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 Nine Months Ended August 2, 1996
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
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 9, 1996 was 9,690,143.
2
VOLT INFORMATION SCIENCES, INC. AND SUBSIDIARIES
FORM 10-Q
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Statements of Income
Nine Months and Three Months Ended
August 2, 1996 and July 28, 1995 3
Condensed Consolidated Balance Sheets
August 2, 1996 and November 3, 1995 4
Condensed Consolidated Statements of Cash Flows
Nine Months Ended August 2, 1996 and July 28, 1995 5
Notes to Condensed Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Nine Months and Three Months Ended August 2, 1996
Compared to the Nine Months and Three Months Ended
July 28, 1995, Respectively 16
PART II - OTHER INFORMATION
Item 2. Changes in Securities 26
Item 4. Submission of Matters to a Vote of Security Holders 26
Item 5. Other Information 27
Item 6. Exhibits and Reports on Form 8-K 27
SIGNATURE 28
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PART I--FINANCIAL INFORMATION
ITEM 1--FINANCIAL STATEMENTS
VOLT INFORMATION SCIENCES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
Nine Months Ended Three Months Ended
----------------- ----- ------------
August 2, July 28, August 2, July 28,
1996 1995 1996 1995
---- ---- ---- ----
(Dollars in thousands)
REVENUES:
Sales of services $ 672,483 $ 551,017 $ 237,533 $ 209,493
Sales of products 63,533 48,799 21,357 16,431
Equity in net income of joint ventures--Note F 82 415 1,865 1,768
Gain on sale of interest in subsidiaries--Note I 3,666
Interest income 1,729 1,427 547 474
Other income (expense) - net--Note B (775) (656) (59) (414)
---------- ---------- ----------- ----------
740,718 601,002 261,243 227,752
---------- ---------- ----------- ----------
COSTS AND EXPENSES:
Cost of sales
Services--Note J 615,372 503,990 216,732 191,213
Products 42,455 32,291 13,933 10,893
Selling and administrative 38,732 31,223 13,635 11,090
Research, development & engineering 9,952 6,064 4,294 1,807
Depreciation and amortization 10,251 8,817 3,486 3,052
Foreign exchange loss - net 304 12 27 22
Interest expense 3,537 4,739 1,177 1,317
---------- ---------- ----------- ----------
720,603 587,136 253,284 219,394
---------- ---------- ----------- ----------
Income before income tax provision,
minority interests and extraordinary item 20,115 13,866 7,959 8,358
Income tax provision--Note H 8,745 5,357 3,815 3,302
Minority interests in net loss of
consolidated subsidiaries--Note I 521 549
---------- ---------- ----------- ----------
Income before extraordinary item 11,891 8,509 4,693 5,056
Extraordinary item--Note D (62) (62)
---------- ---------- ----------- ----------
Net income $ 11,891 $ 8,447 $ 4,693 $ 4,994
========== ========== =========== ==========
(Per Share Data)
Income before extraordinary item $ 1.21 $ .88 $ .47 $ .53
Extraordinary item (.01) (.01)
---------- ---------- ----------- ----------
Net income $ 1.21 $ .87 $ .47 $ .52
========== ========== =========== ==========
Number of shares used in computation
-- Note G 9,798,944 9,627,068 10,035,486 9,640,476
========== ========== =========== ==========
See accompanying notes.
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VOLT INFORMATION SCIENCES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
August 2, November 3,
1996 1995(a)
-------- ----------
(Dollars in thousands)
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 28,721 $ 25,350
Short-term investments 4,349 1,047
Trade accounts receivable less allowances of
$5,354 (1996) and $3,943 (1995)--Note B 99,754 111,696
Inventories--Note C 33,046 28,207
Deferred income taxes 11,105 8,711
Prepaid expenses and other assets 8,164 7,204
-------- --------
TOTAL CURRENT ASSETS 185,139 182,215
INVESTMENTS IN SECURITIES 252 4,136
INVESTMENTS IN AND ADVANCES TO
JOINT VENTURES--Note F 18,423 13,903
PROPERTY, PLANT AND EQUIPMENT--
at cost--Note D
Land and buildings 33,689 33,591
Machinery and equipment 61,568 51,233
Leasehold improvements 2,796 2,818
-------- --------
98,053 87,642
Less allowances for depreciation
and amortization 36,879 32,057
-------- --------
61,174 55,585
DEPOSITS, RECEIVABLES AND OTHER
ASSETS 870 2,764
INTANGIBLE ASSETS--net of accumulated
amortization of $6,004 (1996) and $4,181
(1995) 15,972 5,408
-------- --------
$281,830 $264,011
======== ========
LIABILITIES AND STOCKHOLDERS'
EQUITY
CURRENT LIABILITIES
Notes payable to banks $ 4,864 $ 5,154
Current portion of long-term debt--Note D 3,049 2,000
Accounts payable 28,223 30,786
Accrued expenses
Wages and commissions 25,619 23,403
Taxes other than income taxes 11,139 10,059
Insurance 8,816 18,893
Other 8,770 6,686
Customer advances and other liabilities 18,410 15,250
Income taxes 1,620 12,401
-------- --------
TOTAL CURRENT LIABILITIES 110,510 124,632
LONG-TERM DEBT--Note D 29,873 28,819
DEFERRED INCOME TAXES 951 3,433
-------- --------
141,334 156,884
MINORITY INTERESTS--Note I 20,748
STOCKHOLDERS' EQUITY--Notes
D, E, F, and G
Preferred stock, par value $1.00
Authorized--500,000 shares;
issued--none
Common stock, par value $.10
Authorized--15,000,000 shares;
issued - 9,688,143 shares (1996)
and 9,664,794 shares (1995) 969 966
Paid-in capital 27,678 27,098
Retained earnings 91,048 79,157
Cumulative foreign currency
translation adjustment 34 (168)
Unrealized gain on
marketable securities 19 74
-------- --------
119,748 107,127
-------- --------
$281,830 $264,011
======== ========
(a) The Balance Sheet at November 3, 1995 has been derived from the audited
financial statements at that date.
See accompanying notes.
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VOLT INFORMATION SCIENCES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Nine Months Ended
August 2, July 28,
1996 1995
----------- --------
(Dollars in thousands)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $11,891 $ 8,447
Adjustments to reconcile net income to cash
provided by operating activities:
Extraordinary loss 62
Depreciation and amortization 10,251 8,817
Equity in net income of joint ventures (82) (415)
Gain on sale of interest in subsidiaries (3,666)
Distributions from joint ventures 2,282 904
Accounts receivable provisions 2,315 1,640
Minority interests (521)
Amortization of deferred costs and intangibles 1,863 662
(Gains) losses on foreign currency translation (364) 234
(Gains) losses on dispositions of fixed assets 35 (198)
Deferred income tax provision 1,160 1,115
Gains on sales of securities (14)
Other 11 47
Changes in operating assets and liabilities,
excluding the effect of acquired companies:
(Increase) decrease in accounts receivable 14,094 (1,182)
Increase in inventories (2,603) (2,281)
Increase in prepaid expenses
and other current assets (2,571) (2,888)
(Increase) decrease in deposits, receivables
and other assets 1,781 (1,388)
Increase (decrease) in accounts payable (741) 340
Increase (decrease) in accrued expenses (9,369) 3,939
Increase in customer advances and
other liabilities 2,247 4,200
Increase (decrease) in income tax liability (10,972) 2,589
-------- ------
NET CASH PROVIDED BY OPERATING
ACTIVITIES 17,041 25,630
-------- -------
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VOLT INFORMATION SCIENCES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)--Continued
Nine Months Ended
August 2, July 28,
1996 1995
---------- -------
(Dollars in thousands)
CASH FLOWS FROM INVESTING ACTIVITIES
Maturities of investments 3,159 9,740
Purchases of investments (3,182) (7,641)
Investments in and advances to joint ventures (6,403) (4,323)
Cash of acquired subsidiaries, less
transaction costs 8,421
Proceeds from disposals of property,
plant and equipment 82 606
Purchases of property, plant and equipment (13,192) (9,973)
Other (2,122) (1,125)
-------- -------
NET CASH APPLIED TO INVESTING
ACTIVITIES (13,237) (12,716)
-------- -------
CASH FLOWS FROM FINANCING ACTIVITIES
Payment of long-term debt (1,500) (11,500)
Exercise of stock options 71 209
Increase in minority interest 331
Increase (decrease) in notes payable to banks 148 (282)
-------- -------
NET CASH APPLIED TO FINANCING
ACTIVITIES (950) (11,573)
-------- -------
Effect of exchange rate changes on cash 517 (531)
-------- -------
NET INCREASE IN CASH
AND CASH EQUIVALENTS 3,371 810
Cash and cash equivalents, beginning of period 25,350 17,049
-------- -------
CASH AND CASH EQUIVALENTS,
END OF PERIOD $28,721 $17,859
======= ========
SUPPLEMENTAL INFORMATION
Cash paid during the period:
Interest expense $ 4,220 $ 5,585
Income taxes $18,494 $ 1,525
See accompanying notes.
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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 principles. 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 August 2, 1996 and results of operations for the nine and
three months ended August 2, 1996 and July 28, 1995 and cash flows for the nine
months ended August 2, 1996 and July 28, 1995. Operating results for the nine
and three months ended August 2, 1996 are not necessarily indicative of the
results that may be expected for the fiscal year ending November 1, 1996.
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 November 3, 1995. 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. In March 1995, the limit was
increased to $45,000,000 and the agreement was extended to March 1998. As
collections reduce previously sold undivided interests, new receivables may be
sold up to the $45,000,000 level. At August 2, 1996, and November 3, 1995,
$40,000,000 and $30,000,000, respectively, of interests in accounts receivable
had been sold under this agreement. The sold accounts receivable are reflected
as a reduction of receivables in the accompanying balance sheets. The Company
pays fees based primarily on the purchaser's borrowing costs incurred on
short-term commercial paper which financed the purchase of receivables. Other
income (expense) in the accompanying statements of income includes fees related
to the agreement of $1,664,000 and $1,479,000 in the nine months ended, and
$606,000 and $789,000 in the three months ended, August 2, 1996 and July 28,
1995, 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
stated minimum tangible net worth, as defined, or exceeds a maximum ratio of
debt to tangible net worth.
-7-
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)--Continued
Note C--Inventories
Inventories consist of:
August 2, November 3,
1996 1995
--------- -----------
(Dollars in thousands)
Services:
Accumulated unbilled costs on:
Service contracts $18,998 $15,909
Long-term contracts 2,026 2,980
------ -----
21,023 18,889
------- ------
Products:
Materials and work-in-process 7,494 4,818
Service parts 2,228 1,124
Finished goods 2,301 3,376
------ -------
12,023 9,318
------ -------
Total $33,046 $28,207
======= =======
The cumulative amounts billed, principally under long-term contracts, of
$3,247,000 at August 2, 1996 and $3,469,000 at November 3, 1995 are credited
against the related costs in inventory. Substantially all of the amounts billed
have been collected.
Note D--Long-Term Debt
Long-term debt consists of the following:
August 2, November 3,
1996 1995
--------- -----------
(Dollars in thousands)
12-3/8% Senior Subordinated Debentures, due
July 1, 1998--net of unamortized discount of
$26,000 - 1996 and $36,000 - 1995 (a) $22,829 $22,819
Term loan (b) 6,500 8,000
Notes payable (c) (d) 3,593
------- --------
32,922 30,819
Less amounts due within one year 3,049 2,000
-------- --------
Total long-term debt $29,873 $28,819
======= =======
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)--Continued
Note D--Long Term Debt (Continued)
On August 28, 1996, the Company issued $50,000,000 of Senior Notes in a private
placement with institutional investors. The notes, which have a term of eight
years bear interest at 7.92% per annum payable semiannually and provide for
amortization of principal in five equal annual installments beginning in August
2000. A portion of the proceeds of the notes will be used to retire the
outstanding 12-3/8% Senior Subordinated Debentures. The notes were issued
pursuant to Note Purchase Agreements which contain various affirmative and
negative covenants.
(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. The debentures are subordinated to all existing
and future senior indebtedness (as defined) of the Company. On August 28, 1996,
the Company notified its bondholders that the remaining $22,855,000 of
outstanding debentures will be redeemed on September 27, 1996 at par plus
accrued interest. The accompanying statement of income for the nine months ended
July 28, 1995 reflects an extraordinary charge of $62,000, net of income tax
benefits of $42,000 related to the redemption in May 1995 of $10,000,000 of the
Company's debentures.
(b) In October 1994, the Company entered into a $10,000,000 five-year loan
agreement with Fleet Bank, which is secured by a deed of trust on land and
buildings (book value at August 2, 1996 - $15,182,000). The term loan bears
interest at 7.86% per annum and is repayable in twenty quarterly principal
installments of $500,000, together with interest. In October 1996, if certain
conditions are met, the loan may be extended for two years with a subsequent
reduction of principal payments to $225,000 per quarter and a final payment of
$1,725,000 due October, 2001. The agreement contains various financial
covenants, the most restrictive of which requires the Company to maintain a
tangible net worth of $86,000,000.
(c) Includes two notes payable (which bear interest at 90 day commercial paper
rates), each for $550,000, due on January 2, 1997 and January 2, 1998,
respectively.
(d) An unsecured loan of $2,493,000 from Chase Bank was made to a foreign
subsidiary on January 18, 1996 to finance a printing press. The five-year loan,
guaranteed by the Company, is to be repaid in ten semi-annual payments including
interest calculated at LIBOR (5.53% at August 2, 1996) plus .25% beginning
September 15, 1996.
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)--Continued
Note E--Stockholders' Equity
Changes in the major components of stockholders' equity for the nine
months ended August 2, 1996 are as follows:
Common Paid-In Retained
Stock Capital Earnings
------- --------- --------
(Dollars in thousands)
Balance at November 3, 1995 $966 $27,098 $79,157
Net income for the nine months 11,891
Issuance of 18,349 shares to ESOP 2 498
Stock options exercised - 4,400 shares 1 70
Stock Award - 600 shares 12
------ --------- -------
Balance at August 2, 1996 $969 $27,678 $91,048
==== ======= =======
The other components of stockholders' equity are the unrealized gain on
marketable securities and the cumulative foreign currency translation adjustment
due to the Company's investment in its Australian joint venture, whose
functional currency is the Australian dollar.
On April 22, 1996, the Company granted stock options to acquire 446,250 shares
of the Company's common stock to key employees at $27-1/8 per share, the average
of the high and low prices on such date. The options were granted under the
Company's 1995 Non-Qualified Stock Option Plan.
On June 28, 1996, the shareholders authorized an amendment to the Company's
Certificate of Incorporation to increase the number of authorized shares of
common stock to 30,000,000 shares.
Note F--Summarized Financial Information of Joint Ventures
The Company owns 12-1/2% of the voting stock of Pacific Access Pty. Ltd.
("Pacific Access"), an international joint venture in Australia. This venture,
which commenced operations in July 1991, assumed responsibility throughout
Australia for the marketing, sales and compilation functions of all yellow pages
directories of Telstra Corporation Ltd., ("Telstra"), the Australian
government-owned telephone company, under the terms of a twelve-year contract.
The venture produces a major portion of its revenues and significantly all of
its profits in the Company's second and third fiscal quarters. Telstra owns 50%
of the voting stock of Pacific Access. In the event of a change in control of
the Company, as defined, the Company may be required to sell its shares in the
venture to Telstra at a formula price based on various factors, including
earnings.
In July 1994, the Company entered into a long-term joint venture agreement to
publish the official White Pages, Yellow Pages and Street Guides for Rio de
Janeiro. As of August 2, 1996, the Company has made an aggregate of $13,971,000
of investments in and loans and advances to Telelistas Editora Ltda., a
Brazilian company which has a contract to publish Rio's telephone directories on
behalf of TELERJ, the government-owned telephone company. Such investment
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)--Continued
Note F--Summarized Financial Information of Joint Ventures (Continued)
resulted in the acquisition of a 50% interest in the common shares together with
75% of the issued preferred stock. The agreement, as amended, requires the
Company to provide technology, expertise and key personnel in directory
production, sales and marketing. It is likely that additional advances will be
made by the Company to the joint venture. Such advances will be repaid before
any other distributions of the net assets of the venture. As a result of the
funding requirements, during the start-up period, the Company has recognized 75%
through May 3, 1996, and 100% thereafter, of the losses incurred by the venture.
At such time as the venture becomes profitable, the Company will recognize a
greater than 50% portion of the venture's net income until start-up losses are
recovered and 50% of any profits subsequent thereto. No tax benefit has been
recognized by the venture for operating loss carry forwards. Accordingly, tax
benefits from such losses will be recognized at such time that the venture
becomes profitable.
Consolidated retained earnings at August 2, 1996 includes $5,907,000,
representing the undistributed earnings of Pacific Access. Income taxes have
been paid or provided on such earnings.
The following summarizes the financial information of the joint ventures:
August 2, 1996 November 3, 1995
----------------------- ------------------------
(Dollars in thousands)
Company's
Advances Company's
Total and Equity Total Equity
--------- ---------- --------- ---------
Current assets $ 347,240 $ 270,495
Noncurrent assets 16,662 17,207
Current liabilities (290,777) (227,749)
Due to Volt (1,640) $ 1,640
Noncurrent liabilities (224) (259)
--------- ---------
Equity of combined joint ventures $ 71,261 $ 59,694
========= =========
Equity of Australian joint venture (a) $ 65,765 11,687 $ 55,733 $10,436
Equity of Brazilian joint venture 5,496 5,096 3,961 3,467
--------- ------- --------- -------
$ 71,261 $ 59,694
========= --=======
Investments in and advances to
joint ventures $18,423 $13,903
======== =======
(a)-Pursuant to the Australian 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.
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)--Continued
Note F--Summarized Financial Information of Joint Ventures--(Continued)
Nine Months Ended
August 2, 1996 July 28, 1995
------------------------ -----------------------
(Dollars in thousands)
Company's Company's
Total Equity Total Equity
-------- --------- -------- ----------
Revenues $488,425 $440,188
Costs and expenses 451,578 411,156
Income tax provision 14,127 9,091
-------- -------
Net income $22,720 $19,941
======= =======
Net income of Australian joint venture $26,508 $3,216 $23,438 $2,871
Net loss of Brazilian joint venture (3,788) (3,134) (3,497) (2,456)
-------- -------- ------- -------
$22,720 $19,941
======= =======
Company's equity in net income
of joint ventures $82 $415
=== ====
Three Months Ended
---------------------------------------------------------------
August 2, 1996 July 28, 1995
------------------------- ---------------------------
(Dollars in thousands)
Company's Company's
Total Equity Total Equity
-------- --------- -------- ---------
Revenues $266,730 $224,452
Costs and expenses 230,714 200,838
Income tax provision 12,818 4,861
-------- -------
Net income $23,198 $18,753
======= =======
Net income of Australian joint venture $24,340 $2,971 $19,731 $2,423
Net loss of Brazilian joint venture (1,142) (1,106) (978) (655)
-------- ------- ------ -------
$23,198 $18,753
======= =======
Company's equity in net income of
joint ventures $1,865 $1,768
====== =======
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)--Continued
Note G--Per Share Data
Per share data are computed on the basis of the weighted average number of
shares of common stock outstanding and, if applicable, the assumed exercise of
dilutive outstanding stock options based on the treasury stock method.
Note H--Income Taxes
Significant components of the income tax provision attributable to operations
are as follows:
Nine Months Ended Three Months Ended
--------------------------- -------------------------
August 2, July 28, August 2, July 28,
1996 1995 1996 1995
---------- --------- --------- -------
(Dollars in thousands)
Current:
Federal $6,018 $2,151 $3,564 $2,914
Foreign 775 995 493 476
State and local 792 1,096 111 871
------ ----- ------ -----
7,585 4,242 4,168 4,261
------ ----- ------ -----
Deferred:
Federal 938 885 (267) (773)
Foreign (14) 20 (14)
State and local 236 210 (72) (186)
------- ------ ------ -----
1,160 1,115 (353) (959)
------- ------ ------ -----
$8,745 $5,357 $3,815 $3,302
====== ====== ====== ======
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)--Continued
Note I--Acquisition and Sale of Subsidiaries
During the nine months ended August 2, 1996, the Company acquired a technical
services business and a temporary services business for a total of $3,111,000 in
cash and notes which resulted in an increase in intangible assets of $3,057,000.
On January 29, 1996, the Company merged its wholly-owned subsidiary, Autologic,
Incorporated and related foreign subsidiaries ("Autologic"), representing its
Electronic Publication and Typesetting Systems segment, with Information
International, Inc. ("Triple-I"), resulting in the formation of a new publicly
traded company, Autologic Information International, Inc. ("AII"). Triple-I was
a publicly traded company in the business of electronic publishing prepress
systems.
In connection with the merger, the stockholders of Triple-I received 41% of
AII's common stock based on one share of AII being issued for each outstanding
share of Triple-I and the Company received 59% of the outstanding shares of AII
common stock.
The merger has been accounted for as a purchase of a 59% interest in Triple-I
and a corresponding sale of a 41% interest in Autologic to the former
shareholders of Triple-I. The accompanying 1996 financial statements include the
accounts of AII with the former Triple-I shareholders' 41% interest in AII,
shown as a minority interest in the condensed consolidated balance sheet. The
results of operations of Triple-I are included in the accompanying consolidated
statement of income since the date of acquisition. The sale of 41% of Autologic
resulted in a pretax gain of $3,666,000, net of transaction costs, and also
resulted in 41% of Autologic's assets being reflected in the 1996 balance sheet
at fair value, resulting in an intangible of $5,215,000 with a corresponding
increase in the minority interest. Amortization of such intangible, which
amounted to $522,000 and $261,000 in the nine and three months periods ended
August 2, 1996 is being charged to the minority interest. In addition, the
purchase of the assets of Triple-I resulted in an intangible of $3,847,000.
These intangibles are being amortized over a period of five years.
In connection with the merger, Autologic restructured its operations and
incurred a charge of $700,000 related principally to the termination of
employees. Such charge is included in the results of operations for the nine
months ended August 2, 1996.
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)--Continued
Note I--Acquisition and Sale of Subsidiaries (Continued)
The following unaudited pro forma information presents a summary of consolidated
results of operations as if the acquisitions had occurred at the beginning of
the respective periods with pro forma adjustments to give effect to amortization
of intangibles, minority interest share in operations and certain income tax
adjustments. The pro forma financial information is not necessarily indicative
of the results of operations as they would have been had the transactions been
effected on the assumed dates or of future results of operations of the
consolidated entities.
Nine Months Ended
August 2, July 28,
1996 1995
(Dollars in thousands, except
per share amounts)
Revenue $752,723 $634,731
Net income $12,341 $5,558*
Net income per share $1.26 $.60*
* Reduced by $1,421,000 ($.15 per share) for discontinued operations of Triple-I
Note J--Significant Item in Operating Results
Net income for the nine months ended August 2, 1996 includes first and second
quarter cost reductions aggregating $2,625,000 ($1,600,000, net of taxes, or
$.16 per share) as a result of an agreement to pay a premium to an insurance
carrier to close out prior years' retrospective insurance policies at an amount
less than related liabilities for workers' compensation insurance previously
provided by the Company. This adjustment had a favorable impact primarily on the
operating profit of the Technical Services and Temporary Personnel segment for
the nine months ended August 2, 1996 of $2,100,000. In addition, due to a new
arrangement with its insurance carrier, the Company's ongoing premiums are at a
significantly lower rate.
-15-
16
ITEM 2--MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
NINE MONTHS AND THREE MONTHS ENDED AUGUST 2, 1996 COMPARED TO THE NINE MONTHS
AND THREE MONTHS ENDED JULY 28, 1995
The information which appears below relates to the 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.
This discussion and analysis contains certain forward-looking statements which
are subject to a number of known and unknown risks that, in addition to general
economic and business conditions, could cause actual results, performance and
achievements to differ materially from those described or implied in the
forward-looking statement.
The following summarizes the results of operations by segment:
FOR THE NINE FOR THE THREE
MONTHS ENDED MONTHS ENDED
----------------------------- -------------------------
August 2, July 28, August 2, July 28,
1996 1995 1996 1995
-------- -------- -------- ----------
(Dollars in thousands)
Revenues:
Technical Services and Temporary Personnel $506,599 $395,309 $180,677 $141,357
Electronic Publication and Typesetting Systems 64,059 49,369 21,567 16,666
Telephone Directory 48,955 45,433 18,659 18,777
Engineering and Construction 62,962 45,620 20,420 16,483
Computer Systems 56,815 67,454 18,931 33,912
Equity in net income of joint ventures 82 415 1,865 1,768
Gain on sale of interest in subsidiaries 3,666
Interest and other income (expense) - net 954 771 488 60
Elimination of intersegment revenues (3,374) (3,369) (1,364) (1,271)
-------- -------- -------- ----------
$740,718 $601,002 $261,243 $227,752
======== ======== ======== ========
Income Before Income Taxes, Minority Interests
and Extraordinary Item:
Operating Profit (Loss):
Technical Services and Temporary Personnel $19,264 $18,050 $6,114 $6,159
Electronic Publication and Typesetting Systems (3,065) 409 (1,610) 22
Telephone Directory (1,171) (1,210) 399 241
Engineering and Construction 5,587 2,838 1,859 1,662
Computer Systems 6,029 4,413 2,632 2,157
Eliminations (69) (92) (71) (61)
------- ------- ------ --------
Total Operating Profit 26,575 24,408 9,323 10,180
Equity in net income of joint ventures 82 415 1,865 1,768
Gain on sale of interest in subsidiaries 3,666
Interest and other income (expense) - net 954 771 488 60
General corporate expenses (7,321) (6,977) (2,513) (2,311)
Interest expense (3,537) (4,739) (1,177) (1,317)
Foreign exchange loss - net (304) (12) (27) (22)
------- ------- ------- -------
Income Before Income Taxes, Minority Interests
and Extraordinary Item $20,115 $13,866 $7,959 $8,358
======= ======= ====== ======
-16-
17
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS--Continued
NINE MONTHS ENDED AUGUST 2, 1996 COMPARED TO THE NINE MONTHS ENDED JULY 28, 1995
Results of Operations - Summary
In the nine-month period of fiscal 1996, revenues increased by $139,716,000, or
23%, from fiscal 1995, as sales increased by $136,200,000, or 23%. Revenues in
the 1996 period also included a pretax gain of $3,666,000 from the sale of an
interest in the Company's Electronic Publication and Typesetting Systems
segment. The increase in sales resulted primarily from a $111,290,000 increase
in sales of the Technical Services and Temporary Personnel segment, a
$17,342,000 increase in sales of the Engineering and Construction segment and a
$14,690,000 increase in the sales of the Electronic Publication and Typesetting
Systems segment, partially offset by a $10,639,000 decrease in the sales of the
Computer Systems segment.
The Company's pretax income before minority interests was $20,115,000 in 1996,
compared to $13,866,000 in 1995. The 1996 income included the $3,666,000 pretax
gain discussed above. The operating profit of the Company's segments increased
by $2,167,000 to $26,575,000 in 1996. The principal increases in the segments'
operating income were from the Engineering and Construction segment, with an
increase of $2,749,000 to $5,587,000; the Computer Systems segment, with an
increase of $1,616,000 to $6,029,000 and the Technical Services and Temporary
Personnel segment, with an increase of $1,214,000 to $19,264,000; partially
offset by the Electronic Publication and Typesetting Systems segment, with a
decrease of $3,474,000, to a loss of $3,065,000 compared to a profit of $409,000
in 1995.
Net income in the nine months of 1996 was $11,891,000 compared to net income of
$8,447,000 in the nine months of 1995.
Results of Operations - By Segment
The Technical Services and Temporary Personnel segment's sales increased by
$111,290,000, or 28%, in 1996 to $506,599,000, and the segment's operating
profit increased by $1,214,000, or 7%, to $19,264,000 compared to $18,050,000 in
1995. Approximately $30,500,000, or 27%, of the segment's 1996 sales increase
was due to pass-through costs primarily related to subcontractors to service
large national contracts and $19,500,000 of the sales increase was the result of
business with new customers. The remainder of the increased business was with
existing customers, partially offset by a $17,035,000 sales decrease to a high
margin customer who no longer requires the segment's services. The increase in
the segment's operating profit was due to the $2,100,000 retrospective workers'
compensation insurance adjustment referred to in Note J in the accompanying
financial statements and the increase in sales volume. The increase was
partially offset by a decrease in gross margin of approximately 2 percentage
points, primarily due to higher subcontractor usage billed without a mark-up,
the loss of the high margin customer discussed above, lower margins on
-17-
18
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS--Continued
NINE MONTHS ENDED AUGUST 2, 1996 COMPARED TO THE NINE MONTHS ENDED JULY 28, 1995
the increasing business with the large national contracts, and an increase in
unemployment insurance costs. Overhead costs expressed as a percentage of sales
decreased slightly in 1996 compared to 1995. Normal efficiencies resulting from
increased revenue were partially offset by start-up costs to service several
large national customers which are in the initial stages of their contracts.
The Electronic Publication and Typesetting Systems segment's sales increased by
$14,690,000, or 30%, to $64,059,000 in 1996, while the segment incurred an
operating loss of $3,065,000 compared to a profit of $409,000 in 1995. The sales
increase and the related effects on operating profit described below were
primarily due to the first quarter merger with Triple-I, described in Note I in
the accompanying financial statements. The decrease in operating profit was due
to a 3 percentage point increase in total operating expenses expended per sales
dollar, partially offset by the increased sales volume. In addition, the segment
incurred $700,000 of restructuring charges and a charge of $1,068,000 for
amortization of intangibles resulting from the merger. The markets in which the
segment competes are marked by rapidly changing technology, with sales in fiscal
1996 of equipment introduced within the last three years comprising
approximately 97% of equipment sales.
The Telephone Directory segment's sales increased by $3,522,000, or 8%, to
$48,955,000 in fiscal 1996, while the segment incurred an operating loss of
$1,171,000 compared to a loss of $1,210,000 in 1995. The sales increase is due
to a $1,904,000 increase in telephone directory production volume, an increase
in independent directory sales by the segment's DataNational division of 5% and
increased sales by the Uruguayan printing operation of 35%. The operating losses
in 1996 and 1995 were due to costs to enter a new regional independent directory
market, higher operating costs in the Uruguayan printing operations (resulting,
in 1996, from a move to a new facility and installation of new equipment)
partially offset in 1996 by higher telephone directory production revenues and
profits. This segment's services are rendered under various short and long-term
contracts. Certain contracts expire in fiscal 1998 through 2001, and there can
be no assurance that they will be renewed on similar terms or replaced.
The Engineering and Construction segment's sales increased by $17,342,000, or
38%, to $62,962,000 in fiscal 1996 and its operating profit increased by
$2,749,000, or 97%, to $5,587,000 compared to $2,838,000 in 1995. The sales
increase was due to a 59% increase in the construction division and a 6%
increase in the business systems division. Operating results improved due to the
increased sales volume and a 3 percentage point decrease in overhead expended
per sales dollar.
-18-
19
ITEM 2--MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
NINE MONTHS ENDED AUGUST 2, 1996 COMPARED TO THE NINE MONTHS ENDED JULY 28, 1995
The Computer Systems segment's sales decreased by $10,639,000, or 16%, to
$56,815,000 in 1996; however, its operating profit increased by $1,616,000 or
37% to $6,029,000, from $4,413,000 in 1995. The decrease in sales was primarily
due to higher sales of Delta Operating Service Systems (DOSS) in 1995, compared
to 1996, partially offset by increased sales on conservation services to
utilities. The increase in operating profit was primarily due to increased
profits on conservation services to utilities. Under the completed contract
method of accounting used by this segment, revenues together with related costs
are recognized in income upon acceptance by the customer. Deliveries and
installations under other DOSS contracts continue and customer acceptances are
anticipated later in 1996. Profitability rates on such contracts are not
anticipated to be at the same levels as those earned on the DOSS contracts
accepted in fiscal 1995. This segment's results on a quarter-to-quarter basis
fluctuate as they are highly dependent on the timing of acceptance by customers
under contract for the segment's directory assistance systems, which occurs
periodically rather than evenly.
Results of Operations: Other
Other items, discussed on a consolidated basis, affecting the results of
operations for the nine-month periods were:
Interest income increased by $302,000, or 21%, in 1996, primarily due to the
availability of additional funds for investment.
Other income (expense) changed unfavorably by $119,000 in 1996 primarily due to
$185,000 of higher fees paid in connection with additional sales of receivables.
The Company's share of the net income of its joint ventures was $82,000 in 1996
compared to $415,000 in 1995. The decrease was due to the start-up losses
incurred by the Company's Brazilian joint venture which began operations in July
1994. The Company's share of the net income of its Australian joint venture,
which produces a major portion of its revenues and significantly all of its
profit in the Company's second and third fiscal quarters, increased by $345,000
due to an 11% or $48,000,000 increase in the venture's revenues.
Selling and administrative expenses increased by $7,509,000, or 24%, to
$38,732,000 in 1996 to support the increase in sales. However, these expenses
expressed as a percentage of sales were 5% in both 1996 and 1995.
-19-
20
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS--Continued
NINE MONTHS ENDED AUGUST 2, 1996 COMPARED TO THE NINE MONTHS ENDED JULY 28, 1995
Research, development and engineering expenditures increased by $3,888,000, or
64%, to $9,952,000 in 1996. The increase was due to additional product
development by the Computer Systems segment and the Electronic Publication and
Typesetting Systems segment.
Depreciation and amortization of property, plant & equipment increased by
$1,434,000, or 16%, to $10,251,000 in 1996. The increase was due to increased
fixed asset expenditures in fiscal 1995 and the nine months of 1996.
Interest expense decreased by $1,202,000, or 25%, to $3,537,000 in 1996. The
decrease was primarily due to the redemption of $10,000,000, in May 1995 of the
Company's 12-3/8% Subordinated Debentures and lower borrowings and interest
rates in Uruguay.
The Company's effective tax rate increased to 43% in 1996 from 39% in 1995. The
1996 tax provision was unfavorably impacted by the effect of increased
nondeductible Brazilian joint venture losses and intangible amortization related
to the Autologic merger and the 1995 tax provision was favorably impacted by the
utilization of a net operating loss carryforward.
-20-
21
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS--Continued
THREE MONTHS ENDED AUGUST 2, 1996 COMPARED TO THE THREE MONTHS ENDED JULY 28,
1995
Results of Operations - Summary
In the three-month period of fiscal 1996, revenues increased by $33,491,000, or
15%, from fiscal 1995, as sales increased by $32,966,000 or 15%. The increase in
sales resulted primarily from a $39,320,000 increase in sales of the Technical
Services and Temporary Personnel segment, an increase in sales of the Electronic
Publication and Typesetting Systems segment of $4,901,000 and a $3,937,000
increase in sales of the Engineering and Construction segment, partially offset
by a $14,981,000 decrease in the sales of the Computer Systems segment. The
Company's pretax income before minority interests was $7,959,000 in 1996
compared to $8,358,000 in 1995. The operating profit of the Company's segments
decreased by $857,000 to $9,323,000 in 1996. The decrease in the segments'
operating income was principally related to the Electronic Publication and
Typesetting Systems segment which experienced a decrease of $1,632,000, to a
loss of $1,610,000 compared to a $22,000 profit in 1995 partially offset by the
Computer Systems segment, with an increase of $475,000, to a profit of
$2,632,000 compared to $2,157,000 in 1995.
Net income in the third quarter of 1996 was $4,693,000 compared to net income of
$4,994,000 in 1995.
Results of Operations - By Segment
The Technical Services and Temporary Personnel segment's sales increased by
$39,320,000, or 28%, in 1996 to $180,677,000 and operating profit decreased by
$45,000, or 1%, to $6,114,000 compared to $6,159,000 in 1995. Approximately
$10,700,000, or 27%, of the segment's sales increase was due to pass-through
costs primarily related to subcontractors to service large national contracts
and $7,580,000 of the sales increase in 1996 was the result of business with new
customers. The remainder of the increased business was with existing customers,
partially offset by a $8,700,000 sales decrease to a high margin customer who no
longer requires the segment's services. The slight decrease in the segment's
operating profit was due to a decrease in gross margin of approximately 2
percentage points, primarily due to higher subcontractor usage billed without a
mark-up and the loss of the high margin customer discussed above, partially
offset by increased sales volume. Overhead costs expressed as a percentage of
sales decreased slightly in 1996 compared to 1995. Normal efficiencies resulting
from increased revenue were partially offset by start-up costs to service
several large national customers which are in the initial stages of their
contracts.
-21-
22
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS--Continued
THREE MONTHS ENDED AUGUST 2, 1996 COMPARED TO THE THREE MONTHS ENDED JULY 28,
1995
The Electronic Publication and Typesetting Systems segment's sales increased by
$4,901,000, or 29%, to $21,567,000 in 1996; however, the segment experienced an
operating loss of $1,610,000 compared to an operating profit of $22,000 in 1995.
The sales increase and the related effects on operating profit described below
were primarily due to the first quarter merger with Triple-I, described in Note
I in the accompanying financial statements. The decrease in operating profit was
due to a 7 percentage point increase in total operating expenses expended per
sales dollar, partially offset by the increased sales volume and a 2% increase
in gross margin. The increase in the gross margin percentage resulted from a
change in the product mix (an increase in sales of some high margin products and
a decrease in sales of some low margin items, which are in direct competition
with other manufacturers' products). As a result of the merger with Triple-I,
some of these high margin products which were previously purchased are now
manufactured by the segment. In addition, the segment's operating profit was
reduced by a charge of $534,000 for the amortization of intangibles resulting
from the merger. The markets in which the segment competes are marked by rapidly
changing technology, with sales in fiscal 1996 of equipment introduced within
the last three years comprising approximately 97% of equipment sales.
The Telephone Directory segment's sales decreased by $118,000, or 1%, to
$18,659,000 in fiscal 1996, and the segment's operating profit increased by
$158,000, or 66% to $399,000. The sales decrease is due to the publication in
1995 of certain independent telephone directories by the segment's DataNational
division that will be published in the 1996 fourth quarter, partially offset by
a $555,000 increase in telephone directory production volume and a 6% increase
in Uruguay printing revenue. The operating profit increase was due to higher
telephone directory production revenue partially offset by higher operating
costs in the Uruguayan printing operation (resulting, in 1996, from a move to a
new facility and installation of new equipment). This segment's services are
rendered under various short and long-term contracts. Certain contracts expire
in fiscal 1998 through 2001, and there can be no assurance that they will be
renewed on similar terms or replaced.
The Engineering and Construction segment's sales increased by $3,937,000, or
24%, to $20,420,000 in fiscal 1996 and its operating profit increased by
$197,000 or 12% to $1,859,000 compared to $1,662,000 in 1995. The sales increase
was due to a 31% increase in the construction division and a 23% increase in the
business systems division. Operating results improved due to the increased sales
volume partially offset by a decrease in the gross margin of 1 percentage point.
-22-
23
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS--Continued
THREE MONTHS ENDED AUGUST 2, 1996 COMPARED TO THE THREE MONTHS ENDED JULY 28,
1995
The Computer Systems segment's sales decreased by $14,981,000, or 44%, to
$18,931,000 in 1996 while the operating profit increased by $475,000 or 22% to
$2,632,000, compared to $2,157,000 in 1995. The decrease in sales was primarily
due to the absence, in 1996, of revenues from 1995 customer acceptance of a
major Delta Operating Service Systems (DOSS) project, partially offset by
increased sales on conservation services to utilities. The increase in operating
profit was primarily due to increased profits on conservation services to
utilities.
Results of Operations: Other
Other items, discussed on a consolidated basis, affecting the results of
operations for the three-month periods were:
Interest income increased by $73,000, or 15%, in 1996 primarily due to
additional funds invested.
Other income (expense) changed favorably by $355,000 in 1996 primarily due to
$183,000 of lower fees paid in connection with sales of receivables and an
increase in sundry income.
The Company's equity in the net income of its joint ventures was $1,865,000 in
1996, as compared to $1,768,000 in 1995. The increase was due to the Company's
share of the net income of its Australian joint venture, which increased by
$548,000 due to an increase in the venture's revenue of $42,000,000 or 19% and
higher margins, partially offset by start-up losses incurred by the Company's
Brazilian joint venture which began operations in July 1994.
Selling and administrative expenses increased by $2,545,000, or 23%, to
$13,635,000 in 1996 to support the increase in sales. However, these expenses
expressed as a percentage of sales were 5% in both 1996 and 1995.
Research, development and engineering expenditures increased by $2,487,000, or
138%, to $4,294,000 in 1996. The increase was due to additional product
development by the Computer Systems segment and the Electronic Publication and
Typesetting Systems segment.
-23-
24
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS--Continued
THREE MONTHS ENDED AUGUST 2, 1996 COMPARED TO THE THREE MONTHS ENDED JULY 28,
1995
Depreciation and amortization of property, plant & equipment increased by
$434,000, or 14%, to $3,486,000 in 1996. The increase was due to increased fixed
asset expenditures in fiscal 1995 and the nine months of 1996.
Interest expense decreased by $140,000, or 11%, to $1,177,000 in 1996. The
decrease was primarily due to the redemption of $10,000,000, in May 1995 of the
Company's 12-3/8% Subordinated Debentures and lower borrowings and interest
rates in Uruguay.
The Company's effective tax rate increased to 48% in 1996, from 40% in 1995. The
1996 tax provision was unfavorably impacted by the effect of increased
nondeductible Brazilian joint venture losses and intangible amortization related
to the Autologic merger.
-24-
25
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS--Continued
Liquidity and Source of Capital
Cash and cash equivalents increased by $3,371,000 in 1996 to $28,721,000, and
working capital increased by $17,046,000 to $74,629,000. Cash flows from
operating activities for the nine months ended August 2, 1996 were $17,041,000.
Many factors reflected in the accompanying consolidated statements of cash flows
affected the amount of cash flows from operating activities. The primary factors
in the cash provided by operating activities in 1996 were the net income of
$11,891,000, reduction in accounts receivable of $14,094,000 and the non-cash
expense of $12,114,000 for total depreciation and amortization, partially offset
by decreases in income taxes payable of $10,972,000, and accrued expenses of
$9,369,000.
The principal factors in the cash applied to investing activities of $13,237,000
were purchases of property, plant and equipment of $13,192,000 and investments
in and advances to the Brazilian joint venture of $6,403,000, partially offset
by the cash resulting from the acquisition of subsidiaries of $8,421,000, net of
transaction costs.
In addition to its cash and cash equivalents, at August 2, 1996, the Company's
investment portfolio, primarily U.S. Treasury Notes and certificates of deposit,
had a carrying value of $4,601,000. The Company also has a $10,000,000 credit
line with a domestic bank under a revolving credit agreement which expires
August 1, 1997, unless renewed. The Company had outstanding bank borrowings
under that line of $1,973,000 at August 2, 1996.
On August 28, 1996, the Company completed a $50,000,000 private placement Senior
debt financing. A portion of the proceeds of the debt financing will be used to
retire the outstanding $22,855,000 Senior Subordinated Debentures on September
27, 1996. The balance of the funds will be used for general corporate purposes.
The Company believes that its current financial position, working capital and
future cash flows will be sufficient to fund its presently contemplated
operations and satisfy its debt obligations. The Company has no material capital
commitments. The Company may determine, from time-to-time in the future, to buy
additional shares of its common stock in the market or in privately negotiated
transactions.
In October 1995, the Financial Accounting Standards Board issued Statements of
Financial Accounting Standards No. 123 ("SFAS 123"), "Accounting for Stock-Based
Compensation," which establishes a fair value based method of accounting for
stock-based compensation plans. SFAS 123 encourages, but does not require,
adoption of a fair value based method. The company has determined it will
continue to report under Accounting Principles Board Opinion No. 25, "Accounting
for Stock Issued to Employees."
-25-
26
PART II - OTHER INFORMATION
ITEM 2-- CHANGES IN SECURITIES
On August 28, 1996, the Company privately placed an aggregate of $50,000,000 of
its 7.92% Senior Notes due August 28, 2004 (the "Notes") to a group of qualified
institutional investors. Proceeds from the borrowing are being used to redeem
the remaining $22,855,000 principal amount of 12-3/8% Senior Subordinated
Debentures due 1998 at par plus accrued interest and for general corporate
purposes. The notes are payable in five equal annual installments beginning on
August 28, 2000. The notes were issued pursuant to a series of identical Note
Purchase Agreements which contain various affirmative and negative covenants
including, among other things, requirements that the Company maintain
consolidated net worth (as defined) of $80,000,000 plus 50% of the Company's
consolidated net income (as defined) commencing with the Company's fiscal year
ending November 1, 1996, a minimum fixed charge ratio coverage and certain
limitations on the extent to which the Company and its subsidiaries can incur
additional indebtedness, liens and sales of assets. The foregoing is a brief
description of the Note Purchase Agreements and is qualified in its entirety by
reference to the Composite Conformed Note Purchase Agreement which appears as
Exhibit 4.01 to this Report.
ITEM 4-- SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At the Company's 1996 Annual Meeting of Shareholders held on June 28, 1996,
shareholders:
(a) elected the following to serve as directors of the Corporation until the
1997 Annual Meeting of the Shareholders, by the following votes:
For Vote Withheld
Irwin B. Robins 7,430,735 47,087
John R. Torrell III 7,430,830 46,992
Mark N. Kaplan 7,430,830 46,992
(b) approved to Amend the Company's Certificate of Incorporation to increase
authorized Common Stock from 15,000,000 shares to 30,000,000 shares.
For: 7,083,928 Against: 371,816 Abstain: 22,078
-26-
27
ITEM 4-- SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(Continued)
(c) reported that a majority of the votes cast at the meeting were voted in
favor of the resolution to ratify the action of the Board of Directors in
appointing Ernst & Young LLP as the Corporation's independent public accountants
for the fiscal year ending November 1, 1996, by the following vote:
For: 7,460,556 Against: 5,878 Abstain: 11,388
There were no broker non-votes on any matter voted upon.
ITEM 5-- OTHER INFORMATION
On August 28, 1996, the Company called for the redemption on September 27, 1996
of the remaining $22,855,000 principal amount of 12-3/8% Senior Subordinated
Debentures due 1998 at par plus accrued interest.
ITEM 6-- EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
4.01 Composite Conformed Note Purchase Agreement drafted as of August 28,
1996 with respect to the issuance of the Company's $50,000,000, 7.92%
Senior Notes due August 28, 2004 (excluding disclosure schedules).
15.01 Acknowledgment letter from Ernst & Young LLP
15.02 Independent Accountants' Report on Review of
Interim Financial Information from Ernst & Young LLP
27.01 Financial Data Schedule
(b) Reports on Form 8-K:
No Reports on Form 8-K were filed during the quarter ended August 2, 1996.
-27-
28
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
------------------------------------------
JACK EGAN
Vice President - Corporate Accounting
(Principal Accounting Officer)
Date: September 12, 1996
-28-
29
EXHIBIT INDEX
4.01 Composite Conformed Note Purchase Agreement drafted as of August 28,
1996 with respect to the issuance of the Company's $50,000,000, 7.92%
Senior Notes due August 28, 2004 (excluding disclosure schedules).
15.01 Acknowledgment letter from Ernst & Young LLP
15.02 Independent Accountants' Report on Review of
Interim Financial Information from Ernst & Young LLP
27.01 Financial Data Schedule