<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 Three Months Ended January 30, 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 March 5,
1998 was 14,905,019.
<PAGE> 2
VOLT INFORMATION SCIENCES, INC. AND SUBSIDIARIES
FORM 10-Q
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PART I - FINANCIAL INFORMATION
<S> <C>
Item 1. Financial Statements
Condensed Consolidated Statements of Income -
Three Months Ended January 30, 1998 and January 31, 1997 3
Condensed Consolidated Balance Sheets - January 30, 1998
and October 31, 1997 4
Condensed Consolidated Statements of Cash Flows -
Three Months Ended January 30, 1998 and January 31, 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 18
SIGNATURE 19
</TABLE>
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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> Three Months Ended
------------------
January January
30, 1998 31, 1997
-------- --------
(Dollars in thousands, except per share data)
<S> <C> <C>
NET SALES:
Sales of services $ 343,580 $ 270,824
Sales of products 17,935 17,976
------------ ------------
361,515 288,800
------------ ------------
COSTS AND EXPENSES:
Cost of sales
Services 325,233 253,616
Products 10,106 11,112
Selling and administrative 13,271 11,898
Research, development and engineering 2,967 2,947
Depreciation and amortization 5,029 5,058
------------ ------------
356,606 284,631
------------ ------------
OPERATING PROFIT 4,909 4,169
OTHER INCOME (EXPENSE):
Interest income 761 312
Other income - net 28 174
Foreign exchange (loss) gain - net (453) 295
Interest expense (1,374) (1,495)
------------ ------------
Income before income taxes and items shown below 3,871 3,455
Income tax provision (1,541) (1,538)
Equity in net income of joint ventures--Note F 2,652
Minority interests in net loss of consolidated subsidiaries 255 353
------------ ------------
NET INCOME $ 2,585 $ 4,922
============ ============
Per Share Data
--------------
Basic:
Net income per share $ 0.17 $ 0.34
============ ============
Weighted average number of shares--Note G 14,892,105 14,550,888
============ ============
Diluted:
Net income per share $ 0.17 $ 0.33
============ ============
Weighted average number of shares--Note G 15,379,647 15,017,835
============ ============
</TABLE>
See accompanying notes.
-3-
<PAGE> 4
VOLT INFORMATION SCIENCES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
January October
ASSETS 30, 1998 31, 1997 (a)
-------- ------------
(Dollars in thousands)
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 47,118 $ 54,234
Short-term investments 106 105
Trade accounts receivable less allowances of $5,311 (1998) and $5,067 (1997) 222,236 227,548
Inventories--Note C 36,115 35,953
Deferred income taxes 7,987 8,102
Prepaid expenses and other assets 10,576 9,832
--------- ---------
TOTAL CURRENT ASSETS 324,138 335,774
Investment in securities 750 750
Property, plant and equipment less allowances for depreciation and amortization
of $46,186 (1998) and $45,372 (1997)--Note D 63,297 62,495
Deferred income taxes and other assets 8,744 5,629
Intangible assets-net of accumulated amortization of $10,154 (1998)
and $9,399 (1997)--Note H 15,059 14,074
--------- ---------
$ 411,988 $ 418,722
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Notes payable to banks $ 5,435 $ 4,410
Current portion of long-term debt--Note D 1,399 1,949
Accounts payable 42,133 59,589
Accrued wages and commissions 34,206 34,065
Other accruals 36,284 35,180
Customer advances and other liabilities 27,402 20,518
Income taxes 9,679 10,608
--------- ---------
TOTAL CURRENT LIABILITIES 156,538 166,319
Long-term debt--Note D 55,222 55,447
Minority interests 19,133 19,388
STOCKHOLDERS' EQUITY--Notes D, E and G
Preferred stock, par value $1.00; Authorized--500,000 shares;
issued--none
Common stock, par value $.10; Authorized--30,000,000 shares;
issued 14,902,319 shares (1998) and 14,883,143 shares (1997) 1,490 1,488
Paid-in capital 35,763 34,894
Retained earnings 143,940 141,355
Cumulative foreign currency translation adjustment (98) (169)
--------- ---------
181,095 177,568
--------- ---------
$ 411,988 $ 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>
Three Months Ended
------------------
January January
30, 1998 31, 1997
-------- --------
(Dollars in thousands)
<S> <C> <C>
CASH PROVIDED BY (APPLIED TO) OPERATING ACTIVITIES
Net income $ 2,585 $ 4,922
Adjustments to reconcile net income to cash provided by (applied to)
operating activities
Depreciation and amortization 5,029 5,058
Equity in net income of joint ventures (2,652)
Minority interests (255) (353)
Accounts receivable provisions 645 843
Loss (gain) on foreign currency translation 3 (243)
Deferred income tax provision (benefit) 31 (473)
Other 22 26
Changes in operating assets and liabilities:
Decrease (increase) in accounts receivable 4,472 (6,122)
(Increase) decrease in inventories (162) 12
Decrease (increase) in prepaid expenses and other current assets 579 (21)
Increase in other assets (2,926) (20)
Decrease in accounts payable (18,232) (11,309)
Increase in accrued expenses 1,815 557
Increase in customer advances and other liabilities 5,563 5,203
(Decrease) increase in income taxes payable (942) 837
-------- --------
NET CASH APPLIED TO OPERATING ACTIVITIES (1,773) (3,735)
-------- --------
</TABLE>
-5-
<PAGE> 6
VOLT INFORMATION SCIENCES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)--Continued
<TABLE>
<CAPTION>
Three Months Ended
--------------------------
January January
30, 1998 31, 1997
----------- ----------
(Dollars in thousands)
<S> <C> <C>
CASH PROVIDED BY(APPLIED TO) INVESTING ACTIVITIES
Maturities of investments 105 2,443
Purchases of investments (106) (5,366)
Investment in joint venture (151)
Proceeds from disposals of property, plant and equipment 136 29
Purchases of property, plant and equipment (5,279) (3,909)
Proceeds from sale of joint venture 10,115
Other (801)
-------- --------
NET CASH (APPLIED TO) PROVIDED BY INVESTING ACTIVITIES (5,945) 3,161
-------- --------
CASH PROVIDED BY (APPLIED TO) FINANCING ACTIVITIES
Payment of long-term debt (775) (775)
Exercise of stock options 172 300
Increase (decrease) in notes payable to banks 1,141 (1,222)
-------- --------
NET CASH PROVIDED BY (APPLIED TO) FINANCING ACTIVITIES 538 (1,697)
-------- --------
Effect of exchange rate changes on cash 64 353
-------- --------
NET DECREASE IN CASH AND CASH EQUIVALENTS (7,116) (1,918)
Cash and cash equivalents, beginning of period 54,234 13,277
-------- --------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 47,118 $ 11,359
======== ========
SUPPLEMENTAL INFORMATION
Cash paid during the period:
Interest expense $ 480 $ 543
Income taxes, net of refunds $ 2,552 $ 988
</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 January 30, 1998 and consolidated
results of operations and consolidated cash flows for the periods ended January
30, 1998 and January 31, 1997. Operating results for the 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 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--Financing Arrangements
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 of $129.9
million at January 30, 1998) 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 January
30, 1998.
-7-
<PAGE> 8
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)--Continued
Note C--Inventories
Inventories consist of:
<TABLE>
<CAPTION>
January October
30, 1998 31, 1997
-------- --------
(Dollars in thousands)
<S> <C> <C>
Services:
Accumulated unbilled costs on:
Service contracts $25,753 $23,988
Long-term contracts 542 3,736
------- -------
26,295 27,724
------- -------
Products:
Materials and work-in-process 5,064 4,618
Service parts 2,346 2,318
Finished goods 2,410 1,293
------- -------
9,820 8,229
------- -------
Total $36,115 $35,953
======= =======
</TABLE>
The cumulative amounts billed, principally under long-term contracts, at January
30, 1998 and October 31, 1997, of $19.4 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 $12.3 million and
$12.5 million at January 30, 1998 and October 31, 1997, respectively.
-8-
<PAGE> 9
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)--Continued
Note D--Long-Term Debt
Long-term debt consists of the following:
<TABLE>
<CAPTION>
January October
30, 1998 31, 1997
-------- --------
(Dollars in thousands)
<S> <C> <C>
7.92% Senior Notes (a) $50,000 $50,000
Term loan (b) 4,875 5,100
Notes payable (c) & (d) 1,746 2,296
------- -------
56,621 57,396
Less amounts due within one year 1,399 1,949
------- -------
Total long-term debt $55,222 $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, which have a term of
eight years, bear interest at 7.92% per annum, payable semi-annually on February
28 and August 28, and provide for amortization of principal in five equal annual
installments, beginning in August 2000. 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 a formula, was $113.1 million at January 30, 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 January 30, 1998 (see
Note B).
(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 January 30, 1998 - $14.4 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 five-year loan, guaranteed by the Company, is being repaid
in semi-annual payments of $249,000, plus interest calculated at LIBOR (5.5% at
January 30, 1998) plus 0.25%, through September 15, 2001.
-9-
<PAGE> 10
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)--Continued
Note E--Stockholders' Equity
Changes in the major components of stockholders' equity for the three months
ended January 30, 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 three months 2,585
Contribution of 13,381 shares to ESOP 1 698
Stock options exercised - 5,795 shares 1 171
------ ------- --------
Balance at January 30, 1998 $1,490 $35,763 $143,940
====== ======= ========
</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 F--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 in 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 $6.2 million at January 30, 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.
-10-
<PAGE> 11
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)--Continued
Note F--Summarized Financial Information of Joint Ventures--(Continued)
The following summarizes the operating results of the joint ventures:
<TABLE>
<CAPTION>
Three Months Ended
January 31, 1997
----------------
(Dollars in thousands)
Company's
Total Equity
----- ------
<S> <C> <C>
Revenues $ 104,477
Costs and expenses 107,869
Income tax benefit (2,256)
--------
Net loss $ (1,136)
========
Net loss of Australian joint venture $ (4,328) $ (540)
Net income of Brazilian joint venture 3,192 3,192
-------- -------
$ (1,136)
========
Company's equity in net income of joint ventures $ 2,652
=======
</TABLE>
Note G--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.
Prior year per share data have been restated to conform to the new requirements
and adjusted for the effect of a three-for-two stock split distributed in the
form of a 50% stock dividend on May 27, 1997.
Note H--Acquisitions
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. During fiscal 1997, the Company acquired
community-based telephone directories in North Carolina and West Virginia for a
total of $1.4 million in cash. The two acquisitions resulted in a $3.1 million
increase in intangible assets, which are being amortized over a period of
fifteen years.
-11-
<PAGE> 12
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
THREE MONTHS ENDED JANUARY 30, 1998 COMPARED
TO THE THREE MONTHS ENDED JANUARY 31, 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>
For the Three Months Ended
--------------------------
January January
30, 1998 31, 1997
-------- --------
(Dollars in thousands)
<S> <C> <C>
Net Sales:
- ----------
Staffing Services $ 269,614 $ 210,592
Telephone Directory 16,114 14,894
Telecommunications Services 42,437 28,068
Computer Systems 17,754 19,040
Electronic Publication and Typesetting Systems 18,042 18,094
Elimination of intersegment sales (2,446) (1,888)
--------- ---------
Total Net Sales $ 361,515 $ 288,800
========= =========
Segment Profit (Loss):
- ----------------------
Staffing Services $ 4,817 $ 4,150
Telephone Directory (895) (681)
Telecommunications Services 3,794 3,364
Computer Systems 43 898
Electronic Publication and Typesetting Systems (31) (1,026)
Elimination (12)
--------- ---------
Total Segment Profit 7,728 6,693
General corporate expenses (2,819) (2,524)
--------- ---------
Total Operating Profit 4,909 4,169
Interest and other income - net 789 486
Interest expense (1,374) (1,495)
Foreign exchange (loss) gain - net (453) 295
--------- ---------
Income Before Income Taxes, Equity in Joint
Venture Earnings and Minority Interests $ 3,871 $ 3,455
========= =========
</TABLE>
-12-
<PAGE> 13
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS--Continued
THREE MONTHS ENDED JANUARY 30, 1998 COMPARED
TO THE THREE MONTHS ENDED JANUARY 31, 1997 --Continued
Forward-Looking Statements Disclosure
In order to keep our 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; 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.
-13-
<PAGE> 14
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS--Continued
THREE MONTHS ENDED JANUARY 30, 1998 COMPARED
TO THE THREE MONTHS ENDED JANUARY 31, 1997 --Continued
Results of Operations - Summary
In the three-month period of fiscal 1998, net sales increased by $72.7 million,
or 25% to $361.5 million. The increase in 1998 net sales resulted primarily from
a $59.0 million increase in sales by the Staffing Services segment, a $14.4
million increase in sales by the Telecommunications Services segment and a $1.2
million increase in sales by the Telephone Directory segment, partially offset
by a $1.3 million decrease in sales by the Computer Systems segment.
The Company's 1998 pretax income before joint venture earnings and minority
interests increased by $416,000, or 12%, to $3.9 million. The operating profit
of the Company's segments increased by $1.0 million, or 15%, to $7.7 million in
1998. The principal reasons for the increase in the segments' operating profit
were an improvement of $995,000 from the Electronic Publication and Typesetting
Systems segment, narrowing its loss to $31,000, compared with a loss of $1.0
million in 1997, the Staffing Services segment, with an increase of $667,000, or
16%, to $4.8 million and the Telecommunications Services segment, with an
increase of $430,000, or 13%, to $3.8 million. The improvement in the these
segments' operating profits was partially offset by a decrease in the Computer
Systems segment of $855,000, which produced a profit of $43,000, compared with a
profit of $898,000 in 1997, and a decrease in the Telephone Directory segment of
$214,000, or 31%, resulting in a loss of $895,000, compared with a loss of
$681,000 in 1997.
Net income in the three months of 1998 was $2.6 million, compared with net
income of $4.9 million in the three months of 1997. The 1997 net income included
the Company's portion of joint venture earnings of $2.7 million.
Results of Operations - By Segment
Sales of the Staffing Services segment (formerly referred to as the Technical
Services and Temporary Personnel segment) increased by $59.0 million, or 28%, in
1998 to $269.6 million, and its operating profit increased by $667,000, or 16%,
to $4.8 million, compared with $4.2 million in 1997. Approximately $10.9
million, or 18%, 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, a substantial portion of which is billed without a mark-up, which
increased from $26.0 million to $36.9 million in 1998. Approximately $11.0
million of the increase was from business with new customers with the remaining
increase of $37.1 million arising from existing customers. 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 0.2 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 the opening of new
offices to service national accounts, but remained constant as a percentage of
sales.
The Telephone Directory segment's sales increased by $1.2 million, or 8%, to
$16.1 million in fiscal 1998. Its operating loss increased to $895,000 in 1998
from a loss of $681,000 in 1997. The sales increase was primarily due to a $1.9
million increase in independent directory sales, partially offset by decreases
in telephone directory production volume, systems sales and systems maintenance
revenue. The increase in independent directory sales was due to a large
directory published in the first quarter of fiscal 1998 (the 1997 edition was
published in the
-14-
<PAGE> 15
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS--Continued
THREE MONTHS ENDED JANUARY 30, 1998 COMPARED
TO THE THREE MONTHS ENDED JANUARY 31, 1997 --Continued
Results of Operations - By Segment--Continued
second quarter of fiscal 1997) and four new directories published in the first
quarter of 1998. The increase in the operating loss in 1998 was due to increased
overhead, which included approximately $425,000 of costs to enter new directory
markets, offset by the increased sales volume. 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 22% of
the segment's revenues in the three months ended January 30, 1998, is scheduled
to expire in June 1998. However, the segment has obtained several significant
contracts which began in fiscal 1997. Other contracts are scheduled to expire
from 1998 through 2002.
The Telecommunications Services segment's sales increased by $14.4 million, or
51%, to $42.4 million in fiscal 1998 and its operating profit increased by
$430,000, or 13%, to $3.8 million in fiscal 1998 compared with $3.4 million in
1997. The sales increase was due to a 147% increase in the Business Systems
division and a 21% 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 the major telecommunications providers. Operating results
increased due to the increased sales volume, partially offset by a 2.9
percentage point decrease in gross margins, due to a greater proportion of lower
margin Business Systems sales. Overhead increased by 54% to support the sales
growth and the geographic expansion of this segment.
The Computer Systems segment's sales decreased by $1.3 million, or 7%, to $17.8
million in 1998 and its operating profit was $43,000 compared with $898,000 in
1997. The decrease in sales was primarily due to a decrease in sales of
conservation services to utilities due to the phase-out under several large
contracts with customers which no longer require the segment's services. The
decrease in profit was due to lower sales volume of conservation services and
the absence in 1998 of high margin equipment sales. Under the completed contract
method of accounting used by this segment, revenues together with related costs
are recognized in income upon acceptance by the customer. 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 decreased by
$52,000, to $18.0 million in 1998. However, its operating loss was $31,000,
compared with an operating loss of $1.0 million in 1997. The fiscal 1998 sales
decrease resulted primarily from a decrease in customer service revenues offset,
in large part, by an increase in sales of systems and equipment. Operating
results increased due to a 5.7 percentage point increase in gross margins.
Systems and equipment gross margins increased by 10.9 percentage points due
principally to the sale of a greater proportion of higher margin products and
lower manufacturing costs, and customer service gross margins decreased by 6.4
percentage points due primarily to lower revenues without a corresponding
decrease in associated costs. The markets in which the 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.
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<PAGE> 16
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS--Continued
THREE MONTHS ENDED JANUARY 30, 1998 COMPARED
TO THE THREE MONTHS ENDED JANUARY 31, 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 $449,000, or 144%, in 1998 to $761,000, primarily
due to an increase of funds available for investment.
Other income was reduced by $146,000 in 1998 primarily due to a decrease in
sundry income, partially offset by $227,000 of fees paid in 1997, compared to no
fees in 1998, resulting from the elimination of sales of receivables under the
Company's securitization program.
In the first quarter of 1998, a significant strengthening of the U.S. dollar
compared to other currencies resulted in a foreign exchange loss of $453,000
before the Company's hedging program became effective which mitigated any
further losses. The foreign exchange gain in the first quarter of 1997 of
$295,000 was due to favorable currency movements.
Interest expense decreased by $121,000, or 8%, to $1.4 million in 1998. The
decrease was primarily due to lower interest rates.
The Company's effective tax rate was reduced to 40% in 1998 from 45% in 1997.
The high rate 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 $2.7 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. However, the Company's
portion of profits earned by the venture of $3.2 million, due to the publication
of the yellow pages directories in Rio de Janeiro, through the date of sale were
included in Equity in net income of joint ventures in 1997.
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<PAGE> 17
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS--Continued
Liquidity and Sources of Capital
Cash and cash equivalents decreased by $7.1 million in 1998 to $47.1 million.
Operating activities used $1.8 million of cash flows in the three months of
fiscal 1998. The principal use of cash in operating activities for the three
months ended January 30, 1998 was $18.2 million to reduce the level of accounts
payable. Primary among the factors providing cash flows to operating activities
in 1998 were the Company's net income of $2.6 million, augmented by $5.0 million
of depreciation and amortization, an increase of $5.6 million in customer
advances and other liabilities, and a decrease in the level of accounts
receivable of $4.5 million.
The principal factor in the cash applied to investing activities of $5.9
million was the expenditure for property, plant and equipment of $5.3 million.
Financing activities provided $538,000 of cash from the increase in notes
payable to banks of $1.1 million offset, in part, by $775,000 payments of
long-term debt.
In addition to its cash and cash equivalents, at January 30, 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 (see
Note B in the Notes to Condensed Consolidated Financial Statements). The Company
had no outstanding bank borrowings under that line.
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, except for approximately $6.0 million to upgrade
its Uruguayan printing equipment in fiscal 1998. 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 $300,000 was
incurred and expensed in the three months ended January 30, 1998. The Company
expects to complete the necessary modifications in 1998 and will conduct
extensive testing throughout 1999.
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<PAGE> 18
PART II - OTHER INFORMATION
ITEM 6-- EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
3.01 By-Laws of the Company, as amended.
27.01 Financial Data Schedule
(b) Reports on Form 8-K:
The only Report on Form 8-K filed during the quarter ended January 30, 1998 was
a report dated December 16, 1997 (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.
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<PAGE> 19
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: March 12, 1998 JACK EGAN
Vice President - Corporate Accounting
(Principal Accounting Officer)
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<PAGE> 20
EXHIBIT INDEX
-------------
EXHIBIT DESCRIPTION
NUMBER -----------
- -------
3.01 By-Laws of the Company, as amended.
27.01 Financial Data Schedule (filed with electronic
version only).
<PAGE> 1
BY-LAWS
OF
VOLT INFORMATION SCIENCES, INC.
1. MEETINGS OF SHAREHOLDERS
1.1 ANNUAL MEETING: The annual meeting of shareholders shall be held on the
third Thursday of March in each year, or as soon thereafter as practicable, and
shall be held at a place and time determined by the Board of Directors (the
"Board").
1.2 SPECIAL MEETINGS: Special meetings of the shareholders may be called by
resolution of the Board or by the President, and shall be called by the
President or the Secretary upon the written request (stating the purpose or
purposes of the meeting) of a majority of the directors then in office. Only
business related to the purposes set forth in the notice of the meeting may be
transacted at a special meeting.
1.3 PLACE OF MEETINGS: Meetings of the shareholders may be held in or outside
New York State.
1.4 NOTICE OF MEETINGS; WAIVER OF NOTICE: Written notice of each meeting of
shareholders shall be given to each shareholder entitled to vote at the meeting,
except that (a) it shall not be necessary to give notice to any shareholder who
submits a signed waiver of notice before or after the meeting, and (b) no notice
of an adjourned meeting need be given except when required by law. Each notice
of meeting shall be given, personally or by mail, not less than 10 nor more than
60 days before the meeting and shall state the time and place of the meeting,
and unless it is the annual meeting shall state at whose direction the meeting
is called and the purposes for which it is called. If mailed, notice shall be
considered given when mailed to a shareholder at his address on the
Corporation's records. The attendance of any shareholder at a meeting, without
protesting before the end of the meeting the lack of notice of the meeting,
shall constitute a waiver of notice by him.
1.5 QUORUM: The presence in person or by proxy of the holders of 35% of the
shares entitled to vote shall constitute a quorum for the transaction of any
business. In the absence of a quorum, a majority in voting interest of those
present or, in the absence of all the shareholders, any officer entitled to
preside at or to act as secretary of the meeting, may adjourn the meeting until
a quorum is present. At any adjourned meeting at which a quorum is present, any
action may be taken which might have been taken at the meeting as originally
called.
1.6 VOTING PROXIES: Each shareholder of record may attend meetings and vote
either in person or by proxy. Corporate action to be taken by shareholder vote,
other than the election of directors, shall be authorized by a majority of the
votes cast at a meeting of shareholders, except as otherwise provided by law.
Directors shall be elected in the manner provided in Section 2.1 of these
By-Laws. Voting need not be by ballot unless requested by a shareholder at the
meeting or ordered by the chairman of the meeting. Every proxy must be signed by
the shareholder or his attorney-in-fact. No proxy shall be valid after eleven
months from its date unless it provides otherwise.
Exhibit 3.01
<PAGE> 2
1.7 INSPECTORS OF ELECTION: The Board shall have the power to appoint two
persons (who need not be shareholders) to act as inspectors of election at each
meeting of shareholders. If there are not two inspectors present, ready and
willing to act, the chairman presiding at any meeting may appoint a temporary
inspector or inspectors to act at such meeting. No candidate for the office of
director shall act as an inspector of any election for directors.
1.8 ACTION BY SHAREHOLDERS WITHOUT A MEETING: Any shareholder action may be
taken without a meeting in written consent to the action is signed by all
shareholders entitled to vote on the action.
1.9 ADVANCE NOTIFICATION OF PROPOSED BUSINESS: To be properly brought before an
annual meeting of shareholders, business must be either (1) specified in the
notice of annual meeting (or any supplement thereto) given by or at the
direction of the Board, (2) otherwise properly brought before the annual meeting
by or at the direction of the Board, or (3) otherwise properly brought before
the annual meeting by a shareholder. In addition to any other applicable
requirements, for business to be properly brought before an annual meeting of
shareholders by a shareholder, the shareholder must have given timely notice
thereof in writing to the Secretary of the Corporation. To be timely, such
shareholder's notice of proposed business to be brought before the meeting by a
shareholder must be delivered to or mailed and received by the Secretary at the
principal executive offices of the Corporation not less than one hundred twenty
(120) days nor more than one hundred fifty (150) days prior to the one year
anniversary of the date of the notice of the annual meeting of shareholders that
was held in the immediately preceding year; provided, however, that in the event
that the month and day of the annual meeting of shareholders to be held in the
current year is changed by more than thirty (30) calendar days from the one year
anniversary of the date the annual meeting of shareholders was held in the
immediately preceding year, and less than one hundred thirty (130) days'
informal notice to shareholders or other prior public disclosure of the date of
the annual meeting in the current year is given or made, notice of such proposed
business to be brought before the meeting by the shareholder to be timely must
be so received not later than the close of business on the tenth (10th) day
following the day on which formal or informal notice of the date of the annual
meeting of shareholders was mailed or such other public disclosure was made,
whichever first occurs. A shareholder's notice to the Secretary shall set forth
as to each matter the shareholder proposes to bring before the annual meeting
(a) a brief description of the business desired to be brought before the annual
meeting and the reasons for conducting such business at the annual meeting, (b)
the name and record address of the shareholder proposing such business, (c) the
class, series and number of shares of the Corporation's stock which are
beneficially owned by the shareholder and (d) a description of all arrangements
or understandings between the shareholder and any other person or persons
(naming such person or persons) in connection with the proposing of such
business by the shareholder, and any material interest of the shareholder in
such business. Notwithstanding anything in these By-Laws to the contrary, no
business shall be conducted at the annual meeting of shareholders except in
accordance with the procedures set forth in this Section of the By-Laws;
provided, however, that nothing in this Section of the By-Laws shall be deemed
to preclude discussion by any shareholder of any business brought before the
annual meeting of shareholders. The Chairman of an annual meeting shall, if the
facts warrant, determine and declare to the annual meeting that business was not
properly brought before the annual meeting of shareholders in accordance with
the provisions of this Section of the By-Laws, and any such business not
properly brought before the annual meeting shall not be transacted.
1.10 ADVANCED NOTIFICATION OF PROPOSED NOMINATIONS: Only persons who are
nominated in accordance with the following procedures shall be eligible for
election as directors at any annual meeting of shareholders. Nominations of
persons for election to the Board of the Corporation at the annual meeting of
shareholders may be made by or at the direction of the Board, by any committee
or persons
2
<PAGE> 3
appointed by the Board or by any shareholder of the Corporation entitled to vote
for the election of directors at the meeting who complies with the notice
procedures set forth in this Section of the By-Laws. Such nominations, other
than those made by or at the direction of the Board, shall be made pursuant to
timely notice in writing to the Secretary of the Corporation. To be timely, such
shareholder's notice of nominations of persons to serve as directors must be
delivered to or mailed and received by the Secretary at the principal executive
offices of the Corporation not less than one hundred twenty (120) days nor more
than one hundred fifty (150) days prior to the one year anniversary of the date
of the notice of the annual meeting of shareholders that was held in the
immediately preceding year; provided, however, that in the event that the month
and day of the annual meeting of shareholders to be held in the current year is
changed by more than thirty (30) calendar days from the one year anniversary of
the date the annual meeting of shareholders was held in the immediately
preceding year, and less than one hundred thirty (130) days' informal notice to
shareholders or other prior public disclosure of the date of the annual meeting
in the current year is given or made to shareholders, notice of such nominations
by the shareholder to be timely must be so received not later than the close of
business on the tenth (10th) day following the day on which formal or informal
notice of the date of the meeting was mailed or such other public disclosure was
made, whichever first occurs. Such shareholder's notice to the Secretary shall
set forth (1) as to each person whom the shareholder proposes to nominate for
election or reelection as a Director, (a) the name, age, business address and
residence address of the person, (b) the principal occupation or employment of
the person, (c) the class, series and number of shares of capital stock of the
Corporation which are beneficially owned by the person, and (d) any other
information relating to the person that is required to be disclosed in
solicitations of proxies for election of directors pursuant to the Rules and
Regulations of the Securities and Exchange Commission under Section 14 of the
Securities Exchange Act of 1934, as amended (including such person's written
consent to being named in the proxy statement as a nominee and to serving as
director if elected); and (2) as to the shareholder giving the notice (a) the
name and record address of the shareholder and (b) the class, series and number
of shares of capital stock of the Corporation which are beneficially owned by
the shareholder. The Corporation may require any proposed nominee to furnish
such other information as may reasonably be required by the Corporation to
determine the eligibility of such proposed nominee to serve as a director of the
Corporation. No person shall be eligible for election as a director of the
Corporation unless nominated in accordance with the procedures set forth herein.
The Chairman of the meeting shall, if the facts warrant, determine and declare
to the meeting that a nomination was not made in accordance with the foregoing
procedure, and the defective nomination shall be disregarded.
2. BOARD OF DIRECTORS
2.1 NUMBER, QUALIFICATION, ELECTION AND TERM OF DIRECTORS: The business of the
Corporation shall be managed by the Board, which shall consist of such number of
directors, not less than three nor more than nine, to be fixed from time by the
shareholders or a majority of the entire Board. The directors shall be
classified with respect to the time during which they shall severally hold
office by dividing them into two classes, as nearly equal in number as possible,
but in no event shall any class include less than three directors. At the
meeting of the shareholders of the Corporation held for the election of the
first such classified Board, the directors of the first class shall be elected
for a term of one year and the directors of the second class for a term of two
years. At each annual meeting of shareholders held thereafter, the successors to
the class whose term shall expire that year shall be elected to hold office for
a term of two years, so that the term of office of one class of directors shall
expire each year. Any newly created directorship or decrease in directorship as
authorized by resolution of the Board of Director shall be so apportioned as to
make both classes as nearly equal in number as possible. When the number of
directors is increased by the Board and any newly created directorship is filled
by the Board, there shall be no
3
<PAGE> 4
classification of the additional directors until the next annual meeting of
shareholders. No decrease in the number of directors shall shorten the term of
any incumbent director. Each director shall be at least 21 years old. Directors
shall hold office until the annual meeting at which their term expires and until
the election of their respective successors.
2.2 QUORUM AND MANNER OF ACTING: A majority of the entire Board shall constitute
a quorum for the transaction of business at any meeting, except as provided in
Section 2.8 of these By-Laws. Action of the Board shall be authorized by the
vote of a majority of the directors present at the time of the vote if there is
a quorum, unless otherwise provided by law or these By-Laws. In the absence of a
quorum, a majority of the directors present may adjourn any meeting from time to
time until a quorum is present.
2.3 PLACE OF MEETINGS: Meetings of the Board may be held in or outside New York
State.
2.4 ANNUAL AND REGULAR MEETINGS: Annual meetings of the Board, for the election
of officers and consideration of other matters, shall be held either (a) without
notice immediately after the annual meeting of shareholders and at the same
place, or (b) as soon as practicable after the annual meeting of shareholders,
on notice as provided in Section 2.6 of these By-Laws. Regular meetings of the
Board may be held without notice at such times and places as the Board
determines. If the day fixed for a regular meeting is a legal holiday, the
meeting shall be held on the next business day.
2.5 SPECIAL MEETINGS: Special meetings of the Board may be called by the
President or by a majority of the directors then in office. Only business
related to the purposes set forth in the notice of meeting may be transacted at
a special meeting.
2.6 NOTICE OF MEETINGS; WAIVER OF NOTICE: Notice of the time and place of each
special meeting of the Board, and of each annual meeting not held immediately
after the annual meeting of shareholders and at the same place, shall be given
to each director by mailing it to him at his residence or usual place of
business at least three days before the meeting, or by delivering or telephoning
or telegraphing it to him at least two days before the meeting. Each notice of a
special meeting shall also state the purpose or purposes for which the meeting
is called, Notice need not be given to any director who submits a signed waiver
of notice before or after the meeting, or who attend the meeting without
protesting the lack of notice to him, either before the meeting or when it
begins. Notice of any adjourned meeting need not be given, other than by
announcement at the meeting at which the adjournment is taken.
2.7 RESIGNATION AND REMOVAL OF DIRECTORS: Any director may resign at any time.
Directors may be removed only as provided in the Certificate of Incorporation.
Any or all of the directors may be removed at any time, either with or without
cause, by vote of the shareholders and any of the directors may be removed for
cause by the Board.
2.8 VACANCIES: Any vacancy in the Board, including one created by an increase in
the number of directors, may be filled for the unexpired term by a majority vote
of the remaining directors, though less than a quorum.
2.9 COMPENSATION: Directors shall receive such compensation as the Board
determines, together with reimbursement of their reasonable expenses in
connection with the performance of their duties. A director may also be paid for
serving the Corporation, its affiliates or subsidiaries in other capacities.
4
<PAGE> 5
3. COMMITTEES
3.1 EXECUTIVE COMMITTEE: The Board, by resolution adopted by a majority of the
entire Board, may designate an Executive Committee of two or more directors
which shall have all the authority of the Board, except as otherwise provided in
the resolution or by law, and which shall serve at the pleasure of the Board.
All action of the Executive Committee shall be reported to the Board at its next
meeting. The Executive Committee shall adopt rules of procedure and shall meet
as provided by those rules or by resolution of the Board.
3.2 OTHER COMMITTEES: The Board, by resolution adopted by a majority of the
entire Board, may designate other committees of the Board, consisting of two or
more directors, to serve at the pleasure of the Board, with such powers and
duties as the Board determines.
4. OFFICERS
4.1 NUMBER: The executive officers of the Corporation shall be the Chairman of
the Board of Directors, the President, one or more Vice Presidents, a Secretary
and a Treasurer. Any two or more offices may be held by the same person, except
the offices of President and Secretary.
4.2 ELECTION; TERM OF OFFICE: The executive officers of the Corporation shall be
elected annually by the Board, and each such officer shall hold office until the
next annual meeting of the Board and until the election of his successor.
4.3 SUBORDINATE OFFICERS: The Board may appoint subordinate officers (including
Assistant Secretaries and Assistant Treasurers), agents or employees, each of
whom shall hold office for such period and have such powers and duties as the
Board determines. The Board may delegate to any executive officer or to any
committee the power to appoint and define the powers and duties of any
subordinate officers, agents or employees.
4.4 RESIGNATION AND REMOVAL OF OFFICERS: Any officer may resign at any time. Any
officer elected or appointed by the Board or appointed by an executive officer
or by a committee may be removed by the Board either with or without cause.
4.5 VACANCIES: A vacancy in any office may be filled for the unexpired term in
the manner prescribed in Sections 4.2 and 4.3 of these By-Laws for election or
appointment to the office.
4.6 CHAIRMAN OF THE BOARD OF DIRECTORS: The Chairman of the Board of Directors
shall, when present, preside at all meetings of the Board and at all meetings of
shareholders. He shall have the same power as the President to execute contracts
and other instruments on behalf of the Corporation except as otherwise provided
by law or by the Board, and he shall have such other powers and duties as the
Board assigns to him. During the absence or disability of the President, he
shall exercise all powers and discharge all the duties of the president.
4.7 PRESIDENT: The President shall be the chief executive officer of the
Corporation, and he shall have general supervision over the business and affairs
of the Corporation. He shall, in the absence of the Chairman of the Board of
Directors, preside at all meetings of the Board and meetings of shareholders. He
shall have the power to execute contracts and other instruments of the
Corporation, and such other powers and duties as the Board assigns to him.
5
<PAGE> 6
4.8 VICE PRESIDENTS: Each Vice President shall have such powers and duties as
the Board or the President assigns to him.
4.9 SECRETARY: The Secretary shall record the minutes of all meetings of the
Board and of the shareholders, shall be responsible for giving notice of all
meetings of shareholders and of the Board, shall keep the seal of the
Corporation and, in proper cases, shall apply it to any instrument requiring it
and attest it. He shall have such other duties as the Board or the President
assigns to him. In the absence of the Secretary from any meeting, the minutes
shall be recorded by the person appointed for that purpose by the presiding
officer.
4.10 TREASURER: The Treasurer shall be the chief financial and accounting
officer of the Corporation. Subject to the control of the Board and the
President, the Treasurer shall have charge of the Corporation's funds and
securities and the Corporation's receipts and disbursements. He shall have such
other powers and duties as the Board or the President assigns to him.
4.11 SALARIES: The Board may fix the officers' salaries or it may authorize the
President to fix the salary of any other officer.
5. SHARES
5.1 CERTIFICATES: The shares of the Corporation shall be represented by
certificates in the form approved by the Board.
5.2 TRANSFERS: Shares shall be transferable only on the Corporation's books,
upon surrender of the certificate for the shares, properly endorsed. The Board
may require satisfactory surety before issuing a new certificate claimed to have
been lost or destroyed.
5.3 DETERMINATION OF SHAREHOLDERS OF RECORD: The Board may fix, in advance, a
date as the record date for the determination of shareholders entitled to notice
of or to vote at any meeting of the shareholders, or to express consent to or
dissent from any proposal without a meeting, or to receive payment of any
dividend or the allotment of any rights, or for the purpose of any other action.
The record date may not be more than 60 nor less than 10 days before the date of
the meeting, nor more than 60 days before any other action.
6. INDEMNIFICATION
6.1 GENERAL: Any person made, or threatened to be made, a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative, and including an action by or in the
right of the Corporation or of any other corporation, partnership, joint
venture, trust, employee benefit plan or other enterprise to procure a judgment
in its respective favor (any such action, suit or proceeding is hereinafter
referred to as an "Action"), by reason of the fact that such person or such
person's testator or intestate (a) is or was a director or officer of the
Corporation, or (b) is or was serving any other corporation, partnership, joint
venture, trust, employee benefit plan or other enterprise in any capacity at the
request of the Corporation, shall be indemnified by the Corporation against
judgments, fines, amounts paid in settlement and reasonable expenses (including
attorney's fees) incurred in connection with the defense or as a result of an
Action or in connection with any appeal therein; provided that no
indemnification shall be made to or on behalf of any director or officer if a
6
<PAGE> 7
judgment or other final adjudication adverse to such director or officer
establishes that (i) his or her acts were committed in bad faith or were the
result of active and deliberate dishonesty and, in either case, were material to
the cause of action so adjudicated, or (ii) he or she personally gained in fact
a financial profit or other advantage to which he or she was not legally
entitled. The Corporation may indemnify and advance expenses to any other person
to whom the Corporation is permitted to provide indemnification or the
advancement of expenses to the fullest extent permitted by applicable law,
whether pursuant to rights granted pursuant to, or provided by, the New York
Business Corporation Law or other law, or other rights created by an agreement
approved by the Board, or resolution of shareholders or the Board, and the
adoption of any such resolution or the entering into of any such agreement
approved by the Board is hereby authorized.
6.2 EXPENSE ADVANCES: The Corporation shall, from time to time, advance to any
director or officer of the Corporation expenses (including attorney's fees)
incurred in defending any Action in advance of the final disposition of such
Action; provided that no such advancement shall be made until receipt of any
undertaking by or on behalf of such director or officer to repay such amount as,
and to the extent, required by law.
6.3 PROCEDURE FOR INDEMNIFICATION: Indemnification and advancement of expenses
under this Section 6 shall be made promptly and, in any event, no later than 45
days following the request of the person entitled to such indemnification or
advancement of expenses hereunder. The Board shall promptly (but, in any event,
within such 45-day period) take all such actions (including, without limitation,
any authorizations and findings required by law) as may be necessary to
indemnify, and advance expenses to, each person entitled thereto pursuant to
this Section 6. If the Board is or may be disqualified by law from granting any
authorization, making any finding or taking any other action necessary or
appropriate for such indemnification or advancement, then the Board shall use
its best efforts to cause appropriate person(s) to promptly so authorize, find
or act.
6.4 INSURANCE: The Corporation shall be permitted to purchase and maintain
insurance for its own indemnification and that of its directors and officers and
any other proper person to the maximum extent permitted by law.
6.5 NON-EXCLUSIVITY: Nothing contained in this Section 6 shall limit the right
of indemnification and advancement of expense to which any person would be
entitled by law in the absence of this Section 6, or shall be deemed exclusive
of any rights to which those seeking indemnification or advancement of expenses
may have or hereafter be entitled under any law, provision of the Certificate of
Incorporation, By-Law, agreement approved by the Board, or resolution of
shareholders or directors, and the adoption of any such resolution or entering
into of any such agreement approved by the Board is hereby authorized.
6.6 CONTINUITY OF RIGHTS: The indemnification and advancement of expenses
provided by, or granted pursuant to, this Section 6 shall (i) continue as to a
person who has ceased to serve in a capacity which would entitle such person to
indemnification or advancement of expenses pursuant to this section 6 with
respect to acts or omissions occurring prior to such cessation, (ii) inure to
the benefit of the heirs, executors and administrators of a person entitled to
the benefits of this Section 6 (iii) apply with respect to acts or omissions
occurring prior to the adoption of this Section 6 to the fullest extent
permitted by law and (iv) survive the full or partial repeal or restrictive
amendment hereof with respect to events occurring prior thereto. This Section 6
shall constitute a contract between the Corporation and each person eligible for
indemnification or advancement of expenses hereunder, pursuant to which contract
the Corporation and each person intend to be legally bound.
7
<PAGE> 8
6.7 ENFORCEMENT: The right to indemnification and advancement of expenses
provide by this Section 6 shall be enforceable by any person entitled to
indemnification or advancement of expenses hereunder in any court of competent
jurisdiction. In such an enforcement action the burden shall be on the
Corporation to prove that the indemnification and advancement of expenses being
sought are not appropriate. Neither the failure of the Corporation to determine
whether indemnification or the advancement of expenses is proper in the
circumstances nor an actual determination by the Corporation thereon adverse to
the person seeking such indemnification or advancement shall constitute a
defense to the action or create a presumption that such person is not so
entitled. Without limiting the scope of Section 6.1 (a) a person who has been
successful on the merits or otherwise in the defense of an Action shall be
entitled to indemnification as authorized in Section 6.1 and (b) the termination
of any Action by judgment, settlement, conviction or plea of nolo contendere or
its equivalent shall not in itself create a presumption that such person has not
met the standard of conduct set forth in Section 6.1. Such person's reasonable
expenses incurred in connection with successfully establishing such person's
right to indemnification or advancement of expenses, in whole or in part, in any
such proceeding shall also be indemnified by the Company.
6.8 SEVERABILITY: In this section 6 or any portion hereof shall be invalidated
on any ground by any court of competent jurisdiction, then the Corporation
nevertheless shall indemnify and advance expense to each person otherwise
entitled thereto to the fullest extent permitted by any applicable portion of
this Section 6 that shall not have been invalidated.
7. MISCELLANEOUS
7.1 SEAL: The seal of the Corporation shall be in the form of a circle and shall
bear the Corporation's name and the year (1957) and state (New York) in which it
was incorporated.
7.2 FISCAL YEAR: The Board may determine the Corporation's fiscal year. Until
changed by the Board, the Corporation's fiscal year shall end on the Friday
closest to October 31 of each year.
7.3 VOTING OF SHARES IN OTHER CORPORATIONS: Shares in other corporations which
are held by the Corporation may be represented and voted by the President or a
Vice President or by a proxy or proxies appointed by one of them. The Board may,
however, appoint some other person to vote any such shares.
7.4 AMENDMENTS: Any By-Law may be amended, repealed or adopted by the
shareholders or by a majority of the entire Board, but any By-Law adopted by the
Board may be amended or repealed by the shareholders. If a By-Law regulating
elections of directors is amended, repealed or adopted by the Board, the notice
of the next meeting of shareholders shall set forth the By-Law so amended,
repealed or adopted together with a concise statement of the changes made.
AT A MEETING OF THE BOARD OF DIRECTORS HELD ON OCTOBER 28, 1975, THE FOLLOWING
SECTION WAS ADDED TO THE COMPANY'S BY-LAWS:
"Any one or more members of the Board of Directors or any committee thereof may
participate in a meeting of such Board or Committee by means of a conference
telephone or similar communications equipment allowing all persons participating
in the meeting to hear each other at the same time. Participation by such means
shall constitute presence in person at a meeting."
8
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> OCT-30-1998
<PERIOD-END> JAN-30-1998
<CASH> 47,118
<SECURITIES> 106
<RECEIVABLES> 227,547
<ALLOWANCES> 5,311
<INVENTORY> 36,115
<CURRENT-ASSETS> 324,138
<PP&E> 109,483
<DEPRECIATION> 46,186
<TOTAL-ASSETS> 411,988
<CURRENT-LIABILITIES> 156,538
<BONDS> 55,222
0
0
<COMMON> 1,490
<OTHER-SE> 179,605
<TOTAL-LIABILITY-AND-EQUITY> 411,988
<SALES> 17,935
<TOTAL-REVENUES> 362,304
<CGS> 10,106
<TOTAL-COSTS> 335,339
<OTHER-EXPENSES> 21,075
<LOSS-PROVISION> 645
<INTEREST-EXPENSE> 1,374
<INCOME-PRETAX> 3,871
<INCOME-TAX> 1,541
<INCOME-CONTINUING> 2,585
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,585
<EPS-PRIMARY> 0.17<F1>
<EPS-DILUTED> 0.17
<FN>
<F1>THE AMOUNT IS REPORTED AS EPS BASIC AND NOT FOR EPS PRIMARY.
</FN>
</TABLE>
