Unaudited Pro Forma Financial Information
On December 1, 2014, Volt Delta Resource Holdings, Inc., a wholly-owned subsidiary of Volt Information Sciences, Inc. (the “Company”), and the Company entered into a Membership Interest Purchase Agreement with NewNet Communication Technologies, LLC (“NewNet”) pursuant to which NewNet will purchase Volt Delta Resources, LLC (“VoltDelta”).
The following unaudited pro forma financial information gives effect to the sale of VoltDelta to NewNet, and is based on the historical consolidated financial statements of the Company. The statements of income for the years ended November 3, 2013, October 28, 2012, and October 30, 2011 and for the nine months ended August 3, 2014 give effect to the disposition as if it had occurred at October 30, 2011. Because the operations covered by the VoltDelta sale have not been reflected as discontinued operations in the Company’s annual historical financial statements, the Company is providing pro forma financial information for the three most recent fiscal years and the subsequent interim period.
The historical consolidated financial information presented herein should be read in conjunction with the audited consolidated financial statements and notes thereto appearing in the Company’s Annual Report on Form 10-K for the year ended November 3, 2013, the unaudited consolidated financial statements and notes thereto included in the Company’s Quarterly Report on Form 10-Q for the nine months ended August 3, 2014.
These unaudited pro forma condensed consolidated financial statements are not necessarily indicative of the results of future operations or the actual results that would have been achieved had the sale been consummated during the periods indicated. The pro forma adjustments are based on the best information available to date, which may change as additional information is obtained.
| VOLT INFORMATION SCIENCES, INC. AND SUBSIDIARIES |
| Unaudited Pro Forma Consolidated Condensed Balance Sheet |
| August 3, 2014 |
| (in thousands) |
| As reported | Pro Forma Adjustment | Pro Forma | ||||||||||
| ASSETS | ||||||||||||
| CURRENT ASSETS: | ||||||||||||
| Cash and cash equivalents | $ | 10,449 | $ | (1,094 | ) | $ | 9,355 | |||||
| Restricted cash and short-term investments | 46,282 | - | 46,282 | |||||||||
| Trade accounts receivable | 251,229 | (9,666 | ) | 241,563 | ||||||||
| Recoverable income taxes | 18,051 | (1,024 | ) | 17,027 | ||||||||
| Prepaid insurance and other current assets | 30,882 | (2,464 | ) | 28,418 | ||||||||
| Assets held for sale | - | 21,378 | 21,378 | |||||||||
| TOTAL CURRENT ASSETS | 356,893 | 7,130 | 364,023 | |||||||||
| Prepaid insurance and other assets, excluding current portion | 46,859 | (3,577 | ) | 43,282 | ||||||||
| Property, equipment and software, net | 29,924 | (3,553 | ) | 26,371 | ||||||||
| TOTAL ASSETS | $ | 433,676 | $ | - | $ | 433,676 | ||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||||||
| CURRENT LIABILITIES: | ||||||||||||
| Accrued compensation | $ | 44,038 | $ | (2,196 | ) | $ | 41,842 | |||||
| Accounts payable | 53,070 | (1,851 | ) | 51,219 | ||||||||
| Accrued taxes other than income taxes | 18,369 | (758 | ) | 17,611 | ||||||||
| Accrued insurance and other accruals | 39,687 | (2,654 | ) | 37,033 | ||||||||
| Deferred revenue, net, current portion | 10,825 | (6,206 | ) | 4,619 | ||||||||
| Short-term borrowings, including current portion of long-term debt | 143,196 | - | 143,196 | |||||||||
| Liabilities held for sale | - | 18,169 | 18,169 | |||||||||
| TOTAL CURRENT LIABILITIES | 309,185 | 4,504 | 313,689 | |||||||||
| Accrued insurance and other, excluding current portion | 13,036 | (340 | ) | 12,696 | ||||||||
| Deferred revenue, excluding current portion | 3,225 | (3,146 | ) | 79 | ||||||||
| Income taxes payable, excluding current portion | 9,109 | (1,018 | ) | 8,091 | ||||||||
| Long-term debt, excluding current portion | 7,451 | - | 7,451 | |||||||||
| TOTAL LIABILITIES | 342,006 | - | 342,006 | |||||||||
| Commitments and contingencies | ||||||||||||
STOCKHOLDERS’ EQUITY | ||||||||||||
| Preferred stock, par value $1.00 | - | - | - | |||||||||
| Common stock, par value $0.10 | 2,356 | - | 2,356 | |||||||||
| Paid-in capital | 72,399 | - | 72,399 | |||||||||
| Retained earnings | 62,226 | - | 62,226 | |||||||||
| Accumulated other comprehensive loss | (3,431 | ) | - | (3,431 | ) | |||||||
| Treasury stock | (41,880 | ) | - | (41,880 | ) | |||||||
TOTAL STOCKHOLDERS’ EQUITY | 91,670 | - | 91,670 | |||||||||
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | 433,676 | $ | - | $ | 433,676 | ||||||
| VOLT INFORMATION SCIENCES, INC. AND SUBSIDIARIES |
| Unaudited Pro Forma Consolidated Statements of Operations |
| For the nine months ended August 3, 2014 |
| (in thousands, except per share amounts) |
| As Reported | Pro Forma Adjustment | Pro Forma | ||||||||||
| REVENUE: | ||||||||||||
| Staffing service revenue | $ | 1,195,981 | $ | - | $ | 1,195,981 | ||||||
| Other revenue | 129,623 | (45,247 | ) | 84,376 | ||||||||
| NET REVENUE | 1,325,604 | (45,247 | ) | 1,280,357 | ||||||||
| EXPENSES: | ||||||||||||
| Direct cost of staffing services revenue | 1,026,063 | - | 1,026,063 | |||||||||
| Cost of other revenue | 111,824 | (41,307 | ) | 70,517 | ||||||||
| Selling, administrative and other operating costs | 192,378 | (14,537 | ) | 177,841 | ||||||||
| Amortization of purchased intangible assets | 754 | (598 | ) | 156 | ||||||||
| Restructuring costs | 2,396 | (599 | ) | 1,797 | ||||||||
| Restatement, investigations and remediation | 5,261 | - | 5,261 | |||||||||
| TOTAL EXPENSES | 1,338,676 | (57,041 | ) | 1,281,635 | ||||||||
| OPERATING LOSS | (13,072 | ) | 11,794 | (1,278 | ) | |||||||
| OTHER INCOME (EXPENSE), NET | ||||||||||||
| Interest income (expense), net | (2,449 | ) | (1 | ) | (2,450 | ) | ||||||
| Foreign exchange gain (loss), net | (1,645 | ) | 1,268 | (377 | ) | |||||||
| Other income (expense), net | 134 | 136 | 270 | |||||||||
| TOTAL OTHER INCOME (EXPENSE), NET | (3,960 | ) | 1,403 | (2,557 | ) | |||||||
| LOSS FROM CONTINUING OPERATIONS BEFORE INCOME TAXES | (17,032 | ) | 13,197 | (3,835 | ) | |||||||
| Income tax provision (benefit) | 4,017 | 45 | 4,062 | |||||||||
| LOSS FROM CONTINUING OPERATIONS | (21,049 | ) | 13,512 | (7,897 | ) | |||||||
| LOSS FROM DISCONTINUED OPERATIONS, NET OF INCOME TAXES | - | (13,152 | ) | (13,152 | ) | |||||||
| NET LOSS | $ | (21,049 | ) | $ | - | $ | (21,049 | ) | ||||
| PER SHARE DATA: | ||||||||||||
| Basic: | ||||||||||||
| Loss from continuing operations | $ | (1.01 | ) | $ | - | $ | (0.38 | ) | ||||
| Loss from discontinued operations | - | (0.63 | ) | (0.63 | ) | |||||||
| Net loss | $ | (1.01 | ) | $ | (0.63 | ) | $ | (1.01 | ) | |||
| Weighted average number of shares | 20,859 | 20,859 | 20,859 | |||||||||
| Diluted: | ||||||||||||
| Loss from continuing operations | $ | (1.01 | ) | $ | - | $ | (0.38 | ) | ||||
| Loss from discontinued operations | - | (0.63 | ) | (0.63 | ) | |||||||
| Net loss | $ | (1.01 | ) | $ | (0.63 | ) | $ | (1.01 | ) | |||
| Weighted average number of shares | 20,859 | 20,859 | 20,859 | |||||||||
| VOLT INFORMATION SCIENCES, INC. AND SUBSIDIARIES |
| Unaudited Pro Forma Consolidated Statements of Operations |
| For the year ended November 3, 2013 |
| (in thousands, except per share amounts) |
| As Reported | Pro Forma Adjustment | Pro Forma | ||||||||||
| REVENUE: | ||||||||||||
| Staffing service revenue | $ | 1,899,723 | $ | - | $ | 1,899,723 | ||||||
| Other revenue | 191,214 | (73,465 | ) | 117,749 | ||||||||
| NET REVENUE | 2,090,937 | (73,465 | ) | 2,017,472 | ||||||||
| EXPENSES: | ||||||||||||
| Direct cost of staffing services revenue | 1,634,365 | - | 1,634,365 | |||||||||
| Cost of other revenue | 160,199 | (65,680 | ) | 94,519 | ||||||||
| Selling, administrative and other operating costs | 294,034 | (24,314 | ) | 269,720 | ||||||||
| Amortization of purchased intangible assets | 1,369 | (858 | ) | 511 | ||||||||
| Restructuring costs | 4,726 | (3,945 | ) | 781 | ||||||||
| Restatement, investigations and remediation | 24,828 | - | 24,828 | |||||||||
| TOTAL EXPENSES | 2,119,521 | (94,797 | ) | 2,024,724 | ||||||||
| OPERATING LOSS | (28,584 | ) | 21,332 | (7,252 | ) | |||||||
| OTHER INCOME (EXPENSE), NET | ||||||||||||
| Interest income (expense), net | (2,957 | ) | (2 | ) | (2,959 | ) | ||||||
| Foreign exchange gain (loss), net | 1,104 | (735 | ) | 369 | ||||||||
| Other income (expense), net | 31 | (10 | ) | 21 | ||||||||
| TOTAL OTHER INCOME (EXPENSE), NET | (1,822 | ) | (747 | ) | (2,569 | ) | ||||||
| LOSS FROM CONTINUING OPERATIONS BEFORE INCOME TAXES | (30,406 | ) | 20,585 | (9,821 | ) | |||||||
| Income tax provision (benefit) | 469 | 2,231 | 2,700 | |||||||||
| LOSS FROM CONTINUING OPERATIONS | (30,875 | ) | 18,354 | (12,521 | ) | |||||||
| LOSS FROM DISCONTINUED OPERATIONS, NET OF INCOME TAXES | - | (18,354 | ) | (18,354 | ) | |||||||
| NET LOSS | $ | (30,875 | ) | $ | - | $ | (30,875 | ) | ||||
| PER SHARE DATA: | ||||||||||||
| Basic: | ||||||||||||
| Loss from continuing operations | $ | (1.48 | ) | $ | - | $ | (0.60 | ) | ||||
| Loss from discontinued operations | - | (0.88 | ) | (0.88 | ) | |||||||
| Net loss | $ | (1.48 | ) | $ | (0.88 | ) | $ | (1.48 | ) | |||
| Weighted average number of shares | 20,826 | 20,826 | 20,826 | |||||||||
| Diluted: | ||||||||||||
| Loss from continuing operations | $ | (1.48 | ) | $ | - | $ | (0.60 | ) | ||||
| Loss from discontinued operations | - | (0.88 | ) | (0.88 | ) | |||||||
| Net loss | $ | (1.48 | ) | $ | (0.88 | ) | $ | (1.48 | ) | |||
| Weighted average number of shares | 20,826 | 20,826 | 20,826 | |||||||||
| VOLT INFORMATION SCIENCES, INC. AND SUBSIDIARIES |
| Pro Forma Consolidated Statements of Operations |
| For the year ended October 28, 2012 |
| (in thousands, except per share amounts) |
| As Reported | Pro Forma Adjustment | Pro Forma | ||||||||||
REVENUE: | ||||||||||||
Staffing service revenue | $ | 2,027,601 | $ | - | $ | 2,027,601 | ||||||
Other revenue | 218,526 | (99,679 | ) | 118,847 | ||||||||
NET REVENUE | 2,246,127 | (99,679 | ) | 2,146,448 | ||||||||
EXPENSES: | ||||||||||||
Direct cost of staffing services revenue | 1,738,933 | - | 1,738,933 | |||||||||
Cost of other revenue | 163,853 | (68,281 | ) | 95,572 | ||||||||
Selling, administrative and other operating costs | 310,847 | (26,897 | ) | 283,950 | ||||||||
Amortization of purchased intangible assets | 1,382 | (859 | ) | 523 | ||||||||
Gain on sale of building | (4,418 | ) | - | (4,418 | ) | |||||||
Restatement, investigations and remediation | 42,906 | - | 42,906 | |||||||||
TOTAL EXPENSES | 2,253,503 | (96,037 | ) | 2,157,466 | ||||||||
OPERATING INCOME (LOSS) | (7,376 | ) | (3,642 | ) | (11,018 | ) | ||||||
OTHER INCOME (EXPENSE), NET | ||||||||||||
Interest income (expense), net | (3,072 | ) | 23 | (3,049 | ) | |||||||
Foreign exchange gain (loss), net | (131 | ) | 509 | 378 | ||||||||
Other income (expense), net | (633 | ) | (1 | ) | (634 | ) | ||||||
TOTAL OTHER INCOME (EXPENSE), NET | (3,836 | ) | 531 | (3,305 | ) | |||||||
LOSS FROM CONTINUING OPERATIONS BEFORE INCOME TAXES | (11,212 | ) | - | (14,323 | ) | |||||||
Income tax provision | 2,391 | (689 | ) | 1,702 | ||||||||
LOSS FROM CONTINUING OPERATIONS | (13,603 | ) | (2,422 | ) | (16,025 | ) | ||||||
INCOME FROM DISCONTINUED OPERATIONS, NET OF INCOME TAXES | - | 2,422 | 2,422 | |||||||||
NET INCOME (LOSS) | $ | (13,603 | ) | $ | - | $ | (13,603 | ) | ||||
PER SHARE DATA: | ||||||||||||
Basic: | ||||||||||||
Loss from continuing operations | $ | (0.65 | ) | $ | - | $ | (0.77 | ) | ||||
Income from discontinued operations | - | 0.12 | 0.12 | |||||||||
Net income (loss) | $ | (0.65 | ) | $ | 0.12 | $ | (0.65 | ) | ||||
Weighted average number of shares | 20,813 | 20,813 | 20,813 | |||||||||
Diluted: | ||||||||||||
Loss from continuing operations | $ | (0.65 | ) | $ | - | $ | (0.77 | ) | ||||
Income from discontinued operations | - | 0.12 | 0.12 | |||||||||
Net income (loss) | $ | (0.65 | ) | $ | 0.12 | $ | (0.65 | ) | ||||
Weighted average number of shares | 20,813 | 20,884 | 20,813 | |||||||||
| VOLT INFORMATION SCIENCES, INC. AND SUBSIDIARIES |
| Pro Forma Consolidated Statements of Operations |
| For the year ended October 30, 2011 |
| (in thousands, except per share amounts) |
| As Reported | Pro Forma Adjustment | Pro Forma | ||||||||||
REVENUE: | ||||||||||||
Staffing service revenue | $ | 1,957,905 | $ | - | $ | 1,957,905 | ||||||
Other revenue | 280,204 | (165,349 | ) | 114,855 | ||||||||
NET REVENUE | 2,238,109 | (165,349 | ) | 2,072,760 | ||||||||
EXPENSES: | ||||||||||||
Direct cost of staffing services revenue | 1,698,711 | - | 1,698,711 | |||||||||
Cost of other revenue | 166,211 | (76,022 | ) | 90,189 | ||||||||
Selling, administrative and other operating costs | 302,882 | (28,835 | ) | 274,047 | ||||||||
Amortization of purchased intangible assets | 1,347 | (855 | ) | 492 | ||||||||
Restatement, investigations and remediation | 49,193 | - | 49,193 | |||||||||
TOTAL EXPENSES | 2,218,344 | (105,712 | ) | 2,112,632 | ||||||||
OPERATING INCOME (LOSS) | 19,765 | (59,637 | ) | (39,872 | ) | |||||||
OTHER INCOME (EXPENSE), NET | ||||||||||||
Interest income (expense), net | (2,889 | ) | (4 | ) | (2,893 | ) | ||||||
Foreign exchange gain (loss), net | (569 | ) | 306 | (263 | ) | |||||||
Other income (expense), net | (1,026 | ) | 9 | (1,017 | ) | |||||||
TOTAL OTHER INCOME (EXPENSE), NET | (4,484 | ) | 311 | (4,173 | ) | |||||||
INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE INCOME TAXES | 15,281 | - | (44,045 | ) | ||||||||
Income tax provision (benefit) | (348 | ) | (15,135 | ) | (15,483 | ) | ||||||
INCOME (LOSS) FROM CONTINUING OPERATIONS | 15,629 | (44,191 | ) | (28,562 | ) | |||||||
INCOME FROM DISCONTINUED OPERATIONS, NET OF INCOME TAXES | - | 44,191 | 44,191 | |||||||||
NET INCOME | $ | 15,629 | $ | - | $ | 15,629 | ||||||
PER SHARE DATA: | ||||||||||||
Basic: | ||||||||||||
Income (loss) from continuing operations | $ | 0.75 | $ | - | $ | (1.37 | ) | |||||
Income from discontinued operations | - | 2.12 | 2.12 | |||||||||
Net income | $ | 0.75 | $ | 2.12 | $ | 0.75 | ||||||
Weighted average number of shares | 20,813 | 20,813 | 20,813 | |||||||||
Diluted: | ||||||||||||
Income (loss) from continuing operations | $ | 0.75 | $ | - | $ | (1.37 | ) | |||||
Income from discontinued operations | - | 2.12 | 2.12 | |||||||||
Net income | $ | 0.75 | $ | 2.12 | $ | 0.75 | ||||||
Weighted average number of shares | 20,896 | 20,896 | 20,896 | |||||||||
Notes to Unaudited Pro Forma Financial Information
1. Basis of Pro Forma Presentation
On December 1, 2014, Volt Delta Resource Holdings, Inc., a wholly-owned subsidiary of Volt Information Sciences, Inc. (the “Company”), and the Company entered into a Membership Interest Purchase Agreement with NewNet Communication Technologies, LLC (“NewNet”) pursuant to which NewNet will purchase Volt Delta Resources, LLC (“VoltDelta”).
The proceeds to the Company from the transaction are a $10 million note bearing interest at one half percent (0.5%) per year due in 4 years and convertible into a capital interest of up to 20% in NewNet. The Company may convert the note at any time and is entitled to receive early repayment in the event of certain events such as a change in control of NewNet. The proceeds are in exchange for the ownership of Volt Delta Resources, LLC and its operating subsidiaries, which comprise the Company’s Computer Systems segment, and payment of $4 million by the Company during the first 45 days following the transaction. An additional payment will be made between the parties based on working capital adjustments.
The pro forma adjustments reflected in the accompanying unaudited pro forma condensed consolidated financial information reflects estimates and assumptions that the Company’s management believes to be reasonable, the final amounts could be different by a material amount.
2. Pro Forma Adjustments
The unaudited pro forma condensed consolidated balance sheet at August 3, 2014 reflects the following pro forma adjustments:
| · | Adjustment to reflect the assets and liabilities sold in the VoltDelta sale or otherwise disposed of in connection therewith |
The unaudited pro forma condensed consolidated statements of operations for the nine months ended August 3, 2014 and the years ended November 3, 2013, October 28, 2012, and October 30, 2011 reflect the following pro forma adjustments:
| · | Elimination of the revenues, cost of sales, and operating expenses of the Computer Systems segment being sold or otherwise disposed of, net of taxes. |