publication systems. On January 29, 1996, the Company completed
the combination of its electronic publication and typesetting systems segment,
Autologic, incorporated and related foreign subsidiaries, with Information
International, Inc., to form a publicly traded company, Autologic Information
International, Inc. ("AII".) Volt owns approximately 59% of AII.
JOINT VENTURES
The Company is a party to a joint venture, which commenced operations in July
1991, with Telstra Corporation Ltd., the Australian government-owned telephone
company, and others for the marketing, selling and compilation functions of
yellow pages directories throughout Australia. In January 1997, the Company sold
its interest (acquired in July 1994) in Telelistas Editora Ltda., a Brazilian
company which has a contract to publish Rio de Janeiro's official White Pages,
Yellow Pages and Street Guides telephone directories.
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 November 1, 1996, and those assets
identifiable within each segment at the end of each of those years (see Notes J
and K 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>
November November October
1, 1996 3, 1995 28, 1994
-------- -------- --------
(Dollars in thousands)
<S> <C> <C> <C>
SALES
Technical Services and Temporary Personnel:
Sales to unaffiliated customers $ 713,476 $570,514 $433,443
Intersegment sales 2,809 1,832 1,067
---------- -------- --------
716,285 572,346 434,510
---------- -------- --------
Telephone Directory:
Sales to unaffiliated customers 77,972 68,086 72,319
Intersegment sales 639 1,681 1,836
---------- -------- --------
78,611 69,767 74,155
---------- -------- --------
Telecommunications Services:
Sales to unaffiliated customers 89,957 67,179 51,391
Intersegment sales 1,515 811 1,285
---------- -------- --------
91,472 67,990 52,676
---------- -------- --------
Computer Systems:
Sales to unaffiliated customers 79,033 131,920 99,059
Intersegment sales 53 40 76
---------- -------- --------
79,086 131,960 99,135
---------- -------- --------
Electronic Publication and Typesetting Systems:
Sales to unaffiliated customers 88,476 69,608 64,659
Intersegment sales 762 797 664
---------- -------- --------
89,238 70,405 65,323
---------- -------- --------
Elimination of intersegment sales (5,778) (5,161) (4,928)
---------- -------- --------
Total sales $1,048,914 $907,307 $720,871
========== ======== ========
OPERATING PROFIT (LOSS)
Technical Services and Temporary Personnel $ 27,346 $ 28,117 $ 16,337
Telephone Directory 4,858 1,506 6,695
Telecommunications Services 9,484 6,178 792
Computer Systems 7,707 6,395 (2,168)
Electronic Publication and Typesetting Systems (4,817) 456 1,334
Eliminations (69) (159) (8)
---------- -------- --------
Total operating profit 44,509 42,493 22,982
Interest income and other expense - net 2,278 1,055 797
Gains (losses) on securities - net 52 (7)
Equity in (loss) income of joint ventures (1,414) (1,000) 3,055
Gain on sale of interest in subsidiaries 3,666 9,770
General corporate expenses (9,811) (9,408) (9,263)
Interest expense (5,167) (6,045) (7,468)
Foreign exchange (loss) gain - net (516) 186 (39)
---------- -------- --------
Income before income taxes, minority
interests and extraordinary item $ 33,597 $ 27,281 $ 19,827
========== ======== ========
</TABLE>
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VOLT INFORMATION SCIENCES, INC. AND SUBSIDIARIES
INDUSTRY SEGMENT DATA--Continued
<TABLE>
<CAPTION>
November November October
1, 1996 3, 1995 28, 1994
-------- -------- --------
(Dollars in thousands)
<S> <C> <C> <C>
IDENTIFIABLE ASSETS
Technical Services and Temporary Personnel $ 98,706 $ 52,955 $ 40,230
Telephone Directory 41,622 32,135 28,941
Telecommunications Services 41,082 31,812 21,836
Computer Systems 42,069 44,887 50,273
Electronic Publications and Typesetting Systems 66,504 37,532 36,276
-------- -------- --------
289,983 199,321 177,556
Cash, investments, joint ventures
and other corporate assets 47,161 64,690 49,348
-------- -------- --------
Total assets $337,144 $264,011 $226,904
======== ======== ========
</TABLE>
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TECHNICAL SERVICES AND TEMPORARY PERSONNEL SEGMENT
Volt's Technical Services and Temporary Personnel segment provides, from 238
branch and on-site offices located throughout the United States, a broad range
of employee staffing services, including temporary help and other contingent
staffing services, employment and personnel placement services, technical
personnel placement, payrolling services, employment outsourcing services and
employee leasing services, as well as some permanent placement services, to a
wide range of customers. Except for professional employer services, which are
marketed under the name "Shaw & Shaw", the remainder of this segment's services
are identified and marketed throughout the United States as "Volt Services
Group".
VOLT SERVICES GROUP
Volt Services Group is a single-source provider of all levels of
temporary staffing, offering to its customers an extensive range of
contingent employment services. As a full-service supplier, Volt
Services Group also provides payrolling and outsourcing services, as
well as assuming full responsibility for staffing, supervision and the
management of large projects which are staffed by temporary workers.
Volt Services Group provides professional, engineering, design, data
processing, scientific and technical support personnel, as well as
information technology services, contract engineering services and
temporary help in administrative, clerical, office automation,
accounting, industrial and other job classifications, for varying
periods of time (both short and long-term) 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. Customers
range from those that require one or two temporary employees to national
accounts that require as many as several thousand temporary employees at
one time.
Volt Services Group has been successful in obtaining a number of large
national contracts which typically involve servicing numerous customer
facilities, on-site Volt representation and customized invoicing and
management reports. In some cases, Volt uses subcontractors to assist in
meeting the requirements of the contract. Employees assigned to a single
customer under a national account range from light industrial workers to
high level engineers and information technology professionals. The
bidding process for national accounts is very competitive and Volt is
usually in competition with other major temporary staffing firms. Most
contracts are for a one to three-year time period, at which time they
are typically rebid. Others are for shorter periods and may be for the
duration of a particular identified project or subproject or a
particular need that has arisen which requires additional or substitute
personnel and expire upon completion of the project or when the
particular need ends. These contracts with national accounts typically
require considerable start-up costs and can take up to one year to reach
anticipated revenue levels. This segment maintains a group dedicated to
the acquisition, implementation and service of national accounts;
however, there can be no assurance that Volt Services Group will
maintain accounts that it currently serves, nor that it can obtain
additional national accounts on satisfactory terms.
Volt Services Group provides personnel to companies throughout a broad
spectrum of industries, including the computer, electronics,
manufacturing, aerospace, defense, telecommunications, utility, power
(including certain nuclear and fossil fuel power plants),
transportation, petrochemical, chemical, retail, finance, banking,
insurance, architectural, engineering and other industries, and to
government agencies and universities. Volt Services Group, through its
Volt Accounting Specialists division, provides specialized temporary
personnel in accounting, bookkeeping and other financial
classifications. Volt also acts as a subcontractor to other national
providers to assist them in
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meeting their obligations to their customers. Most customers are located
in the United States, but a small portion of the segment's services are
performed outside the United States.
Volt Services Group furnishes temporary employees to meet various client
requests, such as assigning employees to a specific identified project
or subproject or to meet a particular need that has arisen (which
employees are typically retained until its completion), substituting for
permanent employees 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 downsizing. Volt Services
Group also provides management personnel to coordinate special projects
and to supervise temporary employees, thus relieving a customer of the
need to supervise temporary employees.
Volt Services Group provides the services of employees with a wide
variety of skills, ranging from technical, engineering, computer and
other professional and scientific classifications to clerks, typists,
office automation personnel, secretaries, receptionists, sales promotion
personnel, bank personnel, customer service representatives,
telemarketers, data entry clerks, inventory clerks, assemblers,
warehousing personnel and other clerical and administrative personnel.
Volt Services Group maintains computerized nationwide resume databases
containing resumes of engineers, computer professionals and other
technical, professional and scientific candidates, from which it fills
customer job requirements for these types of employees; these
individuals are frequently willing to relocate to fulfill these
assignments. Lesser skilled employees are generally recruited and
assigned locally, and resumes for these employees are maintained in
computerized data bases at branch offices.
Employees hired by Volt Services Group become Volt employees during the
period of their segment (which typically ranges from as little as one
day to several years). As the employer of record, Volt is responsible
for the payment of salaries, payroll taxes, workers' compensation and
unemployment insurance and other benefits, which may include paid sick
days, holidays and vacations and medical insurance.
SHAW & SHAW
Shaw & Shaw, Inc. specializes in "employee leasing", known as
professional employer services. Shaw & Shaw shares the employer
responsibilities with its client companies, typically serving as the
administrative employer of record for either the entire full-time
workforce or for a specific department or division of the client
company. Services provided by Shaw & Shaw include complete human
resource management, legal and regulatory compliance, comprehensive
health benefits, retirement plans and administration, workers'
compensation insurance, loss control and risk management and payroll
administration. Shaw & Shaw utilizes the purchasing power of the Company
and is able to provide its customers with cost savings in health care,
workers' compensation insurance, and labor administration, as well as
relieving them of the administrative responsibility involved in
maintaining employees.
Shaw & Shaw provides and markets its services to large and small client
companies in a broad spectrum of industries, such as domestic and
international airlines, retail, convenience markets, country clubs,
restaurants, building contractors, petroleum, manufacturing, grocery,
home care, maintenance, janitorial, banking, aerospace, and computer.
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The Technical Services and Temporary Personnel segment also provides some
existing customers with direct full-time employees, the majority of whom have
previously been assigned on a temporary basis and who the customer desires to
hire as direct full-time employees.
During the week ended November 1, 1996, this segment provided approximately
26,400 employees to its customers.
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. However, some
of this segment's national contracts are large, and the loss of any large
contract could have a negative effect on this segment's business unless and
until the business is replaced.
While the markets for the segment's services include a broad range of industries
throughout the United States, general economic conditions in specific geographic
areas or industrial sectors have in the past, and could in the future, affect
the profitability of this segment.
Downward pressures on this segment's operating margins occurred in fiscal 1996
and are anticipated to continue in fiscal 1997 due to increases in overhead to
open new offices, particularly on-site offices for national accounts, start up
costs related to new contracts and additional personnel to bid and service
national accounts, as well as significantly increased competition. In addition,
the trend in the industry is for large customers to consolidate their use of
contingent workers to single source providers.
The segment competes with many technical service, temporary personnel and other
contingent staffing 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, pricing and quality of services provided and its ability to engage,
in a timely manner, personnel meeting customer requirements. Competition is
intense and many of the contracts entered into by this segment are of relatively
short duration, and awarded on the basis of competitive proposals which are
periodically rebid by the customer. Although Volt has been successful in
obtaining various short and long-term contracts in the past, and increasing
revenues accordingly, margins under such contracts have decreased in many
instances. There can be no assurance that existing contracts will be renewed on
satisfactory terms or that additional or replacement contracts will be awarded
to the Company, nor that revenues from an expired contract will be immediately
replaced.
TELEPHONE DIRECTORY SEGMENT
Volt's Telephone Directory segment provides telephone directory production,
commercial printing, database management, sales and marketing services,
licensing of directory production and contract management software systems to
directory and other advertising media publishers and is an independent publisher
of telephone directories. This segment consists of the Directory
Systems/Services division, the DataNational division, the Uruguay division and
the Advanced Technologies, Research & Development subsidiary.
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DIRECTORY SYSTEMS/SERVICES
The division markets to directory publishers, and utilizes internally, highly
specialized computer systems, including both those developed by third parties
for the division and those developed by the Company, as well as third-party
off-the-shelf software. The division integrates and maintains these systems for
managing the production and control of databases, principally for directory and
other advertising media publishers. These systems produce digitized display
advertisements and photocomposed pages, using equipment manufactured by AII and
others, with integrated graphics for yellow and white pages directories, as well
as CD/ROM and Internet directories. The systems incorporate "workflow
management" by which ads are automatically routed between workstations,
increasing through-put and control.
The division customizes its systems to meet the needs of publishers who desire
to perform their work in-house. The division also provides outsourcing services
for advertising, database management and publication to publishers and others
who choose not to do the work in-house. The systems are sold or licensed to, and
the services are performed for, publishers and others worldwide. The division
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, data processing and database management services,
to other customers.
The division also separately markets workstations which are used to facilitate
the creation of telephone directories. These include a graphics workstation
(RAD-GRAF) containing Volt-developed software, which facilitates the
incorporation of special graphic effects in the presentation of ads and provides
merging text and graphics on a finished page. Another workstation, the Real-time
Incolumn Display (RID), is an on-line electronic galley editor which allows last
minute alterations and insertions of ads and listings, while displaying the
composed results as they will appear on the finished page.
The division, through its Volt Directory Marketing group, also provides
telemarketing services for directory advertising sales for both white and yellow
pages directories and provides other telemarketing services to directory
publishers.
Services are rendered under various short and long-term contracts and are
performed primarily at facilities maintained by Volt in Blue Bell and Huntingdon
Valley, Pennsylvania; Indianapolis, Indiana; Anaheim and San Diego, California;
and, in one instance, at the customer's facility.
A substantial portion of Volt's business in this division is obtained through
submission of competitive proposals for contracts that typically expire in one
to three years and are then rebid. Certain contracts expired in 1996, while
others were renewed, and new contracts were awarded to the Company. A contract
with one customer, which accounted for approximately 19% of the segment's
revenues and 61% of the segment's operating profit for fiscal 1996, is scheduled
to expire on December 31, 1997, with the customer having renewal options.
However, the division has obtained several significant contracts which have
begun in fiscal 1997. Other contracts are scheduled to expire in 1997 through
2001. While the Company believes it can secure renewals and/or extensions of
some of the contracts which are scheduled to expire, some of which are material
to this segment, and to obtain replacement business, there can be no assurance
that contracts will be renewed or extended, or that additional or replacement
contracts will be awarded to the Company, on satisfactory terms.
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This division faces intense competition with respect to all of its services and
products from other suppliers and from in-house facilities of potential
customers. Some of this division's significant competitors are companies which
are larger and have substantially greater financial resources than Volt.
DATANATIONAL
DataNational, the independent telephone directory publishing division of Volt,
publishes community-based directories in Virginia, Maryland, North Carolina and
Arkansas.
DataNational offers a community-based directory that provides consumers with
information on businesses which provide services within their local geographic
area. The directories also include features that are unique to the community,
such as school information, maps and a calendar of events. The principal
competition for this division is from the regional telephone companies, whose
directories cover a much wider geographic area than the locations for which the
division publishes directories. The advertiser is attracted to the division's
community directory because it enables them to specifically target local markets
at a much lower cost.
During fiscal 1996, the division added new directories in Charlotte, North
Carolina and Norfolk, Virginia. The division will publish new directories in
Delaware and the District of Columbia in fiscal 1997, bringing the total
community, county and regional directories to sixty-four, an increase of
seventeen over the last five years. The division identifies new markets where
demographics and their local shopping patterns are favorable to the division's
community product.
URUGUAY DIVISION
This South American division is the official publisher of the white and yellow
page telephone directories for Antel, the government-owned telephone company in
Uruguay. The original contract with Antel was signed in 1983 and, in 1996, the
division received an extension through 2002.
In addition to the directory business, the division owns and operates a printing
plant which prints its own telephone directories and also prints directories for
publishers in Argentina and Brazil and does commercial printing for various
customers in those countries and in Uruguay.
The division's revenues are generated from yellow page advertising and its
printing operations.
In 1997, the division plans to publish a business-to-business directory for the
Mercosur common market (Argentina, Brazil, Uruguay and Paraguay) and will begin
offering operator assisted yellow pages ("OAYP") on "900" telephone numbers in
Uruguay. The OAYP will use a sophisticated proprietary computerized system
developed jointly by this division and the Company's Computer Systems segment.
ADVANCED TECHNOLOGIES, RESEARCH & DEVELOPMENT
Volt's Advanced Technologies, Research & Development subsidiary researches and
implements new product lines and adopts new computer technology for internal
office and business processing automation. This subsidiary, through its Volt
Consulting Services division, also provides the Company, as well as
non-affiliated customers, with data processing consulting, applications
development and software systems integration services.
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The Company holds several patents and trademarks related to this segment's
products, but does not believe that any are material to the segment.
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.
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 will continue to be successfully marketed.
TELECOMMUNICATIONS SERVICES SEGMENT
Volt's Telecommunications Services (formerly referred to as the Construction and
Engineering segment) provides telecommunications services, including
engineering, design, construction, installation, maintenance, removal and
distribution of telecommunications products and other support services for the
telecommunications industry. This segment consists of the Voltelcon and Advanced
Technology Services divisions.
VOLTELCON
The division is a nationwide full service provider of
telecommunications services, including engineering, design,
construction, installation, maintenance, removals and distribution of
telecommunications products. The division performs these services on a
project and/or contract personnel placement basis in the outside plant
and central office, and within end-user premises, for telephone
operating companies, interexchange carriers, local exchange carriers,
wireless carriers, telecommunications equipment manufacturers, cable
television, electric, water and sewerage utilities, federal, state and
local government units and private industry.
The division provides both aerial and underground construction
services, using its own vehicles and high production equipment,
including jack and bore, directional boring, excavation for conduit and
manhole systems, cable placement and splicing, pole placement and
wrecking, fiber optic cable installation, splicing, termination and
testing, project management and inspection services.
The division also offers a wide range of outside plant engineering
services, including right of way acquisition, network design for fiber
and copper systems, carrier systems design, conduit design, computer
aided design drafting, digitizing records, building industry consultant
engineering, turnkey design and construction and air pressure design
and record verification.
The division's Business Systems group provides systems integration,
cabling and wiring and telephone equipment installation. This involves
the engineering, design, installation and management of all types of
local and wide area networks, via copper and fiber, for voice, data and
video.
The division's Central Office group is a leading provider of quality
telecommunications services for central office engineering, furnishing,
installation and removal of transmission systems, distribution frame
systems, AC/DC power systems, wiring and cabling, switch peripheral
systems, pre and post conditioning, equipment assembly and system
integration and controlled environment structures.
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The division's Wireless group offers partial or complete turnkey
services to cellular and Personal Communications Services (PCS) license
holders to establish or enhance their network infrastructure. These
services include radio frequency engineering, site evaluations and
acquisition, network engineering and equipment specifications, logistic
support, site construction, testing and integration into the network,
outside plant engineering and construction services and central office
engineering, furnishing and installation to integrate the license
holders' wireless networks into the national telecommunications
network.
The division offers the added value of being able to provide total
management of multi- discipline projects because of its ability to
integrate the efforts of all of its groups on a single project.
ADVANCED TECHNOLOGY SERVICES
Volt's Advanced Technology Services was established in 1994 to meet the
challenges of the "Information Superhighway" and the 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 division accommodates
clients in the telecommunications industry who require a full range of
services from multiple Volt business segments, such as human resources,
equipment, vehicles, systems analysis, network integration, software
development and turnkey applications.
This segment faces substantial competition with respect to all of its
telecommunications services from other suppliers and from in-house capabilities
of potential customers. Competition in this segment remains intense, often
resulting in low margins. Some of this segment's significant competitors are
larger and have substantially greater financial resources than Volt. Other
competitors are small, local companies, that generally have lower overhead.
Volt's ability to compete in this segment depends upon its reputation, technical
capabilities, pricing, 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 Volt's business in this segment is obtained through
submission of competitive proposals for contracts that typically expire in one
to three years and are then rebid. While the segment has obtained various short
and long-term contracts, margins under such contracts have decreased in many
instances. Certain contracts have expired in 1996 and were renewed, and others
will expire in 1997 and 1998. While the Company believes it can secure renewals
and/or extensions of these contracts which are scheduled to expire, some of
which are material to this segment, and to obtain replacement business, there
can be no assurance that contracts will be renewed or extended or that
additional or replacement contracts will be awarded to the Company on
satisfactory terms.
COMPUTER SYSTEMS SEGMENT
The Computer Systems segment designs, develops, sells, leases and maintains
computer-based directory assistance and other data base management and
telecommunications systems and related services for the telecommunications
industry and provides services, principally computer-based projects, to public
utilities. This segment is comprised of Volt Delta Resources and Volt Viewtech.
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VOLT DELTA RESOURCES
Volt Delta Resources ("Volt Delta") is engaged in the design,
programming, sale and/or lease, integration and maintenance of computer
information systems and services, primarily for the telecommunications
market. Volt Delta operates as two business units: Information Systems
and Maintech.
The Information Systems division markets operator services solutions to
telephone companies and interexchange carriers worldwide. In the past,
the division's services consisted of the development and sale of
turnkey systems to its customers. However, some potential customers
have expressed an interest in upgrading their operator services
capabilities by procuring outside services as an alternative to making
a capital investment. Therefore, the division began marketing enhanced
directory assistance capabilities as a transaction-based outsourcing
service. This service is marketed as Directory Express, with the
division owning and operating its own proprietary Delta Operator
Services System ("DOSS") and providing access to a national database.
Directory Express is a transaction-based service designed to offer
Directory Assistance operators worldwide with access to over 120
million United States business, residential and government listings.
For consumers (the end-users), especially cellular and PCS users,
Directory Express is expected to provide a more convenient and
efficient level of directory assistance service since, among other
things, consumers may obtain enhanced directory information without
having to know the correct area code.
DOSS provides new revenue sources to the telephone company from such
applications as call completion, customized intercept and automated
directory assistance. Although a basic DOSS system is offered to
customers who wish to purchase systems, typically each customer will
require some special features and, in some instances, extensive
customization to attain service differentiation. In this market, the
division faces intense competition from much larger international
companies which limits the division's success in winning contracts.
During 1996, Volt Delta Europe ("VDE"), the division's European
operations based in the United Kingdom, was awarded a contract by PTT
Telecom (the Netherlands telephone company) for VDE's Operator and
Agent Services Integration System (OASIS), which provides operator
services providers open access to multiple information-based databases.
VDE is marketing OASIS to other European telecom providers as well.
Volt Delta's services division, Maintech, provides installation
planning, database creation, system and network monitoring, computer
operations, and system maintenance services to Volt Delta's customers.
The division also provides an array of services to customers who have
purchased computer systems and networks from others. These services
include network management, system and network design and
implementation, help desk support and workstation and PC integration,
as well as maintenance services on DEC, SUN, Silicon Graphics, IBM
RS/6000 and other advanced technology product lines.
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 and is readily available from a number
of suppliers.
Under the completed contract method of accounting used by the Volt
Delta division, revenues together with related costs are recognized in
income upon acceptance by the customer. Since sales of systems under
DOSS and OASIS contracts are generally recorded upon customer
- 12 -
<PAGE> 13
acceptance, the number of acceptances in a particular year may affect
the comparability of results with other years. Although sales of
systems are normally not recurring, a larger installed base provides
opportunities for future expansion of existing customer systems, system
enhancement sales and maintenance revenue.
VOLT VIEWTECH
Volt's VIEWtech subsidiary implements energy and water efficiency
programs and provides various management, outsourcing, technical and
financial services to the energy and water utility industry, major
financial institutions, trade associations and manufacturers.
The subsidiary is a certified Fannie Mae lender, operating the nation's
largest residential energy efficiency finance program for a major
utility in San Francisco, under which it has processed, funded and
services over $40 million in low-interest loans, all of which it sells
to Fannie Mae, retaining only limited exposure on the sold loans. The
subsidiary also operates a loan center in Richmond, Virginia, for
another major finance company, supporting energy conservation loan
programs for nineteen utilities and equipment manufacturers who provide
financing to consumers.
The subsidiary manages some of the nation's largest water conservation
programs, which encourage utility customers to install more efficient
water fixtures to reduce water use. In New York City, California and
Florida, the subsidiary has processed over two hundred thirty million
dollars in rebates from the government for over one million installed
water saving devices.
The subsidiary is responsible for the field installation of one of the
largest wireless, fixed-network, real-time data gathering and
distribution automation systems in the United States, installing almost
400,000 network meter reading devices for one utility. The subsidiary
also reads over 500,000 meters monthly for major utilities in the
United States.
The subsidiary internally develops its computer systems and software,
which includes a family of Windows(TM) energy and water analyses
products. The subsidiary has established one of the first interactive
energy analyses on the internet serving major utilities. The subsidiary
has also developed its Rate VIEW product, which provides Department of
Energy specified home energy ratings to label a home's energy
efficiency according to national lender guidelines.
The industry in which the subsidiary operates has been impacted by
deregulation of the energy industry, resulting in a decline of utility
subsidized conservation services, which the subsidiary has provided to
energy utilities since its inception. The subsidiary's business
strategy is to diversify its customer base and develop services and
products which support energy utility marketing efforts, reduce utility
operational costs, support water utility conservation programs, and
facilitate energy efficient home improvements through utility sponsored
low-interest finance programs.
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 inability to sell additional
major systems would have an adverse effect on this segment's business.
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.
- 13 -
<PAGE> 14
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.
Some of this segment's contracts have expired in 1996, while others were renewed
and new contracts were awarded to the Company. The segment anticipates that a
contract with one customer, which accounted for approximately 9% of the
segment's revenues and 46% of the segment's operating profit for fiscal 1996,
will expire in fiscal 1997, because the customer no longer requires Volt's
services. Other contracts are scheduled to expire in 1997 through 2000.
ELECTRONIC PUBLICATION AND TYPESETTING SYSTEMS SEGMENT
Autologic Information International, Inc., a 59% owned publicly held subsidiary
of the Company, and its subsidiaries (collectively, "AII"), design, develop,
manufacture, integrate, market, sell and service computerized image setting and
publication systems equipment and software that automate the various prepress
production steps in the publishing process. AII's products are primarily
marketed and sold to the newspaper publishing industry, the commercial printing
industry and other organizations having internal publishing facilities. AII has
traditionally focused its efforts on high-volume and deadline-driven customers.
AII is seeking to utilize its core capabilities to expand into the lower-volume,
less time- sensitive portion of the commercial publishing and electronic
document transmission markets, while maintaining a leadership role in its
primary market. Although competition is more intense in these additional
markets, they are expanding and AII believes that significant opportunities
exist therein. AII's strategy to meet this competition is to enter niche markets
where AII's strengths can most effectively meet customers' requirements.
On January 29, 1996, Volt caused its wholly-owned subsidiary, Autologic,
Incorporated ("Autologic"), to be merged with and into AII (a newly formed
subsidiary of Volt) and contemporaneously caused all of the capital stock of
certain foreign subsidiaries of Volt to be transferred to AII. At that time,
Information International, Inc. ("Triple-I), a publicly held company was,
pursuant to a vote of its stockholders, also merged with and into AII, as a
result of which the former owners of Triple-I became the owners of 41% (with
Volt owning the remaining 59%) of the then outstanding common stock of AII. The
foregoing formation transactions are collectively referred to as the "Merger".
The Company's reported results of operations contained in this Report for
periods prior to January 29, 1996 reflect only the operations of Autologic and
not those of Triple-I and for subsequent periods reflect the operations of the
combined entities. Accordingly, the Company believes that information contained
in this Report which compares results for periods of this segment before and
after the Merger are not comparable, as they do not reflect results for
comparable business structures. In addition, during the period subsequent to the
Merger, AII effected various restructuring and, therefore, results for the nine
month period of fiscal 1996 subsequent to the Merger are not indicative of
results that may be expected for any subsequent period.
In general, AII's systems consist of computers and computer-based products used
for scanning images, storing and retrieving computerized text and images and
controlling output of those elements to various output devices, such as laser
imaging systems, proofers, platemakers and telecommunications systems. The
Company also produces a variety of hardware and software interface products that
enable different computers and other products to communicate and transfer
information efficiently. To meet the specific requirements of AII's customers,
AII's products can be integrated into complete systems, integrated with a
customer's existing products (whether previously purchased from AII or from
another vendor) or sold and used individually as "stand alone" units.
- 14 -
<PAGE> 15
AII's systems are available in a variety of hardware and software configurations
on a broad base of computer hardware platforms which allow them to be structured
to meet the individual needs of members of the prepress industry, including
publishers of newspapers, telephone directories, magazines, books, directories,
catalogues, yearbooks, print advertising, checks, and other quality graphic art
printed products. To satisfy this diverse customer base, AII offers systems
providing different speed, page size and output quality requirements, depending
on the customer's requirements for final publication. These systems normally
output either to film or photographic paper (both of which are then used to make
printing press plates) or the printing press plates themselves.
Marketing and sale of AII's products within the United States, Canada, Australia
and parts of Europe is provided by AII's direct sales force, and through
independent foreign distributors elsewhere. AII has established a European
operations headquarters near London, England and a Pacific operations
headquarters in Sydney, Australia.
Sales made outside the United States by AII subsidiaries, of products
manufactured or assembled in the United States, together with export sales by
AII directly to unaffiliated foreign customers, amounted to $46.2 million in
fiscal 1996, $36.2 million in fiscal 1995 and $31.2 million in fiscal 1994.
In the past, both Autologic and Triple-I were adversely affected by general
economic recessions in the United States and in other countries where AII's
products are sold. In addition, a significant portion of AII's business is in
the newspaper publishing industry, which has in the past experienced significant
downturns during recessions. Recently newspapers have sought to reduce costs and
expenditures to offset increased newsprint costs, intense competition for
advertising revenues by newspapers and other media and reduced readership of the
smaller number of newspapers, especially in the United States. These factors
have resulted in reductions in equipment purchases by AII's traditional
customers, adversely affecting AII's performance. However, newsprint costs have
decreased in recent months, which may increase the newspapers' ability to make
additional capital expenditures.
AII operates in a highly competitive marketplace with many competitors. Its
position in its markets depends largely upon its reputation, the quality, design
and pricing of its products, its ability to maintain high level technological
capabilities, foresee market changes and continue to identify, develop and
commercialize innovative and competitive products and systems, the timeliness of
its deliveries and its field service. Technological advancements, "open system"
architecture (which allows customers to assemble standardized component
products themselves from several different sources) and general market
conditions have increased price competition. A number of firms, some of which
are substantially larger and have substantially greater financial resources than
AII, manufacture one or more prepress products competing with each of AII's
prepress products. Some of these competitors sell their products as complete
prepress systems, for some of which AII has no competing systems. Other
competitors grant significant discounts of their products which compete with
AII's products in order to promote sales of ancillary products as to which AII
has no competing product.
As a result of this increasing competition, as well as changing patterns of
customer purchasing which have produced an industry-wide trend toward the
purchase of open systems, the industry, including AII, has experienced downward
pressure on profit margins on sales of equipment and software which is likely to
continue. Gross profit margins on customer services have likewise been under
considerable pressure in recent years, which is attributable to the industry
trend towards using open systems, which enables the user to service some
equipment in-house and, because such products are more software oriented, obtain
some service from AII through remote data transfer, rather than on-site.
- 15 -
<PAGE> 16
AII holds several patents and trademarks related to its products; however, it
does not believe that any of these is material to AII's business. AII is also a
licensee of technology from many of its suppliers, none of which individually is
considered material to AII's business.
JOINT VENTURES
A subsidiary of the Company is a 12-1/2% shareholder in Pacific Access Pty. Ltd.
("Pacific Access"), a joint venture company in Australia. This venture, which
commenced operations in July 1991, assumed responsibility throughout Australia
for the marketing, selling 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 January 1997, the Company sold its interest (acquired in July 1994) in
Telelistas Editora Ltda., a Brazilian company which has a contract to publish
Rio de Janeiro's official telephone directories on behalf of the
government-owned telephone company. The Company's interest consisted of 50% of
the common shares and 75% of the redeemable preferred shares and debt in
Telelistas.
For further information concerning the Company's operations and joint ventures,
see "Management's Discussion and Analysis of Financial Condition and Results of
Operations".
Research and Development
During fiscal years 1996, 1995 and 1994, the Company expended approximately
$12,187,000, $6,989,000 and $6,262,000, respectively, on research and
development, all of which is Company sponsored. A major portion of research and
development expenditures were incurred by the Electronic Publication and
Typesetting Systems segment, the Telephone Directory segment and the Computer
Systems segment.
The increase in fiscal year 1996 was due to increased efforts of these segments
to develop new products, upgrade existing products, and maintain competitive
positions by enhancing the quality, efficiency, reliability and
price/performance of products.
Customers
No customer represented more than 10% of the Company's consolidated revenues for
the year ended November 1, 1996. However, in fiscal year 1996, the Technical
Services and Temporary Personnel segment's sales to one customer represented
approximately 13% of the total sales of that segment; the Telephone Directory
segment's sales to one customer represented approximately 20% of the total sales
of that segment; the Telecommunications Services segment's sales to three
customers represented approximately 25%, 23% and 15% of the total sales of that
segment; and the Computer Systems segment's sales to three customers represented
approximately 27%, 12% and 11% of the total sales of that segment. Each of these
segments is dependent on such respective customers. In the event that there were
a loss of one or more of these customers and, unless the business is replaced by
that segment, there could be an adverse effect on the results for that segment's
business, although the Company does not believe that there would be an adverse
effect on the Company taken as a whole.
- 16 -
<PAGE> 17
Seasonality
Historically, the Company's results of operations have been lower in its 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 division produces a major portion of its revenues and
most of its profits in the Company's fourth fiscal quarter, and DataNational's
revenues and profits are lower in the Company's first fiscal quarter due to the
seasonality of its directory closing schedule. Sales by AII are generally lower
in the months of November and December due to the holiday season, which is a
peak publishing period when customers are reluctant to install and test new
equipment.
Employees
During the week ended November 1, 1996, Volt employed approximately 31,400
persons, including approximately 26,400 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.
Certain of the services rendered by Volt's Electronic Publication and
Typesetting Systems, Telephone Directory and Computer Systems segments require
highly trained technical personnel in specialized fields some of whom are
currently in short supply and, while the Company currently has a sufficient
number of such technical personnel in its employ, there can be no assurance that
in the future these segments can continue to employ sufficient technical
personnel necessary for the successful conduct of such services.
Management currently believes that its relations with its employees are
satisfactory.
Regulation
The Company's business is not subject to specific industry government
regulations. In connection with foreign sales, it is subject to the Foreign
Corrupt Practices Act and export controls. The export of certain technologies
are restricted. At the present time, and with respect to the countries in which
the Company's Electronic Publication and Typesetting Systems, Telephone
Directory and Computer Systems segments currently sell most of their products,
the sale of their current products, both hardware and software, are permitted
pursuant to a general export license. If the Company began selling to countries
designated by the United States as sensitive, such sales would be subject to
more restrictive export regulations.
Compliance with applicable present federal, state and local environmental laws
and regulations has not had, and the Company believes that compliance with such
laws and regulations in the future will not have, a material effect on the
Company's earnings, capital expenditures or competitive position.
See also Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
- 17 -
<PAGE> 18
ITEM 2. PROPERTIES
The Company occupies 41,000 square feet at 1221 Avenue of the Americas, New
York, New York under a lease which expires in 2000. The facility is shared by
its corporate headquarters, its Computer Systems' segment headquarters and a
regional headquarters of its Technical Services and Temporary Personnel segment.
The following table sets forth certain information as to each of the Company's
other major facilities:
<TABLE>
<CAPTION>
Sq. Ft.
Leased If Leased,
or Year of Lease
Location Business Segment Owned Expiration
- -------- ---------------- ------- -------------
<S> <C> <C> <C>
Anaheim, Telephone Directory 39,000* owned
California Computer Systems
Technical Services and
Temporary Personnel
El Segundo, Technical Services and 20,000 owned
California Temporary Personnel
Telephone Directory
Thousand Oaks, Electronic Publication and 134,000 owned
California Typesetting Systems
Orange, West Region Headquarters 200,000* owned
California Accounting Center
Technical Services and
Temporary Personnel
Telephone Directory
Computer Systems
San Diego, Technical Services and 20,000 owned
California Temporary Personnel
Norcross, Electronic Publication and 13,000 1998
Georgia Typesetting Systems
Technical Services and
Temporary Personnel
Telecommunications Services
Indianapolis, Telephone Directory 22,000 1998
Indiana Technical Services and
Temporary Personnel
</TABLE>
- 18 -
<PAGE> 19
ITEM 2. PROPERTIES - Continued
<TABLE>
<CAPTION>
Sq. Ft.
Leased If Leased,
or Year of Lease
Location Business Segment Owned Expiration
- -------- ---------------- ------- -------------
<S> <C> <C> <C>
Wallington, Computer Services 32,000 1997
New Jersey
Blue Bell, Telephone Directory 52,000 2001
Pennsylvania
Montevideo, Telephone Directory 96,000 2001
Uruguay
Chantilly, Telephone Directory 20,000 2000
Virginia Computer Systems
Technical Services and
Temporary Personnel
Redmond, Technical Services and
Washington Temporary Personnel 21,000 1998
Los Angeles, Electronic Publication and
California Typesetting Systems 52,000 1999
</TABLE>
* See Note G of Notes to Consolidated Financial Statements for information
regarding a term loan secured by these properties.
In addition, the Company leases space in approximately 207 other facilities
throughout the United States and Europe (excluding month-to-month rentals), each
of which consists of less than 10,000 square feet. These leases expire at
various times from 1997 until 2002 (with one, in the United Kingdom, expiring in
2010).
At times, the Company leases space to others in the buildings which it owns if
it does not then require the space for its own business.
The Company believes that its facilities are adequate for its presently
anticipated requirements and that it is not dependent upon any individually
leased premises.
For additional information pertaining to properties, see Note O of Notes to
Consolidated Financial Statements.
- 19 -
<PAGE> 20
ITEM 3. LEGAL PROCEEDINGS
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
Executive Officers
WILLIAM SHAW, 72, a founder of the Company, has been President and Chairman of
the Board of the Company for more than the past five years and has been employed
in executive capacities by the Company and its predecessors for over forty
years. He is the brother of Jerome Shaw.
JEROME SHAW, 70, a founder of the Company, has been Executive Vice President and
Secretary of the Company for more than the past five years and has been employed
in executive capacities by the Company and its predecessors for over forty
years. He is the brother of William Shaw.
IRWIN B. ROBINS, 62, has been a Senior Vice President of the Company since
September 1985. For more than five years prior thereto, he served as Vice
President and General Counsel of the Company.
JAMES J. GROBERG, 68, has been a Senior Vice President of the Company since
September 1985. Mr. Groberg also served as Treasurer of the Company from
September 1985 to January 1994 and Executive Vice President and Treasurer of the
Company from July 1973 until April 1981.
HOWARD B. WEINREICH, 54, has been General Counsel of the Company since September
1985 and served as Associate General Counsel of the Company from September 1981
until he assumed his present position.
JACK EGAN, 47, has been Vice President - Corporate Accounting and Principal
Accounting Officer since January 1992. For more than five years prior thereto,
he served as Assistant Controller of the Company.
DANIEL G. HALLIHAN, 48, has been Vice President - Accounting Operations since
January 1992. For more than five years prior thereto, he served as Director of
Corporate Financial Planning & Control.
LUDWIG M. GUARINO, 45, has been Treasurer of the Company since January 1994. For
more than five years prior thereto, he served as Assistant Treasurer of the
Company.
- 20 -
<PAGE> 21
ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS
The Company's common stock is quoted on the NASDAQ National Market (NASDAQ
Symbol-Volt). The following table sets forth the high and low prices of Volt's
common stock, as reported by NASDAQ, without retail mark-up, mark-down or
commission:
<TABLE>
<CAPTION>
1996 1995(a)
-------------- ---------------
Fiscal Period High Low High Low
---- --- ---- ---
<S> <C> <C> <C> <C>
First Quarter $27-1/2 $22 $14-3/4 $12-7/8
Second Quarter 31 19 16-5/8 13-5/8
Third Quarter 45-1/2 28-1/4 16 14-1/8
Fourth Quarter 44-1/4 37 24-3/4 14-5/8
</TABLE>
(a) Restated to reflect a two-for-one stock split, effected on October 6, 1995.
The approximate number of record holders of the Company's common stock at
January 17, 1997 was 416.
Cash dividends have not been paid during the two-year period ended November 1,
1996. The Company has agreements, which contain financial covenants, the most
restrictive of which requires the Company to maintain a consolidated net worth
of $93,225,000. At November 1, 1996, this condition was met. (See Note G of
Notes to Consolidated Financial Statements).
- 21 -
<PAGE> 22
ITEM 6. SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
Year Ended (Note 1)
--------------------------------------------------------------------
November November October October October
1, 1996 3, 1995 28, 1994 29, 1993 30, 1992
------- ------- -------- -------- --------
(Dollars in thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Revenues $1,053,496 $ 907,362 $ 734,486 $ 565,173 $ 530,567
========== ========== ========== ========== ==========
Income (loss) from operations
before extraordinary item and cumulative
effect of a change in accounting $ 22,435* $ 16,386* $ 12,044* $ (3,674)* $ 1,091*
Extraordinary item-loss on the
repurchase of debt, net of income taxes--Note 2 (87) (62) (271)
Cumulative effect of a change in accounting
for income taxes--Note 3 959
---------- ---------- ---------- ---------- ----------
Net income (loss) $ 22,348 $ 16,324 $ 11,773 $ (2,715) $ 1,091
========== ========== ========== ========== ==========
<CAPTION>
Per Share Data
<S> <C> <C> <C> <C> <C>
Income (loss) from operations
before extraordinary item and cumulative
effect of a change in accounting $ 2.27* $ 1.70* $ 1.26* $ (.38)* $ .11*
Extraordinary item (.01) (.01) $ (.03)
Cumulative effect of a change in accounting
for income taxes .10
---------- ---------- ---------- ---------- ----------
Net income (loss) $ 2.26 $ 1.69 $ 1.23 $ (.28) $ .11
========== ========== ========== ========== ==========
Number of shares used in computation 9,866,443 9,634,334 9,605,492 9,597,726 9,580,762
Total assets $ 337,144 $ 264,011 $ 226,904 $ 235,892 $ 226,502
Long-term debt, net of current portion $ 57,395 $ 28,819 $ 40,788 $ 58,095 $ 81,076
</TABLE>
Note 1--Fiscal years 1992 through 1994 and 1996, were comprised of 52, weeks
while fiscal year 1995 was comprised of 53 weeks.
Note 2--See Note G of Notes to Consolidated Financial Statements for fiscal
years 1996, 1995 and 1994.
Note 3--The cumulative effect of adopting statement No. 109, "Accounting for
Income Taxes."
Note 4--Cash dividends have not been paid during the five-year period
ended November 1, 1996.
* The results of operations include the following gains and (losses) on the
sale or write-down of marketable securities: 1996 - $52,000; 1994 -
($7,000); 1993 - $199,000 or $.02 per share and 1992 - $541,000 or $.06 per
share.
The results for the fiscal year ended November 1, 1996 included gains
aggregating $2,625,000 ($1,600,000, net of taxes or $.16 per share), 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.
In October 1996, the Internal Revenue Service concluded its examination of
the Company's tax returns for fiscal 1989 through 1993. As a result of the
examination, $1,414,000 ($.14 per share) and $723,000 ($443,000, net of
taxes, or $.04 per share) were included as a tax benefit and interest income,
respectively, for fiscal year ended November 1, 1996.
The results of operations for fiscal 1993 includes a pretax charge of
$6,400,000 or ($.44 per share) for estimated costs in excess of anticipated
revenues under two contracts for major directory assistance systems. In
fiscal 1994 and 1995, the Company received customer acceptance under such
contracts, which, because of the pretax charge in 1993 related to such
contracts, had no effect on Company's earnings for 1994 and 1995, although
revenues (and costs) of $59 million and $15 million were recognized in 1994
and 1995, respectively.
The results of fiscal 1992 include a reversal of a portion of prior years'
business tax expenses of $1,070,000 ($.08 per share) and a charge of $722,000
($.05 per share) relating to a portion of a facility under lease until fiscal
1994 which is no longer being utilized.
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<PAGE> 23
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. Management has made no predictions
or estimates as to future operations and no inferences as to future operations
should be drawn. This discussion and analysis contains forward- looking
statements which, in addition to assuming a continuation of the degree and
timing of customer utilization and rate of renewals of contracts with the
Company at historical levels, are subject to a number of known and unknown risks
that, in addition to general economic, competitive and other business
conditions, (many of which are discussed elsewhere in this Report) could cause
actual results, performance and achievements to differ materially from those
described or implied in the forward-looking statements. The following discussion
should be read in conjunction with the Industry Segment Data in Item 1 of this
Report and the Consolidated Financial Statements and Notes thereto which appear
in Item 8 of this Report.
Results of Operations - Summary
Revenues in fiscal 1996 increased by $146,134,000, or 16%, from fiscal 1995, as
sales increased by $141,607,000, or 16%. Revenues in 1996 included a pretax gain
of $3,666,000 from the sale of an interest in the Company's Electronic
Publication and Typesetting Systems segment. Revenues in fiscal 1995 increased
by $172,876,000, or 24%, from fiscal 1994, as sales increased by $186,436,000,
or 26%. The increase in sales in 1996 and 1995 are primarily attributable to
increases in the Technical Services and Temporary Personnel segment of
$143,939,000 and $137,836,000, respectively, and the Telecommunications Services
segment of $23,482,000 and $15,314,000, respectively. This was partially offset,
in 1996, by a decrease in the Computer Systems segment of $52,874,000 due to the
completion in 1995 of several long-term contracts, which were accounted for
under the completed contract method of accounting.
The Company's income before income taxes, minority interests, and extraordinary
items, increased by 23% in 1996 to $33,597,000, and by 38% in 1995 to
$27,281,000. The 1996 results include a $3,666,000 pretax gain on the sale of
interest in subsidiaries. The increase in operating profit in 1996 was primarily
from the Telephone Directory segment, with an increase of $3,352,000, and the
Telecommunications Services segment, with an increase of $3,306,000, partially
offset by the Electronic Publication and Typesetting systems segment, with a
decrease of $5,273,000. The increase in the operating profit in 1995 was
primarily from the Technical Services and Temporary Personnel segment, with an
increase of $11,780,000, and the Computer Systems segment, with an increase of
$8,563,000.
The extraordinary items in fiscal 1996, 1995 and 1994 were losses of $87,000,
$62,000, and $271,000, respectively, due to the early redemption at par of
$22,854,000, $10,000,000 and $30,000,000 face value of the Company's 12-3/8%
Subordinated Debentures.
Net income in fiscal 1996, 1995 and 1994 was $22,348,000, $16,324,000, and
$11,773,000 respectively.
The fiscal 1996 and 1994 years include 52 weeks, compared to 53 weeks in fiscal
1995.
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<PAGE> 24
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS--Continued
Results of Operations - Segments
The Company's consolidated operating profit was $44,509,000 in fiscal 1996,
compared to $42,493,000 in fiscal 1995 and $22,982,000 in fiscal 1994. (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).
The Technical Services and Temporary Personnel segment's sales increased by
$143,939,000, or 25%, in fiscal 1996 to $716,285,000 and by $137,836,000, or
32%, in fiscal 1995 to $572,346,000. Operating profit of the segment decreased
by $771,000, or 3%, to $27,346,000 in fiscal 1996 after having increased by
$11,780,000, or 72%, to $28,117,000 in fiscal 1995. Approximately $48,100,000,
or 33%, of the segment's 1996 sales increase and $11,700,000, or 8%, of the 1995
sales increase was due to pass-through costs primarily related to the use of
subcontractors to service large national contracts. In fiscal 1996 and 1995,
approximately $28,000,000 and $56,000,000, respectively, of the segment's sales
increase resulted from business with new customers, with pre-existing customers
accounting for the balance of the sales increase. In fiscal 1995, a new
customer, with a high gross margin, accounted for approximately $38,000,000 of
the increase in sales. However, subsequent to February 1996, the segment's
services to that customer were no longer required. The operating profit decrease
in fiscal 1996 was due to a 1.8 percentage point decrease in gross margin, as
well as increases in overhead due to opening new offices to service national
contracts, partially offset by the increased sales and a $2,100,000
retrospective workers' compensation insurance adjustment. One-half of the 1.8
percentage point decrease in gross margin was due to higher subcontractor usage
billed without a mark-up. The loss of the high-margin customer discussed above,
lower margins on the increasing business with large national contracts, and an
increase in unemployment insurance costs accounted for the remainder of the
gross margin decline. The operating profit increase in fiscal 1995 was due to
the increased sales volume and a .9 percentage point increase in gross margin
resulting from lower workers' compensation insurance and other costs, partially
offset by increases in overhead to support the additional sales. Downward
pressures on operating margins are anticipated for fiscal 1997 due to increases
in overhead to open new offices, particularly on-site offices for national
accounts, start-up costs related to new contracts and additional personnel to
bid and service national accounts, as well as significantly increased
competition. As revenues from these new contracts reach their anticipated levels
in the second half of fiscal 1997, operating profits should begin to increase.
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 Telephone Directory segment's sales increased by $8,844,000, or 13%, to
$78,611,000 in fiscal 1996 and decreased by $4,388,000, or 6%, to $69,767,000 in
fiscal 1995. In fiscal 1996, the segment's operating profit increased by
$3,352,000, or 223%, to $4,858,000. In fiscal 1995, the segment's operating
profit decreased by $5,189,000, or 78%, to $1,506,000. The fiscal 1996 sales
increase was due to a 11% increase in telephone directory production volume, an
increase in independent directory sales of 20% and increased sales by the
Uruguayan division of 19%. The increase in operating profit in fiscal 1996 was
due to the sales increase discussed above and higher gross margins on the
telephone directory production sales, partially offset by higher printing costs
in the Uruguayan printing operation resulting from a move to a new facility and
installation of new equipment. The fiscal 1995 sales decline was due to a
decrease in telephone directory production volume, primarily related to the
expiration of a contract in early 1995, which generated sales of $9,000,000 in
fiscal 1994, partially offset by increases in independent directory sales of 16%
and
-24-
<PAGE> 25
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS--Continued
increased volume in the Uruguayan division of 15%. The fiscal 1995 decline in
operating profit was due to the lower telephone directory production sales
volume, an increase in costs to develop new directory management systems and
start-up losses incurred in the automated production of newspaper display
advertisements. This segment's services are rendered under various short and
long-term contracts, some of which expired in 1996 while others were renewed and
new contracts were awarded to the segment. A contract with one customer, which
accounted for approximately 19% of the segment's revenues and 61% of the
segment's operating profit for fiscal 1996, is scheduled to expire on December
31, 1997, with the customer having renewal options. However, the segment has
obtained several significant contracts which have begun in fiscal 1997. Other
contracts are scheduled to expire in 1997 through 2001. While the segment
believes it can secure renewals and/or extensions of some of the contracts which
are scheduled to expire, some of which are material this segment, and obtain
replacement business, there can be no assurance that contracts will be renewed
or extended, or that additional or replacement contracts will be awarded to the
segment, on satisfactory terms.
The Telecommunications Services segment's sales increased by $23,482,000, or 35%
to $91,472,000 in 1996 and $15,314,000, or 29%, to $67,990,000 in fiscal 1995.
Operating profit of the segment increased by $3,306,000, or 54% in fiscal 1996
to $9,484,000, and by $5,386,000, or 680% in fiscal 1995 to $6,178,000. The
fiscal 1996 sales increase was due to a 32% increase in the Construction
division and a 29% increase in the Business Systems division. Operating results
improved due to increased sales volume, and a 1.9 percentage point decrease in
overhead expended per sales dollar. The fiscal 1995 sales increase was due to a
37% increase in the Construction division and an 8% increase in the Business
Systems division. Fiscal 1995 operating income improved due to the increased
sales volume, an increase in the gross margin of 1.3 percentage points and a 6.8
percentage point decrease in overhead expended per sales dollar.
The Computer Systems segment's sales decreased by $52,874,000, or 40%, to
$79,086,000 in fiscal 1996 after having increased by $32,825,000, or 33%, to
$131,960,000 in fiscal 1995, from $99,135,000 in fiscal 1994. The segment had
operating profits in fiscal 1996 and 1995 of $7,707,000 and $6,395,000,
respectively, as compared to an operating loss of $2,168,000 in fiscal 1994. The
1996 and 1995 sales included revenues of $28,000,000 and $85,000,000,
respectively, recognized on customer acceptance of several major Delta Operator
Service Systems (DOSS). The higher level of sales in 1995, than in 1996 was due
to a greater number of DOSS systems accepted by customers in 1995. Fiscal 1996
sales included increased sales of conservation services to utilities. The
increase in operating profit in 1996 was primarily due to increased profits on
conservation services to utilities. The fiscal 1995 increase in sales and
operating profit over 1994 levels was primarily due to a higher number of DOSS
systems accepted in 1995 compared to 1994, increased maintenance revenues and
increased sales and profits on conservation services to utilities. The segment
anticipates that a contract with one customer, which accounted for approximately
9% of the segment's revenues and 46% of the segment's operating profits for
fiscal 1996, will expire in fiscal 1997, because the customer no longer requires
Volt's services. Under the completed contract
-25-
<PAGE> 26
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS--Continued
method of accounting used by this segment, revenues together with related costs
are recognized in income upon acceptance by the customer. Since sales of systems
under large contracts are generally recorded upon customer acceptance,
acceptance in a particular year may affect the comparability of results with
other years. Although sales of systems are normally not recurring, a larger
installed base provides opportunities for future expansion of existing customer
systems, system enhancement sales and maintenance revenue.
The Electronic Publication and Typesetting Systems segment's sales increased by
$18,833,000, or 27%, to $89,238,000 in fiscal 1996 and increased by $5,082,000,
or 8%, to $70,405,000 in fiscal 1995. The segment incurred an operating loss in
fiscal 1996 of $4,817,000, compared to operating profit of $456,000 and
$1,334,000, respectively, in fiscal 1995 and 1994. Since January 29, 1996, the
segment has been comprised of the Company's former Autologic, Incorporated
subsidiary and related foreign subsidiaries ("Autologic"), which were combined
on that date with Information International Incorporated ("Triple-I") as a
publicly held company. (See Note I in the Notes to Consolidated Financial
Statements). The results of operations for all periods prior to the merger
reflect the results of Autologic on a stand-alone basis, while results
subsequent to that date reflect the combined operations of Autologic and
Triple-I. The fiscal 1996 sales increase resulted primarily from the integration
of the two businesses. Had this transaction occurred at the beginning of fiscal
year 1995, sales in 1996 would have been $99,194,000 compared to sales of
$104,643,000 in 1995. The decrease of $5,449,000, or 5.2%, was primarily due to
the phase out of a product line by Triple-I. The 1996 operating loss included
$700,000 of restructuring charges and $1,602,000 for amortization of intangibles
resulting from the merger. The decrease in operating profits in 1996 was also
due to a 4 percentage point increase in total operating expenses expended per
sales dollar, partially offset by the increased sales volume. The fiscal 1996
increase in operating expenses included a 76% increase in engineering, research
and development and a 35% increase in selling and administrative expenses. These
expenses increased at a greater rate than sales in 1996 due to additional new
product and expansion into new markets. The fiscal 1995 sales increase was
primarily due to increased equipment sales in overseas markets. Despite the
increase in sales, operating profits decreased by $878,000, or 66%, in fiscal
1995 to $456,000, primarily due to a reduction in the gross margin of 2.3
percentage points, partially offset by a 1.2 percentage point decrease in total
operating expenses expended per sales dollar. The decrease in the gross margin
percentage resulted from 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' products). The markets
in which the segment competes are marked by rapidly changing technology, with
sales in fiscal years 1996, 1995 and 1994 of equipment introduced within the
last three years comprising approximately 98%, 84% and 84%, respectively, of
equipment sales.
-26-
<PAGE> 27
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS--Continued
Results of Operations - Other Interest income increased by $1,086,000, or 54%,
in fiscal 1996 and increased by $673,000, or 50%, in fiscal 1995. The fiscal
1996 increase was primarily due to $723,000 of interest income received on a tax
refund from the Internal Revenue Service as the result of the completion of an
examination of the Company's tax returns for fiscal years 1989 to 1993. The
fiscal 1995 increase was primarily due to higher prevailing rates and additional
funds available for investment in interest-bearing securities.
The Company's equity in the net loss of its joint ventures was $1,414,000 in
1996, compared to a net loss of $1,000,000 in 1995 and net income of $3,055,000
in 1994. The fiscal 1996 and 1995 decreases were due to the start-up losses
incurred by the Company's Brazilian joint venture which began operations in July
1994. The Company's share of the 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, increased by $242,000 and
$313,000 in fiscal 1996 and 1995, respectively, due to increased revenues. In
January 1997, the Company sold its 50% interest in Telelistas Editora Ltda.
("Telelistas"), a Brazilian joint venture, which is the official publisher of
telephone directories in Rio de Janeiro, for the government-owned telephone
company (see Note L of Consolidated Notes to Financial Statements).
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.
Selling and administrative expenses increased by $7,848,000, or 17%, to
$52,848,000 in 1996 and by $2,491,000, or 6%, to $45,000,000 in 1995 to support
the increased sales activities. These expenses expressed as a percentage of
sales were 5.0% in each of the fiscal years 1996 and 1995 and 5.9% in 1994.
Research and development expenses increased by $5,198,000, or 74%, to
$12,187,000 in 1996 and by $727,000, or 12%, to $6,989,000 in 1995. The increase
in 1996 was due to additional product development by the Telephone Directory,
Computer Systems and, as a result of the combination of Autologic and Triple-I,
the Electronic Publication and Typesetting Systems segments. The increase in
1995 was due to additional product development by the Telephone Directory and
Computer Systems segments, partially offset by a decrease in the Electronic
Publication and Typesetting Systems segment. The decrease in the Electronic
Publication and Typesetting Systems segment in 1995 was due primarily to a
reduction in certain development projects.
Depreciation and amortization increased by $3,683,000, or 29%, to $16,299,000 in
1996 and by $1,305,000, or 12%, to $12,616,000 in 1995. The fiscal 1996 and 1995
increases are due to increased fixed asset expenditures in 1994, 1995 and 1996,
and, in 1996, to the amortization of goodwill created in the Autologic
transaction.
-27-
<PAGE> 28
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS--Continued
The foreign exchange loss in fiscal year 1996 was $516,000, compared to a gain
in 1995 of $186,000, and a loss of $39,000 in fiscal 1994. The foreign exchange
losses in 1996 and 1994 were due to unfavorable, and the gain in 1995, was due
to favorable, currency movements in the European currency market. To minimize
the potential adverse impact on the Company's foreign currency receivables and
sales when the dollar strengthens against foreign currencies, foreign currency
options are purchased.
Interest expense decreased by $878,000, or 15%, to $5,167,000 in 1996 and by
$1,423,000, or 19%, to $6,045,000 in 1995. The decreases in 1996 and 1995 were
due to redemptions and the retirement of $30,000,000 (in 1994), $10,000,000 (in
1995), and the remaining $22,854,000 (in 1996) of the Company's 12-3/8%
Subordinated Debentures. The Company has established additional financing at
lower costs through the issuance in a private placement of $50,000,000 and the
sale of accounts receivable under a securitization program. In fiscal 1996, 1995
and 1994, other income reflects charges of $1,955,000, $2,133,000 and
$1,557,000, respectively, for costs incurred in conjunction with the sale of
accounts receivable (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 1994 through fiscal
1996.
-28-
<PAGE> 29
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS--Continued
Liquidity and Capital Resources
Cash and cash equivalents decreased by $12,073,000 in 1996 to $13,277,000.
Cash of $16,346,000 was used by operating activities in 1996 as a result of the
expansion of the Company's businesses. Primary among the factors providing cash
flows to operating activities in 1996 were the Company's net income of
$22,348,000, augmented by $16,299,000 of depreciation and amortization, and
increases in accounts payable of $14,328,000 primarily due to the use of
subcontractors by the Technical Services and Temporary Personnel segment to
service national accounts. Among the principal uses of cash in operating
activities in 1996 were an increase in the level of accounts receivable of
$57,478,000 due to a $17,000,000 reduction in interests in accounts receivable
sold at November 1, 1996 compared with November 3, 1995 (see Note C of Notes to
Consolidated Financial Statements) as well as increased business with new and
existing customers. A decrease in accrued expenses of $4,034,000 was primarily
the result of an agreement to pay a premium totaling $4,050,000 to an insurance
carrier to close out prior years' retrospective insurance policies, which
resulted in a pretax gain of $2,625,000 (see Note K of Notes to Consolidated
Financial Statements). A decrease in income taxes payable of $8,292,000 was due
to the timing of tax payments made during the year.
The principal factors in the application of $22,558,000 to investing activities
were the net expenditures for property, plant and equipment of $26,370,000 and
the investment in joint ventures of $7,309,000.
The principal factors in cash provided by financing activities ($26,370,000)
were proceeds of $50,000,000 from the private placement of the Company's 7.92%
Senior Notes partially offset by the early redemption of $22,854,000 of the
Company's 12-3/8% Subordinated Debentures.
In addition to its cash and cash equivalents, at November 1, 1996, the Company's
investment portfolio, primarily U.S. treasury notes and certificates of deposit,
had a carrying value of $4,458,000. In addition, the Company has the ability to
sell up to $32,000,000 of additional receivables, in excess of amounts sold at
November 1, 1996, under its existing receivable sales program. The Company also
has $16,500,000 of credit lines with banks, of which $10,000,000 is under a
revolving credit agreement that expires at August 1, 1997 unless renewed. The
Company had outstanding bank borrowings of $5,414,000 at November 1, 1996 under
such lines.
-29-
<PAGE> 30
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS--Continued
The Company believes its current financial position, working capital financing
lines 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 shares of its common stock.
In October 1995, the Financial Accounting Standards Board issued Statements of
Financial Accounting Standards No. 123 ("SFAS 123"), "Accounting for Stock-Based
Compensation," which establishes a fair value based method of accounting for
stock-based compensation plans. SFAS 123 encourages, but does not require,
adoption of a fair value based method. The Company has determined it will
continue to account for such plans in accordance with Accounting Principles
Board Opinion No. 25, "Accounting for Stock Issued to Employees."
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
-30-
<PAGE> 31
ERNST & YOUNG LLP
787 Seventh Avenue
New York, New York 10019
Phone #: 212-773-3000
REPORT OF INDEPENDENT AUDITORS
Board of Directors
Volt Information Sciences, Inc.
We have audited the accompanying consolidated balance sheets of Volt Information
Sciences, Inc. and subsidiaries as of November 1, 1996 and November 3, 1995, and
the related consolidated statements of income, stockholders' equity, and cash
flows for each of the three years in the period ended November 1, 1996. Our
audits also included the financial statement schedule listed in the Index at
Item 14(a)(2). These financial statements and schedule are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
statements and schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of Volt
Information Sciences, Inc. and subsidiaries at November 1, 1996 and November 3,
1995, and the consolidated results of its operations and its cash flows for each
of the three years in the period ended November 1, 1996, in conformity with
generally accepted accounting principles. Also, in our opinion, the related
financial statement schedule, when considered in relation to the basic financial
statements taken as a whole, presents fairly in all material respects the
information set forth therein.
Ernst & Young LLP
January 8, 1997
-31-
<PAGE> 32
VOLT INFORMATION SCIENCES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
November November
1, 1996 3, 1995
------------ ------------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents--Note A $ 13,277,000 $ 25,350,000
Short-term investments--Notes B, N and O 4,458,000 1,047,000
Trade accounts receivable less
allowances of $5,191,000 (1996)
and $3,943,000 (1995)--Note C
and Schedule II 170,484,000 111,696,000
Inventories--Notes A and D 31,646,000 28,207,000
Deferred income taxes--Notes A and F 11,757,000 8,711,000
Prepaid expenses and other assets--Note L 11,524,000 7,204,000
------------ ------------
TOTAL CURRENT ASSETS 243,146,000 182,215,000
INVESTMENTS IN SECURITIES--
Note B and Schedule II -- 4,136,000
INVESTMENTS IN JOINT VENTURES--
Note L 11,179,000 13,903,000
PROPERTY, PLANT AND EQUIPMENT--
at cost--Notes A, G and J
Land and buildings 33,589,000 33,591,000
Machinery and equipment 65,778,000 51,233,000
Leasehold improvements 4,263,000 2,818,000
------------ ------------
103,630,000 87,642,000
Less allowances for depreciation
and amortization 38,761,000 32,057,000
------------ ------------
64,869,000 55,585,000
DEPOSITS, RECEIVABLES
AND OTHER ASSETS 1,459,000 2,764,000
DEFERRED INCOME TAXES--
Notes A and F 1,034,000 --
INTANGIBLE ASSETS--net of accumulated
amortization of $6,459,000 (1996) and
$4,181,000 (1995)--Notes A and F 15,457,000 5,408,000
------------ ------------
$337,144,000 $264,011,000
============ ============
</TABLE>
<TABLE>
<CAPTION>
November November
1, 1996 3, 1995
------------- -------------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS'
EQUITY
CURRENT LIABILITIES
Notes payable to banks--Note E $ 5,414,000 $ 5,154,000
Current portion of long-term debt--
Note G 1,949,000 2,000,000
Accounts payable 43,345,000 30,786,000
Accrued expenses
Wages and commissions 29,998,000 23,403,000
Taxes other than income taxes 12,149,000 10,059,000
Insurance 9,334,000 18,893,000
Other 8,229,000 6,686,000
Customer advances and other liabilities 16,215,000 15,250,000
Income taxes--Notes A and F 3,022,000 12,401,000
------------- -------------
TOTAL CURRENT LIABILITIES 129,655,000 124,632,000
LONG-TERM DEBT--Note G 57,395,000 28,819,000
DEFERRED INCOME TAXES--
Notes A and F -- 3,433,000
------------- -------------
187,050,000 156,884,000
MINORITY INTERESTS--Note I 19,857,000 --
STOCKHOLDERS' EQUITY--Notes
A,B,C,G,H and L and Schedule II
Preferred stock, par value $1.00
Authorized--500,000 shares;
issued--none
Common stock, par value $.10
Authorized--30,000,000 shares;
issued--9,692,143 shares (1996)
and 9,664,794 shares (1995) 969,000 966,000
Paid-in capital 27,763,000 27,098,000
Retained earnings 101,505,000 79,157,000
Cumulative foreign currency
translation adjustment (4,000) (168,000)
Unrealized gain on
marketable securities 4,000 74,000
------------- -------------
130,237,000 107,127,000
COMMITMENTS--Note O
------------- -------------
$ 337,144,000 $ 264,011,000
============= =============
</TABLE>
See Notes to Consolidated Financial Statements.
-32-
<PAGE> 33
VOLT INFORMATION SCIENCES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
YEAR ENDED
---------------------------------------------------------
November November October
1, 1996 3, 1995 28, 1994
--------------- ------------- -------------
<S> <C> <C> <C>
Revenues:
Sales of services $ 960,438,000 $ 837,699,000 $ 656,212,000
Sales of products 88,476,000 69,608,000 64,659,000
--------------- ------------- -------------
Total sales 1,048,914,000 907,307,000 720,871,000
Interest income 3,095,000 2,009,000 1,336,000
Gains (losses) on securities-net 52,000 (7,000)
Equity in (loss) income of joint ventures--Note L (1,414,000) (1,000,000) 3,055,000
Gain on sale of joint venture--Note L 9,770,000
Gain on sale of interest in subsidiaries--Note I 3,666,000
Other expense-net--Note C (817,000) (954,000) (539,000)
--------------- ------------- -------------
1,053,496,000 907,362,000 734,486,000
--------------- ------------- -------------
Costs and expenses:
Cost of sales:
Services 870,677,000 761,240,000 603,607,000
Products 60,026,000 47,104,000 41,984,000
Selling and administrative 52,848,000 45,000,000 42,509,000
Research and development 12,187,000 6,989,000 6,262,000
Engineering 2,179,000 1,273,000 1,479,000
Depreciation and amortization 16,299,000 12,616,000 11,311,000
Foreign exchange loss (gain) - net 516,000 (186,000) 39,000
Interest expense 5,167,000 6,045,000 7,468,000
--------------- ------------- -------------
1,019,899,000 880,081,000 714,659,000
--------------- ------------- -------------
Income before income taxes and
items shown below 33,597,000 27,281,000 19,827,000
Income tax provision--Notes A and F 12,448,000 10,895,000 7,783,000
Minority interests--Note I 1,286,000
--------------- ------------- -------------
Income before extraordinary item 22,435,000 16,386,000 12,044,000
Extraordinary item-loss on repurchase of debt,
net of income taxes--Note G (87,000) (62,000) (271,000)
--------------- ------------- -------------
NET INCOME $ 22,348,000 $ 16,324,000 $ 11,773,000
=============== ============= =============
Per Share Data
Income before extraordinary item $ 2.27 $ 1.70 $ 1.26
--------------- ------------- -------------
Extraordinary item (.01) (.01) (.03)
--------------- ------------- -------------
NET INCOME $ 2.26 $ 1.69 $ 1.23
=============== ============= =============
Number of shares used in computation--Note A 9,866,443 9,634,334 9,605,492
=============== ============= =============
</TABLE>
See Notes to Consolidated Financial Statements.
-33-
<PAGE> 34
VOLT INFORMATION SCIENCES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Cumulative
Foreign Unrealized
Common Stock Currency Gain (Loss)
$.10 Par Value Paid-In Retained Translation On Marketable Treasury
Shares Amount Capital Earnings Adjustment Securities Stock
------ ------ ------- -------- ---------- ---------- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at October 29, 1993 7,789,580 $ 779,000 $ 43,823,000 $ 79,882,000 $(706,000) $(46,100,000)
Stock award--1,000 shares 7,000 11,000
Unrealized foreign currency
translation adjustment--net of
taxes of $338,000 423,000
Unrealized loss on marketable
securities-net of $30,000
tax benefit $(47,000)
Net income for the year 11,773,000
---------- --------- ------------ ------------ --------- -------- ------------
Balance at October 28, 1994 7,789,580 779,000 43,830,000 91,655,000 (283,000) (47,000) (46,089,000)
Contribution to ESOP-8,621 shares 154,000 96,000
Stock options exercised, including
related tax benefit of $130,000 22,750 3,000 469,000
Cancellation of treasury stock (2,977,933) (298,000) (16,873,000) (28,822,000) 45,993,000
Issuance of shares of common
stock resulting from a two-for-one
stock split in the form of a 100%
stock dividend 4,830,397 482,000 (482,000)
Unrealized gain on marketable
securities-net of taxes of $78,000 121,000
Unrealized foreign currency
translation adjustment--net of
taxes of $58,000 115,000
Net income for the year 16,324,000
---------- --------- ------------ ------------ --------- -------- ------------
Balance at November 3, 1995 9,664,794 966,000 27,098,000 79,157,000 (168,000) 74,000 --
Contribution to ESOP 18,349 2,000 498,000
Stock awards 600 11,000
Stock options exercised, including
related tax benefit of $64,000 8,400 1,000 156,000
Unrealized foreign currency
translation adjustment--net of
taxes of $93,000 164,000
Unrealized loss on marketable
securities-net of $45,000 (70,000)
tax benefit
Net income for the year 22,348,000
---------- --------- ------------ ------------ --------- -------- ------------
Balance at November 1, 1996 9,692,143 $ 969,000 $ 27,763,000 $101,505,000 $ (4,000) $ 4,000 $ --
========== ========= ============ ============ ========= ======== ============
</TABLE>
There were no shares of preferred stock issued or outstanding.
See Notes to Consolidated Financial Statements.
-34-
<PAGE> 35
VOLT INFORMATION SCIENCES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED
----------------------------------------------------
November November October
1, 1996 3, 1995 28, 1994
------------ ------------ ------------
<S> <C> <C> <C>
CASH (USED IN) PROVIDED BY OPERATING
ACTIVITIES
Net income $ 22,348,000 $ 16,324,000 $ 11,773,000
Adjustments to reconcile to cash (used in) provided
by operating activities:
Extraordinary loss 87,000 62,000 271,000
Depreciation and amortization 16,299,000 12,616,000 11,311,000
Equity in (income) loss of joint ventures 1,414,000 1,000,000 (3,055,000)
Gain on sale of joint venture (9,770,000)
Gain on partial sale of subsidiaries (3,666,000)
Distributions from joint ventures 2,599,000 2,316,000 3,036,000
Accounts receivable provisions 2,718,000 2,081,000 1,903,000
Minority interests (1,286,000)
(Gains) losses on foreign currency translation (214,000) 102,000 755,000
Losses (gains) on dispositions of property,
plant and equipment 64,000 (354,000) (68,000)
Deferred income tax (benefit) expense (2,736,000) (5,419,000) 816,000
(Gains) losses on sales of securities (34,000) 7,000
Other (8,000) 226,000 304,000
Changes in operating assets and liabilities:
Increase in accounts receivable (57,478,000) (15,731,000) (27,226,000)
(Increase) decrease in inventories (1,661,000) (3,124,000) 526,000
Decrease in recoverable income taxes 4,695,000
Decrease (increase) in prepaid expenses
and other current assets 1,765,000 (2,892,000) 666,000
Decrease (increase) in other assets 1,379,000 (1,494,000) 1,654,000
Increase (decrease) in accounts payable 14,328,000 1,788,000 (108,000)
(Decrease) increase in accrued expenses (4,034,000) 10,596,000 11,164,000
Increase in customer advances
and other liabilities 62,000 3,635,000 4,928,000
(Decrease) increase in income taxes payable (8,292,000) 12,383,000 931,000
------------ ------------ ------------
NET CASH (USED IN) PROVIDED BY OPERATING
ACTIVITIES (16,346,000) 34,115,000 14,513,000
------------ ------------ ------------
CASH (APPLIED TO) PROVIDED BY
INVESTING ACTIVITIES
Sales of investments 48,000 1,050,000 6,851,000
Maturities of investments 7,561,000 10,770,000 12,602,000
Purchases of investments (7,676,000) (8,688,000) (19,888,000)
Investment in joint ventures (7,309,000) (5,049,000) (2,517,000)
Proceeds from sale of a joint venture 16,382,000
Cash of acquired subsidiaries, less transaction costs 8,421,000
Proceeds from disposals of property, plant and equipment 121,000 953,000 258,000
Purchases of property, plant and equipment (21,700,000) (11,886,000) (14,916,000)
Other (2,024,000) (1,365,000)
------------ ------------ ------------
NET CASH APPLIED TO INVESTING ACTIVITIES (22,558,000) (14,215,000) (1,228,000)
------------ ------------ ------------
</TABLE>
-35-
<PAGE> 36
VOLT INFORMATION SCIENCES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS--Continued
<TABLE>
<CAPTION>
YEAR ENDED
----------------------------------------------------
November November October
1, 1996 3, 1995 28, 1994
------------ ------------ ------------
<S> <C> <C> <C>
CASH PROVIDED BY (APPLIED TO)
FINANCING ACTIVITIES
Payment of long-term debt (24,854,000) (12,000,000) (45,400,000)
Proceeds from long-term debt 50,000,000 10,000,000
Exercises of minority interest stock options 205,000
Exercises of stock options 103,000 341,000
Increase (decrease) in notes payable-banks 916,000 1,030,000 (948,000)
------------ ------------ ------------
NET CASH PROVIDED BY (APPLIED TO)
FINANCING ACTIVITIES 26,370,000 (10,629,000) (36,348,000)
------------ ------------ ------------
Effect of exchange rate changes on cash 461,000 (970,000) (969,000)
------------ ------------ ------------
NET (DECREASE) INCREASE IN CASH AND
CASH EQUIVALENTS (12,073,000) 8,301,000 (24,032,000)
Cash and cash equivalents, beginning of year 25,350,000 17,049,000 41,081,000
------------ ------------ ------------
CASH AND CASH EQUIVALENTS,
END OF YEAR $ 13,277,000 $ 25,350,000 $ 17,049,000
============ ============ ============
SUPPLEMENTAL INFORMATION
Cash Paid During The Year
Interest expense $ 5,390,000 $ 6,512,000 $ 8,846,000
Income taxes, net of refunds $ 22,808,000 $ 4,058,000 $ 1,416,000
</TABLE>
See Notes to Consolidated Financial Statements.
-36-
<PAGE> 37
VOLT INFORMATION SCIENCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE A--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Business: The Company operates in three major businesses, consisting of five
industry segments; Technical Services and Temporary Personnel; Telephone
Directory; Telecommunications Services; Computer Systems; and Electronic
Publication and Typesetting Systems.
Fiscal Year: The Company's fiscal year consists of the 52 or 53 weeks ending on
the Friday nearest October 31. The 1996 and 1994 fiscal years were comprised of
52 weeks, compared with 53 weeks in fiscal year 1995.
Consolidation: The consolidated financial statements include the accounts of the
Company and its subsidiaries. All significant intercompany transactions have
been eliminated upon consolidation. The minority interest primarily represents
the 41% separate public ownership of Autologic Information International Inc.
("AII"). The Company has investments in joint ventures which are accounted for
by the equity method.
Use of Estimates: The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
Stock Based Compensation: The Company accounts for its stock based compensation
arrangements under the provisions of APB 25, "Accounting for Stock Issued to
Employees", and intends to continue to do so.
Revenue Recognition: Sales are recorded when products are shipped and when
services are rendered. Revenues and costs applicable to long-term contracts,
including those providing for software customization or modification, are
recognized on the percentage-of-completion method, measured by work performed,
or the completed-contract method, as appropriate. Provisions for estimated
losses on contracts are recorded when such losses become evident.
Cash Equivalents: Cash equivalents consist of investments in short-term, highly
liquid securities having an initial maturity of three months or less.
Investments: The Company's management determines the appropriate classification
of marketable equity and debt securities at the time of purchase and
re-evaluates such designation as of each balance sheet date. Debt securities are
classified as held-to-maturity when the Company has the positive intent and
ability to hold the securities to maturity. Held-to-maturity securities are
stated at amortized cost. Marketable equity securities and debt securities not
classified as held-to-maturity are classified as available-for-sale.
Available-for-sale securities are carried at fair value with the unrealized
gains and losses, net of tax, reported as a separate component of stockholders'
equity.
-37-
<PAGE> 38
VOLT INFORMATION SCIENCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE A--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--Continued
Inventories: Manufacturing inventories are priced at the lower of cost, on a
first-in, first-out basis, or market. Accumulated unbilled costs on contracts
related to performing services are carried at the lower of actual cost or
realizable value.
Long - Lived Assets: In fiscal 1996, the Company adopted SFAS No. 121,
"Accounting for the Impairment of Long - Lived Assets and for Long - Lived
Assets to be Disposed of". The Company reviews for the impairment of long-lived
assets and certain identifiable intangibles whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable. No such impairment indicators have been identified by the Company.
Under Statement No. 121, an impairment loss would be recognized when estimated
future cash flows expected to result from the use of the asset and its eventual
disposition are less than its carrying amount.
Property, Plant and Equipment: Depreciation and amortization are provided on the
straight-line and accelerated methods at rates calculated to write off the cost
of the assets over their estimated useful lives. Fully depreciated assets are
written off against their related allowance accounts. The assets are depreciated
over the following periods:
Buildings - 25 to 31 1/2 years
Machinery and equipment - 3 to 15 years
Leasehold improvements - length of lease or life of asset, whichever is
shorter
Intangible Assets: Intangible assets principally consist of the unamortized
balances of the excess of cost over the fair value of the net assets of
companies acquired. The intangibles are being amortized using the straight-line
method, over a five to twenty-year period with an average remaining life of five
years.
Income Taxes: Income taxes are provided using the liability method in accordance
with Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes" (see Note F).
Foreign Exchange Contracts: Gains and losses on foreign currency option and
forward contracts designated as hedges of existing assets and liabilities and of
identifiable firm commitments are deferred and included in the measurement of
the related foreign currency transaction (see Note N).
Translation of Foreign Currencies: The U.S. dollar is the Company's functional
currency throughout the world, except for the Company's Uruguayan operation and
its joint ventures in Australia and Brazil. Where the U.S. dollar is used as the
functional currency, and in Uruguay and Brazil, which have high inflation rates,
foreign currency gains and losses are included in operations. Translation
adjustments due to the Company's investment in its Australian joint venture,
whose functional currency is its local currency, are recorded as a separate
component of stockholders' equity.
-38-
<PAGE> 39
VOLT INFORMATION SCIENCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued
NOTE A--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--Continued
Per Share Data: Per share data are computed on the basis of the weighted average
number of shares of common stock outstanding and, if applicable, the assumed
exercise of dilutive outstanding stock options based on the treasury stock
method.
NOTE B--INVESTMENTS IN SECURITIES
At November 1, 1996, short-term investments consist principally of U.S. treasury
notes which mature within one year. At November 1, 1996, the Company's portfolio
of debt securities had a market value of $4,458,000 and an amortized cost of
$4,451,000. Gross unrealized holding gains of $7,000 ($4,000 net of taxes) are
shown as an addition to stockholders' equity. At November 3, 1995, the Company's
portfolio of debt securities had a market value of $5,183,000 and an amortized
cost of $5,061,000, with gross unrealized holding gains of $122,000 ($74,000 net
of taxes) shown as an addition to stockholders' equity.
NOTE C--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, interests in new
receivables may be sold up to the $45,000,000 level. At November 1, 1996 and
November 3, 1995, $13,000,000 and $30,000,000, respectively, 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 cost incurred on short-term commercial paper which financed the
purchase of receivables. Other income (expense) in the accompanying 1996, 1995
and 1994 statements of operations includes fees related to the agreement of
$1,955,000, $2,133,000 and $1,557,000, respectively.
The purchaser may terminate the agreement on a minimum of six months' notice. In
addition, the agreement may be terminated if the Company does not maintain a
stated minimum tangible net worth, as defined, or exceeds a stated maximum ratio
of debt to tangible net worth. At November 1, 1996, the Company was in
compliance with such terms.
-39-
<PAGE> 40
VOLT INFORMATION SCIENCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued
NOTE D--INVENTORIES
<TABLE>
<CAPTION>
Inventories consist of: November November
1, 1996 3, 1995
------- -------
(Dollars in thousands)
<S> <C> <C>
Services:
Accumulated unbilled costs on:
Service contracts $17,651 $15,909
Long-term contracts 1,694 2,980
------- -------
19,345 18,889
------- -------
Products:
Materials 5,257 3,441
Work-in-progress 2,654 1,377
Service parts 2,396 1,124
Finished goods 1,994 3,376
------- -------
12,301 9,318
------- -------
Total $31,646 $28,207
======= =======
</TABLE>
The cumulative amounts billed, principally under long-term contracts, of
$3,418,000 at November 1, 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.
NOTE E--SHORT-TERM BORROWINGS
The Company has credit lines with domestic and foreign banks which provide for
unsecured borrowings and letters of credit up to an aggregate of $16,500,000.
The Company's revolving credit agreement, which extended the domestic credit
line of $10,000,000 to August 1, 1997, contains various financial covenants. At
November 1, 1996, the Company had outstanding domestic bank borrowings of
$750,000 ($700,000 - 1995) and foreign bank borrowings of $4,664,000 ($4,454,000
- - 1995). The weighted average interest rate of short-term borrowings at each
year-end was 24% in 1996 and 20% in 1995. The weighted average interest rates
are high due to a high proportion of the borrowings by the Uruguayan operation,
whose interest rates reflect the country's high inflation level. Borrowings in
Uruguay serve to hedge receivables against a loss in value due to the
strengthening of the U.S. dollar against the Uruguayan currency.
NOTE F--INCOME TAXES
Deferred tax assets and liabilities are determined based on differences between
financial reporting and the tax bases of assets and liabilities and are measured
using enacted tax rates and laws that are scheduled to be in effect when the
differences are scheduled to reverse.
-40-
<PAGE> 41
VOLT INFORMATION SCIENCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued
NOTE F--INCOME TAXES--Continued
<TABLE>
<CAPTION>
Year Ended
---------------------------------------------
November November October
1, 1996 3, 1995 28, 1994
-------- -------- -------
(Dollars in thousands)
<S> <C> <C> <C>
The components of income before
income taxes based on the location of
operations, consist of the following:
Domestic $ 33,049 $ 23,975 $16,322
Foreign 548 3,306 3,505
-------- -------- -------
$ 33,597 $ 27,281 $19,827
======== ======== =======
The components of the income
tax provision include:
Current:
Federal $ 10,928(a) $ 12,201(a) 4,585(a)
Foreign 1,513 1,247 1,233
State and local 2,743 2,866 1,149
-------- -------- -------
Total current 15,184 16,314 6,967
-------- -------- -------
Deferred:
Federal (2,181) (4,357) 494
Foreign (643) 140 153
State and local 88 (1,202) 169
-------- -------- -------
Total deferred (2,736) (5,419) 816
-------- -------- -------
Total income tax provision $ 12,448 $ 10,895 $ 7,783
======== ======== =======
</TABLE>
(a) Reduced in 1996 by $158,000 of foreign tax credit carryforwards and
reduced in 1996, 1995 and 1994, respectively, by benefits of $859,000,
$247,000 and $374,000 from general business credits.
As a result of the completion of a tax return examination for fiscal years
1989 through 1993, the 1996 current federal provision includes $1,414,000
of benefit related to the refund of previously paid taxes.
-41-
<PAGE> 42
VOLT INFORMATION SCIENCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued
NOTE F--INCOME TAXES--Continued
The consolidated effective tax rates are different than the U.S. Federal
statutory rate. The differences result from the following:
<TABLE>
<CAPTION>
Year Ended
---------------------------------------------
November November October
1, 1996 3, 1995 29, 1994
-------- -------- ---------
<S> <C> <C> <C>
Statutory rate 35.0% 35.0% 35.0%
State and local taxes, net of federal
tax benefit 4.7 3.9 4.6
Tax effect of foreign operations 2.7 1.1 1.6
Goodwill amortization 2.3 .8 1.0
Adjustment resulting from conclusion
of tax examination related to prior years (4.2)
Utilization of net operating loss carryforward (2.5) (2.4)
General business credits (2.6) (.9) (1.9)
Other - net (.8) 2.5 1.4
---- ---- ----
Effective tax rate 37.1% 39.9% 39.3%
==== ==== ====
</TABLE>
-42-
<PAGE> 43
VOLT INFORMATION SCIENCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued
NOTE F--INCOME TAXES--Continued
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes and operating loss and tax
credit carryforwards. Significant components of the Company's deferred tax
assets and liabilities are as follows:
<TABLE>
<CAPTION>
November November
1, 1996 3, 1995
-------- --------
(Dollars in thousands)
<S> <C> <C>
Deferred Tax Assets:
Allowance for doubtful accounts $ 2,018 $ 1,597
Inventory valuation 5,898 4,818
Domestic net operating loss carryforwards 3,954
Foreign tax credit carryforwards 1,205 1,363
Vacation accruals 1,430 1,198
Warranty accruals 292 419
Foreign asset bases 920 300
Other--net 1,625 414
-------- --------
Total deferred tax assets 17,342 10,109
Valuation allowance for deferred tax assets 1,252 1,477
-------- --------
Net deferred tax assets 16,090 8,632
-------- --------
Deferred Tax Liabilities:
Unremitted earnings of corporate
joint ventures 2,140 1,924
Earnings of joint ventures not currently taxable 464 462
Accelerated depreciation 695 968
-------- --------
Total deferred tax liabilities 3,299 3,354
-------- --------
Net deferred tax assets $ 12,791 $ 5,278
======== ========
Balance sheet classification:
Current assets $ 11,757 $ 8,711
Noncurrent assets 1,034
Noncurrent liabilities (3,433)
-------- --------
Net deferred tax assets $ 12,791 $ 5,278
======== ========
</TABLE>
-43-
<PAGE> 44
VOLT INFORMATION SCIENCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued
NOTE F--INCOME TAXES--Continued
As of November 1, 1996, for tax purposes, the Company had foreign tax credit
carryforwards of $1,205,000, which will expire from 1997 through 2000. For
financial statement purposes, a valuation allowance has been recognized to
offset the deferred tax asset related to these carryforwards. At November 1,
1996, net deferred tax assets include $3,954,000 related to domestic net
operating loss carryforwards of its 59% owned subsidiary, AII, of which
$2,822,000 is subject to certain annual limitations. The carryforwards expire
between 2008 and 2011. Although realization is not assured, management believes
it is more likely than not that all of the asset related to such loss
carryforwards will be realized. The amount of the deferred tax asset considered
realizable, however, could be reduced in the near term, if estimates of future
taxable income during the carryforward period are reduced.
The valuation allowance was decreased during fiscal 1996 by $225,000 primarily
as a result of the utilization of foreign tax credit carryforwards. The
valuation allowance was decreased during fiscal 1995 by $1,525,000, primarily as
a result of the utilization of domestic net operating loss carryforwards,
partially offset by reserves for additional foreign tax credit carryforwards,
which arose during such year, whose use is subject to limitations. The
utilization of the net operating loss resulted in a $1,421,000 reduction to
income tax expense and a $104,000 reduction to goodwill.
Income taxes are provided on the undistributed earnings of the Australian
corporate joint venture, as remittances of such earnings are anticipated.
Undistributed earnings of foreign subsidiaries ($1,757,000) at November 1, 1996
are considered permanently invested and, accordingly, no federal income taxes
have been provided. Should these earnings be distributed, foreign tax credits
would reduce the additional federal income tax which would be payable.
Availability of credits is subject to limitations; accordingly, it is not
practicable to estimate the amounts of the ultimate deferred tax liability, if
any, on such accumulated earnings.
-44-
<PAGE> 45
VOLT INFORMATION SCIENCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued
NOTE G--LONG-TERM DEBT
Long-term debt consists of the following: November November
1, 1996 3, 1995
------- -------
(Dollars in thousands)
7.92% Senior Notes (a) $50,000
12-3/8% Senior Subordinated Debentures,
--net of unamortized discount of $36,000 (b) $22,819
Term Loan (c) 6,000 8,000
Notes Payable (d) & (e) 3,344
------- -------
59,344 30,819
Less amounts due within one year 1,949 2,000
------- -------
Total long-term debt $57,395 $28,819
======= =======
The aggregate maturities of long-term debt for the years 1997 through 2001 are
as follows: $1,949,000, $1,949,000, $1,399,000, $11,399,000 and $12,648,000.
(a) On August 28, 1996, the Company issued $50,000,000 of Senior Notes in a
private placement with institutional investors. The notes, which have a term of
eight years, bear interest at 7.92% per annum, payable semi-annually on February
28 and August 28, and provide for amortization of principal in five equal annual
installments, beginning in August 2000. A portion of the proceeds of the notes
were used to retire the outstanding 12-3/8% Senior Subordinated Debentures. The
notes were issued pursuant to Note Purchase Agreements, which contain various
affirmative and negative covenants, the most restrictive of which requires the
Company to maintain a consolidated net worth of $93,225,000.
(b) The Company's 12-3/8% Senior Subordinated Debentures were retired on
September 27, 1996 at par plus accrued interest, resulting in an extraordinary
charge of $87,000, net of income tax benefit of $55,000. During fiscal years
1995 and 1994, respectively, the Company redeemed $10,000,000 and $30,000,000 of
the debentures, resulting in extraordinary charges of $62,000 and $271,000, net
of income tax benefits of $42,000 and $157,000, respectively.
(c) In October 1994, the Company entered into a $10,000,000 five-year loan
agreement with Fleet Bank, which is secured by a deed of trust on land and
buildings (book value at November 1, 1996 - $15,022,000). In October 1996,
certain conditions were met and the loan which bears interest at 7.86% per annum
was extended for two years with a subsequent reduction of principal payments
from $500,000 to $225,000 per quarter and final payment of $1,725,000, due
October 2001.
(d) 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.
(e) An unsecured loan of $2,493,000 from Chase Manhattan Bank was made to a
foreign subsidiary on January 18, 1996 to finance the acquisition of a printing
press. The five-year loan, guaranteed by the Company, is to be repaid in
semi-annual payments of $249,000 plus interest calculated at LIBOR (5.50%
November 1, 1996) plus .25% through September 15, 2001.
-45-
<PAGE> 46
VOLT INFORMATION SCIENCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued
NOTE H--STOCK OPTION PLANS
The Non-Qualified Stock Option Plan adopted by the Company in fiscal 1980
terminated on June 30, 1990, except for options previously granted under the
plan. Unexercised options expire ten years after grant. Outstanding options at
November 1, 1996 were granted at 100% of the market price on the date of grant
and became exercisable cumulatively in increments of 20% per year in each of the
second through sixth years after date of grant.
In May 1995, the Company adopted a new Non-Qualified Stock Option Plan which
provides for the granting of options to acquire up to 800,000 shares of common
stock to key employees of the Company. Option exercise prices may not be less
than the fair market value of a share on the date the options are granted. The
date each option becomes exercisable and the term of each option, which may not
exceed ten years, are at the discretion of the Company.
Transactions involving outstanding stock options under these plans were:
<TABLE>
<CAPTION>
1980 Plan 1995 Plan
--------- ---------
Number Total Number Total
of Option of Option
Shares Price Shares Price
-------- -------- -------- --------
(Dollars in thousands)
<S> <C> <C> <C> <C>
Outstanding, October 29, 1993 132,450 $ 2,515
Cancelled (1,000) (16)
-------- --------
Outstanding, October 28, 1994 131,450 2,499
Cancelled (2,500) (63)
Exercised (22,750) (341)
Stock Split (see Note K) 110,200
-------- --------
Outstanding, November 3, 1995 216,400 2,095
Exercised (6,400) (66)
Granted 477,050 $ 13,288
Cancelled (10,700) (290)
-------- -------- -------- --------
Outstanding November 1, 1996 210,000 $ 2,029 466,350 $ 12,998
======== ======== ======== ========
Exercisable November 1, 1996
at prices ranging from $6 - $13.50 210,000
========
</TABLE>
In conjunction with the acquisition of a subsidiary in December 1986, ten-year
non-qualified stock options to purchase a total of 100,000 shares of the
Company's common stock at a price of $13.75 per share (adjusted for the stock
split in 1995) were granted to four of the sellers. As of November 1, 1996,
2,000 of these options have been exercised.
-46-
<PAGE> 47
VOLT INFORMATION SCIENCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued
NOTE I--ACQUISITION AND SALE OF SUBSIDIARIES
During fiscal 1996, the Company acquired a technical services business and a
temporary services business for a total of $3,111,000 in cash and notes, which
resulted in an increase in intangible assets of $3,057,000.
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 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 asset of $5,215,000, with a corresponding
increase in the minority interest. Amortization of such intangibles, which
amounted to $783,000 in fiscal 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 a reduction in workforce as
a result of the merger. Such charge is included in the results of operations for
the year ended November 1, 1996.
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 results have been prepared for comparative purposes
only and do not purport to be indicative of the results of operations which
actually would have resulted had the acquisitions occurred on the date indicated
or which may result in the future.
(Unaudited)
Year Ended
November 1, November 3,
1996 1995
----------- -----------
(Dollars in thousands, except
per share amounts)
Revenue $1,067,059 $953,400
Net income $22,885 $13,009*
Net income per share $2.32 $1.35*
*Reduced by $1,421,000 ($.15 per share) for discontinued operations of Triple-I.
-47-
<PAGE> 48
VOLT INFORMATION SCIENCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued
NOTE J--INDUSTRY SEGMENTS
Financial data concerning the Company's sales, operating profit (loss) and
identifiable assets by industry segments for the fiscal years 1996, 1995 and
1994 are presented in tables under Item 1 of Form 10-K and are included herein
by reference.
Total revenues include both sales to unaffiliated customers, as reported in the
Company's consolidated statements of operations, and intersegment sales. Sales
between segments are generally priced at fair market value. Operating profit
(loss) is comprised of total revenues less operating expenses. In computing
operating profit (loss), none of the following items have been added or
deducted: general corporate expense; interest expense; fees related to sales of
accounts receivable; corporate interest income and income taxes. Identifiable
assets are those assets that are used in the Company's operations in each
industry segment. Corporate assets consist principally of cash and cash
equivalents, investments and investments in joint ventures.
Capital expenditures and depreciation and amortization by the Company's industry
segments are as follows:
<TABLE>
<CAPTION>
Capital Expenditures
Year Ended
-------------------------------------
November November October
1, 1996 3, 1995 28, 1994
------- ------- -------
(Dollars in thousands)
<S> <C> <C> <C>
Technical Services and Temporary Personnel $ 3,017 $ 2,336 $ 1,401
Telephone Directory 7,779 2,145 1,660
Telecommunications Services 4,135 4,032 3,528
Computer Systems 2,990 7,599 3,937
Electronic Publication and Typesetting Systems 2,914 1,620 2,590
------- ------- -------
Total segments 20,835 17,732 13,116
Corporate 350 459 1,129
------- ------- -------
$21,185 $18,191 $14,245
======= ======= -------
</TABLE>
<TABLE>
<CAPTION>
Depreciation and Amortization (a)
Year Ended
-------------------------------------
November November October
1, 1996 3, 1995 28, 1994
------- ------- -------
(Dollars in thousands)
<S> <C> <C> <C>
Technical Services and Temporary Personnel $ 1,868 $ 1,439 $ 1,123
Telephone Directory 2,414 2,490 2,616
Telecommunications Services 2,872 2,206 2,040
Computer Systems 4,037 4,005 3,000
Electronic Publication and Typesetting Systems 4,403 1,850 1,647
------- ------- -------
Total segments 15,594 11,990 10,426
Corporate 705 626 885
------- ------- -------
$16,299 $12,616 $11,311
======= ======= =======
</TABLE>
(a) Includes depreciation and amortization of property, plant and equipment for
fiscal years 1996, 1995 and 1994 of $14,052,000, $11,959,000 and $10,745,000,
respectively.
-48-
<PAGE> 49
VOLT INFORMATION SCIENCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued
NOTE K--QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
The following is a summary of unaudited quarterly results of operations for
fiscal years ended November 1, 1996 and November 3, 1995. Each quarter contains
thirteen weeks, except for the fourth quarter of fiscal year 1995, which had
fourteen weeks.
<TABLE>
<CAPTION>
Fiscal 1996 Quarter
------------------------------------------------------------------------
First Second Third Fourth
(Dollars in thousands, except per share amounts)
<S> <C> <C> <C> <C>
Net sales $224,813 $252,313 $258,890 $312,898
======== ======== ======== ========
Gross profit $19,748 (a) $30,216 (a) $28,225 $40,022
======= ======= ======= =======
Income before extraordinary item $2,267 (b) $4,931 $4,693 $10,544(c)
Extraordinary item (87)
-------- -------- -------- -------
Net income $2,267 $4,931 $4,693 $10,457
====== ====== ====== =======
Income per share:
Income before extraordinary item $.23 $.51 $.47 $1.05
Extraordinary item (.01)
----- ----- ----- -----
Net income $.23 $.51 $.47 $1.04
==== ==== ==== =====
</TABLE>
<TABLE>
<CAPTION>
Fiscal 1995 Quarter
------------------------------------------------------------------------
First Second Third Fourth
(Dollars in thousands, except per share amounts)
<S> <C> <C> <C> <C>
Net sales $183,296 $190,596 $225,924 $307,491
======== ======== ======== ========
Gross profit $20,586 $18,750 $23,818 $35,809
======== ======= ======= =======
Income before extraordinary item $2,023 $1,430 $5,056 $7,877
Extraordinary item (62)
--------- -------- ------- ------
Net income $2,023 $1,430 $4,994 $7,877
======= ====== ====== ======
Income (loss) per share: (d)
Income before extraordinary item $.21 $.15 $.53 $.82
Extraordinary item (.01)
---- ------ -----
Net income $.21 $.15 $.52 $.82
==== ===== ==== ====
</TABLE>
(a) Includes first and second quarter gains, respectively, of $597,000
($364,000, net of taxes, or $.04 per share) and $2,028,000 ($1,236,000, net of
taxes or $.13 per share) 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.
(b) Includes a pretax gain of $3,666,000 ($2,371,000, net of taxes, or $.24 per
share) on the sale of an interest in subsidiaries.
(c) Includes $1,414,000 ($.14 per share) and $723,000 ($443,000, net of taxes,
or $.04 per share) as a tax benefit and interest income, respectively, for the
fourth quarter, related to the refund of previously paid taxes as result of a
tax return examination for fiscal years 1989 through 1993.
(d) Per share amounts have been restated to reflect a two-for-one stock split of
the Company's common stock which was effected by a 100% stock dividend,
distributed on October 6, 1995 to shareholders of record as of the close of
business on September 12, 1995.
-49-
<PAGE> 50
VOLT INFORMATION SCIENCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued
NOTE K--QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)--Continued
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. An Australian joint venture (see
Note L) produces a major portion of its revenues and significantly all of its
profits in the Company's second and third fiscal quarters. The Uruguayan
division produces a major portion of its revenues and most of its profits in the
Company's fourth fiscal quarter, and DataNational's revenues and profits are
lower in the Company's first fiscal quarter due to the seasonality of its
directory closing schedule. Sales by AII are generally lower in the months of
November and December due to the holiday season, which is a peak publishing
period when customers are reluctant to install and test new equipment.
NOTE L--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.
Telstra owns 50% of the voting stock of Pacific Access. In the event of a change
in the control of the Company, as defined, the Company may be required to sell
its share of the venture to Telstra at a formula price based upon various
factors, including earnings.
In October 1996, the Company agreed to sell its 50% interest in Telelistas
Editora Ltda. (Telelistas"), a Brazilian joint venture, which is the official
publisher of telephone directories in Rio de Janeiro , for the government-owned
telephone company. In January 1997, the Company received approximately
$3,000,000 in excess of its carrying value at the date of the sale. The
agreement also provides that the Company will continue to guarantee certain
Telelistas obligations which will mature in the next twelve months aggregating
approximately $8,700,000. Accordingly, the Company will defer the recognition of
the gain until and as such guaranteed obligations are repaid. The obligations to
which the Company is a guarantor are secured by the accounts receivable of
Telelistas.
The income of Telelistas for the period November 2, 1996 through the date of
sale, (approximately $2,900,000) will be reported by the Company as equity in
income of joint ventures in the fiscal quarter ended January 31, 1997.
-50-
<PAGE> 51
VOLT INFORMATION SCIENCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued
NOTE L--SUMMARIZED FINANCIAL INFORMATION OF JOINT VENTURES--Continued
The following summarizes certain financial information of the joint ventures:
<TABLE>
<CAPTION>
November 1, 1996 November 3, 1995
---------------- ----------------
(Dollars in thousands)
Company's Company's
Total Equity Total Equity
------- ------- ------- -------
<S> <C> <C> <C> <C>
Current assets $308,561 $270,495
Noncurrent assets 16,275 17,207
Current liabilities (257,310) (227,749)
Due to Volt (754) $754
Noncurrent liability (209) (259)
-------- --------
Equity of combined joint ventures $66,563 $59,694
======= =======
Equity of Brazilian
joint venture $4,336 4,153 $3,961 $3,467
Equity of Australian joint venture (a) 62,227 11,179 55,733 10,436
------- ------- ------- -------
$66,563 $59,694
------- =======
Total investments in and advances
to joint ventures 16,086 13,903
ncluded in prepaid expenses and
other assets (b) 4,907
------- -------
Investments in joint ventures $11,179 $13,903
======= =======
</TABLE>
(a) Pursuant to the venture agreement, the initial capital contributions of all
venturers, other than Telstra, exceeded their proportionate share of ownership
interest in the corporate joint venture. The agreement provides that, upon
liquidation of the venture, the venturers will be entitled to recover such
excess contributions from the net assets of the venture.
(b) The advances to and equity in the Brazilian joint venture at November 1,
1996 is included in the prepaid expenses and other assets, due to the sale of
the Company's interest in January, 1997.
-51-
<PAGE> 52
VOLT INFORMATION SCIENCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued
NOTE L--SUMMARIZED FINANCIAL INFORMATION OF JOINT VENTURES--Continued
<TABLE>
<CAPTION>
Year ended
------------------------------------------------------------------------
November 1, 1996 November 3, 1995 October 28, 1994
---------------- ---------------- ----------------
(Dollars in thousands)
Company's Company's Company's
Total Equity Total Equity Total Equity
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Revenues $ 601,174 $ 559,858 $ 509,481
Costs and expenses 564,945 529,540 476,346
Income tax provision 15,360 11,632 11,321
--------- --------- ---------
Net income $ 20,869 $ 18,686 $ 21,814
========= ========= =========
Net income of Australian joint ventures $ 26,021 $ 3,146 $ 24,056 $ 2,904 $ 20,734 $ 2,591
Net loss of Brazilian joint venture (5,152) (4,560) (5,370) (3,904) (392) (197)
Net income of United States joint venture 1,472 (a) 661
--------- --------- --------- --------- --------- ---------
$ 20,869 $ 18,686 $ 21,814
========= ========= =========
Company's equity in net income (loss) of joint
ventures $ (1,414) $ (1,000) $ 3,055
========= ========= =========
</TABLE>
(a) Represents income through February 28, 1994, the date the Company's 50%
interest in Pacific Volt Information Systems, a joint venture with a subsidiary
of Pacific Bell Directory, was redeemed by the venture for approximately
$16,400,000. The sale of the Company's interest resulted in a gain of $9,770,000
($5,760,000, net of income taxes, or $.60 per share).
Consolidated retained earnings at November 1, 1996 includes $5,534,000,
representing the undistributed earnings of the Australian joint venture. United
States income taxes have been provided for the anticipated remittance of such
earnings.
-52-
<PAGE> 53
VOLT INFORMATION SCIENCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued
NOTE M--EMPLOYEE BENEFITS
The Company has a non-contributory Employee Stock Ownership Plan (ESOP), which
provides for open market or private purchases of Company common stock from
time-to-time, or contributions by the Company of unissued or treasury shares.
Discretionary contributions are made for all employees who have completed one
year of service for a participating employer. Vesting occurs at a rate of 25%
per year of service, commencing with the completion of three years of service.
Contributions of $500,000 in each of fiscal 1996 and 1995 and $250,000 in fiscal
1994 were accrued. Contributions of previously unissued shares were made to the
plan in 1996 and contributions of treasury shares were made in 1995.
The Company has savings plans which permit eligible employees to make
contributions on a pretax salary reduction basis in accordance with the
provisions of Section 401(k) of the Internal Revenue Code. The Company does not
match employees' contributions.
NOTE N--FINANCIAL INSTRUMENTS
Financial instruments which potentially subject the Company to concentrations of
credit risk are primarily cash investments and accounts receivable. At November
1, 1996, the Company's cash investments were primarily in investment grade,
short-term instruments. Concentrations of credit risk with respect to the
receivables are limited due to the large number of customers in the Company's
customer base, and their dispersion across different industries and geographic
areas.
The Company purchases foreign currency option contracts generally having a
maturity of three months to hedge the adverse impact on its foreign currency
receivables and sales when the dollar strengthens against the related foreign
currencies. Foreign exchange (gains) losses in the accompanying statements of
income include (1) any gain on option contracts, which are recognized in income
in the same period as losses on the hedged receivables and reduced dollar amount
of sales and (2) the premium cost of such option contracts, which is amortized
over the contract period. At November 1, 1996, the Company had purchased
options, all of which expire in the first quarter of 1997, at a cost of $81,000,
to exchange various European currencies for U.S. dollars, in the aggregate
notional amount of $5,500,000. There were no unrealized gains or losses on these
contracts at such date.
In addition, the Company entered into foreign currency forward and option
contracts to hedge future foreign currency revenues and payments during the next
three years resulting from a long term service contract. Accordingly, gains and
losses on these hedge contracts are deferred and will be accounted for as part
of the underlying service contract. At November 1, 1996, the Company had forward
contracts to exchange 11,400,000 Dutch guilders for British pounds at fixed
rates. Further, the Company has purchased put options which permit, but do not
require, the Company to exchange an additional 13,600,000 Dutch guilders to be
received in the future from another party at fixed U.S. dollar exchange rates.
To finance the premiums paid on the put options, the Company has written call
options at exercise prices which limit, but do not eliminate, the effect of the
purchased put options. At November 1, 1996, the deferred gain on the
aforementioned contracts was $330,000.
Counterparties to the currency option and forward contracts are major banks.
Credit loss from counterparty nonperformance is not anticipated.
-53-
<PAGE> 54
VOLT INFORMATION SCIENCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued
NOTE N--FINANCIAL INSTRUMENTS--Continued
The carrying amount of financial instruments, including cash and cash
equivalents, accounts receivable, accounts payable and notes payable to banks,
approximated fair value as of November 1, 1996 and November 3, 1995, due to the
relatively short maturity of these instruments. The carrying value of long-term
debt, including the current portion, approximates fair value as of November 1,
1996 and November 3, 1995, based upon quoted market prices for same or similar
debt issues.
NOTE O--COMMITMENTS
The future minimum rental commitments as of November 1, 1996 for all
noncancellable operating leases are as follows:
Fiscal Office
Year Total Space Equipment
- ------ -------- ------- ---------
(Dollars in thousands)
1997 $ 9,035 $ 8,808 $ 227
1998 7,204 7,005 199
1999 5,141 5,077 64
2000 3,726 3,726
2001 1,657 1,657
Thereafter 1,357 1,357
------- ------- -------
$28,120 $27,630 $ 490
======= ======= =======
Rental expense for all operating leases for fiscal years 1996, 1995 and 1994 was
$10,661,000, $8,638,000 and $10,075,000, respectively. Many of the leases also
require the Company to pay or contribute to property taxes, insurance and
ordinary repairs and maintenance.
The Company has guaranteed the performance of a subsidiary under a contract and
also guaranteed the commitments of a joint venture. At November 1, 1996,
outstanding letters of credit of $3,750,000 were issued by banks in support of
these guarantees which were secured by $4,358,000 of the Company's investments
in securities. The letters of credit expire in fiscal 1997, unless renewed, and
the Company believes that risk of loss relative to these financial guarantees is
remote.
-54-
<PAGE> 55
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
PART III
The information called for by Part III (Items 10, 11, 12 and 13) of Form 10-K
(except information as to the Company's executive officers, which information
follows Item 4 in this Report) will be included in the Company's Proxy Statement
which the Company intends to file within 120 days after the close of its fiscal
year ended November 1, 1996, and is hereby incorporated by reference to such
Proxy Statement.
-55-
<PAGE> 56
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
14(a)(1). Financial Statements
The following consolidated financial statements of Volt
Information Sciences, Inc. and subsidiaries are included in
Item 8:
<TABLE>
<CAPTION>
Page
----
<S> <C>
Consolidated Balance Sheets--November 1, 1996 and November 3, 1995. 32
Consolidated Statements of Income--Years ended November 1, 1996,
November 3, 1995 and October 28, 1994. 33
Consolidated Statements of Stockholders' Equity--Years ended
November 1, 1996, November 3, 1995 and October 28, 1994. 34
Consolidated Statements of Cash Flows--Years ended November 1, 1996,
November 3, 1995 and October 28, 1994. 35
Notes to Consolidated Financial Statements. 37
14(a)(2). Financial Statement Schedules
The following consolidated financial statement schedule of
Volt Information Sciences, Inc. and subsidiaries is included
in response to Item 14(d).
Schedule II--Valuation and qualifying accounts S-1
Other schedules (Nos. I, III, IV and V) for which provision
is made in the applicable accounting regulation of the Securities and
Exchange Commission are not required under the related instructions
or are not applicable and, therefore, have been omitted.
</TABLE>
-56-
<PAGE> 57
14 (a) (3). Exhibits
Exhibit Description
2.1 Asset Purchase and Sale Agreement entered into October 6,
1993 between the Company and Omnibus Funding Corporation, et.
al. (Exhibit 2.1 to the Company's Form 8-K, dated October 6,
1993, File No. 1-9232).
2.2 Agreement and Plan of Merger dated as of October 5, 1995, as
amended on November 10, 1995 and December 7, 1995, among
Information International, Incorporated, Autologic, Inc., a
recently formed Delaware corporation, the name of which has
since been change to Autologic Information International,
Inc., and Volt Information Sciences, Inc., Incorporated by
Reference to Appendix I to the Registration Statement on Form
S-4 of Autologic Information International, Inc., (File No.
33-99278).
3.1* Restated Certificate of Incorporation of the Company, as
filed with the Department of State of New York on January 29,
1997.
3.2 By-Laws of the Company (Exhibit 4.02 to the Company's
Quarterly Report on Form 10-Q for the quarter ended July 29,
1988).
4.1 Composite Conformed Note Purchase Agreement drafted as of
August 28, 1996 with respect to the issuance of the Company's
$50,000,000, 7.92% Senior Notes due August 28, 2004
(excluding disclosure schedules). (Exhibit 4.01(a) to the
Company's Quarterly Report on Form 10-Q for the quarter ended
August 28, 1996).
10.1(a)*+ Non-Qualified Stock Option Incentive Plan, as amended
effective August 26, 1996.
10.1(b)*+ 1995 Non-Qualified Stock Option Plan, as amended effective
August 26, 1996.
10.2(a)+ Employment Agreement dated as of May 1, 1987 between the
Company and William Shaw (Exhibit 19.01 to Quarterly Report
on Form 10-Q for the quarter ended May 1, 1987, File No.
1-9232).
10.2(b)+ Amendment dated January 3, 1989 to Employment Agreement
between the Company and William Shaw (Exhibit 19.01(b) to the
Company's Annual Report on Form 10-K for the fiscal year
ended October 28, 1988, File No. 1-9232).
-57-
<PAGE> 58
14 (a) (3). Exhibits--Continued
Exhibit Description
10.3(a)+ Agreement dated as of May 1, 1987 between the Company and
Jerome Shaw (Exhibit 19.02 to the Company's Quarterly Report
on Form 10-Q for the quarter ended May 1, 1987, File No.
1-9232).
10.3(b)+ Amendment dated January 3, 1989 to Agreement between the
Company and Jerome Shaw (Exhibit 19.02(b) to the Company's
Annual Report on Form 10-K for the fiscal year ended October
28, 1988, File No. 1-9232).
10.4(a)+ Agreement dated as of May 1, 1987 between the Company and
Irwin B. Robins (Exhibit 19.03 to the Company's Quarterly
Report on Form 10-Q for the quarter ended May 1, 1987, File
No. 1-9232).
10.4(b)+ Amendment dated June 1, 1992 to Agreement between the Company
and Irwin B. Robins. (Exhibit 10.04(b) to the Company's
Annual Report on Form 10-K for the fiscal year ended October
30, 1992, File No. 1-9232).
10.4(c)+ Amendment dated April 28, 1994 to Agreement between the
Company and Irwin B. Robins. (Exhibit 10.01 to the Company's
Quarterly Report on Form 10-Q for the quarter ended April 29,
1994, File No. 1-9232).
10.4(d)*+ Amendment dated November 28, 1996 to Agreement between the
Company and Irwin B. Robins.
21.* Subsidiaries of the Registrant.
23.* Consent of Ernst & Young LLP.
27.* Financial Data Schedule (filed with electronic version only).
- --------------------
+ Management contract or compensation plan or arrangement.
* Filed herewith. All other exhibits are incorporated herein by reference to
the exhibit indicated in the parenthetical references.
-58-
<PAGE> 59
14 (b). Reports on Form 8-K
No reports on Form 8-K were filed during the fourth quarter of the year ended
November 1, 1996.
UNDERTAKING
The Company hereby undertakes to furnish to the Securities and Exchange
Commission, upon request, all constituent instruments defining the rights of
holders of long-term debt of the Company and its consolidated subsidiaries not
filed herewith. Such instruments have not been filed since none are, nor are
being, registered under Section 12 of the Securities Exchange Act of 1934 and
the total amount of securities authorized under any such instruments does not
exceed 10% of the total assets of the Company and its subsidiaries on a
consolidated basis.
-59-
<PAGE> 60
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange
Act of 1934, the Company has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
VOLT INFORMATION SCIENCES, INC.
Dated: New York, New York
January 24, 1997 By: /s/William Shaw
--------------------------------
William Shaw
Chairman of the Board, President
and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Company and in
the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
/s/William Shaw Chairman of the Board, January 24, 1997
- --------------------- President and Chief Executive
William Shaw Officer and Director
/s/James J. Groberg Director, Senior Vice January 24, 1997
- -------------------- President (Principal
James J. Groberg Financial Officer)
/s/Jack Egan Vice President, Corporate January 24, 1997
- -------------------- Accounting (Principal
Jack Egan Accounting Officer)
/s/Jerome Shaw Director January 24, 1997
- --------------------
Jerome Shaw
/s/Irwin B. Robins Director January 24, 1997
- --------------------
Irwin B. Robins
Director
- --------------------
Mark N. Kaplan
Director
- --------------------
John R. Torell, III
</TABLE>
-60-
<PAGE> 61
INDEX TO EXHIBITS
Exhibit Description
2.1 Asset Purchase and Sale Agreement entered into October 6, 1993
between the Company and Omnibus Funding Corporation, et. al.
(Exhibit 2.1 to the Company's Form 8-K, dated October 6, 1993,
File No. 1-9232).
2.2 Agreement and Plan of Merger dated as of October 5, 1995, as
amended on November 10, 1995 and December 7, 1995, among
Information International, Incorporated, Autologic, Inc., a
recently formed Delaware corporation, the name of which has
since been change to Autologic Information International,
Inc., and Volt Information Sciences, Inc., Incorporated by
Reference to Appendix I to the Registration Statement on Form
S-4 of Autologic Information International, Inc., (File No.
33-99278).
3.1* Restated Certificate of Incorporation of the Company, as filed
with the Department of State of New York on January 29, 1997.
3.2 By-Laws of the Company (Exhibit 4.02 to the Company's
Quarterly Report on Form 10-Q for the quarter ended July 29,
1988).
4.1 Composite Conformed Note Purchase Agreement drafted as of
August 28, 1996 with respect to the issuance of the Company's
$50,000,000, 7.92% Senior Notes due August 28, 2004 (excluding
disclosure schedules). (Exhibit 4.01(a) to the Company's
Quarterly Report on Form 10-Q for the quarter ended August 28,
1996).
10.1(a)*+ Non-Qualified Stock Option Incentive Plan, as amended
effective August 26, 1996.
10.1(b)*+ 1995 Non-Qualified Stock Option Plan, as amended effective
August 26, 1996.
10.2(a)+ Employment Agreement dated as of May 1, 1987 between the
Company and William Shaw (Exhibit 19.01 to Quarterly Report on
Form 10-Q for the quarter ended May 1, 1987, File No. 1-9232).
<PAGE> 62
Exhibit Description
10.2(b)+ Amendment dated January 3, 1989 to Employment Agreement
between the Company and William Shaw (Exhibit 19.01(b) to the
Company's Annual Report on Form 10-K for the fiscal year ended
October 28, 1988, File No. 1-9232).
10.3(a)+ Agreement dated as of May 1, 1987 between the Company and
Jerome Shaw (Exhibit 19.02 to the Company's Quarterly Report
on Form 10-Q for the quarter ended May 1, 1987, File No.
1-9232).
10.3(b)+ Amendment dated January 3, 1989 to Agreement between the
Company and Jerome Shaw (Exhibit 19.02(b) to the Company's
Annual Report on Form 10-K for the fiscal year ended October
28, 1988, File No. 1-9232).
10.4(a)+ Agreement dated as of May 1, 1987 between the Company and
Irwin B. Robins (Exhibit 19.03 to the Company's Quarterly
Report on Form 10-Q for the quarter ended May 1, 1987, File
No. 1-9232).
10.4(b)+ Amendment dated June 1, 1992 to Agreement between the Company
and Irwin B. Robins. (Exhibit 10.04(b) to the Company's Annual
Report on Form 10-K for the fiscal year ended October 30,
1992, File No. 1-9232).
10.4(c)+ Amendment dated April 28, 1994 to Agreement between the
Company and Irwin B. Robins. (Exhibit 10.01 to the Company's
Quarterly Report on Form 10-Q for the quarter ended April 29,
1994, File No. 1-9232).
10.4(d)*+ Amendment dated November 28, 1996 to Agreement between the
Company and Irwin B. Robins.
21.* Subsidiaries of the Registrant.
23.* Consent of Ernst & Young LLP.
27.* Financial Data Schedule (filed with electronic version only).
+ Management contract or compensation plan or arrangement.
* Filed herewith. All other exhibits are incorporated herein by reference to
the exhibit indicated in the parenthetical references.
<PAGE> 63
VOLT INFORMATION SCIENCES, INC. AND SUBSIDIARIES
SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
Column A Column B Column C Column D Column E
- -------- -------- ----------------------------- -------- ---------
Additions
-----------------------------
Balance at Charged to Charged to Balance
Beginning Costs and Other at End
Description of Period Expenses Accounts Deductions of Period
- ----------- ---------- ---------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C>
Year ended November 1, 1996:
Deducted from asset accounts:
Allowance for uncollectible accounts $3,943,000 $2,718,000(1) $833,000 (2) $2,303,000(4) $5,191,000
Unrealized gain on marketable securities (122,000) 115,000 (3) (7,000)
Year ended November 3, 1995:
Deducted from asset accounts:
Allowance for uncollectible accounts $4,027,000 $2,081,000(1) $2,165,000 (4) $3,943,000
Unrealized loss (gain) on marketable securities 77,000 (199,000)(3) (122,000)
Year ended October 28, 1994:
Deducted from asset accounts:
Allowance for uncollectible accounts $3,960,000 $1,903,000(1) $1,836,000 (4) $4,027,000
Unrealized loss on marketable securities $77,000 (3) 77,000
</TABLE>
(1)--Includes a foreign currency translation gain of $49,000 in 1996, and a loss
of $5,000 and $46,000 in 1995 and 1994, respectively.
(2)--Pertains to the opening balance of a company acquired on January 29, 1996.
(3)--Charge (credit) to stockholders' equity.
(4)--Write-off of uncollectible accounts.
S-1
<PAGE> 1
EXHIBIT 3.1
RESTATED CERTIFICATE OF INCORPORATION
OF
VOLT INFORMATION SCIENCES, INC.
UNDER SECTION 807 OF THE BUSINESS CORPORATION LAW
We, the undersigned, William Shaw and Howard B. Weinreich, being respectively
the President and Assistant Secretary of Volt Information Sciences, Inc., hereby
certify:
1. The name of the Corporation is Volt Information Sciences, Inc. The name
under which the Corporation was formed is Volt Technical Corp.
2. The Certification of Incorporation was filed in the Office of the
Department of State of New York on March 6, 1957.
3. The Certificate of Incorporation as amended is hereby restated as
authorized by Section 807 (b) (4) of the Business Corporation Law to
restate the text of the Certificate of Incorporation without amendment
or change, except that Article FOURTH (b) is amended in accordance with
Section 502 of the Business Corporation Law to revoke the designation
of the Class A Convertible Preferred Stock, $1.00 par value, and to
restore all such shares to their status as authorized but unissued
shares of Preferred Stock having a par value of $1.00 per share, and to
restate the text of the Certificate of Incorporation to read as herein
set forth in full:
FIRST: The name of the Corporation is VOLT INFORMATION SCIENCES, INC.
SECOND: The purposes of the Corporation are as follows:
(a) To provide technical assistance in drafting, design,
installations, repair, development and production of
mechanical, electrical, electronics, nuclear and chemical
fields, and to render a general consultive service in the
foregoing and allied fields; to devise, design, manufacture,
deal in install, and maintain, service and repair electrical,
electronic, mechanical and other machinery, equipment, tools,
instruments and weapons; to prepare, edit and publish
technical and other literature, plans and drawings.
(b) To provide to others personnel to perform any of the
functions, services or activities which this corporation may
perform or engage in pursuant to its Certificate of
Incorporation as from time to time amended.
(c) To manufacture, construct, install, prepare, assemble, repair,
alter, improve and otherwise work on and to purchase and
otherwise acquire, hold, use, maintain, operate, rent,
exchange, distribute, sell, and otherwise dispose of, and to
handle, market, store, import, export, deal and trade in and
with electrical, electronic and mechanical devices, machinery,
apparatuses, equipment, products and supplies, control
systems, heating machines, wiring circuits, fixtures,
connectors, motors
1
<PAGE> 2
and appliances of every kind and description, and the
component parts thereof, and all other fixtures, apparatuses,
appliances, engines, accessories, machinery, tools, equipment,
products, and articles designed or intended to be used for the
purposes of producing, creating, generating, accumulating,
supplying, conducting, or transmitting electricity, electrical
energy and impulses, heat, cold, air, light, power, sound,
pictures and images; to make, enter into and perform either
singly or jointly with others, and to subcontract, give and
let out agreements to do or perform any of the foregoing and
to do all other acts and things incidental or related to or
connected with the foregoing.
(d) To render advisory, investigatory, supervisory and managerial
services to any person, corporation, trust, firm, public
authority or organization of any kind.
(e) To manufacture, purchase, or otherwise acquire, own, mortgage,
pledge, sell, assign and transfer, or otherwise dispose of, to
invest, trade, deal in and deal with, goods, wares and
merchandise and real and personal property of every class and
description, and the securities and obligations of any issuer,
whether or not incorporated.
(f) To conduct studies and research and development, and to engage
in any other activity relating to the development,
application, and dissemination of information concerning
science, technology, and other fields of endeavor.
(g) To acquire by purchase, subscription or otherwise all or part
of any interest in the property, assets, business, or good
will of any corporation, association, firm, or individual and
to dispose of, or otherwise deal with such property, assets,
business or good will.
(h) To engage in any similar activity which may promote the
interests of the corporation, or enhance the value of its
property, to the fullest extent permitted by law.
(i) For the accomplishment of the aforesaid purposes, and in
furtherance thereof, the corporation shall have and may
exercise all of the powers now or hereafter conferred by the
Business Corporation Law upon corporations formed thereunder,
subject to any limitations contained in Article 2 of said Law,
or in accordance with the provisions of any other statute of
the State of New York.
THIRD: The amount of the capital stock is $3,500,000.
FOURTH: (a) The aggregate number of shares which the corporation is
authorized to issue is 30,500,000 shares consisting of:
2
<PAGE> 3
(1) 30,000,000 shares of Common Stock having a par value of
$.10 per share; and
(2) 500,000 shares of Preferred Stock having a par value of
$1.00 per share.
(b) The Board of Directors is authorized, subject to limitations
prescribed by law and the provisions of this subsection (b),
to provide for the issuance of the preferred shares in series,
and by filing a certificate pursuant to the Business
Corporation Law, to establish the number of shares to be
included in each such series, and to fix the designation,
relative rights, preferences and limitations of the shares of
each such series. The authority of the Board with respect to
each series shall include, but not be limited to,
determination of the following:
(1) The number of shares constituting that series and the
distinctive designation of that series;
(2) The dividend rate on the shares of that series, whether
dividends shall be cumulative, and if so, from which
date or dates;
(3) Whether that series shall have voting rights, in
addition to the voting rights provided by law, and if
so, the terms of such voting rights;
(4) Whether that series shall have conversion privileges,
and, if so, the terms and conditions of such
conversion, including provision for adjustment of the
conversion rate in such events as the Board of
Directors shall determine;
(5) Whether or not the shares of that series shall be
redeemable, and, if so, the terms and conditions of
such redemption, including the date or dates upon or
after which they shall be redeemable, and the amount
per share payable in case of redemption, which amount
may vary under different conditions and at different
redemption dates;
(6) The rights of the shares of that series in the event of
voluntary or involuntary liquidation, dissolution or
winding up of the corporation;
(7) Any other relative rights, preferences and limitations
of that series.
(c) Dividends on outstanding preferred shares shall be declared
and paid, or set apart for payment, before any dividends shall
be declared and paid,
3
<PAGE> 4
or set apart for payment, on the common shares with respect to
the same dividend period.
FIFTH: No shareholder of this corporation shall, because of his
ownership or holding of stock of any class have a preemptive or other
right to purchase, subscribe for, or take any part of any shares of any
class of stock or any part of any notes, debentures, bonds or other
securities convertible into or carrying options or warrants to purchase
shares of any class of stock of this corporation issued, optioned, or
sold by it after its incorporation, whether now or hereafter authorized
and whether or not the issuance of any such shares or such notes,
debentures, bonds, or other securities would adversely affect the
dividend or voting rights of such shareholders. Any part of the capital
stock and any part of the notes, debentures, bonds, or other securities
convertible into or carrying options or warrants to purchase shares of
stock of this corporation authorized by this Certificate of
Incorporation or by an amended certificate duly filed, may at any time
be issued, optioned for sale, and sold or disposed of by this
corporation pursuant to resolution of its Board of Directors to such
persons and upon such terms as may to such Board seem proper without
first offering such stock or securities or any part thereof to existing
shareholders.
SIXTH: The office of the corporation is located in the City of New
York, County of New York, State of New York.
SEVENTH: The Secretary of State of the State of New York is designated
as the agent of the corporation upon whom process against it may be
served, and the post office address to which the Secretary of State
shall mail a copy of such process served upon him is % CT Corporation
System, 1633 Broadway, New York, NY 10019. The name and addresss of the
registered agent which is to be the agent of the Corporation upon whom
process against it may be served is CT Corporation System, 1633
Broadway, New York, NY 10019.
EIGHTH: The following provisions are inserted for the regulation and
conduct of the affairs of the corporation, and it is expressly provided
that they are intended to be in furtherance and not in limitation or
exclusion of the powers conferred by law.
(a) No contract or other transaction between the corporation and
any other firm or corporation shall be affected or invalidated
by reason of the fact that any one or more of the directors or
officers of this corporation is or are interested in, or is a
member, shareholder, director, or officer, or are members,
shareholders, directors, or officers of such other firm or
corporation; and any director or officer or officers,
individually or jointly, may be a party or parties to, or may
be interested in, any contract or transaction of this
corporation or in which this corporation is interested, and no
contract, act, or transaction of this corporation with any
person or persons, firm, association or corporation shall be
affected or invalidated by reason of the fact that any
director or directors or
4
<PAGE> 5
officer or officers of this corporation is a party or are
parties to, or interested in, such contract, act or
transaction, or in any way connected with such person or
persons, firm, association or corporation, and each and every
person who may become a director or officer of this
corporation is relieved from any liability that might
otherwise exist from thus contracting with this corporation
for the benefit of himself or any firm, association or
corporation in which he may be in anywise interested.
(b) The board of directors shall have power, in its discretion, to
provide for and to pay to directors rendering unusual or
exceptional services to the corporation special compensation
appropriate to the value of such services.
(c) By resolution duly adopted by the holders of not less than a
majority of the shares of stock then issued and outstanding
and entitled to vote at any regular or special meeting of the
shareholders of the corporation duly called and held as
provided in the By-Laws of the corporation, any director or
directors of the corporation may be removed from office at any
time or times, but only for cause.
(d) The corporation shall be permitted to indemnify, and advance
expenses to, any officer, director or other person to the
fullest extent from time to time permitted by law, and, to the
extent consistent therewith, shall indemnify or advance
expenses to any such officer, director or other person to the
fullest extent required by or pursuant to any present or
future by-law of the corporation, agreement approved by the
Board of Directors, or resolution of shareholders or
directors; and the adoption of any such resolution or entering
into of any such agreement approved by the Board of Directors
is hereby authorized.
(e) The corporation may use and apply its surplus earnings or
accumulated profits, not otherwise by law to be reserved, to
the purchase or acquisition of property and to the purchase or
acquisition of its own capital stock from time to time and to
such extent and in such manner and upon such terms as its
board of directors shall determine; and neither the property
nor the capital stock so purchased or acquired, nor any of its
own capital stock taken in payment or satisfaction of any debt
due to the corporation, shall be regarded as profits for the
purpose of declaration or payment of dividends unless
otherwise determined by a majority of the board of directors.
NINTH: The business of the corporation shall be managed by the Board,
which shall consist of such number of directors, not less than three
nor more than nine, to be fixed from time to time by the shareholders
or a majority of the entire Board. The directors shall be classified
with respect to the time during which they shall
5
<PAGE> 6
severally hold office by dividing them into two classes, as nearly
equal in number as possible, but in no event shall any class include
less than three directors. At the meeting of the shareholders of the
corporation held for the election of the first such classified Board,
the directors of the first class shall be elected for a term of one
year and the directors of the second class for a term of two years. At
each annual meeting of shareholders held thereafter, the successors to
the class whose term shall expire that year shall be elected to hold
office for a term of two years, so that the term of office of one class
of directors shall expire each year. Any newly created directorship or
decrease in directorship as authorized by resolution of the Board of
Directors shall be so apportioned as to make both classes as nearly
equal in number as possible. When the number of directors is increased
by the Board and any newly created directorship is filled by the Board,
there shall be no classification of the additional directors until the
next annual meeting of shareholders. No decrease in the number of
directors shall shorten the term of any incumbent director. Each
director shall be at least 21 years old. Directors shall hold office
until the annual meeting at which their term expires and until the
election of their respective successors.
TENTH: A director of the corporation shall not be personally liable to
the corporation or its shareholders for damages for any breach of duty
as a director; provided that, except as hereinafter provided, this
Article TENTH shall neither eliminate nor limit liability: (a) if a
judgment or final adjudication adverse to the director establishes that
(i) the director's acts or omissions were in bad faith or involved
intentional misconduct or a knowing violation of law, (ii) the director
personally gained in fact a financial profit or other advantage to
which the director was not legally entitled, or (iii) the director's
acts violated Section 719 of the New York Business Corporation Law; or
(b) for any act or omission prior to the effectiveness of this Article
TENTH. If the corporation hereafter may by law be permitted to further
eliminate or limit the personal liability of directors, then pursuant
hereto the liability of a director of the corporation shall, at such
time, automatically be further eliminated or limited to the fullest
extent permitted by law. Any repeal of or modification to the
provisions of this Article TENTH shall operate prospectively only and
shall not adversely affect any right or protection of a director of the
Corporation existing pursuant to this Article TENTH at the time of such
repeal or modification.
4. The foregoing amendment was authorized by the unanimous written consent
of the members of the Board of Directors.
IN WITNESS WHEREOF, we have signed this certificate on the 28th day of
January, 1997 and we affirm the statements contained therein as true under
penalties of perjury.
/s/William Shaw /s/Howard B. Weinreich
- ----------------------- ----------------------------------------
William Shaw, President Howard B. Weinreich, Assistant Secretary
6
<PAGE> 1
EXHIBIT 10.1(a)
NON-QUALIFIED STOCK OPTION INCENTIVE PLAN
OF
VOLT INFORMATION SCIENCES, INC.
(a New York Corporation)
(as amended effective August 26, 1996)
STATEMENT OF PURPOSES
The purposes of the Non-Qualified Stock Option Incentive Plan of
Volt Information Sciences, Inc. (hereinafter called the "Plan"), are to secure
to Volt Information Sciences, Inc., a New York corporation (hereinafter called
the "Company") stockholders the advantages of the incentive inherent in stock
ownership on the part of the officers and key employees of the Company and/or
its parent or subsidiaries, who are responsible for the continued success of the
Company, and to provide them with a proprietary interest in and a greater
concern for the welfare of the Company and an incentive to continue service with
the Company and/or its parent or subsidiaries. An eligible employee may be
granted non-qualified options, subject to such limits as may be imposed on the
aggregate number of shares which may be purchased under the Plan.
STATEMENT OF PLAN
1. Shares Subject to Plan. Subject to the provisions of paragraph
11, the total number of shares of common stock of the Company which may be
subject to options under the Plan, shall not exceed 800,000* shares of the
Company's $.10 par value per share, Common Stock, whether authorized but
unissued shares, transferee shares, or shares to be purchased or acquired. Such
shares are from time to time to be allocated by the Stock Option Committee for
option and sale to the participants in accordance with the Plan. In the event
any option granted under the Plan shall expire or terminate for any reason
without having been exercised in full or shall cease for any reason to be
exercisable in whole or in part, the unpurchased shares subject thereto shall
again be available for the purposes of the Plan.
2. Participants. The participants of the Plan shall consist of such
officers or key employees of the Company and/or its parent or subsidiaries, as
may from time to time be designated as participants by the Stock Option
Committee. A director of the Company who is not also an officer or key employee
of the Company shall not be eligible to receive an option. A participant who has
been granted an option may be granted an additional option or options if the
Stock Option Committee shall so determine.
- --------
*As amended September 29, 1980 to increase number of shares subject to the Plan
to 400,000 and to give effect to the 2 for 1 stock split in the form of a 100%
stock dividend distributed on October 6, 1995.
<PAGE> 2
3. Number of Shares. The Option Agreement shall specify the number
of shares to which it pertains.
4. Terms of Options. The Board of Directors or Stock Option
Committee may fix with respect to an option, the exercise price thereof (which
shall be 100%* of the average between the high bid and low asked prices on the
date of grant, but shall in no event be less than the par value of the shares
subject to the option) and such waiting period, exercise dates and other terms
and conditions as it shall deem appropriate.
The Option Agreement and the right to exercise any options
thereunder, shall terminate not more than ten (10) years from the dates any such
options are granted. The Board of Directors or Stock Option Committee may
provide in any Option Agreement that the option may not be exercised at any one
time as to less than a specified number of shares (or the remaining shares
purchasable under the option).
5. Method of Exercising Option. Any option granted hereunder may be
exercised by the participant by delivering to the Company at its main office
(attention of the Secretary) written notice of the number of shares with respect
to which the option is being exercised, accompanied by payment in full, in cash
or by certified check payable to the order of the Company, of the purchase price
of the shares purchased. The Company shall not be required to deliver
certificates for such shares until such payment has been made. Except as
provided in Paragraph 7, no option may be exercised at any time unless the
holder thereof is an employee of the Company. The holder of an option shall have
none of the rights of a stockholder with respect to the shares covered by his
option until such shares shall be issued or transferred to him upon the exercise
of his option.
6. Non-transferability of Options. No option granted under the Plan
shall be transferable other than by Will or by the Laws of Descent and
Distribution, and all options
- --------
*Increased from 85% on September 29, 1980.
-2-
<PAGE> 3
shall be exercisable during the lifetime of the participant by the participant
only. Without limiting the generality of the foregoing, an option may not be
transferred (except as aforesaid), assigned, pledged or hypothecated in any way
(whether by operation of law or otherwise), and shall not be subject to
execution, attachment or similar process. Any attempted transfer, assignment,
pledge, hypothecation or other disposition of an option granted under the Plan,
except as provided herein, shall be null and void and without effect and the
Stock Option Committee may, in its discretion, upon the happening of such event,
terminate such option forthwith.
7. Termination of Employment. In the event that the employment of a
participant to whom an option has been granted under the Plan shall be
terminated (otherwise than by reason of discharge for dishonesty or other
conduct injurious to the Company and/or its parent or any of its subsidiaries)
such option may be exercised (to the extent that the participant was entitled to
do so at the date of termination of his employment) at any time within three (3)
months after such termination, but not thereafter and in no event after the
expiration of the term of the option. Options granted under the Plan shall not
be affected by any change of employment so long as the participant continues to
be an officer or employee of the Company, or of any parent or subsidiary of the
Company. The Option Agreement may contain such provisions as the Stock Option
Committee may approve with respect to approved leaves of absence. Nothing in the
Plan or in any option granted under the Plan shall confer on any participant any
right to continue in the employ of the Company or interfere in any way with any
right of the Company to terminate his employment at any time.
8. Granting of Options. The granting of options pursuant to the
Plan shall take place on the effective date of grant as determined by the Stock
Option Committee, but no such options shall constitute a binding obligation of
the Company until a written option agreement shall be duly executed on behalf of
the Company by the participant to whom such option is to be granted.
9. Duties of the Company. The Company shall at all times during the
term of each option reserve and keep available for issue and sale such number of
shares of its Common Stock as shall be sufficient to satisfy the requirements of
all options at the time outstanding, shall pay all original issue and/or
transfer taxes with respect to the issue and/or transfer of shares pursuant to
such option and all other fees and expenses necessarily incurred by the Company
in connection therewith, and shall from time to time use its best efforts to
comply with all agreements, laws and regulations which, in the opinion of
counsel for the Company, shall be applicable to such options or the issue and
sale of shares hereunder.
10. Conditions of Exercise. Each option shall be subject to the
requirement that, if at any time the Board of Directors or the Stock Option
Committee shall determine, in their discretion, that if (a) the listing,
registration or qualification of the shares subject to such option upon any
securities exchange or under any state or federal law, or (b) the consent or
approval of any governmental body, or (c) any representation or agreement
-3-
<PAGE> 4
by the participant (or other person or persons exercising the option) that
shares purchased under any option are being purchased for investment and not
with a view to the distribution thereof, or (d) any other representation or
agreement by the participant (or other person or persons exercising the option);
or (e) an opinion of counsel for the Company, is necessary or desirable as a
condition of, or in connection with, the granting of such option or the issue or
sale of shares thereunder, then no such option may be exercised in whole or in
part unless such listing, registration, qualification, consent, approval,
representation, agreement or opinion shall have been effected or obtained free
of any conditions not acceptable to the Board of Directors or Stock Option
Committee; provided, however, that in the event that the shares subject to each
option granted hereunder are registered with the Securities and Exchange
Commission any investment representations given with respect to such share shall
automatically become inoperative upon the effective date of such registration.
11. Adjustment Upon Changes in Capitalization. Notwithstanding any
other provision of the Plan, the Option Agreement may contain such provisions as
the Stock Option Committee shall determine to be appropriate for the adjustment
of the allocation of shares, the number and class of shares subject to each
outstanding option and the option prices in the event of changes in the
outstanding Common Stock of the Company by reason of any stock dividends,
split-ups, recapitalization, combination or exchange of shares, merger,
consolidation, acquisition, separation, reorganization or liquidation and the
like.
12. Administration of Plan. The Plan shall be administered by the
Board of Directors which, to the extent it shall determine, may delegate its
powers with respect to the administration of the Plan to a committee of the
Board of Directors (the "Stock Option Committee") consisting of not less than
two directors (or such greater number as required by law), each of whom shall be
a "non-employee director" within the meaning of Rule 16b-3 (or any successor
rule or regulation) promulgated under the Securities Exchange Act of 1934, as
amended. References in the Plan to determinations or actions by the Stock Option
Committee shall be deemed to include determinations and actions by the Board of
Directors. A majority of the members of the Stock Option Committee shall
constitute a quorum. The Stock Option Committee shall determine, within the
limits of the express provisions of the Plan, the individuals to whom and the
time or times when options shall be granted, the number of shares to be subject
to each option and the option price under each option. In making such
determination, the Stock Option Committee may take into account the nature of
the services rendered by such individuals or classes of individuals, their
present and potential contributions to the Company's success, and such other
factors as the Stock Option Committee, in its discretion, shall deem relevant.
Subject to the express provisions of the Plan, the Stock Option Committee may
interpret the Plan, prescribe, amend and rescind rules and regulations relating
to it, determine the terms and provisions of the Option Agreements (which need
not be identical), and make all other determinations and take all other action
necessary or advisable for the administration of the Plan. The determinations of
the Stock Option Committee on the matters referred to in this Paragraph 12 shall
be conclusive.
-4-
<PAGE> 5
13. Effective Date, Termination, Modification and Amendment. The
Plan shall become effective retroactive to June 1, 1980 upon the approval, at a
meeting of shareholders of the Company, of the holders of a majority of all
outstanding shares of common stock of the Company, in which event, all options
granted under the Plan prior to the date of such meeting which are contingent
upon such approval shall be deemed to have been ratified. The Plan (but not
options previously granted under the Plan) shall terminate on June 30, 1990 or
sooner as hereinafter provided. No option shall be granted after termination.
The Plan may at any time, or from time to time, be terminated, modified or
amended by the affirmative vote of the holders of a majority of the outstanding
shares of Capital Stock of the Company entitled to vote thereon. The Board of
Directors of the Company may at any time prior to June 30, 1990, terminate the
Plan or make such modification or amendment of the Plan as it shall deem
advisable; provided, however, that the Board of Directors shall not without
further stockholder approval increase the maximum number of shares as to which
options may be granted, or reduce the percentage of fair market value which
shall be used in determining the purchase price of the stock covered by an
option or extend the period during which any option may be granted or exercised.
No termination, modification or amendment of the Plan may, without the consent
of the participant to whom an option shall previously have been granted,
adversely affect the rights of such participant under such option
14. Laws Governing. The validity and construction of the Plan and
the Option Agreements thereunder shall be governed by the laws of the State of
New York.
15. Termination of Right of Action. Every right of action arising
out of or in connection with the Plan by or on behalf of the Company, or by any
holder of Common Stock of the Company against any past, present or future member
of the Board of Directors or of the Stock Option Committee or against an
employee, or by an employee (past, present or future) against the Company will,
irrespective of the place where an action may be brought and irrespective of the
place of residence of any such holder of Common Stock, director, member of the
Stock Option Committee or employee, cease and be barred by the expiration of
eighteen (18) months from the date of the act or omission in respect of which
such right of action is alleged to have arisen.
-5-
<PAGE> 1
EXHIBIT 10.1(b)
1995 NON-QUALIFIED STOCK OPTION PLAN
OF
VOLT INFORMATION SCIENCES, INC.
(as amended effective August 26, 1996)
1. PURPOSES OF THE PLAN. This stock option plan (the "Plan") is
designed to provide an incentive to key employees (including directors and
officers who are key employees) of Volt Information Sciences, Inc., a New York
corporation (the "Company"), and its present and future subsidiary corporations,
as defined in Paragraph 19 ("Subsidiaries"), and to offer an additional
inducement in obtaining the services of such individuals. The Plan provides for
the grant of nonqualified stock options.
2. STOCK SUBJECT TO THE PLAN. Subject to the provisions of
Paragraph 12, the aggregate number of shares of Common Stock, $.10 par value per
share, of the Company ("Common Stock") for which options may be granted under
the Plan shall not exceed 800,000*. Such shares of Common Stock may, in the
discretion of the Board of Directors of the Company (the "Board of Directors"),
consist either in whole or in part of authorized but unissued shares of Common
Stock or shares of Common Stock held in the treasury of the Company. The Company
shall at all times during the term of the Plan reserve and keep available such
number of shares of Common Stock as will be sufficient to satisfy the
requirements of the Plan. Subject to the provisions of Paragraph 13, any shares
of Common Stock subject to an option which for any reason expires, is cancelled
or is terminated unexercised or which ceases for any reason to be exercisable
shall again become available for the granting of options under the Plan.
3. ADMINISTRATION OF THE PLAN. The Plan shall be administered by
the Board of Directors which, to the extent it shall determine, may delegate its
powers with respect to the administration of the Plan to a committee of the
Board of Directors (the "Committee") consisting of not less than two directors
(or such greater number as required by law), each of whom shall be a
"non-employee director" within the meaning of Rule 16b-3 (or any successor rule
or regulation) promulgated under the Securities Exchange Act of 1934, as amended
(the "Exchange Act"). References in the Plan to determinations or actions by the
Committee shall be deemed to include determinations and actions by the Board of
Directors. A majority of the members of the Committee shall constitute a quorum,
and the acts of a majority of the members present at any
- --------
* Gives effect to the 2 for 1 stock split in the form of a 100% stock dividend
distributed on October 6, 1995.
<PAGE> 2
meeting at which a quorum is present, and any acts approved in writing by all
members without a meeting, shall be the acts of the Committee.
Subject to the express provisions of the Plan, the Committee shall
have the authority, in its sole discretion, to determine the key employees who
shall receive options; the times when they shall receive options; the number of
shares of Common Stock to be subject to each option; the term of each option;
the date each option shall become exercisable; whether an option shall be
exercisable in whole, in part or in installments, and, if in installments, the
number of shares of Common Stock to be subject to each installment; whether the
installments shall be cumulative; the date each installment shall become
exercisable and the term of each installment; whether to accelerate the date of
exercise of any installment; whether shares of Common Stock may be issued on
exercise of an option as partly paid, and, if so, the dates when future
installments of the exercise price shall become due and the amounts of such
installments; the exercise price of each option; the form of payment of the
exercise price; whether to restrict the sale or other disposition of the shares
of Common Stock acquired upon the exercise of an option and to waive any such
restriction; whether to subject the exercise of all or any portion of an option
to the fulfillment of contingencies as specified in the contract referred to in
Paragraph 11 (the "Contract"), including without limitation, contingencies
relating to entering into a covenant not to compete with the Company and its
Parent (as defined in Paragraph 19) and Subsidiaries, to financial objectives
for the Company, a Subsidiary, a division, a product line or other category,
and/or the period of continued employment of the optionee with the Company or
its Subsidiaries, and to determine whether such contingencies have been met; the
amount, if any, necessary to satisfy the Company's obligation to withhold taxes
or other amounts; the fair market value of a share of Common Stock; to construe
the respective Contracts and the Plan; with the consent of the optionee, to
cancel or modify an option, provided such option as modified would be permitted
to be granted on such date under the terms of the Plan; to prescribe, amend and
rescind rules and regulations relating to the Plan; and to make all other
determinations necessary or advisable for administering the Plan. The
determinations of the Committee on the matters referred to in this Paragraph 3
shall be conclusive.
No member or former member of the Committee shall be liable for any
action, failure to act or determination made in good faith with respect to the
Plan or any option hereunder. In addition, the Company shall indemnify and hold
each member and former member of the Committee harmless from and against any
liability, claim for damages and expenses in connection therewith by reason of
any action, failure to act or determination made in good faith under or in
connection with the Plan or any option hereunder to the fullest extent permitted
with respect to directors under the Company's certificate of incorporation,
by-laws or applicable law.
4. ELIGIBILITY. The Committee may from time to time, consistent
with the purposes of the Plan, grant options to key employees (including
officers and directors who are key employees) of the Company or any of its
Subsidiaries. Such options granted shall cover such number of shares of Common
Stock as the Committee may determine; provided, however, that the
-2-
<PAGE> 3
maximum number of shares subject to options that may be granted to any
individual during any calendar year under the Plan shall not exceed 100,000
shares (the "162(m) Maximum").
5. EXERCISE PRICE. The exercise price of the shares of Common Stock
under each option shall be determined by the Committee; provided, however, that
the exercise price of an option shall not be less than 100% of the fair market
value of the shares of Common Stock subject thereto.
The fair market value of a share of Common Stock on any day shall
be (a) if the principal market for the Common Stock is a national securities
exchange, the average of the highest and lowest sales prices per share of Common
Stock on such day as reported by such exchange or on a composite tape reflecting
transactions on such exchange, (b) if the principal market for the Common Stock
is not a national securities exchange and the Common Stock is quoted on the
National Association of Securities Dealers Automated Quotations System
("NASDAQ"), and (i) if actual sales price information is available with respect
to the Common Stock, the average of the highest and lowest sales prices per
share of Common Stock on such day on NASDAQ, or (ii) if such information is not
available, the average of the highest bid and lowest asked prices per share of
Common Stock on such day on NASDAQ, or (c) if the principal market for the
Common Stock is not a national securities exchange and the Common Stock is not
quoted on NASDAQ, the average of the highest bid and lowest asked prices per
share of Common Stock on such day as reported on the NASDAQ OTC Bulletin Board
Service or by National Quotation Bureau, Incorporated or a comparable service;
provided, however, that if clauses (a), (b) and (c) of this Paragraph are all
inapplicable, or if no trades have been made or no quotes are available for such
day, the fair market value of the Common Stock shall be determined by the Board
by any method consistent with applicable regulations adopted by the Treasury
Department relating to stock options.
6. TERM. The term of each option granted pursuant to the Plan shall
be such term as is established by the Committee, in its sole discretion, at or
before the time such option is granted; provided, however, that the term of each
option granted pursuant to the Plan shall be for a period not exceeding 10 years
from the date of grant thereof.
7. EXERCISE. An option (or any part or installment thereof), to the
extent then exercisable, shall be exercised by giving written notice to the
Company at its principal office stating which option is being exercised,
specifying the number of shares of Common Stock as to which such option is being
exercised and accompanied by payment in full of the aggregate exercise price
therefor (or the amount due on exercise if the Contract with respect to an
option permits installment payments) (a) in cash or by certified check or (b) if
the applicable Contract permits, with the authorization of the Committee, with
previously acquired shares of Common Stock having an aggregate fair market
value, on the date of exercise, equal to the aggregate exercise price of all
options being exercised, or with any combination of cash, certified check or
shares of Common
-3-
<PAGE> 4
Stock. In such case, the fair market value of the Common Stock shall be
determined in accordance with Paragraph 5.
A person entitled to receive Common Stock upon the exercise of an
option shall not have the rights of a shareholder with respect to such shares of
Common Stock until the date of issuance of a stock certificate to him for such
shares; provided, however, that until such stock certificate is issued, any
option holder using previously acquired shares of Common Stock in payment of an
option exercise price shall continue to have the rights of a shareholder with
respect to such previously acquired shares.
In no case may a fraction of a share of Common Stock be purchased
or issued under the Plan.
8. TERMINATION OF EMPLOYMENT. Except as may otherwise be expressly
provided in the applicable Contract, any holder of an option whose employment
with the Company (and its Parent and Subsidiaries) has terminated for any reason
other than his death or Disability (as defined in Paragraph 19) may exercise
such option, to the extent exercisable on the date of such termination, at any
time within three months after the date of termination, but not thereafter and
in no event after the date the option would otherwise have expired; provided,
however, that if his employment is terminated either (a) for cause, or (b)
without the consent of the Company, such option shall terminate immediately.
Except as may otherwise be expressly provided in the applicable Contract,
options granted under the Plan shall not be affected by any change in the status
of the holder so long as he continues to be an employee of the Company, its
Parent or any of the Subsidiaries (regardless of having been transferred from
one corporation to another).
For the purposes of the Plan, an employment relationship shall be
deemed to exist between an individual and a corporation if, at the time of the
determination, the individual was an employee of such corporation for purposes
of Section 422(a) of the Internal Revenue Code of 1986, as amended (the "Code").
As a result, an individual on military, sick leave or other bona fide leave of
absence shall continue to be considered an employee for purposes of the Plan
during such leave if the period of the leave does not exceed 90 days, or, if
longer, so long as the individual's right to reemployment with the Company (or a
related corporation) is guaranteed either by statute or by contract. If the
period of leave exceeds 90 days and the individual's right to reemployment is
not guaranteed by statute or by contract, the employment relationship shall be
deemed to have terminated on the 91st day of such leave.
Nothing in the Plan or in any option granted under the Plan shall
confer on any individual any right to continue in the employ of the Company, its
Parent or any of its Subsidiaries, or interfere in any way with any right of the
Company, its Parent or any of its Subsidiaries to terminate the holder's
relationship at any time for any reason whatsoever without liability to the
Company, its Parent or any of its Subsidiaries.
-4-
<PAGE> 5
9. DEATH OR DISABILITY OF AN OPTIONEE. Except as may otherwise be
expressly provided in the applicable Contract, if an optionee dies (a) while he
is employed by the Company, its Parent or any of its Subsidiaries, (b) within
three months after the termination of his employment (unless such termination
was for cause or without the consent of the Company) or (c) within one year
following the termination of his employment by reason of Disability, his option
may be exercised, to the extent exercisable on the date of his death, by his
executor, administrator or other person at the time entitled by law to his
rights under such option, at any time within one year after death, but not
thereafter and in no event after the date the option would otherwise have
expired.
Except as may otherwise be expressly provided in the applicable
Contract, any optionee whose employment has terminated by reason of Disability
may exercise his option, to the extent exercisable upon the effective date of
such termination, at any time within one year after such date, but not
thereafter and in no event after the date the option would otherwise have
expired.
10. COMPLIANCE WITH SECURITIES LAWS. It is a condition to the
exercise of any option that either (a) a Registration Statement under the
Securities Act of 1933, as amended (the "Securities Act"), with respect to the
shares of Common Stock to be issued upon such exercise shall be effective and
current at the time of exercise, or (b) there is an exemption from registration
under the Securities Act for the issuance of shares of Common Stock upon such
exercise. Nothing herein shall be construed as requiring the Company to register
under the Securities Act the shares subject to any option.
The Committee may require the optionee to execute and deliver to
the Company his representations and warranties, in form and substance
satisfactory to the Committee, that (a) the shares of Common Stock to be issued
upon the exercise of the option are being acquired by the optionee for his own
account, for investment only and not with a view to the resale or distribution
thereof, and (b) any subsequent resale or distribution of shares of Common Stock
by such optionee will be made only pursuant to (i) a Registration Statement
under the Securities Act which is effective and current with respect to the
shares of Common Stock being sold, or (ii) a specific exemption from the
registration requirements of the Securities Act, but in claiming such exemption,
the optionee shall, prior to any offer of sale or sale of such shares of Common
Stock, provide the Company with a favorable written opinion of counsel, in form
and substance satisfactory to the Company, as to the applicability of such
exemption to the proposed sale or distribution.
In addition, if at any time the Committee shall determine in its
discretion that the listing or qualification of the shares of Common Stock
subject to such option on any securities exchange or under any applicable law,
or the consent or approval of any governmental regulatory body, is necessary or
desirable as a condition to, or in connection with, the granting of an option or
the issue of shares of Common Stock thereunder, such option may not be exercised
in whole or in part unless such listing, qualification, consent or approval
shall have been effected or obtained free of any conditions not acceptable to
the Committee.
-5-
<PAGE> 6
11. STOCK OPTION CONTRACTS. Each option shall be evidenced by an
appropriate Contract which shall be duly executed by the Company and the
optionee, and shall contain such terms and conditions not inconsistent herewith
as may be determined by the Committee.
12. ADJUSTMENTS UPON CHANGES IN COMMON STOCK. Not withstanding any
other provision of the Plan, in the event of any change in the outstanding
Common Stock by reason of a stock dividend, recapitalization, merger in which
the Company is the surviving corporation, split-up, combination or exchange of
shares or the like, the aggregate number and kind of shares subject to the Plan,
the aggregate number and kind of shares subject to each outstanding option and
the exercise price thereof, and the number and kind of shares subject to the
162(m) Maximum, shall be appropriately adjusted by the Board of Directors, whose
determination shall be conclusive.
In the event of (a) the liquidation or dissolution of the Company,
or (b) a merger in which the Company is not the surviving corporation or a
consolidation, any outstanding options shall terminate, unless other provision
is made therefor in the transaction.
13. AMENDMENTS AND TERMINATION OF THE PLAN. The Plan was adopted by
the Board of Directors on May 17, 1995. No option may be granted under the Plan
after May 16, 2005. The Board of Directors, without further approval of the
Company's shareholders, may at any time suspend or terminate the Plan, in whole
or in part, or amend it from time to time in such respects as it may deem
advisable, including, without limitation, to comply with the provisions of Rule
16b-3 promulgated under the Exchange Act or Section 162(m) of the Code, and to
conform to any change in applicable law or to regulations or rulings of
administrative agencies; provided, however, that no amendment shall be effective
without the requisite prior or subsequent shareholder approval which would (a)
except as contemplated in Paragraph 12, increase the maximum number of shares of
Common Stock for which options may be granted under the Plan or change the
162(m) Maximum, (b) materially increase the benefits to participants under the
Plan or (c) change the eligibility requirements to receive options hereunder. No
termination, suspension or amendment of the Plan shall, without the consent of
the holder of an existing option affected thereby, adversely affect his rights
under such option. The power of the Committee to construe and administer any
options granted under the Plan prior to the termination or suspension of the
Plan nevertheless shall continue after such termination or during such
suspension.
14. NON-TRANSFERABILITY OF OPTIONS. No option granted under the
Plan shall be transferable otherwise than by will or the laws of descent and
distribution, and options may be exercised, during the lifetime of the holder
thereof, only by him or his legal representatives. Except to the extent provided
above, options may not be assigned, transferred, pledged, hypothecated or
disposed of in any way (whether by operation of law or otherwise) and shall not
be subject to execution, attachment or similar process.
-6-
<PAGE> 7
15. WITHHOLDING TAXES. The Company may withhold cash and/or, with
the authorization of the Committee, shares of Common Stock to be issued with
respect thereto having an aggregate fair market value equal to the amount which
it determines is necessary to satisfy its obligation to withhold Federal, state
and local income taxes or other amounts incurred by reason of the grant or
exercise of an option, its disposition, or the disposition of the underlying
shares of Common Stock. Alternatively, the Company may require the holder to pay
to the Company such amount, in cash, promptly upon demand. The Company shall not
be required to issue any shares of Common Stock pursuant to any such option
until all required payments have been made. Fair market value of the shares of
Common Stock shall be determined in accordance with Paragraph 5.
16. LEGENDS; PAYMENT OF EXPENSES. The Company may endorse such
legend or legends upon the certificates for shares of Common Stock issued upon
exercise of an option under the Plan and may issue such "stop transfer"
instructions to its transfer agent in respect of such shares as it determines,
in its discretion, to be necessary or appropriate to (a) prevent a violation of,
or to perfect an exemption from, the registration requirements of the Securities
Act or (b) implement the provisions of the Plan or any agreement between the
Company and the optionee with respect to such shares of Common Stock.
The Company shall pay all issuance taxes with respect to the
issuance of shares of Common Stock upon the exercise of an option granted under
the Plan, as well as all fees and expenses incurred by the Company in connection
with such issuance.
17. USE OF PROCEEDS. The cash proceeds from the sale of shares of
Common Stock pursuant to the exercise of options under the Plan shall be added
to the general funds of the Company and used for corporate purposes.
18. SUBSTITUTIONS AND ASSUMPTIONS OF OPTIONS OF CERTAIN CONSTITUENT
CORPORATIONS. Anything in this Plan to the contrary notwithstanding, the Board
of Directors may, without further approval by the shareholders, substitute new
options for prior options of a Constituent Corporation (as defined in Paragraph
19) or assume the prior options of such Constituent Corporation.
19. DEFINITIONS.
(a) Subsidiary. The term "Subsidiary" shall have the same
definition as "subsidiary corporation" in Section 424(f) of the Code.
(b) Parent. The term "Parent" shall have the same definition
as "parent corporation" in Section 424(e) of the Code.
-7-
<PAGE> 8
(c) Constituent Corporation. The term "Constituent
Corporation" shall mean any corporation which engages with the Company, its
Parent or any Subsidiary in a transaction to which Section 424(a) of the Code
applies (or would apply if the option assumed or substituted were an ISO), or
any Parent or any Subsidiary of such corporation.
(d) Disability. The term "Disability" shall mean a permanent
and total disability within the meaning of Section 22(e)(3) of the Code.
20. GOVERNING LAW. The Plan, such options as may be granted
hereunder and all related matters shall be governed by, and construed in
accordance with, the laws of the State of New York, without regard to conflict
of law provisions.
21. PARTIAL INVALIDITY. The invalidity or illegality of any
provision herein shall not affect the validity of any other provision.
22. SHAREHOLDER APPROVAL. The Plan shall be subject to approval by
the affirmative vote, in person or by proxy, of a majority of all outstanding
shares of the Company at the next duly held meeting of the Company's
shareholders at which a quorum is present. No options granted hereunder may be
exercised prior to such approval, provided that the date of grant of any options
granted hereunder shall be determined as if the Plan had not been subject to
such approval. Notwithstanding the foregoing, if the Plan is not approved by a
vote of the shareholders of the Company on or before May 16, 1996, the Plan and
any options granted hereunder shall terminate.
-8-
<PAGE> 1
EXHIBIT 10.4.D
April 30, 1996
Irwin B. Robins, Esq.
Volt Information Sciences, Inc.
1221 Avenue of the Americas
New York, N.Y. 10020
RE: Employment Agreement Dated as of May 1, 1987 (the "Agreement")
Dear Mr. Robins:
This will confirm our understanding that, subject to the approval of the Board
of Directors of Volt Information Sciences, Inc., the Agreement is hereby amended
as follows:
1. Paragraph 1(a) is hereby amended so that the Employment Term shall
end on April 30, 1998.
Please confirm your agreement to the foregoing by signing a copy of this letter
and returning it to me.
Very truly yours,
William Shaw
Chairman of the Board and President
Agreed to and accepted:
/s/ Irwin B. Robins
- ----------------------
Irwin B. Robins
<PAGE> 1
VOLT INFORMATION SCIENCES, INC. AND SUBSIDIARIES
EXHIBIT 21--SUBSIDIARIES OF THE REGISTRANT
The following is a list of the subsidiaries and joint ventures of Volt as of
January 17, 1997 (exclusive of certain subsidiaries which, if considered in the
aggregate, would not, as of November 1, 1996, constitute a significant
subsidiary within the meaning of Rule 1-02(v) of Regulation S-X). All of such
subsidiaries, to the extent they were active during fiscal 1996 are included as
consolidated subsidiaries in the Registrant's consolidated financial statements
as of November 1, 1996.
Jurisdiction
of
Name (1) Incorporation
Volt Delta Resources, Inc. Nevada
Volt Delta Resources, Inc. Delaware
Jefferson-Adams Corporation New Jersey
Volt Temporary Services, Inc. Delaware
Volt Real Estate Corporation Delaware
VIS, Inc. Delaware
Volt-Autologic Directories S.A. Ltd. Delaware
Volt Holding Corp. Nevada
Volt Realty Two, Inc. Nevada
Volt Orangeca Real Estate Corp. Delaware
Volt Australia, Ltd. Delaware
Shaw & Shaw, Inc. Delaware
Volt Delta Europe, Limited United Kingdom
Volt Human Resources, Inc. Delaware
Volt ATRD Corp. Delaware
Sierra Technology Corporation California
Volt Opportunity Road Realty Corp. Delaware
Nuco II, Ltd. Delaware
Volt Management Corp. Delaware
Volt Technical Corp. Delaware
Fidelity National Credit Services Ltd. California
Tainol, S.A. Uruguay
Nuco I, Ltd. Nevada
Keystone Temps, Inc. Pennsylvania
Volt Information Sciences Funding, Inc. Delaware
Volt Viewtech, Inc. Delaware
Volt Participacoes, Ltda. Brazil
<PAGE> 2
VOLT INFORMATION SCIENCES, INC. AND SUBSIDIARIES--Continued
EXHIBIT 21--SUBSIDIARIES OF THE REGISTRANT--Continued
Jurisdiction
of
Name (1) Incorporation
Volt Cayman Investment Company, Ltd. Cayman Is.
Telelistas Editora, Ltda.(2) Brazil
Pacific Access Pty. Ltd.(3) Australia
Volt Jantech, Inc.(4) Delaware
Volt System I, J.V., Inc.(5) California
Volt Directory Marketing, Ltd.(6) Delaware
Autologic Information International, Inc.(7) Delaware
Autologic Information International, Ltd.(8) Nevada
Autologic Information International, Limited(8) Sweden
Autologic Information International, Limited(8) United Kingdom
Autologic Information International Pty. Limited(8) Australia
Autologic Triple-I Inc.(8) Canada
Autologic Information International, Limited(8) Israel
Xitron Inc. (8) Michigan
- ---------------------------------------
(1) - Except as noted, each named subsidiary is wholly owned, directly or
indirectly, by Volt Information Sciences, Inc., except that in the case of
certain foreign subsidiaries, qualifying shares may be registered in the name of
directors and/or other Volt subsidiaries.
(2) -50% owned joint venture.
(3) -12-1/2% owned joint venture.
(4) -60% owned subsidiary.
(5) -75% owned subsidiary.
(6) -80% owned subsidiary.
(7) -59% owned subsidiary. See discussion at page 15.
(8) -Wholly owned by Autologic Information International, Inc..
<PAGE> 1
EXHIBIT 23 CONSENT OF INDEPENDENT AUDITORS
We consent to 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. 33-18565 on Form S-8 dated
December 14, 1987 and Registration Statement No. 333-13369 on Form S-8 dated
October 3, 1996 of Volt Information Sciences, Inc. of our report dated January
8, 1997 with respect to the consolidated financial statements and schedule of
Volt Information Sciences, Inc. and subsidiaries included in the Form 10-K for
the year ended November 1, 1996.
Ernst & Young LLP
New York, New York
January 26, 1997
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