<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the Nine Months Ended July 28, 2000
Or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the transition period from to
----------------- -----------------
Commission File No. 1-9232
VOLT INFORMATION SCIENCES, INC.
--------------------------------
(Exact name of registrant as specified in its charter)
New York 13-5658129
------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
560 Lexington Avenue, New York, New York 10022
--------------------------------------------- -------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (212) 704-2400
Not Applicable
---------------------------------------------------------------
(Former name, former address and former fiscal year, if changed
since last report)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months, and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
----- -----
The number of shares of common stock, $.10 par value, outstanding as of
September 1, 2000 was 15,206,730.
<PAGE> 2
VOLT INFORMATION SCIENCES, INC. AND SUBSIDIARIES
FORM 10-Q
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PART I - FINANCIAL INFORMATION
<S> <C> <C> <C>
Item 1. Financial Statements
Condensed Consolidated Statements of Income - Nine Months
and Three Months Ended July 28, 2000 and July 30, 1999 3
Condensed Consolidated Balance Sheets - July 28, 2000
and October 29, 1999 4
Condensed Consolidated Statements of Cash Flows -
Nine Months Ended July 28, 2000 and July 30, 1999 5
Notes to Condensed Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 12
Item 3. Qualitative and Quantitative Disclosures About Market Risk 22
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 23
SIGNATURE 24
</TABLE>
-2-
<PAGE> 3
PART I - FINANCIAL INFORMATION
ITEM 1- FINANCIAL STATEMENTS
VOLT INFORMATION SCIENCES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
Nine Months Ended Three Months Ended
------------------------------ -----------------------------
July 28, July 30, July 28, July 30,
2000 1999 2000 1999
----------- ------------ ---------- ---------
(Dollars in thousands, except per share data)
<S> <C> <C> <C> <C>
NET SALES:
Sales of services $1,516,401 $1,527,429 $515,975 $543,481
Sales of products 57,068 54,781 21,245 16,534
------------ ------------- ----------- ------------
1,573,469 1,582,210 537,220 560,015
------------ ------------- ----------- ------------
COSTS AND EXPENSES:
Cost of sales
Services 1,408,141 1,443,123 473,840 508,715
Products 34,208 33,089 13,147 10,054
Selling and administrative 64,736 54,137 24,269 19,950
Research, development and engineering 7,293 7,639 1,520 2,588
Depreciation and amortization 18,437 17,581 6,507 5,891
------------ ------------- ----------- ------------
1,532,815 1,555,569 519,283 547,198
------------ ------------- ----------- ------------
OPERATING PROFIT 40,654 26,641 17,937 12,817
OTHER INCOME (EXPENSE):
Interest income 1,209 1,320 419 374
Other (loss) income - net (354) 148 102 79
Gain on sale of joint venture -- note E 2,049 777
Foreign exchange gain (loss) - net 177 (485) 256 (277)
Interest expense (6,945) (6,136) (2,490) (2,031)
------------ ------------- ----------- ------------
Income before income taxes and minority interests 34,741 23,537 16,224 11,739
Income tax provision (14,261) (9,000) (6,600) (4,870)
Minority interests in net loss
of consolidated subsidiaries 690 1,405 206 833
------------ ------------- ----------- ------------
NET INCOME $21,170 $15,942 $9,830 $7,702
============ ============= =========== ============
Per Share Data
--------------
Basic:
Net income per share $1.40 $1.06 $0.65 $0.51
============ ============= =========== ============
Weighted average number of shares--Note F 15,117,007 15,020,861 15,190,594 15,025,729
============ ============= =========== ============
Diluted:
Net income per share $1.38 $1.05 $0.64 $0.51
============ ============= =========== ============
Weighted average number of shares--Note F 15,307,433 15,137,847 15,412,843 15,154,039
============ ============= =========== ============
</TABLE>
See accompanying notes.
-3-
<PAGE> 4
VOLT INFORMATION SCIENCES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
July 28, October 29,
2000 1999 (a)
---------- -----------
ASSETS (Dollars in thousands)
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $23,482 $32,402
Short-term investments 3,386 2,609
Trade accounts receivable less allowances of $9,553 (2000) and $7,941 (1999) 387,187 364,461
Inventories--Note B 75,919 61,116
Deferred income taxes 2,688 6,874
Prepaid expenses and other assets 15,997 9,585
---------- -----------
TOTAL CURRENT ASSETS 508,659 477,047
Investment in joint venture--Note E 3,995 1,297
Investment in securities 304 162
Property, plant and equipment less allowances for depreciation and amortization
of $59,317 (2000) and $55,937 (1999)--Note C 90,810 78,168
Deferred income taxes and other assets 11,433 11,185
Intangible assets-net of accumulated amortization of $23,496 (2000) and
$18,689 (1999)--Note G 46,038 50,470
---------- -----------
$661,239 $618,329
========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Notes payable to banks--Note C $94,098 $68,498
Current portion of long-term debt--Note C 12,199 12,654
Accounts payable 119,143 127,781
Accrued wages and commissions 50,600 49,209
Other accruals 30,023 33,616
Customer advances and other liabilities 34,985 22,442
Income taxes 5,403 11,146
---------- -----------
TOTAL CURRENT LIABILITIES 346,451 325,346
LONG-TERM DEBT--Note C 44,271 45,728
MINORITY INTERESTS 16,356 17,259
STOCKHOLDERS' EQUITY--Notes C and D
Preferred stock, par value $1.00; Authorized--500,000 shares;
issued--none
Common stock, par value $.10; Authorized--30,000,000 shares;
issued and Outstanding--15,203,530 shares (2000) and
15,032,446 shares (1999) 1,521 1,503
Paid-in capital 40,758 37,696
Retained earnings 212,387 191,217
Accumulated other comprehensive loss (505) (420)
---------- -----------
254,161 229,996
---------- -----------
$661,239 $618,329
========== ===========
</TABLE>
(a) The Balance Sheet at October 29, 1999 has been derived from the
audited financial statements at that date.
See accompanying notes.
-4-
<PAGE> 5
VOLT INFORMATION SCIENCES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Nine Months Ended
---------------------------
July 28, July 30,
2000 1999
--------- ---------
(Dollars in thousands)
<S> <C> <C>
CASH PROVIDED BY (APPLIED TO) OPERATING ACTIVITIES
Net income $ 21,170 $ 15,942
Adjustments to reconcile net income to cash provided by (applied to)
operating activities:
Depreciation and amortization 18,437 17,581
Gain on sale of joint venture (2,049)
Equity in net loss of joint venture 94 34
Minority interests (690) (1,405)
Accounts receivable provisions 6,243 3,361
Loss (gain) on foreign currency translation 231 (109)
Deferred income taxes 4,630 (250)
Other 96 137
Changes in operating assets and liabilities:
Increase in accounts receivable (30,600) (47,577)
Increase in inventories (14,803) (14,098)
Increase in prepaid expenses and other current assets (6,851) (2,523)
(Increase) decrease in other assets (280) 436
(Decrease) increase in accounts payable (8,603) 6,081
(Decrease) increase in accrued expenses (1,075) 8,759
Increase in customer advances and other liabilities 13,000 8,742
Decrease in income taxes payable (5,744) (3,518)
-------- --------
NET CASH APPLIED TO OPERATING ACTIVITIES (4,745) (10,456)
-------- --------
</TABLE>
-5-
<PAGE> 6
VOLT INFORMATION SCIENCES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)--Continued
<TABLE>
<CAPTION>
Nine Months Ended
---------------------------
July 28, July 30,
2000 1999
--------- ---------
(Dollars in thousands)
<S> <C> <C>
CASH PROVIDED BY (APPLIED TO) INVESTING ACTIVITIES
Sales of investments 11,937 3,579
Purchases of investments (12,860) (4,610)
Investment in joint venture (2,792) (1,330)
Acquisitions (426) (38,533)
Proceeds from disposals of property, plant and equipment 815 230
Purchases of property, plant and equipment (27,239) (18,248)
Other (47) (247)
--------- ---------
NET CASH APPLIED TO INVESTING ACTIVITIES (30,612) (59,159)
--------- ---------
CASH PROVIDED BY (APPLIED TO) FINANCING ACTIVITIES
Payment of long-term debt (2,179) (924)
Exercise of stock options 2,522 40
Increase in notes payable to banks 26,347 61,273
-------- --------
NET CASH PROVIDED BY FINANCING ACTIVITIES 26,690 60,389
-------- --------
Effect of exchange rate changes on cash (253) 339
--------- ---------
NET DECREASE IN CASH AND CASH EQUIVALENTS (8,920) (8,887)
Cash and cash equivalents, beginning of period 32,402 31,625
-------- --------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 23,482 $ 22,738
======== ========
SUPPLEMENTAL INFORMATION
Cash paid during the period:
Interest, including $662 capitalized in 2000 and $145 capitalized in 1999 $ 6,571 $ 5,121
Income taxes, net of refunds $ 14,463 $ 11,671
Obligation incurred in connection with the purchase and support of
an Enterprise Resource Planning System $ 4,334
</TABLE>
See accompanying notes.
-6-
<PAGE> 7
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Note A--Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with the instructions for Form 10-Q and Article 10
of Regulation S-X, and, therefore, do not include all information and footnotes
required by generally accepted accounting principles for complete financial
statements. In the opinion of management, the accompanying unaudited condensed
consolidated financial statements contain all adjustments (consisting of normal
recurring accruals) considered necessary for a fair presentation of the
Company's consolidated financial position at July 28, 2000, consolidated
results of operations for the nine and three months ended July 28, 2000 and
July 30, 1999 and consolidated cash flows for the nine months ended July 28,
2000 and July 30, 1999. Operating results for interim periods are not
necessarily indicative of the results that may be expected for the fiscal year.
These statements should be read in conjunction with the financial statements
and footnotes included in the Company's Annual Report on Form 10-K for the year
ended October 29, 1999. The accounting policies used in preparing these
financial statements are the same as those described in that Report. The
Company's fiscal year ends on the Friday nearest October 31. The 2000 fiscal
year will contain 53 weeks (one additional week in the fourth quarter) compared
with fiscal year 1999.
Note B--Inventories
<TABLE>
<CAPTION>
Inventories consist of:
July 28, October 29,
2000 1999
-------- ----------
(Dollars in thousands)
<S> <C> <C>
Services:
Accumulated unbilled costs on service contracts $63,371 $50,079
------- --------
Products:
Materials 8,388 6,205
Work-in-process 1,975 1,910
Service parts 941 1,170
Finished goods 1,244 1,752
------- --------
12,548 11,037
------- --------
Total $75,919 $61,116
======= =======
</TABLE>
The cumulative amounts billed, principally under service contracts at July 28,
2000 and October 29, 1999, of $8.8 million and $2.5 million, respectively, are
credited against the related costs in inventory.
-7-
<PAGE> 8
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)--Continued
Note C--Long-Term Debt and Financial Arrangements
Long-term debt consists of the following:
<TABLE>
<CAPTION>
July 28, October 29,
2000 1999
-------- ----------
(Dollars in thousands)
<S> <C> <C>
7.92% Senior Notes (a) $50,000 $50,000
Term loan (b) 2,625 3,300
Notes and other obligations payable (c) & (d) 3,845 5,082
------- -------
56,470 58,382
Less amounts due within one year 12,199 12,654
------- -------
Total long-term debt $44,271 $45,728
======= =======
</TABLE>
(a) On August 28, 1996, the Company issued $50.0 million of Senior Notes in a
private placement with institutional investors. The notes bear interest at
7.92% per annum, payable semi-annually on February 28 and August 28, and
provide for amortization of principal in five equal annual installments
beginning in August 2000. In March 2000, the Company entered into a series of
interest rate swap agreements, which effectively converted these notes, through
their maturity, from fixed to floating rate debt. The swap rates are based on
LIBOR, reset quarterly, and averaged 7.0% at July 28, 2000. The notes were
issued pursuant to Note Purchase Agreements, which contain various affirmative
and negative covenants. One such covenant requires the Company to maintain a
level of consolidated net worth which, under a formula, was $138.1 million at
July 28, 2000. However, the terms of the Company's revolving Credit Agreement
required the Company to maintain a consolidated net worth of $154.8 million at
July 28, 2000 (see below).
(b) In October 1994, the Company entered into a $10.0 million loan agreement
with Fleet Bank, which is secured by a deed of trust on land and buildings
(book value at July 28, 2000 - $13.4 million). The loan, which bears interest
at 7.86% per annum, requires principal payments of $225,000 per quarter and a
final payment of $1.7 million in October 2001.
(c) A loan of $2.5 million from The Chase Manhattan Bank was made to a foreign
subsidiary on January 18, 1996 to finance the acquisition of a printing press.
The loan, with a balance of $498,666 at July 28, is guaranteed by the Company,
and is being repaid in semi-annual payments of $249,000, plus interest
calculated at LIBOR (6.53% per annum at July 28, 2000) plus 0.25%, through
March 15, 2001.
(d) On February 9, 1999, the Company entered into a $5.6 million Installment
Payment Agreement to purchase and maintain an Enterprise Resource Planning
System for internal use. The system has been capitalized and will be amortized
over a seven year period. The Agreement provides for amortization of interest,
calculated at 6% per annum, and principal amortization in five equal annual
installments of $1.3 million; the first payment was made in February 1999, with
the final payment due in February 2003.
In addition, on July 2, 1997, the Company entered into a $75.0 million,
three-year, syndicated, unsecured, revolving credit agreement ("Multi-year
Revolver") with a group of banks for which The Chase Manhattan Bank ("Chase")
and Fleet Bank, N.A. are serving as co-agents. In December 1998, the Company
amended and restated the Multi-year Revolver extending it to January 2002.
Borrowings under the facility bear interest at various interest rates, with the
Company having the option to select the most favorable rate at the time of
-8-
<PAGE> 9
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)--Continued
Note C--Long-Term Debt and Financial Arrangements--Continued
borrowing. The Multi-year Revolver provides for, among other things, the
maintenance of various financial ratios and covenants, including a requirement
that the Company maintain consolidated net worth (as defined) of $110.0
million, plus 50% of consolidated net income for each completed fiscal year
(resulting in a requirement at July 28, 2000 to maintain consolidated net worth
of $154.8 million), and certain limitations on the extent to which the Company
and its subsidiaries may incur additional indebtedness, grant liens and sell
assets.
On November 29, 1999, the Company entered into an additional $25 million, 364
day, syndicated unsecured revolving credit agreement ("364-day Revolver") with
a group of banks and the same co-agents and terms as the Multi-year Revolver.
On August 17, 2000, the Company amended and reduced its $75.0 million
Multi-year Revolver to $72.5 million and increased its $25.0 million 364-day
Revolver to $72.5 million. The Company from time to time, may also borrow under
uncommitted facilities from various banks. The Company had total outstanding
bank borrowings of $94.1 million at July 28, 2000, of which $69.7 million was
borrowed under the two revolvers and $20.0 million was borrowed under
uncommitted facilities.
Note D--Stockholders' Equity
Changes in the major components of stockholders' equity for the nine months
ended July 28, 2000 are as follows:
<TABLE>
<CAPTION>
Common Paid-In Retained
Stock Capital Earnings
------- ------- --------
(Dollars in thousands)
<S> <C> <C> <C>
Balance at October 29, 1999 $1,503 $37,696 $191,217
Net income for the nine months 21,170
Issuance of 24,939 shares to ESOP 2 556
Stock options exercised - 146,150 shares 16 2,506
------- -------- --------
Balance at July 28, 2000 $1,521 $40,758 $212,387
======= ======== ========
</TABLE>
Another component of stockholders' equity, the accumulated other comprehensive
loss, consists of cumulative unrealized foreign currency translation
adjustments of $236,000 and $62,000 at July 28, 2000 and October 29, 1999,
respectively, and unrealized losses in marketable securities of $269,000 and
$358,000 at July 28, 2000 and October 29, 1999, respectively. Changes in these
items, net of income taxes, are included in the calculation of comprehensive
income as follows:
<TABLE>
<CAPTION>
Nine Months Ended Three Months Ended
------------------------ --------------------------
July 28, July 30, July 28, July 30,
2000 1999 2000 1999
------- ------- ------- -------
(Dollars in thousands)
<S> <C> <C> <C> <C>
Net income $21,170 $15,942 9,830 $7,702
Foreign currency translation adjustments - net (174) (46) (144) 72
Unrealized gains (losses) on marketable securities - net 89 (674) (9) (40)
------- ------- ------- ------
Total comprehensive income $21,085 $15,222 $ 9,677 $7,734
======= ======= ======= ======
</TABLE>
-9-
<PAGE> 10
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)--Continued
Note E--Joint Ventures
The Company owns a 50% interest in westVista Advertising Services, a joint
venture with a subsidiary of TELUS Corporation. The venture was formed in
fiscal 1998 for the acquisition or establishment and subsequent operation of
one or more businesses engaged in the publication of telephone directories in
the western United States. During fiscal 1999, the venture made its first
acquisition, purchasing eleven community Yellow Pages directories at a cost of
$2.6 million. On March 2, 2000, the venture acquired seven additional community
Yellow Pages directories at a cost of $4.8 million. In the first nine months of
fiscal 2000, sales of the venture were $1.5 million and the Company's portion
of the loss sustained was $94,000.
In the nine months and third quarter of 1999, the Company recognized $2.0
million and $777,000, respectively, of a previously deferred gain on the sale
in 1997 of its interest in a Brazilian joint venture. In connection with the
sale, the Company granted credit with respect to the printing of telephone
directories by the Company's Uruguayan division. During fiscal 1999, the
venture repaid substantially all of the balance of its obligations.
Note F--Per Share Data
In calculating basic earnings per share, the dilutive effect of stock options
are excluded. Diluted earnings per share are computed on the basis of the
weighted average number of shares of common stock outstanding and the assumed
exercise of dilutive outstanding stock options based on the treasury stock
method.
<TABLE>
<CAPTION>
Nine Months Ended Three Months Ended
---------------------------- ----------------------------
July 28, July 30, July 28, July 30,
2000 1999 2000 1999
----------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
Denominator for basic earnings per share -
weighted average number of shares 15,117,007 15,020,861 15,190,594 15,025,729
Effect of dilutive securities:
Employee stock options 190,426 116,986 222,249 128,310
--------- ---------- ---------- ----------
Denominator for diluted earnings per share -
Adjusted weighted average number of shares 15,307,433 15,137,847 15,412,843 15,154,039
========== ========== ========== ==========
</TABLE>
Other options to purchase 53,450 and 177,960 shares of the Company's common
stock were outstanding at July 28, 2000 and July 30, 1999, respectively, but
were not included in the computation of diluted earnings per share because
their exercise prices were greater than the average market price of the
Company's common stock and, therefore, the effect of inclusion would have been
antidilutive.
-10-
<PAGE> 11
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)--Continued
Note G--Acquisitions
In December 1999, the Company completed its purchase of the Wired Services and
Professional Staffing divisions of two Lucent Technologies subsidiaries. The
Wired Services division installs cable, wire and small telecommunications
systems for businesses, and the Professional Staffing division provides
technical, management and administrative personnel for temporary assignments.
The Company paid cash for inventory and equipment, with limited additional
consideration due based on future sales of the Wired Services division. The
amounts paid and payable are not considered material to the Company.
In December 1998, the Company acquired Gatton Computing Group Limited, now
known as Volt Europe, a provider of Information Technology ("IT") contractor
resourcing services and IT managed services in the United Kingdom and
continental Europe. The purchase price was $35.9 million in cash. Headquartered
near London, England, Volt Europe offers IT services which include temporary IT
contract consultants, specifically tailored recruitment services, and systems
development, maintenance and technical support services. The Company borrowed
$35.0 million under the Multi-year Revolver to finance this acquisition.
Note H--Segment Disclosures
Financial data concerning the Company's sales and segment operating profit
(loss) by reportable operating segment for the nine and three months ended July
28, 2000 and July 30, 1999 included on page 12 of this report are an integral
part of these financial statements.
During the nine months ended July 28, 2000, consolidated assets increased by
$42.9 million, primarily as a result of increased accounts receivable and
inventories in the Telecommunications Services and Telephone Directory
segments, as well as corporate capitalized costs related to the installation of
an Enterprise Resource Planning system.
-11-
<PAGE> 12
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
NINE MONTHS AND THREE MONTHS ENDED JULY 28, 2000 COMPARED
TO THE NINE MONTHS AND THREE MONTHS ENDED JULY 30, 1999
The information which appears below relates to current and prior periods, the
results of operations for which periods are not necessarily indicative of the
results which may be expected for any subsequent periods. Management has made
no predictions or estimates as to future operations and no inferences as to
future operations should be drawn.
The following summarizes the Company's unaudited results of operations by
segment:
<TABLE>
<CAPTION>
For the Nine Months Ended For the Three Months Ended
--------------------------- ---------------------------
July 28, July 30, July 28, July 30,
2000 1999 2000 1999
--------- ---------- -------- ---------
(Dollars in thousands)
<S> <C> <C> <C> <C>
Net Sales:
---------
Staffing Services
Traditional Staffing $997,230 $888,168 $341,028 $314,720
Managed Services 503,985 568,165 160,746 204,239
--------- ---------- -------- ---------
Total Gross Sales 1,501,215 1,456,333 501,774 518,959
Less: Non-recourse Managed Services (296,265) (185,709) (101,458) (66,623)
--------- ---------- -------- ---------
Net Staffing Services Sales 1,204,950 1,270,624 400,316 452,336
Telephone Directory 62,818 65,239 27,903 29,873
Telecommunications Services 213,759 130,494 77,078 49,266
Computer Systems 47,051 66,670 15,097 14,676
Electronic Publication and Typesetting Systems 57,165 54,947 21,251 16,583
Elimination of intersegment sales (12,274) (5,764) (4,425) (2,719)
--------- ---------- -------- ---------
Total Net Sales $1,573,469 $1,582,210 $537,220 $560,015
========== ========== ======== ========
Segment Operating Profit (Loss):
--------------------------------
Staffing Services $35,839 $27,589 $13,398 $11,353
Telephone Directory (3,412) (31) 882 1,731
Telecommunications Services 16,919 9,786 6,453 5,376
Computer Systems 3,500 2,723 1,079 (400)
Electronic Publication and Typesetting Systems (946) (3,276) (220) (2,196)
--------- ---------- -------- ---------
Total Segment Operating Profit 51,900 36,791 21,592 15,864
General corporate expenses (11,246) (10,150) (3,655) (3,047)
--------- ---------- -------- ---------
Total Operating Profit 40,654 26,641 17,937 12,817
Interest and other income - net 856 1,468 522 453
Gain on sale of joint venture 2,049 777
Foreign exchange gain (loss) - net 176 (485) 255 (277)
Interest expense (6,945) (6,136) (2,490) (2,031)
--------- ---------- -------- ---------
Income Before Income Taxes and Minority Interests $34,741 $23,537 $16,224 $11,739
========= ========== ======== =========
</TABLE>
-12-
<PAGE> 13
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS--Continued
NINE MONTHS AND THREE MONTHS ENDED JULY 28, 2000 COMPARED
TO THE NINE MONTHS AND THREE MONTHS ENDED JULY 30, 1999--Continued
Forward-Looking Statements Disclosure
In order to keep the Company's shareholders and investors informed of the
Company's future plans and objectives, this Report and other reports and
statements issued by the Company and its officers, from time-to-time, contain
certain statements concerning the Company's future plans, objectives,
performance, intentions and expectations that are, or may be deemed to be,
"forward-looking statements". The Company's ability to do this has been
fostered by the Private Securities Litigation Reform Act of 1995, which
provides a "safe harbor" for forward-looking statements to encourage companies
to provide prospective information so long as those statements are accompanied
by meaningful cautionary statements identifying important factors that could
cause actual results to differ materially from those discussed in the
statement. The Company believes that it is in the best interests of its
shareholders to take advantage of the "safe harbor" provisions of that Act.
Although the Company believes that its expectations are based on reasonable
assumptions, these forward- looking statements are subject to a number of known
and unknown risks and uncertainties that could cause the Company's actual
results, performance and achievements to differ materially from those described
or implied in the forward-looking statements. These risks and uncertainties
include, but are not limited to:
- general economic, competitive and other business conditions
- the degree and timing of obtaining new contracts and the rate of renewals
of existing contracts, as well as customers' degree of utilization of the
Company's products and services
- material changes in demand from larger customers, particularly those with
which the Company has national contracts
- the effect of litigation by temporary employees against temporary help
companies and the customers with whom they do business
- decreasing rates of unemployment and higher wages sought by temporary
workers, especially those in certain technical fields particularly
characterized by labor shortages
- changes in customer attitudes toward outsourcing and temporary personnel
- 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
- the Company's ability to 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, cost
overruns and uncertainty of customer acceptance
- the Company's dependence on third parties for some product components
- changes in laws, regulations and government policies, particularly in the
area of staffing services and export controls
- the Company's performance on contracts
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<PAGE> 14
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS--Continued
NINE MONTHS ENDED JULY 28, 2000 COMPARED
TO THE NINE MONTHS ENDED JULY 30, 1999
Forward-Looking Statements Disclosure--Continued
- the degree and effects of inclement weather on the Telecommunications
Services segment
- the timing of customer acceptances of systems
- the Company's ability to attract and retain certain classifications of
technologically qualified personnel, particularly in the areas of research
and development and customer service
These and certain other factors are discussed in the Company's Annual Report on
Form 10-K for the fiscal year ended October 29, 1999 and from time to time
hereafter in the Company's other reports filed with the Securities and Exchange
Commission.
Results of Operations - Summary
In the nine-month period of fiscal 2000, net sales were $1.6 billion. Sales
decreased from the comparable period in fiscal 1999 by $8.7 million, or 1%. The
decrease in net sales resulted primarily from a decrease in sales of $65.7
million by the Staffing Services segment and a $19.6 million decrease by the
Computer Systems segment, partially offset by a $83.3 million increase in sales
by the Telecommunications Services segment.
The operating profit of the Company's segments increased by $15.1 million, or
41%, to $51.9 million in the 2000 nine month period. The increase in operating
profit resulted primarily from an $8.3 million increase by the Staffing
Services segment and a $7.1 million increase by the Telecommunications Services
segment.
The Company's pretax income before minority interests increased by $11.2
million, or 48%, to $34.7 million in the first nine months of fiscal 2000.
Consolidated 1999 results included a gain on the sale of a joint venture of
$2.0 million (see Note E of Notes to Condensed Consolidated Financial
Statements of this report).
The independent yellow page directory publishing division of the Company's
Telephone Directory segment has modified its long-term strategy to promote
increased profitability in the future. Specific initiatives include the
rescoping of certain directories to respond to changing demographics,
publishing of its second major city directory in 2001 to support its
surrounding suburban directories, and the introduction of several new community
directories to strengthen its position in certain geographic areas. In
addition, its sales staff has been strengthened and marketing and advertising
expenditures have increased. While the Company believes these initiatives
should enable the division to return to historical or greater profit levels in
2001 and thereafter, the immediate costs of these initiatives will continue to
significantly reduce the division's and segment's profitability in fiscal year
2000.
Primarily as a result of the reduced earnings of the Telephone Directory
segment, the Company expects that consolidated earnings for the fourth quarter
of fiscal 2000 will approximate consolidated earnings for the fourth quarter of
fiscal 1999. However, short-term implementation costs associated with a new
accounting and back office PeopleSoft Enterprise Resource Planning ("ERP")
system could also impact fourth quarter results.
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<PAGE> 15
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS--Continued
NINE MONTHS ENDED JULY 28, 2000 COMPARED
TO THE NINE MONTHS ENDED JULY 30, 1999
Results of Operations - By Segment
Sales of the Staffing Services segment decreased by $65.7 million, or 5%, to
$1.2 billion in 2000 and its operating profit increased by $8.3 million, or
30%, to $35.8 million, compared with $27.6 million in 1999. The sales decrease
was caused by a reduction in Managed Services revenue of $174.7 million, or
46%, due primarily to an increase in the number of associate vendors who have
agreed, under arrangements that are considered non-recourse against the
Company, to be paid subject to the receipt of the customers' payment to the
Company, the revenue from which is excluded from sales, and a reduction in the
use of associate vendors by one of the Company's largest Managed Services
clients. These revenue decreases were offset, in part, by an increase in sales
of $109.1 million, or 12%, in traditional staffing business. Operating margins
rose from 2.2% to 3.0% for the entire segment and from 3.1% to 3.6% excluding
Managed Services revenue. An increased mix of higher margin recruited business
in both the Technical and Commercial divisions of the segment and strong growth
in permanent placements contributed to higher margins and higher operating
profit for this segment.
The Telephone Directory segment's sales decreased by $2.4 million, or 4%, to
$62.8 million in fiscal 2000 and its operating loss increased to $3.4 million
in 2000 from $31,000 in 1999. The sales decrease was primarily due to decreases
in printing sales in Uruguay of $1.7 million and the segment's Viewtech
division sales of $1.7 million partially offset by an increase in independent
directory publishing sales of $821,000, which included the publication of the
segment's toll-free directory. The increase in operating loss was the result of
the decreased sales and increased costs, including a revised compensation
structure, resulting from strategic initiatives by the segment's independent
yellow page directory division designed to increase future advertising revenue,
and a charge of $867,000, in the first quarter, for a Viewtech customer
receivable deemed uncollectable due to a bankruptcy filing.
The Telecommunications Services segment's sales increased by $83.3 million, or
64%, to $213.8 million in fiscal year 2000 and its operating profit increased
by $7.1 million, or 73%, to $16.9 million in fiscal 2000 compared to $9.8
million in 1999. All of the segment's divisions reported significant increases
in sales as a result of increased revenue from long-haul fiber optic projects
and cross-connect box projects, as well as additional increased business from
several major customers. The increase in operating profit was the result of the
increase in sales and a decrease in overhead of 3.5 percentage points partially
offset by a decrease in gross margins of 4.5 percentage points, primarily due
to amounts recorded in the first quarter for cost overruns on one of the
Business Systems division's projects, the completion of low-margin government
contract work and integration costs for the Lucent Wired Services Division
acquired in late December 1999.
The Computer Systems segment's sales decreased by $19.6 million, or 29%, to
$47.1 million in the first nine months of 2000 and its operating profit
increased to $3.5 million from $2.7 million in the first nine months of 1999.
The sales decrease was primarily due to the recognition in fiscal 1999 of an
operator services system in Holland, which was accounted for under the
completed contract method of accounting. Revenues for this contract were $25.9
million. The decreases in revenue were partially offset and the operating
profit was increased in fiscal 2000 by an increase in customer utilization of
the segment's transaction-based DirectoryExpress/InfoExpress systems, which
outsource the segment's directory database to telephone companies, as well as
increased workstation and software sales.
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<PAGE> 16
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS--Continued
NINE MONTHS ENDED JULY 28, 2000 COMPARED
TO THE NINE MONTHS ENDED JULY 30, 1999--Continued
Results of Operations - By Segment--Continued
The Electronic Publication and Typesetting Systems segment's sales increased by
$2.2 million, or 4%, to $57.2 million in fiscal 2000 and its operating loss
decreased by $2.3 million, or 71%, to $946,000. The increase in sales resulted
from higher domestic and international sales of systems and equipment,
primarily due to sales of the segment's new wide Computer-to-Plate imagers to
Latin American and European customers. The decrease in operating loss was due
to the increase in sales, an increase in service and support gross margins of
9.2 percentage points due to lower spare parts and warranty costs, partially
offset by a decrease in systems and equipment gross margins of 4.5 percentage
points due to price discounting in response to competition and higher
manufacturing costs. Operating expenses decreased by $1.3 million due to cost
reductions. Included in each of the nine month periods are amortization charges
of $1.6 million related to goodwill which will be fully amortized at the end of
the 2001 first quarter. The markets in which the segment competes are marked by
rapidly changing technology, with sales in fiscal 2000 of equipment introduced
within the last three years comprising approximately 94% of equipment sales.
Although cost reductions are being realized, there can be no assurances that
the segment will return to profitability within the near term.
Results of Operations - Other
Other items, discussed on a consolidated basis, affecting results of operations
for the nine-month period were:
Selling and administrative expenses increased by $10.6 million, or 20%, to
$64.7 million in 2000 to support the increased sales activities of the Staffing
Services and Telecommunications Services segments, initiatives taken by the
Telephone Directory segment, and costs associated with a new accounting and
back office ERP system. These expenses, expressed as a percentage of sales,
were 4.1% in 2000 and 3.4% in 1999.
Research, development and engineering decreased by $346,000, or 5%, to $7.3
million in the first nine months of fiscal 2000. The decrease in 2000 was
primarily due to a reduction in product development in the Electronic
Publication and Typesetting Systems segment as new products were completed and
introduced to customers partially offset by increased development costs
associated with the Computer Systems segment.
Depreciation and amortization increased by $856,000, or 5%, to $18.4 million in
the first nine months of fiscal 2000. The increase was attributable to
amortization of intangibles due to acquisitions made during fiscal 1999 and an
increase in depreciation due to the new ERP system.
Interest income decreased by $111,000, or 8%, to $1.2 million in the first nine
months of fiscal 2000, primarily due to a decrease in funds available for
investment.
The other loss of $354,000 in fiscal 2000 is primarily due to an increase in
sundry expenses, including the Company's share in the start-up losses of its
new joint venture, westVista Advertising Services, during the first six months
of the year.
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<PAGE> 17
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS--Continued
NINE MONTHS ENDED JULY 28, 2000 COMPARED
TO THE NINE MONTHS ENDED JULY 30, 1999--Continued
Results of Operations - Other--Continued
In the first nine months of fiscal 1999, the Company recognized $2.0 million of
a previously deferred gain on the sale in 1997 of its interest in a Brazilian
joint venture. In connection with the sale, the Company granted credit with
respect to the printing of telephone directories by the Uruguayan division.
During 1999, the venture repaid substantially all of the balance of its
obligations.
The foreign exchange gain in fiscal 2000 was $177,000, compared to a loss of
$485,000 in the comparable nine month period of fiscal 1999, as a result of
favorable currency movements in the European markets. To reduce the potential
adverse impact from foreign currency changes on the Company's foreign
receivables, sales and firm commitments, foreign currency options are generally
purchased and settled on the last day of each quarter.
Interest expense increased by $809,000, or 13%, to $6.9 million in 2000. The
increase is the result of higher borrowing under the Company's revolving credit
agreements to finance the December 1998 acquisition of Volt Europe and to
support the increased working capital requirements of the Company and higher
interest rates, partially offset by a decrease in financing costs incurred by
the Company's Uruguayan division.
The Company's effective tax rate was increased to 41.0% in 2000 from 38.2% in
1999. The lower effective tax rate in 1999 resulted from the non-taxable gain
on the sale of a Brazilian joint venture.
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<PAGE> 18
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS--Continued
THREE MONTHS ENDED JULY 28, 2000 COMPARED
TO THE THREE MONTHS ENDED JULY 30, 1999
Results of Operations - Summary
In the third quarter of fiscal 2000, net sales decreased from the comparable
period in fiscal 1999 by $22.8 million, or 4%, to $537.2 million. The decrease
in net sales resulted primarily from a $52.0 million decrease in sales by the
Staffing Services segment, partially offset by an increase in sales of $27.8
million by the Telecommunications Services segment and a $4.7 million increase
by the Electronic Publication and Typesetting Systems segment.
The operating profit of the Company's segments increased by $5.7 million, or
36%, to $21.6 million in 2000. The increase in operating profit resulted
primarily from a $2.0 million increase by the Staffing Services segment, a $2.0
million improvement by the Electronic Publication and Typesetting Systems
segment, a $1.5 million improvement by the Computer Systems segment and a $1.1
million increase by the Telecommunications Services segment.
The Company's pretax income before minority interests increased by $4.5
million, or 38%, to $16.2 million in the third quarter of fiscal 2000.
Consolidated 1999 third quarter results included a gain on the sale of a joint
venture of $777,000 (see Note E of Notes to Condensed Consolidated Financial
Statements of this report).
Results of Operations - By Segment
Sales of the Staffing Services segment decreased by $52.0 million, or 12%, to
$400.3 million in the third quarter of fiscal 2000 and its operating profit
increased by $2.0 million, or 18%, to $13.4 million, compared with $11.4
million in the third quarter of fiscal 1999. The sales decrease was caused by a
reduction in Managed Services revenue of $78.3 million, or 57%, due primarily
to an increase in the number of associate vendors who have agreed, under
arrangements that are considered non-recourse against the Company, to be paid
subject to the receipt of the customers' payment to the Company, the revenue
from which is excluded from sales, and a reduction in the use of associate
vendors by one of the Company's largest Managed Services clients. These revenue
decreases were offset, in part, by an increase in sales of $26.3 million, or
8%, in traditional staffing business. Operating margins rose from 2.5% to 3.3%
for the entire segment and from 3.6% to 3.9% excluding Managed Services
revenue. An increased mix of higher margin recruited business in both the
Technical and Commercial divisions of the segment and strong growth in
permanent placements contributed to higher margins and higher operating profit
for this segment.
The Telephone Directory segment's sales decreased by $2.0 million, or 7%, to
$27.9 million in the third quarter of fiscal 2000 and its operating profit
decreased by $849,000 to $882,000. These decreases were primarily due to
reduced emphasis on prepress production business, lower sales by its Viewtech
division and significantly higher expenditures resulting from various strategic
initiatives designed to increase future advertising revenue and enhance the
long-term value and profits of its independent yellow page publishing business.
The Telecommunications Services segment's sales increased by $27.8 million, or
56%, to $77.1 million in the third quarter of fiscal year 2000, and its
operating profit increased by $1.1 million, or 20%, to $6.5 million in fiscal
2000 compared to $5.4 million in the third quarter of fiscal 1999. All of the
segment's divisions reported increases in sales as a result of increased
revenue from long-haul fiber optic projects, cross-connect box projects
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<PAGE> 19
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS--Continued
THREE MONTHS ENDED JULY 28, 2000 COMPARED
TO THE THREE MONTHS ENDED JULY 30, 1999--Continued
Results of Operations - By Segment--Continued
and the new wired services division. The increase in operating profit was the
result of the increase in sales partially offset by a decrease in gross margins
of 6.0 percentage points, due to the completion of low-margin government
contract work and integration costs for the Lucent Wired Services Division
acquired in late December 1999.
The Computer Systems segment's sales increased by $421,000, or 3%, to $15.1
million in 2000 and its operating profit was $1.1 million in 2000 compared to a
loss of $400,000 in 1999. The increase in sales was primarily due to an
increase in customer utilization of the segment's transaction-based
DirectoryExpress/InfoExpress systems, which contributed to the segment's
operating profit. The number of transactions billed for this outsourcing of its
directory database to telephone companies increased from 46 million in the
second quarter of fiscal year 2000 to 51 million in the third quarter of fiscal
year 2000.
The Electronic Publication and Typesetting Systems segment's sales increased by
$4.7 million, or 28%, to $21.3 million in fiscal 2000 and its operating loss
decreased by $2.0 million, or 90%, to $220,000 in fiscal 2000. The increase in
sales resulted from an increase of $4.9 million, or 47%, in sales of systems
and equipment primarily due to sales of the segment's new wide
Computer-to-Plate (CTP) imagers to Latin American and European customers. The
decrease in operating loss was due to an increase in sales and an increase in
service and support gross margins of 6.6 percentage points due to lower spare
parts and warranty costs. A staff reduction and other cost-containment measures
decreased overhead by $381,000. Included in each of the three month periods are
amortization charges of $534,000 related to goodwill which will be fully
amortized at the end of the 2001 first quarter.
Results of Operations - Other
Other items, discussed on a consolidated basis, affecting results of operations
for the three-month periods were:
Selling and administrative expenses increased by $4.3 million, or 22%, to $24.3
million in the third quarter of fiscal 2000 due to initiatives taken by the
Telephone Directory segment and costs associated with a new accounting and back
office ERP. These expenses, expressed as a percentage of sales, were 4.5% in
2000 and 3.6% in 1999.
Research, development and engineering decreased by $ 1.1 million, or 5%, to
$1.5 million in the third quarter of fiscal 2000. The decrease in fiscal 2000
was primarily due to reductions by the Electronic Publication and Typesetting
Systems segment and Computer Systems segment as new products and services were
completed and introduced to customers.
Depreciation and amortization increased by $616,000, or 10%, to $6.5 million in
the third quarter of fiscal 2000. The increase was attributable to amortization
of intangibles due to acquisitions made during fiscal 1999 and an increase in
depreciation due to the new ERP system.
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<PAGE> 20
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS--Continued
Interest income increased by $45,000, or 12%, to $419,000 in the third quarter
of fiscal 2000, primarily due to an increase in funds available for investment.
Other income increased by $23,000 to $102,000 in the third quarter of fiscal
2000, primarily due to the inclusion of the Company's share in the income of
its new joint venture, westVista Advertising Services.
The foreign exchange gain in the third quarter of fiscal 2000 was $256,000,
compared to a loss of $277,000 in the comparable period in 1999, as a result of
favorable currency movements in the European markets. To reduce the potential
adverse impact from foreign currency changes on the Company's foreign
receivables, sales and firm commitments, foreign currency options are generally
purchased and settled the last day of each quarter.
Interest expense increased by $459,000, or 23%, to $2.5 million in the third
quarter of fiscal 2000. The increase is the result of higher borrowing under
the Company's revolving credit agreements to support the increased working
capital requirements of the Company and higher interest rates, partially offset
by the effect of interest rate swap agreements.
The Company's effective tax rate decreased to 40.7% in 2000 from 41.5% in 1999.
Liquidity and Sources of Capital
Cash and cash equivalents decreased by $8.9 million in the nine months ended
July 28, 2000. Operating activities used $4.7 million in cash in 2000. The
principal uses of cash in operating activities for the nine months ended July
28, 2000 were increases in accounts receivable of $30.6 million and inventories
of $14.8 million and a decrease in accounts payable of $8.6 million. Primary
factors providing cash flows to operating activities were the Company's net
income of $21.2 million, augmented by $18.4 million of depreciation and
amortization and a $13.0 million increase in customer advances and other
liabilities.
The principal use of cash applied in investing activities of $30.6 million was
the expenditure of $27.2 million for property, plant and equipment and $2.8
million for investments in joint ventures.
Financing activities provided $26.7 million of cash from the increase in bank
borrowings principally to support the increased working capital requirements of
the Company and for additional investments in the Company's joint ventures.
At July 28, 2000, the Company had $112.5 million of credit lines with banks, of
which $75 million is under a revolving credit agreement ("Multi-year Revolver")
that is not scheduled to expire until January 2002 and may, subject to meeting
certain conditions, be renewed and $25.0 million is under a 364-day revolving
credit agreement ("364-day Revolver") expiring in November 2000. The Company
had total outstanding bank borrowings of $74.1 million at July 28, 2000 under
these lines and $20.0 million under uncommitted facilities (see Note C in the
Notes to Condensed Consolidated Financial Statements of this report).
On August 17, 2000, the Company amended and reduced its $75 million Multi-year
Revolver to $72.5 million and increased its $25.0 million 364-day Revolver to
$72.5 million.
The Company believes that its current financial position, working capital,
future cash flows and credit lines will be sufficient to fund its presently
contemplated operations and satisfy its debt obligations.
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<PAGE> 21
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS--Continued
The Company is currently in the process of installing a back office system that
will provide enhanced financial, accounting, human resources, customer and
management reporting. The cost incurred through July 28, 2000 for this new
Enterprise Resource Planning system, including the purchase and/or lease of
software and hardware, three years of support and the initial implementation
phase was $26.0 million, a significant portion of which has been capitalized
and is being amortized over a seven year period. A significant portion of this
amount has been financed over a three to four year period by vendors (see Note
C in the Notes to Condensed Consolidated Financial Statements). In addition to
the above, the Company has a commitment of $2.0 million for outside services to
support the design, development and implementation stages. The Company has no
other material capital commitments.
The Effect of New Accounting Pronouncements
In June 1998, the FASB issued Statement 133, "Accounting for Derivative
Instruments and Hedging Activities" (SFAS No. 133). The provisions of SFAS No.
133 require companies to record all derivative instruments as assets or
liabilities, measured at fair value. In June 1999, the FASB issued Statement
137, which deferred the effective date of SFAS No. 133. The Company does not
expect that the effects of adopting this new standard in fiscal 2001 will be
material.
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<PAGE> 22
ITEM 3 - QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is subject to market risk exposure in the following areas:
Interest Rate Market Risk
The Company has cash equivalents on which interest income is earned at variable
rates. The Company also has credit lines with various domestic and foreign
banks which provide for unsecured borrowings and letters of credit up to an
aggregate of $112.5 million. At July 28, 2000, the Company had borrowings
totaling $74.1 million under these agreements and $20.0 million under
uncommitted facilities. The interest rates on these borrowings are variable
and, therefore, interest expense and interest income are affected by the
general level of U.S. and foreign interest rates. Increases in interest expense
resulting from an increase in interest rates should be offset to some extent by
a corresponding increase in interest income from cash equivalents.
In March 2000, the Company entered into a series of interest rate swap
agreements which effectively converted $50.0 million of its $56.7 of long-term
debt, through its maturity, from fixed to floating rate debt. Therefore,
interest expense on the debt is affected by the general level of interest
rates.
Equity Price Risk
The Company holds short-term investments in mutual funds for the Company's
deferred compensation plan, and non-current investments consisting of a
portfolio of equity securities. The total market value of these investments is
$3.7 million; $3.4 million of these investments are held for the benefit of
participants in a non-qualified deferred compensation plan with no risk to the
company.
Foreign Exchange Market Risk
The Company has a number of overseas subsidiaries and is, therefore, subject to
exposure from the risk of currency fluctuations as the value of the foreign
currency fluctuates against the dollar, which may impact reported earnings. The
Company attempts to reduce these risks by borrowing funds in local currency to
reduce net assets and the exposure of these assets to currency fluctuations
(but which may result in higher interest costs) and by utilizing foreign
currency option contracts to hedge the adverse impact on foreign currency
receivables and sales when the dollar strengthens against the related foreign
currency. At July 28, 2000, the Company had purchased foreign currency options
in the aggregate notional amount of $5.3 million, which approximated its
exposure in foreign currencies at that date. The Company does not believe that
it is exposed to material foreign exchange market risk.
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<PAGE> 23
PART II - OTHER INFORMATION
ITEM 6-- EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
15.01 Letter from Ernst & Young LLP
15.02 Letter from Ernst & Young LLP regarding interim financial
information
27.01 Financial Data Schedule (filed with electronic version only)
(b) Reports on Form 8-K:
No Reports on Form 8-K were filed during the quarter ended July 28, 2000.
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<PAGE> 24
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
VOLT INFORMATION SCIENCES, INC.
(Registrant)
BY: /s/ JACK EGAN
-----------------------------
Date: September 8, 2000 JACK EGAN
Vice President - Corporate Accounting
(Principal Accounting Officer)
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<PAGE> 25
EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION
------ ------------
15.01 Letter from Ernst & Young LLP
15.02 Letter from Ernst & Young LLP regarding interim financial information
27.01 Financial Data Schedule (filed with electronic version only)
