UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
|X| Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For The Three Months Ended February 3, 2002
Or
|_| Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the transition period from ____________ to ____________
Commission File No. 1-9232
VOLT INFORMATION SCIENCES, INC.
--------------------------------
(Exact name of registrant as specified in its charter)
New York 13-5658129
- ----------------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
560 Lexington Avenue, New York, New York 10022
- ----------------------------------------- ------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (212) 704-2400
Not Applicable
----------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months, and (2) has been subject to such filing requirements
for the past 90 days.
Yes |X| No |_|
The number of shares of the Registrant's common stock, $.10 par value,
outstanding as of March 8, 2002 was 15,215,665.
VOLT INFORMATION SCIENCES, INC. AND SUBSIDIARIES
FORM 10-Q
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Statements of Operations -
Three Months Ended February 3, 2002 and February 4, 2001 3
Condensed Consolidated Balance Sheets -
February 3, 2002 and November 4, 2001 4
Condensed Consolidated Statements of Cash Flows -
Three Months Ended February 3, 2002 and February 4, 2001 5
Notes to Condensed Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 13
Item 3. Qualitative and Quantitative Disclosures about Market Risk 21
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 22
SIGNATURE 23
-2-
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
VOLT INFORMATION SCIENCES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Three Months Ended
----------------------------
February 3, February 4,
2002 2001
------------ ------------
(Dollars in thousands, except per share data)
NET SALES $ 338,753 $ 509,178
COSTS AND EXPENSES:
Cost of sales 326,975 487,929
Selling and administrative 15,428 14,564
Depreciation and amortization--Note K 5,509 6,041
------------ ------------
347,912 508,534
------------ ------------
OPERATING (LOSS) PROFIT (9,159) 644
OTHER INCOME (EXPENSE):
Interest income 198 182
Other (expense) income-net--Note F (318) 64
Foreign exchange loss-net--Note J (13) (254)
Interest expense (1,823) (3,877)
------------ ------------
Loss from continuing operations before income taxes (11,115) (3,241)
Income tax benefit 4,392 1,441
------------ ------------
Loss from continuing operations (6,723) (1,800)
Discontinued Operations--Note H:
Loss from operations, net of income taxes (197) (85)
Gain on disposal, including tax benefit 4,507
------------ ------------
Gain (loss) from discontinued operations 4,310 (85)
------------ ------------
NET LOSS ($2,413) ($1,885)
============ ============
Per Share Data
--------------
Basic and Diluted:
Loss from continuing operations per share ($0.44) ($0.12)
Gain from discontinued operations per share ($0.28)
------------ ------------
Net loss per share ($0.16) ($0.12)
============ ============
Weighted average number of shares--Note G 15,215,665 15,208,770
============ ============
See accompanying notes to condensed consolidated financial statements
-3-
VOLT INFORMATION SCIENCES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
February 3, November 4,
2002 2001(a)
----------- -----------
(Unaudited)
ASSETS (Dollars in thousands)
CURRENT ASSETS
Cash and cash equivalents $ 21,049 $ 18,474
Short-term investments 3,814 3,778
Trade accounts receivable less allowances of $10,131 (2002) and $9,376 (2001) 304,221 362,784
Assets held for sale--Note H 47,635
Recoverable income taxes 5,688
Inventories--Note B 34,203 36,186
Deferred income taxes 8,405 8,585
Prepaid expenses and other assets 17,206 13,487
--------- ---------
TOTAL CURRENT ASSETS 394,586 490,929
Investment in joint venture--Note F 3,466 3,739
Property, plant and equipment less allowances for depreciation and amortization of
$75,291 (2002) and $70,517 (2001)--Note D 94,683 97,147
Deposits and other assets 4,167 5,152
Intangible assets-net of accumulated amortization of $12,363 (2002) and $12,138
(2001)--Note K 40,025 40,269
--------- ---------
TOTAL ASSETS $ 536,927 $ 637,236
========= =========
CURRENT LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Notes payable to banks--Note C $ 15,845 $ 65,843
Current portion of long-term debt--Note D 31,435 31,429
Accounts payable 101,179 114,544
Liabilities related to assets held for sale--Note H 26,313
Accrued wages and commissions 39,755 47,282
Accrued taxes other than income taxes 17,801 15,412
Accrued interest and other accruals 13,051 20,936
Customer advances and other liabilities 23,417 16,548
Income taxes 2,038
--------- ---------
TOTAL CURRENT LIABILITIES 242,483 340,345
Long-term debt--Note D 15,910 15,993
Deferred income taxes 11,121 11,086
STOCKHOLDERS' EQUITY--Notes C, D and E
Preferred stock, par value $1.00; Authorized--500,000 shares; issued--none
Common stock, par value $.10; Authorized--30,000,000 shares; issued--15,215,665 shares 1,522 1,522
Paid-in capital 41,002 41,002
Retained earnings 225,353 227,766
Accumulated comprehensive loss (464) (478)
--------- ---------
TOTAL STOCKHOLDERS' EQUITY 267,413 269,812
--------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 536,927 $ 637,236
========= =========
(a) The Balance sheet at November 4, 2001 has been derived from the audited
financial statements at that date. See accompanying notes to condensed
consolidated financial statements.
-4-
VOLT INFORMATION SCIENCES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Three Months Ended
----------------------------
February 3, February 4,
2002 2001
----------- -----------
(Dollars in thousands)
CASH PROVIDED BY (APPLIED TO) OPERATING ACTIVITIES
Net loss ($ 2,413) ($ 1,885)
Adjustments to reconcile net (loss) income to cash provided by (applied to)
operating activities:
Discontinued operations (4,310) 85
Depreciation and amortization 5,509 6,041
Equity in net loss of joint venture 273 338
Accounts receivable provisions 1,833 1,508
Loss on foreign currency translation 22 15
Deferred income tax provision 203 315
Other 39 97
Changes in operating assets and liabilities:
Decrease in accounts receivable 55,965 12,512
Decrease in inventories 1,983 5,269
(Increase) decrease in prepaid expenses and other current assets (3,572) 112
Decrease other assets 865 1,060
Decrease in accounts payable (12,910) (20,546)
Decrease in accrued expenses (13,242) (2,322)
Increase in customer advances and other liabilities 6,980 10,965
Decrease in income taxes payable (5,980) (7,782)
-------- --------
NET CASH PROVIDED BY OPERATING ACTIVITIES $ 31,245 $ 5,782
-------- --------
-5-
VOLT INFORMATION SCIENCES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)--Continued
Three Months Ended
----------------------------
February 3, February 4,
2002 2001
----------- -----------
(Dollars in thousands)
CASH PROVIDED BY (APPLIED TO) INVESTING ACTIVITIES
Sales of investments $ 387 $ 225
Purchases of investments (232) (315)
Proceeds from disposals of property, plant and equipment 93 201
Purchases of property, plant and equipment (2,995) (9,188)
Proceeds from sale of subsidiary 24,233
Other (191) (48)
-------- --------
NET CASH PROVIDED BY (APPLIED TO) INVESTING ACTIVITIES 21,295 (9,125)
-------- --------
CASH (APPLIED TO) PROVIDED BY FINANCING ACTIVITIES
Payment of long-term debt (77) (225)
Exercise of stock options 25
(Decrease) increase in notes payable to banks (49,623) 4,182
-------- --------
NET CASH (APPLIED TO) PROVIDED BY FINANCING ACTIVITIES (49,700) 3,982
-------- --------
Effect of exchange rate changes on cash (265) (32)
-------- --------
NET INCREASE IN CASH AND CASH EQUIVALENTS FROM CONTINUING OPERATIONS 2,575 607
Net increase in cash and cash equivalents from discontinued operations 2,154
-------- --------
NET INCREASE IN CASH AND CASH EQUIVALENTS 2,575 2,761
Cash and cash equivalents, beginning of period 18,474 34,099
-------- --------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 21,049 $ 36,860
======== ========
SUPPLEMENTAL INFORMATION
Cash paid during the period:
Interest expense $ 1,514 $ 3,109
Income taxes, net of refunds $ 1,384 $ 6,618
See accompanying notes to condensed consolidated financial statements.
-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
required by generally accepted accounting principles for complete financial
statements. In the opinion of management, the accompanying unaudited condensed
consolidated financial statements contain all adjustments (consisting of normal
recurring accruals) considered necessary for a fair presentation of the
Company's consolidated financial position at February 3, 2002 and consolidated
results of operations and consolidated cash flows for the three months ended
February 3, 2002 and February 4, 2001. Operating results for interim periods are
not necessarily indicative of the results that may be expected for the fiscal
year.
These statements should be read in conjunction with the financial statements and
footnotes included in the Company's Annual Report on Form 10-K for the year
ended November 4, 2001. The accounting policies used in preparing these
financial statements are the same as those described in that Report. The
Company's fiscal year ends on the Sunday nearest October 31.
Note B--Inventories
Inventories of accumulated unbilled costs and materials by segment are as
follows:
February 3, November 4,
2002 2001
----------- -----------
(Dollars in thousands)
Staffing Services $ 28 $ 29
Telephone Directory 15,254 9,805
Telecommunications Services 15,626 22,970
Computer Systems 3,295 3,382
------- -------
Total $34,203 $36,186
======= =======
The cumulative amounts billed under service contracts at February 3, 2002 and
November 4, 2001 of $4.8 million and $4.6 million, respectively, are credited
against the related costs in inventory.
Note C--Short-Term Borrowings
At February 3, 2002, the Company had credit lines with domestic and foreign
banks that provide for borrowings and letters of credit up to an aggregate of
$127.7 million, including $115.5 million under a syndicated revolving credit
agreement which expires in September 2002. Borrowings under the revolving credit
facility bear interest at various interest rates, with the Company having the
option to select the most favorable rate at the time of borrowing. The revolving
credit facility requires the maintenance of various financial ratios and
covenants, including a fixed charge ratio and a requirement that the Company
maintain a consolidated net worth of $230.0 million, plus 50% of consolidated
net income for the fiscal year being measured, resulting in a
-7-
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)--Continued
Note C--Short-Term Borrowings--Continued
requirement at February 3, 2002 to maintain consolidated net worth of $230.0
million. The credit agreement also contains certain limitations on the extent to
which the Company and its subsidiaries may incur additional indebtedness, pay
dividends, repurchase capital stock, grant liens and sell assets. In connection
with the repayment of the Senior Notes described in Note D, the Company and the
bank lenders under the Company's revolving credit agreement, amended, effective
February 1, 2002, various covenants in that agreement. The Company also agreed
to secure, and subsequently secured, its obligations under the revolving credit
agreement with certain accounts receivable (the level of which at February 3,
2002 was approximately $56.0 million). The Company believes it will remain in
compliance with the amended covenants included in the revolving credit agreement
throughout its remaining term. At February 3, 2002, the Company had total
outstanding bank borrowings of $15.8 million, of which $11.7 million was
borrowed under the revolving credit line.
Note D--Long-Term Debt
Long-term debt consists of the following:
February 3, November 4,
2002 2001
----------- -----------
(Dollars in thousands)
7.92% Senior Notes (a) $30,000 $30,000
Term loan (b) 15,048 15,125
Notes payable (c) 2,297 2,297
------- -------
47,345 47,422
Less amounts due within one year 31,435 31,429
------- -------
Total long-term debt $15,910 $15,993
======= =======
(a) On August 28, 1996, the Company issued $50.0 million of Senior Notes in a
private placement to institutional investors. The notes bore interest at
7.92% per annum, payable semi-annually on February 28 and August 28, and
provided for amortization of principal in five equal annual installments,
which began in August 2000. In March 2000, the Company entered into a
series of interest swap agreements, which effectively converted these
notes, through their maturity, from fixed to floating rate debt. However
in December 2000, the Company terminated the swap agreements. The fair
value of the agreements at termination of $0.5 million was paid to the
Company and was reducing interest expense over the remaining term of the
notes. The notes were issued pursuant to Note Purchase Agreements, which
contain various affirmative and negative covenants. One such covenant
required the Company to maintain a level of consolidated net worth which,
under the formula in the agreements, was $157.1 million at February 3,
2002. However, the terms of the Company's revolving credit agreements
require the Company to maintain a consolidated net worth of $230.0 million
at February 3, 2002 (see Note C).
In January 2002, the Company received a commitment from a major bank to
enter into a three-year accounts receivable securitization program which,
assuming completion, will provide for the financing of up to $100.0
million of certain accounts receivable, unrelated to those used to secure
the Company's obligations under its revolving credit agreement.
-8-
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)--Continued
Note D--Long-Term Debt--Continued
During the first quarter, the Company determined to prepay the remaining
$30 million of its Senior Notes in lieu of seeking amendments to the
agreements under which the notes were issued. The implementation of the
securitization program referred to in the preceding paragraph as well as
the size of the first quarter loss necessitated the prepayment. The
Company prepaid the notes on March 5, 2002, which otherwise would have
been due in installments over the next two and one-half years. A "make
whole" premium of approximately $2.1 million will be recognized as an
extraordinary pre-tax charge in the second quarter of fiscal 2002 for the
extinguishment of that debt. The Company has reflected the outstanding
principal amount of the Senior Notes as a current liability in the
accompanying balance sheet.
(b) In September 2001, a subsidiary of the Company entered into a $15.1
million loan agreement with General Electric Capital Business Asset
Funding Corporation. The loan, which bears interest at 8.2% per annum and
requires principal and interest payments of $0.4 million per quarter, is
secured by a deed of trust on land and buildings (carrying amount at
February 3, 2002, $12.1 million). The obligation is guaranteed by the
Company.
(c) On February 9, 1999, the Company entered into a $5.6 million installment
payment agreement to finance the purchase and support of an Enterprise
Resource Planning system for internal use as an accounting and back office
system, which has been capitalized and is being amortized over a five to
seven year period. The agreement provides for interest, calculated at 6%,
and principal payments in five equal annual installments of $1.3 million,
which began in February 1999, with the final payment due February 2003.
Note E--Stockholders' Equity
Changes in the major components of stockholders' equity for the three months
ended February 3, 2002 are as follows:
Common Paid-In Retained
Stock Capital Earnings
------- ------- --------
(Dollars in thousands)
Balance at November 4, 2001 $ 1,522 $41,002 $227,766
Net loss for the three months (2,413)
------- ------- --------
Balance at February 3, 2002 $ 1,522 $41,002 $225,353
======= ======= ========
-9-
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)--Continued
Note E--Stockholders' Equity--Continued
Another component of stockholders' equity, the accumulated other comprehensive
loss, consists of cumulative unrealized foreign currency translation losses, net
of taxes, of $482,000 and $468,000 at February 3, 2002 and November 4, 2001,
respectively, and an unrealized gain, net of taxes, of $18,000 and an unrealized
loss, net of taxes, of $10,000 in marketable securities at February 3, 2002 and
November 4, 2001, respectively. Changes in these items, net of income taxes, are
included in the calculation of comprehensive loss as follows:
Three Months Ended
-------------------------------
February 3, February 4,
2002 2001
----------- -----------
(Dollars in thousands)
Net loss ($2,413) ($1,885)
Foreign currency translation adjustments-net (14) 185
Unrealized gain (loss) on marketable securities-net 28 (11)
------- -------
Total comprehensive loss ($2,399) ($1,711)
======= =======
Note F--Joint Venture
The Company owns a 50% interest in westVista Advertising Services, a joint
venture with a subsidiary of TELUS Corporation. The venture was formed in fiscal
1998 for the acquisition or establishment and subsequent operation of one or
more businesses engaged in the publication of telephone directories in the
western United States. Additional acquisitions by the joint venture have been
suspended. In the first quarter of fiscal 2002, sales of the venture were $0.5
million and the Company's portion of the loss sustained was $0.3 million, which
is included in other (expense) income.
Note G--Per Share Data
In calculating basic earnings per share, the dilutive effect of stock options
are excluded. Diluted earnings per share are computed on the basis of the
weighted average number of shares of common stock outstanding and the assumed
exercise of dilutive outstanding stock options based on the treasury stock
method.
Three Months Ended
-------------------------------
February 3, February 4,
2002 2001
----------- -----------
Denominator for basic and diluted earnings per share -
Weighted average number of shares 15,215,665 15,208,770
Due to a pre-tax loss in the first quarter of fiscal 2002 and 2001, none of the
options to purchase 571,201 and 586,211 shares, respectively, of the Company's
common stock were included in the computation of diluted earnings per share
because the effect would be antidilutive.
-10-
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)--Continued
Note H--Sale and Acquisitions of Subsidiaries and Businesses
On November 30, 2001, the Company's 59% owned publicly-held subsidiary,
Autologic Information International, Inc. ("Autologic"), that comprised the
Company's Electronic Publication and Typesetting segment, was acquired by Agfa
Corporation through a tender offer for all of Autologic's outstanding shares and
a subsequent merger. The Company received $24.2 million for its shares. The
Company's gain on the transaction of $4.5 million, including a tax benefit of
$1.7 million, is reflected in the Company's first quarter of fiscal 2002. The
results of operations of Autologic have been classified as discontinued,
Autologic's prior period results have been reclassified and its assets and
liabilities have been included as separate line items on the Company's fiscal
2001 balance sheet.
Included in discontinued operations for the quarters ended February 3, 2002
(through November 30, 2001) and February 4, 2001 are:
Three Months Ended
------------------------------
February February
3, 2002 4, 2001
-------- --------
(Dollars in thousands)
Revenue $ 3,296 $ 16,757
======= ========
Loss before taxes and minority interest $ (488) $ (88)
Income tax benefit (provision) 153 (140)
Minority interest 138 143
------- --------
Loss from operations (197) (85)
------- --------
Gain on disposal before tax benefit 2,761
Income tax benefit 1,746
-------
Gain on disposal 4,507
------- --------
Gain (loss) from discontinued operations $ 4,310 $ (85)
======= ========
Autologic's assets and liabilities reclassified in the November 4, 2001 balance
sheet include:
November
4, 2001
--------
(Dollars in thousands)
Cash $14,879
Accounts receivable 10,807
Inventory 7,782
Deferred taxes and other current assets 5,717
Property, plant and equipment, net 4,401
Deferred taxes and other non-current assets 4,049
-------
Assets held for sale $47,635
=======
Accounts payable $ 2,358
Accrued expenses 4,333
Customer advances and other liabilities 4,037
Minority interest 15,585
-------
Liabilities related to assets held for sale $26,313
=======
-11-
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)--Continued
Note I--Segment Disclosures
Financial data concerning the Company's sales and segment operating profit
(loss) by reportable operating segment for the three months ended February 3,
2002 and February 4, 2001, included on page 13 of this Report, are an integral
part of these financial statements. During the three months ended February 3,
2002, consolidated assets decreased by $100.3 million, primarily due to the sale
of Autologic and decreased accounts receivable in the Staffing Services and
Telecommunications Services segments.
Note J--Derivative Financial Instruments
The Company enters into derivative financial instruments only for hedging
purposes. All derivative financial instruments, such as interest rate swap
contracts and foreign currency options and exchange contracts, are recognized in
the consolidated financial statements at fair value regardless of the purpose or
intent for holding the instrument. Changes in the fair value of derivative
financial instruments are either recognized periodically in income or in
stockholders' equity as a component of comprehensive income, depending on
whether the derivative financial instrument qualifies for hedge accounting, and
if so, whether it qualifies as a fair value hedge or cash flow hedge. Generally,
changes in fair values of derivatives accounted for as fair value hedges are
recorded in income along with the portions of the changes in the fair values of
the hedged items that relate to the hedged risks. Changes in fair values of
derivatives accounted for as cash flow hedges, to the extent they are effective
as hedges, are recorded in other comprehensive income, net of deferred taxes.
Changes in fair values of derivatives not qualifying as hedges are reported in
the results of operations. At February 3, 2002, the Company had no derivative
financial instruments.
Note K--Goodwill
As of November 5, 2001, the Company adopted Financial Accounting Standards Board
Statement No. 142, "Goodwill and Other Intangible Assets" ("SFAS 142"). Under
the new rules, goodwill is no longer amortized, but is subject to annual
impairment tests. As a result, the Company did not incur any expense for the
amortization of goodwill in the first quarter of fiscal 2002. The pre-tax
expense for the amortization of goodwill was $0.8 million in the first quarter
of fiscal 2001. The Company is performing the first of the required impairment
tests of goodwill and other intangible assets as of the beginning of fiscal
2002. At that date, the Company's goodwill, related to prior acquisitions,
amounted to approximately $40.0 million. The Company's revaluation under the new
accounting rules is expected to be completed during the second quarter and it is
likely that there will be a material write-down due to indications of
impairment, reflecting declines in market value of the acquisitions since they
were purchased. The charge for the write-down, to the extent required, will be
reported as a Cumulative Effect of a Change in Accounting with the six months
results, and will result in a restatement of the first quarter 2002 results at
that time.
-12-
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
THREE MONTHS ENDED FEBRUARY 3, 2002 COMPARED
TO THE THREE MONTHS ENDED FEBRUARY 4, 2001
The information, which appears below, relates to current and prior periods, the
results of operations for which periods are not necessarily indicative of the
results which may be expected for any subsequent periods. Management makes no
predictions or estimates as to future operations and no inferences as to future
operations should be drawn.
On November 30, 2001, the Company's 59% owned publicly-held subsidiary,
Autologic Information International, Inc. ("Autologic"), that comprised the
Company's Electronic Publication and Typesetting segment, was acquired by Agfa
Corporation. The results of operations of Autologic have been classified as
discontinued. See "Effects of the Sale of Autologic," below.
Three Months Ended
----------------------------
February 3, February 4,
2002 2001
----------- -----------
(Dollars in thousands)
Net Sales:
Staffing Services
Traditional Staffing $ 265,157 $ 337,772
Managed Services 119,452 183,789
--------- ---------
Total Gross Sales 384,609 521,561
Less: Non-recourse Managed Services (106,766) (108,580)
--------- ---------
Net Staffing Services Sales 277,843 412,981
Telephone Directory 10,624 13,157
Telecommunications Services 33,070 70,906
Computer Systems 21,517 15,266
Elimination of intersegment sales (4,301) (3,132)
--------- ---------
Total Net Sales $ 338,753 $ 509,178
========= =========
Segment Operating (Loss) Profit:
Staffing Services ($ 2,328) $ 2,042
Telephone Directory (366) (1,001)
Telecommunications Services (2,966) 2,736
Computer Systems 2,111 1,713
--------- ---------
Total Segment Operating (Loss) Profit (3,549) 5,490
General corporate expenses (3,758) (3,491)
Financial reporting system expenses (1,852) (1,355)
--------- ---------
Total Operating (Loss) Profit (9,159) 644
Interest and other income (120) 246
Foreign exchange loss-net (13) (254)
Interest expense (1,823) (3,877)
--------- ---------
Loss from continuing operations before income taxes ($ 11,115) ($ 3,241)
========= =========
-13-
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS--Continued
THREE MONTHS ENDED FEBRUARY 3, 2002 COMPARED
TO THE THREE MONTHS ENDED FEBRUARY 4, 2001--Continued
Forward-Looking Statements Disclosure
This Report and other reports and statements issued by the Company and its
officers, from time-to-time, contain certain statements concerning the Company's
future plans, objectives, performance, intentions and expectations that are, or
may be deemed to be, "forwarding-looking statements." Although the Company
believes that its expectations are based on reasonable assumptions, these
forward-looking statements are subject to a number of known and unknown risks
and uncertainties that could cause the Company's actual results, performance and
achievements to differ materially from those described or implied in the
forward-looking statements. These risks and uncertainties include, but are not
limited to:
o general economic, competitive and other business conditions, including the
current recession in the U.S. and European economies, the length and depth
of the recession and the timing of the recovery
o continued financial strength of the Company's customers, some of which
have announced layoffs, unfavorable financial results, investigations by
government agencies and lowered financial expectations for the near term
o the degree and timing of obtaining new contracts and the rate of renewals
of existing contracts, as well as customers' degree of utilization of the
Company's services
o material changes in demand from larger customers, including those with
which the Company has national contracts
o the effect of litigation by temporary employees against temporary help
companies and the customers with which they do business
o variations in the rate of unemployment and higher wages sought by
temporary workers, especially those in certain technical fields
particularly characterized by labor shortages, which could affect the
Company's ability to meet its customers' demands and the Company's profit
margins
o changes in customer attitudes toward the use of outsourcing and temporary
personnel
o the Company's ability to recruit qualified employees to satisfy customer
requirements for the Company's Staffing Services
o the Company's ability to attract and retain certain classifications of
technologically qualified personnel for its own use, particularly in the
areas of research and development and customer service and maintain
superior technological capability and manage risks inherent in the
development, implementation and upgrading of internal systems
o intense price competition and pressure on margins
o the Company's ability to meet competition in highly competitive markets
with minimal impact on margins
o the Company's ability to achieve customer acceptance of its products and
systems in markets characterized by rapidly changing technology and
frequent new product introductions
o the Company's ability to foresee changes and to identify, develop and
commercialize innovative and competitive products and systems in a timely
and cost effective manner
o risks inherent in new product introductions, such as start-up delays, cost
overruns and uncertainty of customer acceptance
o the Company's performance on contracts
o the timing of customer acceptances of systems
o the Company's dependence on third parties for some product components
o changes in laws, regulations and government policies
o the degree and effects of inclement weather
-14-
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS--Continued
THREE MONTHS ENDED FEBRUARY 3, 2002 COMPARED
TO THE THREE MONTHS ENDED FEBRUARY 4, 2001--Continued
These and certain other factors are discussed in the Company's Annual Report on
Form 10-K for the fiscal year ended November 4, 2001 and, from time-to-time, in
the Company's other reports filed with the Securities and Exchange Commission.
Effects of the Sale of Autologic
On November 30, 2001, the Company's 59% owned publicly-held subsidiary,
Autologic Information International, Inc. ("Autologic"), that comprised the
Company's Electronic Publication and Typesetting segment, was acquired by Agfa
Corporation through a tender offer for all of Autologic's outstanding shares and
a subsequent merger. The Company received $24.2 million for its shares. The
Company's gain on the transaction of $4.5 million, including a tax benefit of
$1.7 million, is reflected in the Company's first quarter of fiscal 2002. The
results of operations of Autologic have been classified as discontinued,
Autologic's prior period results have been reclassified and its assets and
liabilities have been included as separate line items on the Company's fiscal
2001 balance sheet.
First Quarter Fiscal 2002 Results to be Restated
In accordance with Financial Accounting Standards Board Statement No. 142 (see
"The Effect of New Accounting Pronouncements," below), the Company is performing
the first of the required impairment tests of goodwill and other intangible
assets as of the beginning of fiscal 2002. At that date, the Company's goodwill,
related to prior acquisitions, amounted to approximately $40.0 million. The
Company's revaluation under the new accounting rules is expected to be completed
during the second quarter and it is likely that there will be a material
write-down due to indications of impairment, reflecting declines in market value
of the acquisitions since they were purchased. The charge for the write-down, to
the extent required, will be reported as a Cumulative Effect of a Change in
Accounting with the six months results, and will result in a restatement of the
first quarter 2002 results of operations at that time.
Second Quarter Fiscal 2002 Transaction
On March 5, 2002, the Company prepaid the remaining $30.0 million of its 7.92%
Senior Notes. A "make whole" premium of $2.1 million paid with the prepayment
will be recognized as an extraordinary pre-tax charge in the second quarter of
fiscal 2002 for the extinguishment of that debt.
Results of Operations - Summary
The following information is provided with respect to the Company's results of
operations prior to giving effect to the expected restatement of the Company's
results of operations that will be made following completion of the Company's
impairment testing of goodwill and other intangible assets as of the beginning
of fiscal 2002 and which will require a restatement of the Company's first
quarter of fiscal 2002 results of operations that are discussed below (see
"First Quarter Fiscal 2002 Results to be Restated," above).
In the three-month period of fiscal 2002, consolidated net sales decreased by
$170.4 million, or 33%, to $338.8 million from the comparable period in fiscal
2001. The decrease in fiscal 2002 net sales resulted primarily from a $135.1
million decrease in sales by the Staffing Services segment, a $37.8 million
decrease in sales by the
-15-
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS--Continued
THREE MONTHS ENDED FEBRUARY 3, 2002 COMPARED
TO THE THREE MONTHS ENDED FEBRUARY 4, 2001--Continued
Results of Operations - Summary--Continued
Telecommunications Services segment and a $2.5 million decrease in sales by the
Telephone Directory segment, partially offset by a $6.3 million increase in
sales by the Computer Systems segment.
The Company's first quarter fiscal 2002 loss from continuing operations before
income taxes was $6.7 million, compared to $1.8 million in fiscal 2001. The
Company's segments reported an operating loss of $3.5 million in the first
quarter of fiscal 2002 compared with an operating profit of $5.5 million in the
fiscal 2001 first quarter. Operating losses of $2.3 million and $3.0 million
were reported by the Staffing Services and Telecommunications Services segments,
respectively, compared to operating profits of $2.0 million and $2.7 million,
respectively, in fiscal 2001. These operating losses were partially offset by a
decrease in the Telephone Directory segment's operating loss and an increase in
the Computer Systems segment's operating profit.
Consolidated results for the first quarter of fiscal 2002 include a $4.5 million
gain, including a tax benefit of $1.7 million, on the sale of the Company's
interest in Autologic and a loss from discontinued operations through the
disposal date of $0.2 million ($0.1 million in fiscal 2001).
The Company incurred a net loss of $2.4 million and $1.9 million in the first
three months of fiscal 2002 and 2001, respectively.
While first quarter results historically are the lowest for the Company's fiscal
year, fiscal 2002 first quarter operating results were adversely affected by the
present economic conditions, particularly in the telecommunications and high
tech industries, which account for the major portion of the Company's revenues.
Several of the Company's large customers in these industries closed their
facilities for two to three weeks, as opposed to the usual one week during the
holidays, have implemented widespread layoffs and, especially in the
telecommunications industry, have significantly reduced capital spending. These
factors materially adversely affected the results of the Company's Staffing
Services and Telecommunications Services segments. To counteract these factors
and strengthen the Company's future results, the Company has expanded its cost
containment programs, which should have a salutary effect in the traditionally
stronger quarters, particularly the third and fourth quarters. A turnaround of
the economy is what the Company requires to return to significant profitability.
Results of Operations - By Segment
Sales of the Staffing Services segment decreased by $135.1 million, or 33%, to
$277.8 million in fiscal 2002 and the segment reported an operating loss of $2.3
million compared to an operating profit of $2.0 million in fiscal 2001.
Approximately 60% of the decline in revenues was in traditional staffing sales
attributable to the Commercial and Light Industrial division which continued to
be adversely affected by the nation's economic conditions. The division
sustained a loss of $4.3 million on sales of $93.7 million during the quarter
compared to an operating loss of $1.8 million on sales of $137.5 million for the
first quarter of fiscal 2001. The increase in operating loss was the result of a
30% decline in traditional staffing sales, partially offset by reduced overhead
due to cost controls. A return to a better economic climate will be necessary to
return the Commercial and Light
-16-
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS--Continued
THREE MONTHS ENDED FEBRUARY 3, 2002 COMPARED
TO THE THREE MONTHS ENDED FEBRUARY 4, 2001--Continued
Results of Operations - By Segment--Continued
Industrial division to profitability, as the revenue declines in this division
are too significant to be compensated by cost reductions. Operating profit of
the Technical Placement division was $2.0 million on sales of $184.1 million for
the first quarter of fiscal 2002 compared to an operating profit of $3.8 million
on sales of $275.5 million for the first quarter of fiscal 2001. Despite a 16%
decline in traditional staffing sales due to the holiday closedowns and layoffs
discussed above, a material reduction in high margin permanent placement
assignments and the implementation of several new ProcureStaff accounts, the
divisional cost containment efforts limited the decline in the Technical
Placement division's operating profit.
The Telephone Directory segment's sales decreased by $2.5 million, or 19%, to
$10.6 million in fiscal 2002 first quarter while its operating loss decreased to
$0.4 million in fiscal 2002 from $1.0 million in fiscal 2001. The segment
traditionally reports losses during the first quarter due to the publication
schedule of its community directory operations, with profits in the latter
portion of the fiscal year. The sales decrease was primarily due to the timing
of the segment's toll-free directory which will be published in the second
quarter of fiscal 2002 rather than the first quarter as it had in fiscal 2001,
partially offset by an increase in printing sales in Uruguay of $1.2 million.
The decrease in operating loss was primarily due to cost control initiatives
and, to a lesser extent, higher gross margins.
The Telecommunications Services segment's sales decreased by $37.8 million, or
53%, to $33.1 million in the first quarter of fiscal 2002, and it sustained an
operating loss of $3.0 million in fiscal 2002 compared with an operating profit
of $2.7 million in fiscal 2001. The results of the segment were due to the
decline in capital expenditure spending by the telecommunications industry. This
factor has also increased competition for available work, pressuring pricing and
margins. Many telecommunications companies ceased capital projects during the
latter portion of 2001 and are still determining where to allocate 2002 capital
spending. Although cost control initiatives reduced overhead by approximately
25% from the prior year's comparable quarter, the ability to reduce costs is
constrained by the need to maintain certain skill sets that have traditionally
been difficult to obtain. A return to profitability will be dependent on a
significant economic recovery.
The Computer Systems segment's sales increased by $6.3 million, or 41%, to $21.5
million in fiscal 2002 and its operating profit increased to $2.1 million in
fiscal 2002 from $1.7 million in fiscal 2001. The growth in operating profit was
the result of the continued expansion of the segment's Application Service
Provider (ASP) directory assistance and web-based services, as well as an
increase in demand for IT services for its Maintech division. Directory
Assistance volume for the quarter was 87.7 million, a 14% increase over the
fiscal 2001 fourth quarter and 55% higher than the fiscal 2001 first quarter.
The fiscal 2002 first quarter also included project revenues of $4.2 million for
its European operations, VoltDelta Europe, associated with a customer's
acceptance of a new operator services switching infrastructure.
-17-
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS--Continued
THREE MONTHS ENDED FEBRUARY 3, 2002 COMPARED
TO THE THREE MONTHS ENDED FEBRUARY 4, 2001--Continued
Results of Operations - Other
Other items, discussed on a consolidated basis, affecting the results of
operations for the three-month periods were:
Selling and administrative expenses increased by $0.9 million, or 6%, to $15.4
million in fiscal 2002 as a result of increased provisions for doubtful
accounts, fees related to the Company's revolving credit agreement and higher
financial reporting system expenses related to a new accounting and back office
system. Financial reporting system expenses include equipment rental and the use
of outside consultants. Selling and administrative expenses, expressed as a
percentage of sales, were 4.6% in fiscal 2002 and 2.9% in fiscal 2001.
Depreciation and amortization decreased by $0.5 million, or 9%, to $5.5 million
in fiscal 2002. The decrease was attributable to a $0.8 million reduction in
goodwill amortization due to the effect of new rules on accounting for goodwill
which eliminated amortization of goodwill in favor of annual impairment tests
(see "The Effect of New Accounting Pronouncements," below), partially offset by
a $0.3 million increase in depreciation expense primarily due to the
amortization of the new financial reporting system.
The other loss in the first quarter of fiscal 2002 of $0.3 million resulted
primarily from the Company's share of losses of its joint venture, westVista
Advertising Services. In fiscal 2001, these losses were offset by various income
items.
The foreign exchange loss in the first quarter of fiscal 2002 was $13,000
compared with $0.3 million in fiscal 2001. The reduction was a result of
favorable currency movements in the European currency markets. To reduce the
potential adverse impact from foreign currency changes on the Company's foreign
currency receivables and firm commitments, foreign currency options are
purchased, when required, during, and generally settled on the last weekday, of
each quarter.
Interest expense decreased by $2.1 million, or 53%, to $1.8 million in the first
quarter of fiscal 2002. The decrease was the result of lower borrowings under
the Company's revolving credit agreement due to the application of $24.2 million
of the proceeds received from the sale of Autologic on November 30, 2001 and
reduced working capital requirements, partially offset by increased interest
expense related to a $15.1 million 8.2% term loan and higher interest rates in
Uruguay.
The Company's effective tax rate was a 39.5% benefit and a 44.5% benefit in
fiscal 2002 and 2001, respectively. The decreased rate was attributable to the
absence in fiscal 2002 of non-deductible goodwill amortization and foreign
losses for which no tax benefit was provided.
-18-
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS--Continued
Liquidity and Sources of Capital
Cash and cash equivalents increased by $2.6 million to $21.0 million in the
three months ended February 3, 2002. Operating activities, exclusive of changes
in operating assets and liabilities, produced $1.1 million of cash, as the
Company's net loss of $2.4 million included non-cash charges primarily for
depreciation and amortization of $5.5 million and accounts receivable provisions
of $1.8 million, as well as the net gain from discontinued operations of $4.3
million. Changes in operating assets and liabilities produced $30.1 million of
cash, net, principally due to cash provided by decreases in the levels of
accounts receivable of $56.0 million and an increase of $7.0 million in customer
advances, partially offset by $26.2 million of expenditures to reduce the level
of accounts payable and accrued expenses and a $6.0 million reduction in net
income taxes payable.
The principal factor in the cash provided by investing activities was the
proceeds from the sale of Autologic of $24.2 million partially offset by the
expenditure of $3.0 million for property, plant and equipment.
A decrease of $49.6 million in bank loans was the principal factor in the cash
applied to financing activities of $49.7 million. The funds used to reduce bank
loans were the proceeds received from the sale of Autologic and cash provided
due to reduced working capital requirements.
In fiscal 2000, the Company began development of a new internet-based Front End
System designed to improve efficiency and connectivity in the recruiting,
assignment, customer maintenance, and other functions in the branch offices of
the Staffing Services segment. The total costs to develop and install this
system are anticipated to be approximately $16.0 million, of which $5.8 million
has been incurred to date. The Company has no other material capital
commitments.
The Company believes that its current financial position, working capital,
future cash flows and credit lines are sufficient to fund its presently
contemplated operations and satisfy its debt obligations.
At February 3, 2002, the Company had $127.7 million of credit lines with banks,
of which $115.5 million is under a revolving credit agreement that is scheduled
to expire in September 2002. The Company had outstanding bank borrowings of
$11.7 million at February 3, 2002 under this line (see Note C in the Notes to
Condensed Consolidated Financial Statements).
In January 2002, the Company received a commitment from a major bank to enter
into a three-year accounts receivable securitization program which, assuming
completion, will provide for the financing of up to $100.0 million of certain
accounts receivable and is currently negotiating a new two year secured
revolving credit facility of up to $50.0 million to replace its existing $115.5
million revolving line of credit. The Company expects to close both facilities
by the end of March 2002.
On March 5, 2002, the Company prepaid the remaining $30.0 million outstanding of
its 7.92% Senior Notes together with a "make whole" premium of $2.1 million. In
connection with the prepayment of the Senior Notes, the Company and the bank
lenders under the Company's revolving credit agreement, amended, effective
February 1, 2002, various covenants in that agreement. The Company also agreed
to secure, and subsequently secured, its obligations under the revolving credit
agreement with certain accounts receivable (the level of which at February 3,
2002 was approximately $56.0 million). The Company believes it will remain in
compliance with the amended covenants included in the revolving credit agreement
throughout its remaining term.
-19-
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS--Continued
The Effect of New Accounting Pronouncements
In June 2001, the Financial Accounting Standards Board issued Statements of
Financial Accounting Standards No. 141, "Business Combinations" ("SFAS 141"),
and No. 142, "Goodwill and Other Intangible Assets" ("SFAS 142"), effective for
fiscal years beginning after December 15, 2001. As of November 5, 2001, the
Company adopted Financial Accounting Standards Board Statement No. 142,
"Goodwill and Other Intangible Assets" ("SFAS 142"). Under the new rules,
goodwill is no longer amortized, but is subject to annual impairment tests. As a
result the Company did not incur any expense for the amortization of goodwill in
the first quarter of fiscal 2002. The pre-tax expense for the amortization of
goodwill was $0.8 million in the first quarter of fiscal 2001. The Company is
performing the first of the required impairment tests of goodwill and other
intangible assets as of the beginning of fiscal 2002. At that date, the
Company's goodwill, related to prior acquisitions, amounted to approximately
$40.0 million. The Company's revaluation under the new accounting rules is
expected to be completed during the second quarter and it is likely that there
will be a material write-down due to indications of impairment, reflecting
declines in market value of the acquisitions since they were purchased. The
charge for the write-down, to the extent required, will be reported as a
Cumulative Effect of a Change in Accounting with the six months results, and
will result in a restatement of the first quarter 2002 results at that time.
-20-
ITEM 3 - QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is subject to market risk exposure in the following areas:
Interest Rate Market Risk
The Company has cash equivalents ($21.0 million at February 3, 2002) on which
interest income is earned at variable rates. The Company also has credit lines
with various domestic and foreign banks, which provide for unsecured borrowings
and letters of credit up to an aggregate of $127.7 million. At February 3, 2002,
the Company had borrowings totaling $15.8 million under these agreements. The
interest rates on these borrowings are variable and, therefore, interest expense
and interest income are affected by the general level of U.S. and foreign
interest rates. Increases in interest expense resulting from an increase in
interest rates could impact the Company's results of operations. The Company
policy is to take actions that would mitigate such risk when appropriate.
The Company's long-term debt of $15.9 million at February 3, 2002 consists of
borrowings at fixed interest rates, and the Company's interest expense related
to these borrowings is not exposed to changes in interest rates in the near
term. In March 2000, the Company entered into a series of interest swap
agreements, which effectively converted the interest payable under its 7.92%
Senior Notes ($40.0 million of which was outstanding at that time), through
maturity, from fixed to floating rate. Therefore, interest expense on the debt
was affected by the general level of interest rates. However, in December 2000,
the Company terminated the swap agreements. The fair value of the agreements at
termination of $0.5 million was paid to the Company and was reducing interest
expense over the remaining term the notes were outstanding. The Senior Notes
were prepaid in full on March 5, 2002.
Equity Price Risk
The Company holds short-term investments in mutual funds for the Company's
deferred compensation plan. At February 3, 2002, the total market value of these
investments is $3.8 million, all of which are being held for the benefit of
participants in a non-qualified deferred compensation plan with no risk to the
Company.
Foreign Exchange Market Risk
The Company has a number of overseas subsidiaries and is, therefore, subject to
exposure from the risk of currency fluctuations as the value of foreign
currencies fluctuate against the dollar, which may impact reported earnings. The
Company attempts to reduce these risks by utilizing foreign currency option
contracts to hedge the adverse impact on foreign currency receivables when the
dollar strengthens against the related foreign currency. At February 3, 2002,
the Company had no outstanding foreign currency options. The Company does not
believe that it is exposed to material foreign exchange market risk.
-21-
PART II - OTHER INFORMATION
ITEM 6 -- EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
Exhibit Description
- --------------------------------------------------------------------------------
4.01(a) Second Amendment dated as of March 5, 2002 to the Credit
Agreement dated as of September 11, 2001 among the Company,
Gatton Volt Consulting Group Limited, JPMorgan Chase Bank, as
administrative agent, and Fleet National Bank, as syndication
agent.
4.01(b) Amended and Restated Joint and Several Guaranty of Payment dated
as of March 5, 2002 by Volt Management Corp., Volt Delta
Resources, Inc. (Nevada), Volt Directories, S.A., Ltd., Volt
Telecommunications Group, Inc., Datanational of Georgia, Inc.,
Volt Information Sciences Funding, Inc., Datanational, Inc.
(Delaware), Volt Technical Resources, LLC and Volt Delta
Resources, Inc. (Delaware), wholly-owned subsidiaries of the
Company, and JPMorgan Chase Bank, as administrative agent and
Fleet National Bank, as syndication agent.
4.01(c) Security Agreement dated as of March 5, 2002 by and among Volt
Telecommunications Group, Inc., Volt Delta Resources, Inc.
(Nevada), Volt Delta Resources, Inc. (Delaware), Datanational,
Inc. and Datanational of Georgia, Inc., wholly-owned subsidiaries
of the Company, and JPMorgan Chase Bank, as collateral agent.
15.01 Letter from Ernst & Young LLP
15.02 Letter from Ernst & Young LLP regarding interim financial
information
(b) Reports on Form 8-K:
No Reports on Form 8-K were filed during the quarter ended February 3, 2002.
However, on February 5, 2002 the Company filed a Current Report on Form 8-K
reporting under Items 5, 7 and 9. No financial statements were filed with that
report.
-22-
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
VOLT INFORMATION SCIENCES, INC.
(Registrant)
BY: /s/ JACK EGAN
-------------------------------------
Date: March 18, 2002 JACK EGAN
Vice President - Corporate Accounting
(Principal Accounting Officer)
-23-
EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION
- --------------------------------------------------------------------------------
4.01(a) Second Amendment dated as of March 5, 2002 to the Credit
Agreement dated as of September 11, 2001 among the Company,
Gatton Volt Consulting Group Limited, JPMorgan Chase Bank, as
administrative agent, and Fleet National Bank, as syndication
agent.
4.01(b) Amended and Restated Joint and Several Guaranty of Payment dated
as of March 5, 2002 by Volt Management Corp., Volt Delta
Resources, Inc. (Nevada), Volt Directories, S.A., Ltd., Volt
Telecommunications Group, Inc., Datanational of Georgia, Inc.,
Volt Information Sciences Funding, Inc., Datanational, Inc.
(Delaware), Volt Technical Resources, LLC and Volt Delta
Resources, Inc. (Delaware), wholly-owned subsidiaries of the
Company, and JPMorgan Chase Bank, as administrative agent and
Fleet National Bank, as syndication agent.
4.01(c) Security Agreement dated as of March 5, 2002 by and among Volt
Telecommunications Group, Inc., Volt Delta Resources, Inc.
(Nevada), Volt Delta Resources, Inc. (Delaware), Datanational,
Inc. and Datanational of Georgia, Inc., wholly-owned subsidiaries
of the Company, and JPMorgan Chase Bank, as collateral agent.
15.01 Letter from Ernst & Young LLP
15.02 Letter from Ernst & Young LLP regarding interim financial
information