1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
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/ X / Quarterly Report Under Section 13 or 15(d) of the Securities Exchange
- - - ----
Act of 1934
For Six Months Ended April 29, 1994
Or
----
/ / Transition Report Pursuant to Section 13 or 15(d) of the Securities
- - - ----
Exchange Act of 1934
For the transition period from to
------------------------
- - - ------------------------
Commission File No. 1-9232
VOLT INFORMATION SCIENCES, INC.
-----------------------------------------------------
(Exact name of registrant as specified in its charter)
New York 13-5658129
- - - ------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1221 Avenue of the Americas, New York, New York 10020
- - - ----------------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (212) 704-2400
1133 Avenue of the Americas, New York, New York 10036
------------------------------------------------------
(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 June
10, 1994 was 4,803,026.
2
PART I - Financial Information
VOLT INFORMATION SCIENCES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Six Months Ended Three Months Ended
---------------- ------------------
April April April April
29, 1994 30, 1993 29, 1994 30, 1993
-------- -------- -------- --------
(Dollars in thousands)
REVENUES:
Sales of services $276,026 $232,842 $145,810 $121,087
Sales of products 28,213 24,622 15,875 13,046
Equity in income of joint
ventures--Note F 990 2,712 940 2,217
Gain on sale of a joint
venture--Note F 9,770 9,770
Interest income 542 761 312 403
Gains (losses) on sale
of securities (8) 168 (9) 6
Other income (expense)
- net--Note B (201) 767 (216) 540
--------- --------- --------- ---------
315,332 261,872 172,482 137,299
--------- --------- --------- ---------
COSTS AND EXPENSES:
Cost of sales
Services 257,696 218,393 134,825 112,084
Products 18,382 15,295 10,356 8,355
Selling and administrative 19,657 17,896 10,792 9,626
Research, development
& engineering 3,577 3,538 2,339 1,819
Depreciation and amortization 5,304 5,163 2,660 2,603
Foreign exchange loss - net 121 136 25 79
Interest 4,038 5,446 1,963 2,638
--------- --------- --------- ---------
308,775 265,867 162,960 137,204
--------- --------- --------- ---------
Income (loss) before income tax
provision (benefit),
extraordinary item and
cumulative effect of a change
in accounting 6,557 (3,995) 9,522 95
Income tax provision
(benefit)--Note H 2,719 (1,327) 3,721 20
--------- --------- --------- ---------
Income (loss) before
extraordinary item and
cumulative effect of a
change in accounting 3,838 (2,668) 5,801 75
Extraordinary item--Note I (189)
Cumulative effect of a
change in accounting
for income taxes--Note H 959
--------- --------- --------- ---------
Net income (loss) $3,649 $(1,709) $5,801 $75
========= ========= ========= =========
(Per Share Data)
Income (loss) before
extraordinary item and
cumulative effect of a
change in accounting $.80 $(.56) $1.21 $.02
Extraordinary item (.04)
Cumulative effect of a
change in accounting
for income taxes .20
--------- --------- --------- ---------
Net income (loss) $.76 $(.36) $1.21 $.02
========= ========= ========= =========
Number of shares used in
computation -- Note G 4,802,466 4,795,700 4,802,905 4,801,020
========= ========= ========= =========
See accompanying notes.
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VOLT INFORMATION SCIENCES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
April 29, October 29,
1994 1993 (a)
--------- ----------
(Dollars in thousands)
ASSETS
CURRENT ASSETS
Cash and cash equivalents $46,445 $41,081
Short-term investments at
lower of cost or market -
market value $2,264 2,260
Trade accounts receivable less allowances of
$4,024 (1994) and $3,960 (1993)--Note B 66,990 73,724
Inventories--Note C 30,319 28,539
Recoverable income taxes 1,933 4,695
Deferred income taxes 2,841 3,402
Prepaid expenses and other assets 6,364 5,121
-------- --------
TOTAL CURRENT ASSETS 154,892 158,822
MARKETABLE SECURITIES--at lower
of cost or market 4,133 5,502
INVESTMENTS in joint ventures--Note F 9,027 15,337
PROPERTY, PLANT AND EQUIPMENT--
at cost--Note D
Land and buildings 33,328 33,192
Machinery and equipment 41,680 41,767
Leasehold improvements 2,394 2,393
-------- --------
77,402 77,352
Less allowances for depreciation
and amortization 31,271 30,709
-------- --------
46,131 46,643
DEPOSITS, RECEIVABLES AND
OTHER ASSETS 2,592 3,652
INTANGIBLE ASSETS--net of accumulated
amortization of $3,198 (1994)
and $2,901 (1993) 5,639 5,936
-------- --------
$222,414 $235,892
======== ========
LIABILITIES AND STOCKHOLDERS'
EQUITY
CURRENT LIABILITIES
Notes payable to banks $4,685 $6,207
Current portion of long-term
debt--Note D 25,400 20,000
Accounts payable 20,017 26,402
Accrued expenses
Wages and commissions 18,430 17,268
Taxes other than income taxes 6,768 5,954
Insurance 14,752 9,344
Other 4,431 5,995
Customer advances and other liabilities 11,677 6,563
-------- --------
TOTAL CURRENT LIABILITIES 106,160 97,733
LONG-TERM DEBT--Note D 32,756 58,095
DEFERRED INCOME TAXES 1,923 2,386
-------- --------
140,839 158,214
STOCKHOLDERS' EQUITY--Notes
D, E and F
Preferred stock, par value $1.00
Authorized--500,000 shares;
issued--none
Common stock, par value $.10
Authorized--15,000,000 shares;
issued - 7,789,580 shares 779 779
Paid-in capital 43,830 43,823
Retained earnings 83,531 79,882
Unrealized loss on marketable securities (23)
Unrealized foreign currency
translation adjustment (453) (706)
-------- --------
127,664 123,778
Less common stock held in treasury
at cost--2,986,554 shares (1994)
and 2,987,554 (1993) 46,089 46,100
-------- --------
81,575 77,678
-------- --------
$222,414 $235,892
======== ========
(a) The Balance Sheet at October 29, 1993 has been derived from the audited
financial statements at that date.
See accompanying notes.
- 3 -
4
VOLT INFORMATION SCIENCES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Six Months Ended
-----------------------------
April 29, April 30,
1994 1993
--------- ---------
(Dollars in thousands)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $3,649 $(1,709)
Adjustments to reconcile net income
(loss) to cash
provided by operating activities:
Extraordinary loss 189
Cumulative effect of a
change in accounting (959)
Depreciation and amortization 5,304 5,163
Equity in income of
joint ventures (990) (2,712)
Gain on sale of a
joint venture (9,770)
Distributions from
joint ventures 1,153 1,568
Accounts receivable provisions 1,134 783
Amortization of deferred
debenture costs,
debt discounts and other
deferred charges 339 387
Gains on foreign currency
translation (258) (270)
Gains on dispositions of
fixed assets (13) (10)
Deferred income tax (benefit) (40) (43)
(Gains) losses on sales of securities 8 (168)
Other 27 23
Changes in operating
assets and liabilities:
Decrease in accounts
receivable 5,398 6,260
(Increase) decrease
in inventories (1,780) 618
Increase in prepaid expenses
and other current assets (1,211) (774)
(Increase) decrease in deposits,
receivables and other assets 800 (188)
Increase in intangible assets (113)
Decrease in accounts payable (4,542) (831)
Increase in accrued expenses 5,763 2,427
Increase in customer advances
and other liabilities 5,106 5,026
(Increase) decrease in
income taxes 2,878 (2,432)
------ ------
NET CASH PROVIDED BY OPERATING
ACTIVITIES 13,144 12,046
------ ------
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5
VOLT INFORMATION SCIENCES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS--CONTINUED
(UNAUDITED)
Six Months Ended
-------------------------------
April 29, April 30,
1994 1993
--------- ---------
(Dollars in thousands)
CASH FLOWS FROM INVESTING ACTIVITIES
Sales of investments 6,851 1,827
Maturities of investments 949 800
Purchases of investments (4,236) (5,326)
Proceeds from disposal
of property,
plant and equipment 92 74
Purchases of property,
plant and equipment (6,656) (4,474)
Proceeds from the sale
of a joint venture 16,383
------ -------
NET CASH APPLIED TO
INVESTING ACTIVITIES 13,383 (7,099)
------ ------
CASH FLOWS FROM FINANCING ACTIVITIES
Decrease in long-term debt (20,000)
Decrease in notes payable to banks (1,290) (56)
------ -------
NET CASH APPLIED TO FINANCING
ACTIVITIES (21,290) (56)
------- -------
Effect of Exchange rate
changes on cash 127 (95)
------- -------
NET INCREASE IN CASH AND CASH
EQUIVALENTS 5,364 4,796
Cash and cash equivalents,
beginning of period 41,081 28,557
------ ------
CASH AND CASH EQUIVALENTS,
END OF PERIOD $46,445 $33,353
======= =======
SUPPLEMENTAL INFORMATION
Cash Paid (Received):
Interest $4,997 $5,522
Income taxes (net of refunds) $(73) $1,100
See accompanying notes.
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6
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
necessary for a fair presentation of financial position, results of operations
and cash flows in conformity with generally accepted accounting princples. 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
financial position at April 29, 1994 and results of operations for the six and
three months ended April 29, 1994 and April 30, 1993 and cash flows for the six
months ended April 29, 1994 and April 30, 1993. Operating results for the six
and three months ended April 29, 1994 are not necessarily indicative of the
results that may be expected for the fiscal year ending October 28, 1994.
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, 1993. The accounting policies used in preparing these
financial statements are the same as those described in the Company's Annual
Report.
The Company's fiscal year ends on the Friday nearest October 31.
Note B--Accounts Receivable
In October 1993, the Company entered into a three-year agreement to sell, on a
limited recourse basis, up to $25,000,000 of undivided interests in a
designated pool of certain eligible accounts receivable. As collections reduce
previously sold undivided interests, new receivables may be sold up to the
$25,000,000 level. At April 29, 1994, $25,000,000 of accounts receivable has
been sold under this agreement. The sold accounts receivable are reflected as
a reduction of receivables in the accompanying 1994 balance sheet. The Company
pays fees based on the purchaser's borrowing costs incurred on short-term
commercial paper which financed the purchase of receivables. Other income
(expense) in the accompanying 1994 statements of operations reflects $708,000
and $354,000 for such fees in the six and three months ended April 29, 1994,
respectively.
The purchaser may terminate the agreement on a minimum of six months' notice.
In addition, the agreement may be terminated if the Company does not maintain a
minimum tangible net worth, as defined, or exceeds a maximum ratio of debt to
tangible net worth.
- 6 -
7
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)--CONTINUED
Note C--Inventories
Inventories consist of:
April 29, October 29,
1994 1993
---------- --------------
(Dollars in thousands)
Services:
Accumulated unbilled costs on:
Service contracts $9,634 $9,818
Long-term contracts 12,078 11,409
------ ------
21,712 21,227
------ ------
Products:
Materials 1,457 1,497
Work-in-progress 1,124 942
Service parts 1,297 968
Finished goods 4,729 3,905
------- -------
8,607 7,312
------- -------
Total $30,319 $28,539
======= =======
The cumulative amounts billed, principally under long-term contracts, of
$69,489,000 at April 29, 1994 and $53,371,000 at October 29, 1993 are credited
against the related costs in inventory. Substantially all of the amounts
billed have been collected.
- 7 -
8
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)--CONTINUED
Note D--Long-Term Debt
Long-term debt consists of the following:
April 29, October 29,
1994 1993
----------- --------------
(Dollars in thousands)
12-3/8% Senior Subordinated
Debentures, due July 1, 1998--
net of unamortized discount of
$99,000 - 1994 and $160,000
- 1993 (a) $42,756 $62,695
Mortgage Payable, due
December 22, 1994 (b) 15,400 15,400
------ -------
58,156 78,095
Less amounts due within one year 25,400 20,000
------- -------
Long-Term Debt $32,756 $58,095
======= =======
(a) The debentures provide for interest to be paid semi-annually on January 1
and July 1 and are redeemable at the option of the Company in whole or in
part, at 100% plus accrued interest. In October 1993, as a result of a
financing agreement (see Note B), the Company called for the redemption and, in
November 1993, redeemed $20,000,000 principal amount of debentures. The
early redemption, at par, resulted in an extraordinary loss of $189,000, net of
income taxes, due to the write-off of related discount and issuance costs.
In April 1994, the Company called for redemption on May 23, 1994 an additional
$10,000,000 of the debentures which, together with previously redeemed and
repurchased debentures, satisfies all sinking fund requirements. The remaining
$32,855,000 principal amount is due July 1, 1998. The debentures are
subordinated to all existing and future senior indebtedness (as defined) of the
Company. At April 29, 1994, the amount available for dividends, pursuant to
the terms of the indenture under which the debentures are issued, was
$19,475,000 and, if no dividend payments are made, the amount available for
capital stock repurchases was $29,476,000. However, under the terms of the
financing agreement (see Note B), at April 29, 1994, only $10,210,000 was
available for such restricted payments.
(b) The mortgage payable, secured by a deed of trust on land and a building
(book value at April 29, 1994 - $15,000,000), bears interest at 1/2% per annum
above the Chemical Bank base rate or 1-1/2% per annum above LIBOR plus certain
additional charges, at the option of the Company. Interest (5.2% at April 29,
1994) is payable monthly with no principal payments required until maturity.
The obligation is of a subsidiary and is guaranteed by the Company. The
Company is currently investigating the replacement or extension of the mortgage
liability.
- 8 -
9
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)--CONTINUED
Note E--Stockholders' Equity
Changes in the major components of Stockholders' Equity for the six months
ended April 29, 1994 are as follows:
Common Paid-In Retained Treasury
Stock Capital Earnings Stock
------ ------- -------- --------
(Dollars in thousands)
Balance at October 29, 1993 $779 $43,823 $79,882 $(46,100)
Stock award-1,000 shares 7 11
Net income for the six months 3,649
------ --------- -------- ---------
Balance at April 29, 1994 $779 $43,830 $83,531 $(46,089)
==== ======= ======= ========
The other components of Stockholders' Equity are a valuation allowance for the
unrealized loss on marketable securities and an unrealized foreign currency
translation adjustment due to the Company's investment in its Australian joint
venture, whose functional currency is the Australian dollar.
Note F--Summarized Financial Information of Joint Ventures
Effective February 28, 1994, the Company's 50% interest in Pacific Volt
Information Systems, a joint venture with a subsidiary of Pacific Bell
Directory was redeemed by the joint venture for approximately $16,400,000.
Pacific Volt Information Systems composes telephone directories in California
for Pacific Bell Directory under a contract expiring December 31, 1996. The
sale of the Company's interest resulted in a gain of $9,770,000 ($5,760,000,
net of income taxes, or $1.20 per share).
The Company has an investment in a 12-1/2% owned corporate joint venture
formed in 1991 with Telstra Corporation Ltd. (Telstra), the Australian
Government-owned telephone company and others. The joint venture assumed the
responsibility throughout Australia for the marketing, sales and compilation
functions of all yellow page directories for Telstra under the terms of a
twelve-year contract. The agreement for the venture provided that the
Company's share of profits or losses from the joint venture in its initial term
of operations through April 30, 1993 could exceed 12-1/2% based on sales levels
achieved. During the six and three months ended April 30, 1993 based on the
venture's sales, the Company's share of the venture's profits amounted to
$914,000 and $1,180,000 respectively, which exceeded 12-1/2% of the venture's
net income by $792,000 for both periods. The venture earns a major portion of
its revenues and significantly all of its profits in the Company's second and
third fiscal quarters. The Company's equity in income of the Australian joint
ventures for the six months ended April 30, 1993 also reflects the reversal of
a tax liability as a result of the completion of an Australian tax examination
of a 50% owned inactive joint venture.
- 9 -
10
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)--CONTINUED
Consolidated retained earnings at April 29, 1994 included $2,880,000
representing the undistributed earnings of the joint venture. Income taxes
have been paid or provided for on such earnings.
Note F--Summarized Financial Information of Joint Ventures--(Continued)
The following summarizes the financial information of the joint ventures:
April 29, 1994 October 29, 1993
--------------------------- ----------------------------
(Dollars in thousands)
Company's Company's
Total Equity Total Equity
---------- ------------ ----------- ------------
Current assets $151,519 $191,302
Noncurrent assets 15,783 17,852
Current liabilities (126,488) (160,110)
-------- --------
Equity of combined joint venture $40,814 $49,044
======= ========
Equity of Australian
joint ventures (a) $40,814 $9,027 $35,789 $8,670
Equity of United States
joint venture 13,255 6,627
Other capitalized costs, net 40
-------- ------- --------- ---------
$40,814 $49,044
======= ========
Investments in joint ventures $9,027 $15,337
====== =======
(a)-Pursuant to the venture agreement, the initial capital contributions of all
venturers, other than Telstra, exceeded their proportionate share of ownership
interest in the corporate joint venture. The agreement provides that, upon
liquidation of the venture, the venturers will be entitled to recover such
excess contributions from the net assets of the venture.
Six Months Ended
-----------------------------------------------------------
April 29, 1994 April 30, 1993
------------------------- --------------------------
(Dollars in thousands)
Company's Company's
Total Equity Total Equity
-------- ---------- --------- ----------
Revenues $202,146 $196,622
Costs and expenses 196,606 192,510
Income tax provision 1,645 352
-------- -------
Income before cumulative
effect of a change
in accounting 3,895 3,760
Cumulative effect of a change in
accounting for Australian
income taxes (a) 5,688
------- -------
Net income $3,895 $9,448
====== ======
Income of Australian joint
ventures before
cumulative effect of a
change in accounting $2,423 $329 $1,571 $1,618
Net income of United States
joint venture 1,472 661 2,189 1,094
------ ------ -------- ------
$3,895 $3,760
====== ======
Company's equity in income of
joint ventures $990 $2,712
==== ======
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)--CONTINUED
Note F--Summarized Financial Information of Joint Ventures--(Continued)
(a) During the first quarter of fiscal 1993, the Company's Australian corporate
joint venture changed its method of accounting for income taxes by adopting the
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes." The cumulative effect of the change increased the joint venture's
income by $5,688,000, due to its ability to recognize deferred Australian tax
assets as permitted by Statement No. 109. The Company's portion of this
increase in income, net of United States taxes, is $432,000 and is included in
the Company's cumulative effect of a change in accounting for income taxes (see
Note H).
Three Months Ended
------------------------------------------------------------
April 29, 1994 April 30, 1993
-------------------------- --------------------------
(Dollars in thousands)
Company's Company's
Total Equity Total Equity
--------- ---------- --------- ----------
Revenues $140,083 $138,027
Costs and expenses 129,465 127,588
Income tax provision 3,515 3,606
-------- --------
Net income $7,103 $6,833
====== =======
Net income of Australian
joint ventures $6,699 $813 $5,512 $1,557
Net income of United States
joint venture 404 127 1,321 660
-------- ----- -------- ------
$7,103 $6,833
====== ======
Company's equity in net income
of joint ventures $940 $2,217
==== ======
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12
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)--CONTINUED
Note G--Per Share Data
The computation of per share data for the six and three months ended April 29,
1994 and April 30, 1993 include only the weighted average number of shares of
Common Stock outstanding; the outstanding stock options have not been included
in the computation since inclusion would not have a material effect.
Note H--Income Taxes
Effective October 31, 1992, the Company adopted Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes." Prior to the
adoption of Statement No. 109, income tax expense was determined using the
liability method prescribed by Statement No. 96, which is superseded by
Statement No. 109. Among other changes, Statement No. 109 changes the
recognition and measurement criteria for deferred tax assets included in
Statement No. 96.
As permitted by Statement No. 109, the Company has elected not to restate the
financial statements of any prior years. The cumulative effect of adopting
Statement No. 109 at the beginning of fiscal 1993 was to increase net income by
$959,000 or $.20 per share, including $432,000 attributable to a corporate
joint venture (see Note F).
Significant components of the income tax provision (benefit) attributable to
operations are as follows:
Six Months Ended Three Months Ended
---------------- ------------------
April April April April
29, 1994 30, 1993 29, 1994 30, 1993
-------- -------- -------- --------
(Dollars in thousands)
Current:
Federal $1,985 $(1,400) $2,946 $(1,033)
Foreign 232 179 178 (17)
State and local 542 (63) 581 (46)
----- ------ ----- ------
2,759 (1,284) 3,705 (1,096)
----- ------ ----- ------
Deferred:
Federal (38) (41) 16 1,068
State and local (2) (2) 48
------ ------- ------ ------
(40) (43) 16 1,116
------ ------- ------ ------
Total $2,719 $(1,327) $3,721 $ 20
====== ======= ====== ======
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13
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)--CONTINUED
Note I--Extraordinary Item
The extraordinary charge to earnings in the six months ended April 29, 1994 is
the result of the early redemption at par of $20,000,000 face value of the
Company's 12-3/8% Subordinated Debentures. The charge was due to the related
discount and issuance costs and is net of an income tax benefit of $101,000.
Note J-- Subsequent Event
The Company called for redemption on May 23, 1994, $10,000,000 of its 12-3/8%
Subordinated Debentures, at par. The Company will incur an extraordinary
charge of approximately $81,000, net of an income tax benefit in the three
months ending July 29, 1994 as a result of the related discount and issuance
costs.
- 13 -
14
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 such
future operations should be drawn.
The following summarizes the results of operations by segment:
FOR THE SIX FOR THE THREE
MONTHS ENDED MONTHS ENDED
------------ -------------
April April April April
29, 1994 30, 1993 29, 1994 30, 1993
-------- -------- -------- --------
(Dollars in thousands)
Revenues:
- - - --------
Technical Services and
Temporary Personnel $205,692 $159,958 $109,520 $83,096
Electronic Publication and
Typesetting Systems 28,561 25,917 16,068 13,623
Telephone Directory 29,673 32,886 17,785 16,152
Engineering and Construction 25,429 22,863 11,282 11,202
Computer Systems 17,049 19,233 8,236 11,818
Equity in income of
joint ventures 990 2,712 940 2,217
Gain on sale of a
joint venture 9,770 9,770
Interest and other
income, net 333 1,696 87 949
Elimination of intersegment
revenues (2,165) (3,393) (1,206) (1,758)
--------- -------- -------- --------
$315,332 $261,872 $172,482 $137,299
======== ======== ======== ========
Income (Loss) Before Income Tax Provision (Benefit),
- - - ----------------------------------------------------
Extraordinary Item and Cumulative Effect of a
- - - ---------------------------------------------
Change in Accounting:
- - - ---------------------
Operating Profit (Loss):
- - - ------------------------
Technical Services and
Temporary Personnel $6,063 $2,966 $4,044 $2,198
Electronic Publication and
Typesetting Systems 364 (222) 316 (513)
Telephone Directory 361 (164) 719 745
Engineering and Construction (221) (585) (569) (550)
Computer Systems (2,281) (133) (1,333) 22
Eliminations 13 (346) (10) (44)
-------- ---- ------ ---
Total Operating Profit 4,299 1,516 3,167 1,858
Equity in income of
joint ventures 990 2,712 940 2,217
Gain on sale of a
joint venture 9,770 9,770
Interest and other
income, net 333 1,696 87 949
General corporate
expenses (4,676) (4,337) (2,454) (2,212)
Interest expense (4,038) (5,446) (1,963) (2,638)
Foreign exchange loss, net (121) (136) (25) (79)
----- ---- --- ---
Income (Loss) Before Income
Tax Provision (Benefit),
Extraordinary Item and
Cumulative Effect of a
Change in Accounting $6,557 $(3,995) $9,522 $95
====== ======== ====== ===
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15
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
SIX MONTHS ENDED APRIL 29, 1994 COMPARED
TO THE SIX MONTHS ENDED APRIL 30, 1993
In the six month period of 1994, revenue increased by $53,460,000 or 20% to
$315,332,000 and the income before income taxes, an extraordinary item and, in
1993, the cumulative effect of a change in accounting was $6,557,000 in 1994
compared to a loss of $3,995,000 in 1993.
The Technical Services and Temporary Personnel segment's sales increased by
$45,734,000 or 29% to $205,692,000 in 1994 and operating profit increased by
$3,097,000 to $6,063,000 in 1994. The increase in sales was attributable to
increased business over a broad spectrum with existing customers and placements
with new customers. The operating profit increased primarily due to the
increased sales throughout the segment and improved gross margins in the
Temporary Personnel division. Most of the contracts entered into are of a
relatively short duration and competition is intense. 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.
Sales of the Electronic Publication and Typesetting Systems segment increased
by $2,644,000 or 10% in 1994 and the operating profit was $364,000 compared to
an operating loss of $222,000 in 1993. The sales increase was in both the
domestic and overseas markets. The increase in profit was due to the increased
sales and reduced development and administrative costs. The markets in which
the segment competes are marked by rapidly changing technology and while the
Company continues to invest 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 such present products or
new products can be successfully marketed.
The Telephone Directory segment's sales decreased by $3,213,000 or 10% to
$29,673,000 in 1994 while the operating profit was $361,000 compared to a loss
of $164,000 in 1993. The higher level of sales in 1993 was primarily due to
the sale of automated directory management systems which accounted for 24% of
the segment's sales in 1993. Sales of the telephone directory production
operations increased by $1,694,000 due to increased volume with existing
customers; and the DataNational division, which publishes independent
directories, reported a revenue increase of $1,727,000
- 15 -
16
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
SIX MONTHS ENDED APRIL 29, 1994 COMPARED
TO THE SIX MONTHS ENDED APRIL 30, 1993--(CONTINUED)
which included the first publication of a community directory in a new market.
Improved gross margins resulted in the improved profitability. The Directory
segment's services are rendered under various short and long-term contracts.
Certain contracts expire in fiscal 1994 through 2001 and there can be no
assurance that they will be renewed or renewed on similar terms.
The Engineering and Construction segment's sales increased by $2,566,000
or 11% to $25,429,000 in 1994 and its operating loss decreased by $364,000 to
$221,000. The sales increase was due primarily to increased sales to new and
existing customers. The operating loss decreased due to the increased sales and
improved gross margins. This segment operates in the intensely competitive
telephone plant construction, interconnect and engineering markets and there
can be no assurance that this segment will return to profitability in the
near-term.
Sales of the Computer Systems segment decreased by $2,184,000 or 11% to
$17,049,000 in 1994 and the segment sustained an operating loss of $2,281,000
in 1994 compared to a loss of $133,000 in 1993. The decrease in sales was due
primarily to the completion of several large contracts in 1993. The operating
loss increased due to the lower sales and higher costs incurred as a result of
establishing additional facilities in 1993 to develop and market new products
and increased marketing, support and administrative costs related to the
existing product line, including the Delta Operator Services System (DOSS).
The first DOSS contract, which is with a major telephone company, was entered
into in 1991. Delivery and installation at the customer's premises began
during fiscal 1992 and continued through the second quarter of fiscal 1994.
Although the system has been installed at most of the intended sites and is
being utilized commercially by the customer, it is still in the process of
implementation. Revenue from the contract will be recognized upon acceptance
by the telephone company. While system acceptance is presently anticipated in
fiscal 1994, a failure to obtain system acceptance from this customer could
have a significant adverse impact on this segment's operations and could
jeopardize its ability to continue to market the product. During 1992, Volt
Delta also entered into a second contract for DOSS with another major
telecommunications customer; and, in 1993, a pilot system was installed which
is being used commercially. Orders have been received in 1994 for a follow-up
production system. In fiscal 1993, the segment was awarded three additional
contracts, two of which necessitated the opening of new branch facilities. As
of April 29, 1994 no revenue has been recognized on any DOSS contracts. In
addition, a new marketing and development facility was opened in 1993. There
can be no assurance that the Company
- 16 -
17
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
SIX MONTHS ENDED APRIL 29, 1994 COMPARED
TO THE SIX MONTHS ENDED APRIL 30, 1993 -- (CONTINUED)
will be able to obtain additional contracts or additional orders under existing
contracts.
The Company's share of the income of its joint ventures was $990,000 for the
six months of 1994, a decrease of $1,722,000 from 1993. Effective February 28,
1994, the Company sold its 50% interest in Pacific Volt Information Systems, a
joint venture, for approximately $16,400,000. The sale resulted in a pretax
gain of $9,770,000. The equity in income of joint ventures for the current six
months includes only four months of income attributable to this joint venture.
The Company's portion of the income of the Australian joint ventures was
$329,000 in 1994 compared to $1,618,000 in 1993. During the six months of
fiscal 1993, the Company's share of profits from its Australian joint venture
exceeded its 12-1/2% ownership by $792,000 under an arrangement which ended
April 30, 1993. See Note F of Notes to Condensed Consolidated Financial
Statements for additional information.
Interest and other income decreased by $1,363,000 to $333,000 due primarily to
fees incurred in 1994 in conjunction with the sale of accounts receivable (see
Note B), the absence of the 1993 gains on the sale of securities and lower
interest income in 1994 compared to 1993.
General corporate expenses increased by 8% to $4,676,000 in 1994 principally
due to costs incurred in relocating the Corporate offices.
Interest expense decreased by $1,408,000 or 26% to $4,038,000 in 1994 compared
to 1993 due to the early redemption of $20,000,000 of the Company's 12-3/8%
Subordinated Debentures and a reduction in the principal amount of a mortgage
loan.
Research, development and engineering costs increased by $39,000 or 1% to
$3,577,000 in 1994 due to increased product development by the Computer Systems
Segment, partially offset by decreases in the Telephone Directory and
Electronic Publication and Typesetting Systems segments.
- 17 -
18
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
THREE MONTHS ENDED APRIL 29, 1994 COMPARED
TO THE THREE MONTHS ENDED APRIL 30, 1993
In the second quarter of 1994 revenue increased by $35,183,000 or 26% to
$172,482,000 and the income before taxes was $9,522,000 in 1994 compared to
$95,000 in 1993.
The Technical Services and Temporary Personnel segment's sales increased by
$26,424,000 or 32% to $109,520,000 and operating profit increased by $1,846,000
to $4,044,000 in 1994. The increase in sales was due to additional business
throughout the segment and the operating profit increase was due to the
increased sales volume and improved gross margins in the Temporary Personnel
division.
Sales of the Electronic Publication and Typesetting Systems segment increased
by $2,445,000 or 18% in 1994 compared to 1993, and the operating profit was
$316,000 compared to a loss of $513,000 in 1993. The sales increase was
attributable to both the domestic and overseas markets. The improved
profitability was due to the sales increase and reduced development and
administrative costs.
The Telephone Directory segment's sales increased by $1,633,000 or 10% to
$17,785,000 compared to 1993 while the operating profit decreased by $26,000
or 3% to $719,000. The sales increase was due to increases in production
business and independent directory sales partially offset due to a sale of an
automated directory management system in 1993. The decrease in operating
profit compared to last year was due to lower margins as a result of a change
in the mix of business among the segment's operations.
The Engineering and Construction segment's sales increased by $80,000 or 1% to
$11,282,000 compared to 1993 while the operating loss increased by $19,000 or
3% to $569,000 compared to 1993.
Sales of the Computer Systems segment decreased by $3,582,000 or 30% to
$8,236,000 in 1994. The segment sustained an operating loss of $1,333,000 in
1994 compared to a profit of $22,000 last year. The decrease in sales is due
to the completion of several large contracts in 1993. The operating loss was
due to the lower sales and higher costs incurred as a result of establishing
additional facilities in 1993 to develop and market new products and increased
marketing, support and administrative costs related to the existing product
line, including the Delta Operator Services System.
- 18 -
19
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
THREE MONTHS ENDED APRIL 29, 1994 COMPARED
TO THE THREE MONTHS ENDED APRIL 30, 1993
The Company's share of the income of its joint ventures was $940,000 in the
second quarter of 1994, a decrease of $1,277,000 from the second quarter of
1993. Effective February 28, 1994, the Company sold its 50% interest in
Pacific Volt Information Systems, a joint venture, for approximately
$16,400,000. The sale resulted in a pretax gain of $9,770,000. The equity in
income of joint ventures for the current three months includes only one month
of income attributable to this joint venture. The Company's portion of the
income of the Australian joint ventures was $813,000 in 1994 compared to
$1,557,000 in 1993. During the three months of fiscal 1993, the Company's
share of profits from its Australian joint venture exceeded its 12-1/2%
ownership by $792,000 under an arrangement which ended April 30, 1993.
Interest and other income decreased by $862,000 to $87,000 due primarily to
fees incurred in 1994 in conjunction with the sale of accounts receivable (see
Note B) and lower interest income in 1994.
General corporate expenses increased by $242,000 or 11% to $2,454,000 in 1994
principally due to costs incurred in relocating the Corporate offices.
Interest expense decreased by 26% to $1,963,000 in 1994 compared to 1993 due to
the early redemption of $20,000,000 of the Company's 12-3/8% Subordinated
Debentures and reductions in the principal amount of a mortgage loan.
Research, development and engineering costs increased by $520,000 or 29% to
$2,339,000 in 1994 due primarily to increased product development by the
Computer Systems segment.
- 19 -
20
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Liquidity and Source of Capital
- - - -------------------------------
Cash and cash equivalents increased by $5,364,000 in the six months ended April
29, 1994 to $46,445,000 due primarily to $16,383,000 received from the sale of
the Company's 50% interest in a joint venture and $13,144,000 of funds provided
from operations partially reduced by the $20,000,000 redemption, at par, of
Subordinated Debentures and $6,656,000 for purchases of property, plant and
equipment.
Working capital decreased by $12,357,000 in the six months to $48,732,000 at
April 29, 1994 due to the inclusion in current liabilities of a $15,400,000
mortgage payable and $10,000,000 of debentures which the Company called for
redemption, partially offset by the proceeds from the sale of the Company's
investment in a joint venture.
The Company believes that its current financial position, working capital and
future cash flow will be sufficient to fund operations and satisfy its debt
obligations. The Company has a line of credit with a domestic bank at April
29, 1994 of approximately $7 million, which expires July 31, 1994, unless
renewed.
In the six months ended April, 29, 1994, the Company's investment portfolio was
reduced by $3,629,000 and at April 29, 1994 included investments carried at
their market value of $4,133,000.
The Company has no material capital commitments. The Company may determine
from time to time in the future to buy additional shares of its Common Stock
and Debentures in the market or in privately negotiated transactions.
- 20 -
21
PART II - Other Information
Items 1 through 5 were not applicable.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
10.01 Amendment dated April 28, 1994 to Agreement between the Company and Irwin
B. Robins.
15.01 Letter from Ernst & Young.
15.02 Letter from Ernst & Young regarding interim financial information.
(b) Reports on Form 8-K.
The only Report on Form 8-K filed during the quarter ended April 29, 1994 was a
report dated April 1, 1994 (date of earliest event reported), reporting Item 2.
Acquisition or Disposition of Assets, Item 5. Other Events, and Item 7.
Financial Statements and Exhibits filing the following Unaudited Pro Forma
Financial Data:
(i) General Statement.
(ii) Unaudited Pro Forma Condensed Consolidated
Balance Sheet of the Company and its
Subsidiaries at January 28, 1994.
(iii) Notes to Unaudited Pro Forma Condensed
Consolidated Balance Sheet.
(iv) Unaudited Pro Forma Condensed Consolidated
Statement of Operations of the
Company and its Subsidiaries for
the fiscal year ended October 29, 1993.
(v) Unaudited Pro Forma Condensed Consolidated
Statement of Operations of the Company and its
Subsidiaries for the three months ended
January 28, 1994.
(vi) Notes to Unaudited Pro Forma Condensed
Consolidated Statement of
Operations.
- 21 -
22
Signatures
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: June 10, 1994 JACK EGAN
Vice President - Corporate
Accounting
(Principal Accounting Officer)
23
EXHIBIT INDEX
-------------
EXHIBIT PAGE
NO. DESCRIPTION NO.
- - - ------- ------------ -----
10.01 Amendment dated April 28, 1994 to Agreement
between the Company and Irwin B. Robins.
15.01 Letter from Ernst & Young.
15.02 Letter from Ernst & Young regarding interim
financial information.