Volt Information Sciences (VOLT) 8-K Entry into a Material Definitive Agreement

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.