<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 Six Months Ended May 1, 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 June 5,
1998 was 14,922,904.
<PAGE> 2
VOLT INFORMATION SCIENCES, INC. AND SUBSIDIARIES
FORM 10-Q
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Statements of Income - Six Months
and Three Months Ended May 1, 1998 and May 2, 1997 3
Condensed Consolidated Balance Sheets - May 1, 1998
and October 31, 1997 4
Condensed Consolidated Statements of Cash Flows -
Six Months Ended May 1, 1998 and May 2, 1997 5
Notes to Condensed Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 11
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders 20
Item 6. Exhibits and Reports on Form 8-K 21
SIGNATURE 22
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<PAGE> 3
PART I - FINANCIAL INFORMATION
ITEM 1- FINANCIAL STATEMENTS
VOLT INFORMATION SCIENCES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended Three Months Ended
---------------- ------------------
May 1, May 2, May 1, May 2,
1998 1997 1998 1997
---- ---- ---- ----
(Dollars in thousands, except per share data)
<S> <C> <C> <C> <C>
NET SALES:
Sales of services $ 733,712 $ 596,658 $ 390,132 $ 325,834
Sales of products 40,386 37,845 22,451 19,869
--------- --------- --------- ---------
774,098 634,503 412,583 345,703
--------- --------- --------- ---------
COSTS AND EXPENSES:
Cost of sales
Services 692,643 554,566 367,410 300,950
Products 23,731 22,740 13,625 11,628
Selling and administrative 27,656 24,872 14,385 12,974
Research, development and engineering 6,504 6,033 3,537 3,086
Depreciation and amortization 10,122 10,173 5,093 5,115
--------- --------- --------- ---------
760,656 618,384 404,050 333,753
--------- --------- --------- ---------
OPERATING PROFIT 13,442 16,119 8,533 11,950
OTHER INCOME (EXPENSE):
Interest income 1,315 589 554 277
Other income - net 118 188 90 14
Foreign exchange (loss) gain - net (657) 179 (204) (116)
Interest expense (2,787) (2,922) (1,413) (1,427)
--------- --------- --------- ---------
Income before income taxes and items shown below 11,431 14,153 7,560 10,698
Income tax provision (4,734) (6,119) (3,193) (4,581)
Equity in net income of joint ventures--Note E 3,600 948
Minority interests in net loss (income)
of consolidated subsidiaries 207 422 (48) 69
--------- --------- --------- ---------
NET INCOME $ 6,904 $ 12,056 $ 4,319 $ 7,134
========= ========= ========= =========
Per Share Data
--------------
Basic:
Net income per share $0.46 $0.83 $0.29 $0.49
===== ===== ===== =====
Weighted average number of shares--Note F 14,902,093 14,585,853 14,912,082 14,620,817
========== ========== ========== ==========
Diluted:
Net income per share $0.45 $0.80 $0.28 $0.47
===== ===== ===== =====
Weighted average number of shares--Note F 15,362,239 15,026,700 15,344,831 15,035,564
========== ========== ========== ==========
</TABLE>
See accompanying notes.
-3-
<PAGE> 4
VOLT INFORMATION SCIENCES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
May 1, October 31,
1998 1997 (a)
----- --------
<S> <C> <C>
ASSETS (Dollars in thousands)
CURRENT ASSETS
Cash and cash equivalents $ 25,176 $ 54,234
Short-term investments 108 105
Trade accounts receivable less allowances of $5,447 (1998) and $5,067 (1997) 249,716 227,548
Inventories--Note B 38,225 35,953
Deferred income taxes 6,600 8,102
Prepaid expenses and other assets 11,278 9,832
--------- ---------
TOTAL CURRENT ASSETS 331,103 335,774
Investment in securities 750 750
Property, plant and equipment less allowances for depreciation and amortization
of $48,225 (1998) and $45,372 (1997)--Note C 69,150 62,495
Deferred income taxes and other assets 9,045 5,629
Intangible assets-net of accumulated amortization of $10,934 (1998) and
$9,399 (1997)--Note G 15,428 14,074
--------- ---------
$ 425,476 $ 418,722
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Notes payable to banks $ 3,072 $ 4,410
Current portion of long-term debt--Note C 1,399 1,949
Accounts payable 61,400 59,589
Accrued wages and commissions 36,759 34,065
Other accruals 32,933 35,180
Customer advances and other liabilities 26,875 20,518
Income taxes 3,221 10,608
--------- ---------
TOTAL CURRENT LIABILITIES 165,659 166,319
Long-term debt--Note C 54,747 55,447
Minority interests 19,171 19,388
STOCKHOLDERS' EQUITY--Notes C, D and F
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--14,919,784 shares (1998) and 14,883,143 shares (1997) 1,492 1,488
Paid-in capital 36,275 34,894
Retained earnings 148,259 141,355
Cumulative foreign currency translation adjustment (127) (169)
--------- ---------
185,899 177,568
--------- ---------
$ 425,476 $ 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>
Six Months Ended
-----------------
May 1, May 2,
1998 1997
---- ----
(Dollars in thousands)
<S> <C> <C>
CASH PROVIDED BY (APPLIED TO) OPERATING ACTIVITIES
Net income $ 6,904 $ 12,056
Adjustments to reconcile net income to cash provided
by (applied to) operating activities:
Depreciation and amortization 10,122 10,173
Equity in net income of joint ventures (3,600)
Minority interests (207) (422)
Accounts receivable provisions 1,293 1,559
Loss (gain) on foreign currency translation 127 (426)
Deferred income tax provision (benefit) 1,282 (561)
Other 50 (11)
Changes in operating assets and liabilities:
Increase in accounts receivable (23,994) (19,724)
Increase in inventories (2,272) (1,615)
Increase in prepaid expenses and other current asset (1,249) (1,705)
Increase in other assets (3,154) (1,393)
Increase in accounts payable 1,102 1,090
Increase in accrued expenses 1,255 5,041
Increase in customer advances and other liabilities 6,212 1,459
Decrease in income taxes payable (7,442) (981)
------ ----
NET CASH (APPLIED TO) PROVIDED BY OPERATING ACTIVITIES (9,971) 940
------ ---
</TABLE>
-5-
<PAGE> 6
VOLT INFORMATION SCIENCES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)--Continued
<TABLE>
<CAPTION>
Six Months Ended
----------------
May 1, May 2,
1998 1997
---- ----
(Dollars in thousands)
<S> <C> <C>
CASH PROVIDED BY (APPLIED TO) INVESTING ACTIVITIES
Maturities of investments 211 4,830
Purchases of investments (214) (5,469)
Investment in joint venture (151)
Proceeds from disposals of property, plant and equipment 338 202
Purchases of property, plant and equipment (15,586) (7,603)
Proceeds from sale of joint venture 10,115
Deferred gain on sale of joint venture 2,550
Other (1,990)
-------- --------
NET CASH (APPLIED TO) PROVIDED BY INVESTING ACTIVITIES (17,241) 4,474
-------- --------
CASH PROVIDED BY (APPLIED TO) FINANCING ACTIVITIES
Payment of long-term debt (1,250) (1,249)
Exercise of stock options 686 3,553
(Decrease) increase in notes payable to banks (1,207) 2,027
-------- --------
NET CASH (APPLIED TO) PROVIDED BY FINANCING ACTIVITIES (1,771) 4,331
-------- --------
Effect of exchange rate changes on cash (75) 595
-------- --------
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (29,058) 10,340
Cash and cash equivalents, beginning of period 54,234 13,277
-------- --------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 25,176 $ 23,617
======== ========
SUPPLEMENTAL INFORMATION
Cash paid during the period:
Interest expense $2,946 $2,912
Income taxes, net of refunds $10,553 $6,176
</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 May 1, 1998, and consolidated
results of operations for the six and three months ended May 1, 1998 and May 2,
1997 and consolidated cash flows for the six months ended May 1, 1998 and May 2,
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
<TABLE>
<CAPTION>
Inventories consist of:
May 1, October 31,
1998 1997
---- ----
(Dollars in thousands)
<S> <C> <C>
Services:
Accumulated unbilled costs on:
Service contracts $27,096 $23,988
Long-term contracts 221 3,736
------- -------
27,317 27,724
------- -------
Products:
Materials and work-in-process 6,287 4,618
Service parts 2,471 2,318
Finished goods 2,150 1,293
------- -------
10,908 8,229
------- -------
Total $38,225 $35,953
======= =======
</TABLE>
The cumulative amounts billed, principally under long-term contracts, at May 1,
1998 and October 31, 1997, of $23.4 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 $11.1 million and
$12.5 million at May 1, 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>
May 1, October 31,
1998 1997
------ -----------
(Dollars in thousands)
<S> <C> <C>
7.92% Senior Notes (a) $50,000 $50,000
Term loan (b) 4,650 5,100
Notes payable (c) & (d) 1,496 2,296
------- -------
56,146 57,396
Less amounts due within one year 1,399 1,949
------- -------
Total long-term debt $54,747 $55,447
======= =======
</TABLE>
(a) On August 28, 1996, the Company issued $50.0 million of Senior Notes in a
private placement with 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 May 1, 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 May 1, 1998 (see below).
(b) In October 1994, the Company entered into a $10.0 million loan agreement
with Fleet Bank, which is secured by a deed of trust on land and buildings (book
value at May 1, 1998 - $14.3 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) An unsecured 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 May
1, 1998) plus 0.25%, through September 15, 2001.
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. The Company has the option to select the most favorable rate at the time
of borrowing. The Agreement provides for 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 May 1,
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 May 1, 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 six months ended
May 1, 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 six months 6,904
Issuance of 13,381 shares to ESOP 1 698
Stock options exercised - 23,260 shares 3 683
-------- -------- --------
Balance at May 1, 1998 $ 1,492 $ 36,275 $148,259
======== ======== ========
</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. The Company has 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.
Accordingly, the gain on the sale has been deferred until the Company's
obligations, if any, are determined. The amounts due to the Company's Uruguayan
division and the obligations to which the Company is a guarantor, which
aggregated $5.9 million at May 1, 1998, 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 venture, resulting in a gain of $12.8 million.
This 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>
Six Months Ended Three Months Ended
---------------- ------------------
May 2, 1997 May 2, 1997
---------------- ------------------
(Dollars in thousands)
Company's Company's
Total Equity Total Equity
-------- ------- -------- -------
<S> <C> <C> <C> <C>
Revenues $255,507 $151,030
Costs and expenses 246,494 138,625
Income tax provision 2,324 4,580
-------- --------
Net income $ 6,689 $ 7,825
======== ========
Net income of Australian joint venture $ 3,497 $ 408 $ 7,825 $ 948
Net income of Brazilian joint venture 3,192 3,192
-------- ------- -------- -------
$ 6,689 $ 7,825
======== ========
Company's equity in net income of joint ventures $ 3,600 $ 948
======= =======
</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 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.
During the first quarter of fiscal year 1998, the Company acquired
community-based telephone directories, principally in Georgia, for $1.7 million,
which includes consideration of approximately $900,000, 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 acquisition resulted in a $1.7 million
increase in intangible assets, which are being amortized over a period of
fifteen years.
-10-
<PAGE> 11
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
SIX MONTHS AND THREE MONTHS ENDED MAY 1, 1998 COMPARED
TO THE SIX MONTHS AND THREE MONTHS ENDED MAY 2, 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>
Six Months Ended Three Months Ended
----------------------- -----------------------
May 1, May 2, May 1, May 2,
1998 1997 1998 1997
--------- --------- --------- ---------
(Dollars in thousands)
<S> <C> <C> <C> <C>
Net Sales:
- ----------
Staffing Services $ 585,141 $ 462,474 $ 315,527 $ 251,882
Telephone Directory 36,470 36,912 20,356 22,018
Telecommunications Services 84,880 63,323 42,443 35,255
Computer Systems 32,202 37,775 14,448 18,735
Electronic Publication and Typesetting Systems 40,590 38,010 22,548 19,916
Elimination of intersegment sales (5,185) (3,991) (2,739) (2,103)
--------- --------- --------- ---------
Total Net Sales $ 774,098 $ 634,503 $ 412,583 $ 345,703
========= ========= ========= =========
Segment Profit (Loss):
- ----------------------
Staffing Services $ 12,642 $ 11,530 $ 7,825 $ 7,380
Telephone Directory (411) 858 484 1,539
Telecommunications Services 7,001 8,326 3,207 4,962
Computer Systems (622) 1,181 (665) 283
Electronic Publication and Typesetting Systems 732 (616) 763 410
Elimination (12)
--------- --------- --------- ---------
Total Segment Profit 19,342 21,267 11,614 14,574
General corporate expenses (5,900) (5,148) (3,081) (2,624)
--------- --------- --------- ---------
Total Operating Profit 13,442 16,119 8,533 11,950
Interest and other income - net 1,433 777 644 291
Interest expense (2,787) (2,922) (1,413) (1,427)
Foreign exchange (loss) gain - net (657) 179 (204) (116)
--------- --------- --------- ---------
Income Before Income Taxes, Equity in Joint
Venture Earnings and Minority Interests $ 11,431 $ 14,153 $ 7,560 $ 10,698
========= ========= ========= =========
</TABLE>
-11-
<PAGE> 12
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS--Continued
SIX MONTHS AND THREE MONTHS ENDED MAY 1, 1998 COMPARED
TO THE SIX MONTHS AND THREE MONTHS ENDED MAY 2, 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, among other things, 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; intense 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
effects of inclement weather; 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 reports hereafter filed with the Securities and Exchange
Commission, including this Report.
-12-
<PAGE> 13
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS--Continued
SIX MONTHS ENDED MAY 1, 1998 COMPARED
TO THE SIX MONTHS ENDED MAY 2, 1997
Results of Operations - Summary
In the six-month period of fiscal 1998, net sales increased from the comparable
period in fiscal 1997 by $139.6 million, or 22%, to $774.1 million. The increase
in 1998 net sales resulted primarily from a $122.7 million increase in sales by
the Staffing Services segment and a $21.6 million increase in sales by the
Telecommunications Services segment, partially offset by a $5.6 million decrease
in sales by the Computer Systems segment.
The Company's pretax income before joint venture earnings and minority interests
decreased by $2.7 million, or 19%, to $11.4 million in 1998. The operating
profit of the Company's segments decreased by $1.9 million, or 9%, to $19.3
million in 1998. 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 six months of 1998 was $6.9 million, compared with net
income of $12.1 million in the first six months of 1997. The 1997 net income
included the Company's portion ($3.6 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 $122.7 million, or 27%, to
$585.1 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 $1.1 million, or 10%, to $12.6 million, compared with $11.5 million
in 1997. Approximately $29.9 million, or 24%, 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 $63.1
million in 1997 to $93.0 million in 1998. Of the remaining sales growth,
approximately $18.6 million was from business with new customers, and $74.2
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 decreased by $442,000, or 1%, to $36.5
million in fiscal 1998. This segment incurred an operating loss of $411,000 in
1998, compared to an operating profit of $858,000 in 1997. The sales decrease
was primarily due to a $2.0 million decrease in system sales, a $2.0 million
decrease in Uruguayan printing, and a $481,000 decrease in telemarketing sales,
partially offset by an increase in independent directory sales of $4.2 million.
The increase in independent directory sales was attributable to fourteen new
directories published in the six months ended May 1, 1998 than in the comparable
period in fiscal 1997. The operating loss in fiscal 1998 was due to increased
overhead, which included approximately $938,000 of costs to
-13-
<PAGE> 14
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS--Continued
SIX MONTHS ENDED MAY 1, 1998 COMPARED
TO THE SIX MONTHS ENDED MAY 2, 1997--Continued
Results of Operations - By Segment--Continued
enter new directory markets, and the 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 19% of the segment's revenues in the six months
ended May 1, 1998, will expire in June 1998 and not be renewed. However, the
segment has obtained several significant contracts which began in fiscal 1997
and 1998. Other contracts are scheduled to expire from 1998 through 2001.
The Telecommunications Services segment's sales increased by $21.6 million, or
34%, to $84.9 million in fiscal 1998, while its operating profit decreased by
$1.3 million, or 16%, to $7.0 million in fiscal 1998, compared with $8.3 million
in 1997. The sales increase was due to a 97% increase in the Business Systems
division and a 10% increase in the Construction division. The sales increases
resulted from several factors, including required upgrading of core
telecommunications infrastructure 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 decrease 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 construction services
stemming from adverse weather conditions, which halted higher margin
cable-laying in Florida for six weeks. Overhead increased by 44% to support the
sales growth and the geographic expansion of this segment. Services performed
under a contract with a telephone carrier, which amounted to 11% of the
segment's revenues in the six months ended May 1, 1998, are expected to be
substantially reduced or eliminated in the future.
The Computer Systems segment's sales decreased by $5.6 million, or 15%, to $32.2
million in 1998 and its operating loss was $622,000, compared with an operating
profit of $1.2 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. The
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 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 periodically rather than
evenly.
The Electronic Publication and Typesetting Systems segment's sales increased by
$2.6 million, or 7%, to $40.6 million in 1998, and its operating profit was
$732,000, compared with an operating loss of $616,000 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, principally in the Pacific Rim, and lower customer
service sales in the domestic market. Operating results increased due to the
sales increase and a 1.4 percentage point increase in gross margins. Systems and
equipment gross margins increased by 4.3 percentage points, due to a greater
proportion of sales being contributed by higher margin products and to lower
manufacturing costs, partially offset by customer service gross margins
decreased by 5.9 percentage points
-14-
<PAGE> 15
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS--Continued
SIX MONTHS ENDED MAY 1, 1998 COMPARED
TO THE SIX MONTHS ENDED MAY 2, 1997--Continued
Results of Operations - By Segment--Continued
primarily due to lower revenues and higher material costs. 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 83% of equipment sales.
Results of Operations - Other
Other items, discussed on a consolidated basis, affecting the results of
operations for the six-month periods were:
Interest income increased by $726,000, or 123%, to $1.3 million in 1998,
primarily due to an increase in the average amount of funds available for
investment during the six-month period of fiscal 1998, compared with the same
period in fiscal 1997.
Other income was reduced by $70,000 in 1998 primarily due to a decrease in
various items of income, partially offset by $262,000 of fees paid in 1997,
compared to no fees in 1998, resulting from the discontinuance of sales of
receivables under the Company's former securitization program.
In the six months of 1998, a significant strengthening of the U.S. dollar
compared to other currencies resulted in a foreign exchange loss of $657,000
before the Company's hedging program became effective, which mitigated any
further losses. The foreign exchange gain in the six months of 1997 of $179,000
was due to favorable currency movements.
Interest expense decreased by $135,000, or 5%, to $2.8 million in 1998. The
decrease was primarily due to lower average outstanding loan balances.
The Company's effective tax rate was reduced to 41% in 1998 from 43% in 1997.
The higher effective income tax rates in 1997 resulted from losses incurred by
the Company's 59%-owned subsidiary, for which no tax benefit was recognized.
The Company's share of the net income of its two joint ventures was $3.6 million
in 1997. Both ventures were sold in fiscal 1997; the Brazilian venture in
January 1997 and the Australian venture in September 1997. The Company has
continued to grant credit and guarantee the Brazilian venture's obligations. As
a result, the gain on the sale of approximately $2.5 million will be deferred
until the Company's obligations, if any, are determined.
-15-
<PAGE> 16
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS--Continued
THREE MONTHS ENDED MAY 1, 1998 COMPARED
TO THE THREE MONTHS ENDED MAY 2, 1997
Results of Operations - Summary
In the three-month period of fiscal 1998, net sales increased by $66.9 million,
or 19%, to $412.6 million. The increase in 1998 net sales resulted primarily
from a $63.6 million increase in sales by the Staffing Services segment and a
$7.2 million increase in sales by the Telecommunications Services segment,
partially offset by a $4.3 million decrease in sales by the Computer Systems
segment.
The Company's pretax income before joint venture earnings and minority interests
decreased by $3.1 million, or 29%, to $7.6 million in 1998. The operating profit
of the Company's segments decreased by $3.0 million, or 20%, to $11.6 million in
1998. 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 three months of 1998 was $4.3 million, compared with net
income of $7.1 million in the three months of 1997. The 1997 net income included
the Company's portion ($948,000) 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 $63.6 million, or 25%, to
$315.5 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 $445,000, or 6%, to $7.8 million in 1998, compared with $7.4
million in 1997. Approximately $19.0 million, or 30%, 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 $37.1
million in 1997 to $56.1 million in 1998. Of the remaining sales growth,
approximately $7.2 million was from business with new customers, and $37.4
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. 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 decreased by $1.7 million, or 8%, to
$20.4 million in fiscal 1998. This segment's operating profit decreased to
$484,000 in 1998, compared to a profit of $1.5 million in 1997. The sales
decrease was primarily due to a $2.3 million decrease in Uruguayan printing, a
$1.8 million decrease in system sales and a $335,000 decrease in telemarketing
sales, partially offset by a $2.3 million increase in independent directory
sales. The increase in independent directory sales was due to ten new
directories published in 1998. The decrease in the operating profit in 1998 was
due to increased overhead, which included approximately $500,000 of costs to
enter new directory markets and the decrease in high margin system 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
-16-
<PAGE> 17
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS--Continued
THREE MONTHS ENDED MAY 1, 1998 COMPARED
TO THE THREE MONTHS ENDED MAY 2, 1997--Continued
Results of Operations - By Segment--Continued
approximately 17% of the segment's revenues in the three months ended May 1,
1998 will expire in June 1998 and not be renewed. However, the segment has
obtained several significant contracts which began in fiscal 1997 and 1998.
Other contracts are scheduled to expire from 1998 through 2001.
The Telecommunications Services segment's sales increased by $7.2 million, or
20%, to $42.4 million in fiscal 1998, while its operating profit decreased by
$1.8 million, or 35%, to $3.2 million in fiscal 1998, compared with $5.0 million
in 1997. The sales increase was primarily due to a 60% increase in the Business
Systems division. The sales increase resulted from several factors, including
required upgrading of core telecommunications infrastructure by existing
customers, the demand for the segment's services in the wireless area, and the
continued emphasis of outsourcing by the major telecommunications providers.
Operating results decreased due to a 4.2 percentage point decrease 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
construction services stemming from adverse weather conditions, which halted
higher margin cable-laying in Florida for six weeks. Overhead increased by 36%
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 three months ended May 1, 1998, are
expected to be substantially reduced or eliminated in the future.
The Computer Systems segment's sales decreased by $4.3 million, or 23%, to $14.4
million in 1998 and its operating loss was $665,000, compared to an operating
profit of $283,000 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. The
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 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 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 periodically rather than evenly.
The Electronic Publication and Typesetting Systems segment's sales increased by
$2.6 million, or 13%, to $22.5 million in 1998, and its operating profit
increased by $353,000, or 86%, to $763,000. The fiscal 1998 sales increase
resulted primarily from increases in sales of systems and equipment in its
domestic operations, offset, in part, by a decrease in its international
operations, principally in the Pacific Rim. Operating results increased due to
the increased sales volume, partially offset by a 2.4 percentage point decrease
in gross margins. The decrease in margins is due principally to the sale of a
greater portion of lower margin products and higher material costs. Operating
expenses increased by $191,000, but decreased 2.7 percentage points when
expressed as a percentage of sales, improving profitability. 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 84% of equipment sales.
-17-
<PAGE> 18
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS--Continued
THREE MONTHS ENDED MAY 1, 1998 COMPARED
TO THE THREE MONTHS ENDED MAY 2, 1997--Continued
Results of Operations - Other
Other items, discussed on a consolidated basis, affecting the results of
operations for the three-month periods were:
Interest income increased by $277,000, or 100%, to $554,000 in the second
quarter of 1998, compared with the second quarter of 1997, primarily due to an
increase in the average amount of funds available for investment.
Other income increased by $76,000 in 1998 primarily due to the absence in 1998
of $35,000 of fees paid in 1997, resulting from the discontinuance of sales of
receivables under the Company's former securitization program.
The foreign exchange losses were $204,000 and $116,000 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.
The Company's share of the net income of its Australian joint venture was
$948,000 in 1997. The venture was sold in September 1997.
-18-
<PAGE> 19
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS--Continued
Liquidity and Sources of Capital
Cash and cash equivalents decreased by $29.0 million to $25.2 million in 1998.
Operating activities used $10.0 million of cash in the six months of fiscal
1998. The principal uses of cash in operating activities for the six months
ended May 1, 1998 were an increase in the level of accounts receivable of $24.0
million and a decrease in income taxes payable of $7.4 million. Primary among
the factors providing cash flows to operating activities in 1998 were the
Company's net income of $6.9 million, augmented by $10.1 million of depreciation
and amortization, and a $6.2 million increase in customer advances and other
liabilities.
The principal factor in the cash applied to investing activities of $17.2
million was the expenditure for property, plant and equipment of $15.6 million.
Financing activities used $1.8 million of cash to reduce long-term debt by $1.3
million and notes payable by $1.2 million, offset, in part, by $686,000 received
from the exercise of stock options.
In addition to its cash and cash equivalents, at May 1, 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. The
Company made its first borrowing under the line on May 18, 1998. A loan of $10.0
million was outstanding at May 31, 1998.
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. 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.
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 has requested verification that they
will be timely compliant. Conversion and testing of systems applications is
expected to cost approximately $4.0 million, of which approximately $800,000 was
incurred and expensed in the six months ended May 1, 1998. The Company expects
to complete the necessary modifications in 1998 and will conduct extensive
testing throughout 1999.
-19-
<PAGE> 20
PART II - OTHER INFORMATION
ITEM 4-- SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At the Company's 1998 Annual Meeting of Shareholders held on April 28, 1998,
shareholders:
(a) elected the following to serve as directors of the Company until the 2000
Annual Meeting of the Shareholders by the following votes:
<TABLE>
<CAPTION>
For Vote Withheld
--- -------------
<S> <C> <C>
Irwin B. Robins 13,275,394 956,215
Mark S. Kaplan 13,265,703 965,906
John R. Torell, III 13,268,399 963,210
</TABLE>
(b) amended the Company's 1995 Non-Qualified Stock Option Plan to authorize the
granting of options to non-employee directors of the Company:
For: 13,331,176 Against: 813,328 Abstain: 87,105
(c) ratified the action of the Board of Directors in appointing Ernst & Young
LLP as the Company's independent public accountants for the fiscal year ending
October 30, 1998 by the following vote:
For: 14,178,948 Against: 10,078 Abstain: 42,583
There were no broker non-votes on any of the matters voted upon.
-20-
<PAGE> 21
PART II - OTHER INFORMATION--Continued
ITEM 6-- EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
10.01+ Amendment dated April 30, 1998 to Agreement between the Company and
Irwin B. Robins.
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).
+ Management contract or compensation plan or arrangement.
(b) Reports on Form 8-K:
The only Report on Form 8-K filed during the quarter ended May 1, 1998 was a
report dated April 15, 1998 (date of earliest event reported) reporting Item 5:
Other Events and Item 7: Financial Statement, Pro Forma Financial Information
and Exhibits. No financial statements or pro forma financial information were
filed with that Report.
-21-
<PAGE> 22
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: June 12, 1998 JACK EGAN
Vice President - Corporate Accounting
(Principal Accounting Officer)
-22-
<PAGE> 23
EXHIBIT INDEX
-------------
EXHIBIT
NUMBER DESCRIPTION
- ------ -----------
10.01+ Amendment dated April 30, 1998 to Agreement between the Company and
Irwin B. Robins.
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).
+ Management contract or compensation plan or arrangement.
<PAGE> 1
April 30, 1998
Irwin B. Robins, Esq.
Volt Information Sciences, Inc.
1221 Avenue of the Americas
New York, NY 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, 2000.
Please confirm your agreement to the foregoing by signing a copy of this letter
and returning it to me.
Very truly yours,
BY: /s/ WILLIAM SHAW
------------------------------------
William Shaw
Chairman of the Board and President
Agreed to and accepted:
BY:/s/ IRWIN B. ROBINS
------------------------------------
Irwin B. Robins
Exhibit 10.01
<PAGE> 1
June 12, 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 June 2,
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 May 1, 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 May 1, 1998, and the
related condensed consolidated statements of income for the six and three month
periods ended May 1, 1998 and May 2, 1997, and the related condensed
consolidated statements of cash flows for the six month periods ended May 1,
1998 and May 2, 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
June 2, 1998
Exhibit 15.02
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> OCT-30-1998
<PERIOD-END> MAY-1-1998
<CASH> 25,176
<SECURITIES> 108
<RECEIVABLES> 255,163
<ALLOWANCES> 5,447
<INVENTORY> 38,225
<CURRENT-ASSETS> 331,103
<PP&E> 117,375
<DEPRECIATION> 48,225
<TOTAL-ASSETS> 425,476
<CURRENT-LIABILITIES> 165,659
<BONDS> 54,747
0
0
<COMMON> 1,492
<OTHER-SE> 184,407
<TOTAL-LIABILITY-AND-EQUITY> 425,476
<SALES> 40,386
<TOTAL-REVENUES> 775,531
<CGS> 23,731
<TOTAL-COSTS> 716,374
<OTHER-EXPENSES> 43,646
<LOSS-PROVISION> 1,293
<INTEREST-EXPENSE> 2,787
<INCOME-PRETAX> 11,431
<INCOME-TAX> 4,734
<INCOME-CONTINUING> 6,904
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,904
<EPS-PRIMARY> 0.46
<EPS-DILUTED> 0.45
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