<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
/X / Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For The Nine Months Ended July 31, 1998
Or
/ / Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the transition period from ------------ to ------------
Commission File No. 1-9232
VOLT INFORMATION SCIENCES, INC.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
New York 13-5658129
------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1221 Avenue of the Americas, New York, New York 10020
----------------------------------------------- -----
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (212) 704-2400
Not Applicable
---------------------------------------------------------
(Former name, former address and former fiscal year, if
changed since last report)
Indicate by check mark whether the Registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months, and (2) has been
subject to such filing requirements for the past 90 days.
Yes /X/ No / /
The number of shares of common stock, $.10 par value, outstanding as
of September 3, 1998 was 14,929,994.
<PAGE> 2
VOLT INFORMATION SCIENCES, INC. AND SUBSIDIARIES
FORM 10-Q
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
<TABLE>
<S> <C>
Condensed Consolidated Statements of Income - Nine Months
and Three Months Ended July 31, 1998 and August 1, 1997 3
Condensed Consolidated Balance Sheets - July 31, 1998
and October 31, 1997 4
Condensed Consolidated Statements of Cash Flows -
Nine Months Ended July 31, 1998 and August 1, 1997 5
Notes to Condensed Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 12
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 22
SIGNATURE 23
</TABLE>
-2-
<PAGE> 3
PART I - FINANCIAL INFORMATION
ITEM 1- FINANCIAL STATEMENTS
VOLT INFORMATION SCIENCES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
Nine Months Ended Three Months Ended
----------------- ------------------
July 31, August 1, July 31, August 1,
1998 1997 1998 1997
----------- ----------- ----------- -----------
(Dollars in thousands, except per share data)
<S> <C> <C> <C> <C>
NET SALES:
Sales of services $ 1,143,290 $ 941,153 $ 409,578 $ 344,495
Sales of products 62,587 59,980 22,201 22,135
----------- ----------- ----------- -----------
1,205,877 1,001,133 431,779 366,630
----------- ----------- ----------- -----------
COSTS AND EXPENSES:
Cost of sales
Services 1,078,367 873,460 385,724 318,894
Products 36,497 35,650 12,766 12,910
Selling and administrative 41,677 37,965 14,021 13,093
Research, development and engineering 11,143 9,912 4,639 3,879
Depreciation and amortization 15,286 15,324 5,164 5,151
----------- ----------- ----------- -----------
1,182,970 972,311 422,314 353,927
----------- ----------- ----------- -----------
OPERATING PROFIT 22,907 28,822 9,465 12,703
OTHER INCOME (EXPENSE):
Interest income 1,812 1,055 497 466
Other income (expense) - net--Note E 76 532 (42) 344
Foreign exchange (loss) gain - net (710) 155 (53) (24)
Interest expense (4,279) (4,318) (1,492) (1,396)
----------- ----------- ----------- -----------
Income before items shown below 19,806 26,246 8,375 12,093
Income tax provision (8,239) (12,076) (3,505) (5,957)
Equity in net income of joint ventures--Note E 6,824 3,224
Minority interests in net loss (income)
of consolidated subsidiaries 163 336 (44) (86)
----------- ----------- ----------- -----------
NET INCOME $ 11,730 $ 21,330 $ 4,826 $ 9,274
=========== =========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
Per Share Data
--------------
<S> <C> <C> <C> <C>
Basic:
Net income per share $ 0.79 $ 1.46 $ 0.32 $ 0.63
========== ========== ========== ============
Weighted average number of shares--Note F 14,909,612 14,657,407 14,924,648 14,800,515
========== ========== ========== ============
Diluted:
Net income per share $ 0.77 $ 1.41 $ 0.32 $ 0.61
========== ========== ========== ============
Weighted average number of shares--Note F 15,321,092 15,119,112 15,238,799 15,303,754
========== ========== ========== ============
</TABLE>
See accompanying notes.
-3-
<PAGE> 4
VOLT INFORMATION SCIENCES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
July 31, October 31,
1998 1997 (a)
--------- ---------
ASSETS (Dollars in thousands)
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 38,009 $ 54,234
Short-term investments 727 105
Trade accounts receivable less allowances of $5,371 (1998) and $5,067 (1997) 251,340 227,548
Inventories--Note B 38,867 35,953
Deferred income taxes 6,670 8,102
Prepaid expenses and other assets 10,102 9,832
--------- ---------
TOTAL CURRENT ASSETS 345,715 335,774
Investment in securities 750 750
Property, plant and equipment less allowances for depreciation and amortization
of $50,050 (1998) and $45,372 (1997)--Note C 68,282 62,495
Deferred income taxes and other assets 9,084 5,629
Intangible assets-net of accumulated amortization of $11,727 (1998) and
$9,399 (1997)--Note G 15,263 14,074
--------- ---------
$ 439,094 $ 418,722
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Notes payable to banks $ 3,189 $ 4,410
Current portion of long-term debt--Note C 1,399 1,949
Accounts payable 64,547 59,589
Accrued wages and commissions 37,452 34,065
Other accruals 33,216 35,180
Customer advances and other liabilities 29,908 20,518
Income taxes 4,711 10,608
--------- ---------
TOTAL CURRENT LIABILITIES 174,422 166,319
Long-term debt--Note C 54,522 55,447
Minority interests 19,215 19,388
STOCKHOLDERS' EQUITY--Notes C and D
Preferred stock, par value $1.00; Authorized--500,000 shares; issued--none
Common stock, par value $.10; Authorized--30,000,000 shares; issued and
outstanding--14,929,994 shares (1998) and 14,883,143 shares (1997) 1,493 1,488
Paid-in capital 36,502 34,894
Retained earnings 153,085 141,355
Cumulative foreign currency translation adjustment (145) (169)
--------- ---------
190,935 177,568
--------- ---------
$ 439,094 $ 418,722
========= =========
</TABLE>
(a) The Balance Sheet at October 31, 1997 has been derived from the
audited financial statements at that date.
See accompanying notes.
-4-
<PAGE> 5
VOLT INFORMATION SCIENCES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Nine Months Ended
-----------------
July 31, August 1,
1998 1997
-------- --------
(Dollars in thousands)
<S> <C> <C>
CASH PROVIDED BY (APPLIED TO) OPERATING ACTIVITIES
Net income $ 11,730 $ 21,330
Adjustments to reconcile net income to cash provided by
operating activities:
Depreciation and amortization 15,286 15,324
Equity in net income of joint ventures (6,824)
Distributions from joint venture 4,329
Minority interests (163) (336)
Accounts receivable provisions 2,056 1,992
Gains on foreign currency translation (117) (710)
Deferred income tax provision 1,191 37
Other 75 76
Changes in operating assets and liabilities:
Increase in accounts receivable (26,658) (32,907)
(Increase) decrease in inventories (2,914) 674
Decrease (increase) in prepaid expenses and other current assets 496 (3,081)
Increase in other assets (3,094) (493)
Increase (decrease) in accounts payable 4,712 (2,539)
Increase in accrued expenses 2,268 8,161
Increase in customer advances and other liabilities 8,713 5,807
(Decrease) increase in income taxes payable (6,034) 2,767
-------- --------
NET CASH PROVIDED BY OPERATING ACTIVITIES 7,547 13,607
-------- --------
</TABLE>
-5-
<PAGE> 6
VOLT INFORMATION SCIENCES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)--Continued
<TABLE>
<CAPTION>
Nine Months Ended
-----------------
July 31, August 1,
1998 1997
-------- --------
(Dollars in thousands)
<S> <C> <C>
CASH PROVIDED BY (APPLIED TO) INVESTING ACTIVITIES
Maturities of investments 319 6,933
Purchases of investments (941) (6,323)
Investment in joint venture (157)
Acquisitions (3,076) (1,396)
Proceeds from disposals of property, plant and equipment 436 288
Purchases of property, plant and equipment (19,162) (11,915)
Proceeds from sale of joint venture 10,115
-------- --------
NET CASH APPLIED TO INVESTING ACTIVITIES (22,424) (2,455)
-------- --------
CASH PROVIDED BY (APPLIED TO) FINANCING ACTIVITIES
Payment of long-term debt (1,475) (1,474)
Exercise of stock options 914 5,564
Payment of notes payable to banks (1,021) (854)
Payment in lieu of fractional shares (2)
-------- --------
NET CASH (APPLIED TO) PROVIDED BY FINANCING ACTIVITIES (1,582) 3,234
-------- --------
Effect of exchange rate changes on cash 234 544
-------- --------
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (16,225) 14,930
Cash and cash equivalents, beginning of period 54,234 13,277
-------- --------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 38,009 $ 28,207
======== ========
SUPPLEMENTAL INFORMATION
Cash paid during the period:
Interest expense $ 3,423 $ 3,300
Income taxes, net of refunds $ 12,613 $ 7,002
</TABLE>
See accompanying notes.
-6-
<PAGE> 7
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Note A--Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with the instructions for Form 10-Q and Article 10 of
Regulation S-X, and, therefore, do not include all information and footnotes
required by generally accepted accounting principles for complete financial
statements. In the opinion of management, the accompanying unaudited condensed
consolidated financial statements contain all adjustments (consisting of normal
recurring accruals) considered necessary for a fair presentation of the
Company's consolidated financial position at July 31, 1998, and consolidated
results of operations for the nine and three months ended July 31, 1998 and
August 1, 1997 and consolidated cash flows for the nine months ended July 31,
1998 and August 1, 1997. Operating results for interim periods are not
necessarily indicative of the results that may be expected for the fiscal year.
These statements should be read in conjunction with the financial statements and
footnotes included in the Company's Annual Report on Form 10-K for the year
ended October 31, 1997. The accounting policies used in preparing these
financial statements are the same as those described in that Report. The 1997
financial statements contained herein have been reclassified to conform with the
current year's presentation. The Company's fiscal year ends on the Friday
nearest October 31.
Note B--Inventories
Inventories consist of:
<TABLE>
<CAPTION>
July 31, October 31,
1998 1997
-------- -----------
(Dollars in thousands)
<S> <C> <C>
Services:
Accumulated unbilled costs on:
Service contracts $27,446 $23,988
Long-term contracts 246 3,736
------- -------
27,692 27,724
------- -------
Products:
Materials and work-in-process 7,925 4,618
Service parts 2,118 2,318
Finished goods 1,132 1,293
------- -------
11,175 8,229
------- -------
Total $38,867 $35,953
======= =======
</TABLE>
The cumulative amounts billed, principally under long-term contracts, at July
31, 1998 and October 31, 1997, of $24.7 million and $17.3 million, respectively,
are credited against the related costs in inventory. Substantially all of the
amounts billed have been collected. Inventories have been reduced by accumulated
amortization of rotable spare parts and other inventory of $10.6 million and
$12.5 million at July 31, 1998 and October 31, 1997, respectively.
-7-
<PAGE> 8
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)--Continued
Note C--Long-Term Debt and Financial Arrangements
Long-term debt consists of the following:
<TABLE>
<CAPTION>
July 31, October 31,
1998 1997
-------- -----------
(Dollars in thousands)
<S> <C> <C>
7.92% Senior Notes (a) $50,000 $50,000
7.86% Term loan (b) 4,425 5,100
Notes payable (c) & (d) 1,496 2,296
------- -------
55,921 57,396
Less amounts due within one year 1,399 1,949
------- -------
Total long-term debt $54,522 $55,447
======= =======
</TABLE>
(a) On August 28, 1996, the Company issued $50.0 million of Senior Notes in a
private placement to institutional investors. The notes 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. The notes were issued pursuant to Note Purchase Agreements, which contain
various affirmative and negative covenants. One such covenant requires the
Company to maintain a level of consolidated net worth which, under the formula
in the agreements, was $113.1 million at July 31, 1998. However, the terms of
the Company's revolving Credit Agreement require the Company to maintain a
consolidated net worth of $129.9 million at July 31, 1998 (see below).
(b) In October 1994, the Company entered into a $10.0 million loan agreement
with Fleet Bank, N.A., which is secured by a deed of trust on land and buildings
(book value at July 31, 1998 - $14.1 million). The loan, which bears interest at
7.86% per annum, requires principal payments of $225,000 per quarter and a final
payment of $1.7 million in October 2001.
(c) The balance at October 31, 1997 included a note payable (with interest
payable at 90 day commercial paper rates) for $550,000, which was due and paid
on January 2, 1998.
(d) A loan of $2.5 million from The Chase Manhattan Bank was made to a foreign
subsidiary on January 18, 1996 to finance the acquisition of a printing press.
The loan, guaranteed by the Company, is being repaid in semi-annual payments of
$249,000, plus interest calculated at LIBOR (5.5% at July 31, 1998) plus 0.25%,
through September 15, 2001.
In addition, on July 2, 1997, the Company entered into a $75.0 million,
three-year, syndicated, unsecured, revolving Credit Agreement ("Agreement") with
a group of banks for which The Chase Manhattan Bank and Fleet Bank, N.A. are
serving as co-agents. Borrowings under the facility will bear interest at
various interest rates, with the Company having the option to select the most
favorable rate at the time of borrowing. The Agreement provides for, among other
things, the maintenance of various financial ratios and covenants, including a
requirement that the Company maintain consolidated net worth (as defined) of
$110.0 million, plus 50% of consolidated net income for each completed fiscal
year, (resulting in a requirement at July 31, 1998 to maintain consolidated net
worth of $129.9 million), and certain limitations on the extent to which the
Company and its subsidiaries may incur additional indebtedness, liens and sale
of assets. There were no outstanding borrowings under the Agreement at July 31,
1998.
-8-
<PAGE> 9
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)--Continued
Note D--Stockholders' Equity
Changes in the major components of stockholders' equity for the nine months
ended July 31, 1998 are as follows:
<TABLE>
<CAPTION>
Common Paid-In Retained
Stock Capital Earnings
------- ------- --------
(Dollars in thousands)
<S> <C> <C> <C>
Balance at October 31, 1997 $ 1,488 $34,894 $141,355
Net income for the nine months 11,730
Issuance of 13,381 shares to ESOP 1 698
Stock options exercised - 33,470 shares 4 910
------- ------- --------
Balance at July 31, 1998 $ 1,493 $36,502 $153,085
======= ======= ========
</TABLE>
The other component of stockholders' equity is a cumulative, unrealized, foreign
currency translation adjustment due to certain European subsidiaries of the
Company, the functional currencies of which are the local currencies.
Note E--Summarized Financial Information of Joint Ventures
In the first quarter of 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, and received $2.5 million in excess of its carrying value at
the date of sale. In connection with the sale, the Company continued to grant
credit and guarantee the venture's obligations with respect to certain import
financing, principally for the printing of telephone directories by the
Company's Uruguayan division, and therefore, had deferred the gain on the sale.
During the third quarter of 1998, Telelistas repaid its obligations and the
Company's guarantees were released. Accordingly, $500,000 of the gain on the
sale has been recognized and is included in other income in the third quarter of
1998. The $2.0 million balance of the deferred gain will be recognized as the
Company's Uruguayan division collects its receivables from Telelistas. Such
receivables are secured by the accounts receivable of Telelistas.
In the fourth quarter of 1997, the Company sold its 12-1/2% interest in Pacific
Access Pty. Ltd., its Australian joint venture, resulting in a gain of $12.8
million. This joint venture was responsible throughout Australia for the
marketing, sales and compilation functions of all yellow pages directories of
Telstra, the Australian telephone company.
-9-
<PAGE> 10
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)--Continued
Note E--Summarized Financial Information of Joint Ventures--(Continued)
The following summarizes the operating results of the joint ventures:
<TABLE>
<CAPTION>
Nine Months Ended Three Months Ended
----------------- ------------------
August 1, 1997 August 1, 1997
-------------- --------------
(Dollars in thousands)
Company's Company's
Total Equity Total Equity
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Revenues $539,534 $284,027
Costs and expenses 489,099 242,605
Income tax provision 17,343 15,019
-------- --------
Net income $ 33,092 $ 26,403
======== ========
Net income of Australian joint venture $ 29,900 $ 3,632 $ 26,403 $ 3,224
Net income of Brazilian joint venture 3,192 3,192
-------- -------- -------- --------
$ 33,092 $ 26,403
======== ========
Company's equity in net income of joint ventures $ 6,824 $ 3,224
======= ========
</TABLE>
Note F--Per Share Data
In 1997, the Financial Accounting Standards Board issued Statement No. 128,
"Earnings per Share". Under the new requirements for calculating basic earnings
per share, the dilutive effect of stock options are excluded. Diluted earnings
per share are computed on the basis of the weighted average number of shares of
common stock outstanding and the assumed exercise of dilutive outstanding stock
options based on the treasury stock method.
Note G--Acquisitions
During the nine months of fiscal year 1998, the Company acquired community-based
telephone directories, principally in Georgia and Virginia, for $2.4 million,
which includes contingent consideration of approximately $450,000, based on a
percentage of estimated revenues to be collected through April 1999. Additional
consideration up to an aggregate of $2.1 million is contingent on annual
earnings in fiscal years 1998 through 2002. Such contingent consideration is not
included in the acquisition cost total above, but will be recorded when, and if,
the future earnings requirements have been met. The acquisitions resulted in a
$2.4 million increase in intangible assets, which are being amortized over a
period of fifteen years.
During the second quarter of fiscal year 1998, the Company acquired a temporary
services business for a total of $1.0 million in cash, which resulted in an
increase in intangible assets of $1.0 million.
-10-
<PAGE> 11
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)--Continued
Note H--Recent Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities" ("SFAS No. 133"). This statement establishes new
accounting and reporting standards for derivative financial instruments and for
hedging activities. SFAS No. 133 requires an entity to measure all derivatives
at fair value and to recognize them in the balance sheet as an asset or
liability, depending on the entity's rights or obligations under the applicable
derivative contract. SFAS No. 133 generally provides for matching the timing of
income recognition for the derivative with the timing of income recognition for
the underlying item being hedged. SFAS No. 133 will be effective for the Company
no later than the quarter ending January 28, 2000. SFAS No. 133 is not expected
to have a significant effect on earnings, the financial position or cash flows
of the Company.
-11-
<PAGE> 12
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
NINE MONTHS AND THREE MONTHS ENDED JULY 31, 1998 COMPARED
TO THE NINE MONTHS AND THREE MONTHS ENDED AUGUST 1, 1997
The information which appears below relates to current and prior periods, the
results of operations for which periods are not necessarily indicative of the
results which may be expected for any subsequent periods. Management has made no
predictions or estimates as to future operations and no inferences as to future
operations should be drawn.
The following summarizes the Company's unaudited results of operations by
segment:
<TABLE>
<CAPTION>
Nine Months Ended Three Months Ended
----------------- ------------------
July 31, August 1, July 31, August 1,
1998 1997 1998 1997
----------- ----------- --------- ---------
(Dollars in thousands)
<S> <C> <C> <C> <C>
Net Sales:
- ----------
Staffing Services $ 922,333 $ 732,090 $ 337,192 $ 269,616
Telephone Directory 59,656 57,302 23,186 20,390
Telecommunications Services 123,685 105,515 38,805 42,192
Computer Systems 45,213 52,845 13,011 15,070
Electronic Publication and Typesetting Systems 62,856 60,322 22,266 22,312
Elimination of intersegment sales (7,866) (6,941) (2,681) (2,950)
----------- ----------- --------- ---------
Total Net Sales $ 1,205,877 $ 1,001,133 $ 431,779 $ 366,630
=========== =========== ========= =========
Segment Profit (Loss):
- ----------------------
Staffing Services $ 21,312 $ 19,318 $ 8,670 $ 7,788
Telephone Directory 1,601 2,512 2,012 1,654
Telecommunications Services 9,415 13,664 2,414 5,338
Computer Systems (2,213) 1,030 (1,591) (151)
Electronic Publication and Typesetting Systems 1,744 24 1,012 640
Elimination of intersegment profit (12)
----------- ----------- --------- ---------
Total Segment Profit 31,859 36,536 12,517 15,269
General corporate expenses (8,952) (7,714) (3,052) (2,566)
----------- ----------- --------- ---------
Total Operating Profit 22,907 28,822 9,465 12,703
Interest and other income - net 1,888 1,587 455 810
Interest expense (4,279) (4,318) (1,492) (1,396)
Foreign exchange (loss) gain - net (710) 155 (53) (24)
----------- ----------- --------- ---------
Income Before Income Taxes, Equity in Joint
Venture Earnings and Minority Interests $ 19,806 $ 26,246 $ 8,375 $ 12,093
=========== =========== ========= =========
</TABLE>
-12-
<PAGE> 13
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS--Continued
NINE MONTHS AND THREE MONTHS ENDED JULY 31, 1998 COMPARED
TO THE NINE MONTHS AND THREE MONTHS ENDED AUGUST 1, 1997--Continued
Forward-Looking Statements Disclosure
- -------------------------------------
In order to keep the Company's stockholders and investors informed of the
Company's future plans and objectives, this Quarterly Report on Form 10-Q and
other reports and statements issued by the Company and its officers from
time-to-time contain certain statements concerning the Company's future plans,
objectives, performance, intentions and expectations that are, or may be deemed
to be, "forward-looking statements". The Company's ability to do this has been
fostered by the Private Securities Litigation Reform Act of 1995, which provides
a "safe harbor" for forward-looking statements to encourage companies to provide
prospective information so long as those statements are accompanied by
meaningful cautionary statements identifying important factors that could cause
actual results to differ materially from those discussed in the statement. The
Company believes that it is in the best interests of its stockholders to take
advantage of the "safe harbor" provisions of that Act.
Although the Company believes that its expectations are based on reasonable
assumptions, these forward-looking statements are subject to a number of known
and unknown risks and uncertainties that could cause the Company's actual
results, performance and achievements to differ materially from those described
or implied in the forward-looking statements. These risks and uncertainties
include, but are not limited to, general economic, competitive and other
business conditions; the degree and timing of obtaining new contracts and the
rate of renewals of existing contracts, as well as customers' degree of
utilization of the Company's services; material changes in demand from larger
customers, including those with which the Company has national contracts;
changes in customer attitudes toward outsourcing; the Company's ability to
recruit qualified employees to satisfy customer requirements for the Company's
staffing services; the Company's ability to meet competition in its highly
competitive markets with minimal impact on margins; the degree of price
competition and pressure on margins; the Company's ability to maintain superior
technological capability; the Company's ability to foresee changes and to
identify, develop and commercialize innovative and competitive products and
systems in a timely and cost effective manner, and achieve customer acceptance
of such products and systems in markets characterized by rapidly changing
technology and frequent new product introductions; risks inherent in new product
introductions, such as start-up delays, uncertainty of customer acceptance, and
dependence on third parties for some product components; changes in laws,
regulations and government policies; the Company's performance on contracts; the
degree and effects of inclement weather; the timing of customer acceptances of
systems; and the Company's ability to attract and retain certain classifications
of technologically qualified personnel, particularly in the areas of research
and development and customer service. These and certain other factors are
discussed in the Company's Annual Report on Form 10-K for the year ended October
31, 1997 and may be discussed in this report and other reports hereafter filed
with the Securities and Exchange Commission, including this Report.
-13-
<PAGE> 14
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS--Continued
NINE MONTHS ENDED JULY 31, 1998 COMPARED
TO THE NINE MONTHS ENDED AUGUST 1, 1997
Results of Operations - Summary
- -------------------------------
In the nine-month period of fiscal 1998, net sales increased from the comparable
period in fiscal 1997 by $204.7 million, or 20%, to $1.2 billion. The increase
in 1998 net sales resulted primarily from a $190.2 million increase in sales by
the Staffing Services segment and a $18.2 million increase in sales by the
Telecommunications Services segment, partially offset by a $7.6 million decrease
in sales by the Computer Systems segment.
The Company's pretax income before joint venture earnings and minority interests
decreased by $6.4 million, or 25%, to $19.8 million in the first nine months of
1998 from the similar fiscal 1997 period. The operating profit of the Company's
segments decreased by $4.7 million, or 13%, to $31.9 million in the first nine
months of 1998 from the similar fiscal 1997 period. While the Staffing Services
segment and the Electronic Publication and Typesetting Systems segment increased
their operating profits, the decrease in results of the three telecommunications
segments more than offset these gains.
Net income in the first nine months of 1998 was $11.7 million, compared with net
income of $21.3 million in the first nine months of 1997. The 1997 net income
included the Company's portion ($6.8 million) of the earnings of two joint
ventures prior to their sale. One of the joint ventures was sold in the first
quarter of fiscal 1997 and the other was sold in the fourth quarter of fiscal
1997.
Results of Operations - By Segment
- ----------------------------------
Sales of the Staffing Services segment increased by $190.2 million, or 26%, to
$922.3 million in 1998. The segment's revenue growth was primarily driven by
additional revenue from new and existing large, national accounts, including
growth in subcontractors' pass-through revenue from national accounts and higher
demand for non-recruited payrolling services. This segment's operating profit
increased by $2.0 million, or 10%, to $21.3 million, compared with $19.3 million
in 1997. Approximately $59.1 million, or 31%, of the segment's 1998 sales
increase was due to pass-through costs primarily related to the use of
subcontractors to service large national contracts, which increased from $106.3
million in 1997 to $165.4 million in 1998. Of the remaining sales growth,
approximately $29.5 million was from business with new customers, and $101.6
million arising from existing customers, including non-recruited payrolling
services. The increase in the segment's operating profit was due to the increase
in sales volume, partially offset by a decrease in gross margin of approximately
0.3 percentage points and higher overhead costs. The decrease in gross margin
percentage was due to higher subcontractor usage, a substantial portion of which
is billed without a mark-up, and lower margins on the increasing business with
large, national, managed service accounts. Overhead costs have increased due to
start-up costs incurred in connection with the opening of new offices to service
national accounts, related infrastructure costs as additional regional and area
management is required to support expansion and higher recruiting costs in a
contracting labor market.
The Telephone Directory segment's sales increased by $2.4 million, or 4%, to
$59.7 million in fiscal 1998, while its operating profit decreased by $911,000,
or 36%, to $1.6 million in fiscal 1998 from $2.5 million in 1997. The sales
increase was primarily due to an increase in independent directory sales of $7.2
million, partially offset by a $2.4 million decrease in system sales, a $2.0
million decrease in Uruguayan printing sales and a $825,000 decrease in
telemarketing sales. The increase in independent directory sales was
attributable to twenty-six new directories published in the nine months ended
July 31, 1998. The decrease in operating profit
-14-
<PAGE> 15
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS--Continued
NINE MONTHS ENDED JULY 31, 1998 COMPARED
TO THE NINE MONTHS ENDED AUGUST 1, 1997--Continued
Results of Operations - By Segment--Continued
- ---------------------------------------------
in fiscal 1998 was due to increased overhead, which included approximately $1.6
million of costs to enter new directory markets, and a decrease in high margin
systems sales. Some of the segment's services are rendered under various short
and long-term contracts, some of which expired in 1997, while others were
renewed and new contracts were awarded to the segment. A contract with one
customer, which accounted for approximately 18% of the segment's revenues in the
nine months ended July 31, 1998, expired in June 1998 and was not renewed.
However, the segment has obtained several significant contracts which began in
fiscal 1997 and 1998. Other contracts are scheduled to expire through 2001.
The Telecommunications Services segment's sales increased by $18.2 million, or
17%, to $123.7 million in fiscal 1998, while its operating profit decreased by
$4.3 million, or 31%, to $9.4 million in fiscal 1998 from $13.7 million in 1997.
The sales increase was primarily due to a 69% increase in the Business Systems
division. The sales increase resulted from several factors, including required
upgrading of core telecommunication infrastructures by existing customers, the
demand for the segment's services in the wireless area, and the continued
emphasis of outsourcing by major telecommunications providers. Operating results
decreased due to a 3.7 percentage point reduction in gross margins, resulting
from a greater proportion of sales being contributed by lower margin business
system services, and a shift in product mix toward lower margin projects in
construction services. In addition, segment overhead increased by 28% to support
the sales growth and the geographic expansion of this segment. Services
performed under a contract with a telephone carrier, which amounted to 10% of
the segment's revenues in the nine months ended July 31, 1998, are expected to
be substantially reduced or eliminated in the future.
The Computer Systems segment's sales decreased by $7.6 million, or 14%, to $45.2
million in 1998 and its operating loss was $2.2 million, compared with an
operating profit of $1.0 million in 1997. The decrease in sales was primarily
due to a decrease in sales of conservation services to utilities, resulting from
the phase-out under several large contracts with customers, which no longer
require the segment's services, and a reduction of system enhancement sales.
This decrease was slightly offset by higher revenue generated by the Maintech
division, which provides maintenance services to the segment's customers, as
well as to customers that have purchased systems and networks from others. The
operating loss was due to lower sales volume of conservation services and the
reduction, in 1998, of high margin system enhancement sales which benefited
operating profit in 1997. Under the completed contract method of accounting used
by a portion of this segment, revenues and related costs are recognized in
income upon acceptance by the customer. This segment's results on a
quarter-to-quarter basis are highly dependent on the acceptance by customers
under contract for the segment's directory assistance systems, which occurs
intermittently rather than evenly.
The Electronic Publication and Typesetting Systems segment's sales increased by
$2.5 million, or 4%, to $62.9 million in 1998, and its operating profit was $1.7
million, compared with an operating profit of $24,000 in 1997. The fiscal 1998
sales increase resulted primarily from an increase in domestic sales of systems
and equipment, partially offset by a decrease in systems and equipment sales of
its international operations, and lower customer service sales in the domestic
market. Most of the international decline was in the Pacific Rim due to the
economic problems in Asia which may continue to impair sales in the region until
Pacific Rim economies and currencies strengthen. Operating profits increased due
to the sales increase and a 1.1 percentage point increase in gross margins. The
markets in which this segment competes are marked by rapidly changing
-15-
<PAGE> 16
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS--Continued
NINE MONTHS ENDED JULY 31, 1998 COMPARED
TO THE NINE MONTHS ENDED AUGUST 1, 1997--Continued
Results of Operations - By Segment--Continued
- ---------------------------------------------
technology, with sales in fiscal 1998 of equipment introduced within the last
three years comprising approximately 79% of equipment sales.
Results of Operations - Other
- -------------------------------
Other items, discussed on a consolidated basis, affecting the results of
operations for the nine-month periods were:
Research, development and engineering increased by $1.2 million, or 12%, to
$11.1 million in 1998, primarily as a result of costs of $1.8 million incurred
to convert and test systems applications under the Company's Enterprise-Wide
Year 2000 Compliance Assurance Program.
Interest income increased by $757,000, or 72%, to $1.8 million in 1998,
primarily due to an increase in the average amount of funds available for
investment during the nine-month period of fiscal 1998, compared with the same
period in fiscal 1997.
Other income was reduced by $456,000, or 86%, to $76,000 in 1998, primarily due
to a non-recurring charge of $650,000 for professional fees in connection with a
terminated transaction and a decrease in various items of income, partially
offset by the recognition of $500,000 of a previously deferred $2.5 million gain
on the sale of the Company's interest in its Brazilian joint venture. (See Note
E in the Notes to Condensed Consolidated Financial Statements)
The foreign exchange loss in the nine months of 1998 was $710,000 compared to a
gain in the same period in fiscal 1997 of $155,000. The foreign exchange loss in
1998 was due to unfavorable, and the gain in 1997 was due to favorable, currency
movements in the European currency market. To reduce the potential adverse
impact from foreign currency changes on the Company's foreign currency
receivables, sales and firm commitments, foreign currency options and forward
contracts are purchased.
Interest expense decreased by $39,000, or 1%, to $4.3 million in 1998. The
decrease was primarily due to lower average outstanding loan balances.
The Company's effective tax rate was reduced to 42% in 1998 from 46% in 1997.
The higher effective income tax rate in 1997 resulted from higher foreign taxes.
The Company's share of the net income of its two joint ventures was $6.8 million
in 1997. Both joint ventures were sold in fiscal 1997; the Brazilian venture in
January 1997 and the Australian venture in September 1997.
-16-
<PAGE> 17
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS--Continued
THREE MONTHS ENDED JULY 31, 1998 COMPARED
TO THE THREE MONTHS ENDED AUGUST 1, 1997
Results of Operations - Summary
- -------------------------------
In the three-month period of fiscal 1998, net sales increased from the
comparable period in fiscal 1997 by $65.1 million, or 18%, to $431.8 million.
The increase in 1998 net sales resulted primarily from a $67.6 million increase
in sales by the Staffing Services segment and a $2.8 million increase in sales
by the Telephone Directory segment, partially offset by a $3.4 million decrease
in sales by the Telecommunications Services segment and a $2.1 million decrease
in sales by the Computer Systems segment.
The Company's pretax income before joint venture earnings and minority interests
decreased by $3.7 million, or 31%, to $8.4 million in the third fiscal quarter
of 1998 from the comparable period in fiscal 1997. The operating profit of the
Company's segments decreased by $2.8 million, or 18%, to $12.5 million in the
third fiscal quarter of 1998 from the comparable period in fiscal 1997. While
the Staffing Services segment, the Electronic Publication and Typesetting
Systems segment and the Telephone Directory segment increased their operating
profits, the decrease in results of the Telecommunications Services and Computer
Systems segments more than offset these gains.
Net income in the three months of 1998 was $4.8 million, compared with net
income of $9.3 million in the three months of 1997. The 1997 net income included
the Company's portion ($3.2 million) of earnings of a joint venture, which was
sold in the fourth quarter of fiscal 1997.
Results of Operations - By Segment
- ----------------------------------
Sales of the Staffing Services segment increased by $67.6 million, or 25%, to
$337.2 million in 1998. The segment's revenue growth was primarily driven by
additional revenue from new and existing large, national accounts, including
growth in subcontractors' pass-through revenue from national accounts and higher
demand for non-recruited payrolling services. This segment's operating profit
increased by $882,000, or 11%, to $8.7 million in 1998, compared with $7.8
million in 1997. Approximately $29.3 million, or 43%, of the segment's 1998
sales growth was due to pass-through costs, primarily related to the use of
subcontractors to service large national contracts, which increased from $43.2
million in 1997 to $72.5 million in 1998. Of the remaining sales growth,
approximately $8.8 million was from business with new customers, and $29.5
million arising from existing customers, including non-recruited payrolling
services. The increase in the segment's operating profit was due to the increase
in sales volume, partially offset by a decrease in gross margin of approximately
0.4 percentage points and higher overhead costs. The decrease in gross margin
percentage was due to higher subcontractor usage, a substantial portion of which
is billed without a mark-up, and lower margins on the increasing business with
large, national, managed service accounts. Although overhead costs have
increased due to the opening of new offices and related infrastructure,
expressed as a percentage of sales, there was a slight reduction in the 1998
third quarter compared with the 1997 third quarter.
The Telephone Directory segment's sales increased by $2.8 million, or 14%, to
$23.2 million in fiscal 1998. This segment's operating profit increased by
$358,000, or 22%, to $2.0 million in 1998, compared with $1.7 million in 1997.
The sales increase was primarily due to a $3.0 million increase in independent
directory sales, partially offset by a $344,000 decrease in telemarketing sales.
The increase in independent directory sales was due to twelve new directories
published in 1998. The increase in the operating profit in 1998 was due to the
increased sales, partially offset by increased overhead, which included
approximately $649,000 of costs to enter new directory markets. Some of the
segment's services are rendered under various short and long-term
-17-
<PAGE> 18
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS--Continued
THREE MONTHS ENDED JULY 31, 1998 COMPARED
TO THE THREE MONTHS ENDED AUGUST 1, 1997--Continued
Results of Operations - By Segment--Continued
- ---------------------------------------------
contracts, some of which expired in 1997, while others were renewed and new
contracts were awarded to the segment. A contract with one customer, which
accounted for approximately 16% of the segment's revenues in the three months
ended July 31, 1998 expired in June 1998 and was not renewed. However, the
segment has obtained several significant contracts which began in fiscal 1997
and 1998. Other contracts are scheduled to expire through 2001.
The Telecommunications Services segment's sales decreased by $3.4 million, or
8%, to $38.8 million in fiscal 1998 and its operating profit decreased by $2.9
million, or 55%, to $2.4 million in fiscal 1998, compared with $5.3 million in
1997. The sales decrease was primarily due to a 15% decrease in the Construction
division, partially offset by a 27% increase in the Business Systems division.
The decline in sales of the Construction division was related to competitive
pricing pressures and the absence in 1998 of certain projects with attractive
pricing completed in 1997. Operating results decreased due to a 3.5 percentage
point decrease in gross margins, resulting from a greater proportion of sales
being contributed by lower margin projects in construction services. Overhead
increased by 6% to support the geographic expansion of this segment. Services,
performed under a contract with a telephone carrier, which amounted to 6% of the
segment's revenues in the three months ended July 31, 1998, are expected to be
substantially reduced or eliminated in the future.
The Computer Systems segment's sales decreased by $2.1 million, or 14%, to $13.0
million in 1998 and its operating loss increased to $1.6 million, compared to an
operating loss of $151,000 in 1997. The decrease in sales was primarily due to a
reduction of system enhancement sales and a decrease in sales of conservation
services to utilities, resulting from the phase-out under several large
contracts with customers which no longer require the segment's services. This
decrease was slightly offset by higher revenue generated by the Maintech
division, which provides maintenance services to the segment's customers, as
well as to customers that have purchased systems and networks from others. The
increased operating loss was due to the reduction in 1998 of high margin system
enhancement sales and lower sales volume of conservation services. Under the
completed contract method of accounting used by a portion of this segment,
revenues and related costs are recognized in income upon acceptance by the
customer. This segment's results on a quarter-to-quarter basis are highly
dependent on the acceptance by customers under contract for the segment's
directory assistance systems, which occurs intermittently rather than evenly.
The Electronic Publication and Typesetting Systems segment's sales decreased by
$46,000, to $22.3 million in 1998, while its operating profit increased by
$372,000, or 58%, to $1.0 million, compared with $640,000 in 1997. The fiscal
1998 sales decrease resulted primarily from decreases in sales of systems and
equipment in its international operations, principally in the Pacific Rim,
offset, in part, by an increase in its domestic operations. Operating results
increased due to a 0.6 percentage point increase in gross margins and a $240,000
reduction of operating expenses. The markets in which this segment competes are
marked by rapidly changing technology, with sales in fiscal 1998 of equipment
introduced within the last three years comprising approximately 74% of equipment
sales.
-18-
<PAGE> 19
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS--Continued
THREE MONTHS ENDED JULY 31, 1998 COMPARED
TO THE THREE MONTHS ENDED AUGUST 1, 1997--Continued
Results of Operations - Other
- -----------------------------
Other items, discussed on a consolidated basis, affecting the results of
operations for the three-month periods were:
Research, development and engineering increased by $760,000, or 20%, to $4.6
million in the third quarter of 1998, primarily as a result of costs of $1.0
million incurred to convert and test systems applications under the Company's
Enterprise-Wide Year 2000 Compliance Assurance Program.
Interest income increased by $31,000, or 7%, to $497,000 in the third quarter of
1998, compared with the third quarter of 1997, primarily due to an increase in
the average amount of funds available for investment.
Other income was reduced by $386,000, primarily due to a non-recurring charge of
$650,000 for professional fees in connection with a terminated transaction and a
decrease in various items of income, partially offset by the recognition of
$500,000 of a previously deferred $2.5 million gain on the sale of the Company's
interest in its Brazilian joint venture.
The foreign exchange losses were $53,000 and $24,000 in fiscal 1998 and 1997,
respectively. The losses were due to unfavorable currency movements in the
European currency markets. To reduce the potential adverse impact from foreign
currency changes on the Company's foreign currency receivables, sales and firm
commitments, foreign currency options and forward contracts are purchased.
Interest expense increased by $96,000, or 7%, to $1.5 million, principally as a
result of borrowings during the 1998 third quarter under the Company's revolving
Credit Agreement. Such borrowings were repaid toward the end of the 1998 third
quarter.
The Company's effective tax rate was reduced to 42% in 1998 from 49% in 1997.
The higher effective income tax rate in 1997 resulted from higher foreign taxes.
The Company's share of the net income of its Australian joint venture was $3.2
million in 1997. The joint venture was sold in September 1997.
-19-
<PAGE> 20
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS--Continued
Liquidity and Sources of Capital
- --------------------------------
Cash and cash equivalents decreased by $16.2 million to $38.0 million in 1998.
Operating activities provided $7.5 million of cash in the first nine months of
fiscal 1998. Primary among the factors providing cash flows from operating
activities were the Company's net income of $11.7 million, augmented by net
non-cash expense charges of $18.3 million (primarily $15.3 million of
depreciation and amortization). These cash flows were offset, in part, by the
use of $22.5 million related to changes in operating assets and liabilities
(increases in the levels of accounts receivable of $26.7 million, inventories of
$2.9 million and other assets of $3.1 million and a decrease in income taxes
payable of $6.0 million, partially offset principally by increases in customer
advances and other liabilities of $8.7 million and in accounts payable and
accrued expenses of an aggregate of $7.0 million).
The principal factors in the cash applied to investing activities of $22.4
million were the expenditure for property, plant and equipment of $19.2 million
and acquisitions of community-based phone directories and a temporary services
business totaling $3.1 million (See Note G of the Notes to Condensed
Consolidated Financial Statements).
Financing activities used $1.6 million of cash to reduce long-term debt by $1.5
million and notes payable by $1.0 million, offset, in part, by $914,000 received
from the exercise of stock options.
In addition to its cash and cash equivalents, at July 31, 1998, the Company has
a $75.0 million, three-year, syndicated, unsecured credit line with a group of
banks under a revolving Credit Agreement which extends to July 2, 2000. At July
31, 1998 the Company had no outstanding bank borrowings under that line.
In August 1998, the Company formed a joint venture with TELUS Corporation to
publish community telephone directories in the western half of the United
States. Each partner has committed $25 million for acquisitions, start-up and
operations of the venture. The Company has no other material capital
commitments. The Company may determine, from time-to-time in the future, to buy
shares of its common stock. The Company believes that its current financial
position, working capital, future cash flows and credit lines will be sufficient
to fund its presently contemplated operations and satisfy its debt obligations.
Year 2000 Compliance
- --------------------
The Company utilizes software and related technologies throughout its businesses
that will be affected by the issues associated with the programming code in
existing systems as the millennium (Year 2000) approaches. To ensure that the
Company's internal systems and products offered for sale will continue to meet
its internal needs and those of its customers, Volt's Enterprise-Wide Year 2000
Compliance Assurance Program is well under way.
The Program involves Volt employees and consultants identifying, correcting or
reprogramming, and testing all programs and systems for Year 2000 compliance. In
addition, the Company has addressed the issue with suppliers of systems on which
certain of the Company's systems rely and with which significant electronic
commerce is conducted, and has requested verification that they will be timely
compliant. To that end, the Company has been and will continue to work closely
with those vendors and customers to ensure Year 2000 compliance is achieved. If
the Company determines, through that verification process, that critical
suppliers, vendors and major customers are not compliant, their progress will be
monitored and appropriate contingency plans established.
-20-
<PAGE> 21
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS--Continued
Year 2000 Compliance--Continued
- -------------------------------
Based on recent assessments of current progress and future plans, the Company
believes that the Year 2000 date will not significantly affect its ability to
deliver services and products to its customers on a timely basis. Core internal
systems will be converted and modified in 1998. Extensive testing has begun and
will continue throughout 1998 and 1999. No issues have been encountered nor are
any anticipated which would materially affect the Company's ability to continue
operations.
To minimize the risk to the Company, in the event that certain of its internal
systems or those of third parties will not be compliant, plans are expected to
be developed in early 1999 that will include back-up stand alone systems,
methods not reliant on computers, and the identification and commitment of
alternate suppliers and vendors.
The Company believes it is taking the necessary steps to become Year 2000
compliant. There will be consequences if internal or external significant Year
2000 issues are not resolved. However, the Company believes that incremental
costs to perform mission-critical tasks will not have a material adverse effect
on the Company.
Conversion and testing of systems applications is expected to cost approximately
$4.0 million, of which approximately $1.8 million was incurred in the nine
months ended July 31, 1998.
-21-
<PAGE> 22
PART II - OTHER INFORMATION
ITEM 6-- EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
15.01 Letter from Ernst & Young LLP
15.02 Letter from Ernst & Young LLP regarding interim financial information.
27.01 Financial Data Schedule (filed with electronic version only).
(b) Reports on Form 8-K:
No Reports on Form 8-K were filed during the third quarter ended July 31, 1998.
However, after the end of the third quarter, the Company filed a Report on Form
8-K dated August 20, 1998 (date of earliest event reported August 20, 1998),
reporting under Item 5, Other Events, and Item 7, Financial Statements and
Exhibits. No financial statements were filed with that report.
-22-
<PAGE> 23
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
VOLT INFORMATION SCIENCES, INC.
(Registrant)
BY: /s/ JACK EGAN
-------------------------------------
Date: September 11, 1998 JACK EGAN
Vice President - Corporate Accounting
(Principal Accounting Officer)
-23-
<PAGE> 24
EXHIBIT INDEX
-------------
EXHIBIT
NUMBER DESCRIPTION
- ------ -----------
15.01 Letter from Ernst & Young LLP
15.02 Letter from Ernst & Young LLP regarding interim financial information.
27.01 Financial Data Schedule (filed with electronic version only).
<PAGE> 1
September 11, 1998
Securities and Exchange Commission
Washington DC 20549
We are aware of the incorporation by reference in Post-Effective Amendment No. 2
to Registration Statement No. 2-75618 on Form S-8 dated September 12, 1988,
Post-Effective Amendment No. 3 to Registration Statement No. 2-70180 on Form S-8
dated April 8, 1983, Registration Statement No. 33-18565 on Form S-8 dated
December 14, 1987, Registration Statement No. 333-13369 on Form S-8 dated
October 3, 1996 and Registration Statement No. 333-45903 on Form S-8 dated
February 10, 1998 of Volt Information Sciences, Inc. of our report dated
September 1, 1998, relating to the unaudited condensed consolidated interim
financial statements of Volt Information Sciences, Inc. which are included in
its Form 10-Q for the quarter ended July 31, 1998.
Pursuant to Rule 436(c) of the Securities Act of 1933 our report is not part of
the registration statement prepared or certified by accountants within the
meaning of Section 7 or 11 of the Securities Act of 1933.
Ernst & Young LLP
New York, New York
Exhibit 15.01
<PAGE> 1
ERNST & YOUNG LLP 787 Seventh Avenue Phone 212-773-3000
New York, New York 10019
INDEPENDENT ACCOUNTANTS' REPORT ON REVIEW OF INTERIM
FINANCIAL INFORMATION
To the Stockholders
Volt Information Sciences, Inc.
We have reviewed the accompanying unaudited condensed consolidated balance sheet
of Volt Information Sciences, Inc. and subsidiaries as of July 31, 1998, and the
related condensed consolidated statements of income for the nine and three month
periods ended July 31, 1998 and August 1, 1997, and the related condensed
consolidated statements of cash flows for the nine month periods ended July 31,
1998 and August 1, 1997. These financial statements are the responsibility of
the Company's management.
We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical procedures to financial
data and making inquiries of persons responsible for accounting matters. It is
substantially less in scope than an audit conducted in accordance with generally
accepted auditing standards, which will be performed for the full year with the
objective of expressing an opinion regarding the financial statements taken as a
whole. Accordingly, we do not express such an opinion.
Based on our reviews, we are not aware of any material modifications that should
be made to the condensed consolidated interim financial statements referred to
above for them to be in conformity with generally accepted accounting
principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet of Volt Information Sciences, Inc. as
of October 31, 1997, and the related consolidated statements of income and cash
flows for the year then ended, not presented herein; and in our report dated
December 17, 1997, we expressed an unqualified opinion on these consolidated
financial statements. In our opinion, the information set forth in the
accompanying condensed consolidated balance sheet as of October 31, 1997, is
fairly stated, in all material respects, in relation to the consolidated balance
sheet from which it has been derived.
Ernst & Young LLP
September 1, 1998
Exhibit 15.02
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<FISCAL-YEAR-END> OCT-30-1998
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<RECEIVABLES> 256,711
<ALLOWANCES> 5,371
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