<PAGE> 1
FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
|X| Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 (No Fee Required) For the fiscal year ended October 31, 1997
or
|_| Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 (No Fee Required) For the transition period from
__________________________________ to ______________________
Commission File Number: 1-9232
VOLT INFORMATION SCIENCES, INC.
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(Exact name of registrant as specified in its charter)
New York 13-5658129
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1221 Avenue of the Americas, New York, New York 10020-1579
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (212) 704-2400
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
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Common Stock, $.10 par value New York Stock Exchange, Inc.
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Securities registered pursuant to Section 12(g) of the Act:
None
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Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days. Yes |X| No |_|
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. |X|
The aggregate market value of the common stock held by non-affiliates of the
Registrant as of January 16, 1998 (based on the closing price on the New York
Stock Exchange on that date) was approximately $350 million (based on the number
of shares outstanding on that date exclusive of all shares held beneficially by
executive officers and directors and their spouses and the Registrant's Savings
Plan and Employee Stock Ownership Plan, without conceding that all such persons
or plans are "affiliates" of the Registrant).
The number of shares of common stock outstanding as of January 16, 1998 was
14,902,319.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Company's Proxy Statement for its 1998 Annual Meeting are
incorporated by reference into Part III of this Report.
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PART I
ITEM 1. BUSINESS
GENERAL
Volt Information Sciences, Inc., a New York corporation, incorporated in 1957,
and its subsidiaries (collectively "Volt" or the "Company", unless the context
otherwise requires) operate in three major businesses, consisting of the
following five industry segments:
STAFFING SERVICES
(1) Technical Services and Temporary Personnel - This segment provides employee
staffing services, including temporary help and other contingent staffing
services, employment and personnel placement services, technical personnel
placement, payrolling services, employment outsourcing services and employee
leasing services, as well as some permanent placement services, to a wide range
of customers.
TELECOMMUNICATIONS & INFORMATION SOLUTIONS
(2) Telephone Directory - This segment provides telephone directory production,
commercial printing, database management, sales and marketing services,
licensing of directory production and contract management software systems to
directory publishers and others, and is an independent publisher of telephone
directories.
(3) Telecommunications Services - This segment provides telecommunications
services, including engineering, design, construction, installation,
maintenance, removals and distribution of telecommunications products in the
outside plant and central office, and within end-user premises.
(4) Computer Systems - This segment designs, develops, integrates, markets,
sells, leases and maintains computer-based directory assistance and other
database management and telecommunications systems and related services for the
telecommunications industry, and provides services, principally computer-based
projects, to public utilities and financial institutions.
PREPRESS PUBLISHING SYSTEMS
(5) Electronic Publication and Typesetting Systems - This segment designs,
develops, manufactures, integrates, markets, sells and services computerized
imagesetting and publication systems through Autologic International, Inc., the
Company's 59% owned publicly-held subsidiary, and its subsidiaries (collectively
"AII").
INFORMATION AS TO INDUSTRY SEGMENTS
The following tables set forth the contribution of each industry segment to the
Company's consolidated sales and operating profit for each of the three fiscal
years in the period ended October 31, 1997, and those assets identifiable within
each segment at the end of each of those years (see Note J of Notes to
Consolidated Financial Statements and Management's Discussion and Analysis of
Financial Condition and Results of Operations).
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VOLT INFORMATION SCIENCES, INC. AND SUBSIDIARIES
INDUSTRY SEGMENT DATA
<TABLE>
<CAPTION>
October November November
31, 1997 1, 1996 3, 1995
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<S> <C> <C> <C>
SALES (Dollars in thousands)
Technical Services and Temporary Personnel:
Sales to unaffiliated customers $1,015,579 $713,476 $570,514
Intersegment sales 5,218 2,809 1,832
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1,020,797 716,285 572,346
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Telephone Directory:
Sales to unaffiliated customers 88,214 77,972 68,086
Intersegment sales 1,376 639 1,681
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89,590 78,611 69,767
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Telecommunications Services:
Sales to unaffiliated customers 143,360 89,957 67,179
Intersegment sales 2,811 1,515 811
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146,171 91,472 67,990
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Computer Systems:
Sales to unaffiliated customers 70,123 79,033 131,920
Intersegment sales 89 53 40
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70,212 79,086 131,960
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Electronic Publication and Typesetting Systems:
Sales to unaffiliated customers 84,197 88,120 69,608
Intersegment sales 429 762 797
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84,626 88,882 70,405
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Elimination of intersegment sales (9,923) (5,778) (5,161)
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Total sales $1,401,473 $1,048,558 $907,307
=========== =========== =========
OPERATING PROFIT (LOSS)
Technical Services and Temporary Personnel $30,761 $27,346 $28,117
Telephone Directory 8,881 4,858 1,506
Telecommunications Services 18,722 9,484 6,178
Computer Systems 247 7,707 6,395
Electronic Publication and Typesetting Systems 1,521 (4,127) 456
Eliminations (12) (69) (159)
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Total operating profit 60,120 45,199 42,493
Interest and other income - net 2,089 2,278 1,055
(Loss) gain on securities (3,000) 52
Equity in net income (loss) of joint ventures 6,824 (1,414) (1,000)
Gain on sale of joint venture 12,807
Gain on sale of interest in subsidiaries 3,666
General corporate expense (10,811) (9,811) (9,408)
Interest expense (5,656) (5,167) (6,045)
Foreign exchange gain (loss) - net 52 (516) 186
----------- ----------- ---------
Income from continuing operations before income taxes,
minority interests and extraordinary item $62,425 $34,287 $27,281
=========== =========== =========
</TABLE>
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VOLT INFORMATION SCIENCES, INC. AND SUBSIDIARIES
INDUSTRY SEGMENT DATA--Continued
October November November
31, 1997 1, 1996 3, 1995
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(Dollars in thousands)
IDENTIFIABLE ASSETS
Technical Services and Temporary Personnel $155,818 $ 98,706 $ 52,955
Telephone Directory 45,971 41,622 32,135
Telecommunications Services 58,393 41,082 31,812
Computer Systems 35,750 42,069 44,887
Electronic Publication and Typesetting Systems 55,305 66,504 37,532
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351,237 289,983 199,321
Cash, investments, joint ventures
and other corporate assets 67,485 47,161 64,690
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Total assets $418,722 $337,144 $264,011
======== ======== ========
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FORWARD-LOOKING STATEMENTS DISCLOSURE
In order to keep our stockholders and investors informed of the Company's future
plans and objectives, this Annual Report on Form 10-K 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 (many of which are discussed elsewhere in
this annual report) 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 this annual report for the fiscal year ended October 31, 1997, and
from time to time in the Company's other reports hereafter filed with the
Securities and Exchange Commission.
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TECHNICAL SERVICES AND TEMPORARY PERSONNEL SEGMENT
Volt's Technical Services and Temporary Personnel segment provides, from 272
branch and on-site offices located throughout the United States, a broad range
of employee staffing services, including temporary help and other contingent
staffing services, employment and personnel placement services, technical
personnel placement, payrolling services, employment outsourcing services and
employee leasing services, as well as some permanent placement services, to a
wide range of customers. Except for professional employer services, which are
marketed under the name "Shaw & Shaw", the remainder of this segment's services
are identified and marketed throughout the United States as "Volt Services
Group".
VOLT SERVICES GROUP
Volt Services Group is a single-source provider of all levels of temporary
staffing, offering to its customers an extensive range of contingent
employment services. As a full-service supplier, Volt Services Group also
provides payrolling and outsourcing services, as well as assuming full
responsibility for staffing, supervision and the management of large
projects which are staffed by temporary workers.
Volt Services Group provides professional, engineering, design, data
processing, scientific and technical support personnel, as well as
information technology services, contract engineering services and
temporary help in administrative, clerical, office automation, accounting,
industrial and other job classifications, for varying periods of time
(both short and long-term) to companies and other organizations (including
government agencies) in a broad range of industries which have a need for
such personnel, but are unable, or do not choose to engage such personnel
as their own employees. Customers range from those that require one or two
temporary employees to national accounts that require as many as several
thousand temporary employees at one time.
Volt Services Group has been successful in obtaining a number of large
national contracts which typically involve servicing numerous customer
facilities, on-site Volt representation and customized invoicing and
management reports. In some cases, Volt uses subcontractors to assist in
meeting the requirements of the contract. Volt also acts as a
subcontractor to other national providers to assist them in meeting their
obligations to their customers. Employees assigned to a customer under a
national account could range from light industrial workers to high-level
engineers and information technology professionals. The bidding process
for national accounts is very competitive and Volt is usually in
competition with other major temporary staffing firms. Most contracts are
for a one to three year time period, at which time they are typically
rebid. Others are for shorter periods and may be for the duration of a
particular project or subproject or a particular need that has arisen
which requires additional or substitute personnel and expire upon
completion of the project or when the particular need ends. These
contracts with national accounts typically require considerable start-up
costs and can usually take from six months up to one year to reach
anticipated revenue levels. This segment maintains a group dedicated to
the acquisition, implementation and service of national accounts; however,
there can be no assurance that Volt Services Group will maintain accounts
that it currently serves, nor that it can obtain additional national
accounts on satisfactory terms.
Volt Services Group provides personnel to companies throughout a broad
spectrum of industries, including the computer, electronics,
manufacturing, aerospace, defense, telecommunications, utility, power
(including certain nuclear and fossil fuel power plants), transportation,
petrochemical, chemical, retail, finance, banking, insurance,
architectural, engineering and other industries, and to government
agencies and universities. Volt Services Group, through its Volt
Accounting Specialists division, provides specialized temporary personnel
in accounting, bookkeeping and other financial classifications. Most
customers are located in the United States, but a small portion of the
segment's services are performed outside the United States.
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Volt Services Group furnishes temporary employees to meet various client
requirements, such as assigning employees to a specific identified project
or subproject or to meet a particular need that has arisen (which
employees are typically retained until its completion), substituting for
permanent employees during vacation and sick leave, staffing high turnover
positions, filling in during the full-time hiring process or during a
hiring freeze, and staffing seasonal peaks, special projects, conversions,
inventories and offices that are downsizing. Volt Services Group also
provides management personnel to coordinate special projects and to
supervise temporary employees, thus relieving a customer of the need to
supervise temporary employees.
Volt Services Group provides the services of employees with a wide variety
of skills, ranging from technical, engineering, computer and other
professional and scientific classifications to clerks, typists, office
automation personnel, secretaries, receptionists, sales promotion
personnel, bank personnel, accountants, bookkeepers, customer service
representatives, telemarketers, data entry clerks, inventory clerks,
assemblers, warehousing personnel and other clerical and administrative
personnel.
Volt Services Group maintains computerized nationwide resume databases
containing resumes of engineers, computer professionals and other
technical, professional and scientific candidates, from which it fills
customer job requirements for these types of employees. These individuals
are frequently willing to relocate to fulfill these assignments. Lesser
skilled employees are generally recruited and assigned locally, and
resumes for these employees are maintained in computerized databases at
branch offices.
Employees hired by Volt Services Group become Volt employees during the
period of their assignment, which ranges from as little as one day to
several years. As the employer of record, Volt is responsible for the
payment of salaries, payroll taxes, workers' compensation and unemployment
insurance and other benefits, which may include paid sick days, holidays
and vacations and medical insurance.
SHAW & SHAW
Shaw & Shaw, Inc. specializes in professional employer services, known as
"employee leasing". Shaw & Shaw shares the employer responsibilities with
its client companies, typically serving as the administrative employer of
record for either the entire full-time workforce or for a specific
department or division of the client company. Services provided by Shaw &
Shaw include complete human resource management, legal and regulatory
compliance, comprehensive health benefits, retirement plans and
administration, workers' compensation insurance, loss control and risk
management and payroll administration. Shaw & Shaw utilizes the purchasing
power of the Company which enables it to provide its customers with cost
savings in health care, workers' compensation insurance, and labor
administration, as well as relieving them of the administrative
responsibilities involved in maintaining employees.
Shaw & Shaw provides and markets its services to large and small client
companies in a broad spectrum of industries, such as retail, convenience
markets, country clubs, restaurants, building contractors, petroleum,
manufacturing, grocery, home care, maintenance, janitorial, banking and
computer.
The Technical Services and Temporary Personnel segment also provides some
existing customers with direct full-time employees, the majority of whom have
previously been assigned on a temporary basis and who the customer desires to
hire as direct full-time employees.
During the week ended October 31, 1997, this segment provided approximately
31,000 employees to its customers.
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The segment is not dependent upon a single customer or a few customers, the loss
of which might have a materially adverse effect upon its business. However, some
of this segment's national contracts are large, and the loss of any large
contract could have a negative effect on this segment's business unless, and
until, the business is replaced.
While the markets for the segment's services include a broad range of industries
throughout the United States, general economic conditions in specific geographic
areas or industrial sectors have in the past, and could in the future, affect
the profitability of this segment. In addition, this segment could be affected
by changes in government laws and regulations, customers' attitudes toward
outsourcing and temporary personnel, as well as decreasing rates of unemployment
and higher wages sought by temporary workers, especially those in certain
technical fields particularly characterized by labor shortages.
Downward pressures on this segment's operating margins occurred in fiscal 1996
and continued through the first half of fiscal 1997, due to increases in
overhead to open new offices, particularly on-site offices for national
accounts, start-up costs related to new contracts and additional personnel to
bid and service national accounts, as well as significantly increased
competition. As revenues from the new, national, managed service accounts have
begun to reach their anticipated levels, operating profits have begun to
increase during the second half of the year, and are anticipated to continue to
increase, although there can be no assurance that this trend will be sustained.
In addition, the trend in the industry is for large customers to consolidate
their use of contingent workers to single source providers.
The segment competes with many technical service, temporary personnel and other
contingent staffing firms, some of which are larger than Volt, as well as with
individuals seeking direct employment from the Company's existing and potential
customers.
The ability of Volt to compete successfully for customers depends on its
reputation, pricing and quality of service provided and its ability to engage,
in a timely manner, personnel meeting customer requirements. Competition is
intense and many of the contracts entered into by this segment are of a
relatively short duration, and awarded on the basis of competitive proposals
which are periodically rebid by the customer. Although Volt has been successful
in obtaining various short and long-term contracts in the past, with concomitant
increases in revenues, in many instances margins under such contracts have
decreased. There can be no assurance that existing contracts will be renewed on
satisfactory terms or that additional or replacement contracts will be awarded
to the Company, nor that revenues from an expired contract will be immediately
replaced.
TELEPHONE DIRECTORY SEGMENT
Volt's Telephone Directory segment provides telephone directory production,
commercial printing, database management, sales and marketing services,
licensing of directory production and contract management software systems to
directory and other advertising media publishers and is an independent publisher
of telephone directories. This segment consists of the Directory
Systems/Services division, the DataNational division, the Uruguay division and
the Advanced Technologies, Research & Development subsidiary.
DIRECTORY SYSTEMS/SERVICES
This division markets to directory publishers, and utilizes internally,
highly specialized computer systems, including both those developed by
third parties for the division and those developed by the Company, as well
as third-party off-the-shelf software. The division integrates and
maintains these systems for managing the production and control of
databases, principally for directory and other advertising media
publishers. These
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systems produce digitized display advertisements and photocomposed pages,
using equipment manufactured by AII and others, with integrated graphics
for yellow and white pages directories, as well as CD/ROM and internet
directories. The systems incorporate "workflow management", by which ads
are automatically routed between workstations, increasing through-put and
control.
The division customizes its systems to meet the needs of publishers who
desire to perform their work in-house. The division also provides
outsourcing services for advertising, database management and publication
to publishers and others who choose not to do the work in-house. The
systems are sold or licensed to, and the services are performed for,
publishers and others worldwide. The division also provides directory
management systems and various photocomposition services to a number of
regional telephone and independent directory publishers throughout North
America, licenses production system software to directory publishers and
provides commercial services, such as composition, data processing and
database management services, to other customers.
The division also separately markets workstations which are used to
facilitate the creation of telephone directories. These include a graphics
workstation (RAD-GRAF) containing Volt-developed software, which
facilitates the incorporation of special graphic effects in the
presentation of ads and provides merging text and graphics on a finished
page, the Real-time Incolumn Display workstation (RID), which is an
on-line electronic galley editor which allows last minute alterations and
insertions of ads and listings, while displaying the composed results as
they will appear on the finished page, and an interactive pagination
system (DPIC), which allows the user to customize page layouts to their
own specifications.
The division, through its Volt Directory Marketing group, also provides
telemarketing services for directory advertising sales for both white and
yellow pages directories and provides other telemarketing services to
directory publishers.
Services are rendered under various short and long-term contracts and are
performed primarily at facilities maintained by Volt in Anaheim and San
Diego, California; Indianapolis, Indiana; Blue Bell and Huntingdon Valley,
Pennsylvania; and, in one instance, at the customer's facility.
A substantial portion of the division's business is obtained through
submission of competitive proposals for contracts that typically expire in
one to three years and are then rebid. A contract with one customer, which
accounted for approximately 16% of the segment's revenues and 22% of the
segment's operating profit for fiscal 1997, is scheduled to expire in June
1998. Other contracts are scheduled to expire in 1998 and 1999. However,
the division has obtained several significant contracts which began in
fiscal 1997. While the Company believes it can secure renewals and/or
extensions of some of the contracts which are scheduled to expire, some of
which are material to this segment, and to obtain replacement business,
there can be no assurance that contracts will be renewed or extended, or
that additional or replacement contracts will be awarded to the Company on
satisfactory terms.
The division faces intense competition with respect to all of its services
and products from other suppliers and from in-house facilities of
potential customers. Some of this division's significant competitors are
companies which are larger and have substantially greater financial
resources than Volt.
DATANATIONAL
DataNational, the independent telephone directory publishing division of
Volt, publishes community-based directories in Arkansas, Delaware,
Maryland, North Carolina, Pennsylvania, Virginia and West Virginia.
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DataNational offers a community-based directory that provides consumers
with information on businesses which provide services within their local
geographic area. The directories also include features that are unique to
the community, such as school information, maps and a calendar of events.
The principal competition for this division is from the regional telephone
companies, whose directories typically cover a much wider geographic area
than the locations for which the division publishes directories. The
advertiser is attracted to the division's community directory, because it
enables them to specifically target their local markets at a much lower
cost.
During fiscal 1997, the division added three new directories, bringing the
total community, county and regional directories to sixty-seven, an
increase of thirteen over the last five years. The division identifies new
markets where demographics and their local shopping patterns are favorable
to the division's community-oriented product and expands accordingly.
URUGUAY
This division's revenues are generated from yellow pages advertising and
its printing operations in South America. The division is the official
publisher of the white and yellow pages telephone directories for Antel,
the government-owned telephone company in Uruguay, under a contract with
Antel originally entered into in 1983 and extended through 2002.
In addition to the directory business, the division owns and operates a
printing plant that prints its own telephone directories and also prints
directories for publishers in Argentina and Brazil and does commercial
printing for various customers in those countries and in Uruguay.
During fiscal 1997, the division began offering operator assisted yellow
pages ("OAYP") on "900" telephone numbers in Uruguay. The OAYP uses a
sophisticated, proprietary, computerized system developed jointly by this
division and the Company's Computer Systems segment. Publication of a
planned business-to-business directory for the Mercosur common market
(Argentina, Brazil, Uruguay and Paraguay) is now scheduled for April 1998.
ADVANCED TECHNOLOGIES, RESEARCH & DEVELOPMENT
Volt's Advanced Technologies, Research & Development subsidiary researches
and implements new product lines and adopts new computer technology for
internal office and business processing automation. This subsidiary,
through its Volt Consulting Services division, also provides the Company,
as well as non-affiliated customers, with data processing consulting,
applications development and software systems integration services.
The Company holds several patents and trademarks related to this segment's
products, but does not believe that any are material to the segment.
Volt's ability to compete in its Telephone Directory segment depends upon its
reputation, technical capabilities, price, quality of service and ability to
meet customer requirements in a timely manner. Volt believes that its
competitive position in this segment's areas of operations is augmented by its
ability to draw upon the expertise and resources of its other segments.
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Although Volt continues its investment in research and development, there is no
assurance that this segment's present or future products will be competitive,
that the segment will continue to develop new products or that present products
or new products will continue to be successfully marketed.
TELECOMMUNICATIONS SERVICES SEGMENT
Volt's Telecommunications Services segment provides telecommunications services,
including engineering, design, construction, installation, maintenance, removals
and distribution of telecommunications products and other support services for
the telecommunications industry. This segment consists of the Voltelcon and
Advanced Technology Services divisions.
VOLTELCON
This division is a nationwide full-service provider of telecommunications
services, including engineering, design, construction, installation,
maintenance, removals and distribution of telecommunications products. The
division performs these services on a project and/or contract personnel
placement basis in the outside plant and central office, and within
end-user premises, for telephone operating companies, interexchange
carriers, local exchange carriers, wireless carriers, telecommunications
equipment manufacturers, cable television, electric, water and sewerage
utilities, federal, state and local government units and private industry.
The division's Construction group provides both aerial and underground
construction services, using its own vehicles and high production
equipment, including jack and bore, directional boring, excavation for
conduit and manhole systems, cable placement and splicing, pole placement
and wrecking, fiber optic cable installation, splicing, termination and
testing, project management and inspection services.
The division's Engineering group also offers a wide range of outside plant
engineering services, including right of way acquisition, network design
for fiber and copper systems, carrier systems design, conduit design,
computer aided design drafting, digitizing records, building industry
consultant engineering, turnkey design and construction and air pressure
design and record verification.
The division's Business Systems group provides systems integration,
cabling and wiring and telephone equipment installation. This involves the
engineering, design, installation and management of many types of local
and wide area networks, via copper and fiber, for voice, data and video.
The division's Central Office group is a leading provider of
telecommunications services for central office engineering, furnishing,
installation and removal of transmission systems, distribution frame
systems, AC/DC power systems, wiring and cabling, switch peripheral
systems, pre and post conditioning, equipment assembly and system
integration and controlled environment structures.
The division's Wireless group offers partial or complete turnkey services
to cellular and Personal Communications Services (PCS) license holders to
establish or enhance their network infrastructure. These services include
radio frequency engineering, site evaluations and acquisition, network
engineering and equipment specifications, logistic support, site
construction, testing and integration into the network, outside plant
engineering and construction services and central office engineering,
furnishing and installation to integrate the license holders' wireless
networks into the national telecommunications network.
The division offers the added value of being able to provide total
management of multi-discipline projects because of its ability to
integrate the efforts of all of its groups on a single project. In
addition, the division is
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also responsible for turnkey programs performed nationwide which require a
single point of contact and uniform quality.
ADVANCED TECHNOLOGY SERVICES
Volt's Advanced Technology Services was established in 1994 to meet the
challenges of the "Information Superhighway" and the merging of voice,
data and video services to telephony, broadband and other providers of
information system services, such as telephone companies, interexchange
carriers, government and private industry. This division accommodates
clients in the telecommunications industry who require a full range of
services from multiple Volt business segments, such as human resources,
equipment, vehicles, systems analysis, network integration, software
development and turnkey applications. This division is also responsible
for turnkey programs performed nationwide which require a single point of
contact and uniform quality.
This segment faces substantial competition with respect to all of its
telecommunications services from other suppliers and from in-house capabilities
of potential customers. Competition in this segment remains intense, often
resulting in low margins. Some of this segment's significant competitors are
larger and have substantially greater financial resources than Volt. Other
competitors are small, local companies, that generally have lower overhead.
Volt's ability to compete in this segment depends upon its reputation, technical
capabilities, pricing, quality of service and ability to meet customer
requirements in a timely manner. Volt believes that its competitive position in
this segment is augmented by its ability to draw upon the expertise and
resources of other Volt segments.
A substantial portion of Volt's business in this segment is obtained through
submission of competitive proposals for contracts that typically expire in one
to three years and are then rebid. While the segment has obtained various short
and long-term contracts, margins under such contracts have decreased in many
instances. Most contracts that expired in 1997 were renewed, and others will
expire in 1998 through 2002. While the Company believes it can secure renewals
and/or extensions of some of these contracts which are scheduled to expire, some
of which are material to this segment, and obtain replacement business, there
can be no assurance that contracts will be renewed or extended or that
additional or replacement contracts will be awarded to the Company on
satisfactory terms.
COMPUTER SYSTEMS SEGMENT
The Computer Systems segment designs, develops, sells, leases and maintains
computer-based directory assistance and other database management and
telecommunications systems and related services for the telecommunications
industry and provides services, principally computer-based projects, to public
utilities. This segment is comprised of Volt Delta Resources ("Volt Delta") and
Volt VIEWtech.
VOLT DELTA RESOURCESUP
Volt Delta is engaged in the design, programming, sale and/or lease,
integration and maintenance of computer information systems and services,
primarily for the telecommunications market. Volt Delta operates as two
business units: Information Systems and Maintech.
Information Systems markets operator services solutions to telephone
companies and interexchange carriers worldwide. To meet the needs of
customers who desire to upgrade their operator services capabilities by
procuring outside services as an alternative to making a capital
investment, the division has deployed and is marketing enhanced directory
assistance capabilities as a transaction-based outsourcing service. This
service is
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<PAGE> 13
marketed as Directory Express, with the division owning and operating its
own proprietary Delta Operator Services System ("DOSS") and providing
access to a national database. As an adjunct to Directory Express, Volt
Delta's Info Express service permits its transaction-based customers to
offer operator assisted yellow pages ("OAYP"), directional and other
enhanced capabilities. These are designed to offer Directory Assistance
operators worldwide access to over 120 million United States business,
residential and government listings. For consumers (the end-users),
especially cellular and PCS users, Directory Express is expected to
provide a more convenient and efficient level of directory assistance
service since, among other things, consumers may obtain enhanced directory
and yellow pages information without having to know the correct area code.
These Volt Delta services provide new revenue sources to the telephone
company from such applications as call completion, customized intercept
and automated directory assistance. Although a basic DOSS system is
offered to customers who wish to purchase systems, typically each customer
will require some special features and, in some instances, extensive
customization to attain service differentiation. In this market, the
division faces intense competition from much larger international
companies which limit the division's success in winning contracts. The
inability to sell additional major systems would have an adverse effect on
this segment's business.
During 1996, Volt Delta Europe ("VDE"), the division's European
operations, based in the United Kingdom, was awarded a contract by PTT
Telecom (the Netherlands telephone company) for VDE's Operator and Agent
Services Integration System (OASiS), which offers operator services
providers with open access to multiple information-based databases. The
system is currently undergoing final testing at the customer's site. VDE
is marketing OASiS to other European telecom providers as well and expects
to introduce the system to the domestic market during 1998.
Volt Delta's services division, Maintech, provides installation planning,
system and network monitoring, and system maintenance services to Volt
Delta's customers. The division also provides an array of services to
customers who have purchased computer systems and networks from others.
These services include network management, system and network design and
implementation, help desk support and workstation and PC integration, as
well as maintenance services on DEC, SUN, Silicon Graphics, IBM RS/6000
and other advanced technology product lines.
In order to fulfill its commitments under its contracts, Volt Delta is
required to develop advanced computer software programs and purchase
substantial amounts of computer and related equipment manufactured by
unaffiliated corporations. Much of the equipment required for these
contracts is purchased as needed and is readily available from a number of
suppliers.
Under the completed contract method of accounting used by the Volt Delta
division, revenues together with related costs are recognized in income
upon acceptance by the customer. Since sales of systems under DOSS and
OASiS contracts are generally recorded upon customer acceptance, the
number of acceptances in a particular year may affect the comparability of
results with other years. Although sales of systems are normally not
recurring, a larger installed base provides opportunities for future
expansion of existing customer systems, enhancement sales and maintenance
revenue.
VOLT VIEWTECH
Volt's VIEWtech subsidiary implements energy and water efficiency programs
and provides various management, outsourcing, technical and financial
services to the energy and water utility industries, major financial
institutions, trade associations and manufacturers.
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<PAGE> 14
The subsidiary is a certified Fannie Mae lender, operating the nation's
largest residential energy efficiency finance program for a major utility
in San Francisco, under which it has processed, funded and services over
$80.0 million in low-interest loans, all of which it sells to Fannie Mae,
retaining only limited exposure on the sold loans. The subsidiary also
operates a loan center in Richmond, Virginia, for another major finance
company, supporting energy conservation loan programs for nineteen
utilities and equipment manufacturers which provide financing to
consumers.
The subsidiary manages some of the nation's largest water conservation
programs, which encourage utility customers to install more efficient
water fixtures to reduce water use. The subsidiary reads over 500,000
meters monthly for major utilities in the United States.
The subsidiary internally develops its computer systems and software,
which includes a family of Windows(TM) energy and water analyses products.
The subsidiary has established one of the first interactive energy
analyses on the internet, serving major utilities. The subsidiary has also
developed its RateVIEW product, which provides Department of Energy
specified home energy ratings to label a home's energy efficiency
according to national lender guidelines.
The industry in which the subsidiary operates has been impacted by
deregulation of the energy industry, resulting in a decline of utility
subsidized conservation services, which the subsidiary has provided to
energy utilities since its inception. The subsidiary's business strategy
is to diversify its customer base and develop services and products which
support energy utility marketing efforts, reduce utility operational
costs, support water utility conservation programs, and facilitate energy
efficient home improvements through utility sponsored low-interest finance
programs.
Although Volt continues its investment in research and development, there is no
assurance that this segment's present or future products will be competitive,
that the segment will continue to develop new products or that present products
or new products can be successfully marketed.
The Company holds several patents and trademarks related to this segment's
products, but does not believe that these patents or trademarks are material to
the segment.
The business environment in which this segment operates is highly competitive.
Some of this segment's principal competitors are considerably larger than Volt
and have substantially greater financial resources. This segment's position in
its market depends largely upon its reputation, quality of service and ability
to develop, maintain and implement information systems on a cost competitive
basis.
Some of this segment's contracts have expired in 1997, while others were renewed
and new contracts were awarded to the Company. A contract with one customer,
which accounted for approximately 9% of the segment's revenues and 46% of the
segment's operating profit for fiscal 1996, expired in August 1997, because the
customer no longer required Volt's services. Other contracts are scheduled to
expire in 1998 through 2008.
ELECTRONIC PUBLICATION AND TYPESETTING SYSTEMS SEGMENT
Autologic Information International, Inc., a 59% owned, publicly-held subsidiary
of the Company, and its subsidiaries (collectively, "AII") , design, develop,
manufacture, integrate, market, sell and service computerized imagesetting and
publication systems equipment and software that automate the various prepress
production steps in the publishing process. AII's products are primarily
marketed and sold to the newspaper publishing industry, the commercial printing
industry and other organizations having internal publishing facilities. AII has
traditionally focused its efforts on high-volume and deadline-driven customers.
However, AII is seeking to utilize its core
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<PAGE> 15
capabilities to expand into the lower-volume, less time-sensitive portion of the
commercial publishing and electronic document distribution markets, while
maintaining a leadership role in its primary market. Although competition is
more intense in these additional markets which are expanding, AII believes that
significant opportunities exist therein. AII's strategy to meet this competition
is to enter niche markets, where AII's strengths can most effectively meet
customers' requirements.
AII was formed on January 29, 1996, by the merger (the "Merger") into it of the
Company's then existing Electronic Publication and Typesetting Systems segment,
then consisting of Autologic, Incorporated and related foreign subsidiaries of
the Company, (collectively "Autologic"), and Information International, Inc.
("Triple-I"), a publicly-held company. The Company's reported results of
operations contained in this Report for periods prior to January 29, 1996
reflect only the operations of Autologic and not those of Triple-I and for
subsequent periods reflect the operations of the combined entities. Accordingly,
the Company believes that information contained in this Report which compares
results for periods of this segment before and after the Merger are not
comparable, as they do not reflect results for comparable business structures.
In general, AII's systems consist of computers and computer-based products used
for scanning images, storing and retrieving computerized text and images and
controlling output of those elements to various output devices, such as laser
imaging systems, proofers, platemakers and document distribution systems. The
principal imaging device sold by AII is the 3850 film recorder which is
manufactured by AII. AII is currently in the process of developing its own
proprietary computer-to-plate imager for the newspaper market based on its
existing imaging and manufacturing technology. AII also manufactures a scanner,
the APS 3750, and a variety of hardware and software interface products that
enable different computers and other products to communicate and transfer
information efficiently. To meet the specific requirements of AII's customers,
AII's products can be integrated into complete systems, integrated with a
customer's existing products (whether previously purchased from AII or from
another vendor) or sold and used individually as "stand alone" units.
In addition, in fiscal 1997, AII introduced a new product aimed at the motion
picture industry, the Laser Cinema Recorder ("LCR"), which is designed to
address the requirements of the motion picture industry for high quality, high
throughput imaging of 35mm master motion picture film from digitally created
scenes.
AII's systems are available in a variety of hardware and software configurations
on a broad base of computer hardware platforms which allow them to be structured
to meet the individual needs of members of the prepress industry, including
publishers of newspapers, telephone directories, magazines, books, directories,
catalogues, yearbooks, print advertising, checks, and other quality graphic art
printed products. To satisfy this diverse customer base, AII offers systems
providing different speed, page size and output quality requirements, depending
on the customer's requirements for final publication. These systems normally
output either to film or photographic paper (both of which are then used to make
printing press plates) or to the printing press plates themselves.
Marketing and sale of AII's products throughout the United States, Canada,
Australia and parts of Europe are provided by AII's direct sales force, and
through independent foreign distributors elsewhere. AII has established a
European operations headquarters near London, England and a Pacific operations
headquarters in Sydney, Australia.
Sales made outside the United States by AII subsidiaries, of products
manufactured or assembled in the United States, together with export sales by
AII directly to unaffiliated foreign customers, amounted to $38.4 million in
fiscal 1997, $46.2 million in fiscal 1996 and $36.2 million in fiscal 1995.
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<PAGE> 16
A significant portion of AII's business is in the newspaper publishing industry,
which has, in the past, experienced significant downturns during recessions.
Newspapers have been seeking to reduce costs and expenditures to offset
increased newsprint costs, intense competition for advertising revenues and
reduced readership of the smaller number of newspapers, especially in the United
States. These factors have resulted in reductions in equipment purchases by
AII's traditional customers, adversely affecting AII's performance. However,
newspapers have recently been experiencing increased advertising revenue and
increased page counts, although it is not known if this trend will continue.
These developments and the year 2000 issue, which could require replacement of
equipment, may have a positive effect on AII as newspapers make additional
capital expenditures.
AII operates in a highly competitive marketplace. Its position in its markets
depends largely upon its reputation, the quality, design and pricing of its
products, its ability to maintain high-level technological capabilities, foresee
market changes and continue to identify, develop and commercialize innovative
and competitive products and systems, and to improve the timeliness of its
deliveries and its field service. Technological advancements, "open system"
architecture (which allows customers to assemble standardized component products
themselves from several different sources) and general market conditions have
increased price competition. A number of firms, some of which are substantially
larger and have substantially greater financial resources than AII, manufacture
one or more prepress products competing with each of AII's prepress products.
Some of these competitors sell their products as complete prepress systems, for
some of which AII has no competing systems. Other competitors grant significant
price discounts for products which compete with AII's products in order to
promote sales of ancillary products as to which AII has no competing product.
As a result of this increasing competition, as well as changing patterns of
customer purchasing that have produced an industry-wide trend toward the
purchase of open systems, the industry, including AII, has experienced pressure
on profit margins on sales of equipment and software, which is likely to
continue. Gross profit margins on customer services have likewise been under
considerable pressure in recent years. This is attributable to the industry
trend towards using open systems, which enables the user to service some
equipment in-house. In addition, since such products are more software oriented,
AII services through remote data transfer, rather than on-site. To counter this
pattern, AII is striving to reduce costs while designing and marketing cost
justifiable products for its customer and market segment.
Although AII continues its investment in research and development, there is no
assurance that this segment's present or future products will be competitive,
that the segment will continue to develop new products or that present products
or new products can be successfully marketed.
AII holds several patents and trademarks related to its products; however, it
does not believe that any of these are material to AII's business. AII is also a
licensee of technology from many of its suppliers, none of which individually is
considered material to AII's business.
The business environment in which this segment operates is highly competitive.
Some of this segment's principal competitors are considerably larger than AII
and have substantially greater financial resources. This segment's position in
its market depends largely upon its reputation, quality of service and ability
to develop, maintain and implement information systems on a cost competitive
basis.
JOINT VENTURES
During the fiscal year, the Company terminated two joint ventures.
In January 1997, the Company sold its interest (acquired in July 1994) in
Telelistas Editora Ltda., ("Telelistas"), a Brazilian company which has a
contract to publish Rio de Janeiro's official telephone directories on behalf of
the
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<PAGE> 17
government-owned telephone company. The Company continues to be contingently
liable for certain guarantees previously made by it in respect to certain import
financing for the printing of Telelistas' directories by the Company's Uruguayan
subsidiary (see Note L of Notes to Consolidated Financial Statements).
In September 1997, the Company sold its interest (acquired in 1991) in Pacific
Access Pty. Ltd. ("Pacific Access"), a joint venture company in Australia, which
marketed, sold and compiled the yellow pages directories of Telstra Corporation,
Ltd., the Australian telephone company.
For further information concerning the Company's operations and joint ventures,
see Management's Discussion and Analysis of Financial Condition and Results of
Operations.
RESEARCH, DEVELOPMENT AND ENGINEERING
During fiscal years 1997, 1996 and 1995, the Company expended approximately
$14.3 million, $14.4 million and $8.3 million, respectively, on research,
development and engineering, all of which is Company sponsored. A major portion
of research and development expenditures were incurred by the Electronic
Publication and Typesetting Systems, the Telephone Directory and the Computer
Systems segments. The increase in fiscal year 1996 was due to increased efforts
by these segments to develop new products, upgrade existing products and
maintain competitive positions by enhancing the quality, efficiency, reliability
and price/performance of products.
CUSTOMERS
In fiscal year 1997, the Technical Services and Temporary Personnel segment's
sales to two customers represented approximately 16% and 11% of the total sales
of that segment; the Telephone Directory segment's sales to one customer
represented approximately 11% of the total sales of that segment; the
Telecommunications Services segment's sales to four customers represented
approximately 25%, 25%, 12% and 10% of the total sales of that segment; and the
Computer Systems segment's sales to four customers represented approximately
22%, 15%, 12% and 10% of the total sales of that segment. Each of these segments
is dependent on such respective customers. Only one of such customers
represented more than 10% of the Company's consolidated revenues in fiscal year
1997, but less than 10% in prior years. In the event that there were a loss of
one or more of these customers and, unless the business is replaced by that
segment, there could be an adverse effect on the results for that segment's
business, although the Company does not believe that there would be an adverse
effect on the Company taken as a whole.
SEASONALITY
Historically, the Company's results of operations have been lower in its first
fiscal quarter as a result of reduced requirements for its technical and
temporary personnel due to the holiday season. In addition, Pacific Access (see
"Joint Ventures" above) produced a major portion of its revenues and
significantly all of its profits in the Company's second and third fiscal
quarters. The Uruguay division produces a major portion of its revenues and most
of its profits in the Company's fourth fiscal quarter, and DataNational's
revenues and profits are lower in the Company's first fiscal quarter, due to the
seasonality of its directory closing schedule. Sales by AII are generally lower
in the months of November and December due to the holiday season, which is a
peak publishing period when customers are reluctant to install and test new
equipment.
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<PAGE> 18
EMPLOYEES
During the week ended October 31, 1997, Volt employed approximately 36,800
persons, including approximately 31,000 persons who were on temporary assignment
for the Technical Services and Temporary Personnel segment.
Volt is a party to two collective bargaining agreements which cover a small
number of employees.
Certain services rendered by Volt's Electronic Publication and Typesetting
Systems, Telephone Directory and Computer Systems segments require highly
trained technical personnel in specialized fields, some of whom are currently in
short supply and, while the Company currently has a sufficient number of such
technical personnel in its employ, there can be no assurance that in the future
these segments can continue to employ sufficient technical personnel necessary
for the successful conduct of such services.
Management currently believes that its relations with its employees are
satisfactory.
REGULATION
The Company's business is not subject to specific industry government
regulations. In connection with foreign sales, it is subject to export controls,
including restrictions on the export of certain technologies. At the present
time, and with respect to the countries in which the Company's Electronic
Publication and Typesetting Systems, Telephone Directory and Computer Systems
segments currently sell most of their products, the sale of their current
products, both hardware and software, are permitted pursuant to a general export
license. If the Company began selling to countries designated by the United
States as sensitive, such sales would be subject to more restrictive export
regulations.
Compliance with applicable present federal, state and local environmental laws
and regulations has not had, and the Company believes that compliance with such
laws and regulations in the future will not have, a material effect on the
Company's earnings, capital expenditures or competitive position.
See also Management's Discussion and Analysis of Financial Condition and Results
of Operations.
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<PAGE> 19
ITEM 2. PROPERTIES
The Company occupies 44,000 square feet at 1221 Avenue of the Americas, New
York, New York under a lease which expires in 2000. The facility is shared by
its corporate headquarters, its Computer Systems segment headquarters and a
regional headquarters of its Technical Services and Temporary Personnel segment.
The following table sets forth certain information as to each of the Company's
other major facilities:
Sq. Ft.
Leased If Leased,
or Year of Lease
Location Business Segment Owned Expiration
- -------- ---------------- ----- ----------
Anaheim, Telephone Directory 39,000* owned
California Computer Systems
Technical Services and
Temporary Personnel
El Segundo, Technical Services and 20,000 owned
California Temporary Personnel
Los Angeles, Electronic Publication and 52,000 1999
California Typesetting Systems
Orange, West Region Headquarters 200,000* owned
California Accounting Center
Technical Services and
Temporary Personnel
Telephone Directory
Computer Systems
San Diego, Technical Services and 20,000 owned
California Temporary Personnel
Telephone Directory
Thousand Oaks, Electronic Publication and 134,000 owned
California Typesetting Systems
Norcross, Electronic Publication and 13,000 1998
Georgia Typesetting Systems
Technical Services and
Temporary Personnel
Telecommunications Services
Indianapolis, Telephone Directory 16,000 1998
Indiana Technical Services and
Temporary Personnel
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<PAGE> 20
ITEM 2. PROPERTIES--Continued
Sq. Ft.
Leased If Leased,
or Year of Lease
Location Business Segment Owned Expiration
- -------- ---------------- ----- ----------
Wallington, Computer Services 32,000 1998
New Jersey
Blue Bell, Telephone Directory 52,000 2001
Pennsylvania
Montevideo, Telephone Directory 96,000 2001
Uruguay
Chantilly, Telephone Directory 20,000 2000
Virginia Computer Systems
Technical Services and
Temporary Personnel
Redmond, Technical Services and 21,000 1998
Washington Temporary Personnel
* See Note G of Notes to Consolidated Financial Statements for information
regarding a term loan secured by these properties.
In addition, the Company leases space in approximately 190 other facilities
worldwide, (excluding month-to-month rentals), each of which consists of less
than 10,000 square feet. These leases expire at various times from 1998 until
2002 (with one, in the United Kingdom, expiring in 2010).
At times, the Company leases space to others in the buildings, which it owns, if
it does not then require the space for its own business.
The Company believes that its facilities are adequate for its presently
anticipated requirements and that it is not dependent upon any individually
leased premises.
For additional information pertaining to lease commitments, see Note O of Notes
to Consolidated Financial Statements.
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<PAGE> 21
ITEM 3. LEGAL PROCEEDINGS
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
Executive Officers
WILLIAM SHAW, 73, a founder of the Company, has been President and Chairman of
the Board of the Company for more than the past five years and has been employed
in executive capacities by the Company and its predecessors for over forty
years.
JEROME SHAW, 71, a founder of the Company, has been Executive Vice President and
Secretary of the Company for more than the past five years and has been employed
in executive capacities by the Company and its predecessors for over forty
years.
IRWIN B. ROBINS, 63, has been a Senior Vice President of the Company since
September 1985 and has been employed in executive capacities by the Company
since July 1980.
JAMES J. GROBERG, 69, has been a Senior Vice President and Principal Financial
Officer of the Company since September 1985 and, except from May 1981 to
September 1985, has been employed in executive capacities by the Company since
July 1973.
HOWARD B. WEINREICH, 55, has been General Counsel of the Company since September
1985 and has been employed in executive capacities by the Company since August
1981.
JACK EGAN, 48, has been Vice President - Corporate Accounting and Principal
Accounting Officer since January 1992 and has been employed in executive
capacities by the Company since November 1979.
DANIEL G. HALLIHAN, 49, has been Vice President - Accounting Operations since
January 1992 and has been employed in executive capacities by the Company since
October 1986.
LUDWIG M. GUARINO, 46, has been Treasurer of the Company since January 1994 and
has been employed in executive capacities by the Company since April 1976.
STEVEN A. SHAW, 38, has been a Vice President of the Company since April 1997
and has been employed by the Company in various capacities since November 1995.
For more than five years prior thereto, he controlled and operated a number of
privately-held telecommunication services companies, of which he owned most of
the equity interest.
William Shaw and Jerome Shaw are brothers. Steven A. Shaw is the son of Jerome
Shaw. There are no other family relationships among the executive officers or
directors of the Company.
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<PAGE> 22
ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS
The Company's common stock has been traded on the New York Stock Exchange (NYSE
Symbol-VOL) since May 7, 1997, prior to which it was included in The Nasdaq
Stock Market National System. The following table sets forth the high and low
prices of Volt's common stock, as reported by the NYSE since May 1997 and by
Nasdaq without retail mark-up, mark-down or commission prior thereto:
1997 (a) 1996 (a)
------------------- --------------------
Fiscal Period High Low High Low
---- --- ---- ---
First Quarter $33 $22-1/3 $18-1/3 $14-2/3
Second Quarter 36-2/3 28-1/2 20-2/3 12-2/3
Third Quarter 56-3/4 36-1/2 30-1/3 18-5/6
Fourth Quarter 69-3/16 52-5/8 29-1/2 24-2/3
(a) Restated to reflect a three-for-two stock split, distributed in the form of
a 50% stock dividend on May 27, 1997.
The approximate number of record holders of the Company's common stock at
January 16, 1998 was 460.
Cash dividends have not been paid during the reported periods. The Company has
agreements, which contain financial covenants, one of which requires the Company
to maintain a consolidated net worth of $129.9 million at October 31, 1997,
increasing by 50% of consolidated net income for each completed fiscal year
thereafter. At October 31, 1997, this condition was met (see Note C of Notes to
Consolidated Financial Statements).
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<PAGE> 23
ITEM 6. SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
Year Ended (Note 1)
--------------------------------------------------------------------------
October November November October October
31, 1997 1, 1996 3, 1995 28, 1994 29, 1993
------------ ------------ ------------ ----------- ------------
(Dollars in thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Revenues $1,420,193 $1,053,140 $907,362 $734,486 $565,173
============ ============ ============ =========== ============
Income (loss) from continuing operations
before items below $39,969* $22,687* $16,386* $12,044* $(3,674)*
Loss from discontinued operations--Note 2 (119) (252)
Extraordinary item-loss on repurchase
of debt, net of income taxes--Note 3 (87) (62) (271)
Cumulative effect of a change in accounting
for income taxes--Note 4 959
------------ ------------ ------------ ----------- ------------
Net income (loss) $39,850 $22,348 $16,324 $11,773 $(2,715)
============ ============ ============ =========== ============
Per Share Data, (Restated for stock splits in fiscal 1997 and 1995)
Income (loss) from continuing operations
before items below $2.63* $1.53* $1.13* $0.84* $(0.26)*
Loss from discontinued operations (0.01) (0.01)
Extraordinary item (0.01) (0.02)
Cumulative effect of a change in accounting
for income taxes 0.07
------------ ------------ ------------ ----------- ------------
Net income (loss) $2.62 $1.51 $1.13 $0.82 $(0.19)
============ ============ ============ =========== ============
Number of shares used in computations 15,182,240 14,799,665 14,451,501 14,408,238 14,396,589
Total assets $418,722 $337,144 $264,011 $226,904 $235,892
Long-term debt, net of current portion $55,447 $57,395 $28,819 $40,788 $58,095
</TABLE>
Note 1--Fiscal years 1993, 1994, 1996 and 1997 were comprised of 52 weeks, while
fiscal year 1995 was comprised of 53 weeks.
Note 2--See Note P of Notes to Consolidated Financial Statements for fiscal
years 1997 and 1996.
Note 3--See Note G of Notes to Consolidated Financial Statements for fiscal
years 1996 and 1995. The 1994 extraordinary loss was due to the early redemption
of $30.0 million of debentures.
Note 4--Cumulative effect of adopting Statement No. 109, "Accounting for Income
Taxes."
Note 5--Cash dividends have not been paid during the five-year period ended
October 31, 1997.
* The results of operations include the following gains and (losses) on the
sale or write-down of marketable securities: 1997 - ($3.0 million, $1.8
million, net of taxes) or ($0.12 per share); 1996 - $52,000; 1994 -
($7,000) and 1993 - $199,000 or $0.01 per share.
The results for the fiscal year ended October 31, 1997 included a gain of
$12.8 million ($7.9 million, net of taxes or $0.52 per share) on the sale
of the Company's interest in an Australian joint venture.
The results for the fiscal year ended November 1, 1996 included gains
aggregating $2.6 million ($1.6 million, net of taxes or $0.11 per share),
as a result of an agreement to pay a premium to an insurance carrier to
close out prior years' retrospective insurance policies at an amount less
than related liabilities for workers' compensation insurance previously
provided by the Company.
In October 1996, the Internal Revenue Service concluded its examination of
the Company's tax returns for fiscal 1989 through 1993. As a result of the
examination, $1.4 million ($0.09 per share) and $723,000 ($443,000, net of
taxes, or $0.03 per share) were included as a tax benefit and interest
income, respectively, for the fiscal year ended November 1, 1996.
The results of operations for fiscal 1993 include a pretax charge of $6.4
million ($4.2 million, net of taxes or $0.29 per share) for estimated
costs in excess of anticipated revenues under two contracts for major
directory assistance systems. In fiscal 1994 and 1995, the Company
received customer acceptance under such contracts, which, because of the
pretax charge in 1993 related to such contracts, had no effect on
Company's earnings for 1994 and 1995, although revenues (and costs) of
$59.0 million and $15.0 million were recognized in 1994 and 1995,
respectively.
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<PAGE> 24
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The information which appears below relates to prior periods, the results of
operations for which periods are not necessarily indicative of the results which
may be expected for any subsequent periods. Management has made no predictions
or estimates as to future operations and no inferences as to future operations
should be drawn.
The following discussion should be read in conjunction with the Industry Segment
Data in Item 1 of this Report and the Consolidated Financial Statements and
Notes thereto which appear in Item 8 of this Report.
Fiscal Year 1997 Compared to Fiscal Year 1996
Results of Operations - Summary
Revenues in fiscal 1997 increased by $367.1 million, or 35%, from fiscal 1996,
as sales increased by $352.9 million, or 34%. The increase in sales in 1997 was
primarily attributable to increases in the Technical Services and Temporary
Personnel segment and Telecommunications Services segment of $304.5 million and
$54.7 million, respectively.
The Company's income from continuing operations before income taxes and minority
interests increased by $28.1 million, or 82%, in 1997 to $62.4 million, as
operating profit increased by $14.9 million, or 33%, to $60.1 million. The
increase in operating profit in 1997 was from the Telecommunications segment,
with an increase of $9.2 million, the Electronic Publication and Typesetting
Systems segment, with an increase of $5.6 million, the Telephone Directory
segment, with an increase of $4.0 million, and the Technical Services and
Temporary Personnel segment, with an increase of $3.4 million. This was
partially offset by a decrease in the operating profit of the Computer Systems
segment of $7.5 million. Consolidated 1997 results included a pretax gain of
$12.8 million on the sale of the Company's interest in an Australian joint
venture and was reduced by a $3.0 million pretax charge to earnings, to fully
reserve an investment in a PCS/wireless company. The 1996 results included a
$3.7 million pretax gain on the sale of an interest in the Company's Electronic
Publication and Typesetting Systems segment. In addition, the Company's 1997
portion of profits earned by joint ventures increased to $6.8 million, compared
with a loss of $1.4 million in 1996.
The loss from discontinued operations represents the Company's portion (59%) of
the operating loss and loss on disposal, in fiscal 1997, related to a division,
acquired at the end of January 1996, of the Company's Electronic Publication and
Typesetting Systems segment.
The extraordinary item in fiscal 1996 consisted of a loss of $87,000, due to the
retirement at par of the remaining $22.9 million face value of the Company's
12-3/8% Senior Subordinated Debentures.
Net income in fiscal 1997 and 1996 was $39.9 million and $22.3 million,
respectively.
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<PAGE> 25
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS--Continued
Fiscal Year 1997 Compared to Fiscal Year 1996--Continued
Results of Operations - Segments
The Company's consolidated operating profit was $60.1 million in fiscal 1997,
compared with $45.2 million in fiscal 1996 (see Industry Segment Data in Item 1
of this Report and Note J of Notes to Consolidated Financial Statements in Item
8 of this Report).
The Technical Services and Temporary Personnel segment's sales increased by
$304.5 million, or 43%, in fiscal 1997 to $1.02 billion. Operating profit of the
segment increased by $3.4 million, or 12%, to $30.8 million in fiscal 1997.
Approximately $82.9 million, or 27%, of the segment's 1997 sales increase was
due to pass-through costs, primarily related to the use of subcontractors to
service large national contracts, which increased from $71.5 million to $154.4
million in 1997. In fiscal 1997, approximately $74.5 million of the segment's
sales increase resulted from business with new customers, including $39.2
million from one such customer. The remaining increase of $154.9 million was
with existing customers, partially offset by the loss of $7.8 million of sales
to a high margin customer which, since April 1996, has no longer required the
segment's 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 0.9 percentage points, higher overhead costs and the absence, in
1997, of a non-recurring 1996 favorable $2.1 million retrospective workers'
compensation insurance adjustment (see Note K of Notes to Consolidated Financial
Statements). The decrease in gross margin percentage was due to higher
subcontractor usage billed without a mark-up, lower margins on the increasing
business with large, national, managed service accounts, and the loss of the
high margin customer discussed above, offset, in part, by lower workers'
compensation insurance premiums. Overhead costs increased due to start-up costs
related to new offices and staffing for recently won national accounts, which
are in the initial stages of their contracts. As revenues from the new national
accounts have begun to reach their anticipated levels, operating profits have
begun to increase during the second half of the year and, are anticipated to
continue to increase, although there can be no assurance that the trend will be
sustained. Although the markets for the segment's services include a broad range
of industries throughout the United States, general economic difficulties in
specific geographic areas or industrial sectors have in the past, and could in
the future, affect the profitability of this segment.
The Telephone Directory segment's sales increased by $11.0 million, or 14%, to
$89.6 million in fiscal 1997. Operating profit of the segment increased by $4.0
million, or 83%, to $8.9 million. The fiscal 1997 sales increase was due to
increased telephone directory production volume of 8%, increased independent
directory sales of 9%, increased sales by the Uruguayan division of 14%,
increased telemarketing sales of 62% and increased system sales of 35%. The
increase in operating profit in fiscal 1997 was due to the sales increases
discussed above and a 4.4 percentage point decrease in total operating expenses
expended per sales dollar, and the absence, in 1997, of non-recurring costs
incurred in 1996 by the Uruguayan division (due to a move to a new facility and
installation of new equipment). This 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 16% of the segment's
revenues and 22% of the segment's operating profit for fiscal 1997, is scheduled
to expire in June 1998. However, the segment has obtained several significant
contracts which have begun in fiscal 1997. Other contracts are scheduled to
expire from 1998 through 2002.
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<PAGE> 26
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS--Continued
Fiscal Year 1997 Compared to Fiscal Year 1996--Continued
Results of Operations - Segments--Continued
While the segment believes it can secure renewals and/or extensions of some of
the contracts which are scheduled to expire, some of which are material to this
segment, and obtain replacement business, there can be no assurance that
contracts will be renewed or extended, or that additional or replacement
contracts will be awarded to the segment on satisfactory terms.
The Telecommunications Services segment's sales increased by $54.7 million, or
60%, to $146.2 million in 1997. Operating profit of the segment increased by
$9.2 million, or 97%, in fiscal 1997 to $18.7 million. The fiscal 1997 sales
increase was due to a 163% increase in the Advanced Technology Services
division, a 46% increase in the Construction division and a 59% increase in the
Business Systems division. Operating results improved due to increased sales
volume and a 2.5 percentage point increase in gross margins. The segment has
benefited from the significant increase in capital expenditures by the
telecommunications industry in 1997 to upgrade and build infrastructure.
Although growth in sales and operating profit is anticipated, it is not expected
to continue at the high rate sustained in fiscal 1997 compared to 1996. A
substantial portion of the business in this segment is obtained through
submission of competitive proposals for contracts that typically expire in one
to three years and are then rebid. Most contracts that expired in 1997 were
renewed, and others will expire in 1998 through 2002. While the Company believes
it can secure renewals and/or extensions of some of these contracts which are
scheduled to expire, some of which are material to this segment, and obtain
replacement business, there can be no assurance that contracts will be renewed
or extended or that additional or replacement contracts will be awarded to the
Company on satisfactory terms.
The Computer Systems segment's sales decreased by $8.9 million, or 11%, to $70.2
million in fiscal 1997. The segment had an operating profit in fiscal 1997 of
$247,000, compared to $7.7 million in fiscal 1996. Fiscal 1997 and 1996 sales
included revenues of $24.4 million and $27.6 million, respectively, recognized
on customer acceptance of several major Delta Operator Service Systems. The
decrease in sales and operating profit was primarily due to decreased sales and
profits on conservation services to utilities due to the phase-out under a large
contract with a customer which no longer required the segment's services. This
customer accounted for approximately 9% of the segment's revenues and 46% of the
segment's operating profit for fiscal 1996. The decrease in sales of systems and
start-up costs related to Directory Express, a new transaction-based outsourcing
service, further reduced operating profits. 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; the level of acceptances
in a particular year may affect the comparability of results with other years.
Although sales of systems are normally not recurring, a larger installed base
provides opportunities for future expansion of existing customer systems, system
enhancement sales and maintenance revenue.
The Electronic Publication and Typesetting Systems segment's sales decreased by
$4.3 million, or 5%, to $84.6 million in fiscal 1997. The segment had an
operating profit in fiscal 1997 of $1.5 million, compared to an operating loss
of $4.1 million in fiscal 1996. Since January 29, 1996, the segment has been
comprised of the Company's former Autologic, Incorporated subsidiary and related
foreign subsidiaries ("Autologic"), which were
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<PAGE> 27
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS--Continued
Fiscal Year 1997 Compared to Fiscal Year 1996--Continued
Results of Operations - Segments--Continued
combined on that date with Information International, Incorporated ("Triple-I"),
as a publicly-held company, (see Note I of Notes to Consolidated Financial
Statements). The results of operations for fiscal 1996 reflect the three-month
results of Autologic on a stand-alone basis and the nine-month results of the
merged operations, while results for fiscal 1997 reflect the results of the
merged operations for all twelve months. The fiscal 1997 sales decrease resulted
from a decrease in sales of systems and equipment, primarily in the European
market, partially offset by an increase in customer service sales in the
domestic market. The increased profitability in 1997 was due to a 9.0 percentage
point improvement in gross margins, and the absence of a $700,000 restructuring
charge related to the merger which was recorded in the first quarter of fiscal
1996, partially offset by decreased sales volume, an increase in operating
expenses and charges in 1997 of $2.1 million (compared to $1.6 million in 1996)
for amortization of intangibles resulting from the merger. Systems and equipment
gross margins increased by 11.1 percentage points, principally due to a change
in the product mix (an increase in sales of some high margin products and a
decrease in sales of some low margin products), lower manufacturing costs and
reduced competition. Customer service gross margins improved by 6.6 percentage
points, due primarily to workforce reductions. Operating expenses increased due
to the development of additional new products and expansion into new markets.
The markets in which the segment competes are marked by rapidly changing
technology, with sales in fiscal years 1997 and 1996 of equipment introduced
within the last three years comprising approximately 83% and 98%, respectively,
of equipment sales.
Results of Operations - Other
Interest income decreased by $1.4 million, or 45%, in fiscal 1997. The decrease
in 1997 was primarily attributable to $723,000 of interest income received in
1996 on a tax refund from the Internal Revenue Service as the result of the
completion of an examination of the Company's tax returns for fiscal years 1989
to 1993, and due to the use of available funds to eliminate sales of receivables
under the Company's securitization program.
Other income (expense) changed favorably by $1.2 million in 1997, primarily due
to $1.6 million of lower fees resulting from the elimination in the first half
of fiscal 1997 of sales of receivables under the Company's securitization
program, partially offset by an increase in sundry expenses.
The Company's equity in net income of its joint ventures was $6.8 million in
1997, compared to a $1.4 million loss in 1996. The improvement was due to an
increase in the Company's portion of earnings from its Brazilian and Australian
joint ventures. In September 1997, the Company sold its interest in the
Australian joint venture resulting in a pretax gain of $12.8 million. In January
1997, the Company sold its 50% interest in the Brazilian joint venture. Due to
the Company's guarantee of certain of the venture's obligations, the gain on the
sale of approximately $2.5 million has been deferred until the Company's
obligations under such guarantees 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 (loss) of joint ventures (see Note L of Notes
to Consolidated Financial Statements).
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<PAGE> 28
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS--Continued
Fiscal Year 1997 Compared to Fiscal Year 1996--Continued
Results of Operations - Other--Continued
Research, development and engineering expenses decreased by $65,000, or less
than 1%, to $14.3 million in 1997. The decrease in 1997 was due to a reduction
in product development by the Telephone Directory segment, partially offset by
increases by the Computer Systems and Electronic Publication and Typesetting
Systems segments.
Depreciation and amortization increased by $4.2 million, or 26%, to $20.5
million in 1997. The fiscal 1997 increase was due to increased fixed asset
expenditures in 1996 and 1997 and a full year of amortization of intangibles in
1997, which resulted from the 1996 Autologic transaction, compared to nine
months of amortization in 1996.
The foreign exchange gain in fiscal year 1997 was $52,000, compared to a loss in
1996 of $516,000. The gain in 1997 was due to favorable, and the loss in 1996
was due to unfavorable, currency movements in the European currency market. To
minimize the potential adverse impact on the Company's foreign currency
receivables and sales when the dollar strengthens against foreign currencies,
foreign currency options and forward contracts are purchased.
Interest expense increased by $489,000, or 9%, to $5.7 million in 1997. The
increase was primarily due to an increase in long-term debt resulting from the
issuance in a private placement, in August 1996, of $50.0 million of 7.92%
Senior Notes, offset, in part, by the retirement of $22.9 million face value of
12-3/8% Senior Subordinated Debentures in September 1996, using proceeds from
the private placement. In fiscal 1997 and 1996, other income reflects charges of
$316,000 and $2.0 million, respectively, for costs incurred in conjunction with
the sale of accounts receivable (see Note C of Notes to Consolidated Financial
Statements).
See Note F of Notes to Consolidated Financial Statements for information
concerning the Company's effective tax rates for fiscal years 1997 and 1996.
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<PAGE> 29
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS--Continued
Fiscal Year 1996 Compared to Fiscal Year 1995
Results of Operations - Summary
Revenues in fiscal 1996 increased by $145.8 million, or 16%, from fiscal 1995,
as sales increased by $141.3 million, or 16%. Revenues in 1996 included a pretax
gain of $3.7 million from the sale of an interest in the Company's Electronic
Publication and Typesetting Systems segment. The increase in sales in 1996 was
primarily attributable to increases in the Technical Services and Temporary
Personnel segment and the Telecommunications Services segment of $143.9 million
and $23.5 million, respectively. This was partially offset by a decrease in the
Computer Systems segment of $52.9 million due to the completion in 1995 of
several long-term contracts, which were accounted for under the completed
contract method of accounting.
The Company's income from continuing operations before income taxes, minority
interests and extraordinary item increased by $7.0 million, or 26%, in 1996 to
$34.3 million. The 1996 results included a $3.7 million pretax gain on the sale
of interest in subsidiaries. The increase in operating profit in 1996 was
primarily from the Telephone Directory segment, with an increase of $3.4
million, and the Telecommunications Services segment, with an increase of $3.3
million, partially offset by the Electronic Publication and Typesetting Systems
segment, with a decrease of $4.6 million.
The loss from discontinued operations in fiscal 1996 represents the Company's
portion (59%) of the operating loss and loss on disposal related to a division
of the Company's Electronic Publication and Typesetting Systems segment.
The extraordinary items in fiscal 1996 and 1995 were losses of $87,000 and
$62,000, respectively, due to the early redemption at par of $22.9 million and
$10.0 million face value, respectively, of the Company's 12-3/8% Senior
Subordinated Debentures.
Net income in fiscal 1996 and 1995 was $22.3 million and $16.3 million,
respectively.
Fiscal 1996 included 52 weeks, compared to 53 weeks in fiscal 1995.
Results of Operations - Segments
The Company's consolidated operating profit was $45.2 million in fiscal 1996,
compared to $42.5 million in fiscal 1995. (See Industry Segment Data in Item 1
of this Report and Note J of Notes to Consolidated Financial Statements in Item
8 of this Report).
The Technical Services and Temporary Personnel segment's sales increased by
$143.9 million, or 25%, in fiscal 1996 to $716.3 million. Operating profit of
the segment decreased by $771,000, or 3%, to $27.3 million in fiscal 1996.
Approximately $48.1 million, or 33%, of the segment's 1996 sales increase was
due to pass-through costs primarily related to the use of subcontractors to
service large national contracts, which increased from $23.4
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<PAGE> 30
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS--Continued
Fiscal Year 1996 Compared to Fiscal Year 1995--Continued
Results of Operations - Segments--Continued
million in 1995 to $71.5 million in 1996. In fiscal 1996, approximately $28.0
million of the segment's sales increase resulted from business with new
customers, with pre-existing customers accounting for the balance of the sales
increase. The operating profit decrease in fiscal 1996 was due to a 1.8
percentage point decrease in gross margins, as well as increases in overhead,
due to the opening of new offices to service national contracts, partially
offset by the increased sales and a $2.1 million retrospective workers'
compensation insurance adjustment. One-half of the 1.8 percentage point decrease
in gross margin was due to higher subcontractor usage billed without a mark-up.
The loss of a high margin customer in April 1996, lower margins on the
increasing business with large national contracts and an increase in
unemployment insurance costs accounted for the remainder of the gross margin
decline.
The Telephone Directory segment's sales increased by $8.8 million, or 13%, to
$78.6 million in fiscal 1996. In fiscal 1996, the segment's operating profit
increased by $3.4 million, or 223%, to $4.9 million. The fiscal 1996 sales
increase was due to an 11% increase in telephone directory production volume, an
increase in independent directory sales of 20% and increased sales by the
Uruguayan division of 19%. The increase in operating profit in fiscal 1996 was
due to the sales increase discussed above and higher gross margins on the
telephone directory production sales, partially offset by higher printing costs
in the Uruguay printing operation resulting from a move to a new facility and
installation of new equipment.
The Telecommunications Services segment's sales increased by $23.5 million, or
35%, to $91.5 million in 1996. Operating profit of the segment increased by $3.3
million, or 54%, in fiscal 1996 to $9.5 million. The fiscal 1996 sales increase
was due to a 32% increase in the Construction division and a 29% increase in the
Business Systems division. Operating results improved due to increased sales
volume and a 1.9 percentage point decrease in overhead expended per sales
dollar.
The Computer Systems segment's sales decreased by $52.9 million, or 40%, to
$79.1 million in fiscal 1996. Operating profit in fiscal 1996 increased by $1.3
million, or 21%, to $7.7 million. The 1996 and 1995 sales included revenues of
$28.0 million and $85.0 million, respectively, recognized on customer acceptance
of several major Delta Operator Service Systems (DOSS). The higher level of
sales in 1995, compared to 1996, was due to a greater number of DOSS systems
accepted by customers in 1995. Fiscal 1996 operating profit increased, primarily
due to increased sales and profit on conservation services to utilities. A
contract with one customer, which accounted for approximately 9% of the
segment's revenues and 46% of the segment's operating profits for fiscal 1996,
expired in August 1997, because the customer no longer required Volt's services.
The Electronic Publication and Typesetting Systems segment's sales increased by
$18.5 million, or 26%, to $88.9 million in fiscal 1996. The segment incurred an
operating loss in fiscal 1996 of $4.1 million, compared to an operating profit
of $456,000 in fiscal 1995. As noted above, the results of operations for all
periods prior to January 29, 1996 reflect the results of Autologic on a
stand-alone basis, while results subsequent to that date reflect the combined
operations of Autologic and Triple-I. The fiscal 1996 sales increase resulted
primarily from the
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<PAGE> 31
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS--Continued
Fiscal Year 1996 Compared to Fiscal Year 1995--Continued
Results of Operations - Segments--Continued
integration of the two businesses. Had this transaction occurred at the
beginning of fiscal year 1995, sales in 1996 would have been $98.8 million,
compared to sales of $104.6 million in 1995. The decrease of $5.8 million, or
5.5%, was primarily due to the phaseout of a product line by Triple-I. The 1996
operating loss included $700,000 of restructuring charges and $1.6 million for
amortization of intangibles resulting from the merger. The decrease in operating
profit in 1996 was also due to a 4.0 percentage point increase in total
operating expenses expended per sales dollar, partially offset by the increased
sales volume. The fiscal 1996 increase in operating expenses included a 76%
increase in research, development and engineering and a 35% increase in selling
and administrative expenses. These expenses increased at a greater rate than
sales in 1996 due to additional new products and expansion into new markets. The
markets in which the segment competes are marked by rapidly changing technology,
with sales in fiscal years 1996 and 1995 of equipment introduced within the last
three years, comprising approximately 98% and 84%, respectively, of equipment
sales.
Results of Operations - Other
Interest income increased by $1.1 million, or 54%, in fiscal 1996. The fiscal
1996 increase was primarily due to $723,000 of interest income received on a tax
refund from the Internal Revenue Service as the result of the completion of an
examination of the Company's tax returns for fiscal years 1989 to 1993.
The Company's equity in the net loss of its joint ventures was $1.4 million in
1996, compared to $1.0 million in 1995. The fiscal 1996 decrease was due to the
start-up losses incurred by the Company's Brazilian joint venture, which began
operations in July 1994. The Company's share of the income of its Australian
joint venture increased by $242,000 in fiscal 1996 due to increased revenues
(see Note L of Notes to Consolidated Financial Statements).
Research, development and engineering expenses increased by $6.1 million, or
74%, to $14.4 million in 1996. The increase in 1996 was due to additional
product development by the Telephone Directory, Computer Systems, and, as a
result of the combination of Autologic and Triple-I, the Electronic Publication
and Typesetting Systems segment.
Depreciation and amortization increased by $3.7 million, or 29%, to $16.3
million in 1996. The fiscal 1996 increase was due to increased fixed asset
expenditures in 1995 and 1996 and, in 1996, to the amortization of goodwill
created in the Autologic transaction.
The foreign exchange loss in fiscal year 1996 was $516,000, compared to a gain
in 1995 of $186,000. The foreign exchange loss in 1996 was due to unfavorable,
and the gain in 1995 was due to favorable, currency movements in the European
currency market. To minimize the potential adverse impact on the Company's
foreign currency receivables and sales when the dollar strengthens against
foreign currencies, foreign currency options and forward contracts are
purchased.
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<PAGE> 32
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS--Continued
Fiscal Year 1996 Compared to Fiscal Year 1995--Continued
Results of Operations - Other-- Continued
Interest expense decreased by $878,000, or 15%, to $5.2 million in 1996. The
decrease in 1996 was due to redemptions and the retirement of $10.0 million (in
1995) and the remaining $22.9 million (in 1996) of the Company's 12-3/8% Senior
Subordinated Debentures. The Company has established additional financing at
lower costs through the issuance in a private placement of $50.0 million Senior
Notes.
See Note F of Notes to Consolidated Financial Statements for information
concerning the Company's effective tax rates for fiscal years 1996 and 1995.
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<PAGE> 33
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS--Continued
Liquidity and Capital Resources
Cash and cash equivalents increased by $41.0 million in 1997 to $54.2 million.
Cash of $19.6 million was provided by operating activities in 1997. Primary
among the factors providing cash flows to operating activities in 1997 were the
Company's net income of $39.9 million, augmented by $20.5 million of
depreciation and amortization, increases in accounts payable of $16.6 million,
which was primarily due to an increased use of subcontractors by the Technical
Services and Temporary Personnel segment to service national accounts, increases
in accrued expenses of $10.5 million and an increase in income taxes payable of
$7.5 million, which was due to the timing of tax payments made during the year.
Among the principal applications of cash in operating activities in 1997 were an
increase in the level of accounts receivable of $61.7 million, due to increased
business with new and existing customers, and a $13.0 million reduction in
accounts receivable sold in fiscal 1997 due to the termination, by the Company,
of a receivable securitization program (see Note C of Notes to Consolidated
Financial Statements).
The principal factor in cash provided by investing activities of $16.6 million
was proceeds from the sale of joint ventures of $32.7 million, which was offset,
in part, by $15.5 million of purchases of property, plant and equipment.
The principal factor in cash provided by financing activities of $4.6 million
was proceeds of $7.1 million from the exercise of stock options, offset, in
part, by the payment of $1.9 million of long-term debt.
In addition to its cash and cash equivalents, at October 31, 1997, the Company
had $87.3 million of credit lines with banks, of which $75.0 million is under a
revolving credit agreement that does not expire until July 2000 unless renewed.
The Company had outstanding bank borrowings of $4.4 million at October 31, 1997
under such lines.
The Company believes its current financial position, credit lines and future
cash flows will be sufficient to fund its presently contemplated operations and
satisfy its debt obligations. The Company has no material capital commitments,
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. This is common to
most businesses, and concerns the inability of information systems to properly
recognize and process date-sensitive information related to the year 2000 and
beyond. 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.
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<PAGE> 34
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS--Continued
Year 2000 Compliance--Continued
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. Certain systems will be replaced rather than
corrected, at a cost that is not expected to be material. Conversion and testing
of remaining systems applications is expected to cost approximately $4.0
million, the majority of which will be incurred and expensed in fiscal 1998. The
Company expects to complete the necessary modifications in 1998, and will
conduct extensive testing throughout 1999.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
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<PAGE> 35
ERNST & YOUNG LLP 787 Seventh Avenue Phone #: 212-773-3000
New York, New York 10019
REPORT OF INDEPENDENT AUDITORS
Board of Directors
Volt Information Sciences, Inc.
We have audited the accompanying consolidated balance sheets of Volt Information
Sciences, Inc. and subsidiaries as of October 31, 1997 and November 1, 1996, and
the related consolidated statements of income, stockholders' equity, and cash
flows for each of the three years in the period ended October 31, 1997. Our
audits also included the financial statement schedule listed in the Index at
Item 14(a)(2). These financial statements and schedule are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements and schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of Volt
Information Sciences, Inc. and subsidiaries at October 31, 1997 and November 1,
1996, and the consolidated results of its operations and its cash flows for
each of the three years in the period ended October 31, 1997, in conformity with
generally accepted accounting principles. Also, in our opinion, the related
financial statement schedule, when considered in relation to the basic financial
statements taken as a whole, presents fairly in all material respects the
information set forth therein.
Ernst & Young LLP
December 17, 1997
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<PAGE> 36
VOLT INFORMATION SCIENCES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
October November
31, 1997 1, 1996
--------- --------
(Dollars in thousands)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents--Note A $54,234 $13,277
Short-term investments--Notes A, B and N 105 4,458
Trade accounts receivable less allowances of $5,067 (1997) and
$5,191 (1996)--Note C and Schedule II 227,548 170,484
Inventories--Notes A and D 35,953 31,646
Deferred income taxes--Notes A and F and Schedule II 8,102 11,757
Prepaid expenses and other assets--Note L 9,832 11,524
--------- --------
TOTAL CURRENT ASSETS 335,774 243,146
Investment in securities--Notes A and B and Schedule II 750
Investment in joint venture--Note L 11,179
Property, plant and equipment, net--Notes A, G and J 62,495 64,869
Deferred income taxes and other assets--Notes A and F 5,629 2,493
Intangible assets-net of accumulated amortization of $9,399 (1997) and
$6,459 (1996)--Notes A and I 14,074 15,457
--------- --------
$418,722 $337,144
========= ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Notes payable to banks--Note E $4,410 $5,414
Current portion of long-term debt--Note G 1,949 1,949
Accounts payable 59,589 43,345
Accrued wages and commissions 34,065 29,998
Accrued taxes other than income taxes 13,600 12,149
Accrued insurance 11,005 9,334
Accrued interest and other accruals 10,575 8,229
Customer advances and other liabilities 20,518 16,215
Income taxes--Notes A and F 10,608 3,022
--------- --------
TOTAL CURRENT LIABILITIES 166,319 129,655
LONG-TERM DEBT--Note G 55,447 57,395
MINORITY INTERESTS--Note I 19,388 19,857
STOCKHOLDERS' EQUITY--Notes A, B, C, G, H and L and Schedule II
Preferred stock, par value $1.00; Authorized--500,000 shares;
issued--none
Common stock, par value $.10; Authorized--30,000,000 shares; issued
14,883,143 shares (1997) and 9,692,143 shares (1996) 1,488 969
Paid-in capital 34,894 27,763
Retained earnings 141,355 101,505
Cumulative foreign currency translation adjustment (169)
--------- --------
177,568 130,237
--------- --------
COMMITMENTS--Note O
--------- --------
$418,722 $337,144
========= ========
</TABLE>
See Notes to Consolidated Financial Statements.
-36-
<PAGE> 37
VOLT INFORMATION SCIENCES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
YEAR ENDED
------------------------------------------
October November November
31, 1997 1, 1996 3, 1995
------------ ------------ ------------
(Dollars in thousands, except per share data)
<S> <C> <C> <C>
Revenues:
Sales of services $1,317,276 $960,438 $837,699
Sales of products 84,197 88,120 69,608
------------ ------------ ------------
Total sales 1,401,473 1,048,558 907,307
Interest income 1,689 3,095 2,009
(Loss) gain on securities (3,000) 52
Equity in net income (loss) of joint ventures--Note L 6,824 (1,414) (1,000)
Gain on sale of joint venture--Note L 12,807
Gain on sale of interest in subsidiaries--Note I 3,666
Other income (expense)-net--Note C 400 (817) (954)
------------ ------------ ------------
1,420,193 1,053,140 907,362
------------ ------------ ------------
Cosos and expenses:
Cost of sales:
Services 1,213,652 870,911 761,240
Products 49,709 58,746 47,104
Selling and administrative 54,008 52,848 45,000
Research, development and engineering 14,301 14,366 8,262
Depreciation and amortization 20,494 16,299 12,616
Foreign exchange (gain) loss - net (52) 516 (186)
Interest expense 5,656 5,167 6,045
------------ ------------ ------------
1,357,768 1,018,853 880,081
------------ ------------ ------------
Income from continuing operations before
income taxes and items shown below 62,425 34,287 27,281
Income tax provision-- Notes A and F 22,797 12,710 10,895
Minority interests--Note I 341 1,110
------------ ------------ ------------
Income from continuing operations before extraordinary item 39,969 22,687 16,386
Loss from discontinued operations--Note P (119) (252)
Extraordinary item-loss on repurchase of debt,
net of income taxes--Note G (87) (62)
------------ ------------ ------------
NET INCOME $39,850 $22,348 $16,324
============ ============ ============
Per Share Data
Income from continuing operations before extraordinary item $2.63 $1.53 $1.13
Loss from discontinued operations (0.01) (0.01)
Extraordinary item (0.01)
------------ ------------ ------------
NET INCOME $2.62 $1.51 $1.13
============ ============ ============
Number of shares used in computation--Note A 15,182,240 14,799,665 14,451,501
============ ============ ============
</TABLE>
See Notes to Consolidated Financial Statements.
-37-
<PAGE> 38
VOLT INFORMATION SCIENCES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Cumulative Unrealized
Foreign Gain (Loss)
Common Stock Currency On
$.10 Par Value Paid-In Retained Translation Marketable Treasury
Shares Amount Capital Earnings Adjustment Securities Stock
------ ------ ------- -------- ---------- ---------- -----
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at October 28, 1994 7,789,580 $779 $43,830 $91,655 $(283) $(47) $(46,089)
Contribution to ESOP- 8,621 shares 154 96
Stock options exercised, including
related tax benefit of $130 22,750 3 469
Cancellation of treasury stock (2,977,933) (298) (16,873) (28,822) 45,993
Issuance of shares of common
stock resulting from a two-for-one
stock split in the form of a 100%
stock dividend 4,830,397 482 (482)
Unrealized gain on marketable
securities-net of taxes of $78 121
Unrealized foreign currency
translation adjustment-net of
taxes of $58 115
Net income for the year 16,324
---------- ------ ------- -------- ----- ---- --------
Balance at November 3, 1995 9,664,794 966 27,098 79,157 (168) 74 --
Contribution to ESOP 18,349 2 498
Stock awards 600 11
Stock options exercised, including
related tax benefit of $64 8,400 1 156
Unrealized foreign currency
translation adjustment-net of
taxes of $93 164
Unrealized loss on marketable
securities-net of $45 tax benefit (70)
Net income for the year 22,348
---------- ------ ------- -------- ----- ---- --------
Balance at November 1, 1996 9,692,143 969 27,763 101,505 (4) 4 --
Contribution to ESOP 12,423 1 499
Stock awards 1,000 29
Stock options exercised, including
related tax benefit of $2,878 253,530 25 7,096
Issuance of shares of common stock
resulting from a three-for-two
stock split in the form of a 50%
stock dividend 4,924,047 493 (493)
Unrealized foreign currency
translation adjustment-net of $39
tax benefit (165)
Unrealized loss on marketable securities -
net of $2 tax benefit (4)
Net income for the year 39,850
---------- ------ ------- -------- ----- ---- --------
Balance at October 31, 1997 14,883,143 $1,488 $34,894 $141,355 $(169) $-- $--
========== ====== ======= ======== ===== ==== ========
</TABLE>
There were no shares of preferred stock issued or outstanding.
See Notes to Consolidated Financial Statements.
-38-
<PAGE> 39
VOLT INFORMATION SCIENCES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED
------------------------------
October November November
31, 1997 1, 1996 3, 1995
-------- -------- --------
(Dollars in thousands)
<S> <C> <C> <C>
CASH PROVIDED BY (APPLIED TO) OPERATING
ACTIVITIES
Net income $39,850 $22,348 $16,324
Adjustments to reconcile net income to cash
provided by (applied to) operating activities:
Loss from discontinued operations 119 252
Extraordinary loss 87 62
Depreciation and amortization 20,494 16,299 12,616
Equity in net (income) loss of joint ventures (6,824) 1,414 1,000
Distributions from joint ventures 4,814 2,599 2,316
Loss (gain) on securities 3,000 (34)
Gain on sale of joint venture (12,807)
Gain on partial sale of subsidiaries (3,666)
Accounts receivable provisions 3,046 2,718 2,081
Minority interests (341) (1,110)
Loss (gain) on foreign currency translation 39 (214) 102
Loss (gain) on dispositions of property,
plant and equipment 64 (354)
Deferred income tax expense (benefit) 1,120 (2,474) (5,419)
Other 92 (436) 226
Changes in operating assets and liabilities:
Increase in accounts receivable (61,701) (57,478) (15,731)
Increase in inventories (4,631) (1,661) (3,124)
(Increase) decrease in prepaid expenses
and other current assets (1,371) 1,765 (2,892)
(Increase) decrease in other assets (597) 1,379 (1,494)
Increase in accounts payable 16,626 14,328 1,788
Increase (decrease) in accrued expenses 10,532 (4,034) 10,596
Increase in customer advances
and other liabilities 700 62 3,635
Increase (decrease) in income taxes payable 7,486 (8,554) 12,383
-------- -------- --------
NET CASH PROVIDED BY (APPLIED TO)
OPERATING ACTIVITIES 19,646 (16,346) 34,115
-------- -------- --------
CASH PROVIDED BY (APPLIED TO)
INVESTING ACTIVITIES
Sales of investments 48 1,050
Maturities of investments 7,037 7,561 10,770
Purchases of investments (6,428) (7,676) (8,688)
Investment in joint ventures (157) (7,309) (5,049)
Proceeds from sale of joint ventures 32,732
Cash of acquired subsidiaries, less transaction costs 8,421
Proceeds from disposals of property, plant and equipment 328 121 953
Purchases of property, plant and equipment (15,471) (21,700) (11,886)
Other (1,395) (2,024) (1,365)
-------- -------- --------
NET CASH PROVIDED BY (APPLIED TO)
INVESTING ACTIVITIES 16,646 (22,558) (14,215)
-------- -------- --------
</TABLE>
-39-
<PAGE> 40
VOLT INFORMATION SCIENCES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS--Continued
YEAR ENDED
------------------------------
October November November
31, 1997 1, 1996 3, 1995
-------- -------- --------
(Dollars in thousands)
CASH PROVIDED BY (APPLIED TO)
FINANCING ACTIVITIES
Payment of long-term debt (1,949) (24,854) (12,000)
Proceeds from long-term debt 50,000
Exercises of minority interest stock options 205
Exercises of stock options 7,150 103 341
(Decrease) increase in notes payable-banks (580) 916 1,030
-------- -------- --------
NET CASH PROVIDED BY (APPLIED TO)
FINANCING ACTIVITIES 4,621 26,370 (10,629)
-------- -------- --------
Effect of exchange rate changes on cash 44 461 (970)
-------- -------- --------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 40,957 (12,073) 8,301
Cash and cash equivalents, beginning of year 13,277 25,350 17,049
-------- -------- --------
CASH AND CASH EQUIVALENTS,
END OF YEAR $54,234 $13,277 $25,350
======== ======== ========
SUPPLEMENTAL INFORMATION
Cash Paid During The Year:
Interest expense $5,563 $5,390 $6,512
Income taxes, net of refunds $11,375 $22,808 $4,058
See Notes to Consolidated Financial Statements.
-40-
<PAGE> 41
VOLT INFORMATION SCIENCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE A--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Business: The Company operates in three major businesses, consisting of five
industry segments: Technical Services and Temporary Personnel; Telephone
Directory; Telecommunications Services; Computer Systems; and Electronic
Publication and Typesetting Systems.
Fiscal Year: The Company's fiscal year consists of the 52 or 53 weeks ending on
the Friday nearest October 31. The 1997 and 1996 fiscal years were comprised of
52 weeks, compared with 53 weeks in fiscal year 1995.
Consolidation: The consolidated financial statements include the accounts of the
Company and its subsidiaries. All significant intercompany transactions have
been eliminated upon consolidation. The minority interest primarily represents
the 41% interest in Autologic Information International, Inc. ("AII") owned by
the public.
Use of Estimates: The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
Stock-Based Compensation: The Company accounts for its stock-based compensation
arrangements under the provisions of APB Opinion 25, "Accounting for Stock
Issued to Employees" (see Note H).
Revenue Recognition: Sales are recorded when products are shipped and when
services are rendered. Revenues and costs applicable to long-term contracts,
including those providing for software customization or modification, are
recognized on the percentage-of-completion method, measured by work performed,
or the completed-contract method, as appropriate. Provisions for estimated
losses on contracts are recorded when such losses become evident.
Cash Equivalents: Cash equivalents consist of investments in short-term, highly
liquid securities having an initial maturity of three months or less.
Investments: The Company's management determines the appropriate classification
of marketable equity and debt securities at the time of purchase and
re-evaluates such designation as of each balance sheet date. Debt securities are
classified as held-to-maturity when the Company has the positive intent and
ability to hold the securities to maturity. Held-to-maturity securities are
stated at amortized cost. Marketable equity securities and debt securities not
classified as held-to-maturity are classified as available-for-sale.
Available-for-sale securities are carried at fair value with the unrealized
gains and losses, net of tax, reported as a separate component of stockholders'
equity. Losses considered to be other than temporary are charged to earnings.
Inventories: Manufacturing inventories are priced at the lower of cost, on a
first-in, first-out basis, or market. Accumulated unbilled costs on contracts
related to performing services are carried at the lower of actual cost or
realizable value (see Note D).
Long-Lived Assets: The Company reviews for the impairment of long-lived assets
and certain identifiable intangibles whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable. No such
impairment indicators have been identified by the Company. An impairment loss
would be recognized when estimated future cash flows expected to result from the
use of the asset and its eventual disposition are less than its carrying amount.
-41-
<PAGE> 42
VOLT INFORMATION SCIENCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued
NOTE A--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--Continued
Property, Plant and Equipment: Depreciation and amortization are provided on the
straight-line and accelerated methods at rates calculated to write off the cost
of the assets over their estimated useful lives. Fully depreciated assets are
written off against their related allowance accounts. The assets are depreciated
over the following periods:
Buildings - 25 to 31-1/2 years
Machinery and equipment - 3 to 15 years
Leasehold improvements - length of lease or life of asset, whichever is
shorter
October November
31, 1997 1, 1996
-------- --------
Property, plant and equipment consist of: (Dollars in thousands)
Land and buildings $33,750 $33,589
Machinery and equipment 69,491 65,778
Leasehold improvements 4,626 4,263
-------- --------
107,867 103,630
Less allowances for depreciation and amortization 45,372 38,761
-------- --------
$62,495 $64,869
======== ========
A term loan is secured by a deed of trust on land and buildings with a book
value at October 31, 1997 of $14.6 million (see Note G).
Intangible Assets: Intangible assets principally consist of the unamortized
balances of the excess of cost over the fair value of the net assets of
companies acquired. The intangibles are being amortized using the straight-line
method, over a five to twenty year period with an average remaining life of five
years.
Income Taxes: Income taxes are provided using the liability method (see Note F).
Foreign Exchange Contracts: Gains and losses on foreign currency option and
forward contracts designated as hedges of existing assets and liabilities and of
identifiable firm commitments are deferred and included in the measurement of
the related foreign currency transaction (see Note N).
Translation of Foreign Currencies: At October 31, 1997, the U.S. dollar is the
Company's functional currency throughout the world, except for the Company's
Uruguayan operation and certain European subsidiaries. Where the U.S. dollar is
used as the functional currency, and in Uruguay, which has a high inflation
rate, foreign currency gains and losses are included in operations. The
translation adjustments recorded as a separate component of stockholders' equity
result from changes in exchange rates, due to the European subsidiaries and,
prior to its sale, the Australian joint venture, whose functional currencies
were not the U.S. dollar.
Per Share Data: Per share data are computed on the basis of the weighted average
number of shares of common stock outstanding and, if applicable, the assumed
exercise of dilutive outstanding stock options based on the treasury stock
method. In February 1997, the Financial Accounting Standards Board issued
Statement No. 128,
-42-
<PAGE> 43
VOLT INFORMATION SCIENCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued
NOTE A--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--Continued
Per Share Data--Continued
"Earnings per Share", which is required to be adopted by the Company beginning
in the first quarter of fiscal 1998. At that time, the Company will be required
to change the method currently used to compute earnings per share and to restate
all prior periods. Under the new requirements for calculating "basic" earnings
per share, the dilutive effect of stock options will be excluded. Basic earnings
per share are therefore expected to be slightly higher than per share data
reported in the accompanying financial statements.
Comprehensive Income: In June 1997, the FASB issued Statement of Financial
Accounting Standards No. 130, "Reporting Comprehensive Income" (SFAS No. 130).
The provisions of SFAS No. 130 require companies to classify items of
comprehensive income by their nature in a financial statement and display the
accumulated balance of other comprehensive income separately or as part of a
reconciliation of net income in the consolidated financial statements. The
Company's comprehensive income items are not currently material; accordingly,
the effect of adopting this statement is not expected to be material when it
becomes effective for fiscal 1999.
Segment Reporting: In June 1997, the FASB issued Statement of Financial
Accounting Standards No. 131, "Disclosures about Segments of an Enterprise and
Related Information" (SFAS No. 131). Under the provisions of SFAS No. 131,
public business enterprises must report financial and descriptive information
about its reportable segments. The Company does not expect the adoption of this
new standard in fiscal 1999 to result in material changes to previously reported
amounts or disclosures.
NOTE B--INVESTMENTS IN SECURITIES
At October 31, 1997, short-term investments consist of a bank certificate of
deposit which matures within one year. Non-current investments at such date
consist of a portfolio of equity securities with a cost of $3.8 million, reduced
by a reserve for decline in market value of $3.0 million. Such decline in value,
considered to be other than temporary, was charged to earnings in fiscal 1997.
At November 1, 1996, the Company's portfolio of debt securities had an amortized
cost of $4.5 million which approximated market value. These debt securities
matured during the 1997 fiscal year.
NOTE C-- FINANCING ARRANGEMENTS
On July 2, 1997, the Company entered into a $75.0 million, three-year,
syndicated, unsecured, revolving Credit Agreement with a group of banks for
which The Chase Manhattan Bank ("Chase") 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 October 31, 1997), 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 October
31, 1997.
The Agreement replaced the Company's previous $10.0 million revolving facility
with Chase and its previous $45.0 million accounts receivable securitization
program. The accounts receivable securitization agreement entitled the Company
to sell, on a limited recourse basis, up to $45.0 million of undivided interests
in a designated
-43-
<PAGE> 44
VOLT INFORMATION SCIENCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued
NOTE C-- FINANCING ARRANGEMENTS--Continued
pool of certain eligible accounts receivable. At November 1, 1996, $13.0 million
of interests in accounts receivable had been sold under this agreement. The sold
accounts receivable are reflected as a reduction of receivables in the
accompanying November 1, 1996 balance sheet. The Company paid fees based
primarily on the purchaser's borrowing costs incurred on short-term commercial
paper which financed the purchase of receivables. Other income (expense) in the
accompanying 1997, 1996 and 1995 statements of income includes fees related to
the agreement of $316,000, $2.0 million and $2.1 million, respectively.
NOTE D--INVENTORIES
Inventories consist of:
October November
31, 1997 1, 1996
------- -------
(Dollars in thousands)
Services:
Accumulated unbilled costs on:
Service contracts $23,988 $17,651
Long-term contracts 3,736 1,694
------- -------
27,724 19,345
------- -------
Products:
Materials 3,653 5,257
Work-in-process 965 2,654
Service parts 2,318 2,396
Finished goods 1,293 1,994
------- -------
8,229 12,301
------- -------
Total $35,953 $31,646
======= =======
The cumulative amounts billed, principally under long-term contracts, of $17.3
million and $3.4 million at October 31, 1997 and November 1, 1996, 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 $12.5 million and
$15.5 million at October 31, 1997 and November 1, 1996, respectively.
NOTE E--SHORT-TERM BORROWINGS
The Company has credit lines with domestic and foreign banks which provide for
unsecured borrowings and letters of credit up to an aggregate of $87.3 million,
including a $75.0 million revolving credit agreement (see Note C). At October
31, 1997, the Company had bank borrowings under these credit lines of $4.4
million ($5.4 million- 1996), principally in foreign currencies. The weighted
average interest rate of short-term borrowings at each year-end was 16% in 1997
and 24% in 1996. The weighted average interest rates are high, due to a high
proportion of borrowings by the Uruguayan operation, whose interest rates
reflect the country's high inflation level. Borrowings in Uruguay serve to hedge
receivables against a loss in value, due to the strengthening of the U.S. dollar
against the Uruguayan currency.
-44-
<PAGE> 45
VOLT INFORMATION SCIENCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued
NOTE F--INCOME TAXES
Deferred tax assets and liabilities are determined based on differences between
financial reporting and the tax bases of assets and liabilities and are measured
using enacted tax rates and laws that are expected to be in effect when the
differences are scheduled to reverse.
<TABLE>
<CAPTION>
Year Ended
--------------------------------
October November November
31, 1997 1, 1996 3, 1995
-------- -------- --------
(Dollars in thousands)
<S> <C> <C> <C>
The components of income from
continuing operations before income
taxes, based on the location of
operations, consist of the following:
Domestic $40,848 $33,739 $23,975
Foreign 21,577 548 3,306
-------- -------- --------
$62,425 $34,287 $27,281
======== ======== ========
The components of the income tax provision include:
Current:
Federal $12,260(a) $10,928(a) $12,201(a)
Foreign 5,417 1,513 1,247
State and local 4,000 2,743 2,866
-------- -------- --------
Total current 21,677 15,184 16,314
-------- -------- --------
Deferred:
Federal 660 (1,946) (4,357)
Foreign 480 (643) 140
State and local (20) 115 (1,202)
-------- -------- --------
Total deferred 1,120 (2,474) (5,419)
-------- -------- --------
Total income tax provision $22,797 $12,710 $10,895
======== ======== ========
</TABLE>
(a) Reduced in 1997 and 1996 by $99,000 and $158,000, respectively, of foreign
tax credit carryforwards and reduced in 1997, 1996 and 1995, respectively, by
benefits of $481,000, $859,000 and $247,000 from general business credits.
As a result of the completion of a tax return examination for fiscal years 1989
through 1993, the 1996 current federal provision includes $1.4 million of
benefit related to the refund of previously paid taxes.
-45-
<PAGE> 46
VOLT INFORMATION SCIENCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued
NOTE F--INCOME TAXES--Continued
The consolidated effective tax rates are different than the U.S. Federal
statutory rate. The differences result from the following:
Year Ended
-----------------------------
October November November
31, 1997 1, 1996 3, 1995
-------- ------- -------
Statutory rate 35.0% 35.0% 35.0%
State and local taxes, net of federal
tax benefit 4.2 4.7 3.9
Tax effect of foreign operations (5.0) 2.7 1.1
Goodwill amortization 1.3 2.3 .8
Adjustment resulting from conclusion
of tax examination related to prior years (4.2)
Utilization of net operating loss carryforward (2.5)
General business credits (.8) (2.6) (.9)
Other - net 1.8 (.8) 2.5
---- ---- ----
Effective tax rate 36.5% 37.1% 39.9%
==== ==== ====
-46-
<PAGE> 47
VOLT INFORMATION SCIENCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued
NOTE F--INCOME TAXES--Continued
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes and also include operating
loss and tax credit carryforwards. Significant components of the Company's
deferred tax assets and liabilities are as follows:
October November
31, 1997 1, 1996
------- --------
(Dollars in thousands)
Deferred Tax Assets:
Allowance for doubtful accounts $568 $2,018
Inventory valuation 4,605 5,898
Domestic net operating loss carryforwards 3,884 3,954
Foreign tax credit carryforwards 606 1,205
Accelerated book depreciation 149
Vacation accruals 1,680 1,430
Warranty accruals 348 292
Foreign asset bases 479 920
Other--net 1,391 1,625
------- -------
Total deferred tax assets 13,710 17,342
Valuation allowance for deferred tax assets 606 1,252
------- -------
Deferred tax assets, net of valuation allowance 13,104 16,090
------- -------
Deferred Tax Liabilities:
Unremitted earnings of corporate
joint ventures 2,140
Earnings not currently taxable 366 464
Accounts receivable valuation 909
Accelerated depreciation 695
------- -------
Total deferred tax liabilities 1,275 3,299
------- -------
Net deferred tax assets $11,829 $12,791
======= =======
Balance sheet classification:
Current assets $8,102 $11,757
Noncurrent assets 3,727 1,034
------- -------
Net deferred tax assets $11,829 $12,791
======= =======
-47-
<PAGE> 48
VOLT INFORMATION SCIENCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued
NOTE F--INCOME TAXES--Continued
As of October 31, 1997, for tax purposes, the Company had foreign tax credit
carryforwards of $606,000, which expire from 1998 through 2002. For financial
statement purposes, a valuation allowance has been recognized to offset the
deferred tax asset related to these carryforwards. At October 31, 1997, net
deferred tax assets include $3.9 million related to domestic net operating loss
carryforwards of its 59% owned subsidiary, AII, of which $905,000 is subject to
certain annual limitations. The carryforwards expire between 2008 and 2011.
Although realization is not assured, management believes it is more likely than
not that all of the assets related to such loss carryforwards will be realized.
The amount of the deferred tax asset considered realizable, however, could be
reduced if estimates of future taxable income during the carryforward period are
reduced.
The valuation allowance was decreased during fiscal 1997 and 1996 by $646,000
and $225,000, respectively. During fiscal 1997 the allowance was reduced to
reflect the utilization of foreign tax credit carryforwards of $99,000 and the
expiration of unused foreign tax credits of $880,000 and increased due to new
foreign tax credit carryforwards of $380,000. The decrease in 1996 was due to
the utilization of $158,000 of foreign tax credit carryforwards.
Undistributed earnings of foreign subsidiaries ($2.9 million) at October 31,
1997 are considered permanently invested and, accordingly, no federal income
taxes thereon have been provided. Should these earnings be distributed, foreign
tax credits would reduce the additional federal income tax which would be
payable. Availability of credits is subject to limitations; accordingly, it is
not practicable to estimate the amounts of the ultimate deferred tax liability,
if any, on such accumulated earnings.
-48-
<PAGE> 49
VOLT INFORMATION SCIENCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued
NOTE G--LONG-TERM DEBT
Long-term debt consists of the following: October November
31, 1997 1, 1996
------- -------
(Dollars in thousands)
7.92% Senior Notes (a) $50,000 $50,000
Term Loan (b) 5,100 6,000
Notes Payable (c) & (d) 2,296 3,344
------- -------
57,396 59,344
Less amounts due within one year 1,949 1,949
------- -------
Total long-term debt $55,447 $57,395
======= =======
The aggregate maturities of long-term debt are as follows: $1.9 million (1998),
$1.4 million (1999), $11.4 million (2000), $12.6 million (2001) and $10.0
million (2002), with the remainder due thereafter.
(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.
A portion of the proceeds of the notes were used to retire the outstanding
12-3/8% Senior Subordinated Debentures. The notes were issued pursuant to
Note Purchase Agreements, which contain various affirmative and negative
covenants, including one which requires the Company to maintain a level of
consolidated net worth determined under a formula (resulting in a
requirement of $113.1 million at October 31, 1997). The terms of the
Company's revolving Credit Agreement require the Company to maintain a
consolidated net worth of $129.9 million at October 31, 1997 (see Note C).
(b) In October 1994, the Company entered into a $10.0 million, five-year
loan agreement with Fleet Bank, which is secured by a deed of trust on
land and buildings (book value at October 31, 1997 - $14.6 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) Includes a note payable (which bears interest at 90 day commercial
paper rates) for $550,000 due on January 2, 1998. The balance at November
1, 1996 also included another note for $550,000 which was paid in 1997.
(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, which is being repaid in semi-annual payments of $249,000 plus
interest calculated at LIBOR (5.78% at October 31, 1997) plus 0.25%
through September 15, 2001.
During fiscal 1996, the Company's 12-3/8% Senior Subordinated Debentures were
retired at par plus accrued interest, resulting in an extraordinary charge of
$87,000, net of an income tax benefit of $55,000. During fiscal year 1995, the
Company redeemed $10.0 million of the debentures, resulting in an extraordinary
charge of $62,000, net of income tax benefits of $42,000.
-49-
<PAGE> 50
VOLT INFORMATION SCIENCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued
NOTE H--STOCK OPTION PLANS
The Non-Qualified Stock Option Plan adopted by the Company in fiscal 1980
terminated on June 30, 1990, except for options previously granted under the
plan. Unexercised options expire ten years after grant. Outstanding options at
October 31, 1997 were granted at 100% of the market price of the shares on the
date of grant and became exercisable cumulatively in increments of 20% per year
in each of the second through sixth years after date of grant.
In May 1995, the Company adopted a new Non-Qualified Stock Option Plan, which
provides for the granting of options to acquire up to 1.2 million shares
(adjusted for the stock split in 1997) of common stock to key employees of the
Company. Option exercise prices may not be less than 100% of the market price of
the shares on the date the options are granted. The date each option becomes
exercisable and the term of each option, which may not exceed ten years, are at
the discretion of the Company. Options granted become fully vested within one to
five years after the date of grant. At October 31, 1997, options for 236,378
shares were vested and 526,145 (500,475 - 1996) shares were available for future
grants under the plan.
All share and per share data is restated to reflect the October 1995 and May
1997 stock splits. (See Note K).
Transactions involving outstanding stock options under these plans were:
<TABLE>
<CAPTION>
1980 Plan 1995 Plan
--------------------------- ---------------------------
Number of Weighted Average Number of Weighted Average
Shares Exercise Price Shares Exercise Price
--------- ---------------- --------- ----------------
<S> <C> <C> <C> <C>
Outstanding-October 28, 1994 394,350 $ 6.34
Exercised (62,250) 5.47
Forfeited (7,500) 6.45
-------
Outstanding-November 3, 1995 324,600 6.45
Granted 715,575 $18.57
Exercised (9,600) 6.88
Forfeited (16,050) 18.08
------- -------
Outstanding-November 1, 1996 315,000 6.44 699,525 18.58
Granted 6,850 35.98
Exercised (157,000) 8.88 (146,827) 18.11
Forfeited (32,520) 18.08
------- -------
Outstanding-October 31, 1997 158,000 $ 4.02 527,028 $18.97
======= =======
</TABLE>
-50-
<PAGE> 51
VOLT INFORMATION SCIENCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued
NOTE H--STOCK OPTION PLANS--Continued
Price ranges of outstanding and exercisable options as of October 31, 1997 are
summarized below:
<TABLE>
<CAPTION>
Outstanding Options Exercisable Options
------------------------------------------- ----------------------------
Range of Number of Remaining Weighted Average Number of Weighted Average
Exercise Prices Shares Life (Years) Exercise Price Shares Exercise Price
- --------------- ------ ------------ -------------- ------ --------------
<S> <C> <C> <C> <C> <C>
1980 Plan:
$4.00-$5.67 158,000 3 $4.02 158,000 $4.02
1995 Plan:
$18.08-$25.42 523,928 9 $18.78 236,378 $19.49
$50.56 3,100 10 $50.56 -- --
</TABLE>
At November 1, 1996 and November 3, 1995, all outstanding options under the 1980
plan were fully vested and exercisable.
The Company has elected to follow APB Opinion 25, "Accounting for Stock Issued
to Employees", to account for its stock options. No compensation cost is
recognized because the option exercise price is equal to the market price of the
underlying stock on the date of grant. Had compensation cost for these plans
been determined at the grant dates for awards under the alternative method
provided for in SFAS 123, "Accounting and Disclosure for Stock Based
Compensation", pro forma net income and earnings per share would have been:
1997 1996
------- -------
Pro forma net income (in thousands) $37,703 $20,612
Pro forma net income per share $2.52 $1.40
Since the fair value method of accounting applies only to options granted in
fiscal years 1996 and 1997, the pro forma effect may not be fully reflected
until 1998.
The fair value of each option grant is estimated using the Multiple
Black-Scholes option pricing model, with the following weighted-average
assumptions used for grants in 1997 and 1996, respectively: risk-free interest
rates of 6.0% and 6.2%, expected volatility of .72 and .80, an expected life of
the options of three years and no dividends.
In conjunction with the acquisition of a subsidiary in December 1986, ten-year
non-qualified stock options to purchase a total of 150,000 shares of the
Company's common stock at the price of $9.17 per share (adjusted for the stock
splits in 1995 and 1997) were granted to four of the sellers. As of October 31,
1997, 24,000 of these options have been exercised and the remainder expired.
-51-
<PAGE> 52
VOLT INFORMATION SCIENCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued
NOTE I--ACQUISITION AND SALE OF SUBSIDIARIES
During fiscal 1997, the Company acquired community-based directories in North
Carolina and West Virginia for a total of $1.4 million in cash, which resulted
in a $1.4 million increase in intangible assets.
During fiscal 1996, the Company acquired a technical services business and a
temporary services business for a total of $3.1 million in cash and notes, which
resulted in an increase in intangible assets of $3.1 million.
On January 29, 1996, the Company merged its wholly-owned subsidiary, Autologic,
Incorporated and related foreign subsidiaries ("Autologic"), representing its
Electronic Publication and Typesetting Systems segment, with Information
International, Inc. ("Triple-I"), resulting in the formation of AII, a new
publicly traded company. Triple-I was a publicly traded company in the business
of electronic publishing prepress systems. In connection with the merger, the
stockholders of Triple-I received 41% of AII's common stock, based on one share
of AII being issued for each outstanding share of Triple-I, and the Company
received 59% of the outstanding shares of AII common stock.
The merger has been accounted for as a purchase of a 59% interest in Triple-I
and a corresponding sale of a 41% interest in Autologic to the former
shareholders of Triple-I. The accompanying 1996 financial statements include the
accounts of AII with the former Triple-I shareholders' 41% interest in AII shown
as a minority interest in the consolidated balance sheet. The results of
operations of Triple-I are included in the accompanying consolidated statements
of income since the date of acquisition. The sale of 41% of Autologic resulted
in a pretax gain of $3.7 million, net of transaction costs, and also resulted in
41% of Autologic's assets being reflected in the 1996 balance sheet at fair
value, resulting in an intangible asset of $5.2 million, with a corresponding
increase in the minority interest. Amortization of such intangibles, which
amounted to $1.4 million in fiscal 1997 ($783,000 in fiscal 1996), is being
charged to the minority interest. In addition, the purchase of the assets of
Triple-I resulted in an intangible of $3.8 million. These intangibles are being
amortized over a period of five years. In connection with the merger, Autologic
restructured its operations and incurred a charge of $700,000, related
principally to a reduction in workforce as a result of the merger. Such charge
is included in the results of operations for the year ended November 1, 1996.
The following unaudited pro forma information presents a summary of consolidated
results of operations, as if the acquisitions had occurred at the beginning of
the respective periods with pro forma adjustments to give effect to amortization
of intangibles, minority interest share in operations and certain income tax
adjustments. The pro forma results have been prepared for comparative purposes
only and do not purport to be indicative of the results of operations which
actually would have resulted had the acquisitions occurred on the date indicated
or which may result in the future.
(Unaudited)
Year Ended
----------------------------
November November
1, 1996 3, 1995
------- -------
(Dollars in thousands, except per share amounts)
Revenue $1,067,059 $953,400
Net income $22,885 $13,009 *
Net income per share $1.55 $0.90
* Reduced by $1,421,000 ($0.10 per share) for discontinued operations of
Triple-I.
-52-
<PAGE> 53
VOLT INFORMATION SCIENCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued
NOTE J--INDUSTRY SEGMENTS
Financial data concerning the Company's sales, operating profit (loss) and
identifiable assets by industry segments for fiscal years 1997, 1996 and 1995
are presented in tables under Item 1 of Form 10-K and are incorporated herein by
reference.
Total revenues include both sales to unaffiliated customers, as reported in the
Company's consolidated statements of income, and intersegment sales. Sales
between segments are generally priced at fair market value. Operating profit
(loss) is comprised of total revenues less operating expenses. In computing
operating profit (loss), none of the following items have been added or
deducted: general corporate expense; interest expense; fees related to sales of
accounts receivable; corporate interest income and income taxes. Identifiable
assets are those assets that are used in the Company's operations in each
industry segment. Corporate assets consist principally of cash and cash
equivalents, investments and investments in joint ventures.
Sales to one customer of the Technical Services and Temporary Personnel segment
represented 12% of consolidated sales and 16% of sales of that segment in fiscal
1997. No customer accounted for ten percent or more of the Company's sales in
fiscal 1996 or 1995.
Capital expenditures and depreciation and amortization by the Company's industry
segments are as follows:
Year Ended
---------------------------------
October November November
31, 1997 1, 1996 3, 1995
------- ------- -------
(Dollars in thousands)
Capital Expenditures
---------------------------------
Technical Services and Temporary Personnel $4,494 $3,017 $2,336
Telephone Directory 2,133 7,779 2,145
Telecommunications Services 3,817 4,135 4,032
Computer Systems 2,468 2,990 7,599
Electronic Publication and Typesetting Systems 2,359 2,914 1,620
------- ------- -------
Total segments 15,271 20,835 17,732
Corporate 323 350 459
------- ------- -------
$15,594 $21,185 $18,191
======= ======= =======
Depreciation and Amortization (a)
---------------------------------
Technical Services and Temporary Personnel $2,653 $1,868 $1,439
Telephone Directory 3,292 2,414 2,490
Telecommunications Services 3,321 2,872 2,206
Computer Systems 5,802 4,037 4,005
Electronic Publication and Typesetting Systems 4,770 4,403 1,850
------- ------- -------
Total segments 19,838 15,594 11,990
Corporate 656 705 626
------- ------- -------
$20,494 $16,299 $12,616
======= ======= =======
(a) Includes depreciation and amortization of property, plant and equipment for
fiscal years 1997, 1996 and 1995 of $17.6 million, $14.1 million and $12.0
million, respectively.
-53-
<PAGE> 54
VOLT INFORMATION SCIENCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued
NOTE K--QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
The following is a summary of unaudited quarterly results of operations for
fiscal years ended October 31, 1997 and November 1, 1996. Each quarter contains
thirteen weeks.
<TABLE>
<CAPTION>
Fiscal 1997 Quarter
--------------------------------------------------
First Second Third Fourth
--------- --------- --------- --------
(Dollars in thousands, except per share data)
<S> <C> <C> <C> <C>
Net sales $288,800 $345,703 $366,630 $400,340
========= ========= ========= ========
Gross profit $24,072 $33,125 $34,826 $46,089
========= ========= ========= ========
Income from continuing operations $5,041(a) $7,134 $9,274 $18,520(b)
Loss from discontinued operations (119)
--------- --------- --------- --------
Net income $4,922 $7,134 $9,274 $18,520
========= ========= ========= ========
Income per share (f):
Income from continuing operations $0.34 $0.47 $0.61 $1.20
Loss from discontinued operations (0.01)
--------- --------- --------- --------
Net income $0.33 $0.47 $0.61 $1.20
========= ========= ========= ========
Fiscal 1996 Quarter
--------------------------------------------------
First Second Third Fourth
--------- --------- --------- --------
(Dollars in thousands, except per share data)
Net sales $224,813 $252,202 $258,820 $312,723
========= ========= ========= ========
Gross profit $19,748(c) $30,491(c) $28,474 $40,188
========= ========= ========= ========
Income from continuing operations before extraordinary item $2,267(d) $5,031 $4,784 $10,605(e)
Loss from discontinued operations (100) (91) (61)
Extraordinary item (87)
--------- --------- --------- --------
Net income $2,267 $4,931 $4,693 $10,457
========= ========= ========= ========
Income per share (f):
Income from continuing operations before extraordinary item $0.16 $0.35 $0.32 $0.70
Loss from discontinued operations (0.01) (0.01)
Extraordinary item (0.01)
--------- --------- --------- --------
Net income $0.16 $0.34 $0.31 $0.69
========= ========= ========= ========
</TABLE>
(a) In the first quarter of 1997, the Company sold its interest in a Brazilian
joint venture. Due to the Company's guarantee of certain of the venture's
obligations, the gain on the sale of approximately $2.5 million has been
deferred until the Company's obligations, under such guarantees are determined.
However, the Company's portion of profits earned by the venture of $3.2 million
($0.21 per share) through the date of sale were included in equity in net income
(loss) of joint ventures.
(b) In the fourth quarter of 1997, the Company sold its interest in an
Australian joint venture resulting in a gain of $12.8 million ($7.9 million, net
of taxes, or $0.52 per share). In addition, the Company fully reserved its
investment in a PCS/wireless company, resulting in a fourth quarter charge to
earnings of $3.0 million ($1.8 million, net of taxes, or $0.12 per share).
-54-
<PAGE> 55
VOLT INFORMATION SCIENCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued
NOTE K--QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)--Continued
(c) The first and second quarters of fiscal 1996 include gains, respectively, of
$597,000 ($364,000, net of taxes, or $0.02 per share) and $2.0 million ($1.2
million, net of taxes, or $0.09 per share), as a result of an agreement to pay a
premium to an insurance carrier to close out prior years retrospective insurance
policies at an amount less than related liabilities for workers' compensation
insurance previously provided by the Company.
(d) The first quarter of fiscal 1996 includes a pretax gain of $3.7 million
($2.4 million, net of taxes, or $0.16 per share) on the sale of an interest in
subsidiaries.
(e) The fourth quarter of fiscal 1996 includes $1.4 million ($0.09 per share)
and $723,000 ($443,000, net of taxes, or $0.03 per share) as a tax benefit and
interest income, respectively, related to the refund of previously paid taxes,
as a result of a tax return examination for fiscal years 1989 through 1993.
(f) Applicable per share amounts have been restated to reflect a three-for-two
stock split of the Company's common stock, which was effected by a 50% stock
dividend, distributed on May 27, 1997, to shareholders of record as of the close
of business on May 12, 1997.
Historically, the Company's results of operations have been lower in the first
fiscal quarter, as a result of reduced requirements for its technical and
temporary personnel, due to the holiday season. An Australian joint venture (see
Note L) produced a major portion of its revenues and significantly all of its
profits in the Company's second and third fiscal quarters. The Uruguayan
division produces a major portion of its revenues and most of its profits in the
Company's fourth fiscal quarter, and DataNational's revenues and profits are
lower in the Company's first fiscal quarter due to the seasonality of its
directory closing schedule. Sales by AII are generally lower in the months of
November and December due to the holiday season, which is a peak publishing
period when customers are reluctant to install and test new equipment.
NOTE L--SUMMARIZED FINANCIAL INFORMATION OF JOINT VENTURES
The Company sold its interests in its Australian and Brazilian joint ventures
during fiscal year 1997.
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.
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 will continue to 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 under such
guarantees are determined. The obligations to which the Company is a guarantor,
which aggregated $7.0 million at October 31, 1997, are secured by the accounts
receivable of Telelistas.
-55-
<PAGE> 56
VOLT INFORMATION SCIENCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued
NOTE L--SUMMARIZED FINANCIAL INFORMATION OF JOINT VENTURES--Continued
At November 1, 1996, the combined joint ventures' current assets were $308.6
million, noncurrent assets were $16.3 million and total liabilities were $258.3
million. The Company's investments in and advances to the Australian and
Brazilian joint ventures were $11.2 million and $4.9 million, respectively. The
investment in and advances to the Brazilian venture were included in prepaid
expenses and other assets in the accompanying financial statements at November
1, 1996.
The following summarizes the operating results of the joint ventures through the
date of sale and the Company's equity:
<TABLE>
<CAPTION>
Year Ended
------------------------------------------------------
October 31, 1997 November 1, 1996 November 3, 1995
---------------- ---------------- ----------------
(Dollars in thousands)
Company's Company's Company's
Total Equity Total Equity Total Equity
------- ------ ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Revenues $539,534 $601,174 $559,858
Costs and expenses 489,099 564,945 529,540
Income tax provision 17,343 15,360 11,632
------- ------- -------
Net income $33,092 $20,869 $18,686
======= ======= =======
Net income of Australian joint venture $29,900 $3,632 $26,021 $3,146 $24,056 $2,904
Net income (loss) of Brazilian joint venture 3,192 3,192 (5,152) (4,560) (5,370) (3,904)
------- ------ ------- ------- ------- -------
$33,092 $20,869 $18,686
======= ======= =======
Company's equity in net income (loss) of joint
ventures $6,824 $(1,414) $(1,000)
====== ======= =======
</TABLE>
-56-
<PAGE> 57
VOLT INFORMATION SCIENCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued
NOTE M--EMPLOYEE BENEFITS
The Company has a non-contributory Employee Stock Ownership Plan (ESOP), which
provides for open market or private purchases of Company common stock from
time-to-time, or contributions by the Company of unissued or treasury shares.
Discretionary contributions are made for all employees who have completed one
year of service for a participating employer. Vesting occurs at a rate of 25%
per year of service, commencing with the completion of three years of service.
Contributions of $700,000 in fiscal 1997 and $500,000 in each of fiscal years
1996 and 1995 were accrued. Contributions of previously unissued shares were
made to the plan in 1997 and 1996 and contributions of treasury shares were made
in 1995.
The Company has savings plans which permit eligible employees to make
contributions on a pretax salary reduction basis in accordance with the
provisions of Section 401(k) of the Internal Revenue Code. The Company does not
match employee contributions.
NOTE N--FINANCIAL INSTRUMENTS
Financial instruments which potentially subject the Company to concentrations of
credit risk are primarily cash investments and accounts receivable. At October
31, 1997, the Company's cash investments were primarily in investment grade,
short-term instruments. Concentrations of credit risk with respect to the
Company's receivables are limited due to the large number of customers in the
Company's customer base, and their dispersion across different industries and
geographic areas.
The Company purchases foreign currency option contracts generally having a
maturity of three to six months, to hedge the adverse impact on its foreign
currency receivables and sales when the dollar strengthens against the related
foreign currencies. Foreign exchange (gain) loss in the accompanying statements
of income include (1) any gain on option contracts, which are recognized in
income in the same period as losses on the hedged receivables and reduced dollar
amount of sales, and (2) the premium cost of such option contracts, which is
amortized over the contract period. At October 31, 1997, the Company had
purchased options, all of which expire in the first quarter of 1998, at a cost
of $129,000, to exchange various European currencies for U.S. dollars, in the
aggregate notional amount of $4.5 million. There were no unrealized gains or
losses on these contracts at such date.
In addition, the Company entered into foreign currency forward and option
contracts to hedge future foreign currency revenues and payments during the next
two years resulting from a long-term service contract. Accordingly, gains and
losses on these hedge contracts are deferred and will be accounted for as part
of the underlying service contract. At October 31, 1997, the Company had forward
contracts to exchange 6.5 million Dutch guilders for British pounds at fixed
rates, as certain of the costs will be denominated in British pounds. Further,
the Company has purchased put options at a cost of $25,000 which permit, but do
not require, the Company to exchange an additional 7.8 million Dutch guilders to
be received in the future from another party at fixed U.S. dollar exchange
rates. At October 31, 1997, the deferred gain on the aforementioned contracts
was $1.1 million.
Counterparties to the currency option and forward contracts are major banks.
Credit loss from counterparty nonperformance is not anticipated.
-57-
<PAGE> 58
VOLT INFORMATION SCIENCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued
NOTE N--FINANCIAL INSTRUMENTS--Continued
The carrying amount of financial instruments, including cash and cash
equivalents, accounts receivable, accounts payable and notes payable to banks,
approximated fair value as of October 31, 1997 and November 1, 1996, due to the
relatively short maturity of these instruments. The carrying value of long-term
debt, including the current portion, approximates fair value as of October 31,
1997 and November 1, 1996, based upon quoted market prices for same or similar
debt issues.
NOTE O -- COMMITMENTS
The future minimum rental commitments as of October 31, 1997 for all
noncancellable operating leases are as follows:
Fiscal Office
Year Total Space Equipment
- ---- ----- ----- ---------
(Dollars in thousands)
1998 $9,609 $9,455 $154
1999 7,472 7,387 85
2000 4,427 4,391 36
2001 2,188 2,188 --
2002 471 471 --
Thereafter 976 976 --
------- ------- ------
$25,143 $24,868 $275
======= ======= ======
Rental expense for all operating leases for fiscal years 1997, 1996 and 1995 was
$13.0 million, $10.7 million and $8.6 million, respectively. Many of the leases
also require the Company to pay or contribute to property taxes, insurance and
ordinary repairs and maintenance.
The Company has guaranteed the performance of subsidiaries under contracts and
also guaranteed the commitments of a former joint venture. At October 31, 1997,
outstanding letters of credit of $3.2 million were issued by banks in support of
these guarantees. The letters of credit expire in fiscal 1998, unless renewed.
The Company believes that risk of loss relative to these financial guarantees is
remote.
NOTE P--DISCONTINUED OPERATIONS
During the first quarter of 1997, AII disposed of the assets and discontinued
Digiflex, its advertisement delivery operation. Digiflex was acquired at the end
of January 1996. The 1997 loss from discontinued operations represents the
Company's portion (59%) of the operating loss and loss on disposal related to
Digiflex. No income tax benefits have been allocated to the 1997 loss. The loss
from discontinued operations for the twelve months ended November 1, 1996
includes the Company's portion of Digiflex's operating loss of $428,000, net of
a $262,000 tax benefit, on revenues of $356,000. The 1996 results have been
reclassified to conform with the current year's presentation.
-58-
<PAGE> 59
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
PART III
The information called for by Part III (Items 10, 11, 12 and 13) of Form 10-K
(except information as to the Company's executive officers, which information
follows Item 4 in this Report) will be included in the Company's Proxy
Statement, which the Company intends to file within 120 days after the close of
its fiscal year ended October 31, 1997, and is hereby incorporated by reference
to such Proxy Statement.
-59-
<PAGE> 60
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
<TABLE>
<CAPTION>
14(a)(1). Financial Statements
The following consolidated financial statements of Volt Information
Sciences, Inc. and subsidiaries are included in Item 8:
Page
----
<S> <C>
Consolidated Balance Sheets--October 31, 1997 and November 1, 1996. 36
Consolidated Statements of Income--Years ended October 31, 1997,
November 1, 1996 and November 3, 1995. 37
Consolidated Statements of Stockholders' Equity--Years ended
October 31, 1997, November 1, 1996 and November 3, 1995. 38
Consolidated Statements of Cash Flows--Years ended October 31, 1997,
November 1, 1996 and November 3, 1995. 39
Notes to Consolidated Financial Statements. 41
14(a)(2). Financial Statement Schedules
The following consolidated financial statement schedule of Volt
Information Sciences, Inc. and subsidiaries is included in response
to Item 14(d):
Schedule II--Valuation and qualifying accounts S-1
Other schedules (Nos. I, III, IV and V) for which provision
is made in the applicable accounting regulation of the Securities and
Exchange Commission are not required under the related instructions
or are not applicable and, therefore, have been omitted.
</TABLE>
-60-
<PAGE> 61
14(a)(3). Exhibits
Exhibit Description
- ------- -----------
2.1 Agreement and Plan of Merger dated as of October 5, 1995, as amended
on November 10, 1995 and December 7, 1995, among Information
International, Incorporated, Autologic, Inc., name changed to
Autologic Information International, Inc., and Volt Information
Sciences, Inc., Incorporated by Reference to Appendix I to the
Registration Statement on Form S-4 of Autologic Information
International, Inc., (File No. 33-99278).
3.1 Restated Certificate of Incorporation of the Company, as filed with
the Department of State of New York on January 29, 1997. (Exhibit
3.1 to the Company's Annual Report on Form 10-K for the fiscal year
ended November 1, 1996).
3.2* By-Laws of the Company.
4.1 Composite Conformed Note Purchase Agreement drafted as of August 28,
1996, with respect to the issuance of the Company's $50.0 million,
7.92% Senior Notes due August 28, 2004 (excluding disclosure
schedules). (Exhibit 4.01(a) to the Company's Quarterly Report on
Form 10-Q for the quarter ended August 2, 1996).
4.2 Credit Agreement dated July 2, 1997 among the Company, The Chase
Manhattan Bank, individually and as Administrative Agent, Fleet
Bank, N.A., individually and as Co-Agent, BankBoston, N.A., Mellon
Bank, and Wells Fargo Bank, N.A. (Exhibit 4.1 to the Company's Form
8-K, dated July 14, 1997, File No. 1-9232).
10.1(a)+ Non-Qualified Stock Option Incentive Plan, as amended, effective
August 26, 1996. (Exhibit 10.1(a) to the Company's Annual Report on
Form 10-K for the fiscal year ended November 1, 1996).
10.1(b)+ 1995 Non-Qualified Stock Option Plan, as amended, effective August
26, 1996. (Exhibit 10.1(b) to the Company's Annual Report on Form
10-K for the fiscal year ended November 1, 1996).
10.2(a)+ Employment Agreement dated as of May 1, 1987 between the Company and
William Shaw. (Exhibit 19.01 to the Company's Quarterly Report on
Form 10-Q for the quarter ended May 1, 1987, File No. 1-9232).
10.2(b)+ Amendment dated January 3, 1989 to Employment Agreement between the
Company and William Shaw. (Exhibit 19.01(b) to the Company's Annual
Report on Form 10-K for the fiscal year ended October 28, 1988, File
No. 1-9232).
-61-
<PAGE> 62
14(a)(3). Exhibits--Continued
Exhibit Description
- ------- -----------
10.3(a)+ Agreement dated as of May 1, 1987 between the Company and Jerome
Shaw (Exhibit 19.02 to the Company's Quarterly Report on Form 10-Q
for the quarter ended May 1, 1987, File No. 1-9232).
10.3(b)+ Amendment dated January 3, 1989 to Agreement between the Company and
Jerome Shaw (Exhibit 19.02(b) to the Company's Annual Report on Form
10-K for the fiscal year ended October 28, 1988, File No. 1-9232).
10.4(a)+ Agreement dated as of May 1, 1987 between the Company and Irwin B.
Robins (Exhibit 19.03 to the Company's Quarterly Report on Form 10-Q
for the quarter ended May 1, 1987, File No. 1-9232).
10.4(b)+ Amendment dated June 1, 1992 to Agreement between the Company and
Irwin B. Robins (Exhibit 10.04(b) to the Company's Annual Report on
Form 10-K for the fiscal year ended October 30, 1992, File No.
1-9232).
10.4(c)+ Amendment dated April 28, 1994 to Agreement between the Company and
Irwin B. Robins (Exhibit 10.01 to the Company's Quarterly Report on
Form 10-Q for the quarter ended April 29, 1994, File No. 1-9232).
10.4(d)+ Amendment dated April 30, 1996 to Agreement between the Company and
Irwin B. Robins. (Exhibit 10.04(d) to the Company's Annual Report on
Form 10-K for the fiscal year ended October 31, 1997, File No.
1-9232).
21.* Subsidiaries of the Registrant.
23.* Consent of Ernst & Young LLP.
27.* Financial Data Schedule (filed with electronic version only).
- ----------
+ Management contract or compensation plan or arrangement.
* Filed herewith. All other exhibits are incorporated herein by reference to
the exhibit indicated in the parenthetical references.
-62-
<PAGE> 63
14(b). Reports on Form 8-K
No reports on Form 8-K were filed during the fourth quarter of the year ended
October 31, 1997.
UNDERTAKING
The Company hereby undertakes to furnish to the Securities and Exchange
Commission, upon request, all constituent instruments defining the rights of
holders of long-term debt of the Company and its consolidated subsidiaries not
filed herewith. Such instruments have not been filed since none are, nor are
being, registered under Section 12 of the Securities Exchange Act of 1934 and
the total amount of securities authorized under any such instruments does not
exceed 10% of the total assets of the Company and its subsidiaries on a
consolidated basis.
-63-
<PAGE> 64
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange
Act of 1934, the Company has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
VOLT INFORMATION SCIENCES, INC.
Dated: New York, New York By: /s/ William Shaw
January 23, 1998 ---------------------------------
William Shaw
Chairman of the Board, President
and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Company and in
the capacities and on the dates indicated.
Signature Title Date
- --------- ----- ----
/s/ William Shaw Chairman of the Board, January 23, 1998
- --------------------- President and Chief Executive
William Shaw Officer and Director
/s/ James J. Groberg Director, Senior Vice January 23, 1998
- --------------------- President (Principal
James J. Groberg Financial Officer)
/s/ Jack Egan Vice President, Corporate January 23, 1998
- --------------------- Accounting (Principal
Jack Egan Accounting Officer)
/s/ Jerome Shaw Director January 23, 1998
- ---------------------
Jerome Shaw
/s/ Irwin B. Robins Director January 23, 1998
- ---------------------
Irwin B. Robins
Director
- ---------------------
Mark N. Kaplan
Director
- ---------------------
John R. Torell, III
-64-
<PAGE> 65
VOLT INFORMATION SCIENCES, INC. AND SUBSIDIARIES
SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
Column A Column B Column C Column D Column E
- -------- --------- ------------------------ ---------- ---------
Additions
------------------------
Balance at Charged to Charged to Balance
Beginning Costs and Other at End
Description of Period Expenses Accounts Deductions of Period
- ----------- --------- -------- -------- ---------- ---------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
Year ended October 31, 1997:
Deducted from asset accounts:
Allowance for uncollectible accounts $5,191 $3,046 $3,170(1)(4) $5,067
Allowance for deferred tax assets 1,252 $(99)(5) 547(6) 606
Unrealized loss (gain) on marketable securities (7) 3,000 7 (3) 3,000
Year ended November 1, 1996:
Deducted from asset accounts:
Allowance for uncollectible accounts $3,943 $2,718 $833 (2) $2,303(1)(4) 5,191
Allowance for deferred tax assets 1,477 (158)(5) 67(6) 1,252
Unrealized loss (gain) on marketable securities (122) 115 (3) (7)
Year ended November 3, 1995:
Deducted from asset accounts:
Allowance for uncollectible accounts $4,027 $2,081(1) $2,165(4) $3,943
Allowance for deferred tax assets 3,002 $(1,525)(5) 1,477
Unrealized loss (gain) on marketable securities 77 (199)(3) (122)
</TABLE>
(1)--Includes a foreign currency translation gain of $64 in 1997, gain of $49 in
1996, and a loss of $5 in 1995, respectively.
(2)--Pertains to the opening balance of a company acquired on January 29, 1996.
(3)--Charge (credit) to stockholders' equity.
(4)--Write-off of uncollectible accounts.
(5)--Credit to income tax provision, and in 1995, $104 to intangibles.
(6)--Principally, write-off of unutilized foreign tax credits.
<PAGE> 66
INDEX TO EXHIBITS
Exhibit Description
- ------- -----------
2.1 Agreement and Plan of Merger dated as of October 5, 1995, as amended
on November 10, 1995 and December 7, 1995, among Information
International, Incorporated, Autologic, Inc., name changed to
Autologic Information International, Inc., and Volt Information
Sciences, Inc., Incorporated by Reference to Appendix I to the
Registration Statement on Form S-4 of Autologic Information
International, Inc., (File No. 33-99278).
3.1 Restated Certificate of Incorporation of the Company, as filed with
the Department of State of New York on January 29, 1997. (Exhibit
3.1 to the Company's Annual Report on Form 10-K for the fiscal year
ended November 1, 1996).
3.2* By-Laws of the Company.
4.1 Composite Conformed Note Purchase Agreement drafted as of August 28,
1996 with respect to the issuance of the Company's $50.0 million,
7.92% Senior Notes due August 28, 2004 (excluding disclosure
schedules). (Exhibit 4.01(a) to the Company's Quarterly Report on
Form 10-Q for the quarter ended August 2, 1996).
4.2 Credit Agreement dated July 2, 1997 among the Company, The Chase
Manhattan Bank, individually and as Administrative Agent, Fleet
Bank, N.A., individually and as Co-Agent, BankBoston, N.A., Mellon
Bank, and Wells Fargo Bank, N.A. (Exhibit 4.1 to the Company's Form
8-K, dated July 14, 1997, File No. 1-9232).
10.1(a)+ Non-Qualified Stock Option Incentive Plan, as amended, effective
August 26, 1996. (Exhibit 10.1(a) to the Company's Annual Report on
Form 10-K for the fiscal year ended November 1, 1996).
10.1(b)+ 1995 Non-Qualified Stock Option Plan, as amended, effective August
26, 1996. (Exhibit 10.1(b) to the Company's Annual Report on Form
10-K for the fiscal year ended November 1, 1996).
10.2(a)+ Employment Agreement dated as of May 1, 1987 between the Company and
William Shaw (Exhibit 19.01 to the Company's Quarterly Report on
Form 10-Q for the quarter ended May 1, 1987, File No. 1-9232).
10.2(b)+ Amendment dated January 3, 1989 to Employment Agreement between the
Company and William Shaw (Exhibit 19.01(b) to the Company's Annual
Report on Form 10-K for the fiscal year ended October 28, 1988, File
No. 1-9232).
10.3(a)+ Agreement dated as of May 1, 1987 between the Company and Jerome
Shaw (Exhibit 19.02 to the Company's Quarterly Report on Form 10-Q
for the quarter ended May 1, 1987, File No. 1-9232).
<PAGE> 67
Exhibit Description
- ------- -----------
10.3(b)+ Amendment dated January 3, 1989 to Agreement between the Company and
Jerome Shaw (Exhibit 19.02(b) to the Company's Annual Report on Form
10-K for the fiscal year ended October 28, 1988, File No. 1-9232).
10.4(a)+ Agreement dated as of May 1, 1987 between the Company and Irwin B.
Robins (Exhibit 19.03 to the Company's Quarterly Report on Form 10-Q
for the quarter ended May 1, 1987, File No. 1-9232).
10.4(b)+ Amendment dated June 1, 1992 to Agreement between the Company and
Irwin B. Robins. (Exhibit 10.04(b) to the Company's Annual Report on
Form 10-K for the fiscal year ended October 30, 1992, File No.
1-9232).
10.4(c)+ Amendment dated April 28, 1994 to Agreement between the Company and
Irwin B. Robins. (Exhibit 10.01 to the Company's Quarterly Report on
Form 10-Q for the quarter ended April 29, 1994, File No. 1-9232).
10.4(d)+ Amendment dated April 30, 1996 to Agreement between the Company and
Irwin B. Robins. (Exhibit 10.04(d) to the Company's Annual Report on
Form 10-K for the fiscal year ended October 31, 1997, File No.
1-9232).
21.* Subsidiaries of the Registrant.
23.* Consent of Ernst & Young LLP.
27.* Financial Data Schedule (filed with electronic version only).
- ----------
+ Management contract or compensation plan or arrangement.
* Filed herewith. All other exhibits are incorporated herein by reference to
the exhibit indicated in the parenthetical references.
<PAGE> 1
EXHIBIT 3.2
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.
<PAGE> 2
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.
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.
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 Directors shall be so apportioned as to
make both classes as nearly equal in number as possible. When the number of
directors is increased by the Board and any newly created directorship is filled
by the Board, there shall be no classification of the additional directors until
the next annual meeting of shareholders. No decrease in the number of directors
shall shorten the term of any incumbent director. Each director shall be at
least 21 years old. Directors shall hold office until the annual
<PAGE> 3
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.
<PAGE> 4
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.
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.
<PAGE> 5
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.
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.
<PAGE> 6
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
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
<PAGE> 7
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
<PAGE> 8
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.
6.7 Enforcement: The right to indemnification and advancement of expenses
provided 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.
<PAGE> 9
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."
<PAGE> 1
VOLT INFORMATION SCIENCES, INC. AND SUBSIDIARIES
EXHIBIT 21--SUBSIDIARIES OF THE REGISTRANT
The following is a list of the subsidiaries and joint ventures of Volt as of
January 16, 1998 (exclusive of certain subsidiaries which, if considered in the
aggregate, would not, as of October 31, 1997, constitute a significant
subsidiary within the meaning of Rule 1-02(v) of Regulation S-X). All of such
subsidiaries, to the extent they were active during fiscal 1997, are included as
consolidated subsidiaries in the Registrant's consolidated financial statements
as of October 31, 1997.
Jurisdiction
of
Name (1) Incorporation
- -------- -------------
Volt Delta Resources, Inc. Nevada
Volt Delta Resources, Inc. Delaware
Jefferson-Adams Corporation New Jersey
Volt Temporary Services, Inc. Delaware
Volt Real Estate Corporation Delaware
VIS, Inc. Delaware
Volt-Autologic Directories S.A., Ltd. Delaware
Volt Holding Corp. Nevada
Volt Realty Two, Inc. Nevada
500 South Douglas Realty Corp. Delaware
14011 So. Normandie Ave. Realty Corp. Nevada
Volt Orangeca Real Estate Corp. Delaware
Volt Australia, Ltd. Delaware
Shaw & Shaw, Inc. Delaware
Volt Human Resources, Inc. Delaware
Volt ATRD Corp. Delaware
Sierra Technology Corporation California
Volt Opportunity Road Realty Corp. Delaware
Nuco II, Ltd. Delaware
Volt Management Corp. Delaware
Volt Technical Corp. Delaware
Fidelity National Credit Services Ltd. California
Nuco I, Ltd. Nevada
Keystone Temps, Inc. Pennsylvania
Volt Information Sciences Funding, Inc. Delaware
Volt Viewtech, Inc. Delaware
Volt Asia Enterprises, Ltd. Delaware
Volt STL Holdings, Inc. Delaware
DataNational of Georgia, Inc. Georgia
DataNational, Inc. Delaware
Volt Road Boring Corp. Florida
<PAGE> 2
VOLT INFORMATION SCIENCES, INC. AND SUBSIDIARIES
EXHIBIT 21--SUBSIDIARIES OF THE REGISTRANT--Continued
Jurisdiction
of
Name (1) Incorporation
- -------- -------------
Volt Delta B.V. Netherlands
Volt Delta Europe, Limited United Kingdom
Volt Management (UK), Ltd. United Kingdom
Tainol, S.A. Uruguay
Volt Human Resources (VHRI), Inc. Canada
Volt Services Group (Netherlands) B.V. Netherlands
Volt Jantec, Inc. (2) Delaware
Volt System I, J.V., Inc. (3) California
Volt Directory Marketing, Ltd. (4) Delaware
Autologic Information International, Inc. (5) Delaware
Autologic Information International, Ltd. (6) Nevada
Autologic Information International, A.B. (6) Sweden
Autologic Information International, Limited (6) United Kingdom
Autologic Information International Pty. Limited (6) Australia
Autologic Triple-I, Inc. (6) Canada
Autologic Information International, Ltd. (6) Israel
Xitron, Inc. (6) Michigan
- ----------
(1) - Except as noted, each named subsidiary is wholly owned, directly or
indirectly, by Volt Information Sciences, Inc., except that in the case of
certain foreign subsidiaries, qualifying shares may be registered in the name of
directors and/or other Volt subsidiaries.
(2) -60% owned subsidiary.
(3) -75% owned subsidiary.
(4) -80% owned subsidiary.
(5) -59% owned subsidiary. See discussion on page 14.
(6) -Wholly owned by Autologic Information International, Inc.
<PAGE> 1
EXHIBIT 23
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in Post-Effective Amendment No. 2
to Registration Statement No. 2-75618 on Form S-8 dated September 12, 1988,
Post-Effective Amendment No. 3 to Registration Statement No. 2-70180 on Form S-8
dated April 8, 1983, Registration Statement No. 33-18565 on Form S-8 dated
December 14, 1987 and Registration Statement No. 333-13369 on Form S-8 dated
October 3, 1996 of Volt Information Sciences, Inc. of our report dated December
17, 1997, with respect to the consolidated financial statements and schedule of
Volt Information Sciences, Inc. and subsidiaries included in the Form 10K for
the year ended October 31, 1997.
Ernst & Young LLP
New York, New York
January 27, 1998
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